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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 23, 1998
REGISTRATION STATEMENT NO. 333-51623
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
SUMMIT PROPERTIES INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
MARYLAND 56-1857807
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
</TABLE>
212 SOUTH TRYON STREET, SUITE 500
CHARLOTTE, NORTH CAROLINA 28281
(704) 334-9905
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------------
WILLIAM F. PAULSEN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SUMMIT PROPERTIES INC.
212 SOUTH TRYON STREET, SUITE 500
CHARLOTTE, NORTH CAROLINA 28281
(704) 334-9905
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
copy to:
DAVID W. WATSON, P.C.
GOODWIN, PROCTER & HOAR LLP
Exchange Place
Boston, Massachusetts 02109-2881
(617) 570-1000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: At any time
and from time to time after the effective date of this Registration Statement in
light of market conditions and other factors.
---------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=========================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SHARES AMOUNT TO BE AGGREGATE PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE(3)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per
share................................ 2,500,000 $19.3438 $48,359,375 $2,041
=========================================================================================================================
</TABLE>
(1) Plus such additional number of shares as may be required in the event of a
stock dividend, reverse stock split, split-up recapitalization or other
similar event. Pursuant to Rule 429 under the Securities Act of 1933, as
amended (the "Securities Act").
(2) This estimate is based on the average of the high and low sales prices on
the New York Stock Exchange of the Common Stock of Summit Properties Inc.
("Common Stock") on June 19, 1998, pursuant to Rule 457(c) under the
Securities Act, and is made solely for the purposes of determining the
registration fee.
(3) Pursuant to Rule 457(a) of the Securities Act, the Registration Fee of
$14,267 has been reduced by $12,226 which was previously paid by the
Registrant at the time of the initial filing of this Registration Statement.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
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DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
2,500,000 SHARES OF COMMON STOCK
SUMMIT PROPERTIES INC.
Summit Properties Inc., a Maryland corporation (the "Company"), hereby
offers participation in its Dividend Reinvestment and Stock Purchase Plan (the
"Plan"). The Plan is designed to provide both interested new investors as well
as existing shareholders of the Company's stock (including the Company's common
stock, par value $0.01 per share (the "Common Stock"), and other classes of
equity securities outstanding from time to time (collectively, the "Company
Stock")) with an economical and convenient method to purchase shares of Common
Stock under the stock purchase provision of the Plan (the "Stock Purchase
Program"). The Plan also permits shareholders to designate all, a portion or
none of the cash dividends on their newly purchased Common Stock and cash
dividends on their existing Company Stock for reinvestment in more shares of
Common Stock through the dividend reinvestment provisions of the Plan (the
"Dividend Reinvestment Program"). Some of the significant features of the Plan
are as follows:
- Participants (as defined in Questions 2 and 5) may purchase additional
shares of Common Stock at a 3% discount (subject to change) by
automatically reinvesting all or a portion of their cash dividends on
Company Stock in the Dividend Reinvestment Program. See Question 12.
- Participants may also purchase shares of Common Stock at a 3% discount
(subject to change) by making optional cash payments of $100 to $10,000
per month. See Question 17.
- Optional cash payments in excess of $10,000 may be made with the
permission of the Company. Such purchases may be priced at a discount
ranging from 0% to 5% as determined by the Company in its sole discretion
from time to time. See Question 17.
- Common Stock will be purchased by the Agent (as defined in Question 4)
directly from the Company or in open market or privately negotiated
transactions, as determined from time to time by the Company, to fulfill
requirements for the Plan. At present, the Company expects that shares
usually will be purchased directly from the Company.
- Holders of shares currently enrolled in the Company's previous Dividend
Reinvestment Plan will automatically be enrolled in this Plan.
Participation in the Plan is entirely voluntary, and participants may
terminate their participation at any time. Shareholders who do not choose
to participate in the Plan will continue to receive cash dividends, as
declared, in the usual manner. Participants may also request that any or
all of the shares held in their Plan account ("Plan Shares") be sold by
the Agent. See Question 27.
- Holders of Company Stock held in their own name ("Record Owners") may
participate directly. Holders of shares in bank, broker or other nominee
names (a "Beneficial Owner") may participate in the Plan by requesting
that the bank, broker or other nominee reinvest dividends and/or make
optional cash payments on the Beneficial Owner's behalf. Alternatively,
Beneficial Owners may ask their bank, broker or other nominee to transfer
the shares into the Beneficial Owner's own name and then participate
directly. See Questions 6 and 8.
The shares of Common Stock, both those outstanding and those offered
hereby, as well as other shares of Company Stock, are subject to repurchase by
the Company under certain conditions and are subject to certain restrictions on
ownership and transferability which prohibit any person (either alone or with
others as a group) from owning shares in excess of 9.8% (by number or value) (or
15% for certain investors that will be "looked through" under the Internal
Revenue Code of 1986, as amended (the "Code") for purposes of the foregoing
requirement) of any class or series the Company's outstanding capital stock,
subject to certain exceptions.
The Company will bear the costs relating to the registration of the Common
Stock being offered hereby, estimated to be approximately $50,000.
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 JUNE 23, 1998.
<PAGE> 3
AVAILABLE INFORMATION
The Company has 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 with respect to the Plan Shares. 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, 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 is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and 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 ("NYSE"),
and such materials can be inspected and copied at the NYSE, 20 Broad Street, New
York, New York 10005.
In accordance with Section 2-210 of the Maryland General Corporation Law,
as amended (the "MGCL"), the Board of Directors has authorized the issuance of
some or all of the shares of any or all of its classes or series of capital
stock without certificates. The Company has the authority to designate and issue
more than one class or series of capital stock having various preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption. In addition,
the Company's Articles of Incorporation impose limitations on the ownership and
transfer of the Company's capital stock. The Company will furnish a full
statement of the relative rights and preferences of each class or series of
capital stock of the Company which has been so designated and any restrictions
on the ownership or transfer of capital stock of the Company to any stockholder
upon request and without charge. Written requests for such copies should be
directed 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.
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, 1997, 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 May 29, 1998, 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, 1998, filed with the Commission pursuant to the Exchange Act,
including all amendments thereto (File No. 1-12792);
(d) 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); and
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(e) Annual Report of the Company's 1996 Non-Qualified Employee Stock
Purchase Plan on Form 11-K for the year ended December 31, 1997, filed with
the Commission pursuant to the Exchange Act.
All other documents filed with the Commission by the Company 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 Common Stock
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.
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<PAGE> 5
THE COMPANY
The Company is one of the largest developers and operators of luxury
apartment communities in the southeastern United States. The Company is a
self-administered and self-managed real estate investment trust (a "REIT"). The
Company's Common Stock is listed on the NYSE under the symbol "SMT."
The Company's business is conducted principally through Summit Properties
Partnership, L.P., a Delaware limited partnership (the "Operating Partnership"),
of which the Company is the sole general partner and, as of May 31, 1998, the
holder of approximately 85.2% of the outstanding units of limited partnership
interests ("Units") of the Operating Partnership. 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, and Summit Apartment Builders, Inc., a Florida
corporation.
