e424b5
Filed Pursuant to
Rule 424(b)(5)
Registration Statement
No. 333-130681
Prospectus Supplement
(To the prospectus dated
December 23, 2005)
30,000,000 Shares
CapitalSource Inc.
Common stock
We are selling 30,000,000 shares of our common stock. 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 June 23, 2008 was
$11.19 per share.
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Per Share
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Total
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Public offering price
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$
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11.00
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$
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330,000,000
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Underwriting discounts and commissions
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$
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0.4856
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$
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11,480,070
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(1)
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Proceeds to CapitalSource, before expenses
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$
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10.5144
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$
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318,519,930
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(1)
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(1) |
The underwriters will not receive any discounts or commissions
on the sale of 6,359,000 shares of our common stock to
affiliated purchasers.
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We have granted the underwriters a
30-day
option to purchase up to 4,500,000 additional shares of our
common stock at the public offering price, less the underwriting
discounts and commissions, to cover over-allotments, if any.
Delivery of the shares of common stock will be made on or about
June 27, 2008.
Investing in our common stock involves risks. See the
Risk Factors in our Annual Report on
Form 10-K
for the year ended December 31, 2007 and our Quarterly
Report on
Form 10-Q
for the quarter ended March 31, 2008, each of which is
incorporated by reference in this prospectus supplement and the
accompanying prospectus.
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.
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JPMorgan |
Wachovia Securities |
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BMO
Capital Markets |
Citi |
Deutsche Bank Securities |
Morgan
Stanley |
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Banc
of America Securities LLC |
SunTrust Robinson Humphrey |
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JMP
Securities |
Sandler ONeill + Partners, L.P. |
June 23, 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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Aggregate Offering
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Aggregate Offering
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Amount of
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Securities to be Offered
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Registered (1)
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Price Per Share (2)
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Price
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Registration Fee (3)
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Common Stock, $0.01 par value per share
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34,500,000
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$11.71
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$403,995,000
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$15,877
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(1) |
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Reflects the potential issuance of additional shares of common stock pursuant to an over-allotment option. |
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(2) |
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Calculated in accordance with Rules 457(r) and 457(c) under the Securities Act of 1933, as amended,
based on the average of the high and low sales prices for the common stock as reported on The New York Stock Exchange
on June 23, 2008. |
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(3) |
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The registration fee is offset completely by $16,149 remaining from registration fees previously paid in connection with prior filings
under our automatic shelf registration statement (Reg. No. 333-130681). |
Table of
contents
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Page
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Prospectus Supplement
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About this Prospectus Supplement
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S-ii
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Cautionary Note Regarding Forward-Looking Statements
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S-ii
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Prospectus Supplement Summary
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S-1
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Selected Consolidated Historical Financial Data
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S-6
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The Offering
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S-8
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Use of Proceeds
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S-9
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Underwriting
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S-10
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Legal Matters
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S-17
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Experts
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S-17
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Where You Can Find More Information
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S-17
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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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20
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Description of Depositary Shares
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24
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Description of Warrants
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27
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Description of Purchase Contracts
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28
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Description of Units
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29
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Legal Matters
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29
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Experts
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29
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About this
prospectus supplement
This document is in two parts. The first part is the prospectus
supplement, which describes our common stock and certain other
matters relating to our company. The second part, the base
prospectus, gives more general information about securities we
may offer from time to time, some of which does not apply to the
offering. Generally, when we refer to the prospectus, we are
referring to both parts of this document combined. If
information contained in the prospectus supplement differs from
the information in the base prospectus, the information in the
prospectus supplement supersedes the description in the base
prospectus.
Cautionary
note regarding forward-looking statements
This prospectus supplement, the accompanying prospectus and the
documents incorporated by reference contain forward-looking
statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which are subject
to numerous assumptions, risks, and uncertainties. All
statements contained in this prospectus supplement, the
accompanying prospectus and the documents incorporated by
reference that are not clearly historical in nature are
forward-looking, and the words anticipate,
assume, believe, expect,
estimate, plan, will,
look forward, and similar expressions are generally
intended to identify forward-looking statements. All
forward-looking statements (including statements regarding
future financial and operating results and future transactions
and their results) involve risks, uncertainties and
contingencies, many of which are beyond our control which may
cause actual results, performance, or achievements to differ
materially from anticipated results, performance or
achievements. Actual results could differ materially from those
contained or implied by such statements for a variety of
factors, including without limitation:
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we may be unsuccessful in completing our acquisition of assets
and assumption of liabilities from Fremont
Investment & Loan, or FIL, or otherwise pursuing our
deposit funding strategy on schedule, on proposed or favorable
terms or at all, despite significant efforts;
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changes in economic or market conditions;
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continued or worsening disruptions in credit and other markets
may make it difficult for us to obtain debt financing on
attractive terms or at all, could prevent us from optimizing the
amount of leverage we employ and could adversely affect our
liquidity position;
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movements in interest rates and lending spreads may adversely
affect our borrowing strategy;
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competitive and other market pressures could adversely affect
loan pricing;
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the success and timing of other business strategies;
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the nature, extent, and timing of any governmental actions and
reforms, or changes in tax laws or regulations affecting REITs;
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extended disruption of vital infrastructure;
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whether, upon or after the closing of the asset acquisition from
FIL, we modify our dividend policy to conform to that of other
commercial depository institutions and retain rather than
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S-ii
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distribute a majority of our earnings to redeploy in what we
believe to be attractive lending opportunities;
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whether we are able to monetize our investment in our healthcare
net lease assets successfully;
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whether we determine not to elect to qualify as a REIT beginning
in 2009 or thereafter;
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hedging activities may result in reported losses not offset by
gains reported in our consolidated financial statements; and
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other risk factors described in our Annual Report on Form
10-K for the
year ended December 31, 2007, our Current Report on
Form 10-Q
for the quarter ended March 31, 2008 and our other filings
with the SEC.
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All forward-looking statements included in this prospectus
supplement, the accompanying prospectus and the documents
incorporated by reference are based on information available at
the time the statement is made. We are under no obligation to
(and expressly disclaim any such obligation to) update or alter
our forward-looking statements, whether as a result of new
information, future events or otherwise. The information
contained in this section should be read in conjunction with our
consolidated financial statements and related notes incorporated
by reference into this prospectus supplement and the
accompanying prospectus.
S-iii
Prospectus
supplement summary
The following summary is qualified in its entirety by the
more detailed information included elsewhere or incorporated by
reference in this prospectus supplement or the accompanying
prospectus. Because this is a summary, it may not contain all
the information that is important to you. You should read the
entire prospectus supplement and the accompanying prospectus,
including the information incorporated by reference, before
making an investment decision. When used in this prospectus
supplement, the terms CapitalSource, we,
our and us refer to CapitalSource Inc.
and its subsidiaries, unless the context requires otherwise.
CapitalSource
Inc.
We are a commercial finance, investment and asset management
company focused on the middle market. We operate as a real
estate investment trust (REIT) and provide senior
and subordinate commercial loans, invest in real estate and
residential mortgage assets, and engage in asset management and
servicing activities.
