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Filed Pursuant to Rule 424(b)(2)
Registration No. 333-83781-01
PROSPECTUS SUPPLEMENT
(To Prospectus dated August 6, 1999)
(LOGO)
SUMMIT PROPERTIES LOGO
SUMMIT PROPERTIES PARTNERSHIP, L.P.
$250,000,000
Medium-Term Notes
Due Nine Months or More from Date of Issue
The following terms may apply to the notes. The final terms of each note will be
specified in a pricing supplement. For more information, see "Description of
Notes."
- - Mature nine months or more from the date of issue
- - Denominated and/or payable in United States dollars or a foreign currency or
currency units
- - May be subject to redemption at our option or repurchase at the option of the
holder
- - Fixed or floating interest rate. The floating interest rate formula may be
based on:
-- CD Rate
-- CMT Rate
-- Commercial Paper Rate
-- Eleventh District Cost of Funds Rate
-- Federal Funds Rate
-- LIBOR
-- Prime Rate
-- Treasury Rate
-- Any other interest rate basis or interest rate formula specified in a
pricing supplement
- - Fixed rate notes may bear no interest when issued at a discount from the
principal amount due at maturity
- - Certificated or book-entry form
- - Interest paid on fixed rate notes as specified in a pricing supplement and on
the maturity date
- - Interest paid on floating rate notes monthly, quarterly, semi-annually or
annually
- - Minimum denominations of $1,000, increased in multiples of $1,000
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-3 OF THIS PROSPECTUS
SUPPLEMENT AND PAGE 2 OF THE ACCOMPANYING PROSPECTUS.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus supplement, the accompanying prospectus
or any pricing supplement. Any representation to the contrary is a criminal
offense.
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PRICE TO AGENTS' PROCEEDS
PUBLIC DISCOUNTS TO SUMMIT
- -------------------------------------------------------------------------------------------------------------------
Per note 100% .125%-.750% 99.875%-99.250%
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Total $250,000,000 $312,500-$1,875,000 $249,687,500-$248,125,000
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
We are offering the notes on a continuous basis through or to the agents listed
below acting as agent or principal. Each agent has agreed to use its reasonable
efforts to solicit offers to purchase the notes.
J.P. MORGAN & CO.
FIRST UNION SECURITIES, INC.
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
April 20, 2000
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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 these securities 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 the
date on the front cover of the applicable document.
Unless the context otherwise requires, references in this prospectus supplement
to "we," "us" and "our" are to Summit Properties Partnership, L.P. References in
this prospectus supplement to "agent" are to J.P. Morgan Securities Inc., First
Union Securities, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Morgan Stanley & Co. Incorporated.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
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PAGE
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Risk Factors................................................ S-3
Forward-Looking Statements.................................. S-5
Description of Notes........................................ S-7
Special Provisions Relating to Foreign Currency Notes....... S-30
United States Federal Income Tax Considerations............. S-33
Supplemental Plan of Distribution........................... S-42
Legal Matters............................................... S-43
PROSPECTUS
Risk Factors................................................ 2
About This Prospectus and Where You Can Find More
Information............................................... 9
Summit Properties Inc. and Summit Properties Partnership,
L.P....................................................... 11
Use of Proceeds............................................. 11
Ratios of Earnings to Fixed Charges......................... 12
Description of Debt Securities.............................. 13
Description of Preferred Stock.............................. 26
Description of Common Stock................................. 32
Limits on Ownership of Capital Stock........................ 34
Shareholder Rights Plan..................................... 36
Important Provisions of Maryland Law........................ 37
Federal Income Tax Considerations and Consequences of Your
Investment................................................ 39
Plan of Distribution........................................ 52
Legal Matters............................................... 54
Experts..................................................... 54
</TABLE>
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RISK FACTORS
Your investment in the notes involves certain risks. In consultation with your
own financial and legal advisors, you should carefully consider, among other
matters, the following discussion of risks before deciding whether an investment
in the notes is suitable for you. The notes are not an appropriate investment
for you if you are unsophisticated with respect to their significant components.
THERE WILL BE STRUCTURE RISKS WITH RESPECT TO NOTES INDEXED TO CURRENCY,
INTEREST RATE OR OTHER INDICES OR FORMULAS.
If you invest in notes indexed to one or more currencies or composite
currencies, interest rates or other indices or formulas, there will be
significant risks not associated with a conventional fixed rate or floating rate
debt security. These risks include fluctuation of the indices or formulas and
the possibility that you will receive a lower, or no, amount of principal,
premium or interest and 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 that 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 or are otherwise subject to mandatory
redemption, we may choose, in the case of optional redemption, or may be
obligated, in the case of mandatory redemption, to redeem your notes at times
when prevailing interest rates may be relatively low. Accordingly, you generally
will not be able to reinvest the redemption proceeds in a comparable security at
an effective interest rate as high as that of the notes.
THERE MAY BE AN UNCERTAIN TRADING MARKET FOR THE NOTES, AND MANY FACTORS MAY
AFFECT THE TRADING VALUE OF THE NOTES.
The notes will not have an established trading market when issued, and we cannot
assure you a trading market for your notes will ever develop or be maintained.
Many factors independent of our creditworthiness may affect the trading market
for your notes. These factors include:
- - the complexity and volatility of the index or formula applicable to the
notes;
- - the method of calculating the principal, premium and interest in respect
of the notes;
- - the time remaining to the maturity of the notes;
- - the outstanding amount of the notes;
- - the redemption features of the notes;
- - the amount of other securities linked to the index or formula applicable
to the notes; and
- - the level, direction and volatility of market interest rates generally.
In addition, because some notes were designed for specific investment objectives
or strategies, these notes will have a more limited trading market and
experience more price volatility. There may be a limited number of buyers for
these notes. This may affect the price you receive for these notes or your
ability to sell these notes at all. You should not purchase notes unless you
understand and know you can bear the related investment risks.
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OUR CREDIT RATINGS MAY NOT REFLECT ALL RISKS OF AN INVESTMENT IN THE NOTES.
Our credit ratings are an assessment of our ability to pay our obligations.
Consequently, real or anticipated changes in our credit ratings will generally
affect the market value of your notes. Our credit ratings, however, may not
reflect the potential impact of risks related to structure, market or other
factors discussed above on the value of your notes.
FLUCTUATIONS IN EXCHANGE RATES AND MODIFICATION OF EXCHANGE CONTROLS MAY IMPAIR
YOUR INVESTMENT IN THE NOTES.
The rates of exchange between the United States dollar and the applicable
foreign currency or composite currency fluctuate and are highly volatile. If a
note is payable in a foreign currency, any significant depreciation of the
foreign currency or composite currency compared to the United States dollar
would result in a decrease in the United States dollar equivalent yield of your
foreign currency note. Fluctuations in exchange rates are caused by many factors
which are beyond our control. These factors include economic, financial and
political events, as well as the supply of a particular currency or composite
currency compared to the demand for that particular currency.
In addition, government and monetary authorities may impose or revise exchange
controls. These controls could affect exchange rates and the availability of the
foreign currency or composite currency in which payments on the notes may be
made. Also, even if no exchange controls were in place, the foreign currency or
composite currency might not be available on a payment date as a result of
circumstances that are beyond our control. In this case, we would satisfy our
payment obligations in respect of the foreign currency note in United States
dollars, regardless of what the exchange rate may be on that date.
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FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus, including the
information incorporated by reference in the prospectus, contain statements that
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. You can identify forward-looking statements by the use
of the words "believe," "expect," "anticipate," "intend," "estimate," "assume"
and other similar expressions which predict or indicate future events and trends
and which do not relate to historical matters. These statements include, among
other things, statements regarding the intent, belief or expectations of Summit
Properties Inc. and Summit Properties Partnership, L.P. with respect to:
- - the declaration or payment of distributions;
- - potential developments or acquisitions or dispositions of properties,
assets or other public or private companies;
- - the anticipated operating performance of our apartment communities;
- - our policies regarding investments, indebtedness, acquisitions,
dispositions, financings, conflicts of interest and other matters;
- - the qualification of Summit Properties Inc. as a real estate investment
trust under the Internal Revenue Code of 1986, as amended;
- - the real estate markets in the southeast, southwest, mid-atlantic and
mid-west regions of the United States and in general;
- - the availability of debt and equity financing;
- - interest rates;
- - general economic conditions; and
- - trends affecting our financial condition or results of operations.
You should not rely on forward-looking statements because they involve known and
unknown risks, uncertainties and other factors, some of which are beyond our
control. These risks, uncertainties and other factors may cause our actual
results, performance or achievements to be materially different from the
anticipated future results, performance or achievements expressed or implied by
the forward-looking statements. Some of the factors that might cause these
differences include, but are not limited to, the following:
- - we may fail to secure or may abandon development opportunities;
- - construction costs of a community may exceed original estimates;
- - construction and lease-up may not be completed on schedule, resulting in
increased debt service expense and construction costs and reduced rental
revenues;
- - occupancy rates and market rents may be adversely affected by local
economic and market conditions which are beyond our control;
- - financing may not be available to us, or may not be available on favorable
terms;
- - our cash flow may be insufficient to meet required payments of principal
and interest;
- - our existing indebtedness may mature in an unfavorable credit environment,
preventing such indebtedness from being refinanced, or, if refinanced,
causing such refinancing to occur on terms that are not as favorable as
the terms of the existing indebtedness;
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- - legislative or regulatory changes, including changes to laws governing the
taxation of real estate investment trusts; and
- - generally accepted accounting principles, policies and guidelines
applicable to real estate investment trusts.
In addition, the factors described under the heading "Risk Factors" in both this
prospectus supplement and the accompanying prospectus may result in these
differences. You should carefully review all of these factors, and you should be
aware that there may be other factors that could cause these differences.
We caution you that, while forward-looking statements reflect our estimates and
beliefs, they are not guarantees of future performance. These forward-looking
statements were based on information, plans and estimates at the date of this
prospectus supplement and the accompanying prospectus, and we do not promise to
update any forward-looking statements to reflect changes in underlying
assumptions or factors, new information, future events or other changes.
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DESCRIPTION OF NOTES
The notes will be issued under an indenture, dated as of August 7, 1997, as
supplemented and as further amended, supplemented or modified from time to time,
between us and First Union National Bank, as trustee. The following summary of
the material provisions of the notes and of the indenture is not complete and is
qualified in its entirety by reference to the indenture and the notes.
The following description of the notes will apply unless otherwise specified in
an applicable pricing supplement.
GENERAL
The notes will be issued under the indenture as unsecured general obligations of
Summit Properties Partnership, L.P. and will rank equally with all of our other
unsecured and unsubordinated indebtedness from time to time outstanding. The
notes are junior in claim to our mortgages and other secured indebtedness which
encumber certain of our assets, and to indebtedness and other liabilities of our
subsidiaries. Thus, we will have to satisfy such indebtedness in full before
holders of notes will be able to realize any value from encumbered or
indirectly-held communities. Additionally, we will repay the notes solely from
our assets; holders of the notes will not have recourse against our general
partner or any of our limited partners for repayment of the notes.
The indenture does not limit the amount of debt that we may issue. We may issue
our debt from time to time as a single series or in two or more separate series
up to the aggregate principal amount from time to time authorized by us for each
series. We may, from time to time, without the consent of the holders of the
notes, provide for the issuance of notes or other debt instruments under the
indenture in addition to the $250,000,000 aggregate initial offering price of
the notes offered by this prospectus supplement.
The notes are currently limited up to $250,000,000 aggregate initial offering
price, or the equivalent in one or more foreign or composite currencies. This
amount, however, will be reduced by the aggregate initial offering price of any
other debt securities issued by us, whether within or outside the United States,
pursuant to the registration statement of which the accompanying prospectus
forms a part. The notes will be offered on a continuing basis and will mature on
a day nine months or more from the date of issue, as selected by the purchaser
and agreed to by us. Interest-bearing notes will bear interest at either fixed
or floating rates as specified in the applicable pricing supplement. Some notes
may not bear interest or may bear interest at a below market rate. Notes may be
issued at significant discounts from their principal amount payable at stated
maturity, or on any date before the stated maturity date on which the principal
or an installment of principal of a note becomes due and payable, whether by the
declaration of acceleration, call for redemption at our option, repayment at the
option of the holder or otherwise.
Unless we state otherwise in the applicable pricing supplement, the notes will
be denominated in United States dollars, and we will make payments of principal
of, and premium, if any, and interest on, the notes in United States dollars.
The notes also may be denominated in one or more foreign or composite
currencies, and we may make payments of principal of, and premium, if any, and
interest on, the notes in one or more foreign or composite currencies.
Unless we state otherwise in the applicable pricing supplement, purchasers are
required to pay for the notes in the currencies in which the notes are
denominated, whether United States dollars or other currencies. Currently, a
limited number of facilities exist in the United States for conversion of United
States dollars into foreign currencies or composite currencies and vice versa.
