<PAGE>
PURSUANT TO RULE NO. 424(b)(5)
REGISTRATION NOS. 333-04301 and 333-14401
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 6, 1996)
$370,000,000
COLONIAL REALTY LIMITED PARTNERSHIP
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
--------------
Colonial Realty Limited Partnership (the "Company") may offer from time to
time up to $370,000,000 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
Company of other Debt 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 Company or
repayment at the option of the Holder thereof, in each case, in whole or in
part, prior to its Stated Maturity Date, or the Stated Maturity Date may be
extended, if specified in the applicable Pricing Supplement. In addition, each
Note will 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.
The Company may issue Notes that 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 June 15 and December 15 of each year and on
the Maturity Date. The Company may also issue Discount Notes, Indexed Notes
and Amortizing Notes.
The interest rate, or formula for the determination of the interest rate, if
any, applicable to each Note and the other variable terms thereof will be
established by the Company on the date of issue of such Note and will be
specified in the applicable Pricing Supplement. Interest rates or formulas and
other terms of Notes are subject to change by the Company, but no such change
will affect any Note previously issued or as to which an offer to purchase has
been accepted by the Company.
Each Note will be issued in book-entry form (a "Book-Entry Note") or in
fully registered 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 (or such other
depositary identified in the applicable Pricing Supplement) (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). Except in limited circumstances, Book-Entry Notes will
not be exchangeable for Certificated Notes.
SEE "RISK FACTORS" COMMENCING ON PAGE S-3 OF THIS PROSPECTUS SUPPLEMENT AND
PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DISCUSSION OF CERTAIN RISKS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES OFFERED
HEREBY.
--------------
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, THE
PROSPECTUS OR ANY SUPPLEMENT HERETO. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=========================================================================================================
PRICE TO AGENTS' DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(1)(2) COMPANY(1)(3)
- ----------------------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Per Note.................................. 100% .125%-.750% 99.250%-99.875%
- ----------------------------------------------------------------------------------------------------------
Total(4).................................. $370,000,000 $462,500-$2,775,000 $367,225,000-$369,537,500
==========================================================================================================
</TABLE>
(1) Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Lehman Brothers Inc., J.P. Morgan Securities Inc. and UBS Securities LLC
(the "Agents"), individually or in a syndicate, may purchase Notes, as
principal, from the Company 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
Company 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 Company will pay a commission to an Agent, ranging
from .125% to .750% of the principal amount of a Note, depending upon its
stated maturity, sold through an Agent. Commissions with respect to Notes
with stated maturities in excess of 30 years that are sold through such
Agent will be negotiated between the Company and such Agent at the time of
such sale. See "Plan of Distribution."
(2) The Company 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 Company estimated at $510,000.
(4) Or the equivalent thereof in one or more foreign or composite currencies.
--------------
The Notes are being offered on a continuing basis by the Company to or
through the Agents. Unless otherwise specified in the applicable Pricing
Supplement, the Notes will not be listed on any securities exchange. There is
no assurance that the Notes offered hereby will be sold or, if sold, that
there will be a secondary market for the Notes or liquidity in the secondary
market if one develops. The Company reserves the right to cancel or modify the
offer made hereby without notice. The Company 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.
LEHMAN BROTHERS
J.P. MORGAN & CO.
UBS SECURITIES
--------------
The date of this Prospectus Supplement is December 6, 1996.
<PAGE>
IN CONNECTION WITH AN OFFERING OF NOTES PURCHASED BY ONE OR MORE AGENTS AS
PRINCIPAL ON A FIXED OFFERING PRICE BASIS, SUCH AGENT(S) MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF NOTES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE>
RISK FACTORS
This Prospectus Supplement does not describe all of the risks of an
investment in Notes, whether resulting from such Notes being denominated or
payable in or determined by reference to a currency or composite currency
other than United States dollars or to one or more interest rate, currency or
other indices or formulas, or otherwise. The Company and the Agents 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 investors should consult their own financial and legal advisors as
to the risks entailed by an investment in such Notes and the suitability of
investing in such Notes in light of their particular circumstances. The Notes
are not an appropriate investment for investors who are unsophisticated with
respect to foreign currency transactions or transactions involving the
applicable interest rate or currency index or other indices or formulas.
Prospective investors should carefully consider, among other factors,
including those described in the accompanying Prospectus under the heading
"Risk Factors," the matters described below.
STRUCTURE RISKS
An investment in Notes indexed, as to principal, premium, if any, and/or
interest, if any, to one or more interest rate, currency (including exchange
rates and swap indices between currencies or composite currencies) or other
indices or formulas, 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 indices or formulas may be subject to significant
changes, that no interest will be payable in respect of such Notes or will be
payable at a rate lower than one applicable to a conventional fixed rate or
floating rate debt security issued by the Company at the same time, that
repayment of the principal and/or premium, if any, in respect of such Notes
may occur at times other than that expected by the Holders (as defined in the
accompanying Prospectus), and that the Holders could lose all or a substantial
portion of principal and/or premium, if any, payable with respect to such
Notes on the Maturity Date (as defined under "Description of Notes--General").
Such risks depend on a number of interrelated factors, including economic,
financial and political events, over which the Company has no control.
Additionally, if the formula used to determine the amount of principal,
premium, if any, and/or interest, if any, payable with respect to such Notes
contains a multiplier or leverage factor, the effect of any change in the
applicable index or indices or formula or formulas will be magnified. In
recent years, values of certain indices and formulas have been highly volatile
and such volatility may be expected to continue in the future. Fluctuations in
the value of any particular index or formula that have occurred in the past
are not necessarily indicative, however, of fluctuations that may occur in the
future.
Any optional redemption feature of Notes might affect the market value of
such Notes. Since the Company may be expected to redeem such Notes when
prevailing interest rates are relatively low, Holders generally will not be
able to reinvest the redemption proceeds in a comparable security at an
effective interest rate as high as the current interest rate on such Notes.
The Notes will not have an established trading market when issued, and there
can be no assurance of a secondary market for the Notes or the liquidity of
the secondary market if one develops. See "Plan of Distribution."
The secondary market, if any, for Notes will be affected by a number of
factors independent of the creditworthiness of the Company and the value of
the applicable index or indices or formula or formulas, including the
complexity and volatility of each such index or formula, the method of
calculating the principal, premium, if any, and/or interest, if any, 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 formula 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. Holders may not be able to sell such Notes
readily or at prices that will enable them to realize their anticipated yield.
No investor should purchase Notes
S-3
<PAGE>
unless such investor understands and is able to bear the risk that such Notes
may not be readily saleable, that the value of such Notes will fluctuate over
time and that such fluctuations may be significant.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes (as defined under "Description of
Notes--General") 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 Specified Currency (as defined under "Description of Notes--General")
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 Company has no control, such as economic,
financial and political events and the supply and demand for the Specified
Currency. In addition, if the formula used to determine the amount of
principal, premium, if any, and/or interest, if any, 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 certain foreign or composite currencies have been highly volatile and such
volatility may be expected to continue 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 Specified Currency applicable to a Foreign Currency Note
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, if any,
on, a Foreign Currency Note is due, which could affect exchange rates as well
as the availability of the Specified Currency on such date. Even if there are
no exchange controls, it is possible that the Specified Currency would not be
available on the applicable payment date due to other circumstances beyond the
control of the Company. In such cases, the Company will be entitled to satisfy
its obligations in respect of such Foreign Currency Note in United States
dollars. See "Special Provisions Relating to Foreign Currency Notes--
Availability of Specified Currency."
CREDIT RATINGS
The credit ratings assigned to the Company's medium-term note program may
not reflect the potential impact of all risks related to structure and other
factors on the value of the Notes. 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 investing in such Notes in
light of their particular circumstances.
DESCRIPTION OF NOTES
The Notes will be issued as a series of Debt Securities under an Indenture,
dated as of July 22, 1996, as amended or modified from time to time (the
"Indenture"), between the Company and Bankers Trust Company, 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 the Notes supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of the Debt
Securities set forth in the Prospectus, to which reference is hereby made. The
following description of Notes will apply to each Note offered hereby
S-4
<PAGE>
unless otherwise specified in the applicable Pricing Supplement. The variable
terms of the Notes sold pursuant to any Pricing Supplement will be described
therein.
GENERAL
All Debt Securities, including the Notes, issued and to be issued under the
Indenture will be unsecured general obligations of the Company and will rank
pari passu with all other unsecured and unsubordinated indebtedness of the
Company from time to time outstanding. No partner of the Company, including
the Company's general partner, will have any liability with respect to the
Notes or the Indenture. 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
Company for each series. The Company 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 $370,000,000
aggregate initial offering price of Notes offered hereby.
The Notes will be offered on a continuing basis by the Company to or through
the Agents and are currently limited to up to $370,000,000 aggregate initial
offering price, or the equivalent thereof in one or more foreign or composite
currencies. Each Note will mature on any day nine months or more from its date
of issue (the "Stated Maturity Date"), as specified in the applicable Pricing
Supplement, unless the principal thereof (or any installment of principal
thereof) becomes due and payable prior to the Stated Maturity Date, whether by
the declaration of acceleration of maturity, notice of redemption at the
option of the Company, notice of the Holder's option to elect repayment or
otherwise, or if the maturity of the Note is extended in accordance with its
terms (the Stated Maturity Date or such prior or later date, as the case may
be, is herein referred to as the "Maturity Date" with respect to the principal
of such Note repayable on such date). A Pricing Supplement will specify
whether the Stated Maturity Date may be extended by the Company and, if so,
the Final Maturity Date (as hereinafter defined). 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. The Company may also issue Discount Notes, Indexed Notes
and Amortizing Notes (as such terms are hereinafter defined).
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be denominated in, and payments of principal, premium, if any, and/or
interest, if any, in respect thereof will be made in, United States dollars.
The Notes also may be denominated in, and payments of principal, premium, if
any, and/or interest, if any, in respect thereof may be made in, one or more
foreign or composite currencies ("Foreign Currency Notes"). See "Special
Provisions Relating to Foreign Currency Notes--Payment of Principal, Premium,
if any, and Interest, if any." The currency or composite currency in which a
particular Note is denominated (or, if such currency or composite currency is
no longer legal tender for the payment of public and private debts, such other
currency or composite currency of the relevant country which is then legal
tender for the payment of such debts) is herein referred to as the "Specified
Currency" with respect to such Note. References herein to "United States
dollars," "U.S. dollars" or "$" are to the lawful currency of the United
States of America (the "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 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. The Agent
from or through which a Foreign Currency Note is purchased will be prepared to
arrange for the conversion of United States dollars into the Specified
Currency in order to enable the purchaser to pay for such Foreign Currency
Note, provided that a request is made to such Agent on or prior to the fifth
Business Day (as hereinafter defined) preceding the date of delivery of such
Foreign Currency Note, or by such other day as determined by such Agent. Each
such conversion will be made by such 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 Relating to Foreign Currency Notes."
S-5
<PAGE>
Interest rates offered by the Company with respect to the Notes may differ
depending upon, among other factors, the aggregate principal amount of Notes
purchased in any single transaction. Notes with different variable terms other
than interest rates may also be offered concurrently to different investors.
Interest rates or formulas and other terms of Notes are subject to change by
the Company from time to time, but no such change will affect any Note
previously issued or as to which an offer to purchase has been accepted by the
Company.
Each Note will be issued as a Book-Entry Note represented by one or more
fully registered Global Securities or as a fully registered Certificated Note.
The minimum 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 minimum denominations of each Foreign
Currency Note will be specified in the applicable Pricing Supplement.
Payments of principal of, and premium, if any, and interest, if any, on,
Book-Entry Notes will be made by the Company 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 Maturity Date will be
made in immediately available funds upon presentation and surrender thereof
(and, in the case of any repayment on an Optional Repayment Date specified in
the applicable Pricing Supplement, upon submission of a duly completed
election form in accordance with the provisions described below) at the office
or agency maintained by the Company for such purpose in the Borough of
Manhattan, The City of New York, currently the corporate trust office of the
Trustee located at Four Albany Street, New York, New York 10006. Payment of
interest, if any, due on the Maturity Date of a Certificated Note will be made
to the person to whom payment of the principal thereof and premium, if any,
thereon shall be made. Payment of interest, if any, due on a Certificated Note
on any Interest Payment Date (as hereinafter defined) other than the Maturity
Date will be made by check mailed to the address of the Holder entitled
thereto as such address shall appear in the Security Register of the Company
at the close of business on the Record Date (as hereinafter defined).
Notwithstanding the foregoing, a Holder of $10,000,000 (or, if the Specified
Currency is other than United States dollars, the equivalent thereof in such
Specified Currency) or more in aggregate principal amount of Certificated
Notes (whether having identical or different terms and provisions) will be
entitled to receive interest payments, if any, 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 Relating to Foreign Currency Notes--
Payment of Principal, Premium, if any, and Interest, if any."
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, 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 the Specified Currency (unless the Specified Currency is
European Currency Units ("ECU"), in which case such day is also 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 is not a day designated as an ECU
non-settlement day by the ECU Banking Association) or, if ECU non-settlement
days do not appear on that page (and are not so designated), a day that 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 a day on which
dealings in the Designated LIBOR Currency (as hereinafter defined) are
transacted in the London interbank market.
