Health Care REIT 424(b)(5)
The
information in this preliminary prospectus supplement is not
complete and may be changed. This preliminary prospectus
supplement and the accompanying prospectus are not an offer to
sell these securities, and we are not soliciting offers to buy
these securities, in any jurisdiction where the offer or sale is
not permitted.
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Filed
Pursuant To Rule 424(b)(5)
Registration No. 333-134082
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PRELIMINARY
PROSPECTUS SUPPLEMENT
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Subject
to Completion
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November 13,
2006
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(To
Prospectus dated May 12, 2006)
$300,000,000
% Convertible
Senior Notes due 2026
NOTES
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We are offering $300 million
aggregate principal amount of our % convertible
senior notes due 2026.
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We will pay % interest
per annum on the principal amount of the notes, payable
semi-annually in arrears on June 1 and December 1 of each year,
beginning on June 1, 2007. Interest will accrue on the notes
from and including November , 2006 or from and
including the last date in respect of which interest has been
paid or provided for, as the case may be, to, but excluding, the
next interest payment date or maturity date, as the case may be.
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The notes will mature on
December 1, 2026.
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CONVERSION
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The notes will be convertible into
cash and, if applicable, shares of our common stock based on an
initial conversion rate, subject to adjustment,
of shares
per $1,000 principal amount of notes (which represents an
initial conversion price of approximately
$ per
share), in certain circumstances.
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Holders may convert their notes
into cash and, if applicable, shares of our common stock prior
to stated maturity only under the following circumstances:
(1) the notes will be convertible during any calendar
quarter after the calendar quarter ending December 31,
2006, if the closing sale price of our common stock for each of
20 or more trading days in a period of 30 consecutive trading
days ending on the last trading day of the immediately preceding
calendar quarter exceeds 120% of the conversion price in effect
on the last trading day of the immediately preceding calendar
quarter; (2) the notes will be convertible during the five
consecutive business days immediately after any five consecutive
trading day period (we refer to this five consecutive trading
day period as the note measurement period) in which
the average trading price per $1,000 principal amount of notes
was equal to or less than 97% of the average conversion value of
the notes during the note measurement period; (3) the notes
will be convertible upon the occurrence of specified corporate
transactions; (4) the notes will be convertible if we have
called the notes for redemption; and (5) the notes will be
convertible at any time from, and including, November 1,
2011 to, and including, December 1, 2011 and at any time
from, and including, November 1, 2026 until the close of
business on the business day immediately preceding
December 1, 2026 or earlier redemption or repurchase.
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Upon conversion, holders of notes
will receive cash and, if applicable, shares of our common
stock, based on the sum of the daily settlement
amounts described in this prospectus supplement for the 20
consecutive trading days that begins on, and includes, the third
trading day after the day the notes are tendered for conversion,
subject to certain exceptions in connection with conversions
during a period immediately preceding the maturity date as
described in this prospectus supplement. We refer to the cash
due upon conversion as the principal return and the
shares, if any, due upon conversion as the net
shares.
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A holder that surrenders notes for
conversion in connection with a make-whole fundamental
change that occurs before December 1, 2011 may in
certain circumstances be entitled to an increased conversion
rate.
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REDEMPTION AND
REPURCHASE
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Prior to December 1, 2011, we
cannot redeem the notes except to preserve our status as a REIT.
On or after December 1, 2011, we may from time to time at
our option redeem the notes, in whole or in part, for cash, at a
redemption price equal to 100% of the principal amount of the
notes we redeem, plus any accrued and unpaid interest to, but
excluding, the redemption date.
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On each of December 1, 2011,
December 1, 2016 and December 1, 2021, holders may
require us to purchase all or a portion of their notes at a
purchase price in cash equal to 100% of the principal amount of
the notes to be purchased, plus any accrued and unpaid interest
to, but excluding, the purchase date.
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Holders may require us to
repurchase all or a portion of their notes upon a fundamental
change, as described in this prospectus supplement, at a
repurchase price in cash equal to 100% of the principal amount
of the notes to be repurchased, plus any accrued and unpaid
interest to, but excluding, the fundamental change repurchase
date.
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RANKING
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The notes will be our senior
unsecured obligations and will rank equally with all of our
existing and future senior unsecured indebtedness. The notes
will be effectively subordinated to all of our existing and
future secured indebtedness and all existing and future
liabilities of our subsidiaries, including trade payables. As of
September 30, 2006, our subsidiaries had approximately
$406.4 million of indebtedness and other obligations (which
includes $276 million outstanding under our unsecured lines
of credit arrangements under which we and certain of our
subsidiaries are co-borrowers) that would effectively rank
senior to the notes. In addition, to the extent that we complete
the mergers, the notes may be structurally subordinated to the
indebtedness and other obligations of Windrose and its
subsidiaries.
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LISTING
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The notes are a new issue of
securities, and there is currently no established trading market
for the notes. An active or liquid market may not develop for
the notes or, if developed, be maintained. We have not applied,
and do not intend to apply, for the listing of the notes on any
securities exchange.
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Our common stock is listed on the
New York Stock Exchange under the symbol HCN. On
November 10, 2006, the last reported sale price of our
common stock on the New York Stock Exchange was $39.56 per share.
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Investing in the notes involves significant risks. See
Risk factors beginning on
page S-10.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the accuracy or adequacy of this
prospectus supplement or the accompanying prospectus. Any
representation to the contrary is a criminal offense.
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Per
note
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Total
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Public offering price
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%
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$
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Underwriting discounts and
commissions
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%
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$
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Proceeds, before expenses, to us
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%
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$
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We have granted to the underwriters the option, exercisable on
or before the 30th day after the date of this prospectus
supplement, to purchase up to an additional $45 million
aggregate principal amount of notes, solely to cover
over-allotments, if any.
We expect that the notes will be ready for delivery in
book-entry-only form through The Depository Trust Company
on or
about ,
2006.
Joint
Book-Running Managers
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UBS
Investment Bank |
Deutsche
Bank Securities |
Co-Lead
Manager
Banc
of America Securities LLC
Co-Managers
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JPMorgan |
Wachovia
Securities |
The date of this prospectus
supplement
is ,
2006.
You should rely only on the information contained or
incorporated by reference in this prospectus supplement, the
accompanying prospectus and any free writing
prospectus we authorize to be delivered to you. We have
not, and the underwriters have not, authorized anyone to provide
you with additional information or information different from
that contained in this prospectus supplement, the accompanying
prospectus and any such free writing prospectus. We
are not making an offer to sell the notes in any jurisdiction
where the offer or sale of the notes is not permitted. You
should not assume that the information appearing in this
prospectus supplement, the accompanying prospectus, any such
free writing prospectus or the documents
incorporated therein by reference is accurate as of any date
other than their respective dates. Our business, financial
condition, results of operations and prospects may have changed
since those dates.
Table of
Contents
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Page
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Prospectus Supplement
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S-1
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S-10
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S-20
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S-21
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S-22
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S-23
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S-25
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S-26
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S-31
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S-32
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S-59
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S-61
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S-68
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S-71
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S-71
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S-71
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Base Prospectus
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4
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4
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5
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6
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7
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8
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9
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10
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16
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17
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21
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24
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25
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25
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26
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27
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41
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42
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42
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S-i
Prospectus
supplement summary
This summary highlights selected information about us and
this offering. This information is not complete and does not
contain all of the information you should consider before
investing in our notes. You should read this entire prospectus
supplement and the accompanying prospectus carefully, including
Risk factors contained in this prospectus supplement
and the financial statements and the other information
incorporated by reference in this prospectus supplement and the
accompanying prospectus, before making an investment decision.
Unless we have specifically indicated otherwise, references in
this prospectus supplement to we, us,
our, the Company, or similar terms are
to Health Care REIT, Inc. and its subsidiaries. If the
description of the offering varies between this prospectus
supplement and the accompanying prospectus, you should rely on
the information in this prospectus supplement.
ABOUT OUR
COMPANY
We are a self-administered, equity real estate investment trust
that invests in health care and senior housing properties.
Founded in 1970, we were the first real estate investment trust
to invest exclusively in health care facilities.
As of September 30, 2006, we had approximately
$3.1 billion of net real estate investments, inclusive of
credit enhancements, in 477 facilities located in 37 states
and managed by 58 different operators. At that date, the
portfolio included 39 independent living/continuing care
retirement communities, 204 assisted living facilities, 220
skilled nursing facilities and 14 specialty care facilities.
Our principal executive offices are located at One SeaGate,
Suite 1500, Toledo, Ohio, 43604, and our telephone number
is
(419) 247-2800.
Our Web site address is www.hcreit.com. The information on our
Web site is not part of this prospectus supplement or the
accompanying prospectus.
OUR
STRATEGY
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 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 increases
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.
S-1
The
Portfolio
The following table summarizes our portfolio as of
September 30, 2006:
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Percentage of
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Percentage of
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Number of
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Number of
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Investment per
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Number of
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Number of
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Type of
Facility
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Investments(1)
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investments
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Revenues(2)
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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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(in
thousands)
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(in
thousands)
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Independent living/CCRCs
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$
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488,863
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16
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%
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$
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29,756
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12
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%
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39
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5,224
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$
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112,737
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16
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18
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Assisted living facilities
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996,318
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32
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%
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85,271
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36
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%
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204
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12,615
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88,480
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23
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33
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Skilled nursing facilities
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1,413,508
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46
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%
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111,262
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46
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%
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220
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30,063
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47,662
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22
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28
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Specialty care facilities
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205,745
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6
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%
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13,894
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6
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%
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14
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1,265
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183,067
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7
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8
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Totals
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$
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3,104,434
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100
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%
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$
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240,183
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100
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%
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477
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49,167
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(1) |
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Investments include real estate investments and credit
enhancements which amounted to $3,101,984,000 and $2,450,000,
respectively. |
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(2) |
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Revenues include gross revenues and revenues from
discontinued operations for the nine months ended
September 30, 2006. |
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(3) |
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Investment per Bed/Unit was computed by using the total
investment amount of $3,369,546,000 which includes real estate
investments, credit enhancements and unfunded commitments for
which initial funding has commenced which amounted to
$3,101,984,000, $2,450,000 and $265,112,000, respectively. |
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(4) |
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We have investments in properties located in 37 states
and managed by 58 different operators. |
We invest in health care and senior housing properties. We
diversify our investment portfolio by operator and geographic
location. 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 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 health care and senior housing
properties 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.
Recent
developments
On September 12, 2006, we and Windrose Medical Properties
Trust entered into an Agreement and Plan of Merger whereby
Windrose will merge with and into one of our wholly-owned
subsidiaries, with the subsidiary continuing as the surviving
entity, and another one of our wholly-owned subsidiaries will
merge with and into Windrose Medical Properties, L.P.,
Windroses operating partnership, with the Windrose
partnership continuing as the surviving entity. The Agreement
and Plan of Merger is referred to as the merger
agreement and these two transactions are collectively
referred to as the mergers.
S-2
The combined entity will offer:
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expertise and critical mass across all sectors of senior housing
and health care real estate;
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property management and development capabilities;
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increased portfolio growth through expanded investment and
development opportunities;
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enhanced asset type diversification, reduced tenant
concentration, and a favorable investment maturity
profile; and
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improved key portfolio metrics, including a higher
non-governmental component of tenant revenues.
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Under the terms of the merger agreement, each outstanding share
of Windrose will be exchanged for between 0.4509 and
0.4650 shares of our common stock. The actual exchange
ratio at closing will be based upon the volume-weighted average
price per share of our common stock on the New York Stock
Exchange for the 10 trading days that are selected by lot from
the 15 trading day period ending on and including the fifth
trading day prior to the closing of the mergers. The merger
agreement also provides that, at the effective time of the
mergers, each share of Windrose 7.5% Series A Cumulative
Convertible Preferred Stock issued and outstanding immediately
prior to the effective time of the mergers will be converted
into one share of our 7.5% Series G Cumulative Convertible
Preferred Stock, $1.00 par value per share, having
substantially similar rights and preferences as the Windrose
7.5% Series A Cumulative Convertible Preferred Stock.
Windrose is a self-managed real estate investment trust based in
Indianapolis, Indiana with offices in Nashville, Tennessee.
Windrose was formed to acquire, selectively develop and manage
specialty medical properties, such as medical office buildings,
ambulatory surgery centers, outpatient treatment diagnostic
facilities, physician group practice clinics, specialty
hospitals and treatment centers. More information is available
on Windroses Web site at www.windrosempt.com. The
information on Windroses Web site is not part of this
prospectus supplement or the accompanying prospectus.
Other
information
The SEC maintains an Internet Web site at http://www.sec.gov
that contains our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and proxy statements, and all amendments thereto. All reports
that we file with the SEC may be read and copied at the
SECs Public Reference Room at 100 F Street, N.E.,
Washington, DC 20549. Information about the operation of the
Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330.
S-3
The offering
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Issuer |
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Health Care REIT, Inc. |
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Notes |
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$300 million aggregate principal amount
of % convertible senior notes due 2026. We have
granted to the underwriters an option to purchase up to
$45 million aggregate principal amount of additional notes,
solely to cover over-allotments, if any. |
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Maturity |
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The notes will mature on December 1, 2026, unless earlier
redeemed, repurchased or converted. |
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Interest payment dates |
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We will pay % interest per annum on the principal
amount of the notes, payable semi-annually in arrears on June 1
and December 1 of each year, starting on June 1, 2007, to
holders of record at the close of business on the preceding May
15 and November 15, respectively. Interest will accrue on the
notes from and including November , 2006 or
from and including the last date in respect of which interest
has been paid or provided for, as the case may be, to, but
excluding, the next interest payment date or maturity date, as
the case may be. |
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Ranking |
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The notes will be our senior unsecured obligations and will rank
equally with all of our existing and future senior unsecured
indebtedness. The notes will be effectively subordinated to all
of our existing and future secured indebtedness and all existing
and future liabilities of our subsidiaries, including trade
payables. As of September 30, 2006, our subsidiaries had
approximately $406.4 million of indebtedness and other
obligations (which includes $276 million outstanding under
our unsecured lines of credit arrangements under which we and
certain of our subsidiaries are co-borrowers) that would
effectively rank senior to the notes. In addition, to the extent
that we complete the mergers, the notes may be structurally
subordinated to the indebtedness and other obligations of
Windrose and its subsidiaries. |
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Conversion rights |
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The notes will be convertible into cash and, if applicable,
shares of our common stock, $1.00 par value per share,
based on an initial conversion rate, subject to adjustment,
of shares
per $1,000 principal amount of notes (which represents an
initial conversion price of approximately
$ per share), only in the
following circumstances and to the following extent: |
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- the notes will be
convertible during any calendar quarter after the calendar
quarter ending December 31, 2006, if the closing sale price
of our common stock for each of 20 or more trading days in a
period of 30 consecutive trading days ending on the last trading
day of the immediately preceding calendar quarter exceeds 120%
of the conversion price in effect on the last trading day of the
immediately preceding calendar quarter;
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- the notes will be
convertible during the five consecutive business days
immediately after any five consecutive trading day period (we
refer to this five consecutive trading day period as the
note measurement period) in which the
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S-4
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average trading price per $1,000 principal amount of notes was
equal to or less than 97% of the average conversion value of the
notes during the note measurement period; |
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- the notes will be
convertible if we make certain distributions on our common stock
or engage in certain transactions;
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- the notes will be
convertible if we call the notes for redemption; and
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- the notes will be
convertible at any time from, and including, November 1,
2011 to, and including, December 1, 2011 and at any time
from, and including, November 1, 2026 until the close of
business on the business day immediately preceding
December 1, 2026 or earlier redemption or repurchase.
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Upon conversion, holders will receive, per $1,000 principal
amount being converted, a settlement amount that is
equal to the sum of the daily settlement amounts for
each of the 20 trading days during the cash settlement
averaging period. |
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The cash settlement averaging period with respect to
any note means: |
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- for notes that are
converted at any time on or after the 23rd scheduled
trading day prior to the maturity date of the applicable notes,
the 20 consecutive trading days beginning on, and including, the
20th scheduled trading day prior to the maturity
date; and
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|
- in all other
circumstances, the 20 consecutive trading days beginning on, and
including, the third trading day following the conversion date.
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The daily settlement amount for a given trading day
consists of: |
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- cash equal to the
lesser of $50 and the daily conversion
value; and
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- to the extent the
daily conversion value exceeds $50, a number of whole shares
equal to:
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- the
excess of the daily conversion value over $50, divided by
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- the
volume weighted average price of our common stock on that
trading day.
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We refer to the cash due upon conversion as the principal
return, and we refer to the shares, if any, that are due
upon conversion as the net shares. The daily
conversion value on a given trading day generally means
one-twentieth of the product of the applicable conversion rate
and the volume weighted average price of our common stock on
that trading day. |
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A holder that surrenders notes for conversion in connection with
a make-whole fundamental change that occurs before
December 1, 2011 may in certain circumstances be entitled
to an increased conversion rate. |
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See Description of notesConversion Rights. |
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Sinking fund |
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None. |
S-5
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Redemption of notes at our option |
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Prior to December 1, 2011, we cannot redeem the notes
except to preserve our status as a REIT for U.S. federal
income tax purposes. On or after December 1, 2011, we may
from time to time at our option redeem the notes, in whole or in
part. In either case, the notes shall be redeemed at a
redemption price in cash equal to 100% of the principal amount
of the notes we redeem, plus any accrued and unpaid interest to,
but excluding, the redemption date. See Description of
notesRedemption of Notes at our Option. |
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Purchase of notes by us at the option of the holder |
|
On each of December 1, 2011, December 1, 2016 and
December 1, 2021, holders may require us to purchase all or
a portion of their notes at a purchase price in cash equal to
100% of the principal amount of the notes to be purchased, plus
any accrued and unpaid interest to, but excluding, the purchase
date. See Description of notesPurchase of Notes by
Us at the Option of the Holder. |
|
Right of holder to require us to repurchase notes if a
fundamental change occurs |
|
If a fundamental change, as described in this prospectus
supplement, occurs, holders may require us to repurchase all or
a portion of their notes for cash at a repurchase price equal to
100% of the principal amount of the notes to be repurchased,
plus any accrued and unpaid interest to, but excluding, the
repurchase date. |
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See Description of notesHolders May Require Us to
Repurchase Their Notes upon a Fundamental Change. |
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Events of default |
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If an event of default on the notes has occurred and is
continuing, the principal amount of the notes plus any premium
and accrued and unpaid interest may become immediately due and
payable. These amounts automatically become due and payable upon
certain events of default. See Description of
notesEvents of Default. |
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Use of proceeds |
|
We estimate that the net proceeds to us from this offering will
be approximately $293.6 million (or approximately
$337.7 million if the underwriters exercise in full their
over-allotment option). We intend to use the net proceeds to
invest in additional health care and senior housing properties.
Pending such use, the net proceeds primarily will be used to
repay borrowings under our unsecured lines of credit
arrangements. See Use of proceeds. |
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Restrictions on ownership |
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In order to assist us in maintaining our qualification as a REIT
for U.S. federal income tax purposes, no person may own, or
be deemed to own by virtue of the attribution rules of the
Internal Revenue Code of 1986, as amended (the Internal
Revenue Code or the Code), more than 9.8% of
the value of our outstanding capital stock, subject to certain
exceptions. Notwithstanding any other provision of the notes, no
holder of notes will be entitled to convert such notes for our
common stock to the extent that receipt of our common stock
would cause the holder (together with the holders
affiliates) to exceed the ownership limit contained in our
by-laws (with respect to |
S-6
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our common stock and preferred stock) and our certificates of
designation (with respect to our preferred stock). See
Restrictions on Transfer of Securities in the
accompanying prospectus. |
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DTC eligibility |
|
The notes will be issued in book-entry-only form and will be
represented by one or more global certificates, without interest
coupons, deposited with, or on behalf of, the Depository Trust
Company, or DTC, and registered in the name of a nominee of DTC.
Beneficial interests in the notes will be shown on, and
transfers will be effected only through, records maintained by
DTC and its direct and indirect participants. Except in limited
circumstances, holders may not exchange interests in their notes
for certificated securities. See Description of
notesForm, Denomination and Registration of Notes. |
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Listing and trading |
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The notes are a new issue of securities, and there is currently
no established trading market for the notes. An active or liquid
market may not develop for the notes or, if developed, be
maintained. We have not applied, and do not intend to apply, for
the listing of the notes on any securities exchange. Our common
stock is listed on the New York Stock Exchange under the symbol
HCN. |
|
Certain U.S. federal tax considerations |
|
For a discussion of certain U.S. federal tax considerations
relating to the purchase, ownership and disposition of the notes
and shares of common stock into which the notes are convertible,
see Certain federal income tax considerations. |
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Risk factors |
|
In analyzing an investment in the notes we are offering pursuant
to this prospectus supplement, you should carefully consider,
along with other matters included or incorporated by reference
in this prospectus supplement, the information set forth under
Risk factors beginning on
page S-10. |
For a more complete description of the terms of the notes, see
Description of notes. For a more complete
description of our common stock, see Description of Our
Common Stock and Description of Certain Provisions
of Our Certificate of Incorporation and By-Laws in the
accompanying prospectus.
S-7
Summary financial
data
SELECTED
HISTORICAL CONSOLIDATED FINANCIAL DATA
The summary selected historical consolidated financial data set
forth below should be read in conjunction with
Capitalization and Prospectus supplement
summaryRecent developments, as well as the other
information that we have filed with the SEC and incorporated by
reference herein. The summary selected historical consolidated
financial data for each of the years in the three-year period
ended December 31, 2005 have been derived from our audited
consolidated financial statements. These financial statements
have been audited by Ernst & Young LLP, our independent
registered public accounting firm. The following summary
selected historical consolidated financial data as of and for
the nine months ended September 30, 2006 and 2005 have been
derived from our unaudited interim consolidated financial
statements. In the opinion of our management, the unaudited
interim consolidated financial statements have been prepared on
the same basis as the audited consolidated financial statements
and include all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of the financial
position and results of operations as of such dates and for such
periods. Results for the interim periods are not necessarily
indicative of the results to be expected for the full year. This
information is only a summary, and should be read together with,
and is qualified in its entirety by reference to, our historical
consolidated financial statements and notes thereto and the
Managements Discussion and Analysis of Financial
Condition and Results of Operations included in our
Quarterly Report on
Form 10-Q
for the quarterly period ended September 30, 2006 and our
Annual Report on
Form 10-K
for the year ended December 31, 2005, as updated by our
Current Report on
Form 8-K
filed October 20, 2006, which are incorporated by reference
herein. Amounts are in thousands, except per share data.