The Company was organized as a REIT under the laws of the State of Maryland
on December 1, 1993 and later changed to corporate form on January 13, 1994. On
February 15, 1994, the Company completed its initial public offering of Common
Stock. The principal executive office of the Company is located at 212 South
Tryon Street, Suite 500, Charlotte, North Carolina 28281; telephone number (704)
334-9905.
Additional information regarding the Company, including the audited
financial statements of the Company and descriptions of the Company, is
contained in the documents incorporated by reference herein. See "Incorporation
of Certain Documents by Reference" above.
USE OF PROCEEDS
The Plan will raise additional capital for the Company to the extent that
shares of Common Stock issued hereunder are authorized but previously unissued
shares or treasury shares (rather than shares acquired in the open market). The
Company currently intends to issue such shares and, therefore, the Plan is
expected to raise capital for the Company. 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 in the Operating Partnership in exchange
for additional Units. The Operating Partnership intends to use the net proceeds
from the Company's sale of Common Stock 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.
SUMMARY OF PLAN
The Plan provides both current owners of Company Stock and interested new
investors with a convenient and attractive method of investing cash dividends
and optional cash payments of $100 to $10,000 per month in shares of Common
Stock at a discount from the Market Price (as defined in Question 12) and
without payment of any brokerage commission or service charge. In addition,
optional cash payments in excess of the $10,000 monthly limit may be invested in
shares at a discount from the Market Price in cases where the Company, at its
discretion, approves a Request for Waiver for such stock purchases (see below
and Question 17). Each of the discounts is subject to change from time to time
(but will not vary from the range of 0% to 5%) and is also subject to
discontinuance at the Company's discretion at any time based on a number of
factors, including current market conditions, the level of participation in the
Plan and the Company's current and projected capital needs. Except with respect
to the Waiver Discount (as defined in Question 17 and discussed below), the
Company will provide Participants with written notice of a change in the
applicable
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discount at least 30 days prior to the relevant Record Date (as defined in
Question 13), or prior to enrollment for new investors, via an appropriate press
release.
Optional cash payments of less than $100 and that portion of any optional
cash payment which exceeds the maximum monthly purchase limit of $10,000, unless
such upper limit has been waived, are subject to return to the Participant
without interest. For stock purchased with optional cash payments, Participants
may elect to have the certificates for such shares sent to them free of charge
or retained by the Agent for safekeeping, and additional certificates may be
sent to the Agent for safekeeping without payment of any fee. See Question 24.
Participants may also request that any or all shares held in the Plan be sold by
the Agent on behalf of such Participants for a nominal fee, any brokerage costs
and any applicable stock transfer taxes on the sale of such shares, all of which
will be deducted by the Agent and the balance sent to the Participant. See
Question 27.
Should the Company choose to allow purchases in excess of the $10,000
monthly limit, it will first designate a discount of 0% to 5% (the "Waiver
Discount") from the Market Price for the investment of optional cash payments
that exceed $10,000. Each month, at least five (5) business days prior to the
Optional Cash Payment Due Date, the Company will establish the Waiver Discount
and Threshold Price (each as defined in Question 17), applicable to all optional
cash payments that exceed $10,000 in that month, or may choose not to offer an
opportunity for such waivers for that month. Interested Participants may then
call (704) 371-7130 or (888) 762-9876 to receive notice of the designated Waiver
Discount and Threshold Price for that month, if any. The Participant must then
seek permission to exceed the normal $10,000 limit via submission of the Request
for Waiver form. If approved by the Company, full payment along with a copy of
the approved Request for Waiver form must be received by the Optional Cash
Payment Due Date. See Question 17 for further information about this aspect of
the Plan. The Waiver Discount and Threshold Price, which may vary each month,
will be established in the Company's sole discretion. With respect to optional
cash payments that exceed $10,000, for each Trading Day of the related Pricing
Period (each as defined in Question 12) on which the Threshold Price is not
satisfied, 1/10 of a Participant's optional cash payment will be returned
without interest. Optional cash payments that do not exceed $10,000 and the
reinvestment of dividends in additional shares of Common Stock will not be
subject to the Waiver Discount or Threshold Price, if any.
The Company expects to grant Requests for Waiver to financial
intermediaries, including brokers and dealers, and other Participants in the
future. Grants of Requests for Waiver will be made in the sole discretion of the
Company based on a variety of factors, which may include: the Company's current
and projected capital needs, the alternatives available to the Company to meet
those needs, prevailing market prices for Common Stock, general economic and
market conditions, expected aberrations in the price or trading volume of the
Common Stock, the potential disruption of the price of the Common Stock by a
financial intermediary, the number of shares of Company Stock held by the
Participant submitting the Request for Waiver, the past actions of a Participant
under the Plan, the aggregate amount of optional cash payments for which such
Requests for Waiver have been submitted and the administrative constraints
associated with granting such Requests for Waiver. If such Requests for Waiver
are granted, a portion of the shares available for issuance under the Plan may
be purchased by Participants (including brokers or dealers) who, in connection
with any resales of such shares, could be deemed to be underwriters within the
meaning of the Securities Act. To the extent that Requests for Waiver are
granted it is expected that a greater number of shares will be issued under the
Stock Purchase Program of the Plan as opposed to the Dividend Reinvestment
Program of the Plan. Subject to the availability of shares of Common Stock
registered for issuance under the Plan, there is no pre-established maximum
limit on the number of shares that may be purchased pursuant to approved
Requests for Waiver.
Financial intermediaries may purchase a significant portion of the shares
of Common Stock issued pursuant to the Stock Purchase Program of the Plan. The
Company does not have any formal or informal understanding with any such
organizations and, therefore, the extent of such financial intermediaries'
participation under the Plan cannot be estimated at this time. Participants that
are financial intermediaries that acquire shares of Common Stock under the Plan
with a view to distribution of such shares or that offer or
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sell shares for the Company in connection with the Plan may be deemed to be
underwriters within the meaning of the Securities Act.
From time to time, financial intermediaries, including brokers and dealers,
may engage in positioning transactions in order to benefit from the discount
from the Market Price of the shares of Common Stock acquired through the
reinvestment of dividends or optional cash payments under the Plan. Such
transactions may cause fluctuations in the trading volume of the Common Stock.
Financial intermediaries that engage in positioning transactions may be deemed
to be underwriters within the meaning of the Securities Act. The Plan is
intended for the benefit of investors in the Company and not for individuals who
engage in transactions which may cause aberrations in the price or trading
volume of the Common Stock.
THE PLAN
The Company's prior Dividend Reinvestment and Stock Purchase Plan was
adopted by the Board of Directors on September 8, 1997 and became effective on
November 4, 1997. On March 9, 1998, the Board of Directors voted to increase the
number of shares of Common Stock available for sale by the Company under a
Dividend Reinvestment and Stock Purchase Plan and to replace the prior plan with
the Plan as set forth below. This Plan provides for the investment of cash
dividends and sales of shares of Common Stock on substantially the same terms
and conditions as the prior plan. The following questions and answers explain
and constitute the Plan. Shareholders who do not participate in the Plan will
receive cash dividends, as declared and paid in the usual manner.
