e424b5
Filed pursuant to Rule 424(b)(5)
(File
No. 333-130681)
PROSPECTUS SUPPLEMENT
TO PROSPECTUS DATED DECEMBER 23, 2005
8,109,975 Shares
Common
Stock
This prospectus supplement provides for the resale from time to
time of up to 8,109,975 shares of our common stock by the
selling stockholders named in this prospectus supplement. The
selling stockholders acquired the shares registered for resale
in various transactions since September 1, 2006. We are
required to register these shares for resale under the terms of
our agreement with the selling stockholders. We will not receive
any proceeds from the sale of the shares of common stock by the
selling stockholders but we will pay the expenses associated
with this offering.
Our common stock is listed on the New York Stock Exchange, or
NYSE, under the symbol CSE. The last reported sale
price of our common stock on the NYSE on March 13, 2008 was
$12.82 per share.
Investing in our common stock involves certain risks. See the
Risk Factors discussed in our reports filed with the
Securities and Exchange Commission and incorporated by reference
in this prospectus supplement and the accompanying prospectus
before investing in our common stock.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus supplement or the
accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The date of this prospectus supplement is March 14, 2008
CALCULATION OF REGISTRATION FEE
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Proposed Maximum |
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Proposed Maximum |
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Title of Each Class of |
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Amount to be |
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Offering Price |
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Aggregate Offering |
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Amount of |
Securities to be Registered |
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Registered |
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per Unit(1) |
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Price |
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Registration Fee |
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Common Stock, par value $.01 per share
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8,109,975 |
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$12.85 |
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$104,213,179 |
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$4,096 |
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(1) |
Pursuant to Rule 457(c) under the Securities Act of 1933, as amended, such price is based on
the average high and low prices for the common stock on March 13, 2008, as reported on The New
York Stock Exchange. |
You should rely only on the information contained in or
incorporated by reference in this prospectus supplement and the
accompanying prospectus. We have not authorized anyone to
provide you with different information. We are not making an
offer of these securities in any state where the offer is not
permitted. You should not assume that the information contained
or incorporated by reference in this prospectus supplement and
the accompanying prospectus is accurate as of any date other
than the date on the front of this prospectus supplement.
TABLE OF
CONTENTS
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Page
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Prospectus Supplement
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S-2
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S-2
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S-2
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S-2
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S-5
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S-6
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S-6
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Prospectus
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About This Prospectus
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1
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Available Information
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1
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Incorporation of Certain Documents By Reference
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2
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Forward-Looking Statements
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3
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About CapitalSource Inc.
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3
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Use of Proceeds
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3
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Description of Debt Securities
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4
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Description of Capital Stock
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19
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Description of Depositary Shares
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23
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Description of Warrants
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26
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Description of Purchase Contracts
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27
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Description of Units
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28
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Legal Matters
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28
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Experts
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28
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INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference
information into this prospectus supplement. This means that we
can disclose important information to you by referring you to
another document filed separately with the SEC. The information
incorporated by reference is considered to be a part of this
prospectus supplement, except for any information that is
superseded by other information that is included in or
incorporated by reference into this document.
This prospectus supplement incorporates by reference the
documents listed below that we have previously filed with the
SEC (File
No. 001-31753).
These documents contain important information about us:
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our Annual Report on
Form 10-K
for the year ended December 31, 2007;
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our Current Reports on
Form 8-K
filed with the SEC on January 29, 2008 and
February 14, 2008; and
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the description of our common stock contained in our
Registration Statement on
Form 8-A
filed with the SEC on July 25, 2003, as amended by our
Registration Statement on
Form 8-A/A
filed with the SEC on May 22, 2006, including any amendment
or reports filed for the purpose of updating such description.
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We incorporate by reference any additional documents that we may
file with the SEC under Section 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934 (other than those
furnished pursuant to Item 2.02 or
Item 7.01 of
Form 8-K
or other information furnished to the SEC) from the
date of the registration statement of which this prospectus
supplement is part until the termination of the offering of the
securities. These documents may include annual, quarterly and
current reports, as well as proxy statements. Any material that
we later file with the SEC will automatically update and replace
the information previously filed with the SEC.
ABOUT
CAPITALSOURCE INC.
Our principal executive office is located at 4445 Willard
Avenue, 12th floor, Chevy Chase, Maryland 20815, and our
telephone number is
(301) 841-2700.
We maintain a website at www.capitalsource.com on which
we post all reports we file with the SEC under
Section 13(a) of the Securities Exchange Act of 1934, as
amended. We also post on this site our key corporate governance
documents, including our board committee charters, our ethics
policy and our principles of corporate governance. Information
contained on our website is not part of this prospectus
supplement or the accompanying prospectus.
USE OF
PROCEEDS
We will not receive any proceeds from the sale of the shares of
common stock by any selling stockholder. All the proceeds from
the sales by the selling stockholders will be for the accounts
of the selling stockholders. See the Selling
Stockholders and Plan of Distribution sections
of this prospectus supplement.
SELLING
STOCKHOLDERS
The following table sets forth information known to us regarding
beneficial ownership of our common stock by the selling
stockholders as of March 10, 2008, and as adjusted to
reflect the sale of the shares of common stock offered by this
prospectus supplement.
The number of shares beneficially owned by each selling
stockholder is determined under rules promulgated by the SEC.
The information does not necessarily indicate beneficial
ownership for any other purpose. Under these rules, the number
of shares of common stock deemed outstanding includes shares
issuable upon exercise of options held by the respective person
or group which may be exercised within 60 days after
March 10, 2008 and shares underlying restricted stock units
held or beneficially owned by the respective person or group
which are currently vested or vest within 60 days after
March 10, 2008. For purposes of calculating each
persons or groups percentage ownership, currently
exercisable stock options, stock options exercisable within
60 days after March 10, 2008 and restricted stock
units that are currently vested or vest within 60 days
after March 10, 2008 are included for that person or group
but not the stock options or restricted stock units of any other
person or group. The percentage of
S-2
shares beneficially owned before and after this offering is
based on 224,692,412 outstanding shares of our common stock as
of March 10, 2008. Since the selling stockholders may sell
all, some or none of the offered shares, no estimate can be made
of the number of offered shares that will be sold or that will
be owned upon completion of the offering. In the table below, we
have assumed that all of the offered shares, as well as all
other shares beneficially owned by the selling stockholders,
which also have been registered for resale, will be sold.
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Number (and Percentage)
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of Shares
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Number (and
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Beneficially
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Number
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Percentage)
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Owned
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of Shares of
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of Shares Beneficially
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Prior to the
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Common Stock
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Owned Following the
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Beneficial Owner
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Offering
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Offered Hereby
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Offering
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Farallon Partners, L.L.C.(4)(5)
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12,912,863
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(5
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2,608,625(1
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56,753
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(*%)(1)(3)
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Farallon Capital Management, L.L.C.(4)(5)
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21,562,704
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(9
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4,020,400(2
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56,753
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(*%)(2)(3)
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Madison Dearborn Partners III, L.P.
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24,044,297
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(10
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1,480,950
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2,790,529
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(1.2%) (7)
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Total
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58,463,111
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.375
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(26
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.0%)(8)
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8,109,975
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2,847,282
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(1.3%)(3)(7)(8)
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(1) |
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As the general partner of the partnerships in the chart below
(each such partnership being a Farallon
Partnership), Farallon Partners, L.L.C.
(FPLLC), may, for purposes of
Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the
Exchange Act), be deemed to beneficially own
the shares owned by each such Farallon Partnership. As managing
members of FPLLC, each of William F. Duhamel,
Richard B. Fried, Monica R. Landry, Douglas M.
MacMahon, William F. Mellin, Stephen L. Millham,
Jason E. Moment, Ashish H. Pant, Rajiv A. Patel,
Derek C. Schrier, Andrew J.M. Spokes and Mark C.
Wehrly and, as Senior Managing Member of FPLLC, Thomas F.
Steyer (together, the Farallon Managing
Members) may, for purposes of
Rule 13d-3
under the Exchange Act, be deemed to beneficially own the shares
owned by each such Farallon Partnership. |
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Number of
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Number of
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Number of
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Shares of
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Shares of
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Shares of
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Common Stock
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Common Stock
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Common Stock Held
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Partnership
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held by Partnership
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Offered by Partnership
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Following Offering
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Farallon Capital Partners, L.P.
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9,741,164
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1,122,990
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RR Capital Partners, L.P.
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943,629
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50,667
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Farallon Capital Institutional Partners, L.P.
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862,186
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479,792
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0
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Farallon Capital Institutional Partners II, L.P.
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9,208
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Farallon Capital Institutional Partners III, L.P.
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15,309
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Tinicum Partners, L.P.
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9,730
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522
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Farallon Capital Offshore Investors II, L.P.
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1,274,884
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954,654
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(2) |
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As the manager of Farallon Capital Offshore Investors, Inc. (the
Managed Account) and Farallon CS
Institutional Finance, L.L.C. (Farallon CS
LLC), which is the general partner of Farallon CS
Institutional Finance II, L.P. (Farallon CS
LP), Farallon Capital Management, L.L.C.
(FCMLLC) may, for purposes of
Rule 13d-3
under the Exchange Act, be deemed to beneficially own the shares
owned by the Managed Account and the shares beneficially owned
by Farallon CS LLC. As the general partner of
Farallon CS LP, Farallon CS LLC may, for purposes of
Rule 13d-3
under the Exchange Act, be deemed to beneficially own the shares
owned by Farallon CS LP. As managing members and, in the
case of Mr. Steyer, as Senior Managing Member, of FCMLLC,
each of the Farallon Managing Members may, for purposes of
Rule 13d-3
under the Exchange Act, be deemed to beneficially own the shares
owned by the Managed Account and Farallon CS LP. |
S-3
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Number of
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Number of
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Number of
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Shares of
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Shares of
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Shares of
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Common
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Common Stock
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Common Stock Held
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Fund
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Stock held by Fund
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Offered by Fund
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Following Offering
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Farallon Capital Offshore Investors, Inc.
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3,638,485
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2,506,548
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Farallon CS Institutional Finance II, L.P.
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17,867,466
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1,513,852
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(3) |
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In addition to the shares referenced in footnotes (1)
and (2), the Farallon entities referenced above or in these
footnotes may also be deemed to beneficially own
(i) 29,848 shares beneficially owned by
Mr. Steyer through his ownership of certain options to
purchase 18,486 shares, which options are immediately
exercisable or exercisable within 60 days of March 10,
2008, and certain vested restricted stock units and restricted
stock units which vest within 60 days of March 10,
2008 and which could, upon the occurrence of Mr. Steyer no
longer serving as a director of the Company, result in the
receipt by Mr. Steyer of 11,362 shares and
(ii) 26,905 shares beneficially owned by
Andrew B. Fremder through his ownership of certain options
to purchase 18,486 shares, which options are immediately
exercisable or exercisable within 60 days of March 10,
2008, and certain vested restricted stock units and restricted
stock units which vest within 60 days of March 10,
2008, which could, upon the occurrence of Mr. Fremder no
longer serving as a director of the Company, result in the
receipt by Mr. Fremder of 8,419 shares. The shares
referenced in this footnote are not part of the Offering, and
such entities will continue to be deemed to beneficially own
such shares after the Offering. |
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Until September 2007, Mr. Fremder was granted limited
powers of attorney, dated as of February 1, 2003, to act
for FCMLLC and FPLLC, jointly with any managing member or the
Senior Managing Member of FCMLLC, with regard to
Farallon CS LPs, the Managed Accounts and the
Farallon Partnerships investments in the Company. Such
powers of attorney were revoked in September 2007.
Notwithstanding such revocation, if Mr. Fremder, and the
other individuals and entities identified in this footnote and
footnotes (1) to (3) above were deemed members of a
group holding equity securities of the Company, such other
individuals and entities may, for purposes of
Rule 13d-3
under the Exchange Act, be deemed to beneficially own the shares
beneficially owned by Mr. Fremder and Mr. Steyer
through their ownership of the options and restricted stock
units described in footnote (3) above, and Mr. Fremder
may, for purposes of
Rule 13d-3
under the Exchange Act, be deemed to beneficially own the shares
held or beneficially owned by such entities and other
individuals. |
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Farallon CS LLC, FCMLLC, FPLLC, the Managed Account, Farallon CS
LP, each of the Farallon Partnerships, each of the Farallon
Managing Members and Mr. Fremder disclaim any beneficial
ownership of the shares other than those directly owned by such
person or entity. All of the entities and individuals identified
in footnotes (1) to (4) above disclaim group
attribution. The address for each of the above-mentioned
entities and persons is
c/o Farallon
Capital Management, L.L.C., One Maritime Plaza, Suite 2100,
San Francisco, CA 94111. |
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Includes 23,512,743.758 shares held directly or
beneficially owned (see footnote (7) below) by Madison Dearborn
Capital Partners III, L.P. (MDCP),
522,082.72 shares held directly or beneficially owned (see
footnote (7) below) by Madison Dearborn Special Equity III, L.P.