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Year ended
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Nine months
ended
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|
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December 31,
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September 30,
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2005
|
|
|
2006
|
|
|
|
|
Operating Data
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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Revenues
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$
|
178,560
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|
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$
|
232,453
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$
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275,317
|
|
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$
|
198,951
|
|
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$
|
236,229
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Income from continuing operations
available to common stockholders
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|
57,617
|
|
|
|
67,098
|
|
|
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55,427
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33,554
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|
|
|
59,922
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Net income available to common
stockholders
|
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|
70,732
|
|
|
|
72,634
|
|
|
|
62,692
|
|
|
|
36,105
|
|
|
|
63,793
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Per Share Data
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Basic:
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|
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|
|
|
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Income from continuing operations
available to common stockholders
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|
$
|
1.32
|
|
|
$
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1.30
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|
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$
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1.02
|
|
|
$
|
0.63
|
|
|
$
|
0.99
|
|
Net income available to common
stockholders
|
|
$
|
1.62
|
|
|
$
|
1.41
|
|
|
$
|
1.16
|
|
|
$
|
0.67
|
|
|
$
|
1.05
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|
Diluted:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
available to common stockholders
|
|
$
|
1.30
|
|
|
$
|
1.29
|
|
|
$
|
1.02
|
|
|
$
|
0.62
|
|
|
$
|
0.98
|
|
Net income available to common
stockholders
|
|
$
|
1.60
|
|
|
$
|
1.39
|
|
|
$
|
1.15
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|
|
$
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0.67
|
|
|
$
|
1.04
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|
Cash distributions per common share
|
|
$
|
2.34
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|
|
$
|
2.385
|
|
|
$
|
2.46
|
|
|
$
|
1.84
|
|
|
$
|
1.90
|
|
S-8
SELECTED
UNAUDITED ADJUSTED AND PRO FORMA CONSOLIDATED FINANCIAL
DATA
The summary selected unaudited adjusted and pro forma
consolidated financial data set forth below should be read in
conjunction with Capitalization and Prospectus
supplement summaryRecent developments, as well as
the other information that we have filed with the SEC and
incorporated by reference herein. The actual financial data set
forth below has been derived from our unaudited interim
consolidated financial statements. The as adjusted financial
data set forth below gives effect to the sale of the notes
offered by this prospectus supplement. The pro forma as adjusted
financial data set forth below is presented as if the mergers
had occurred on September 30, 2006 and includes the sale of
the notes offered by this prospectus supplement. The pro forma
amounts are presented for illustrative purposes only. You should
not rely on the pro forma amounts as being indicative of the
financial position or results of operations of the combined
company that would have actually occurred had the mergers been
completed as of the date indicated above, nor is it necessarily
indicative of the future operating results or financial position
of the combined company. This information is only a summary, and
should be read together with, and is qualified in its entirety
by reference to, (i) our historical consolidated financial
statements and notes thereto and the Managements
Discussion and Analysis of Financial Condition and Results of
Operations included in our Quarterly Report on
Form 10-Q
for the quarterly period ended September 30, 2006 and our
Annual Report on
Form 10-K
for the year ended December 31, 2005, as updated by our
Current Report on
Form 8-K
filed October 20, 2006 and (ii) the unaudited pro
forma condensed consolidated financial statements and notes and
Windroses historical consolidated financial statements and
notes thereto for the year ended December 31, 2005 and for
the quarterly period ended September 30, 2006, as filed
with our Current Report on
Form 8-K
dated November 13, 2006, which are incorporated by
reference herein. Amounts are in thousands.
|
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|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2006
|
|
|
|
|
|
|
|
|
|
Pro forma
|
|
|
|
Actual
|
|
|
As
adjusted
|
|
|
as
adjusted
|
|
|
|
|
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
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|
Net real estate investments
|
|
$
|
3,094,828
|
|
|
$
|
3,094,828
|
|
|
$
|
4,011,424
|
|
Total assets
|
|
|
3,200,829
|
|
|
|
3,224,829
|
|
|
|
4,179,270
|
|
Total debt
|
|
|
1,603,302
|
|
|
|
1,627,302
|
|
|
|
2,116,611
|
|
Total liabilities and minority
interests
|
|
|
1,653,860
|
|
|
|
1,677,860
|
|
|
|
2,196,297
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|
Total stockholders equity
|
|
|
1,546,969
|
|
|
|
1,546,969
|
|
|
|
1,982,973
|
|
S-9
Risk factors
Investing in the notes involves a high degree of risk. In
addition to the other information included and incorporated by
reference in this prospectus supplement and the accompanying
prospectus, you should carefully consider the risks described
below before purchasing the notes. If any of the following risks
actually occurs, our business, results of operations and
financial condition will likely suffer. As a result, the trading
price of the notes and our common stock may decline, and you may
lose part or all of your investment.
RISKS RELATED TO
OUR BUSINESS
Our expected
results may not be achieved
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: the status of
the economy; the status of capital markets, including prevailing
interest rates; 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; changes in
financing terms; competition within the health care and senior
housing industries; negative developments in the operating
results or financial condition of operators, including, but not
limited to, their ability to pay rent and repay loans; the
Companys ability to transition or sell facilities with
profitable results; the failure of closings to occur as and when
anticipated; acts of God affecting our properties; our ability
to reinvest sale proceeds at similar rates to assets sold;
operator bankruptcies or insolvencies; government regulations
affecting Medicare and Medicaid reimbursement rates; liability
claims and insurance costs for our operators; unanticipated
difficulties
and/or
expenditures relating to future acquisitions; environmental laws
affecting our properties; delays in reinvestment of sale
proceeds; changes in rules or practices governing the
Companys financial reporting; and other factors, including
REIT qualification, anti-takeover provisions and key management
personnel.
Risk factors
related to our operators revenues and expenses
Our facility operators revenues are primarily driven by
occupancy, Medicare and Medicaid reimbursement, if applicable,
and private pay rates. Expenses for these facilities are
primarily driven by the costs of labor, food, utilities, taxes,
insurance and rent or debt service. Revenues from government
reimbursement have, and may continue, to come under pressure due
to reimbursement cuts and state budget shortfalls. Liability
insurance and staffing costs continue to increase for our
operators. To the extent that any decrease in revenues
and/or any
increase in operating expenses result in a facility not
generating enough cash to make payments to us, the credit of our
operator and the value of other collateral would have to be
relied upon.
Risk factors
related to operator bankruptcies
We are exposed to the risk that our operators may not be able to
meet the rent, principal and interest or other payments due us,
which may result in an operator bankruptcy or insolvency, or
that an operator might become subject to bankruptcy or
insolvency proceedings for other reasons. Although our operating
lease agreements provide us with the right to evict an operator,
demand immediate payment of rent and exercise other remedies,
and our loans provide us with the right to terminate any funding
obligation, demand immediate repayment of principal and unpaid
interest, foreclose on the collateral and exercise other
remedies, the bankruptcy laws afford certain rights to a party
that has filed for bankruptcy or reorganization. An operator in
bankruptcy may be able to limit or delay our ability to collect
unpaid rent in the case of a lease or to receive unpaid
principal and interest in the case of a loan, and to exercise
other rights and remedies.
S-10
Risk
factors
We may be required to fund certain expenses (e.g., real estate
taxes and maintenance) to preserve the value of a facility,
avoid the imposition of liens on a facility
and/or
transition a facility to a new operator. In some instances, we
have terminated our lease with an operator and relet the
facility to another operator. In some of those situations, we
have provided working capital loans to and limited
indemnification of the new operator. If we cannot transition a
leased facility to a new operator, we may take possession of
that facility, which may expose us to certain successor
liabilities. Should such events occur, our revenue and operating
cash flow may be adversely affected.
Risk factors
related to government regulations
Our operators businesses are affected by government
reimbursement and private payor rates. To the extent that a
facility receives a significant portion of its revenues from
governmental payors, primarily Medicare and Medicaid, such
revenues may be subject to statutory and regulatory changes,
retroactive rate adjustments, recovery of program overpayments
or set-offs, administrative rulings, policy interpretations,
payment or other delays by fiscal intermediaries, government
funding restrictions (at a program level or with respect to
specific facilities) and interruption or delays in payments due
to any ongoing governmental investigations and audits at such
facility. In recent years, governmental payors have frozen or
reduced payments to health care providers due to budgetary
pressures. Health care reimbursement will likely continue to be
of paramount importance to federal and state authorities. We
cannot make any assessment as to the ultimate timing or effect
any future legislative reforms may have on the financial
condition of the skilled nursing industry, the specialty care
industry or the health care industry in general. There can be no
assurance that adequate reimbursement levels will continue to be
available for services provided by any facility operator,
whether the facility receives reimbursement from Medicare,
Medicaid or private payors. Significant limits on the scope of
services reimbursed and on reimbursement rates and fees could
have a material adverse effect on an operators liquidity,
financial condition and results of operations, which could
adversely affect the ability of an operator to meet its
obligations to us. In addition, the replacement of an operator
that has defaulted on its lease or loan could be delayed by the
approval process of any federal, state or local agency necessary
for the transfer of the facility or the replacement of the
operator licensed to manage the facility.
Risk factors
related to liability claims and insurance costs
Long-term care facility operators (skilled nursing facilities,
assisted living facilities, and independent living/continuing
care retirement communities) have experienced substantial
increases in both the number and size of patient care liability
claims in recent years, particularly in the states of Texas and
Florida. As a result, general and professional liability costs
have increased and may continue to increase. Long-term care
liability insurance rates have increased nationwide because of
large jury awards in states like Texas and Florida. Over the
past four years, both Texas and Florida have adopted skilled
nursing facility liability laws that modify or limit tort
damages. Despite some of these reforms, the long-term care
industry overall continues to experience very high general and
professional liability costs. Insurance companies have responded
to this claims crisis by severely restricting their capacity to
write long-term care general and professional liability
policies. No assurances can be given that the climate for
long-term care general and professional liability insurance will
improve in any of the foregoing states or any other states where
the facility operators conduct business. Insurance companies may
continue to reduce or stop writing general and professional
liability policies for long-term care facilities. Thus, general
professional liability insurance coverage may be restricted or
very costly, which may adversely affect the facility
operators future operations, cash flows and financial
condition, and may have a material adverse effect on the
facility operators ability to meet their obligations to us.
S-11
Risk
factors
Risk factors
related to acquisitions
We are exposed to the risk that our future acquisitions may not
prove to be successful. We could encounter unanticipated
difficulties and expenditures relating to any acquired
properties, including contingent liabilities, and newly acquired
properties might require significant management attention that
would otherwise be devoted to our ongoing business. If we agree
to provide construction funding to an operator and the project
is not completed, we may need to take steps to ensure completion
of the project or we could lose the property. These costs may
negatively affect our results of operations. Moreover, if we
issue equity securities or incur additional debt, or both, to
finance future acquisitions, it may reduce our per share
financial results.
Risk factors
related to environmental laws
Under various federal and state laws, owners or operators of
real estate may be required to respond to the release of
hazardous substances on the property and may be held liable for
property damage, personal injuries or penalties that result from
environmental contamination. These laws also expose us to the
possibility that we may become liable to reimburse the
government for damages and costs it incurs in connection with
the contamination. Generally, such liability attaches to a
person based on the persons relationship to the property.
Our tenants or borrowers are primarily responsible for the
condition of the property and since we are a passive landlord,
we do not participate in the management of any
property in which we have an interest. Moreover, we review
environmental site assessments of the properties that we own or
encumber prior to taking an interest in them. Those assessments
are designed to meet the all appropriate inquiry
standard, which qualifies us for the innocent purchaser defense
if environmental liabilities arise. Based upon such assessments,
we do not believe that any of our properties are subject to
material environmental contamination. However, environmental
liabilities may be present in our properties and we may incur
costs to remediate contamination, which could have a material
adverse effect on our business or financial condition.
Risk factors
related to reinvestment of sale proceeds
From time to time, we will have cash available from (1) the
proceeds of sales of our securities, (2) principal payments
on our loans receivable and (3) the sale of properties,
including non-elective dispositions, under the terms of master
leases or similar financial support arrangements. We must
re-invest these proceeds, on a timely basis, in properties or in
qualified short-term investments. We compete for real estate
investments with a broad variety of potential investors. This
competition for attractive investments may negatively affect our
ability to make timely investments on terms acceptable to us.
Delays in acquiring properties may negatively impact revenues
and perhaps our ability to make distributions to stockholders.
Other risk
factors related to our business
We are subject to a number of other risks related to our
business. First, we might fail to qualify or remain qualified as
a REIT. We intend to operate as a REIT under the Internal
Revenue Code and believe we have and will continue to operate in
such a manner. Since REIT qualification requires us to meet a
number of complex requirements, it is possible that we may fail
to fulfill them, and if we do, our earnings will be reduced by
the amount of federal taxes owed. A reduction in our earnings
would affect the amount we could distribute to our stockholders.
Also, if we were not a REIT, we would not be required to make
distributions to stockholders since a non-REIT is not required
to pay dividends to stockholders amounting to at least 90% of
its annual taxable income (including 100% of capital gains).
Second, our certificate of incorporation and by-laws contain
anti-takeover provisions (staggered board provisions,
restrictions on share ownership and transfer and super majority
stockholder approval requirements for business combinations)
that could make it more difficult for or even prevent a third
S-12
Risk
factors
party from acquiring us without the approval of our incumbent
board of directors. Provisions and agreements that inhibit or
discourage takeover attempts could reduce the market value of
our common stock.
Third, we are dependent on key personnel. Although we have
entered into employment agreements with our executive officers,
losing any one of them could, at least temporarily, have an
adverse impact on our operations. We believe that losing more
than one would have a material adverse impact on our business.
RISKS RELATED TO
THE MERGERS
We may not
consummate the mergers.
The merger agreement that we entered into with Windrose is
subject to a number of conditions, including, among other
things, the approval of Windroses shareholders. If the
transaction with Windrose is not consummated, our growth
prospects may be negatively impacted. Accordingly, in making an
investment decision to purchase the notes, you should consider
our operations both on a stand-alone basis and on a combined
basis with Windrose and consider the possibility that the
transaction with Windrose may not be consummated.
The closing of
the mergers poses risks for the ongoing operations of Health
Care REIT, including that:
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-
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following the mergers, we may not achieve expected cost savings
and operating efficiencies, such as the elimination of redundant
administrative costs;
|
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|
-
|
the Windrose portfolio may not perform as well as we anticipate
due to various factors, including changes in macro-economic
conditions and the demand for specialty medical properties;
|
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|
-
|
unforeseen difficulties may arise in integrating Windrose assets
into our portfolio due to differences in the types of facilities
in which we and Windrose invest; and
|
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|
-
|
we may not effectively integrate Windroses operations and
systems, including its accounting systems.
|
If we fail to successfully integrate Windrose
and/or to
realize the intended benefits of the mergers, the market price
of our common stock could decline from its market price after
the mergers, and this may depress the trading price of the notes.
If the IRS
successfully asserts that we were not or will not continue to be
qualified as a REIT, or that Windrose is not a REIT at the
effective time of the mergers, we will incur adverse tax
consequences.
We have been organized as, and believe that our past and present
operations qualifies us as, a REIT. In addition, following the
mergers, we intend to operate in a manner that will allow us to
continue to qualify as a REIT. However, qualification as a REIT
involves the application of highly technical and complex Code
provisions for which there are only limited judicial or
administrative interpretations and involves the determination of
various factual matters and circumstances not entirely within
our control. If we fail to qualify as a REIT, we will not be
allowed a deduction for dividends paid to stockholders in
computing taxable income and will become subject to federal
income tax at regular corporate tax rates. In such an event, we
could be subject to potentially significant tax liabilities.
Unless entitled to relief under certain statutory provisions, we
will also be disqualified from treatment as a REIT for the four
taxable years following the year in which we lost our
qualification. If Windrose fails to qualify as a REIT at the
time of the mergers, we will be subject to tax at the highest
regular corporate rate on the
S-13
Risk
factors
built-in gain on each Windrose asset existing at the time of the
mergers if we were to dispose of the asset within the ten-year
period following the merger.
RISKS RELATED TO
THE NOTES AND OUR COMMON STOCK
Our business
operations may not generate the cash needed to service our
indebtedness.
We cannot assure you that our business will generate sufficient
cash flow from operations or that future borrowings will enable
us to pay our indebtedness, including the notes we are offering
in this prospectus supplement. As adjusted to include the sale
of these notes, assuming the underwriters do not exercise their
over-allotment option, our total consolidated debt as of
September 30, 2006 would have been approximately
$1.6 billion, which would have represented approximately
51% of our total capitalization as of that date. In addition, to
the extent that we complete the mergers, we will assume the
indebtedness and other obligations of Windrose and its
subsidiaries. The indenture for the notes will not restrict our
ability to incur additional indebtedness.
The notes will be
effectively subordinated to our secured indebtedness and
subordinated to all liabilities of our subsidiaries from time to
time outstanding.
The notes are obligations only of Health Care REIT, Inc. and
will not be guaranteed by our subsidiaries or secured by any of
our or their properties or assets. Our subsidiaries, which own
approximately 45% of our real estate investments as of September
30, 2006, are separate legal entities and have no obligation to
pay any amounts due pursuant to the notes.
As of September 30, 2006, our subsidiaries had
approximately $406.4 million of indebtedness and other
obligations (which includes $276 million outstanding under
our unsecured lines of credit arrangements under which we and
certain of our subsidiaries are co-borrowers) that would
effectively rank senior to the notes. In addition, to the extent
that we complete the mergers, the notes may be structurally
subordinated to the indebtedness and other obligations of
Windrose and its subsidiaries. See Description of other
indebtedness.
Volatility of the
market price of our common stock may depress the trading price
of the notes.
Since January 1, 2004, the trading price of our common
stock on the New York Stock Exchange has ranged from a low of
$27.70 per share to a high of $42.24 per share. Because the
notes are convertible into shares of our common stock in certain
circumstances, volatility in the price of our common stock may
depress the trading price of the notes. The risk of volatility
and depressed prices of our common stock also applies to holders
who receive shares of common stock upon conversion of their
notes.
The share price of our common stock depends upon several
factors, including, but not limited to: our financial condition,
performance and prospects; general economic and financial market
conditions; changes in estimates by analysts; the market for
similar securities issued by REITs; and our ability to meet
analysts estimates. In addition, the market price of our
common stock may be affected by future sales of our securities,
including additional issuances of common stock and securities
convertible into common stock.
These factors, among others, could significantly depress the
trading price of the notes and the price of our common stock
issued upon conversion of the notes.
In addition, the price of our common stock could also be
affected by possible sales of our common stock by investors who
view the notes as a more attractive means of equity
participation in us and by hedging or arbitrage trading activity
that we expect to develop involving our common stock. The
hedging or arbitrage could, in turn, affect the trading price of
the notes, or any common stock that holders receive upon
conversion of the notes.
S-14
Risk
factors
The net share
settlement feature of the notes may have adverse
consequences.
The net share settlement feature of the notes, as described
under Description of notesConversion
RightsPayment upon conversion, may:
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result in holders receiving no shares upon conversion or fewer
shares relative to the conversion value of the notes;
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reduce our liquidity;
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delay holders receipt of the consideration due upon
conversion; and
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subject holders to market risk before receiving any shares upon
conversion.
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If the notes are convertible, upon conversion, holders will
receive cash and, if applicable, shares of our common stock
based on the sum of the daily settlement amounts
described in this prospectus supplement for the 20 consecutive
trading days that begins on, and includes, the third trading day
after the day the notes are tendered for conversion, subject to
certain exceptions in connection with conversions during a
period immediately preceding the maturity date of the notes as
described in this prospectus supplement. We refer to this 20
trading day period as the cash settlement averaging
period.
We will generally deliver the cash and, if applicable, shares of
common stock issuable upon conversion as soon as practicable,
but in no event more than three business days after the last
trading day in the cash settlement averaging period, which will
generally be at least 22 trading days after the date holders
tender their notes for conversion. In addition, because the
consideration due upon conversion is based in part on the
trading prices of our common stock during the cash settlement
averaging period, any decrease in the price of our common stock
after you tender your notes for conversion may significantly
decrease the value of the consideration you receive.
Furthermore, because we must settle at least a portion of our
conversion obligation in cash, the conversion of notes may
significantly reduce our liquidity.
The conversion
rate of the notes may not be adjusted for all dilutive events
that may occur.
As described under Description of notesConversion
RightsAdjustments to the conversion rate, we will
adjust the conversion rate of the notes for certain events,
including, among others:
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the issuance of stock dividends on our common stock;
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the issuance of certain rights or warrants;
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certain subdivisions and combinations of our capital stock;
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certain cash dividends;
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the distribution of capital stock, indebtedness or
assets; and
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certain tender or exchange offers.
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We will not adjust the conversion rate for other events, such as
an issuance of common stock for cash or in connection with an
acquisition, that may adversely affect the trading price of the
notes or our common stock. If we engage in any of these types of
transactions, the value of the common stock into which your
notes may be convertible may be diluted. An event that adversely
affects the value of the notes, but does not result in an
adjustment to the conversion rate may occur.
S-15
Risk
factors
The increase in
the conversion rate applicable to notes that holders convert in
connection with a make-whole fundamental change may not
adequately compensate you for the lost option time value of your
notes as a result of that fundamental change.
If a make-whole fundamental change occurs before
December 1, 2011, we will under certain circumstances
increase the conversion rate applicable to holders who convert
their notes within a specified time frame. The amount of the
increase in the conversion rate depends on the date when the
fundamental change becomes effective and the applicable price
described in this prospectus supplement. See Description
of notesConversion RightsAdjustment to the
conversion rate upon the occurrence of a make-whole fundamental
change.
Although the increase in the conversion rate is designed to
compensate you for the lost option time value of your notes as a
result of the make-whole fundamental change, the increase in the
conversion rate is only an approximation of the lost value and
may not adequately compensate you for the loss. In addition, you
will not be entitled to an increased conversion rate if:
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the make-whole fundamental change occurs on or after
December 1, 2011;
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you surrender a note for conversion in connection with a
make-whole fundamental change we have announced, but the
make-whole fundamental change is not consummated; or
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the applicable price is greater
than
per share or less
than per
share (in each case, subject to adjustment).
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Furthermore, a holder may not receive the additional
consideration payable as a result of the increase in the
conversion rate until the third business day after the effective
date of the make-whole fundamental change, or even later, which
could be a significant period of time after the date the holder
has tendered its notes for conversion. In addition, we will not
increase the conversion rate, with respect to a make-whole
fundamental change, to an amount (subject to adjustment) that
exceeds shares
per $1,000 principal amount of notes. Our obligation to increase
the conversion rate as described above also could be considered
a penalty, in which case its enforceability would be subject to
general principles of reasonableness of economic remedies.
We may not have
the ability to purchase the notes on the purchase dates or upon
a fundamental change or to pay the cash payment due upon
conversion.
On each of December 1, 2011, December 1, 2016 and
December 1, 2021, holders may require us to purchase, for
cash, all or a portion of their notes at 100% of their principal
amount, plus any accrued and unpaid interest to, but excluding,
that date. If a fundamental change occurs, holders of the notes
may require us to repurchase, for cash, all or a portion of
their notes at 100% of their principal amount, plus any accrued
and unpaid interest to, but excluding, that date. In addition,
upon conversion of the notes, we must pay the principal return
in cash. We may not have sufficient funds to pay the repurchase
price or principal return when due. In addition, the terms of
any borrowing agreements which we may enter into from time to
time may require early repayment of borrowings under
circumstances similar to those constituting a fundamental
change. These agreements may also make our repurchase of notes,
or the cash payment due upon conversion of the notes, an event
of default under the agreements. If we fail to repurchase the
notes or pay the cash payment due upon conversion when required,
we will be in default under the indenture governing the notes.
See Description of notesConversion Rights,
Description of notesPurchase of Notes by Us at the
Option of the Holder and Description of
notesHolders May Require Us to Repurchase Their
Notes Upon a Fundamental Change.
S-16
Risk
factors
You may not be
able to convert your notes into cash and, if applicable, shares
of our common stock before November 1, 2026, other than
during the period from November 1, 2011 to December 1,
2011, and the value of the notes could be less than the value of
the common stock into which your notes could otherwise be
converted.
Prior to November 1, 2026, other than during the period
from November 1, 2011 to December 1, 2011, the notes
are convertible into cash and, if applicable, shares of our
common stock only if specified conditions are met. These
conditions may not be met. If these conditions for conversion
are not met, you will not be able to convert your notes and you
may not be able to receive the value of the common stock into
which the notes would otherwise be convertible. In addition, for
these and other reasons, the trading price of the notes could be
substantially less than the conversion value of the notes.
We have made only
limited covenants in the indenture for the notes, and these
limited covenants may not protect your investment.
The indenture for the notes does not:
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require us to maintain any financial ratios or specific levels
of net worth, revenues, income, cash flows or liquidity and,
accordingly, does not protect holders of the notes in the event
that we experience significant adverse changes in our financial
condition or results of operations;
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limit our subsidiaries ability to incur indebtedness which
would effectively rank senior to the notes;
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limit our ability to incur secured indebtedness or indebtedness
that is equal in right of payment to the notes;
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restrict our subsidiaries ability to issue securities that
would be senior to the common stock of our subsidiaries held by
us;
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restrict our ability to repurchase our securities;
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restrict our ability to pledge our assets or those of our
subsidiaries; or
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restrict our ability to make investments or to pay dividends or
make other payments in respect of our common stock or other
securities ranking junior to the notes.
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Furthermore, the indenture for the notes contains only limited
protections in the event of a change in control. We could engage
in many types of transactions, such as acquisitions,
refinancings or recapitalizations, that could substantially
affect our capital structure and the value of the notes and our
common stock but would not constitute a fundamental
change that permits holders to require us to repurchase
their notes. For these reasons, you should not consider the
covenants in the indenture or the repurchase feature of the
notes as a significant factor in evaluating whether to invest in
the notes.
