<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-25575
PROSPECTUS SUPPLEMENT
(To Prospectus dated July 29, 1997)
[SUMMIT PROPERTIES LOGO]
SUMMIT PROPERTIES PARTNERSHIP, L.P.
$30,000,000
6 5/8% Notes due 2003
ISSUE PRICE: 99.786%
Interest payable June 15 and December 15
Interest on the 6 5/8% Notes due December 15, 2003 (the "Notes") of Summit
Properties Partnership, L.P. (the "Operating Partnership") offered hereby is
payable semi-annually on June 15 and December 15, commencing June 15, 1998. See
"Description of Notes -- Principal and Interest." The Notes will mature on
December 15, 2003. The Notes may be redeemed at any time at the option of the
Operating Partnership, in whole or in part, at a redemption price equal to the
sum of (i) the principal amount of the Notes being redeemed plus accrued
interest thereon to the redemption date and (ii) the Make-Whole Amount (as
hereinafter defined), if any. See "Description of Notes -- Optional Redemption."
The Notes will be represented by one or more Global Securities (as hereinafter
defined) registered in the name of The Depository Trust Company ("DTC") or its
nominee. Interests in the Global Securities will be shown on, and transfers
thereof will be effected only through, records maintained by DTC and its
participants. Except as provided herein, Notes in definitive form will not be
issued. See "Description of Notes."
SEE "RISK FACTORS" COMMENCING ON PAGE 3 OF THE PROSPECTUS FOR A DISCUSSION OF
CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN THE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND OPERATING
PUBLIC(1) COMMISSIONS(2) PARTNERSHIP(1)(3)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note 99.786% .625% 99.161%
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Total $29,935,800 $187,500 $29,748,300
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from December 17, 1997.
(2) The Operating Partnership and Summit Properties have agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(3) Before deducting expenses payable by the Operating Partnership, estimated at
$100,000.
The Notes are offered, subject to prior sale, when, as and if accepted by the
Underwriter and subject to approval of certain legal matters by Skadden, Arps,
Slate, Meagher & Flom LLP, counsel for the Underwriter. It is expected that
delivery of the Notes will be made on or about December 17, 1997 through the
facilities of DTC, against payment therefor in immediately available funds.
J.P. MORGAN & CO.
December 12, 1997
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS WHICH
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICES OF THE NOTES. SPECIFICALLY,
THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING AND MAY BID FOR,
AND PURCHASE, THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING".
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE OPERATING PARTNERSHIP OR ANY UNDERWRITER. THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH THEY RELATE OR ANY OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY
SUCH SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT NOR THE
ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE OPERATING PARTNERSHIP SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
THIS PROSPECTUS SUPPLEMENT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT"). THE OPERATING PARTNERSHIP'S ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENTS.
CERTAIN FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE ARE DISCUSSED IN THE SECTION
ENTITLED "RISK FACTORS" BEGINNING ON PAGE 3 OF THE PROSPECTUS. THE READER IS
CAUTIONED, HOWEVER, THAT THE FACTORS DISCUSSED IN THAT SECTION MAY NOT BE
EXHAUSTIVE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PROSPECTUS SUPPLEMENT
Summary................................................................. S-3
Use of Proceeds......................................................... S-5
Ratio of Earnings to Fixed Charges...................................... S-5
Description of Notes.................................................... S-5
Underwriting............................................................ S-12
Legal Matters........................................................... S-12
PROSPECTUS
Available Information................................................... 2
Incorporation of Certain Documents by Reference......................... 2
Risk Factors............................................................ 3
The Company and the Operating Partnership............................... 8
Use of Proceeds......................................................... 8
Ratios of Earnings to Fixed Charges..................................... 8
Description of Debt Securities.......................................... 9
Description of Preferred Stock.......................................... 20
Description of Common Stock............................................. 25
Restrictions on Transfers of Capital Stock.............................. 26
Federal Income Tax Considerations....................................... 27
Plan of Distribution.................................................... 29
Legal Matters........................................................... 30
Experts................................................................. 30
</TABLE>
S-2
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus or incorporated herein or therein by reference. Unless
the context otherwise requires, all references in this Prospectus Supplement to
the "Operating Partnership" shall mean Summit Properties Partnership, L.P., and
its subsidiaries and predecessors on an aggregated basis. Unless otherwise
indicated, information contained herein is given as of November 30, 1997.
THE OPERATING PARTNERSHIP
The Operating Partnership is one of the largest developers and operators of
luxury apartment communities in the southeastern United States. The sole general
partner of the Operating Partnership is Summit Properties Inc. ("Summit
Properties"), a Maryland corporation and a fully integrated real estate
investment trust ("REIT"). Summit Properties' common stock, par value $.01 per
share (the "Common Stock"), is listed on the New York Stock Exchange under the
symbol "SMT." Summit Properties owns approximately 85.3% of the outstanding
partnership interests ("Units") of the Operating Partnership.
The Operating Partnership's portfolio consists of 58 completed apartment
communities (the "Communities") with 13,722 apartment homes, including Summit
Foxcroft in which the Operating Partnership has a 75% managing general partner
interest. The Operating Partnership also has ten apartment communities with
2,553 apartment homes under construction.
The Operating Partnership is pursuing growth in ten primary markets with the
objective of being a dominant provider of luxury apartment homes in these
markets. The Operating Partnership has limited its focus to the 10 primary
markets in order to improve operational and marketing efficiencies, improve
market knowledge and build value in the Operating Partnership's brand. The
markets are primarily located in four areas of the Southeast, Mid-Atlantic and
Mid-West: the I-85 Corridor connecting Atlanta, Charlotte and the Raleigh-Durham
area; the greater Washington, DC/Virginia area; central and south Florida; and
Indianapolis, Indiana and Columbus, Ohio.
THE OFFERING
SECURITIES OFFERED................... $30,000,000 aggregate principal amount of
the Notes.
MATURITY............................. December 15, 2003
INTEREST PAYMENT DATES............... Semi-annually on June 15 and December 15,
commencing June 15, 1998.
RANKING.............................. The Notes will be senior unsecured
obligations of the Operating Partnership
and will rank equally with the Operating
Partnership's other unsecured and
unsubordinated indebtedness. The Notes
will be effectively subordinated to
mortgages and other secured indebtedness
of the Operating Partnership and to
indebtedness and other liabilities of the
Operating Partnership's subsidiaries. In
addition, the Notes will be repaid solely
from the assets of the Operating
Partnership; holders of the Notes will
not have recourse against any general
partner or limited partner of the
Operating Partnership for the repayment
of the Notes.
USE OF PROCEEDS...................... The net proceeds from the sale of the
Notes will be used to repay borrowings
under the Operating Partnership's
unsecured $150 million credit facility
(the "Unsecured Credit Facility") that
were incurred principally to finance
development and acquisition activities.
See "Use of Proceeds."
OPTIONAL REDEMPTION.................. The Notes are redeemable at any time at
the option of the Operating Partnership,
in whole or in part, at a redemption
price equal to the sum of (i) the
principal amount of the Notes being
redeemed plus accrued interest to the
redemption date and (ii) the Make-Whole
Amount, if any. See "Description of
Notes -- Optional Redemption."
S-3
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CERTAIN COVENANTS.................... The Notes contain various covenants
including the following:
- Neither the Operating Partnership nor
any Subsidiary (as hereinafter defined)
may incur any Indebtedness (as
hereinafter defined) if, after giving
effect thereto, the aggregate principal
amount of all outstanding Indebtedness
of the Operating Partnership and its
Subsidiaries on a consolidated basis is
greater than 60% of the sum of (i) the
Total Assets (as hereinafter defined)
of the Operating Partnership and its
Subsidiaries as of the end of the most
recent calendar quarter and (ii) 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 the Operating
Partnership or any Subsidiary since the
end of such calendar quarter, including
those proceeds obtained in connection
with the incurrence of such additional
Indebtedness.
- Neither the Operating Partnership nor
any Subsidiary may incur any
Indebtedness secured by any mortgage or
other lien upon any of the property of
the Operating Partnership or any
Subsidiary if, after giving effect
thereto, the aggregate principal amount
of all outstanding Indebtedness of the
Operating Partnership and its
Subsidiaries on a consolidated basis
which is secured by any mortgage or
other lien on the property of the
Operating Partnership or any Subsidiary
is greater than 40% of the sum of (i)
the Total Assets of the Operating
Partnership and its Subsidiaries as of
the end of the most recent calendar
quarter and (ii) 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 the
Operating Partnership or any Subsidiary
since the end of such calendar quarter,
including those proceeds obtained in
connection with the incurrence of such
additional Indebtedness.
- The Operating Partnership and its
Subsidiaries will maintain Total
Unencumbered Assets (as hereinafter
defined) of not less than 150% of the
aggregate outstanding principal amount
of the Unsecured Indebtedness (as
hereinafter defined) of the Operating
Partnership and its Subsidiaries on a
consolidated basis.
- Neither the Operating Partnership nor
any Subsidiary may incur any
Indebtedness if, after giving effect
thereto, the ratio of Consolidated
Income Available for Debt Service (as
hereinafter defined) to the Annual
Service Charge (as hereinafter defined)
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 to
certain assumptions.
For a more complete description of the
terms and definitions used in the
foregoing limitations, see "Description
of Notes -- Certain Covenants."
S-4
<PAGE> 5
USE OF PROCEEDS
The $29.6 million estimated net proceeds to the Operating Partnership from the
Offering will be used to repay borrowings under the Unsecured Credit Facility
that were incurred principally to finance the development of Summit Ballantyne
I, Summit Lake I, Summit Plantation II, Summit Russett, Summit Sedgebrook I,
Summit Stonefield, Summit New Albany, Summit Fair Lakes I and Summit Governor's
Village. As of December 11, 1997, the Unsecured Credit Facility, which matures
on September 30, 1999, bore interest at a rate of 6.79% per annum and
approximately $37.0 million was outstanding thereunder.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the consolidated ratios of earnings to fixed
charges for the Company, the Operating Partnership and the predecessor to the
Company and the Operating Partnership for the periods shown:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993 DECEMBER 31, 1992
- ------------------ ----------------- ----------------- ----------------- ----------------- -----------------
<C> <C> <C> <C> <C> <C>
2.02 1.78 1.65 1.52 0.77* 0.62*
</TABLE>
- ---------------
* Prior to the completion of the Company's February 15, 1994 initial public
offering of its common stock, the Company maintained a different capital
structure. As a result, although the original properties have historically
generated positive net cash flow, the financial statements of the Company show
net losses for the fiscal years ended December 31, 1993 and 1992.
Consequently, the computation of the ratio of earnings to fixed charges for
such periods indicates that earnings were inadequate to cover fixed charges by
approximately $6.0 million and $10.1 million for the fiscal years ended
December 31, 1993 and 1992, respectively.
The ratios of earnings to fixed charges were computed by dividing earnings by
fixed charges. For this purpose, earnings consist of pre-tax income from
continuing operations plus fixed charges. Fixed charges consist of interest
expense (whether expensed or capitalized), estimated interest component of rent
expense, and the amortization of debt issuance costs. To date, the Company has
not issued any preferred stock; therefore, the ratios of earnings to combined
fixed charges and preferred stock dividend requirements are the same as the
ratios of earnings to fixed charges presented above.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered hereby
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the "Senior Debt Securities" set forth in
the accompanying Prospectus under "Description of Debt Securities," to which
reference is hereby made.
GENERAL
The Notes constitute a separate series of Senior Debt Securities (which are more
fully described in the accompanying Prospectus) to be issued under an Indenture,
dated as of August 7, 1997 (the "Original Indenture"), as supplemented by
Supplemental Indenture No. 2, to be dated as of December 17, 1997 (the
"Supplemental Indenture" and together with the Original Indenture, the
"Indenture") between the Operating Partnership and First Union National Bank
(the "Trustee"). The form of the Indenture has been filed as an exhibit to the
Registration Statement of which this Prospectus Supplement is a part and is
available for inspection at the offices of the Operating Partnership. The
Indenture is subject to, and governed by, the Trust Indenture Act of 1939, as
amended (the "TIA"). The statements made hereunder relating to the Indenture and
the Notes are summaries of certain provisions thereof, do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all provisions of the Indenture and the Notes. All capitalized terms used
but not defined herein shall have the respective meanings set forth in the
Indenture.
The Notes will be limited to an aggregate principal amount of $30,000,000. The
Notes will be direct, senior unsecured obligations of the Operating Partnership
and will rank equally with all other unsecured and unsubordinated indebtedness
of the Operating Partnership from time to time outstanding. The Notes will be
effectively subordinated to mortgages and other secured indebtedness of the
Operating Partnership and to Indebtedness and other liabilities of subsidiaries
of the Operating Partnership. Accordingly, such prior indebtedness will have to
be satisfied in full before holders of the Notes will be able to realize any
value from encumbered or indirectly-held communities. In addition, the Notes
will be repaid solely from the assets of the Operating Partnership; holders of
the Notes will not have recourse against any general partner or limited partner
of the Operating Partnership for the repayment of the Notes.
S-5
<PAGE> 6
As of December 11, 1997, on a pro forma basis after giving effect to the
Offering, the Operating Partnership would have had approximately $460.7 million
of indebtedness, of which approximately $267.3 million would have been secured
by 33 of the Communities. The Operating Partnership may incur additional
indebtedness, including secured indebtedness, subject to the provisions
described below under "-- Certain Covenants -- Limitations on Incurrence of
Indebtedness."
The Notes will only be issued in fully registered form in denominations of
$1,000 and integral multiples thereof.
PRINCIPAL AND INTEREST
The Notes will bear interest at 6 5/8% per annum and will mature on December 15,
2003. The Notes will bear interest from December 17, 1997 or from the
immediately preceding Interest Payment Date (as defined below) to which interest
has been paid, payable semi-annually in arrears on June 15 and December 15 of
each year, commencing June 15, 1998 (each, an "Interest Payment Date"), to the
Persons in whose name the Notes are registered in the Security Register on the
preceding June 1 or December 1 (whether or not a Business Day, as defined
below), as the case may be (each, a "Regular Record Date"). Interest on the
Notes will be computed on the basis of a 360-day year of twelve 30-day months.
If any Interest Payment Date or Stated Maturity falls on a day that is not a
Business Day, the required payment shall be made on the next Business Day as if
it were made on the date such payment was due and no interest shall accrue on
the amount so payable for the period from and after such Interest Payment Date
or Maturity, as the case may be. "Business Day" means any day, other than a
Saturday or Sunday, that is neither a legal holiday nor a day on which banks in
the City of New York or in the City of Charlotte are authorized or required by
law, regulation or executive order to close.
The principal of and interest on the Notes will be payable at the corporate
trust office of the agent of First Union (the "Paying Agent") in the City of
Charlotte, North Carolina, initially located at 230 South Tryon Street, provided
that, at the option of the Operating Partnership, payment of interest may be
made by check mailed to the address of the Person entitled thereto as it appears
in the Security Register or by wire transfer of funds to such Person at an
account maintained within the United States.
OPTIONAL REDEMPTION
The Notes may be redeemed at any time at the option of the Operating
Partnership, in whole or in part, at a redemption price equal to the sum of (i)
the principal amount of the Notes being redeemed plus accrued interest thereon
to the redemption date and (ii) the Make-Whole Amount, if any, with respect to
such Notes (the "Redemption Price").
If notice has been given as provided in the Indenture and funds for the
redemption of any Notes called for redemption shall have been made available on
the redemption date referred to in such notice, such Notes will cease to bear
interest on the date fixed for such redemption specified in such notice and the
only right of the Holders of the Notes will be to receive payment of the
Redemption Price.
Notice of any optional redemption of any Notes will be given to Holders at their
addresses, as shown in the Security Register, not more than 60 nor less than 30
days prior to the date fixed for redemption. The notice of redemption will
specify, among other items, the Redemption Price and the principal amount of the
Notes held by such Holder to be redeemed.