(MDSE), and 9,470.897 shares held
directly by Special Advisors Fund I, LLC
(SAF). The shares held or beneficially owned
by MDCP, MDSE and SAF may be deemed to be beneficially owned by
Madison Dearborn Partners III, L.P. (MDP
III), the general partner of MDCP and MDSE and the
manager of SAF. As the sole members of a limited partner
committee of MDP III that has the power, acting by majority
vote, to vote or dispose of the shares directly held or
beneficially owned by MDCP, MDSE and SAF, John A. Canning, Paul
J. Finnegan and Samuel M. Mencoff have shared voting and
investment power over such shares (other than the right to vote
the shares referenced in footnote (7)). MDP III, MDCP, MDSE
and SAF may be deemed to be a group for purposes of
Rule 13(d)-3 of the Exchange Act, but expressly disclaim
group attribution other than as disclosed in the
Schedule 13D/A filed for MDP III on February 14,
2008. Messrs. Canning, Finnegan and Mencoff, and MDP III
each hereby disclaims any beneficial ownership of any shares
directly held or beneficially owned by MDCP, MDSE and SAF,
except to the extent of their respective pecuniary interests
therein. The address for the Madison Dearborn Partners entities
and persons is Three First National Plaza, Suite 3800,
Chicago, IL 60602. |
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This amount consists of 2,729,913 shares of common stock
beneficially owned by MDCP and 60,616 shares beneficially
owned by MDSE covered by the Partially Collateralized Equity
Total Return Swap with Full Recourse to MDCP and MDSE dated
September 13, 2007 and over which MDCP and MDSE share
investment power with Citibank, N.A. Under the terms of the
agreement, MDCP and MDSE are obligated to pledge certain
currently owned shares of common stock to Citibank, N.A. until
September 17, 2010, unless earlier terminated. |
S-4
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(8) |
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Includes the total number of shares of common stock beneficially
owned prior to or following the offering, as applicable, by
FPLLC, FCMLLC and MDP III, including the 56,753 shares of
common stock underlying options and restricted stock units held
in total by Messrs. Fremder and Steyer. Such
56,753 shares, which are discussed in footnote (3),
are included in the total number of shares beneficially owned
for each of FPLLC and FCMLLC in the table above but are counted
only once in the total listed above. |
PLAN OF
DISTRIBUTION
The shares of common stock are being registered to permit the
resale of any or all of such shares by the stockholders from
time to time after the date of this prospectus supplement. We
are required to register these shares for resale under the terms
of an agreement with the selling stockholders. We will not
receive any proceeds from the sale by the selling stockholders
of common stock. We will bear the fees and expenses incurred in
connection with our obligation to register common stock held by
selling stockholders. However, the selling stockholders will pay
all underwriting discounts, commissions and agents
commissions, if any. The registration of the selling
stockholders shares of common stock does not necessarily
mean that the selling stockholders will offer or sell any of
their shares.
The selling stockholders may offer and sell shares of common
stock from time to time in one or more transactions at fixed
prices, at prevailing market prices at the time of sale, at
varying prices determined at the time of sale or at negotiated
prices. Any such price may be changed from time to time. Each
selling stockholder will act independently from us in making
decisions with respect to the timing, manner of sale, amount of
securities to be sold and the pricing of any transaction. These
prices will be determined by the selling stockholder or by
agreement between such holder and underwriters or dealers who
may receive fees or commissions in connection with such sale.
Such sales may be effected by a variety of methods, including
the following:
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in market transactions;
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in privately negotiated transactions;
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through the writing of options;
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in a block trade in which a broker-dealer will attempt to sell a
block of securities as agent but may position and resell a
portion of the block as principal to facilitate the transaction;
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if we agree to it prior to the distribution, through one or more
underwriters on a firm commitment or best-efforts basis;
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through broker-dealers, who may act as agents or principals;
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directly to one or more purchasers;
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through agents; or
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in any combination of the above or by any other legally
available means.
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In connection with the sale of the shares of common stock, the
selling stockholders may enter into hedging transactions with
brokers, dealers or other financial institutions, who may in
turn engage in short sales of common stock, deliver the shares
of common stock to close out such short positions, or loan or
pledge the shares of common stock to brokers, dealers or other
financial institutions that in turn may sell such securities.
The underwriter or underwriters with respect to an underwritten
offering of common stock and the other material terms and
conditions of the underwriting will be set forth in a prospectus
supplement relating to such offering and, if an underwriting
syndicate is used, the managing underwriter or underwriters will
be set forth on the cover of the prospectus supplement. In
connection with the sale of the shares of common stock,
underwriters will receive compensation in the form of
underwriting discounts or commissions and may also receive
commissions from purchasers of debentures and underlying common
stock for whom they may act as agent. Underwriters may sell to
or through dealers, and such 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.
To our knowledge, there are currently no plans, arrangements or
understandings between any selling stockholders and any
underwriter, broker-dealer or agent regarding the sale of the
shares of common stock by the selling stockholders. The selling
stockholders may decide to sell all, any portion or none of the
shares of common stock offered by them pursuant to this
prospectus supplement. In addition, any selling stockholder may
S-5
transfer, devise or give the shares of common stock by other
means not described in this prospectus supplement. Any shares of
common stock covered by this prospectus supplement that qualify
for sale pursuant to Rule 144 of the Securities Act may be
sold under Rule 144 rather than pursuant to this prospectus
supplement.
The selling stockholders and any underwriters, brokers, dealers,
other financial institutions or agents participating in the
distribution of the shares of common stock may be deemed to be
underwriters within the meaning of the Securities
Act, and any profit on the sale of the shares of common stock by
the selling stockholders and any commissions received by any
such underwriters, broker-dealers or agents may be deemed to be
underwriting commissions under the Securities Act. If the
selling stockholders were deemed to be underwriters, the selling
stockholders may be subject to statutory liabilities including,
but not limited to, those of Sections 11, 12 and 17 of the
Securities Act and
Rule 10b-5
under the Exchange Act.
The selling stockholders and any other person participating in
the distribution will be subject to the applicable provisions of
the Exchange Act and the rules and regulations under the
Exchange Act, including, without limitation, Regulation M,
which may limit the timing of purchases and sales of any shares
of common stock by the selling stockholders and any other
relevant person. Furthermore, Regulation M may restrict the
ability of any person engaged in the distribution of the shares
of common stock to engage in market-making activities with
respect to the common stock being distributed. All of the above
may affect the marketability of common stock and the ability of
any person or entity to engage in market-making activities with
respect to common stock.
Under the securities laws of certain states, the shares of
common stock may be sold in those states only through registered
or licensed brokers or dealers. In addition, in certain states
the shares of common stock may not be sold unless such shares of
common stock have been registered or qualified for sale in the
state or an exemption from registration or qualification is
available and complied with.
We have agreed to indemnify the selling stockholders against
certain civil liabilities, including certain liabilities arising
under the Securities Act, and the selling stockholders will be
entitled to contribution from us in connection with those
liabilities. The selling stockholders will severally indemnify
us against certain civil liabilities, including liabilities
arising under the Securities Act, and will be entitled to
contribution severally from the selling stockholders in
connection with those liabilities.
We are permitted to suspend the use of this prospectus
supplement under certain circumstances relating to corporate
developments, public filings with the SEC and similar events if
necessary to amend or supplement the disclosures contained in
this prospectus supplement or the documents incorporated by
reference.
LEGAL
MATTERS
The validity of the common stock offered by means of this
prospectus supplement and certain U.S. federal income tax
matters have been passed upon for us by Hogan &
Hartson L.L.P.
EXPERTS
The consolidated financial statements of CapitalSource Inc.
appearing in CapitalSource Inc.s Annual Report
(Form 10-K)
for the year ended December 31, 2007, and CapitalSource
Inc. managements assessment of the effectiveness of
internal control over financial reporting as of
December 31, 2007 included therein, have been audited by
Ernst & Young LLP, independent registered public
accounting firm, as set forth in their reports thereon, included
therein, and incorporated herein by reference. Such consolidated
financial statements and managements assessment are
incorporated herein by reference in reliance upon such reports
given on the authority of such firm as experts in accounting and
auditing.
S-6
Debt
Securities, Common Stock, Preferred Stock, Depositary Shares,
Warrants, Purchase Contracts and Units
We may offer the securities listed above, including units
consisting of any two or more of such securities, from time to
time. In addition, this prospectus may be used to offer
securities for the account of other persons.
This prospectus describes some of the general terms that may
apply to these securities. The specific terms of any securities
to be offered will be described in a supplement to this
prospectus, a post-effective amendment to the registration
statement of which this prospectus is a part or in documents
incorporated by reference into this prospectus.
We or any selling securityholders may offer and sell these
securities to or through one or more underwriters, dealers and
agents, or directly to purchasers, on a continuous or delayed
basis.
Our common stock is listed on the New York Stock Exchange under
the symbol CSE.
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. Any representation to the contrary is a criminal
offense.
The date of this prospectus is December 23, 2005
TABLE OF
CONTENTS
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-i-
ABOUT
THIS PROSPECTUS
You should rely only on the information provided in this
prospectus and in any prospectus supplement, including the
information incorporated by reference. We have not authorized
anyone to provide you with different information. You should not
assume that the information in this prospectus, or any
supplement to this prospectus, is accurate at any date other
than the date indicated on the cover page of these documents.
References in this prospectus to CapitalSource,
we, us and our are to
CapitalSource Inc. In this prospectus, we sometimes refer to the
debt securities, common stock, preferred stock, depository
shares, purchase contracts, units and warrants collectively as
offered securities.
AVAILABLE
INFORMATION
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. Because our common stock
trades on the New York Stock Exchange under the symbol
CSE, those materials can also be inspected and
copied at the offices of that organization. Here are ways you
can review and obtain copies of this information:
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Where to
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What is Available
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Get it
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Paper copies of information
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SECs Public Reference Room
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100 F Street, N.E.
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Washington, D.C. 20549
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The New York Stock Exchange
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20 Broad Street
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New York, New York 10005
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On-line information, free of charge
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SECs Internet website at
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www.sec.gov
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Information about the SECs Public Reference Room
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Call the SEC at
1-800-SEC-0330
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We have filed with the SEC a registration statement on
Form S-3
under the Securities Act of 1933 relating to the securities
covered by this prospectus. The registration statement,
including the attached exhibits and schedules, contains
additional relevant information about us and the securities.
This prospectus does not contain all of the information set
forth in the registration statement. Whenever a reference is
made in this prospectus to a contract or other document, the
reference is only a summary and you should refer to the exhibits
that form a part of the registration statement for a copy of the
contract or other document. You can get a copy of the
registration statement, at prescribed rates, from the sources
listed above. The registration statement and the documents
referred to below under Incorporation of Certain Documents
by Reference are also available on our Internet website,
www.capitalsource.com, under Investor
Relations SEC Filings. You can also obtain
these documents from us, without charge (other than exhibits,
unless the exhibits are specifically incorporated by reference),
by requesting them in writing or by telephone at the following
address:
CapitalSource Inc.
4445 Willard Avenue, 12th Floor
Chevy Chase, Maryland 20815
(800) 370-9431
Attn: Investor Relations
Internet Website: www.capitalsource.com
Information
contained on our internet website does not constitute a part of
this prospectus.
1
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference
information into this prospectus. This means that we can
disclose important information to you by referring you to
another document filed separately with the SEC. The information
incorporated by reference is considered to be a part of this
prospectus, except for any information that is superseded by
other information that is included in or incorporated by
reference into this document.
This prospectus incorporates by reference the documents listed
below that we have previously filed with the SEC (File
No. 001-31753). These documents contain important
information about us:
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our Annual Report on
Form 10-K
for the year ended December 31, 2004;
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our Quarterly Reports on
Form 10-Q
for the quarters ended March 31, 2005, June 30, 2005
and September 30, 2005;
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our Current Reports on
Form 8-K
filed with the SEC on January 31, 2005, February 17,
2005, April 8, 2005, April 20, 2005, April 28,
2005, July 7, 2005, October 6, 2005, October 13,
2005, November 23, 2005, December 1, 2005,
December 20, 2005 and December 23, 2005; and
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the description of our common stock contained in our
Registration Statement on Form 8-A filed with the SEC on
July 25, 2003, including any amendment or reports filed for
the purpose of updating such description.
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We incorporate by reference any additional documents that we may
file with the SEC under Section 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934 (other than those
furnished pursuant to Item 2.02 or
Item 7.01 of
Form 8-K
or other information furnished to the SEC) from the
date of the registration statement of which this prospectus is
part until the termination of the offering of the securities.
These documents may include annual, quarterly and current
reports, as well as proxy statements. Any material that we later
file with the SEC will automatically update and replace the
information previously filed with the SEC.
For purposes of this registration statement, any statement
contained in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified
or superseded to the extent that a statement contained herein or
in any other subsequently filed document which also is or is
deemed to be incorporated herein by reference modifies or
supersedes such statement in such document.