"Principal Financial Center" means (i) the capital city of the country
issuing the Specified Currency (except as described in the immediately
preceding paragraph with respect to ECU) or (ii) the capital city of the
country to which the Designated LIBOR Currency, if applicable, relates (or, in
the case of ECU, Luxembourg), except, in each case, that with respect to
United States dollars, Australian dollars, Canadian dollars, Deutsche marks,
S-6
<PAGE>
Dutch guilders, Italian lire and Swiss francs, the "Principal Financial
Center" shall be The City of New York, Sydney, Toronto, Frankfurt, Amsterdam,
Milan (solely in the case of clause (i) above) and Zurich, 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
Company for such purpose in the Borough of Manhattan, The City of New York,
currently the corporate trust office of the Trustee located at Four Albany
Street, New York, New York 10006. No service charge will be made by the
Company or the Trustee for any such registration of transfer or exchange of
Notes, but the Company 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).
The defeasance and covenant defeasance provisions contained in the Indenture
shall apply to the Notes.
REDEMPTION AT THE OPTION OF THE COMPANY
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 Company prior to the Stated Maturity Date only if 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
Company 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 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 thereon to the date of redemption, on
written notice given to the Holders thereof not more than 60 nor less than 30
calendar days prior to the date of redemption 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. For a discussion of the redemption of Discount Notes, see "--
Discount Notes."
EXTENSION OF MATURITY
The Pricing Supplement relating to each Note will indicate whether the
Company has the option to extend the Stated Maturity Date of such Note for one
or more periods of from one to five whole years (each an "Extension Period")
up to but not beyond the date (the "Final Maturity Date") set forth in such
Pricing Supplement.
The Company may exercise such option with respect to a Note by notifying the
Trustee of such exercise not more than 60 nor less than 45 calendar days prior
to the Stated Maturity Date of such Note or, if the maturity of such Note has
been previously extended, the date of maturity in effect prior to the exercise
of such option (the "Original Maturity Date"). If the Company so notifies the
Trustee of such exercise, the Trustee will send not later than 40 calendar
days prior to the Original Maturity Date, by telegram, telex, facsimile
transmission, hand delivery or letter (first class, postage prepaid), to the
Holder of such Note a notice (the "Extension Notice") relating to such
Extension Period, indicating (i) that the Company has elected to extend the
Original Maturity Date of such Note, (ii) the new date of maturity of such
Note specified in the Extension Notice, (iii) in the case of a Fixed Rate
Note, the interest rate applicable to such Extension Period or, in the case of
a Floating Rate Note, the Spread and/or Spread Multiplier applicable to the
Extension Period, and (iv) the provisions, if any, for redemption at the
option of the Company during the Extension Period, including the date or dates
on which or the period or periods during which and the price or prices at
which such redemption may occur during the Extension Period. Upon the sending
by the Trustee of an Extension Notice to the Holder of a Note, the Original
Maturity Date of such Note will be extended automatically, and, except as
modified by the Extension Notice and
S-7
<PAGE>
as described in the next two paragraphs, such Note will continue to bear the
same terms in effect prior to the sending of such Extension Notice.
Notwithstanding the foregoing, not later than 20 calendar days prior to the
Original Maturity Date for a Note, the Company may, at its option, revoke the
interest rate, in the case of a Fixed Rate Note, or the Spread and/or Spread
Multiplier, in the case of a Floating Rate Note, specified in the Extension
Notice and establish a higher interest rate, in the case of a Fixed Rate Note,
or a Spread and/or Spread Multiplier resulting in a higher interest rate, in
the case of a Floating Rate Note, for the Extension Period by causing the
Trustee to send by telegram, telex, facsimile transmission, hand delivery or
letter (first class, postage prepaid) notice of such higher interest rate or
Spread and/or Spread Multiplier resulting in a higher interest rate, as the
case may be, to the Holder of such Note. Such notice will be irrevocable. All
Notes with respect to which the Original Maturity Date is extended will bear
such higher interest rate, in the case of a Fixed Rate Note, or Spread and/or
Spread Multiplier resulting in a higher interest rate, in the case of a
Floating Rate Note, for the Extension Period, whether or not tendered for
repayment as provided in the next paragraph.
If the Company extends the Original Maturity Date of a Note, the Holder of
such Note will have the option to elect repayment of such Note, in whole but
not in part, by the Company on the Original Maturity Date at a price equal to
the principal amount thereof plus unpaid interest accrued to the date of
repayment. In order for a Note to be so repaid on the Original Maturity Date,
the Holder of such Note must follow the procedures set forth below under "--
Repayment at the Option of the Holder" for optional repayment, except that the
period for delivery of such Note or notification to the Trustee will be not
more than 35 nor less than 25 calendar days prior to the Original Maturity
Date. A Holder who has tendered a Note for repayment following receipt of an
Extension Notice may revoke such tender for repayment by written notice to the
Trustee received prior to 5:00 P.M., New York City time, on the tenth calendar
day prior to the Original Maturity Date.
REPAYMENT AT THE OPTION OF THE HOLDER
The Notes will be repayable by the Company at the option of the Holders
thereof prior to the Stated Maturity Date only if 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 thereon to the date of repayment, unless
such Note is a Discount Note, in which case the Pricing Supplement will
specify the amount payable upon such repayment. For any Note to be repaid, the
Trustee must receive at its office maintained for such purpose in the Borough
of Manhattan, The City of New York (currently the corporate trust office of
the Trustee located at Four Albany Street, New York, New York 10006), not more
than 60 nor less than 30 calendar days prior to the date of repayment, (i)
such Note, together with the form thereon entitled "Option to Elect Repayment"
duly completed or (ii) a telegram, telex, facsimile transmission, or a letter
from a member of a national securities exchange or the National Association of
Securities Dealers, Inc. or a commercial bank or trust company in the United
States setting forth the name of the holder of such Note, the principal amount
of such Note, the principal amount of such Note to be repaid, the certificate
number or a description of the tenor and terms of such Note, a statement that
the option to elect repayment is being exercised thereby, and a guarantee that
such Note, together with the duly completed form entitled "Option to Elect
Repayment" on the reverse of such Note, in either case, will be received by
the Trustee not later than the fifth Business Day after the date of such
telegram, telex, facsimile transmission or letter, provided that such
telegram, telex, facsimile transmission, or letter shall only be effective if
such Note and form duly completed are received by the Trustee by such fifth
Business Day. Except in the case of Extendible Notes, and unless otherwise
specified in the applicable Pricing Supplement, 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
S-8
<PAGE>
or any portion of the Book-Entry Notes represented by such Global Securities
repaid must instruct 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 instruct 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 Company will comply with the requirements of Section
14(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the rules promulgated thereunder, and any other securities laws or
regulations in connection with any such repayment.
The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may, at the
discretion of the Company, be held, resold or surrendered to the Trustee for
cancellation.
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, except as described above under "--Extension of
Maturity," 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
be made in an amount equal to the 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) 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
Interest on Fixed Rate Notes will be payable on June 15 and December 15 of
each year or on such other date(s) specified in the applicable Pricing
Supplement (each, an "Interest Payment Date" with respect to Fixed Rate Notes)
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.
S-9
<PAGE>
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 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
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. 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,
Initial Interest Reset Date, Interest Reset Dates, Interest Payment 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 also specify the Designated LIBOR
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" or an "Inverse Floating Rate Note," or as having an
addendum attached or having "Other/Additional Provisions" apply, in each
case relating to a different interest rate formula, 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 applicable Spread Multiplier, if any. Commencing on the
Initial 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 Initial 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 Initial 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 Initial 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 Initial Interest Reset Date, the rate at which
S-10
<PAGE>
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 Initial
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
(or, if none, the Initial Interest Rate).
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 by the Calculation
Agent as of the applicable Interest Determination Date and calculated on or
prior to the Calculation Date (as hereinafter defined), except with respect to
LIBOR and the Eleventh District Cost of Funds Rate, which will be calculated
on such Interest Determination Date. 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 Designated LIBOR 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
S-11
<PAGE>
(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
the Interest Determination Date would otherwise fall on an Interest Reset
Date, then such Interest Reset Date will be postponed to the next succeeding
Business Day. 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.
Notwithstanding the foregoing, 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. Under current New York law, the maximum rate of interest, subject
to certain exceptions, for any loan in an amount less than $250,000 is 16% and
for any loan in the amount of $250,000 or more but less than $2,500,000 is 25%
per annum on a simple interest basis. These limits do not apply to loans of
$2,500,000 or more.
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 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" with respect to Floating Rate Notes) 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 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 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
S-12
<PAGE>
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 the applicable Interest Rate Basis specified in the
applicable Pricing Supplement applied.
Unless otherwise specified in the applicable Pricing Supplement, Bankers
Trust Company 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 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 the Agents or their affiliates)
selected by the Calculation Agent for negotiable United States dollar
certificates of deposit of major United States money center 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 weekly or monthly average, as specified in the applicable
Pricing Supplement, for 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 falls. 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
S-13
<PAGE>
treasury constant maturity rate for the Designated CMT Maturity Index as
published in 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 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 offered rates
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 in The City of New
York (which may include the Agents or their affiliates) (each, a "Reference
Dealer") 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 offered
rates as of approximately 3:30 P.M., New 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 offered rates 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 Calculation Agent will
obtain quotations for the Treasury Note with the shorter remaining term to
maturity.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service (or any successor service) on the page specified in the applicable
Pricing Supplement (or any other page as may replace such page on such
service) for the purpose of displaying Treasury Constant Maturities as
reported in H.15(519) or, if no such page is specified in the applicable
Pricing Supplement, page 7052.
"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 or, if no such maturity is specified in the applicable Pricing
Supplement, two 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
S-14
<PAGE>
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 the
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
the Agents or their affiliates) selected by the Calculation Agent (after
consultation with the Company) 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.
"Money Market Yield" means a yield (expressed as a percentage) calculated in
accordance with the following formula:
D X 360 X 100
Money Market Yield = _____________
360 - (D X M)
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 applicable Interest Reset Period.
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
S-15
<PAGE>
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 the Agents or their affiliates) selected by the Calculation Agent
(after consultation with the Company) 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 quoting 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"), 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 Designated LIBOR 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 Designated LIBOR 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 so appear (if "LIBOR Reuters" is applicable) or if no such
rate so appears (if "LIBOR Telerate" is 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 (if "LIBOR Reuters" is applicable) or no rate
appears (if "LIBOR Telerate" is applicable) 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 (which may
include affiliates of the Agents) in the London interbank market, as
selected by the Calculation Agent, to provide the Calculation Agent with
its offered quotation for deposits in the Designated LIBOR 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 the Designated LIBOR
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 (which may include affiliates of
the Agents) in such Principal Financial Center selected by the Calculation
Agent for loans in the Designated LIBOR 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 the Designated LIBOR 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.
"Designated LIBOR Currency" means the currency or composite currency
specified in the applicable Pricing Supplement as to which LIBOR shall be
calculated or, if no such currency or composite currency is specified in the
applicable Pricing Supplement, United States dollars.
S-16
<PAGE>
"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) on the page specified in such Pricing
Supplement (or any other page as may replace such page on such service) for
the purpose of displaying the London interbank rates of major banks for the
Designated LIBOR 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) on the page specified in such Pricing Supplement (or any
other page as may replace such page on such service) for the purpose of
displaying the London interbank rates of major banks for the Designated LIBOR
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 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 or base
lending 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 (which may
include affiliates of the Agents) in The City of New York selected by the
Calculation Agent (after consultation with the Company). 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 a
reasonable number of substitute banks or trust companies (which may include
affiliates of the Agents) 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
(after consultation with the Company) 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 on the Reuter Monitor Money
Rates Service (or any successor service) on the "USPRIME1" page (or such other
page as may replace the USPRIME1 page on such 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
S-17
<PAGE>
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 the Agents or their
affiliates) selected by the Calculation Agent (after consultation with the
Company), 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/ADDITIONAL PROVISIONS; ADDENDUM
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 Stated Maturity Date, any redemption or repayment provisions 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 described in the applicable
Pricing Supplement.
DISCOUNT NOTES
The Company may offer Notes ("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) by more than a
percentage equal to the product of 0.25% and the number of full years to the
Stated Maturity Date. 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. The difference between the Issue Price of a Discount Note and par is
referred to herein as the "Discount." In the event of redemption, repayment or
acceleration of maturity of a Discount Note, the amount payable to the Holder
of such 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 Discount Note (if applicable), multiplied by the Initial Redemption
Percentage (as adjusted by the Annual Redemption Percentage Reduction, if
applicable) and (ii) any unpaid interest accrued thereon to the date of such
redemption, repayment or acceleration of maturity, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, for
purposes of determining the amount of Discount that has accrued as of any date
on which a redemption, repayment or acceleration of maturity occurs for a
Discount Note, such Discount will be accrued using a constant yield method.