If an active and
liquid trading market for the notes does not develop, the market
price of the notes may decline and you may be unable to sell
your notes.
The notes are a new issue of securities for which there is
currently no public market. We do not intend to list the notes
on any national securities exchange. An active trading market
may not develop for the notes. Even if a trading market for the
notes develops, the market may not be liquid. If an active
trading market does not develop, you may be unable to resell
your notes or may only be able to sell them at a substantial
discount.
We may invest or
spend the proceeds in this offering in ways with which you may
not agree and in ways that may not earn a profit.
We intend to use the net proceeds from this offering to invest
in additional health care and senior housing properties, and,
pending such use, the net proceeds primarily will be used to
repay borrowings under our unsecured lines of credit
arrangements. However, we will retain broad discretion over the
use
S-17
Risk
factors
of the proceeds from this offering. You may not agree with the
ways we decide to use these proceeds, and our use of the
proceeds may not yield any profits.
Ownership
limitations in our by-laws and certificates of designation may
impair the ability of holders to convert notes into our common
stock.
In order to assist us in maintaining our qualification as a REIT
for U.S. federal income tax purposes, no person may own, or
be deemed to own by virtue of the attribution rules of the
Internal Revenue Code, more than 9.8% of the value of our
outstanding capital stock, subject to certain exceptions. For
this purpose, all options, warrants, convertible securities or
other rights to acquire our common stock will be treated as if
all such rights had been exercised. Notwithstanding any other
provision of the notes, no holder of notes will be entitled to
convert such notes for our common stock to the extent that
receipt of our common stock would cause the holder (together
with the holders affiliates) to exceed the ownership limit
contained in our by-laws (with respect to our common stock and
preferred stock) and our certificates of designation (with
respect to our preferred stock). See Restrictions on
Transfer of Securities in the accompanying prospectus.
Provisions in the
indenture for the notes, our certificate of incorporation and
by-laws and Delaware law could discourage an acquisition of us
by a third party, even if the acquisition would be favorable to
you.
If a fundamental change (as defined in the
indenture) occurs, holders of the notes will have the right, at
their option, to require us to repurchase all or a portion of
their notes. In the event of a make-whole fundamental
change, we also may be required to increase the conversion
rate applicable to notes surrendered for conversion in
connection with such make-whole fundamental change. In addition,
the indenture for the notes prohibits us from engaging in
certain mergers or acquisitions unless, among other things, the
surviving entity assumes our obligations under the notes. These
and other provisions, including the provisions of our charter
documents and Delaware law described under Description of
Certain Provisions of Our Certificate of Incorporation and
By-Laws in the accompanying prospectus could prevent or
deter a third party from acquiring us even where the acquisition
could be beneficial to you.
An adverse rating
of the notes may cause their trading price to fall.
If a rating agency rates the notes, it may assign a rating that
is lower than the ratings assigned to our other debt. Ratings
agencies also may lower ratings on the notes in the future. If
rating agencies assign a
lower-than-expected
rating or reduce, or indicate that they may reduce, their
ratings in the future, the trading price of the notes could
significantly decline.
You may have to
pay U.S. taxes if we adjust the conversion rate in certain
circumstances, even if you do not receive any cash.
We will adjust the conversion rate of the notes for stock splits
and combinations, stock dividends, certain cash dividends and
certain other events that affect our capital structure. See
Description of notesConversion
RightsAdjustments to the conversion rate. If we
adjust the conversion rate, or if we fail to make certain
adjustments, you may be treated as having received a
constructive distribution from us, resulting in taxable income
to you for U.S. federal income tax purposes, even though
you would not receive any cash in connection with the conversion
rate adjustment and even though you might not exercise your
conversion right. See Certain federal income tax
considerations on
page S-61.
We believe that
the notes do not constitute U.S. real property
interests and therefore we currently would not be required
to withhold on payments to non-U.S. holders under the
S-18
Risk
factors
Foreign
Investment in Real Property Act, or FIRPTA. There can be no
assurance, however, that the notes will not constitute U.S. real
property interests in the future.
Although we are not currently aware of any facts that would
cause our conclusion to change, depending on the facts in
existence at the time of any sale, redemption, repurchase,
conversion, or retirement of notes, it is possible that the
notes could constitute U.S. real property interests. If so,
non-U.S. holders of notes would be subject to withholding on
payments in connection with such a sale, redemption, repurchase,
conversion, or retirement regardless of whether such non-U.S.
holders provide certification documenting their non-U.S. status.
See Certain federal income tax
considerationsNon-U.S. Holders.
As a holder of
notes, you will not be entitled to any rights with respect to
our common stock, but you will be subject to all changes made
with respect to our common stock.
If you hold notes, you will not be entitled to any rights with
respect to our common stock (including, without limitation,
voting rights and rights to receive any dividends or other
distributions on our common stock), but you will be subject to
all changes affecting our common stock. You will have the rights
with respect to our common stock only when we deliver shares of
common stock, if any, to you upon conversion of your notes. For
example, in the event that an amendment is proposed to our
certificate of incorporation or by-laws requiring stockholder
approval and the record date for determining the stockholders of
record entitled to vote on the amendment occurs prior to the
date you are deemed to have received common stock, if any, upon
conversion, you will not be entitled to vote on the amendment,
although you will nevertheless be subject to any changes in the
powers, preferences or special rights of our common stock. In
addition, because of the contingent conversion and net share
settlement features of the notes, you may not be able to convert
your notes other than during the period from November 1,
2011 to December 1, 2011 and the one month period
immediately preceding the maturity date, and you may not receive
any shares upon conversion.
Holders of our
outstanding shares of preferred stock have, and holders of any
future outstanding shares of preferred stock will have,
liquidation, dividend and other rights that are senior to the
rights of the holders of our common stock.
Since our board of directors has the authority to designate and
issue preferred stock with liquidation, dividend and other
rights that are senior to those of our common stock, our issued
and outstanding shares of preferred stock, as well as any that
may be issued in the future, would receive, upon our voluntary
or involuntary liquidation, dissolution or winding up, before
any payment is made to holders of our common stock, their
liquidation preferences as well as any accrued and unpaid
distributions. These payments would reduce the remaining amount
of our assets, if any, available for distribution to holders of
our common stock.
Our ability to
pay dividends in the future is subject to many
factors.
Our ability to pay dividends may be impaired if any of the risks
described in this prospectus supplement and the accompanying
prospectus or incorporated by reference herein and in the
accompanying prospectus, were to occur. In addition, payment of
our dividends depends upon our earnings, our financial
condition, maintenance of our REIT status and other factors as
our board of directors may deem relevant from time to time.
S-19
Forward-looking
statements
This prospectus supplement and the documents incorporated by
reference contain statements that constitute
forward-looking statements as that term is defined
in the 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 our earnings guidance.
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For example, when we use words such as may,
will, intend, should,
believe, expect, anticipate,
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 the risks discussed above, in the sections captioned
Risk factors in this prospectus supplement and
Cautionary Statement Concerning Forward-Looking Statements
and Risk Factors in the accompanying prospectus and the
documents that are incorporated herein by reference.
S-20
Ratio of earnings to
fixed charges
The table below sets forth our ratio of earnings to fixed
charges for the periods indicated. The ratio of earnings to
fixed charges was computed by dividing earnings by our fixed
charges. For purposes of calculating this ratio,
earnings includes pretax income from continuing
operations before extraordinary items, 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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Nine months
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ended
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Year ended
December 31,
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September 30,
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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
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Consolidated ratio of earnings to
fixed charges (unaudited)
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2.37
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2.24
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2.13
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2.03
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1.89
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1.77
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1.96
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S-21
Use of proceeds
The net proceeds from the sale of the notes will be
approximately $293.6 million, after deducting underwriting
discounts and commissions and our estimated offering expenses.
We intend to use the net proceeds to invest in additional health
care and senior housing properties. Pending such use, we intend
to use the net proceeds primarily to repay borrowings under our
unsecured lines of credit arrangements and other outstanding
indebtedness. As of November 10, 2006, we had an
outstanding balance of $208.5 million under our unsecured
lines of credit arrangements bearing interest at an average rate
of 6.3%.
Affiliates of certain of the underwriters are lenders under our
Third Amended and Restated Loan Agreement, dated as of
July 26, 2006, as amended. Pending investments in
additional properties, we intend to use the net proceeds of this
offering primarily to repay borrowings under such agreement. See
Underwriting. Pending their ultimate use, any net
proceeds from this offering may be invested in short-term,
investment grade, interest-bearing securities, certificates of
deposit or direct or guaranteed obligations of the United States.
S-22
Capitalization
The following table sets forth our capitalization as of
September 30, 2006: on a historical basis; on an as
adjusted basis to give effect to the sale of the notes offered
by this prospectus supplement (assuming no exercise of the
underwriters over-allotment option and not giving effect
to the conversion of the notes); and on a pro forma as adjusted
basis to give effect to the sale of the notes offered by this
prospectus supplement (assuming no exercise of the
underwriters over-allotment option and not giving effect
to the conversion of the notes) and the consummation of the
mergers. Completion of the mergers is subject to a number of
conditions, and we cannot assure you that the mergers will be
completed.
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September 30,
2006
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Pro forma
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Actual
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As
adjusted
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as
adjusted
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(in
thousands)
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Cash and cash equivalents
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$
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15,490
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$
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33,090
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$
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27,400
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Debt:
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Borrowings under unsecured lines
of credit
arrangements(1)
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276,000
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0
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71,250
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Senior notes due 2007
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52,500
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52,500
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52,500
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Senior notes due 2008
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42,330
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42,330
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42,330
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Senior notes due 2012
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250,000
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250,000
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250,000
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Senior notes due 2013
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300,000
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300,000
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300,000
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Senior notes due 2015
|
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250,000
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250,000
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250,000
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Senior notes due 2016
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300,000
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300,000
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300,000
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%
convertible senior notes due 2026
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0
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300,000
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300,000
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Liability to subsidiary trust
issuing preferred securities
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0
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0
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53,513
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Other long-term obligations
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130,405
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130,405
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494,951
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|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
1,601,235
|
|
|
|
1,625,235
|
|
|
|
2,114,544
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock, $1.00 par
value; authorized25,000,000 shares
|
|
|
|
|
|
|
|
|
|
|
|
|
Series D Cumulative
Redeemable Preferred Stock; 4,000,000 shares issued and
outstanding
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
100,000
|
|
Series E Cumulative
Convertible and Redeemable Preferred Stock; 74,989 shares
issued and outstanding
|
|
|
1,875
|
|
|
|
1,875
|
|
|
|
1,875
|
|
Series F Cumulative
Redeemable Preferred Stock; 7,000,000 shares issued and
outstanding
|
|
|
175,000
|
|
|
|
175,000
|
|
|
|
175,000
|
|
Series G Cumulative
Convertible Preferred Stock; 2,100,000 shares issued and
outstanding
|
|
|
0
|
|
|
|
0
|
|
|
|
52,500
|
|
Common Stock, $1.00 par
value; authorized 125,000,000 shares;
63,143,473 shares issued; 63,067,226 shares
outstanding(2)
|
|
|
63,005
|
|
|
|
63,005
|
|
|
|
72,881
|
|
Capital in excess of par value
|
|
|
1,469,491
|
|
|
|
1,469,491
|
|
|
|
1,848,792
|
|
Treasury stock
|
|
|
(2,714
|
)
|
|
|
(2,714
|
)
|
|
|
(2,714
|
)
|
Cumulative net income
|
|
|
909,894
|
|
|
|
909,894
|
|
|
|
904,221
|
|
Cumulative dividends
|
|
|
(1,171,302
|
)
|
|
|
(1,171,302
|
)
|
|
|
(1,171,302
|
)
|
Accumulated other comprehensive
income
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Other equity
|
|
|
1,720
|
|
|
|
1,720
|
|
|
|
1,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
1,546,969
|
|
|
|
1,546,969
|
|
|
|
1,982,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
3,148,204
|
|
|
$
|
3,172,204
|
|
|
$
|
4,097,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(footnotes on following
page)
S-23
Capitalization
|
|
|
(1) |
|
$208.5 million was outstanding under our unsecured lines
of credit arrangements at November 10, 2006. |
|
(2) |
|
Excludes: (i) 587,961 shares of common stock
reserved for issuance that relate to outstanding options under
our 1995 Stock Incentive Plan and our 2005 Long-Term Incentive
Plan; (ii) 38,331 shares of common stock reserved for
issuance that relate to outstanding options under our Stock Plan
for Non-Employee Directors; (iii) 1,634,404 shares of
common stock reserved for issuance under our dividend
reinvestment and stock purchase plan; and
(iv) 57,401 shares of common stock reserved for
issuance that relate to the Series E Cumulative Convertible
and Redeemable Preferred Stock. |
You should read this table in conjunction with the
Managements Discussion and Analysis of Financial
Condition and Results of Operations contained in our
Annual Report on
Form 10-K
for the year ended December 31, 2005, as updated by our
Current Report on
Form 8-K
dated October 20, 2006, and Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2006 and our
consolidated financial statements, related notes and other
financial information that we have incorporated by reference
into this prospectus supplement and the accompanying prospectus.
S-24
Price range of
shares and dividend history
Our common stock is traded on the New York Stock Exchange under
the symbol HCN. As of September 30, 2006, there
were 5,757 holders of record of our common stock. The following
table sets forth, for the periods shown, the high and low sale
prices of our common stock as reported by the NYSE, for the
periods indicated, and cash dividends per share. On
November 10, 2006, the last reported sale price of our
common stock as reported by the NYSE was $39.56 per share.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price of
shares
|
|
|
Dividends
|
|
|
High
|
|
|
Low
|
|
|
per
share
|
|
|
Year Ended December 31, 2003
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
27.92
|
|
|
$
|
24.84
|
|
|
$
|
0.585
|
Second Quarter
|
|
|
30.73
|
|
|
|
26.10
|
|
|
|
0.585
|
Third Quarter
|
|
|
31.82
|
|
|
|
29.25
|
|
|
|
0.585
|
Fourth Quarter
|
|
|
36.10
|
|
|
|
30.68
|
|
|
|
0.585
|
Year Ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
40.65
|
|
|
$
|
35.77
|
|
|
$
|
0.585
|
Second Quarter
|
|
|
40.88
|
|
|
|
27.70
|
|
|
|
0.600
|
Third Quarter
|
|
|
35.20
|
|
|
|
31.11
|
|
|
|
0.600
|
Fourth Quarter
|
|
|
38.15
|
|
|
|
34.41
|
|
|
|
0.600
|
Year Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
38.04
|
|
|
$
|
31.15
|
|
|
$
|
0.600
|
Second Quarter
|
|
|
37.99
|
|
|
|
31.69
|
|
|
|
0.620
|
Third Quarter
|
|
|
39.20
|
|
|
|
35.13
|
|
|
|
0.620
|
Fourth Quarter
|
|
|
37.37
|
|
|
|
33.35
|
|
|
|
0.620
|
Year Ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
38.50
|
|
|
$
|
33.68
|
|
|
$
|
0.620
|
Second Quarter
|
|
|
38.09
|
|
|
|
32.80
|
|
|
|
0.640
|
Third Quarter
|
|
|
40.12
|
|
|
|
34.55
|
|
|
|
0.640
|
Fourth Quarter (through
November 10, 2006)
|
|
|
42.24
|
|
|
|
39.05
|
|
|
|
*
|
|
|
|
* |
|
The current annualized dividend rate is $0.64. The next
quarterly dividend will be paid on November 20, 2006 to
stockholders of record as of October 31, 2006 and will
represent our 142nd consecutive quarterly dividend
payment. |
Under the real estate investment trust rules of the Internal
Revenue Code, we are required to pay at least 90% of our
ordinary taxable income (including 100% of capital gains) as
dividends in order to avoid taxation as a corporation. The
declaration of dividends is at the discretion of our board of
directors and depends upon our distributable funds, financial
requirements, tax considerations and other factors. Decisions
with respect to the distribution of capital gains are made on a
case-by-case
basis. A portion of our dividends paid may be deemed either
capital gain income or a return of capital, or both, to our
stockholders. We provide our stockholders with an annual
statement which designates the taxability of their dividends.
We have a dividend reinvestment and stock purchase plan under
which stockholders of record may invest all or a portion of
their dividends and up to an additional $5,000 per month to
purchase additional shares. Additionally, investors who are not
stockholders of the Company may use this plan to make an initial
investment in the Companys shares of up to $5,000. We have
the discretion to grant waivers for purchases in excess of
$5,000.
S-25
Selected
consolidated financial data
SELECTED
HISTORICAL CONSOLIDATED FINANCIAL DATA OF HEALTH CARE
REIT
The selected historical consolidated financial data set forth
below should be read in conjunction with
Capitalization and Prospectus supplement
summaryRecent developments, as well as the other
information that we have filed with the SEC and incorporated by
reference herein. See Where you can find additional
information beginning on
page S-71.
The selected historical consolidated financial data for each of
the years in the five-year period ended December 31, 2005
have been derived from our audited consolidated financial
statements. These financial statements have been audited by
Ernst & Young LLP, our independent registered public
accounting firm. The following selected historical consolidated
financial data as of and for the nine months ended
September 30, 2006 and 2005 have been derived from our
unaudited interim consolidated financial statements. In the
opinion of our management, the unaudited interim consolidated
financial statements have been prepared on the same basis as the
audited consolidated financial statements and include all
adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of the financial position and
results of operations as of such dates and for such periods.
Results for the interim periods are not necessarily indicative
of the results to be expected for the full year. This
information is only a summary, and should be read together with,
and is qualified in its entirety by reference to, our historical
consolidated financial statements and notes thereto and the
Managements Discussion and Analysis of Financial
Condition and Results of Operations included in our
Quarterly Report on
Form 10-Q
for the quarterly period ended September 30, 2006 and our
Annual Report on
Form 10-K
for the year ended December 31, 2005, as updated by our
Current Report on
Form 8-K
filed October 20, 2006, which are incorporated by reference
herein. Amounts are in thousands, except per share data.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
December 31,
|
|
|
Nine months ended
September 30,
|
|
|
|
2001
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2005
|
|
|
2006
|
|
|
|
|
Operating Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
103,393
|
|
|
$
|
132,782
|
|
|
$
|
178,560
|
|
|
$
|
232,453
|
|
|
$
|
275,317
|
|
|
$
|
198,951
|
|
|
$
|
236,229
|
|
Income from continuing operations
available to common stockholders
|
|
|
35,092
|
|
|
|
43,244
|
|
|
|
57,617
|
|
|
|
67,098
|
|
|
|
55,427
|
|
|
|
33,554
|
|
|
|
59,922
|
|
Net income available to common
stockholders
|
|
|
47,044
|
|
|
|
55,191
|
|
|
|
70,732
|
|
|
|
72,634
|
|
|
|
62,692
|
|
|
|
36,105
|
|
|
|
63,793
|
|
Per Share Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
available to common stockholders
|
|
$
|
1.15
|
|
|
$
|
1.18
|
|
|
$
|
1.32
|
|
|
$
|
1.30
|
|
|
$
|
1.02
|
|
|
$
|
0.63
|
|
|
$
|
0.99
|
|
Net income available to common
stockholders
|
|
$
|
1.54
|
|
|
$
|
1.50
|
|
|
$
|
1.62
|
|
|
$
|
1.41
|
|
|
$
|
1.16
|
|
|
$
|
0.67
|
|
|
$
|
1.05
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
available to common stockholders
|
|
$
|
1.13
|
|
|
$
|
1.16
|
|
|
$
|
1.30
|
|
|
$
|
1.29
|
|
|
$
|
1.02
|
|
|
$
|
0.62
|
|
|
$
|
0.98
|
|
Net income available to common
stockholders
|
|
$
|
1.52
|
|
|
$
|
1.48
|
|
|
$
|
1.60
|
|
|
$
|
1.39
|
|
|
$
|
1.15
|
|
|
$
|
0.67
|
|
|
$
|
1.04
|
|
Cash distributions per common share
|
|
$
|
2.34
|
|
|
$
|
2.34
|
|
|
$
|
2.34
|
|
|
$
|
2.385
|
|
|
$
|
2.46
|
|
|
$
|
1.84
|
|
|
$
|
1.90
|
|
S-26
Selected
consolidated financial data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
2001
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2005
|
|
|
2006
|
|
|
|
|
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net real estate investments
|
|
$
|
1,213,564
|
|
|
$
|
1,524,457
|
|
|
$
|
1,992,446
|
|
|
$
|
2,441,972
|
|
|
$
|
2,849,518
|
|
|
$
|
2,616,288
|
|
|
$
|
3,094,828
|
|
Total assets
|
|
|
1,267,543
|
|
|
|
1,591,482
|
|
|
|
2,184,088
|
|
|
|
2,552,171
|
|
|
|
2,972,164
|
|
|
|
2,736,898
|
|
|
|
3,200,829
|
|
Total debt
|
|
|
488,916
|
|
|
|
673,703
|
|
|
|
1,014,541
|
|
|
|
1,192,958
|
|
|
|
1,500,818
|
|
|
|
1,373,154
|
|
|
|
1,603,302
|
|
Total liabilities
|
|
|
509,673
|
|
|
|
694,250
|
|
|
|
1,034,409
|
|
|
|
1,216,892
|
|
|
|
1,541,408
|
|
|
|
1,417,202
|
|
|
|
1,653,860
|
|
Total stockholders equity
|
|
|
757,870
|
|
|
|
897,232
|
|
|
|
1,149,679
|
|
|
|
1,335,279
|
|
|
|
1,430,756
|
|
|
|
1,319,696
|
|
|
|
1,546,969
|
|
S-27
Selected
consolidated financial data
SELECTED
HISTORICAL CONSOLIDATED FINANCIAL DATA OF WINDROSE
The selected historical consolidated financial data of Windrose
set forth below should be read in conjunction with
Capitalization and Prospectus supplement
summaryRecent developments, as well as the other
information that we have filed with the SEC and incorporated by
reference herein. See Where you can find additional
information beginning on page S-71. The following
selected historical consolidated financial data for
(i) each of the years in the three-year period ended
December 31, 2005 and for the period from August 16,
2002 (inception) to December 31, 2002 for Windrose and
(ii) the period from January 1, 2002 to
August 15, 2002 and the year ended December 31, 2001
for Windroses accounting predecessor, have been derived
from Windroses audited consolidated financial statements.
These financial statements have been audited by KPMG LLP,
Windroses independent registered public accounting firm.
The following selected historical consolidated financial data as
of and for the nine months ended September 30, 2006 and
2005 have been derived from Windroses unaudited interim
consolidated financial statements. In the opinion of
Windroses management, the unaudited interim consolidated
financial statements have been prepared on the same basis as the
audited consolidated financial statements and include all
adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of the financial position and
results of operations as of such dates and for such periods.
Results for the interim periods are not necessarily indicative
of the results to be expected for the full year. This
information is only a summary and should be read together with,
and is qualified in its entirety by reference to,
Windroses historical consolidated financial statements and
notes thereto for the quarterly period ended September 30,
2006 and for the year ended December 31, 2005, as filed
with our Current Report on
Form 8-K
dated November 13, 2006, which is incorporated by reference
herein. Amounts are in thousands, except per share data.