PURPOSE
1. WHAT IS THE PURPOSE OF THE PLAN?
The primary purpose of the Plan is to provide both current shareholders of
the Company Stock and interested new investors with an economical and convenient
method of increasing their investment in the Company. Current shareholders are
permitted to invest cash dividends in additional shares of Common Stock without
payment of any brokerage commission or service charge and at a discount from the
Market Price (as defined in Question 12). Current shareholders as well as new
investors may also invest optional cash payments in shares of Common Stock at a
discount from the Market Price and without payment of any brokerage commission
or service charge. See Questions 5 and 6 for a description of the shareholders
who are eligible to participate in the Plan and methods for Beneficial Owners
and current non-shareholders to become eligible to participate. To the extent
shares are purchased from the Company under the Plan, the Company will receive
additional funds for use as described above under "Use of Proceeds."
The Plan may also be used by the Company to raise additional capital
through the sale each month of a portion of the shares available for issuance
under the Plan to purchasers of shares (including brokers or dealers) who, in
connection with any resales of such shares, may be deemed to be underwriters.
These sales will be effected through the Company's ability to waive limitations
applicable to the amounts which Participants may invest pursuant to the Stock
Purchase Program (see Question 17 for information concerning limitations
applicable to optional cash payments and certain of the factors considered by
the Company in granting waivers).
However, the Plan is primarily intended for the benefit of long-term
investors, and not for the benefit of individuals or institutions who engage in
short-term trading activities that could cause aberrations in the composite
trading volume of the Company's Common Stock. From time to time, financial
intermediaries may engage in positioning transactions in order to benefit from
the discount from the Market Price of the shares of Common Stock acquired
through the reinvestment of dividends and optional cash payments under the Plan.
Such transactions may cause fluctuations in the trading volume of the Common
Stock. The Company reserves the right to modify, suspend or terminate
participation in the Plan by otherwise eligible holders of Common Stock in order
to eliminate practices which are not consistent with the purposes of the Plan.
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OPTIONS AVAILABLE TO PARTICIPANTS
2. WHAT OPTIONS ARE AVAILABLE TO ENROLLED PARTICIPANTS?
Dividend Reinvestment Program. Holders of Company Stock who wish to
participate in the Plan, whether Record Owners, Beneficial Owners or interested
new investors who make an initial investment through the Stock Purchase Program
described below (each a "Participant"; see also Question 5 regarding the
definition of a "Participant") may elect to have all, a portion or none of their
cash dividends paid on their shares of Company Stock automatically reinvested in
additional shares of Common Stock through the Dividend Reinvestment Program.
Cash dividends are paid on Company Stock when and as declared by the Company's
Board of Directors, generally on a quarterly basis. See "Dividends." Subject to
the availability of shares of Common Stock registered for issuance under the
Plan, there is no limitation on the amount of dividends a Participant may
reinvest under the Dividend Reinvestment Program.
Stock Purchase Program. Each month, Participants may also elect to invest
optional cash payments in shares of Common Stock, subject to a minimum monthly
purchase limit of $100 and a maximum monthly purchase limit of $10,000. The
maximum limit is subject to waiver at the Company's discretion. See Question 17.
Participants may make optional cash payments each month even if dividends on
their shares of Common Stock are not being reinvested and whether or not a
dividend has been declared. Participants are not required to enroll any shares
of Common Stock purchased through the Stock Purchase Program into the Dividend
Reinvestment Program but may designate all or a portion of such shares for such
participation on the Authorization Form if desired.
ADVANTAGES AND DISADVANTAGES
3. WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF THE PLAN?
ADVANTAGES
(a) The Plan provides Participants with the opportunity to reinvest cash
dividends paid on all or a portion of their shares of Company Stock in
additional shares of Common Stock without payment of any brokerage commissions
or service charge and at a discount, which is currently 5% and is subject to
change by the Company. See Question 12. The Company will provide Participants
with written notice of any change in the applicable discount at least 30 days
prior to the relevant Record Date (as defined in Question 13) via an appropriate
press release. See Question 12.
(b) The Plan provides Participants with the opportunity to make monthly
investments of optional cash payments, subject to minimum and maximum amounts,
for the purchase of shares of Common Stock at a 3% discount from the Market
Price (subject to change upon advance notice to Participants) and without
payment of any brokerage commission or service charge. The Participant may
designate all, a portion or none of such purchased shares to be enrolled in the
Dividend Reinvestment Program.
(c) All cash dividends paid on Participants' Plan Shares enrolled in the
Dividend Reinvestment Program can be fully invested in additional shares of
Common Stock because the Plan permits fractional shares to be credited to Plan
accounts. Dividends on such fractional shares, as well as on whole shares, will
also be reinvested in additional shares which will be credited to Participants'
Plan accounts.
(d) The Agent, at no charge and at the election of Participants, either
sends certificates to Participants for optional shares purchased or provides for
the safekeeping of stock certificates for shares credited to each Plan account.
(e) A Participant may also elect to deposit with the Agent certificates for
the stockholder's other shares of Company Stock registered in his or her name
for safekeeping without charge. Because the Participant bears the risk of loss
in sending certificates to the Agent, certificates should be sent by registered
mail, return receipt requested and properly insured, to the address specified in
Question 35 below. If certificates are later issued either upon request of the
Participant or upon termination of participation, new certificates will be
issued.
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(f) Periodic statements reflecting all current activity, including
purchases of Plan Shares and the most recent Plan account balance, simplify
Participants' record keeping. See Question 22 for information concerning reports
to Participants.
DISADVANTAGES
(a) No interest will be paid by the Company or the Agent on dividends or
optional cash payments held pending reinvestment or investment. See Question 11.
In addition, optional cash payments of less than $100 and that portion of any
optional cash payment which exceeds the maximum monthly purchase limit of
$10,000, unless such upper limit has been waived, are subject to return to the
Participant without interest. Moreover, purchases above the $10,000 limit that
have been granted a waiver may also be subject to return to the Participant
without interest in the event that the Threshold Price, if any, is not met for
any Trading Day during the related Pricing Period. See Question 17.
(b) With respect to shares acquired from the Company, the actual number of
shares to be issued to the Participant or the Participant's Plan account will
not be determined until after the end of the relevant Pricing Period. Therefore,
during the Pricing Period, Participants will not know the actual price per share
or number of shares they have purchased.
(c) With respect to shares acquired from the Company, while the Plan
currently provides for a discount for reinvested dividends and optional cash
payments, the Participant's purchase price, as so discounted, may exceed the
price at which shares of the Common Stock are trading on the Investment Date (as
defined in Questions 11 and 18) when the shares are issued or thereafter. The
trading price on the Investment Date generally governs the amount of taxable
income to shareholders. See Question 40.