The constant yield will be calculated using a 30-day month, 360-day year
convention, a compounding period that, except for the Initial Period (as
hereinafter defined), corresponds to the shortest period between Interest
Payment Dates for the applicable Discount Note (with ratable accruals within a
compounding period), a coupon rate equal to the initial coupon rate applicable
to such Discount Note and an assumption that the maturity of such Discount
Note will not be accelerated. If the period from the date of issue to the
initial Interest Payment Date for a Discount Note (the "Initial Period") is
shorter than the compounding period for such Discount Note, a proportionate
amount of the yield for an entire compounding period will be accrued. If the
Initial Period is longer than the compounding period, then such period will be
divided into a regular compounding period and a short period with the short
period being treated as provided in the preceding sentence. The accrual of the
applicable Discount may differ from the accrual of original issue discount for
purposes of the Internal Revenue Code of 1986, as amended (the "Code"),
certain Discount Notes may not be treated as having original issue discount
within the meaning of the Code, and Notes other than Discount Notes may be
treated as issued with original issue discount for federal income tax
purposes. See "United States Federal Income Tax Considerations."
INDEXED NOTES
The Company may from time to time offer Notes ("Indexed Notes") 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 designated currencies (including a
composite
S-18
<PAGE>
currency such as the ECU) relative to an indexed currency or to other items,
in each case 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, if any, payable in
respect of Indexed Notes, certain historical information with respect to the
specified indexed item and any material tax considerations associated with an
investment in Indexed Notes will be specified in the applicable Pricing
Supplement. See also "Risk Factors."
AMORTIZING NOTES
The Company may from time to time offer Notes ("Amortizing Notes") with the
amount of principal thereof and interest thereon payable in installments over
the term of such 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.
BOOK-ENTRY NOTES
The Company 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 of like tenor and terms up to
$200,000,000 aggregate principal amount 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 below, 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
transferable. 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 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 in a
like aggregate principal amount, only if (i) the Depositary notifies the
Company that it is unwilling or unable to continue as Depositary for the
Global Securities, or the Company becomes aware that the Depositary has ceased
to be a clearing agency registered under the Exchange Act and, in any such
case, the Company shall not have appointed a successor to the Depositary
within 90 days thereafter, (ii) the Company, in its sole discretion,
determines that the Global Securities shall be exchangeable for Certificated
Notes or (iii) an Event of Default shall have occurred and be continuing with
respect to the Notes under the Indenture and the
S-19
<PAGE>
Beneficial Owners representing a majority in principal amount of the Notes
advise the Depositary to cease acting as depositary for the Notes. 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 Agents), 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 records of
Direct Participants and Indirect Participants. 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 Participants 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 deposited by Participants with the Depositary are
registered in the name of the Depositary's partnership nominee, Cede & Co.
The deposit of Global Securities with 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.
S-20
<PAGE>
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and
by Direct Participants 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 Company 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).
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.
Principal, premium, if any, and/or interest, if any, 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 Company, 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, if any, to the Depositary is the
responsibility of the Company and 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 Participants and Indirect
Participants.
A Beneficial Owner shall give notice of any option to elect to have its
Book-Entry Notes repaid by the Company, 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.
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 Company 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 Company 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 book-entry system has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
None of the Company, any Agents, the Trustee or the registrar for the Notes
will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in a
Global Security or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
S-21
<PAGE>
EVENTS OF DEFAULT
Pursuant to resolutions adopted by the general partner of the Company, and
notwithstanding any provision to the contrary in the Indenture or the
Prospectus, the following events are "Events of Default" with respect to the
Notes: (i) default for 30 days in the payment of any installment of interest
on any Note; (ii) default in the payment of principal of (or premium, if any,
on) any Note at its maturity or in connection with any redemption, repayment,
acceleration of maturity or otherwise; (iii) default in the performance or
breach of any other covenant or warranty of the Company contained in the
Indenture (other than a covenant added to the Indenture solely for the benefit
of a series of Debt Securities issued thereunder other than the Notes),
continued for 60 days after written notice as provided in the Indenture; (iv)
default in the payment of an aggregate principal amount exceeding $10,000,000
of any recourse indebtedness of the Company or any mortgage, indenture or
other instrument under which such indebtedness is issued or by which such
indebtedness is secured, such default having occurred after the expiration of
any applicable grace period and having resulted in the acceleration of the
maturity of such indebtedness, but only if such indebtedness is not discharged
or such acceleration is not rescinded or annulled; (vi) certain events of
bankruptcy, insolvency or reorganization, or court appointment of a receiver,
liquidator or trustee of the Company or any Significant Subsidiary; and (vi)
any other Event of Default provided with respect to the Notes. "Significant
Subsidiary" means any Subsidiary that is a "significant subsidiary" (within
the meaning of Regulation S-X promulgated under the Securities Act (as defined
under "Plan of Distribution") of the Company.
SPECIAL PROVISIONS 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 Company and the Agents disclaim 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, if
any, on, Foreign Currency Notes. Such persons should consult their own
financial and legal advisors with regard to such matters. See "Risk Factors--
Exchange Rates and Exchange Controls."
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST, IF ANY
Unless otherwise specified in the applicable Pricing Supplement, the Company
is obligated to make payments of principal of, and premium, if any, and
interest, if any, on, a Foreign Currency Note in the Specified Currency. Any
such amounts payable by the Company in the Specified Currency will be
converted by the exchange rate agent named in the applicable Pricing
Supplement (the "Exchange Rate Agent") into United States dollars for payment
to Holders unless otherwise specified in the applicable Pricing Supplement or
the Holder of such Foreign Currency Note elects, in the manner hereinafter
described, to receive such amounts in the Specified Currency.
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
Company for the purchase by the quoting dealer of the Specified Currency for
United States dollars for settlement on such payment date in the aggregate
amount of such Specified 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 Specified Currency.
S-22
<PAGE>
Holders of Foreign Currency Notes may elect to receive all or a specified
portion of any payment of principal, premium, if any, and/or interest, if any,
in the Specified 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.
Holders of Foreign Currency Notes may elect to receive all or a specified
portion of all future payments in the Specified Currency 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 applicable
Record Date or at least fifteen calendar days prior to the Maturity Date, as
the case may be. Holders of Foreign Currency Notes 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 Specified Currency may be made.
Unless otherwise specified in the applicable Pricing Supplement, if the
Specified Currency is other than United States dollars, a Beneficial Owner of
the related Global Security or Securities which elects to receive payments of
principal, premium, if any, and/or interest, if any, in the Specified 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 Specified Currency.
Payments of the principal of, and premium, if any, and/or interest, if any,
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, if any, on Foreign Currency Notes which are to be made in the
Specified 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 the circumstances described under "Description of Notes--General."
Payments of principal of, and premium, if any, and/or interest, if any, on,
Foreign Currency Notes which are to be made in the Specified 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 office or agency maintained by the Company for such
purpose in the Borough of Manhattan, The City of New York, currently the
corporate trust office of the Trustee located at Four Albany Street, New York,
New York 10006, in time for the Trustee to make such payments in such funds in
accordance with its normal procedures.
AVAILABILITY OF SPECIFIED CURRENCY
Except as set forth below, if the Specified Currency for a Foreign Currency
Note is not available for the required payment of principal, premium, if any,
and/or interest, if any, in respect thereof due to the imposition of exchange
controls or other circumstances beyond the control of the Company, then the
Company 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, computed by the Exchange Rate Agent, 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 the Specified Currency for a Foreign Currency Note is a composite
currency that is not available for the required payment of principal, premium,
if any, and/or interest, if any, in respect thereof due to the imposition of
S-23
<PAGE>
exchange controls or other circumstances beyond the control of the Company,
the Company 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 equivalent of the composite currency in United States dollars.
The component currencies of the composite currency for this purpose (the
"Component Currencies") 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 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 Market Exchange Rate on the second Business Day prior to the
required payment or, if such Market Exchange Rate is not then available, 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 Specified Currency other than United States
dollars means the noon dollar buying rate in The City of New York for cable
transfers for such Specified Currency as certified for customs purposes (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 Specified 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.
GOVERNING LAW AND JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. Under current New York law, a state court in the State
of New York rendering a judgment in respect of a Foreign Currency Note would
be required to render such judgment in the Specified Currency, and such
foreign currency judgment would be converted into United States dollars at the
exchange rate prevailing on the date of entry of such judgment. Accordingly,
the Holder of such Foreign Currency Note would be subject to exchange rate
fluctuations between the date of entry of such foreign currency judgment and
the time the amount of such foreign currency judgment is paid to such Holder
in United States dollars and converted by such Holder into the Specified
Currency. It is not certain, however, whether a non-New York state court would
follow the same rules and procedures with respect to conversions of foreign
currency judgments.
The Company will indemnify the Holder of any Note against any loss incurred
by such Holder as a result of any judgment or order being given or made for
any amount due under such Note and such judgment or order requiring payment in
a currency or composite currency (the "Judgment Currency") other than the
Specified Currency, and as a result of any variation between (i) the rate of
exchange at which the Specified Currency amount is converted into the Judgment
Currency for the purpose of such judgment or order, and (ii) the rate of
exchange at which the Holder of such Note, on the date of payment of such
judgment or order, is able to purchase the Specified Currency with the amount
of the Judgment Currency actually received by such Holder, as the case may be.
S-24
<PAGE>
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, possibly with retroactive effect, 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, regulated investment companies, tax-exempt
organizations, dealers in securities or currencies, persons holding Notes that
are a hedge or that are hedged against currency risks or as a position in a
"straddle" or "conversion transaction" 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.
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 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, other than interest on an "Original Issue
Discount Note" that is not "qualified stated interest" (each as defined below
under "Original Issue Discount--General"), 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
General. 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 ("Original Issue
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, as amended on June 11, 1996, under the original
issue discount provisions of 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 a
Note providing for the payment of any amount other than qualified stated
interest (as hereinafter defined) prior to maturity, multiplied by the
weighted average maturity of such Note). 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 (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 at certain specified types of variable rates (as discussed below under
"Original Issue Discount--Variable Notes"). 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
S-25
<PAGE>
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) is less than a specified de minimis amount, then the stated interest on
the Note will be treated as 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 an Original Issue Discount Note having a
maturity of more than one year from its date of issue 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 an Original
Issue Discount Note is the sum of the daily portions of original issue
discount with respect to such Original Issue Discount Note for each day during
the taxable year (or portion of the taxable year) on which such U.S. Holder
held such Original Issue Discount Note. The "daily portion" of original issue
discount on any Original Issue 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 of any
length and the accrual periods may vary in length over the term of the
Original Issue 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 excess of (i) the product of the Original Issue
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 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 an Original Issue Discount Note at the beginning of any accrual
period is the sum of the issue price of the Original Issue Discount Note plus
the amount of original issue discount allocable to all prior accrual periods
minus the amount of any prior payments on the Original Issue Discount Note
that were not qualified stated interest payments. The amount of original issue
discount allocable to an initial short accrual period may be computed using
any reasonable method if all other accrual periods other than a final short
accrual period are of equal length. The amount of original issue discount
allocable to the final accrual period is the difference between (x) the amount
payable at the maturity of the Original Issue Discount Note (other than any
payment of qualified stated interest) and (y) the Original Issue Discount
Note's adjusted issue price as of the beginning of the final accrual period.
Under these rules, U.S. Holders generally will have to include in income
increasingly greater amounts of original issue discount in successive accrual
periods.
Acquisition Premium. A U.S. Holder who purchases an Original Issue 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
Original Issue Discount Note after the purchase date other than payments of
qualified stated interest, will be considered to have purchased the Original
Issue 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 Original Issue Discount Note
for any taxable year (or portion thereof in which the U.S. Holder holds the
Original Issue Discount Note) will be reduced (but not below zero) by the
portion of the acquisition premium properly allocable to the period.
Variable Notes. 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 does not provide
for stated interest other than 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
S-26
<PAGE>
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 .65 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 or is not
reasonably expected to significantly affect the yield on the Variable 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. A rate will not qualify as an
objective rate if (i) it is based on information that is 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 (although a rate does not fail to be an objective rate merely
because it is based on the credit quality of the issuer) or (ii) it is
reasonably expected that the average value of the rate during the first half
of the Note's term will be either significantly less than or significantly
greater than the value of the rate during the final half of the Note's term.
An Objective Rate includes a "qualified inverse floating rate," which is a
rate 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 qualified floating rate. The OID Regulations
also provide that if a Variable Note provides for stated interest at a fixed
rate for an initial period of one year or less 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 and
if interest on such Note is unconditionally payable in cash or property (other
than debt instruments of the issuer) at least annually, then all stated
interest on such Note 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. The amount of qualified stated interest and
the amount of original issue discount, if any, that accrues during an accrual
period on such Variable Note is determined under the rules applicable to fixed
rate debt instruments 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. The qualified stated
interest allocable to an accrual period is increased (or decreased) if the
interest actually paid during an accrual period exceeds (or is less than) the
interest assumed to be paid during the accrual period pursuant to the
foregoing rules.
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
S-27
<PAGE>
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 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. 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.
The CPDI Regulations generally require a U.S. Holder of such an instrument to
include future 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 CPDI Regulations apply to debt instruments issued on or
after August 13, 1996. 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.
Optional Redemption. Certain of the Notes (i) may be redeemable at the
option of the Company 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"). For purposes of accruing original issue discount, a
call option exercisable by the Company or a put option exercisable by a holder
will be presumed to be exercised if, by utilizing any date on which the Note
may be redeemed or repaid as its maturity date and the amount payable on that
date in accordance with the terms of the Note (the "redemption price") as its
stated redemption price at maturity, the yield on the Note is (i) in the case
of a call option exercisable by the Company, lower than its yield to maturity
or, (ii) in the case of a put option exercisable by a Holder, is greater than
its yield to maturity. If such an option is not in fact exercised when
presumed to be, solely for purposes of accruing original issue discount, the
Note will be treated as if it were redeemed, and a new Note issued, on the
presumed exercise date for an amount equal to its adjusted issue price on that
date. 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.