We operate as three reportable segments: (1) Commercial
Finance, (2) Healthcare Net Lease, and (3) Residential
Mortgage Investment. Our Commercial Finance segment comprises
our commercial lending business activities; our Healthcare Net
Lease segment comprises our direct real estate investment
business activities; and our Residential Mortgage Investment
segment comprises our residential mortgage investment activities.
Through our Commercial Finance segment activities, our primary
goal is to be the leading provider of financing to middle market
businesses that require customized and sophisticated financing.
We provide a wide range of financial products that we negotiate
and structure on a client-specific basis through direct
interaction with the owners and senior managers of our clients.
We also originate and participate in syndicated debt financings.
We seek to add value to our clients businesses by
providing tailored financing that meets their specific business
needs and objectives. As of March 31, 2008, we had 1,179
loans outstanding under which we had funded an aggregate of
$9.8 billion and committed to lend up to an additional
$4.6 billion.
Through our Healthcare Net Lease segment activities, we invest
in income-producing healthcare facilities, principally long-term
care facilities in the United States. We provide lease financing
to skilled nursing facilities and, to a lesser extent, assisted
living facilities, rehabilitation and acute care facilities. As
of March 31, 2008, we had $1.0 billion in direct real
estate investments comprised of 187 healthcare facilities that
were leased to 42 tenants through long-term,
triple-net
operating leases.
Through our Residential Mortgage Investment segment activities,
we invest in certain residential mortgage assets to optimize our
REIT structure. As of March 31, 2008, our residential
mortgage investment portfolio totaled $5.3 billion, which
included investments in residential mortgage loans and
residential mortgage-backed securities (RMBS). Over
99% of our investments in RMBS are represented by
mortgage-backed securities that were issued and guaranteed by
Fannie Mae or Freddie Mac (hereinafter, Agency MBS).
In addition, we hold mortgage-related receivables secured by
prime residential mortgage loans financed with permanent,
non-recourse secured debt.
In our Commercial Finance and Healthcare Net Lease segments, the
financing needs of our clients are often specific to their
particular business or situation. We believe we can most
successfully meet these needs and manage risk through industry
or sector expertise and flexibility in structuring financings.
We offer a range of senior and subordinate mortgage loans,
S-1
real estate lease financing, asset-based loans, cash flow loans
and equity investments to our clients. Because we believe
specialized industry
and/or
sector knowledge is important to successfully serve our client
base, we originate, underwrite and manage our financings through
three focused commercial financing businesses organized around
our areas of expertise. Focusing our efforts in these specific
sectors, industries and markets allows us to rapidly design and
implement products that satisfy the special financing needs of
our clients.
These three primary commercial finance businesses are:
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Corporate Finance, which generally provides senior and
subordinate loans through direct origination and participation
in syndicated loan transactions;
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Healthcare and Specialty Finance, which, including our
Healthcare Net Lease segment activities, generally provides
first mortgage loans, asset-based revolving lines of credit, and
other cash flow loans to healthcare businesses and a broad range
of other companies and makes investments in income-producing
healthcare facilities, particularly long-term care
facilities; and
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Structured Finance, which generally engages in commercial
and residential real estate finance and also provides
asset-based lending to finance companies.
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Although we have made loans as large as $375 million, our
average commercial loan size was $8.3 million as of
March 31, 2008, and our average loan exposure by client was
$13.3 million as of March 31, 2008. Our commercial
loans generally have a maturity of two to five years with a
weighted average maturity of 3.1 years as of March 31,
2008. Substantially all of our commercial loans require monthly
interest payments at variable rates and, in many cases, our
commercial loans provide for interest rate floors that help us
maintain our yields when interest rates are low or declining. We
price our loans based upon the risk profile of our clients. As
of March 31, 2008, our geographically diverse client base
consisted of 735 clients with headquarters in 48 states,
the District of Columbia, Puerto Rico and select international
locations, primarily in Canada and Europe.
Recent
Developments
Asset Acquisition
from Fremont Investment & Loan
Maintaining broad and diverse funding sources has been a key to
our funding strategy since inception. We have identified
deposit-based funding as a potentially attractive method of
further broadening and diversifying our funding sources. To that
end, on April 13, 2008, we entered into a definitive asset
purchase agreement with Fremont Investment & Loan, or
FIL, a California industrial bank, pursuant to which we agreed
to cause a new subsidiary, CapitalSource Bank (in organization)
(CapitalSource Bank), to assume all of FILs
deposits (approximately $5.6 billion as of March 31,
2008) and deposit-related liabilities and to acquire 22
retail banking branches and operate them as CapitalSource Bank.
Under the FIL agreement, we also will acquire certain systems
and other infrastructure necessary to operate the retail branch
network, cash and short-term investments (approximately
$3.0 billion as of March 31, 2008) and the
A participation interest in a pool of commercial
real estate loans (which participation interest had an
outstanding principal balance of approximately $2.7 billion
as of March 31, 2008). The FIL agreement provides for a
cash purchase price of $58 million plus an amount (such
amount not to exceed $140 million) equal to 2% of assumed
deposits at closing. The participation interest will be acquired
at a 3% discount to its net book value. We are not acquiring
FIL, any
S-2
contingent liabilities or any business operations except
FILs retail branch network. We intend to fund a majority
of our commercial loans through CapitalSource Bank in the future.
We have received approval from the Federal Deposit Insurance
Corporation, or FDIC, and the California Department of Financial
Institutions to form CapitalSource Bank as a
California-chartered industrial bank, to acquire assets and
assume the liabilities from FIL as described above, to establish
22 of FILs branches as branches of CapitalSource Bank and
to obtain federal deposit insurance for CapitalSource Bank, in
each case subject to the conditions set forth in their
respective regulatory approvals. These conditions include, among
others, requirements that:
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CapitalSource Bank maintain a total risk-based capital ratio of
not less than 15% and an adequate allowance for loan and lease
losses;
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We and certain of our subsidiaries make capital contributions as
may be necessary to maintain CapitalSource Banks liquidity
at levels the FDIC deems appropriate, including by providing a
$150 million unsecured revolving credit facility that
CapitalSource Bank may draw on at any time it, or the FDIC,
deems necessary; and
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CapitalSource Bank, like many other de novo banks, not pay any
dividends for its first three years of operations without prior
approval of its regulators.
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These approvals constitute all regulatory approvals necessary
for our formation of CapitalSource Bank and the completion of
the FIL transaction. In accordance with the terms of the Fremont
agreement, in lieu of obtaining approval of its shareholders, on
June 18, 2008, FILs parent company, Fremont General
Corporation, filed a voluntary petition for relief under Chapter
11 of the U.S. Bankruptcy Code. The bankruptcy filing does not
impact FILs operations pending closing of the asset
acquisition. Fremont General Corporation has stated that it
intends to promptly file a motion with the bankruptcy court for
its approval to complete the asset acquisition; the parties
expect the bankruptcy court to approve this motion. We expect
the transaction to close early in the third quarter of 2008,
following satisfaction of the conditions in the regulatory
approvals and the remaining closing conditions in the purchase
and assumption agreement. However, we cannot assure investors
that the transaction will occur on this schedule or these terms
or at all.
We believe the acquisition will give CapitalSource Bank access
to a significant base of deposits with strong growth prospects.