Generally, commercial banks in the United States do not offer non-United States
dollar checking and savings account facilities. Each agent is prepared to
arrange for the conversion of United States dollars into the applicable currency
specified on the note to enable the purchaser of the notes to pay for the
related foreign currency note. However, the purchaser of the note must make a
request to the agent on or before five business days before the date of delivery
of the foreign currency note, or by any other date specified by the agent. Each
agent will make such conversion on the terms and subject to the conditions,
limitations and charges as such agent may from time to time establish in
accordance with its regular foreign exchange practices. The purchaser of each
such foreign currency note will bear all costs of exchange.
Interest rates offered by us with respect to the notes may differ depending
upon, among other things, the aggregate principal amount of notes purchased in
any single transaction. We may change interest rates or
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formulas and other terms of the notes from time to time, but no change will
affect any note already issued or as to which we have accepted an offer to
purchase. We may offer notes with similar variable terms other than interest
rates concurrently at any time. We may also concurrently offer notes having
different variable terms to different investors.
Each note will be issued in fully registered form or in certificated form. Each
book-entry note will be represented by one or more fully registered global notes
registered in the name of a nominee of The Depository Trust Company, as
depository. Notes issued in United States dollars will be issued in
denominations of $1,000 and integral multiples of $1,000. The authorized
denominations of each note issued in a foreign currency will be specified in the
applicable pricing supplement. Interest rates may differ depending upon, among
other things, the aggregate principal amount of the notes purchased in any
single transaction.
PAYMENT OF PRINCIPAL AND INTEREST
We will make interest payments on the book-entry notes by wire transfer in
immediately available funds through the trustee to the depository or its
nominee.
Payments of principal of, and premium, if any, and interest on, book-entry notes
will be made by us through the trustee to the depository or its nominee. See
"-- Book-entry notes." In the case of certificated notes, payment of principal
and premium, if any, due on the maturity date will be made in immediately
available funds upon presentation and surrender of the certificated notes (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 such purpose in the Borough
of Manhattan, The City of New York. Payment of interest due on the maturity date
of a certificated note will be made to the person to whom payment of the
principal and premium, if any, shall be made. Payment of interest due on a
certificated note on any interest payment date, other than the date upon which
the note matures, will be made by check mailed to the address of the holder as
such address appears in the security register. Notwithstanding the foregoing, a
holder of $10,000,000 or more in aggregate principal amount of certificated
notes, whether having identical or different terms and provisions, will be
entitled to receive interest payments on any interest payment date other than
the maturity date by wire transfer in immediately available funds if such holder
delivers appropriate wire transfer instructions in writing to the trustee not
less than 15 days prior to the relevant interest payment date. Any such wire
transfer instructions received by the trustee will remain in effect until
revoked by such holder.
In general, when we refer to "business day," we mean any day other than a
Saturday or Sunday, that is neither a legal holiday nor a day on which the law
either authorizes or requires banking institutions to close in The City of New
York or the City of Charlotte. For the purposes of foreign currency notes, a
business day is also not a day on which the law either authorizes or requires
banking institutions to close in the capital city of the country issuing the
specified currency. With respect to notes as to which the London Interbank
Offered Rate, or LIBOR, is an applicable interest rate basis, a business day is
also a London business day. "London business day" means a day on which
commercial banks are open for business in London, England, including dealings in
London in the currency specified in the applicable pricing supplement as to
which LIBOR shall be calculated or, if no such currency is so specified, United
States dollars.
Only the depository may transfer or exchange the book-entry notes. See
"-- Book-entry notes." Registration of transfer or exchange of notes in
certificated form will be made at the office or agency maintained by us for such
purpose in the Borough of Manhattan, The City of New York. Neither we, the
trustee nor the designated agent will make any service charges for any such
registration of transfer or payments equal to any tax or other governmental
charge that may be imposed in connection with a transfer or exchange, other than
an exchange pursuant to the indenture not involving any transfer.
REDEMPTION AT OUR OPTION
Unless otherwise specified in the applicable pricing supplement, the notes will
not be subject to any sinking fund. We may, at our option, redeem the notes
prior to the stated maturity date only if specified in the applicable notes and
in the applicable pricing supplement. If specified in the applicable pricing
supplement, we may, at our option, redeem the notes on any date on or after the
applicable initial redemption date specified in
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the pricing supplement. On or after the initial redemption date, if any, we may,
at our option, redeem the related note at any time in whole or in part at the
applicable redemption price referred to below together with interest on the
principal of the applicable note payable to the redemption date, on notice
given, not more than 60 nor less than 30 days before the redemption date. We
will redeem the notes in increments of $1,000, provided that any remaining
principal amount will be an authorized denomination of the applicable note.
Unless we specify otherwise in the applicable pricing supplement, when we refer
to the "redemption price" with respect to a note, we mean an amount equal to the
initial redemption percentage specified in the applicable pricing supplement (as
adjusted, if applicable) multiplied by the unpaid principal amount to be
redeemed. This initial redemption percentage, if any, applicable to a note shall
decline at each anniversary of the initial redemption date by a percentage of
the principal amount to be redeemed as specified in the applicable pricing
supplement, until the redemption price is 100% of the principal amount to be
redeemed.
The applicable pricing supplement with respect to a note will specify any
applicable mandatory redemption or sinking fund provisions.
REPAYMENT AT THE OPTION OF THE HOLDER; REPURCHASE BY US
If an applicable pricing supplement so indicates, we will repay the notes in
whole or in part at the option of the holders of the notes on any optional
repayment date specified in the applicable pricing supplement. If a note does
not indicate an optional repayment date, it will not be repayable at the option
of the holder before the stated maturity date.
The repurchase price for such notes will be 100% of the principal amount to be
repaid, together with unpaid interest on the principal of the applicable note
payable to the date of repayment. For any note to be repaid, the trustee or the
designated agent must receive, not more than 60 nor less than 30 days before the
optional repayment date:
- - in the case of a note in certificated form, the note and the form entitled
"Option to Elect Repayment" duly completed; or
- - a telegram, telex facsimile transmission or a letter from a member of a
national securities exchange, the National Association of Securities
Dealers, Inc. or a commercial bank trust company in the United States that
sets forth:
-- the name of the holder of such note;
-- the principal amount of such note;
-- the principal amount of such note to be repaid;
-- the certificate number or a description of the tenor and term of such
note; and
-- a statement that the option to elect repayment is being exercised
thereby, a guarantee that such note to be repaid, together with the
form "Option to Elect Repayment" on the reverse of such note, will be
received by the trustee or the designated agent not later than the
fifth business day after the date of such correspondence.
Such information shall only be effective if such note and duly completed form is
received by the trustee or the designated agent not later than the fifth
business day after the date of such correspondence.
The holder may exercise the repayment option for less than the entire principal
amount of the note, but in that event, the principal amount of the note
remaining outstanding after repayment must be an authorized denomination. Unless
otherwise stated in the applicable pricing supplement, exercise of the repayment
option by the holder of a note will be irrevocable.
Only the depository may exercise the repayment option in respect of global
securities representing notes in book-entry form. Accordingly, beneficial owners
of global securities that desire to have all or any portion of the notes in
book-entry form represented by global securities repaid must instruct the
participant through which they own their interest to direct the depository to
exercise the repayment option on their behalf by forwarding
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the repayment instructions to the trustee as discussed above. In order to ensure
that the 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 of notes in
book-entry form should consult the participants through which they own their
interests for the respective deadlines. All instructions given to participants
from beneficial owners of notes in book-entry form relating to the option to
elect repayment will be irrevocable. In addition, at the time instructions are
given, each beneficial owner will cause the participant through which it owns
its interest to transfer its interest in the global security or securities
representing the related notes in book-entry form, on the depository's records,
to the trustee. See "-- Book-entry notes."
If applicable, we will comply with the requirements of Section 14(e)-1 of the
Exchange Act and the rules promulgated thereunder and any other securities laws
or regulations in connection with any repayment at the option of the holder.
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
General
Each interest-bearing note will bear interest from the date of issue at the rate
per annum or, in the case of a floating rate note, pursuant to the interest rate
formula stated in the applicable note and in the applicable pricing supplement
until the principal of the note is paid or made available for payment. Interest
payments on fixed rate notes and floating rate notes will equal the amount of
interest accrued from and including the immediately preceding interest payment
date in respect of which interest has been paid or made available for payment or
from and including the date of issue, if no interest has been paid or made
available for payment with respect to the note, to, but excluding, the related
interest payment date or the stated maturity date, as the case may be.
Interest will be payable in arrears on each interest payment date specified in
the applicable pricing supplement on which an installment of interest is due and
payable and on the maturity date of the note. The first payment of interest on
any note originally issued between a regular record date and the related
interest payment date will be made on the interest payment date immediately
following the next succeeding regular record date to the registered holder on
the next succeeding regular record date. The regular record date will be the
fifteenth calendar day, whether or not a business day, immediately preceding the
related interest payment date.
Fixed rate notes
Interest on fixed rate notes will be payable on the date(s) specified in the
applicable pricing supplement and on the maturity date. Unless otherwise
specified in the applicable pricing supplement, each fixed rate note will bear
interest from the date of issue at the rate per annum stated on the face of the
note until the principal amount of the note is paid or made available for
payment. Unless otherwise specified in the applicable pricing supplement,
interest on fixed rate notes will be computed on the basis of a 360-day year of
twelve 30-day months.
If any interest payment date or the maturity date of a fixed rate note falls on
a day that is not a business day, the related payment of principal, premium, if
any, or interest will be made on the next succeeding business day as if made on
the date that the applicable payment was due, and no interest will accrue on the
amount payable from and after the interest payment date or the maturity date, as
the case may be, to the date of such payment on the next succeeding business
day.
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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 be one or more
of the following:
- - 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 that is specified
in the applicable pricing supplement.
A floating rate note may bear interest with respect to two or more interest rate
bases.
Each floating rate note will bear interest from the date of issue at the rates
specified in the applicable floating rate note until the principal of the
applicable note is paid or made available for payment. Except as provided below
or in the applicable pricing supplement, the interest payment dates with respect
to floating rate notes 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;
- - semi-annually -- the third Wednesday of the two months of each year
specified in the applicable pricing supplement;
- - annually -- the third Wednesday of the month of each year specified in the
applicable pricing supplement; and
- - the date upon which the note matures.
If any interest payment date for any floating rate note other than the maturity
date, would otherwise be a day that is not a business day, the interest payment
date will be postponed to the next succeeding day that is a business day, except
that in the case of a floating rate note as to which LIBOR is an applicable
interest rate basis, if the business day falls in the next succeeding calendar
month, the applicable interest payment date will be the immediately preceding
business day. If the maturity date of a floating rate note falls on a day that
is not a business day, the payment of principal, premium, if any, and interest
will be made on the next succeeding business day, and no interest on that
payment will accrue for the period from and after the date the note matures to
the date of that payment on the next succeeding business day.
All percentages resulting from any calculation on floating rate notes will be
rounded to the nearest one hundred-thousandth of a percentage point, with five
one-millionths of a percentage point rounded upwards. 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 with one-half cent being
rounded upward.
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With respect to each floating rate note, accrued interest is calculated by
multiplying its principal amount by an accrued interest factor. Unless otherwise
specified in the applicable pricing supplement, such accrued interest factor is
computed by adding the interest factor calculated for each day in the applicable
interest period.
- - In the case of notes for which an applicable interest rate basis is the CD
Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
the Federal Funds Rate, LIBOR or the Prime Rate, the interest factor for
each day will be computed by dividing the interest rate applicable to each
day by 360.
- - In the case of notes for which an applicable interest rate basis is the
CMT Rate or the Treasury Rate, the interest factor for each day will be
computed by dividing the interest rate applicable to each day by the
actual number of days in the year.
- - The interest factor for floating rate notes for which the interest rate is
calculated with reference to two or more interest rate bases will be
calculated in each period in the same manner as if only one of the
applicable interest rate bases applied.
Terms. Each applicable pricing supplement will specify the terms of the
floating rate note being delivered, including the following:
- - 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, and the fixed interest
rate, if applicable;
- - the interest rate basis or bases;
- - the interest rate in effect from the date of issue until the date on which
such interest rate on the related floating rate note will be reset;
- - the date on which the interest rate on the related floating rate note will
be reset;
- - the interest payment dates;
- - the period to maturity of the instrument or obligation with respect to
which the interest rate basis or bases will be calculated;
- - a maximum numerical limitation, or ceiling, on the rate at which interest
may accrue during any interest period, if any;
- - a minimum numerical limitation, or floor, on the rate at which interest
may accrue during any interest period, if any;
- - the number of basis points to be added to or subtracted from the related
interest rate basis or bases (the "Spread");
- - the percentage of the related interest rate basis or bases by which the
interest rate basis or bases will be multiplied to determine the
applicable interest rate (the "Spread Multiplier");
- - if one or more of the specified interest rate bases is LIBOR, the
Designated LIBOR Currency and the Designated LIBOR Page; and
- - if one or more of the specified interest rate bases is the CMT Rate, the
Designated CMT Maturity Index and/or the Designated CMT Telerate Page.