S-28
<PAGE>
Election to Treat All Interest as Original Issue Discount. 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. The election is irrevocable except with the approval of the IRS.
U.S. Holders should consult their tax advisors regarding the advisability of
making such an election.
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 equal to the excess of the total principal and interest payments on
the Short-Term Note over its issue price. 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 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 incurred or maintained to purchase or carry
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).
Market Discount
If a U.S. Holder purchases a Note, other than an Original Issue 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 an Original Issue Discount Note, for an amount that is less than its
"revised" issue price (generally, adjusted issued 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 an Original Issue 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 a
constant yield basis.
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 an allocable portion of market
discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or constant yield), 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 acquired by the U.S. Holder on or after the first day of the
first 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
S-29
<PAGE>
may elect to amortize such premium using a constant yield method over the
remaining term of the Note and may offset interest (including original issue
discount) 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 instruments then owned and thereafter
acquired by the U.S. Holder on or after the first day of the first taxable
year to which such election applies and may be revoked only with the consent
of the IRS. Holders should be aware that on June 26, 1996, the IRS released
proposed Treasury Regulations modifying the treatment of amortizable bond
premium. These Treasury Regulations would apply to Notes acquired, or in
certain circumstances, held, 60 days after the publication of final Treasury
Regulations in the Federal Register.
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 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 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 capital gain or
loss, and will be long-term capital gain or loss if the Note were held for
more than one year.
Extension of Maturity
Under Final Treasury Regulations under Section 1001 of the Code, published
on June 26, 1996 (the "Section 1001 Regulations"), the exercise of an option
provided to the Company to extend the maturity of a Note will result in a
taxable deemed exchange of an old Note for a new Note if such option cannot be
unilaterally exercised by the Company and if such exercise modifies the terms
of the Note to a degree that is "economically significant." Generally, an
option is not unilaterally exercisable if the Holder's consent is required,
the Holder can demand repayment, or the Holder can put the Note to an
affiliate of the Company. Therefore, unless the Company eliminates a Holder's
right to demand repayment upon a maturity extension, such option would not be
considered to be unilaterally exercisable. The exercise of an option that
changes the timing of payments under a debt instrument is considered
economically significant if there is a "material deferral" of scheduled
payments. The Section 1001 Regulations generally provide that a deferral of
scheduled payments within a safe-harbor period which begins on the original
due date for the first deferred payment and extends for a period not longer
than the lesser of five years or 50 percent of the original term of the debt
instrument will not be considered a material deferral. Under the Section 1001
Regulations, the exercise of an option that changes the yield on a debt
instrument will generally be considered economically significant if it alters
the annual yield of the debt instrument by more than the greater of (i) 25
basis points or (ii) 5 percent of the annual yield of the debt instrument
prior to modification.
NOTES DENOMINATED, OR IN RESPECT OF WHICH INTEREST IS PAYABLE, IN A FOREIGN
CURRENCY
As used herein, "Foreign Currency" means a currency or composite currency
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
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
(based on the exchange rate in effect 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.
S-30
<PAGE>
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 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 (based on the
exchange rate in effect 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 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
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 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 Note. Such gain
or loss generally will be capital gain or loss (except to the extent of any
accrued 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 Note is disposed of (or deemed disposed of as a result of a material
change in the terms of such Note). In the case of a 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 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 payments received by the holder other than payments of qualified
stated interest. A U.S. Holder's tax basis in a 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 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
S-31
<PAGE>
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 an Original Issue 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 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 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 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.
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
Subject to the discussion below under "--Backup Withholding," 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 of the Company, a controlled foreign corporation related
to the Company 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
S-32
<PAGE>
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
Company 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). 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.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis for sale by the Company to
or through Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Lehman Brothers Inc., J.P. Morgan Securities Inc. and UBS
Securities LLC (the "Agents"). The Agents, individually or in a syndicate, may
purchase Notes, as principal, from the Company 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 Company and an Agent, such Agent will 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 Company 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 as an agent of the Company.
Commissions with respect to Notes with stated maturities in excess of 30 years
that are sold through an Agent as an agent of the Company will be negotiated
between the Company and such Agent at the time of such sale.
S-33
<PAGE>
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. An Agent may sell Notes it has purchased from the Company
as principal to certain dealers less a concession equal to all or any portion
of the discount received in connection with such purchase. Such Agent may
allow, and such dealers may reallow, a discount to certain other dealers and,
unless otherwise specified in the applicable Pricing Supplement, such discount
allowed to any dealer will not be in excess of the discount to be received by
such Agent from the Company. After the initial offering of Notes, the offering
price (in the case of Notes to be resold on a fixed offering price basis), the
concession and the reallowance may be changed.
The Company has reserved the right to sell the Notes directly to investors
and other purchasers, and may accept offers to purchase Notes directly from
investors and other purchasers from time to time on its own behalf.
The Company 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 Company or through an Agent). 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 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.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Company has
agreed to indemnify the Agents against, and to provide contribution with
respect to, certain liabilities (including liabilities under the Securities
Act). The Company has agreed to reimburse the Agents for certain other
expenses.
In the ordinary course of its business, the Agents and their affiliates have
engaged and may in the future engage in investment and commercial banking
transactions with the Company and certain of its affiliates.
From time to time, the Company may issue and sell other Debt Securities
described in the accompanying Prospectus, and the amount of Notes offered
hereby is subject to reduction as a result of such sales.
LEGAL MATTERS
The legality of the Notes offered hereby will be passed upon for the Company
by Hogan & Hartson L.L.P., Washington, D.C. Certain legal matters will be
passed upon for the Agents by Brown & Wood LLP, New York, New York. Hogan &
Hartson L.L.P. and Brown & Wood LLP will rely on the opinion of Sirote &
Permutt P.C., Birmingham, Alabama, as to matters of Alabama law.
S-34
<PAGE>
PROSPECTUS
$370,000,000
COLONIAL REALTY LIMITED PARTNERSHIP
DEBT SECURITIES
----------------
Colonial Realty Limited Partnership (the "Company") may from time to time
offer in one or more series debt securities ("Debt Securities") with an
aggregate public offering price of up to $370,000,000 (or its equivalent based
on the exchange rate at the time of sale) in amounts, at prices and on terms
to be determined at the time of offering. The Debt Securities may be offered
in separate series in amounts, at prices and on terms to be described in one
or more supplements to this Prospectus (a "Prospectus Supplement").
The specific terms of the Debt Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable, the specific title, aggregate
principal amount, currency, form (which may be registered or bearer, or
certificated or global), authorized denominations, maturity, rate (or manner
of calculation thereof) and time of payment of interest, any terms for
redemption at the option of the Company or repayment at the option of the
holder, any terms for any sinking fund payments, additional covenants and any
initial public offering price.
The applicable Prospectus Supplement also will contain information, where
applicable, about certain U.S. federal income tax considerations relating to,
and any listing on a securities exchange of, the Debt Securities covered by
such Prospectus Supplement.
The Debt Securities may be offered directly, through agents designated from
time to time by the Company, or to or through underwriters or dealers. If any
agents or underwriters are involved in the sale of any of the Debt Securities,
their names, and any applicable purchase price, fee, commission or discount
arrangement with, between or among them, will be set forth, or will be
calculable from the information set forth, in an accompanying Prospectus
Supplement. See "Plan of Distribution." No Debt Securities may be sold without
delivery of a Prospectus Supplement describing the method and terms of the
offering of such Debt Securities.
SEE "RISK FACTORS" BEGINNING ON PAGE 2 FOR CERTAIN FACTORS RELATING TO AN
INVESTMENT IN THE DEBT SECURITIES.
----------------
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. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
----------------
The date of this Prospectus is December 6, 1996
<PAGE>
THE COMPANY
The Debt Securities offered hereby are being issued by the Company, which is
the "operating partnership" of Colonial Properties Trust ("Colonial"), an
Alabama real estate investment trust ("REIT") whose common shares are listed
on the New York Stock Exchange ("NYSE") under the symbol "CLP." The Company is
managed by Colonial, through its wholly owned subsidiary, Colonial Properties
Holding Company, Inc., an Alabama corporation ("CPHC"), which in turn owns
approximately 67.7% of the partnership interests in the Company as of
September 30, 1996 and serves as the sole general partner of the Company. The
Company's activities as of September 30, 1996 include ownership of a
diversified portfolio of 69 multifamily, retail and office properties located
in Alabama, Florida, Georgia and South Carolina, development of new
properties, acquisitions of existing properties, and build-to-suit
development.
As of September 30, 1996, the Company owned a portfolio of 40 garden-style
multifamily apartment communities containing a total of 13,401 apartment units
(the "Multifamily Properties"), 19 retail properties (including five regional
malls, two "power centers," 11 neighborhood shopping centers, and one mini-
warehouse storage facility) containing a total of approximately 5.0 million
square feet of retail space (the "Retail Properties"), ten office properties
containing a total of approximately 1.0 million square feet of office space
(the "Office Properties") and parcels of land adjacent to certain of these
properties (the "Land"). (The Multifamily Properties, the Retail Properties,
the Office Properties and the Land are referred to collectively as the
"Properties.") The Company also is expanding four Multifamily Properties and
two Retail Properties and is developing four new multifamily properties.
Colonial currently conducts all of its business through CPHC, the Company,
Colonial Properties Services Limited Partnership (the "Management
Partnership"), which provides management services for the Properties, and
Colonial Properties Services, Inc. (the "Management Corporation"), which
provides management services for properties owned by third parties. The
Company owns all of the Properties (or interests therein). The Company is the
sole general partner of the Management Partnership and owns 99% of the
interests therein.
Since Colonial's initial public offering in September 1993 (the "IPO"), the
Company has significantly expanded its portfolio of Properties and its
operating businesses. The Company has acquired direct or indirect interests in
24 additional Multifamily Properties, nine additional Retail Properties and
several additional parcels of Land. The Company also has completed the
expansion of two Multifamily Properties, has initiated or is planning the
expansion or development of seven additional Multifamily Properties, and has
initiated major expansions of Macon Mall and Montgomery Promenade. The
Company's acquisitions and its expansion and development activities have
increased the Company's presence in Alabama, Florida, Georgia and South
Carolina.
The Company's staff of approximately 570 employees provides a full range of
real estate services from its headquarters in Birmingham, Alabama and from
five regional offices located in the Mobile, Huntsville and Montgomery,
Alabama and Orlando and Tampa, Florida metropolitan areas.
The principal executive offices of the Company are located at 2101 Sixth
Avenue North, Suite 750, Birmingham, Alabama 35203, and its telephone number
is (205) 250-8700.
RISK FACTORS
Prospective investors should carefully consider, among other factors, the
matters described below.
REAL ESTATE INVESTMENT RISKS
General. Real property investments are subject to varying degrees of risk.
The Company's ability to service debt will depend in large part on the amount
of income generated, expenses incurred and capital expenditures required. The
Company's income from retail, multifamily or office properties may be
adversely
2
<PAGE>
affected by a number of factors, including the general economic climate and
local real estate conditions, such as an oversupply of, or a reduction in
demand for, retail, apartment or office space in the area and the
attractiveness of the properties to shoppers, residents and tenants. In
addition, income from properties and real estate values also are affected by
such factors as the cost of compliance with government regulation, including
zoning and tax laws, the potential for liability under applicable laws,
interest rate levels and the availability of financing. Certain significant
expenditures associated with each equity investment by the Company in a
property (such as mortgage payments, if any, real estate taxes and maintenance
costs) also are generally not reduced when circumstances cause a reduction in
income from the property.
Renewal of Leases and Reletting of Space. The Company is subject to the
risks that upon expiration of leases for space located at the Properties, the
leases may not be renewed, the space may not be relet or the terms of the
renewal or reletting (including the cost of required renovations or
concessions to tenants) may be less favorable than current lease terms.
Although the Company has established an annual budget for renovation and
reletting expenses that it believes are reasonable in light of each Property's
situation, no assurance can be given that this budget will be sufficient to
cover these expenses. If the Company is unable promptly to relet or renew
leases for all or substantially all of the space at its Properties, if the
rental rates upon such renewal or reletting are significantly lower than
expected, or if the Company's reserves for these purposes prove inadequate,
then the Company's cash provided by operating activities and ability to make
debt service payments could be adversely affected.
Dependence on Primary Markets. All of the Properties are located in the
Southeastern United States, and 38 of the Properties are located in Birmingham
and Montgomery, Alabama, Orlando, Florida and Macon, Georgia. The Company's
performance and its ability to make debt service payments could be adversely
affected by economic conditions in the Southeast and in Birmingham,
Montgomery, central Florida and Macon in particular.
Possible Environmental Liabilities. Under various Federal, state and local
laws, ordinances and regulations, a current or previous owner or operator of
real estate may be required to investigate and clean up certain hazardous
substances released at the property, and may be held liable to a governmental
entity or to third parties for property damage and for investigation and
cleanup costs incurred by such parties in connection with the contamination.
