<PAGE>
Pursuant to Rule 424(b)(5)
Registration Nos. 333-42049 and
333-37922
PROSPECTUS SUPPLEMENT
(To prospectus dated June 7, 2000)
$225,000,000
COLONIAL REALTY LIMITED PARTNERSHIP
Medium-Term Notes
Due Nine Months or More From Date of Issue
---------------
The Company: Colonial Realty Limited Partnership. Our principal
executive office is located at 2101 Sixth Avenue North, Suite 750, Birmingham,
Alabama 35203, and our telephone number is (205) 250-8700.
Terms: We plan to offer and sell Notes with various terms, including the
following:
. Ranking as senior . Interest at fixed or floating
indebtedness of the rates, or no interest at all. The
Company floating interest rate may be
based on one or more of the
. Stated maturities of 9 following indices plus or minus a
months or more from date spread and/or multiplied by a
of issue spread multiplier:
-- CD rate
-- CMT rate
. Redemption and/or -- Commercial paper rate
repayment provisions, if -- Eleventh district cost of
applicable, whether funds rate
mandatory or at the -- Federal funds rate
option of the Company or -- LIBOR
Noteholders -- Prime rate
-- Treasury rate
. Payments in U.S. dollars
or one or more foreign . Interest payments on fixed rate
currencies Notes on each June 15 and
December 15
. Minimum denominations of
$1,000 or other
specified denominations
for foreign currencies
. Interest payments on floating
. Book-entry (through The rate Notes on a monthly,
Depository Trust quarterly, semiannual or annual
Company) or certificated basis
form
We will specify the final terms for each Note, which may be different
from the terms described in this prospectus supplement, in the applicable
pricing supplement.
Investing in the Notes involves certain risks. See "Risk Factors" on
page S-3.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement, the accompanying prospectus or any pricing
supplement is truthful or complete. Any representation to the contrary is a
criminal offense.
<TABLE>
<CAPTION>
Agent's Discounts
Public Offering Price and Commissions Proceeds to Company
--------------------- --------------------- ---------------------------
<S> <C> <C> <C>
Per Note................ 100% .125% - .750% 99.875% - 99.250%
Total(1)................ $225,000,000 $281,250 - $1,687,500 $224,718,750 - $223,312,500
</TABLE>
--------
(1) Or the equivalent thereof in one or more foreign currencies.
We may sell Notes to the Agents referred to below as principal for
resale at varying or fixed offering prices or through the Agents as agent
using their reasonable efforts on our behalf. We may also sell Notes without
the assistance of any Agent.
If we sell other securities referred to in the accompanying prospectus,
we may be limited in offering and selling the entire amount of Notes referred
to in this prospectus supplement.
---------------
Merrill Lynch & Co.
Banc One Capital Markets, Inc.
Bear, Stearns & Co., Inc.
Goldman, Sachs & Co.
PNC Capital Markets, Inc.
Salomon Smith Barney
Wachovia Securities, Inc.
---------------
The date of this prospectus supplement is August 31, 2000.
<PAGE>
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
Risk Factors............................................................... S-3
Description of Notes....................................................... S-5
Special Provisions Relating to Foreign Currency Notes...................... S-25
Certain United States Federal Income Tax Considerations.................... S-28
Plan of Distribution....................................................... S-37
Prospectus
Where to Find Additional Information....................................... 2
The Company................................................................ 3
Ratio of Earnings to Fixed Charges......................................... 3
Risk Factors............................................................... 4
Use of Proceeds............................................................ 9
Description of Debt Securities............................................. 10
Plan of Distribution....................................................... 24
Experts.................................................................... 25
Legal Matters.............................................................. 25
</TABLE>
---------------
You should rely only on the information contained or incorporated by
reference in this prospectus supplement, the accompanying prospectus and any
pricing supplement. Neither we nor any Agent has authorized any other person to
provide you with different or additional information. If anyone provides you
with different or additional information, you should not rely on it. Neither we
nor any Agent is making an offer to sell the Notes in any jurisdiction where
the offer or sale is not permitted. You should assume that the information
contained or incorporated by reference in this prospectus supplement, the
accompanying prospectus and any pricing supplement is accurate only as of its
date.
References in this prospectus supplement to "Colonial Realty", "the
Company," "we," "us" or "our" are to Colonial Realty Limited Partnership.
2
<PAGE>
RISK FACTORS
Your investment in the Notes involves certain risks. In consultation with
your own financial and legal advisers, you should carefully consider, among
other matters, the following discussion of risks before deciding whether an
investment in the Notes is suitable for you. Notes are not an appropriate
investment for you if you are unsophisticated with respect to their significant
components.
Notes Indexed to Interest Rate, Currency or Other Indices or Formulas May Have
Risks Not Associated With a Conventional Debt Security
If you invest in Notes indexed to one or more interest rate, currency or
other indices or formulas, you will be subject to significant risks not
associated with a conventional fixed rate or floating rate debt security. These
risks include fluctuation of the particular indices or formulas and the
possibility that you will receive a lower, or no, amount of principal, premium
or interest, at different times than you expected. We have no control over a
number of matters, including economic, financial and political events, that are
important in determining the existence, magnitude and longevity of these risks
and their results. In addition, if an index or formula used to determine any
amounts payable in respect of the Notes contains a multiplier or leverage
factor, the effect of any change in the particular index or formula will be
magnified. In recent years, values of certain indices and formulas have been
volatile, and volatility in those and other indices and formulas may be
expected in the future. However, past experience is not necessarily indicative
of what may occur in the future.
Redemption May Adversely Affect Your Return on the Notes
If your Notes are redeemable at our option, we may choose to redeem your
Notes at times when prevailing interest rates are relatively low. In addition,
if your Notes are subject to mandatory redemption, we may be required to redeem
your Notes at times when prevailing interest rates are relatively low. As a
result, you generally will not be able to reinvest the redemption proceeds in a
comparable security at an effective interest rate as high as your Notes being
redeemed.
There May Not Be Any Trading Market for Your Notes; Many Factors Affect the
Trading and Market Value of Your Notes
Upon issuance, your Notes will not have an established trading market. We
cannot assure you a trading market for your Notes will ever develop or be
maintained if developed. In addition to our creditworthiness, many factors
affect the trading market for, and trading value of, your Notes. These factors
include:
. the complexity and volatility of the index or formula applicable to
your Notes,
. the method of calculating the principal, premium and interest in
respect of your Notes,
. the time remaining to the maturity of your Notes,
. the outstanding amount of Notes related to your Notes,
. any redemption features of your Notes,
. the amount of other debt securities linked to the index or formula
applicable to your Notes, and
. the level, direction and volatility of market interest rates
generally.
There may be a limited number of buyers when you decide to sell your
Notes. This may affect the price you receive for your Notes or your ability to
sell your Notes at all. In addition, Notes that are designed for specific
investment objectives or strategies often experience a more limited trading
market and more price volatility than those not so designed. You should not
purchase Notes unless you understand and know you can bear all of the
investment risks involving your Notes.
S-3
<PAGE>
Foreign Currency Notes Are Subject to Exchange Rate and Exchange Control Risks
If you invest in Notes that are denominated and/or payable in a currency
other than U.S. dollars ("Foreign Currency Notes"), you will be subject to
significant risks not associated with an investment in a debt security
denominated and payable in U.S. dollars, including the possibility of material
changes in the exchange rate between U.S. dollars and the applicable foreign
currency and the imposition or modification of exchange controls by the
applicable governments. We have no control over the factors that generally
affect these risks, including economic, financial and political events and the
supply and demand for the applicable currencies. Moreover, if payments on your
Foreign Currency Notes are determined by reference to a formula containing a
multiplier or leverage factor, the effect of any change in the exchange rates
between the applicable currencies will be magnified. In recent years, exchange
rates between certain currencies have been highly volatile and volatility
between these currencies or with other currencies may be expected in the
future. Fluctuations between currencies in the past are not necessarily
indicative, however, of fluctuations that may occur in the future. Depreciation
of your payment currency would result in a decrease in the U.S. dollar
equivalent yield of your Foreign Currency Notes, in the U.S. dollar equivalent
value of the principal and any premium payable at maturity or any earlier
redemption of your Foreign Currency Notes and, generally, in the U.S. dollar
equivalent market value of your Foreign Currency Notes.
Governmental exchange controls could affect exchange rates and the
availability of the payment currency for your Foreign Currency Notes on a
required payment date. Even if there are no exchange controls, it is possible
that your payment currency will not be available on a required payment date for
circumstances beyond our control. In these cases, we will be allowed to satisfy
our obligations in respect of your Foreign Currency Notes in U.S. dollars.
Our Credit Ratings May Not Reflect All Risks of an Investment in the Notes
The credit ratings of our medium-term note program may not reflect the
potential impact of all risks related to structure and other factors on any
trading market for, or trading value of, your Notes. In addition, real or
anticipated changes in our credit ratings will generally affect any trading
market for, or trading value of, your Notes.
S-4
<PAGE>
DESCRIPTION OF THE NOTES
We will issue the Notes 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"), with 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 in this prospectus supplement shall have the
meanings given to them in the accompanying prospectus, the Notes or the
Indenture, as the case may be. The term "Debt Securities," as used in this
prospectus supplement, refers to all debt securities, including the Notes,
issued and issuable from time to time under the Indenture. The following
description of Notes will apply to each Note offered hereby unless otherwise
specified in the applicable pricing supplement.
General
All of our Debt Securities, including the Notes, that we have issued or
will issue under the Indenture will be unsecured general obligations and will
rank equally with all of our other unsecured and unsubordinated indebtedness
outstanding from time to time. The Indenture does not limit the aggregate
amount of Debt Securities that we may issue thereunder. Accordingly, we may
issue Debt Securities from time to time in one or more series up to the
aggregate initial offering price authorized by us for the particular series. We
may, from time to time, without the consent of the registered holders of the
Notes, issue medium-term notes that are part of the same series as the Notes or
other Debt Securities under the Indenture in addition to the $225,000,000
aggregate initial offering price of Notes offered hereby. As of the date of
this prospectus supplement, we have issued $357,500,000 aggregate initial
offering price of medium-term notes that are part of the same series as the
Notes, all of which is outstanding as of that date. In addition, we may, from
time to time, without the consent of the registered holders of the Notes, issue
additional Notes or other Debt Securities having the same terms as previously
issued Notes (other than the date of issuance, the date interest, if any,
begins to accrue and the offering price, which may vary) that will form a
single issue with the previously issued Notes.
The Notes are currently limited to the $225,000,000 aggregate initial
offering price, or the equivalent thereof in one or more foreign currencies.
However, the $225,000,000 aggregate initial offering price of Notes offered
hereby may be reduced by our sale of other securities referred to in the
accompanying prospectus. Notes that bear interest will either be Fixed Rate
Notes or Floating Rate Notes, as specified in the applicable pricing
supplement. We may also issue Discount Notes, Indexed Notes and Amortizing
Notes, as specified in the applicable pricing supplement.
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, as
applicable, by the declaration of acceleration of maturity, notice of
redemption at our option, notice of the registered holder's option to elect
repayment or otherwise (the Stated Maturity Date or any date prior to the
Stated Maturity Date on which the particular Note becomes due and payable, as
the case may be, is referred to as the "Maturity Date" with respect to the
principal of the particular Note repayable on that date).
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 currencies. See "Special Provisions Relating to Foreign
Currency Notes--Payment of Principal, Premium, if any, and Interest, if any."
The currency in which a Note is denominated (or, if that currency is no longer
legal tender for the payment of public and private debts in the country issuing
that currency or, in the case of Euro, in the member states of the European
Union that have adopted the single currency in accordance with the Treaty
establishing the European Community, as
S-5
<PAGE>
amended by the Treaty on European Union, the currency which is then legal
tender in the related country or in the adopting member states of the European
Union, as the case may be) is referred to as the "Specified Currency" with
respect to the particular Note. References to "United States dollars," "U.S.
dollars" or "$" are to the lawful currency of the United States of America (the
"United States").
You will be required to pay for your Notes in the Specified Currency. At
the present time, there are limited facilities in the United States for the
conversion of United States dollars into foreign 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 may be prepared to arrange for the
conversion of United States dollars into the Specified Currency in order to
enable you to pay for your Foreign Currency Note, provided that you make a
request to that Agent on or prior to the fifth Business Day (as defined below)
preceding the date of delivery of the particular Foreign Currency Note, or by
any other day determined by that Agent. Each conversion will be made by an
Agent on the terms and subject to the conditions, limitations and charges as
that Agent may from time to time establish in accordance with its regular
foreign exchange practices. You will be required to bear all costs of exchange
in respect of your Foreign Currency Note. See "Special Provisions Relating to
Foreign Currency Notes."
