<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE 6, 1996)
$100,000,000
[LOGO]
DUKE REALTY LIMITED PARTNERSHIP
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
-----------------
Duke Realty Limited Partnership (the "Operating Partnership") may offer from
time to time up to $100,000,000 aggregate initial offering price, or the
equivalent thereof in one or more foreign or composite currencies, of its
Medium-Term Notes Due Nine Months or More from Date of Issue (the "Notes"). Such
aggregate initial offering price is subject to reduction as a result of the sale
by the Operating Partnership or by Duke Realty Investments, Inc. (the "Company")
of other Securities described in the accompanying Prospectus. Each Note will
mature on any day nine months or more from the date of issue, as specified in
the applicable pricing supplement hereto (each, a "Pricing Supplement"), and may
be subject to redemption at the option of the Operating Partnership or repayment
at the option of the Holder thereof, in each case, in whole or in part, prior to
its Stated Maturity Date, as specified in the applicable Pricing Supplement. In
addition, each Note may be denominated and/or payable in United States dollars
or a foreign or composite currency, as specified in the applicable Pricing
Supplement. The Notes, other than Foreign Currency Notes, will be issued in
minimum denominations of $1,000 and integral multiples thereof, unless otherwise
specified in the applicable Pricing Supplement, while Foreign Currency Notes
will be issued in the minimum denominations specified in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, Notes will
bear interest at fixed rates ("Fixed Rate Notes") or at floating rates
("Floating Rate Notes"). The applicable Pricing Supplement will specify whether
a Floating Rate Note is a Regular Floating Rate Note, a Floating Rate/Fixed Rate
Note or an Inverse Floating Rate Note and whether the rate of interest thereon
is determined by reference to one or more of the CD Rate, the CMT Rate, the
Commercial Paper Rate, the Eleventh District Cost of Funds Rate, the Federal
Funds Rate, LIBOR, the Prime Rate or the Treasury Rate (each, an "Interest Rate
Basis"), or any other interest rate basis or formula, as adjusted by any Spread
and/or Spread Multiplier. Interest on each Floating Rate Note will accrue from
its date of issue and, unless otherwise specified in the applicable Pricing
Supplement, will be payable monthly, quarterly, semiannually or annually in
arrears, as specified in the applicable Pricing Supplement, and on the Maturity
Date. Unless otherwise specified in the applicable Pricing Supplement, the rate
of interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually, as specified in the applicable Pricing
Supplement. Interest on each Fixed Rate Note will accrue from its date of issue
and, unless otherwise specified in the applicable Pricing Supplement, will be
payable semiannually in arrears on May 1 and November 1 of each year and on the
Maturity Date. Notes may also be issued that do not bear any interest currently
or that bear interest at a below market rate. See "Description of Notes."
The interest rate, or formula for the determination of the interest rate,
applicable to each Note and the other variable terms thereof will be established
by the Operating Partnership on the date of issue of such Note and will be
specified in the applicable Pricing Supplement. Interest rates or formulae and
other terms of Notes are subject to change by the Operating Partnership, but no
change will affect any Note already issued or as to which an offer to purchase
has been accepted by the Operating Partnership.
Each Note will be issued in fully registered book-entry form (a "Book-Entry
Note") or in certificated form (a "Certificated Note"), as specified in the
applicable Pricing Supplement. Each Book-Entry Note will be represented by one
or more fully registered global securities (the "Global Securities") deposited
with or on behalf of The Depository Trust Company (the "Depositary") and
registered in the name of the Depositary or the Depositary's nominee. Interests
in the Global Securities will be shown on, and transfers thereof will be
effected only through, records maintained by the Depositary (with respect to its
participants) and the Depositary's participants (with respect to beneficial
owners).
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
AGENTS'
DISCOUNTS PROCEEDS TO THE
PRICE TO AND OPERATING
PUBLIC (1) COMMISSIONS (1)(2) PARTNERSHIP (1)(3)
<S> <C> <C> <C>
Per Note............................. 100.000% .125% - .750% 99.875% - 99.250%
$125,000 - $99,875,000 -
Total (4)............................ $100,000,000 $750,000 $99,250,000
</TABLE>
(1) Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
First Chicago Capital Markets, Inc., Goldman, Sachs & Co., J.P. Morgan
Securities Inc. and UBS Securities LLC (the "Agents") may purchase the
Notes, as principal, from the Operating Partnership, for resale to investors
and other purchasers at varying prices relating to prevailing market prices
at the time of resale as determined by the applicable Agent, or, if so
specified in the applicable Pricing Supplement, for resale at a fixed
offering price. Unless otherwise specified in the applicable Pricing
Supplement, any Note sold to an Agent as principal will be purchased by such
Agent at a price equal to 100% of the principal amount thereof less a
percentage of the principal amount equal to the commission applicable to an
agency sale (as described below) of a Note of identical maturity. If agreed
to by the Operating Partnership and an Agent, such Agent may utilize its
reasonable efforts on an agency basis to solicit offers to purchase the
Notes at 100% of the principal amount thereof, unless otherwise specified in
the applicable Pricing Supplement. The Operating Partnership will pay a
commission to the applicable Agent, ranging from .125% to .750% of the
principal amount of a Note, depending upon its stated maturity, sold through
such Agent. Commissions with respect to Notes with stated maturities in
excess of 30 years that are sold through an Agent will be negotiated between
the Operating Partnership and such Agent at the time of such sale. See "Plan
of Distribution."
(2) The Operating Partnership has agreed to indemnify the Agents against, and to
provide contribution with respect to, certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See "Plan of
Distribution."
(3) Before deducting expenses payable by the Operating Partnership estimated at
$75,000.
(4) Or the equivalent thereof in one or more foreign or composite currencies.
---------------------
The Notes are being offered on a continuous basis by the Operating
Partnership to or through the Agents. Unless otherwise specified in the
applicable Pricing Supplement, the Notes will not be listed on any securities
exchange and there can be no assurance that the Notes offered hereby will be
sold or that there will be a secondary market for the Notes. The Operating
Partnership reserves the right to cancel or modify the offer made hereby without
notice. The Operating Partnership or an Agent, if it solicits the offer on an
agency basis, may reject any offer to purchase Notes in whole or in part. See
"Plan of Distribution."
---------------------
MERRILL LYNCH & CO.
FIRST CHICAGO CAPITAL MARKETS, INC.
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
UBS SECURITIES
--------------
The date of this Prospectus Supplement is May 13, 1997.
<PAGE>
------------------------
CERTAIN PERSONS PARTICIPATING IN OFFERINGS OF NOTES MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
OFFERED NOTES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH NOTES, AND THE IMPOSITION OF PENALTY BIDS, DURING AND AFTER
SUCH OFFERINGS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "SUPPLEMENTAL PLAN OF
DISTRIBUTION."
------------------------
RATIOS OF EARNINGS TO FIXED CHARGES
The Operating Partnership's ratio of earnings to fixed charges for the three
months ended March 31, 1997 was 2.32 and for the year ended December 31, 1996
was 2.20.
For purposes of computing these ratios, earnings have been calculated by
adding fixed charges, excluding capitalized interest, to income (loss) before
gains or losses on property sales and (if applicable) minority interest in the
Operating Partnership. Fixed charges consist (if applicable) of interest costs,
whether expensed or capitalized, the interest component of rental expense and
amortization of debt issuance costs.
DESCRIPTION OF NOTES
The Notes will be issued as a series of Debt Securities under an Indenture,
dated as of September 19, 1995, as amended or supplemented from time to time
(the "Indenture"), between the Operating Partnership and The First National Bank
of Chicago, as trustee (the "Trustee"). The Indenture is subject to, and
governed by, the Trust Indenture Act of 1939, as amended. The following summary
of certain provisions of the Notes and the Indenture does not purport to be
complete and is qualified in its entirety by reference to the actual provisions
of the Notes and the Indenture. Capitalized terms used but not defined herein
shall have the meanings given to them in the accompanying Prospectus, the Notes
or the Indenture, as the case may be. The term "Debt Securities," as used in
this Prospectus Supplement, refers to all debt securities, including the Notes,
issued and issuable from time to time under the Indenture. The following
description of Notes will apply to each Note offered hereby unless otherwise
specified in the applicable Pricing Supplement.
GENERAL
All Debt Securities, including the Notes, issued and to be issued under the
Indenture will be unsecured general obligations of the Operating Partnership and
will rank pari passu with all other unsecured and unsubordinated indebtedness of
the Operating Partnership from time to time outstanding. The Indenture does not
limit the aggregate initial offering price of Debt Securities that may be issued
thereunder and Debt Securities may be issued thereunder from time to time in one
or more series up to the aggregate initial offering price from time to time
authorized by the Operating Partnership for each series. However, the Notes are
effectively subordinated to mortgages and other secured indebtedness of the
Operating Partnership (approximately $261 million at March 31, 1997), which
encumber certain assets of the Operating Partnership. The Operating Partnership
may, from time to time, without the consent of the Holders of the Notes, provide
for the issuance of Notes or other Debt Securities under the Indenture in
addition to the $100,000,000 aggregate initial offering price of Notes offered
hereby.
The Notes are currently limited to up to $100,000,000 aggregate initial
offering price, or the equivalent thereof in one or more foreign or composite
currencies. The Notes will be offered on a continuous basis and will mature on
any day nine months or more from their dates of issue (each, a "Stated Maturity
Date"), as specified in the applicable Pricing Supplement. Unless otherwise
specified in the applicable Pricing Supplement, interest-bearing Notes will
either be Fixed Rate Notes or Floating Rate Notes, as specified in the
applicable Pricing Supplement. Notes may also be issued that do not bear any
interest currently or that bear interest at a below market rate.
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Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be denominated in, and payments of principal, premium, if any, and/or
interest will be made in, United States dollars. The Notes also may be
denominated in, and payments of principal, premium, if any, and/or interest may
be made in, one or more foreign currencies or composite currencies ("Foreign
Currency Notes"). See "Special Provisions and Risks Relating to Foreign Currency
Notes -- Payments of Principal, Premium, if any, and Interest." The currency or
composite currency in which a Note is denominated, whether United States dollars
or otherwise, is herein referred to as the "Specified Currency." References
herein to "United States dollars," "U.S. dollars" and "U.S.$" are to the lawful
currency of the United States of America ("United States").
Unless otherwise specified in the applicable Pricing Supplement, purchasers
are required to pay for the Notes in the applicable Specified Currencies. At the
present time, there are limited facilities in the United States for the
conversion of United States dollars into foreign currencies or composite
currencies and vice versa, and commercial banks do not generally offer
non-United States dollar checking or savings account facilities in the United
States. Each applicable Agent is prepared to arrange for the conversion of
United States dollars into the applicable Specified Currency to enable the
purchaser to pay for the related Foreign Currency Note, provided that a request
is made to such Agent on or prior to the third Business Day (as hereinafter
defined) preceding the date of delivery of such Foreign Currency Note, or by
such other day determined by such Agent. Each such conversion will be made by an
Agent on such terms and subject to such conditions, limitations and charges as
such Agent may from time to time establish in accordance with its regular
foreign exchange practices. All costs of exchange will be borne by the purchaser
of each such Foreign Currency Note. See "Special Provisions and Risks Relating
to Foreign Currency Notes."
Interest rates offered by the Operating Partnership with respect to the
Notes may differ depending upon, among other things, the aggregate principal
amount of Notes purchased in any single transaction. Interest rates or formulae
and other terms of Notes are subject to change by the Operating Partnership from
time to time, but no such change will affect any Note already issued or as to
which an offer to purchase has been accepted by the Operating Partnership.
Each Note will be issued in fully registered form as a Book-Entry Note or a
Certificated Note. The authorized denominations of each Note other than a
Foreign Currency Note will be $1,000 and integral multiples thereof, unless
otherwise specified in the applicable Pricing Supplement, while the authorized
denominations of each Foreign Currency Note will be specified in the applicable
Pricing Supplement.
Payments of principal of, and premium, if any, and interest on, Book-Entry
Notes will be made by the Operating Partnership through the Trustee to the
Depositary. See "-- Book-Entry Notes." In the case of Certificated Notes,
payment of principal and premium, if any, due on the Stated Maturity Date or any
prior date on which the principal, or an installment of principal, of each
Certificated Note becomes due and payable, whether by the declaration of
acceleration, notice of redemption at the option of the Operating Partnership,
notice of the Holder's option to elect repayment or otherwise (the Stated
Maturity Date or such prior date, as the case may be, is herein referred to as
the "Maturity Date" with respect to the principal of the applicable Note
repayable on such date) will be made in immediately available funds upon
presentation and surrender thereof at the office or agency maintained by the
Operating Partnership for such purpose in the Borough of Manhattan, The City of
New York (or, in the case of any repayment on an Optional Repayment Date, upon
presentation of such Certificated Note and a duly completed election form in
accordance with the provisions described below), currently the corporate trust
office of the Trustee located initially at 14 Wall Street, Eighth Floor - Window
2, New York, New York 10005. Payment of interest due on the Maturity Date of
each Certificated Note will be made to the person to whom payment of the
principal and premium, if any, shall be made. Payment of interest due on each
Certificated Note on any Interest Payment Date (as hereinafter defined) other
than the Maturity Date will be made at the office or agency referred to above
maintained by the Operating Partnership for such purpose or, at the option of
the Operating Partnership, may be made by check mailed to the address of the
Holder entitled thereto as such address shall appear in the Security Register of
the Operating Partnership. Notwithstanding the foregoing, a Holder of
$10,000,000 (or, if the applicable Specified Currency is other than United
States dollars, the equivalent thereof in such
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<PAGE>
Specified Currency) or more in aggregate principal amount of Notes (whether
having identical or different terms and provisions) will be entitled to receive
interest payments on any Interest Payment Date other than the Maturity Date by
wire transfer of immediately available funds if appropriate wire transfer
instructions have been received in writing by the Trustee not less than 15 days
prior to such Interest Payment Date. Any such wire transfer instructions
received by the Trustee shall remain in effect until revoked by such Holder. For
special payment terms applicable to Foreign Currency Notes, see "Special
Provisions and Risks Relating to Foreign Currency Notes -- Payments of
Principal, Premium, if any, and Interest."
As used herein, "Business Day" means any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking institutions
are authorized or required by law, regulation or executive order to close in The
City of New York; provided, however, that, with respect to Foreign Currency
Notes the payment of which is to be made in a currency or composite currency
other than United States dollars, such day is also not a day on which banking
institutions are authorized or required by law, regulation or executive order to
close in the Principal Financial Center (as hereinafter defined) of the country
issuing such currency or composite currency (or, in the case of European
Currency Units ("ECU"), is not a day that appears as an ECU non-settlement day
on the display designated as "ISDE" on the Reuter Monitor Money Rates Service
(or a day so designated by the ECU Banking Association) or, if ECU
non-settlement days do not appear on that page (and are not so designated), is
not a day on which payments in ECU cannot be settled in the international
interbank market); provided, further, that, with respect to Notes as to which
LIBOR is an applicable Interest Rate Basis, such day is also a London Business
Day (as hereinafter defined). "London Business Day" means any day (i) if the
Index Currency (as hereinafter defined) is other than ECU, on which dealings in
such Index Currency are transacted in the London interbank market or (ii) if the
Index Currency is ECU, that is not designated as an ECU non-settlement day on
the display designated as "ISDE" on the Reuter Monitor Money Rates Service (or a
day so designated by the ECU Banking Association) or, if ECU non-settlement days
do not appear on that page (and are not so designated), is not a day on which
payments in ECU cannot be settled in the international interbank market.