In addition, some environmental laws create a lien on the contaminated site in
favor of the government for damages and costs it incurs in connection with the
contamination. The presence of contamination or the failure to remediate
contamination may adversely affect the owner's ability to sell or lease real
estate or to borrow using the real estate as collateral. The owner or operator
of a site also may be liable under common law to third parties for damages and
injuries resulting from environmental contamination emanating from the site.
The Company has not been notified by any governmental authority of any
material non-compliance, liability or other claim in connection with any of
the Properties and the Company is not aware of any other environmental
condition with respect to any of the Properties that could be material. No
assurance, however, can be given that no prior owner created any material
environmental condition not known to the Company, that no material
environmental condition with respect to any Property has occurred during the
Company's ownership thereof, or that future uses or conditions (including,
without limitation, changes in applicable environmental laws and regulations)
will not result in imposition of environmental liability.
At one of the Company's Properties, the Gadsden Mall in Gadsden, Alabama,
four underground storage tanks were removed in 1989. In connection with the
removal of these gasoline storage tanks, associated petroleum contamination
was discovered in the soil and groundwater. The Company is currently working
with the state regulatory agency to remediate the contamination in accordance
with applicable requirements. Because the tanks were registered with the
Alabama Department of Environmental Management and the facility was in
compliance with regulations prior to the incident, the Company has been
reimbursed under the Alabama Underground Storage Tank Trust Fund for the costs
incurred to date in connection with the ongoing cleanup, and expects to be
reimbursed for the remaining costs as well. Currently, a free product recovery
program is underway.
3
<PAGE>
At the Bardmoor Village Shopping Center in Largo, Florida, which the Company
acquired in October 1996, soil and groundwater contamination was discovered in
May 1995. The contamination included dry cleaning solvents, primarily
perchloroethylene, and was determined to have been released from a dry
cleaning business operated by a tenant at the property. The Company and the
seller of the property, Reynolds Metals Development Company ("Reynolds"), have
entered into an indemnity agreement under which Reynolds is obligated to
indemnify the Company against any claims brought by any governmental
authorities or third parties as a result of the contamination, including costs
incurred in the investigation and remediation of the contamination, as well as
damages to persons, property or natural resources. In addition, the Florida
Department of Environmental Protection has determined that the property is
eligible for the State of Florida's Drycleaning Solvent Cleanup Program, which
means that remediation of the contamination will be funded by the State's
Hazardous Waste Management Trust Fund.
DEBT FINANCING
The Company is subject to the risks associated with debt financing,
including the risk that the Company's cash provided by operating activities
will be insufficient to meet required payments of principal and interest, the
risks of rising interest rates on the Company's floating rate debt, the risk
that the Company will not be able to prepay or refinance existing indebtedness
on the Properties (which generally will not have been fully amortized at
maturity) or that the terms of such refinancing will not be as favorable as
the terms of existing indebtedness. In the event the Company is unable to
secure refinancing of such indebtedness on acceptable terms, the Company might
be forced to dispose of properties upon disadvantageous terms, which might
result in losses to the Company and might adversely affect the cash flow
available for debt service. In addition, If one or more properties are
mortgaged to secure payment of indebtedness and the Company is unable to meet
mortgage payments, the mortgage securing the property could be foreclosed upon
by, or the property could be otherwise transferred to, the mortgagee with a
consequent loss of income and asset value to the Company.
CONFLICTS OF INTEREST
The Lowder family (which includes Thomas, James, Robert and Catherine Lowder
and their affiliates) holds interests in certain companies that in the past
have performed construction management, insurance brokerage and other services
with respect to the Properties. These companies may perform similar services
for the Company in the future. As a result of its financial interest in these
companies, the Lowder family may realize benefits from transactions between
such companies and the Company that are not realized by other holders of
interests in the Company. In addition, Thomas Lowder and his brother, James
Lowder, as directors of CPHC, may be in a position to influence the Company to
do business with companies in which the Lowder family has a financial
interest. Although the Company is subject to certain policies designed to
eliminate or minimize potential conflicts of interest, including a policy
which requires that transactions in which a director or officer of CPHC has a
conflict of interest be approved by a majority of the disinterested directors,
there can be no assurance that these policies will be successful in
eliminating the influence of such conflicts, or that such transactions, if
any, will be on terms as favorable to the Company as could be obtained in an
arms-length transaction with a third party.
DEVELOPMENT AND ACQUISITION RISKS
The Company intends to continue development of new multifamily, retail and
office properties (including expansions of existing Properties on the land
adjacent to those Properties) and to consider acquisitions of multifamily,
retail and office properties where it believes that such development or
acquisition is consistent with the business strategies of the Company. New
project development is subject to a number of risks, including construction
delays or cost overruns that may increase project costs, financing risks as
described above, the failure to meet anticipated occupancy or rent levels,
failure to receive required zoning, occupancy and other governmental permits
and authorizations and changes in applicable zoning and land use laws, which
may result in the incurrence of development costs in connection with projects
that are not pursued to completion. In addition, because Colonial must
distribute 95% of its taxable income in order to maintain its qualification as
a REIT, the Company anticipates that new developments and acquisitions will be
financed primarily through lines of credit or other forms of secured or
unsecured construction financing. If permanent debt or equity financing is
4
<PAGE>
not available on acceptable terms to refinance such new developments or
acquisitions are undertaken without permanent financing, further development
activities or acquisitions may be curtailed or cash available for distribution
to shareholders or to meet debt service obligations may be adversely affected.
Acquisitions entail risks that investments will fail to perform in accordance
with expectations and that judgments with respect to the costs of improvements
to bring an acquired property up to standards established for the market
position intended for that property will prove inaccurate, as well as general
investment risks associated with any new real estate investment. See "--Real
Estate Investment Risks" above.
CHANGES IN POLICIES
The major policies of the Company, including its policies with respect to
development, acquisitions, financing, growth, operations, debt capitalization
and distributions, are determined by the board of directors of CPHC. Although
it has no present intention to do so, the board may amend or revise these and
other policies from time to time. A change in these policies could adversely
affect the Company's financial condition, results of operations, or ability to
make debt service payments.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the
Company intends to use the net proceeds of any sale of Debt Securities for
general business purposes, including, without limitation, the development and
acquisition of additional properties as suitable opportunities arise, the
repayment of certain debt outstanding at such time, capital expenditures,
improvements to certain properties in the Company's portfolio, working capital
and other general purposes.
RATIOS OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for the years ended
December 31, 1993, 1994 and 1995 and the nine months ended September 30, 1996
was 1.26, 2.23, 1.92 and 2.41, respectively.
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, earnings consist of income (loss) before
gains from sales of property and extraordinary items plus fixed charges. Fixed
charges consist of interest expense (including interest costs capitalized) and
the amortization of debt issuance costs.
Prior to completion of Colonial's IPO, certain of the predecessor entities
to the Company operated in a highly leveraged manner. As a result, although
the Properties have historically generated positive net cash flow, the
combined financial statements of the predecessor entities for the fiscal years
ended December 31, 1992 and 1991 show net losses. Consequently, the
computation of the ratio of earnings to fixed charges for such periods
indicates that earnings were inadequate to cover fixed charges by
approximately $0.8 million and $3.4 million for the years ended December 31,
1992 and 1991, respectively.
The reorganization and recapitalization effected in connection with the IPO
permitted the Company to de-leverage the Properties significantly, resulting
in an improved ratio of earnings to fixed charges for periods subsequent to
the IPO.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions of
the Debt Securities to which this Prospectus and any applicable Prospectus
Supplement may relate. The particular terms of the Debt Securities being
offered and the extent to which such general provisions may apply will be
described in a Prospectus Supplement relating to such Debt Securities.
5
<PAGE>
The Debt Securities will be issued under an Indenture, as amended or
supplemented from time to time (the "Indenture"), between the Company and
Bankers Trust Company, as trustee (the "Trustee"). The Indenture has been
filed as an exhibit to the Registration Statement of which this Prospectus is
a part and is available for inspection at the corporate trust office of the
Trustee or as described above under "Available Information." The Indenture is
subject to, and governed by, the Trust Indenture Act of 1939, as amended (the
"TIA"). The statements made hereunder relating to the Indenture and the Debt
Securities to be issued thereunder are summaries of certain provisions thereof
and do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all provisions of the Indenture and such Debt
Securities. All section references appearing herein are to sections of the
Indenture, and capitalized terms used but not defined herein shall have the
respective meanings set forth in the Indenture.
GENERAL
The Debt Securities will be direct, unsecured recourse obligations of the
Company and will rank equally with all other unsecured and unsubordinated
indebtedness of the Company. Unless otherwise specified in the applicable
Prospectus Supplement, Colonial has no obligation for payment of principal or
interest on the Debt Securities. Except as set forth in the Indenture or in
one or more indentures supplemental thereto and described in a Prospectus
Supplement relating thereto, the Debt Securities may be issued without limit
as to aggregate principal amount, in one or more series, in each case as
established from time to time in or pursuant to authority granted by a
resolution of the Board of Directors of CPHC, as general partner of the
Company, or as established in the Indenture (or in accordance with) or in one
or more indentures supplemental to the Indenture. All Debt Securities of one
series need not be issued at the same time and, unless otherwise provided, a
series may be reopened, without the consent of the Holders of the Debt
Securities of such series, for issuances of additional Debt Securities of such
series. The Debt Securities, while recourse to all of the assets of the
Company, will not be recourse to either CPHC, as general partner of the
Company, or to Colonial, as sole shareholder of CPHC.
The Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
the Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Trustee may be appointed to act with respect
to such series. In the event that two or more persons are acting as Trustee
with respect to different series of Debt Securities, each such Trustee shall
be a trustee of a trust under the Indenture separate and apart from the trust
administered by any other Trustee, and, except as otherwise indicated herein,
any action described herein to be taken by each Trustee may be taken by each
such Trustee with respect to, and only with respect to, the one or more series
of Debt Securities for which it is Trustee under the Indenture.
The Prospectus Supplement relating to any series of Debt Securities being
offered will contain the specific terms thereof, including, without
limitation:
(1) The title of such Debt Securities;
(2) The aggregate principal amount of such Debt Securities and any limit
on such aggregate principal amount;
(3) The percentage of the principal amount at which such Debt Securities
will be issued and, if other than the principal amount thereof, the portion
of the principal amount thereof payable upon declaration of acceleration of
the maturity thereof;
(4) The date or dates, or the method for determining such date or dates,
on which the principal of such Debt Securities will be payable;
(5) The rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which such Debt Securities
will bear interest, if any;
(6) The date or dates, or the method for determining such date or dates,
from which any interest will accrue, the dates on which any such interest
will be payable, the regular record dates for such interest payment dates,
or the method by which such dates shall be determined, the persons to whom
such interest
6
<PAGE>
shall be payable, and the basis upon which interest shall be calculated if
other than that of a 360-day year of twelve 30-day months;
(7) The place or places where the principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable, where such Debt
Securities may be surrendered for conversion or registration of transfer or
exchange and where notices or demands to or upon the Company in respect of
such Debt Securities and the Indenture may be served;
(8) The period or periods within which, the price or prices at which and
the other terms and conditions upon which such Debt Securities may be
redeemed, in whole or in part, at the option of the Company, if the Company
is to have such an option;
(9) The obligation, if any, of the Company to redeem, repay or purchase
such Debt Securities pursuant to any sinking fund or analogous provision or
at the option of a Holder thereof, and the period or periods within which
or the date and dates on which, the price or prices at which and the other
terms and conditions upon which such Debt Securities will be redeemed,
repaid or purchased, in whole or in part, pursuant to such obligation;
(10) If other than U.S. dollars, the currency or currencies in which such
Debt Securities are denominated and/or payable, which may be a foreign
currency or units of two or more foreign currencies or a composite currency
or currencies, and the terms and conditions relating thereto;
(11) Whether the amount of payments of principal of (and premium, if any)
or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
method may, but need not be, based on a currency, currencies, currency unit
or units or composite currency or currencies) and the manner in which such
amounts shall be determined;
(12) Any additions to, modifications of or deletions from the terms of
such Debt Securities with respect to Events of Default or covenants set
forth in the Indenture;
(13) Whether such Debt Securities will be issued in certificated and/or
book-entry form;
(14) Whether such Debt Securities will be in registered or bearer form
and, if in registered form, the denominations thereof if other than $1,000
and any integral multiple thereof and, if in bearer form, the denominations
thereof and the terms and conditions relating thereto;
(15) The applicability, if any, of the defeasance and covenant defeasance
provisions of Article Fourteen of the Indenture;
(16) Whether and under what circumstances the Company will pay any
additional amounts on such Debt Securities in respect of any tax,
assessment or governmental charge and, if so, whether the Company will have
the option to redeem such Debt Securities in lieu of making such payment;
(17) The terms and conditions, if any, upon which such Debt Securities
may be subordinated to other indebtedness of the Company; and
(18) Any other terms of such Debt Securities not inconsistent with the
provisions of the Indenture (Section 301).
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). Special federal income tax, accounting
and other considerations applicable to Original Issue Discount Securities will
be described in the applicable Prospectus Supplement.