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The interest rate borne by the floating rate notes will be determined as
follows:
Regular Floating Rates Notes. Unless a floating rate note is designated as a
Floating Rate/Fixed Rate Note, an Inverse Floating Rate Note or as having an
addendum attached or as having "other provisions" apply relating to a different
interest rate formula, it will be a Regular Floating Rate Note and, except as
described in an applicable pricing supplement, 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 Initial Interest Reset Date, the rate at which interest on
such Regular Floating Rate Note shall be payable shall be reset as of each
Interest Reset Date; provided, however, that the interest rate in effect for the
period, if any, from the date of issue to the Initial Interest Reset Date will
be the "Initial Interest Rate."
When we refer to "Initial Interest Reset Date," we refer to the first date on
which the interest rate on the related floating rate note will be reset.
Floating Rate/Fixed Rate Notes. If a floating rate note is designated as a
Floating Rate/Fixed Rate Note, it 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 Initial Interest Reset Date, the rate at which interest on the
applicable Floating Rate/Fixed Rate Note will be payable will be reset as of
each Interest Reset Date; provided, however, that:
- - the interest rate in effect for the period 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, and including, the date on
which interest begins to accrue on a fixed rate basis to maturity will be
the fixed interest rate, if the rate is specified in the applicable
pricing supplement, or if no fixed interest rate is specified, the
interest rate in effect on the Floating Rate/Fixed Rate Note on the day
immediately preceding the date on which interest begins to accrue on a
fixed rate basis.
Inverse Floating Rate Notes. If a floating rate note is designated as an
Inverse Floating Rate Note, then except as described below, it will bear
interest equal to the fixed interest rate specified in the related pricing
supplement minus 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;
provided, however, that unless otherwise specified in the applicable pricing
supplement, the interest rate on the applicable Inverse Floating Rate Note will
not be less than zero percent.
Commencing on the Initial Interest Reset Date, the rate at which interest on the
applicable 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 from the date of issue to the Initial Interest Reset Date will be the
initial interest rate.
Unless otherwise specified in the applicable pricing supplement, the interest
rate with respect to each interest rate basis will be determined in accordance
with the applicable provisions below. Except as set forth above or in the
applicable pricing supplement, the interest rate in effect on each day shall be:
- - if that day is an Interest Reset Date, the interest rate determined as of
the Interest Determination Date immediately preceding such Interest Reset
Date; or
- - if that day is not an Interest Reset Date, the interest rate determined as
of the Interest Determination Date immediately preceding the most recent
Interest Reset Date.
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<PAGE> 14
Interest Reset Date for floating rate notes. The applicable pricing supplement
will specify the dates on which the interest rate on the related floating rate
note will be reset. We refer to such a date in this prospectus supplement as an
"Interest Reset Date." Unless otherwise specified in the applicable pricing
supplement, the Interest Reset Date 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;
- - 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;
- - semi-annually -- 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.
If any Interest Reset Date for a floating rate note would otherwise be a day
that is not a business day, the applicable date on which the interest rate on
the related floating rate note will be reset will be postponed to the next
succeeding day that is a business day, except that in the case of a floating
rate note as to which LIBOR is an applicable basis on which the interest rate on
the related floating rate note will be reset, if the business day falls in the
next succeeding calendar month, then the date on which the interest rate on the
related floating rate note will be reset will be the immediately preceding
business day. In addition, in the case of a floating rate note for which the
Treasury Rate is an applicable interest rate basis, if the Interest
Determination Date would otherwise fall on a date on which the interest rate on
the related floating rate note will be reset, then the applicable date on which
the interest rate on the related floating rate note will be reset will be
postponed to the next succeeding business day.
Interest Determination Dates. The interest rate applicable to each interest
reset period commencing on the date on which the interest rate on the related
floating rate note will be reset with respect to that interest reset period will
be the rate determined by the calculation agent as of the applicable "Interest
Determination Date" and calculated on or prior to the calculation date referred
to below, except with respect to LIBOR and the Eleventh District Cost of Funds
Rate, which will be calculated on such Interest Determination Date:
- - The Interest Determination Date with respect to the CD Rate, the CMT Rate,
the Commercial Paper Rate, the Federal Funds Rate and the Prime Rate will
be the second business day immediately preceding the applicable Interest
Reset Date.
- - The Interest Determination Date with respect to the Eleventh District Cost
of Funds Rate will be the last working day of the month immediately
preceding the applicable Interest Reset Date on which the Federal Home
Loan Bank of San Francisco publishes the monthly weighted average cost of
funds paid by member institutions of the Eleventh Federal Home Loan Bank
District.
- - The Interest Determination Date with respect to LIBOR will be the second
London business day immediately preceding the applicable Interest Reset
Date; unless the Designated LIBOR Currency is British pounds sterling, in
which case the Interest Determination Date will be the applicable Interest
Reset Date.
- - The Interest Determination Date with respect to the Treasury Rate will be
the day in the week in which the applicable Interest Reset Date falls on
which day Treasury Bills are normally auctioned. Treasury Bills are
normally sold at an auction held on Monday of each week, unless that
Monday falls on a legal holiday, in which case the auction is normally
held on the immediately 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 applicable Interest Reset
Date, the Interest Determination Date will be the
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<PAGE> 15
preceding Friday; and provided, further, that if an auction falls on any
Interest Reset Date, then the Interest Reset Date will be postponed to the
first business day following the auction.
- - The Interest Determination Date pertaining to a floating rate note, the
interest rate on which is determined with reference to two or more
interest rate bases, will be the most recent business day which is at
least two business days prior to the Interest Reset Date applicable to the
floating rate note on which each interest rate basis is determinable. Each
interest rate basis will be determined as of the Interest Determination
Date, and the applicable interest rate will take effect on the related
Interest Reset Date.
When we refer to "Treasury Bills" we mean direct obligations of the United
States.
Maximum and minimum interest rates. A floating rate note may also have one or
both of the following:
- - a maximum numerical limitation, or ceiling, on the rate at which interest
may accrue during any interest period; and
- - a minimum numerical limitation, or floor, on the rate at which interest
may accrue during any period.
In addition to any maximum numerical limitation on the rate on which interest
may accrue during any interest period that may apply to any floating rate note,
the interest rate on floating rate notes will be in no event higher than the
maximum rate permitted by New York law, as the same may be modified by United
States law of general application.
Calculation date. Unless the applicable pricing supplement provides otherwise,
the trustee under the indenture, First Union National Bank, will be the
calculation agent with respect to any floating rate note. Upon the request of
the holder of any floating rate note, the calculation agent will provide 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. Unless the applicable pricing supplement states otherwise,
the calculation date, if applicable, pertaining to any Interest Determination
Date will be the earlier of:
- - the tenth calendar day after the applicable Interest Determination Date,
or, if the tenth calendar day is not a business day, the next succeeding
business day; or
- - the business day immediately preceding the applicable interest payment
date or the date upon which the note matures, as the case may be.
Unless otherwise specified in the applicable pricing supplement, the calculation
agent shall determine each interest rate basis in accordance with the following
provisions.
CD Rate. CD Rate notes will bear interest at a specified rate that will be
reset periodically based on the CD Rate and any Spread and/or Spread Multiplier.
"CD Rate" means, for any Interest Determination Date, the rate for negotiable
United States dollar certificates of deposit having the specified Index Maturity
as published in H.15(519) under the heading "CDs (secondary market)."
The following procedures will apply if the rate cannot be set as described
above:
- - If the rate is not published before 3:00 p.m., New York City time, on the
relevant calculation date, then the CD Rate on the CD Rate Interest
Determination Date will be the rate for negotiable United States dollar
certificates of deposit having the specified Index Maturity as published
in H.15 Daily Update or such other recognized electronic source used for
the purpose of displaying such rate, under the caption "CDs (secondary
market)."
- - If by 3:00 p.m., New York City time, on the calculation date, the rate is
not published in H.15(519), H.15 Daily Update or another recognized
electronic source, the CD Rate on the CD Rate Interest Determination Date
will be calculated by the calculation agent and will be the arithmetic
mean of the secondary market offered rates, as of 10:00 a.m., New York
City time, of three leading non-bank dealers of negotiable United States
dollar certificates of deposit in New York City, which may include any of
the agents or their affiliates, selected by the calculation agent for
negotiable United States dollar certificates of deposit of
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<PAGE> 16
major United States money center banks in the market for negotiable United
States dollar certificates of deposit with a remaining maturity closest to
the Index Maturity specified in the applicable pricing supplement in an
amount that is representative for a single transaction in that market at
that time.
- - If fewer than three dealers selected by the calculation agent are quoting
rates, the rate will be the same rate used for the prior interest period.
"Index Maturity" means, for a floating rate note, the period to maturity of the
interest or obligation on which the interest rate formula is based, as specified
in the applicable pricing supplement.
"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 notes will bear interest at a specified rate that will be
reset periodically based on the CMT Rate and any Spread and/or Spread
Multiplier.
"CMT Rate" means, for any Interest Determination Date, the rate displayed on the
Designated CMT Telerate Page under the caption ". . . Treasury Constant
Maturities . . . Federal Reserve Board Release H.15 . . . Mondays Approximately
3:45 p.m.," under the column for the Designated CMT Maturity Index for:
- - if the Designated CMT Telerate Page is 7051, the rate on the related CMT
Rate Interest Determination Date; or
- - if the Designated CMT Telerate Page is 7052, the weekly or monthly
average, as specified in the applicable pricing supplement, for the week
or the month, as applicable, ended immediately preceding the week or the
month, as applicable, in which the related CMT Rate Interest Determination
Date occurs.
- - If the rate is no longer displayed on the relevant page or is not
displayed by 3:00 p.m., New York City time, on the related calculation
date, then the CMT Rate for the CMT Rate Interest Determination Date will
be the treasury constant maturity rate for the Designated CMT Maturity
Index as published in the relevant H.15(519).
- - If the rate is no longer published in H.15(519) or is not published by
3:00 p.m., New York City time, on the calculation date, then the CMT Rate
on the CMT Rate Interest Determination Date will be the treasury constant
maturity rate for the Designated CMT Maturity Index, or other United
States Treasury rate for the Designated CMT Maturity Index, for the CMT
Rate Interest Determination Date with respect to the Interest Reset Date
as published by either the Board of Governors of the Federal Reserve
System or the United States Department of the Treasury that the
calculation agent determines to be comparable to the rate formerly
displayed on the Designated CMT Telerate Page and published in the
relevant H.15(519).
- - If that information is not provided by 3:00 p.m., New York City time, on
the calculation date, then the CMT Rate on the CMT Rate Interest
Determination Date will be calculated by the calculation agent and will be
a yield to maturity, based on the arithmetic mean of the secondary market
bid prices as of approximately 3:30 p.m., New York City time, on the CMT
Rate Interest Determination Date reported, according to their written
records, by three leading primary United States government securities
dealers (each, a "Reference Dealer") in New York City, which may include
any of the agents or their affiliates, selected by the calculation agent
(from five Reference Dealers selected by the calculation agent after
eliminating the highest quotation, or in the event of equality, one of the
highest, and the lowest quotation, or in the event of equality, one of the
lowest), for the most recently issued direct noncallable fixed rate
obligations of the United States ("Treasury Notes") with an original
maturity of approximately the Designated CMT Maturity Index and a
remaining term to maturity of not less than the Designated CMT Maturity
Index minus one year.
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<PAGE> 17
- - If the calculation agent is unable to obtain three Treasury Note
quotations, the CMT Rate on the CMT Rate Interest Determination Date will
be calculated by the calculation agent and will be a yield to maturity
based on the arithmetic mean of the secondary market bid prices as of
approximately 3:30 p.m., New York City time, on the CMT Rate Interest
Determination Date of three Reference Dealers in New York City, which may
include any of the agents or their affiliates, selected by the calculation
agent (from five Reference Dealers selected by the calculation agent after
eliminating the highest quotation, or in the event of equality, one of the
highest, and the lowest quotation, or in the event of equality, one of the
lowest), for Treasury Notes with an original maturity of the number of
years that is the next highest to the Designated CMT Maturity Index and a
remaining term to maturity closest to the Designated CMT Maturity Index
and in an amount of at least United States $100,000,000. If three or four
and not five of such Reference Dealers are providing quotes, then the CMT
Rate will be based on the arithmetic mean of the offer prices obtained and
neither the highest nor the lowest of such quotes will be eliminated. If
two Treasury Notes with an original maturity have remaining terms to
maturity equally close to the Designated CMT Maturity Index, the
calculation agent will obtain from five Reference Dealers quotations for
the Treasury Note with the shorter remaining term to maturity and will use
those quotations to calculate the CMT Rate as described above.
"Designated CMT Telerate Page" means the display on the Bridge Telerate, Inc. or
any successor service on the page specified in the applicable pricing
supplement, or any other page as may replace the specified page on such service,
for the purpose of displaying "Treasury Constant Maturities" as reported in
H.15(519). If a page is not specified in the applicable pricing supplement, the
Designated CMT Telerate Page will be 7052 for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of the
United States Treasury securities (one, two, three, five, seven, 10, 20 or 30
years) specified in the applicable pricing supplement with respect to which the
CMT Rate will be calculated. If no maturity is specified in the applicable
pricing supplement, the Designated CMT Maturity Index will be two years.