If less than all the Notes are to be redeemed at the option of the Operating
Partnership, the Operating Partnership will notify the Trustee at least 45 days
prior to the giving of the redemption notice (or such shorter period as is
satisfactory to the Trustee) of the aggregate principal amount of Notes to be
redeemed and their redemption date. The Trustee shall select, in such manner as
it shall deem fair and appropriate, Notes to be redeemed in whole or in part.
Notes may be redeemed in part in the minimum authorized denomination for Notes
or in any integral multiple thereof.
"Make-Whole Amount" means, in connection with any optional redemption or
accelerated payment of any Note, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest (exclusive
of interest accrued to the date of redemption or accelerated payment) that would
have been payable in respect of such dollar if such redemption or accelerated
payment had not been made, determined by discounting, on a semi-annual basis,
such principal and interest at the Reinvestment Rate (determined on the third
Business Day preceding the date such notice of redemption
S-6
<PAGE> 7
is given or declaration of acceleration is made) from the respective dates on
which such principal and interest would have been payable if such redemption or
accelerated payment had not been made, over (ii) the aggregate principal amount
of the Notes being redeemed or paid.
"Reinvestment Rate" means .25% (twenty-five one hundredths of one percent) plus
the arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For such purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated "H.15(519)" or
any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded United States government
securities adjusted to constant maturities or, if such statistical release is
not published at the time of any determination of the Make-Whole Amount, then
such other reasonably comparable index which shall be designated by the
Operating Partnership.
CERTAIN COVENANTS
Limitations on Incurrence of Indebtedness. The Operating Partnership will not,
and will not permit any Subsidiary (as defined below) to, incur any Indebtedness
(as defined below) 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 outstanding Indebtedness of the Operating
Partnership and its Subsidiaries on a consolidated basis determined in
accordance with GAAP is greater than 60% of the sum of (without duplication) (i)
the Total Assets (as defined below) of the Operating Partnership and its
Subsidiaries as of the end of the calendar quarter covered in the Operating
Partnership's Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as
the case may be, most recently filed with the Securities and Exchange Commission
(the "Commission") (or, if such filing is not permitted under the Exchange Act,
with the Trustee) prior to the incurrence of such additional Indebtedness and
(ii) 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 the Operating
Partnership or any Subsidiary since the end of such calendar quarter, including
those proceeds obtained in connection with the incurrence of such additional
Indebtedness.
In addition to the foregoing limitation on the incurrence of Indebtedness, the
Operating Partnership will not, and will not permit any Subsidiary to, incur any
Indebtedness secured by any Encumbrance (as defined below) upon any of the
property of the Operating Partnership or any Subsidiary 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
outstanding Indebtedness of the Operating Partnership and its Subsidiaries on a
consolidated basis which is secured by any Encumbrance on property of the
Operating Partnership or any Subsidiary is greater than 40% of the sum of
(without duplication) (i) the Total Assets of the Operating Partnership and its
Subsidiaries as of the end of the calendar quarter covered in the Operating
Partnership's Annual Report on Form 10-K or Quarterly Report on Form 1O-Q, as
the case may be, most recently filed with the Commission (or, if such filing is
not permitted under the Exchange Act, with the Trustee) prior to the incurrence
of such additional Indebtedness and (ii) 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 the Operating Partnership or any Subsidiary since the end of
such calendar quarter, including those proceeds obtained in connection with the
incurrence of such additional Indebtedness.
The Operating Partnership and its Subsidiaries may not at any time own Total
Unencumbered Assets (as defined below) equal to less than 150% of the aggregate
outstanding principal amount of the Unsecured Indebtedness (as defined below) of
the Operating Partnership and its Subsidiaries on a consolidated basis.
In addition to the foregoing limitations on the incurrence of Indebtedness, the
Operating Partnership will not, and will not permit any Subsidiary to, incur any
Indebtedness if the ratio of Consolidated Income Available for Debt Service (as
defined below) to the Annual Service Charge (as defined below) for the four
consecutive fiscal quarters most recently ended prior to the date on which such
additional Indebtedness is to be incurred shall have been less than 1.5:1
S-7
<PAGE> 8
on a pro forma basis after giving effect thereto and to the application of the
proceeds therefrom, and calculated on the assumption that (i) such Indebtedness
and any other Indebtedness incurred by the Operating Partnership and its
Subsidiaries since the first day of such four-quarter period and the application
of the proceeds therefrom, including to refinance other Indebtedness, had
occurred at the beginning of such period; (ii) the repayment or retirement of
any other Indebtedness by the Operating Partnership and its 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); (iii) in the
case of Acquired Indebtedness (as defined below) 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 (iv) in the case of any acquisition or disposition by
the Operating Partnership or its 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.
Provision of Financial Information. Whether or not the Operating Partnership is
subject to Section 13 or 15(d) of the Exchange Act, the Operating Partnership
will, to the extent permitted under the Exchange Act, file with the Commission
the annual reports, quarterly reports and other documents which the Operating
Partnership would have been required to file with the Commission pursuant to
such Section 13 or 15(d) if the Operating Partnership were so subject, such
documents to be filed with the Commission on or prior to the respective dates
(the "Required Filing Dates") by which the Operating Partnership would have been
required to file such documents if the Operating Partnership were so subject.
The Operating Partnership will also in any event (x) within 15 days of each
Required Filing Date (i) if the Operating Partnership is 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 the Operating
Partnership would have been required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act if the Operating Partnership were
subject to such Sections, (ii) file with the Trustee copies of the annual
reports, quarterly reports and other documents that the Operating Partnership
would have been required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act if the Operating Partnership were subject to such
Sections and (y) if filing such documents by the Operating Partnership with the
Commission is not permitted under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such documents to any prospective Holder.
Waiver of Certain Covenants. The Operating Partnership 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 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, the obligations
of the Operating Partnership and the duties of the Trustee in respect of any
such term, provision or condition shall remain in full force and effect.
As used herein, and in the Indenture:
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the time
such Person becomes a Subsidiary or (ii) assumed in connection with the
acquisition of assets from such Person, in each case, other than Indebtedness
incurred in connection with, or in contemplation of, such Person 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 or the
date the acquired Person becomes a Subsidiary.
"Annual Service Charge" for any period means the aggregate interest expense for
such period in respect of, and the amortization during such period of any
original issue discount of, Indebtedness of the Operating Partnership and its
Subsidiaries and the amount of dividends which are payable during such period in
respect of any Disqualified Stock.
"Capital Stock" means, with respect to any Person, any capital stock (including
preferred stock), shares, interests, participations or other ownership interests
(however designated) of such Person and any rights (other than debt securities
convertible into or exchangeable for corporate stock), warrants or options to
purchase any thereof.
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<PAGE> 9
"Consolidated Income Available for Debt Service" for any period means Earnings
from Operations (as defined below) of the Operating Partnership and its
Subsidiaries plus amounts which have been deducted, and minus amounts which have
been added, for the following (without duplication): (i) interest on
Indebtedness of the Operating Partnership and its Subsidiaries, (ii) provision
for taxes of the Operating Partnership and its Subsidiaries based on income,
(iii) amortization of debt discount, (iv) provisions for gains and losses on
properties and property depreciation and amortization, (v) the effect of any
noncash charge resulting from a change in accounting principles in determining
Earnings from Operations for such period and (vi) amortization of deferred
charges.
"Disqualified Stock" means, with respect to any Person, any Capital Stock of
such Person which by the terms of such Capital Stock (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 (i) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise
(other than Capital Stock which is redeemable solely in exchange for common
stock), (ii) is convertible into or exchangeable or exercisable for Indebtedness
or Disqualified Stock or (iii) is redeemable at the option of the holder
thereof, in whole or in part (other than Capital Stock which is redeemable
solely in exchange for Capital Stock which is not Disqualified Stock or the
redemption price of which may, at the option of such Person, be paid in Capital
Stock which is not Disqualified Stock), in each case on or prior to the Stated
Maturity of the Notes.
"Earnings from Operations" for any period means net earnings excluding gains and
losses on sales of investments, extraordinary items and property valuation
losses, net as reflected in the financial statements of the Operating
Partnership and its Subsidiaries for such period determined on a consolidated
basis in accordance with GAAP.
"Encumbrance" means any mortgage, lien, charge, pledge or security interest of
any kind.
"Indebtedness" of the Operating Partnership or any Subsidiary means any
indebtedness of the Operating Partnership or any Subsidiary, whether or not
contingent, in respect of (i) borrowed money or evidenced by bonds, notes,
debentures or similar instruments whether or not such indebtedness is secured by
any Encumbrance existing on property owned by the Operating Partnership or any
Subsidiary, (ii) indebtedness for borrowed money of a Person other than the
Operating Partnership or a Subsidiary which is secured by any Encumbrance
existing on property owned by the Operating Partnership or any Subsidiary, to
the extent of the lesser of (x) the amount of indebtedness so secured and (y)
the fair market value of the property subject to such Encumbrance, (iii) the
reimbursement obligations, contingent or otherwise, in connection with any
letters of credit actually issued or amounts representing the balance deferred
and unpaid of the purchase price of any property 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, (iv) the
principal amount of all obligations of the Operating Partnership or any
Subsidiary with respect to redemption, repayment or other repurchase of any
Disqualified Stock, (v) any lease of property by the Operating Partnership or
any Subsidiary as lessee which is reflected on the Operating Partnership's
consolidated balance sheet as a capitalized lease in accordance with GAAP, or
(vi) 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 under (i) through (iii) above, that any such items (other
than letters of credit) would appear as a liability on the Operating
Partnership's consolidated balance sheet in accordance with GAAP, and also
includes, to the extent not otherwise included, any obligation by the Operating
Partnership or any Subsidiary to be liable for, or to pay, as obligor, guarantor
or otherwise (other than for purposes of collection in the ordinary course of
business), Indebtedness of another Person (other than the Operating Partnership
or any Subsidiary) (it being understood that Indebtedness shall be deemed to be
incurred by the Operating Partnership or any Subsidiary whenever the Operating
Partnership or such Subsidiary shall create, assume, guarantee or otherwise
become liable in respect thereof).
"Subsidiary" means, with respect to any Person, any corporation or other entity
of which a majority of (i) the voting power of the voting equity securities or
(ii) the outstanding equity interests of which are owned, directly or
indirectly, by such Person. For the purposes of this definition, "voting equity
securities" means equity securities having voting power for the election of
directors, whether at all times or only so long as no senior class of security
has such voting power by reason of any contingency.
"Total Assets" as of any date means the sum of (i) the Undepreciated Real Estate
Assets and (ii) all other assets of the Operating Partnership and its
Subsidiaries determined in accordance with GAAP (but excluding accounts
receivable and intangibles).
"Total Unencumbered Assets" means the sum of (i) those Undepreciated Real Estate
Assets not subject to an Encumbrance for borrowed money and (ii) all other
assets of the Operating Partnership and its Subsidiaries not
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<PAGE> 10
subject to an Encumbrance for borrowed money, determined in accordance with GAAP
(but excluding accounts receivable and intangibles).
"Undepreciated Real Estate Assets" as of any date means the cost (original cost
plus capital improvements) of real estate assets of the Operating Partnership
and its Subsidiaries on such date, before depreciation and amortization,
determined on a consolidated basis in accordance with GAAP.
"Unsecured Indebtedness" means Indebtedness which is not secured by any
Encumbrance upon any of the properties of the Operating Partnership or any
Subsidiary.
See "Description of Debt Securities -- Certain Covenants" in the accompanying
Prospectus for a description of additional covenants applicable to the Operating
Partnership.
EVENTS OF DEFAULT
The Indenture provides that the following events are "Events of Default" with
respect to the Notes: (a) 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; (b) default in the payment of the principal of (or Make-Whole Amount, if
any, on) any Notes when due and payable; (c) default in the performance, or
breach, of any other covenant or warranty of the Operating Partnership 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; (d)
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 the Operating Partnership (or by any
Subsidiary, the repayment of which the Operating Partnership has guaranteed or
for which the Operating Partnership is 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 the Operating Partnership as provided in the Indenture;
(e) the entry by a court of competent jurisdiction of one or more judgments,
orders or decrees against the Operating Partnership or any Subsidiary 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 (f) certain
events of bankruptcy, insolvency or reorganization, or court appointment of a
receiver, liquidator or trustee of the Operating Partnership or any Significant
Subsidiary. The Term "Significant Subsidiary" has the meaning ascribed to such
term in Regulation S-X promulgated under the Securities Act of 1933, as amended.
If an Event of Default specified in clause (f) above, relating to the Operating
Partnership or any Significant Subsidiary occurs, the principal amount of and
the Make-Whole Amount on, all outstanding Notes shall become due and payable
without any declaration or other act on the part of the Trustee or of 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
" --Certain Covenants" herein and "Description of Debt Securities -- Certain
Covenants" in the accompanying Prospectus will be subject to covenant
defeasance.
BOOK-ENTRY SYSTEM
The provisions described under "Description of Debt Securities -- Global
Securities" in the accompanying Prospectus will apply to the Notes.
DTC has advised the Operating Partnership of the following information regarding
DTC: DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. DTC holds securities that its Participants (as defined
in the accompanying Prospectus) deposit with DTC. DTC also facilitates the
settlement among its Participants of securities
S-10
<PAGE> 11
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in its Participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct Participants of DTC include securities brokers and dealers (including the
Underwriters), banks, trust companies, clearing corporations and certain other
organizations. DTC is owned by a number of its direct Participants and by the
NYSE, the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others
such as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a direct Participant of DTC,
either directly or indirectly. The rules applicable to DTC and its participants
are on file with the Commission.
GOVERNING LAW
The Indenture will be governed by and shall be construed in accordance with the
laws of the State of New York.
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 (i)
against Summit Properties or any other past, present or future partner in the
Operating Partnership, (ii) against any other person or entity which owns an
interest, directly or indirectly, in any partner of the Operating Partnership,
or (iii) against any past, present or future stockholder, employee, officer or
director, as such, of Summit Properties or any successor, either directly or
through the Operating Partnership or Summit Properties 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.
S-11
<PAGE> 12
UNDERWRITING
Subject to the terms and conditions in the Underwriting Agreement dated the date
hereof (the "Underwriting Agreement"), the Operating Partnership has agreed to
sell to the Underwriter named below (the "Underwriter"), and the Underwriter has
agreed to purchase, the principal amount of Notes set forth opposite its name
below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
- ----------- ----------------
<S> <C>
J.P. Morgan Securities Inc.................................. $30,000,000
-----------
Total.................................................. $30,000,000
===========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the Underwriter
will be obligated to purchase all of the Notes if any are purchased.
The Underwriter has advised the Operating Partnership that it proposes initially
to offer the Notes directly to the public at the public offering price set forth
on the cover page of this Prospectus Supplement, and to certain dealers at such
price less a concession not in excess of .375% of the principal amount of the
Notes. The Underwriter may allow, and such dealers may reallow, a concession not
in excess of .250% of the principal amount of the Notes to certain other
dealers. After the initial public offering, the public offering price and such
concession may be changed.
The Notes are a new issue of securities with no established trading market. The
Operating Partnership has been advised by the Underwriter that the Underwriter
intends to make a market in the Notes but is not obligated to do so and may
discontinue market making at any time without notice. No assurance can be given
as to the liquidity of the trading market for the Notes.
In connection with the Offering, the Underwriter may engage in transactions that
stabilize, maintain or otherwise affect the prices of the Notes. Specifically,
the Underwriter may overallot the Offering, creating a syndicate short position.
In addition, the Underwriter may bid for, and purchase, in the open market to
cover syndicate shorts or to stabilize the prices of the Notes. Finally, the
underwriting syndicate may reclaim selling concessions allowed for distributing
the Notes in the Offering, if the syndicate repurchases previously distributed
Notes in syndicate covering transactions, in stabilization transactions or
otherwise. Any of these activities may stabilize or maintain the prices of the
Notes above independent market levels. The Underwriter is not required to engage
in these activities, and may end any of these activities at any time.