(d) Because optional cash payments must be received by the Agent by the
Optional Cash Payment Due Date, such payments may be exposed to changes in
market conditions for a longer period of time than in the case of typical
secondary market transactions. See Questions 11 and 18 through 20 for detailed
information.
(e) Resales of shares of Common Stock credited to a Participant's Plan
account will involve a nominal fee per transaction to be deducted from the
proceeds of the sale by the Agent (if such resale is made by the Agent at the
request of a Participant), plus any brokerage commission and any applicable
stock transfer taxes on the resales. See Questions 21 and 27.
(f) Shares of Common Stock deposited in the Participant's Plan account
cannot be pledged until such shares are withdrawn from the Plan. See Question
38.
ADMINISTRATION
4. WHO ADMINISTERS THE PLAN?
The Company has retained First Union National Bank, as plan administrator
(the "Agent"), to administer the Plan, keep records, send statements of account
activity to each Participant and perform other duties relating to the Plan. See
Question 22 for information concerning reports to Participants. Certificates for
shares of Common Stock purchased pursuant to the Stock Purchase Program but not
designated for investment in the Dividend Reinvestment Program will be sent to
the Participant or held by the Agent, at the Participant's discretion, free of
charge. Plan Shares designated for investment in the Dividend Reinvestment
Program will be held by the Agent and registered in the Agent's name (or its
nominee) as agent for each Participant in the Plan. As record holder for the
Plan Shares, the Agent will receive dividends on all Plan Shares held on the
dividend Record Date, will credit such dividends to Participants' Plan accounts
on the basis of whole or fractional Plan Shares held in such accounts, and will
automatically reinvest such dividends in additional shares of Common Stock
according to the portion of the Participants' shares of Company Stock designated
to participate in the Dividend Reinvestment Program. Any remaining portion of
cash dividends not designated for reinvestment will be sent to the Participant.
See Question 9. If the Agent resigns or otherwise ceases to act as plan
administrator, the Company will appoint a new plan administrator to administer
the Plan.
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The Agent also acts as dividend disbursing agent, transfer agent and
registrar for the Company's Common Stock.
PARTICIPATION
For purposes of this section, responses are generally directed (a) to
existing shareholders, according to the method by which their shares are held,
or (b) to investors who are not currently shareholders but would like to make an
initial purchase of Common Stock to become a Participant. Existing shareholders
are either Record Owners or Beneficial Owners. A Record Owner is a shareholder
who owns shares of Company Stock in his or her own name. A Beneficial Owner is a
shareholder who beneficially owns shares of Company Stock that are registered in
a name other than his or her own name (for example, the shares are held in the
name of a bank, broker or other nominee). A RECORD OWNER MAY PARTICIPATE
DIRECTLY IN THE PLAN, WHEREAS A BENEFICIAL OWNER WILL EITHER HAVE TO BECOME A
RECORD OWNER BY HAVING ONE OR MORE SHARES TRANSFERRED INTO HIS OR HER OWN NAME
OR COORDINATE HIS OR HER PARTICIPATION IN THE PLAN THROUGH THE BANK, BROKER OR
OTHER NOMINEE IN WHOSE NAME THE BENEFICIAL OWNER'S SHARES ARE HELD. For more
detailed information and instructions, see Questions 5 and 6.
5. WHO IS ELIGIBLE TO PARTICIPATE?
Record Owners. All Record Owners of Company Stock are eligible to
participate directly in the Plan.
Beneficial Owners. In order to participate directly in the Dividend
Reinvestment Program of the Plan, a Beneficial Owner must become a Record Owner
by having one or more shares transferred into his or her own name from that of
the applicable bank, broker or other nominee. Alternatively, a Beneficial Owner
may seek to arrange with the bank, broker or other nominee who is the Record
Owner to participate on the Beneficial Owner's behalf.
Non-shareholders. Individuals who do not presently own any Company Stock
(as either a Record Owner or Beneficial Owner) may participate in the Plan by
making an initial purchase of Common Stock through the Stock Purchase Program.
Common Stock may not be available under the Plan in all states. This
Prospectus does not constitute an offer to sell, or a solicitation of an offer
to buy, any Common Stock or other securities in any state or any other
jurisdiction to any person to whom it is unlawful to make such offer in such
jurisdiction.
In order for the Company to maintain its qualification as a REIT, not more
than 50% in value of any class or series the Company's outstanding capital stock
may be owned, directly or indirectly, by five or fewer individuals (as defined
in the Code). The Company may terminate, by written notice, at any time any
Participant's individual participation in the Plan if such participation would
be in violation of the restrictions contained in the Articles of Incorporation
or Bylaws of the Company. Such restrictions prohibit any stockholder, directly
or indirectly, from beneficially owning 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 any class or series the Company's
outstanding capital stock. Any attempted transfer or acquisition of capital
stock that would create a direct or indirect ownership of capital stock in
excess of this limit or otherwise result in disqualification of the Company as a
REIT will be null and void. The Company's Articles of Incorporation provide that
capital stock subject to this limitation is subject to various rights of the
Company to enforce this limitation, including conversion of the shares into
nonvoting stock and transfer to a trust. The above summary of the ownership
limitation is qualified in its entirety by reference to the Company's Articles
of Incorporation, as amended from time to time. The Company reserves the right
to invalidate any purchases made under the Plan that, in the Company's sole
discretion, may violate the 9.8% ownership limit. Any grant of a Request for
Waiver, as more fully described in Question 17, shall not be deemed to be a
waiver of such ownership limits.
6. HOW DOES AN ELIGIBLE PERSON PARTICIPATE?
Record Owners may join the Plan by completing and signing an Authorization
Form and returning it to the Agent. Authorization Forms may be obtained at any
time by written request to First Union National Bank,
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1525 West W. T. Harris Boulevard, Charlotte, NC, 28288-1153 Attn: Shareholder
Relations or by telephoning the Agent at (800) 829-8432. Additionally, holders
of shares currently enrolled in the Company's prior Dividend Reinvestment Plan
will automatically be enrolled in this Plan.
Beneficial Owners who wish to join the Plan must instruct their bank,
broker or other nominee to arrange participation in the Plan on the Beneficial
Owner's behalf. The bank, broker or other nominee should then make arrangements
with its securities depository and the securities depository will provide the
Agent with the information necessary to allow the Beneficial Owner to
participate in the Plan. Should the Beneficial Owner wish to participate in the
Stock Purchase Program, a Broker and Nominee Form ("B&N Form") must also be sent
to the Agent for the bank, broker or other nominee to participate in the Stock
Purchase Program on behalf of the Beneficial Owner. See Question 8. To
facilitate participation by Beneficial Owners, the Company has made arrangements
with the Agent to reinvest dividends and accept optional cash payments under the
Stock Purchase Program by Record Owners such as brokers, banks and other
nominees, on behalf of Beneficial Owners. Interested Beneficial Owners are
cautioned to insure that the broker, bank or other nominee passes along the
proceeds of any applicable discount to the beneficiary's account.
Alternatively, a Beneficial Owner may simply request that the number of
shares the Beneficial Owner wishes to be enrolled in the Plan be reregistered by
the bank, broker or other nominee in the Beneficial Owner's own name as Record
Owner in order to directly participate in the Plan.