"Principal Financial Center" means the capital city of the country issuing
the currency or composite currency in which any payment in respect of the
related Notes is to be made or, solely with respect to the calculation of LIBOR,
the Index Currency, except that with respect to United States dollars,
Australian dollars, Deutsche marks, Dutch guilders, Italian lire, Swiss francs
and ECU's, the Principal Financial Center shall be The City of New York, Sydney,
Frankfurt, Amsterdam, Milan, Zurich and Luxembourg, respectively.
Book-Entry Notes may be transferred or exchanged only through the
Depositary. See "-- Book-Entry Notes." Registration of transfer or exchange of
Certificated Notes will be made at the office or agency maintained by the
Operating Partnership for such purpose in the Borough of Manhattan, The City of
New York. No service charge will be made by the Operating Partnership or the
Trustee for any such registration of transfer or exchange of Notes, but the
Operating Partnership may require payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection therewith (other
than exchanges pursuant to the Indenture not involving any transfer).
Notwithstanding any provisions described in this Prospectus Supplement to
the contrary, if a Note specifies that an Addendum is attached thereto or that
"Other/Additional Provisions" apply, such Note will be subject to the terms
specified in such Addendum or "Other/Additional Provisions," as the case may be,
and will be described in the applicable Pricing Supplement.
REDEMPTION AT THE OPTION OF THE OPERATING PARTNERSHIP
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. The Notes will be redeemable at the
option of the Operating Partnership prior to the Stated Maturity Date only if
agreed to by the Operating Partnership and the purchasers thereof at the time of
sale and an Initial Redemption Date is specified in the applicable Pricing
Supplement. If so specified, the Notes will be subject to redemption at the
option of the Operating Partnership on any date on and after the applicable
Initial Redemption Date in whole or from time to time in part in increments of
$1,000 or such
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other minimum denomination specified in such Pricing Supplement (provided that
any remaining principal amount thereof shall be at least $1,000 or such minimum
denomination), at the applicable Redemption Price (as hereinafter defined),
together with unpaid interest accrued to the date of redemption, on notice given
not more than 60 nor less than 30 calendar days prior to the date of redemption
and in accordance with the provisions of the Indenture. "Redemption Price," with
respect to a Note, means an amount equal to the Initial Redemption Percentage
specified in the applicable Pricing Supplement (as adjusted by the Annual
Redemption Percentage Reduction, if applicable) multiplied by the unpaid
principal amount to be redeemed. The Initial Redemption Percentage, if any,
applicable to a Note shall decline at each anniversary of the Initial Redemption
Date by an amount equal to the applicable Annual Redemption Percentage
Reduction, if any, until the Redemption Price is equal to 100% of the unpaid
principal amount to be redeemed. See also "-- Original Issue Discount Notes."
REPAYMENT AT THE OPTION OF THE HOLDER
The Notes will be repayable by the Operating Partnership at the option of
the Holders thereof prior to the Stated Maturity Date only if agreed to by the
Operating Partnership and the purchasers thereof at the time of sale and one or
more Optional Repayment Dates are specified in the applicable Pricing
Supplement. If so specified, the Notes will be subject to repayment at the
option of the Holders thereof on any Optional Repayment Date in whole or from
time to time in part in increments of $1,000 or such other minimum denomination
specified in the applicable Pricing Supplement (provided that any remaining
principal amount thereof shall be at least $1,000 or such other minimum
denomination), at a repayment price equal to 100% of the unpaid principal amount
to be repaid, together with unpaid interest accrued to the date of repayment.
For any Note to be repaid, such Note must be received, together with the form
thereon entitled "Option to Elect Repayment" duly completed, by the Trustee at
its Corporate Trust Office (or such other address of which the Operating
Partnership shall from time to time notify the Holders) not more than 60 nor
less than 30 calendar days prior to the date of repayment. Exercise of such
repayment option by the Holder will be irrevocable.
Only the Depositary may exercise the repayment option in respect of Global
Securities representing Book-Entry Notes. Accordingly, Beneficial Owners (as
hereinafter defined) of Global Securities that desire to have all or any portion
of the Book-Entry Notes represented by such Global Securities repaid must direct
the Participant (as hereinafter defined) through which they own their interest
to direct the Depositary to exercise the repayment option on their behalf by
delivering the related Global Security and duly completed election form to the
Trustee as aforesaid. In order to ensure that such Global Security and election
form are received by the Trustee on a particular day, the applicable Beneficial
Owner must so direct the Participant through which it owns its interest before
such Participant's deadline for accepting instructions for that day. Different
firms may have different deadlines for accepting instructions from their
customers. Accordingly, Beneficial Owners should consult the Participants
through which they own their interest for the respective deadlines for such
Participants. All instructions given to Participants from Beneficial Owners of
Global Securities relating to the option to elect repayment shall be
irrevocable. In addition, at the time such instructions are given, each such
Beneficial Owner shall cause the Participant through which it owns its interest
to transfer such Beneficial Owner's interest in the Global Security or
Securities representing the related Book-Entry Notes, on the Depositary's
records, to the Trustee. See "-- Book-Entry Notes."
If applicable, the Operating Partnership will comply with the requirements
of Rule 14e-1 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and any other securities laws or regulations in connection with
any such repayment.
The Operating Partnership may at any time purchase Notes at any price or
prices in the open market or otherwise. Notes so purchased by the Operating
Partnership may, at the discretion of the Operating Partnership, be held, resold
or surrendered to the Trustee for cancellation.
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INTEREST
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, each
interest-bearing Note will bear interest from its date of issue at the rate per
annum, in the case of a Fixed Rate Note, or pursuant to the interest rate
formula, in the case of a Floating Rate Note, in each case as specified in the
applicable Pricing Supplement, until the principal thereof is paid or duly made
available for payment. Unless otherwise specified in the applicable Pricing
Supplement, interest payments in respect of Fixed Rate Notes and Floating Rate
Notes will equal the amount of interest accrued from and including the
immediately preceding Interest Payment Date in respect of which interest has
been paid or duly made available for payment (or from and including the date of
issue, if no interest has been paid or duly made available for payment with
respect to the applicable Note) to but excluding the applicable Interest Payment
Date or the Maturity Date, as the case may be (each, an "Interest Period").
Interest on Fixed Rate Notes and Floating Rate Notes will be payable in
arrears on each Interest Payment Date and on the Maturity Date. Unless otherwise
specified in the applicable Pricing Supplement, the first payment of interest on
any such Note originally issued between a Record Date (as hereinafter defined)
and the related Interest Payment Date will be made on the Interest Payment Date
immediately following the next succeeding Record Date to the Holder on such next
succeeding Record Date. Unless otherwise specified in the applicable Pricing
Supplement, a "Record Date" shall be the fifteenth calendar day (whether or not
a Business Day) immediately preceding the related Interest Payment Date.
FIXED RATE NOTES
Unless otherwise specified in the applicable Pricing Supplement, interest on
Fixed Rate Notes will be payable on May 1 and November 1 of each year (each, an
"Interest Payment Date") and on the Maturity Date. Unless otherwise specified in
the applicable Pricing Supplement, interest on Fixed Rate Notes will be computed
on the basis of a 360-day year of twelve 30-day months.
If any Interest Payment Date or the Maturity Date of a Fixed Rate Note falls
on a day that is not a Business Day, the required payment of principal, premium,
if any, and/or interest will be made on the next succeeding Business Day with
the same force and effect as if made on the date such payment was due, and no
interest will accrue on such payment for the period from and after such Interest
Payment Date or the Maturity Date, as the case may be, to the date of such
payment on the next succeeding Business Day.
FLOATING RATE NOTES
Unless otherwise specified in the applicable Pricing Supplement, Floating
Rate Notes will be issued as described below. The applicable Pricing Supplement
will specify certain terms with respect to which each Floating Rate Note is
being delivered, including: whether such Floating Rate Note is a "Regular
Floating Rate Note," a "Floating Rate/Fixed Rate Note" or an "Inverse Floating
Rate Note," the Fixed Rate Commencement Date, if applicable, Fixed Interest
Rate, if applicable, Interest Rate Basis or Bases, Initial Interest Rate, if
any, Interest Reset Period and Dates, Interest Payment Period and Dates, Index
Maturity, Maximum Interest Rate and/or Minimum Interest Rate, if any, and Spread
and/or Spread Multiplier, if any, as such terms are defined below. If one or
more of the applicable Interest Rate Bases is LIBOR or the CMT Rate, the
applicable Pricing Supplement will specify the Index Currency and Designated
LIBOR Page or the Designated CMT Maturity Index and Designated CMT Telerate
Page, respectively, as such terms are defined below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(i) Unless such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," an "Inverse Floating Rate Note" or as having an
Addendum attached, such Floating Rate Note will be designated as a "Regular
Floating Rate Note" and, except as described below or in the applicable
Pricing Supplement, will bear interest at the rate determined by reference
to the applicable Interest Rate Basis or Bases (a) plus or minus the
applicable Spread, if any, and/or (b) multiplied by the
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applicable Spread Multiplier, if any. Commencing on the first Interest Reset
Date, the rate at which interest on such Regular Floating Rate Note shall be
payable shall be reset as of each Interest Reset Date; PROVIDED, HOWEVER,
that the interest rate in effect for the period, if any, from the date of
issue to the first Interest Reset Date will be the Initial Interest Rate.
(ii) If such Floating Rate Note is designated as a "Floating Rate/Fixed
Rate Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases (a)
plus or minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any. Commencing on the first Interest Reset
Date, the rate at which interest on such Floating Rate/Fixed Rate Note shall
be payable shall be reset as of each Interest Reset Date; PROVIDED, HOWEVER,
that (y) the interest rate in effect for the period, if any, from the date
of issue to the first Interest Reset Date will be the Initial Interest Rate
and (z) the interest rate in effect for the period commencing on the Fixed
Rate Commencement Date to the Maturity Date shall be the Fixed Interest
Rate, if such rate is specified in the applicable Pricing Supplement or, if
no such Fixed Interest Rate is specified, the interest rate in effect
thereon on the day immediately preceding the Fixed Rate Commencement Date.
(iii) If such Floating Rate Note is designated as an "Inverse Floating
Rate Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest at the Fixed Interest
Rate minus the rate determined by reference to the applicable Interest Rate
Basis or Bases (a) plus or minus the applicable Spread, if any, and/or (b)
multiplied by the applicable Spread Multiplier, if any; PROVIDED, HOWEVER,
that, unless otherwise specified in the applicable Pricing Supplement, the
interest rate thereon will not be less than zero. Commencing on the first
Interest Reset Date, the rate at which interest on such Inverse Floating
Rate Note shall be payable shall be reset as of each Interest Reset Date;
PROVIDED, HOWEVER, that the interest rate in effect for the period, if any,
from the date of issue to the first Interest Reset Date will be the Initial
Interest Rate.
The "Spread" is the number of basis points to be added to or subtracted from
the related Interest Rate Basis or Bases applicable to such Floating Rate Note.
The "Spread Multiplier" is the percentage of the related Interest Rate Basis or
Bases applicable to such Floating Rate Note by which such Interest Rate Basis or
Bases will be multiplied to determine the applicable interest rate on such
Floating Rate Note. The "Index Maturity" is the period to maturity of the
instrument or obligation with respect to which the related Interest Rate Basis
or Bases will be calculated.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate with respect to each Interest Rate Basis will be determined in
accordance with the applicable provisions below. Except as set forth above or in
the applicable Pricing Supplement, the interest rate in effect on each day shall
be (i) if such day is an Interest Reset Date, the interest rate determined as of
the Interest Determination Date (as hereinafter defined) immediately preceding
such Interest Reset Date or (ii) if such day is not an Interest Reset Date, the
interest rate determined as of the Interest Determination Date immediately
preceding the most recent Interest Reset Date.
Interest on Floating Rate Notes will be determined by reference to the
applicable Interest Rate Basis or Interest Rate Bases, which may, as described
below, include (i) the CD Rate, (ii) the CMT Rate, (iii) the Commercial Paper
Rate, (iv) the Eleventh District Cost of Funds Rate, (v) the Federal Funds Rate,
(vi) LIBOR, (vii) the Prime Rate, (viii) the Treasury Rate, or (ix) such other
Interest Rate Basis or interest rate formula as may be specified in the
applicable Pricing Supplement; PROVIDED, HOWEVER, that the interest rate in
effect on a Floating Rate Note for the period, if any, from the date of issue to
the first Interest Reset Date will be the Initial Interest Rate; PROVIDED,
FURTHER, that with respect to a Floating Rate/Fixed Rate Note the interest rate
in effect for the period commencing on the Fixed Rate Commencement Date to the
Maturity Date shall be the Fixed Interest Rate, if such rate is specified in the
applicable Pricing Supplement or, if no such Fixed Interest Rate is specified,
the interest rate in effect thereon on the day immediately preceding the Fixed
Rate Commencement Date.
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The applicable Pricing Supplement will specify whether the rate of interest
on the related Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually or on such other specified basis (each, an
"Interest Reset Period") and the dates on which such rate of interest will be
reset (each, an "Interest Reset Date"). Unless otherwise specified in the
applicable Pricing Supplement, the Interest Reset Dates will be, in the case of
Floating Rate Notes which reset: (i) daily, each Business Day; (ii) weekly, the
Wednesday of each week (with the exception of weekly reset Floating Rate Notes
as to which the Treasury Rate is an applicable Interest Rate Basis, which will
reset the Tuesday of each week, except as described below); (iii) monthly, the
third Wednesday of each month (with the exception of monthly reset Floating Rate
Notes as to which the Eleventh District Cost of Funds Rate is an applicable
Interest Rate Basis, which will reset on the first calendar day of the month);
(iv) quarterly, the third Wednesday of March, June, September and December of
each year, (v) semiannually, the third Wednesday of the two months specified in
the applicable Pricing Supplement; and (vi) annually, the third Wednesday of the
month specified in the applicable Pricing Supplement; PROVIDED HOWEVER, that,
with respect to Floating Rate/Fixed Rate Notes, the rate of interest thereon
will not reset after the applicable Fixed Rate Commencement Date. If any
Interest Reset Date for any Floating Rate Note would otherwise be a day that is
not a Business Day, such Interest Reset Date will be postponed to the next
succeeding Business Day, except that in the case of a Floating Rate Note as to
which LIBOR is an applicable Interest Rate Basis and such Business Day falls in
the next succeeding calendar month, such Interest Reset Date will be the
immediately preceding Business Day.