Interest rates that we offer on 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. We may change
interest rates or formulas and other terms of Notes from time to time, but no
change of terms will affect any Note we have previously issued or as to which
we have accepted an offer to purchase.
We will issue each Note 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 of $1,000, while the minimum denominations of
each Foreign Currency Note will be specified in the applicable pricing
supplement.
We will make payments of principal of, and premium, if any, and interest,
if any, on, Book-Entry Notes through the Trustee to the Depositary. See "--
Book-Entry Notes." In the case of Certificated Notes, we will make payments of
principal of, and premium, if any, on, the Maturity Date in immediately
available funds upon presentation and surrender thereof (and, in the case of
any repayment on an Optional Repayment Date, upon submission of a duly
completed election form if and as required by the provisions described below)
at the office or agency maintained by us for this 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. We will make
payments of interest, if any, on the Maturity Date of a Certificated Note to
the person to whom payment of the principal thereof and premium, if any,
thereon shall be made. We will make payments of interest, if any, on a
Certificated Note on any Interest Payment Date (as defined below) other than
the Maturity Date by check mailed to the address of the registered holder
entitled thereto appearing in the Security Register. Notwithstanding the
foregoing, we will make payments of interest, if any, on any Interest Payment
Date other than the Maturity Date to each registered holder of $10,000,000 (or,
if the Specified Currency is other than United States dollars, the equivalent
thereof in the particular Specified Currency) or more in aggregate principal
amount of Certificated Notes (whether having identical or different terms and
provisions) by wire transfer of immediately available funds if the applicable
registered holder has delivered appropriate wire transfer instructions in
writing to the Trustee not less than 15 days prior to the particular Interest
Payment Date. Any wire transfer instructions received by the Trustee shall
remain in effect until revoked by the applicable registered 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."
"Business Day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which commercial banks are authorized or
required by law, regulation or executive order to close in The City of New
York; provided, however, that, with respect to Foreign Currency Notes, the day
must also not be a day on which commercial banks are authorized or required by
law, regulation or executive order to close in the
S-6
<PAGE>
Principal Financial Center (as defined below) of the country issuing the
Specified Currency (or, if the Specified Currency is Euro, the day must also
be a day on which the Trans-European Automated Real-Time Gross Settlement
Express Transfer (TARGET) System is open); provided, further, that, with
respect to Notes as to which LIBOR is an applicable Interest Rate Basis, the
day must also be a London Banking Day (as defined below). "London Banking Day"
means a day on which commercial banks are open for business (including
dealings in the LIBOR Currency (as defined below)) in London.
"Principal Financial Center" means, as applicable:
. the capital city of the country issuing the Specified Currency; or
. the capital city of the country to which the LIBOR Currency relates;
provided, however, that with respect to United States dollars,
Australian dollars, Canadian dollars, Deutsche marks, Dutch guilders,
Italian lire, Portuguese escudos, South African rand and Swiss francs,
the "Principal Financial Center" shall be The City of New York, Sydney
and (solely in the case of the Specified Currency) Melbourne, Toronto,
Frankfurt, Amsterdam, Milan, London (solely in the case of the LIBOR
Currency), Johannesburg 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 us for
this purpose in the Borough of Manhattan, The City of New York, currently the
corporate trust office of the Trustee. No service charge will be imposed for
any such registration of transfer or exchange of Notes, but we may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection therewith (other than certain exchanges 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; No Sinking Fund
If an Initial Redemption Date is specified in the applicable pricing
supplement, we may redeem the particular Notes prior to their Stated Maturity
Date at our option on any date on or after that Initial Redemption Date in
whole or from time to time in part in increments of $1,000 or any other
integral multiple of an authorized denomination specified in the applicable
pricing supplement (provided that any remaining principal amount thereof shall
be at least $1,000 or other minimum authorized denomination applicable
thereto), at the applicable Redemption Price (as defined below), together with
unpaid interest accrued thereon to the date of redemption. We must give
written notice to registered holders of the particular Notes to be redeemed at
our option not more than 60 nor less than 30 calendar days prior to the date
of redemption. "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 thereof 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 thereof to be
redeemed. For a discussion of the redemption of Discount Notes, see "--
Discount Notes."
The Notes will not be subject to, or entitled to the benefit of, any
sinking fund.
Repayment at the Option of the Holder
If one or more Optional Repayment Dates are specified in the applicable
pricing supplement, registered holders of the particular Notes may require us
to repay those Notes prior to their Stated Maturity Date on any Optional
Repayment Date in whole or from time to time in part in increments of $1,000
or any
S-7
<PAGE>
other integral multiple of an authorized denomination specified in the
applicable pricing supplement (provided that any remaining principal amount
thereof shall be at least $1,000 or other minimum authorized denomination
applicable thereto), at a repayment price equal to 100% of the unpaid principal
amount thereof to be repaid, together with unpaid interest accrued thereon to
the date of repayment. A registered holder's exercise of the repayment option
will be irrevocable. For a discussion of the repayment of Discount Notes, see
"--Discount Notes."
For any Note to be repaid, the Trustee must receive, at its corporate
trust office in the Borough of Manhattan, The City of New York, not more than
60 nor less than 30 calendar days prior to the date of repayment, the
particular Notes to be repaid and:
. in the case of a Certificated Note, the form entitled "Option to
Elect Repayment" duly completed; or
. in the case of a Book-Entry Note, repayment instructions from the
applicable Beneficial Owner (as defined below) to the Depositary and
forwarded by the Depositary.
Only the Depositary may exercise the repayment option in respect of
Global Securities representing Book-Entry Notes. Accordingly, Beneficial Owners
of Global Securities that desire to have all or any portion of the Book-Entry
Notes represented thereby repaid must instruct the Participant (as defined
below) through which they own their interest to direct the Depositary to
exercise the repayment option on their behalf by forwarding the repayment
instructions to the Trustee as aforesaid. In order to ensure that these
instructions 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 that 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 their
Participants for the respective deadlines. 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 repayment
instructions are given, each Beneficial Owner shall cause the Participant
through which it owns its interest to transfer the Beneficial Owner's interest
in the Global Security representing the related Book-Entry Notes, on the
Depositary's records, to the Trustee. See "--Book-Entry Notes."
If applicable, we 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 repayment of Notes at the option of the registered holders
thereof.
We may at any time purchase Notes at any price or prices in the open
market or otherwise. Notes so purchased by us may, at our discretion, be held,
resold or surrendered to the Trustee for cancellation.
Interest
Each interest-bearing Note will bear interest from its date of issue at
the rate per annum, in the case of a Fixed Rate Note, or pursuant to the
interest rate formula, in the case of a Floating Rate Note, in each case as
specified in the applicable pricing supplement, until the principal thereof is
paid. We will make interest payments in respect of Fixed Rate Notes and
Floating Rate Notes 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 from and including the date of issue, if no interest
has been paid, 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. The first
payment of interest on any Note originally issued between a Record Date (as
defined below) and the related Interest Payment Date will be made on the
Interest Payment Date immediately following the next succeeding Record Date to
the registered holder on the next succeeding Record Date. The "Record Date"
shall be the fifteenth calendar day, whether or not a Business Day, immediately
preceding the related Interest Payment Date.
S-8
<PAGE>
Fixed Rate Notes
Interest on Fixed Rate Notes will be payable on June 15 and December 15
of each year or on any 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. Interest on Fixed Rate Notes will be computed on the
basis of a 360-day year of twelve 30-day months.
If any Interest Payment Date or the Maturity Date of a Fixed Rate Note
falls on a day that is not a Business Day, we will make the required payment of
principal, premium, if any, and/or interest on the next succeeding Business
Day, and no additional interest will accrue in respect of the payment made on
that 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:
. 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,
. the Treasury Rate, or
any 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 of the
Floating Rate Notes being offered thereby, including:
. whether the Floating Rate Note is:
-- a "Regular Floating Rate Note,"
-- a "Floating Rate/Fixed Rate Note" or
-- an "Inverse Floating Rate Note,"
. the Fixed Rate Commencement Date, if applicable,
. Fixed Interest Rate, if applicable,
. Interest Rate Basis or Bases,
. Initial Interest Rate, if any,
. Interest Reset Dates,
. Interest Payment Dates,
. Index Maturity,
. Maximum Interest Rate and/or Minimum Interest Rate, if any,
S-9
<PAGE>
. Spread and/or Spread Multiplier, or
. if one or more of the applicable Interest Rate Bases is LIBOR, the
LIBOR Currency and LIBOR Page.
The rate derived from the applicable Interest Rate Basis will be
determined in accordance with the related provisions below. The interest rate
in effect on each day will be based on:
. if that day is an Interest Reset Date, the rate determined as of the
Interest Determination Date (as defined below) immediately preceding
that Interest Reset Date, or
. if that day is not an Interest Reset Date, the rate determined as of
the Interest Determination Date immediately preceding the most recent
Interest Reset Date; provided, however, that the interest rate in
effect for the period, if any, from the date of issue to the first
Interest Reset Date will be the Initial Interest Reset Date.
The "Spread" is the number of basis points to be added to or subtracted
from the related Interest Rate Basis or Bases applicable to a Floating Rate
Note. The "Spread Multiplier" is the percentage of the related Interest Rate
Basis or Bases applicable to a Floating Rate Note by which the Interest Rate
Basis or Bases will be multiplied to determine the applicable interest rate.
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.
Regular Floating Rate Notes. Unless a 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, the particular Floating Rate
Note will be a Regular Floating Rate Note and will bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases:
. plus or minus the applicable Spread, if any, and/or
. multiplied by the applicable Spread Multiplier, if any.
Commencing on the first Interest Reset Date, the rate at which interest
on a Regular Floating Rate Note is payable will be reset as of each Interest
Reset Date; provided, however, that the interest rate in effect for the period,
if any, from the date of issue to the first Interest Reset Date will be the
Initial Interest Rate.
Floating Rate/Fixed Rate Notes. If a Floating Rate Note is designated as
a Floating Rate/Fixed Rate Note, the particular Floating Rate Note will bear
interest at the rate determined by reference to the applicable Interest Rate
Basis or Bases:
. plus or minus the applicable Spread, if any, and/or
. multiplied by the applicable Spread Multiplier, if any.
Commencing on the first Interest Reset Date, the rate at which interest
on a Floating Rate/Fixed Rate Note is payable will be reset as of each Interest
Reset Date; provided, however, that:
. the interest rate in effect for the period, if any, from the date of
issue to the first Interest Reset Date will be the Initial Interest
Rate; and
. the interest rate in effect commencing on the Fixed Rate Commencement
Date will be the Fixed Interest Rate, if specified in the applicable
pricing supplement, or, if not so specified, the interest rate in
effect on the day immediately preceding the Fixed Rate Commencement
Date.
Inverse Floating Rate Notes. If a Floating Rate Note is designated as an
"Inverse Floating Rate Note," the particular 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:
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. plus or minus the applicable Spread, if any, and/or
. multiplied by the applicable Spread Multiplier, if any;
provided, however, that interest on an Inverse Floating Rate Note will
not be less than zero. Commencing on the first Interest Reset Date, the rate at
which interest on an Inverse Floating Rate Note is payable will be reset as of
each Interest Reset Date; provided, however, that the interest rate in effect
for the period, if any, from the date of issue to the first Interest Reset Date
will be the Initial Interest Rate.
Interest Reset Dates. The applicable pricing supplement will specify the
dates on which the rate of interest on a Floating Rate Note will be reset
(each, an "Interest Reset Date"), and the period between Interest Reset Dates
will be the "Interest Reset Period." The Interest Reset Dates will be, in the
case of Floating Rate Notes which reset:
. daily -- each Business Day;
. 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 under "--Interest Determination
Dates";
. 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;
. quarterly -- the third Wednesday of March, June, September and
December of each year;
. semiannually -- the third Wednesday of the two months specified in
the applicable pricing supplement; and
. 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 particular 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, the particular 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
that Business Day falls in the next succeeding calendar month, the particular
Interest Reset Date will be the immediately preceding Business Day. In
addition, in the case of a Floating Rate Note as to which the Treasury Rate is
an applicable Interest Rate Basis, if the Interest Determination Date would
otherwise fall on an Interest Reset Date, the particular Interest Reset Date
will be postponed to the next succeeding Business Day.