Non-shareholders may join the Plan as a Record Owner by making an initial
investment in an amount of at least $100 up to $10,000 (unless the maximum limit
is specifically waived by the Company, as discussed in Question 17). The
non-shareholder should mark the box on the Authorization Form indicating that it
is a non-shareholder wishing to become a Participant and should designate the
amount of the initial purchase of Common Stock. At the same time, the new
Participant may designate all, a portion or none of the purchased shares to be
enrolled in the Dividend Reinvestment Program. The Authorization Form should be
returned to the Agent, with payment, on or before the applicable dates discussed
below.
ANY PARTICIPANT WHO RETURNS A PROPERLY EXECUTED AUTHORIZATION FORM TO THE
AGENT WITHOUT SPECIFYING THE NUMBER OF SHARES TO BE INCLUDED IN THE DIVIDEND
REINVESTMENT PROGRAM WILL BE ENROLLED AS HAVING SELECTED THE FULL DIVIDEND
REINVESTMENT OPTION DESCRIBED BELOW. See Question 7 for other investment option
information.
If an Authorization Form requesting reinvestment of dividends is received
by the Agent at least five (5) business days before the Record Date established
for a particular dividend, reinvestment will commence with that dividend. If an
Authorization Form is received less than five (5) business days before the
Record Date established for a particular dividend, the reinvestment of dividends
will begin on the dividend payment date following the next Record Date if such
stockholder or the participating bank, broker or other nominee is still a holder
of record. Additionally, for Participants wishing to make optional cash payments
to purchase shares under the Stock Purchase Program, full payment must be
received by the Agent by the Optional Cash Payment Due Date. In the case of
current non-shareholders making an initial investment to become Participants,
both the Authorization Form and full payment of their designated initial
investment must be received by the Optional Cash Payment Due Date. See also
Questions 7 and 8.
7. WHAT DOES THE AUTHORIZATION FORM PROVIDE?
The Authorization Form appoints the Agent as agent for the Participant and
directs the Company to pay to the Agent the Participant's cash dividends on the
Company Stock owned by the Participant on the applicable Record Date and
enrolled in the Dividend Reinvestment Program, and thereafter including all
whole and fractional shares of Common Stock credited to the Participant's Plan
account as they are added with each reinvestment or optional cash purchase
designated for reinvestment. Such cash dividends with respect to shares enrolled
in the Dividend Reinvestment Program will be automatically reinvested by the
Agent in shares of Common Stock. Any remaining cash dividends not enrolled in
the Dividend Reinvestment Program will be paid directly to the Participant.
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Additionally, the Authorization Form directs the Agent to purchase Common
Stock with a Participant's optional cash payments, if any, and whether to enroll
all, a portion or none of such purchased shares in the Dividend Reinvestment
Program. See Question 8 for a discussion of the B&N Form which is required to be
used for optional cash payments of a Beneficial Owner whose bank, broker or
other nominee holds the Beneficial Owner's shares in the name of a major
securities depository.
The Authorization Form provides for the purchase of initial or additional
shares of Common Stock through the following investment options:
(1) If "Full Dividend Reinvestment" is elected, the Agent will apply
all cash dividends on all shares of Company Stock then or subsequently
registered in the Participant's name, and all cash dividends on all Plan
Shares (except as otherwise directed under (3) below), together with any
optional cash payments, toward the purchase of additional Plan Shares.
(2) If "Partial Dividend Reinvestment" is elected, the Agent will
apply all cash dividends on only the number shares of Company Stock then or
subsequently registered in the Participant's name and specified on the
Authorization Form and all cash dividends on all Plan Shares (except as
otherwise directed under (3) below), together with any optional cash
payments, toward the purchase of additional Plan Shares.
(3) If "Optional Cash Payments" is elected, the Agent will apply any
optional cash payments made by the Participant to the purchase of
additional shares of Common Stock in accordance with the Plan and will
apply dividends on such additional Plan Shares as directed. UNLESS THE
PARTICIPANT DESIGNATES ALL, A PORTION OR NONE OF SUCH NEW PLAN SHARES FOR
ENROLLMENT IN THE DIVIDEND REINVESTMENT PROGRAM, THE PARTICIPANT WILL BE
ENROLLED AS HAVING SELECTED THE FULL DIVIDEND REINVESTMENT OPTION.
Each Participant may select any one of the options desired, and the
designated options will remain in effect until a Participant specifies otherwise
by indicating a different option on a new Authorization Form, by withdrawing
some or all shares from the Plan in favor of receiving cash dividends or in
order to sell the Participant's Common Stock (see Questions 26 and 27), or until
the Plan is terminated.
Participants may change their investment options at any time by requesting
a new Authorization Form and returning it to the Agent at the address set forth
in Question 35. Any Authorization Form which is returned to the Agent to change
a Participant's investment options will be effective in accordance with the
schedule described in the last paragraph of Question 6.
ANY PARTICIPANT WHO RETURNS A PROPERLY EXECUTED AUTHORIZATION FORM TO THE
AGENT WITHOUT ELECTING AN INVESTMENT OPTION WILL BE ENROLLED AS HAVING SELECTED
THE FULL DIVIDEND REINVESTMENT OPTION.
8. WHAT DOES THE B&N FORM PROVIDE?
The B&N Form provides the only means other than redesignation of the stock
in the Beneficial Owner's own name, by which a bank, broker or other nominee
holding shares of a Beneficial Owner in the name of a major securities
depository may invest optional cash payments on behalf of such Beneficial Owner.
A B&N FORM MUST BE DELIVERED TO THE AGENT EACH TIME THAT SUCH BANK, BROKER OR
OTHER NOMINEE TRANSMITS OPTIONAL CASH PAYMENTS ON BEHALF OF A BENEFICIAL OWNER.
Forms will be furnished at any time upon request to the Agent at the address or
telephone number specified in Question 35.
Prior to submitting the B&N Form, the bank, broker or other nominee for a
Beneficial Owner must make arrangements with its securities depository and the
Agent in order to participate on behalf of the Beneficial Owner. See Questions 5
and 6.
THE B&N FORM AND APPROPRIATE INSTRUCTIONS MUST BE RECEIVED BY THE AGENT NOT
LATER THAN FIVE (5) BUSINESS DAYS BEFORE THE APPLICABLE OPTIONAL CASH PAYMENT
DUE DATE OR THE PAYMENT WILL NOT BE INVESTED UNTIL THE FOLLOWING INVESTMENT
DATE.
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9. IS PARTIAL PARTICIPATION POSSIBLE UNDER THE PLAN?
Yes. New investors, Record Owners or the bank, broker or other nominee for
Beneficial Owners may designate any desired number of their shares for which
dividends are to be reinvested. Dividends will thereafter be reinvested only on
the number of shares specified, and the Participant will continue to receive
cash dividends on the remainder of the shares.