The interest rate applicable to each Interest Reset Period commencing on the
related Interest Reset Date will be the rate determined as of the applicable
Interest Determination Date on or prior to the Calculation Date (as hereinafter
defined). The "Interest Determination Date" with respect to the CD Rate, the CMT
Rate, the Commercial Paper Rate, the Federal Funds Rate and the Prime Rate will
be the second Business Day immediately preceding the applicable Interest Reset
Date; the "Interest Determination Date" with respect to the Eleventh District
Cost of Funds Rate will be the last working day of the month immediately
preceding the applicable Interest Reset Date on which the Federal Home Loan Bank
of San Francisco (the "FHLB of San Francisco") publishes the Index (as
hereinafter defined); and the "Interest Determination Date" with respect to
LIBOR will be the second London Business Day immediately preceding the
applicable Interest Reset Date, unless the Index Currency is British pounds
sterling, in which case the "Interest Determination Date" will be the applicable
Interest Reset Date. With respect to the Treasury Rate, the "Interest
Determination Date" will be the day in the week in which the applicable Interest
Reset Date falls on which day Treasury Bills (as hereinafter defined) are
normally auctioned (Treasury Bills are normally sold at an auction held on
Monday of each week, unless that day is a legal holiday, in which case the
auction is normally held on the following Tuesday, except that such auction may
be held on the preceding Friday); PROVIDED, HOWEVER, that if an auction is held
on the Friday of the week preceding the applicable Interest Reset Date, the
Interest Determination Date will be such preceding Friday; PROVIDED, FURTHER,
that if an auction falls on the applicable Interest Reset Date, then the
Interest Reset Date will instead be the first Business Day following such
auction. The "Interest Determination Date" pertaining to a Floating Rate Note
the interest rate of which is determined by reference to two or more Interest
Rate Bases will be the most recent Business Day which is at least two Business
Days prior to the applicable Interest Reset Date for such Floating Rate Note on
which each Interest Rate Basis is determinable. Each Interest Rate Basis will be
determined as of such date, and the applicable interest rate will take effect on
the applicable Interest Reset Date.
A Floating Rate Note may also have either or both of the following: (i) a
Maximum Interest Rate, or ceiling, that may accrue during any Interest Period
and (ii) a Minimum Interest Rate, or floor, that may accrue during any Interest
Period. In addition to any Maximum Interest Rate that may apply to any Floating
Rate Note, the interest rate on Floating Rate Notes will in no event be higher
than the maximum rate permitted by New York law, as the same may be modified by
United States law of general application.
Except as provided below or in the applicable Pricing Supplement, interest
will be payable, in the case of Floating Rate Notes which reset: (i) daily,
weekly or monthly, on the third Wednesday of each month or on the third
Wednesday of March, June, September and December of each year, as specified in
the applicable
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Pricing Supplement; (ii) quarterly, on the third Wednesday of March, June,
September and December of each year, (iii) semiannually, on the third Wednesday
of the two months of each year specified in the applicable Pricing Supplement;
and (iv) annually, on the third Wednesday of the month of each year specified in
the applicable Pricing Supplement (each, an "Interest Payment Date") and, in
each case, on the Maturity Date. If any Interest Payment Date other than the
Maturity Date for any Floating Rate Note would otherwise be a day that is not a
Business Day, such Interest Payment Date will be postponed to the next
succeeding Business Day, except that in the case of a Floating Rate Note as to
which LIBOR is an applicable Interest Rate Basis and such Business Day falls in
the next succeeding calendar month, such Interest Payment Date will be the
immediately preceding Business Day. If the Maturity Date of a Floating Rate Note
falls on a day that is not a Business Day, the required payment of principal,
premium, if any, and interest will be made on the next succeeding Business Day
with the same force and effect as if made on the date such payment was due, and
no interest will accrue on such payment for the period from and after the
Maturity Date to the date of such payment on the next succeeding Business Day.
All percentages resulting from any calculation on Floating Rate Notes will
be rounded to the nearest one hundred-thousandth of a percentage point, with
five-one millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) would be rounded to 9.87655% (or .0987655)), and all amounts used in
or resulting from such calculation on Floating Rate Notes will be rounded, in
the case of United States dollars, to the nearest cent or, in the case of a
foreign currency or composite currency, to the nearest unit (with one-half cent
or unit being rounded upwards).
With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its principal amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in the applicable Interest Period. Unless otherwise specified in the
applicable Pricing Supplement, the interest factor for each such day will be
computed by dividing the interest rate applicable to such day by 360, in the
case of Floating Rate Notes for which an applicable Interest Rate Basis is the
CD Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number of days
in the year in the case of Floating Rate Notes for which an applicable Interest
Rate Basis is the CMT Rate or the Treasury Rate. Unless otherwise specified in
the applicable Pricing Supplement, the interest factor for Floating Rate Notes
for which the interest rate is calculated with reference to two or more Interest
Rate Bases will be calculated in each period in the same manner as if only one
of the applicable Interest Rate Bases applied as specified in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, The First
National Bank of Chicago will be the "Calculation Agent." Upon request of the
Holder of any Floating Rate Note, the Calculation Agent will disclose the
interest rate then in effect and, if determined, the interest rate that will
become effective as a result of a determination made for the next succeeding
Interest Reset Date with respect to such Floating Rate Note. Unless otherwise
specified in the applicable Pricing Supplement, the "Calculation Date," if
applicable, pertaining to any Interest Determination Date will be the earlier of
(i) the tenth calendar day after such Interest Determination Date, or, if such
day is not a Business Day, the next succeeding Business Day or (ii) the Business
Day immediately preceding the applicable Interest Payment Date or the Maturity
Date, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, the
Calculation Agent shall determine each Interest Rate Basis in accordance with
the following provisions.
CD RATE. Unless otherwise specified in the applicable Pricing Supplement,
"CD Rate" means, with respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference to
the CD Rate (a "CD Rate Interest Determination Date"), the rate on such date for
negotiable United States dollar certificates of deposit having the Index
Maturity specified in the applicable Pricing Supplement as published by the
Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates" or any successor publication ("H.15(519)")
under
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the heading "CDs (Secondary Market)," or, if not published by 3:00 P.M., New
York City time, on the related Calculation Date, the rate on such CD Rate
Interest Determination Date for negotiable United States dollar certificates of
deposit of the Index Maturity specified in the applicable Pricing Supplement as
published by the Federal Reserve Bank of New York in its daily statistical
release "Composite 3:30 P.M. Quotations for U.S. Government Securities" or any
successor publication ("Composite Quotations") under the heading "Certificates
of Deposit." If such rate is not yet published in either H.15(519) or Composite
Quotations by 3:00 P.M., New York City time, on the related Calculation Date,
then the CD Rate on such CD Rate Interest Determination Date will be calculated
by the Calculation Agent and will be the arithmetic mean of the secondary market
offered rates as of 10:00 A.M., New York City time, on such CD Rate Interest
Determination Date, of three leading nonbank dealers in negotiable United States
dollar certificates of deposit in The City of New York (which may include an
Agent or its affiliates) selected by the Calculation Agent for negotiable United
States dollar certificates of deposit of major United States money market banks
for negotiable certificates of deposit with a remaining maturity closest to the
Index Maturity specified in the applicable Pricing Supplement in an amount that
is representative for a single transaction in that market at that time;
PROVIDED, HOWEVER, that if the dealers so selected by the Calculation Agent are
not quoting as mentioned in this sentence, the CD Rate determined as of such CD
Rate Interest Determination Date will be the CD Rate in effect on such CD Rate
Interest Determination Date.
CMT RATE. Unless otherwise specified in the applicable Pricing Supplement,
"CMT Rate" means, with respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference to
the CMT Rate (a "CMT Rate Interest Determination Date"), the rate displayed on
the Designated CMT Telerate Page under the caption "...Treasury Constant
Maturities...Federal Reserve Board Release H.15. . .Mondays Approximately 3:45
P.M.," under the column for the Designated CMT Maturity Index for (i) if the
Designated CMT Telerate Page is 7055, the rate on such CMT Rate Interest
Determination Date and (ii) if the Designated CMT Telerate Page is 7052, the
week, or the month, as applicable, ended immediately preceding the week or the
month, as applicable, in which the related CMT Rate Interest Determination Date
occurs. If such rate is no longer displayed on the relevant page or is not
displayed by 3:00 P.M., New York City time, on the related Calculation Date,
then the CMT Rate for such CMT Rate Interest Determination Date will be such
treasury constant maturity rate for the Designated CMT Maturity Index as
published in the relevant H.15(519). If such rate is no longer published or is
not published by 3:00 P.M., New York City time, on the related Calculation Date,
then the CMT Rate on such CMT Rate Interest Determination Date will be such
treasury constant maturity rate for the Designated CMT Maturity Index (or other
United States Treasury rate for the Designated CMT Maturity Index) for the CMT
Rate Interest Determination Date with respect to such Interest Reset Date as may
then be published by either the Board of Governors of the Federal Reserve System
or the United States Department of the Treasury that the Calculation Agent
determines to be comparable to the rate formerly displayed on the Designated CMT
Telerate Page and published in the relevant H.15(519). If such information is
not provided by 3:00 P.M., New York City time, on the related Calculation Date,
then the CMT Rate on the CMT Rate Interest Determination Date will be calculated
by the Calculation Agent and will be a yield to maturity, based on the
arithmetic mean of the secondary market closing offer side prices as of
approximately 3:30 P.M., New York City time, on such CMT Rate Interest
Determination Date reported, according to their written records, by three
leading primary United States government securities dealers (each, a "Reference
Dealer") in The City of New York (which may include an Agent or its affiliates)
selected by the Calculation Agent (from five such Reference Dealers selected by
the Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for the most recently issued direct noncallable
fixed rate obligations of the United States ("Treasury Notes") with an original
maturity of approximately the Designated CMT Maturity Index and a remaining term
to maturity of not less than such Designated CMT Maturity Index minus one year.
If the Calculation Agent is unable to obtain three such Treasury Note
quotations, the CMT Rate on such CMT Rate Interest Determination Date will be
calculated by the Calculation Agent and will be a yield to maturity based on the
arithmetic mean of the secondary market offer side prices as of approximately
3:30 P.M., New
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<PAGE>
York City time, on such CMT Rate Interest Determination Date of three Reference
Dealers in The City of New York (from five such Reference Dealers selected by
the Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for Treasury Notes with an original maturity of
the number of years that is the next highest to the Designated CMT Maturity
Index and a remaining term to maturity closest to the Designated CMT Maturity
Index and in an amount of at least $100 million. If three or four (and not five)
of such Reference Dealers are quoting as described above, then the CMT Rate will
be based on the arithmetic mean of the offer prices obtained and neither the
highest nor the lowest of such quotes will be eliminated; PROVIDED, HOWEVER,
that if fewer than three Reference Dealers so selected by the Calculation Agent
are quoting as mentioned herein, the CMT Rate determined as of such CMT Rate
Interest Determination Date will be the CMT Rate in effect on such CMT Rate
Interest Determination Date. If two Treasury Notes with an original maturity as
described in the second preceding sentence have remaining terms to maturity
equally close to the Designated CMT Maturity Index, the quotes for the Treasury
Note with the shorter remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page specified in the applicable Pricing Supplement (or any other
page as may replace such page on that service for the purpose of displaying
Treasury Constant Maturities as reported in H.15(519)) for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519). If no such
page is specified in the applicable Pricing Supplement, the Designated CMT
Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified in
the applicable Pricing Supplement with respect to which the CMT Rate will be
calculated. If no such maturity is specified in the applicable Pricing
Supplement, the Designated CMT Maturity Index shall be 2 years.
COMMERCIAL PAPER RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Commercial Paper Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Commercial Paper Rate (a "Commercial Paper
Rate Interest Determination Date"), the Money Market Yield (as hereinafter
defined) on such date of the rate for commercial paper having the Index Maturity
specified in the applicable Pricing Supplement as published in H.15(519) under
the heading "Commercial Paper." In the event that such rate is not published by
3:00 P.M., New York City time, on the related Calculation Date, then the
Commercial Paper Rate on such Commercial Paper Rate Interest Determination Date
will be the Money Market Yield of the rate for commercial paper having the Index
Maturity specified in the applicable Pricing Supplement as published in
Composite Quotations under the heading "Commercial Paper" (with an Index
Maturity of one month or three months being deemed to be equivalent to an Index
Maturity of 30 days or 90 days, respectively). If such rate is not yet published
in either H.15(519) or Composite Quotations by 3:00 P.M; New York City time, on
the related Calculation Date, then the Commercial Paper Rate on such Commercial
Paper Rate Interest Determination Date will be calculated by the Calculation
Agent and will be the Money Market Yield of an arithmetic mean of the offered
rates at approximately 11:00 A.M., New York City time, on such Commercial Paper
Rate Interest Determination Date of three leading dealers of commercial paper in
The City of New York (which may include an Agent or its affiliates) selected by
the Calculation Agent for commercial paper having the Index Maturity specified
in the applicable Pricing Supplement placed for an industrial issuer whose bond
rating is "AA", or the equivalent, from a nationally recognized statistical
rating organization; PROVIDED, HOWEVER, that if the dealers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the Commercial
Paper Rate determined as of such Commercial Paper Rate Interest Determination
Date will be the Commercial Paper Rate in effect on such Commercial Paper Rate
Interest Determination Date.
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"Money Market Yield" means a yield (expressed as a percentage) calculated in
accordance with the following formula:
<TABLE>
<S> <C> <C> <C>
D X 360 X 100
Money Market Yield = --------------
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the Interest Period for which interest is being calculated.
ELEVENTH DISTRICT COST OF FUNDS RATE. Unless otherwise specified in the
applicable Pricing Supplement, "Eleventh District Cost of Funds Rate" means,
with respect to any Interest Determination Date relating to a Floating Rate Note
for which the interest rate is determined with reference to the Eleventh
District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate Interest
Determination Date"), the rate equal to the monthly weighted average cost of
funds for the calendar month immediately preceding the month in which such
Eleventh District Cost of Funds Rate Interest Determination Date falls, as set
forth under the caption "11th District" on Telerate Page 7058 as of 11:00 A.M.,
San Francisco time, on such Eleventh District Cost of Funds Rate Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on such
Eleventh District Cost of Funds Rate Interest Determination Date, then the
Eleventh District Cost of Funds Rate on such Eleventh District Cost of Funds
Rate Interest Determination Date shall be the monthly weighted average cost of
funds paid by member institutions of the Eleventh Federal Home Loan Bank
District that was most recently announced (the "Index") by the FHLB of San
Francisco as such cost of funds for the calendar month immediately preceding
such Eleventh District Cost of Funds Rate Interest Determination Date. If the
FHLB of San Francisco fails to announce the Index on or prior to such Eleventh
District Cost of Funds Rate Interest Determination Date for the calendar month
immediately preceding such Eleventh District Cost of Funds Rate Interest
Determination Date, the Eleventh District Cost of Funds Rate determined as of
such Eleventh District Cost of Funds Rate Interest Determination Date will be
the Eleventh District Cost of Funds Rate in effect on such Eleventh District
Cost of Funds Rate Interest Determination Date.
FEDERAL FUNDS RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Federal Funds Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Interest Determination Date"), the rate on such date for United States dollar
federal funds as published in H.15(519) under the heading "Federal Funds
(Effective)" or, if not published by 3:00 P.M., New York City time, on the
related Calculation Date, the rate on such Federal Funds Rate Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate." If such rate is not published in either
H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on the
related Calculation Date, then the Federal Funds Rate on such Federal Funds Rate
Interest Determination Date will be calculated by the Calculation Agent and will
be the arithmetic mean of the rates for the last transaction in overnight United
States dollar federal funds arranged by three leading brokers of federal funds
transactions in The City of New York (which may include an Agent or its
affiliates) selected by the Calculation Agent prior to 9:00 A.M., New York City
time, on such Federal Funds Rate Interest Determination Date; PROVIDED, HOWEVER,
that if the brokers so selected by the Calculation Agent are not quoted as
mentioned in this sentence, the Federal Funds Rate determined as of such Federal
Funds Rate Interest Determination Date will be the Federal Funds Rate in effect
on such Federal Funds Rate Interest Determination Date.