Interest Determination Dates. The interest rate applicable to an Interest
Reset Period commencing on the related Interest Reset Date will be determined
by reference to the applicable Interest Rate Basis as of the particular
"Interest Determination Date," which will be:
. with respect to the Federal Funds Rate and the Prime Rate--the
Business Day immediately preceding the related Interest Reset Date;
. with respect to the CD Rate, the CMT Rate and the Commercial Paper
Rate--the second Business Day preceding the related Interest Reset
Date;
. with respect to the Eleventh District Cost of Funds Rate--the last
working day of the month immediately preceding the related Interest
Reset Date on which the Federal Home Loan Bank of San Francisco
publishes the Index (as defined below);
. with respect to LIBOR--the second London Banking Day preceding the
related Interest Reset Date; and
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. with respect to the Treasury Rate--the day in the week in which the
related Interest Reset Date falls on which day Treasury Bills (as
defined below) are normally auctioned (i.e., Treasury Bills are
normally sold at auction 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 the auction may be held on the
preceding Friday); provided, however, that if an auction is held on
the Friday of the week preceding the related Interest Reset Date, the
Interest Determination Date will be the preceding Friday.
The Interest Determination Date pertaining to a Floating Rate Note the
interest rate of which is determined with reference to two or more Interest
Rate Bases will be the latest Business Day which is at least two Business Days
before the related Interest Reset Date for the applicable Floating Rate Note on
which each Interest Reset Basis is determinable.
Calculation Dates. Unless otherwise specified in the applicable pricing
supplement, Bankers Trust Company will be the "Calculation Agent." The interest
rate applicable to each Interest Reset Period will be determined by the
Calculation Agent on or prior to the Calculation Date (as defined below),
except with respect to LIBOR and the Eleventh District Cost of Funds Rate,
which will be determined on the particular Interest Determination Date. Upon
request of the registered holder of a 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 the particular Floating
Rate Note. The "Calculation Date," if applicable, pertaining to any Interest
Determination Date will be the earlier of:
. the tenth calendar day after the particular Interest Determination
Date or, if such day is not a Business Day, the next succeeding
Business Day; or
. the Business Day immediately preceding the applicable Interest
Payment Date or the Maturity Date, as the case may be.
Maximum and Minimum Interest Rates. A Floating Rate Note may also have
either or both of the following:
. a maximum numerical limitation, or ceiling, on the interest rate that
may accrue during any Interest Reset Period (a "Maximum Interest
Rate"); and
. a minimum numerical limitation, or floor, on the interest rate that
may accrue during any Interest Reset Period (a "Minimum Interest
Rate").
In addition to any Maximum Interest Rate that may apply to a 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.
Interest Payments. The applicable pricing supplement will specify the
dates on which interest on Floating Rate Notes is payable (each, an "Interest
Payment Date" with respect to Floating Rate Notes). The Interest Payment Dates
will be, in the case of Floating Rate Notes which reset:
. daily, weekly or monthly -- 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;
. quarterly -- the third Wednesday of March, June, September and
December of each year;
. semiannually -- the third Wednesday of the two months of each year
specified in the applicable pricing supplement; and
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. annually -- the third Wednesday of the month of each year specified
in the applicable pricing supplement.
In addition, the Maturity Date will also be an Interest Payment 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 that Business Day falls in the next
succeeding calendar month, the particular 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, we will make the required
payment of principal, premium, if any, and interest on the next succeeding
Business Day, and no additional interest will accrue in respect of the payment
made on that 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. For example,
9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655). All dollar
amounts used in or resulting from any calculation on Floating Rate Notes will
be rounded, in the case of United States dollars, to the nearest cent or, in
the case of a foreign currency, 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. The accrued
interest factor is computed by adding the interest factor calculated for each
day in the particular Interest Period and will be computed by dividing the
interest rate applicable to such day by 360, in the case of Floating Rate Notes
as to which the CD Rate, the Commercial Paper Rate, the Eleventh District Cost
of Funds Rate, the Federal Funds Rate, LIBOR or the Prime Rate is an applicable
Interest Rate Basis, or by the actual number of days in the year, in the case
of Floating Rate Notes as to which the CMT Rate or the Treasury Rate is an
applicable Interest Rate Basis. The interest factor for Floating Rate Notes as
to 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.
The Calculation Agent shall determine the rate derived from each Interest
Rate Basis in accordance with the following provisions.
CD Rate. "CD Rate" means:
(1) the rate on the particular Interest Determination Date for
negotiable United States dollar certificates of deposit having the Index
Maturity specified in the applicable pricing supplement as published in
H.15(519) (as defined below) under the caption "qCDs (secondary
market)," or
(2) if the rate referred to in clause (1) is not so published by 3:00
P.M., New York City time, on the related Calculation Date, the rate on
the particular Interest Determination Date for negotiable United States
dollar certificates of deposit of the particular Index Maturity as
published in H.15 Daily Update (as defined below), or such other
recognized electronic source used for the purpose of displaying the
applicable rate, under the caption "CDs (secondary market)," or
(3) if the rate referred to in clause (2) is not so published by 3:00
P.M., New York City time, on the related Calculation Date, the rate on
the particular Interest Determination Date calculated by the Calculation
Agent as the arithmetic mean of the secondary market offered rates as of
10:00 A.M., New York City time, on that 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
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deposit of major United States money market banks for negotiable United
States certificates of deposit with a remaining maturity closest to the
particular Index Maturity in an amount that is representative for a
single transaction in that market at that time, or
(4) if the dealers so selected by the Calculation Agent are not quoting
as mentioned in clause (3), the CD Rate in effect on the particular
Interest Determination Date.
"H.15(519)" means the weekly statistical release designated as H.15(519),
or any successor publication, published by the Board of Governors of the
Federal Reserve System.
"H.15 Daily Update" means the daily update of H.15(519), available
through the world-wide-web site of the Board of Governors of the Federal
Reserve System at http:/www.bog.frb.fed.us/releases/h15/update, or any
successor site or publication.
CMT Rate. "CMT Rate" means:
(5)if CMT Telerate Page 7051 is specified in the applicable pricing
supplement:
(a)the percentage equal to the yield for United States Treasury
securities at "constant maturity" having the Index Maturity specified
in the applicable pricing supplement as published in H.15(519) under
the caption "Treasury Constant Maturities," as the yield is displayed
on Bridge Telerate, Inc. (or any successor service) on page 7051 (or
any other page as may replace the specified page on that service)
("Telerate Page 7051"), for the particular Interest Determination
Date, or
(b)if the rate referred to in clause (a) does not so appear on
Telerate Page 7051, the percentage equal to the yield for United
States Treasury securities at "constant maturity" having the
particular Index Maturity and for the particular Interest
Determination Date as published in H.15(519) under the caption
"Treasury Constant Maturities," or
(c)if the rate referred to in clause (b) does not so appear in
H.15(519), the rate on the particular Interest Determination Date for
the period of the particular Index Maturity as may then be published
by either the Federal Reserve System Board of Governors or the United
States Department of the Treasury that the Calculation Agent
determines to be comparable to the rate which would otherwise have
been published in H.15(519), or
(d)if the rate referred to in clause (c) is not so published,
the rate on the particular Interest Determination Date calculated by
the Calculation Agent as a yield to maturity based on the arithmetic
mean of the secondary market bid prices at approximately 3:30 P.M.,
New York City time, on that Interest Determination Date of 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 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 United States Treasury securities
with an original maturity equal to the particular Index Maturity, a
remaining term to maturity no more than 1 year shorter than that
Index Maturity and in a principal amount that is representative for a
single transaction in the securities in that market at that time, or
(e)if fewer than five but more than two of the prices referred
to in clause (d) are provided as requested, the rate on the
particular Interest Determination Date calculated by the Calculation
Agent based on the arithmetic mean of the bid prices obtained and
neither the highest nor the lowest of the quotations shall be
eliminated, or
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(f)if fewer than three prices referred to in clause (d) are
provided as requested, the rate on the particular Interest
Determination Date calculated by the Calculation Agent as a yield to
maturity based on the arithmetic mean of the secondary market bid
prices as of approximately 3:30 P.M., New York City time, on that
Interest Determination Date of three Reference Dealers selected by
the Calculation Agent from five 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 United States Treasury
securities with an original maturity greater than the particular
Index Maturity, a remaining term to maturity closest to that Index
Maturity and in a principal amount that is representative for a
single transaction in the securities in that market at that time, or
(g)if fewer than five but more than two prices referred to in
clause (f) are provided as requested, the rate on the particular
Interest Determination Date calculated by the Calculation Agent based
on the arithmetic mean of the bid prices obtained and neither the
highest nor the lowest of the quotations will be eliminated, or
(h)if fewer than three prices referred to in clause (f) are
provided as requested, the CMT Rate in effect on the particular
Interest Determination Date.
(6)if CMT Telerate Page 7052 is specified in the applicable pricing
supplement:
(a)the percentage equal to the one-week or one-month, as
specified in the applicable pricing supplement, average yield for
United States Treasury securities at "constant maturity" having the
Index Maturity specified in the applicable pricing supplement as
published in H.15(519) opposite the caption "Treasury Constant
Maturities," as the yield is displayed on Bridge Telerate, Inc. (or
any successor service) (on page 7052 or any other page as may replace
the specified page on that service) ("Telerate Page 7052"), for the
week or month, as applicable, ended immediately preceding the week or
month, as applicable, in which the particular Interest Determination
Date falls, or
(b)if the rate referred to in clause (a) does not so appear on
Telerate Page 7052, the percentage equal to the one-week or one-
month, as specified in the applicable pricing supplement, average
yield for United States Treasury securities at "constant maturity"
having the particular Index Maturity and for the week or month, as
applicable, preceding the particular Interest Determination Date as
published in H.15(519) opposite the caption "Treasury Constant
Maturities," or
(c)if the rate referred to in clause (b) does not so appear in
H.15(519), the one-week or one-month, as specified in the applicable
pricing supplement, average yield for United States Treasury
securities at "constant maturity" having the particular Index
Maturity as otherwise announced by the Federal Reserve Bank of New
York for the week or month, as applicable, ended immediately
preceding the week or month, as applicable, in which the particular
Interest Determination Date falls, or
(d)if the rate referred to in clause (c) is not so published,
the rate on the particular Interest Determination Date calculated by
the Calculation Agent as a yield to maturity based on the arithmetic
mean of the secondary market bid prices at approximately 3:30 P.M.,
New York City time, on that Interest Determination Date of three
Reference Dealers selected by the Calculation Agent from five
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 United States Treasury securities with an original
maturity equal to the particular Index Maturity, a remaining term to
maturity no more than 1 year
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shorter than that Index Maturity and in a principal amount that is
representative for a single transaction in the securities in that
market at that time, or
(e)if fewer than five but more than two of the prices referred
to in clause (d) are provided as requested, the rate on the
particular Interest Determination Date calculated by the Calculation
Agent based on the arithmetic mean of the bid prices obtained and
neither the highest nor the lowest of the quotations shall be
eliminated, or
(f)if fewer than three prices referred to in clause (d) are
provided as requested, the rate on the particular Interest
Determination Date calculated by the Calculation Agent as a yield to
maturity based on the arithmetic mean of the secondary market bid
prices as of approximately 3:30 P.M., New York City time, on that
Interest Determination Date of three Reference Dealers selected by
the Calculation Agent from five 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 United States Treasury
securities with an original maturity greater than the particular
Index Maturity, a remaining term to maturity closest to that Index
Maturity and in a principal amount that is representative for a
single transaction in the securities in that market at the time, or
(g)if fewer than five but more than two prices referred to in
clause (f) are provided as requested, the rate on the particular
Interest Determination Date calculated by the Calculation Agent based
on the arithmetic mean of the bid prices obtained and neither the
highest or the lowest of the quotations will be eliminated, or
(h)if fewer than three prices referred to in clause (f) are
provided as requested, the CMT Rate in effect on that Interest
Determination Date.
If two United States Treasury securities with an original maturity
greater than the Index Maturity specified in the applicable pricing supplement
have remaining terms to maturity equally close to the particular Index
Maturity, the quotes for the United States Treasury security with the shorter
original remaining term to maturity will be used.