2
FORWARD-LOOKING
STATEMENTS
This prospectus and the documents incorporated by reference in
this prospectus contain forward-looking statements within the
meaning of Section 27A of the Securities Act and
Section 21E of the Exchange Act. Forward-looking statements
relate to future events or our future financial performance. We
generally identify forward-looking statements by terminology
such as may, will, should,
expects, plans, anticipates,
could, intends, target,
projects, contemplates,
believes, estimates,
predicts, potential or
continue or the negative of these terms or other
similar words. These statements are only predictions. The
outcome of the events described in these forward-looking
statements is subject to known and unknown risks, uncertainties
and other factors that may cause our clients or our
industrys actual results, levels of activity, performance
or achievements to be materially different from any future
results, levels of activity, performance or achievements
expressed or implied by these forward-looking statements. The
sections entitled Managements Discussion and
Analysis of Financial Condition and Results of Operations,
Risk Factors and Business in our
disclosures included or incorporated by reference into this
prospectus discuss some of the factors that could contribute to
these differences.
The forward-looking statements made in this prospectus and the
documents incorporated by reference relate only to events as of
the date on which the statements are made. We undertake no
obligation to update any forward-looking statement to reflect
events or circumstances after the date on which the statement is
made or to reflect the occurrence of unanticipated events.
ABOUT
CAPITALSOURCE INC.
Our principal executive office is located at 4445 Willard
Avenue, 12th floor, Chevy Chase, Maryland 20815, and our
telephone number is (301) 841-2700. We maintain a website
at www.capitalsource.com on which we post all reports we
file with the SEC under Section 13(a) of the Securities
Exchange Act of 1934. We also post on this site our key
corporate governance documents, including our board committee
charters, our ethics policy and our principles of corporate
governance.
USE OF
PROCEEDS
Unless we specify another use in the applicable prospectus
supplement, we will use the net proceeds from the sale of any
securities offered by us for general corporate purposes, which
may include repayment of indebtedness or acquisitions. We will
not receive proceeds from sales of securities by selling
securityholders except as may otherwise be stated in an
applicable prospectus supplement.
3
DESCRIPTION
OF DEBT SECURITIES
The following description sets forth certain general provisions
of the debt securities of the Company that may be offered by
means of this prospectus. The particular terms of the debt
securities being offered and the extent to which such general
provisions described below apply will be described in a
prospectus supplement relating to such debt securities and in
the applicable indenture or in one or more supplemental
indentures, officers certificates or resolutions of the
board of directors of the Company relating thereto.
General
The debt securities offered by means of this prospectus will be
our direct, unsecured obligations and may be either senior debt
securities or subordinated debt securities. Senior debt
securities will be issued under an Indenture for Senior Debt
Securities, as amended, supplemented or modified from time to
time between us, as obligor, and U.S. Bank, National
Association, as trustee. Subordinated debt securities will be
issued, under an Indenture for Subordinated Debt Securities, as
amended, supplemented or modified from time to time between us,
as obligor, and Wells Fargo Bank, National Association, as
trustee. These indentures will be subject to and governed by the
Trust Indenture Act of 1939, as amended, and the forms of each
have been filed as exhibits to the registration statement of
which this prospectus is a part. The statements made in this
section relating to the debt securities and the indentures are
summaries of all anticipated material provisions thereof. You
should read carefully any prospectus supplement describing the
terms of a series of debt securities offered hereby and the
indentures described herein which are filed as exhibits to the
registration statement of which this prospectus is a part. All
section references appearing herein are to sections of each
indenture unless otherwise indicated and capitalized terms used
but not defined under this heading shall have the respective
meanings set forth in each indenture.
Our senior debt securities will rank equally with all of our
other senior unsecured and unsubordinated indebtedness that may
be outstanding from time to time and will rank senior to all of
our subordinated indebtedness that may be outstanding from time
to time. Our subordinated debt securities will be subordinated
in right of payment to the prior payment in full of our senior
debt as described below under Ranking.
If specified in the prospectus supplement, one or more of our
subsidiaries or other persons (collectively, the
Subsidiary Guarantors), will fully and
unconditionally guarantee (the Subsidiary
Guarantees) on a joint and several basis the debt
securities as described under Subsidiary
Guarantees and in the prospectus supplement. The
Subsidiary Guarantees will be unsecured obligations of each
Subsidiary Guarantor. The Subsidiary Guarantees of subordinated
debt securities will be subordinated to the senior debt of the
Subsidiary Guarantors on the same basis as the subordinated debt
securities are subordinated to our senior debt securities. Each
of the Subsidiary Guarantors is a separate and distinct legal
entity from us and has no obligation, contingent or otherwise,
to pay any amounts due pursuant to the debt securities or to
make any funds available therefor, whether by dividends,
distributions, loans or other payments, other than as expressly
provided in a guarantee.
Except as set forth in the applicable indenture or in one or
more supplemental indentures, officers certificates or
resolutions of the board of directors of the Company relating
thereto and described in a prospectus supplement relating
thereto, we may issue the debt securities without limit as to
aggregate principal amount, in one or more series, or as
established in the applicable indenture or in one or more
supplemental indentures, officers certificates or board of
directors resolutions relating to such indenture. We refer to
such resolution, officers certificate or supplemental
indenture collectively as a supplemental indenture. All debt
securities of one series need not be issued at the same time
and, unless otherwise provided, a series may be reopened,
without the consent of the holders of the debt securities of
such series, for issuances of additional debt securities of such
series.
Each indenture provides that there may be more than one trustee
thereunder, each with respect to one or more series of debt
securities (Section 101). Any trustee under an indenture
may resign or be removed with respect to one or more series of
debt securities, and a successor trustee may be appointed to act
with respect to such series. In the event that two or more
persons are acting as trustee with respect to different series
of debt securities, each such trustee shall be a trustee of a
trust under the applicable indenture separate and apart from the
trust administered by any other trustee, and, except as
otherwise indicated in this summary or the indenture, any action
described herein to be taken by each trustee may be taken by
each such trustee with respect to, and only with respect to, the
one or more series of debt securities for which it is trustee
under the applicable indenture (Section 609).
4
The supplemental indenture relating to any series of debt
securities being offered will contain, and the prospectus
supplement relating thereto will describe, the specific terms
thereof which, pursuant to Section 301 of the indentures,
may include, without limitation:
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the title of such debt securities;
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the classification of such debt securities as senior securities
or subordinated securities;
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the aggregate principal amount of such debt securities and any
limit on such aggregate principal amount;
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the percentage of the principal amount of such debt securities
that will be issued and, if other than the principal amount
thereof, the portion of the principal amount thereof payable
upon declaration of acceleration of the maturity thereof;
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the terms and conditions, if any, upon which such debt
securities may be convertible or exchangeable into our common
stock or other securities and the terms and conditions upon
which such conversion or exchange may be effected, including,
without limitation, the initial conversion or exchange price or
rate (or manner of calculation thereof), the portion that is
convertible or exchangeable or the method by which any such
portion shall be determined, the conversion or exchange period,
provisions as to whether conversion or exchange will be at the
option of the holders or at our option, the events requiring an
adjustment of conversion or exchange price, provisions affecting
conversion or exchange in the event of the redemption of such
debt securities and any applicable limitations on the ownership
or transferability of the securities into which such debt
securities are convertible;
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the date or dates, or the method for determining such date or
dates, on which the principal of such debt securities will be
payable;
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the rate or rates (which may be fixed or variable), or the
method by which such rate or rates shall be determined, at which
such debt securities will bear interest, if any;
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the date or dates, or the method for determining such date or
dates, from which any such interest will accrue, the dates on
which any such interest will be payable, the regular record
dates for such interest payment dates, or the method by which
such dates shall be determined, the persons to whom such
interest shall be payable, and the basis upon which interest
shall be calculated if other than that of a
360-day year
of twelve
30-day
months;
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the place or places other than or in addition to New York City
where the principal of (and premium, if any) and interest, if
any (including any additional amounts required to paid in
respect of certain taxes, assessments or governmental charges
imposed on holders of the debt securities), on such debt
securities will be payable, where such debt securities may be
surrendered for registration of transfer or exchange and where
notices or demands to or upon us in respect of such debt
securities and the applicable indenture may be served;
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the date or dates on which, or the period or periods within
which, the price or prices at which and the other terms and
conditions upon which such debt securities may be redeemed, in
whole or in part, at our option, if we are to have such an
option;
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our obligation, if any, to redeem, repay or purchase such debt
securities pursuant to any provision or at the option of a
holder thereof, and the period or periods within which or the
date or dates on which and the price or prices at which and the
other terms and conditions upon which such debt securities will
be redeemed, repaid or purchased, in whole or in part, pursuant
to such obligation, including any sinking fund payments;
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if other than U.S. dollars, the currency or currencies in
which such debt securities are denominated and payable, which
may be a foreign currency or units of two or more foreign
currencies or a composite currency or currencies, and the terms
and conditions relating thereto;
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whether the amount of payments of principal of (and premium, if
any) or interest, if any, on such debt securities may be
determined with reference to an index, formula or other method
(which index, formula or
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method may, but need not be, based on a currency, currencies,
currency unit or units or composite currency or currencies) and
the manner in which such amounts shall be determined;
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any additions to, modifications of or deletions from the terms
of such debt securities with respect to events of default or
covenants set forth in the applicable indenture;
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whether the principal of (and premium, if any) or interest
(including any additional amounts required to be paid in respect
of certain taxes, assessments or governmental charges) on such
debt securities are to be payable, at our election or the
holders election, in one or more currencies other than
that in which such debt securities are payable in the absence of
the making of such an election, the period or periods within
which, and the terms and conditions upon which, such election
may be made, and the time and manner of, and identity of the
exchange rate agent with responsibility for, determining the
exchange rate between the currency or currencies in which such
debt securities are payable in the absence of making such an
election and the currency or currencies in which such debt
securities are to be payable upon the making of such an election;
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whether such debt securities will be issued in the form of one
or more global securities and whether such global securities are
to be issuable in a temporary global form or permanent global
form;
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whether such debt securities will be issued in certificated or
book-entry form;
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whether such debt securities will be in registered or bearer
form and, if in registered form, the denominations thereof if
other than $1,000 and any integral multiple thereof and, if in
bearer form, the denominations thereof if other than $5,000 and
terms and conditions relating thereto;
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the applicability, if any, of the defeasance and covenant
defeasance provisions of Article Fourteen of the applicable
indenture;
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whether and under what circumstances we will pay any additional
amounts on such debt securities as contemplated in the
applicable indenture in respect of any tax, assessment or
governmental charge and, if so, whether we will have the option
to redeem such debt securities in lieu of making such payment;
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if such debt securities are to be issued upon the exercise of
warrants, the time, manner and place for such debt securities to
be authenticated and delivered;
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whether and the extent to which such debt securities are
guaranteed by the Subsidiary Guarantors and the form of any such
guarantee;
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the name of the applicable trustee and the address of its
corporate trust office; and
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any other terms of such debt securities not inconsistent with
the provisions of the applicable indenture (Section 301).
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The debt securities may provide for less than the entire
principal amount thereof to be payable upon declaration of
acceleration of the maturity thereof. We refer to such debt
securities as the original issue discount securities. Special
federal income tax, accounting and other considerations
applicable to original issue discount securities will be
described in the applicable prospectus supplement.
Except as maybe set forth in the applicable indenture or in one
or more supplemental indentures, neither indenture contains any
provisions that would limit our ability to incur indebtedness or
that would afford holders of debt securities protection in the
event of a highly leveraged transaction involving us, including
any merger or consolidation with or acquisition of a highly
leveraged company. In addition, as described below under
Merger, Consolidation or Sale of Assets,
we have broad discretion to engage in mergers, consolidations or
other significant transactions without the consent of the
holders of the debt securities offered hereby
(Article Eight). You should refer to the applicable
prospectus supplement for information with respect to any
deletions from, modifications of or additions to our events of
default or covenants that are described below, including any
addition of a covenant or other provision providing event risk
or similar protection.
6
Subsidiary
Guarantees
If specified in the prospectus supplement, the Subsidiary
Guarantors will guarantee the debt securities of a series.
Unless otherwise indicated in the prospectus supplement, the
following provisions will apply to the Subsidiary Guarantees of
the Subsidiary Guarantors.
Subject to the limitations described below and in the prospectus
supplement, the Subsidiary Guarantors will, jointly and
severally, fully and unconditionally guarantee the punctual
payment when due, whether at stated maturity, by acceleration or
otherwise, of all our payment obligations under the Indentures
and the debt securities of a series, whether for principal of,
premium, if any, or interest on the debt securities or otherwise
(all such obligations guaranteed by a Subsidiary Guarantor being
herein called the Guaranteed Obligations). The
Subsidiary Guarantors will also pay all expenses (including
reasonable counsel fees and expenses) incurred by the applicable
trustee in enforcing any rights under a Subsidiary Guarantee
with respect to a Subsidiary Guarantor.