LIBOR. Unless otherwise specified in the applicable Pricing Supplement,
"LIBOR" means the rate determined in accordance with the following provisions:
(i) With respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference
to LIBOR (a "LIBOR Interest Determination Date"),
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LIBOR will be either: (a) if "LIBOR Reuters" is specified in the applicable
Pricing Supplement, the arithmetic mean of the offered rates (unless the
Designated LIBOR Page by its terms provides only for a single rate, in which
case such single rate shall be used) for deposits in the Index Currency
having the Index Maturity specified in such Pricing Supplement, commencing
on the applicable Interest Reset Date, that appear (or, if only a single
rate is required as aforesaid, appears) on the Designated LIBOR Page as of
11:00 A.M., London time, on such LIBOR Interest Determination Date, or (b)
if "LIBOR Telerate" is specified in the applicable Pricing Supplement or if
neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable
Pricing Supplement as the method for calculating LIBOR, the rate for
deposits in the Index Currency having the Index Maturity specified in such
Pricing Supplement, commencing on such Interest Reset Date, that appears on
the Designated LIBOR Page as of 11:00 A.M., London time, on such LIBOR
Interest Determination Date. If fewer than two such offered rates appear, or
if no such rate appears, as applicable, LIBOR on such LIBOR Interest
Determination Date will be determined in accordance with the provisions
described in clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear, or no rate appears, as the case may be, on
the Designated LIBOR Page as specified in clause (i) above, the Calculation
Agent will request the principal London offices of each of four major
reference banks in the London interbank market, as selected by the
Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in the Index Currency for the period of the Index
Maturity specified in the applicable Pricing Supplement, commencing on the
applicable Interest Reset Date, to prime banks in the London interbank
market at approximately 11:00 A.M., London time, on such LIBOR Interest
Determination Date and in a principal amount that is representative for a
single transaction in such Index Currency in such market at such time. If at
least two such quotations are so provided, then LIBOR on such LIBOR Interest
Determination Date will be the arithmetic mean of such quotations. If fewer
than two such quotations are so provided, then LIBOR on such LIBOR Interest
Determination Date will be the arithmetic mean of the rates quoted at
approximately 11:00 A.M., in the applicable Principal Financial Center, on
such LIBOR Interest Determination Date by three major banks in such
Principal Financial Center selected by the Calculation Agent for loans in
the Index Currency to leading European banks, having the Index Maturity
specified in the applicable Pricing Supplement and in a principal amount
that is representative for a single transaction in such Index Currency in
such market at such time; PROVIDED, HOWEVER, that if the banks so selected
by the Calculation Agent are not quoting as mentioned in this sentence,
LIBOR determined as of such LIBOR Interest Determination Date will be LIBOR
in effect on such LIBOR Interest Determination Date.
"Index Currency" means the currency or composite currency specified in the
applicable Pricing Supplement as to which LIBOR shall be calculated. If no such
currency or composite currency is specified in the applicable Pricing
Supplement, the Index Currency shall be United States dollars.
"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the
applicable Pricing Supplement, the display on the Reuter Monitor Money Rates
Service (or any successor service) for the purpose of displaying the London
interbank rates of major banks for the applicable Index Currency, or (b) if
"LIBOR Telerate" is specified in the applicable Pricing Supplement or neither
"LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable Pricing
Supplement as the method for calculating LIBOR, the display on the Dow Jones
Telerate Service (or any successor service) for the purpose of displaying the
London interbank rates of major banks for the applicable Index Currency.
PRIME RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Prime Rate" means, with respect to any Interest Determination Date
relating to a Floating Rate Note for which the interest rate is determined with
reference to the Prime Rate (a "Prime Rate Interest Determination Date"), the
rate on such date as such rate is published in H.15(519) under the heading "Bank
Prime Loan." If such rate is not published prior to 3:00 P.M., New York City
time, on the related Calculation Date, then the Prime Rate shall be the
arithmetic mean of the rates of interest publicly announced by each bank that
appears on the Reuters Screen USPRIME1 Page (as hereinafter defined) as such
bank's prime rate or base lending rate as in effect
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for such Prime Rate Interest Determination Date. If fewer than four such rates
appear on the Reuters Screen USPRIME1 Page for such Prime Rate Interest
Determination Date, then the Prime Rate shall be the arithmetic mean of the
prime rates quoted on the basis of the actual number of days in the year divided
by a 360-day year as of the close of business on such Prime Rate Interest
Determination Date by four major money center banks in The City of New York
selected by the Calculation Agent. If fewer than four such quotations are so
provided, then the Prime Rate shall be the arithmetic mean of four prime rates
quoted on the basis of the actual number of days in the year divided by a
360-day year as of the close of business on such Prime Rate Interest
Determination Date as furnished in The City of New York by the major money
center banks, if any, that have provided such quotations and by as many
substitute banks or trust companies as necessary in order to obtain four such
prime rate quotations, provided such substitute banks or trust companies are
organized and doing business under the laws of the United States, or any State
thereof, each having total equity capital of at least $500 million and being
subject to supervision or examination by Federal or State authority, selected by
the Calculation Agent to provide such rate or rates; PROVIDED, HOWEVER, that if
the banks or trust companies so selected by the Calculation Agent are not
quoting as mentioned in this sentence, the Prime Rate determined as of such
Prime Rate Interest Determination Date will be the Prime Rate in effect on such
Prime Rate Interest Determination Date.
"Reuters Screen USPRIME1 Page" means the display designated as page
"USPRIME1" on the Reuter Monitor Money Rates Service (or such other page as may
replace the USPRIME1 page on that service for the purpose of displaying prime
rates or base lending rates of major United States banks).
TREASURY RATE. Unless otherwise specified in the applicable Pricing
Supplement, "Treasury Rate" means, with respect to any Interest Determination
Date relating to a Floating Rate Note for which the interest rate is determined
by reference to the Treasury Rate (a "Treasury Rate Interest Determination
Date"), the rate from the auction held on such Treasury Rate Interest
Determination Date (the "Auction") of direct obligations of the United States
("Treasury Bills") having the Index Maturity specified in the applicable Pricing
Supplement, as such rate is published in H.15(519) under the heading "Treasury
Bills-auction average (investment)" or, if not published by 3:00 P.M., New York
City time, on the related Calculation Date, the auction average rate of such
Treasury Bills (expressed as a bond equivalent on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) as otherwise announced by
the United States Department of the Treasury. In the event that the results of
the Auction of Treasury Bills having the Index Maturity specified in the
applicable Pricing Supplement are not reported as provided by 3:00 P.M., New
York City time, on the related Calculation Date, or if no such Auction is held,
then the Treasury Rate will be calculated by the Calculation Agent and will be a
yield to maturity (expressed as a bond equivalent on the basis of a year of 365
or 366 days, as applicable, and applied on a daily basis) of the arithmetic mean
of the secondary market bid rates, as of approximately 3:30 P.M., New York City
time, on such Treasury Rate Interest Determination Date, of three leading
primary United States government securities dealers (which may include an Agent
or its affiliates) selected by the Calculation Agent, for the issue of Treasury
Bills with a remaining maturity closest to the Index Maturity specified in the
applicable Pricing Supplement; PROVIDED, HOWEVER, that if the dealers so
selected by the Calculation Agent are not quoting as mentioned in this sentence,
the Treasury Rate determined as of such Treasury Rate Interest Determination
Date will be the Treasury Rate in effect on such Treasury Rate Interest
Determination Date.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to the Notes, including the specification and
determination of one or more Interest Rate Bases, the calculation of the
interest rate applicable to a Floating Rate Note, the Interest Payment Dates,
the Maturity Date or any other term relating thereto, may be modified and/or
supplemented as specified under "Other/Additional Provisions" on the face
thereof or in an Addendum relating thereto, if so specified on the face thereof
and in the applicable Pricing Supplement.
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AMORTIZING NOTES
The Operating Partnership may from time to time offer Fixed Rate Notes which
pay a level amount in respect of both interest and principal amortized over the
life of such Fixed Rate Notes ("Amortizing Notes"). Unless otherwise specified
in the applicable Pricing Supplement, interest on each Amortizing Note will be
computed on the basis of a 360-day year of twelve 30-day months. Payments with
respect to Amortizing Notes will be applied first to interest due and payable
thereon and then to the reduction of the unpaid principal amount thereof.
Further information concerning additional terms and provisions of Amortizing
Notes will be specified in the applicable Pricing Supplement, including a table
setting forth repayment information for such Amortizing Notes.
ORIGINAL ISSUE DISCOUNT NOTES
The Operating Partnership may offer Notes ("Original Issue Discount Notes")
from time to time that have an Issue Price (as specified in the applicable
Pricing Supplement) that is less than 100% of the principal amount thereof
(i.e., par). Original Issue Discount Notes may not bear any interest currently
or may bear interest at a rate that is below market rates at the time of
issuance. Unless otherwise specified in the applicable Pricing Supplement, the
difference between the Issue Price of an Original Issue Discount Note and par is
referred to herein as the "Discount" and will be ratably accrued over the term
of such Original Issue Discount Note for purposes of determining the amount to
be paid in the event of redemption, repayment or acceleration of maturity of
such Original Issue Discount Note. In the event of redemption, repayment or
acceleration of maturity of an Original Issue Discount Note, the amount payable
to the Holder of such Original Issue Discount Note will be equal to the sum of:
(i) the Issue Price (increased by any accruals of Discount) and, in the event of
any redemption of such Original Issue Discount Note (if applicable), multiplied
by the Initial Redemption Percentage specified in the applicable Pricing
Supplement (as adjusted by the Annual Redemption Percentage Reduction, if
applicable); and (ii) any accrued and unpaid interest on such Original Issue
Discount Note, from the date of issue to the date of redemption, repayment or
acceleration of maturity. Certain additional considerations relating to Original
Issue Discount Notes may be specified in the applicable Pricing Supplement.
INDEXED NOTES
Notes may be issued with the amount of principal, premium and/or interest
payable in respect thereof to be determined with reference to the price or
prices of specified commodities or stocks, to the exchange rate of one or more
specified currencies (including a composite currency such as the ECU) relative
to an indexed currency or to such other price(s) or exchange rate(s) ("Indexed
Notes"), as specified in the applicable Pricing Supplement. In certain cases,
Holders of Indexed Notes may receive a principal payment on the Maturity Date
that is greater than or less than the principal amount of such Indexed Notes
depending upon the relative value on the Maturity Date of the specified indexed
item. Information as to the method for determining the amount of principal,
premium, if any, and/or interest payable in respect of Indexed Notes, certain
historical information with respect to the specified indexed item and tax
considerations associated with an investment in Indexed Notes will be specified
in the applicable Pricing Supplement.
CERTAIN COVENANTS
LIMITATIONS ON INCURRENCE OF DEBT. The Operating Partnership will not, and
will not permit any Subsidiary to, incur any Debt (as defined below), other than
intercompany debt (representing Debt to which the only parties are the Company,
the Operating Partnership and any of their Subsidiaries (but only so long as
such Debt is held solely by any of the Company, the Operating Partnership and
any Subsidiary) that is subordinate in right of payment to the Notes) if,
immediately after giving effect to the incurrence of such additional Debt, the
aggregate principal amount of all outstanding Debt of the Operating Partnership
and its Subsidiaries on a consolidated basis determined in accordance with
generally accepted accounting principles is greater than 55% of the sum of (i)
the Operating Partnership's Total Assets (as defined below) as of the end of the
calendar quarter covered in the Operating Partnership's Annual Report on Form
10-K or Quarterly Report on Form 10-Q, as the case may be, most recently filed
with the Securities and Exchange
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Commission (or, if such filing is not permitted under the Exchange Act, with the
Trustee) prior to the incurrence of such additional Debt and (ii) the increase
in Total Assets from the end of such quarter including, without limitation, any
increase in Total Assets resulting from the incurrence of such additional Debt
(such increase together with the Operating Partnership's Total Assets shall be
referred to as the "Adjusted Total Assets").
In addition to the foregoing limitation on the incurrence of Debt, the
Operating Partnership will not, and will not permit any Subsidiary to, incur any
Debt if the ratio of Consolidated Income Available for Debt Service to the
Annual Service Charge (in each case as defined below) for the four consecutive
fiscal quarters most recently ended prior to the date on which such additional
Debt is to be incurred shall have been less than 2.0 to 1, on a pro forma basis
after giving effect to the incurrence of such Debt and to the application of the
proceeds therefrom, and calculated on the assumption that (i) such Debt and any
other Debt incurred by the Operating Partnership or its Subsidiaries since the
first day of such four-quarter period and the application of the proceeds
therefrom, including to refinance other Debt, had occurred at the beginning of
such period, (ii) the repayment or retirement of any other Debt by the Operating
Partnership or its Subsidiaries since the first day of such four-quarter period
had been incurred, repaid or retired at the beginning of such period (except
that, in making such computation, the amount of Debt under any revolving credit
facility shall be computed based upon the average daily balance of such Debt
during such period), (iii) the income earned on any increase in Adjusted Total
Assets since the end of such four-quarter period had been earned, on an
annualized basis, during such period, and (iv) in the case of any acquisition or
disposition by the Operating Partnership or any Subsidiary of any asset or group
of assets since the first day of such four-quarter period, including, without
limitation, by merger, stock purchase or sale, or asset purchase or sale, such
acquisition or disposition or any related repayment of Debt had occurred as of
the first day of such period with the appropriate adjustments with respect to
such acquisition or disposition being included in such pro forma calculation.
In addition to the foregoing limitations on the incurrence of Debt, the
Operating Partnership will not, and will not permit any Subsidiary to, incur any
Debt secured by any mortgage, lien, charge, pledge, encumbrance or security
interest of any kind upon any of the property of the Operating Partnership or
any Subsidiary ("Secured Debt"), whether owned at the date of the Indenture or
thereafter acquired, if, immediately after giving effect to the incurrence of
such additional Secured Debt, the aggregate principal amount of all outstanding
Secured Debt of the Operating Partnership and its Subsidiaries on a consolidated
basis is greater than 40% of the Operating Partnership's Adjusted Total Assets.
For purposes of the foregoing provisions regarding the limitation on the
incurrence of Debt, Debt shall be deemed to be "incurred" by the Operating
Partnership and its Subsidiaries on a consolidated basis whenever the Operating
Partnership and its Subsidiaries on a consolidated basis shall create, assume,
guarantee or otherwise become liable in respect thereof.
MAINTENANCE OF TOTAL UNENCUMBERED ASSETS. The Operating Partnership is
required to maintain Total Unencumbered Assets of not less than 185% of the
aggregate outstanding principal amount of the Unsecured Debt of the Operating
Partnership.
As used herein:
"ANNUAL SERVICE CHARGE" as of any date means the amount which is expensed in
any 12-month period for interest on Debt.
"CONSOLIDATED INCOME AVAILABLE FOR DEBT SERVICE" for any period means
Consolidated Net Income (as defined below) of the Operating Partnership and its
Subsidiaries (i) plus amounts which have been deducted for (a) interest on Debt
of the Operating Partnership and its Subsidiaries, (b) provision for taxes of
the Operating Partnership and its Subsidiaries based on income, (c) amortization
of debt discount,
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(d) depreciation and amortization, (e) the effect of any noncash charge
resulting from a change in accounting principles in determining Consolidated Net
Income for such period, (f) amortization of deferred charges and (g) provisions
for or realized losses on properties and (ii) less amounts which have been
included for gains on properties.