Except as set forth below under "Certain Covenants--Limitations on
Incurrence of Debt," the Indenture does not contain any provisions that would
limit the ability of the Company to incur indebtedness or that would afford
Holders of Debt Securities protection in the event of a highly leveraged or
similar transaction involving the Company or in the event of a change of
control. Restrictions on ownership and transfers of Colonial's common shares
of beneficial interest and preferred shares of beneficial interest are
designed to preserve its status as a REIT and, therefore, may act to prevent
or hinder a change of control. Reference is made to the applicable
7
<PAGE>
Prospectus Supplement for information with respect to any deletions from,
modifications of or additions to the Events of Default or covenants of the
Company that are described below, including any addition of a covenant or
other provision providing event risk or similar protection.
DENOMINATION, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof (Section 302).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium, if any) and interest on any series of
Debt Securities will be payable at the corporate trust office of the Trustee,
Four Albany Street, New York, New York 10006; provided that, at the option of
the Company, payment of interest may be made by check mailed to the address of
the person entitled thereto as it appears in the register for such Debt
Securities or by wire transfer of funds to such person at an account
maintained within the United States (Sections 301, 305, 306, 307 and 1002).
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable regular record
date and may either be paid to the person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to the Holder of such Debt Security not
less than ten days prior to such Special Record Date, or may be paid at any
time in any other lawful manner, all as more completely described in the
Indenture (Section 307).
Subject to certain limitations imposed upon Debt Securities issued in book-
entry form, the Debt Securities of any series will be exchangeable for other
Debt Securities of the same series and of a like aggregate principal amount
and tenor of different authorized denominations upon surrender of such Debt
Securities at the corporate trust office of the Trustee referred to above. In
addition, subject to certain limitations imposed upon Debt Securities issued
in book-entry form, the Debt Securities of any series may be surrendered for
conversion or registration of transfer or exchange thereof at the corporate
trust office of the Trustee. Every Debt Security surrendered for conversion,
registration of transfer or exchange must be duly endorsed or accompanied by a
written instrument of transfer. No service charge will be made for any
registration of transfer or exchange of any Debt Securities, but the Company
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. If the applicable Prospectus
Supplement refers to any transfer agent (in addition to the Trustee) initially
designated by the Company with respect to any series of Debt Securities, the
Company may at any time rescind the designation of any such transfer agent or
approve a change in the location through which any such transfer agent acts,
except that the Company will be required to maintain a transfer agent in each
place of payment for such series. The Company may at any time designate
additional transfer agents with respect to any series of Debt Securities
(Section 1002).
Neither the Company nor the Trustee shall be required to (i) issue, register
the transfer of or exchange Debt Securities of any series during a period
beginning at the opening of business 15 days before any selection of Debt
Securities of that series to be redeemed and ending at the close of business
on the day of mailing of the relevant notice of redemption; (ii) register the
transfer of or exchange any Debt Security, or portion thereof, called for
redemption, except the unredeemed portion of any Debt Security being redeemed
in part; or (iii) issue, register the transfer of or exchange any Debt
Security that has been surrendered for repayment at the option of the Holder,
except the portion, if any, of such Debt Security not to be so repaid (Section
305).
MERGER, CONSOLIDATION OR SALE
The Company will be permitted to consolidate with, or sell, lease or convey
all or substantially all of its assets to, or merge with or into, any other
entity, provided that (a) either the Company shall be the continuing entity,
or the successor entity (if other than the Company) formed by or resulting
from any such consolidation or merger or which shall have received the
transfer of such assets shall expressly assume payment of the principal
8
<PAGE>
of (and premium, if any) and interest on all of the Debt Securities and the
due and punctual performance and observance of all of the covenants and
conditions contained in the Indenture; (b) immediately after giving effect to
such transaction and treating any indebtedness that becomes an obligation of
the Company or any Subsidiary as a result thereof as having been incurred by
the Company or such Subsidiary at the time of such transaction, no Event of
Default under the Indenture, and no event which, after notice or the lapse of
time, or both, would become such an Event of Default, shall have occurred and
be continuing; and (c) an officer's certificate and legal opinion covering
such conditions shall be delivered to the Trustee (Sections 801 and 803).
CERTAIN COVENANTS
Limitations on Incurrence of Debt. The Company 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 Colonial, any of its
subsidiaries, the Company and any Subsidiary, or Debt owed to the Management
Corporation arising from routine cash management practices, but only so long
as such Debt is held solely by any of Colonial, any of its subsidiaries, the
Company and any Subsidiary), that is subordinate in right of payment to the
Debt Securities, if, immediately after giving effect to the incurrence of such
Debt and the application of the proceeds thereof, the aggregate principal
amount of all outstanding Debt of the Company and its Subsidiaries on a
consolidated basis determined in accordance with generally accepted accounting
principles is greater than 60% of the sum of (i) the Company's Adjusted Total
Assets (as defined below) as of the end of the most recent fiscal quarter
prior to the incurrence of such additional Debt, (ii) the purchase price of
any real estate assets or mortgages receivable (or interests therein) acquired
by the Company or any Subsidiary since the end of such fiscal quarter,
including those obtained in connection with the incurrence of such additional
Debt and (iii) the net amount of any securities offering proceeds received by
the Company or any Subsidiary since the end of such fiscal quarter (to the
extent that such proceeds were not used to acquire such real estate assets or
mortgages receivable or used to reduce Debt) (Section 1004(a)).
In addition to the foregoing limitation on the incurrence of Debt, the
Company 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 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 1.5 to 1, on a pro forma basis after giving effect to the incurrence of
such Debt and to the application of the proceeds thereof (Section 1004(b)).
Further, the Company 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 Company 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 Secured Debt and the application of the proceeds thereof, the aggregate
principal amount of all outstanding Secured Debt of the Company and its
Subsidiaries on a consolidated basis is greater than 40% of the sum of (i) the
Company's Adjusted Total Assets as of the end of the most recent fiscal
quarter prior to the incurrence of such additional Debt, (ii) the purchase
price of any real estate assets or mortgages receivable (or interests therein)
acquired by the Company or any Subsidiary since the end of such fiscal
quarter, including those obtained in connection with the incurrence of such
additional Debt and (iii) the amount of any securities offering proceeds
received by the Company or any Subsidiary since the end of such fiscal quarter
(to the extent that such proceeds were not used to acquire such real estate
assets or mortgages receivable or used to reduce Debt) (Section 1004(c)).
For purposes of the foregoing provisions regarding the limitation on the
incurrence of Debt, Debt shall be deemed to be "incurred" by the Company or a
Subsidiary whenever the Company or such Subsidiary shall create, assume,
guarantee or otherwise become liable in respect thereof.
Maintenance of Unencumbered Total Asset Value. The Company will at all times
maintain an Unencumbered Total Asset Value in an amount not less than 150% of
the aggregate principal amount of all outstanding unsecured Debt of the
Company and its Subsidiaries (Section 1004(d)).
9
<PAGE>
Existence. Except as described above under "Merger, Consolidation or Sale,"
the Company will do or cause to be done all things necessary to preserve and
keep in full force and effect its existence, rights (by partnership agreement
and statute) and franchises; provided, however, that the Company shall not be
required to preserve any right or franchise if it determines that the
preservation thereof is no longer desirable in the conduct of its business and
that the loss thereof is not disadvantageous in any material respect to the
Holders of the Debt Securities (Section 1006).
Maintenance of Properties. The Company will cause all of its material
properties used or useful in the conduct of its business or the business of
any Subsidiary to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that the Company and its
Subsidiaries shall not be prevented from selling or otherwise disposing of for
value its properties in the ordinary course of business (Section 1007).
Insurance. The Company will, and will cause each of its Subsidiaries to,
keep all of its insurable properties insured against loss or damage at least
equal to their then full insurable value with insurers of recognized
responsibility and having an A.M. Best policy holder's rating of not less than
A-:V (Section 1008).
Payment of Taxes and Other Claims. The Company will pay or discharge or
cause to be paid or discharged, before the same shall become delinquent, (i)
all taxes, assessments and governmental charges levied or imposed upon it or
any Subsidiary or upon the income, profits or property of the Company or any
Subsidiary, and (ii) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a lien upon the property of the Company
or any Subsidiary; provided, however, that the Company shall not be required
to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings or for which the Company
has set apart and maintains an adequate reserve (Section 1009).
Provision of Financial Information. Whether or not the Company is subject to
Section 13 or 15(d) of the Exchange Act (as defined below), the Company will,
to the extent permitted under the Exchange Act, file with the Commission the
annual reports, quarterly reports and other documents which the Company would
have been required to file with the Commission pursuant to such Section 13 or
15(d) if the Company were so subject (the "Financial Information"), such
documents to be filed with the Commission on or prior to the respective dates
(the "Required Filing Dates") by which the Company would have been required so
to file such documents if the Company were so subject. The Company also will
in any event (x) within 15 days of each Required Filing Date (i) transmit by
mail to all Holders of Debt Securities, as their names and addresses appear in
the Security Register, without cost to such Holders, copies of the Financial
Information and (ii) file with the Trustee copies of the Financial
Information, and (y) if filing such documents by the Company with the
Commission is not permitted under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such documents to any prospective Holder (Section 1010).
As used herein,
"Adjusted Total Assets" as of any date means the sum of (i) $328,177,823
(which represents the amount determined by multiplying the price at which
Colonial's common shares of beneficial interest were offered in the IPO by the
sum of (A) the common shares of beneficial interest of Colonial issued in the
IPO and (B) the Units of the Company not held by Colonial that were issued in
connection with the IPO), (ii) $108,841,000 (which represents the principal
amount of outstanding Debt of the Company immediately following the IPO) and
(iii) the purchase price or cost of any real estate assets or mortgages
receivable (or interests therein) acquired (including the value of any Units
issued in connection therewith) or developed after the IPO and the amount of
any securities offering proceeds and other proceeds of Debt received after the
IPO (to the extent such proceeds were not used to acquire real estate assets
or mortgages receivable or used to reduce Debt), adjusted for the proceeds of
any real estate assets disposed of by the Company. This definition of
"Adjusted Total Assets" values the assets owned by the Company at the time of
the IPO at the market capitalization of the Company at that time,
10
<PAGE>
which the Company believes to be a more appropriate measure of the value of
those assets than undepreciated book value, which reflects their pre-IPO cost
before accumulated depreciation.
"Annual Service Charge" as of any date means the amount of any interest
expensed during the four consecutive fiscal quarters most recently ended prior
to such date.
"Consolidated Income Available for Debt Service" for any period means
Consolidated Net Income (as defined below) of the Company and its Subsidiaries
plus amounts which have been deducted for (a) interest on Debt of the Company
and its Subsidiaries, (b) provision for taxes of the Company and its
Subsidiaries based on income, (c) amortization of debt discount, (d)
provisions for gains and losses on properties, (e) depreciation and
amortization, (f) the effect of any noncash charge resulting from a change in
accounting principles in determining Consolidated Net Income for such period
and (g) amortization of deferred charges.
"Consolidated Net Income" for any period means the amount of net income (or
loss) of the Company and its Subsidiaries for such period determined on a
consolidated basis in accordance with generally accepted accounting
principles.
"Debt" of the Company or any Subsidiary means any indebtedness of the
Company or any Subsidiary, 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 Company or any
Subsidiary, (iii) reimbursement obligations 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
Company or any Subsidiary as lessee which is reflected on the Company's
consolidated balance sheet as a capitalized lease in accordance with generally
accepted accounting principles; in the case of items of indebtedness incurred
under (i) through (iii) above to the extent that any such items (other than
letters of credit) would appear as a liability on the Company's consolidated
balance sheet in accordance with generally accepted accounting principles, and
also includes, to the extent not otherwise included, any obligation of the
Company 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 Company or any
Subsidiary).
"Disqualified Stock" means, with respect to any person, any capital stock or
partnership interest of such person which by the terms of such capital stock
or partnership interest (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable), upon the
occurrence of any event or otherwise: (i) matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise; (ii) is
convertible into or exchangeable or exercisable for Debt or Disqualified
Stock; or (iii) is redeemable at the option of the holder thereof, in whole or
in part, in each case or prior to the maturity of the relevant series of Debt
Securities.
"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 Company or by one or more Subsidiaries of the
Company. For the purposes of this definition, "voting stock" means stock
having the voting power for the election of directors, general partners,
managers 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. The Management Corporation would not be considered a Subsidiary
of the Company.
"Unencumbered Total Asset Value" as of any date means the sum of (i) the
portion of Adjusted Total Assets allocable to the Company's real estate assets
and (ii) the value of all other assets of the Company and its Subsidiaries on
a consolidated basis determined in accordance with generally accepted
accounting principles (but excluding intangibles and accounts receivable), in
each case which are unencumbered by any mortgage, lien, charge, pledge or
security interest. For purposes of this definition, the portion of Adjusted
Total Assets allocable to each of the 36 properties owed by the Company at the
time of the IPO shall be determined by reference to each such property's
contribution to net operating income of the Company at the time of the IPO,
and the portion
11
<PAGE>
allocable to each property acquired or developed after the IPO shall be equal
to the purchase price or cost of such property.