10. WHEN MAY AN ELIGIBLE SHAREHOLDER JOIN THE PLAN?
A Record Owner may join the Plan at any time. A non-shareholder may join
the Plan by making an initial investment of $100 to $10,000 (or more by
permission of the Company) when returning the Authorization Form. See Question
7. Once in the Plan, a Participant remains in the Plan until he or she withdraws
from the Plan, the Company terminates his or her participation in the Plan or
the Company terminates the Plan. See Question 27 regarding withdrawal from the
Plan.
11. WHAT ARE INVESTMENT DATES AND WHEN WILL DIVIDENDS OR OTHER MONEY BE
INVESTED?
Shares purchased under the Plan will be purchased on the "Investment Date"
in each month. The Investment Date with respect to the Common Stock acquired
pursuant to dividend reinvestments will be (i) if acquired directly from the
Company, the quarterly dividend payment date declared by the Board of Directors
or (ii) in the case of open market purchases, the date or dates of actual
investment, but no later than ten (10) business days following the dividend
payment date. See Question 18 for detailed information concerning Investment
Dates for optional cash payments under the Stock Purchase Program.
When open market purchases are made by the Agent, such purchases may be
made on any securities exchange where shares of Common Stock are traded, in the
over-the-counter market or by negotiated transactions, and may be subject to
such terms with respect to price, delivery and other matters as agreed to by the
Agent. Neither the Company nor any Participant shall have any authorization or
power to direct the time or price at which shares will be purchased or the
selection of the broker or dealer through or from whom purchases are to be made
by the Agent. However, when open market purchases are made by the Agent, the
Agent shall use its best efforts to purchase the shares at the lowest possible
price.
Shares will be allocated and credited to Participants' Plan accounts on the
appropriate Investment Date.
NO INTEREST WILL BE PAID ON CASH DIVIDENDS PENDING
INVESTMENT OR REINVESTMENT UNDER THE TERMS OF THE PLAN.
PURCHASES AND PRICES OF SHARES
12. WHAT WILL BE THE PRICE TO PARTICIPANTS OF SHARES PURCHASED UNDER THE PLAN?
With respect to reinvested dividends and optional cash payments that do not
exceed $10,000 (see Question 17 for a discussion of the discount applicable to
optional cash payments in excess of $10,000), unless share are purchased on the
open market, shares will be purchased directly from the Company for the Plan at
a discount from the Market Price (as defined below) established by the Company
from time to time, currently 3% for both reinvested dividends and optional cash
payments. If shares are purchased on the open market for the Plan, Participants
will receive a discount from the Market Price, established by the Company from
time to time, currently 3% for both reinvested dividends and optional cash
payments, after including the amount of any brokerage commissions paid by the
Company. In the case of open market purchases, in no event will the aggregate
amount of (i) any applicable brokerage commissions as described in Question 21
below plus (ii) any discount from the Market Price exceed the lesser of 5% of
the fair market value of the Common Stock (a) at the time of purchase or (b) on
the Investment Date. In the case of purchases from the Company, in no event will
the discount from the Market Price exceed 5% of the fair market value of the
Common Stock on the Investment Date.
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Each of the discounts is subject to change from time to time (but will not
vary from the range of 0% to 5%) and is also subject to discontinuance at the
Company's discretion at any time based on a number of factors, including current
market conditions, the level of participation in the Plan and the Company's
current and projected capital needs. Except with respect to the Waiver Discount,
the Company will provide Participants with written notice of a change in the
applicable discount at least 30 days prior to the relevant Record Date, or prior
to enrollment for new investors, via an appropriate press release.
The "Market Price," in the case of shares purchased directly from the
Company, will be the average of the daily high and low sales prices, computed to
three decimal places, of the Common Stock on the NYSE or other applicable
securities exchange, as reported in the Wall Street Journal, during the "Pricing
Period" (i.e., the ten (10) days on which the NYSE is open and for which trades
in the Company's Common Stock are reported (each a "Trading Day") immediately
preceding the relevant Investment Date, or, if no trading occurs in the Common
Stock on one or more of such days, for the 10 days immediately preceding the
Investment Date for which trades are reported). In the case of shares purchased
on the open market, the "Market Price" will be the weighted average of the
actual prices paid, computed to three decimal places, for all of the Common
Stock purchased by the Agent with all Participants' reinvested dividends and
optional cash payments for the related month.
Neither the Company nor any Participant shall have any authorization or
power to direct the time or price at which shares will be purchased or the
selection of the broker or dealer through or from whom purchases are to be made
by the Agent. However, when open market purchases are made by the Agent, the
Agent shall use its best efforts to purchase the shares at the lowest possible
price.
13. WHAT ARE THE RECORD DATES FOR DIVIDEND REINVESTMENT?
For the reinvestment of dividends, the "Record Date" is the record date
declared by the Company's Board of Directors for such dividend. Likewise, the
dividend payment date declared by the Board of Directors constitutes the
Investment Date. See Question 11 for further details about Investment Dates.
Please refer to Questions 11, 18 and 19 for a discussion of the Investment Dates
and Optional Cash Payment Due Dates applicable to optional cash payments.
14. HOW WILL THE NUMBER OF SHARES PURCHASED FOR A PARTICIPANT BE DETERMINED?
A Participant's account in the Plan will be credited with the number of
shares, including fractions computed to three decimal places, equal to the total
amount to be invested on behalf of such Participant divided by the applicable
discounted Market Price (i.e., the Market Price per share as calculated pursuant
to the methods described in Question 12, as applicable, minus the relevant
discount). The total amount to be invested will depend on the amount of any
dividends paid on the number of shares owned by the Participant and designated
for reinvestment, plus dividends on the Plan Shares in such Participant's Plan
account designated for reinvestment and the amount of any optional cash payments
made by such Participant and available for investment on the related Investment
Date. Subject to the availability of shares of Common Stock registered for
issuance under the Plan, there is no total maximum number of shares available
for issuance pursuant to the reinvestment of dividends.
15. WHAT IS THE SOURCE OF COMMON STOCK PURCHASED UNDER THE PLAN?
Plan Shares will be purchased either directly from the Company or on the
open market, or by a combination of the foregoing, at the option of the Company,
after a review of current market conditions and the Company's current and
projected capital needs. The Company will determine the source of the Common
Stock to be purchased under the Plan. Neither the Company nor the Agent shall be
required to provide any written notice to Participants as to the source of the
Common Stock to be purchased under the Plan, but current information regarding
the source of the Common Stock may be obtained by contacting the General Counsel
of the Company at (704) 334-9905.
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16. HOW DOES THE STOCK PURCHASE PROGRAM WORK?