"CONSOLIDATED NET INCOME" for any period means the amount of consolidated
net income (or loss) of the Operating Partnership and its Subsidiaries for such
period determined on a consolidated basis in accordance with generally accepted
accounting principles.
"DEBT" of the Operating Partnership or any Subsidiary means any indebtedness
of the Operating Partnership and its Subsidiaries, whether or not contingent, in
respect of (i) borrowed money evidenced by bonds, notes, debentures or similar
instruments, (ii) indebtedness secured by any mortgage, pledge, lien, charge,
encumbrance or any security interest existing on property owned by the Operating
Partnership and its Subsidiaries, (iii) the reimbursement obligations,
contingent or otherwise, in connection with any letters of credit actually
issued or amounts representing the balance deferred and unpaid of the purchase
price of any property except any such balance that constitutes an accrued
expense or trade payable or (iv) any lease of property by the Operating
Partnership and its Subsidiaries as lessee which is reflected in the Operating
Partnership's consolidated balance sheet as a capitalized lease in accordance
with generally accepted accounting principles, in the case of items of
indebtedness under (i) through (iii) above to the extent that any such items
(other than letters of credit) would appear as a liability on the Operating
Partnership's consolidated balance sheet in accordance with generally accepted
accounting principles, and also includes, to the extent not otherwise included,
any obligation by the Operating Partnership or any Subsidiary to be liable for,
or to pay, as obligor, guarantor or otherwise (other than for purposes of
collection in the ordinary course of business), indebtedness of another person
(other than the Operating Partnership or any Subsidiary) (it being understood
that Debt shall be deemed to be incurred by the Operating Partnership and its
Subsidiaries on a consolidated basis whenever the Operating Partnership and its
Subsidiaries on a consolidated basis shall create, assume, guarantee or
otherwise become liable in respect thereof).
"FUNDS FROM OPERATIONS" for any period means the Consolidated Net Income of
the Operating Partnership and its Subsidiaries for such period without giving
effect to depreciation and amortization, gains or losses from extraordinary
items, gains or losses on sales of real estate, gains or losses on investments
in marketable securities and any provision/benefit for income taxes for such
period, plus the allocable portion, based on the Operating Partnership's
ownership interest, of funds from operations of unconsolidated joint ventures,
all determined on a consistent basis in accordance with generally accepted
accounting principles.
"SUBSIDIARY" means a corporation, partnership or limited liability company,
a majority of the outstanding voting stock, partnership interests or membership
interests, as the case may be, of which is owned or controlled, directly or
indirectly, by the Operating Partnership or by one or more other Subsidiaries of
the Operating Partnership. For the purposes of this definition, "voting stock"
means stock having voting power for the election of directors, or trustees, as
the case may be, whether at all times or only so long as no senior class of
stock has such voting power by reason of any contingency.
"TOTAL ASSETS" as of any date means the sum of (i) the Operating
Partnership's and its Subsidiaries' Undepreciated Real Estate Assets and (ii)
all other assets of the Operating Partnership and its Subsidiaries on a
consolidated basis determined in accordance with generally accepted accounting
principles (but excluding intangibles and accounts receivable).
"TOTAL UNENCUMBERED ASSETS" means the sum of (i) those Undepreciated Real
Estate Assets not subject to an encumbrance and (ii) all other assets of the
Operating Partnership and its Subsidiaries not subject to an encumbrance
determined in accordance with generally accepted accounting principles (but
excluding accounts receivable and intangibles).
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"UNDEPRECIATED REAL ESTATE ASSETS" as of any date means the cost (original
cost plus capital improvements) of real estate assets of the Operating
Partnership and its Subsidiaries on such date, before depreciation and
amortization, determined on a consolidated basis in accordance with generally
accepted accounting principles.
"UNSECURED DEBT" means Debt of the Operating Partnership or any Subsidiary
which is not secured by any mortgage, lien, charge, pledge or security interest
of any kind upon any of the properties of the Operating Partnership or any
Subsidiary.
Reference is made to the section entitled "Description of Debt Securities --
Certain Covenants" in the accompanying Prospectus for a description of
additional covenants applicable to the Notes. Compliance with the covenants
described herein and such additional covenants with respect to the Notes
generally may not be waived by the Board of Directors of the Company, as general
partner of the Operating Partnership, or by the Trustee unless the Holders of at
least a majority in principal amount of all outstanding Notes consent to such
waiver; PROVIDED, HOWEVER, that the defeasance and covenant defeasance
provisions of the Indenture described under "Description of Debt Securities --
Discharge, Defeasance and Covenant Defeasance" in the accompanying Prospectus
will apply to the Notes, including with respect to the covenants described in
this Prospectus Supplement.
BOOK-ENTRY NOTES
The Operating Partnership has established a depositary arrangement with The
Depository Trust Company with respect to the Book-Entry Notes, the terms of
which are summarized below. Any additional or differing terms of the depositary
arrangement with respect to the Book-Entry Notes will be described in the
applicable Pricing Supplement.
Upon issuance, all Book-Entry Notes up to $200,000,000 aggregate principal
amount bearing interest (if any) at the same rate or pursuant to the same
formula and having the same date of issue, currency of denomination and payment,
Interest Payment Dates (if any), Stated Maturity Date, redemption provisions (if
any), repayment provisions (if any) and other terms will be represented by a
single Global Security. Each Global Security representing Book-Entry Notes will
be deposited with, or on behalf of, the Depositary and will be registered in the
name of the Depositary or a nominee of the Depositary. No Global Security may be
transferred except as a whole by a nominee of the Depositary to the Depositary
or to another nominee of the Depositary, or by the Depositary or such nominee to
a successor of the Depositary or a nominee of such successor.
So long as the Depositary or its nominee is the registered owner of a Global
Security, the Depositary or its nominee, as the case may be, will be the sole
Holder of the Book-Entry Notes represented thereby for all purposes under the
Indenture. Except as otherwise provided in this section, the Beneficial Owners
of the Global Security or Securities representing Book-Entry Notes will not be
entitled to receive physical delivery of Certificated Notes and will not be
considered the Holders thereof for any purpose under the Indenture, and no
Global Security representing Book-Entry Notes shall be exchangeable or
transferrable. Accordingly, each Beneficial Owner must rely on the procedures of
the Depositary and, if such Beneficial Owner is not a Participant, on the
procedures of the Participant through which such Beneficial Owner owns its
interest in order to exercise any rights of a Holder under such Global Security
or the Indenture. The laws of some jurisdictions require that certain purchasers
of securities take physical delivery of such securities in certificated form.
Such limits and such laws may impair the ability to transfer beneficial
interests in a Global Security representing Book-Entry Notes.
Unless otherwise specified in the applicable Pricing Supplement, each Global
Security representing Book-Entry Notes will be exchangeable for Certificated
Notes of like tenor and terms and of differing authorized denominations
aggregating a like principal amount, only if (i) the Depositary notifies the
Operating Partnership that it is unwilling or unable to continue as Depositary
for the Global Securities or the Depositary ceases to be a clearing agency
registered under the Exchange Act (if so required by applicable
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law or regulation) and, in each case, a successor Depositary is not appointed by
the Operating Partnership within 90 days after the Operating Partnership
receives such notice or becomes aware of such unwillingness, inability or
ineligibility, (ii) the Operating Partnership in its sole discretion determines
that the Global Securities shall be exchangeable for Certificated Notes or (iii)
there shall have occurred and be continuing an Event of Default under the
Indenture with respect to the Notes and beneficial owners representing a
majority in aggregate principal amount of the Book-Entry Notes represented by
Global Securities advise the Depositary to cease acting as depositary. Upon any
such exchange, the Certificated Notes shall be registered in the names of the
Beneficial Owners of the Global Security or Securities representing Book-Entry
Notes, which names shall be provided by the Depositary's relevant Participants
(as identified by the Depositary) to the Trustee.
The following is based on information furnished by the Depositary:
The Depositary will act as securities depository for the Book-Entry
Notes. The Book-Entry Notes will be issued as fully registered securities
registered in the name of Cede & Co. (the Depositary's partnership nominee).
One fully registered Global Security will be issued for each issue of
Book-Entry Notes, each in the aggregate principal amount of such issue, and
will be deposited with the Depositary. If, however, the aggregate principal
amount of any issue exceeds $200,000,000, one Global Security will be issued
with respect to each $200,000,000 of principal amount and an additional
Global Security will be issued with respect to any remaining principal
amount of such issue.
The Depositary is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and
a "clearing agency" registered pursuant to the provisions of Section 17A of
the Exchange Act. The Depositary holds securities that its participants
("Participants") deposit with the Depositary. The Depositary also
facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates.
Direct Participants of the Depositary ("Direct Participants") include
securities brokers and dealers (including the Agent), banks, trust
companies, clearing corporations and certain other organizations. The
Depositary is owned by a number of its Direct Participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the Depositary's
system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to the Depositary and its
Participants are on file with the Securities and Exchange Commission.
Purchases of Book-Entry Notes under the Depositary's system must be made
by or through Direct Participants, which will receive a credit for such
Book-Entry Notes on the Depositary's records. The ownership interest of each
actual purchaser of each Book-Entry Note represented by a Global Security
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written
confirmation from the Depositary of their purchase, but Beneficial Owners
are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the
Direct or Indirect Participants through which such Beneficial Owner entered
into the transaction. Transfers of ownership interests in a Global Security
representing Book-Entry Notes are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners of a Global Security representing Book-Entry Notes will not receive
Certificated Notes representing their ownership interests therein, except in
the event that use of the Book-Entry system for such Book-Entry Notes is
discontinued.
To facilitate subsequent transfers, all Global Securities representing
Book-Entry Notes which are deposited with, or on behalf of, the Depositary
are registered in the name of the Depositary's nominee,
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Cede & Co. The deposit of Global Securities with, or on behalf of, the
Depositary and their registration in the name of Cede & Co. effect no change
in beneficial ownership. The Depositary has no knowledge of the actual
Beneficial Owners of the Global Securities representing the Book-Entry
Notes; the Depositary's records reflect only the identity of the Direct
Participants to whose accounts such Book-Entry Notes are credited, which may
or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and by
Direct and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements
as may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with respect
to the Global Securities representing the Book-Entry Notes. Under its usual
procedures, the Depositary mails an Omnibus Proxy to the Operating
Partnership as soon as possible after the applicable record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those
Direct Participants to whose accounts the Book-Entry Notes are credited on
the applicable record date (identified in a listing attached to the Omnibus
Proxy).
Principal, premium, if any, and/or interest payments on the Global
Securities representing the Book Entry Notes will be made to the Depositary.
The Depositary's practice is to credit Direct Participants' accounts on the
applicable payment date in accordance with their respective holdings shown
on the Depositary's records unless the Depositary has reason to believe that
it will not receive payment on such date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers
in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of the Depositary, the Trustee or
the Operating Partnership, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal,
premium, if any, and/or interest to the Depositary is the responsibility of
the Operating Partnership or the Trustee, disbursement of such payments to
Direct Participants shall be the responsibility of the Depositary, and
disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
If applicable, redemption notices shall be sent to Cede & Co. If less
than all of the Book-Entry Notes within an issue are being redeemed, the
Depositary's practice is to determine by lot the amount of the interest of
each Direct Participant in such issue to be redeemed.
A Beneficial Owner shall give notice of any option to elect to have its
Book-Entry Notes repaid by the Operating Partnership, through its
Participant, to the Trustee, and shall effect delivery of such Book-Entry
Notes by causing the Direct Participant to transfer the Participant's
interest in the Global Security or Securities representing such Book-Entry
Notes, on the Depositary's records, to the Trustee. The requirement for
physical delivery of Book-Entry Notes in connection with a demand for
repayment will be deemed satisfied when the ownership rights in the Global
Security or Securities representing such Book-Entry Notes are transferred by
Direct Participants on the Depositary's records.
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The Depositary may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving
reasonable notice to the Operating Partnership or the Trustee. Under such
circumstances, in the event that a successor securities depository is not
obtained, Certificated Notes are required to be printed and delivered.
The Operating Partnership may decide to discontinue use of the system of
book-entry transfers through the Depositary (or a successor securities
depository). In that event, Certificated Notes will be printed and
delivered.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that the Operating
Partnership believes to be reliable, but the Operating Partnership takes no
responsibility for the accuracy thereof.
CERTAIN INVESTMENT CONSIDERATIONS
An investment in Notes indexed, as to principal, premium, if any, and/or
interest, to one or more currencies or composite currencies (including exchange
rates and swap indices between currencies or composite currencies), commodities,
interest rates or other indices, either directly or inversely, entails
significant risks that are not associated with similar investments in a
conventional fixed rate or floating rate debt security. Such risks include,
without limitation, the possibility that such index or indices may be subject to
significant changes, that the resulting interest rate will be less than that
payable on a conventional fixed rate or floating rate debt security issued by
the Operating Partnership at the same time, that the repayment of principal
and/or premium, if any, can occur at times other than that expected by the
investor, and that the investor could lose all or a substantial portion of
principal and/or premium, if any, payable on the Maturity Date. Such risks
depend on a number of interrelated factors, including economic, financial and
political events, over which the Operating Partnership has no control.
Additionally, if the formula used to determine the amount of principal, premium,
if any, and/or interest payable with respect to such Notes contains a multiplier
or leverage factor, the effect of any change in the applicable index or indices
will be magnified. In recent years, values of certain indices have been highly
volatile and such volatility may be expected to continue in the future.
Fluctuations in the value of any particular index that have occurred in the past
are not necessarily indicative, however, of fluctuations that may occur in the
future.
Any optional redemption feature of the Notes might affect the market value
of such Notes. Since the Operating Partnership may be expected to redeem such
Notes when prevailing interest rates are relatively low, an investor might not
be able to reinvest the redemption proceeds at an effective interest rate as
high as the interest rate on such Notes.
The secondary market for such Notes will be affected by a number of factors
independent of the creditworthiness of the Operating Partnership and the value
of the applicable index or indices, including the complexity and volatility of
such index or indices, the method of calculating the principal, premium, if any,
and/or interest in respect of such Notes, the time remaining to the maturity of
such Notes, the outstanding amount of such Notes, any redemption features of
such Notes, the amount of other debt securities linked to such index or indices
and the level, direction and volatility of market interest rates generally. Such
factors also will affect the market value of such Notes. In addition, certain
Notes may be designed for specific investment objectives or strategies and,
therefore, may have a more limited secondary market and experience more price
volatility than conventional debt securities. Investors may not be able to sell
such Notes readily or at prices that will enable investors to realize their
anticipated yield. No investor should purchase Notes unless such investor
understands and is able to bear the risk that such Notes may not be readily
saleable, that the value of Notes will fluctuate over time and that such
fluctuations may be significant.
The credit ratings assigned to the Operating Partnership's medium-term note
program may not reflect the potential impact of all risks related to structure
and other factors on the market value of the Notes.
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Accordingly, prospective investors should consult their own financial and legal
advisors as to the risks entailed by an investment in the Notes and the
suitability of such Notes in light of their particular circumstances.
SPECIAL PROVISIONS AND RISKS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, Foreign
Currency Notes will not be sold in, or to residents of, the country issuing the
applicable currency. The information set forth in this Prospectus Supplement is
directed to prospective purchasers who are United States residents and, with
respect to Foreign Currency Notes, is by necessity incomplete. The Operating
Partnership disclaims any responsibility to advise prospective purchasers who
are residents of countries other than the United States with respect to any
matters that may affect the purchase, holding or receipt of payments of
principal of, and premium, if any, and interest on, the Foreign Currency Notes.