Acquiring retail branches and deposit-funding capability
positions us to grow by diversifying and strengthening our
funding platform, and giving us access to lower and more stable
cost of funds with less reliance on the capital markets,
allowing us to take advantage of what we believe are attractive
lending opportunities now available in the market. We anticipate
that forming CapitalSource Bank, acquiring branches and assuming
the deposit liabilities will enhance our liquidity profile,
increase our profitability and improve our capital efficiency.
Our business plan approved by the regulators permits a sale of
up to $2.2 billion of our existing loans to CapitalSource
Bank, the proceeds from which sale we intend to use to reduce
our total debt by approximately $1.5 billion.
Closing the asset acquisition and commencing the operations of
CapitalSource Bank may have other strategic implications for us
in light of current market conditions.
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Dividend Policy. As previously announced, we
declared a $0.60 dividend for the second quarter of 2008,
payable on or about June 30 to our stockholders of record on
June 16. Upon the closing of the asset acquisition from
FIL, we expect to reevaluate our dividend policy and may decide
to retain a majority of our earnings, consistent with dividend
policies of other
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S-3
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commercial depository institutions, to redeploy in attractive
lending opportunities, subject to satisfying our minimum
distribution requirements to qualify as a REIT for 2008.
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Possible Healthcare Net Lease Transaction. With our
focus on our commercial lending activities, we expect to
continue to explore ways to monetize our investment in our
healthcare net lease assets, including a possible initial public
offering of the common shares of an entity holding these assets.
In any such transaction, we anticipate retaining a majority
ownership interest and being the external manager of the new
entity. The information in this prospectus supplement does
not constitute an offer to sell or solicitation of an offer to
buy any of the common shares of any entity holding our
healthcare net lease business.
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REIT Status. We intend to qualify to be taxed as a
REIT for 2008, which may require us to acquire a significant
amount of additional residential mortgage or other real estate
assets due to the addition of the assets and operations of
CapitalSource Bank to those of our existing taxable REIT
subsidiaries. As we assess the impact of a depository franchise
on our overall business operations, we intend to reexamine the
strategic rationale for our REIT election, and we may determine
not to elect to qualify as a REIT beginning in 2009 or
thereafter.
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Impact of Recent
Market Conditions
Since June 2007, we have witnessed a significant disruption in
the capital markets that has affected many financial
institutions. This disruption resulted in a substantial
reduction in liquidity for certain assets, greater pricing for
risk and de-leveraging. The disruption also presents what we
consider near-term market opportunities to take advantage of an
asset origination environment with increased spreads and tighter
deal structures and to selectively purchase high quality assets
at attractive prices.
In our Commercial Finance segment, we have seen and continue to
see negative effects from the disruption in the form of a higher
cost of funds on our borrowings as measured by a spread to
one-month LIBOR. We also have experienced and expect to continue
to experience greater difficulty and higher cost in securing
term debt for our loans. We have seen higher borrowing costs,
lower advance rates and other less advantageous terms on our
secured credit facilities that we have renewed in 2008.
As further described above in Asset Acquisition from
Fremont Investment & Loan, we believe
CapitalSource Bank will diversify and strengthen our funding and
position us to take advantage of the attractive opportunities we
perceive in the current market environment. We believe that
deposit funding will lower our cost of funds and reduce our
reliance on the more volatile capital markets.
It is possible the US economy as a whole may stagnate or
continue to weaken. We expect that the credit performance of our
portfolio will decline in light of the current difficult
economic conditions that are likely to adversely affect our
clients ability to fulfill their obligations to us.
Additional deterioration of the US economy could further impair
the credit performance of our portfolio.
During the three months ended March 31, 2008, we also saw
decreases in the carrying value of certain of our residential
mortgage investments, representing a decline of approximately
1.0% in the value of the portfolio, as the market dislocation
impacted the pricing relationship between mortgage assets
(including Agency MBS that we own) and low risk fixed income
securities. Since mid-March 2008, conditions in the residential
mortgage market have stabilized.
S-4
However, to reduce our exposure to this market volatility, we
have implemented an asset reduction strategy for residential
mortgage investments. During the three months ended
March 31, 2008, we sold Agency MBS with a face value of
$591.4 million. Subsequent to March 31, 2008, we sold
additional Agency MBS with a face value of $1.5 billion.
These decreases in the size of our residential mortgage
portfolio resulted in a recognition of a loss in adjusted
earnings of approximately $20.6 million for the three
months ended March 31, 2008 and to date, approximately
$36.1 million subsequent to March 31, 2008. We do not
anticipate further sales of Agency MBS in 2008 but may acquire
additional residential mortgage or other REIT-eligible assets to
continue to optimize our REIT structure during 2008.
Amendment to
Unsecured Credit Facility
We currently are amending our $1.07 billion unsecured
credit facility. If approved by lenders representing a majority
of the outstanding commitments, the proposed amendment would:
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provide us additional flexibility to operate our business
assuming the consummation of the FIL transaction and/or the
possible initial public offering of our healthcare net lease
business;
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assuming consistent BBB- ratings from Standard &
Poors and Fitch, increase pricing on borrowings under the
facility by 1.875% to 3% over LIBOR or 1.5% over the applicable
base rate; and
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amend certain existing or establish certain new financial
covenants, including, without limitation, consolidated debt to
consolidated shareholders equity, consolidated tangible net
worth, available asset coverage ratio and consolidated EBITDA to
interest expense.
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S-5
Selected
consolidated historical financial data
The following tables show selected portions of our audited
historical consolidated financial data as of, and for, the five
years ended December 31, 2007, and unaudited historical
consolidated financial data as of, and for, the three months
ended March 31, 2008 and 2007. We derived our selected
audited consolidated financial data as of, and for, the five
years ended December 31, 2007 from our audited consolidated
financial statements, which have been audited by
Ernst & Young LLP, independent registered public
accounting firm. The selected unaudited consolidated financial
data as of March 31, 2008 and for the three months ended
March 31, 2008 and 2007, are derived from our unaudited
financial statements included in our Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2008 and incorporated by
reference in this prospectus supplement, and have been prepared
in accordance with accounting principles generally accepted in
the United States for interim financial information, and in our
opinion, reflect all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation of our
results of operations and financial position. The results of
operations for the three months ended March 31, 2008 are
not necessarily indicative of the results of operations to be
expected for the full year or any future period.