The Operating Partnership and Summit Properties have agreed to indemnify the
Underwriter against certain civil liabilities, including liabilities under the
Securities Act of 1933, as amended, or to contribute to payments the Underwriter
may be required to make in respect thereof.
In the ordinary course of their respective business, affiliates of the
Underwriter have engaged, or may in the future engage, in commercial banking and
investment banking transactions with the Operating Partnership.
LEGAL MATTERS
Certain legal matters, including the legality of the Notes being offered hereby,
are being passed upon for the Operating Partnership by Goodwin, Procter & Hoar
LLP, Boston, Massachusetts. Certain legal matters related to the Offering are
being passed upon for the Underwriter by Skadden, Arps, Slate, Meagher & Flom
LLP, New York, New York.
S-12
<PAGE> 13
PROSPECTUS
$250,000,000
SUMMIT PROPERTIES INC.
PREFERRED STOCK
COMMON STOCK
$250,000,000
SUMMIT PROPERTIES PARTNERSHIP, L.P.
DEBT SECURITIES
------------------------
Summit Properties Inc. ("Summit" or the "Company") may offer from time to
time in one or more series (i) shares of its preferred stock, $.01 par value per
share ("Preferred Stock") and (ii) shares of its common stock, $.01 par value
per share ("Common Stock"). Summit Properties Partnership, L.P. (the "Operating
Partnership") may offer from time to time in one or more series unsecured,
non-convertible investment grade debt securities (the "Debt Securities"). The
aggregate public offering price of the Preferred Stock and the Common Stock
shall be up to $250,000,000 (or its equivalent in another currency based on the
exchange rate at the time of sale) and the aggregate public offering price of
the Debt Securities (collectively with the Preferred Stock and the Common Stock,
the "Securities") shall be up to $250,000,000 (or its equivalent in another
currency based on the exchange rate at the time of sale). The Securities will be
issued in amounts, at prices and on terms to be determined at the time of
offering. The Securities may be offered separately or together, in separate
series, in amounts, at prices and on terms to be set forth in one or more
supplements to this Prospectus (each a "Prospectus Supplement").
The specific terms of the Securities for which this Prospectus is being
delivered will be set forth in the applicable Prospectus Supplement and will
include, where applicable: (i) in the case of Preferred Stock, the specific
designation and stated value per share, any dividend, liquidation, redemption,
conversion, voting and other rights, and any initial public offering price; (ii)
in the case of Common Stock, any initial public offering price; and (iii) in the
case of Debt Securities, the specific title, aggregate principal amount,
ranking, currency, form (which may be registered or bearer, or certificated or
global), authorized denominations, maturity, rate (or manner of calculation
thereof) and time of payment of interest, terms for redemption at the option of
the Operating Partnership or repayment at the option of the holder, terms for
sinking fund payments, covenants and any initial public offering price. In
addition, such specific terms may include limitations on direct or beneficial
ownership and restrictions on transfer of the Securities, in each case as may be
consistent with the Company's Articles of Incorporation, as then in effect, or
otherwise appropriate to preserve the status of the Company as a real estate
investment trust ("REIT") for federal income tax purposes. See "Restrictions on
Transfers of Capital Stock."
The applicable Prospectus Supplement will also contain information, where
appropriate, about material United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities covered
by such Prospectus Supplement.
The Preferred Stock and Common Stock may be offered by the Company and the
Debt Securities may be offered by the Operating Partnership directly to one or
more purchasers, through agents designated from time to time by the Company or
the Operating Partnership, respectively, or to or through underwriters or
dealers. If any agents or underwriters are involved in the sale of any of the
Securities, their names, and any applicable purchase price, fee, commission or
discount arrangement between or among them, will be set forth, or will be
calculable from the information set forth, in an accompanying Prospectus
Supplement. See "Plan of Distribution." No Securities may be sold without
delivery of a Prospectus Supplement describing the method and terms of the
offering of such Securities.
SEE "RISK FACTORS" ON PAGE 3 FOR CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS JULY 29, 1997.
<PAGE> 14
AVAILABLE INFORMATION
The Company and the Operating Partnership have filed with the Securities
and Exchange Commission (the "SEC" or "Commission") a registration statement on
Form S-3 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Securities offered hereby.
This Prospectus, which constitutes part of the Registration Statement, omits
certain of the information contained in the Registration Statement and the
exhibits thereto on file with the Commission pursuant to the Securities Act and
the rules and regulations of the Commission thereunder. The Registration
Statement, including exhibits thereto, may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at the Commission's Regional Offices at 7
World Trade Center, 13th Floor, New York, New York 10048, and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and copies
may be obtained at the prescribed rates from the Public Reference Section of the
Commission at its principal office in Washington, D.C. The Commission also
maintains a Web site at http://www.sec.gov containing reports, proxy and
information statements and other information regarding registrants, including
the Company and the Operating Partnership, that file electronically with the
Commission. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference.
The Company and the Operating Partnership are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith, the Company and the Operating Partnership
file reports and proxy statements and other information with the Commission.
Such reports, proxy statements and other information can be inspected and copied
at the locations described above. Copies of such materials can be obtained by
mail from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. In addition, the
Common Stock is listed on the New York Stock Exchange (the "NYSE"), and such
materials can be inspected and copied at the NYSE, 20 Broad Street, New York,
New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1996, filed with the Commission pursuant to the Exchange Act,
including all amendments thereto (File No. 1-12792);
(b) The Company's Current Report on Form 8-K dated March 6, 1997, filed
with the Commission pursuant to the Exchange Act, including all
amendments thereto (File No. 1-12792);
(c) The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997, filed with the Commission pursuant to the Exchange Act (File
No. 1-12792);
(d) The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1997, filed with the Commission pursuant to the Exchange Act (File
No. 1-12792);
(e) The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A filed with the Commission pursuant
to the Exchange Act (File No. 1-12792);
(f) Annual Report of the Company's 1996 Non-Qualified Employee Stock
Purchase Plan on Form 11-K for the year ended December 31, 1996, filed
with the Commission pursuant to the Exchange Act (File No. 1-12792);
(g) The Operating Partnership's Registration Statement on Form 10, dated
April 21, 1997, filed with the Commission pursuant to the Exchange Act,
including all amendments and reports updating such description (File
No. 0-22411);
(h) The Operating Partnership's Current Report on Form 8-K dated July 23,
1997, filed with the Commission pursuant to the Exchange Act (File No.
0-22411); and
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<PAGE> 15
(i) The Operating Partnership's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997, filed with the Commission pursuant to the
Exchange Act (File No. 0-22411).
All other documents filed with the Commission by the Company or the
Operating Partnership pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Securities are to be incorporated herein by
reference and such documents shall be deemed to be a part hereof from the date
of filing of such documents. Any person receiving a copy of this Prospectus may
obtain, without charge, upon request, a copy of any of the documents
incorporated by reference herein (except for the exhibits to such documents,
unless such exhibits are specifically incorporated by reference into such
documents). Written requests for such copies should be mailed to Michael G.
Malone, Esq., Summit Properties Inc., 212 South Tryon Street, Suite 500,
Charlotte, North Carolina 28281. Telephone requests may be directed to Mr.
Malone at (704) 334-9905.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
RISK FACTORS
An investment in the Securities involves various risks. Prospective
investors should carefully consider the following information in conjunction
with the other information contained or incorporated by reference in this
Prospectus and the applicable Prospectus Supplement before making a decision to
purchase any Securities. Unless the context otherwise requires, the "Company"
shall also hereinafter refer to the Operating Partnership and its subsidiaries.
DEVELOPMENT AND ACQUISITION RISKS
The Company intends to continue to pursue the development and construction
of apartment home communities. Risks associated with the Company's development
and construction activities may include: the abandonment of development and
acquisition opportunities explored by the Company; construction costs of a
community may exceed original estimates due to increased materials, labor or
other expenses, which could make completion of the community uneconomical; the
incurrence of additional costs or liability resulting from defects in
construction material; occupancy rates and rents at a newly completed community
are dependent on a number of factors, including market and general economic
conditions, and may not be sufficient to make the community profitable;
financing may not be available on favorable terms for the development of a
community; and construction and lease-up may not be completed on schedule,
resulting in increased debt service expense and construction costs. Development
activities are also subject to risks relating to the inability to obtain, or
delays in obtaining, all necessary zoning, land-use, building, occupancy, and
other required governmental permits and authorizations. The occurrence of any of
the events described above could adversely affect the Company's ability to
achieve its projected yields on communities under development or reconstruction
and could prevent the Company from making expected distributions. See "-- Real
Estate Investment Risks."
Acquisitions entail risks that investments will fail to perform in
accordance with expectations and that judgments with respect to the costs of
improvements to bring an acquired community up to standards established for the
market position intended for that community will prove inaccurate, as well as
general investment risks associated with any new real estate investment.
Although the Company undertakes an evaluation of the physical condition of each
new community before it is acquired, certain defects or necessary repairs may
not be detected until after the community is acquired, which could significantly
increase the Company's total acquisition costs.
DEPENDENCE ON PRIMARY MARKETS
Although the communities currently owned by the Company (the "Communities")
are located in four areas of the Southeast, Mid-Atlantic and Mid-West regions of
the United States, most of the Communities
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<PAGE> 16
are concentrated in three Southeastern regions: the I-85 Corridor connecting
Atlanta, Charlotte and the Raleigh-Durham area; the greater Washington,
DC/Virginia area; and central and south Florida. The Company's performance,
therefore, is dependent upon economic conditions in these regions. A decline in
the economy in these regions or other events that could affect the supply or
demand for apartment homes, such as increased construction of new apartment
homes, may adversely affect the Company's financial performance and its ability
to perform its obligations with respect to the Debt Securities or make
distributions to its stockholders.
REAL ESTATE INVESTMENT RISKS
General Risks. Real property investments are subject to varying degrees of
risk. The yields available from equity investments in real estate depend on the
amount of income generated and expenses incurred. If the Communities do not
generate revenues sufficient to meet operating expenses, including debt service
and capital expenditures, the Company's cash flow and ability to pay
distributions to its stockholders will be adversely affected.
An apartment community's revenues and value may be adversely affected by a
number of factors, including the cyclical nature of the real estate market
(which is characterized by periods of significant expansion and contraction in
the number of housing starts, the amount of building permit activity and the
availability of financing); the national economic climate; the local economic
climate (which may be adversely impacted by plant closings, industry slowdowns,
military base closings and other factors); local real estate conditions (such as
an oversupply of or a reduced demand for apartment homes); the perceptions by
prospective residents of the safety, convenience and attractiveness of the
community; the ability of the owner to provide adequate management, maintenance
and insurance; and increased operating costs (including real estate taxes and
utilities). Certain significant expenditures associated with each equity
investment (such as mortgage payments, if any, real estate taxes, insurance and
maintenance costs) are generally not reduced when circumstances cause a
reduction in income from the investment. If a community is mortgaged to secure
payment of indebtedness, and if the Company is unable to meet its mortgage
payments, a loss could be sustained as a result of foreclosure on the community
or the exercise of other remedies by the mortgagee. In addition, real estate
values and income from communities are also affected by such factors as interest
rate levels, the availability of financing and the cost of compliance with
government regulation, including zoning, tax and rent stabilization laws.
Market Illiquidity. Equity real estate investments are relatively
illiquid. Such illiquidity will tend to limit the ability of the Company to vary
its portfolio promptly in response to changes in economic or other conditions.
Competition. The Company focuses its operations in ten markets which are
primarily located in four areas of the Southeast, Mid-Atlantic and Mid-West: the
I-85 Corridor connecting Atlanta, Charlotte and the Raleigh-Durham area; the
greater Washington, DC/Virginia area; central and south Florida; and
Indianapolis, Indiana and Columbus, Ohio. Within each market there are numerous
housing alternatives that compete with the Communities in attracting residents.
The Communities compete directly with other rental apartments, condominiums and
single-family homes that are available for rent or sale in the markets in which
the Communities are located. In addition, various entities, including insurance
companies, pension and investment funds, partnerships, investment companies and
other multifamily REITs, may compete with the Company for the acquisition of
existing properties and the development of new properties, some of which may
have greater resources than the Company. The Company has not identified any
dominant competitor, nor is it currently the dominant competitor, in its
markets.
Affordable Housing Laws or Restrictions. A number of the Communities are,
and will be in the future, subject to federal, state and local statutes or other
restrictions requiring that a percentage of apartment homes be made available to
residents satisfying certain income requirements. These laws and restrictions,
as well as any changes thereto making it more difficult to meet such
requirements, or a reduction in or elimination of certain financing advantages
available in some instances to persons satisfying such requirements, could
adversely affect the Company's profitability and its development and acquisition
projects in the future.
4
<PAGE> 17
POTENTIAL ENVIRONMENTAL LIABILITIES
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
required to investigate and clean up hazardous or toxic substances or petroleum
product releases at such property, and may be held liable to a governmental
entity or to third parties for property damage and for investigation and
clean-up costs incurred by such parties in connection with the contamination.
Such laws, ordinances and regulations typically impose clean-up responsibility
and liability without regard to whether the owner knew of or caused the presence
of the contaminants, and the liability under such laws has been interpreted to
be joint and several, unless the harm is divisible and there is a reasonable
basis for allocation of responsibility. The cost of investigation, remediation
or removal of such substances may be substantial, and the presence of such
substances, or the failure to remediate properly the contamination on such
property, may adversely affect the owner's ability to sell or rent such property
or to borrow using such property as collateral. Persons who arrange for the
disposal or treatment of hazardous or toxic substances may also be liable for
the costs of removal or remediation of such substances at the disposal or
treatment facility, whether or not such facility is owned or operated by such
person. In addition, some environmental laws create a lien on the contaminated
site in favor of the government for damages and costs it incurs in connection
with the contamination. Finally, the owner or operator of a site may be subject
to common law claims by third parties based on damages and costs resulting from
environmental contamination emanating from a site. In connection with the
ownership, operation, management and development of the Communities and other
real properties, the Company may be potentially liable for such damages and
costs.
All of the Communities have been subjected to a Phase I or similar
environmental assessment (which involves general inspections without soil
sampling or ground water analysis and generally without radon testing). These
assessments have not revealed any environmental liability that the Company
believes would have a material adverse effect on the Company's business, assets
or results of operations, nor has the Company been notified by a governmental
authority of any noncompliance, liability or claim relating to hazardous or
toxic substances or petroleum products in connection with any of the Communities
that it believes would have a material adverse effect on the Company's business,
assets or results of operations. The Company is also not aware of any
environmental liability relating to those communities which it has, or its
predecessors have, owned or leased or otherwise managed, developed or operated
that it believes would have a material adverse effect on the Company's business,
assets or results of operations.
It is possible that the Company's assessments do not reveal all
environmental liabilities or that there are material environmental liabilities
of which the Company is unaware. Moreover, no assurances can be given that (i)
future laws, ordinances or regulations will not impose any material
environmental liability or (ii) the current environmental condition of the
Communities will not be affected by residents, by the condition of land or
operations in the vicinity of the properties (such as the presence of
underground storage tanks), or by third parties unrelated to the Company.
NO LIMITATION ON DEBT IN ORGANIZATIONAL DOCUMENTS
The Company currently has a policy of incurring debt only if upon such
incurrence the ratio of debt-to-total market capitalization (i.e., the total
consolidated debt of the Company as a percentage of the market value of
outstanding shares of capital stock of the Company including units of limited
partnership interest of the Operating Partnership) would continue to be 50% or
less. However, the organizational documents of the Company do not contain any
limitation on the amount or percentage of indebtedness the Company may incur and
the Company's Board of Directors has the power to alter the current policy.
Accordingly, the Company could become more highly leveraged, resulting in an
increase in debt service that could adversely affect the Company's ability to
make expected distributions to stockholders and in an increased risk of default
on its obligations under any Debt Securities.