Such persons should consult their own financial and legal advisors with regard
to such matters.
THIS PROSPECTUS SUPPLEMENT DOES NOT DESCRIBE ALL OF THE RISKS OF AN
INVESTMENT IN FOREIGN CURRENCY NOTES THAT RESULT FROM SUCH FOREIGN CURRENCY
NOTES BEING DENOMINATED OR PAYABLE IN A CURRENCY OR COMPOSITE CURRENCY OTHER
THAN UNITED STATES DOLLARS. THE OPERATING PARTNERSHIP AND EACH AGENT DISCLAIM
ANY RESPONSIBILITY TO ADVISE PROSPECTIVE INVESTORS OF SUCH RISKS AS THEY EXIST
AT THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS THEY CHANGE FROM TIME TO TIME.
PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS
TO THE RISKS ENTAILED BY AN INVESTMENT IN FOREIGN CURRENCY NOTES. FOREIGN
CURRENCY NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes entails significant risks that are
not associated with a similar investment in a debt security denominated and
payable in United States dollars. Such risks include, without limitation, the
possibility of significant changes in the rate of exchange between the United
States dollar and the applicable foreign currency or composite currency and the
possibility of the imposition or modification of exchange controls by the
applicable governments or monetary authorities. Such risks generally depend on
factors over which the Operating Partnership has no control, such as economic,
financial and political events and the supply and demand for the applicable
currencies or composite currencies. In addition, if the formula used to
determine the amount of principal, premium, if any, and/or interest payable with
respect to Foreign Currency Notes contains a multiplier or leverage factor, the
effect of any change in the applicable currencies or composite currencies will
be magnified. In recent years, rates of exchange between the United States
dollar and foreign currencies or composite currencies have been highly volatile
and such volatility may be expected in the future. Fluctuations in any
particular exchange rate that have occurred in the past are not necessarily
indicative, however, of fluctuations that may occur in the future. Depreciation
of the foreign currency or composite currency in which a Foreign Currency Note
is payable against the United States dollar would result in a decrease in the
United States dollar-equivalent yield of such Foreign Currency Note, in the
United States dollar-equivalent value of the principal and premium, if any,
payable on the Maturity Date of such Foreign Currency Note, and, generally, in
the United States dollar-equivalent market value of such Foreign Currency Note.
Governments or monetary authorities have imposed from time to time, and may
in the future impose or revise, exchange controls at or prior to the date on
which any payment of principal of, or premium, if any, or interest on, a Foreign
Currency Note is due, which could affect exchange rates as well as the
availability of the foreign currency or composite currency in which such payment
is to be made on such date. Even if there are no exchange controls, it is
possible that the foreign currency or composite currency in which a payment in
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respect of any particular Foreign Currency Note is to be made would not be
available on the applicable payment date due to other circumstances beyond the
control of the Operating Partnership. In such cases, the Operating Partnership
will be entitled to satisfy its obligations in respect of such Foreign Currency
Note in United States dollars. See "-- Payment Currency."
GOVERNING LAW; JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. If an action based on Foreign Currency Notes were
commenced in a court of the United States, it is likely that such court would
grant judgment relating to such Foreign Currency Notes only in United States
dollars. It is not clear, however, whether, in granting such judgment, the rate
of conversion into United States dollars would be determined with reference to
the date of default, the date of entry of the judgment or some other date. Under
current New York law, a state court in the State of New York rendering a
judgment on a Foreign Currency Note would be required to render such judgment in
the applicable foreign currency or composite currency, and such judgment would
be converted into United States dollars at the exchange rate prevailing on the
date of entry of the judgment. Accordingly, Holders of Foreign Currency Notes
would bear the risk of exchange rate fluctuations between the time the amount of
the judgment is calculated and the time such amount is converted from United
States dollars into the applicable foreign currency or composite currency.
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST
Unless otherwise specified in the applicable Pricing Supplement, the
Operating Partnership is obligated to make payments of principal of, and
premium, if any, and interest on, Foreign Currency Notes in the applicable
Specified Currency (or, if such Specified Currency is not at the time of such
payment legal tender for the payment of public and private debts, in such other
coin or currency of the country which issued such Specified Currency as at the
time of such payment is legal tender for the payment of such debts). Any such
amounts payable by the Operating Partnership in a foreign currency or composite
currency will, unless otherwise specified in the applicable Pricing Supplement,
be converted by the Exchange Rate Agent named in the applicable Pricing
Supplement into United States dollars for payment to Holders. However, the
Holder of a Foreign Currency Note may elect to receive such amounts in the
applicable foreign currency or composite currency as hereinafter described.
Any United States dollar amount to be received by a Holder of a Foreign
Currency Note will be based on the highest bid quotation in The City of New York
received by the Exchange Rate Agent at approximately 11:00 A.M., New York City
time, on the second Business Day preceding the applicable payment date from
three recognized foreign exchange dealers (one of whom may be the Exchange Rate
Agent) selected by the Exchange Rate Agent and approved by the Operating
Partnership for the purchase by the quoting dealer of the applicable foreign
currency or composite currency for United States dollars for settlement on such
payment date in the aggregate amount of such currency or composite currency
payable to all Holders of Foreign Currency Notes scheduled to receive United
States dollar payments and at which the applicable dealer commits to execute a
contract. All currency exchange costs will be borne by the Holders of such
Foreign Currency Notes by deductions from such payments. If three such bid
quotations are not available, payments will be made in the applicable foreign
currency or composite currency.
A Holder of a Foreign Currency Note may elect to receive all or a specified
portion of any payment of the principal of, and premium, if any, and/or interest
on, such Foreign Currency Note in the applicable foreign currency or composite
currency by submitting a written request for such payment to the Trustee at its
corporate trust office in The City of New York on or prior to the applicable
Record Date or at least fifteen calendar days prior to the Maturity Date, as the
case may be. Such written request may be mailed or hand delivered or sent by
cable, telex or other form of facsimile transmission. A Holder of a Foreign
Currency Note may elect to receive all or a specified portion of all future
payments in the applicable foreign currency or composite currency in respect of
such principal, premium, if any, and/or interest and need not file a separate
election for each payment. Such election will remain in effect until revoked by
written notice to the Trustee, but written notice of any such revocation must be
received by the Trustee on or prior to the
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applicable Record Date or at least fifteen calendar days prior to the Maturity
Date, as the case may be. Holders of Foreign Currency Notes whose Notes are to
be held in the name of a broker or nominee should contact such broker or nominee
to determine whether and how an election to receive payments in the applicable
foreign currency or composite currency may be made.
Payments of the principal of, and premium, if any, and/or interest on,
Foreign Currency Notes which are to be made in United States dollars will be
made in the manner specified herein with respect to Notes denominated in United
States dollars. See "Description of Notes -- General." Payments of interest on
Foreign Currency Notes which are to be made in the applicable foreign currency
or composite currency on an Interest Payment Date other than the Maturity Date
will be made by check mailed to the address of the Holders of such Foreign
Currency Notes as they appear in the Security Register, subject to the right to
receive such interest payments by wire transfer of immediately available funds
under certain circumstances described under "Description of Notes -- General."
Payments of principal of, and premium, if any, and/or interest on, Foreign
Currency Notes which are to be made in the applicable foreign currency or
composite currency on the Maturity Date will be made by wire transfer of
immediately available funds to an account with a bank designated at least
fifteen calendar days prior to the Maturity Date by each Holder thereof,
provided that such bank has appropriate facilities therefor and that the
applicable Foreign Currency Note is presented and surrendered at the principal
corporate trust office of the Trustee in time for the Trustee to make such
payments in such funds in accordance with its normal procedures.
Unless otherwise specified in the applicable Pricing Supplement, a
Beneficial Owner of a Global Security or Securities representing Book-Entry
Notes payable in a currency or composite currency other than United States
dollars which elects to receive payments of principal, premium, if any, and/or
interest in such currency or composite currency must notify the Participant
through which it owns its interest on or prior to the applicable Record Date or
at least fifteen calendar days prior to the Maturity Date, as the case may be,
of such Beneficial Owner's election. Such Participant must notify the Depositary
of such election on or prior to the third Business Day after such Record Date or
at least twelve calendar days prior to the Maturity Date, as the case may be,
and the Depositary will notify the Trustee of such election on or prior to the
fifth Business Day after such Record Date or at least ten calendar days prior to
the Maturity Date, as the case may be. If complete instructions are received by
the Participant from the Beneficial Owner and forwarded by the Participant to
the Depositary, and by the Depositary to the Trustee, on or prior to such dates,
then such Beneficial Owner will receive payments in the applicable foreign
currency or composite currency.
PAYMENT CURRENCY
If the applicable foreign currency for a Foreign Currency Note is not
available for the required payment of principal, premium, if any, and/or
interest due to the imposition of exchange controls or other circumstances
beyond the control of the Operating Partnership, the Operating Partnership will
be entitled to satisfy its obligations to the Holder of such Foreign Currency
Note by making such payment in United States dollars on the basis of the Market
Exchange Rate on the second Business Day prior to such payment or, if such
Market Exchange Rate is not then available, on the basis of the most recently
available Market Exchange Rate or as otherwise specified in the applicable
Pricing Supplement.
If payment in respect of a Foreign Currency Note is required to be made in
any composite currency (e.g., ECU), and such composite currency is unavailable
due to the imposition of exchange controls or other circumstances beyond the
control of the Operating Partnership, the Operating Partnership will be entitled
to satisfy its obligations to the Holder of such Foreign Currency Note by making
such payment in United States dollars. The amount of each payment in United
States dollars shall be computed by the Exchange Rate Agent on the basis of the
equivalent of the composite currency in United States dollars. The component
currencies of the composite currency for this purpose (collectively, the
"Component Currencies" and each, a "Component Currency") shall be the currency
amounts that were components of the composite currency as of the last day on
which the composite currency was used. The equivalent of the composite currency
in
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United States dollars shall be calculated by aggregating the United States
dollar equivalents of the Component Currencies. The United States dollar
equivalent of each of the Component Currencies shall be determined by the
Exchange Rate Agent on the basis of the most recently available Market Exchange
Rate for each such Component Currency, or as otherwise specified in the
applicable Pricing Supplement.
If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of the currency as a Component
Currency shall be divided or multiplied in the same proportion. If two or more
Component Currencies are consolidated into a single currency, the amounts of
those currencies as Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated Component
Currencies expressed in such single currency. If any Component Currency is
divided into two or more currencies, the amount of the original Component
Currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original Component Currency.
The "Market Exchange Rate" for a currency or composite currency other than
United States dollars means the noon dollar buying rate in The City of New York
for cable transfers for such currency or composite currency as certified for
customs purposes by (or if not so certified, as otherwise determined by) the
Federal Reserve Bank of New York. Any payment made in United States dollars
under such circumstances where the required payment is in a currency or
composite currency other than United States dollars will not constitute an Event
of Default under the Indenture with respect to the Notes.
All determinations referred to above made by the Exchange Rate Agent shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the Holders of the Foreign Currency
Notes.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, tax-exempt organizations, individual
retirement and other tax deferred accounts, regulated investment companies,
dealers in securities or currencies, persons holding Notes as a hedge against
currency risks or as a position in a "straddle" for tax purposes, or persons
whose functional currency is not the United States dollar. It also does not deal
with holders other than original purchasers (except where otherwise specifically
noted). Persons considering the purchase of the Notes should consult their own
tax advisors concerning the application of United States Federal income tax laws
to their particular situations as well as any consequences of the purchase,
ownership and disposition of the Notes arising under the laws of any other
taxing jurisdiction. BECAUSE THE EXACT PRICING AND OTHER TERMS OF THE NOTES WILL
VARY, NO ASSURANCE CAN BE GIVEN THAT THE CONSIDERATIONS DESCRIBED BELOW WILL
APPLY TO A PARTICULAR ISSUANCE OF NOTES. CERTAIN MATERIAL UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES RELATING TO THE OWNERSHIP OF PARTICULAR NOTES (WHERE
APPLICABLE) WILL BE SUMMARIZED IN THE PRICING SUPPLEMENT RELATING TO SUCH NOTES.
PERSONS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE APPLICATION OF UNITED STATES FEDERAL INCOME TAX LAWS TO THEIR
PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE NOTES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN
TAXING JURISDICTION.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision
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thereof, (iii) an estate or trust the income of which is subject to United
States Federal income taxation regardless of its source or (iv) any other person
whose income or gain in respect of a Note is effectively connected with the
conduct of a United States trade or business. As used herein, the term "non-U.S.
Holder" means a beneficial owner of a Note that is not a U.S. Holder.
U.S. HOLDERS
PAYMENTS OF INTEREST. Payments of interest on a Note generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received (in accordance with the U.S. Holder's regular method
of tax accounting).
ORIGINAL ISSUE DISCOUNT. The following summary is a general discussion of
the United States Federal income tax consequences to U.S. Holders of the
purchase, ownership and disposition of Notes issued with original issue discount
("Discount Notes"). The following summary is based upon final Treasury
regulations (the "OID Regulations") released by the Internal Revenue Service
("IRS") on January 27, 1994 under the original issue discount provisions of the
Internal Revenue Code of 1986, as amended (the "Code").
For United States Federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a DE MINIMIS amount (generally 1/4 of 1%
of the Note's stated redemption price at maturity multiplied by the number of
complete years to its maturity from its issue date or, in the case of an
installment obligation (as defined in the OID Regulations) multiplied by the
weighted average maturity of such obligation). The issue price of each Note in
an issue of Notes equals the first price at which a substantial amount of such
Notes has been sold to the public (ignoring sales to bond houses, brokers, or
similar persons or organizations acting in the capacity of underwriters,
placement agents, or wholesalers). The stated redemption price at maturity of a
Note is the sum of all payments provided by the Note other than "qualified
stated interest" payments. The term "qualified stated interest" generally means
stated interest that is unconditionally payable in cash or property (other than
debt instruments of the issuer) at least annually at a single fixed rate or (in
certain cases) at one or more floating rates that appropriately take into
account the length of the interval between stated interest payments. In
addition, under the OID Regulations, if a Note bears interest for one or more
accrual periods at a rate below the rate applicable for the remaining term of
such Note (E.G., Notes with teaser rates or interest holidays), and if the
greater of either the resulting foregone interest on such Note or any "true"
discount on such Note (I.E., the excess of the Note's stated principal amount
over its issue price) equals or exceeds a specified DE MINIMIS amount, then the
stated interest on the Note would be treated as original issue discount rather
than qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S. Holder
as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of a Discount Note must include original issue
discount in income as ordinary interest for United States Federal income tax
purposes as it accrues under a constant yield method in advance of receipt of
the cash payments attributable to such income, regardless of such U.S. Holder's
regular method of tax accounting. In general, the amount of original issue
discount included in income by the initial U.S. Holder of a Discount Note is the
sum of the daily portions of original issue discount with respect to such
Discount Note for each day during the taxable year (or portion of the taxable
year) on which such U.S. Holder held such Discount Note. The "daily portion" of
original issue discount on any Discount Note is determined by allocating to each
day in any accrual period a ratable portion of the original issue discount
allocable to that accrual period. An "accrual period" may be selected by each
holder, may be of any length and may vary in length over the term of the
Discount Note, provided that each accrual period is no longer than one year and
each scheduled payment of principal or interest occurs either on the final day
of an accrual period or on the first day of an accrual period. The amount of
original issue discount allocable to each accrual period is generally equal to
the difference between (i) the product of the Discount Note's adjusted issue
price at the beginning of such accrual period and its yield to maturity
(determined on the basis of compounding at the close of each accrual period and
appropriately adjusted to take into account the length
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of the particular accrual period) and (ii) the amount of any qualified stated
interest payments allocable to such accrual period. The "adjusted issue price"
of a Discount Note at the beginning of any accrual period is the sum of the
issue price of the Discount Note plus the amount of original issue discount
allocable to all prior accrual periods plus the amount of any qualified stated
interest on the Discount Note that has accrued prior to the beginning of the
accrual period but is not payable until a later date minus the amount of any
prior payments on the Discount Note that were not qualified stated interest
payments. Under these rules, U.S. Holders generally will have to include in
income increasingly greater amounts of original issue discount in successive
accrual periods than the amounts that would be includible on a straight-line
basis.