Commercial Paper Rate. Commercial Paper Rate notes will bear interest at a
specified rate that will be reset periodically based on the Commercial Paper
Rate and any Spread and/or Spread Multiplier.
"Commercial Paper Rate" means, for any Interest Determination Date, the Money
Market Yield of the annual rate, quoted on a bank discount basis, for the
relevant Commercial Paper Rate Interest Determination Date for commercial paper
having the specified Index Maturity as published by the Board of Governors of
the Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates" under the heading "Commercial Paper -- Nonfinancial."
The following procedures will apply if the rate cannot be set as described
above:
- - If the rate is not published before 3:00 p.m., New York City time, on the
calculation date, then the Commercial Paper Rate will be the Money Market
Yield of such rate on the Commercial Paper Rate Interest Determination
Date for commercial paper having the Index Maturity specified in the
applicable pricing supplement as published in H.15 Daily Update or such
other recognized electronic source used for the purpose of displaying such
rate under the caption "Commercial Paper -- Nonfinancial."
- - If by 3:00 p.m., New York City time, on the calculation date the rate is
not published in H.15(519) or H.15 Daily Update or another recognized
electronic source, the Commercial Paper Rate will be calculated by the
calculation agent and will be the Money Market Yield of the arithmetic
mean of the offered rates as of 11:00 a.m., New York City time, on the
Commercial Paper Rate Interest Determination Date, of three leading
dealers of commercial paper in New York City, which may include any of the
agents or their affiliates, selected by the calculation agent for
commercial paper of the specified Index Maturity placed for a nonfinancial
issuer whose bond rating is "Aa," or the equivalent, from a nationally
recognized rating agency.
- - If fewer than three dealers selected by the calculation agent are
providing quotes, the rate will be the same as the rate used in the prior
interest period.
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"Money Market Yield" means a yield, expressed as a percentage, calculated in
accordance with the following formula:
<TABLE>
<S> <C> <C> <C> <C>
D X 360
Money Market Yield = --------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the annual 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 period from the Interest Reset Date to but excluding the day that
numerically corresponds to such Interest Reset Date, or if there is not a
numerically corresponding day, the last day in the calendar month that is the
number of months corresponding to the specified Index Maturity after the month
in which such Interest Reset Date falls.
Eleventh District Cost of Funds Rate. Eleventh District Cost of Funds Rate
notes will bear interest at a specified rate that will be reset periodically
based on the Eleventh District Cost of Funds Rate and any Spread and/or Spread
Multiplier.
"Eleventh District Cost of Funds Rate" means, for any Interest Determination
Date, the rate on the relevant Eleventh District Cost of Funds Rate Interest
Determination Date equal to the monthly weighted average cost of funds for the
calendar month immediately preceding the month in which the Eleventh District
Cost of Funds Rate Interest Determination Date falls, as set forth under the
caption "11th District" on Bridge Telerate, Inc. or any successor service on
Page 7058, or any other page as may replace that page on such service ("Telerate
Page 7058") as of 11:00 a.m., San Francisco time, on the Eleventh District Cost
of Funds Rate Interest Determination Date.
The following procedures will apply if the rate cannot be set as described
above:
- - If the rate does not appear on Telerate Page 7058 on the Eleventh District
Cost of Funds Rate Interest Determination Date, then the Eleventh District
Cost of Funds Rate on the Interest Determination Date will be the monthly
weighted average cost of funds paid by member institutions of the Eleventh
Federal Home Loan Bank District that was most recently announced (the
"Index") by the Federal Home Loan Bank of San Francisco, as the cost of
funds for the calendar month immediately preceding the Eleventh District
Cost of Funds Rate Interest Determination Date.
- - If the Federal Home Loan Bank of San Francisco fails to announce the Index
on or prior to the Eleventh District Cost of Funds Rate Interest
Determination Date for the calendar month immediately preceding such date,
the rate will be the same as the rate used in the prior interest period.
Federal Funds Rate. Federal Funds Rate notes will bear interest at a specified
rate that will be reset periodically based on the Federal Funds Rate and any
Spread and/or Spread Multiplier.
"Federal Funds Rate" means, for any Interest Determination Date, the rate on the
relevant Federal Funds Rate Interest Determination Date for Federal Funds as
published in H.15(519) under the heading "Federal Funds (Effective)", as such
rate is displayed on Bridge Telerate, Inc. or any successor service on page 120,
or any other page as may replace that page on such service ("Telerate Page
120").
The following procedures will apply if the rate cannot be set as described
above:
- - If the rate is not published before 3:00 p.m., New York City time, or does
not appear on Telerate Page 120 on the calculation date, then the Federal
Funds Rate for the Interest Determination Date will be the rate on the
Federal Funds Rate Interest Determination Date as published in H.15 Daily
Update, or another recognized electronic source used for the purpose of
displaying such rate, under the caption "Federal Funds (Effective)".
- - If by 3:00 p.m., New York City time, on the calculation date the rate does
not appear on Telerate Page 120 or is not yet published in H.15(519), H.15
Daily Update or another recognized electronic source, the Federal Funds
Rate for the Interest Determination Date will be calculated by the
calculation agent, and will be the arithmetic mean of the rates, as of
9:00 a.m., New York City time, on the Federal Funds Rate Interest
Determination Date for the last transaction in overnight Federal Funds
arranged by three leading
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<PAGE> 19
brokers of Federal Funds transactions in New York City, which may include
any of the agents or their affiliates, selected by the calculation agent
prior to 9:00 a.m., New York City time.
- - If fewer than three brokers selected by the calculation agent are
providing quotes, the rate will be the same as the rate used in the prior
interest period.
LIBOR. LIBOR notes will bear interest at the rates, calculated with reference
to LIBOR and the Spread and/or Spread Multiplier, if any, specified in the
applicable LIBOR notes and in any applicable pricing supplement.
"LIBOR" means:
- - if "LIBOR Telerate" is specified in the applicable pricing supplement or
if neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
applicable pricing supplement as the method for calculating LIBOR, the
rate for deposits in the Designated LIBOR Currency having the Index
Maturity specified in the applicable pricing supplement, commencing on the
applicable Interest Reset Date that appears on the Designated LIBOR Page
as of 11:00 a.m., London time, on the applicable Interest Determination
Date;
- - if "LIBOR Reuters" is specified in the applicable pricing supplement, the
arithmetic mean of the offered rates for deposits in the Designated LIBOR
Currency having the Index Maturity specified in the applicable pricing
supplement, commencing on the applicable Interest Reset Date, that appear
on the Designated LIBOR Page specified in the applicable pricing
supplement as of 11:00 a.m., London time, on the applicable Interest
Determination Date; provided, that, if the Designated LIBOR Page by its
terms provides only for a single rate, then the single rate will be used;
- - with respect to a LIBOR Interest Determination Date on which fewer than
two offered rates appear, or no rate appears, as the case may be, on the
designated LIBOR Page as specified in the preceding two clauses, the rate
calculated by the calculation agent as the arithmetic mean of at least two
quotations obtained by the calculation agent after requesting the
principal London offices of each of four major reference banks, which may
include affiliates of an agent, in the London interbank market to provide
the calculation agent with its offered quotation for deposits in the
Designated LIBOR Currency for the period of the Index Maturity specified
in the applicable pricing supplement, commencing on the applicable
Interest Reset Date, to prime banks in the London interbank market at
approximately 11:00 a.m., London time, on the applicable Interest
Determination Date and in a principal amount that is representative for a
single transaction in the Designated LIBOR Currency in that market at that
time;
- - if fewer than two quotations referred to in the preceeding clause are so
provided, the rate on the applicable Interest Determination Date
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 applicable Interest Determination Date by three major banks
in such Principal Financial Center selected by the calculation agent,
which may include affiliates of an agent, for loans in the Designated
LIBOR Currency to leading European banks, having the Index Maturity
designated in the applicable pricing supplement and in a principal amount
that is representative for a single transaction in that market at that
time; or
- - if the banks so selected by the calculation agent are not quoting as
mentioned in the preceeding clause, LIBOR in effect on the applicable
Interest Determination Date.
"Designated LIBOR Currency" means the currency specified in the applicable
pricing supplement as to which LIBOR shall be calculated or, if no such currency
is specified in the applicable pricing supplement, United States dollars.
"Designated LIBOR Page" means either:
- - if "LIBOR Telerate" is designated in the applicable pricing supplement or
neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
applicable pricing supplement as the method for calculating LIBOR, the
display on Bridge Telerate, Inc. or any successor service on the page
specified in such pricing supplement or any page as may replace the
specified page on that service for the purpose of displaying the London
interbank rates of major banks for the Designated LIBOR Currency; or
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<PAGE> 20
- - 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 the specified page on that service for the purpose of
displaying the London interbank rates of major banks for the Designated
LIBOR Currency.
"Principal Financial Center" means the capital city of the country to which the
Designated LIBOR Currency relates, except 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, Toronto,
Frankfurt, Amsterdam, Milan, London, Johannesburg and Zurich, respectively.
Prime Rate. Prime Rate notes will bear interest at a specified rate that will
be reset periodically based on the Prime Rate and any Spread and/or Spread
Multiplier.
"Prime Rate" means, for any Interest Determination Date, the rate set forth for
the relevant Prime Rate Interest Determination Date in H.15(519) under the
heading "Bank Prime Loan."
The following procedures will apply if the rate cannot be set as described
above:
- - If the rate is not published before 3:00 p.m., New York City time, on the
calculation date, then the Prime Rate will be the rate on such Prime Rate
Interest Determination Date as published in H.15 Daily Update, or such
other recognized electronic source used for the purpose of displaying such
rate, under the caption "Bank Prime Loan." If such rate is not yet
published in H.15(519), H.15 Daily Update or another recognized electronic
source by 3:00 p.m., New York City time, on the related calculation date,
then the Prime Rate shall be the arithmetic mean of the rates of interest
publicly announced by each bank that appears on the display designated as
page "USPRIME1" on the Reuters Monitor Money Rates Service ("Reuters
Screen USPRIME1 Page") or any successor service as the bank's prime rate
or base lending rate as in effect for the Prime Rate Interest
Determination Date as quoted on the Reuters Screen USPRIME1 Page on the
Prime Rate Interest Determination Date.
- - If fewer than four rates appear on the Reuters Screen USPRIME1 Page on the
Prime Rate Interest Determination Date, the Prime Rate will be the
arithmetic mean of the prime rates or base lending rates (quoted on the
basis of the actual number of days in the year divided by a 360-day year)
as of the close of business on the Prime Rate Interest Determination Date
by four major banks in New York City selected by the calculation agent.
- - If fewer than four banks selected by the calculation agent are providing
quotes, the rate will be the same rate as used for the prior interest
period.
Treasury Rate. Treasury Rate notes will bear interest at a specified rate that
will be reset periodically based on the Treasury Rate and any Spread and/or
Spread Multiplier.
"Treasury Rate" means, for any Interest Determination Date, the rate for the
auction on the relevant Treasury Rate Interest Determination Date of Treasury
Bills having the specified Index Maturity specified in the applicable pricing
supplement under the caption "INVESTMENT RATE" on the display on the Bridge
Telerate, Inc. or any successor service on page 56, or any other page as may
replace that page on such service ("Telerate Page 56") or page 57, or any other
page as may replace that page on such service ("Telerate Page 57").
The following procedures will apply if the rate cannot be set as described
above:
- - If the rate is not published by 3:00 p.m., New York City time, on the
relevant calculation date, then the Treasury Rate will be the Bond
Equivalent Yield of the rate for such Treasury Bills as published in H.15
Daily Update, or another recognized electronic source used for the purpose
of displaying such rate, under the caption "U.S. Government
Securities/Treasury Bills/Auction High" or, if 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 such Treasury Bills as announced
by the United States Department of the Treasury.
- - If the auction rate of Treasury Bills having the Index Maturity specified
in the applicable pricing supplement is not so announced by the United
States Department of the Treasury, or if no such auction is
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held, then the Treasury Rate will be the Bond Equivalent Yield of the rate
on such Treasury Rate Interest Determination Date of Treasury Bills having
the Index Maturity specified in the applicable pricing supplement as
published in H.15(519) under the caption "U.S. Government
Securities/Treasury Bills/Secondary Market" or, if not yet published by
3:00 p.m., New York City time, on the related calculation date, the rate
on such Treasury Rate Interest Determination Date of such Treasury Bills
as published in H.15 Daily Update, or another recognized electronic source
used for the purpose of displaying such rate, under the caption "U.S.
Government Securities/Treasury Bills/Secondary Market."
- - If such rate is not yet published in H.15 (519), H.15 Daily Update or
another recognized electronic source, then the Treasury Rate will be
calculated by the calculation agent and will be 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 such Treasury Rate
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; provided, however, that if the dealers so
selected by the calculation agent are not quoting as mentioned in this
sentence, the Treasury Rate determined as of such Treasury Rate Interest
Determination Date will be the Treasury Rate in effect on such Treasury
Rate Interest Determination Date.