IMPACT ON DEBT SECURITIES OF HIGHLY LEVERAGED TRANSACTION OR CHANGE IN CONTROL
The indentures under which Debt Securities will be issued do not contain
any provision that would afford holders of Debt Securities protection in the
event of a highly leveraged transaction or change in control
5
<PAGE> 18
(through the acquisition of securities, the election of directors or otherwise)
involving the Operating Partnership or Summit. Accordingly, except as may be set
forth in any Prospectus Supplement, the Debt Securities will not contain any
protection in the event of such a transaction. A highly leveraged transaction or
a change in control of the Company could adversely affect the Company's ability
to meet its obligations under the Debt Securities.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT
The Company intends to operate in a manner that will enable it to qualify
as a real estate investment trust (a "REIT") under the Internal Revenue Code of
1986, as amended (the "Code"). Although management of the Company believes that
the Company is organized and operates in such a manner, no assurance can be
given that the Company qualifies or will remain qualified as a REIT.
Qualification as a REIT involves the application of highly technical and complex
Code provisions for which there are only limited judicial and administrative
interpretations. The determination of various factual matters and circumstances
not entirely within the Company's control may affect the Company's ability to
qualify as a REIT. If the Company fails to qualify as a REIT, it will be subject
to federal income tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates. In addition, unless entitled to
relief under certain statutory provisions, the Company will be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification is lost. The additional tax imposed in any year during which the
Company does not qualify for treatment as a REIT would significantly reduce the
cash flow available for distribution to stockholders.
LIMITS ON CHANGES IN CONTROL
Certain provisions contained in the Company's Articles of Incorporation
(the "Articles of Incorporation") and the Company's Bylaws (the "Bylaws"), and
under Maryland law, may have the effect of discouraging a third party from
making an acquisition proposal for the Company and may thereby inhibit a change
in control of the Company. For example, such provisions may (i) deter tender
offers for the Common Stock, which offers may be attractive to the stockholders,
or (ii) deter purchases of large blocks of Common Stock, thereby limiting the
opportunity for stockholders to receive a premium for their Common Stock over
then-prevailing market prices. These provisions include the following:
Preferred Stock. The Articles of Incorporation authorize the Board of
Directors to issue up to 25 million shares of Preferred Stock (together with the
Common Stock, the "Voting Securities") and to establish the preferences and
rights (including the right to vote and the right to convert into Common Stock)
of any Preferred Stock issued.
Ownership Limit. In order for the Company to maintain its qualification as
a REIT, not more than 50% in value of its outstanding Voting Securities may be
owned, directly or indirectly, by five or fewer individuals (as defined in the
Code). For the purpose of preserving the Company's REIT qualification, the
Articles of Incorporation, subject to certain exceptions, provide that no holder
may own, directly or indirectly, more than 9.8% (or 15% for certain investors
that will be "looked through" under the Code for purposes of the foregoing REIT
qualification requirement) of the outstanding Voting Securities of the Company.
Although the Board of Directors of the Company has the authority to waive this
restriction with respect to a particular stockholder if it is satisfied, based
upon the advice of tax-counsel, that ownership in excess of this limit would not
jeopardize the Company's status as a REIT, the Board of Directors could decide
that such action would not be in the best interests of the Company in connection
with a proposed change in control.
Required Consent of Holders of Units for Certain Transactions. The
Operating Partnership may not sell, transfer or otherwise dispose of all or
substantially all of its assets or engage in any other similar transaction
(regardless of the form of such transaction) that would result in the
recognition of significant taxable gain to the holders of units of limited
partnership interest of the Operating Partnership ("Units") without the consent
of the holders of 85% of all outstanding Units. Summit currently holds
approximately 84.5% of the outstanding Units. This consent requirement could
limit the possibility of an acquisition or change in control of the Operating
Partnership.
6
<PAGE> 19
Maryland Business Combination Statute. Under the Maryland General
Corporation Law ("MGCL"), certain "business combinations" (including mergers,
consolidations, share exchanges, certain asset transfers and certain issuances
of equity securities) between a Maryland corporation and any persons who own 10%
or more of the voting power of the corporation's shares (an "Interested
Stockholder") are prohibited for five years after the most recent date on which
the Interested Stockholder became an Interested Stockholder. Thereafter, any
such business combination must be approved by the affirmative vote of at least
(a) 80% of the votes entitled to be cast by holders of outstanding voting shares
of the corporation other than shares held by the Interested Stockholder with
whom the business combination is to be effected, unless, among other things, the
holders of the corporation's shares receive a minimum price (as defined in the
MGCL) for their shares and the consideration is received in cash or in the same
form as previously paid by the Interested Stockholder for the shares that it
owns. However, these provisions of Maryland law do not apply to "business
combinations" with an Interested Stockholder that are approved or exempted by
the board of directors of the corporation before that Interested Stockholder
becomes an Interested Stockholder.
The Articles of Incorporation of the Company exempt from the Maryland
business combination statute any business combination with William F. Paulsen,
William B. McGuire, Jr., Raymond V. Jones and David F. Tufaro, or current or
future affiliates, associates or other persons acting in concert as a group with
any of the foregoing persons.
Maryland Control Share Acquisition Statute. Maryland law provides that
"control shares" of a Maryland corporation acquired in a "control share
acquisition" have no voting rights except to the extent approved by a vote of
two-thirds of the votes eligible under the statute to be cast on the matter.
"Control Shares" are voting shares that, if aggregated with all other such
shares of stock previously acquired by the acquiror, would entitle the acquiror
to exercise voting power in electing directors within one of the following
ranges of voting power: (i) one-fifth or more but less than one-third, (ii)
one-third or more but less than a majority, or (iii) a majority of all voting
power. Control Shares do not include shares the acquiring person is then
entitled to vote as a result of having previously obtained stockholder approval.
A "control share acquisition" means the acquisition of Control Shares, subject
to certain exceptions.
If voting rights are not approved at a meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute, then,
subject to certain conditions and limitations, the corporation may redeem any or
all of the Control Shares (except those for which voting rights have previously
been approved) for fair value. If voting rights for Control Shares are approved
at a stockholder meeting and the acquiror becomes entitled to vote a majority of
the shares entitled to vote, all other stockholders may exercise appraisal
rights.
The Articles of Incorporation and the Bylaws of the Company exempt from the
Maryland control share acquisition statute any future transactions which would
otherwise be subject to the statute by Messrs. Paulsen, McGuire, Jones and
Tufaro, or current or future affiliates, associates, or other persons acting in
concert or as a group with any of the foregoing persons. Consequently, this
prohibition on voting control shares will not apply to such persons.
7
<PAGE> 20
THE COMPANY AND THE OPERATING PARTNERSHIP
GENERAL
Summit is one of the largest developers and operators of luxury garden
apartment communities in the southeastern United States. The Company is a
self-administered and self-managed real estate investment trust. The Company's
Common Stock is listed on the New York Stock Exchange under the symbol "SMT."
The Company's business is conducted principally through the Operating
Partnership, of which the Company is the sole general partner and, as of June
30, 1997, the holder of approximately 84.7% of the outstanding Units. Subject to
certain holding periods, each Unit, other than those held by the Company, may be
submitted by the holder thereof for redemption by the Operating Partnership. The
Company may, at its option, satisfy any redemption request by delivering cash or
one share (subject to certain adjustments) of Common Stock for each Unit
submitted for redemption. With each such exchange, the number of Units owned by
the Company and, therefore, the Company's percentage interest in the Operating
Partnership, will increase.
The Company's third party management and certain construction and other
businesses are conducted through its subsidiaries, Summit Management Company, a
Maryland corporation (the "Management Company"), and Summit Apartment Builders,
Inc., a Florida corporation (the "Construction Company").
The Company was organized as a real estate investment trust under the laws
of the State of Maryland on December 1, 1993 and later changed to corporate form
on January 13, 1994. The Operating Partnership was organized as a limited
partnership under the laws of the State of Delaware on January 14, 1994. On
February 15, 1994, the Company completed its initial public offering of Common
Stock (the "Initial Offering"). The principal executive office of the Company
and the Operating Partnership is located at 212 South Tryon Street, Suite 500,
Charlotte, North Carolina 28281; telephone number (704) 334-9905.
USE OF PROCEEDS
The Company is required by the terms of the partnership agreement of the
Operating Partnership, to invest the net proceeds of any sale of Common Stock or
Preferred Stock in the Operating Partnership in exchange for additional Units or
preferred Units, as the case may be. As will be more fully described in the
applicable Prospectus Supplement, the Company and the Operating Partnership
intend to use the net proceeds from the sale of Securities for one or more of
the following: repayment of indebtedness, investments in new communities and new
developments, maintenance of currently owned communities and general corporate
purposes.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the consolidated ratios of earnings to fixed
charges for the Company, the Operating Partnership and the predecessor to the
Company and the Operating Partnership for the periods shown:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993 DECEMBER 31, 1992
- ---------------- ----------------- ----------------- ----------------- ----------------- -----------------
<C> <C> <C> <C> <C> <C>
2.20 1.78 1.65 1.52 0.77* 0.62*
</TABLE>
- ---------------
* Prior to the completion of the Initial Offering, the Company maintained a
different capital structure. As a result, although the original properties
have historically generated positive net cash flow, the financial statements
of the Company show net losses for the fiscal years ended December 31, 1993
and 1992. Consequently, the computation of the ratio of earnings to fixed
charges for such periods indicates that earnings were inadequate to cover
fixed charges by approximately $6.0 million and $10.1 million for the fiscal
years ended December 31, 1993 and 1992, respectively.
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, earnings consist of pre-tax income from
continuing operations plus fixed charges. Fixed charges consist of interest
expense (whether expensed or capitalized), estimated interest component of rent
expense, and the amortization of debt issuance costs. To date, the Company has
not issued any Preferred Stock; therefore, the ratios of earnings to combined
fixed charges and preferred stock dividend requirements are the same as the
ratios of earnings to fixed charges presented above.
8
<PAGE> 21
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Company conducts its business principally through the Operating
Partnership. Consequently, the Operating Partnership, and not the Company, will
issue the Debt Securities. The Debt Securities will be direct unsecured
obligations of the Operating Partnership and may be either senior Debt
Securities ("Senior Securities") or subordinated Debt Securities ("Subordinated
Securities"). The Debt Securities will be issued under one or more indentures,
each dated as of a date prior to the issuance of the Debt Securities to which it
relates. Senior Securities and Subordinated Securities may be issued pursuant to
separate indentures (respectively, a "Senior Indenture" and a "Subordinated
Indenture"), in each case between the Operating Partnership and a trustee (a
"Trustee"), which may be the same Trustee, and in the form that has been filed
as an exhibit to the Registration Statement of which this Prospectus is a part,
subject to such amendments or supplements as may be adopted from time to time.
The Senior Indenture and the Subordinated Indenture, as amended or supplemented
from time to time, are sometimes hereinafter referred to collectively as the
"Indentures." The Indentures will be subject to and governed by the Trust
Indenture Act of 1939, as amended (the "TIA"). The statements made under this
heading relating to the Debt Securities and the Indentures are summaries of the
material provisions thereof, do not purport to be complete and are qualified in
their entirety by reference to the Indentures and such Debt Securities.
Capitalized terms used herein and not defined shall have the meanings
assigned to them in the applicable Indenture.
TERMS
The indebtedness represented by the Senior Securities will rank equally
with all other unsecured and unsubordinated indebtedness of the Operating
Partnership. The indebtedness represented by Subordinated Securities will be
subordinated in right of payment to the prior payment in full of the Senior Debt
of the Operating Partnership as described under " -- Subordination." The
particular terms of the Debt Securities offered by a Prospectus Supplement will
be described in the applicable Prospectus Supplement, along with any applicable
modifications of or additions to the general terms of the Debt Securities as
described herein and in the applicable Indenture and any applicable federal
income tax considerations. Accordingly, for a description of the terms of any
series of Debt Securities, reference must be made to both the Prospectus
Supplement relating thereto and the description of the Debt Securities set forth
in this Prospectus.
Except as set forth in any Prospectus Supplement, the Debt Securities may
be issued without limit as to aggregate principal amount, in one or more series,
in each case as established from time to time by the Operating Partnership or as
set forth in the applicable Indenture or in one or more indentures supplemental
to such Indenture. All Debt Securities of one series need not be issued at the
same time and, unless otherwise provided, a series may be reopened, without the
consent of the holders of the Debt Securities of such series, for issuance of
additional Debt Securities of such series.
Each Indenture provides that the Operating Partnership may, but need not,
designate more than one Trustee thereunder, each with respect to one or more
series of Debt Securities. Any Trustee under an Indenture may resign or be
removed with respect to one or more series of Debt Securities and a successor
Trustee may be appointed to act with respect to such series. In the event that
two or more persons are acting as Trustee with respect to different series of
Debt Securities, each such Trustee shall be a Trustee of a trust under the
applicable Indenture separate and apart from the trust administered by any other
Trustee, and, except as otherwise indicated herein, any action described herein
to be taken by each Trustee may be taken by each such Trustee with respect to,
and only with respect to, the one or more series of Debt Securities for which it
is Trustee under the applicable Indenture.
9
<PAGE> 22
The following summaries set forth the material terms and provisions of the
Indentures and the Debt Securities. The Prospectus Supplement relating to the
series of Debt Securities being offered will contain further terms of such Debt
Securities, including the following specific terms:
(1) The title of such Debt Securities and whether such Debt Securities are
Senior Securities or Subordinated Securities;
(2) The aggregate principal amount of such Debt Securities and any limit
on such aggregate principal amount;
(3) The price (expressed as a percentage of the principal amount thereof)
at which such Debt Securities will be issued and, if other than the
principal amount thereof, the portion of the principal amount thereof
payable upon declaration of acceleration of the maturity thereof;
(4) The date or dates, or the method for determining such date or dates,
on which the principal of such Debt Securities will be payable;
(5) The rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(6) The date or dates, or the method for determining such date or dates,
from which any such interest will accrue, the dates on which any such
interest will be payable, the record dates for such interest payment
dates, or the method by which such dates shall be determined, the
persons to whom such interest shall be payable, and the basis upon
which interest shall be calculated if other than that of a 360-day
year of twelve 30-day months;
(7) The place or places where the principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable, where such
Debt Securities may be surrendered for registration of transfer or
exchange and where notices or demands to or upon the Operating
Partnership in respect of such Debt Securities and the applicable
Indenture may be served;
(8) The period or periods, if any, within which, the price or prices at
which and the other terms and conditions upon which such Debt
Securities may, pursuant to any optional or mandatory redemption
provisions, be redeemed, as a whole or in part, at the option of the
Operating Partnership;
(9) The obligation, if any, of the Operating Partnership to redeem, repay
or purchase such Debt Securities pursuant to any sinking fund or
analogous provision or at the option of a holder thereof, and the
period or periods within which, the price or prices at which and the
other terms and conditions upon which such Debt Securities will be
redeemed, repaid or purchased, as a whole or in part, pursuant to such
obligation;
(10) If other than U.S. dollars, the currency or currencies in which such
Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite
currency or currencies, and the terms and conditions relating thereto;
(11) Whether the amount of payments of principal of (and premium, if any)
or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula
or method may, but need not be, based on a currency, currencies,
currency unit or units, or composite currency or currencies) and the
manner in which such amounts shall be determined;
(12) Whether such Debt Securities will be issued in certificated or
book-entry form and, if in book entry form, the identity of the
depository for such Debt Securities;
(13) Whether such Debt Securities will be in registered or bearer form and,
if in registered form, the denominations thereof if other than $1,000
and any integral multiple thereof and, if in bearer form, the
denominations thereof and terms and conditions relating thereto;
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<PAGE> 23
(14) The applicability, if any, of the defeasance and covenant defeasance
provisions described herein or set forth in the applicable Indenture,
or any modification thereof;
(15) Whether and under what circumstances the Operating Partnership will
pay any additional amounts on such Debt Securities in respect of any
tax, assessment or governmental charge and, if so, whether the
Operating Partnership will have the option to redeem such Debt
Securities in lieu of making such payment;
(16) Any deletions from, modifications of or additions to the events of
default or covenants of the Operating Partnership, to the extent
different from those described herein or set forth in the applicable
Indenture with respect to such Debt Securities, and any change in the
right of any Trustee or any of the holders to declare the principal
amount of any of such Debt Securities due and payable;
(17) With respect to any Debt Securities that provide for optional
redemption or prepayment upon the occurrence of certain events (such
as a change of control of the Operating Partnership), (i) the possible
effects of such provisions on the market price of the Operating
Partnership's or the Company's securities or in deterring certain
mergers, tender offers or other takeover attempts, and the intention
of the Operating Partnership to comply with the requirements of Rule
14e-1 under the Exchange Act and any other applicable securities laws
in connection with such provisions; (ii) whether the occurrence of the
specified events may give rise to cross-defaults on other indebtedness
such that payment on such Debt Securities may be effectively
subordinated; and (iii) the existence of any limitation on the
Operating Partnership's financial or legal ability to repurchase such
Debt Securities upon the occurrence of such an event (including, if
true, the lack of assurance that such a repurchase can be effected)
and the impact, if any, under the Indenture of such a failure,
including whether and under what circumstances such a failure may
constitute an event of default;
(18) The name of the applicable trustee and the nature of any material
relationship with the Operating Partnership or with any of its
affiliates, and the percentage of Debt Securities of the class
necessary to require the trustee to take action; and
(19) Any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture.