Completion of the mergers is subject to a number of conditions,
and we cannot assure you that the mergers will be completed.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 16,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
January 1,
2002
|
|
|
(inception) to
|
|
|
Year ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
through
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2001
|
|
|
August 15,
2002
|
|
|
2002
|
|
|
2002
|
|
|
Year ended
December 31,
|
|
|
Nine months ended
September 30,
|
|
|
|
|
|
|
|
|
|
(Predecessor)
|
|
|
(Predecessor)
|
|
|
(Windrose)
|
|
|
(Combined)
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2005
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
Operating Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues(1)
|
|
$
|
4,568
|
|
|
$
|
4,145
|
|
|
$
|
9,901
|
|
|
$
|
14,046
|
|
|
$
|
17,485
|
|
|
$
|
32,261
|
|
|
$
|
50,122
|
|
|
$
|
33,680
|
|
|
$
|
70,049
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations available to common shareholders
|
|
|
(51
|
)
|
|
|
(1,016
|
)
|
|
|
43
|
|
|
|
(972
|
)
|
|
|
1,106
|
|
|
|
3,651
|
|
|
|
2,783
|
|
|
|
2,692
|
|
|
|
(724
|
)
|
|
|
|
|
|
|
|
|
Net income (loss) available to
common shareholders
|
|
|
(51
|
)
|
|
|
(1,016
|
)
|
|
|
43
|
|
|
|
(972
|
)
|
|
|
1,248
|
|
|
|
4,053
|
|
|
|
4,018
|
|
|
|
3,933
|
|
|
|
(724
|
)
|
|
|
|
|
|
|
|
|
Per Share Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations available to common shareholders
|
|
|
|
|
|
|
|
|
|
$
|
0.01
|
|
|
|
|
|
|
$
|
0.19
|
|
|
$
|
0.35
|
|
|
$
|
0.20
|
|
|
$
|
0.21
|
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
Net income (loss) available to
common shareholders
|
|
|
|
|
|
|
|
|
|
$
|
0.01
|
|
|
|
|
|
|
$
|
0.21
|
|
|
$
|
0.39
|
|
|
$
|
0.29
|
|
|
$
|
0.30
|
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
S-28
Selected
consolidated financial data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 16,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
January 1,
2002
|
|
|
(inception) to
|
|
|
Year ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
through
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2001
|
|
|
August 15,
2002
|
|
|
2002
|
|
|
2002
|
|
|
Year ended
December 31,
|
|
|
Nine months ended
September 30,
|
|
|
|
|
|
|
|
|
|
(Predecessor)
|
|
|
(Predecessor)
|
|
|
(Windrose)
|
|
|
(Combined)
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2005
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations available to common shareholders
|
|
|
|
|
|
|
|
|
|
$
|
0.01
|
|
|
|
|
|
|
$
|
0.19
|
|
|
$
|
0.35
|
|
|
$
|
0.20
|
|
|
$
|
0.21
|
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
Net income (loss) available to
common shareholders
|
|
|
|
|
|
|
|
|
|
$
|
0.01
|
|
|
|
|
|
|
$
|
0.21
|
|
|
$
|
0.39
|
|
|
$
|
0.29
|
|
|
$
|
0.30
|
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
Cash distributions per common share
|
|
|
|
|
|
|
|
|
|
$
|
0.00
|
|
|
|
|
|
|
$
|
0.61
|
|
|
$
|
0.88
|
|
|
$
|
0.90
|
|
|
$
|
0.675
|
|
|
$
|
0.695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2001
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
|
|
|
(Predecessor)
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2005
|
|
|
2006
|
|
|
|
|
|
|
|
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net real estate investments
|
|
$
|
0
|
|
|
$
|
63,565
|
|
|
$
|
162,105
|
|
|
$
|
303,128
|
|
|
$
|
667,841
|
|
|
$
|
419,484
|
|
|
$
|
707,738
|
|
|
|
|
|
Total assets
|
|
|
1,535
|
|
|
|
75,265
|
|
|
|
187,893
|
|
|
|
324,974
|
|
|
|
702,436
|
|
|
|
446,533
|
|
|
|
773,048
|
|
|
|
|
|
Total debt
|
|
|
687
|
|
|
|
9,664
|
|
|
|
76,893
|
|
|
|
187,134
|
|
|
|
435,147
|
|
|
|
228,185
|
|
|
|
468,036
|
|
|
|
|
|
Total liabilities and minority
interests
|
|
|
1,915
|
|
|
|
17,888
|
|
|
|
85,735
|
|
|
|
205,568
|
|
|
|
464,271
|
|
|
|
251,390
|
|
|
|
496,816
|
|
|
|
|
|
Total shareholders equity
(deficit)
|
|
|
(379
|
)
|
|
|
57,377
|
|
|
|
102,158
|
|
|
|
119,406
|
|
|
|
238,165
|
|
|
|
195,143
|
|
|
|
276,232
|
|
|
|
|
|
|
|
|
(1) |
|
Includes reclassifications to conform certain amounts with
our presentation. |
SELECTED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
DATA
The following selected unaudited pro forma condensed
consolidated financial data is presented as if the mergers had
occurred as of January 1, 2005 for income statement
purposes and on September 30, 2006 for balance sheet
purposes. This data should be read in conjunction with, and the
information is qualified in its entirety by, (i) our
historical consolidated financial statements and notes thereto
contained in our Annual Report on
Form 10-K
for the year ended December 31, 2005, as updated by our
Current Report on
Form 8-K
filed on October 20, 2006, (ii) our historical
consolidated financial statements and notes thereto contained in
our Quarterly Report on
Form 10-Q
for the quarterly period ended September 30, 2006, and
(iii) the unaudited pro forma condensed consolidated
financial statements and notes and Windroses historical
consolidated financial statements and notes thereto for the year
ended December 31, 2005 and for the quarterly period ended
September 30, 2006, as filed with our Current Report on
Form 8-K
dated November 13, 2006. Each of the foregoing have been
incorporated by reference herein. Completion of the mergers is
subject to a number of conditions, and we cannot assure you that
the mergers will be completed.
S-29
Selected
consolidated financial data
The pro forma amounts in the table below are presented for
illustrative purposes only. You should not rely on the pro forma
amounts as being indicative of the financial position or results
of operations of the combined company that would have actually
occurred had the mergers been completed as of the dates
indicated above, nor is it necessarily indicative of the future
operating results or financial position of the combined company.
See also Risk factorsRisks Related to the
MergersWe may not consummate the mergers. The pro
forma amounts in the table below have not been adjusted to give
effect to the sale of the notes offered by this prospectus
supplement. Amounts are in thousands, except per share data.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months
|
|
|
|
Year ended
|
|
|
ended
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
2005
|
|
|
2006
|
|
|
|
|
Operating Data
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
359,884
|
|
|
$
|
308,880
|
|
Income from continuing operations
|
|
|
70,179
|
|
|
|
74,147
|
|
Income from continuing operations
available to common stockholders
|
|
|
46,590
|
|
|
|
55,206
|
|
Other Data
|
|
|
|
|
|
|
|
|
Average number of common shares
outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
63,986
|
|
|
|
70,642
|
|
Diluted
|
|
|
64,686
|
|
|
|
71,289
|
|
Per Share Data
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
1.10
|
|
|
$
|
1.05
|
|
Income from continuing operations
available to common stockholders
|
|
$
|
0.73
|
|
|
$
|
0.78
|
|
Diluted:
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
1.08
|
|
|
$
|
1.04
|
|
Income from continuing operations
available to common stockholders
|
|
$
|
0.72
|
|
|
$
|
0.77
|
|
Cash distributions per common share
|
|
$
|
2.46
|
|
|
$
|
1.90
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2006
|
|
|
|
|
Balance Sheet Data
|
|
|
|
|
Net real estate investments
|
|
$
|
4,011,424
|
|
Total assets
|
|
|
4,172,870
|
|
Total debt
|
|
|
2,110,211
|
|
Total liabilities and minority
interests
|
|
|
2,189,897
|
|
Total stockholders equity
|
|
|
1,982,973
|
|
S-30
Management and
directors
The following table sets forth certain information regarding our
Executive Officers and Directors:
Executive
Officers
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Office
|
|
George L. Chapman
|
|
|
59
|
|
|
Chairman and Chief Executive
Officer
|
Raymond W. Braun
|
|
|
48
|
|
|
President
|
Erin C. Ibele
|
|
|
44
|
|
|
Senior Vice
President-Administration and Corporate Secretary
|
Charles J. Herman, Jr.
|
|
|
41
|
|
|
Executive Vice President and Chief
Investment Officer
|
Scott A. Estes
|
|
|
35
|
|
|
Senior Vice President and Chief
Financial Officer
|
Jeffrey H. Miller
|
|
|
46
|
|
|
Executive Vice President and
General Counsel
|
Michael A. Crabtree
|
|
|
49
|
|
|
Vice President and Treasurer
|
Board of
Directors
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
William C. Ballard, Jr.
|
|
|
66
|
|
|
Of Counsel, Greenebaum
Doll & McDonald PLLC and Director of UnitedHealth Group
Incorporated
|
Pier C. Borra
|
|
|
66
|
|
|
Chairman and Chief Executive
Officer of CORA Health Services, Inc.
|
George L. Chapman
|
|
|
59
|
|
|
Chairman and Chief Executive
Officer
|
Thomas J. DeRosa
|
|
|
48
|
|
|
Former Vice-Chairman and Chief
Financial Officer of The Rouse Company and former Global Co-Head
of the Health Care Investment Banking Group of Deutsche Bank
|
Jeffrey H. Donahue
|
|
|
60
|
|
|
President and Chief Executive
Officer of The Enterprise Social Investment Corporation and
former Executive Vice President and Chief Financial Officer of
The Rouse Company
|
Peter J. Grua
|
|
|
52
|
|
|
Managing Partner of HLM Venture
Partners and Director of Renal Care Group, Inc. and DrugMax, Inc.
|
Sharon M. Oster
|
|
|
58
|
|
|
Professor of Management and
Entrepreneurship, Yale University School of Management
|
R. Scott Trumbull
|
|
|
58
|
|
|
Chairman and Chief Executive
Officer of Franklin Electric Co., Inc. and former Executive Vice
President and Chief Financial Officer of Owens-Illinois, Inc.
|
If the mergers with Windrose are completed, (1) Fred S.
Klipsch, Chairman and Chief Executive Officer of Windrose, will
be appointed to the Companys Board of Directors (provided
that such appointment does not violate any applicable legal
requirements or the rules of the NYSE) and will become the Vice
Chairman of the Company, (2) Frederick L. Farrar,
President, Chief Operating Officer and Treasurer of Windrose,
will become an Executive Vice President of the Company and
Senior Vice President of the Medical Properties Division, and
(3) Daniel R. Loftus, Executive Vice President, Secretary
and General Counsel of Windrose, will become a Senior Vice
President of the Company and Executive Vice President of the
Medical Properties Division.
S-31
Description of notes
We will issue the notes under an indenture, to be dated as of
November , 2006, between us and The Bank of New
York Trust Company, N.A., as trustee, as supplemented by a
supplemental indenture thereto, to be dated as of
November , 2006, relating to the notes. We
refer to the indenture as so supplemented as the
indenture. The following summary of the terms of the
notes and the indenture does not purport to be complete and is
subject, and qualified in its entirety by reference, to the
detailed provisions of the notes and the indenture. We will
provide copies of the indenture to you upon request. The
indenture is also available for inspection at the office of the
trustee. The notes and the indenture, and not this description,
define your legal rights as a holder of the notes.
The following description of the particular terms of the notes
supplements and, to the extent inconsistent therewith, replaces
the description of the general terms and provisions of the debt
securities set forth in the accompanying prospectus, to which
reference is hereby made. For purposes of this summary, the
terms Health Care REIT, we,
us and our refer only to Health Care
REIT, Inc. and not to any of its subsidiaries, unless we specify
otherwise.
GENERAL
The notes we are offering:
|
|
-
|
are initially limited to $300 million aggregate principal
amount, or $345 million if the underwriters exercise in
full their over-allotment option; we may, without the consent of
holders of the notes, increase the principal amount of the notes
by issuing additional notes in the future on the same terms and
conditions, except for any difference in the issue price and
interest accrued prior to the issue date of the additional
notes, and with the same CUSIP number as the notes offered
hereby, provided that such additional notes constitute part of
the same issue as the notes offered hereby for U.S. federal
income tax purposes; the notes offered by this prospectus
supplement and the accompanying prospectus and any such
additional notes would rank equally and ratably and would be
treated as a single series of debt securities for all purposes
under the indenture;
|
|
-
|
bear interest at a rate of % per annum, payable
semi-annually in arrears on June 1 and December 1 of
each year, beginning on June 1, 2007, to holders of record
at the close of business on the preceding May 15 and
November 15, respectively, except as described below;
|
|
-
|
will be issued in denominations of integral multiples of $1,000
principal amount;
|
|
-
|
are our unsecured indebtedness and are equal in right of payment
to our senior unsecured indebtedness as described under
Ranking:
|
|
-
|
are convertible into cash and, if applicable, shares of our
common stock based on an initial conversion rate
of shares per $1,000
principal amount of notes (which represents an initial
conversion price of approximately
$ per share) under the conditions
and subject to such adjustments described under
Conversion rights;
|
|
-
|
are redeemable, in whole or in part, by us at any time on or
after December 1, 2011, at a redemption price in cash equal
to 100% of the principal amount of the notes we redeem, plus
accrued and unpaid interest to, but excluding, the redemption
date, as described under Redemption of notes at our
option; the notes are also redeemable at any time prior to
maturity to the extent necessary to preserve our status as a
REIT;
|
|
-
|
are subject to purchase by us at the option of the holder on
each of December 1, 2011, December 1, 2016 and
December 1, 2021, at a purchase price in cash equal to 100%
of the principal amount of the notes to be purchased, plus
accrued and unpaid interest to, but excluding, the purchase
date, as described under Purchase of notes by us at
the option of the holder;
|
|
-
|
are subject to repurchase by us at the option of the holder upon
a fundamental change, as described under Holders may
require us to repurchase their notes upon a fundamental
change, at a
|
S-32
repurchase price in cash equal to 100% of the principal amount
of the notes to be repurchased, plus accrued and unpaid interest
to, but excluding, the fundamental change repurchase
date; and
|
|
- |
mature on December 1, 2026, unless previously redeemed,
repurchased or purchased by us or converted.
|
All cash payments on the notes will be made in U.S. dollars.
We will issue the notes in denominations of integral multiples
of $1,000 principal amount, without coupons. We will initially
issue the notes as global securities in book-entry form. We will
make payments in respect of notes represented by global
securities by wire transfer of immediately available funds to
DTC or its nominee as registered owner of the global securities.
We will make payments in respect of notes that are issued in
certificated form by wire transfer of immediately available
funds to the accounts specified by each holder of more than
$5.0 million aggregate principal amount of notes. However,
if a holder of a certificated note does not specify an account,
or holds $5.0 million or less in aggregate principal amount
of notes, then we will mail a check to that holders
registered address.
You may convert notes at the office of the conversion agent,
present notes for registration of transfer at the office of the
registrar for the notes and present notes for payment at
maturity at the office of the paying agent. We have appointed
the trustee as the initial conversion agent, registrar and
paying agent for the notes.
We will not provide a sinking fund for the notes. The indenture
does not contain any financial covenants and will not limit our
ability to incur additional indebtedness, including senior or
secured indebtedness, pay dividends or repurchase our
securities. In addition, the indenture does not provide any
protection to holders of notes in the event of a highly
leveraged transaction or a change in control, except as, and
only to the limited extent, described under Holders
may require us to repurchase their notes upon a fundamental
change and Consolidation, merger and sale of
assets.
If any payment date with respect to the notes falls on a day
that is not a business day, we will make the payment on the next
business day. The payment made on the next business day will be
treated as though it had been made on the original payment date,
and no interest will accrue on the payment for the additional
period of time.
INTEREST
PAYMENTS
We will pay interest on the notes at a rate
of % per annum, payable semi-annually in arrears
on each June 1 and December 1 of each year, beginning
on June 1, 2007. Except as described below, we will pay
interest that is due on an interest payment date to holders of
record at the close of business on the preceding May 15 and
November 15, respectively. Interest will accrue on the
notes from and including November , 2006 or
from and including the last date in respect of which interest
has been paid or provided for, as the case may be, to, but
excluding, the next interest payment date or maturity date, as
the case may be. We will pay interest on the notes on the basis
of a 360-day
year consisting of twelve
30-day
months.
If notes are converted after a record date but prior to the next
interest payment date, holders of such notes at the close of
business on the record date will, on the corresponding interest
payment date, receive the interest payable on such notes on that
interest payment date notwithstanding the conversion. However, a
holder who surrenders a note for conversion after a record date
but prior to the next interest payment date must pay to the
conversion agent, upon surrender, an amount equal to the amount
of interest payable on the corresponding interest payment date
on the note being converted; provided that no such interest
payment need be made to us:
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if the note is surrendered for conversion after the record date
immediately preceding the final maturity date of that note;
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S-33
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if we have called the note for redemption;
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if we have specified a repurchase date following a fundamental
change that is after a record date but on or prior to the next
interest payment date, and the note is tendered for conversion
after such record date and on or before such interest payment
date; or
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to the extent of any overdue interest, if any overdue interest
exists at the time of conversion with respect to such note.
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CONVERSION
RIGHTS
If the conditions for conversion of the notes described below,
including those described under Conditions for
conversion and Conversion procedures,
are satisfied, holders of notes may, subject to prior maturity,
redemption or repurchase, convert their notes in integral
multiples of $1,000 principal amount into cash in an amount
described below and, if applicable, shares of our common stock,
based on an initial conversion rate
of shares
of our common stock per $1,000 principal amount of notes,
subject to adjustment as described below. This rate results in
an initial conversion price of approximately
$ per share. We will not
issue fractional shares of common stock upon conversion of the
notes and instead will pay a cash adjustment for fractional
shares based on the volume-weighted average price per share of
our common stock on the last trading day of the cash settlement
averaging period. Except as described above, we will not make
any payment or other adjustment on conversion with respect to
any accrued interest on the notes, and we will not adjust the
conversion rate to account for accrued and unpaid interest.
On conversion, the holders of notes will, to the extent they
receive any shares of our common stock upon conversion, receive,
in addition to the consideration that is otherwise due upon
conversion, the rights under any future stockholder rights plan
(i.e., a poison pill) that we may establish, unless the
rights have separated from our common stock at the time of
conversion, in which case the conversion rate will be adjusted
at the time of separation as if we had distributed to all
holders of our common stock shares of our capital stock,
evidences of indebtedness, other assets or certain rights or
warrants as described in the fourth bullet point under
Adjustments to the conversion rate below,
subject to readjustment in the event of the expiration,
termination or redemption of such rights.
In certain circumstances, a holder must pay interest if the
conversion occurs between a record date and an interest payment
date. See Interest Payments above.
The conversion right with respect to any notes we have called
for redemption will expire at the close of business on the last
business day immediately preceding the redemption date, unless
we default in the payment of the redemption price. A note for
which a holder has delivered a purchase notice or a fundamental
change repurchase notice, as described below, requiring us to
purchase the note may be surrendered for conversion only if the
holder withdraws the notice in accordance with the indenture,
unless we default in the payment of the purchase price or
fundamental change repurchase price. In all cases, the right to
convert the notes will terminate at the close of business on the
business day immediately preceding the maturity date.
Conversion
procedures
To convert a certificated note, the holder must complete the
conversion notice on the back of the note and deliver it,
together with the note and any required interest payment, to the
office of the conversion agent for the notes, which will
initially be the office of the trustee. In addition, the holder
must pay any tax or duty payable as a result of any transfer
involving the issuance or delivery of the shares of common stock
in a name other than that of the registered holder of the note.
The note will be deemed to be converted on the date on which the
holder has satisfied all of these requirements. We refer to this
S-34
Description of
notes
date as the conversion date. To convert interests in
a global note, the holder must comply with DTCs then
applicable conversion program procedures.
A holder that has delivered a purchase notice or repurchase
notice with respect to a note, as described below, may convert
that note only if the holder withdraws the notice in accordance
with the indenture. See Purchase of Notes by Us at
the Option of the Holder and Holders May
Require Us to Repurchase Their Notes upon a Fundamental
Change.
We will deliver, through the conversion agent, the cash and, if
applicable, through our transfer agent, shares of common stock
issuable upon conversion as soon as practicable, but in no event
more than three business days after the last trading day in the
cash settlement averaging period described below.
However, if a holder surrenders a note for conversion in
connection with a make-whole fundamental change
under circumstances where we must increase the conversion rate
applicable to that note, then we will deliver, through the
conversion agent, the consideration that is payable on account
of the increase in the conversion rate as soon as practicable,
but in no event after the third business day after the later of:
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the date the holder surrenders the note for conversion;
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the last trading day in the applicable cash settlement averaging
period; and
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the effective date of the make-whole fundamental change.
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See Adjustment to the conversion rate upon the
occurrence of a make-whole fundamental change.
For a discussion of certain tax consequences to a holder that
converts notes, see Certain federal income tax
considerationsConversion of the Notes.
Payment upon
conversion
Holders that tender their notes for conversion will receive cash
and, if applicable, shares of our common stock as follows. Upon
conversion, holders will receive, per $1,000 principal amount
being converted, a settlement amount that is equal
to the sum of the daily settlement amounts (as
described below) for each of the 20 trading days during the
cash settlement averaging period (as described
below).
The cash settlement averaging period with respect to
any note means:
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if the note is converted during the period beginning on the
23rd scheduled trading day prior to the maturity date, the
20 consecutive trading days beginning on, and including, the
20th scheduled trading day prior to the maturity
date; and
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in all other circumstances, the 20 consecutive trading days
beginning on, and including, the third trading day following the
conversion date.
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The daily settlement amount, for each of the 20
trading days during the cash settlement averaging period,
consists of:
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cash equal to the lesser of $50 and the daily conversion
value (as described below); and
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to the extent the daily conversion value exceeds $50, a number
of shares equal to:
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the excess of the daily conversion value over $50, divided by
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the volume-weighted average price per share of our
common stock on that trading day.
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We will deliver cash in lieu of any fractional shares of common
stock based on the volume-weighted average price per share of
our common stock on the last trading day of the cash settlement
averaging period.
S-35
Description of
notes
We refer to the cash due upon conversion as the principal
return, and we refer to the shares, if any, that are due
upon conversion as the net shares. The daily
conversion value on a given trading day generally means
one-twentieth of the product of:
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the applicable conversion rate; and
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the volume-weighted average price per share of our common stock
on that trading day.
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The volume-weighted average price per share of our
common stock on a trading day is the volume-weighted average
price per share of our common stock on the New York Stock
Exchange or, if our common stock is not listed on the New York
Stock Exchange, on the principal exchange or
over-the-counter
market on which our common stock is then listed or traded, from
9:30 a.m. to 4:00 p.m., New York City time, on that
trading day, as displayed by Bloomberg. If such price is not
available, the volume weighted average price means the market
value per share of our common stock on such day as determined by
a nationally recognized investment banking firm retained for
this purpose by us.
Trading day generally means any day during which:
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trading in our common stock generally occurs;
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there is no market disruption event (a described
below); and
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a closing sale price for our common stock is provided on the New
York Stock Exchange or, if our common stock is not then listed
on the New York Stock Exchange, on the principal other
U.S. national or regional securities exchange on which our
common stock is then listed or, if our common stock is not then
listed on a U.S. national or regional securities exchange,
on the principal other market on which our common stock is then
traded.
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Market disruption event generally means either:
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a failure by the primary United States national securities
exchange or market on which our common stock is listed or
admitted to trading to open for trading during its regular
trading session; or
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the occurrence or existence prior to 1:00 p.m. on any
trading day for our common stock for an aggregate of at least 30
minutes of any suspension or limitation imposed on trading (by
reason of movements in price exceeding limits permitted by the
stock exchange or otherwise) in our common stock or in any
options, contracts or future contracts relating to our common
stock.
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We may not have the financial resources, and we may not be able
to arrange for financing, to pay the cash due upon conversion.
Furthermore, payment of cash upon conversion may violate the
terms of our then existing indebtedness. See Risk
factorsRisks Related to the Notes and our Common
StockWe may not have the ability to purchase the notes on
the purchase dates or upon a fundamental change or to pay the
cash payment due upon conversion. Our failure to pay cash
on the notes when converted would result in an event of default
with respect to the notes.
Conditions for
conversion
The notes will become convertible only in certain circumstances,
which we describe below. If the notes become convertible, we
will provide written notice to each holder, at its address
appearing in the security register, and we will publicly
announce, through a reputable national newswire service, and
publish on our website, that the notes have become convertible,
stating, among other things:
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the event causing the notes to become convertible;
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the time during which the notes will be convertible as a result
of that event;
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if that event is a transaction described under
Conversion upon the occurrence of certain corporate
transactions, the anticipated effective date of the
transaction; and
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S-36
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the procedures holders must follow to convert their notes,
including the name and address of the conversion agent.