"Bond Equivalent Yield" means a yield, expressed as a percentage, calculated in
accordance with the following formula:
<TABLE>
<S> <C> <C> <C> <C>
D X N
Bond Equivalent Yield = ------------- 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, "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.
AMORTIZING NOTES
We may from time to time offer notes, with amounts of principal and interest
payable in installments over the term of the notes. Unless otherwise specified
in the applicable pricing supplement, interest on each such note will be
computed on the basis of a 360-day year of twelve 30-day months. Payments with
respect to such notes will be applied first to interest due and payable on these
notes and then to the reduction of the unpaid principal amount of the notes.
Further information concerning additional terms and conditions of any issue of
notes will be provided in the applicable pricing supplement. A table setting
forth repayment information in respect of an issue of notes will be included in
the applicable note and the applicable pricing supplement.
ORIGINAL ISSUE DISCOUNT NOTES
We may from time to time offer notes at a price that is less than 100% of the
principal amount of the note ("Discount Notes"). 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. When we refer to "Discount," we mean the difference
between the issue price of a Discount Note and 100% of the principal amount. On
the maturity date, the amount payable to the holder will be equal to the sum of:
- - the issue price, increased by any accruals of Discount and, in the event
of any redemption of a 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 thereon to the maturity date.
Unless otherwise specified in the applicable pricing supplement, for purposes of
determining the amount of Discount that has accrued as of any date on which a
redemption, repayment or acceleration of maturity occurs for a Discount Note,
such Discount will be accrued using a constant yield method. The constant yield
will be calculated using a 30-day month, 360-day year convention, a compounding
period that, except for the period
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from the date of issue to the initial interest payment date for a Discount Note,
corresponds to the shortest period between interest payment dates for the
applicable Discount Note, with ratable accruals within a compounding period, a
coupon rate equal to the initial coupon rate applicable to such Discount Note
and an assumption that the maturity of such Discount Note will not be
accelerated. If the period from the date of issue to the initial interest
payment date for a Discount Note is:
- - shorter than the compounding period for such Discount Note, a
proportionate amount of the yield for an entire compounding period will be
accrued.
- - longer than the compounding period, then such period will be divided into
a regular compounding period and a short period, with the short period
being treated as provided in the preceding sentence.
The accrual of the applicable Discount may differ from the accrual of original
issue discount for purposes of the Internal Revenue Code, certain Discount Notes
may not be treated as having original issue discount within the meaning of the
Internal Revenue Code of 1986 and notes other than Discount Notes may be treated
as issued with original issue discount for federal income tax purposes. See
"United States Federal Income Tax Considerations."
INDEXED NOTES
We may issue notes with the amount of principal, premium and/or interest payable
to be determined with reference:
- - to the price or prices of specified commodities or stocks;
- - to the exchange rate of one or more designated currencies, including a
composite currency such as the ECU, relative to an indexed currency; or
- - to such other price(s) or exchange rate(s), as specified in the applicable
pricing supplement.
We refer to these types of notes in this prospectus supplement as "Indexed
Notes."
In certain cases, holders of Indexed Notes may receive a principal payment on
the maturity date that is greater than or less than the principal amount of such
Indexed Notes depending upon the relative value on the maturity date of the
specified indexed item. Information as to the method for determining the amount
of principal, premium, if any, and/or interest payable in respect of Indexed
Notes, particular historical information with respect to the specified indexed
item and certain tax considerations associated with an investment in Indexed
Notes will be specified in the applicable pricing supplement. See also "Risk
Factors."
COVENANTS
Limitations on incurrence of indebtedness
We will not, and will not permit any of our subsidiaries to, incur any
Indebtedness if, immediately after giving effect to the incurrence of such
additional Indebtedness and the application of the proceeds from the additional
Indebtedness, the aggregate principal amount of all of our outstanding
Indebtedness and that of our subsidiaries on a consolidated basis determined in
accordance with generally accepted accounting principles is greater than 60% of
the sum of, without duplication:
- - our Total Assets and those of our subsidiaries as of the end of the
calendar quarter covered in our Annual Report on Form 10-K or Quarterly
Report on Form 10-Q, as the case may be, most recently filed with the
Securities and Exchange Commission, or if such filing is not permitted
under the Exchange Act, with the trustee, prior to the incurrence of such
additional Indebtedness; and
- - the purchase price of any real estate assets or mortgages receivable
acquired, and the amount of any securities offering proceeds received, to
the extent that such proceeds were not used to acquire real estate assets
or mortgages receivable or used to reduce Indebtedness, by us or any of
our subsidiaries since the end of such calendar quarter, including those
proceeds obtained in connection with the incurrence of such additional
Indebtedness.
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In addition to the foregoing limitation on the incurrence of Indebtedness, we
will not, and will not permit any of our subsidiaries to, incur any Indebtedness
secured by any Encumbrance upon any of our property or any of our subsidiaries
if, immediately after giving effect to the incurrence of such additional
Indebtedness and the application of the proceeds thereof, the aggregate
principal amount of all of our outstanding Indebtedness and that of our
subsidiaries is greater than 40% of the sum of, without duplication:
- - our Total Assets and those of our subsidiaries as of the end of the
calendar quarter covered in our Annual Report on Form 10-K or Quarterly
Report on Form 10-Q, as the case may be, most recently filed with the
Securities and Exchange Commission, or if such filing is not permitted
under the Exchange Act, with the trustee, prior to the incurrence of such
additional Indebtedness; and
- - the purchase price of any real estate assets or mortgages receivable
acquired, and the amount of any securities offering proceeds received, to
the extent that such proceeds were not used to acquire real estate assets
or mortgages receivable or used to reduce Indebtedness, by us or any of
our subsidiaries since the end of such calendar quarter, including those
proceeds obtained in connection with the incurrence of such additional
Indebtedness.
We and our subsidiaries may not at any time own Total Unencumbered Assets equal
to less than 150% of the aggregate outstanding principal amount of our
Indebtedness and that of our subsidiaries on a consolidated basis which is not
secured by any Encumbrance upon any of our properties or those of our
subsidiaries.
In addition to the foregoing limitation on the incurrence of Indebtedness, we
will not, and will not permit any of our subsidiaries to, incur any Indebtedness
if the ratio of Consolidated Income Available for Debt Service to the Annual
Service Charge for the four consecutive fiscal quarters most recently ended
prior to the date on which such additional Indebtedness is to be incurred shall
have been less than 1.5:1 on a pro forma basis after giving effect thereto and
to the application of the proceeds therefrom, and calculated on the assumption
that:
- - such Indebtedness and any other Indebtedness incurred by us and our
subsidiaries since the first day of such four-quarter period and the
application of the proceeds from such Indebtedness, including to refinance
other Indebtedness, had occurred at the beginning of such period;
- - the repayment or retirement of any other Indebtedness by us and our
subsidiaries since the first day of such four-quarter period had been
repaid or retired at the beginning of such period, except that, in making
such computation, the amount of Indebtedness under any revolving credit
facility shall be computed based upon the average daily balance of such
Indebtedness during such period;
- - in the case of Acquired Indebtedness or Indebtedness incurred in
connection with any acquisition since the first day of such four-quarter
period, the related acquisition had occurred as of the first day of such
period with the appropriate adjustments with respect to such acquisition
being included in such pro forma calculation; and
- - in the case of any acquisition or disposition by us or our subsidiaries of
any asset or group of assets since the first day of such four-quarter
period, whether by merger, stock purchase or sale, or asset purchase or
sale, such acquisition or disposition or any related repayment of
Indebtedness had occurred as of the first day of such period with the
appropriate adjustments with respect to such acquisition or disposition
being included in such pro forma calculation.
When we refer to "Acquired Indebtedness," we refer to Indebtedness of a person
or entity (a) existing at the time such person or entity becomes our subsidiary
or (b) assumed in connection with the acquisition of assets from such person or
entity, in each case, other than Indebtedness incurred in connection with, or in
contemplation of, such person or entity becoming a subsidiary or such
acquisition. Acquired Indebtedness shall be deemed to be incurred on the date of
the related acquisition of assets from any person on the date the acquired
person or entity becomes our subsidiary.
When we refer to "Annual Service Charge" for any period, we refer to the
aggregate interest expense for such period in respect of, and the amortization
during such period of any original issue discount of, our Indebtedness and that
of our subsidiaries and the amount of dividends which are payable during such
period in respect of any Disqualified Stock.
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When we refer to "Consolidated Income Available for Debt Service" for any
period, we refer to our Earnings from Operations and those of our subsidiaries
plus amounts which have been deducted, and minus amounts which have been added,
for the following, without duplication:
- - interest on our Indebtedness and that of our subsidiaries;
- - provision for taxes based on our income and that of our subsidiaries;
- - amortization of debt discount;
- - provisions for gains and losses on properties and property depreciation
and amortization;
- - the effect of any noncash charge resulting from a change in accounting
principles in determining Earnings from Operations for such period; and
- - amortization of deferred charges.
When we refer to "Disqualified Stock," we refer to, any ownership interest,
including any capital stock, shares, interests, participations, any rights
(other than debt securities convertible into or exchangeable for corporate
stock), warrants or options to purchase any of the foregoing, of a person or
entity which by the terms of such ownership interest or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable, upon the happening of any event or otherwise:
- - matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, other than an ownership interest which is
redeemable solely in exchange for common stock;
- - is convertible into or exchangeable or exercisable for Indebtedness or
Disqualified Stock; or
- - is redeemable at the option of the holder thereof, in whole or in part,
other than an ownership interest which is redeemable solely in exchange
for an ownership interest which is not Disqualified Stock or the
redemption price of which may, at the option of such person or entity, be
paid in an ownership interest which is not Disqualified Stock;
in each case on or prior to the maturity date of the notes.
When we refer to "Earnings from Operations" for any period, we refer to net
earnings excluding gains and losses on sales of investments, extraordinary items
and property valuation losses, net as reflected in our financial statements and
those of our subsidiaries for such period determined on a consolidated basis in
accordance with generally accepted accounting principles.
When we refer to "Encumbrance," we refer to any mortgage, lien, charge, pledge
or security interest of any kind.
When we refer to "Indebtedness" of Summit Properties Partnership, L.P. or any of
our subsidiaries, we refer to any indebtedness of us or any of our subsidiaries,
whether or not contingent, in respect of:
- - borrowed money or evidenced by bonds, notes, debentures or similar
instruments whether or not such indebtedness is secured by an Encumbrance
existing on property owned by us and any of our subsidiaries;
- - indebtedness for borrowed money of a person or entity other than us or any
of our subsidiaries, which is secured by an Encumbrance existing on
property owned by us and any of our subsidiaries, to the extent of the
lesser of:
-- the amount of indebtedness so secured; and
-- the fair market value of the property subject to such Encumbrance;
- - the reimbursement obligations, contingent or otherwise, in connection with
any letters of credit actually issued or amounts representing the balance
deferred and unpaid of the purchase price of any property or services,
except any such balance that constitutes an accrued expense or trade
payable, or all conditional sale obligations or obligations under any
title retention agreement;
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- - the principal amount of all of our obligations and those of our
subsidiaries with respect to redemption, repayment or other repurchase of
any Disqualified Stock;
- - any lease of property by us and any of our subsidiaries as lessee which is
reflected on our consolidated balance sheet as a capitalized lease in
accordance with generally accepted accounting principles; or
- - interest rate swaps, caps or similar agreements and foreign exchange
contracts, currency swaps or similar agreements, to the extent, in the
case of items of indebtedness described in the first three bullet points
listed in this paragraph, that any such items, other than letters of
credit, would appear as a liability on our consolidated balance sheet in
accordance with generally accepted accounting principles.
Indebtedness also includes to the extent not otherwise included, any obligation
by us and any of our subsidiaries 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 or entity, other than us and
any of our subsidiaries. It being understood that Indebtedness shall be deemed
to be incurred by us or any of our subsidiaries whenever we and any of our
subsidiaries shall create, assume, guarantee or otherwise become liable in
respect thereof.
When we use the term "Total Assets" as of any date, we refer to the sum of:
- - the cost (original cost plus capital improvements) of our real estate
assets and those of our subsidiaries on such date, before depreciation and
amortization, determined on a consolidated basis in accordance with
generally accepted accounting principles; and
- - all of our other assets and those of our subsidiaries determined in
accordance with generally accepted accounting principles, but excluding
accounts receivable and intangibles.
When we refer to "Total Unencumbered Assets," we refer to the sum of:
- - those Undepreciated Real Estate Assets not subject to an Encumbrance for
borrowed money; and
- - all of our other assets and those of our subsidiaries not subject to an
Encumbrance for borrowed money, determined in accordance with generally
accepted accounting principles, but excluding accounts receivable and
intangibles.