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Three Months Ended March 31,
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Year Ended December 31,
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($ in thousands, except share and per share data)
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2008
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2007
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2007
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2006
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2005
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2004
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2003
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Results of operations:
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Interest income
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$
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308,325
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$
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289,554
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$
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1,277,903
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$
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1,016,533
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$
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514,652
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$
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313,827
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$
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175,169
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Fee income
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33,641
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50,027
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162,395
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170,485
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130,638
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86,324
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50,596
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Total interest and fee income
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341,966
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339,581
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1,440,298
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1,187,018
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645,290
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400,151
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225,765
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Operating lease income
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27,690
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20,288
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97,013
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|
|
|
30,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment income
|
|
|
369,656
|
|
|
|
359,869
|
|
|
1,537,311
|
|
|
|
1,217,760
|
|
|
645,290
|
|
|
400,151
|
|
|
225,765
|
Interest expense
|
|
|
188,945
|
|
|
|
186,649
|
|
|
847,241
|
|
|
|
606,725
|
|
|
185,935
|
|
|
79,053
|
|
|
39,956
|
|
|
|
|
|
|
Net investment income
|
|
|
180,711
|
|
|
|
173,220
|
|
|
690,070
|
|
|
|
611,035
|
|
|
459,355
|
|
|
321,098
|
|
|
185,809
|
Provision for loan losses
|
|
|
5,659
|
|
|
|
14,926
|
|
|
78,641
|
|
|
|
81,562
|
|
|
65,680
|
|
|
25,710
|
|
|
11,337
|
|
|
|
|
|
|
Net investment income after provision for loan losses
|
|
|
175,052
|
|
|
|
158,294
|
|
|
611,429
|
|
|
|
529,473
|
|
|
393,675
|
|
|
295,388
|
|
|
174,472
|
Depreciation of direct real estate investments
|
|
|
8,916
|
|
|
|
6,762
|
|
|
32,004
|
|
|
|
11,468
|
|
|
|
|
|
|
|
|
|
Other operating expenses
|
|
|
58,593
|
|
|
|
58,560
|
|
|
235,987
|
|
|
|
204,584
|
|
|
143,836
|
|
|
107,748
|
|
|
67,807
|
Total other (expense) income
|
|
|
(96,399
|
)
|
|
|
6,049
|
|
|
(74,650
|
)
|
|
|
37,328
|
|
|
19,233
|
|
|
17,781
|
|
|
25,815
|
Noncontrolling interests expense
|
|
|
1,297
|
|
|
|
1,330
|
|
|
4,938
|
|
|
|
4,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before income taxes and cumulative effect of
accounting change
|
|
|
9,847
|
|
|
|
97,691
|
|
|
263,850
|
|
|
|
346,038
|
|
|
269,072
|
|
|
205,421
|
|
|
132,480
|
Income taxes(1)
|
|
|
3,076
|
|
|
|
19,001
|
|
|
87,563
|
|
|
|
67,132
|
|
|
104,400
|
|
|
80,570
|
|
|
24,712
|
|
|
|
|
|
|
Net income before cumulative effect of accounting change
|
|
|
6,771
|
|
|
|
78,690
|
|
|
176,287
|
|
|
|
278,906
|
|
|
164,672
|
|
|
124,851
|
|
|
107,768
|
Cumulative effect of accounting change, net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,771
|
|
|
$
|
78,690
|
|
$
|
176,287
|
|
|
$
|
279,276
|
|
$
|
164,672
|
|
$
|
124,851
|
|
$
|
107,768
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.03
|
|
|
$
|
0.44
|
|
$
|
0.92
|
|
|
$
|
1.68
|
|
$
|
1.36
|
|
$
|
1.07
|
|
$
|
1.02
|
Diluted
|
|
$
|
0.03
|
|
|
$
|
0.43
|
|
$
|
0.91
|
|
|
$
|
1.65
|
|
$
|
1.33
|
|
$
|
1.06
|
|
$
|
1.01
|
Average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
220,085,148
|
|
|
|
179,324,672
|
|
|
191,697,254
|
|
|
|
166,273,730
|
|
|
120,976,558
|
|
|
116,217,650
|
|
|
105,281,806
|
Diluted
|
|
|
221,493,514
|
|
|
|
181,743,884
|
|
|
193,282,656
|
|
|
|
169,220,007
|
|
|
123,433,645
|
|
|
117,600,676
|
|
|
107,170,585
|
Cash dividends declared per share
|
|
$
|
0.60
|
|
|
$
|
0.58
|
|
$
|
2.38
|
|
|
$
|
2.02
|
|
$
|
0.50
|
|
$
|
|
|
$
|
|
|
|
|
|
|
(1)
|
|
As a result of our decision to
elect REIT status beginning with the tax year ended
December 31, 2006, we provided for income taxes for the
years ended December 31, 2007 and 2006, based on effective
tax rates of 39.4% and 39.9%, respectively,
|
S-6
|
|
|
|
|
for the income earned by our
taxable REIT subsidiaries. We provided for income taxes for the
three months ended March 31, 2008 and 2007, based on
effective tax rates of 39.2% and 38.9%, respectively, for the
income earned by our taxable REIT subsidiaries. We did not
provide for any income taxes for the income earned by our
qualified REIT subsidiaries for the years ended
December 31, 2007 and 2006 or for the three months ended
March 31, 2008 and 2007. We provided for income taxes on
the consolidated income earned based on a 33.2%, 19.4%, 38.8%
and 39.2% effective tax rates in 2007, 2006, 2005 and 2004,
respectively. We provided for income taxes on the income earned
from August 7, 2003, through December 31, 2003, based
on a 38.0% effective tax rate. Prior to our reorganization as a
C corporation on August 6, 2003, we operated as
a limited liability company and did not provide for income taxes
as all income taxes were paid directly by our members.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
As of December 31,
|
($ in thousands)
|
|
March 31, 2008
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
|
Balance sheet data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-related receivables, net
|
|
$
|
1,978,852
|
|
$
|
2,041,917
|
|
$
|
2,295,922
|
|
$
|
39,438
|
|
$
|
|
|
$
|
|
Mortgage-backed securities pledged, trading
|
|
|
3,310,176
|
|
|
4,060,605
|
|
|
3,502,753
|
|
|
323,370
|
|
|
|
|
|
|
Total loans, net
|
|
|
9,471,286
|
|
|
9,581,718
|
|
|
7,599,231
|
|
|
5,779,966
|
|
|
4,140,381
|
|
|
2,339,089
|
Direct real estate investments, net
|
|
|
1,016,972
|
|
|
1,017,604
|
|
|
722,303
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
17,701,438
|
|
|
18,040,349
|
|
|
15,210,574
|
|
|
6,987,068
|
|
|
4,736,829
|
|
|
2,567,091
|
Repurchase agreements
|
|
|
3,427,856
|
|
|
3,910,027
|
|
|
3,510,768
|
|
|
358,423
|
|
|
|
|
|
8,446
|
Credit facilities
|
|
|
2,373,106
|
|
|
2,207,063
|
|
|
2,251,658
|
|
|
2,450,452
|
|
|
964,843
|
|
|
736,700
|
Term debt
|
|
|
7,021,686
|
|
|
7,255,675
|
|
|
5,809,685
|
|
|
1,779,748
|
|
|
2,186,311
|
|
|
920,865
|
Other borrowings
|
|
|
1,574,994
|
|
|
1,594,870
|
|
|
1,288,575
|
|
|
786,959
|
|
|
555,000
|
|
|
|
|
|
|
|
|
|
Total borrowings
|
|
|
14,397,642
|
|
|
14,967,635
|
|
|
12,860,686
|
|
|
5,375,582
|
|
|
3,706,154
|
|
|
1,666,011
|
Total shareholders equity
|
|
|
2,654,272
|
|
|
2,582,271
|
|
|
2,093,040
|
|
|
1,199,938
|
|
|
946,391
|
|
|
867,132
|
|
|
S-7
The
offering
The following is a brief summary of certain terms of this
offering. For a more complete description of our common stock,
see Description of Capital Stock in the accompanying
prospectus.