ADDITIONAL COVENANTS AND/OR MODIFICATIONS TO THE COVENANTS DESCRIBED ABOVE
Any additional covenants of the Company and/or modifications to the
covenants described above with respect to any Debt Securities or series
thereof, will be described in the Prospectus Supplement relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (i) default
for 30 days in the payment of any installment of interest on any Debt Security
of such series; (ii) default in the payment of principal of (or premium, if
any, on) any Debt Security of such series at its maturity; (iii) default in
making any sinking fund payment as required for any Debt Security of such
series; (iv) default in the performance or breach of any other covenant or
warranty of the Company contained in the Indenture (other than a covenant
added to the Indenture solely for the benefit of a series of Debt Securities
issued thereunder other than such series), continued for 60 days after written
notice as provided in the Indenture; (v) default in the payment of an
aggregate principal amount exceeding $10,000,000 of any indebtedness of the
Company or any mortgage, indenture or other instrument under which such
indebtedness is issued or by which such indebtedness is secured, such default
having occurred after the expiration of any applicable grace period and having
resulted in the acceleration of the maturity of such indebtedness, but only if
such indebtedness is not discharged or such acceleration is not rescinded or
annulled; (vi) certain events of bankruptcy, insolvency or reorganization, or
court appointment of a receiver, liquidator or trustee of the Company or any
Significant Subsidiary or the property of either; and (vii) any other Event of
Default provided with respect to a particular series of Debt Securities
(Section 501). "Significant Subsidiary" means any Subsidiary that is a
"significant subsidiary" (within the meaning of Regulation S-X promulgated
under the Securities Act (as defined below)) of the Company.
If an Event of Default under the Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in every
such case the Trustee or the Holders of not less than 25% of the principal
amount of the Outstanding Debt Securities of that series will have the right
to declare the principal amount (or, if the Debt Securities of that series are
Original Issue Discount Securities or indexed securities, such portion of the
principal amount as may be specified in the terms thereof) of all the Debt
Securities of that series to be due and payable immediately by written notice
thereof to the Company (and to the applicable Trustee if given by the
Holders). However, at any time after such a declaration of acceleration with
respect to Debt Securities of such series (or of all Debt Securities then
Outstanding under the Indenture, as the case may be) has been made, but before
a judgment or decree for payment of the money due has been obtained by the
Trustee, the Holders of not less than a majority in principal amount of
Outstanding Debt Securities of such series (or of all Debt Securities then
Outstanding under the Indenture, as the case may be) may rescind and annul
such declaration and its consequences if (a) the Company shall have deposited
with the Trustee all required payments of the principal of (and premium, if
any) and interest on the Debt Securities of such series (or of all Debt
Securities then Outstanding under the Indenture, as the case may be), plus
certain fees, expenses, disbursements and advances of the Trustee and (b) all
events of default, other than the non-payment of accelerated principal (or
specified portion thereof), with respect to Debt Securities of such series (or
of all Debt Securities then Outstanding under the Indenture, as the case may
be) have been cured or waived as provided in the Indenture (Section 502). The
Indenture also provides that the Holders of not less than a majority in
principal amount of the Outstanding Debt Securities of any series (or of all
Debt Securities then Outstanding under the Indenture, as the case may be) may
waive any past default with respect to such series and its consequences,
except a default (x) in the payment of the principal of (or premium, if any)
or interest on any Debt Security of such series or (y) in respect of a
covenant or provision contained in the Indenture that cannot be modified or
amended without the consent of the Holder of each Outstanding Debt Security
affected thereby (Section 513).
The Trustee will be required to give notice to the Holders of Debt
Securities within 90 days of a default under the Indenture unless such default
shall have been cured or waived; provided, however, that the Trustee
12
<PAGE>
may withhold notice to the Holders of any series of Debt Securities of any
default with respect to such series (except a default in the payment of the
principal of (or premium, if any) or interest on any Debt Security of such
series or in the payment of any sinking fund installment in respect of any
Debt Security of such series) if specified responsible officers of the Trustee
consider such withholding to be in the interest of such Holders (Section 601).
The Indenture provides that no Holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to the
Indenture or for any remedy thereunder, except in the cases of failure of the
Trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an Event of Default from the Holders of
not less than 25% in principal amount of the Outstanding Debt Securities of
such series, as well as an offer of indemnity reasonably satisfactory to it
(Section 507). This provision will not prevent, however, any Holder of Debt
Securities from instituting suit for the enforcement of payment of the
principal of (and premium, if any) and interest on such Debt Securities at the
respective due dates thereof (Section 508).
Subject to provisions in the Indenture relating to its duties in case of
default, the Trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any Holders of any
series of Debt Securities then Outstanding under the Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
(Section 602). The Holders of not less than a majority in principal amount of
the Outstanding Debt Securities of any series (or of all Debt Securities then
Outstanding under the Indenture, as the case may be) shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or of exercising any trust or power conferred upon
such Trustee. However, the Trustee may refuse to follow any direction which is
in conflict with any law or the Indenture, which may involve the Trustee in
personal liability or which may be unduly prejudicial to the Holders of Debt
Securities of such series not joining therein (Section 512).
Within 120 days after the close of each fiscal year, the Company will be
required to deliver to the Trustee a certificate, signed by one of several
specified officers of CPHC, stating whether or not such officer has knowledge
of any default under the Indenture and, if so, specifying each such default
and the nature and status thereof (Section 1011).
MODIFICATION OF THE INDENTURES
Modifications and amendments of the Indenture may be made only with the
consent of the Holders of not less than a majority in principal amount of all
Outstanding Debt Securities issued under the Indenture which are affected by
such modification or amendment; provided, however, that no such modification
or amendment may, without the consent of the Holder of each such Debt Security
affected thereby, (a) change the stated maturity of the principal of, or any
installment of interest (or premium, if any) on, any such Debt Security; (b)
reduce the principal amount of, or the rate or amount of interest on, or any
premium payable on redemption of, any such Debt Security, or reduce the amount
of principal of an Original Issue Discount Security that would be due and
payable upon declaration of acceleration of the maturity thereof or would be
provable in bankruptcy, or adversely affect any right of repayment of the
Holder of any such Debt Security; (c) change the place of payment, or the coin
or currency, for payment of principal or premium, if any, or interest on any
such Debt Security; (d) impair the right to institute suit for the enforcement
of any payment on or with respect to any such Debt Security; (e) reduce the
above-stated percentage of Outstanding Debt Securities of any series necessary
to modify or amend the Indenture, to waive compliance with certain provisions
thereof or certain defaults and consequences thereunder or to reduce the
quorum or voting requirements set forth in the Indenture; or (f) modify any of
the foregoing provisions or any of the provisions relating to the waiver of
certain past defaults or certain covenants, except to increase the required
percentage to effect such action or to provide that certain other provisions
may not be modified or waived without the consent of the Holder of such Debt
Security (Section 902).
The Holders of not less than a majority in principal amount of Outstanding
Debt Securities of each series affected thereby have the right to waive
compliance by the Company with certain covenants in the Indenture (Section
1013).
13
<PAGE>
Modifications and amendments of the Indenture may be permitted to be made by
the Company and the Trustee without the consent of any Holder of Debt
Securities for any of the following purposes: (i) to evidence the succession
of another person to the Company as obligor under the Indenture; (ii) to add
to the covenants of the Company for the benefit of the Holders of all or any
series of Debt Securities or to surrender any right or power conferred upon
the Company in the Indenture; (iii) to add Events of Default for the benefit
of the Holders of all or any series of Debt Securities; (iv) to add or change
any provisions of the Indenture to facilitate the issuance of, or to
liberalize certain terms of, Debt Securities in bearer form, or to permit or
facilitate the issuance of Debt Securities in uncertificated form, provided
that such action shall not adversely affect the interests of the Holders of
the Debt Securities of any series in any material respect; (v) to change or
eliminate any provisions of the Indenture, provided that any such change or
elimination shall become effective only when there are no Debt Securities
Outstanding of any series created prior thereto which are entitled to the
benefit of such provision; (vi) to secure the Debt Securities; (vii) to
establish the form or terms of Debt Securities of any series; (viii) to
provide for the acceptance of appointment by a successor Trustee or facilitate
the administration of the trusts under the Indenture by more than one Trustee;
(ix) to cure any ambiguity, defect or inconsistency in the Indenture, provided
that such action shall not adversely affect the interests of Holders of Debt
Securities of any series issued under the Indenture in any material respect;
or (x) to supplement any of the provisions of the Indenture to the extent
necessary to permit or facilitate defeasance and discharge of any series of
such Debt Securities, provided that such action shall not adversely affect the
interests of the Holders of the Debt Securities of any series in any material
respect (Section 901).
The Indenture provides that in determining whether the Holders of the
requisite principal amount of Outstanding Debt Securities of a series have
given any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of Holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security
that shall be deemed to be Outstanding shall be the amount of the principal
thereof that would be due and payable as of the date of such determination
upon declaration of acceleration of the maturity thereof, (ii) the principal
amount of any Debt Security denominated in a foreign currency that shall be
deemed Outstanding shall be the U.S. dollar equivalent, determined on the
issue date for such Debt Security, of the principal amount (or, in the case of
Original Issue Discount Security, the U.S. dollar equivalent on the issue date
of such Debt Security of the amount determined as provided in (i) above),
(iii) the principal amount of an indexed security that shall be deemed
Outstanding shall be the principal face amount of such indexed security at
original issuance, unless otherwise provided with respect to such indexed
security pursuant to the Indenture and (iv) Debt Securities owned by the
Company or any other obligor upon the Debt Securities or any affiliate of the
Company or of such other obligor shall be disregarded (Section 101).
The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series (Section 1501). A meeting will be permitted to be
called at any time by the Trustee, and also, upon request, by the Company or
the Holders of at least 10% in principal amount of the Outstanding Debt
Securities of such series, in any such case upon notice given as provided in
the Indenture (Section 1502). Except for any consent that must be given by the
Holder of each Debt Security affected by certain modifications and amendments
of the Indenture, any resolution presented at a meeting or adjourned meeting
duly reconvened at which a quorum is present may be adopted by the affirmative
vote of the Holders of a majority in principal amount of the Outstanding Debt
Securities of that series; provided, however, that, except as referred to
above, any resolution with respect to any request, demand, authorization,
direction, notice, consent, waiver or other action that may be made, given or
taken by the Holders of a specified percentage, which is less than a majority,
in principal amount of the Outstanding Debt Securities of a series may be
adopted at a meeting or adjourned meeting or adjourned meeting duly reconvened
at which a quorum is present by the affirmative vote of the Holders of such
specified percentage in principal amount of the Outstanding Debt Securities of
that series. Any resolution passed or decision taken at any meeting of Holders
of Debt Securities of any series duly held in accordance with the Indenture
will be binding on all Holders of Debt Securities of that series. The quorum
at any meeting called to adopt a resolution, and at any reconvened meeting,
will be persons holding or representing a majority in principal amount of the
Outstanding Debt Securities of a series; provided, however, that if any action
is to be taken at such meeting with respect to a consent or waiver which may
be given by the Holders of not less than a specified percentage in principal
amount of the Outstanding
14
<PAGE>
Debt Securities of a series, the persons holding or representing such
specified percentage in principal amount of the Outstanding Debt Securities of
such series will constitute a quorum (Section 1504).
Notwithstanding the foregoing provisions, the Indenture provides that if any
action is to be taken at a meeting of Holders of Debt Securities of any series
with respect to any request, demand, authorization, direction, notice,
consent, waiver and other action that the Indenture expressly provides may be
made, given or taken by the Holders of a specified percentage in principal
amount of all Outstanding Debt Securities affected thereby, or the Holders of
such series and one or more additional series: (i) there shall be no minimum
quorum requirement for such meeting, and (ii) the principal amount of the
Outstanding Debt Securities of such series that vote in favor of such request,
demand, authorization, direction, notice, consent, waiver or other action
shall be taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has been
made, given or taken under the Indenture (Section 1504).
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Company may be permitted under the Indenture to discharge certain
obligations to Holders of any series of Debt Securities issued thereunder that
have not already been delivered to the Trustee for cancellation and that
either have become due and payable or will become due and payable within one
year (or scheduled for redemption within one year) by irrevocably depositing
with the Trustee, in trust, funds in such currency or currencies, currency
unit or units or composite currency or currencies in which such Debt
Securities are payable in an amount sufficient to pay the entire indebtedness
on such Debt Securities in respect of principal (and premium, if any) and
interest to the date of such deposit (if such Debt Securities have become due
and payable) or to the stated maturity or redemption date, as the case may be.
The Indenture provides that, if the provisions of Article Fourteen are made
applicable to the Debt Securities of or within any series pursuant to Section
301 of the Indenture, the Company may elect either (a) to defease and be
discharged from any and all obligations with respect to such Debt Securities
(except for the obligation to pay additional amounts, if any, upon the
occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities, and the obligations to register
the transfer or exchange of such Debt Securities, to replace temporary or
mutilated, destroyed, lost or stolen Debt Securities, to maintain an office or
agency in respect of such Debt Securities and to hold moneys for payment in
trust) ("defeasance") (Section 1402) or (b) to be released from its
obligations with respect to such Debt Securities under certain specified
sections of Article Ten of the Indenture as specified in the applicable
Prospectus Supplement and any omission to comply with such obligations shall
not constitute an Event of Default with respect to such Debt Securities
("covenant defeasance") (Section 1403), in either case upon the irrevocable
deposit by the Company with the Trustee, in trust, of an amount, in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable at stated maturity, or
Government Obligations (as defined below), or both, applicable to such Debt
Securities which through the scheduled payment of principal and interest in
accordance with their terms will provide money in an amount sufficient without
reinvestment to pay the principal of (and premium, if any) and interest on
such Debt Securities, and any mandatory sinking fund or analogous payments
thereon, on the scheduled due dates therefor.