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We will mail the notice, and make the public announcement and
publication, as soon as practicable, but in no event later than
the open of business on the first date the notes become
convertible as a result of the event. If we fail to mail the
notice or make the public announcement or publication by that
time, then the notes will remain convertible for an additional
business day for each business day, on or after the first date
the notes become convertible, that we fail to mail such notice
or make such public announcement or publication. In addition, if
the event causing the notes to become convertible is a
make-whole fundamental change for which we must increase the
conversion rate applicable to holders that convert their notes
in connection with that make-whole fundamental change, as
described under Adjustment to the conversion rate
upon the occurrence of a make-whole fundamental change,
then the increased conversion rate will continue to apply to
holders that convert their notes during any period that the
convertibility of the notes pursuant to that make-whole
fundamental change is so extended.
Holders may surrender their notes for conversion only in the
circumstances described below. In all cases, the right to
convert the notes will terminate at the close of business on the
business day immediately preceding the maturity date.
Conversion based
on price of common stock
Prior to maturity or earlier redemption or repurchase, holders
may surrender their notes for conversion during any calendar
quarter after the calendar quarter ending December 31,
2006, if the closing sale price (as defined in the
indenture) of our common stock for each of 20 or more trading
days in a period of 30 consecutive trading days ending on
the last trading day of the immediately preceding calendar
quarter exceeds 120% of the conversion price in effect on the
last trading day of the immediately preceding calendar quarter
as determined by us. Our board of directors will make
appropriate adjustments, in its good faith determination, to
account for any adjustment to the conversion rate that becomes
effective, or any event requiring an adjustment to the
conversion rate where the ex date (as defined in the
indenture) of the event occurs, during that 30 consecutive
trading day period.
The closing sale price of our common stock on any
trading day generally means the closing sale price per share of
our common stock (or, if no closing sale price per share is
reported, the average of the bid and ask prices per share or, if
more than one in either case, the average of the average bid and
the average ask prices per share) on such trading day on the
U.S. principal national securities exchange on which our
common stock is listed or, if our common stock is not listed on
a U.S. national securities exchange, as otherwise provided
in the indenture.
Conversion upon
satisfaction of the trading price condition
Prior to maturity or earlier redemption or repurchase, holders
may surrender their notes for conversion during the five
consecutive business days immediately after any five consecutive
trading day period (we refer to this five consecutive trading
day period as the note measurement period) in which
the average trading price per $1,000 principal amount of notes,
as determined by us following a request by a holder of notes in
accordance with the procedures described below, was equal to or
less than 97% of the average conversion value of the notes
during the note measurement period. We refer to this condition
as the trading price condition.
For purposes of the trading price condition, the
conversion value per $1,000 principal amount of
notes on a trading day is the product of the closing sale price
per share of our common stock and the conversion rate of the
notes in effect on that trading day.
S-37
Description of
notes
Except as described below, the trading price of the
notes on any day generally means the average secondary market
bid quotations obtained by the bid solicitation agent for
$5.0 million principal amount of notes at approximately
4:00 p.m., New York City time, on such day from three
independent nationally recognized securities dealers we select.
However, if the bid solicitation agent can reasonably obtain
only two such bids, then the average of the two bids will
instead be used, and if the bid solicitation agent can
reasonably obtain only one such bid, then that one bid will be
used. Even still, if on a given day:
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the bid solicitation agent cannot reasonably obtain at least one
bid for $5.0 million principal amount of notes from an
independent nationally recognized securities dealer; or
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in the reasonable, good faith judgment of our board of
directors, the bid quotation or quotations that the bid
solicitation agent has obtained are not indicative of the
secondary market value of the notes,
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then the trading price per $1,000 principal amount of notes will
be deemed to be equal to 97% of the product of the closing sale
price of our common stock on that day and the conversion rate in
effect on that day.
The bid solicitation agent will have no obligation to determine
the trading price of the notes unless we have requested it to do
so, and we will have no obligation to make such request unless a
holder of at least $1.0 million in aggregate principal
amount of notes provides us with reasonable evidence that the
trading price per $1,000 principal amount of notes would be
equal to or less than 97% of the conversion value of the notes.
At such time, we will instruct the bid solicitation agent to
determine the trading price of the notes for each of the next
five trading days and on each following trading day until the
trading price condition is no longer satisfied.
Conversion based
on redemption
If we call a note for redemption, the holder of that note may
surrender the note for conversion at any time before the close
of business on the business day immediately preceding the
redemption date.
Conversion upon
the occurrence of certain corporate transactions
If:
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a fundamental change, as described under
Holders may require us to repurchase their notes
upon a fundamental change, or a make-whole
fundamental change, as described under
Adjustment to the conversion rate upon the
occurrence of a make-whole fundamental change
occurs; or
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we are party to a consolidation, amalgamation, statutory
arrangement, merger or binding share exchange pursuant to which
our common stock would be converted into or exchanged for, or
would constitute solely the right to receive, cash, securities
or other property,
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then a holder may surrender its notes for conversion at any time
during the period that begins on, and includes, the
30th day before the date we originally announce as the
anticipated effective date of the transaction and ends on, and
includes, the 30th day after the actual effective date of
the transaction. In addition, if the transaction is a
make-whole fundamental change, then the notes may
also be surrendered for conversion at any time during the
make-whole conversion period described under
Adjustment to the conversion rate upon the
occurrence of a make-whole fundamental change, and if the
transaction is a fundamental change, then the notes
may also be surrendered for conversion at any time until, and
including, the fundamental change repurchase date for that
fundamental change. Holders that convert their notes in
connection with a make-whole fundamental change may
in some circumstances also be entitled to an increased
conversion rate. See Adjustment to the conversion
rate upon the occurrence of a make-whole fundamental
change.
S-38
Description of
notes
In addition, if we take any action, or become aware of any
event, that would require an adjustment to the conversion rate
as described in the third, fourth, fifth (other than the
distribution of regular quarterly cash dividends) or sixth
bullet point under Adjustments to the conversion
rate below, then we must mail to holders written notice of
the action or event at least 20 days before the record,
effective or expiration date, as the case may be, of the
transaction. Holders may surrender their notes for conversion
beginning on the date we mail the notice (or, if earlier, the
date the indenture requires us to mail the notice) until the
close of business on the business day immediately preceding the
ex date (as defined in the indenture) of the
transaction or the expiration date for such transaction or until
we announce that the transaction will not take place.
Conversion during
specified periods
The notes may be surrendered for conversion at any time from,
and including, November 1, 2011 to, and including,
December 1, 2011 and at any time from, and including,
November 1, 2026 until the close of business of the
business day immediately preceding December 1, 2026 or
earlier redemption or repurchase.
Change in the
conversion right upon certain reclassifications, business
combinations and asset sales
Except as provided in the indenture and as described below, if
we reclassify our common stock or are party to a consolidation,
amalgamation, statutory arrangement, merger or binding share
exchange, or if there occurs a sale, transfer, lease, conveyance
or other disposition of all or substantially all of our property
or assets, in each case pursuant to which our common stock would
be converted into or exchanged for, or would constitute solely
the right to receive, cash, securities or other property, then,
at the effective time of the transaction, the right to convert a
note will be changed into a right to convert it into the kind
and amount of cash, securities or other property (the
reference property), which a holder of such note
would have received (assuming, if applicable, that the holder
would have made the applicable election referred to in the
immediately following paragraph) if the holder had converted the
note and, upon such conversion, received, immediately before the
transaction, a number of shares of our common stock equal to the
conversion rate then applicable multiplied by the principal
amount (expressed in thousands) of the note. However, at and
after the effective time of the transaction, the principal
return payable upon conversion of the notes will continue to be
payable in cash (instead of reference property), but the daily
conversion value will be calculated based on the fair value of
the reference property. A change in the conversion right such as
this could substantially lessen or eliminate the value of the
conversion right. For example, if a third party acquires us in a
cash merger, each note would be convertible solely into cash and
would no longer be potentially convertible into securities whose
value could increase depending on our future financial
performance, prospects and other factors. There is no precise,
established definition of the phrase all or substantially
all under applicable law. Accordingly, there may be
uncertainty as to whether the provisions above would apply to a
sale, transfer, lease, conveyance or other disposition of less
than all of our property or assets.
If a transaction described above occurs and holders of our
common stock have the opportunity to elect the form of
consideration to receive in that transaction, then we will make
adequate provision to give holders of the notes, treated as a
single class, a reasonable opportunity to elect the form of such
consideration for purposes of determining the composition of the
reference property described above. Once the
election is made, it will apply to all holders of our notes
after the effective time of the transaction.
We will agree in the indenture not to become a party to such a
transaction unless its terms are consistent with these
provisions.
S-39
Description of
notes
Adjustments to
the conversion rate
Subject to the terms of the indenture, we will adjust the
conversion rate for:
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dividends or distributions on our common stock payable in shares
of our common stock to all holders of our common stock;
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subdivisions, combinations or certain reclassifications of our
common stock;
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distributions to all or substantially all holders of our common
stock of certain rights or warrants (other than, as described
below, rights distributed pursuant to a stockholder rights plan)
entitling them, for a period expiring not more than 60 days
immediately following the record date for the distribution, to
purchase or subscribe for shares of our common stock, or
securities convertible into or exchangeable or exercisable for
shares of our common stock, at a price per share that is less
than the current market price (as defined in the
indenture) per share of our common stock on the record date for
the distribution;
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dividends or other distributions to all or substantially all
holders of our common stock of shares of our or any of our
existing or future subsidiaries capital stock (other than
our common stock), evidences of indebtedness or other assets
(other than dividends or distributions covered by the bullet
points below) or the dividend or distribution to all or
substantially all holders of our common stock of certain rights
or warrants (other than those covered in the immediately
preceding bullet point or, as described below, certain rights or
warrants distributed pursuant to a stockholder rights plan) to
purchase or subscribe for our securities;
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cash dividends or other cash distributions to all or
substantially all holders of our common stock, other than:
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distributions in respect of tender or exchange offers described
in the bullet point below; and
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regular quarterly cash dividends, to the extent the aggregate
amount of such dividends in any quarterly period does not exceed
$0.64 per share of our common stock ($0.64 being the
Reference Dividend Amount); and
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distributions of cash or other consideration by us or any of our
subsidiaries in respect of a tender offer or exchange offer for
our common stock, to the extent that such cash and the value of
any such other consideration per share of our common stock
validly tendered or exchanged exceeds the closing sale price per
share of our common stock on the first trading day after the
last date on which tenders or exchanges may be made pursuant to
the tender or exchange offer.
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Subject to the provisions of the indenture, if we distribute
cash in accordance with the fifth bullet point above, then we
will generally increase the conversion rate based on the
following formula:
CR1 = CR0 x MP0 / (MP0 − C)
where
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CR0 =
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the conversion rate in effect immediately prior to the
ex-dividend date for such distribution;
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CR1 =
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the new conversion rate immediately on and after the ex-dividend
date for such distribution;
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MP0 =
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current market price (as defined in the indenture)
per share of our common stock on the record date for the
distribution; and
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C =
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the amount in cash per share that we distribute to holders of
our common stock that exceeds the Reference Dividend Amount.
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The Reference Dividend Amount is subject to adjustment in a
manner inversely proportional to adjustments to the conversion
rate; provided that no adjustment will be made to the Reference
Dividend
S-40
Description of
notes
Amount for any adjustment made to the conversion rate under the
fifth bullet point. Notwithstanding the foregoing, if an
adjustment is required to be made under the fifth bullet point
as result of a distribution that is not a regular quarterly
dividend, the Reference Dividend Amount will be deemed to be
zero.
We will not adjust the conversion rate for such cash dividends
or other cash distributions pursuant to this provision to the
extent that the adjustment would reduce the conversion price
below the par value per share of our common stock ($1.00),
subject to adjustment for stock splits and combinations, stock
dividends, reclassifications and similar events.
Current market price per share of our common stock
on a date generally means the average of the closing sale prices
of our common stock for the 10 consecutive trading days
ending on, but excluding, the earlier of that date or the ex
date with respect to the distribution requiring such
computation. We will make adjustments to the current market
price in accordance with the indenture to account for the
occurrence of certain events during the 10 consecutive
trading day period.
To the extent any of the rights, options or warrants described
in the bullet points above are not exercised before they expire,
we will readjust the conversion rate to the conversion rate that
would then be in effect if such rights, options or warrants had
not been distributed. If we issue rights, options or warrants
that are only exercisable upon the occurrence of certain
triggering events, then we will not adjust the conversion rate
pursuant to the bullet points above until the earliest of these
triggering events occurs.
The indenture does not require us to adjust the conversion rate
for any of the transactions described in the bullet points above
if we make provision for each holder of the notes to participate
in the transaction without conversion as if such holder held a
number of shares equal to the conversion rate in effect on the
ex date or effective date, as the case may be, for
such transaction multiplied by the principal amount (expressed
in thousands) of the applicable notes held by such holder.
We will not adjust the conversion rate pursuant to the bullet
points above unless the adjustment would result in a change of
at least 1% in the then effective conversion rate. However, we
will carry forward any adjustment that we would otherwise have
to make and take that adjustment into account in any subsequent
adjustment. In addition, at the end of each fiscal year,
beginning with the fiscal year ending on December 31, 2006,
we will give effect to any adjustments that we have otherwise
deferred pursuant to this provision, and those adjustments, if
any, will no longer be carried forward and taken into account in
any subsequent adjustment. Furthermore, if we mail a notice of
redemption or a fundamental change or make-whole fundamental
change, or any transaction described under
Conversion upon the occurrence of certain corporate
transactions above, occurs, then we will give effect to
all adjustments that we have otherwise deferred pursuant to this
provision.
To the extent permitted by law and the continued listing
requirements of the NYSE, we may, from time to time, increase
the conversion rate by any amount for a period of at least
20 days or any longer period required by law, so long as
the increase is irrevocable during that period and our board of
directors determines that the increase is in our best interests.
We will mail a notice of the increase to holders at least
15 days before the day the increase commences. However, we
cannot decrease the conversion price below the par value per
share of our common stock ($1.00), subject to adjustment for
stock splits and combinations, stock dividends,
reclassifications and similar events. In addition, we may also
increase the conversion rate as we determine to be advisable in
order to avoid taxes to recipients of certain distributions.
On conversion, the holders of notes will, to the extent they
receive any shares of our common stock upon conversion, receive,
in addition to the consideration that is otherwise due upon
conversion, the rights under any future stockholder rights plan
(i.e., a poison pill) that we may establish, unless the
S-41
Description of
notes
rights have separated from our common stock at the time of
conversion, in which case the conversion rate will be adjusted
at the time of separation as if we had distributed to all
holders of our common stock shares of our capital stock,
evidences of indebtedness, other assets or certain rights or
warrants as described in the fourth bullet point under
Adjustments to the conversion rate above,
subject to readjustment in the event of the expiration,
termination or redemption of such rights.
In the event of:
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a taxable distribution to holders of common stock which results
in an adjustment to the conversion rate; or
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an increase in the conversion rate at our discretion,
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the holders of the notes may, in certain circumstances, be
deemed to have received a distribution subject to
U.S. federal income tax as a dividend. This generally would
occur, for example, if we adjust the conversion rate to
compensate holders for cash dividends on our common stock and
could also occur if we make other distributions of cash or
property to our stockholders. See Certain federal income
tax considerationsConversion of the Notes.
Adjustment to the
conversion rate upon the occurrence of a make-whole fundamental
change
If, prior to December 1, 2011:
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there occurs a sale, transfer, lease, conveyance or other
disposition of all or substantially all of our property or
assets to any person or group (as those
terms are used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934), including any group acting for
the purpose of acquiring, holding, voting or disposing of
securities within the meaning of
Rule 13d-5(b)(1)
under the Securities Exchange Act of 1934 (we refer to such a
transaction as an asset sale make-whole fundamental
change); or
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there occurs any transaction or series of related transactions
(other than a listed stock business combination as
described under Holders may require us to repurchase
their notes upon a fundamental change), in connection with
which (whether by means of an exchange offer, liquidation,
tender offer, consolidation, amalgamation, statutory
arrangement, merger, combination, reclassification,
recapitalization, asset sale, lease of assets or otherwise) our
common stock is exchanged for, converted into, acquired for or
constitutes solely the right to receive other securities, other
property, assets or cash (we refer to such any transaction
described in this or the immediately preceding bullet point as a
make-whole fundamental change),
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then we will increase the conversion rate applicable to notes
that are surrendered for conversion at any time from, and
including, the 30th day before the date we originally
announce as the anticipated effective date of the make-whole
fundamental change to, and including, the 40th business day
after the effective date of the make-whole fundamental change
(or, if the make-whole fundamental change also constitutes a
fundamental change, as described under
Holders may require us to repurchase their notes
upon a fundamental change, to, and including, the
fundamental change repurchase date for that fundamental change).
We refer to this period as the make-whole conversion
period.
We will mail to holders, at their addresses appearing in the
security register, notice of, and we will publicly announce,
through a reputable national newswire service, and publish on
our website, the anticipated effective date of any proposed
make-whole fundamental change. We must make this mailing,
announcement and publication at least 30 days before the
anticipated effective date of the make-whole fundamental change.
In addition, no later than the third business day after the
completion of the make-whole fundamental change, we must make an
additional notice, announcement and publication announcing such
completion.
S-42
Description of
notes
If a holder surrenders a note for conversion in connection with
a make-whole fundamental change we have announced, but the
make-whole fundamental change is not consummated, then the
holder will not be entitled to the increased conversion rate
referred to above in connection with the conversion.
The increase in
the conversion rate
In connection with the make-whole fundamental change, we will
increase the conversion rate by reference to the table below,
based on the date when the make-whole fundamental change becomes
effective, which we refer to as the effective date,
and the applicable price. If the make-whole
fundamental change is a transaction or series of related
transactions described in the second bullet point under
Adjustment to the conversion rate upon the
occurrence of a make-whole fundamental change and the
consideration (excluding cash payments for fractional shares or
pursuant to statutory appraisal rights) for our common stock in
the make-whole fundamental change consists solely of cash, then
the applicable price will be the cash amount paid
per share of our common stock in the make-whole fundamental
change. If the make-whole fundamental change is an asset sale
make-whole fundamental change and the consideration paid for our
property and assets consists solely of cash, then the
applicable price will be the cash amount paid for
our property and assets, expressed as an amount per share of our
common stock outstanding on the effective date of the asset sale
make-whole fundamental change. In all other cases, the
applicable price will be the average of the
closing sale prices (as defined in the indenture)
per share of our common stock for the five consecutive trading
days immediately preceding the effective date. Our board of
directors will make appropriate adjustments, in its good faith
determination, to account for any adjustment to the conversion
rate that becomes effective, or any event requiring an
adjustment to the conversion rate where the ex date of the event
occurs, at any time during those five consecutive trading days.
The following table sets forth the number of additional shares
per $1,000 principal amount of notes that will be added to the
conversion rate applicable to notes that are converted during
the make-whole conversion period. The increased conversion rate
will be used to determine the amount of cash and, if applicable,
shares that are due upon conversion, as described under
Payment upon conversion above. If an event
occurs that requires an adjustment to the conversion rate, we
will, on the date we must adjust the conversion rate, adjust
each applicable price set forth in the first column of the table
below by multiplying the applicable price in effect immediately
before the adjustment by a fraction:
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whose numerator is the conversion rate in effect immediately
before the adjustment; and
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whose denominator is the adjusted conversion rate.
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In addition, we will adjust the number of additional shares in
the table below in the same manner in which, and for the same
events for which, we must adjust the conversion rate as
described under Adjustments to the conversion
rate.
S-43
Description of
notes
Number of
additional shares
(per
$1,000 principal amount of notes)
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Effective
date
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November ,
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December 1,
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December 1,
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December 1,
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December 1,
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December 1,
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Applicable
price
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2006
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2007
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2008
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2009
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2010
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2011
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$
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The numbers of additional shares set forth in the table above
are based on a closing sale price per share of our common stock
of $ on
November , 2006, a conversion rate
of
per $1,000 principal amount of notes and certain other
assumptions.
The exact applicable price and effective date may not be as set
forth in the table above, in which case:
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if the actual applicable price is between two applicable prices
listed in the table above, or the actual effective date is
between two dates listed in the table above, we will determine
the number of additional shares by linear interpolation between
the numbers of additional shares set forth for the two
applicable prices, or for the two dates based on a
365-day
year, as applicable;
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if the actual applicable price is greater than
$ per share (subject to
adjustment), we will not increase the conversion rate; and
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if the actual applicable price is less than
$ per share (subject to
adjustment), we will not increase the conversion rate.
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However, we will not increase the conversion rate as described
above to the extent the increase will cause the conversion rate
to
exceed shares
per $1,000 principal amount. We will adjust this maximum
conversion rate in the same manner in which, and for the same
events for which, we must adjust the conversion rate as
described under Adjustments to the conversion rate.
Because we may not deliver the consideration due solely as a
result of the increase in the conversion rate described above
until after the effective date of the make-whole fundamental
change, such consideration may not consist of shares of our
common stock as a result of the provisions described above under
the caption Change in the conversion right upon
certain reclassifications, business combinations and asset
sales. Accordingly, the shares, if any, due as a result of
such increase may be paid in reference property.
S-44
Description of
notes
Our obligation to increase the conversion rate as described
above could be considered a penalty, in which case its
enforceability would be subject to general principles of
reasonableness of economic remedies.
REDEMPTION OF
NOTES AT OUR OPTION
Prior to December 1, 2011, we cannot redeem the notes
except to preserve our status as a REIT. If, at any time, we
determine it is necessary to redeem the notes in order to
preserve our status as a REIT, we may redeem the notes, in whole
or in part, for cash equal to 100% of the principal amount of
the notes to be redeemed plus any accrued and unpaid interest
to, but excluding, the redemption date. In addition, we may
redeem the notes at our option, in whole or in part, at any
time, and from time to time, on or after December 1, 2011,
on a date not less than 30 nor more than 60 days after the
day we mail a redemption notice to each holder of notes to be
redeemed at the address of the holder appearing in the security
register, at a redemption price, payable in cash, equal to 100%
of the principal amount of the notes we redeem plus any accrued
and unpaid interest to, but excluding, the redemption date.
However, if a redemption date is after a record date for the
payment of an installment of interest and on or before the
related interest payment date, then the payment of interest
becoming due on that interest payment date will be payable, on
that interest payment date, to the holder of record at the close
of business on the record date, and the redemption price will
not include any accrued and unpaid interest. The redemption date
must be a business day.
For a discussion of certain tax consequences to a holder upon a
redemption of notes, see Certain federal income tax
considerationsDisposition.
If the paying agent holds money sufficient to pay the redemption
price due on a note on the redemption date in accordance with
the terms of the indenture, then, on and after the redemption
date, the note will cease to be outstanding and interest on the
note will cease to accrue, whether or not the holder delivers
the note to the paying agent. Thereafter, all other rights of
the holder terminate, other than the right to receive the
redemption price upon delivery of the note.
The conversion right with respect to any notes we have called
for redemption will expire at the close of business on the last
business day immediately preceding the redemption date, unless
we default in the payment of the redemption price.
If we redeem less than all of the outstanding notes, the trustee
will select the notes to be redeemed in integral multiples of
$1,000 principal amount by lot, on a pro rata basis or in
accordance with any other method the trustee considers fair and
appropriate. However, we may redeem the notes only in integral
multiples of $1,000 principal amount. If a portion of a
holders notes is selected for partial redemption and the
holder converts a portion of the notes, the principal amount of
the note that is subject to redemption will be reduced by the
principal amount that the holder converted.
We will not redeem any notes at our option if the principal
amount of the notes has been accelerated and the acceleration
has not been rescinded on or before the redemption date.
PURCHASE OF NOTES
BY US AT THE OPTION OF THE HOLDER
On each of December 1, 2011, December 1, 2016 and
December 1, 2021 (each, a purchase date), a
holder may require us to purchase all or a portion of the
holders outstanding notes, at a price in cash equal to
100% of the principal amount of the notes to be purchased, plus
any accrued and unpaid interest to, but excluding, the purchase
date, subject to certain additional conditions. However, we
will, on the purchase date, pay the accrued and unpaid interest
to, but excluding, the purchase date to the holder of record at
the close of business on the immediately preceding record date.