In the case of subordinated debt securities, a Subsidiary
Guarantors Subsidiary Guarantee will be subordinated in
right of payment to the senior debt of such Subsidiary Guarantor
on the same basis as the subordinated debt securities are
subordinated to our senior debt securities. No payment will be
made by any Subsidiary Guarantor under its Subsidiary Guarantee
during any period in which payments by us on the subordinated
debt securities are suspended by the subordination provisions of
the subordinated debt indenture.
Each Subsidiary Guarantee will be limited in amount to an amount
not to exceed the maximum amount that can be guaranteed by the
relevant Subsidiary Guarantor without rendering such Subsidiary
Guarantee voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally.
Each Subsidiary Guarantee will be a continuing guarantee and
will:
(1) remain in full force and effect until either
(a) payment in full of all the applicable debt securities
(or such debt securities are otherwise satisfied and discharged
in accordance with the provisions of the applicable indenture)
or (b) released as described in the following paragraph;
(2) be binding upon each Subsidiary Guarantor; and
(3) inure to the benefit of and be enforceable by the
applicable trustee, the holders and their successors,
transferees and assigns.
In the event that a Subsidiary Guarantor ceases to be a
subsidiary, either legal defeasance or covenant defeasance
occurs with respect to the series or all or substantially all of
the assets or all of the capital stock of such Subsidiary
Guarantor is sold, including by way of sale, merger,
consolidation or otherwise, such Subsidiary Guarantor will be
released and discharged of its obligations under its Subsidiary
Guarantee without any further action required on the part of the
trustee or any holder, and no other person acquiring or owning
the assets or capital stock of such Subsidiary Guarantor will be
required to enter into a Subsidiary Guarantee. In addition, the
prospectus supplement may specify additional circumstances under
which a Subsidiary Guarantor can be released from its Subsidiary
Guarantee.
Denomination,
Interest, Registration and Transfer
Unless otherwise described in the applicable prospectus
supplement, the debt securities of any series offered by means
of this prospectus will be issuable in denominations of $1,000
and integral multiples thereof and those in bearer form will be
issuable in denominations of $5,000 (Section 302).
Unless otherwise specified in the applicable prospectus
supplement, the principal of (and applicable premium, if any)
and interest on any series of debt securities (including any
additional amounts required to be paid in respect of certain
taxes, assessments or governmental charges imposed on holders of
the debt securities) will be payable at the corporate trust
office of the trustee, the address of which will be stated in
the applicable prospectus supplement; provided that, at our
option, payment of interest may be made by check mailed to the
address of the person entitled thereto as it appears in the
applicable register for such debt securities or by wire transfer
of funds to such person at an account maintained within the
United States (Sections 301, 305, 306, 307 and 1002).
7
Any interest not punctually paid or duly provided for on any
interest payment date with respect to a debt security, which we
refer to as defaulted interest, will forthwith cease to be
payable to the holder on the applicable regular record date and
may either be paid:
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to the person in whose name such debt security is registered at
the close of business on a special record date for the payment
of such defaulted interest to be fixed by the trustee, notice
whereof shall be given to the holder of such debt security not
less than ten days prior to such special record date; or
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at any time in any other lawful manner, all as more completely
described in the applicable indenture (Section 307).
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Subject to certain limitations imposed upon debt securities
issued in book-entry form, the debt securities of any series
will be exchangeable for other debt securities of the same
series and of a like aggregate principal amount and tenor of
different authorized denominations upon surrender of such debt
securities at the corporate trust office of the applicable
trustee referred to above. In addition, subject to certain
limitations imposed upon debt securities issued in book-entry
form, the debt securities of any series may be surrendered for
registration of transfer or exchange thereof at the corporate
trust office of the applicable trustee. Every debt security
surrendered for registration of transfer or exchange must be
duly endorsed or accompanied by a written instrument of
transfer. No service charge will be made for any registration of
transfer or exchange of any debt securities, but we may require
payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith
(Section 305). If the applicable prospectus supplement
refers to any transfer agent (in addition to the applicable
trustee) initially designated by us with respect to any series
of debt securities, we may at any time rescind the designation
of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that we will
be required to maintain a transfer agent in each place of
payment for such series. We may at any time designate additional
transfer agents with respect to any series of debt securities
(Section 1002).
Neither we nor any trustee shall be required to:
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issue, register the transfer of or exchange debt securities of
any series during a period beginning at the opening of business
15 days before any selection of debt securities of that
series to be redeemed and ending at the close of business on the
day of mailing of the relevant notice of redemption;
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register the transfer of or exchange any debt security, or
portion thereof, called for redemption, except the unredeemed
portion of any debt security being redeemed in part;
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exchange any debt securities in bearer form, unless such debt
securities are simultaneously surrendered for redemption with
debt securities in registered form of the same series and like
tenor; or
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issue, register the transfer of or exchange any debt security
that has been surrendered for repayment at the option of the
holder, except the portion, if any, of such debt security not to
be so repaid (Section 305).
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Merger,
Consolidation or Sale of Assets (Article Eight)
Unless otherwise set forth in a supplemental indenture relating
to any series of debt securities and described in the applicable
prospectus supplement, we are permitted to consolidate with, or
sell, lease or convey all or substantially all of our respective
assets to, or merge with or into, any other entity provided that:
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either we shall be the continuing entity, or the successor
entity formed by or resulting from any such consolidation or
merger or the entity which shall have received the transfer of
such assets shall expressly assume all of our obligations under
the indenture, including payment of the principal of (and
premium, if any) and interest on all of the debt securities and
the due and punctual performance and observance of all of the
covenants and conditions contained in each indenture;
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immediately after giving effect to such transaction and treating
any indebtedness that becomes our obligation or the obligation
of any of our Subsidiaries (as defined below) as a result
thereof as having been incurred by us or our Subsidiary at the
time of such transaction, no event of default under the
indentures, and no event which, after notice or the lapse of
time, or both, would become such an event of default, shall have
occurred and be continuing; and
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an officers certificate and legal opinion covering such
conditions shall be delivered to each trustee (Sections 801
and 803).
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The indentures do not currently provide the holders of debt
securities any other rights or protections in the event of any
such transaction. The term substantially all as used
in the indentures will likely be interpreted under applicable
state law and will be dependent upon particular facts and
circumstances. Although there is a limited body of case law
interpreting this phrase, there is no established definition
under applicable law. As a result, we cannot assure you how a
court would interpret this phrase under applicable law in the
event of a transaction which may constitute a transfer of
all or substantially all of our assets which could
limit your ability to determine if we have complied with the
provisions of Article Eight of the indentures or whether
you may have any other rights available to you under the
indentures.
Certain
Covenants
Except as described under Merger,
Consolidation or Sale of Assets above, we will be required
to do or cause to be done all things necessary to preserve and
keep in full force and effect our existence, rights (charter and
statutory) and franchises; provided, however, that we shall not
be required to preserve any right or franchise if we determine
that the preservation thereof is no longer desirable in the
conduct of business and that the loss thereof is not
disadvantageous in any material respect to the holders of the
debt securities.
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Maintenance
of Properties
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We will be required to cause all of our material properties used
or useful in the conduct of our business or the business of any
Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and
will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in
our judgment may be necessary so that the business carried on in
connection therewith may be properly and advantageously
conducted at all times (Section 1007); provided, however,
that we shall not be prevented from discontinuing the operation
and maintenance of our properties or the properties of our
Subsidiaries if we or our Subsidiaries determine that such
discontinuance is desirable in the conduct of business and not
disadvantageous in any material respect to the holders of the
debt securities.
We will be required to, and will be required to cause each of
our Subsidiaries, to keep all insurable properties insured
against loss or damage in amounts and types that are
commercially reasonable (Section 1008).
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Payment
of Taxes and Other Claims
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We will be required to pay or discharge or cause to be paid or
discharged, before the same shall become delinquent:
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all material taxes, assessments and governmental charges levied
or imposed upon us or any Subsidiary or upon our income, profits
or property or that of any Subsidiary; and
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all material lawful claims for labor, materials and supplies
which, if unpaid, might by law become a lien upon our property
or the property of any Subsidiary, unless such lien would not
have a material adverse effect upon such property;
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provided, however, that we shall not be required to pay or
discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or
validity is being contested in good faith by appropriate
proceedings or for which we have set apart and maintain an
adequate reserve (Section 1009).
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Provision
of Financial Information
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If the Company is required to file reports with the SEC pursuant
to Section 13 or 15(d) of the Exchange Act, the Company
will file such reports by the required date and, within
15 days of such date, deliver copies of all such
9
reports to the trustees and transmit a copy to each holder of
debt securities offered by means of this prospectus. If the
Company is not required to file reports with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act, the Company will
deliver to the applicable trustee and transmit to each holder of
debt securities offered by means of this prospectus reports that
contain substantially the same kind of information that would
have been included in annual and quarterly reports filed with
the SEC had the Company been required to file such reports, such
information to be delivered or transmitted within 15 days
after the same would have been required to be filed with the SEC
had the Company been required to file such reports.
Notwithstanding the foregoing, if the Company is not required to
file reports with the SEC because information about the Company
is contained in the reports filed by another entity with the
SEC, the delivery to the trustee for the debt securities offered
by means of this prospectus of the reports filed by such entity
with the SEC and the transmittal by mail to all holders of such
debt securities of each annual and quarterly report filed with
the SEC by such entity within the time periods set forth in the
preceding sentence shall be deemed to satisfy the obligation of
the Company to provide financial information under the
applicable provisions of the Indenture (Section 1010).
Additional
Covenants and/or Modifications to the Covenants Described
Above
Any additions to, modifications of or deletions of any of the
covenants described above with respect to any debt securities or
series thereof will be set forth in a supplemental indenture
(Section 301) and described in the prospectus supplement
relating thereto.
Events of
Default, Notice and Waiver
Each indenture will provide that the following events are
events of default with respect to any series of debt
securities issued thereunder:
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default in the payment of any installment of interest (including
any additional amounts required to be paid in respect of certain
taxes, assessments or governmental charges imposed on holders of
the debt securities, as the case may be) on any debt security of
such series and continuance of such default for 30 days;
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default in the payment of principal of (or premium, if any, on)
any debt security of such series when due and payable, whether
at maturity, upon redemption or otherwise;
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default in the performance, or breach, of any other covenant or
warranty on our part or the part of any guarantor contained in
the applicable indenture (other than a covenant added to the
indenture solely for the benefit of a series of debt securities
issued thereunder other than such series), or the failure of any
Subsidiary to comply with the limitations on incurrence of
indebtedness contained in the senior indenture, if applicable,
and, in each case, the continuance of such default or breach for
60 days after written notice as provided in the applicable
indenture;
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default in the payment of recourse indebtedness of the Company
or a Subsidiary Guarantor in an aggregate principal amount in
excess of $10,000,000, which default shall have resulted in the
indebtedness becoming or being declared due and payable prior to
the date on which it would otherwise have become due and
payable, or the obligations being accelerated, without the
acceleration having been rescinded or annulled within a
specified period of time;
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certain events of bankruptcy, insolvency or reorganization, or
court appointment of a receiver, liquidator or trustee of the
Company, any Subsidiary Guarantor or any Significant Subsidiary
(as defined in the indentures and discussed below);
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the Subsidiary Guarantee of any debt security by a Subsidiary
Guarantor ceases to be in full force and effect or enforceable
in accordance with its terms;
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any other event of default provided with respect to a particular
series of debt securities (Section 501).
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Significant Subsidiary means any Subsidiary that is
a significant subsidiary (within the meaning of
Regulation S-X
promulgated under the Securities Act) of the Company.
10
Subsidiary means a corporation, partnership or other
entity a majority of the voting power of the voting equity
securities or the outstanding equity interests of which are
owned, directly or indirectly, by us, a Subsidiary Guarantor or
by one or more other Subsidiaries of us or a Subsidiary
Guarantor. For the purposes of this definition, voting
equity securities means equity securities having voting
power for the election of directors, whether at all times or
only so long as no senior class of security has such voting
power by reason of any contingency.
If an event of default under any indenture with respect to debt
securities of any series at the time outstanding occurs and is
continuing, then in every such case the applicable trustee or
the holders of not less than 25% of the principal amount of the
outstanding debt securities of that series will have the right
to declare the principal amount (or, if the debt securities of
that series are original issue discount securities or indexed
securities, such portion of the principal amount as may be
specified in the terms thereof), or premium, if any, of all the
debt securities of that series to be due and payable immediately
by written notice thereof to us (and to the applicable trustee
if given by the holders). However, at any time after such a
declaration of acceleration with respect to debt securities of
such series (or of all debt securities then outstanding under
any indenture, as the case may be) has been made, but before a
judgment or decree for payment of the money due has been
obtained by the applicable trustee, the holders of not less than
a majority in principal amount of outstanding debt securities of
such series may rescind and annul such declaration and its
consequences if:
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we shall have deposited with the applicable trustee all required
payments of the principal of (and premium, if any) and interest
on the debt securities of such series, plus certain fees,
expenses, disbursements and advances of the applicable
trustee; and
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all events of default, other than the non-payment of accelerated
principal (or specified portion thereof), with respect to debt
securities of such series have been cured or waived as provided
in such indenture (Section 502).