When we refer to "Undepreciated Real Estate Assets" as of any date, we refer to
the cost (original cost plus capital improvements) of our real estate assets and
those of our subsidiaries on such date, before depreciation and amortization,
determined on a consolidated basis in accordance with generally accepted
accounting principles.
Provision of financial information
Whether we are subject to Section 13 or 15(d) of the Exchange Act we will, to
the extent permitted under the Exchange Act file with the Securities and
Exchange Commission the annual reports, quarterly reports and other documents
which we would have been required to file with the Securities and Exchange
Commission pursuant to such Section 13 or 15(d) if we were so subject. We will
file such documents with the Securities and Exchange Commission on or prior to
the respective dates (the "Required Filing Dates") mandated by such Sections. In
addition, we will:
- - within 15 days of each Required Filing Date (a) if we are not then subject
to such Section 13 or 15(d), transmit by mail to all holders of notes, as
their names and addresses appear in the security register, without cost to
such holders, copies of the annual reports and quarterly reports that we
would have been required to file with the Securities and Exchange
Commission pursuant to Section 13 or 15(d) of the Exchange Act if we were
subject to such Sections, and (b) file with the trustee copies of the
annual reports, quarterly reports and other documents that we would have
been required to file with the Securities and Exchange Commission pursuant
to Section 13 or 15(d) of the Exchange Act if we were subject to such
Sections; and
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- - if filing such documents by us with the Securities and Exchange Commission
is not permitted under the Exchange Act promptly upon written request and
payment of the reasonable cost of duplication and delivery, supply copies
of such documents to any prospective holder.
Waiver of certain covenants
We may omit to comply with any term, provision or condition of the foregoing
covenants, and with any other term, provision or condition with respect to the
notes, except any such term, provision or condition which could not be amended
without the consent of all holders of the notes, if before or after the time for
such compliance the holders of at least a majority in principal amount of all of
the outstanding notes, by act of such holders, either waive such compliance in
such instance or generally waive compliance with such covenant or condition.
Except to the extent so expressly waived, and until such waiver shall become
effective, our obligations and the duties of the trustee in respect of any such
term, provision or condition shall remain in full force and effect.
See "Description of Debt Securities -- Covenants" in the accompanying prospectus
for a description of additional covenants applicable to us.
EVENTS OF DEFAULT
The indenture for the notes provides that the following events are "Events of
Default" with respect to the notes:
- - default in the payment of any interest on any notes when such interest
becomes due and payable that continues for a period of 30 days;
- - default in the payment of the principal of any notes when due and payable;
- - default in the performance, or breach, of any other covenant or warranty
of ours in the indenture with respect to the notes and continuance of such
default or breach for a period of 60 days after written notice as provided
in the indenture;
- - default under any bond, debenture, note, mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any indebtedness for money borrowed by us (or by any our
subsidiaries, the repayment of which we have guaranteed or for which we
are directly responsible or liable as obligor or guarantor), having an
aggregate principal amount outstanding of at least $10,000,000, whether
such indebtedness now exists or shall hereafter be created, which default
shall have resulted in such indebtedness becoming or being declared due
and payable prior to the date on which it would otherwise have become due
and payable, without such indebtedness having been discharged, or such
acceleration having been rescinded or annulled, within a period of 10 days
after written notice to us as provided in the indenture;
- - the entry by a court of competent jurisdiction of one or more judgments,
orders or decrees against us or any of our subsidiaries in an aggregate
amount, excluding amounts covered by insurance, in excess of $10,000,000
and such judgments, orders or decrees remain undischarged, unstayed and
unsatisfied in an aggregate amount, excluding amounts covered by
insurance, in excess of $10,000,000 for a period of 30 consecutive days;
and
- - certain events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee of us or any Significant
Subsidiary. When we refer to "Significant Subsidiary" we refer to the
meaning ascribed to such term in Regulation S-X promulgated under the
Securities Act. If an Event of Default specified in this clause relating
to us or any Significant Subsidiary occurs, the principal amount of all
outstanding notes shall become due and payable without any declaration or
other act on the part of the trustee or the holders.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The provisions of Article 14 of the indenture relating to defeasance and
covenant defeasance, which are described under "Description of Debt
Securities -- Discharge, defeasance and covenant defeasance" in the accompanying
prospectus, will apply to the notes. Each of the covenants described under
"-- Covenants" in this
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prospectus supplement and "Description of Debt Securities -- Covenants" in the
accompanying prospectus will be subject to covenant defeasance.
NO PERSONAL LIABILITY OR RECOURSE
No recourse under or upon any obligation, covenant or agreement contained in the
indenture or the notes, or because of any indebtedness evidenced thereby, or for
any claim based thereon or otherwise in respect thereof, shall be had:
- - against Summit Properties Inc. or any other past, present or future
partner in Summit Properties Partnership, L.P.;
- - against any other person or entity which owns an interest, directly or
indirectly, in any of our partners; or
- - against any past, present or future stockholder, employee, officer or
director, as such, of Summit Properties Inc. or any successor, either
directly or through us or Summit Properties Inc. or any successor, under
any rule of law, statute or constitutional provision or by the enforcement
of any assessment or by any legal or equitable proceeding or otherwise.
Each holder of notes waives and releases all such liability by accepting
such notes. The waiver and release are part of the consideration for the
issue of the notes.
BOOK-ENTRY NOTES
Description of the Global Notes
Upon issuance, all notes in book-entry form up to $400,000,000 aggregate
principal amount having the same date of issue, interest rate or formula, stated
maturity date and redemption and/or repayment provisions, if any, and otherwise
having identical terms and provisions will be represented by one or more fully
registered global notes (the "Global Notes"). Each Global Note will be deposited
with, or on behalf of, The Depository Trust Company, as depository, registered
in the name of the depository or a nominee of the depository. No Global Note may
be transferred except as a whole by the depository to a nominee of the
depository, or by a nominee of the depository to the depository or another
nominee of the depository or by the depository or any such nominee to a
successor of the depository or a nominee of the successor.
So long as the depository, or its nominee, is the registered owner of a Global
Note, the depository or its nominee, as the case may be, will be considered the
sole owner or holder of the notes represented by such Global Note for all
purposes under the indenture. Except as provided below, beneficial owners of a
Global Note will not have the right to have the notes represented by a Global
Note registered in their names, will not receive or have the right to receive
physical delivery of the notes in definitive form and will not be considered the
owners or holders thereof under the indenture. Accordingly, each person owning a
beneficial interest in a Global Note must rely on the procedures of the
depository or on the procedures of the participant through which that person
owns its interest, to exercise any rights of a holder under the indenture. We
understand that under existing industry practices, in the event that we request
any action of holders or that an owner of a beneficial interest in a Global Note
desires to give or take any action which a holder has the right to give or take
under the indenture, the depository would authorize the participants holding the
relevant beneficial interests to give or take the desired action, and the
participants would authorize beneficial owners owning through the participants
to give or take the desired action or would otherwise act upon the instructions
of beneficial owners.
Exchange for notes in certificated form
The Global Notes will be exchangeable for notes in certificated form of like
tenor and terms and of differing authorized denominations aggregating a like
aggregate principal amount, only if:
- - the depository notifies us that it is unwilling or unable to continue as
depository or the depository ceases to be a clearing agency registered
under the Exchange Act and we do not appoint a successor depository within
90 days after receipt of such notice or when we become aware of such fact;
- - we determine that the Global Notes shall be exchangeable; or
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- - a default or an Event of Default has occurred and continues with respect
to the notes, and beneficial owners representing a majority in aggregate
principal amount of the book-entry notes represented by the Global Note
advise the depository to stop acting as the depository.
The certificated notes will be registered in the name or names as the depository
instructs the trustee. Instructions may be based upon directions received by the
depository from participants with respect to ownership of beneficial interests
in the Global Notes as described under "-- Procedures of the depository."
Procedures of the depository
The following is based on information furnished by the depository: The
depository will act as securities depository for the notes in book-entry form.
The notes in book-entry form will be issued as fully registered securities
registered in the name of Cede & Co., the depository's partnership nominee. One
fully registered Global Note will be issued for each issue of notes in
book-entry form, each in the aggregate principal amount of the issue, and will
be deposited with the depository. If, however, the aggregate principal amount of
an issue is greater than $400,000,000, one Global Note will be issued with
respect to each $400,000,000 of principal amount and one Global Note will be
issued for the remaining principal amount of such issue.
The depository 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
depository holds securities that its participants deposit with the depository.
The depository 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 depository include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations. The
depository is owned by a number of the depository's direct participants and by
the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the
National Association of Securities Dealers, Inc. Other entities 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, also have access to the depository's system. The rules applicable to
the depository and its participants are on file with the Securities and Exchange
Commission.
Purchasers of notes in book-entry form under the depository's system must be
made by or through direct participants, which will receive a credit for those
notes in book-entry form on the depository's records. The ownership interest of
each actual purchaser of each note in book-entry form represented by a Global
Note is, in turn, to be recorded on the records of direct participants and
indirect participants. Beneficial owners in book-entry form will not receive
written confirmation from the depository 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 the beneficial owner entered
into the transaction. Transfers of ownership interests in a Global Note
representing notes in book-entry form are to be accomplished by entries made on
the books of participants acting on behalf of beneficial owners. Beneficial
owners of a Global Note representing notes in book-entry form will not receive
notes in certificated form representing their ownership interests, except in the
event that use of the book-entry system for such notes in book-entry form is
discontinued.
To facilitate subsequent transfers, all Global Notes representing notes in
book-entry form which are deposited with, or on behalf of, the depository are
registered in the name of the depository's nominee, Cede & Co. The deposit of
Global Notes with, or on behalf of, the depository and their registration in the
name of Cede & Co. effect no change in beneficial ownership. The depository has
no knowledge of the actual beneficial owners of the Global Notes representing
the notes in book-entry form; the depository's records reflect only the identity
of the direct participants to whose accounts such notes in book-entry form 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.
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Conveyance of notices and other communications by the depository 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 depository nor Cede & Co. will consent or vote with respect to the
Global Notes representing the notes in book-entry form. Under its usual
procedures, the depository mails an omnibus proxy to us as soon as possible
after the applicable record date. The omnibus proxy assigns Cede & Co.'s
consenting or voting rights to those direct participants, identified in a
listing attached to the omnibus proxy, to whose accounts the notes in book-entry
form are credited on the applicable record date.
We will make principal, premium, if any, and/or interest, if any, payments on
the Global Notes representing the notes in book-entry form in immediately
available funds to the depository. The depository's practice is to credit direct
participants' accounts on the applicable payment date in accordance with their
respective holdings shown on the depository's records unless the depository has
reason to believe that it will not receive payment on the applicable payment
date. Payments by participants to beneficial owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of the applicable participant and not of the
depository, 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 depository is the
responsibility of us and the trustee. Disbursement of payments to direct
participants will be the responsibility of the depository, and disbursement of
payments to the beneficial owners will be the responsibility of direct
participants and indirect participants.
If applicable, redemption notices shall be sent to Cede & Co. If less than all
of the notes in book-entry form of like tenor and terms are being redeemed, the
depository's practice is to determine by lot the amount of the interest of each
direct participant in the issue to be redeemed.
A beneficial owner will give notice of any option to elect to have its notes in
book-entry form repaid by us, through its participant, to the trustee, and will
effect delivery of the applicable notes in book-entry form by causing the direct
participant to transfer the participant's interest in the Global Note, on the
depository's records, to the trustee.
The depository may discontinue providing its services as securities depository
with respect to the notes in book-entry form at any time by giving reasonable
notice to us or the trustee. In the event that a successor securities depository
is not obtained, notes in certificated form are required to be printed and
delivered.
We may decide to discontinue use of the system of book-entry transfers through
the depository or a successor securities depository. In that event, notes in
certificated form will be printed and delivered.
The information in this section concerning the depository and the depository's
system has been obtained from sources that we believe to be reliable, but we
take no responsibility for the accuracy of the information.
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SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Except as otherwise disclosed in an applicable pricing supplement, foreign
currency notes will not be sold in, or to residents of, the country issuing the
applicable foreign currency. All information in this prospectus supplement is
directed to prospective purchasers that are United States residents and, with
respect to foreign currency notes, is by necessity incomplete. We disclaim any
responsibility to advise prospective purchasers who are residents of countries
other than the United States with respect to any matters that affect the foreign
currency notes. Such persons should consult their own financial and legal
advisors with regard to matters relating to the foreign currency notes. See
"Risk Factors -- Fluctuations in exchange rates and modification of exchange
controls may impair your investment in the notes."
PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST
Unless otherwise specified in the applicable pricing supplement, we are
obligated to make payments of principal of, and premium, if any, and interest
on, foreign currency notes in the applicable foreign currency, or if such
foreign currency is not at the time of such payment legal tender for the payment
of public and private debts, in such other coin or currency of the country which
issued such foreign currency as at the time of such payment is legal tender for
the payment of such debts. The exchange rate agent named in the applicable
pricing supplement will convert any such amounts payable by us in a foreign
currency or composite currency, unless otherwise specified in the applicable
pricing supplement, into United States dollars for payment to holders. However,
the holder of a foreign currency note may elect to receive such amounts in the
applicable foreign currency or composite currency as described below.