If so provided in the applicable Prospectus Supplement, the Debt Securities
may be issued at a discount below their principal amount and provide for less
than the entire principal amount thereof to be payable upon declaration of
acceleration of the maturity thereof ("Original Issue Discount Securities"). In
such cases, any special U.S. federal income tax, accounting and other
considerations applicable to Original Issue Discount Securities will be
described in the applicable Prospectus Supplement.
Except as described under "Merger, Consolidation or Sale of Assets" or as
may be set forth in any Prospectus Supplement, the Debt Securities will not
contain any provisions that would limit the ability of the Operating Partnership
to incur indebtedness or that would afford holders of Debt Securities protection
in the event of (i) a highly leveraged or similar transaction involving the
Operating Partnership, the management of the Operating Partnership or the
Company, or any affiliate of any such party, (ii) a change of control, or (iii)
a reorganization, restructuring, merger or similar transaction involving the
Operating Partnership that may adversely affect the holders of the Debt
Securities. In addition, subject to the limitations set forth under "Merger,
Consolidation or Sale of Assets," the Operating Partnership may, in the future,
enter into certain transactions, such as the sale of all or substantially all of
its assets or the merger or consolidation of the Operating Partnership, that
would increase the amount of the Operating Partnership's indebtedness or
substantially reduce or eliminate the Operating Partnership's indebtedness or
substantially reduce or eliminate the Operating Partnership's assets, which may
have an adverse effect on the Operating Partnership's ability to service its
indebtedness, including the Debt Securities. Neither Maryland General
Corporation Law nor the governing instruments of the Company and the Operating
Partnership define the term "substantially all" in connection with the sale of
assets. Additionally, Maryland cases interpreting the words "substantially all"
all rely heavily upon the facts and circumstances of the particular case.
Consequently, to determine whether a
11
<PAGE> 24
sale of "substantially all" of the Operating Partnership's assets has occurred,
a holder of Debt Securities must review the financial and other information
disclosed by the Operating Partnership to the public. Restrictions on ownership
and transfers of the Common Stock and Preferred Stock are designed to preserve
the Company's status as a REIT and, therefore, may act to prevent or hinder a
change of control. See "Restrictions on Transfers of Capital Stock." Reference
is made to the applicable Prospectus Supplement for information with respect to
any deletions from, modifications of, or additions to, the events of default or
covenants that are described below, including any addition of a covenant or
other provision providing event risk or similar protection.
DENOMINATION, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the
Debt Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof.
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for any
authorized denomination of other Debt Securities of the same series and of a
like aggregate principal amount and tenor upon surrender of such Debt Securities
at the corporate trust office of the applicable Trustee or at the office of any
transfer agent designated by the Operating Partnership for such purpose. In
addition, subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series may be surrendered for
registration of transfer or exchange thereof at the corporate trust office of
the applicable Trustee or at the office of any transfer agent designated by the
Operating Partnership for such purpose. Every Debt Security surrendered for
registration of transfer or exchange must be duly endorsed or accompanied by a
written instrument of transfer, and the person requesting such action must
provide evidence of title and identity satisfactory to the applicable Trustee or
transfer agent. No service charge will be made for any registration of transfer
or exchange of any Debt Securities, but the Trustee or the Operating Partnership
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. If the applicable Prospectus Supplement
refers to any transfer agent (in addition to the applicable Trustee) initially
designated by the Operating Partnership with respect to any series of Debt
Securities, the Operating Partnership may at any time rescind the designation of
any such transfer agent or approve a change in the location through which any
such transfer agent acts, except that the Operating Partnership will be required
to maintain a transfer agent in each place of payment for such series. The
Operating Partnership may at any time designate additional transfer agents with
respect to any series of Debt Securities.
Neither the Operating Partnership nor any Trustee shall be required (i) to
issue, register the transfer of or exchange Debt Securities of any series during
a period beginning at the opening of business 15 days before the day of mailing
of a notice of redemption of any Debt Securities that may be selected for
redemption and ending at the close of business on the day of such mailing; (ii)
to register the transfer of or exchange any Debt Security, or portion thereof,
so selected for redemption, in whole or in part, except the unredeemed portion
of any Debt Security being redeemed in part; or (iii) to issue, register the
transfer of or exchange any Debt Security that has been surrendered for
repayment at the option of the holder, except the portion, if any, of such Debt
Security not to be so repaid.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indentures provide that the Operating Partnership may, without the
consent of the holders of any outstanding Debt Securities, consolidate with, or
sell, lease or convey all or substantially all of its assets to, or merge with
or into, any other entity provided that (i) either the Operating Partnership
shall be the continuing entity, or the successor entity (if other than the
Operating Partnership) formed by or resulting from any such consolidation or
merger or which shall have received the transfer of such assets, shall expressly
assume (A) the Operating Partnership's obligations to pay principal of (and
premium, if any) and interest on all of the Debt Securities and (B) the due and
punctual performance and observance of all of the covenants and conditions
contained in each Indenture; (ii) immediately after giving effect to such
transaction and treating any indebtedness that becomes an obligation of the
Operating Partnership or any subsidiary as a result thereof as having been
incurred by the Operating Partnership or such subsidiary at the time of such
transaction, no
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<PAGE> 25
event of default under the Indentures, and no event which, after notice or the
lapse of time, or both, would become such an event of default, shall have
occurred and be continuing; and (iii) an officers' certificate and legal opinion
covering such conditions shall be delivered to each Trustee.
CERTAIN COVENANTS
Existence. Except as permitted under "--Merger, Consolidation or Sale of
Assets," the Indentures require the Operating Partnership to do or cause to be
done all things necessary to preserve and keep in full force and effect its
existence, rights and franchises; provided, however, that the Operating
Partnership shall not be required to preserve any right or franchise if it
determines that the preservation thereof is no longer desirable in the conduct
of its business.
Maintenance of Properties. The Indentures require the Operating
Partnership to cause all of its material properties used or useful in the
conduct of its business or the business of any subsidiary to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Operating Partnership may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that the Operating Partnership and its subsidiaries shall not
be prevented from selling or otherwise disposing of their properties for value
in the ordinary course of business.
Insurance. The Indentures require the Operating Partnership to cause each
of its and its subsidiaries' insurable properties to be insured against loss or
damage at least equal to their then full insurable value with insurers of
recognized responsibility and, if described in the applicable Prospectus
Supplement, having a specified rating from a recognized insurance rating
service.
Payment of Taxes and Other Claims. The Indentures require the Operating
Partnership to pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (i) all taxes, assessments and governmental
charges levied or imposed upon it or any subsidiary or upon the income, profits
or property of the Operating Partnership or any subsidiary and (ii) all lawful
claims for labor, materials and supplies which, if unpaid, might by law become a
lien upon the property of the Operating Partnership or any subsidiary; provided,
however, that the Operating Partnership shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith.
Additional Covenants. Any additional covenants of the Operating
Partnership with respect to any series of Debt Securities will be set forth in
the Prospectus Supplement relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture provides that the following events are "Events of Default" with
respect to any series of Debt Securities issued thereunder: (i) default for 30
days in the payment of any installment of interest on any Debt Security of such
series; (ii) default in the payment of principal of (or premium, if any, on) any
Debt Security of such series at its maturity; (iii) default in making any
sinking fund payment as required for any Debt Security of such series; (iv)
default in the performance or breach of any other covenant or warranty of the
Operating Partnership contained in the Indenture (other than a covenant added to
the Indenture solely for the benefit of a series of Debt Securities issued
thereunder other than such series), continued for 60 days after written notice
as provided in the applicable Indenture; (v) a default under any bond,
debenture, note or other evidence of indebtedness for money borrowed (except
mortgage indebtedness) by the Operating Partnership or any of its subsidiaries
in an aggregate principal amount in excess of $25,000,000 or under any indenture
or instrument under which there may be issued or by which there may be secured
or evidenced any indebtedness for money borrowed (except mortgage indebtedness)
by the Operating Partnership or any of its subsidiaries in an aggregate
principal amount in excess of $25,000,000, whether such indebtedness exists on
the date of such Indenture or shall thereafter 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 or
such obligations
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being accelerated, without such acceleration having been rescinded or annulled;
(vi) certain events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee of the Operating Partnership or
any Significant Subsidiary of the Operating Partnership; and (vii) any other
event of default provided with respect to a particular series of Debt
Securities. The term "Significant Subsidiary" has the meaning ascribed to such
term in Regulation S-X promulgated under the Securities Act.
If an event of default under any Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in every
such case the applicable Trustee or the holders of not less than 25% in
principal amount of the Debt Securities of that series will have the right to
declare the principal amount (or, if the Debt Securities of that series are
Original Issue Discount Securities or indexed securities, such portion of the
principal amount as may be specified in the terms thereof) of all the Debt
Securities of that series to be due and payable immediately by written notice
thereof to the Operating Partnership (and to the applicable Trustee if given by
the holders). However, at any time after such a declaration of acceleration with
respect to Debt Securities of such series (or of all Debt Securities then
outstanding under any Indenture, as the case may be) has been made, but before a
judgment or decree for payment of the money due has been obtained by the
applicable Trustee, the holders of not less than a majority in principal amount
of outstanding Debt Securities of such series (or of all Debt Securities then
outstanding under the applicable Indenture, as the case may be) may rescind and
annul such declaration and its consequences if (i) the Operating Partnership
shall have deposited with the applicable Trustee all required payments of the
principal of (and premium, if any) and interest on the Debt Securities of such
series (or of all Debt Securities then outstanding under the applicable
Indenture, as the case may be), plus certain fees, expenses, disbursements and
advances of the applicable Trustee; and (ii) all events of default, other than
the non-payment of accelerated principal (or specified portion thereof), with
respect to Debt Securities of such series (or of all Debt Securities then
outstanding under the applicable Indenture, as the case may be) have been cured
or waived as provided in such Indenture. The Indentures also provide that the
holders of not less than a majority in principal amount of the outstanding Debt
Securities of any series (or of all Debt Securities then outstanding under the
applicable Indenture, as the case may be) may waive any past default with
respect to such series and its consequences, except a default (i) in the payment
of the principal of (or premium, if any) or interest on any Debt Security of
such series; or (ii) in respect of a covenant or provision contained in the
applicable Indenture that cannot be modified or amended without the consent of
the holder of each outstanding Debt Security affected thereby.
The Indentures require each Trustee to give notice to the holders of Debt
Securities within 90 days of a default under the applicable Indenture unless
such default shall have been cured or waived; provided, however, that such
Trustee may withhold notice to the holders of any series of Debt Securities of
any default with respect to such series (except a default in the payment of the
principal of (or premium, if any) or interest on any Debt Security of such
series or in the payment of any sinking fund installment in respect of any Debt
Security of such series) if specified responsible officers of such Trustee
consider such withholding to be in the interest of such holders.
The Indentures provide that no holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to such Indenture
or for any remedy thereunder, except in the case of failure of the applicable
Trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an event of default from the holders of not
less than 25% in principal amount of the outstanding Debt Securities of such
series, as well as an offer of indemnity reasonably satisfactory to it. This
provision will not prevent, however, any holder of Debt Securities from
instituting suit for the enforcement of payment of the principal of (and
premium, if any) and interest on such Debt Securities at the respective due
dates thereof.
The Indentures provide that, subject to provisions in each Indenture
relating to its duties in case of default, a Trustee will be under no obligation
to exercise any of its rights or powers under an Indenture at the request or
direction of any holders of any series of Debt Securities then outstanding under
such Indenture, unless such holders shall have offered to the Trustee thereunder
reasonable security or indemnity. The holders of not less than a majority in
principal amount of the outstanding Debt Securities of any series (or of all
Debt Securities then outstanding under an Indenture, as the case may be) shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the applicable Trustee, or of exercising any trust
or power conferred upon such Trustee. However, a Trustee may refuse to follow
any
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<PAGE> 27
direction which is in conflict with any law or the applicable Indenture, which
may involve such Trustee in personal liability or which may be unduly
prejudicial to the holders of Debt Securities of such series not joining
therein.
Within 120 days after the close of each fiscal year, the Operating
Partnership will be required to deliver to each Trustee a certificate, signed by
one of several specified officers of Summit, as general partner of the Operating
Partnership, stating whether or not such officer has knowledge of any default
under the applicable Indenture and, if so, specifying each such default and the
nature and status thereof.
MODIFICATION OF THE INDENTURES
Modifications and amendments of an Indenture will be permitted to be made
only with the consent of the holders of not less than a majority in principal
amount of all outstanding Debt Securities issued under such Indenture affected
by such modification or amendment; provided, however, that no such modification
or amendment may, without the consent of the holder of each such Debt Security
affected thereby, (i) change the stated maturity of the principal of, or any
installment of interest (or premium, if any) on, any such Debt Security; (ii)
reduce the principal amount of, or the rate or amount of interest on, or any
premium payable on redemption of, any such Debt Security, or reduce the amount
of principal of an Original Issue Discount Security that would be due and
payable upon declaration of acceleration of the maturity thereof or would be
provable in bankruptcy, or adversely affect any right of repayment of the holder
of any such Debt Security; (iii) change the place of payment, or the coin or
currency, for payment of principal of, premium, if any, or interest on any such
Debt Security; (iv) impair the right to institute suit for the enforcement of
any payment on or with respect to any such Debt Security; (v) reduce the
above-stated percentage of any outstanding Debt Securities necessary to modify
or amend the applicable Indenture with respect to such Debt Securities, to waive
compliance with certain provisions thereof or certain defaults and consequences
thereunder or to reduce the quorum or voting requirements set forth in the
applicable Indenture; or (vi) modify any of the foregoing provisions or any of
the provisions relating to the waiver of certain past defaults or certain
covenants, except to increase the required percentage to effect such action or
to provide that certain other provisions may not be modified or waived without
the consent of the holder of such Debt Security.
The holders of a majority in aggregate principal amount of the outstanding
Debt Securities of each series may, on behalf of all holders of Debt Securities
of that series, waive, insofar as that series is concerned, compliance by the
Operating Partnership with certain restrictive covenants of the applicable
Indenture.