Commercial Paper Rate. "Commercial Paper Rate" means:
(7)the Money Market Yield (as defined below) on the particular Interest
Determination 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 caption "Commercial Paper-Nonfinancial", or
(8)if the rate referred to in clause (1) is not so published by 3:00
P.M., New York City time, on the related Calculation Date, the Money
Market Yield of the rate on the particular Interest Determination Date
for commercial paper having the particular Index Maturity as published in
H.15 Daily Update, or such other recognized electronic source used for
the purpose of displaying the applicable rate, under the caption
"Commercial Paper-Nonfinancial", or
(9)if the rate referred to in clause (2) is not so published by 3:00
P.M., New York City time, on the related Calculation Date, the rate on
the particular Interest Determination Date calculated by the Calculation
Agent as the Money Market Yield of the arithmetic mean of the offered
rates at approximately 11:00 A.M., New York City time, on that Interest
Determination Date of three leading dealers of United States dollar
commercial paper in The City of New York (which may include the Agents or
their affiliates) selected by the Calculation Agent for commercial paper
having the particular Index Maturity placed for industrial issuers whose
bond rating is "Aa", or the equivalent, from a nationally recognized
statistical rating organization, or
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(10) if the dealers so selected by the Calculation Agent are not quoting
as mentioned in clause (3), the Commercial Paper Rate in effect on the
particular Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated
in accordance with the following formula:
D X 360
Money Market Yield = ---------------- X 100
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. "Eleventh District Cost of Funds
Rate" means:
(11) the rate equal to the monthly weighted average cost of funds for the
calendar month immediately preceding the month in which the particular
Interest Determination Date falls as set forth under the caption "11th
District" on the display on Bridge Telerate, Inc. (or any successor
service) on page 7058 (or any other page as may replace the specified
page on that service) ("Telerate Page 7058") as of 11:00 A.M., San
Francisco time, on that Interest Determination Date, or
(12) if the rate referred to in clause (1) does not so appear on Telerate
Page 7058, 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 Federal Home Loan Bank of
San Francisco as the cost of funds for the calendar month immediately
preceding that Interest Determination Date, or
(13) if the Federal Home Loan Bank of San Francisco fails to announce the
Index on or prior to the particular Interest Determination Date for the
calendar month immediately preceding that Interest Determination Date,
the Eleventh District Cost of Funds Rate in effect on the particular
Interest Determination Date.
Federal Funds Rate. "Federal Funds Rate" means:
(14) the rate on the particular Interest Determination Date for United
States dollar federal funds as published in H.15(519) under the caption
"Federal Funds (Effective)" and displayed on Bridge Telerate, Inc. (or
any successor service) on page 120 (or any other page as may replace the
specified page on that service) ("Telerate Page 120"), or
(15) if the rate referred to in clause (1) does not so appear on Telerate
Page 120 or is not so published by 3:00 P.M., New York City time, on the
related Calculation Date, the rate on the particular Interest
Determination Date for United States dollar federal funds as published in
H.15 Daily Update, or such other recognized electronic source used for
the purpose of displaying the applicable rate, under the caption "Federal
Funds (Effective)," or
(16) if the rate referred to in clause (2) is not so published by 3:00
P.M., New York City time, on the related Calculation Date, the rate on
the particular Interest Determination Date calculated by the Calculation
Agent as the arithmetic mean of the rates for the last transaction in
overnight United States dollar federal funds arranged by three leading
brokers of United States dollar federal funds transactions in The City of
New York (which may include the Agents or their affiliates) selected by
the Calculation Agent prior to 9:00 A.M., New York City time, on that
Interest Determination Date, or
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(17) if the brokers so selected by the Calculation Agent are not quoting
as mentioned in clause (3), the Federal Funds Rate in effect on the
particular Interest Determination Date.
LIBOR. "LIBOR" means:
(18) 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 LIBOR Currency having the
Index Maturity specified in the applicable pricing supplement, commencing
on the related Interest Reset Date, that appears on the LIBOR Page as of
11:00 A.M., London time, on the particular Interest Determination Date,
or
(19)if "LIBOR Reuters" is specified in the applicable pricing supplement,
the arithmetic mean of the offered rates, calculated by the Calculation
Agent, or the offered rate, if the LIBOR Page by its terms provides only
for a single rate, for deposits in the LIBOR Currency having the
particular Index Maturity, commencing on the related Interest Reset Date,
that appear or appears, as the case may be, on the LIBOR Page as of 11:00
A.M., London time, on the particular Interest Determination Date, or
(20)if fewer than two offered rates appear, or no rate appears, as the
case may be, on the particular Interest Determination Date on the LIBOR
Page as specified in clause (1) or (2), as applicable, the rate
calculated by the Calculation Agent of at least two offered quotations
obtained by the Calculation Agent after requesting the principal London
offices of each of four major reference banks (which may include
affiliates of the Agents) in the London interbank market to provide the
Calculation Agent with its offered quotation for deposits in the LIBOR
Currency for the period of the particular Index Maturity, commencing on
the related Interest Reset Date, to prime banks in the London interbank
market at approximately 11:00 A.M., London time, on that Interest
Determination Date and in a principal amount that is representative for a
single transaction in the LIBOR Currency in that market at that time, or
(21)if fewer than two offered quotations referred to in clause (3) are
provided as requested, the rate calculated by the Calculation Agent as
the arithmetic mean of the rates quoted at approximately 11:00 A.M., in
the applicable Principal Financial Center, on the particular Interest
Determination Date by three major banks (which may include affiliates of
the Agents) in that Principal Financial Center selected by the
Calculation Agent for loans in the LIBOR Currency to leading European
banks having the particular Index Maturity and in a principal amount that
is representative for a single transaction in the LIBOR Currency in that
market at that time, or
(22)if the banks so selected by the Calculation Agent are not quoting as
mentioned in clause (4), LIBOR in effect on the particular Interest
Determination Date.
"LIBOR Currency" means the currency specified in the applicable pricing
supplement as to which LIBOR shall be calculated or, if no currency is
specified in the applicable pricing supplement, United States dollars.
"LIBOR Page" means either:
. 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 the applicable pricing
supplement (or any other page as may replace that page on that
service) for the purpose of displaying the London interbank rates of
major banks for the LIBOR Currency; or
. 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
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for calculating LIBOR, the display on Bridge Telerate, Inc. (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 the London interbank rates of
major banks for the LIBOR Currency.
Prime Rate. "Prime Rate" means:
(23)the rate on the particular Interest Determination Date as published in
H.15(519) under the caption "Bank Prime Loan," or
(24)if the rate referred to in clause (1) is not so published by 3:00
P.M., New York City time, on the related Calculation Date, the rate on the
particular Interest Determination Date as published in H.15 Daily Update,
or such other recognized electronic source used for the purpose of
displaying the applicable rate, under the caption "Bank Prime Loan," or
(25)if the rate referred to in clause (2) is not so published by 3:00
P.M., New York City time, on the related Calculation Date, the rate on the
particular Interest Determination Date calculated by the Calculation Agent
as the arithmetic mean of the rates of interest publicly announced by each
bank that appears on the Reuters Screen US PRIME 1 Page (as defined below)
as the applicable bank's prime rate or base lending rate as of 11:00 A.M.,
New York City time, on that Interest Determination Date, or
(26)if fewer than four rates referred to in clause (3) are so published by
3:00 p.m., New York City time, on the related Calculation Date, the rate
on the particular Interest Determination Date calculated by the
Calculation Agent as 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 that Interest
Determination Date by three major banks (which may include affiliates of
the Agents) in The City of New York selected by the Calculation Agent, or
(27)if the banks so selected by the Calculation Agent are not quoting as
mentioned in clause (4), the Prime Rate in effect on the particular
Interest Determination Date.
"Reuters Screen US PRIME 1 Page" means the display on the Reuter Monitor
Money Rates Service (or any successor service) on the "US PRIME 1" page (or any
other page as may replace that page on that service) for the purpose of
displaying prime rates or base lending rates of major United States banks.
Treasury Rate. "Treasury Rate" means:
(28) the rate from the auction held on the 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 under the caption "INVESTMENT RATE" on the display on Bridge
Telerate, Inc. (or any successor service) on page 56 (or any other page as may
replace that page on that service) ("Telerate Page 56") or page 57 (or any
other page as may replace that page on that service) ("Telerate Page 57"), or
(29) if the rate referred to in clause (1) is not so published by 3:00
P.M., New York City time, on the related Calculation Date, the Bond Equivalent
Yield (as defined below) of the rate for the applicable Treasury Bills as
published in H.15 Daily Update, or another recognized electronic source used
for the purpose of displaying the applicable rate, under the caption "U.S.
Government Securities/Treasury Bills/Auction High," or
(30) if the rate referred to in clause (2) is not so published by 3:00
P.M., New York City time, on the related Calculation Date, the Bond Equivalent
Yield of the auction rate of the applicable Treasury Bills as announced by the
United States Department of the Treasury, or
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(31) if the rate referred to in clause (3) is not so announced by the
United States Department of the Treasury, or if the Auction is not held, the
Bond Equivalent Yield of the rate on the particular Interest Determination Date
of the applicable Treasury Bills as published in H.15(519) under the caption
"U.S. Government Securities/Treasury Bills/Secondary Market," or
(32) if the rate referred to in clause (4) is not so published by 3:00
P.M., New York City time, on the related Calculation Date, the rate on the
particular Interest Determination Date of the applicable Treasury Bills as
published in H.15 Daily Update, or another recognized electronic source used
for the purpose of displaying the applicable rate, under the caption "U.S.
Government Securities/Treasury Bills/Secondary Market," or
(33) if the rate referred to in clause (5) is not so published by 3:00
P.M., New York City time, on the related Calculation Date, the rate on the
particular Interest Determination Date calculated by the Calculation Agent as
the Bond Equivalent Yield of the arithmetic mean of the secondary market bid
rates, as of approximately 3:30 P.M., New York City time, on that Interest
Determination Date, of three primary United States government securities
dealers (which may include the Agents or their affiliates) selected by the
Calculation Agent for the issue of Treasury Bills with a remaining maturity
closest to the Index Maturity specified in the applicable pricing supplement,
or
(34) if the dealers so selected by the Calculation Agent are not quoting
as mentioned in clause (6), the Treasury Rate in effect on the particular
Interest Determination Date.
"Bond Equivalent Yield" means a yield (expressed as a percentage)
calculated in accordance with the following formula:
<TABLE>
<S> <C> <C>
Bond Equivalent
Yield = D x N x 100
-------------
360 - (D x M)
</TABLE>
where "D" refers to the applicable per annum rate for Treasury Bills quoted on
a bank discount basis and expressed as a decimal, "N" refers to 365 or 366, as
the case may be, and "M" refers to the actual number of days in the applicable
Interest Reset Period.
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 of the applicable Notes or in an
Addendum relating to the applicable Notes, if so specified on the face of the
applicable Notes, and, in each case, as specified in the applicable pricing
supplement.
Discount Notes
We may from time to time offer Notes ("Discount Notes") 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 as
the "Discount." In the event of redemption, repayment or acceleration of
maturity of a Discount Note, the amount payable to the Holder of a Discount
Note will be equal to the sum of:
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. the Issue Price (increased by any accruals of Discount) and, in the
event of any redemption of the applicable Discount Note, if
applicable, multiplied by the Initial Redemption Percentage (as
adjusted by the Annual Redemption Percentage Reduction, if
applicable); and
. any unpaid interest accrued on the Discount Notes to the date of the
redemption, repayment or acceleration of maturity, as the case may
be.
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, a 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
defined below), 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 the Discount Note and an assumption that the maturity of a Discount Note
will not be accelerated. If the period from the date of issue to the first
Interest Payment Date for a Discount Note (the "Initial Period") is shorter
than the compounding period for the 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 the 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
"Certain United States Federal Income Tax Considerations."
Indexed Notes
We 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 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
We may from time to time offer Notes ("Amortizing Notes") with the amount
of principal thereof and interest thereon payable in installments over their
terms. 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
We have 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.
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Upon issuance, all Book-Entry Notes of like tenor and terms up to
$400,000,000 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 another
nominee of the Depositary to a successor of the Depositary or a nominee of a
successor to the Depositary.
So long as the Depositary or its nominee is the registered holder of a
Global Security, the Depositary or its nominee, as the case may be, will be the
sole owner 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 registered 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 that Beneficial Owner is not a Participant, on the
procedures of the Participant through which that Beneficial Owner owns its
interest in order to exercise any rights of a registered holder under the
Indenture. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in certificated form. Such
limits and laws may impair the ability to transfer beneficial interests in a
Global Security representing Book-Entry Notes.
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 us that it is unwilling or unable to continue as Depositary for the
Global Securities or we become aware that the Depositary has ceased to be a
clearing agency registered under the Exchange Act and, in any such case we fail
to appoint a successor to the Depositary within 60 calendar days, (ii) we, in
our sole discretion, determine that the Global Securities shall be exchangeable
for Certificated Notes or (iii) an Event of Default has occurred and is
continuing with respect to the Notes under the Indenture. 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 $400,000,000 (which is not currently possible due to
limitations on the aggregate principal amount of the Notes), one Global
Security will be issued with respect to each $400,000,000 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
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<PAGE>
and by the New York Stock Exchange, Inc., the American Stock Exchange LLC, 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 which are deposited with, or on behalf of, the Depositary are
registered in the name of the Depositary's nominee, Cede & Co. The deposit of
Global Securities with, or on behalf of, the Depositary and their registration
in the name of Cede & Co. effect no change in beneficial ownership. The
Depositary has no knowledge of the actual Beneficial Owners of the Global
Securities representing the Book-Entry Notes; the Depositary's records reflect
only the identity of the Direct Participants to whose accounts such Book-Entry
Notes are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and by
Direct 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 a 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).