Any United States dollar amount to be received by a holder of a foreign currency
note will be based on the highest bid quotation in The City of New York received
by the exchange rate agent at approximately 11:00 a.m., New York City time, on
the second business day preceding the applicable payment date from three
recognized foreign exchange dealers, one of whom may be the exchange rate agent.
These foreign exchange dealers will be selected by the exchange rate agent and
approved by us for the purchase by the quoting dealer of the applicable foreign
currency for United States dollars for settlement on such payment date in the
aggregate amount of such applicable foreign currency payable to all holders of
foreign currency notes scheduled to receive United States dollar payments and at
which the applicable dealer commits to execute a contract. The holders of such
foreign currency notes will bear all currency exchange costs through deductions
from such payments. If three such bid quotations are not available, payments
will be made in the applicable foreign currency.
A holder of a foreign currency note may elect to receive all or a specified
portion of any payment of the principal of, and premium, if any, and/or interest
on, such foreign currency note in the applicable foreign currency. In order to
make such an election, the holders must submit a written request for such
payment to us at the office or agency maintained for such purpose in the Borough
of Manhattan, The City of New York on or prior to the applicable record date or
at least fifteen calendar days prior to the maturity date, as the case may be.
Such written request may be mailed or hand delivered or sent by cable, telex or
other form of facsimile transmission. A holder of a foreign currency note may
elect to receive all or a specified portion of all future payments in the
applicable foreign currency in respect of such principal, premium, if any,
and/or interest and need not file a separate election for each payment. Such
election will remain in effect until revoked by written notice to the trustee or
the designated agent, but written notice of any such revocation must be received
by the trustee or the designated agent on or prior to the applicable record date
or at least fifteen calendar days prior to the date on which such foreign
currency note matures, as the case may be. Holders of foreign currency notes
whose notes are to be held in the name of a broker or nominee should contact
such broker or nominee to determine whether and how an election to receive
payments in the applicable foreign currency may be made.
We will make payments of the principal of, and premium, if any, and/or interest
on, foreign currency notes which are to be made in United States dollars as
described in this prospectus supplement with respect to notes denominated in
United States dollars. We will make payments of interest on foreign currency
notes which are to be made in the applicable foreign currency on an interest
payment date other than the maturity date by check
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mailed to the address of the holders of such foreign currency notes as appears
in the security register, subject to the right to receive such interest payments
by wire transfer of immediately available funds under the specific circumstances
described under "Description of Notes -- General." We will make payments of
principal of, and premium, if any, and/or interest on, foreign currency notes
which are to be made in the applicable foreign currency 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 each
holder thereof, provided that such bank has appropriate facilities for such wire
transfer and that the applicable foreign currency note is presented and
surrendered at the principal corporate trust office of the trustee in time for
the trustee or the designated agent to make such payments in such funds in
accordance with its normal procedures.
Unless otherwise specified in the applicable pricing supplement, a beneficial
owner of a Global Note or notes representing book-entry notes payable in an
applicable foreign currency other than United States dollars that elects to
receive payments of principal, premium, if any, and/or interest in such
applicable foreign currency must notify the participant through which it owns
its interest on or prior to the applicable record date or at least fifteen
calendar days prior to the maturity date, as the case may be, of such beneficial
owner's election. Such participant must notify the depository of such election
on or prior to the third business day after such record date or at least twelve
calendar days prior to the maturity date, as the case may be, and the depository
will notify the trustee or the designated agent of such election on or prior to
the fifth business day after such record date or at least ten calendar days
prior to the maturity date, as the case may be. If complete instructions are
received by the participant from the beneficial owner and forwarded by the
participant to the depository, and by the depository to the trustee or the
designated agent, on or prior to such dates, then such beneficial owner will
receive payments in the applicable foreign currency.
PAYMENT CURRENCY
Applicable foreign currency unavailable
If the applicable foreign currency for a foreign currency note is not available
for the required payment of principal, premium, if any, and/or interest due to
the imposition of exchange controls or other circumstances beyond our reasonable
control, we will be permitted to satisfy our obligations to the holder of such
foreign currency note by making such payment in United States dollars. The
payment in United States dollars will be made by us on the basis of the noon
dollar buying rate in The City of New York for cable transfers for such currency
as certified for customs purposes by, or if not so certified, as otherwise
determined by, the Federal Reserve Bank of New York on the second business day
prior to such payment. If such rate is not then available, then we will make the
payment on the basis of the most recently available rate or as otherwise
specified in the applicable pricing supplement. Any payment made in United
States dollars under such circumstances where the required payment is in a
currency other than United States dollars will not constitute an Event of
Default under the indenture with respect to the notes.
Composite currency
If payment in respect of a foreign currency note is required to be made in any
composite currency (e.g., ECU), and such composite currency is unavailable due
to the imposition of exchange controls or other circumstances beyond our
reasonable control, we will be entitled to satisfy our obligations to the holder
of such foreign currency note by making such payment in United States dollars.
The amount of each payment in United States dollars shall be computed by the
exchange rate agent on the basis of the equivalent of the composite currency in
United States dollars. The component currencies of the composite currency for
this purpose shall be the currency amounts that were components of the composite
currency as of the last day on which the composite currency was used. The
equivalent of the composite currency in United States dollars shall be
calculated by aggregating the United States dollar equivalents of the component
currencies. The United States dollar equivalent of each of the component
currencies shall be determined by the exchange rate agent on the basis of the
most recently available rate described in the prior paragraph for each such
component currency, or as otherwise specified in the applicable pricing
supplement.
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If the official unit of any component currency is altered by way of combination
or subdivision, the number of units of the currency as a component currency
shall be divided or multiplied in the same proportion. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as component currencies shall be replaced by an amount in such single
currency equal to the sum of the amounts of the consolidated component
currencies expressed in such single currency. If any component currency is
divided into two or more currencies, the amount of the original component
currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original component currency.
All determinations referred to above made by the exchange rate agent shall be at
its sole discretion and shall, in the absence of manifest error, be conclusive
for all purposes and binding on the holders of the foreign currency notes.
GOVERNING LAW; JUDGMENTS
The notes will be governed by and construed in accordance with the laws of the
State of New York. Under current New York law, where a cause of action is based
upon an obligation denominated in a non-United States currency, a state court in
the State of New York rendering a judgment on such an obligation would be
required to render such judgment in the non-United States currency, and such
judgment would be converted into United States dollars at the exchange rate
prevailing on the date of entry of the judgment. The holders of such notes could
be subject to exchange rate fluctuations occurring after such judgment is
rendered. It is not certain, however, that a non-New York court would follow the
same rules with respect to conversion.
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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of the principal United States federal
income tax consequences of the purchase, ownership and disposition of the notes
and 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, regulated investment companies,
dealers in securities or currencies, persons holding notes as a hedge against
currency risks or as a position in a "straddle" for tax purposes, or persons
whose functional currency is not the United States dollar. It also does not deal
with holders other than original purchasers, except where otherwise specifically
noted. Persons considering the purchase of the notes should consult their own
tax advisors concerning the application of United States federal income tax laws
to their particular situations, as well as any consequences of the purchase,
ownership and disposition of the notes arising under the laws of any other
taxing jurisdiction.
As used in this discussion, the term "U.S. Holder" means a beneficial owner of a
note that is for United States federal income tax purposes:
- - a citizen or resident of the United States;
- - a corporation, partnership or other entity, treated as a corporation or a
partnership for federal income tax purposes, created or organized in or
under the laws of the United States, any state of the United States or the
District of Columbia, other than a partnership that is not treated as a
United States person under any applicable treasury regulations;
- - an estate whose income is subject to United States federal income tax
regardless of its source; or
- - 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. Notwithstanding the preceding sentence, to the extent provided
in treasury regulations, certain trusts in existence on August 20, 1996,
and treated as United States persons under the Internal Revenue Code of
1986 and applicable treasury regulations thereunder prior to such date,
that elect to continue to be treated as United States persons under the
Internal Revenue Code of 1986 or applicable treasury regulations
thereunder also will be a U.S. Holder.
As used in this discussion, the term "non-U.S. Holder" means a beneficial owner
of a note that is not a U.S. Holder.
U.S. HOLDERS
Payments of interest
Payments of interest on a note generally will be taxable to a U.S. Holder as
ordinary interest income at the time such payments are accrued or are received
in accordance with the U.S. Holder's regular method of tax accounting.
Original issue discount
The following summary is a general discussion of the United States federal
income tax consequences to U.S. Holders of the purchase, ownership and
disposition of notes issued with original issue discount. The following summary
is based upon final treasury regulations, as amended (the "OID Regulations"),
under the original issue discount provisions of the Internal Revenue Code of
1986.
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
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
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been sold, ignoring sales to bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents, or
wholesalers. The stated redemption price at maturity of a note is the sum of all
payments provided by the note other than qualified stated interest payments.
When we refer to "qualified stated interest" we generally mean 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. In addition, under the
OID Regulations, if a note bears interest for one or more accrual periods at a
rate below the rate applicable for the remaining term of such note (e.g., notes
with teaser rates or interest holidays), and if the greater of either the
resulting foregone interest on such note or any "true" discount on such note
(i.e., the excess of the note's stated principal amount over its issue price)
equals or exceeds a specified de minimis amount, then the stated interest on the
note would be treated as original issue discount rather than qualified stated
interest.
Payments of qualified stated interest on a note are taxable to a U.S. Holder as
ordinary interest income at the time such payments are accrued or are received
in accordance with the U.S. Holder's regular method of tax accounting. A U.S.
Holder of a note issued with original issue discount must include such 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 initial U.S. Holder
of a note issued with original issue discount should include that amount of
original issue discount in income as is equal to the sum of the daily portions
of original issue discount with respect to the note for each day during the
taxable year, or portion of the taxable year, on which the U.S. Holder held the
note issued with original issue discount. The "daily portion" of original issue
discount on any note issued with original issue discount 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 note
issued with original issue discount, 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:
- - the product of the 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
- - the amount of any qualified stated interest payments allocable to such
accrual period. The "adjusted issue price" of a note issued with original
issue discount at the beginning of any accrual period is the sum of the
issue price of the note plus the amount of original issue discount
allocable to all prior accrual periods minus the amount of any prior
payments on the note that were not qualified stated interest payments.
Under these rules, U.S. Holders generally will have to include in income
increasingly greater amounts of original issue discount in successive
accrual periods.
A U.S. Holder who purchases a note issued with original issue discount 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 note after the
purchase date other than payments of qualified stated interest, will be
considered to have purchased the 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 note issued with
original issue discount for any taxable year, or portion thereof in which the
U.S. Holder holds the 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 rate notes
Under the OID Regulations, floating rate notes are subject to special rules
whereby a floating rate 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 floating rate 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:
- - one or more qualified floating rates;
- - a single fixed rate and one or more qualified floating rates;
- - a single objective rate; or
- - a single fixed rate and a single objective rate that is a qualified
inverse floating rate.
A variable rate is a "qualified floating rate" if 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 floating rate note
is denominated equal to the product of a qualified floating rate and either (a)
a fixed multiple that is greater than 0.65 but not more than 1.35, or (b) a
fixed multiple greater than or equal to 0.65 but not more than 1.35, increased
or decreased by a fixed 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 floating rate note
(e.g., two or more qualified floating rates with values within 25 basis points
of each other as determined on the floating rate note's issue date) will be
treated as a single qualified floating rate. Notwithstanding the foregoing, a
variable rate that would otherwise constitute a qualified floating rate but
which is subject to one or more restrictions such as a maximum numerical
limitation (i.e., a cap) or a minimum numerical limitation (i.e., a floor) may,
under certain circumstances, fail to be treated as a qualified floating rate
under the OID Regulations unless such cap or floor is fixed throughout the term
of the note.
An "objective rate" is a rate that is 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 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. An objective rate is a
"qualified inverse floating rate" if (a) the rate is equal to a fixed rate minus
a qualified floating rate, and (b) the 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 floating rate 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 floating rate 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.
In general, if (a) a floating rate 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 (b) 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 floating rate 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 floating rate 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 floating rate note is determined under the rules
applicable to fixed rate debt instruments by assuming that the variable rate is
a fixed rate equal to:
- - 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
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- - 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 floating rate 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 floating rate 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 floating rate note. The OID Regulations
generally require that such a floating rate 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 floating
rate 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 floating rate
note's issue date. Any objective rate, other than a qualified inverse floating
rate, provided for under the terms of the floating rate note is converted into a
fixed rate that reflects the yield that is reasonably expected for the floating
rate note. In the case of a floating rate 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 floating rate 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 floating rate note as of the
floating rate 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 floating rate note is then
converted into an equivalent fixed rate debt instrument in the manner described
above.
Once 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 floating rate 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. In 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 floating rate note
during the accrual period.