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Each indenture also provides that the holders of not less than a
majority in principal amount of the outstanding debt securities
of any series may waive any past default with respect to such
series and its consequences, except a default:
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in the payment of the principal of (or premium, if any) or
interest on any debt security (including any additional amounts
required to be paid in respect of certain taxes, assessments or
governmental charges imposed on holders of the debt securities,
as the case may be) of such series;
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in respect of a covenant or provision contained in the
applicable indenture that cannot be modified or amended without
the consent of the holder of each outstanding debt security
affected thereby; or
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in the conversion or exchange of any debt security in accordance
with its terms (Section 513).
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Each trustee will be required to give notice to the holders of
debt securities within 90 days of a default under the
applicable indenture unless such default shall have been cured
or waived; provided, however, that such trustee may withhold
notice to the holders of any series of debt securities of any
default with respect to such series (except a default in the
payment of the principal of (or premium, if any) or interest on
any debt security of such series or in the payment of any
sinking fund installment in respect of any debt security of such
series) if specified responsible officers of such trustee
consider such withholding to be in the interest of such holders
(Section 601); and provided further that no such notice
will be given in the case of a non-payment event of default
until at least 60 days after the occurrence of the relevant
default.
Each indenture also provides that no holders of debt securities
of any series may institute any proceedings, judicial or
otherwise, with respect to such indenture or for any remedy
thereunder, except in the cases of failure of the applicable
trustee, for 60 days, to act after it has received a
written request to institute proceedings in respect of an event
of default from the holders of not less than 25% in principal
amount of the outstanding debt securities of such series, as
well as an offer of indemnity reasonably satisfactory to it and
no inconsistent direction has been given to the trustee by
holders of at least a majority in principal amount of the
outstanding debt securities during such 60 days
(Section 507). This provision will not prevent, however,
any holder of debt securities from instituting suit for the
enforcement of payment of the principal of (and premium, if any)
and interest on such debt securities at the respective due dates
thereof (Section 508).
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Subject to provisions in each indenture relating to its duties
in case of default, no trustee will be under any obligation to
exercise any of its rights or powers under an indenture at the
request or direction of any holders of any series of debt
securities then outstanding under such indenture, unless such
holders shall have offered to the trustee thereunder security or
indemnity reasonably satisfactory to it (Section 602). The
holders of not less than a majority in principal amount of the
outstanding debt securities of any series (or of all debt
securities then outstanding under an indenture, as the case may
be) shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the
applicable trustee, or of exercising any trust or power
conferred upon such trustee. However, a trustee may refuse to
follow any direction which is in conflict with any law or the
applicable indenture, which may involve such trustee in personal
liability or which may be unduly prejudicial to the holders of
debt securities of such series not joining therein
(Section 512).
Within 120 days after the end of each fiscal year, we will
be required to deliver to each trustee a certificate, signed by
one of several specified officers, stating whether or not such
officer has knowledge of any non-compliance under the applicable
indenture and, if so, specifying each such non-compliance and
the nature and status thereof (Section 1011).
Modification
of the Indentures
Modifications and amendments of an indenture will be permitted
to be made only with the consent of the holders of not less than
a majority in principal amount of all outstanding debt
securities issued under such indenture which are affected by
such modification or amendment; provided, however, that no such
modification or amendment may, without the consent of the holder
of each such debt security affected thereby:
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change the stated maturity of the principal of, or any
installment of interest (or premium, if any) on, any such debt
security;
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reduce the principal amount of, or the rate or amount of
interest on, or any premium payable on redemption of, any such
debt security, change our obligation to pay any additional
amounts required to be paid in respect of certain taxes,
assessments or governmental charges imposed on holders of the
debt securities, as the case may be, or reduce the amount of
principal of an original issue discount security that would be
due and payable upon declaration of acceleration of the maturity
thereof or would be provable in bankruptcy, or adversely affect
any right of repayment at the option of the holder of any such
debt security;
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change the place of payment, or the coin or currency, for
payment of the principal of (or premium, if any) or interest on
any such debt security;
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impair the right to institute suit for the enforcement of any
payment on or with respect to any such debt security;
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reduce the above-stated percentage of outstanding debt
securities of any series necessary to modify or amend the
applicable indenture, to waive compliance with certain
provisions thereof or certain defaults and consequences
thereunder or to reduce the quorum or voting requirements set
forth in the applicable indenture;
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modify any of the foregoing provisions or any of the provisions
relating to the waiver of certain past defaults or certain
covenants, except to increase the required percentage to effect
such action or to provide that certain other provisions may not
be modified or waived without the consent of the holder of such
debt security; or
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release a Subsidiary Guarantor from any Subsidiary Guarantee
(Section 902).
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The holders of not less than a majority in principal amount of
outstanding debt securities of each series affected thereby will
have the right to waive compliance by us with certain covenants
in such indenture (Section 1013).
Modifications and amendments of an indenture will be permitted
to be made by us and the respective trustee thereunder without
the consent of any holder of debt securities for any of the
following purposes:
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to evidence the succession of another person as obligor or
Subsidiary Guarantor under such indenture;
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to add to our covenants for the benefit of the holders of all or
any series of debt securities or to surrender any right or power
conferred upon us in the indenture;
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to add events of default for the benefit of the holders of all
or any series of debt securities;
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to add or change any provisions of an indenture to facilitate
the issuance of, or to liberalize certain terms of, debt
securities in bearer form, or to permit or facilitate the
issuance of debt securities in uncertificated form, provided
that such action shall not adversely affect the interests of the
holders of the debt securities of any series in any material
respect;
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to change or eliminate any provisions of an indenture, provided
that any such change or elimination shall become effective only
when there are no debt securities outstanding of any series
created prior thereto which are entitled to the benefit of such
provision;
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to secure the debt securities;
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to establish the form or terms of debt securities of any series;
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to provide for the acceptance of appointment by a successor
trustee or facilitate the administration of the trusts under an
indenture by more than one trustee;
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to cure any ambiguity, defect or inconsistency in an indenture;
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to make any other provision in the indenture which shall not be
inconsistent with the indenture, provided that such action shall
not adversely affect the interests of holders of debt securities
of any series issued under such indenture in any material
respect;
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to add a Subsidiary Guarantor; or
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to supplement any of the provisions of an indenture to the
extent necessary to permit or facilitate defeasance and
discharge of any series of such debt securities, provided that
such action shall not adversely affect the interests of the
holders of the debt securities of any series in any material
respect (Section 901).
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Each indenture will provide that in determining whether the
holders of the requisite principal amount of outstanding debt
securities of a series have given any request, demand,
authorization, direction, notice, consent or waiver thereunder
or whether a quorum is present at a meeting of holders of debt
securities:
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the principal amount of an original issue discount security that
shall be deemed to be outstanding shall be the amount of the
principal thereof that would be due and payable as of the date
of such determination upon declaration of acceleration of the
maturity thereof;
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the principal amount of any debt security denominated in a
foreign currency that shall be deemed outstanding shall be the
U.S. dollar equivalent, determined on the issue date for
such debt security, of the principal amount (or, in the case of
an original issue discount security, the U.S. dollar
equivalent on the issue date of such debt security of the amount
determined as provided in the preceding clause);
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the principal amount of an indexed security that shall be deemed
outstanding shall be the principal face amount of such indexed
security at original issuance, unless otherwise provided with
respect to such indexed security pursuant to the applicable
indenture; and
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debt securities owned by us or any other obligor under the debt
securities or our affiliate or an affiliate of such other
obligor shall be disregarded (Section 101).
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Each indenture will contain provisions for convening meetings of
the holders of debt securities of a series (Section 1501).
A meeting will be permitted to be called at any time by the
applicable trustee, and also, upon request, by us or the holders
of at least 10% in principal amount of the outstanding debt
securities of such series, in any such case upon notice given as
provided in the indenture. Except for any consent that must be
given by the holder of each debt security affected by certain
modifications and amendments of an indenture, any resolution
presented at a meeting or adjourned meeting duly reconvened at
which a quorum is present may be adopted by the affirmative vote
of the holders of a majority in principal amount of the
outstanding debt securities of that series; provided, however,
that, except as referred to above, any resolution with respect
to any request, demand,
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authorization, direction, notice, consent, waiver or other
action that may be made, given or taken by the holders of a
specified percentage, which is less than a majority, in
principal amount of the outstanding debt securities of a series
may be adopted at a meeting or adjourned meeting duly reconvened
at which a quorum is present by the affirmative vote of the
holders of such specified percentage in principal amount of the
outstanding debt securities of that series. Any resolution
passed or decision taken at any meeting of holders of debt
securities of any series duly held in accordance with an
indenture will be binding on all holders of debt securities of
that series. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be persons
holding or representing a majority in principal amount of the
outstanding debt securities of a series; provided, however, that
if any action is to be taken at such meeting with respect to a
consent or waiver which may be given by the holders of not less
than a specified percentage in principal amount of the
outstanding debt securities of a series, the persons holding or
representing such specified percentage in principal amount of
the outstanding debt securities of such series will constitute a
quorum.
Notwithstanding the foregoing provisions, each indenture
provides that if any action is to be taken at a meeting of
holders of debt securities of any series with respect to any
request, demand, authorization, direction, notice, consent,
waiver and other action that such indenture expressly provides
may be made, given or taken by the holders of a specified
percentage in principal amount of all outstanding debt
securities affected thereby, or the holders of such series and
one or more additional series:
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there shall be no minimum quorum requirement for such
meeting; and
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the principal amount of the outstanding debt securities of such
series that vote in favor of such request, demand,
authorization, direction, notice, consent, waiver or other
action shall be taken into account in determining whether such
request, demand, authorization, direction, notice, consent,
waiver or other action has been made, given or taken under such
indenture.
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Ranking
The terms and conditions, if any, upon which the debt securities
and any guarantee of the debt securities are subordinated to our
other indebtedness and indebtedness of our Subsidiary Guarantors
will be set forth in the applicable prospectus supplement
relating thereto. Such terms will include a description of the
indebtedness ranking senior to the debt securities and any
guarantee, the restrictions on payments to the holders of such
debt securities and guarantees while a default with respect to
such senior indebtedness in continuing, the restrictions, if
any, on payments to the holders of such debt securities
following an event of default, and provisions requiring holders
of such debt securities to remit certain payments to holders of
senior indebtedness.
Discharge,
Defeasance and Covenant Defeasance
We may discharge certain obligations to holders of any series of
debt securities issued thereunder that have not already been
delivered to the applicable trustee for cancellation and that
either have become due and payable or will become due and
payable within one year (or scheduled for redemption within one
year) by irrevocably depositing with the applicable trustee, in
trust, funds in such currency or currencies, currency unit or
units or composite currency or currencies in which such debt
securities are payable in an amount sufficient to pay the entire
indebtedness on such debt securities in respect of principal
(and premium, if any) and interest to the date of such deposit
(if such debt securities have become due and payable) or to the
stated maturity or redemption date, as the case may be
(Section 401).
Each indenture provides that, if the provisions of
Article Fourteen are made applicable to the debt securities
of or within any series pursuant to Section 301 of such
indenture, we may elect either:
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to defease and be discharged from any and all obligations with
respect to such debt securities (except for the obligation to
pay additional amounts required to be paid in respect of certain
taxes, assessments or governmental charges imposed on holders of
such debt securities, and the obligations to register the
transfer or exchange of such debt securities, to replace
temporary or mutilated, destroyed, lost or stolen debt
securities, to maintain an office or agency in respect of such
debt securities and to hold moneys for payment in trust)
(defeasance) (Section 1402); or
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to be released from its obligations with respect to such debt
securities under certain specified covenants under such
indenture as specified in the applicable prospectus supplement
and any omission to comply with such obligations shall not
constitute an event of default with respect to such debt
securities (covenant defeasance) (Section 1403),
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in either case upon the irrevocable deposit by us with the
applicable trustee, in trust, of an amount, in such currency or
currencies, currency unit or units or composite currency or
currencies in which such debt securities are payable at stated
maturity, or Government Obligations (as defined below), or both,
applicable to such debt securities which through the scheduled
payment of principal and interest in accordance with their terms
will provide money in an amount sufficient without reinvestment
to pay the principal of (and premium, if any) and interest on
such debt securities, and any mandatory sinking fund or
analogous payments thereon, on the scheduled due dates therefor.
Such a trust will only be permitted to be established if, among
other things, we have delivered to the applicable trustee an
opinion of counsel (as specified in the applicable indenture) to
the effect that the holders of such debt securities will not
recognize income, gain or loss for federal income tax purposes
as a result of such defeasance or covenant defeasance and will
be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if
such defeasance or covenant defeasance had not occurred, and
such opinion of counsel, in the case of defeasance, will be
required to refer to and be based upon a ruling of the Internal
Revenue Service or a change in applicable U.S. federal
income tax law occurring after the date of the indenture
(Section 1404).