All current Record Owners and non-shareholders who have timely submitted
signed Authorization Forms indicating their intention to participate in this
program of the Plan, and Beneficial Owners whose brokers, banks or other
nominees have timely indicated their intention to participate in this program
(except for Beneficial Owners whose brokers, banks or other nominees hold the
shares of the Beneficial Owners in the name of a major securities depository),
are eligible to make optional cash payments during any month, whether or not a
dividend is declared. If a bank, broker or other nominee holds shares of a
Beneficial Owner in the name of a major securities depository, optional cash
payments must be made through the use of the B&N Form. See Question 8. Optional
cash payments must be accompanied by an Authorization Form or a B&N Form, as
applicable. Each month the Agent will apply any optional cash payment received
from a Participant no later than the Optional Cash Payment Due Date to the
purchase of additional shares of Common Stock for the account of the Participant
on the following Investment Date (as defined in Questions 11 and 18) and will
enroll all, a portion or none of such shares in the Dividend Reinvestment
Program as so directed by the Participant on the Authorization Form.
The discount from the Market Price applicable to optional cash payments up
to the monthly limit of $10,000 will be 3% (subject to change) of the Market
Price (as defined in Question 12). For optional cash payments in excess of
$10,000, the discount will be established each month (between 0% and 5%) by the
Company. Refer to Question 17 for a discussion of the possible limitations
applicable to the purchase of shares made with optional cash payments.
17. WHAT LIMITATIONS APPLY TO OPTIONAL CASH PAYMENTS?
Minimum/Maximum Limits. For any Investment Date, each optional cash
payment is subject to a minimum of $100 and a maximum of $10,000. See Question
18 regarding the determination of Investment Dates for optional cash payments.
For purposes of these limitations, all Plan accounts under common control,
management or representation by a bank, broker or other nominee on a single B&N
Form will be aggregated. Optional cash payments of less than $100 and that
portion of any optional cash payment which exceeds the maximum monthly purchase
limit of $10,000, unless such maximum limit has been waived by the Company, will
be returned to the Participant without interest at the end of the relevant
Pricing Period.
Threshold Price. The Company may establish for any Pricing Period a
minimum price (the "Threshold Price") applicable to optional cash payments made
pursuant to Requests for Waiver. If established for any Pricing Period, the
Threshold Price will be stated as a dollar amount that the average of the high
and low sales price of the Common Stock on the NYSE, or other applicable
securities exchange, for each day of the applicable Pricing Period must equal or
exceed. In the event that the Threshold Price is not satisfied for a Trading Day
in the Pricing Period, then that day and the trading prices for that day will be
excluded from that Pricing Period. Thus, for example, if the Threshold Price is
not satisfied for 3 of the 10 days in a Pricing Period, then the average sales
price for purchases and the optional cash payments which may be invested will be
based on the remaining 7 days when the Threshold Price is satisfied. For each
day during the Pricing Period for which the Threshold Price is not satisfied,
1/10 of each optional cash payment made pursuant to a Request for Waiver will be
returned to such Participant by check, without interest, as soon as practicable
after the applicable Investment Date.
The establishment of a Threshold Price and the possible return of a portion
of the investment applies only to optional cash payments made pursuant to a
Request for Waiver. Setting a Threshold Price for a Pricing Period shall not
affect the setting of a Threshold Price for any subsequent Pricing Period.
Neither the Company nor the Agent shall be required to provide any written
notice to Participants as to the Threshold Price for any Pricing Period.
Waiver Discount. Each month the Company may establish a discount from the
Market Price applicable only to optional cash payments made pursuant to a
Request for Waiver. Such discount (the "Waiver Discount") may be between 0% and
5% of the purchase price and may vary each month, but once established will
uniformly apply to all optional cash payments made pursuant to an approved
Request for Waiver for that month. Setting a Waiver Discount for a particular
month shall not affect the setting of a Waiver Discount for
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any subsequent month. The Waiver Discount will apply to the entire optional cash
payment and not just the portion that exceeds $10,000.
The establishment of a Waiver Discount applies only to optional cash
payments made pursuant to a Request for Waiver. All other optional cash payments
will be made at a 3% discount from the Market Price (subject to change) without
regard to any Waiver Discount.
Request for Waiver. Optional cash payments in excess of $10,000 per month
may be made only pursuant to a Request for Waiver approved by the Company.
Participants who wish to submit an optional cash payment in excess of $10,000
for any Investment Date must obtain the prior written approval of the Company,
and a copy of such written approval must accompany any such optional cash
payment. In order to receive a Request for Waiver Form, Participants should
request the form from the Company via facsimile at (704) 333-8340. At least five
(5) business days prior to the applicable Optional Cash Payment Due Date for an
Investment Date, the Company will determine whether to establish a Threshold
Price and/or a Waiver Discount. This determination will be made by the Company
in its discretion after a review of such considerations as transaction costs,
current market conditions, the level of participation in the Plan, and current
and projected capital needs. Participants may ascertain whether a Threshold
Price has been set or waived, and obtain the Waiver Discount, for the given
Pricing Period by telephoning the Company at (704) 371-7130 or (888) 762-9876 to
hear a pre-recorded message. A Request for Waiver must then be received by the
Company via U.S. mail or facsimile at (704) 333-8340 for that month at least two
(2) business days before the Optional Cash Payment Due Date. The Company will
then notify the Participant if the Request for Waiver has been approved no later
than one business day prior to the Optional Cash Payment Due Date. Please refer
to Question 19 for further procedural details with respect to submitting timely
payments and the allowable period within which bank clearance must be achieved.
THE COMPANY HAS SOLE DISCRETION WHETHER TO GRANT ANY APPROVAL FOR OPTIONAL
CASH PAYMENTS IN EXCESS OF THE ALLOWABLE MAXIMUM AMOUNT. In deciding whether to
approve a Request for Waiver, the Company will consider a variety of relevant
factors including, but not limited to, transaction costs, whether the Plan is
then acquiring newly issued shares directly from the Company or acquiring shares
in the open market, the Company's need for additional funds, the attractiveness
of obtaining such additional funds through the sale of Common Stock as compared
to other sources of funds, the purchase price likely to apply to any sale of
Common Stock, the Participant submitting the request, the extent and nature of
such Participant's prior participation in the Plan, the number of shares of
Common Stock held of record by such Participant and the aggregate amount of
optional cash payments in excess of $10,000 for which Requests for Waiver have
been submitted by all Participants. If Requests for Waiver are submitted for any
Investment Date for an aggregate amount in excess of the amount the Company is
then willing to accept, the Company may honor such requests in order of receipt,
pro rata or by any other method that the Company determines to be appropriate.
There is no pre-established maximum limit applicable to optional cash payments
that may be made pursuant to approved Requests for Waiver.
18. WHAT ARE THE DUE DATES AND INVESTMENT DATES FOR OPTIONAL CASH PAYMENTS?
Optional cash payments will be invested every month on the related
Investment Date. The "Optional Cash Payment Due Date" is one business day prior
to the commencement of the related Pricing Period and the "Investment Date" is
on or about the first day of each month or, in the case of open market
purchases, no later than the last business day of each month.
Optional cash payments received by the Agent by the Optional Cash Payment
Due Date will be applied to the purchase of shares of Common Stock on the
Investment Date which relates to that Pricing Period. No interest will be paid
by the Company or the Agent on optional cash payments held pending investment.