Accordingly, the holder submitting the note for purchase will
not receive this accrued and unpaid interest unless that holder
was also the holder of record at the close of business on the
immediately preceding record date.
S-45
Description of
notes
On each purchase date, we will purchase all notes for which the
holder has delivered and not withdrawn a written purchase
notice. Holders may submit their written purchase notice to the
paying agent at any time from the opening of business on the
date that is 20 business days before the purchase date
until the close of business on the business day immediately
preceding the purchase date.
For a discussion of certain tax consequences to a holder
receiving cash upon a purchase of the notes at the holders
option, see Certain federal income tax
considerationsDisposition.
We will give notice on a date that is at least 20 business
days before each purchase date to all holders at their addresses
shown on the register of the registrar, and to beneficial owners
as required by applicable law, stating, among other things:
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the amount of the purchase price;
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that notes with respect to which the holder has delivered a
purchase notice may be converted, if otherwise convertible, only
if the holder withdraws the purchase notice in accordance with
the terms of the indenture; and
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the procedures that holders must follow to require us to
purchase their notes, including the name and address of the
paying agent.
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To require us to purchase its notes, the holder must deliver a
purchase notice that states:
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the certificate numbers of the holders notes to be
delivered for purchase, if they are in certificated form;
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the principal amount of the notes to be purchased, which must be
an integral multiple of $1,000; and
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that the notes are to be purchased by us pursuant to the
applicable provisions of the indenture.
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A holder that has delivered a purchase notice may withdraw the
purchase notice by delivering a written notice of withdrawal to
the paying agent before the close of business on the business
day before the purchase date. The notice of withdrawal must
state:
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the name of the holder;
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a statement that the holder is withdrawing its election to
require us to purchase its notes;
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the certificate numbers of the notes being withdrawn, if they
are in certificated form;
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the principal amount being withdrawn, which must be an integral
multiple of $1,000; and
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the principal amount, if any, of the notes that remain subject
to the purchase notice, which must be an integral multiple of
$1,000.
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If the notes are not in certificated form, the above notices
must comply with appropriate DTC procedures.
To receive payment of the purchase price for a note for which
the holder has delivered and not withdrawn a purchase notice,
the holder must deliver the note, together with necessary
endorsements, to the paying agent at any time after delivery of
the purchase notice. We will pay the purchase price for the note
on the later of the purchase date and the time of delivery of
the note, together with necessary endorsements.
If the paying agent holds on a purchase date money sufficient to
pay the purchase price due on a note in accordance with the
terms of the indenture, then, on and after that purchase date,
the note will cease to be outstanding and interest on the note
will cease to accrue, whether or not the holder delivers the
note to the paying agent. Thereafter, all other rights of the
holder terminate, other than the right to receive the purchase
price upon delivery of the note.
We may not have the financial resources, and we may not be able
to arrange for financing, to pay the purchase price for all
notes holders have elected to have us purchase. Furthermore, the
terms of our then existing indebtedness may prohibit our payment
of the purchase price. See Risk factorsRisks
S-46
Description of
notes
Related to the Notes and our Common StockWe may not have
the ability to purchase the notes on the purchase dates or upon
a fundamental change or to pay the cash payment due upon
conversion. Our failure to purchase the notes when
required would result in an event of default with respect to the
notes.
We will not purchase any notes at the option of holders if the
principal amount of the notes has been accelerated, and such
acceleration has not been rescinded, on or prior to such date.
In connection with any purchase offer, we will, to the extent
applicable:
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comply with the provisions of
Rule 13e-4
and Regulation 14E and all other applicable laws; and
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file a Schedule TO or any other required schedule under the
Securities Exchange Act of 1934 or other applicable laws.
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HOLDERS MAY
REQUIRE US TO REPURCHASE THEIR NOTES UPON A FUNDAMENTAL
CHANGE
If a fundamental change, as described below, occurs,
each holder will have the right, at its option, subject to the
terms and conditions of the indenture, to require us to
repurchase for cash all or any portion of the holders
notes in integral multiples of $1,000 principal amount, at a
price equal to 100% of the principal amount of the notes to be
repurchased, plus, except as described below, any accrued and
unpaid interest to, but excluding, the fundamental change
repurchase date, as described below.
However, if the fundamental change repurchase date is after a
record date for the payment of an installment of interest and on
or before the related interest payment date, then the payment of
interest becoming due on that interest payment date will be
payable, on that interest payment date, to the holder of record
at the close of business on the record date, and the repurchase
price will not include any accrued and unpaid interest.
We must repurchase the notes on a date of our choosing, which we
refer to as the fundamental change repurchase date.
However, the fundamental change repurchase date must be no later
than 35 days, and no earlier than 20 days, after the
date we have mailed a notice of the fundamental change, as
described below.
Within 20 business days after the occurrence of a fundamental
change, we must mail to all holders of notes at their addresses
shown on the register of the registrar, and to beneficial owners
as required by applicable law, a notice regarding the
fundamental change. We must also publish the notice in The New
York Times, the Wall Street Journal or another newspaper of
national circulation. The notice must state, among other things:
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the events causing the fundamental change;
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the date of the fundamental change;
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the fundamental change repurchase date;
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the last date on which a holder may exercise the repurchase
right;
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the fundamental change repurchase price;
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the names and addresses of the paying agent and the conversion
agent;
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the procedures that holders must follow to exercise their
repurchase right;
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the conversion rate and any adjustments to the conversion rate
that will result from the fundamental change; and
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that notes with respect to which a holder has delivered a
fundamental change repurchase notice may be converted, if
otherwise convertible, only if the holder withdraws the
fundamental change repurchase notice in accordance with the
terms of the indenture.
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S-47
To exercise the repurchase right, a holder must deliver a
written fundamental change repurchase notice to the paying agent
no later than the close of business on the business day
immediately preceding the fundamental change repurchase date.
This written notice must state:
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the certificate numbers of the notes that the holder will
deliver for repurchase, if they are in certificated form;
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the principal amount of the notes to be repurchased, which must
be an integral multiple of $1,000; and
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that the notes are to be repurchased by us pursuant to the
fundamental change provisions of the indenture.
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A holder may withdraw any fundamental change repurchase notice
by delivering to the paying agent a written notice of withdrawal
prior to the close of business on the business day immediately
preceding the fundamental change repurchase date. The notice of
withdrawal must state:
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the name of the holder;
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a statement that the holder is withdrawing its election to
require us to repurchase its notes;
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the certificate numbers of the notes being withdrawn, if they
are in certificated form;
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the principal amount of notes being withdrawn, which must be an
integral multiple of $1,000; and
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the principal amount, if any, of the notes that remain subject
to the fundamental change repurchase notice, which must be an
integral multiple of $1,000.
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If the notes are not in certificated form, the above notices
must comply with appropriate DTC procedures.
To receive payment of the fundamental change repurchase price
for a note for which the holder has delivered and not withdrawn
a fundamental change repurchase notice, the holder must deliver
the note, together with necessary endorsements, to the paying
agent at any time after delivery of the fundamental change
repurchase notice. We will pay the fundamental change repurchase
price for the note on the later of the fundamental change
repurchase date and the time of delivery of the note, together
with necessary endorsements.
For a discussion of certain tax consequences to a holder upon
the exercise of the repurchase right, see Certain federal
income tax considerationsDisposition.
If the paying agent holds on the fundamental change repurchase
date money sufficient to pay the fundamental change repurchase
price due on a note in accordance with the terms of the
indenture, then, on and after the fundamental change repurchase
date, the note will cease to be outstanding and interest on such
note will cease to accrue, whether or not the holder delivers
the note to the paying agent. Thereafter, all other rights of
the holder terminate, other than the right to receive the
fundamental change repurchase price upon delivery of the note.
A fundamental change generally will be deemed to
occur upon the occurrence of a change in control or
a termination of trading.
A change in control generally will be deemed to
occur at such time as:
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any person or group (as those terms are
used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934) is or becomes the beneficial owner
(as that term is used in
Rule 13d-3
under the Securities Exchange Act of 1934), directly or
indirectly, of 50% or more of the total outstanding voting power
of all classes of our capital stock entitled to vote generally
in the election of directors (voting stock);
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there occurs a sale, transfer, lease, conveyance or other
disposition of all or substantially all of our property or
assets to any person or group (as those
terms are used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934), including any group acting for
the purpose of acquiring,
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S-48
holding, voting or disposing of securities within the meaning of
Rule 13d-5(b)(1)
under the Securities Exchange Act of 1934;
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we consolidate with, or merge with or into, another person or
any person consolidates with, or merges with or into, us, unless
either:
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the persons that beneficially owned, directly or
indirectly, the shares of our voting stock immediately prior to
such consolidation or merger beneficially own,
directly or indirectly, immediately after such consolidation or
merger, shares of the surviving or continuing corporations
voting stock representing at least a majority of the total
outstanding voting power of all outstanding classes of voting
stock of the surviving or continuing corporation in
substantially the same proportion as such ownership immediately
prior to such consolidation or merger; or
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both of the following conditions are satisfied (we refer to such
a transaction as a listed stock business
combination):
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at least 90% of the consideration (other than cash payments for
fractional shares or pursuant to statutory appraisal rights) in
such consolidation or merger consists of common stock and any
associated rights traded on a U.S. national securities
exchange (or which will be so traded when issued or exchanged in
connection with such consolidation or merger); and
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as a result of such consolidation or merger, the notes, upon
conversion, will become convertible into cash and, if
applicable, solely such common stock and associated rights;
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the following persons cease for any reason to constitute a
majority of our board of directors:
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individuals who on the first issue date of the notes constituted
our board of directors; and
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any new directors whose election to our board of directors or
whose nomination for election by our stockholders was approved
by at least a majority of our directors then still in office
either who were directors on such first issue date of the notes
or whose election or nomination for election was previously so
approved; or
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we are liquidated or dissolved or holders of our capital stock
approve any plan or proposal for our liquidation or dissolution.
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There is no precise, established definition of the phrase
all or substantially all under applicable law.
Accordingly, there may be uncertainty as to whether a sale,
transfer, lease, conveyance or other disposition of less than
all of our property or assets would permit a holder to exercise
its right to have us repurchase its notes in accordance with the
fundamental change provisions described above.
A termination of trading is deemed to occur if our
common stock (or other common stock into which the notes are
then convertible) is no longer listed for trading on a
U.S. national securities exchange.
We may not have the financial resources, and we may not be able
to arrange for financing, to pay the fundamental change
repurchase price for all notes holders have elected to have us
repurchase. Furthermore, the terms of our then existing
indebtedness may prohibit our payment of the fundamental change
repurchase price. See Risk factorsRisks Related to
the Notes and our Common StockWe may not have the ability
to purchase the notes on the purchase dates or upon a
fundamental change or to pay the cash payment due upon
conversion. Our failure to repurchase the notes when
required would result in an event of default with respect to the
notes.
We may in the future enter into transactions, including
recapitalizations, that would not constitute a fundamental
change but that would increase our debt or otherwise adversely
affect holders. The indenture for the notes does not restrict
our or our subsidiaries ability to incur indebtedness,
including additional senior or secured indebtedness. Our
incurrence of additional indebtedness could adversely affect our
ability to service our indebtedness, including the notes.
S-49
Description of
notes
In addition, the fundamental change repurchase feature of the
notes would not necessarily afford holders of the notes
protection in the event of highly leveraged or other
transactions involving us that may adversely affect holders of
the notes. Furthermore, the fundamental change repurchase
feature of the notes may in certain circumstances deter or
discourage a third party from acquiring us, even if the
acquisition may be beneficial to you.
We will not repurchase any notes at the option of holders upon a
fundamental change if the principal amount of the notes has been
accelerated, and such acceleration has not been rescinded, on or
prior to such date.
In connection with any fundamental change offer, we will, to the
extent applicable:
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comply with the provisions of
Rule 13e-4
and Regulation 14E and all other applicable laws; and
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file a Schedule TO or any other required schedule under the
Securities Exchange Act of 1934 or other applicable laws.
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RANKING
The notes will be our unsecured senior obligations and will rank
equally with all our other unsecured senior indebtedness.
However, the notes will be effectively subordinated to any of
our existing and future secured indebtedness to the extent of
the assets securing such indebtedness. The notes will also be
structurally subordinated to all liabilities, including trade
payables and lease obligations, if any, of our subsidiaries. Any
right by us to receive the assets of any of our subsidiaries
upon its liquidation or reorganization, and the consequent right
of the holders of the notes to participate in these assets, will
be structurally subordinated to the claims of that
subsidiarys creditors, except to the extent that we are
recognized as a creditor of such subsidiary, in which case our
claims would still be subordinated to any security interests in
the assets of such subsidiary and any indebtedness of such
subsidiary that is senior to that held by us.
As of September 30, 2006, approximately 45% of our real
estate investments were owned by our subsidiaries. However, the
notes are exclusively our obligations. Our subsidiaries are
separate and distinct legal entities and have no obligation,
contingent or otherwise, to pay any amounts due on the notes or
to make any funds available for payment on the notes, whether by
dividends, loans or other payments. In addition, the payment of
dividends and the making of loans and advances to us by our
subsidiaries may be subject to statutory, contractual or other
restrictions, may depend on the earnings or financial condition
of those subsidiaries and are subject to various business
considerations. As a result, we may be unable to gain access to
the cash flow or assets of our subsidiaries.
The indenture does not limit the amount of additional
indebtedness, including senior or secured indebtedness, which we
can create, incur, assume or guarantee, nor does the indenture
limit the amount of indebtedness or other liabilities that our
subsidiaries can create, incur, assume or guarantee.
For a description of our existing indebtedness and that of our
subsidiaries, see Description of other indebtedness.
CONSOLIDATION,
MERGER AND SALE OF ASSETS
The indenture prohibits us from consolidating with or merging
with or into, or selling, transferring, leasing, conveying or
otherwise disposing of all or substantially all of our property
or assets to another person (including pursuant to a statutory
arrangement), whether in a single transaction or series of
related transactions, unless, among other things:
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such person assumes all of our obligations under the notes and
the indenture;
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no default or event of default exists immediately after giving
effect to the transaction or series of transactions; and
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the person formed by such consolidation, the person with or into
which we are merged or the person which leases or acquires, by
sale, transfer, conveyance or otherwise, all or substantially
all of our property or assets, is an entity organized and
existing under the laws of the United States, any state of the
United States or the District of Columbia;
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When the successor assumes all of our obligations under the
indenture, except in the case of a lease, our obligations under
the indenture will terminate.
Some of the transactions described above could constitute a
fundamental change that permits holders to require us to
repurchase their notes, as described under Holders
may require us to repurchase their notes upon a fundamental
change.
There is no precise, established definition of the phrase
all or substantially all under applicable law.
Accordingly, there may be uncertainty as to whether the
provisions above would apply to a sale, transfer, lease,
conveyance or other disposition of less than all of our property
or assets.
EVENTS OF
DEFAULT
The following are events of default under the indenture for the
notes:
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our failure to pay the principal of or premium, if any, on any
note when due, whether at maturity, upon redemption, on the
purchase date with respect to a purchase at the option of the
holder, on a fundamental change repurchase date with respect to
a fundamental change or otherwise;
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our failure to pay an installment of interest on any note when
due, if the failure continues for 30 days after the date
when due;
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our failure to satisfy our conversion obligations upon the
exercise of a holders conversion right;
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our failure to timely provide notice as described under
Adjustment to the conversion rate upon the
occurrence of a make-whole fundamental change,
Purchase of notes by us at the option of the
holder or Holders may require us to repurchase
their notes upon a fundamental change;
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our failure to comply with any other term, covenant or agreement
contained in the notes or the indenture, if the failure is not
cured within 60 days after notice to us by the trustee or
to the trustee and us by holders of at least 25% in aggregate
principal amount of the notes then outstanding, in accordance
with the indenture;
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a default by us or any of our subsidiaries in the payment when
due, after the expiration of any applicable grace period, of
principal of, or premium, if any, or interest on, indebtedness
for money borrowed in the aggregate principal amount then
outstanding of $10.0 million or more, which default results
in the acceleration of our or our subsidiaries
indebtedness for money borrowed in such aggregate principal
amount or more so that it becomes due and payable before the
date on which it would otherwise have become due and payable, if
such default is not cured or waived, or such acceleration is not
rescinded, within 10 days after notice to us by the trustee
or to us and the trustee by holders of at least 25% in aggregate
principal amount of notes then outstanding, in accordance with
the indenture;
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failure by us or any of our subsidiaries to pay final judgments,
the aggregate uninsured portion of which is at least
$10.0 million, if the judgments are not paid or discharged
within 30 days; and
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certain events of bankruptcy, insolvency or reorganization with
respect to us or any of our subsidiaries that is a
significant subsidiary (as defined in
Regulation S-X
under the Securities Exchange Act of 1934).
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If an event of default, other than an event of default referred
to in the last bullet point above with respect to us (but
including an event of default referred to in that bullet point
solely with respect to a significant subsidiary of ours), has
occurred and is continuing, either the trustee, by written
notice to us, or the holders of at least 25% in aggregate
principal amount of the notes then outstanding, by written
S-51
Description of
notes
notice to us and the trustee, may declare the principal of, and
any accrued and unpaid interest, and any premium on, all notes
to be immediately due and payable. In the case of an event of
default referred to in the last bullet point above with respect
to us (and not solely with respect to a significant subsidiary
of ours), the principal of, and accrued and unpaid interest, and
any premium on, all notes will automatically become immediately
due and payable.
After any such acceleration, the holders of a majority in
aggregate principal amount of the notes, by written notice to
the trustee, may rescind or annul such acceleration in certain
circumstances, if:
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the rescission would not conflict with any order or decree;
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all events of default, other than the non-payment of accelerated
principal, premium or interest, have been cured or
waived; and
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certain amounts due to the trustee are paid.
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The indenture does not obligate the trustee to exercise any of
its rights or powers at the request or demand of the holders,
unless the holders have offered to the trustee security or
indemnity that is reasonably satisfactory to the trustee against
the costs, expenses and liabilities that the trustee may incur
to comply with the request or demand. Subject to the indenture,
applicable law and the trustees rights to indemnification,
the holders of a majority in aggregate principal amount of the
outstanding notes will have the right to direct the time, method
and place of conducting any proceeding for any remedy available
to the trustee or exercising any trust or power conferred on the
trustee.
No holder will have any right to institute any proceeding under
the indenture, or for the appointment of a receiver or a
trustee, or for any other remedy under the indenture, unless:
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the holder gives the trustee written notice of a continuing
event of default;
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the holders of at least 25% in aggregate principal amount of the
notes then outstanding make a written request to the trustee to
pursue the remedy;
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the holder or holders offer and, if requested, provide the
trustee indemnity reasonably satisfactory to the trustee against
any loss, liability or expense; and
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the trustee fails to comply with the request within 60 days
after the trustee receives the notice, request and offer of
indemnity and does not receive, during those 60 days, from
holders of a majority in aggregate principal amount of the notes
then outstanding, a direction that is inconsistent with the
request.
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However, the above limitations do not apply to a suit by a
holder to enforce:
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the payment of any amounts due on that holders notes after
the applicable due date; or
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the right to convert that holders notes in accordance with
the indenture.
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Except as provided in the indenture, the holders of a majority
of the aggregate principal amount of outstanding notes may, by
notice to the trustee, waive any past default or event of
default and its consequences, other than a default or event of
default:
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in the payment of principal of, or premium, if any, or interest
on, any note or in the payment of the redemption price, purchase
price or fundamental change repurchase price;
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arising from our failure to convert any note in accordance with
the indenture; or
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in respect of any provision under the indenture that cannot be
modified or amended without the consent of the holders of each
outstanding note affected.
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We will promptly notify the trustee if a default or event of
default occurs. In addition, the indenture requires us to
furnish to the trustee, on an annual basis, a statement by our
officers stating whether they are aware of any default or event
of default by us in performing any of our obligations under the
indenture or the notes and describing any such default or event
of default. If a default or event of default has occurred and
the trustee has received notice of the default or event of
default in accordance
S-52
Description of
notes
with the indenture, the trustee must mail to each holder a
notice of the default or event of default within 30 days
after receipt of such notice. However, the trustee need not mail
the notice if the default or event of default:
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has been cured or waived; or
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is not in the payment of any amounts due with respect to any
note and the trustee in good faith determines that withholding
the notice is in the best interests of holders.
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MODIFICATION AND
WAIVER
We may amend or supplement the indenture or the notes with the
consent of the trustee and holders of at least a majority in
aggregate principal amount of the outstanding notes. In
addition, subject to certain exceptions, the holders of a
majority in aggregate principal amount of the outstanding notes
may waive our compliance with any provision of the indenture or
notes. However, without the consent of the holders of each
outstanding note affected, no amendment, supplement or waiver
may:
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change the stated maturity of the principal of, or the payment
date of any installment of interest or any premium on, any note;
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reduce the principal amount of, or any premium or interest on,
any note;
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change the place, manner or currency of payment of principal of,
or any premium or interest on, any note;
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impair the right to institute a suit for the enforcement of any
payment on, or with respect to, or of the conversion of, any
note;
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modify, in a manner adverse to the holders of the notes, the
provisions of the indenture relating to the right of the holders
to require us to purchase notes at their option or upon a
fundamental change;
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modify the ranking provisions of the indenture in a manner
adverse to the holders of notes;
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adversely affect the right of the holders of the notes to
convert their notes in accordance with the indenture;
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reduce the percentage in aggregate principal amount of
outstanding notes whose holders must consent to a modification
or amendment of the indenture or the notes;
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reduce the percentage in aggregate principal amount of
outstanding notes whose holders must consent to a waiver of
compliance with any provision of the indenture or the notes or a
waiver of any default or event of default; or
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modify the provisions of the indenture with respect to
modification and waiver (including waiver of a default or event
of default), except to increase the percentage required for
modification or waiver or to provide for the consent of each
affected holder.
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We may, with the trustees consent, amend or supplement the
indenture or the notes without notice to or the consent of any
holder of the notes to:
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evidence the assumption of our obligations under the indenture
and the notes by a successor upon our consolidation or merger or
the sale, transfer, lease, conveyance or other disposition of
all or substantially all of our property or assets in accordance
with the indenture;
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make adjustments in accordance with the indenture to the right
to convert the notes upon certain reclassifications or changes
in our common stock and certain consolidations, mergers and
binding share exchanges and upon the sale, transfer, lease,
conveyance or other disposition of all or substantially all of
our property or assets;
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secure our obligations in respect of the notes;
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add to our covenants for the benefit of the holders of the notes
or to surrender any right or power conferred upon us; or
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make provision with respect to adjustments to the conversion
rate as required by the indenture or to increase the conversion
rate in accordance with the indenture.
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In addition, we and the trustee may enter into a supplemental
indenture without the consent of holders of the notes in order
to cure any ambiguity, defect, omission or inconsistency in the
indenture in a manner that does not, individually or in the
aggregate with all other changes, adversely affect the rights of
any holder.
Except as provided in the indenture, the holders of a majority
in aggregate principal amount of the outstanding notes, by
notice to the trustee, generally may:
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waive compliance by us with any provision of the indenture or
the notes, as detailed in the indenture; and
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waive any past default or event of default and its consequences,
except a default or event of default:
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in the payment of principal of, or premium, if any, or interest
on, any note or in the payment of the redemption price, purchase
price or fundamental change repurchase price;
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arising from our failure to convert any note in accordance with
the indenture; or
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in respect of any provision under the indenture that cannot be
modified or amended without the consent of the holders of each
outstanding note affected.
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DISCHARGE
We may generally satisfy and discharge our obligations under the
indenture by:
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delivering all outstanding notes to the trustee for
cancellation; or
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depositing with the trustee or the paying agent after the notes
have become due and payable, whether at stated maturity or any
redemption date, purchase date or fundamental change repurchase
date, cash, and, if applicable as provided in the indenture,
other consideration, sufficient to pay all amounts due on all
outstanding notes and paying all other sums payable under the
indenture.
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In addition, in the case of a deposit, there must not exist a
default or event of default on the date we make the deposit, and
the deposit must not result in a breach or violation of, or
constitute a default under, the indenture or any other agreement
or instrument to which we are a party or by which we are bound.
The notes will not be subject to either the full defeasance or
covenant defeasance provisions of the indenture.