|
|
|
Issuer |
|
CapitalSource Inc. |
|
Common stock offered to the public |
|
30,000,000 shares including 6,000,000 shares that will
be purchased by affiliates of Farallon Capital Management,
L.L.C., one of our largest stockholders, 350,000 shares
that will be purchased by John K. Delaney, our Chairman and
Chief Executive Officer and 9,000 shares that will be
purchased by Michael C. Szwajkowski, President of our
Structured Finance Business. In this prospectus supplement, we
refer to the affiliates of Farallon Capital Management, L.L.C.,
Mr. Delaney and Mr. Szwajkowski as affiliated
purchasers. |
|
Shares subject to the overallotment option |
|
4,500,000 shares |
|
Common stock to be outstanding after this offering |
|
266,019,225 shares(1) |
|
Use of Proceeds |
|
Our net proceeds from this offering will be approximately
$318.0 million, or approximately $365.3 million if the
underwriters exercise their over-allotment option in full, after
deducting underwriting discounts and commissions and other
estimated expenses of this offering. We intend to use all of the
net proceeds of the offering to pay down indebtedness under
three of our credit facilities or to repurchase outstanding
debt. Through repayment of indebtedness under these credit
facilities, certain of our underwriters, Wachovia Capital
Markets, LLC and Citigroup Global Markets Inc. or their
affiliates, may receive more than 10% of the net proceeds from
this offering. Certain other underwriters, including
J.P. Morgan Securities Inc., BMO Capital Markets Corp. and
SunTrust Robinson Humphrey, Inc. or their respective affiliates
also are lenders on one of our credit facilities to be repaid
and will receive their proportionate share of the net proceeds
from this offering. See Underwriting. The
underwriters will not receive any underwriting discount or
commission on the sale of 6,359,000 shares of our common
stock to affiliated purchasers. For a more complete description,
see Use of Proceeds. |
|
NYSE Symbol |
|
CSE |
|
Settlement Date |
|
Delivery of shares of our common stock will be made against
payment therefore on or about June 27, 2008, which will be
the third business day after pricing of the offered shares. |
|
Risk Factors |
|
For other information you should consider before buying shares
of our common stock, see the Risk Factors sections
in our Annual Report on
Form 10-K
for the year ended December 31, 2007 and our Quarterly
Report on
Form 10-Q
for the quarter ended March 31, 2008, as well as the other
documents incorporated by reference into this prospectus
supplement. |
|
|
|
(1)
|
|
The number of shares of our common
stock to be outstanding after this offering is based on
236,019,225 shares outstanding as of May 1, 2008 and
assumes no exercise of the underwriters over-allotment
option. If the underwriters over-allotment option is
exercised in full, the number of shares of our common stock
outstanding upon completion of this offering will be 270,519,225.
|
S-8
Use of
proceeds
Our net proceeds from this offering will be approximately
$318.0 million, or approximately $365.3 million if the
underwriters exercise their over-allotment option in full, after
deducting underwriting discounts and commissions and other
estimated expenses of this offering. We intend to use all of the
net proceeds of the offering to pay down indebtedness under
three of our credit facilities or to repurchase outstanding
debt. Through repayment of indebtedness under these credit
facilities, certain of our underwriters, Wachovia Capital
Markets, LLC and Citigroup Global Markets Inc. or their
affiliates, may receive more than 10% of the net proceeds from
this offering. Certain other underwriters, including
J.P. Morgan Securities Inc., BMO Capital Markets Corp. and
SunTrust Robinson Humphrey, Inc. or their respective affiliates
also are lenders on one of our credit facilities to be repaid
and will receive their proportionate share of the net proceeds
from this offering. See Underwriting. During 2007
and 2008, we borrowed money under these credit facilities to
fund our commercial lending and investment business and for
general working capital. As of May 8, 2008, these credit
facilities had an aggregate of $1.07 billion outstanding.
Interest on borrowings under the credit facilities is charged at
either (a) the Commercial Paper (CP) rate plus
2.25%, which was approximately 2.46%, as of May 8, 2008 or
(b) a blended CP and LIBOR rate plus 2.00%, which was 2.56%
as of May 8, 2008. These credit facilities mature in March
and April 2009.
S-9
Underwriting
We are offering shares of our common stock described in this
prospectus supplement through a number of underwriters.
J.P. Morgan Securities Inc. and Wachovia Capital Markets,
LLC are acting as joint book-running managers of the offering
and as representatives of the underwriters. We have entered into
an underwriting agreement with the underwriters. Subject to the
terms and conditions of the underwriting agreement, we have
agreed to sell to the underwriters, and each underwriter has
severally agreed to purchase, at the public offering price less
the underwriting discounts and commissions set forth on the
cover page of this prospectus supplement, the number of shares
of our common stock listed next to its name in the following
table:
|
|
|
|
|
Name
|
|
Number of shares
|
|
|
J.P. Morgan Securities Inc.
|
|
|
9,373,200
|
Wachovia Capital Markets, LLC
|
|
|
9,373,200
|
BMO Capital Markets Corp.
|
|
|
1,911,300
|
Citigroup Global Markets Inc.
|
|
|
1,911,300
|
Deutsche Bank Securities Inc.
|
|
|
1,911,300
|
Morgan Stanley & Co. Incorporated
|
|
|
1,911,300
|
Banc of America Securities LLC
|
|
|
1,223,100
|
SunTrust Robinson Humphrey, Inc.
|
|
|
1,223,100
|
JMP Securities LLC
|
|
|
581,100
|
Sandler ONeill & Partners, L.P.
|
|
|
581,100
|
|
|
|
|
Total
|
|
|
30,000,000
|
|
|
The underwriters are committed to purchase all the shares of our
common stock offered by us if they purchase any shares. The
underwriting agreement also provides that if an underwriter
defaults, the purchase commitments of non-defaulting
underwriters may also be increased or the offering may be
terminated.
Certain affiliates of Farallon Capital Management, L.L.C., one
of our largest stockholders, John K. Delaney, our Chairman
and Chief Executive Officer, and Michael C. Szwajkowski,
President of our Structured Finance Business, have agreed to
purchase an aggregate of 6,359,000 shares of our common
stock directly from the underwriters at the price equal to the
public offering price. The underwriters will not receive any
underwriting discount or commission on the sale of our common
stock to these affiliated purchasers.
The underwriters propose to offer the shares of our common stock
directly to the public at the public offering price set forth on
the cover page of this prospectus supplement and to certain
dealers at that price less a concession not in excess of $0.2914
per share. Any such dealers may resell shares to certain other
brokers or dealers at a discount of up to $0.10 per share from
the initial public offering price. After the public offering of
the shares, the offering price and other selling terms may be
changed by the underwriters.
The underwriters have an option to buy up to 4,500,000
additional shares of our common stock from us to cover sales of
shares by the underwriters which exceed the number of shares
specified in the table above. The underwriters have 30 days
from the date of this prospectus supplement to exercise this
over-allotment option. If any shares are purchased with this
over-
S-10
allotment option, the underwriters will purchase shares in
approximately the same proportion as shown in the table above.
If any additional shares of our common stock are purchased, the
underwriters will offer the additional shares on the same terms
as those on which the shares are being offered.