Modifications and amendments of an Indenture will be permitted to be made
by the Operating Partnership and the respective Trustee thereunder without the
consent of any holder of Debt Securities for any of the following purposes: (i)
to evidence the succession of another person to the Operating Partnership as
obligor under such Indenture; (ii) to add to the covenants of the Operating
Partnership for the benefit of the holders of all or any series of Debt
Securities or to surrender any right or power conferred upon the Operating
Partnership in such Indenture; (iii) to add events of default for the benefit of
the holders of all or any series of Debt Securities; (iv) to add or change any
provisions of an Indenture to facilitate the issuance of, or to liberalize
certain terms of, Debt Securities in bearer form, or to permit or facilitate the
issuance of Debt Securities in uncertificated form, provided that such action
shall not adversely affect the interests of the holders of the Debt Securities
of any series in any material respect; (v) to change or eliminate any provisions
of an Indenture, provided that any such change or elimination shall become
effective only when there are no Debt Securities outstanding of any series
created prior thereto which are entitled to the benefit of such provision; (vi)
to secure the Debt Securities; (vii) to establish the form or terms of Debt
Securities of any series; (viii) to provide for the acceptance of appointment by
a successor Trustee or facilitate the administration of the trusts under an
Indenture by more than one Trustee; (ix) to cure any ambiguity, defect or
inconsistency in an Indenture, provided that such action shall not adversely
affect the interests of holders of Debt Securities of any series issued under
such Indenture; or (x) to supplement any of the provisions of an Indenture to
the extent necessary to permit or facilitate defeasance and discharge of any
series of such Debt Securities, provided that such action shall not adversely
affect the interests of the holders of the outstanding Debt Securities of any
series.
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The Indentures provide that in determining whether the holders of the
requisite principal amount of outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security that
shall be deemed to be outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof; (ii) the principal amount
of any Debt Security denominated in a foreign currency that shall be deemed
outstanding shall be the U.S. dollar equivalent, determined on the issue date
for such Debt Security, of the principal amount (or, in the case of an Original
Issue Discount Security, the U.S. dollar equivalent on the issue date of such
Debt Security of the amount determined as provided in (i) above); (iii) the
principal amount of an indexed security that shall be deemed outstanding shall
be the principal face amount of such indexed security at original issuance,
unless otherwise provided with respect to such indexed security pursuant to such
Indenture; and (iv) Debt Securities owned by the Operating Partnership or any
other obligor upon the Debt Securities or any affiliate of the Operating
Partnership or of such other obligor shall be disregarded.
The Indentures contain provisions for convening meetings of the holders of
Debt Securities of a series. A meeting will be permitted to be called at any
time by the applicable Trustee, and also, upon request, by the Operating
Partnership or the holders of at least 10% in principal amount of the
outstanding Debt Securities of such series, in any such case upon notice given
as provided in such Indenture. Except for any consent that must be given by the
holder of each Debt Security affected by certain modifications and amendments of
an Indenture, any resolution presented at a meeting or adjourned meeting duly
reconvened at which a quorum is present may be adopted by the affirmative vote
of the holders of a majority in principal amount of the outstanding Debt
Securities of that series; provided, however, that, except as referred to above,
any resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the
holders of a specified percentage, which is less than a majority, in principal
amount of the outstanding Debt Securities of a series may be adopted at a
meeting or adjourned meeting duly reconvened at which a quorum is present by the
affirmative vote of the holders of such specified percentage in principal amount
of the outstanding Debt Securities of that series. Any resolution passed or
decision taken at any meeting of holders of Debt Securities of any series duly
held in accordance with an Indenture will be binding on all holders of Debt
Securities of that series. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be persons holding or
representing a majority in principal amount of the outstanding Debt Securities
of a series; provided, however, that if any action is to be taken at such
meeting with respect to a consent or waiver which may be given by the holders of
not less than a specified percentage in principal amount of the outstanding Debt
Securities of a series, the persons holding or representing such specified
percentage in principal amount of the outstanding Debt Securities of such series
will constitute a quorum.
Notwithstanding the foregoing provisions, the Indentures provide that if
any action is to be taken at a meeting of holders of Debt Securities of any
series with respect to any request, demand, authorization, direction, notice,
consent, waiver and other action that such Indenture expressly provides may be
made, given or taken by the holders of a specified percentage in principal
amount of all outstanding Debt Securities affected thereby, or of the holders of
such series and one or more additional series: (i) there shall be no minimum
quorum requirement for such meeting; and (ii) the principal amount of the
outstanding Debt Securities of such series that vote in favor of such request,
demand, authorization, direction, notice, consent, waiver or other action shall
be taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has been made,
given or taken under such Indenture.
SUBORDINATION
Unless otherwise provided in the applicable Prospectus Supplement,
Subordinated Securities will be subject to the following subordination
provisions.
Upon any distribution to creditors of the Operating Partnership in a
liquidation, dissolution or reorganization, the payment of the principal of and
interest on any Subordinated Securities will be subordinated to the extent
provided in the applicable Indenture in right of payment to the prior payment in
full
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of all Senior Debt (as defined below), but the obligation of the Operating
Partnership to make payments of the principal of and interest on such
Subordinated Securities will not otherwise be affected. No payment of principal
or interest will be permitted to be made on Subordinated Securities at any time
if a default on Senior Debt exists that permits the holders of such Senior Debt
to accelerate its maturity and the default is the subject of judicial
proceedings or the Operating Partnership receives notice of the default. After
all Senior Debt is paid in full and until the Subordinated Securities are paid
in full, holders will be subrogated to the rights of holders of Senior Debt to
the extent that distributions otherwise payable to holders have been applied to
the payment of Senior Debt. The Subordinated Indenture will not restrict the
amount of Senior Debt or other indebtedness of the Operating Partnership and its
subsidiaries. As a result of these subordination provisions, in the event of a
distribution of assets upon insolvency, holders of Subordinated Indebtedness may
recover less, ratably, than general creditors of the Operating Partnership.
Senior Debt will be defined in the applicable Indenture as the principal of
and interest on, or substantially similar payments to be made by the Operating
Partnership in respect of, the following, whether outstanding at the date of
execution of the applicable Indenture or thereafter incurred, created or
assumed: (i) indebtedness of the Operating Partnership for money borrowed or
represented by purchase-money obligations; (ii) indebtedness of the Operating
Partnership evidenced by notes, debentures, or bonds, or other securities issued
under the provisions of an indenture, fiscal agency agreement or other
agreement; (iii) obligations of the Operating Partnership as lessee under leases
of property either made as part of any sale and leaseback transaction to which
the Operating Partnership is a party or otherwise; (iv) indebtedness,
obligations and liabilities of others in respect of which the Operating
Partnership is liable contingently or otherwise to pay or advance money or
property or as guarantor, endorser or otherwise or which the Operating
Partnership has agreed to purchase or otherwise acquire; and (v) any binding
commitment of the Operating Partnership to fund any real estate investment or to
fund any investment in any entity making such real estate investment, in each
case other than (A) any such indebtedness, obligation or liability referred to
in clauses (i) through (iv) above as to which, in the instrument creating or
evidencing the same pursuant to which the same is outstanding, it is provided
that such indebtedness, obligation or liability is not superior in right of
payment to the Subordinated Securities or ranks pari passu with the Subordinated
Securities; (B) any such indebtedness, obligation or liability which is
subordinated to indebtedness of the Operating Partnership to substantially the
same extent as or to a greater extent than the Subordinated Securities are
subordinated; and (C) the Subordinated Securities. There will not be any
restrictions in any Indenture relating to Subordinated Securities upon the
creation of additional Senior Debt.
If this Prospectus is being delivered in connection with a series of
Subordinated Securities, the accompanying Prospectus Supplement or the
information incorporated herein by reference will set forth the approximate
amount of Senior Debt outstanding as of the end of the Operating Partnership's
most recent fiscal quarter.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise indicated in the applicable Prospectus Supplement, the
Operating Partnership will be permitted, at its option, to discharge certain
obligations to holders of any series of Debt Securities issued under any
Indenture that have not already been delivered to the applicable Trustee for
cancellation and that either have become due and payable or will become due and
payable within one year (or scheduled for redemption within one year) by
irrevocably depositing with the applicable Trustee, in trust, funds in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable in an amount sufficient to
pay the entire indebtedness on such Debt Securities in respect of principal (and
premium, if any) and interest to the date of such deposit (if such Debt
Securities have become due and payable) or to the stated maturity or redemption
date, as the case may be.
The Indentures provide that, unless otherwise indicated in the applicable
Prospectus Supplement, the Operating Partnership may elect either (i) to defease
and be discharged from any and all obligations with respect to such Debt
Securities (except for the obligation to pay additional amounts, if any, upon
the occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities and the obligations to register the
transfer or exchange of such Debt Securities, to replace
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<PAGE> 30
temporary or mutilated, destroyed, lost or stolen Debt Securities, to maintain
an office or agency in respect of such Debt Securities, to hold moneys for
payment in trust) ("defeasance"); or (ii) to be released from its obligations
with respect to such Debt Securities under the applicable Indenture (being the
restrictions described under " -- Certain Covenants") or, if provided in the
applicable Prospectus Supplement, its obligations with respect to any other
covenant, and any omission to comply with such obligations shall not constitute
an event of default with respect to such Debt Securities ("covenant
defeasance"), in either case upon the irrevocable deposit by the Operating
Partnership with the applicable Trustee, in trust, of an amount, in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable at stated maturity, or
Government Obligations (as defined below), or both, applicable to such Debt
Securities, which through the scheduled payment of principal and interest in
accordance with their terms will provide money in an amount sufficient to pay
the principal of (and premium, if any) and interest on such Debt Securities, and
any mandatory sinking fund or analogous payments thereon, on the scheduled due
dates therefor.
Such a trust will only be permitted to be established if, among other
things, the Operating Partnership has delivered to the applicable Trustee an
opinion of counsel (as specified in the applicable Indenture) to the effect that
the holders of such Debt Securities will not recognize income, gain or loss for
U.S. federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance or covenant defeasance had not occurred, and such opinion of counsel,
in the case of defeasance, will be required to refer to and be based upon a
ruling received from or published by the Internal Revenue Service (the
"Service") or a change in applicable United States federal income tax law
occurring after the date of the Indenture. In the event of such defeasance, the
holders of such Debt Securities would thereafter be able to look only to such
trust fund for payment of principal (and premium, if any) and interest.
"Government Obligations" means securities that are (i) direct obligations
of the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged; or (ii) obligations
of a person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government which issued
the foreign currency in which the Debt Securities of such series are payable,
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America or such other government, which, in
either case, are not callable or redeemable at the option of the issuer thereof,
and shall also include a depository receipt issued by a bank or trust company as
custodian with respect to any such Government Obligation or a specific payment
of interest on or principal of any such Government Obligation held by such
custodian for the account of the holder of a depository receipt; provided,
however, that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the Government
Obligation or the specific payment of interest on or principal of the Government
Obligation evidenced by such depository receipt.
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Operating Partnership has deposited funds and/or Government Obligations to
effect defeasance or covenant defeasance with respect to Debt Securities of any
series, (i) the holder of a Debt Security of such series is entitled to, and
does, elect pursuant to the applicable Indenture or the terms of such Debt
Security to receive payment in a currency, currency unit or composite currency
other than that in which such deposit has been made in respect of such Debt
Security; or (ii) a Conversion Event (as defined below) occurs in respect of the
currency, currency unit or composite currency in which such deposit has been
made, the indebtedness represented by such Debt Security will be deemed to have
been, and will be, fully discharged and satisfied through the payment of the
principal of (and premium, if any) and interest on such Debt Security as they
become due out of the proceeds yielded by converting the amount so deposited in
respect of such Debt Security into the currency, currency unit or composite
currency in which such Debt Security becomes payable as a result of such
election or such cessation of usage based on the applicable market exchange
rate. "Conversion Event" means the cessation of use of (i) a currency, currency
unit or composite currency both by the government of the country which issued
such currency and for the settlement of transactions by a central bank or other
public institutions of or within
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<PAGE> 31
the international banking community; (ii) the European Currency Unit ("ECU")
both within the European Monetary System and for the settlement of transactions
by public institutions of or within the European Communities; or (iii) any
currency unit or composite currency other than the ECU for the purposes for
which it was established. Unless otherwise provided in the applicable Prospectus
Supplement, all payments of principal of (and premium, if any) and interest on
any Debt Security that is payable in a foreign currency that ceases to be used
by its government of issuance shall be made in U.S. dollars.
In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because of
the occurrence of any event of default other than the event of default described
in clause (iv) under "-- Events of Default, Notice and Waiver" with respect to
specified sections of an Indenture (which sections would no longer be applicable
to such Debt Securities) or described in clause (vii) under "Events of Default,
Notice and Waiver" with respect to any other covenant as to which there has been
covenant defeasance, the amount in such currency, currency unit or composite
currency in which such Debt Securities are payable, and Government Obligations
on deposit with the applicable Trustee, will be sufficient to pay amounts due on
such Debt Securities at the time of their stated maturity but may not be
sufficient to pay amounts due on such Debt Securities at the time of the
acceleration resulting from such event of default. However, the Operating
Partnership would remain liable to make payment of such amounts due at the time
of acceleration.
The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
NO CONVERSION RIGHTS
The Debt Securities will not be convertible into or exchangeable for any
capital stock of the Company or any equity interest in the Operating
Partnership.
PAYMENT
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium, if any) and interest on any series of Debt
Securities will be payable at the corporate trust office of the Trustee, the
address of which will be stated in the applicable Prospectus Supplement;
provided, however, that, at the option of the Operating Partnership, payment of
interest may be made by check mailed to the address of the person entitled
thereto as it appears in the applicable register for such Debt Securities or by
wire transfer of funds to such person at an account maintained within the United
States.
All moneys paid by the Operating Partnership to a paying agent or a Trustee
for the payment of the principal of or any premium or interest on any Debt
Security which remain unclaimed at the end of two years after such principal,
premium or interest has become due and payable will be repaid to the Operating
Partnership, and the holder of such Debt Security thereafter may look only to
the Operating Partnership for payment thereof.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary identified in the applicable
Prospectus Supplement relating to such series. Global Securities may be issued
in either registered or bearer form and in either temporary or permanent form.
The specific terms of the depositary arrangement with respect to a series of
Debt Securities will be described in the applicable Prospectus Supplement
relating to such series.
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DESCRIPTION OF PREFERRED STOCK
The description of the Company's Preferred Stock set forth below is a
summary of the material provisions thereof, does not purport to be complete and
is qualified in its entirety by reference to the Company's Articles of
Incorporation (the "Articles of Incorporation") and Bylaws (the "Bylaws"), as in
effect from time to time.
GENERAL
Under the Articles of Incorporation, the Company has authority to issue 25
million shares of Preferred Stock, par value $.01 per share, none of which was
outstanding as of the date of this Prospectus. Under Maryland law, stockholders
generally are not responsible for the corporation's debts or obligations. Shares
of Preferred Stock may be issued from time to time, in one or more series, as
authorized by the Board of Directors of the Company. Prior to issuance of shares
of each series, the Board of Directors is required by the Maryland General
Corporation Law ("MGCL") and the Company's Articles of Incorporation to fix for
each series, subject to the provisions of the Company's Articles of
Incorporation regarding excess stock, $.01 par value per share ("Excess Stock"),
the terms, preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms or
conditions of redemption, as are permitted by Maryland law. The Preferred Stock
will, when issued, be fully paid and nonassessable and will have no preemptive
rights. The Board of Directors could authorize the issuance of shares of
Preferred Stock with terms and conditions that could have the effect of
discouraging a takeover or other transaction that holders of Common Stock might
believe to be in their best interests or in which holders of some, or a
majority, of the shares of Common Stock might receive a premium for their shares
over the then market price of such shares of Common Stock.
TERMS
The following description of the Preferred Stock sets forth the material
terms and provisions of the Preferred Stock to which any Prospectus Supplement
may relate. The statements below describing the Preferred Stock are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of the Company's Articles of Incorporation and Bylaws and
any applicable amendment to the Articles of Incorporation designating terms of a
series of Preferred Stock (a "Designating Amendment").