OWNERSHIP
LIMIT
In order to assist us in maintaining our qualification as a REIT
for U.S. federal income tax purposes, no person may own, or
be deemed to own by virtue of the attribution rules of the
Internal Revenue Code, more than 9.8% of the value of our
outstanding capital stock, subject to certain exceptions. For
this purpose, all options, warrants, convertible securities or
other rights to acquire our common stock will be treated as if
all such rights had been exercised. Notwithstanding any other
provision of the notes, no holder of notes will be entitled to
convert such notes for our common stock to the extent that
receipt of our common stock would cause the holder (together
with the holders affiliates) to exceed the ownership limit
contained in our by-laws (with respect to our common stock and
preferred stock) and our certificates of designation (with
respect to our preferred stock). See Restrictions on
Transfer of Securities in the accompanying prospectus.
CALCULATIONS IN
RESPECT OF NOTES
We and our agents are responsible for making all calculations
called for under the indenture and notes. These calculations
include, but are not limited to, the determination of the
trading price of the notes,
S-54
Description of
notes
the current market price of our common stock, the number of
shares, if any, issuable upon conversion of the notes and
amounts of interest payable on the notes and adjustments to the
conversion rate. We and our agents will make all of these
calculations in good faith, and, absent manifest error, these
calculations will be final and binding on all holders of notes.
We will provide a copy of these calculations to the trustee, as
required, and, absent manifest error, the trustee is entitled to
rely on the accuracy of our calculations without independent
verification.
SEC
REPORTING
We must provide the trustee with a copy of the reports required
pursuant to Section 13 or 15(d) of the Exchange Act no
later than the time those reports are required to be filed with
the SEC, whether or not we are then subject to the reporting
requirements of the Exchange Act.
REPORTS TO
TRUSTEE
We will regularly furnish to the trustee copies of our annual
report to stockholders, containing audited financial statements,
and any other financial reports which we furnish to our
stockholders.
UNCLAIMED
MONEY
If money deposited with the trustee or paying agent for the
payment of principal of, premium, if any, or accrued and unpaid
interest on, the notes remains unclaimed for two years, the
trustee and paying agent will pay the money back to us upon our
written request. However, the trustee and paying agent have the
right to withhold paying the money back to us until they publish
in a newspaper of general circulation in the City of New York,
or mail to each holder, a notice stating that the money will be
paid back to us if unclaimed after a date no less than
30 days from the publication or mailing. After the trustee
or paying agent pays the money back to us, holders of notes
entitled to the money must look to us for payment as general
creditors, subject to applicable law, and all liability of the
trustee and the paying agent with respect to the money will
cease.
PURCHASE AND
CANCELLATION
The registrar, paying agent and conversion agent will forward to
the trustee any notes surrendered to them for transfer,
exchange, payment or conversion, and the trustee will promptly
cancel those notes in accordance with its customary procedures.
We may, to the extent permitted by law, purchase notes in the
open market or by tender offer at any price or by private
agreement. We may, at our option and to the extent permitted by
law, reissue, resell or surrender to the trustee for
cancellation any notes we purchase in this manner. Notes
surrendered to the trustee for cancellation may not be reissued
or resold and will be promptly cancelled.
REPLACEMENT OF
NOTES
We will replace mutilated, lost, destroyed or stolen notes at
the holders expense upon delivery to the trustee of the
mutilated notes or evidence of the loss, destruction or theft of
the notes satisfactory to the trustee and us. In the case of a
lost, destroyed or stolen note, we or the trustee may require,
at the expense of the holder, indemnity reasonably satisfactory
to us and the trustee.
TRUSTEE AND
TRANSFER AGENT
The trustee for the notes is The Bank of New York Trust Company,
N.A., and we have appointed the trustee as the paying agent, bid
solicitation agent, registrar, conversion agent and custodian
with regard to the notes. The indenture permits the trustee to
deal with us and any of our affiliates with the same rights the
trustee would have if it were not trustee. However, under the
Trust Indenture Act of 1939, if the trustee acquires any
conflicting interest and there exists a default with respect to
the notes, the
S-55
Description of
notes
trustee must eliminate the conflict or resign. The Bank of New
York Trust Company, N.A. and its affiliates have in the past
provided and may from time to time in the future provide banking
and other services to us in the ordinary course of their
business.
The holders of a majority in aggregate principal amount of the
notes then outstanding have the right to direct the time, method
and place of conducting any proceeding for any remedy available
to the trustee, subject to certain exceptions. If an event of
default occurs and is continuing, the trustee must exercise its
rights and powers under the indenture using the same degree of
care and skill as a prudent person would exercise or use under
the circumstances in the conduct of his or her own affairs. The
indenture does not obligate the trustee to exercise any of its
rights or powers at the request or demand of the holders, unless
the holders have offered to the trustee security or indemnity
that is reasonably satisfactory to the trustee against the
costs, expenses and liabilities that the trustee may incur to
comply with the request or demand.
The transfer agent for our common stock is Mellon Investor
Services LLC.
LISTING AND
TRADING
The notes are a new issue of securities, and there is currently
no established trading market for the notes. An active or liquid
market may not develop for the notes or, if developed, be
maintained. We have not applied, and do not intend to apply, for
the listing of the notes on any securities exchange. Our common
stock is listed on the New York Stock Exchange under the ticker
symbol HCN.
FORM,
DENOMINATION AND REGISTRATION OF NOTES
General
The notes will be issued in registered form, without interest
coupons, in denominations of integral multiples of $1,000
principal amount, in the form of global securities, as further
provided below. See Global securities below
for more information. The trustee need not:
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register the transfer of or exchange any note for a period of
15 days before selecting notes to be redeemed;
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register the transfer of or exchange any note during the period
beginning at the opening of business 15 days before the
mailing of a notice of redemption of notes selected for
redemption and ending at the close of business on the day of the
mailing; or
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register the transfer of or exchange any note that has been
selected for redemption or for which the holder has delivered,
and not validly withdrawn, a purchase notice or fundamental
change repurchase notice, except, in the case of a partial
redemption, purchase or repurchase, that portion of the notes
not being redeemed, purchased or repurchased.
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See Global securities,
Certificated securities and Ownership
Limit in this prospectus supplement and Restrictions
on Transfer of Securities in the accompanying prospectus
for a description of additional transfer restrictions that apply
to the notes.
We will not impose a service charge in connection with any
transfer or exchange of any note, but we may in general require
payment of a sum sufficient to cover any transfer tax or similar
governmental charge imposed in connection with the transfer or
exchange.
Global
securities
Global securities will be deposited with the trustee as
custodian for The Depository Trust Company, or DTC, and
registered in the name of DTC or a nominee of DTC.
Investors may hold their interests in a global security directly
through DTC, if they are DTC participants, or indirectly through
organizations that are DTC participants.
S-56
Description of
notes
Except in the limited circumstances described below and in
Certificated securities, holders of notes will
not be entitled to receive notes in certificated form. Unless
and until it is exchanged in whole or in part for certificated
securities, each global security may not be transferred except
as a whole by DTC to a nominee of DTC or by a nominee of DTC to
DTC or another nominee of DTC.
We will apply to DTC for acceptance of the global securities in
its book-entry settlement system. The custodian and DTC will
electronically record the principal amount of notes represented
by global securities held within DTC. Beneficial interests in
the global securities will be shown on records maintained by DTC
and its direct and indirect participants. So long as DTC or its
nominee is the registered owner or holder of a global security,
DTC or such nominee will be considered the sole owner or holder
of the notes represented by such global security for all
purposes under the indenture and the notes. No owner of a
beneficial interest in a global security will be able to
transfer such interest except in accordance with DTCs
applicable procedures and the applicable procedures of its
direct and indirect participants. The laws of some jurisdictions
may require that certain purchasers of securities take physical
delivery of such securities in definitive form. These
limitations and requirements may impair the ability to transfer
or pledge beneficial interests in a global security.
Payments of principal, premium, if any, and interest under each
global security will be made to DTC or its nominee as the
registered owner of such global security. We expect that DTC or
its nominee, upon receipt of any such payment, will immediately
credit DTC participants accounts with payments
proportional to their respective beneficial interests in the
principal amount of the relevant global security as shown on the
records of DTC. We also expect that payments by DTC participants
to owners of beneficial interests will be governed by standing
instructions and customary practices, as is now the case with
securities held for the accounts of customers registered in the
names of nominees for such customers. Such payments will be the
responsibility of such participants, and none of us, the
trustee, the custodian or any paying agent or registrar will
have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial
interests in any global security or for maintaining or reviewing
any records relating to such beneficial interests.
DTC has advised us that it is a limited-purpose trust company
organized under the New York Banking Law, a banking
organization within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a clearing
corporation within the meaning of the New York Uniform
Commercial Code and a clearing agency registered
under the Securities Exchange Act of 1934. DTC was created to
hold the securities of its participants and to facilitate the
clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry
changes in accounts of the participants, which eliminates the
need for physical movement of securities certificates.
DTCs participants include securities brokers and dealers
(including the underwriters), banks, trust companies, clearing
corporations and certain other organizations, some of whom
(and/or their representatives) own the depository. Access to
DTCs book-entry system is also available to others, such
as banks, brokers, dealers and trust companies, that clear
through or maintain a custodial relationship with a participant,
either directly or indirectly. The ownership interest and
transfer of ownership interests of each beneficial owner or
purchaser of each security held by or on behalf of DTC are
recorded on the records of the direct and indirect participants.
Certificated
securities
The trustee will exchange each beneficial interest in a global
security for one or more certificated securities registered in
the name of the owner of the beneficial interest, as identified
by DTC, only if:
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DTC notifies us that it is unwilling or unable to continue as
depositary for that global security or ceases to be a clearing
agency registered under the Securities Exchange Act of 1934 and,
in either case, we do not appoint a successor depositary within
90 days of such notice or cessation; or
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S-57
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an event of default has occurred and is continuing and the
trustee has received a request from DTC to issue certificated
securities.
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Same-day
settlement and payment
We will make payments in respect of notes represented by global
securities by wire transfer of immediately available funds to
DTC or its nominee as registered owner of the global securities.
We will make payments in respect of notes that are issued in
certificated form by wire transfer of immediately available
funds to the accounts specified by each holder of more than
$5.0 million aggregate principal amount of notes. However,
if a holder of a certificated note does not specify an account,
or holds $5.0 million or less in aggregate principal amount
of notes, then we will mail a check to that holders
registered address.
We expect the notes will trade in DTCs Same-Day Funds
Settlement System, and DTC will require all permitted secondary
market trading activity in the notes to be settled in
immediately available funds. We expect that secondary trading in
any certificated securities will also be settled in immediately
available funds.
Transfers between participants in DTC will be effected in the
ordinary way in accordance with DTC rules and will be settled in
same-day funds.
Although DTC has agreed to the above procedures to facilitate
transfers of interests in the global securities among DTC
participants, DTC is under no obligation to perform or to
continue those procedures, and those procedures may be
discontinued at any time. None of us, the underwriters or the
trustee will have any responsibility for the performance by DTC
or its direct or indirect participants of their respective
obligations under the rules and procedures governing their
operations.
We have obtained the information we describe in this prospectus
supplement concerning DTC and its book-entry system from sources
that we believe to be reliable, but neither we nor the
underwriters take any responsibility for the accuracy of this
information.
GOVERNING
LAW
The indenture and the notes will be governed by and construed in
accordance with the laws of the State of New York, without
giving effect to such states conflicts of laws principles.
S-58
Description of other
indebtedness
CREDIT
FACILITIES
We have a $700,000,000 unsecured revolving credit facility (the
Credit Facility) with KeyBank National Association,
as administrative agent, Deutsche Bank Securities Inc., as
syndication agent, and UBS Securities LLC, Bank of America, N.A.
and JPMorgan Chase Bank, N.A., as documentation agents, and
certain lenders signatory thereto, which matures in July 2009,
bears annual fees of 12.5 to 25 basis points and carries an
annual agents fee of $50,000. The Credit Facility provides
for interest on outstanding borrowings at either LIBOR plus a
margin of 57.5 to 125 basis points or a base rate. The
margins on LIBOR or prime rate borrowings and the annual fees
are dependent upon various conditions, including our debt
ratings and the level of borrowings outstanding. At
November 10, 2006, we were able to borrow at either LIBOR
plus 90 basis points or the base rate.
The Credit Facility contains customary affirmative and
restrictive covenants that, among other things, limit us and
certain of our subsidiaries with respect to indebtedness,
liabilities, liens, dividends, loans, investments, purchases and
fundamental changes to the corporate structure and line of
business. We also are required to maintain a minimum tangible
net worth of $1,000,000,000 plus 100% of net issuance proceeds
received by us in connection with equity issuances, fixed charge
coverage of not less than 175%, a leverage ratio of not more
than 0.60 to 1.00, and a ratio of unencumbered assets to
unsecured indebtedness of not less than 1.95 to 1.00, all as
defined in the Credit Facility.
The Credit Facility contains customary events of default,
including, among other things, and subject to applicable grace
periods, other indebtedness payment defaults, material
misrepresentations, covenant defaults, certain bankruptcy events
and judgment defaults. We and certain of our subsidiaries are
co-borrowers under the Credit Facility.
We also have an unsecured revolving line of credit in the amount
of $40,000,000 bearing interest at the lenders prime rate
or LIBOR plus 90 basis points, at our option, expiring in
May 2007. We and certain of our subsidiaries are co-borrowers
under this line of credit.
In connection with various acquisitions, we
and/or
certain of our subsidiaries have assumed indebtedness that, at
September 30, 2006, had an outstanding balance of
$130,405,000 with a 7.135% weighted average interest rate.
SENIOR
NOTES
In December 2005, we completed the sale of $300,000,000 of
senior unsecured notes due 2016. The notes have a weighted
average interest rate of 6.20%.
In April 2005, we completed the sale of $250,000,000 of senior
unsecured notes due 2015. The notes have a weighted average
interest rate of 5.875%.
In November 2003 and September 2004, we completed the sale of
$250,000,000 and $50,000,000, respectively, of senior unsecured
notes due 2013. The notes have a weighted average interest rate
of 6.0%.
In September 2002 and March 2003, we completed the sale of
$150,000,000 and $100,000,000, respectively, of senior unsecured
notes due 2012. The notes have a weighted average interest rate
of 8.0%.
S-59
Description of
other indebtedness
In August 2001, we completed the sale of $175,000,000 of senior
unsecured notes due 2007. In May 2005, we completed the
redemption of $122,500,000 of these notes, leaving $52,500,000
outstanding. The notes have a weighted average interest rate of
7.5%.
In March 1998, we completed the sale of $100,000,000 of senior
unsecured notes due 2008. In May 2005, we completed a tender
offer for $57,670,000 of these notes, leaving $42,330,000
outstanding. The notes have a weighted average interest rate of
7.625%.
S-60
Certain federal
income tax considerations
GENERAL
The following is a general discussion of material
U.S. federal income tax considerations applicable to
initial holders of the notes (holders that purchased the notes
in the initial offering for the original issue price as defined
in section 1273 of the Code) who hold the notes, or common
shares received on conversion of a note, as capital assets. This
discussion is based on the Internal Revenue Code, income tax
regulations promulgated thereunder, judicial positions,
published positions of the Internal Revenue Service
(IRS) and other applicable authorities, all as in
effect as of the date hereof and all of which are subject to
change, possibly with retroactive effect. This discussion does
not address all of the tax consequences that may be relevant to
a particular holder or to holders subject to special treatment
under the Code, such as financial institutions, broker dealers,
insurance companies, former U.S. citizens or long-term
residents, tax-exempt organizations, persons that are, or that
hold their notes, or common shares received on conversion of a
note, through, partnerships or other passthrough entities,
U.S. holders (as defined below) whose functional currency
is not the U.S. dollar, or persons that hold notes, or
common shares received on conversion of a note, as part of a
straddle, hedge, conversion, synthetic security or constructive
sale transaction for U.S. federal income tax purposes.
Except as specifically provided below with respect to
non-U.S. holders
(as described below), the discussion is limited to holders of
notes, or common shares received on conversion of a note, that
are U.S. holders.
We have not sought any rulings from the IRS with respect to the
U.S. federal income tax consequences discussed below. The
discussion below is not binding on the IRS or the courts.
Accordingly, there can be no assurance that the IRS will not
take, or that a court will not sustain, a position concerning
the tax consequences of the purchase, ownership or disposition
of the notes, the qualification and taxation of the Company as a
REIT or the ownership or disposition of shares of the
Companys common stock for which the notes may be exchanged
that is different from that discussed below.
For purposes of this discussion, a U.S. holder means a
beneficial owner of notes that for U.S. federal income tax
purposes is: a citizen or resident of the United States; a
corporation (including an entity treated as a corporation for
U.S. federal income tax purposes) created or organized in
or under the laws of the United States, any of its states or the
District of Columbia; an estate whose income is subject to
U.S. federal income tax regardless of its source; or any
trust with respect to which a U.S. court is able to
exercise primary supervision over the administration of such
trust; and one or more U.S. persons have authority to
control all substantial decisions of the trust.
If a partnership, including an entity that is treated as a
partnership for U.S. federal income tax purposes, is a
beneficial owner of the notes, or common shares received on
conversion of a note, the U.S. federal income tax
consequences to such partnership and the partners in such
partnership will generally depend on the status of the partner
and the activities of the partnership.
A
non-U.S. holder
means any beneficial owner of a note that is not a
U.S. holder.
INTEREST
A U.S. holder of the notes generally will be required to
report interest earned on the notes as ordinary income in
accordance with the U.S. holders regular method of
tax accounting. In general, if the terms of a debt instrument
entitle a holder to receive payments, other than certain fixed
periodic interest payments, that, in aggregate, exceed the issue
price of the instrument, the debt instrument may be treated as
issued with original issue discount, in which case
the holder would be required to accrue interest income using a
constant yield method over the term of the instrument. The notes
are not expected to be issued with original issue discount for
U.S. federal income tax purposes.
S-61
Certain federal
income tax considerations
DISPOSITION
Upon the sale, exchange, redemption, retirement, repurchase or
other taxable disposition of a note (other than a conversion
into a combination of cash and common shares), a
U.S. holder who acquired the note upon its issuance will
generally recognize capital gain or loss equal to the difference
(if any) between the amount realized (other than amounts
attributable to accrued but unpaid stated interest which will be
taxable as ordinary income if not previously included in such
holders income) and such U.S. holders tax basis
in the note. The U.S. holders tax basis for a note
generally will be the purchase price paid by the
U.S. holder for the note. Such gain or loss shall be
treated as long-term capital gain or loss if the note was held
by the U.S. holder for more than one year. Long-term
capital gain recognized by certain non-corporate
U.S. holders generally will be subject to a reduced tax
rate. Subject to limited exceptions, capital losses cannot be
used to offset a U.S. holders ordinary income. If you
sell a note at a loss that exceeds certain thresholds, you may
be required to file a disclosure statement with the IRS under
the Treasury regulations.
CONVERSION OF THE
NOTES
The tax treatment of a conversion of a note into cash and common
shares is uncertain and U.S. holders should consult their
tax advisors regarding the consequences of such a conversion.
If we satisfy the conversion obligation in part cash and part
common shares, we intend to take the position that the notes are
securities for U.S. federal income tax purposes and that,
as a result, the exchange would be treated as a recapitalization
(although we cannot guarantee that the IRS will not challenge
this conclusion). In such case, the holder will recognize as
taxable income any gain realized in the conversion to the extent
of the cash received (excluding cash received in lieu of a
fractional common share), but no loss will be recognized on such
conversion. The holders adjusted tax basis in the common
shares permitted to be received tax-free will equal the
holders tax basis in the corresponding note (reduced by
any tax basis allocable to a fractional common share), less the
amount of cash received (excluding cash received in lieu of a
fractional common share), plus the amount of taxable gain
recognized on the conversion. The holders holding period
for the common shares received will include the holding period
for the corresponding note. Cash received in lieu of a
fractional common share upon conversion of the notes will
generally be treated as a payment in exchange for the fractional
share. Accordingly, the receipt of cash in lieu of a fractional
common share generally will result in capital gain or loss
measured by the difference between the cash received for the
fractional share and the holders adjusted tax basis
allocable to the fractional share.
If the conversion of a note into cash and common shares were not
treated as a recapitalization, the cash payment received
generally would be treated as proceeds from the sale of a
portion of the note and taxed in the manner described above in
Disposition (or, in the case of cash received in
lieu of a fractional share, taxed as a disposition of a
fractional share), and the common shares received would be
treated as having been received upon a conversion of the note,
which generally would not be taxable to a U.S. holder. In
such case, the U.S. holders tax basis in the note
would generally be allocated pro rata among the common shares
received, the fractional share that is treated as sold for cash
and the portion of the note that is treated as sold for cash.
The holding period for the common shares received in the
conversion would include the holding period for the notes.
The tax treatment of any interest forfeited based on the
conversion of a note into cash and common shares after the
record date but prior to the next interest payment date is not
clear. There is authority for excluding such forfeited interest
from the taxable income of a U.S. holder. However,
U.S. holders should consult their tax advisors regarding
the tax treatment of such forfeited interest.
S-62
Certain federal
income tax considerations
In the event that a U.S. holder receives solely cash upon
conversion of the holders note, the holder will recognize
gain or loss equal to the difference between the proceeds
received by such holder and the holders adjusted tax basis
in the note. See Disposition above.
The receipt of reference property upon conversion of a note may
be taxable, and we encourage you to consult your tax advisor as
to the consequences of the receipt of any reference property
upon conversion.
Any common shares received upon conversion of a note would be
subject to the rules described in the accompanying prospectus
regarding taxation and backup withholding of U.S. federal
income tax on distributions on, or sales or other dispositions
of, our common shares. See U.S. Federal Income Tax
ConsiderationsU.S. Federal Income Taxation of Holders
of Our Stock in the accompanying prospectus.
The conversion rate of the notes is subject to adjustment under
certain circumstances. See Description of
notesConversion RightsAdjustments to the conversion
rate. Certain adjustments to (or the failure to make such
adjustments to) the conversion rate of the notes that increase a
U.S. note holders proportionate interest in our
assets or earnings and profits may result in a taxable
constructive distribution to the holder, whether or not the
holder ever converts the notes. This would occur, for example,
for an adjustment to the conversion rate to compensate holders
of notes for distributions of cash or property to our
shareholders. Any such constructive distribution will be treated
as a dividend for tax purposes, resulting in ordinary income, to
the extent of our current or accumulated earnings and profits.
As a result, U.S. holders of notes could have taxable
income as a result of an event pursuant to which they receive no
cash or property. Generally, a U.S. holders tax basis
in a note will be increased to the extent any such constructive
distribution is treated as a dividend. Moreover, if there is an
adjustment (or a failure to make an adjustment) to the
conversion rate of the notes that increases the proportionate
interest of the holders of outstanding common shares in our
assets or earnings and profits, then such increase in the
proportionate interest of the holders of the common shares
generally will be treated as a constructive distribution to such
holders of common shares, taxable as described above. It is not
clear whether a constructive dividend deemed paid to a
U.S. holder would be eligible for the preferential rates of
federal income tax applicable in respect of certain dividends
received. It is also unclear whether corporate holders would be
entitled to claim the dividends received deduction with respect
to any such constructive dividends. The receipt of property by a
U.S. holder in lieu of a conversion rate adjustment may be
taxable, and we encourage you to consult your tax advisor as to
the consequences of the receipt of any such property.
NON-U.S. HOLDERS
The rules governing the U.S. federal income taxation of
non-U.S. holders
are complex, and no attempt will be made herein to provide more
than a summary of certain of such rules. Prospective
non-U.S. holders
should consult with their own tax advisors to determine the
impact of federal, state, local, and
non-U.S. laws
with regard to the notes.
A
non-U.S. holder
generally will not be subject to U.S. federal income or
withholding tax on payments of interest on a note, provided
that: the
non-U.S. holder
is not: a direct or indirect owner of 10% or more of the total
voting power of all our voting stock; a controlled foreign
corporation related (directly or indirectly) to us through stock
ownership; or a bank whose receipt of interest on a note is
pursuant to a loan agreement entered into in the ordinary course
of business; such interest payments are not effectively
connected with the conduct by the
non-U.S. holder
of a trade or business within the United States; and we or our
paying agent receives certain information from the
non-U.S. holder
(or a financial institution that holds the notes in the ordinary
course of its trade or business), including certification that
such holder is a
non-U.S. holder.