The underwriting fee is equal to the public offering price per
share of common stock less the amount paid by the underwriters
to us per share of our common stock. The underwriting fee is
4.4145% of the aggregate proceeds of this offering. The
following table shows the per share and total underwriting
discounts and commissions to be paid to the underwriters
assuming both no exercise and full exercise of the
underwriters option to purchase additional shares.
|
|
|
|
|
|
|
|
|
|
Without
|
|
With full
|
|
|
over-allotment
|
|
over-allotment
|
|
|
exercise
|
|
exercise
|
|
|
Per Share (1)
|
|
$
|
0.4856
|
|
$
|
0.4856
|
Total (1)
|
|
$
|
11,480,070
|
|
$
|
13,665,270
|
|
|
|
|
(1) |
The underwriters will not receive any discounts or commissions
on the sale of 6,359,000 shares to affiliated purchasers.
|
We estimate that the total expenses of this offering will be
approximately $500,000.
A prospectus supplement in electronic format may be made
available on the web sites maintained by one or more
underwriters, or selling group members, if any, participating in
the offering. The underwriters may agree to allocate a number of
shares to underwriters and selling group members for sale to
their online brokerage account holders. Internet distributions
will be allocated by the representatives to underwriters and
selling group members that may make Internet distributions on
the same basis as other allocations.
We have agreed, subject to certain limited exceptions, that we
will not (i) offer, pledge, announce the intention to sell,
sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right
or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, or file with the SEC a registration
statement under the Securities Act of 1933, as amended, relating
to, any shares of our common stock or securities convertible
into or exchangeable or exercisable for any shares of our common
stock, or publicly disclose the intention to make any offer,
sale, pledge, disposition or filing, or (ii) enter into any
swap or other arrangement that transfers, in whole or in part,
any of the economic consequences of ownership of any shares of
our common stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise,
in each case without the prior written consent of
J.P. Morgan Securities Inc. and Wachovia Capital Markets,
LLC on behalf of the underwriters for a period of 90 days
after the date of this prospectus supplement. Notwithstanding
the foregoing, if (1) during the last 17 days of the
90-day
restricted period, we issue an earnings release or material news
or a material event relating to our company occurs; or
(2) prior to the expiration of the
90-day
restricted period, we announce that we will release earnings
results during the
16-day
period beginning on the last day of the
90-day
period, the restrictions described above shall continue to apply
until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
occurrence of the material news or material event.
Our directors and named executive officers, and certain
affiliates of Farallon Capital Management, L.L.C. and Madison
Dearborn Partners have agreed, subject to certain limited
exceptions,
S-11
that they will not (i) offer, pledge, announce the
intention to sell, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase or otherwise
transfer or dispose of, directly or indirectly, or act to cause
us to file with the SEC a registration statement under the
Securities Act relating to, any shares of our common stock or
securities convertible into or exchangeable or exercisable for
any shares of our common stock, or publicly disclose the
intention to make any offer, sale, pledge, disposition or
filing, or (ii) enter into any swap or other arrangement
that transfers, in whole or in part, any of the economic
consequences of ownership of any shares of our common stock,
whether any such transaction described in clause (i) or
(ii) above is to be settled by delivery of Common Stock or
such other securities, in cash or otherwise, in each case
without the prior written consent of J.P. Morgan Securities
Inc. and Wachovia Capital Markets, LLC on behalf of the
underwriters for a period of 60 days after the date of this
prospectus supplement. Notwithstanding the foregoing, if
(1) during the last 17 days of the
60-day
restricted period, we issue an earnings release or material news
or a material event relating to our company occurs; or
(2) prior to the expiration of the
60-day
restricted period, we announce that we will release earnings
results during the
16-day
period beginning on the last day of the
60-day
period, the restrictions described above shall continue to apply
until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
occurrence of the material news or material event.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act.
In connection with this offering, the underwriters may engage in
stabilizing transactions, which involves making bids for,
purchasing and selling shares of our common stock in the open
market for the purpose of preventing or retarding a decline in
the market price of the common stock while this offering is in
progress. These stabilizing transactions may include making
short sales of the common stock, which involves the sale by the
underwriters of a greater number of shares of our common stock
than they are required to purchase in this offering, and
purchasing shares of our common stock on the open market to
cover positions created by short sales. Short sales may be
covered shorts, which are short positions in an
amount not greater than the underwriters over-allotment
option referred to above, or may be naked shorts,
which are short positions in excess of that amount. The
underwriters may close out any covered short position either by
exercising their over-allotment option, in whole or in part, or
by purchasing shares in the open market. In making this
determination, the underwriters will consider, among other
things, the price of shares available for purchase in the open
market compared to the price at which the underwriters may
purchase shares through the over-allotment option. A naked short
position is more likely to be created if the underwriters are
concerned that there may be downward pressure on the price of
the common stock in the open market that could adversely affect
investors who purchase in this offering. To the extent that the
underwriters create a naked short position, they will purchase
shares in the open market to cover the position.
The underwriters have advised us that, pursuant to
Regulation M of the Securities Act, they may also engage in
other activities that stabilize, maintain or otherwise affect
the price of the common stock, including the imposition of
penalty bids. This means that if the representatives of the
underwriters purchase common stock in the open market in
stabilizing transactions or to cover short sales, the
representatives can require the underwriters that sold those
shares as part of this offering to repay the underwriting
discount received by them.
S-12
These activities may have the effect of raising or maintaining
the market price of the common stock or preventing or retarding
a decline in the market price of the common stock, and, as a
result, the price of the common stock may be higher than the
price that otherwise might exist in the open market. If the
underwriters commence these activities, they may discontinue
them at any time. The underwriters may carry out these
transactions on the New York Stock Exchange, in the
over-the-counter market or otherwise.
Each of the underwriters may arrange to sell shares in certain
jurisdictions outside the United States through affiliates,
either directly where they are permitted to do so or through
affiliates. In that regard, Wachovia Capital Markets, LLC may
arrange to sell the shares in certain jurisdictions through an
affiliate, Wachovia Securities International Limited or WSIL.
WSIL is a wholly-owned indirect subsidiary of Wachovia
Corporation and an affiliate of Wachovia Capital Markets, LLC.
WSIL is a UK incorporated investment firm regulated by the
Financial Services Authority. Wachovia Securities is the trade
name for the corporate and investment banking services of
Wachovia Corporation and its affiliates, including Wachovia
Capital Markets, LLC and WSIL.
United
Kingdom
Other than in the United States, no action has been taken by us
or the underwriters that would permit a public offering of the
securities offered by this prospectus supplement in any
jurisdiction where action for that purpose is required. The
securities offered by this prospectus supplement may not be
offered or sold, directly or indirectly, nor may this prospectus
supplement or any other offering material or advertisements in
connection with the offer and sale of any such securities be
distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable
rules and regulations of that jurisdiction. Persons into whose
possession this prospectus supplement comes are advised to
inform themselves about and to observe any restrictions relating
to the offering and the distribution of this prospectus
supplement. This prospectus supplement does not constitute an
offer to sell or a solicitation of an offer to buy any
securities offered by this prospectus supplement in any
jurisdiction in which such an offer or a solicitation is
unlawful.
This document is only being distributed to and is only directed
at (i) persons who are outside the United Kingdom or
(ii) to investment professionals falling within
Article 19(5) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005 (the Order) or
(iii) high net worth entities, and other persons to whom it
may lawfully be communicated, falling with Article 49(2)(a)
to (d) of the Order (all such persons together being
referred to as relevant persons). The securities are
only available to, and any invitation, offer or agreement to
subscribe, purchase or otherwise acquire such securities will be
engaged in only with, relevant persons. Any person who is not a
relevant person should not act or rely on this document or any
of its contents.