Government Obligations means securities,
which are:
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direct obligations of the United States of America or the
government which issued the foreign currency in which the debt
securities of a particular series are payable, for the payment
of which its full faith and credit is pledged; or
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obligations of a person controlled or supervised by and acting
as an agency or instrumentality of the United States of America
or such government which issued the foreign currency in which
the debt securities of such series are payable, the timely
payment of which is unconditionally guaranteed as a full faith
and credit obligation of the United States of America or such
government,
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which, in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a
depository receipt issued by a bank or trust company as
custodian with respect to any such Government Obligation or a
specific payment of interest on or principal of any such
Government Obligation held by such custodian for the account of
the holder of a depository receipt, provided that (except as
required by applicable law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in
respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced
by such depository receipt (Section 101).
Unless otherwise provided in the applicable prospectus
supplement, if after we have deposited funds and/or Government
Obligations to effect defeasance or covenant defeasance with
respect to debt securities of any series:
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the holder of a debt security of such series is entitled to, and
does, elect pursuant to the applicable indenture or the terms of
such debt security to receive payment in a currency, currency
unit or composite currency other than that in which such deposit
has been made in respect of such debt security; or
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a Conversion Event (as defined below) occurs in respect of the
currency, currency unit or composite currency in which such
deposit has been made, the indebtedness represented by such debt
security will be deemed to have been, and will be, fully
discharged and satisfied through the payment of the principal of
(and premium, if any) and interest on such debt security as they
become due out of the proceeds yielded by converting the amount
so deposited in respect of such debt security into the currency,
currency unit or composite currency in which such debt security
becomes payable as a result of such election or such cessation
of usage based on the applicable market exchange rate
(Section 1405).
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As used in this prospectus, Conversion Event
means the cessation of use of:
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a foreign currency, currency unit or composite currency other
than the Euro both by the government of the country which issued
such currency and for the settlement of transactions by a
central bank or other public institutions of or within the
international banking community;
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the Euro both within the member states of the European Union
that have adopted the single currency in accordance with the
treaty establishing the European Community, as amended, and for
the settlement of transactions by public institutions of or
within the European Union; or
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any currency unit or composite currency for the purposes for
which it was established.
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Unless otherwise provided in the applicable prospectus
supplement, all payments of principal of (and premium, if any)
and interest on any debt security that is payable in a foreign
currency that ceases to be used by its government of issuance
shall be made in U.S. dollars.
In the event we effect covenant defeasance with respect to any
debt securities and such debt securities are declared due and
payable because of the occurrence of any event of default other
than the event of default described in the third bullet under
Events of Default, Notice and Waiver
above with respect to certain specified sections of
Article Ten of each indenture (which sections would no
longer be applicable to such debt securities as a result of such
covenant defeasance) or described in the seventh bullet under
Events of Default, Notice and Waiver
above with respect to any other covenant as to which there has
been covenant defeasance, the amount in such currency, currency
unit or composite currency in which such debt securities are
payable, and Government Obligations on deposit with the
applicable trustee, will be sufficient to pay amounts due on
such debt securities at the time of their stated maturity but
may not be sufficient to pay amounts due on such debt securities
at the time of the acceleration resulting from such default.
However, we would remain liable to make payment of such amounts
due at the time of acceleration.
The applicable prospectus supplement may further describe the
provisions, if any, permitting such defeasance or covenant
defeasance, including any modifications to the provisions
described above, with respect to the debt securities of or
within a particular series.
Redemption
of Securities
If the applicable supplemental indenture provides that the debt
securities are redeemable, we may redeem such debt securities at
any time at our option, in whole or in part, at the redemption
price, except as may otherwise be provided in connection with
any debt securities or series thereof.
After notice has been given as provided in the indenture, if
funds for the redemption of any debt securities called for
redemption shall have been made available on such redemption
date, such debt securities will cease to bear interest on the
date fixed for such redemption specified in such notice, and the
only right of the holders of the debt securities will be to
receive payment of the redemption price.
Notice of any optional redemption of any debt securities will be
given to holders at their addresses, as shown on our books and
records, not more than 60 nor less than 30 days prior to
the date fixed for redemption. The notice of redemption will
specify, among other items, the redemption price and the
principal amount of the debt securities held by such holder to
be redeemed.
If we elect to redeem debt securities, we will notify the
trustee at least 45 days prior to the redemption date (or
such shorter period as satisfactory to the trustee) of the
aggregate principal amount of debt securities to be redeemed and
the redemption date. If less than all of the debt securities are
to be redeemed, the trustee shall select the debt securities to
be redeemed in such manner as it shall deem fair and appropriate
(Article Eleven).
If the applicable supplemental indenture provides that the debt
securities are redeemable at the option of the holder, we will
redeem such debt securities in accordance with the terms of the
applicable supplemental indenture. In the event we determine
that any such redemption constitutes an issuer tender offer, we
will comply with the provisions of Rule 13e-4 of the
Exchange Act and any other applicable tender offer rules, and
will file a Schedule TO
16
or any other schedule required under such rules, in connection
with any offer to repurchase the notes at the option of the
holder.
Global
Securities
If the applicable prospectus supplement so indicates, the debt
securities will be evidenced by one or more global securities,
which will be deposited with, or on behalf of, The Depository
Trust Company, New York, New York, or DTC, and
registered in the name of Cede & Co., as DTCs
nominee.
Holders may hold their interests in any of the global securities
directly through DTC, or indirectly through organizations which
are participants in DTC. Transfers between participants will be
effected in the ordinary way in accordance with DTC rules and
will be settled in immediately available funds.
Holders who are not DTC participants may beneficially own
interests in a global security held by DTC only through
participants, including some banks, brokers, dealers, trust
companies and other parties that clear through or maintain a
custodial relationship with a participant, either directly or
indirectly, and have indirect access to the DTC system. So long
as Cede & Co., as the nominee of DTC, is the
registered owner of any global security, Cede & Co.
for all purposes will be considered the sole holder of such
global security. Except as provided below, owners of beneficial
interests in a global security will not be entitled to have
certificates registered in their names, will not receive or be
entitled to receive physical delivery of certificates in
definitive form, and will not be considered the holders thereof.
Neither we nor the trustee, nor any registrar or paying agent,
will have any responsibility for the performance by DTC or their
participants or indirect participants of their respective
obligations under the rules and procedures governing their
operations. DTC has advised us that it will take any action
permitted to be taken by a holder of debt securities only at the
direction of one or more participants whose accounts are
credited with DTC interests in a global security.
DTC has advised us as follows:
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DTC is a limited purpose trust company organized under the New
York Banking Law, a banking organization within the
meaning of the New York Banking Law, a member of the Federal
Reserve System, a clearing corporation within the
meaning of the New York Uniform Commercial Code and a
clearing agency registered pursuant to the
provisions of Section 17A of the Exchange Act;
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DTC holds securities for its participants to facilitate the
clearance and settlement of securities transactions, such as
transfers and pledges, among participants in deposited
securities through electronic book-entry changes to accounts of
its participants, thereby eliminating the need for physical
movement of securities certificates. Participants include
securities brokers and dealers, banks, trust companies, clearing
corporations and other organizations;
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some of such participants, or their representatives, together
with other entities, own DTC; and
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the rules applicable to DTC and its participants are on file
with the SEC.
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Purchases of debt securities under the DTC system must be made
by or through participants, which will receive a credit for the
debt securities on DTCs records. The ownership interest of
each actual purchaser of each debt security is in turn to be
recorded on the participants and indirect
participants records. Purchasers will not receive written
confirmation from DTC of their purchase, but purchasers are
expected to receive written confirmations providing details of
the transaction, as well as periodic statements of their
holdings, from the participant or indirect participant through
which the purchasers entered into the transaction. Transfers of
ownership interests in the debt securities are to be
accomplished by entries made on the books of participants and
indirect participants acting on behalf of actual purchasers.
Purchasers of debt securities will not receive certificates
representing their ownership interests, except if the use of the
book-entry system for the debt securities is discontinued.
The deposit of debt securities with DTC and their registration
in the name of Cede & Co. effect no change in
beneficial ownership. DTC has no knowledge of the actual
beneficial owners of the debt securities. DTCs records
reflect only the identity of the participants to whose accounts
such debt securities are credited, which may or may
17
not be the beneficial owners. The participants will remain
responsible for keeping account of their holdings on behalf of
their customers.
The laws of some jurisdictions require that some purchasers of
securities take physical delivery of securities in definitive
form. Such laws may impair the ability to transfer beneficial
interests in the global security.
Redemption notices shall be sent to Cede & Co. If less
than all of the principal amount of the global securities of the
same series is being redeemed, DTCs practice is to
determine by lot the amount of the interest of each participant
therein to be redeemed.
Conveyance of notices and other communications by DTC to
participants, by participants to indirect participants and by
participants and indirect participants to beneficial owners will
be governed by arrangements among them, subject to any statutory
or regulatory requirements that may be in effect from time to
time.
Principal, interest payments, and payments of any premium
amounts on the debt securities will be made to Cede &
Co. by wire transfer of immediately available funds. DTCs
practice is to credit participants accounts on the payable
date in accordance with their respective holdings shown on
DTCs records unless DTC has reason to believe that it will
not receive payment on the payment date. Payments by
participants to beneficial owners will be governed by standing
instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or
registered in street name, and will be the
responsibility of such participant and not of DTC or the
operating partnership, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payments of
principal, interest, and payments of any premium amounts to
Cede & Co. is our responsibility, disbursement of such
payments to participants is the responsibility of DTC, and
disbursement of such payments to the beneficial owners of the
debt securities is the responsibility of participants and
indirect participants. Neither we nor the trustee will have any
responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership
interests in the global securities or for maintaining,
supervising or reviewing any records relating to such beneficial
ownership interests.
DTC may discontinue providing its services as securities
depository with respect to the debt securities at any time by
giving us reasonable notice. Under such circumstances, in the
event that a successor securities depository is not obtained,
certificates for the relevant notes will be printed and
delivered in exchange for interests in such global security. Any
global security that is exchangeable pursuant to the preceding
sentence shall be exchangeable for relevant debt securities in
authorized denominations registered in such names as DTC shall
direct. It is expected that such instruction will be based upon
directions received by DTC from its participants with respect to
ownership of beneficial interests in such global security.
We may decide to discontinue use of the system of book-entry
transfers through DTC, or a successor securities depository. In
that event, certificates representing the debt securities will
be printed and delivered.
The information in this section concerning DTC and DTCs
book-entry system has been obtained from sources that we believe
to be reliable, but we do not take responsibility for the
accuracy thereof.
18
DESCRIPTION
OF CAPITAL STOCK
The following description of our capital stock and provisions of
our Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws are summaries and are qualified by
reference to the terms of these documents. Our authorized
capital stock consists of 500 million shares of common
stock, par value $0.01 per share, and 50 million
shares of preferred stock, par value $0.01 per share.
Common
Stock
As of December 1, 2005, there were 140,375,257 shares
of common stock outstanding. In addition, as of December 1,
2005, there were 4,485,790 additional shares of common stock
available for issuance under our equity incentive plan and
1,843,846 shares available for issuance under our employee
stock purchase plan.
Holders of shares of our common stock are entitled to one vote
for each share of common stock held on all matters submitted to
a vote of shareholders and do not have cumulative voting rights.
Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of
the directors standing for election. Holders of shares of our
common stock are entitled to receive ratably any dividends as
may be declared by our board of directors out of funds legally
available for distribution, after provision has been made for
any preferential dividend rights of outstanding preferred stock,
if any. Upon our liquidation, dissolution or winding up, the
holders of our common stock are entitled to receive ratably the
net assets available after the payment of all of our debts and
other liabilities, and after the satisfaction of the rights of
any outstanding preferred stock, if any. Holders of our common
stock have no preemptive, subscription, redemption or conversion
rights, nor are they entitled to the benefit of any sinking
fund. The outstanding shares of common stock are validly issued,
fully paid and non-assessable. Except as may be imposed on
shares issued upon exercise of options or restricted stock
granted under our equity incentive plan, and except as may be
imposed by applicable securities laws, there are no restrictions
on the alienability of the shares. Holders of shares of our
common stock are not liable for further calls or assessments by
us. The rights, powers, preferences and privileges of holders of
common stock are subordinate to, and may be adversely affected
by, the rights of the holders of shares of any series of
preferred stock which our board of directors may designate and
issue in the future. Certain of our existing holders of common
stock have the right to require us to register their shares of
common stock under the Securities Act in specified
circumstances. See the discussion below under the caption
Shareholder Registration Rights.
Our common stock is listed on The New York Stock Exchange under
the symbol CSE.