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms, including:
(1) The title and stated value of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the liquidation
preference per share and the offering price of such Preferred Stock;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to such Preferred Stock;
(4) The date from which dividends on such Preferred Stock shall
accumulate, if applicable;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Stock;
(6) The provision for a sinking fund, if any, for such Preferred Stock;
(7) The provision for redemption, if applicable, of such Preferred Stock;
(8) Any listing of such Preferred Stock on any securities exchange;
(9) The terms and conditions, if applicable, upon which such Preferred
Stock will be convertible into Common Stock, including the conversion
price or rate (or manner of calculation thereof);
(10) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock;
(11) A discussion of federal income tax considerations applicable to such
Preferred Stock;
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(12) The relative ranking and preference of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company;
(13) Any limitations on issuance of any series of Preferred Stock ranking
senior to or on a parity with such series of Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company; and
(14) Any limitations on direct or beneficial ownership and restrictions on
transfer, in each case as may be appropriate to preserve the status of
the Company as a REIT.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred
Stock will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of the Company, rank (i) senior to all classes or
series of Common Stock of the Company, and to all equity securities ranking
junior to such Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution or winding up of the Company; (ii) on a parity with all
equity securities issued by the Company, the terms of which specifically provide
that such equity securities rank on a parity with the Preferred Stock with
respect to dividend rights or rights upon liquidation, dissolution or winding up
of the Company; and (iii) junior to all equity securities issued by the Company,
the terms of which specifically provide that such equity securities rank senior
to the Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution or winding up of the Company. The term "equity
securities" does not include convertible debt securities.
DIVIDENDS
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of assets
of the Company legally available for payment, cash dividends at such rates and
on such dates as will be set forth in the applicable Prospectus Supplement. Each
such dividend shall be payable to holders of record as they appear on the share
transfer books of the Company on such record dates as shall be fixed by the
Board of Directors of the Company.
Dividends on any series of the Preferred Stock may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Directors of the Company fails
to declare a dividend payable on a dividend payment date on any series of the
Preferred Stock for which dividends are non-cumulative, then the holders of such
series of the Preferred Stock will have no right to receive a dividend in
respect of the dividend period ending on such dividend payment date, and the
Company will have no obligation to pay the dividend accrued for such period,
whether or not dividends on such series are declared payable on any future
dividend payment date.
If Preferred Stock of any series is outstanding, no dividends will be
declared or paid or set apart for payment on any capital stock of the Company of
any other series ranking, as to dividends, on a parity with or junior to the
Preferred Stock of such series for any period unless (i) if such series of
Preferred Stock has a cumulative dividend, full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof is set apart for such payment on the Preferred Stock of such
series for all past dividend periods and the then current dividend period; or
(ii) if such series of Preferred Stock does not have a cumulative dividend, full
dividends for the then current dividend period have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for such payment on the Preferred Stock of such series. When
dividends are not paid in full (or a sum sufficient for such full payment is not
so set apart) upon Preferred Stock of any series and the shares of any other
series of Preferred Stock ranking on a parity as to dividends with the Preferred
Stock of such series, all dividends declared upon Preferred Stock of such series
and any other series of Preferred Stock ranking on a parity as to dividends with
such Preferred Stock shall be declared pro rata so that the amount of dividends
declared per share of Preferred Stock of such series and such other series of
Preferred Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the Preferred Stock of such series (which shall
not include any accumulation in respect of unpaid dividends for prior dividend
periods if such
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Preferred Stock does not have a cumulative dividend) and such other series of
Preferred Stock bear to each other. No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or payments on
Preferred Stock of such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Stock has a cumulative dividend, full cumulative
dividends on the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for payment for all past dividend periods and the then current
dividend period; and (ii) if such series of Preferred Stock does not have a
cumulative dividend, full dividends on the Preferred Stock of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof is set apart for payment for the then current dividend
period, no dividends (other than in shares of Common Stock or other shares of
capital stock ranking junior to the Preferred Stock of such series as to
dividends and upon liquidation) shall be declared or paid or set aside for
payment nor shall any other distribution be declared or made upon the Common
Stock, or any other capital stock of the Company ranking junior to or on a
parity with the Preferred Stock of such series as to dividends or upon
liquidation, nor shall any shares of Common Stock, or any other shares of
capital stock of the Company ranking junior to or on a parity with the Preferred
Stock of such series as to dividends or upon liquidation be redeemed, purchased
or otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any such shares) by the
Company (except by conversion into or exchange for other capital stock of the
Company ranking junior to the Preferred Stock of such series as to dividends and
upon liquidation).
Any dividend payment made on shares of a series of Preferred Stock shall
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of such series which remains payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Stock
will be subject to mandatory redemption or redemption at the option of the
Company, as a whole or in part, in each case upon the terms, at the times and at
the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon (which
shall not, if such Preferred Stock does not have a cumulative dividend, include
any accumulation in respect of unpaid dividends for prior dividend periods) to
the date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable Prospectus Supplement. If the
redemption price for Preferred Stock of any series is payable only from the net
proceeds of the issuance of shares of capital stock of the Company, the terms of
such Preferred Stock may provide that, if no such shares of capital stock shall
have been issued or to the extent the net proceeds from any issuance are
insufficient to pay in full the aggregate redemption price then due, such
Preferred Stock shall automatically and mandatorily be converted into the
applicable shares of capital stock of the Company pursuant to conversion
provisions specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if a series of Preferred Stock
has a cumulative dividend, full cumulative dividends on all shares of such
series of Preferred Stock shall have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past dividend periods and the then current dividend period; and
(ii) if a series of Preferred Stock does not have a cumulative dividend, full
dividends on all shares of the Preferred Stock of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for the then current dividend period, no
shares of such series of Preferred Stock shall be redeemed unless all
outstanding shares of Preferred Stock of such series are simultaneously
redeemed; provided, however, that the foregoing shall not prevent the purchase
or acquisition of Preferred Stock of such series to preserve the REIT status of
the Company or pursuant to a purchase or exchange offer made on the same terms
to holders of all outstanding shares of Preferred Stock of such series. In
addition, unless (i) if such
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series of Preferred Stock has a cumulative dividend, full cumulative dividends
on all outstanding shares of such series of Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past dividend periods and the then
current dividend period; and (ii) if such series of Preferred Stock does not
have a cumulative dividend, full dividends on the Preferred Stock of such series
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for the then current
dividend period, the Company shall not purchase or otherwise acquire directly or
indirectly any shares of Preferred Stock of such series (except by conversion
into or exchange for capital shares of the Company ranking junior to the
Preferred Stock of such series as to dividends and upon liquidation); provided,
however, that the foregoing shall not prevent the purchase or acquisition of
shares of Preferred Stock of such series to preserve the REIT status of the
Company or pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding shares of Preferred Stock of such series.
If fewer than all of the outstanding shares of Preferred Stock of any
series are to be redeemed, the number of shares to be redeemed will be
determined by the Company and such shares may be redeemed pro rata from the
holders of record of such shares in proportion to the number of such shares held
or for which redemption is requested by such holder (with adjustments to avoid
redemption of fractional shares) or by any other equitable manner determined by
the Company.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Stock of
any series to be redeemed at the address shown on the stock transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
of shares and series of the Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Preferred Stock are
to be surrendered for payment of the redemption price; (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date; and (vi) the
date upon which the holder's conversion rights, if any, as to such shares shall
terminate. If fewer than all the shares of Preferred Stock of any series are to
be redeemed, the notice mailed to each such holder thereof shall also specify
the number of shares of Preferred Stock to be redeemed from each such holder. If
notice of redemption of any Preferred Stock has been given and if the funds
necessary for such redemption have been set aside by the Company in trust for
the benefit of the holders of any Preferred Stock so called for redemption, then
from and after the redemption date dividends will cease to accrue on such
Preferred Stock, and all rights of the holders of such shares will terminate,
except the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Common Stock or any other class or series of capital
stock of the Company ranking junior to the Preferred Stock in the distribution
of assets upon any liquidation, dissolution or winding up of the Company, the
holders of each series of Preferred Stock shall be entitled to receive out of
assets of the Company legally available for distribution to stockholders
liquidating distributions in the amount of the liquidation preference per share,
if any, set forth in the applicable Prospectus Supplement, plus an amount equal
to all dividends accrued and unpaid thereon (which shall not include any
accumulation in respect of unpaid noncumulative dividends for prior dividend
periods). After payment of the full amount of the liquidating distributions to
which they are entitled, the holders of Preferred Stock will have no right or
claim to any of the remaining assets of the Company. In the event that, upon any
such voluntary or involuntary liquidation, dissolution or winding up, the
available assets of the Company are insufficient to pay the amount of the
liquidating distributions on all outstanding shares of Preferred Stock and the
corresponding amounts payable on all shares of other classes or series of
capital stock of the Company ranking on a parity with the Preferred Stock in the
distribution of assets, then the holders of the Preferred Stock and all other
such classes or series of capital stock shall share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Stock, the remaining assets of the Company shall be distributed among
the holders of any other classes or series of capital stock ranking junior to
the Preferred Stock upon liquidation, dissolution or winding up, according to
their respective
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rights and preferences and in each case according to their respective number of
shares. For such purposes, the consolidation or merger of the Company with or
into any other corporation, trust or entity, or the sale, lease or conveyance of
all or substantially all of the property or business of the Company, shall not
be deemed to constitute a liquidation, dissolution or winding up of the Company.
VOTING RIGHTS
Holders of the Preferred Stock will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Unless provided otherwise for any series of Preferred Stock, so long as any
shares of Preferred Stock of a series remain outstanding, the Company will not,
without the affirmative vote or consent of the holders of at least two-thirds of
the shares of such series of Preferred Stock outstanding at the time, given in
person or by proxy, either in writing or at a meeting (such series voting
separately as a class), (i) authorize or create, or increase the authorized or
issued amount of, any class or series of capital stock ranking prior to such
series of Preferred Stock with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up or reclassify
any authorized capital stock of the Company into such shares, or create,
authorize or issue any obligation or security convertible into or evidencing the
right to purchase any such shares; or (ii) amend, alter or repeal the provisions
of the Company's Articles of Incorporation or the Designating Amendment for such
series of Preferred Stock, whether by merger, consolidation or otherwise (an
"Event"), so as to materially and adversely affect any right, preference,
privilege or voting power of such series of Preferred Stock or the holders
thereof; provided, however, with respect to the occurrence of any of the Events
set forth in (ii) above, so long as the Preferred Stock remains outstanding with
the terms thereof materially unchanged, taking into account that upon the
occurrence of an Event the Company may not be the surviving entity, the
occurrence of any such Event shall not be deemed to materially and adversely
affect such rights, preferences, privileges or voting power of holders of
Preferred Stock, and provided further that (A) any increase in the amount of the
authorized Preferred Stock or the creation or issuance of any other series of
Preferred Stock, or (B) any increase in the amount of authorized shares of such
series or any other series of Preferred Stock, in each case ranking on a parity
with or junior to the Preferred Stock of such series with respect to payment of
dividends or the distribution of assets upon liquidation, dissolution or winding
up, shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Stock shall have
been redeemed or called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Stock
is convertible into Common Stock will be set forth in the applicable Prospectus
Supplement relating thereto. Such terms will include the number of shares of
Common Stock into which the shares of Preferred Stock are convertible, the
conversion price or rate (or manner of calculation thereof), the conversion
period, provisions as to whether conversion will be at the option of the holders
of the Preferred Stock or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such series of Preferred Stock.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Code not more than 50% in
value of its outstanding capital stock may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain entities)
during the last half of a taxable year. To assist the Company in meeting this
requirement, the Company may take certain actions to limit the beneficial
ownership, directly or indirectly, by a single person of the Company's
outstanding equity securities, including any Preferred Stock of the Company.
Therefore, the Designating Amendment for each series of Preferred Stock may
contain provisions restricting the ownership and transfer of the Preferred
Stock. The applicable Prospectus Supplement will specify any
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additional ownership limitation relating to a series of Preferred Stock. See
"Restrictions on Transfers of Capital Stock."
TRANSFER AGENT
The transfer agent and registrar for the Preferred Stock will be set forth
in the applicable Prospectus Supplement.
DESCRIPTION OF COMMON STOCK
The description of the Company's Common Stock set forth below is a summary
of the material provisions thereof, does not purport to be complete and is
qualified in its entirety by reference to the Company's Articles of
Incorporation and Bylaws, as in effect from time to time.
GENERAL
Under the Articles of Incorporation, the Company has authority to issue 100
million shares of Common Stock, par value $.01 per share. Under Maryland law,
stockholders generally are not responsible for the corporation's debts or
obligations. At March 31, 1997, the Company had outstanding 23,078,821 shares of
Common Stock.
TERMS
The following description of the Common Stock sets forth the material terms
and provisions of the Common Stock to which any Prospectus Supplement may
relate. Subject to the preferential rights of any other class or series of stock
and to the provisions of the Company's Articles of Incorporation regarding
Excess Stock, holders of shares of Common Stock will be entitled to receive
dividends on shares of Common Stock if, as and when authorized and declared by
the Board of Directors of the Company out of assets legally available therefor
and to share ratably in the assets of the Company legally available for
distribution to its stockholders in the event of its liquidation, dissolution or
winding-up after payment of, or adequate provision for, all known debts and
liabilities of the Company.
Subject to the provisions of the Company's Articles of Incorporation
regarding Excess Stock, each outstanding share of Common Stock entitles the
holder to one vote on all matters submitted to a vote of stockholders, including
the election of Directors and, except as otherwise required by law or except as
provided with respect to any other class or series of stock, the holders of
Common Stock will possess the exclusive voting power. The Company's Board of
Directors is divided into three classes. The members of each class serve for a
term of three years. The terms for the three classes are staggered such that the
term of only one class of directors expires each year. There is no cumulative
voting in the election of Directors, which means that the holders of a majority
of the outstanding shares of Common Stock can elect all of the Directors then
standing for election, and the holders of the remaining shares of Common Stock
will not be able to elect any Directors.
Holders of Common Stock have no conversion, sinking fund or redemption
rights, or preemptive rights to subscribe for any securities of the Company.
Subject to the provisions of the Company's Articles of Incorporation
regarding Excess Stock, all shares of Common Stock will have equal dividend,
distribution, liquidation and other rights, and will have no preference,
appraisal or exchange rights.
Pursuant to the MGCL, a corporation generally cannot dissolve, amend its
Articles of Incorporation, merge, sell all or substantially all of its assets,
engage in a share exchange or engage in similar transactions outside the
ordinary course of business unless approved by the affirmative vote of
stockholders holding at least two-thirds of the shares entitled to vote on the
matter unless a lesser percentage (but not less than a majority of all of the
votes to be cast on the matter) is set forth in the corporation's Articles of
Incorporation. The Company's Articles of Incorporation provide that such
transactions, with the exception of an amendment of
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the Articles of Incorporation affecting restrictions on transfer, can be
effected by a vote of a majority of the shares entitled to vote on such matters.
Provisions of the Company's Articles of Incorporation described below under
"Restrictions on Transfers of Capital Stock," together with other provisions of
the Company's Articles of Incorporation and the MGCL may discourage a change in
control and limit the opportunity for stockholders to receive a premium for
their Common Stock.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Code, not more than 50% in
value of its outstanding capital stock may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain entities)
during the last half of a taxable year. To assist the Company in meeting this
requirement, the Company may take certain actions to limit the beneficial
ownership, directly or indirectly, by a single person of the Company's
outstanding equity securities. See "Restrictions on Transfers of Capital Stock."
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is First Union
National Bank of North Carolina.