If a floating rate note does not qualify as a variable rate debt instrument
under the OID Regulations, then the floating rate note would be treated as a
contingent payment debt obligation under the contingent payment debt instrument
regulations issued by the United States Treasury Department. The contingent
payment debt instrument regulations generally require a U.S. Holder of a
contingent payment debt 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 contingent payment
debt instrument 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 floating rate 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.
Some of the notes (a) may be redeemable at our option prior to their stated
maturity and/or (b) may be repayable at the option of the holder prior to their
stated maturity. Notes containing such features may be subject to rules that
differ from the general rules discussed above. Investors intending to purchase
notes with these 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.
In general, U.S. Holders may elect to include in income all interest, including
stated interest, acquisition discount, original issue discount, de minimis
original issue discount, market discount, de minimis market
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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.
Short-term notes
Notes that have a fixed maturity of one year or less will be treated as having
been issued with original issue discount. 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 the U.S. Holder does not make this
election, 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, unless an election is
made to accrue the acquisition discount under the constant yield method, through
the date of sale or maturity. In this scenario, 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.
Market discount
If a U.S. Holder purchases a note, other than a note issued with original issue
discount, for an amount that is less than its issue price (or, in the case of a
subsequent purchaser, its stated redemption price at maturity) or, in the case
of a note issued with original issue discount, 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 must treat any partial principal
payment, or in the case of a note issued with original issue discount, 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 (a) the amount of such payment or
realized gain or (b) 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. Unless the U.S. Holder elects to accrue market discount
on the basis of semi-annual compounding, market discount will accrue ratably
during the period from the date of acquisition to the maturity date of the note.
Under the market discount rules, a current deduction is only allowed to the
extent the interest expense exceeds an allocable portion of market discount.
Thus, 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. A U.S. Holder may elect to include market discount
in income currently as it accrues, on either a ratable or semi-annual
compounding basis, in which case the rules described above regarding the
treatment as ordinary income of gain upon the disposition of the note and upon
the receipt of certain cash payments and regarding the deferral of interest
deductions will not apply. Generally, such currently included market discount is
treated as ordinary interest for United States federal income tax purposes. Such
an election will apply to all debt instruments 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. As part of such election, the U.S. Holder may offset
interest otherwise required to be included in respect of the note
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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 held by the U.S.
Holder at the beginning of the first taxable year to which the election applies
and to all taxable debt instruments acquired on or after such date. The election
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. The deductibility of capital losses is subject
to limitations. Prospective investors should consult their own tax advisors
concerning these tax law provisions.
Notes denominated, or in respect of which interest is payable, 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 United States 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 United States dollars at that time, and such
United States dollar value will be the U.S. Holder's tax basis in such 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, must include in income the United States
dollar value of the amount of interest income, including original issue discount
or market discount and reduced by amortizable bond premium to the extent
applicable, that has accrued and is otherwise required to be taken into account
with respect to a note during an accrual period. In order to calculate the
United States dollar value of such accrued income, such income shall be
translated 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 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 falls 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 United States dollar value of the foreign currency payment received,
determined on the date such payment is received, in respect of such accrual
period and the United States dollar value of interest income that has accrued
during such accrual periods.
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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 United States 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. This 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 constitute 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 the
applicable holding period. To the extent the amount realized represents accrued
but unpaid interest, however, these amounts must be treated as interest income,
with exchange gain or loss computed as described above. If a U.S. Holder
receives foreign currency on a sale, exchange or retirement, the amount realized
will be based on the United States dollar value of the foreign currency on the
date the payment is received or the note is disposed of, or deemed disposed of
in the case of a taxable exchange of the note for a new note. In the case of a
note denominated in foreign currency and traded on an established securities
market, a cash basis U.S. Holder, or upon election, an accrual basis U.S.
Holder, will determine the United States 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 the U.S. Holder, increased by the amounts of any
market discount or original issue discount previously included in income by the
holder with respect to such note and reduced by any amortized acquisition or
other premium and any payments other than qualified stated interest 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 equal the United
States 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.
Any gain or loss realized upon the sale, exchange or retirement of a note
attributable to fluctuations in currency exchange rates will be treated as
ordinary income or loss which will not constitute interest income or expense.
The U.S. Holder will recognize gain or loss attributable to fluctuations in
exchange rates equal to the difference between the United States dollar value of
the foreign currency principal amount of the note, determined on the date (a)
the U.S. Holder receives such payment or (b) the U.S. Holder disposes of the
note, and the United States dollar value of the foreign currency principal
amount of the note, determined on the date the U.S. Holder acquired the note.
The U.S. Holder will recognize such foreign currency gain or loss only to the
extent of the total gain or loss realized by the U.S. Holder on the sale,
exchange or retirement of the note.
Original issue discount. In the case of a note issued with original issue
discount, (a) original issue discount is determined in units of the foreign
currency, (b) accrued original issue discount is translated in United States
dollars as described in "-- Accrual method" above and (c) 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 United
States 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, (a)
market discount is determined in units of the foreign currency, (b) 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 United States 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 (c) accrued market discount currently includible in
income by a U.S. Holder for any accrual period is translated into United States
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 "-- Accrual method" above
with respect to computation of exchange gain or loss on accrued interest.
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For a note issued with amortizable bond premium, such premium is determined in
the relevant foreign currency and reduces interest income in units of the
foreign currency. Although not entirely clear, a U.S. Holder should recognize
exchange gain or loss equal to the difference between the United States dollar
value of the bond premium amortized with respect to a period, determined on the
date the U.S. Holder receives interest attributable to such period, and the
United States 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 United States dollar value of such foreign currency,
determined at the time the U.S. Holder receives the interest 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
United States dollars or its use to purchase notes, will be treated as ordinary
income or loss.
NON-U.S. HOLDERS
The following discussion regarding non-U.S. Holders applies where the notes are
not effectively connected with a United States trade or business of the non-U.S.
Holder.
A non-U.S. Holder will generally not be subject to United States federal income
taxes on payments of principal, premium, if any, or interest (other than
contingent interest), including original issue discount, if any, on a note,
unless such non-U.S. Holder is a:
- - direct or indirect 10% or greater holder of the capital or profits
interests in Summit Properties Partnership, L.P.;
- - a controlled foreign corporation related to Summit Properties Partnership,
L.P.; or
- - a bank receiving interest described in Section 881(c)(3)(A) of the
Internal Revenue Code of 1986.
To qualify for the exemption from taxation, the non-U.S. Holder will need to
provide to the withholding agent a statement that (a) is signed by the
beneficial owner of the note under penalties of perjury, (b) certifies that such
owner is not a U.S. Holder and (c) provides the name and address of the
beneficial owner. The statement may be made on an IRS Form W-8, IRS Form W-8 BEN
or a substantially similar form, and the beneficial owner must inform the
withholding agent of any change in the information on the statement within 30
days of such change. If a note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the withholding agent. However, in
such case, the signed statement must be accompanied by a copy of the IRS Form
W-8, IRS Form W-8 BEN or the substitute form provided by the beneficial owner to
the organization or institution.
United States Treasury Regulations generally effective for payments made after
December 31, 2000, provide alternative methods for satisfying the certification
requirements described in this section. In the case of a non-U.S. Holder that is
a partnership, these regulations generally require that the certification
described in this section be provided by the partners, and the partnership
provide certain information, including a United States taxpayer identification
number.
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 attributable to an office or other fixed place of
business maintained by the non-U.S. Holder in the United States. 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 unitholder of Summit
Properties Partnership, L.P. 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, or
unless the notes are contingent payment debt obligations.
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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.
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 (a) the broker
determines that the seller is a corporation or other exempt recipient or (b) 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 (1) the broker determines that the seller is an
exempt recipient or (2) 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, IRS Form W-8 BEN or substitute
form 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.
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SUPPLEMENTAL PLAN OF DISTRIBUTION
Under the terms of a distribution agreement, we are offering the notes on a
continuous basis through or to J.P. Morgan Securities Inc., First Union
Securities, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan
Stanley & Co. Incorporated, as agents. The agents have agreed to use their
reasonable best efforts to solicit orders. We will pay an agent a commission
ranging from .125% to .750% of the principal amount of each note, depending on
its maturity, sold through that agent. The exact commission paid will be
determined by the stated maturity of the notes sold. Commissions with respect to
notes with stated maturities of over 30 years will be negotiated at the time of
sale. The following table describes the potential proceeds that we will receive,
but does not include expenses payable by us which are estimated to be $750,000.
<TABLE>
<CAPTION>
AGENTS' DISCOUNTS AND
PRICE TO PUBLIC COMMISSIONS PROCEEDS TO SUMMIT
--------------- ---------------------- ----------------------------
<S> <C> <C> <C>
Per note............. 100% .125% to .750% 99.875% to 99.250%
Total................ $250,000,000 $312,500 to $1,875,000 $249,687,500 to $248,125,000
</TABLE>
We may sell notes directly to investors (other than broker-dealers) in those
jurisdictions in which we are permitted to do so. If we sell notes directly to
investors, no commission or discount will be paid. We also may sell notes to any
agent as principal for the agent's account at a price agreed upon at the time of
sale. Such notes may be resold by the agent to investors at a fixed public
offering price or at prevailing market prices, or at a related price, as
determined by the agent. Unless otherwise specified in the pricing supplement,
any note sold to an agent as principal will be purchased at a price equal to
100% of the principal amount minus a discount equal to the commission that would
be paid on an agency sale of a note of identical maturity.
The agents may sell notes purchased from us as principal to other dealers for
resale to investors and other purchasers and may provide any portion of the
discount received in connection with their purchase from us to such dealers.
After the initial public offering of the notes, the public offering price and
other selling terms may be changed.
The notes will not have an established trading market when issued. Also, the
notes will not be listed on any securities exchange. The agents may make a
market in the notes, as permitted by applicable laws and regulations, but are
not obligated to do so and may discontinue any market-making at any time without
notice. There can be no assurance of a secondary market for any notes, or that
any purchaser of notes will be able to sell notes in the future.
Each purchaser of a note will arrange for payment as instructed by the
applicable agent. The agents are required to deliver the proceeds of the notes
to us in immediately available funds, to a bank designated by us in accordance
with the terms of the distribution agreement, on the date of settlement.
The agents may be deemed to be "underwriters" within the meaning of the
Securities Act. We have agreed to indemnify the agents against certain
liabilities, including liabilities under the Securities Act or to contribute to
payments that they may be required to make in connection with such
indemnification.
We reserve the right to withdraw, cancel or modify the offer made hereby without
notice. We will have the sole right to accept offers to purchase notes and may
reject any proposed purchase of notes as a whole or in part. The agents will
have the right, in their discretion reasonably exercised, to reject any offer to
purchase notes, as a whole or in part.
In connection with the purchase of notes by one or more agents, as principal,
for resale at a fixed price, the agents may engage in transactions that
stabilize, maintain or otherwise affect the price of the notes. Such
transactions may consist of bids or purchases of notes for the purpose of
pegging, fixing or maintaining the price of the notes. Specifically, the agents
may overallot in connection with such offering, creating a syndicate short
position. In addition, the agents may bid for and purchase the notes in the open
market to cover a syndicate short position or to stabilize, maintain or
otherwise affect the price of the notes. Finally, the syndicate may reclaim
selling concessions allowed for distributing notes in the offering, if the
syndicate repurchases previously distributed notes in the market to cover
overallotments or to stabilize the price of the notes. Any of these
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activities may stabilize or maintain the market price of the notes above
independent market level. The agents are not required to engage in any of these
activities, and may end any of them at any time.
Concurrently with the offering of the notes through the agents, we may issue
other securities as described in the accompanying prospectus.
In the ordinary course of their respective businesses, the agents and their
affiliates have engaged in, and may in the future engage in, investment and/or
commercial banking transactions with us and certain of our affiliates. In
addition, First Union National Bank, an affiliate of First Union Securities,
Inc., is the trustee under the indenture.
To the extent the proceeds of an offering of notes are used to repay borrowings
under our unsecured credit facility, under which certain of the agents or their
affiliates are lenders, such agents or their affiliates may receive a portion of
those proceeds. It is possible that 10% or more of the net proceeds of an
offering of notes covered by a pricing supplement will be applied to the
repayment of a loan or loans made to us by certain of the agents or their
affiliates. Under the Conduct Rules of the National Association of Securities
Dealers, Inc., special considerations apply to a public offering of securities
where more than 10% of the net proceeds will be paid to a participating
underwriter or any of its affiliates. Therefore, any such offering will be
conducted pursuant to Rule 2710(c)(8) of the Conduct Rules of the National
Association of Securities Dealers, Inc.
LEGAL MATTERS
Certain legal matters relating to the notes will be passed upon for us by
Goodwin, Procter & Hoar LLP, Boston, Massachusetts and for the agents by Brown &
Wood LLP, New York, New York. The opinions of Goodwin, Procter & Hoar LLP, and
Brown & Wood LLP will be based upon, and subject to, certain assumptions as to
future actions required to be taken in connection with the issuance and sale of
the notes and as to other events that may affect the validity of the notes but
that cannot be ascertained on the date of such opinions.
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(SUMMIT PROPERTIES LOGO)