Principal, premium, if any, and/or interest, if any, payments on the
Global Securities representing the Book-Entry Notes will be made in immediately
available funds 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 us, 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.
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If applicable, redemption notices shall be sent to Cede & Co. If less
than all of the Book-Entry Notes of like tenor and terms are being redeemed,
the Depositary's practice is to determine by lot the amount of the interest of
each Direct Participant in such issue to be redeemed.
A Beneficial Owner shall give notice of any option to elect to have its
Book-Entry Notes repaid by us, 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 us 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.
We may decide to discontinue use of the system of book-entry transfers
through the Depositary (or a successor securities depository). In that event,
Certificated Notes will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that we believe to be
reliable, but neither we nor any Agent takes any responsibility for the
accuracy thereof.
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<PAGE>
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
Specified 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. We 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, their Foreign Currency Notes.
These purchasers should consult their own financial and legal advisors with
regard to these risks. 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, we are
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 amounts so
payable by us 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 the registered holders thereof unless
otherwise specified in the applicable pricing supplement or a registered holder
elects, in the manner described below, to receive these amounts in the
Specified Currency.
Any United States dollar amount to be received by a registered 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 us for
the purchase by the quoting dealer of the Specified Currency for United States
dollars for settlement on that payment date in the aggregate amount of the
Specified Currency payable to all registered 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 registered holders of Foreign Currency Notes by deductions from any
payments. If three bid quotations are not available, payments will be made in
the Specified Currency.
Registered 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 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. This written request may be mailed or hand
delivered or sent by cable, telex or other form of facsimile transmission. This
election will remain in effect until revoked by written notice delivered to the
Trustee on or prior to a Record Date or at least fifteen calendar days prior to
the Maturity Date, as the case may be. Registered holders of Foreign Currency
Notes to be held in the name of a broker or nominee should contact their 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 a
Global Security 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 its election. The applicable Participant must notify the Depositary of its
election on or prior to the third Business Day after the applicable 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 that election on or prior to
the fifth Business Day after the applicable 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 applicable Beneficial
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Owner and forwarded by the Participant to the Depositary, and by the Depositary
to the Trustee, on or prior to such dates, then the applicable Beneficial Owner
will receive payments in the Specified Currency.
We will make 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 in the manner specified herein with respect to Notes denominated
in United States dollars. See "Description of Notes--General." We will make
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
by check mailed to the address of the registered holders of their Foreign
Currency Notes as they appear in the Security Register, subject to the right to
receive these interest payments by wire transfer of immediately available funds
under the circumstances described under "Description of Notes--General." We
will make 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 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 the applicable registered holder, provided the particular bank
has appropriate facilities to make these payments and the particular Foreign
Currency Note is presented and surrendered at the office or agency maintained
by the Company for this purpose in the Borough of Manhattan, The City of New
York, in time for the Trustee to make these payments in accordance with its
normal procedures.
Availability of Specified Currency
If the Specified Currency for Foreign Currency Notes is not available for
any required payment of principal, premium, if any, and/or interest, if any,
due to the imposition of exchange controls or other circumstances beyond our
control, we will be entitled to satisfy our obligations to the registered
holders of these Foreign Currency Notes by making payments 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 the particular payment or, if the
Market Exchange Rate is not then available, on the basis of the most recently
available Market Exchange Rate.
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 the Specified Currency as certified for customs purposes
(or, if not so certified, as otherwise determined) by the Federal Reserve Bank
of New York.
All determinations 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 registered holders of the Foreign Currency Notes.
Judgments
Under current New York law, a state court in the State of New York would
be required to render a judgment in respect of a Foreign Currency Note in the
Specified Currency, and a judgment in the Specified Currency would be converted
into United States dollars at the exchange rate prevailing on the date of entry
of the judgment. Accordingly, registered holders of Foreign Currency Notes
would be subject to exchange rate fluctuations between the date of entry of a
foreign currency judgment and the time when the amount of the foreign currency
judgment is paid in United States dollars and converted by the applicable
registered 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.
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We will indemnify the registered holder of any Note against any loss
incurred as a result of any judgment or order being given or made for any
amount due under the particular Note and that judgment or order requiring
payment in a currency (the "Judgment Currency") other than the Specified
Currency, and as a result of any variation between:
. the rate of exchange at which the Specified Currency amount is
converted into the Judgment Currency for the purpose of that judgment
or order; and
. the rate of exchange at which the registered holder, on the date of
payment of that judgment or order, is able to purchase the Specified
Currency with the amount of the Judgment Currency actually received.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, tax-exempt organizations, regulated
investment companies, dealers in securities or currencies, persons holding
Notes as a hedge against currency risks or as a position in a "straddle" for
tax purposes, or persons whose functional currency is not the United States
dollar. It also does not deal with holders other than original purchasers
(except where otherwise specifically noted).
Persons considering the purchase of the Notes should consult their own
tax advisors concerning the application of United States Federal income tax
laws to their particular situations as well as any consequences of the
purchase, ownership and disposition of the Notes arising under the laws of any
state, local or foreign taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation or partnership (including an entity
treated as a corporation or partnership for United State Federal income tax
purposes) created or organized in or under the laws of the United States, any
state thereof or the District of Columbia (other than a partnership that is not
treated as a United States person under any applicable Treasury regulations),
(iii) an estate whose income is subject to United States federal income tax
regardless of its source, (iv) a trust if a court within the United States is
able to exercise primary supervision over the administration of the trust and
one or more United States persons have the authority to control all substantial
decisions of the trust, or (v) 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. Notwithstanding the preceding clause (iv), to the extent provided in
regulations, certain trusts in existence on August 20, 1996 and treated as
United States persons prior to such date that elect to continue to be so
treated also shall be considered U.S. Holders. 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"), 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 defined below) 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
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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 the resulting foregone
interest on such Note or any "true" discount on such Note (i.e., the excess of
the Note's stated principal amount over its issue price) equals or exceeds a
specified de minimis amount, then the stated interest on the Note would be
treated as original issue discount rather than qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of an Original Issue Discount Note having a maturity
of more than one year from its issue date 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 difference between (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 OID Regulations generally
allow any reasonable method to be used in determining the amount of original
issue discount allocable to a short initial accrual period (if all other
accrual periods are of equal length other than a short final accrual period)
and require that the amount of original issue discount allocable to the final
accrual period equal of the excess of the amount payable at the maturity of the
Original Issue Discount Note (other than any payment of qualified stated
interest) over 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.
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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
provides for stated interest, paid or compounded at least annually, at current
values of (i) one or more qualified floating rates, (ii) a single fixed rate
and one or more qualified floating rates, (iii) a single objective rate, or
(iv) a single fixed rate and a single objective rate that is a qualified
inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than .65 but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than .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 that is based on
objective financial or economic information. A rate will not qualify as an
objective rate if 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). In addition, a rate
will not qualify as an objective rate if 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. A "qualified inverse floating
rate" is any objective rate where such rate is equal to a fixed rate minus a
qualified floating rate, as long as variations in the rate can reasonably be
expected to inversely reflect contemporaneous variations in the 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
the 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 the 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 a Variable Note is determined under the rules applicable to
fixed rate debt instruments by assuming that the variable rate is a fixed
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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 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. In general, the regulations concerning the
proper United States Federal income tax treatment of contingent payment debt
instruments (the "CPDI Regulations) 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 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 will be presumed to be exercised if, by utilizing any date on which
the Note may be redeemed or repaid as its maturity
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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 option
is not in fact exercised when presumed to be, solely for the 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.
Election to Treat All Interests 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. This
election applies only to the Note for which it is made and cannot be revoked
without the consent of the IRS. A U.S. Holder considering this election should
consult its own tax advisor.
Short-Term Notes
Notes that have a fixed maturity of one year or less ("Short-Term Notes")
will be treated as having been issued with original issue discount because none
of the interest will be treated as qualified stated interest. In general, an
individual or other cash method U.S. Holder is not required to accrue such
original issue discount unless the U.S. Holder elects to do so. If such an
election is not made, any gain recognized by the U.S. Holder on the sale,
exchange or maturity of the Short-Term Note will be ordinary income to the
extent of the original issue discount accrued on a straight-line basis, or upon
election under the constant yield method (based on daily compounding), through
the date of sale or maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the Short-
Term Note will be deferred until a corresponding amount of income is realized.
U.S. Holders who report income for United States Federal income tax purposes
under the accrual method, and certain other holders including banks and dealers
in securities, are required to accrue original issue discount on a Short-Term
Note on a straight-line basis unless an election is made to accrue the original
issue discount under a constant yield method (based on daily compounding).
Market Discount
If a U.S. Holder purchases a Note at original issue, 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 adjusted issue price as of the purchase date, such U.S.
Holder will be treated as having purchased such Note at a "market discount,"
unless such market discount is less than a specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat
any partial principal payment (or, in the case of 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
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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 basis), in which case the rules described above
regarding the treatment as ordinary income of gain upon the disposition of the
Note and upon the receipt of certain cash payments and regarding the deferral
of interest deductions will not apply. Generally, such currently included
market discount is treated as ordinary interest for United States Federal
income tax purposes. Such an election will apply to all debt instruments
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 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
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.
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 long-term capital
gain or loss if the Note were held for more than one year. Non-corporate
taxpayers are subject to reduced maximum rates on long-term capital gains and
are generally subject to tax at ordinary income rates on short-term capital
gains. The deductibility of capital losses is subject to certain limitations.
Prospective investors should consult their own tax advisors concerning these
tax law provisions.
Notes Denominated or on which Interest is Payable in a Foreign Currency
As used herein, "Foreign Currency" means a 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 (determined on the date such
payment is received) regardless of whether the payment is in fact converted to
U.S. dollars at that time, and such U.S. dollar value will be the U.S. Holder's
tax basis in such Foreign Currency. No exchange gain or loss is recognized with
respect to the receipt of such payment.
Payments of Interest in a Foreign Currency--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
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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 (determined on the date such payment is received) in respect
of such accrual period and the U.S. dollar value of interest income that has
accrued during such accrual period (as determined above).
Purchase, Sale and Retirement of Notes. A U.S. Holder who purchases a
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 the 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 principal
payments received by the holder. 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 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.
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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 acquired 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 partner (as defined in Section 871(h)(3) of the Code) in 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
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
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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.
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 partner in 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 BEN 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.
Withholding Regulations
Recently finalized Treasury regulations, dealing with withholding on
income paid to foreign persons, backup withholding and related matters,
generally will be effective for payments made after December 31, 2000, subject
to certain transition rules. These regulations generally attempt to unify
certification requirements and modify reliance standards. In particular, the
new regulations replace the current IRS Form W-8, Form 4224 and Form 1001 with
various revised IRS Forms W-8 and provide that the current Form W-8, Form 4224
and Form 1001 will be invalid after December 31, 2000. Therefore, the holder of
Notes will be required to file the appropriate revised Form W-8 before December
31, 2000.
Those recently finalized regulations also generally would require, in the
case of Notes held by a foreign partnership, that (i) certification described
above be provided by the partners rather than the foreign partnership and (ii)
the partnership provide certain information, including a United States taxpayer
identification number. A look through rule generally would apply in the case of
tiered partnerships.
Prospective investors are strongly urged to consult their own tax
advisors with respect to these withholding regulations.
S-36
<PAGE>
PLAN OF DISTRIBUTION
We are offering the Notes on a continuing basis for sale to or through
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc One Capital Markets,
Inc., Bear, Stearns & Co. Inc., Goldman, Sachs & Co., PNC Capital Markets,
Inc., Salomon Smith Barney Inc., and Wachovia Securities, Inc. (the "Agents").
We also may appoint additional persons to serve as Agents from time to time.
The Agents, individually or in a syndicate, may purchase Notes, as principal,
from us 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. However, we may agree
with an Agent for that Agent to utilize its reasonable efforts on an agency
basis on our behalf to solicit offers to purchase Notes at 100% of the
principal amount thereof, unless otherwise specified in the applicable pricing
supplement. We 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 that Agent as our agent. We will negotiate commissions with respect to
Notes with stated maturities in excess of 30 years that are sold through an
Agent as our agent at the time of the related sale. In addition, we estimate
our expenses incurred in connection with the offering and sale of the Notes,
including reimbursement of certain of the Agents' expenses, total approximately
$100,000.
Unless otherwise specified in the applicable pricing supplement, any Note
sold to an Agent as principal will be purchased by that 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 us as
principal to certain dealers less a concession equal to all or any portion of
the discount received in connection with that purchase. An Agent may allow, and
dealers may reallow, a discount to certain other dealers. 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.