Such a trust may only be established if, among other things, the Company has
delivered to the Trustee an opinion of counsel (as specified in the Indenture)
to the effect that the Holders of such Debt Securities will not recognize
income, gain or loss for federal income tax purposes as a result of such
defeasance or covenant defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such defeasance or covenant defeasance had not occurred, and such
opinion of counsel, in the case of defeasance, will be required to refer to
and be based upon a ruling of the Internal Revenue Service or a change in
applicable U.S. federal income tax law occurring after the date of the
Indenture (Section 1404).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations
of a person controlled
15
<PAGE>
or supervised by and acting as an agency or instrumentality of the United
States of America or such government which issued the foreign currency in
which the Debt Securities of such series are payable, the timely payment of
which is unconditionally guaranteed as a full faith and credit obligation of
the United States of America or such government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian
with respect to any such Government Obligation or a specific payment of
interest on or principal of any such Government Obligation held by such
custodian for the account of the Holder of a depository receipt, provided that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the Holder of such depository receipt
from any amount received by the custodian in respect of the Government
Obligation or the specific payment of interest on or principal of the
Government Obligation evidenced by such depository receipt (Section 101).
Unless otherwise provided in the applicable Prospectus Supplement, if, after
the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any
series, (a) the Holder of a Debt Security of such series is entitled to, and
does, elect pursuant to the Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(b) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security will be deemed to have been,
and will be, fully discharged and satisfied through the payment of the
principal of (and premium, if any) and interest on such Debt Security as they
become due out of the proceeds yielded by converting the amount so deposited
in respect of such Debt Security into the currency, currency unit or composite
currency in which such Debt Security becomes payable as a result of such
election or Conversion Event or such cessation of usage based on the
applicable market exchange rate (Section 1405). "Conversion Event" means the
cessation of use of (i) a currency, currency unit or composite currency both
by the government of the country which issued such currency and for the
settlement of transactions by a central bank or other public institutions of
or within the international banking community, (ii) the ECU both within the
European Monetary System and for the settlement of transactions by public
institutions of or within the European Communities or (iii) any currency unit
or composite currency other than the ECU for the purposes for which it was
established. Unless otherwise provided in the applicable Prospectus
Supplement, all payments of principal of (and premium, if any) and interest on
any Debt Security that is payable in a foreign currency that ceases to be used
by its government of issuance shall be made in U.S. dollars (Section 101).
In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because
of the occurrence of any Event of Default other than the Event of Default
described in clause (iv) under "Events of Default, Notice and Waiver" with
respect to certain specified sections of Article Ten of the Indenture (which
sections would no longer be applicable to such Debt Securities as a result of
such covenant defeasance) or described in clause (vii) under "Events of
Default, Notice and Waiver" with respect to any other covenant as to which
there has been covenant defeasance, the amount in such currency, currency unit
or composite currency in which such Debt Securities are payable, and
Government Obligations on deposit with the Trustee, will be sufficient to pay
amounts due on such Debt Securities at the time of their stated maturity but
may not be sufficient to pay amounts due on such Debt Securities at the time
of the acceleration resulting from such Default. However, the Company would
remain liable to make payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
REDEMPTION OF SECURITIES
The Indenture provides that the Debt Securities may be redeemed at any time
at the option of the Company, in whole or in part, at the Redemption Price,
except as may otherwise be provided in connection with any Debt Securities or
series thereof.
16
<PAGE>
From and after notice has been given as provided in the Indenture, if funds
for the redemption of any Debt Securities called for redemption shall have
been made available on such redemption date, such Debt Securities will cease
to bear interest on the date fixed for such redemption specified in such
notice, and the only right of the Holders of the Debt Securities will be to
receive payment of the Redemption Price (Section 1106).
Notice of any optional redemption of any Debt Securities will be given to
Holders at their addresses, as shown in the Security Register, not more than
60 nor less than 30 days prior to the date fixed for redemption. The notice of
redemption will specify, among other items, the Redemption Price and the
principal amount of the Debt Securities held by such Holder to be redeemed
(Section 1104).
If the Company elects to redeem Debt Securities, it will notify the Trustee
at least 45 days prior to the redemption date (or such shorter period as is
satisfactory to the Trustee) of the aggregate principal amount of Debt
Securities to be redeemed and the redemption date (Section 1102). If less than
all the Debt Securities are to be redeemed, the Trustee shall select the Debt
Securities to be redeemed in such manner as it shall deem fair and
appropriate.
NO CONVERSION RIGHTS
The Debt Securities will not be convertible into or exchangeable for any
capital stock of Colonial or equity interest in the Company.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depository identified in the applicable
Prospectus Supplement relating to such series. Global Securities may be issued
in either registered or bearer form and in either temporary or permanent form.
The specific terms of the depository arrangement with respect to a series of
Debt Securities will be described in the applicable Prospectus Supplement
relating to such series.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities to or through underwriters for
public offer and sale by them, and also may sell the Debt Securities offered
hereby to investors directly or through agents. Any such underwriter or agent
involved in the offer and sale of the Debt Securities will be named in the
applicable Prospectus Supplement.
Underwriters may offer and sell the Debt Securities at a fixed price or
prices, which may be changed, at prices related to the prevailing market
prices at the time of sale or at negotiated prices. The Company also may, from
time to time, authorize underwriters acting as the Company's agents to offer
and sell the Debt Securities upon terms and conditions set forth in the
applicable Prospectus Supplement. In connection with the sale of the Debt
Securities, underwriters may be deemed to have received compensation from the
Company in the form of underwriting discounts or commissions and may also
receive commissions from purchasers of the Debt Securities for whom they may
act as agent. Underwriters may sell the Debt Securities to or through dealers,
and such dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters and/or commissions from the
purchasers for whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of the Debt Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable Prospectus Supplement. Underwriters,
dealers and agents participating in the distribution of the Debt Securities
may be deemed to be underwriters, and any discounts and commissions received
by them and any profit realized by them on resale of the Debt Securities may
be deemed to be underwriting discounts and commissions under the Securities
Act. Underwriters, dealers and agents may be entitled, under agreements to be
entered into with the Company, to indemnification against and contribution
toward certain civil liabilities, including liabilities under the Securities
Act.
17
<PAGE>
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Debt Securities from the
Company at the public offering price set forth in such Prospectus Supplement
pursuant to delayed delivery contracts ("Contracts") providing for payment and
delivery on the date or dates stated in such Prospectus Supplement. Each
Contract will be for an amount not less than, and the aggregate principal
amount of Debt Securities sold pursuant to Contracts shall be not less nor
more than, the respective amounts stated in the applicable Prospectus
Supplement. Institutions with whom Contracts, when authorized, may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions, and other
institutions but will in all cases be subject to the approval of the Company.
Contracts will not be subject to any conditions except (i) the purchase by an
institution of the Debt Securities covered by its Contracts shall not at the
time of delivery be prohibited under the laws of any jurisdiction in the
United States to which such institution is subject, and (ii) if the Debt
Securities are being sold to underwriters, the Company shall have sold to such
underwriters the total principal amount of the Debt Securities less the
principal amount thereof covered by Contracts.
Certain of the underwriters and their affiliates may be customers of, engage
in transactions with and perform services for the Company and its Subsidiaries
in the ordinary course of business.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information filed by the Company with the Commission in accordance with
the Exchange Act can be inspected at the Public Reference Section maintained
by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549
and the following regional offices of the Commission: 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511 and Seven World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material can be obtained from
the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
The Company has filed with the Commission a registration statement on Form
S-3 (the "Registration Statement"), of which this Prospectus is a part, under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Debt Securities offered hereby. This Prospectus does not contain all of
the information set forth in the Registration Statement, certain portions of
which have been omitted as permitted by the rules and regulations of the
Commission. Statements contained in this Prospectus as to the contents of any
contract or other documents are not necessarily complete, and in each
instance, reference is made to the copy of such contract or documents filed as
an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference and the exhibits and schedules thereto. For
further information regarding the Company and the Debt Securities, reference
is hereby made to the Registration Statement and such exhibits and schedules
which may be obtained from the Commission at its principal office in
Washington, D.C. upon payment of the fees prescribed by the Commission. The
Commission maintains a "web site' that contains reports, proxy and information
statements and other information regarding issuers that file electronically
with the Commission. The address of such site is "http://www.sec.gov".
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company under the Exchange
Act with the Commission and are integrated herein by reference:
1. The Company's Form 10 filed with the Commission on May 13, 1996, File
No. 0-20707, and as amended on June 21, 1996, July 3, 1996 and July 5,
1996.
18
<PAGE>
2. The Company's Quarterly Reports on Form 10-Q dated June 30, 1996 and
September 30, 1996 and filed with the Commission on August 16, 1996 and
November 14, 1996, respectively, pursuant to the Exchange Act.
3. The Company's Current Reports on Form 8-K dated July 17, 1996,
December 5, 1996 and December 6, 1996 and filed with the Commission on July
22, 1996, December 5, 1996, and December 6, 1996 respectively, pursuant to
the Exchange Act.
All documents filed by the Company subsequent to the date of this Prospectus
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to
termination of the offering of all Debt Securities to which this Prospectus
relates shall be deemed to be incorporated by reference in this Prospectus and
shall be part hereof from the date of filing of such document.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained in
this Prospectus (in the case of a statement in a previously filed document
incorporated or deemed to be incorporated by reference herein), in any
accompanying Prospectus Supplement relating to a specific offering of Debt
Securities or in any other subsequently filed document that is also
incorporated or deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus or any accompanying Prospectus Supplement. Subject to the
foregoing, all information appearing in this Prospectus and each accompanying
Prospectus Supplement is qualified in its entirety by the information
appearing in the documents incorporated by reference.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon their
written or oral request, a copy of the Form 10 and any or all other documents
incorporated herein by reference (other than exhibits to such documents,
unless such exhibits are specifically incorporated by reference in such
documents). Written requests for such copies should be addressed to Douglas B.
Nunnelley, Colonial Properties Holding Company, Inc.'s Senior Vice President
and Chief Financial Officer, at 2101 Sixth Avenue North, Suite 750,
Birmingham, Alabama 35203, telephone number (205) 250-8700.
LEGAL MATTERS
The legality of the Debt Securities offered hereby will be passed upon for
the Company by Hogan & Hartson L.L.P., Washington, D.C.
EXPERTS
The consolidated and combined financial statements and the related financial
statement schedules of the Company for the years ended December 31, 1995,
1994, and 1993; the combined historical summary of revenues and direct
operating expenses of Acquisition Properties--Crowne Chase Apartments and
Crowne Point Apartments for the year ending December 31, 1995; the historical
summary of revenues and direct operating expenses of Acquired Property--
Northdale Court for the year ended December 31, 1994; the combined historical
summaries of revenues and direct operating expenses of Acquired Properties--
Rime Properties for the nine months ended September 30, 1994 and the year
ended December 31, 1993; and the combined historical summary of revenues and
direct operating expenses of Acquired Properties--Epoch Properties for the
year ended December 31, 1993; all of which are included in the Company's Form
10 (incorporated herein by reference); and the historical summary of revenues
and direct operating expenses of Acquired Property--Wekiva Riverwalk for the
year ended December 31, 1995 which is included in the Company's Form 8-K filed
December 5, 1996 (incorporated herein by reference), have been incorporated by
reference herein in reliance upon the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
The historical summary of revenues and direct operating expenses of
Acquisition Property--Briarcliffe Mall for the year ended December 31, 1995,
which is included in the Company's Form 10 (incorporated herein by reference),
has been audited by Margolin, Winer & Evens LLP, independent accountants, and
is included herein in reliance upon the authority of said firm as experts in
accounting and auditing.
19
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT
OR THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLE-
MENT, THE APPLICABLE PRICING SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE AGENTS. NEITHER THE DELIVERY OF THIS PRO-
SPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IM-
PLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUP-
PLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER 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
Risk Factors............................................................... S-3
Description of Notes....................................................... S-4
Special Provisions Relating to Foreign Currency Notes...................... S-22
Certain United States Federal Income Tax Considerations.................... S-25
Plan of Distribution....................................................... S-33
Legal Matters.............................................................. S-34
PROSPECTUS
The Company................................................................ 2
Risk Factors............................................................... 2
Use of Proceeds............................................................ 5
Ratios of Earnings to Fixed Charges........................................ 5
Description of Debt Securities............................................. 5
Plan of Distribution....................................................... 17
Available Information...................................................... 18
Incorporation of Certain Documents By Reference............................ 18
Legal Matters.............................................................. 19
Experts.................................................................... 19
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$370,000,000
[LOGO OF COLONIAL PROPERTIES]
COLONIAL REALTY
LIMITED PARTNERSHIP
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE
FROM DATE OF ISSUE
----------------
PROSPECTUS SUPPLEMENT
----------------
MERRILL LYNCH & CO.
LEHMAN BROTHERS
J.P. MORGAN & CO.
UBS SECURITIES
DECEMBER 6, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