If a portion of the initial purchase price of a Note is attributable to
interest that accrued prior to the Note's issue date, the first stated interest
payment on the Note is to be made within one year of the Note's issue date and
such payment will equal or exceed the amount of pre-issuance accrued interest,
then the U.S. Holder may elect to decrease the issue price of the note by the
amount of pre-issuance accrued interest, in which case a portion of the first
stated interest payment will be treated as a return of the excluded pre-issuance
accrued interest and not as an amount payable on the Note.
A U.S. Holder who purchases a Discount Note for an amount that is greater
than its adjusted issue price as of the purchase date and less than or equal to
the sum of all amounts payable on the Discount Note after the purchase date
other than payments of qualified stated interest, will be considered to have
purchased the Discount Note at an "acquisition premium." Under the acquisition
premium rules, the amount of original issue discount which such U.S. Holder must
include in its gross income with respect to such Discount Note for any taxable
year (or portion thereof in which the U.S. Holder holds the Discount Note) will
be reduced (but not below zero) by the portion of the acquisition premium
properly allocable to the period.
Under the OID Regulations, Floating Rate Notes and Indexed Notes ("Variable
Notes") are subject to special rules whereby a Variable Note will qualify as a
"variable rate debt instrument" if (a) its issue price does not exceed the total
noncontingent principal payments due under the Variable Note by more than a
specified DE MINIMIS amount and (b) it provides for stated interest, paid or
compounded at least annually, at current values of (i) one or more qualified
floating rates, (ii) a single fixed rate and one or more qualified floating
rates, (iii) a single objective rate, or (iv) a single fixed rate and a single
objective rate that is a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than .65 but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than zero but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified Floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the Variable Note (E.G., two or more qualified floating rates with
values within 25 basis points of each other as determined on the Variable Note's
issue date) will be treated as a single qualified floating rate. Notwithstanding
the foregoing, a variable rate that would otherwise constitute a qualified
floating rate but which is subject to one or more restrictions such as a maximum
numerical limitation (I.E., a cap) or a minimum numerical limitation (I.E., a
floor) may, under certain circumstances, fail to be treated as a qualified
floating rate under the OID Regulations unless such cap or floor is fixed
throughout the term of the Note. An "objective rate" is a rate that is not
itself a qualified floating rate but which is determined using a single fixed
formula and which is based upon objective financial or economic information,
which generally includes a rate that is based on one or more qualified floating
rates or on the yield of actively traded personal property; however, an
objective rate does not include a rate based on information within the control
of the issuer (or a related party) or that is unique to the circumstances of the
issuer (or a related party), such as dividends, profits or the value of the
issuer's stock. The OID Regulations also provide that other variable interest
rates may be treated as objective rates if so designated
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by the IRS in the future. Despite the foregoing, a variable rate of interest on
a Variable Note will not constitute an objective rate if it is reasonably
expected that the average value of such rate during the first half of the
Variable Note's term will be either significantly less than or significantly
greater than the average value of the rate during the final half of the Variable
Note's term. A "qualified inverse floating rate" is any objective rate where
such rate is equal to a fixed rate minus a qualified floating rate, as long as
variations in the rate can reasonably be expected to inversely reflect
contemporaneous variations in the cost of newly borrowed funds. The OID
Regulations also provide that if a Variable Note provides for stated interest at
a fixed rate for an initial period of less than one year followed by a variable
rate that is either a qualified floating rate or an objective rate and if the
variable rate on the Variable Note's issue date is intended to approximate the
fixed rate (E.G., the value of the variable rate on the issue date does not
differ from the value of the fixed rate by more than 25 basis points), then the
fixed rate and the variable rate together will constitute either a single
qualified floating rate or objective rate, as the case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations, then
any stated interest on such Note which is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually will
constitute qualified stated interest and will be taxed accordingly. Thus, a
Variable Note that provides for stated interest at either a single qualified
floating rate or a single objective rate throughout the term thereof and that
qualifies as a "variable rate debt instrument" under the OID Regulations will
generally not be treated as having been issued with original issue discount
unless the Variable Note is issued at a "true" discount (I.E., at a price below
the Note's stated principal amount) in excess of a specified DE MINIMIS amount.
Original issue discount on such a Variable Note arising from "true" discount is
allocated to an accrual period using the constant yield method described above
by assuming that the variable rate is a fixed rate equal to (i) in the case of a
qualified floating rate or qualified inverse floating rate, the value as of the
issue date, of the qualified floating rate or qualified inverse floating rate,
or (ii) in the case of an objective rate (other than a qualified inverse
floating rate), a fixed rate that reflects the yield that is reasonably expected
for the Variable Note.
In general, any other Variable Note that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Variable
Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed rate
that reflects the yield that is reasonably expected for the Variable Note. In
the case of a Variable Note that qualifies as a "variable rate debt instrument"
and provides for stated interest at a fixed rate in addition to either one or
more qualified floating rates or a qualified inverse floating rate, the fixed
rate is initially converted into a qualified floating rate (or a qualified
inverse floating rate, if the Variable Note provides for a qualified inverse
floating rate). Under such circumstances, the qualified floating rate or
qualified inverse floating rate that replaces the fixed rate must be such that
the fair market value of the Variable Note as of the Variable Note's issue date
is approximately the same as the fair market value of an otherwise identical
debt instrument that provides for either the qualified floating rate or
qualified inverse floating rate rather than the fixed rate. Subsequent to
converting the fixed rate into either a qualified floating rate or a qualified
inverse floating rate, the Variable Note is then converted into an "equivalent"
fixed rate debt instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S. Holder
of the Variable Note will account for such original issue discount and qualified
stated interest as if the U.S. Holder held the "equivalent" fixed rate debt
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instrument. Each accrual period appropriate adjustments will be made to the
amount of qualified stated interest or original issue discount assumed to have
been accrued or paid with respect to the "equivalent" fixed rate debt instrument
in the event that such amounts differ from the actual amount of interest accrued
or paid on the Variable Note during the accrual period.
If a Variable Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Variable Note would be treated as a
contingent payment debt obligation. U.S. Holders should be aware that on June
11, 1996 the Treasury Department issued final regulations (the "CPDI
Regulations") concerning the proper United States Federal income tax treatment
of contingent payment debt instruments. In general, the CPDI Regulations cause
the timing and character of income, gain or loss reported on a contingent
payment debt instrument to substantially differ from the timing and character of
income, gain or loss reported on a contingent payment debt instrument under
general principles of prior United States Federal income tax law. Specifically,
the CPDI Regulations generally require a U.S. Holder of such an instrument to
include contingent and noncontingent interest payments in income as such
interest accrues based upon a projected payment schedule. Moreover, in general,
under the CPDI Regulations, any gain recognized by a U.S. Holder on the sale,
exchange, or retirement of a contingent payment debt instrument will be treated
as ordinary income and all or a portion of any loss realized could be treated as
ordinary loss as opposed to capital loss (depending upon the circumstances). The
proper United States Federal income tax treatment of Variable Notes that are
treated as contingent payment debt obligations will be more fully described in
the applicable Pricing Supplement. Furthermore, any other special United States
Federal income tax considerations, not otherwise discussed herein, which are
applicable to any particular issue of Notes will be discussed in the applicable
Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option of the Operating
Partnership prior to their stated maturity (a "call option") and/or (ii) may be
repayable at the option of the holder prior to their stated maturity (a "put
option"). Notes containing such features may be subject to rules that differ
from the general rules discussed above. Investors intending to purchase Notes
with such features should consult their own tax advisors, since the original
issue discount consequences will depend, in part, on the particular terms and
features of the purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, DE
MINIMIS original issue discount, market discount, DE MINIMIS market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions. This election applies only to the Note for which it
is made and cannot be revoked without the consent of the IRS. A U.S. Holder
considering this election should consult its own tax advisor.
The OID Regulations contain certain special rules that generally allow any
reasonable method to be used in determining the amount of original issue
discount allocable to a short initial accrual period (if all other accrual
periods are of equal length) and require that the amount of original issue
discount allocable to the final accrual period equal the excess of the amount
payable at the maturity of the Discount Note (other than any payment of
qualified stated interest) over the Discount Note's adjusted issue price as of
the beginning of such final accrual period. In addition, if an interval between
payments of qualified stated interest on a Discount Note contains more than one
accrual period, then the amount of qualified stated interest payable at the end
of such interval is allocated PRO RATA (on the basis of their relative lengths)
between the accrual periods contained in the interval.
SHORT-TERM NOTES. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount because none of the interest will be treated as qualified stated
interest. In general, an individual or other cash method U.S. Holder is not
required to accrue such original issue discount unless the U.S. Holder elects to
do so. If such an election is not made, any gain recognized by the U.S. Holder
on the sale, exchange or maturity of the Short-Term Note will be ordinary
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income to the extent of the original issue discount accrued on a straight-line
basis, or upon election under the constant yield method (based on daily
compounding), through the date of sale or maturity, and a portion of the
deductions otherwise allowable to the U.S. Holder for interest on borrowings
allocable to the Short-Term Note will be deferred until a corresponding amount
of income is realized. U.S. Holders who report income for United States Federal
income tax purposes under the accrual method, and certain other holders
including banks and dealers in securities, are required to accrue original issue
discount on a Short-Term Note on a straight-line basis unless an election is
made to accrue the original issue discount under a constant yield method (based
on daily compounding). Purchasers of Short-Term Notes are urged to consult their
tax advisors before making any election with respect to such Notes.
MARKET DISCOUNT. If a U.S. Holder purchases a Note at original issue, other
than a Discount Note, for an amount that is less than its issue price (or, in
the case of a subsequent purchaser, its stated redemption price at maturity) or,
in the case of a Discount Note, for an amount that is less than its adjusted
issue price as of the purchase date, such U.S. Holder will be treated as having
purchased such Note at a "market discount," unless such market discount is less
than a specified DE MINIMIS amount.
Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment (or, in the case of a Discount Note, any payment that
does not constitute qualified stated interest) on, or any gain realized on the
sale, exchange, retirement or other disposition of, a Note as ordinary income to
the extent of the lesser of (i) the amount of such payment or realized gain or
(ii) the market discount which has not previously been included in income and is
treated as having accrued on such Note at the time of such payment or
disposition. Market discount will be considered to accrue ratably during the
period from the date of acquisition to the maturity date of the Note, unless the
U.S. Holder elects to accrue market discount on the basis of semiannual
compounding. Once made, such an election is irrevocable.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
certain earlier dispositions, because a current deduction is only allowed to the
extent the interest expense exceeds the portion of market discount allocable to
the days during the taxable year in which the bond was held by the taxpayer. A
U.S. Holder may elect to include market discount in income currently as it
accrues (on either a ratable or semiannual compounding basis), in which case the
rules described above regarding the treatment as ordinary income of gain upon
the disposition of the Note and upon the receipt of certain cash payments and
regarding the deferral of interest deductions will not apply. Generally, such
currently included market discount is treated as ordinary interest for United
States Federal income tax purposes. Such an election will apply to all debt
instruments with market discount acquired by the U.S. Holder on or after the
first day of the taxable year to which such election applies and may be revoked
only with the consent of the IRS.
PREMIUM. If a U.S. Holder purchases a Note for an amount that is greater
than the sum of all amounts payable on the Note after the purchase date other
than payments of qualified stated interest, such U.S. Holder will be considered
to have purchased the Note with "amortizable bond premium" equal in amount to
such excess. A U.S. Holder may elect to amortize such premium using a constant
yield method over the remaining term of the Note and may offset interest
otherwise required to be included in respect of the Note during any taxable year
by the amortized amount of such excess for the taxable year. However, if the
Note may be optionally redeemed after the U.S. Holder acquires it at a price in
excess of its stated redemption price at maturity, special rules would apply
which could result in a deferral of the amortization of some bond premium until
later in the term of the Note. Any election to amortize bond premium applies to
all taxable debt obligations then owned and thereafter acquired by the U.S.
Holder and may be revoked only with the consent of the IRS.
DISPOSITION OF A NOTE. Except as discussed above, upon the sale, exchange
or retirement of a Note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement (other than amounts representing accrued and unpaid interest) and
such
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U.S. Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis
in a Note generally will equal such U.S. Holder's initial investment in the Note
increased by any original issue discount (or acquisition discount in the case of
a Short-Term Note) included in income (and accrued market discount, if any, if
the U.S. Holder has included such market discount in income) and decreased by
the amount of any payments, other than qualified stated interest payments,
received and amortizable bond premium taken with respect to such Note. Such gain
or loss generally will be long-term capital gain or loss if the Note were held
for more than one year.
NOTES DENOMINATED, OR IN RESPECT OF WHICH INTEREST IS
PAYABLE, IN A FOREIGN CURRENCY
The following discussion applies to U.S. Holders of Notes that are
denominated in a Foreign Currency ("Foreign Currency Notes"). As used herein,
"Foreign Currency" means a currency or currency unit other than U.S. dollars.
PAYMENTS OF INTEREST IN A FOREIGN CURRENCY.
CASH METHOD. A. U.S. Holder who uses the cash method of accounting for
United States Federal income tax purposes and who receives a payment of interest
on a Foreign Currency Note (other than original issue discount or market
discount) will be required to include in income the U.S. dollar value of the
Foreign Currency payment (determined on the date such payment is received)
regardless of whether the payment is in fact converted to U.S. dollars at that
time, and such U.S. dollar value will be the U.S. Holder's tax basis in such
Foreign Currency. No exchange gain or loss is recognized with respect to the
receipt of such payment.
ACCRUAL METHOD. A U.S. Holder who uses the accrual method of accounting for
United States Federal income tax purposes, or who otherwise is required to
accrue interest prior to receipt, will be required to include in income the U.S.
dollar value of the amount of interest income (including original issue discount
or market discount and reduced by amortizable bond premium to the extent
applicable) that has accrued and is otherwise required to be taken into account
with respect to a Foreign Currency Note during an accrual period. The U.S.
dollar value of such accrued income will be determined by translating such
income at the average rate of exchange for the accrual period or, with respect
to an accrual period that spans two taxable years, at the average rate for the
partial period within the taxable year. A U.S. Holder may elect, however, to
translate such accrued interest income using the rate of exchange on the last
day of the accrual period or, with respect to an accrual period that spans two
taxable years, using the rate of exchange on the last day of the taxable year.