We reserve 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 by us 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, you will
be required to pay the purchase price of your Notes 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 a secondary market for
the Notes will develop 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.
In connection with an offering of Notes purchased by one or more Agents
as principal on a fixed offering price basis, the applicable Agents will be
permitted to engage in certain transactions that stabilize the price of Notes.
These transactions may consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of Notes. If those Agents create a short
position in Notes, i.e., if they sell Notes in an amount exceeding the amount
referred to in the applicable pricing supplement, they may reduce that short
position by purchasing Notes in the open market. In general, purchases of Notes
for the purpose of stabilization or to reduce a short position could cause the
price of Notes to be higher than it might be in the absence of these type of
purchases.
S-37
<PAGE>
Neither we nor any Agent makes any representation or prediction as to the
direction or magnitude of any effect that the transactions described in the
immediately preceding paragraph may have on the price of Notes. In addition,
neither we nor any Agent makes any representation that the Agents will engage
in any such transactions or that such transactions, once commenced, will not be
discontinued without notice.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). We have agreed to
indemnify the Agents against certain liabilities, including liabilities under
the Securities Act, or to contribute to payments the Agents may be required to
make in respect thereof.
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 us and certain of our affiliates.
From time to time, we may sell other securities referred to in the
accompanying prospectus, and the amount of Notes offered hereby may be reduced
as a result of these sales.
S-38
<PAGE>
PROSPECTUS
$400,000,000
COLONIAL REALTY LIMITED PARTNERSHIP
Debt Securities
---------------
We may from time to time offer in one or more series debt securities with
an aggregate public offering price of up to $400,000,000 (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.
The specific terms of the debt securities to which this prospectus
relates 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 our option 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 U.S. federal income tax considerations relating to, and any
listing on a securities exchange of, the debt securities covered by the
prospectus supplement.
The debt securities may be offered directly, through agents designated
from time to time by us, 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. For more detailed information, see "Plan of Distribution" on page
26 of this prospectus. No debt securities may be sold without delivery of a
prospectus supplement describing the method and terms of the offering of the
debt securities.
---------------
We encourage you to read this entire prospectus carefully,
including the section entitled "Risk Factors" beginning on page 4.
---------------
Neither the Securities Exchange Commission nor any state securities commission
has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. 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.
This prospectus is dated June 7, 2000
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with
the SEC utilizing a "shelf" registration process. Under this process, Colonial
Realty Limited Partnership, which we generally refer to as the "Company" or
"we," "us," or "our" in this prospectus, may offer and sell the securities
described in this prospectus in one or more offerings up to a total dollar
amount of $400,000,000. This prospectus provides you with a general description
of the securities we may offer. Each time we offer securities, we will provide
a prospectus supplement and attach it to this prospectus. The prospectus
supplement will contain specific information about the terms of the securities
being offered at that time. The prospectus supplement may also add, update or
change information contained in this prospectus. You should read both this
prospectus and any prospectus supplement, together with any additional
information you may need to make your investment decision.
WHERE TO FIND ADDITIONAL INFORMATION
The Company files annual, quarterly and special reports and other
information with the SEC. You may read and copy materials the Company has filed
with the SEC at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of its public reference room. The Company's SEC
filings also are available to the public on the SEC's Internet site at
http://www.sec.gov.
The SEC allows the Company to "incorporate by reference" in this
prospectus certain information it files with the SEC, which means that it may
disclose important information in this prospectus by referring the reader to
the document that contains the information. The information incorporated by
reference is considered to be a part of this prospectus, and later information
filed with the SEC will update and supersede this information. The Company
incorporates by reference the documents listed below and any future filings it
makes with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, until the offering of securities covered by this
prospectus is completed:
. the Annual Report on Form 10-K of the Company for the fiscal year ended
December 31, 1999;
. the Company's Current Report on Form 8-K dated January 18, 2000 and filed
with the SEC on February 3, 2000; and
. the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 2000.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this prospectus is delivered, upon his or
her written or oral request, a copy of any or all of the information
incorporated by reference in this prospectus, other than exhibits to such
documents, unless the exhibits are specifically incorporated by reference in
such documents. Written requests for such copies should be addressed to:
Colonial Properties Trust 2101 Sixth Avenue North, Suite 750 Birmingham,
Alabama 35203 Attn: Chief Financial Officer(205) 250-8700
The Company has filed with the SEC a "shelf" registration statement on
Form S-3 under the Securities Act of 1933, relating to the securities that may
be offered by this prospectus. This prospectus is a part of that registration
statement, but does not contain all of the information in the registration
statement. For more detail concerning the Company and any securities offered by
this prospectus, you may examine the registration statement and the exhibits
filed with it at the locations listed in the first paragraph under this
heading.
Readers should rely on the information provided or incorporated by
reference in this prospectus or in the applicable supplement to this
prospectus. Readers should not assume that the information in this prospectus
and the applicable supplement is accurate as of any date other than the date on
the front cover of the document.
2
<PAGE>
THE COMPANY
The Company is the "operating partnership" of Colonial Properties Trust,
an Alabama real estate investment trust, or "REIT," whose shares are listed on
the New York Stock Exchange and which we generally refer to as "Colonial
Properties" in this prospectus. We are a fully integrated real estate company
engaged in the ownership, development and operation of multifamily, retail and
office properties. As of December 31, 1999, our real estate portfolio consisted
of 111 properties located in Alabama, Florida, Georgia, Mississippi, North
Carolina, South Carolina, Tennessee, Texas, and Virginia. As of December 31,
1999, the Company owned 52 multifamily apartment communities containing a total
of 16,415 apartment units, 41 retail properties containing a total of
approximately 13.9 million square feet of retail space, 18 office properties
containing a total of approximately 3.1 million square feet of office space,
and certain undeveloped parcels of land adjacent to or near some of our
properties.
As of December 31, 1999, the Company had approximately 1,000 employees
providing a full range of real estate services from our headquarters in
Birmingham, Alabama, from our sixteen regional offices located in the Orlando
and Tampa, Florida, Macon and Roswell, Georgia, Birmingham, Huntsville,
Montgomery and Mobile, Alabama, Greenville, South Carolina and Burlington,
North Carolina metropolitan areas, and from the locations of our properties.
Our principal executive offices are located at 2101 Sixth Avenue North, Suite
750, Birmingham, Alabama 35203, and our telephone number is (205) 250-8700.
RATIOS OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges of the Company for each of the
periods indicated was as follows:
<TABLE>
<CAPTION>
For the twelve months
For the three ended December 31,
months ended -----------------------------
March 31, 2000 1999 1998 1997 1996 1995
-------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
1.65x 2.03x 2.14x 1.95x 2.28x 1.89x
</TABLE>
For purposes of computing these ratios, we calculated earnings by adding
fixed charges (excluding capitalized interest) to income (loss) before gains
from sales of property, income taxes and extraordinary items. "Fixed charges"
consist of (1) interest costs, whether expensed or capitalized, (2) the
interest component of rental expense, and (3) amortization and write-off of
debt discounts and issue costs, whether expensed or capitalized.
3
<PAGE>
RISK FACTORS
Described below are the risks that we believe are material to investors
who purchase or own our debt securities.
Our performance is subject to general risks associated with the real estate
industry
Our assets may not generate sufficient income and we may not be able to
control our operating costs
If our assets do not generate income sufficient to pay our expenses and
maintain our properties, or if we do not adequately control our operating
costs, we may not be able to service our debt. A number of factors may
adversely affect our ability to generate sufficient income to pay our expenses,
maintain our properties and permit us to service our debt. These factors
include:
. whether or not we can attract tenants at favorable rental rates,
which will depend on several factors, including:
-- local conditions such as an oversupply of, or reduction in demand
for, multifamily, retail or office properties;
-- the attractiveness of our properties to residents, shoppers and
tenants; and
-- decreases in market rental rates; and
. our ability to collect rent from our tenants.
Factors that may adversely affect our operating costs include:
. the need to pay for insurance and other operating costs, including
real estate taxes, which could increase over time;
. the need periodically to repair, renovate and relet space;
. the cost of compliance with governmental regulation, including zoning
and tax laws;
. the potential for liability under applicable laws;
. interest rate levels; and
. the availability of financing.
Our expenses may remain constant even if our revenues decrease
The expense of owning and operating a property is not necessarily reduced
when circumstances such as market factors and competition cause a reduction in
income from the property. As a result, if revenues drop, we may not be able to
reduce our expenses accordingly. Loan payments are an example of a cost that
will not be reduced if our revenues decrease. If a property is mortgaged and we
are unable to meet the mortgage payments, the lender could foreclose on the
mortgage and take the property, resulting in a further reduction in revenues.
We may be unable to renew leases or relet space as leases expire
If our tenants decide not to renew their leases upon their expiration, we
may not be able to relet the space. Even if the tenants do renew or we can
relet the space, the terms of renewal or reletting, including the cost of
required renovations, may be less favorable than current lease terms. If we are
unable to renew the leases or relet the space promptly, or if the rental rates
upon renewal or reletting are significantly lower than expected rates, then our
cash flow and ability to service debt would be adversely affected.
4
<PAGE>
We depend on local economic conditions in our primary markets
As of December 31, 1999, all of our properties were located in the
Sunbelt region of the United States, and 45 of our properties were located in
Birmingham and Montgomery, Alabama, Orlando, Florida and Macon, Georgia. Our
performance and ability to service our debt could be adversely affected by
economic conditions in the Sunbelt region and in Birmingham, Montgomery,
Orlando and Macon in particular.
New acquisitions and developments may fail to perform as expected
Assuming we are able to obtain capital on commercially reasonable terms,
we intend to selectively acquire multifamily, retail or office properties where
we perceive investment opportunities that are consistent with our business
strategies. Newly acquired properties may fail to perform as expected. We may
underestimate the costs necessary to bring an acquired property up to the
standards we have established for its intended market position. In addition, we
may not be in a position or have the opportunity in the future to make suitable
property acquisitions on favorable terms.
Competition for acquisitions could result in increased prices for
properties
We expect other major real estate investors with significant capital to
compete with us for attractive investment opportunities. These competitors
include publicly traded REITs, private REITs, investment banking firms and
private institutional investment funds. This competition could increase prices
for multifamily, retail or office properties.
Our development and expansion activities are subject to risks
We intend to continue to develop new properties and expand existing
properties where we believe that development or expansion is consistent with
our business strategies. New projects subject us to a number of risks,
including the risks that:
. construction delays or cost overruns may increase project costs;
. permanent debt or equity financing may not be available on acceptable
terms to finance new development or expansion projects;
. we may fail to meet anticipated occupancy or rent levels;
. we may fail to secure required zoning, occupancy or other
governmental permits and authorizations; and
. changes in applicable zoning and land use laws may require us to
abandon projects prior to their completion, resulting in the loss of
development costs incurred up to the time of abandonment.
Because real estate investments are illiquid, we may not be able to sell
properties when appropriate
Real estate investments generally cannot be sold quickly. We may not be
able to vary our portfolio promptly in response to economic or other
conditions. This inability to respond to changes in the performance of our
investments could adversely affect our ability to service our debt.
Environmental problems are possible and can be costly
Federal, state and local laws and regulations relating to the protection
of the environment may require a current or previous owner or operator of real
property to investigate and clean up hazardous or toxic substances or petroleum
product releases at the property, without regard to whether the owner or
operator knew or caused the presence of the contaminants. If unidentified
environmental problems arise at one of our properties, we may have to make
substantial payments to a governmental entity or third parties for property
damage and for investigation and clean-up costs. Even if more than one person
may have been responsible for the contamination, we may be held responsible for
all of the clean-up costs incurred. Our liability under environmental laws
could adversely affect our cash flow and our ability to service our debt.
5
<PAGE>
At one of our 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. We are 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, we have been reimbursed under the Alabama Underground
Storage Tank Trust Fund for the costs incurred to date in connection with the
ongoing cleanup, and we expect to be reimbursed for the remaining costs as
well. We have received a "no further action" letter from the Alabama Department
of Environmental Management.
On December 29, 1998, we acquired Bel Air Mall in Mobile, Alabama. During
the course of our environmental due diligence, we identified several different
areas of the property in which contamination is present. One of those areas
involves drycleaner solvent; the others involve petroleum contamination. The
Alabama Department of Environmental Management is overseeing the investigation
and cleanup of the drycleaner contamination. It is possible that a claim could
be asserted against us, as owner of the property, for the investigation and
remediation of the contamination. Under the terms of the purchase and sale
agreement, the former owner of the property purchased a $10 million insurance
policy and established escrow accounts totaling $1,275,000 to cover the costs
associated with investigating and remediating the contaminated areas. In
addition, subject to limitations, the seller will be performing all required
remediation of the drycleaner contamination.