European Economic
Area
In relation to each Member State of the European Economic Area
(Iceland, Norway and Lichtenstein in addition to the member
states of the European Union) which has implemented the
Prospectus Directive (each, a Relevant Member
State), from and including the date on which the European
Union Prospectus Directive (the EU Prospectus
Directive) is implemented in that Relevant Member State
(the Relevant Implementation Date) an offer of
securities described in this prospectus supplement may not be
made to the public in that Relevant
S-13
Member State prior to the publication of a prospectus in
relation to the shares which has been approved by the competent
authority in that Relevant Member State or, where appropriate,
approved in another Relevant Member State and notified to the
competent authority in that Relevant Member State, all in
accordance with the EU Prospectus Directive, except that it may,
with effect from and including the Relevant Implementation Date,
make an offer of shares to the public in that Relevant Member
State at any time:
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to legal entities which are authorized or regulated to operate
in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in securities;
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to any legal entity which has two or more of (1) an average
of at least 250 employees during the last financial year;
(2) a total balance sheet of more than 43,000,000 and
(3) an annual net turnover of more than 50,000,000,
as shown in its last annual or consolidated accounts;
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to fewer than 100 natural or legal persons (other than qualified
investors as defined in the EU Prospectus Directive)
subject to obtaining the prior consent of the book-running
mangers for any such offer; or
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in any other circumstances which do not require the publication
by the Issuer of a prospectus pursuant to Article 3 of the
Prospectus Directive.
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For the purposes of this provision, the expression an
offer of securities to the public in relation to any
securities in any Relevant Member State means the communication
in any form and by any means of sufficient information on the
terms of the offer and the securities to be offered so as to
enable an investor to decide to purchase or subscribe for the
securities, as the same may be varied in that Member State by
any measure implementing the EU Prospectus Directive in that
Member State and the expression EU Prospectus Directive means
Directive
2003/71/EC
and includes any relevant implementing measure in each Relevant
Member State.
Finland
This prospectus supplement and the accompanying prospectus have
not been prepared to comply with the standards and requirements
regarding public offering set forth in the Finnish Securities
Market Act (1989/495, as amended) and have not been approved by
the Finnish Financial Supervision Authority. The securities may
not be offered, sold, advertised or otherwise marketed in
Finland under circumstances which constitute public offering of
securities under Finnish law.
France
The securities (i) will not be offered or sold, directly or
indirectly, to the public (appel public à
lépargne) in the Republic of France and
(ii) offers and sales of securities in the Republic of
France (a) will only be made to qualified investors
(investisseurs qualifiés) as defined in, and in accordance
with, Articles L
411-1, L
411-2 and D
411-1 to D
411-3 of the
French Code monétaire et financier or (b) will be made
in any other circumstances which do not require the publication
by the Issuer of a prospectus pursuant to Article L
411-2 of the
Code Monétaire et Financier and
Article 211-2
of the Règlement Général of the Autorité des
marchés financiers. Investors are informed that neither
this prospectus supplement nor the accompanying prospectus has
been admitted to the clearance procedures of the Autorité
des marchés financiers, and that any subsequent direct or
indirect circulation to the public of the securities so acquired
may not occur
S-14
without meeting the conditions provided for in Articles L
411-1, L
411-2, L
412-2 and L
621-8 to L
621-8-2 of
the Code Monétaire et Financier.
In addition, the issuer represents and agrees that it has not
distributed or caused to be distributed and will not distribute
or cause to be distributed in the Republic of France, this
prospectus supplement, the accompanying prospectus or any other
offering material relating to the securities other than to those
investors (if any) to whom offers and sales of the securities in
the Republic of France may be made as described above.
Italy
The offering of the securities has not been registered pursuant
to the Italian securities legislation and, accordingly, each of
the underwriters has represented and agreed that it has not
offered or sold, and will not offer or sell, any securities in
the Republic of Italy in a solicitation to the public, and that
sales of the securities in the Republic of Italy shall be
effected in accordance with all Italian securities, tax and
exchange control and other applicable laws and regulations. In
any case, the securities cannot be offered or sold to any
individuals in the Republic of Italy either in the primary
market or the secondary market.
Each of the underwriters has represented and agreed that it will
not offer, sell or deliver any securities or distribute copies
of this prospectus supplement or the accompanying prospectus or
any other document relating to the securities in the Republic of
Italy except:
(1) to Professional Investors, as defined in
Article 31.2 of CONSOB Regulation No. 11522 of
2 July 1998 as amended
(Regulation No. 11522), pursuant to
Article 30.2 and 100 of Legislative Decree No. 58 of
24 February 1998 as amended (Decree
No. 58), or in any other circumstances where an
expressed exemption to comply with the solicitation restrictions
provided by Decree No. 58 or Regulation No. 11971
of 14 May 1999 as amended applies, provided, however, that
any such offer, sale or delivery of the securities or
distribution of copies of the prospectus supplement,
accompanying prospectus or any other document relating to the
securities in the Republic of Italy must be:
(a) made by investment firms, banks or financial
intermediaries permitted to conduct such activities in the
Republic of Italy in accordance with Legislative Decree
No. 385 of 1 September 1993 as amended (Decree
No. 385), Decree No. 58, CONSOB
Regulation No. 11522 and any other applicable laws and
regulations;
(b) in compliance with Article 129 of Decree
No. 385 and the implementing instructions of the Bank of
Italy, pursuant to which the issue, trading or placement of
securities in Italy is subject to a prior notification to the
Bank of Italy, unless and exemption, depending, inter alia, on
the aggregate amount and the characteristics of the securities
issued or offered in the Republic of Italy, applies;
and
(c) in compliance with any other applicable notification
requirement or limitation which may be imposed by CONSOB or the
Bank of Italy.
Norway
The securities will not be offered in Norway other than
(i) to investors who are deemed professional investors
under
Section 5-4
of the Norwegian Securities Trading Act of 1997 as
S-15
defined in Regulation no. 1424 of 9 December 2005
(Professional Investors), (ii) to fewer than
100 investors that are not Professional Investors or with a
total consideration of less than EUR 100,000 calculated
over a period of 12 months, or (iii) with a minimum
subscription amount of EUR 50,000. Consequently, no public
offering will be made in Norway and neither the prospectus
supplement nor the accompanying prospectus has been filed with
or approved by any Norwegian authority. The prospectus
supplement and the accompanying prospectus must not be
reproduced or otherwise distributed to others by the recipient.
Switzerland
This product has not been registered or approved for public
distribution in Switzerland by the Swiss Federal Banking
Commission under the Swiss Investment Fund Act. This
product shall not be offered or sold to the public in or from
Switzerland, directly or indirectly, and neither this prospectus
supplement nor the accompanying prospectus may be distributed or
published to the public in Switzerland and neither this
prospectus supplement nor the accompanying prospectus shall
constitute a prospectus in the sense of art. 652a or 1156 of the
Swiss Code of Obligations.