RESTRICTIONS ON TRANSFERS OF CAPITAL STOCK
For the Company to qualify as a REIT under the Code, among other things,
not more than 50% in value of its outstanding capital stock may be owned,
directly or indirectly, by five or fewer individuals (defined in the Code to
include certain entities) during the last half of a taxable year (other than the
first year) (the "Five or Fewer Test"), and such capital stock must be
beneficially owned by 100 or more persons during at least 335 days of a taxable
year of 12 months (other than the first year) or during a proportionate part of
a shorter taxable year. See "Federal Income Tax Considerations." In order to
protect the Company against the risk of losing its status as a REIT on account
of a concentration of ownership among its stockholders, the Articles of
Incorporation, subject to certain exceptions, provide that no holder who is an
individual may own, or be deemed to own by virtue of the attribution provisions
of the Code, more than 9.8% (the "Ownership Limit") of the Company's capital
stock. Pursuant to the Code, certain types of entities, such as pension trusts
qualifying under Section 401(a) of the Code, United States investment companies
registered under the Investment Company Act of 1940 and corporations will be
looked-through for the purposes of the Five or Fewer Test. The Company's
Articles of Incorporation limits such entities to holding no more than 15% of
the aggregate value of the Company's shares of capital stock (the "Look-Through
Ownership Limit"). Any transfer of capital stock or any security convertible
into capital stock that would create a direct or indirect ownership of capital
stock in excess of the Ownership Limit or the Look-Through Ownership Limit or
that would result in the disqualification of the Company as a REIT, including
any transfer that results in the capital stock being owned by fewer than 100
persons or results in the Company being "closely held" within the meaning of
Section 856(h) of the Code, shall be null and void, and the intended transferee
will acquire no rights to the capital stock. The Board of Directors in its sole
discretion may waive the Ownership Limit or the Look-Through Ownership Limit if
evidence satisfactory to the Board of Directors and the Company's tax counsel is
presented that the changes in ownership will not then or in the future
jeopardize the Company's status as a REIT and the Board of Directors otherwise
decides that such action is in the best interests of the Company. The foregoing
restrictions on transferability and ownership will not apply if the Board of
Directors determines that it is no longer in the best interests of the Company
to attempt to qualify, or to continue to qualify, as a REIT.
Capital stock owned, or deemed to be owned, or transferred to a stockholder
in excess of the Ownership Limit or the Look-Through Ownership Limit will
automatically be converted into shares of Excess Stock that will be transferred,
by operation of law, to the Company as trustee of a trust for the exclusive
benefit of the transferees to whom such capital stock may be ultimately
transferred without violating the Ownership Limit or the Look-Through Ownership
Limit. While held in trust, the Excess Stock will not be considered for purposes
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of any stockholder vote or the determination of a quorum for such vote and,
except upon liquidation, will not be entitled to participate in distributions.
Any distribution paid on Excess Stock, prior to the discovery by the Company
that capital stock has been transferred in violation of the Ownership Limit or
the Look-Through Ownership Limit, shall be repaid to the Company upon demand.
Shares of Excess Stock are not treasury stock, but rather constitute a separate
class of issued and outstanding stock of the Company. The original
transferee-stockholder may, at any time while the shares of Excess Stock are
held by the Company in trust, transfer the interest in the trust representing
the Excess Stock to any individual whose ownership of the capital stock
converted into such Excess Stock would be permitted under the Ownership Limit or
the Look-Through Ownership Limit, at a price not in excess of (i) the price paid
by the original transferee-stockholder for the capital stock that was converted
into Excess Stock, or (ii) if the original transferee-stockholder did not give
value for such shares (e.g. the capital stock was received through a gift,
devise or other transaction), the average closing price for the class of shares
from which such shares of Excess Stock were converted for the ten days
immediately preceding such sale or gift. Immediately upon the transfer to the
permitted transferee, the Excess Stock will automatically be converted into
capital stock of the class from which it was converted. If the foregoing
transfer restrictions are determined to be void or invalid by virtue of any
legal decision, statute, rule or regulation, then the intended transferee of any
Excess Stock may be deemed, at the option of the Company, to have acted as an
agent on behalf of the Company in acquiring the Excess Stock and to hold the
Excess Stock on behalf of the Company.
In addition, the Company will have the right, for a period of 90 days
during the time any shares of Excess Stock are held by the Company in trust, to
purchase all or any portion of the Excess Stock from the original
transferee-stockholder for the lesser of (i) the price initially paid for the
capital stock by the original transferee-stockholder, or if the original
transferee-stockholder did not give value for such shares (e.g., the shares were
received through a gift, devise or other transaction), the average closing price
for the class of capital stock from which such shares of Excess Stock were
converted for the ten days immediately preceding such sale or gift, and (ii) the
average closing price for the class of such shares of Excess Stock were
converted for the ten trading days immediately preceding the date the Company
elects to purchase such shares. The 90-day period begins on the date notice is
received of the violative transfer if the original transferee-stockholder gives
notice to the Company of the transfer or, if no such notice is given, the date
the Board of Directors determines that a violative transfer has been made.
These restrictions will not preclude settlement of transactions through the
New York Stock Exchange.
Each stockholder shall, upon demand, be required to disclose to the Company
in writing any information with respect to the direct, indirect and constructive
ownership of the Company's capital stock as the Board of Directors deems
necessary to comply with the provisions of the Code applicable to REITs, to
comply with the requirements of any taxing authority or governmental agency or
to determine any such compliance.
The Ownership Limit and the Look-Through Ownership Limit may have the
effect of precluding acquisition of control of the Company unless the Board of
Directors determines that maintenance of REIT status is no longer in the best
interests of the Company.
FEDERAL INCOME TAX CONSIDERATIONS
Based on quarterly and annual internal compliance tests, annual review of
such testing conducted by its independent accountants, and consultation with
such accountants and the Company's counsel from time to time, the Company
believes it has operated, and the Company intends to continue to operate, in
such a manner as to qualify as a REIT under the Code, but no assurance can be
given that it will at all times so qualify.
The provisions of the Code pertaining to REITs are highly technical and
complex. The following is a brief and general summary of the material federal
income tax considerations of an investment in the Company's Securities to the
extent those considerations relate to the taxation of the Company. To the extent
such considerations relate to the tax treatment of particular Securities, they
will be addressed in the applicable Prospectus Supplement. For the particular
provisions that govern the federal income tax treatment of the Company and its
stockholders, reference is made to Sections 856 through 860 of the Code and the
regulations
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thereunder. The following summary is qualified in its entirety by those Sections
of the Code and the regulations thereunder.
The statements in this discussion are based on current provisions of the
Code, Treasury Regulations promulgated under the Code, the legislative history
of the Code, existing administrative rulings and practices of the Service, and
judicial decisions. No assurance can be given that future legislative, judicial,
or administrative actions or decisions, which may be retroactive in effect, will
not affect the accuracy of any statements in this Prospectus with respect to the
transactions entered into or contemplated prior to the effective date of such
changes. To the extent that legal conclusions are contained in this summary, the
Company has based such conclusions on the opinion of counsel to the Company.
EACH INVESTOR IS ADVISED TO CONSULT HIS OWN TAX ADVISOR REGARDING THE
SPECIFIC TAX CONSEQUENCE TO HIM OR HER OF AN INVESTMENT IN THE COMPANY'S
SECURITIES.
Under the Code, if certain requirements are met in a taxable year, a REIT
generally will not be subject to federal income tax with respect to income that
it distributes to its stockholders. However, the Company may be subject to
federal income tax under certain circumstances including taxes at regular
corporate rates on any undistributed REIT taxable income, the "alternative
minimum tax" on its items of tax preference, and taxes imposed on income and
gain generated by certain extraordinary transactions. If the Company fails to
qualify during any taxable year as a REIT, unless certain relief provisions are
available, it will be subject to tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates, which could have
a material adverse effect upon its stockholders.
In addition to meeting a number of technical requirements, including
requirements regarding distributions to shareholders, diversification of
ownership and record keeping, to qualify as a REIT the Company must meet certain
tests regarding the nature of its assets and its gross income. The Company is
largely restricted under these tests to holding "real estate assets" (as defined
in the Code) for investment (and not for resale) and relatively small amounts of
investment securities. Accordingly, the Company's ability to diversify its
holdings outside of investments in real estate is limited. The requirements of
the statutory tests also impose certain requirements on the Company's leases
with its tenants, including restrictions on the Company's ability to provide
noncustomary services to its tenants. Because the Company's proportionate share
of the assets and items of income of the Operating Partnership and its
subsidiaries are treated as assets and gross income of the Company, the same
restrictions apply to the operations and investments of the Operating
Partnership and its subsidiaries. Further, changes in law, or in the
interpretation of the law, may change the nature and effect of these
restrictions or add additional restrictions to the manner in which the Company
conducts its business.
In the opinion of Goodwin, Procter & Hoar LLP, counsel to the Company,
commencing with the taxable year ending December 31, 1994, the Company has been
organized and operated in conformity with the requirements for qualification and
taxation as a REIT under the Code, and the Company's proposed method of
operation will enable it to continue to meet the requirements for qualification
and taxation as a REIT under the Code. Investors should be aware, however, that
opinions of counsel are not binding upon the Service or any court. Moreover,
Goodwin, Procter & Hoar LLP's opinion is based on various assumptions and is
conditioned upon certain representations made by the Company as to factual
matters, including representations regarding the nature of the Company's
properties, and the future conduct of the Company's business. The Company's
qualification and taxation as a REIT depends upon the Company's ability to meet
on a continuing basis, through actual annual operating results, the distribution
levels, stock ownership, and other various qualification tests imposed under the
Code. Goodwin, Procter & Hoar LLP will not review the Company's compliance with
those tests on a continuing basis. Accordingly, no assurance can be given that
the actual results of the Company's operation for any particular taxable year
will satisfy such requirements.
Investors are urged to consult their own tax advisors with respect to the
appropriateness of an investment in the Securities offered hereby and with
respect to the tax consequences arising under federal law and the laws of any
state, municipality or other taxing jurisdiction, including tax consequences
resulting from such investor's own tax characteristics. In particular, foreign
investors should consult their own tax advisors
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concerning the tax consequences of an investment in the Company, including the
possibility of United States income tax withholding on Company distributions.
PLAN OF DISTRIBUTION
The Company may sell Preferred Stock and Common Stock and the Operating
Partnership may sell Debt Securities through underwriters or dealers, directly
to one or more purchasers, through agents or through a combination of any such
methods of sale.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, or at negotiated prices.
In connection with the sale of Securities, underwriters or agents may
receive compensation from the Company, from the Operating Partnership or from
purchasers of Securities, for whom they may act as agents, in the form of
discounts, concessions or commissions. Underwriters may sell Securities to or
through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
from the purchasers for whom they may act as agents. Underwriters, dealers, and
agents that participate in the distribution of Securities may be deemed to be
underwriters under the Securities Act, and any discounts or commissions they
receive from the Company or the Operating Partnership, and any profit on the
resale of Securities they realize may be deemed to be underwriting discounts and
commissions under the Securities Act. Any such underwriter or agent will be
identified, and any such compensation received from the Company or the Operating
Partnership will be described, in the applicable Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, each
series of Securities will be a new issue with no established trading market,
other than the Common Stock which is listed on the NYSE. Any shares of Common
Stock sold pursuant to a Prospectus Supplement will be listed on the NYSE,
subject to official notice of issuance. The Operating Partnership or the Company
may elect to list any series of Debt Securities or Preferred Stock,
respectively, on an exchange, but is not obligated to do so. It is possible that
one or more underwriters may make a market in a series of Securities, but will
not be obligated to do so and may discontinue any market making at any time
without notice. Therefore, no assurance can be given as to the liquidity of, or
the trading market for, any series of Debt Securities or Preferred Stock.
Until the distribution of the Securities is completed, rules of the
Commission may limit the ability of any underwriters and selling group members
to bid for and purchase the Securities. As an exception to these rules,
underwriters are permitted to engage in certain transactions that stabilize the
price of the Securities. Such transactions consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the Securities.
If any underwriters create a short position in the Securities in connection
with an offering, i.e., if they sell more Securities than are set forth on the
cover page of the applicable Prospectus Supplement, the underwriters may reduce
that short position by purchasing Securities in the open market.
The lead underwriters may also impose a penalty bid on certain other
underwriters and selling group members participating in an offering. This means
that if the lead underwriters purchase Securities in the open market to reduce
the underwriters' short position or to stabilize the price of the Securities,
they may reclaim the amount of any selling concession from the underwriters and
selling group members who sold those Securities as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security before the distribution is completed.
Neither the Company nor the Operating Partnership makes any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above might have on the price of the
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Securities. In addition, neither the Company nor the Operating Partnership makes
any representation that underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
Under agreements into which the Company or the Operating Partnership may
enter, underwriters, dealers and agents who participate in the distribution of
Securities may be entitled to indemnification by the Company or the Operating
Partnership against certain liabilities, including liabilities under the
Securities Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, or be tenants of, the Company or the Operating Partnership
in the ordinary course of business.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Securities from the Company
at the public offering price set forth in such Prospectus Supplement pursuant to
delayed delivery contracts ("Company Contracts") providing for payment and
delivery on the date or dates stated in such Prospectus Supplement. Institutions
with which such contracts, when authorized, may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Company. The obligations of any purchaser
under any such contract will be subject to the condition that the purchase of
the Securities shall not at the time of delivery be prohibited under the laws of
the jurisdiction to which such purchaser is subject. The underwriters and such
other agents will not have any responsibility in respect of the validity or
performance of such contracts.
If so indicated in the applicable Prospectus Supplement, the Operating
Partnership will authorize underwriters or other persons acting as the Operating
Partnership's agents to solicit offers by certain institutions to purchase Debt
Securities from the Operating Partnership at the public offering price set forth
in such Prospectus Supplement pursuant to delayed delivery contracts ("Operating
Partnership Contracts") providing for payment and delivery on the date or dates
stated in such Prospectus Supplement. Each Operating Partnership Contract will
be for an amount not less than, and the aggregate principal amount of Debt
Securities sold pursuant to Operating Partnership Contracts shall be not less
nor more than, the respective amounts stated in the applicable Prospectus
Supplement. Institutions with which such contracts, when authorized, may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions, and others, but
will in all cases be subject to the approval of the Operating Partnership. The
obligations of any purchaser under any such contract will be subject to the
conditions that (i) the purchase of the Debt Securities shall not at the time of
delivery be prohibited under the laws of any jurisdiction in the United States
to which such purchaser is subject, and (ii) if the Debt Securities are being
sold to underwriters, the Operating Partnership shall have sold to such
underwriters the total principal amount of the Debt Securities less the
principal amount thereof covered by Operating Partnership Contracts. The
underwriters and such other agents will not have any responsibility in respect
of the validity or performance of such contracts.
In order to comply with the securities laws of certain states, if
applicable, the Securities offered hereby will be sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition, in certain
states Securities may not be sold unless they have been registered or qualified
for sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
LEGAL MATTERS
Certain legal matters, including the legality of the Securities, will be
passed upon for the Company and the Operating Partnership by Goodwin, Procter &
Hoar LLP, Boston, Massachusetts.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this registration statement by reference from the Company's
Annual Report on Form 10-K for the year ended December 31,
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1996, as amended, the Annual Report on Form 11-K of the Company's 1996
Non-Qualified Employee Stock Purchase Plan for the year ended December 31, 1996
and the Operating Partnership's Registration Statement on Form 10, dated April
21, 1997, as amended, have been audited by Deloitte & Touche LLP, independent
accountants, as stated in their reports which are incorporated herein by
reference and have been so incorporated in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing. The financial
statements incorporated in this registration statement by reference from the
Company's Current Report on Form 8-K/A-1, dated May 1, 1997, and the Operating
Partnership's Registration Statement on Form 10/A-2, dated June 30, 1997, have
been audited by Reznick, Fedder & Silverman, Deloitte & Touche LLP and Arthur
Andersen LLP, independent accountants, as stated in their reports which are
incorporated herein by reference and have been so incorporated in reliance upon
the report of each such firm given upon their authority as experts in accounting
and auditing.
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