Some potential losses are not covered by insurance
We carry comprehensive liability, fire, extended coverage and rental loss
insurance on all of our properties. We believe the policy specifications and
insured limits of these policies are adequate and appropriate. There are,
however, certain types of losses, such as lease and other contract claims, that
generally are not insured. Should an uninsured loss or a loss in excess of
insured limits occur, we could lose all or a portion of the capital we have
invested in a property, as well as the anticipated future revenue from the
property. In such an event, we might nevertheless remain obligated for any
mortgage debt or other financial obligations related to the property.
Debt financing, financial covenants, our degree of leverage and increases in
interest rates could adversely affect our economic performance
Scheduled debt payments could adversely affect our financial condition
Our business is subject to risks normally associated with debt financing.
If principal payments due at maturity cannot be refinanced, extended or paid
with proceeds of other capital transactions, such as new equity capital, our
cash flow will not be sufficient in all years to repay all maturing debt. If
prevailing interest rates or other factors at the time of refinancing, such as
the possible reluctance of lenders to make commercial real estate loans, result
in higher interest rates, increased interest expense would adversely affect
cash flow and our ability to service our debt.
Our obligation to comply with financial covenants in our debt agreements
could restrict our range of operating activities
Our credit facility contains customary restrictions, requirements and
other limitations on our ability to incur debt, including:
. debt to assets ratios;
. secured debt to total assets ratios;
. debt service coverage ratios; and
. minimum ratios of unencumbered assets to unsecured debt.
6
<PAGE>
The indenture under which our senior unsecured debt is issued contains
financial and operating covenants including coverage ratios. Our indenture also
limits our ability to:
. incur secured and unsecured indebtedness;
. sell all or substantially all or our assets; and
. engage in mergers, consolidations and acquisitions.
Our degree of leverage could limit our ability to obtain additional
financing
Our "debt to market capitalization" ratio, which we calculate as total
debt as a percentage of total debt plus the market value of our outstanding
units and the outstanding common shares of beneficial interest of Colonial
Properties, was approximately 51.3% as of December 31, 1999. Increases in our
leverage could adversely affect our ability to obtain additional financing in
the future for working capital, capital expenditures, acquisitions, development
or other general corporate purposes, and may make us more vulnerable to a
downturn in business or the economy generally.
Rising interest rates could adversely affect our cash flow
Advances under our credit facility bear interest at a variable rate
ranging between 80 and 135 basis points above LIBOR. We may borrow additional
money with variable interest rates in the future, and may enter into other
transactions to limit our exposure to rising interest rates as appropriate and
cost effective. Increases in interest rates, or the loss of the benefits of
hedging agreements, would increase our interest expense, which would adversely
affect cash flow and our ability to service our debt.
Some of our general partner's trustees and officers have conflicts of interest
and could exercise influence in a manner inconsistent with holders of interests
in the Company
As a result of their substantial ownership of common shares of our
general partner, Colonial Properties, and units of the Company, Messrs. Thomas
Lowder, Colonial Properties' Chairman of the Board, Chief Executive Officer and
President, and James Lowder, Harold Ripps, Herbert Meisler and William Johnson,
each of whom is a trustee of Colonial Properties, might seek to exert influence
over our decisions as to sales or refinancings of particular properties we own.
Any such exercise of influence might produce decisions which are not in the
best interest of all of the holders of interests in the Company.
The Lowder family, which includes Thomas and James Lowder, who are
brothers, and their affiliates, holds interests in companies that have
performed construction, management, insurance brokerage and other services with
respect to our properties. These companies may perform similar services for us
in the future. As a result, 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 and James
Lowder, as trustees of Colonial Properties, may be in a position to influence
the Company to do business with companies in which the Lowder family has a
financial interest. Our policies may not be successful in eliminating the
influence of conflicts. Moreover, transactions with companies controlled by the
Lowder family, if any, may not be on terms as favorable to us as we could
obtain in an arms-length transaction with a third party.
We do not control our management, leasing and brokerage businesses
To facilitate the maintenance of its REIT qualification, Colonial
Properties has a "non-controlled subsidiary," Colonial Properties Services,
Inc., which conducts management, leasing and brokerage business for properties
the Company does not wholly own. While Colonial Properties owns 99% of the
economic interest in the non-controlled subsidiary, 99% of its voting stock is
owned by members of the Lowder family. We therefore lack the ability to set the
business policies and operations of the non-controlled subsidiary.
7
<PAGE>
We are subject to risks associated with the property management, leasing and
brokerage businesses
In addition to the risks we face as a result of our ownership of real
estate, we face risks relating to the property management, leasing and
brokerage businesses of Colonial Properties Services, Inc., including risks
that:
. management contracts or service agreements with third-party owners
will be lost to competitors;
. contracts will not be renewed upon expiration or will not be renewed
on terms consistent with current terms; and
. leasing and brokerage activity generally may decline.
Each of these developments could adversely affect our ability to service our
debt.
We are dependent on external sources of capital
To qualify as a REIT, Colonial Properties must distribute to its
shareholders each year at least 95% (90% for taxable years beginning after
December 31, 2000) of its net taxable income, excluding any net capital gain.
Because of these distribution requirements, it is not likely that we will be
able to fund all future capital needs from income from operations. We
therefore will have to rely on third-party sources of capital, which may or
may not be available on favorable terms or at all. Our access to third-party
sources of capital depends on a number of things, including the market's
perception of our growth potential and our current and potential future
earnings. Moreover, additional equity offerings may result in substantial
dilution, and additional debt financing may substantially increase our
leverage.
Our general partner may change our business policies in the future
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 trustees of
Colonial Properties. 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 service debt.
We intend to qualify as a partnership but cannot guarantee that we will
qualify
We intend to qualify as a partnership for federal income tax purposes.
However, we will be treated as a corporation for federal income tax purposes
if we are a "publicly traded partnership," unless at least 90% of our income
is qualifying income as defined in the tax code. The income requirements
applicable to REITs and the definition of qualifying income for purposes of
this 90% test are similar in most, but not all, respects. Qualifying income
for the 90% test generally includes passive income, such as specified types of
real property rents, dividends and interest. We cannot guarantee that we will
meet this qualifying income test. If we were to be taxed as a corporation, we
would incur substantial tax liabilities, Colonial Properties would fail to
qualify as a REIT for tax purposes and Colonial Properties' and our ability to
raise additional capital could be impaired.
Our general partner intends to qualify as a REIT, but we cannot
guarantee that it will qualify
We believe that Colonial Properties has qualified for taxation as a REIT
for federal income tax purposes commencing with its taxable year ended
December 31, 1993. If Colonial Properties qualifies as a REIT, it generally
will not be subject to federal income tax on its income that it distributes to
its shareholders. Colonial Properties plans to continue to meet the
requirements for taxation as a REIT, but it may not qualify. Many of the REIT
requirements are highly technical and complex. The determination that Colonial
Properties is a REIT requires an analysis of various factual matters and
circumstances that may not be totally within its control. For example, to
qualify as a REIT, at least 95% of Colonial Properties' gross income must come
from certain sources that are itemized in the REIT tax laws. Colonial
Properties is also required to distribute to
8
<PAGE>
shareholders at least 95% (90% for taxable years beginning after December 31,
2000) of its REIT taxable income, excluding capital gains. The fact that
Colonial Properties holds most of its assets through us further complicates the
application of the REIT requirements. Even a technical or inadvertent mistake
could jeopardize Colonial Properties' REIT status. Furthermore, Congress and
the IRS might make changes to the tax laws and regulations, and the courts
might issue new rulings that make it more difficult, or impossible, for
Colonial Properties to remain qualified as a REIT. We do not believe, however,
that any pending or proposed tax law changes would jeopardize its REIT status.
If Colonial Properties failed to qualify as a REIT, it would be subject
to federal income tax at regular corporate rates. Also, unless the IRS granted
relief under certain statutory provisions, Colonial Properties would remain
disqualified as a REIT for the four years following the year Colonial
Properties first failed to qualify. If Colonial Properties failed to qualify as
a REIT, it would have to pay significant income taxes and would therefore have
less money available for investments or for distributions to shareholders. This
would likely have a significant adverse affect on the value of our securities.
In addition, Colonial Properties would no longer be required to make any
distributions to shareholders, but we would still be required to distribute
quarterly substantially all of our net cash revenues to our unitholders.
REIT Modernization Act changes to the REIT asset tests
Currently, a REIT may not own securities in any one issuer if the value
of those securities exceeds 5% of the value of the REIT's total assets or the
securities owned by the REIT represent more than 10% of the issuer's
outstanding voting securities. As a result of the REIT Modernization Act, after
December 31, 2000, the 5% value test and the 10% voting security test will be
modified in two respects. First, the 10% voting securities test will be
expanded so that REITs also will be prohibited from owning more than 10% of the
value of the outstanding securities of any one issuer. Second, an exception to
these tests that will allow a REIT to own securities of a subsidiary that
exceeds the 5% value test and the new 10% vote or value test if the subsidiary
elects to be a "taxable REIT subsidiary," which would be a fully taxable
corporation. The expanded 10% vote or value test, however, will not apply to an
existing subsidiary unless it engages in a substantial new line of business or
acquires any substantial asset or Colonial Properties acquires any securities
in that subsidiary after July 12, 1999. Under a new asset test, for taxable
years beginning after December 31, 2000, Colonial Properties will not be able
to own securities of taxable REIT subsidiaries that represent in the aggregate
more than 20% of the value of Colonial Properties' total assets. At the present
time, no decision has been made as to whether Colonial Property Services, Inc.
will elect to be treated as a taxable REIT subsidiary.
Several provisions of the new law will ensure that a taxable REIT
subsidiary will be subject to an appropriate level of federal income taxation.
For example, a taxable REIT subsidiary will be limited in its ability to deduct
interest payments made to an affiliated REIT. In addition, the REIT will have
to pay a 100% penalty tax on some payments that it receives if the economic
arrangements between the REIT, the REIT's tenants, and the taxable REIT
subsidiary are not comparable to similar arrangements between unrelated
parties.
USE OF PROCEEDS
Unless otherwise described in the supplement to this prospectus used to
offer specific securities, the Company intends to use the net proceeds from the
sale of securities under this prospectus for general corporate purposes,
including, without limitation, the development and acquisition of additional
properties as suitable opportunities arise, the repayment of other debt,
capital expenditures, improvements to certain properties in our portfolio,
working capital and other general purposes.
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DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general provisions of the
debt securities that may be offered by means of this prospectus. The particular
terms of the debt securities being offered and the extent to which such general
provisions described below apply will be described in a prospectus supplement
relating to such debt securities.
Any debt securities offered by means of this prospectus will be issued
under an indenture dated July 22, 1996, as amended or supplemented from time to
time, between the Company and Bankers Trust Company, as 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 "Where to Find Additional
Information" on page 2 of this prospectus. The indenture is subject to, and
governed by, the Trust Indenture Act of 1939, as amended. The statements made
in this prospectus relating to the indenture and the debt securities to be
issued under the indenture are summaries of some, but not all, of the
provisions of the indenture and debt securities 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. Unless otherwise
specified, all section references appearing in this summary are to sections of
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 Properties, our general partner, 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 supplemental indentures
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 trustees of Colonial
Properties, as general partner of the Company, or as established in, or in
accordance with, the indenture or in one or more supplemental indentures. All
debt securities of one series do not have to 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 that series, for issuances of additional debt
securities of such series (Section 301). The debt securities, while recourse to
all of the assets of the Company, will not be recourse to Colonial Properties,
as general partner of the Company.
The indenture provides that there may be more than one trustee under the
indenture, 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 (section 608 of the indenture). In the event that
two or more persons are acting as trustee with respect to different series of
debt securities, 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 in this summary or in the indenture, any action
described 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 (Section 609).
The prospectus supplement relating to any series of debt securities being
offered will contain information on the specific terms of those debt
securities, including, without limitation:
. the title of such debt securities;
. the aggregate principal amount of such debt securities and any limit
on such aggregate principal amount;
. the percentage of the principal amount at which such debt securities
will be issued and, if other than the entire principal amount, the
portion of the principal amount payable upon declaration of
acceleration of the maturity thereof;
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. the date or dates, or the method for determining the date or dates,
on which the principal of such debt securities will be payable;
. the rate or rates (which may be fixed or variable) at which such debt
securities will bear interest, if any, or the method by which such
rate or rates shall be determined;
. the date or dates, or the method for determining such date or dates,
from which any interest will accrue, the dates on which any interest
will be payable, the regular record dates for interest payment dates,
or the method by which such interest payment dates shall be
determined, the persons to whom such interest shall be payable, and
the basis upon which interest shall be calculated if other than that
of a 360-day year of twelve 30-day months;
. 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;
. 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 the option to redeem;
. 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 of the debt securities, 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 the Company's obligation to redeem,
repay or repurchase such debt securities;
. 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;
. 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;
. 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;
. whether such debt securities will be issued in certificated and/or
book-entry form;
. 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 of $1,000 and, if in bearer form,
the denominations thereof and the terms and conditions relating
thereto;
. the applicability, if any, of the defeasance and covenant defeasance
provisions of Article Fourteen of the indenture;
. 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;
. the terms and conditions, if any, upon which such debt securities may
be subordinated to other debt of the Company; and
. any other terms of the debt securities not inconsistent with the
provisions of the indenture (Section 301).