S-63
Certain federal
income tax considerations
A
non-U.S. holder
that is not exempt from tax under these rules generally will be
subject to U.S. federal income tax withholding at a rate of
30% unless: the income is effectively connected with the conduct
of a U.S. trade or business; or an applicable income tax
treaty provides for a lower rate of, or exemption from,
withholding tax.
Except to the extent provided by an applicable tax treaty,
interest on a note that is effectively connected with the
conduct by a
non-U.S. holder
of a trade or business in the U.S. generally will be
subject to U.S. federal income tax on a net basis at the
rates applicable to U.S. persons generally and general
U.S. federal income tax return filing requirements will
apply (and, if such interest is realized by corporate holders,
the holders may also be subject to a 30% branch profits tax,
which is generally imposed on a foreign corporation on the
actual or deemed repatriation from the United States of earnings
and profits attributable to a United States trade or business).
If interest is subject to U.S. federal income tax on a net
basis in accordance with the rules described in the preceding
sentence, payments of such interest or of the disposition
proceeds will not be subject to U.S. withholding tax so
long as the
non-U.S. holder
provides us or the paying agent with an IRS
Form W-8ECI.
To claim the benefit of an income tax treaty, the
non-U.S. holder
must timely provide the appropriate, properly executed IRS forms.
A
non-U.S. holder
generally will not be subject to U.S. federal income or
withholding tax to the extent the note is converted into our
common shares.
To the extent a
non-U.S. holder
recognizes any gain as a result of the receipt of cash in the
conversion (including the receipt of cash in lieu of a
fractional common share upon conversion), such gain would be
subject to the rules described below with respect to the sale or
exchange of a note.
Any common shares received upon a conversion of a note would be
subject to the rules described in the accompanying prospectus
regarding taxation and withholding of U.S. federal income
tax on distributions on, or sales or other dispositions of, our
common shares held by a
non-U.S. holder.
See U.S. Federal Income Tax
ConsiderationsU.S. Federal Income Taxation of Holders
of Our StockTaxation of Foreign Stockholders in the
accompanying prospectus.
The conversion rate of the notes is subject to adjustment in
certain circumstances. Any such adjustment (or failure to make
such adjustment) could, in certain circumstances, give rise to a
deemed distribution to
non-U.S. holders
of the notes. See Description of notesConversion
RightsAdjustments to the conversion rate above. In
such case, the deemed distribution would be subject to the rules
described in the accompanying prospectus regarding taxation and
withholding of U.S. federal income tax on dividends in
respect of common shares. See U.S. Federal Income Tax
ConsiderationsU.S. Federal Income Taxation of Holders
of Our StockTaxation of Foreign Stockholders in the
accompanying prospectus. Any resulting withholding tax
attributable to deemed dividends would be collected from
interest payments made on the notes.
Generally, but subject to the rules described below under
Information Reporting and Backup Withholding, a
non-U.S. holder
will not be subject to U.S. federal income or withholding
tax on gains from the sale or other taxable disposition of a
note unless: such gains are effectively connected with the
conduct by the
non-U.S. holder
of a trade or business within the U.S. and, if the
non-U.S. holder
is entitled to the benefits under an applicable tax treaty,
attributable to a permanent establishment or a fixed base in the
U.S.; such
non-U.S. holder
is an individual who is present in the U.S. for
183 days or more in the taxable year of disposition and
meets certain other requirements; or the notes constitute a
U.S. real property interest within the meaning of the
Foreign Investment in Real Property Tax Act, which is referred
to as FIRPTA.
Except to the extent provided by an applicable tax treaty, a
non-U.S. holder
generally will be subject to U.S. federal income tax with
respect to gain from the sale or disposition of a note that is
effectively
S-64
Certain federal
income tax considerations
connected with the conduct by the
non-U.S. holder
of a trade or business in the United States (and
non-U.S. holders
that are corporations may also be subject to a 30% branch
profits tax, which is generally imposed on a foreign corporation
on the actual or deemed repatriation from the United States of
earnings and profits attributable to a United States trade or
business). If such gains are realized by a
non-U.S. holder
who is an individual present in the United States for
183 days or more in the taxable year, then such individual
generally will be subject to U.S. federal income tax at a
rate of 30% (or at a reduced rate under an applicable income tax
treaty) on the amount by which capital gains from
U.S. sources (including gains from the sale or other
disposition of the notes) exceed capital losses allocable to
U.S. sources. To claim the benefit of an income tax treaty,
the
non-U.S. holder
must timely provide the appropriate, properly executed IRS
forms. If the notes were to constitute a U.S. real property
interest under FIRPTA, a sale or exchange of a note would
generally be subject to the rules described in the accompanying
prospectus regarding taxation and withholding of
U.S. federal income tax on sales of common shares under
FIRPTA. The notes will not constitute a U.S. real property
interest for purposes of FIRPTA if we are a
domestically-controlled REIT. We believe that currently we are,
and expect to continue to be, a domestically-controlled REIT
and, therefore, that a sale of the notes would not be subject to
taxation under FIRPTA. See U.S. Federal Income Tax
ConsiderationsU.S. Federal Income Taxation of Holders
of Our StockTaxation of Foreign Stockholders in the
accompanying prospectus.
INFORMATION
REPORTING AND BACKUP WITHHOLDING
In general, information reporting will apply to a
U.S. holder (other than an exempt recipient,
including a corporation and certain other persons who, when
required, demonstrate their exempt status) with respect to: any
payments made of principal of and interest on the notes,
dividends, and payment of the proceeds of a sale or other
disposition of the notes before maturity.
In addition, backup withholding at the applicable
statutory rate may apply to such amounts if a non-corporate
U.S. holder fails to provide a correct taxpayer
identification number or otherwise comply with applicable
requirements of the backup withholding rules. As described in
Description of notesConversion
RightsAdjustments to the conversion rate above,
certain adjustments to (or failures to make an adjustment to)
the conversion rate of the notes may result in a deemed dividend
to the holder of a note. Any backup withholding obligation
attributable to such deemed dividends would be collected from
interest payments made on the notes.
Payments to a
non-U.S. holder
of interest on a note generally will be reported to the IRS and
to the
non-U.S. holder.
Copies of applicable IRS information returns may be made
available, under the provisions of a specific tax treaty or
agreement, to the tax authorities of the country in which the
non-U.S. holder
resides.
As a general matter, backup withholding and information
reporting will not apply to a payment of the proceeds of a sale
of a note effected at a foreign office of a foreign broker.
Information reporting (but not backup withholding) will apply,
however, to a payment of the proceeds of a sale of a note by a
foreign office of a broker that: is a U.S. person; derives
50% or more of its gross income for a specified three-year
period from the conduct of a trade or business in the U.S.; is a
controlled foreign corporation (a foreign
corporation controlled by certain U.S. shareholders) for
U.S. tax purposes; or is a foreign partnership, if at any
time during its tax year more than 50% of its income or capital
interest are held by U.S. persons or if it is engaged in
the conduct of a trade or business in the U.S., unless the
broker has documentary evidence in its records that the holder
or beneficial owner is a
non-U.S. holder
and certain other conditions are met, or the holder otherwise
establishes an exemption.
Payment of the proceeds of a sale of a note effected at a
U.S. office of a broker is subject to both backup
withholding and information reporting unless the holder
certifies under penalty of perjury that
S-65
Certain federal
income tax considerations
the holder is a
non-U.S. holder,
or otherwise establishes an exemption; provided that, in either
case, neither we nor any withholding agent knows or has reason
to know that the holder is a United States person or that the
conditions of any other exemptions are in fact not satisfied.
Upon surrender of a note for conversion, we may deduct and
withhold from the consideration otherwise deliverable to such
holder any amount required to be deducted and withheld under the
backup withholding rules. Any backup withholding is not an
additional tax and may be refunded or credited against the
holders U.S. federal income tax liability, provided
that the required information is provided to the IRS on a timely
basis.
RECENT
LEGISLATION
Under the Tax Increase Prevention and Reconciliation Act of
2005, the 15% maximum federal income tax rate on long-term
capital gains and qualified dividend income for
domestic non-corporate taxpayers was extended through
December 31, 2010.
TAXATION OF THE
COMPANY AS A REIT
We have elected to be treated as a REIT under Sections 856
through 860 of the Code for federal income tax purposes
commencing with our taxable year ended December 31, 1970.
We believe that we have been organized and have operated in a
manner that qualifies for taxation as a REIT under the Code. We
also believe that we will continue to operate in a manner that
will preserve our status as a REIT. We cannot however, assure
you that such requirements will be met in the future.
We have received an opinion from Arnold & Porter LLP,
our legal counsel, to the effect that we qualified as a REIT
under the Code commencing with our taxable year ended
December 31, 2001, we have been organized and have operated
in conformity with the requirements for qualification and
taxation as a REIT under the Code and that our proposed manner
of operation will enable us to continue to satisfy the
requirements for qualification as a REIT under the Code for the
calendar year 2006, and thereafter, based upon the
representations made by us in a factual representation letter.
However, you should be aware that opinions of counsel are not
binding on the IRS or on the courts, and, if the IRS were to
challenge these conclusions, no assurance can be given that
these conclusions would be sustained in court. The opinion of
Arnold & Porter LLP is based on various assumptions as
well as on certain representations made by us as to factual
matters. The rules governing REITs are highly technical and
require ongoing compliance with a variety of tests that depend,
among other things, on future operating results, asset
diversification, distribution levels and diversity of share
ownership.
Arnold & Porter LLP will not monitor our compliance
with these requirements. While we expect to satisfy these tests,
and will use our best efforts to do so, no assurance can be
given that we will qualify as a REIT for any particular year, or
that the applicable law will not change and adversely affect us
and our shareholders.
S-66
Certain federal
income tax considerations
For a more detailed discussion of the federal income taxation of
holders of our notes and the federal income taxation of REITs,
which includes a variety of complex requirements relating to
share ownership, income, assets and distributions, please see
the accompanying prospectus under the heading
U.S. Federal Income Tax
ConsiderationsU.S. Federal Income Taxation of the
Company as a REIT.
THE PRECEDING DISCUSSION OF CERTAIN FEDERAL INCOME TAX
CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX
ADVICE AND THE COMPANY MAKES NO REPRESENTATION AS TO THE TAX
CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF THE
NOTES AND COMMON STOCK RECEIVED UPON CONVERSION OF THE
NOTES. THE PROPER TAX TREATMENT OF A HOLDER OF NOTES IS
UNCERTAIN IN VARIOUS RESPECTS. ACCORDINGLY, EACH PROSPECTIVE
PURCHASER SHOULD CONSULT ITS OWN TAX ADVISOR AS TO PARTICULAR
TAX CONSEQUENCES TO IT OF PURCHASING, HOLDING AND DISPOSING OF
THE NOTES AND SHARES OF OUR COMMON STOCK ACQUIRED UPON
CONVERSION OF THE NOTES, INCLUDING THE APPLICABILITY AND EFFECT
OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY PROPOSED
CHANGES IN APPLICABLE LAWS.
S-67
Underwriting
UBS Securities LLC and Deutsche Bank Securities Inc. are acting
as joint book-running managers of the offering. Subject to the
terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives UBS
Securities LLC and Deutsche Bank Securities Inc., have severally
agreed to purchase from us the following respective principal
amounts of notes listed opposite their names below at the public
offering price less the underwriting discounts and commissions
set forth on the cover page of this prospectus supplement:
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Principal
amount
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Underwriter
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of
notes
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UBS Securities LLC
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Deutsche Bank Securities Inc.
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Banc of America Securities LLC
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J.P. Morgan Securities Inc.
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Wachovia Capital Markets, LLC
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Total
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$
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300,000,000
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The underwriting agreement provides that the obligations of the
several underwriters to purchase the notes offered hereby are
subject to certain conditions precedent and that the
underwriters will purchase all of the notes offered by this
prospectus supplement, other than those covered by the
over-allotment option described below, if any of these notes are
purchased.
We have been advised by the representatives of the underwriters
that the underwriters propose to offer the notes to the public
at the public offering price set forth on the cover of this
prospectus supplement and to dealers at a price that represents
a concession not in excess of % of the aggregate
principal amount of the notes. The underwriters may allow, and
these dealers may re-allow, a concession of not more
than % of the principal amount of the notes to other
dealers. After the public offering, representatives of the
underwriters may change the offering price and other selling
terms. Sales of notes made outside the United States may be made
by affiliates of the underwriters.
We have granted to the underwriters an option, exercisable not
later than 30 days after the date of this prospectus
supplement, to purchase up to $45,000,000 additional aggregate
principal amount of notes at the public offering price less the
underwriting discounts and commissions set forth on the cover
page of this prospectus supplement. The underwriters may
exercise this option only to cover over-allotments made in
connection with the sale of the notes offered by this prospectus
supplement. To the extent that the underwriters exercise this
option, each of the underwriters will become obligated, subject
to conditions, to purchase approximately the same percentage of
these additional notes as the principal amount of notes to be
purchased by it in the above table bears to the total principal
amount of notes offered by this prospectus supplement. We will
be obligated, pursuant to the option, to sell these additional
notes to the underwriters to the extent the option is exercised.
If any additional notes are purchased, the underwriters will
offer the additional notes on the same terms as those on which
the notes are being offered.
The following table shows the per note (expressed as a
percentage of the principal amount of notes) and total
underwriting discounts and commissions we will pay to the
underwriters, assuming both no
S-68
Underwriting
exercise and full exercise of the underwriters option to
purchase up to an additional $45,000,000 aggregate principal
amount of notes:
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Without exercise
of
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With full
exercise
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over-allotment
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of
over-allotment
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option
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option
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Per note
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%
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%
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Total
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$
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$
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In addition, we estimate that our share of the total expenses of
this offering, excluding underwriting discounts and commissions,
will be approximately $400,000.
We have agreed to indemnify the underwriters against some
specified types of liabilities, including liabilities under the
Securities Act, and to contribute to payments the underwriters
may be required to make in respect of any of these liabilities.
We and each of our executive officers and directors have agreed
not to offer, sell or otherwise dispose of any notes, shares of
our common stock, securities of ours that are substantially
similar to the notes or our common stock, or any securities that
the executive officers and directors have, or will have, the
right to acquire through the exercise of options, warrants,
subscription or other rights for a period of 90 days after
the date of this prospectus supplement without the prior written
consent of UBS Securities LLC and Deutsche Bank Securities Inc.,
subject to limited exceptions. This consent may be given at any
time without public notice.
Our common stock is traded on the New York Stock Exchange under
the symbol HCN.
The notes offered by this prospectus supplement are a new issue
of securities with no established trading market. We do not
intend to apply for listing of the notes on a national
securities exchange or on any automated dealer quotation system.
We have been advised by the representatives of the underwriters
that they intend to make a market in the notes, but the
underwriters are not obligated to do so and may discontinue
market-making at any time without notice. We can provide no
assurances as to the development or liquidity of any trading
market for the notes. If an active public trading market for the
notes does not develop, the market price and liquidity of the
notes may be adversely affected.
In connection with the offering, the underwriters may engage in
activities that stabilize, maintain or otherwise affect the
price of the notes and our common stock. These transactions may
include short sales, purchases to cover positions created by
short sales and stabilizing transactions.
Short sales involve the sale by the underwriters of a greater
principal amount of notes than they are required to purchase in
the offering. Covered short sales are sales made in an amount
not greater than the underwriters option to purchase
additional notes from us in the offering. The underwriters may
close out any covered short position by either exercising their
option to purchase additional notes or purchasing notes in the
open market. In determining the source of notes to close out the
covered short position, the underwriters will consider, among
other things, the price of notes available for purchase in the
open market as compared to the price at which they may purchase
notes through the over-allotment option.
Naked short sales are any sales in excess of the over-allotment
option. The underwriters must close out any naked short position
by purchasing notes in the open market. A naked short position
is more likely to be created if underwriters are concerned that
there may be downward pressure on the price of the notes in the
open market prior to the completion of the offering.
Stabilizing transactions consist of various bids for or
purchases of the notes made by the underwriters in the open
market prior to the completion of the offering.
S-69
Underwriting
The underwriters may impose a penalty bid. This occurs when a
particular underwriter repays to the other underwriters a
portion of the underwriting discount received by it because the
representatives of the underwriters have repurchased notes sold
by or for the account of that underwriter in stabilizing or
short covering transactions.
Purchases to cover a short position and stabilizing transactions
may have the effect of preventing or slowing a decline in the
market price of the notes. Additionally, these purchases, along
with the imposition of the penalty bid, may stabilize, maintain
or otherwise affect the market price of the notes. As a result,
the price of the notes may be higher than the price that might
otherwise exist in the open market. These transactions may be
effected on the
over-the-counter
market or otherwise and may be discontinued at any time.
A prospectus supplement in electronic format may be made
available on Internet Web sites maintained by one or more of the
lead underwriters of this offering and may be made available on
Web sites maintained by other underwriters. Other than the
prospectus supplement in electronic format, the information on
any underwriters Web site and any information contained in
any other Web site maintained by an underwriter is not part of
the prospectus supplement or the registration statement of which
the prospectus supplement forms a part.
Certain of the underwriters or their predecessors have, from
time to time, provided investment banking and other financial
advisory services to us, for which they have received customary
fees. Affiliates of each of UBS Securities LLC, Deutsche Bank
Securities Inc., Banc of America Securities LLC,
J.P. Morgan Securities Inc. and Wachovia Capital Markets,
LLC are lenders under our Third Amended and Restated Loan
Agreement dated July 26, 2006. We intend to use the net
proceeds of this offering primarily to repay borrowings under
such agreement. Also, Deutsche Bank Securities Inc. is the
syndication agent and UBS Securities LLC, Bank of America, N.A.
and JPMorgan Chase Bank, N.A. are documentation agents under
such agreement.
S-70
Legal matters
The validity of the issuance of the notes offered hereby will be
passed upon for us by Shumaker, Loop & Kendrick, LLP,
Toledo, Ohio. Arnold & Porter LLP will pass upon
certain federal income tax matters relating to us and Calfee,
Halter & Griswold LLP, Cleveland, Ohio will pass upon
certain legal matters for the underwriters. The validity of the
notes offered by this prospectus supplement will be passed upon
for the underwriters by Dewey Ballantine LLP, New York, New York.
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 October 20, 2006, as of December 31, 2005 and
2004, and each of the three years in the period 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 included therein, which are incorporated by reference in
the accompanying prospectus by reference. Our financial
statements and schedules and managements assessment are
incorporated by reference in reliance upon Ernst &
Young LLPs reports, given on their authority as experts in
accounting and auditing.
The consolidated financial statements and related financial
statement schedule of Windrose Medical Properties Trust and
Subsidiaries as of December 31, 2005 and 2004, and for each
of the years in the three-year period ended December 31,
2005, have been incorporated by reference herein and in the
registration statement in reliance upon the report of
KPMG LLP, independent registered public accounting firm,
incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
Where you can find
more information
The prospectus supplement and the accompanying prospectus are
part of a registration statement that we filed with the SEC
covering the securities that may be offered under this
prospectus supplement. The registration statement, including the
attached exhibits and schedules, contain 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 http://www.hcreit.com as soon as reasonably practicable
after they are filed with, or furnished to, the SEC. The
information on or connected to our Internet Web site is not, and
shall not be deemed to be, a part of, or incorporated into this
prospectus supplement. You can review these SEC filings and the
registration statement by accessing the SECs Internet Web
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, DC 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. These filings with the SEC are also available through the
New York Stock Exchange, 20 Broad Street, New York, New
York 10005.
S-71
INCORPORATION OF
INFORMATION FILED WITH THE SEC
General
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 this prospectus
supplement;
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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
supplement.
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DOCUMENTS
INCORPORATED BY REFERENCE
This prospectus supplement incorporates by reference the
following documents we filed with the SEC:
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-
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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 the 2006 Annual Meeting of
Stockholders filed on March 28, 2006;
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Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2006;
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-
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Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2006;
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-
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Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2006;
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-
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Amendment No. 1 to Quarterly Report on
Form 10-Q/A
for the quarter ended September 30, 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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-
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Current Report on
Form 8-K
filed on March 23, 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 supplement);
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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 supplement);
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Current Report on
Form 8-K
filed on May 10, 2006;
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-
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Current Report on
Form 8-K
filed on June 5, 2006;
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-
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Current Report on
Form 8-K
filed on September 13, 2006;
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Current Report on
Form 8-K
filed on September 15, 2006;
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Current Report on
Form 8-K
filed on September 26, 2006;
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-
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Current Report on
Form 8-K
filed on October 6, 2006;
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Current Report on
Form 8-K
filed on October 13, 2006;
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Current Report on
Form 8-K
filed on October 20, 2006;
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Current Report on
Form 8-K
filed on November 13, 2006;
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-
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The description of our common stock as set forth in the
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
77/8%
Series D Cumulative Redeemable Preferred Stock as set forth
in the 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
75/8%
Series F Cumulative Redeemable Preferred Stock as set forth
in the 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 after the date of this
prospectus supplement and before the date this offering is
terminated;
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other than the portions of such documents that by statute or
rule, by designation in such document or otherwise, are not
deemed to be filed the SEC or are not required to be
incorporated herein by reference.
S-72
This prospectus supplement summarizes material provisions of
contracts and other documents to which we refer. Since this
prospectus supplement 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 supplement a free copy, without exhibits, of any
or all documents incorporated by reference into this prospectus
supplement. 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
S-73
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
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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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42
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3
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.
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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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4
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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.
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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.
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.
5
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.
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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
77/8%
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
75/8%
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.
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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
6
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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Percentage
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Percentage
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Number
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Number
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Investment
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Number
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Number
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of
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of
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of
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of
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per
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of
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of
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Type of Facility
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Investments(1)
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Investments
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Revenues(2)
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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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(In thousands)
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(In thousands)
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Independent Living/CCRCs
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$
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426,653
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15
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%
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$
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9,300
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12
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%
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32
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4,494
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$
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104,855
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13
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16
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Assisted Living Facilities
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974,154
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33
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%
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28,483
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36
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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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45
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%
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35,613
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46
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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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24
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29
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Specialty Care Facilities
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194,510
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7
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%
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4,691
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6
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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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6
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7
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Totals
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$
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2,918,764
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100
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%
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$
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78,087
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100
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%
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457
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46,781
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(1) |
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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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(2) |
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Revenues include gross revenues and revenues from discontinued
operations for the three months ended March 31, 2006. |
7
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(3) |
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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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(4) |
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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 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.
8
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
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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
87/8%
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
77/8%
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 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
75/8%
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.
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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.
9
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
77/8%
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
75/8%
Series F Cumulative Redeemable Preferred Stock.
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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.
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.
10
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.
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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.
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.
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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.
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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.
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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
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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.
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However, you are entitled at any time to bring a lawsuit for the
payment of money due on your security after its due date.
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.
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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
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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
Defeasance Full 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
Considerations U.S. Federal Income and Estate
Taxation of Holders of Our Debt Securities
U.S. Holders Sale, 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.
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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.
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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.
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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
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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.
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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.
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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
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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.
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
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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.
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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
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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.
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
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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 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
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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.
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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.
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.
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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.
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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 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.
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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.
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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.
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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.
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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.
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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.
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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 of the fair market value of
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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:
(1) which is managed by one or more trustees or directors;
(2) the beneficial ownership of which is evidenced by
transferable shares or by transferable certificates of
beneficial interest;
(3) which would be taxable as a domestic corporation but
for the federal income tax law relating to REITs;
(4) which is neither a financial institution nor an
insurance company;
(5) 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;
(6) 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
(7) 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.
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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
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.
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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.
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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
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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.
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
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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 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
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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.
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.
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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.
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 REIT Annual
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
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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%.
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.
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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.
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
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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.
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.
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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.
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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 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.
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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.
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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
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.
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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
39
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. 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.
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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
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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.
PLAN OF
DISTRIBUTION
We may sell the securities:
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through underwriters or dealers;
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through agents;
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directly to purchasers; or
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through a combination of any of these methods of sale.
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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.
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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.
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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
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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.
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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 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.
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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.
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