The underwriters and their affiliates have provided in the past
to us and our affiliates and may provide from time to time in
the future certain commercial banking, financial advisory,
investment banking and other services for us and such affiliates
in the ordinary course of their business, for which they have
received and may continue to receive customary fees and
commissions. The joint book-running managers of the offering are
acting as financial advisors in connection with our acquisition
of FIL and will be receiving market-based fees in connection
therewith. Certain affiliates of the underwriters are lenders
and/or
agents under our credit facilities, our repurchase agreements
and/or our
other borrowing transactions, the terms of which are described
in Managements Discussion and Analysis of Financial
Condition and Results of OperationsLiquidity and Capital
Resources in our Annual Report on
Form 10-K
for the year ended December 31, 2007 and Quarterly Report
on
Form 10-Q
for the quarter ended March 31, 2008, each of which is
incorporated by reference into this prospectus supplement. We
intend to pay down indebtedness under three of our credit
facilities; therefore, certain of the underwriters, including
Wachovia Capital Markets, LLC and Citigroup Global Markets Inc.
or their respective affiliates, may receive more than 10% of the
net proceeds from this offering. Certain other underwriters,
including J.P. Morgan Securities Inc., BMO Capital Markets
Corp. and SunTrust Robinson Humphrey, Inc. or their respective
affiliates also are lenders on one of our credit facilities to
be repaid and will receive their proportionate share of the net
proceeds from this offering. In addition, from time to time,
certain of the underwriters and their affiliates may effect
transactions for their own account or the account of customers,
and hold on behalf of themselves or their customers, long or
short positions in our debt or equity securities or loans, and
may do so in the future. Moreover, a managing director of an
affiliate of Wachovia Capital Markets, LLC currently serves as
one of our directors.
S-16
Legal
matters
The validity of the shares offered by means of this prospectus
supplement and certain U.S. federal income tax matters will
be passed upon for us by Hogan & Hartson LLP. Certain
legal matters regarding the shares will be passed upon for the
underwriters by Clifford Chance US LLP, New York, New York.
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, have been audited by
Ernst & Young LLP, independent registered public
accounting firm, as set forth in their report thereon, included
therein, and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
Where you can
find more information
We file annual, quarterly and special reports, proxy statements
and other information with the SEC. You may read and copy any
reports, statements or other information on file with the SEC at
the SECs public reference room located at
100 F Street, NE, Room 1580,
Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330
for further information on the public reference room. Our SEC
filings are also available to the public from commercial
document retrieval services and through the Internet website
maintained by the SEC at www.sec.gov.
We have filed with the SEC a registration statement under the
Securities Act of 1933, as amended, that registers the
distribution of these securities. The registration statement,
including the attached exhibits and schedules, contains
additional relevant information about us and the securities.
This prospectus supplement and the accompanying prospectus do
not contain all of the information set forth in the registration
statement. This prospectus supplement incorporates by reference
the documents set forth below that have been previously filed
with the SEC. These documents contain important information
about us and our financial condition.
S-17
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CapitalSource SEC Filings (File
No. 1-31753)
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Period or Filing Date
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Annual Report on
Form 10-K
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Year Ended December 31, 2007
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Quarterly Report on
Form 10-Q
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Quarter Ended March 31, 2008
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Current Reports on
Form 8-K
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Filed on each of:
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January 29, 2008
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February 14, 2008
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March 14, 2008
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March 21, 2008
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April 17, 2008
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May 1, 2008
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May 6, 2008
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June 18, 2008
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June 23, 2008
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Description of shares of CapitalSource common stock contained in
its 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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Filed on July 25, 2003 and May 22, 2006
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We also incorporate by reference into this prospectus supplement
additional documents that we may file with the SEC under
Sections 13(a), 13(c), 14 and 15(d) of the Securities
Exchange Act of 1934, as amended, between the date of this
prospectus supplement and the completion of the offering;
provided, that we are not incorporating any information
furnished under either Item 2.02 or Item 7.01 of any
current report on
Form 8-K
except to the extent identified in any such report. These
documents include periodic reports such as Annual Reports on
Form 10-K,
Quarterly Reports on
Form 10-Q
and Current Reports on
Form 8-K,
as well as proxy statements.
You can obtain any of the documents incorporated by reference
from us as described below, through the SEC or through the
SECs Internet website as described above. Documents
incorporated by reference are available without charge,
excluding all exhibits unless an exhibit has been specifically
incorporated by reference into this prospectus supplement.
Investors may obtain documents incorporated by reference into
this prospectus supplement by requesting them in writing, by
telephone or via the Internet from the company 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
THE INFORMATION
CONTAINED ON OUR WEBSITE DOES NOT CONSTITUTE A PART OF
THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS.
S-18
Prospectus
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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What is Available |
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Where to 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 |
On-line information, free of charge
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SECs Internet website at |
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www.sec.gov |
Information about the SECs Public Reference Room
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Call the SEC at 1-800-SEC-0330 |
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. |
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
4
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).
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 |
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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 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). |
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.
6
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.
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:
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(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; |
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(2) be binding upon each Subsidiary Guarantor; and |
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(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.
7
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).
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). |
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). |
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). |
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 |
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
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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 |
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; |
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 |
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 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.
10
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). |
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.
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
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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). |
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). |
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).
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).
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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). |
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 |
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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). |
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). |
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, 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
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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. |
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 |
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omission to comply with such obligations shall not constitute an
event of default with respect to such debt securities
(covenant defeasance) (Section 1403), |
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, |
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. |
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
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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 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. |
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.
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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 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.
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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.
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Transfer Agent
Wachovia Bank, National Association serves as transfer agent for
shares of our common stock.
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. |
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. |
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
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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 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
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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.
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 |
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.
23
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.
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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.
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, |
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. |
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 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. |
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. |
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. |
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.
29
30,000,000 Shares
CapitalSource Inc.
Common stock
Prospectus Supplement
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|
JPMorgan |
Wachovia Securities |
|
|
|
|
BMO
Capital Markets |
Citi |
Deutsche Bank Securities |
Morgan Stanley |
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Banc
of America Securities LLC |
SunTrust Robinson Humphrey |
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JMP
Securities |
Sandler ONeill + Partners, L.P. |
June 23, 2008
You should rely only on the information contained or
incorporated by reference in this prospectus supplement and the
accompanying prospectus. We have not, and the underwriters have
not, authorized anyone to provide you with information different
from that contained or incorporated by reference in this
prospectus supplement and the accompanying prospectus. We are
not, and the underwriters are not, offering to sell, and seeking
offers to buy, common stock in jurisdictions where offers and
sales are not permitted. The information appearing in this
prospectus supplement and the accompanying prospectus and the
documents incorporated by reference herein or therein is
accurate only as of their respective dates or on other dates
which are specified in those documents. Our business, financial
condition, results of operation and prospects may have changed
since those dates.
No action is being taken in any jurisdiction outside the United
States to permit a public offering of the common stock or
possession or distribution of this prospectus supplement and the
accompanying prospectus in that jurisdiction. Persons who come
into possession of this prospectus supplement and the
accompanying prospectus in jurisdictions outside the United
States are required to inform themselves about and to observe
any restrictions as to this offering and the distribution of
this prospectus supplement and the accompanying prospectus
supplement and the accompanying prospectus applicable to that
jurisdiction.