Preferred
Stock
Our board of directors is authorized, without further vote or
action by the shareholders, to issue from time to time up to an
aggregate of 50 million shares of preferred stock in one or
more series. As of the date of this prospectus, there are no
shares of preferred stock outstanding. Each series of preferred
stock shall have the number of shares, designations,
preferences, voting powers, qualifications and special or
relative rights or privileges as shall be determined by our
board of directors, which may include, but are not limited to,
dividend rights, voting rights, redemption and sinking fund
provisions, liquidation preferences, conversion rights and
preemptive rights. We will distribute a supplement to this
prospectus relating to any series of preferred stock we may
offer. The prospectus supplement will describe the specific
terms of the particular series of preferred stock offered.
Our board of directors has the authority to issue preferred
stock and to determine its rights and preferences in order to
eliminate delays associated with a shareholder vote on specific
issuances. The issuance of preferred stock, while providing
desired flexibility in connection with possible acquisitions and
other corporate purposes, could adversely affect the voting
power or other rights of the holders of our common stock, and
could make it more difficult for a third party to acquire, or
could discourage a third party from attempting to acquire, a
majority of our outstanding voting stock.
Transfer
Agent
Wachovia Bank, National Association serves as transfer agent for
shares of our common stock.
19
Delaware
Law and Certain Charter and Bylaw Provisions
We are subject to the provisions of Section 203 of the
General Corporation Law of Delaware. In general, the statute
prohibits a publicly held Delaware corporation from engaging in
a business combination with interested
shareholders for a period of three years after the date of the
transaction in which the person became an interested
shareholder, unless the business combination is approved in a
prescribed manner. A business combination includes
certain mergers, asset sales and other transactions resulting in
a financial benefit to the interested shareholder. Subject to
exceptions, an interested shareholder is a person
who, alone or together with his affiliates and associates, owns,
or within the prior three years did own, 15% or more of the
corporations voting stock.
Our certificate of incorporation and bylaws provide that:
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the board of directors be divided into three classes, with
staggered three-year terms;
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directors may be removed only for cause and only by the
affirmative vote of at least a majority of the voting power of
all of the then outstanding shares of our capital stock entitled
to vote generally in the election of directors voting together
as a single class; and
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any vacancy on the board of directors, however the vacancy
occurs, including a vacancy due to an enlargement of the board,
may only be filled by the affirmative vote of a majority the
directors then in office.
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The classification of our board of directors and the limitations
on removal of directors and filling of vacancies could have the
effect of making it more difficult for a third party to acquire,
or of discouraging a third party from, acquiring us.
Our bylaws also provide that:
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any action required or permitted to be taken by the shareholders
at an annual meeting or special meeting of shareholders may only
be taken if it is properly brought before such meeting; and
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special meetings of the shareholders may be called by our board
of directors, the chairman of our board of directors, our Chief
Executive Officer or our President and shall be called by our
Secretary at the written request of at least 10% in voting power
of all capital stock outstanding and entitled to cast votes at
the meeting.
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Our bylaws provide that, in order for any shareholder business
(other than shareholder nominations of directors) to be
considered properly brought before a meeting, a
shareholder must comply with requirements regarding advance
notice to us. For business to be properly brought before a
meeting by a shareholder, it must be a proper matter for
shareholder action under the Delaware General Corporation Law,
the shareholder must have given timely notice thereof in writing
to our Secretary, and the notice must comply with the procedures
set forth in our bylaws. Except for shareholder proposals
submitted in accordance with the federal proxy rules as to which
the requirements specified therein shall control, a
shareholders notice, to be timely, must be delivered to or
mailed and received at our principal executive offices, not less
than 120 calendar days prior to the one year anniversary of the
date of our proxy statement issued in connection with the prior
years annual meeting in the case of an annual meeting, and
not less than 60 calendar days prior to the meeting in the case
of a special meeting; provided, however, that if a public
announcement of the date of the special meeting is not given at
least 70 days before the scheduled date for the special
meeting, then a shareholders notice will be timely if it
is received at our principal executive offices within
10 days following the date public notice of the meeting
date is first given, whether by press release or other public
filing.
Our bylaws also provide that subject to the rights of holders of
any class or series of capital stock then outstanding,
nominations for the election or re-election of directors at a
meeting of the shareholders may be made by any shareholder
entitled to vote in the election of directors generally who
complies with the procedures set forth in our bylaws and who is
a shareholder of record at the time notice is delivered to our
Secretary. Any shareholder entitled to vote in the election of
directors generally may nominate one or more persons for
election or re-election as directors at an annual meeting only
if timely notice of such shareholders intent to make such
nomination or nominations has been given in writing to our
Secretary. To be timely, a shareholders notice must be
delivered to or mailed and received at our principal executive
offices not less than 120 calendar days prior to the one year
20
anniversary of the date of our proxy statement issued in
connection with the prior years annual meeting in the case
of an annual meeting, and not less than 60 calendar days prior
to the meeting in the case of a special meeting; provided,
however, that if a public announcement of the date of the
special meeting is not given at least 70 days before the
scheduled date for the special meeting, then a
shareholders notice will be timely if it is received at
our principal executive offices within 10 days following
the date public notice of the meeting date is first given,
whether by press release or other public filing.
The purpose of requiring shareholders to give us advance notice
of nominations and other shareholder business is to afford our
board of directors a meaningful opportunity to consider the
qualifications of the proposed nominees and the advisability of
the other proposed business and, to the extent deemed necessary
or desirable by our board of directors, to inform shareholders
and make recommendations about such qualifications or business,
as well as to provide a more orderly procedure for conducting
meetings of shareholders. Although our bylaws do not give our
board of directors any power to disapprove shareholder
nominations for the election of directors or proposals for
action, they may have the effect of precluding a contest for the
election of directors or the consideration of shareholder
proposals if proper procedures are not followed and of
discouraging or deterring a third party from conducting a
solicitation of proxies to elect its own slate of directors or
to approve its own proposal without regard to whether
consideration of such nominees or proposals might be harmful or
beneficial to us and our shareholders. These provisions could
also delay shareholder actions which are favored by the holders
of a majority of our outstanding voting securities until the
next shareholders meeting.
Delaware corporate law provides generally that the affirmative
vote of a majority of the shares entitled to vote on such matter
is required to amend a corporations certificate of
incorporation or bylaws, unless a corporations certificate
of incorporation or bylaws requires a greater percentage. Our
certificate of incorporation permits our board of directors to
amend or repeal most provisions of our bylaws by majority vote
but requires the affirmative vote of the holders of at least
662/3%
of the voting power of all of the then outstanding shares of our
capital stock entitled to vote to amend or repeal certain
provisions of our bylaws. Generally, our certificate of
incorporation may be amended by holders of a majority of the
voting power of the then outstanding shares of our capital stock
entitled to vote. No amendment of the provision of our
certificate of incorporation providing for the division of our
board of directors into three classes with staggered three-year
terms may be approved absent the affirmative vote of the holders
of at least
662/3%
of the voting power of all the then outstanding shares of
capital stock entitled to vote. The shareholder vote with
respect to an amendment of our certificate of incorporation or
bylaws would be in addition to any separate class vote that
might in the future be required under the terms of any series
preferred stock that might be outstanding at the time any such
amendments are submitted to shareholders.
Limitation
of Liability and Indemnification of Officers and
Directors
Our bylaws provide indemnification, including advancement of
expenses, to the fullest extent permitted under applicable law
to any person made or threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative by
reason of the fact that such person is or was a director or
officer of CapitalSource, or is or was serving at our request as
a director or officer of another corporation, partnership, joint
venture, trust, or other enterprise, including service with
respect to an employee benefit plan. In addition, our
certificate of incorporation provides that our directors will
not be personally liable to us or our shareholders for monetary
damages for breaches of their fiduciary duty as directors,
unless they violated their duty of loyalty to us or our
shareholders, acted in bad faith, knowingly or intentionally
violated the law, authorized illegal dividends or redemptions or
derived an improper personal benefit from their action as
directors. This provision does not limit or eliminate our rights
or the rights of any shareholder to seek nonmonetary relief such
as an injunction or rescission in the event of a breach of a
directors duty of care. In addition, this provision does
not limit the directors responsibilities under Delaware
law or any other laws, such as the federal securities laws. We
have obtained insurance that insures our directors and officers
against certain losses and which insures us against our
obligations to indemnify the directors and officers. We also
have entered into indemnification agreements with our directors
and executive officers.
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Shareholder
Registration Rights
Certain of our existing shareholders, including members of our
management, who collectively hold approximately
64.0 million shares of our common stock, are entitled to
certain rights with respect to the registration of such shares
under the Securities Act pursuant to an Amended and Restated
Registration Rights Agreement that we entered into with certain
of our existing shareholders in connection with the closing of
our August 2002 recapitalization transaction. All of these
shares currently are tradable, subject to compliance with the
volume and manner of sale provisions of Rule 144 under the
Securities Act, and any shares registered pursuant to the
agreement would become freely tradable without restriction under
the Securities Act. Our existing shareholders, by exercising
their registration rights, could cause a large number of shares
of our common stock to be registered and publicly sold, which
could cause the market price of shares of our common stock to
decline significantly.
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S-3
Demand Registration Rights
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Under the terms of our Amended and Restated Registration Rights
Agreement, so long as we remain eligible to register securities
by means of a registration statement on
Form S-3,
holders of our registrable shares have the right, subject to
certain limitations, to demand the registration of their shares
of common stock provided that the aggregate market value of the
shares of common stock to be registered equals at least
$10 million. We expect to satisfy any exercises of these
rights through preparation of a prospectus supplement to this
prospectus.
Subject to the exceptions and limitations set forth in the
Amended and Restated Registration Rights Agreement, the holders
of registrable securities under that agreement have unlimited
piggyback registration rights until August 12, 2009. We
expect to satisfy any exercises of these rights through
preparation of a prospectus supplement to this prospectus.
22
DESCRIPTION
OF DEPOSITARY SHARES
The description of certain provisions of any deposit agreement
and any related depositary shares and depositary receipts in
this prospectus and in any prospectus supplement are summaries
of the material provisions of that deposit agreement and of the
depositary shares and depositary receipts. These descriptions do
not restate those agreements and do not contain all of the
information that you may find useful. We urge you to read the
applicable agreements because they, and not the summaries,
define many of your rights as a holder of the depositary shares.
For more information, please review the form of deposit
agreement and form of depositary receipts relating to each
series of the preferred stock, which will be filed with the SEC
promptly after the offering of that series of preferred stock
and will be available as described under the heading
Available Information on page 1.
General
We may elect to have shares of preferred stock represented by
depositary shares. The shares of any series of the preferred
stock underlying the depositary shares will be deposited under a
separate deposit agreement between us and a bank or trust
company that we select. The prospectus supplement relating to a
series of depositary shares will set forth the name and address
of this preferred stock depositary. Subject to the terms of the
deposit agreement, each owner of a depositary share will be
entitled, proportionately, to all the rights, preferences and
privileges of the preferred stock represented by such depositary
share, including dividend, voting, redemption, conversion,
exchange and liquidation rights. As of the date of this
prospectus, there are no depositary shares outstanding.
The depositary shares will be evidenced by depositary receipts
issued pursuant to the deposit agreement, each of which will
represent the applicable interest in a number of shares of a
particular series of the preferred stock described in the
applicable prospectus supplement.
A holder of depositary shares will be entitled to receive the
shares of preferred stock, but only in whole shares of preferred
stock, underlying those depositary shares. If the depositary
receipts delivered by the holder evidence a number of depositary
shares in excess of the whole number of shares of preferred
stock to be withdrawn, the depositary will deliver to that
holder at the same time a new depositary receipt for the excess
number of depositary shares.
Dividends
and Other Distributions
The preferred stock depositary will distribute all cash
dividends or other cash distributions in respect of the series
of preferred stock represented by the depositary shares to the
record holders of depositary receipts in proportion, to the
extent possible, to the number of depositary shares owned by
those holders. The depositary, however, will distribute only the
amount that can be distributed without attributing to any
depositary share a fraction of one cent, and any undistributed
balance will be added to and treated as part of the next sum
received by the depositary for distribution to record holders of
depositary receipts then outstanding.
If there is a distribution other than in cash in respect of the
preferred stock, the preferred stock depositary will distribute
property received by it to the record holders of depositary
receipts in proportion, insofar as possible, to the number of
depositary shares owned by those holders, unless the preferred
stock depositary determines that it is not feasible to make such
a distribution. In that case, the preferred stock depositary
may, with our approval, adopt any method that it deems equitable
and practicable to effect the distribution, including a public
or private sale of the property and distribution of the net
proceeds from the sale to the holders.
The amount distributed in any of the above cases will be reduced
by any amount we or the preferred stock depositary are required
to withhold on account of taxes.
Conversion
and Exchange
If any series of preferred stock underlying the depositary
shares is subject to provisions relating to its conversion or
exchange as set forth in an applicable prospectus supplement,
each record holder of depositary receipts will have the right or
obligation to convert or exchange the depositary shares
evidenced by the depositary receipts pursuant to those
provisions.