If the last day of an accrual period is within five business days of the date of
receipt of the accrued interest, a U.S. Holder may translate such interest using
the rate of exchange on the date of receipt. The above election will apply to
other debt obligations held by the U.S. Holder and may not be changed without
the consent of the IRS. A U.S. Holder should consult a tax advisor before making
the above election. A U.S. Holder will recognize exchange gain or loss (which
will be treated as ordinary income or loss) with respect to accrued interest
income on the date such income is received. The amount of ordinary income or
loss recognized will equal the difference, if any, between the U.S. dollar value
of the Foreign Currency payment received (determined on the date such payment is
received) in respect of such accrual period and the U.S. dollar value of
interest income that has accrued during such accrual period (as determined
above).
PURCHASE, SALE AND RETIREMENT OF NOTES. A U.S. Holder who purchases a
Foreign Currency Note with previously owned Foreign Currency will recognize
ordinary income or loss in an amount equal to the difference, if any, between
such U.S. Holder's tax basis in the Foreign Currency and the U.S. dollar fair
market value of the Foreign Currency used to purchase the Foreign Currency Note,
determined on the date of purchase.
Except as discussed above with respect to Short-Term Notes, upon the sale,
exchange or retirement of a Foreign Currency Note, a U.S. Holder will recognize
taxable gain or loss equal to the difference between the amount realized on the
sale, exchange or retirement and such U.S. Holder's adjusted tax basis in the
Foreign Currency Note. Such gain or loss generally will be capital gain or loss
(except to the extent of any accrued
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market discount not previously included in the U.S. Holder's income) and will be
long-term capital gain or loss if at the time of sale, exchange or retirement
the Note has been held by such U.S. Holder for more than one year. To the extent
the amount realized represents accrued but unpaid interest, however, such
amounts must be taken into account as interest income, with exchange gain or
loss computed as described in "Payments of Interest in a Foreign Currency"
above. If a U.S. Holder receives Foreign Currency on such a sale, exchange or
retirement the amount realized will be based on the U.S. dollar value of the
Foreign Currency on the date the payment is received or the Foreign Currency
Note is disposed of (or deemed disposed of in the case of a taxable exchange of
the Note for a new Note). In the case of a Foreign Currency Note that is
denominated in Foreign Currency and is traded on an established securities
market, a cash basis U.S. Holder (or, upon election, an accrual basis U.S.
Holder) will determine the U.S. dollar value of the amount realized by
translating the Foreign Currency payment at the spot rate of exchange on the
settlement date of the sale. A U.S. Holder's adjusted tax basis in a Foreign
Currency Note will equal the cost of the Note to such holder, increased by the
amounts of any market discount or original issue discount previously included in
income by the holder with respect to such Note and reduced by any amortized
acquisition or other premium and any principal payments received by the holder.
A U.S. Holder's tax basis in a Foreign Currency Note, and the amount of any
subsequent adjustments to such holder's tax basis, will be the U.S. dollar value
of the Foreign Currency amount paid for such Note, or of the Foreign Currency
amount of the adjustment, determined on the date of such purchase or adjustment.
Gain or loss realized upon the sale, exchange or retirement of a Foreign
Currency Note that is attributable to fluctuations in currency exchange rates
will be ordinary income or loss which will not be treated as interest income or
expense. Gain or loss attributable to fluctuations in exchange rates will equal
the difference between the U.S. dollar value of the Foreign Currency principal
amount of the Note, determined on the date such payment is received or the Note
is disposed of, and the U.S. dollar value of the Foreign Currency principal
amount of the Note, determined on the date the U.S. Holder acquired the Note.
Such Foreign Currency gain or loss will be recognized only to the extent of the
total gain or loss realized by the U.S. Holder on the sale, exchange or
retirement of the Note.
ORIGINAL ISSUE DISCOUNT. In the case of a Discount Note or Short-Term Note,
(i) original issue discount is determined in units of the Foreign Currency, (ii)
accrued original issue discount is translated into U.S. dollars as described in
"Payments of Interest in a Foreign Currency -- Accrual Method" above and (iii)
the amount of Foreign Currency gain or loss on the accrued original issue
discount is determined by comparing the amount of income received attributable
to the discount (either upon payment, maturity or an earlier disposition), as
translated into U.S. dollars at the rate of exchange on the date of such
receipt, with the amount of original issue discount accrued, as translated
above.
PREMIUM AND MARKET DISCOUNT. In the case of a Foreign Currency Note with
market discount, (i) market discount is determined in units of the Foreign
Currency, (ii) accrued market discount taken into account upon the receipt of
any partial principal payment or upon the sale, exchange, retirement or other
disposition of the Note (other than accrued market discount required to be taken
into account currently) is translated into U.S. dollars at the exchange rate on
such disposition date (and no part of such accrued market discount is treated as
exchange gain or loss) and (iii) accrued market discount currently includible in
income by a U.S. Holder for any accrual period is translated into U.S. dollars
on the basis of the average exchange rate in effect during such accrual period,
and the exchange gain or loss is determined upon the receipt of any partial
principal payment or upon the sale, exchange, retirement or other disposition of
the Note in the manner described in "Payments of Interest in a Foreign Currency
- -- Accrual Method" above with respect to computation of exchange gain or loss on
accrued interest.
With respect to a Foreign Currency Note issued with amortizable bond
premium, such premium is determined in the relevant Foreign Currency and reduces
interest income in units of the Foreign Currency. Although not entirely clear, a
U.S. Holder should recognize exchange gain or loss equal to the difference
between the U.S. dollar value of the bond premium amortized with respect to a
period, determined on the
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date the interest attributable to such period is received, and the U.S. dollar
value of the bond premium determined on the date of the acquisition of the Note.
A U.S. Holder that elects not to amortize bond premium must treat the bond
premium as a capital loss when the Foreign Currency Note matures.
EXCHANGE OF FOREIGN CURRENCIES. A U.S. Holder will have a tax basis in any
Foreign Currency received as interest or on the sale, exchange or retirement of
a Note equal to the U.S. dollar value of such Foreign Currency, determined at
the time the interest is received or at the time of the sale, exchange or
retirement. Any gain or loss realized by a U.S. Holder on a sale or other
disposition of Foreign Currency (including its exchange for U.S. dollars or its
use to purchase Notes) will be ordinary income or loss.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original issue
discount, if any) on a Note, unless such non-U.S. Holder is a direct or indirect
10% or greater shareholder (as defined in Section 871(h)(3) of the Code) of the
Operating Partnership, a controlled foreign corporation related to the Operating
Partnership or a bank receiving interest described in section 881(c)(3)(A) of
the Code. To qualify for the exemption from taxation, the last United States
payor in the chain of payment prior to payment to a non-U.S. Holder (the
"Withholding Agent") must have received in the year in which a payment of
interest or principal occurs, or in either of the two preceding calendar years,
a statement that (i) is signed by the beneficial owner of the Note under
penalties of perjury, (ii) certifies that such owner is not a U.S. Holder and
(iii) provides the name and address of the beneficial owner. The statement may
be made on an IRS Form W-8 or a substantially similar form, and the beneficial
owner must inform the Withholding Agent of any change in the information on the
statement within 30 days of such change. If a Note is held through a securities
clearing organization or certain other financial institutions, the organization
or institution may provide a signed statement to the Withholding Agent. However,
in such case, the signed statement must be accompanied by a copy of the IRS Form
W-8 or the substitute form provided by the beneficial owner to the organization
or institution. The Treasury Department is considering implementation of further
certification requirements aimed at determining whether the issuer of a debt
obligation is related to holders thereof.
Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Note, provided the gain is not effectively connected with the conduct of a trade
or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the
Operating Partnership or, at the time of such individual's death, payments in
respect of the Notes would have been effectively connected with the conduct by
such individual of a trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would establish
an exemption from backup withholding for those non-U.S. Holders who are not
exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met).
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<PAGE>
Such a sale must also be reported by the broker to the IRS, unless either (i)
the broker determines that the seller is an exempt recipient or (ii) the seller
certifies its non-U.S. status (and certain other conditions are met).
Certification of the registered owner's non-U.S. status would be made normally
on an IRS Form W-8 under penalties of perjury, although in certain cases it may
be possible to submit other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
SUPPLEMENTAL PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis for sale by the Operating
Partnership to or through Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, First Chicago Capital Markets, Inc., Goldman, Sachs & Co.,
J.P. Morgan Securities Inc. and UBS Securities LLC (the "Agents"). The Agents
may purchase Notes, as principal, from the Operating Partnership from time to
time for resale to investors and other purchasers at varying prices relating to
prevailing market prices at the time of resale as determined by the applicable
Agent, or, if so specified in the applicable Pricing Supplement, for resale at a
fixed offering price. If agreed to by the Operating Partnership and an Agent,
such Agent may also utilize its reasonable efforts on an agency basis to solicit
offers to purchase the Notes at 100% of the principal amount thereof, unless
otherwise specified in the applicable Pricing Supplement. The Operating
Partnership will pay a commission to an Agent, ranging from .125% to .750% of
the principal amount of each Note, depending upon its stated maturity, sold
through such Agent. Commissions with respect to Notes with stated maturities in
excess of 30 years that are sold through an Agent will be negotiated between the
Operating Partnership and such Agent at the time of such sale.
Unless otherwise specified in the applicable Pricing Supplement, any Note
sold to an Agent as principal will be purchased by such Agent at a price equal
to 100% of the principal amount thereof less a percentage of the principal
amount equal to the commission applicable to an agency sale of a Note of
identical maturity. Each Agent may sell Notes it has purchased from the
Operating Partnership as principal to other dealers for resale to investors and
other purchasers, and may allow any portion of the discount received in
connection with such purchase from the Operating Partnership to such dealers.
After the initial offering of Notes, the offering price (in the case of Notes to
be resold on a fixed price basis), the concession and the discount may be
changed.
The Operating Partnership has reserved the right to sell the Notes directly
to investors, and may solicit and accept offers to purchase Notes directly from
investors from time to time on its own behalf. No commission will be paid on
Notes sold directly by the Operating Partnership. In certain instances, the
Operating Partnership may offer Notes to or through additional agents named in
the applicable Pricing Supplement.
The Operating Partnership reserves the right to withdraw, cancel or modify
the offer made hereby without notice and may reject offers in whole or in part
(whether placed directly with the Operating Partnership or through the Agents).
Each Agent will have the right, in its discretion reasonably exercised, to
reject in whole or in part any offer to purchase Notes received by it on an
agency basis.
Unless otherwise specified in the applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in the Specified Currency in The City of New York on the date of
settlement. See "Description of Notes -- General."
Upon issuance, the Notes will not have an established trading market. The
Notes will not be listed on any securities exchange. The Agents may from time to
time purchase and sell Notes in the secondary market, but the Agents are not
obligated to do so, and there can be no assurance that there will be a secondary
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<PAGE>
market for the Notes or that there will be liquidity in the secondary market if
one develops. From time to time, the Agents may make a market in the Notes, but
the Agents are not obligated to do so and may discontinue any market-making
activity at any time.
Until the distribution of the Notes is completed, rules of the Securities
and Exchange Commission may limit the ability of the Agents to bid for and
purchase Notes. As an exception to these rules, the Agents are permitted to
engage in certain transactions that stabilize the price of the Notes. Such
transactions may consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the Notes.
If the Agents create a short position in the Notes in connection with the
offering, (i.e., if they sell more Notes than are set forth on the cover page of
this Prospectus Supplement), they may reduce that short position by purchasing
Notes in the open market.
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
the offering.
The Agents also may impose a penalty bid on certain Agents. This means that
if the Agents purchase Notes in the open market to reduce the Agents' short
position or to stabilize the price of the Notes, they may reclaim the amount of
the selling concession from the Agents who sold those Notes as part of the
offering.
Neither the Operating Partnership nor any of the Agents makes any
representation or prediction as to the direction or magnitude of any effect that
the tranactions described above may have on the price of the Notes. In addition,
neither the Operating Partnership nor any of the Agents makes any representation
that the Agents will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Operating
Partnership has agreed to indemnify the Agents against certain liabilities
(including liabilities under the Securities Act), or to contribute to payments
the Agents may be required to make in respect thereof. The Operating Partnership
has agreed to reimburse the Agents for certain other expenses.
In the ordinary course of their respective businesses, certain of the Agents
and their affiliates have engaged and may in the future engage in investment and
commercial banking transactions with the Operating Partnership and certain of
its affiliates. In particular, Merrill Lynch from time to time provides
investment banking and financial advisory services to the Company and the
Operating Partnership. Merrill Lynch also acted as representative of various
underwriters in connection with public offerings of the Company's Common Stock,
depositary shares for the Company's Preferred Stock and the Operating
Partnership's debt securities in 1993, 1994, 1995, 1996 and 1997. Merrill Lynch
and the Operating Partnership have entered into a Forward Treasury Lock
Agreement pursuant to which the Operating Partnership paid a fee to Merrill
Lynch. UBS Securities LLC and the Operating Partnership are parties to a secured
loan facility pursuant to which the Operating Partnership owes UBS Securities
LLC approximately $34 million at March 31, 1997. The First National Bank of
Chicago, an affiliate of First Chicago Capital Markets, Inc., is serving as
Trustee for the Notes and is also an agent bank for the Operating Partnership's
credit line.
Concurrently with the offering of Notes described herein, the Operating
Partnership or the Company may issue other Securities described in the
accompanying Prospectus.
LEGAL MATTERS
In addition to the legal opinions referred to under "Legal Opinions" in the
accompanying Prospectus, the description of Federal income tax matters contained
in this Prospectus Supplement entitled "Certain United States Federal Income Tax
Considerations" is based upon the opinion of Bose McKinney and Evans.
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<PAGE>
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NO DEALER, SALESMAN OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE OPERATING PARTNERSHIP OR THE
AGENTS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR
ANY SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS SUPPLEMENT OR IN THE PROSPECTUS OR IN THE AFFAIRS OF THE OPERATING
PARTNERSHIP SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
PROSPECTUS SUPPLEMENT
Ratios of Earnings to Fixed Charges............... S-2
Description of Notes.............................. S-2
Certain Investment Considerations................. S-21
Special Provisions and Risks Relating to Foreign
Currency Notes................................... S-22
Certain United States Federal Income Tax
Considerations................................... S-25
Notes Denominated, or in Respect of Which Interest
is Payable, in a Foreign Currency................ S-31
Supplemental Plan of Distribution................. S-34
Legal Matters..................................... S-35
PROSPECTUS
Available Information............................. 2
Incorporation of Certain Documents by Reference... 2
The Company and the Operating Partnership......... 3
Use of Proceeds................................... 3
Ratios of Earnings to Fixed Charges............... 3
Description of Debt Securities.................... 4
Description of Preferred Stock.................... 14
Description of Depositary Shares.................. 20
Description of Common Stock....................... 24
Plan of Distribution.............................. 25
Legal Opinions.................................... 26
Experts........................................... 26
</TABLE>
$100,000,000
[LOGO]
DUKE REALTY
LIMITED PARTNERSHIP
MEDIUM-TERM NOTES
DUE NINE
MONTHS OR MORE FROM
DATE OF ISSUE
-------------------
PROSPECTUS SUPPLEMENT
-------------------
MERRILL LYNCH & CO.
FIRST CHICAGO
CAPITAL MARKETS, INC.
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
UBS SECURITIES
MAY 13, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