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The debt securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof.
We refer to such debt securities as "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 described below under "Certain Covenants--Limitations on
Incurrence of Debt" beginning on page 14 of this prospectus, the indenture does
not contain any provisions that would limit the ability of the Company to incur
debt 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
Properties' 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. You should refer
to the applicable 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, on pages 14-20 of this
prospectus, 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 offered by means of this prospectus will be
issuable in denominations of $1,000 and integral multiples of $1,000 (Section
302).
Unless otherwise specified in the applicable prospectus supplement, the
principal of (and applicable premium, if any) and interest on any series of
debt securities will be payable at the corporate trust office of the trustee,
the address of which will be stated in the applicable prospectus supplement;
provided that, at the option of the Company, payment of interest may be made by
check mailed to the address of the person entitled to the interest payment as
it appears in the register for the 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 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 for the payment of such
defaulted interest to be fixed by the trustee, and notice whereof
shall be given to the holder of such debt security not less than ten
days prior to such special record date; or
. 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 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 (section 305). 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 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 offered by means of this prospectus (Section 1002).
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Neither the Company nor the trustee shall be required to:
. 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;
. 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
. 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:
. 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 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;
. immediately after giving effect to such transaction and treating any
indebtedness that becomes an obligation of the Company or any
Subsidiary (as defined below) 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
. an officer's certificate and legal opinion covering such conditions
described above shall be delivered to the trustee (Sections 801 and
803).
As used in this prospectus, "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. Colonial Properties Services, Inc. would not be
considered a Subsidiary of the Company.
Certain Covenants
Limitations on Incurrence of Debt. Under the indenture, the Company will
not, and will not permit any Subsidiary to, incur any Debt (as defined below),
other than intercompany Debt (including Debt owed to Colonial Properties
Services, Inc. arising from routine cash management practices) 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:
. 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;
. 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
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. 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).
In addition to the foregoing limitations 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 (as defined below) to
the Annual Service Charge (as defined below) for the four consecutive fiscal
quarters most recently ended prior to the date on which such additional Debt is
to be incurred shall have been less than 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, whether owned at the date of the indenture or thereafter acquired,
which we refer to as "Secured Debt," 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:
. the Company's Adjusted Total Assets as of the end of the most recent
fiscal quarter prior to the incurrence of such additional Debt;
. 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
. 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 Subsidiary shall create, assume, guarantee
or otherwise become liable in respect of the Debt.
Maintenance of Unencumbered Total Asset Value. Under the indenture, the
Company will at all times maintain an Unencumbered Total Asset Value (as
defined below) 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)).
Existence. Except as described under "Merger, Consolidation or Sale" on
page 14 of this prospectus, 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 of the right or franchise is no longer
desirable in the conduct of its business and that the loss of the right or
franchise is not disadvantageous in any material respect to the holders of the
debt securities (Section 1006).
Maintenance of Properties. Under the indenture, 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 of the material properties, 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).
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Insurance. Under the indenture, 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. Under the indenture, the Company will
pay or discharge or cause to be paid or discharged, before they shall become
delinquent:
. 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
. 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. Under the indenture, whether or not
the Company is subject to Section 13 or 15(d) of the Securities Exchange Act of
1934, which we refer to as the "Exchange Act," the Company will, to the extent
permitted under the Exchange Act, file with the SEC the annual reports,
quarterly reports and other documents which the Company would have been
required to file with the SEC pursuant to such Section 13 or 15(d) if the
Company were subject to those provisions. We refer to these reports and other
documents as the "Financial Information." The Financial Information must be
filed with the SEC on or prior to the respective dates by which the Company
would have been required to file the Financial Information if the Company were
subject to Section 13 or 15(d) of the Exchange Act. We refer to these dates as
the "Required Filing Dates." The Company also will in any event:
. within 15 days of each Required Filing Date, (a) 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 (b) file with the trustee copies of the
Financial Information; and
. if filing such documents by the Company with the SEC is not permitted
under the Exchange Act, promptly supply copies of such documents to
any prospective holder upon written request and payment of the
reasonable cost of duplication and delivery (Section 1010).
As used in this prospectus,
"Adjusted Total Assets" as of any date means the sum of:
. $328,177,823 (which represents the amount determined by multiplying
the price at which Colonial Properties' common shares of beneficial
interest were offered in its initial public offering, or the "IPO,"
by the sum of (a) the common shares of beneficial interest of
Colonial Properties issued in the IPO and (b) the units of the
Company not held by Colonial Properties that were issued in
connection with the IPO);
. $108,841,000 (which represents the principal amount of outstanding
Debt of the Company immediately following the IPO); and
. 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
(including the cost of tenant improvements) 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 (up to the purchase price or cost of such assets).
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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, 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:
. interest on Debt of the Company and its Subsidiaries;
. provision for taxes of the Company and its Subsidiaries based on
income;
. amortization of debt discount;
. provisions for gains and losses on properties;
. depreciation and amortization;
. the effect of any noncash charge resulting from a change in
accounting principles in determining Consolidated Net Income for such
period; and
. 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:
. borrowed money evidenced by bonds, notes, debentures or similar
instruments;
. debt secured by any mortgage, pledge, lien, charge, encumbrance or
any security interest existing on property owned by the Company or
any Subsidiary; or
. 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 balance that
constitutes an accrued expense or trade payable;
but only to the extent that any of the items described above (other than
letters of credit) would appear as a liability on the Company's consolidated
balance sheet in accordance with generally accepted accounting principles. In
addition, "Debt" also includes:
. 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;
. 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).
"Unencumbered Total Asset Value" as of any date means the sum of (a) the
portion of Adjusted Total Assets allocable to the Company's real estate assets
and (b) 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,
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lien, charge, pledge or security interest. For purposes of this definition, the
portion of Adjusted Total Assets allocable to each of the 36 properties owned
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 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
offered by means of this prospectus, will be described in the prospectus
supplement relating to such debt securities.
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:
. default for 30 days in the payment of any installment of interest on
any debt security of such series;
. default in the payment of principal of (or premium, if any, on) any
debt security of such series at its maturity;
. default in making any sinking fund payment as required for any debt
security of such series;
. 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;
. default in the payment of an aggregate principal amount exceeding
$10,000,000 of any debt of the Company or any mortgage, indenture or
other instrument under which such debt is issued or by which such
debt 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 debt, but only if such debt is not discharged
or such acceleration is not rescinded or annulled;
. certain events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee of the Company or
any Significant Subsidiary (as defined below) or the property of
either; and
. any other Event of Default provided with respect to a particular
series of debt securities (Section 501).
As used in this prospectus, "Significant Subsidiary" means any Subsidiary
that is a "significant subsidiary" (within the meaning of Regulation S-X
promulgated under the Securities Act of 1933, as amended) 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 (as defined below) 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
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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:
. 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
. 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:
. in the payment of the principal of (or premium, if any) or interest
on any debt security of such series; or
. 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 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 of notice to be in the interest of those 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 Colonial Properties, 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).
18
<PAGE>
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:
. change the stated maturity of the principal of, or any installment of
interest (or premium, if any) on, any such debt security;
. 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;
. 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;
. impair the right to institute suit for the enforcement of any payment
on or with respect to any such debt security;
. 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
. 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).
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:
. to evidence the succession of another person to the Company as
obligor under the indenture;
. 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;
. to add Events of Default for the benefit of the holders of all or any
series of debt securities;
. 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;
. 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;
. to secure the debt securities;
. to establish the form or terms of debt securities of any series;
. 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;
19
<PAGE>
. 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
. 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:
. 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;
. 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 the preceding
clause;
. 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
. 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 specified 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 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
20
<PAGE>
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:
. there shall be no minimum quorum requirement for such meeting; and
. 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 of the
indenture are made applicable to the debt securities of or within any series
pursuant to Section 301 of the indenture, the Company may elect either:
. 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), which we refer to as a "defeasance" (Section
1402); or
. 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, such
that any omission to comply with such obligations shall not
constitute an Event of Default with respect to such debt securities,
which we refer to as a "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).
21
<PAGE>
As used in this prospectus, "Government Obligations" means securities
which are:
. 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
. obligations of a person controlled or supervised by and acting as an
agency or instrumentality of the United States of America or such
government which issued the foreign currency in which the debt
securities of such series are payable, the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation of
the United States of America or such government,
which, in either case, are not callable or redeemable at the option of the
issuer thereof, and shall also include a depository receipt issued by a bank or
trust company as custodian with respect to any such Government Obligation or a
specific payment of interest on or principal of any such Government Obligation
held by such custodian for the account of the holder of a depository receipt,
provided that (except as required by 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:
. 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
. 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).
As used in this prospectus, "Conversion Event" means the cessation of use
of:
. 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;
. the ECU both within the European Monetary System and for the
settlement of transactions by public institutions of or within the
European Communities;
. 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 the fourth clause under "Events of Default, Notice and Waiver," on
page 18 of
22
<PAGE>
this prospectus, 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 the seventh
clause under "Events of Default, Notice and Waiver," on page 19 of this
prospectus, 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 Event of 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
specified in the indenture, except as may otherwise be provided in connection
with any debt securities or series thereof.
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 Properties 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 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.
23
<PAGE>
PLAN OF DISTRIBUTION
The Company may sell the debt securities offered by means of this
prospectus to or through underwriters for public offering and sale by them, and
also may sell the debt securities offered by means of this prospectus to
investors directly or through agents. Any 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 offered by means of
this prospectus 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 offered by means of this prospectus to or through dealers, and the
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 offered by means
of this prospectus, 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.
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 to which the
prospectus supplement relates from the Company at the public offering price set
forth in the prospectus supplement pursuant to "delayed delivery contracts"
providing for payment and delivery on the date or dates stated in the
prospectus supplement. Each delayed delivery contract will be for an amount not
less than, and the aggregate principal amount of debt securities sold pursuant
to delayed delivery contracts shall be not less nor more than, the respective
amounts stated in the applicable prospectus supplement. Institutions with whom
delayed delivery 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. The obligations of the
purchasers pursuant to a delayed delivery contract will not be subject to any
conditions except that:
. the purchase by an institution of the debt securities covered by its
delayed delivery contracts shall not at the time of delivery be
prohibited under the laws of any jurisdiction in the United States to
which the institution is subject; and
. if the debt securities are being sold to underwriters, the Company
shall have sold to the underwriters the total principal amount of the
debt securities less the principal amount thereof covered by delayed
delivery 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.
24
<PAGE>
EXPERTS
The consolidated balance sheets as of December 31, 1999 and 1998 and the
consolidated statements of income, partners' capital, and cash flows for each
of the three years in the period ended December 31, 1999, which are included in
the Company's Form 10-K (incorporated herein by reference) have been
incorporated herein in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
LEGAL MATTERS
The legality of the debt securities offered by means of this prospectus
will be passed upon for the Company by Hogan & Hartson L.L.P., Washington, D.C.
25
<PAGE>
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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
----
Prospectus Supplement
<S> <C>
Risk Factors............................................................... S-3
Description of Notes....................................................... S-5
Special Provisions Relating to Foreign Currency Notes...................... S-25
Certain United States Federal Income
Tax Considerations........................................................ S-28
Plan of Distribution....................................................... S-37
Prospectus
Where to Find Additional Information....................................... 2
The Company................................................................ 3
Ratio of Earnings to Fixed Charges......................................... 3
Risk Factors............................................................... 4
Use of Proceeds............................................................ 9
Description of Debt Securities............................................. 10
Plan of Distribution....................................................... 24
Experts.................................................................... 25
Legal Matters.............................................................. 25
</TABLE>
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$225,000,000
Colonial Realty
Limited Partnership
Medium-Term Notes
Due Nine Months or More
From Date of Issue
-------------
PROSPECTUS SUPPLEMENT
-------------
Merrill Lynch & Co.
Banc One Capital Markets, Inc.
Bear, Stearns & Co. Inc.
Goldman, Sachs & Co.
PNC Capital Markets, Inc.
Salomon Smith Barney
Wachovia Securities, Inc.
August 31, 2000
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