23
Redemption
of Depositary Shares
If any series of preferred stock underlying the depositary
shares is subject to redemption, the depositary shares will be
redeemed from the proceeds received by the preferred stock
depositary resulting from the redemption, in whole or in part,
of the preferred stock held by the preferred stock depositary.
Whenever we redeem a share of preferred stock held by the
preferred stock depositary, the preferred stock depositary will
redeem as of the same redemption date a proportionate number of
depositary shares representing the shares of preferred stock
that were redeemed. The redemption price per depositary share
will be equal to the aggregate redemption price payable with
respect to the number of shares of preferred stock underlying
the depositary shares. If fewer than all the depositary shares
are to be redeemed, the depositary shares to be redeemed will be
selected by lot or proportionately as we may determine.
After the date fixed for redemption, the depositary shares
called for redemption will no longer be deemed to be outstanding
and all rights of the holders of the depositary shares will
cease, except the right to receive the redemption price. Any
funds that we deposit with the preferred stock depositary
relating to depositary shares which are not redeemed by the
holders of the depositary shares will be returned to us after a
period of two years from the date the funds are deposited by us.
Voting
Upon receipt of notice of any meeting at which the holders of
any shares of preferred stock underlying the depositary shares
are entitled to vote, the preferred stock depositary will mail
the information contained in the notice to the record holders of
the depositary receipts. Each record holder of the depositary
receipts on the record date, which will be the same date as the
record date for the preferred stock, may then instruct the
preferred stock depositary as to the exercise of the voting
rights pertaining to the number of shares of preferred stock
underlying that holders depositary shares. The preferred
stock depositary will try to vote the number of shares of
preferred stock underlying the depositary shares in accordance
with the instructions, and we will agree to take all reasonable
action which the preferred stock depositary deems necessary to
enable the preferred stock depositary to do so. The preferred
stock depositary will abstain from voting the preferred stock to
the extent that it does not receive specific written
instructions from holders of depositary receipts representing
the preferred stock.
Record
Date
Subject to the provisions of the deposit agreement, whenever
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any cash dividend or other cash distribution becomes payable,
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any distribution other than cash is made,
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any rights, preferences or privileges are offered with respect
to the preferred stock,
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the preferred stock depositary receives notice of any meeting at
which holders of preferred stock are entitled to vote or of
which holders of preferred stock are entitled to notice, or
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the preferred stock depositary receives notice of the mandatory
conversion of or any election by us to call for the redemption
of any preferred stock,
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the preferred stock depositary will in each instance fix a
record date, which will be the same as the record date for the
preferred stock, for the determination of the holders of
depositary receipts:
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who will be entitled to receive dividend, distribution, rights,
preferences or privileges or the net proceeds of any
sale, or
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who will be entitled to give instructions for the exercise of
voting rights at any such meeting or to receive notice of the
meeting or the redemption or conversion.
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Withdrawal
of Preferred Stock
Upon surrender of depositary receipts at the principal office of
the preferred stock depositary, upon payment of any unpaid
amount due the preferred stock depositary, and subject to the
terms of the deposit agreement, the owner of the depositary
shares evidenced by the depositary receipts is entitled to
delivery of the number of whole shares of
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preferred stock and all money and other property, if any,
represented by the depositary shares. Partial shares of
preferred stock will not be issued. If the depositary receipts
delivered by the holder evidence a number of depositary shares
in excess of the number of depositary shares representing the
number of whole shares of preferred stock to be withdrawn, the
preferred stock depositary will deliver to the holder at the
same time a new depositary receipt evidencing the excess number
of depositary shares. Holders of preferred stock that are
withdrawn will not be entitled to deposit the shares that have
been withdrawn under the deposit agreement or to receive
depositary receipts.
Amendment
and Termination of the Deposit Agreement
We and the preferred stock depositary may at any time agree to
amend the form of depositary receipt and any provision of the
deposit agreement. However, any amendment that materially and
adversely alters the rights of holders of depositary shares will
not be effective unless the amendment has been approved by the
holders of at least a majority of the depositary shares then
outstanding. The deposit agreement may be terminated by us or by
the preferred stock depositary only if all outstanding shares
have been redeemed or if a final distribution in respect of the
underlying preferred stock has been made to the holders of the
depositary shares in connection with our liquidation,
dissolution or winding up.
Charges
of Preferred Stock Depositary
We will pay all charges of the preferred stock depositary
including charges in connection with the initial deposit of the
preferred stock, the initial issuance of the depositary
receipts, the distribution of information to the holders of
depositary receipts with respect to matters on which preference
stock is entitled to vote, withdrawals of the preferred stock by
the holders of depositary receipts or redemption or conversion
of the preferred stock, except for taxes (including transfer
taxes, if any) and other governmental charges and any other
charges expressly provided in the deposit agreement to be at the
expense of holders of depositary receipts or persons depositing
preferred stock.
Miscellaneous
Neither we nor the preferred stock depositary will be liable if
either of us is prevented or delayed by law or any circumstance
beyond our control in performing any obligations under the
deposit agreement. The obligations of the preferred stock
depositary under the deposit agreement are limited to performing
its duties under the agreement without negligence or bad faith.
Our obligations under the deposit agreement are limited to
performing our duties in good faith. Neither we nor the
preferred stock depositary is obligated to prosecute or defend
any legal proceeding in respect of any depositary shares or
preferred stock unless satisfactory indemnity is furnished. We
and the preferred stock depositary may rely on advice of or
information from counsel, accountants or other persons that they
believe to be competent and on documents that they believe to be
genuine.
The preferred stock depositary may resign at any time or be
removed by us, effective upon the acceptance by its successor of
its appointment. If we have not appointed a successor preferred
stock depositary and the successor depositary has not accepted
its appointment within 60 days after the preferred stock
depositary delivered a resignation notice to us, the preferred
stock depositary may terminate the deposit agreement. See
Amendment and Termination of the Deposit
Agreement above.
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DESCRIPTION
OF WARRANTS
We may issue warrants to purchase debt securities, common stock,
preferred stock or other securities described in this
prospectus. We may issue warrants independently or as part of a
unit with other securities. Warrants sold with other securities
as a unit may be attached to or separate from the other
securities. We will issue warrants under separate warrant
agreements between us and a warrant agent that we will name in
the applicable prospectus supplement. As of the date of this
prospectus, there are no warrants outstanding.
We will distribute a prospectus supplement relating to any
warrants that we may offer. The prospectus supplement will
describe specific terms relating to the offering, including a
description of any other securities being offered together with
the warrants. These terms will include some or all of the
following:
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the title of the warrants;
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the aggregate number of warrants;
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the price or prices at which the warrants will be issued;
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terms relating to the currency or currencies, in which the
prices of the warrants may be payable;
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the designation, number and terms of the debt securities, common
stock, preferred stock or other securities or rights, including
rights to receive payment in cash or securities based on the
value, rate or
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price of one or more specified commodities, currencies or
indices, purchasable upon exercise of the warrants and
procedures by which those numbers may be adjusted;
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the exercise price of the warrants, including any provisions for
changes or adjustments to the exercise price, and terms relating
to the currency in which such price is payable;
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the dates or periods during which the warrants are exercisable;
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the designation and terms of any securities with which the
warrants are issued as a unit;
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if the warrants are issued as a unit with another security, the
date on which the warrants and the other security will be
separately transferable;
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if the exercise price is not payable in U.S. dollars, terms
relating to the currency in which the exercise price is
denominated;
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any minimum or maximum amount of warrants that may be exercised
at any one time; any terms relating to the modification of the
warrants;
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a discussion of material federal income tax considerations, if
applicable;
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any other terms of the warrants, including terms, procedures and
limitations relating to the transferability, exchange, exercise
or redemption of the warrants.
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Warrants issued for securities other than our debt securities,
common stock or preferred stock will not be exercisable until at
least one year from the date of sale of the warrant.
The applicable prospectus supplement will describe the specific
terms of any warrant units.
The descriptions of the warrant agreements in this prospectus
and in any prospectus supplement are summaries of the material
provisions of the applicable agreements. These descriptions do
not restate those agreements in their entirety and do not
contain all of the information that you may find useful. We urge
you to read the applicable agreements because they, and not the
summaries, define many of your rights as holders of the warrants
or any warrant units. For more information, please review the
form of the relevant agreements, which will be filed with the
SEC promptly after the offering of warrants or warrant units and
will be available as described under the heading Available
Information on page 1.
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DESCRIPTION
OF PURCHASE CONTRACTS
We may issue purchase contracts obligating holders to purchase
from us, and us to sell to the holders, a number of debt
securities, shares of our common stock, preferred stock or
depositary shares or warrants at a future date or dates. The
purchase contracts may require us to make periodic payments to
the holders of the purchase contracts, which may or may not be
unsecured. As of the date of this prospectus, there are no
purchase contracts outstanding.
The prospectus supplement relating to any purchase contracts we
are offering will describe the material terms of the purchase
contracts and any applicable pledge or depository arrangements,
including one or more of the following:
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the stated amount a holder will be obligated to pay in order to
purchase our debt securities, common stock, preferred stock,
depositary shares or warrants or the formula to determine such
amount.
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the settlement date or dates on which the holder will be
obligated to purchase the securities. The prospectus supplement
will specify whether certain events may cause the settlement
date to occur on an earlier date and the terms on which an early
settlement would occur.
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the events, if any, that will cause our obligations and the
obligations of the holder under the purchase contract to
terminate.
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the settlement rate, which is a number that, when multiplied by
the stated amount of a purchase contract, determines the number
of securities that we will be obligated to sell and a holder
will be obligated to purchase under that purchase contract upon
payment of the stated amount of a purchase contract. The
settlement rate may be determined by the application of a
formula specified in the prospectus supplement. Purchase
contracts may include anti-dilution provisions to adjust the
number of securities to be delivered upon the occurrence of
specified events.
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whether the purchase contracts will be issued separately or as
part of units consisting of a purchase contract and an
underlying security with an aggregate principal amount equal to
the stated amount. Any underlying securities will be pledged by
the holder to secure its obligations under a purchase contract.
Underlying securities may be our debt securities, depositary
shares, preferred securities, common stock, warrants or debt
obligations or government securities.
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the terms of any pledge arrangement relating to any underlying
securities.
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the amount and terms of the contract fee, if any, that may be
payable. The contract fee may be calculated as a percentage of
the stated amount of the purchase contract or otherwise.
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The descriptions of the purchase contracts and any applicable
underlying security or pledge or depository arrangements in this
prospectus and in any prospectus supplement are summaries of the
material provisions of the applicable agreements. These
descriptions do not restate those agreements in their entirety
and may not contain all the information that you may find
useful. We urge you to read the applicable agreements because
they, and not the summaries, define many of your rights as
holders of the purchase contracts. For more information, please
review the form of the relevant agreements, which will be filed
with the SEC promptly after the offering of purchase contracts
or purchase contract units and will be available as described
under the heading Available Information on
page 1.
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DESCRIPTION
OF UNITS
We may issue units comprised of one or more of the other
securities described in this prospectus in any combination. Each
unit may also include debt obligations of third parties, such as
U.S. Treasury securities. 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 prospectus supplement will describe:
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the designation and terms of the units and of the securities
comprising the units, including whether and under what
circumstances the securities comprising the units may be held or
transferred separately;
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a description of the terms of any unit agreement governing the
units;
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a description of the provisions for the payment, settlement,
transfer or exchange of the units;
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a discussion of material federal income tax considerations, if
applicable; and
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whether the units will be issued in fully registered or global
form.
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The descriptions of the units and any applicable underlying
security or pledge or depository arrangements in this prospectus
and in any prospectus supplement are summaries of the material
provisions of the applicable agreements. These descriptions do
not restate those agreements in their entirety and may not
contain all the information that you may find useful. We urge
you to read the applicable agreements because they, and not the
summaries, define many of your rights as holders of the units.
For more information, please review the form of the relevant
agreements, which will be filed with the SEC promptly after the
offering of units and will be available as described under the
heading Available Information on page 1.
LEGAL
MATTERS
In connection with particular offerings of the securities in the
future, and if stated in the applicable prospectus supplement,
the validity of those securities and certain U.S. federal income
tax matters may be passed upon for us by Hogan &
Hartson L.L.P., and for the underwriters or agents by counsel
named in the applicable prospectus supplement.
EXPERTS
The consolidated financial statements of CapitalSource Inc.
appearing in CapitalSource Inc.s Annual Report
(Form 10-K)
for the year ended December 31, 2004, and CapitalSource
Inc. managements assessment of the effectiveness of
internal control over financial reporting as of
December 31, 2004 included therein, have been audited by
Ernst & Young LLP, independent registered public
accounting firm, as set forth in their reports thereon, included
therein, and incorporated herein by reference. Such consolidated
financial statements and managements assessment are
incorporated herein by reference in reliance upon such reports
given on the authority of such firm as experts in accounting and
auditing.
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