Generally, optional cash payments received after the Optional Cash Payment Due
Date will be returned to Participants without interest at the end of the Pricing
Period; such optional cash payments may be resubmitted by a Participant prior to
the commencement of the next or a later Pricing Period as to which the Company
is entertaining Requests for Waiver.
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19. WHEN MUST OPTIONAL CASH PAYMENTS BE RECEIVED BY THE AGENT?
Each month the Agent will apply an optional cash payment for which good
funds are timely received to the purchase of shares of Common Stock for the
account of the Participant on the next Investment Date. See Question 18. In
order for funds to be invested on the next Investment Date, the Agent must have
received a check, money order or wire transfer by the Optional Cash Payment Due
Date and such check, money order or wire transfer must have cleared before the
related Investment Date. Wire transfers may be used only if approved verbally in
advance by the Agent. Checks and money orders are accepted subject to timely
collection as good funds and verification of compliance with the terms of the
Plan. Checks or money orders should be made payable to "First Union National
Bank -- Summit Properties Inc. DRSPP." Checks returned for any reason will not
be resubmitted for collection.
NO INTEREST WILL BE PAID BY THE COMPANY OR THE AGENT ON OPTIONAL CASH
PAYMENTS HELD PENDING INVESTMENT. SINCE NO INTEREST IS PAID ON CASH HELD BY THE
AGENT, IT NORMALLY WILL BE IN THE BEST INTEREST OF A PARTICIPANT TO DEFER
OPTIONAL CASH PAYMENTS UNTIL SHORTLY BEFORE COMMENCEMENT OF THE PRICING PERIOD.
In order for payments to be invested on the Investment Date, in addition to
the timely receipt of good funds, the Agent must have received an Authorization
Form or a B&N Form, as appropriate. See Questions 6 and 8.
20. MAY OPTIONAL CASH PAYMENTS BE RETURNED?
Upon telephone or written request to the Agent received at least five (5)
business days prior to the Optional Cash Payment Due Date for the Investment
Date with respect to which optional cash payments have been delivered to the
Agent, such optional cash payments will be returned to the Participant as soon
as practicable. Requests received less than five (5) business days prior to such
date will not be returned but instead will be invested on the next related
Investment Date. Additionally, a portion of each optional cash payment will be
returned by check, without interest, as soon as practicable after the Investment
Date for each Trading Day of the Pricing Period that does not meet the Threshold
Price, if any, applicable to optional cash payments made pursuant to Requests
for Waiver. See Question 17. Also, each optional cash payment, to the extent
that it does not either conform to the limitations described in Question 18 or
clear within the time limit described in Question 19, will be subject to return
to the Participant as soon as practicable.
21. ARE THERE ANY EXPENSES TO PARTICIPANTS IN CONNECTION WITH THEIR
PARTICIPATION UNDER THE PLAN?
Participants will incur no brokerage commissions or service charges in
connection with the reinvestment of dividends and in connection with all
purchases made pursuant to optional cash payments under the Plan. The Company
will pay all other costs of administration of the Plan. Additionally,
Participants may elect to send the certificates for their other shares of the
Company Stock to the Agent for safekeeping, and there is no fee for this
service. However, Participants who request that the Agent sell all or any
portion of their shares (see Question 27) must pay a nominal fee per transaction
to the Agent, any related brokerage commissions and applicable stock transfer
taxes.
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<PAGE> 18
REPORTS TO PARTICIPANTS
22. WHAT KIND OF REPORTS WILL BE SENT TO PARTICIPANTS IN THE PLAN?
Each Participant in the Plan will receive an annual statement regarding his
or her account. Each Participant will also receive a statement of his or her
account following each purchase of additional shares. These statements are the
Participant's continuing record of the cost of purchases and should be retained
for income tax purposes. In addition, Participants will receive copies of other
communications sent to holders of the Common Stock, including the Company's
annual report to its shareholders, the notice of annual meeting and proxy
statement in connection with its annual meeting of shareholders and Internal
Revenue Service information for reporting dividends paid.
DIVIDENDS ON FRACTIONS
23. WILL PARTICIPANTS BE CREDITED WITH DIVIDENDS ON FRACTIONS OF SHARES?
Yes. Any fractional share held in a Participant's Plan account that has
been designated for participation in the Dividend Reinvestment Program of the
Plan will receive a proportionate amount of any dividend declared on the Common
Stock.
CERTIFICATES FOR SHARES
24. WILL CERTIFICATES BE ISSUED FOR SHARES PURCHASED?
Normally, Common Stock purchased for Participants under the Plan will be
held in the name of the Agent or its nominee. No certificates will be issued to
Participants for shares in the Plan unless a Participant submits a written
request to the Agent or until participation in the Plan is terminated. At any
time, a Participant may request the Agent to send a certificate for some or all
of the whole shares credited to a Participant's account. This request should be
mailed to the Agent at the address set forth in the answer to Question 35. There
is no fee for this service. Any remaining whole shares and any fractions of
shares will remain credited to the Plan account. Certificates for fractional
shares will not be issued under any circumstances.
A Participant may also elect to deposit with the Agent certificates for the
stockholder's other shares of Company Stock registered in his or her name for
safekeeping under the Plan without charge. Because the Participant bears the
risk of loss in sending certificates to the Agent, certificates should be sent
by registered mail, return receipt requested, and properly insured to the
address specified in Question 35 below. If certificates are later issued either
upon request of the Participant or upon termination of participation, new,
differently numbered certificates will be issued.
25. IN WHOSE NAME WILL CERTIFICATES BE REGISTERED WHEN ISSUED?
Each Plan account is maintained in the name in which the related
Participant's certificates were registered at the time of enrollment in the
Plan. Stock certificates for those shares purchased under the Plan will be
similarly registered when issued upon a Participant's request. If a Participant
is a Beneficial Owner, such request must be placed through such Participant's
banker, broker or other nominee. See Question 6. A Participant who wishes to
pledge shares credited to such Participant's Plan account must first withdraw
such shares from the Plan account. See Question 38.
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<PAGE> 19
WITHDRAWALS AND TERMINATION
26. WHEN MAY PARTICIPANTS WITHDRAW FROM THE PLAN?
Participants may withdraw from the Plan with respect to all or a portion of
the shares held in his or her Plan account at any time. If the request to
withdraw is received prior to a dividend Record Date set by the Board of
Directors for determining shareholders of record entitled to receive a dividend,
the request will be processed on the day following receipt of the request by the
Agent.
If the request to withdraw is received by the Agent on or after a dividend
Record Date, but before the payment date, the Agent, in its sole discretion, may
either pay such dividend in cash or reinvest it in shares for the Participant's
Plan account. The request for withdrawal will then be processed as promptly as
possible following such dividend payment date. All dividends subsequent to such
dividend payment date will be paid in cash unless a shareholder re-enrolls in
the Plan, which may be done at any time.
Any optional cash payments which have been sent to the Agent prior to a
request for withdrawal will also be invested on the next Investment Date unless
a Participant expressly requests return of that payment in the request for
withdrawal, and the request for withdrawal is received by the Agent at least
five (5) business days prior to the Optional Cash Payment Due Date.
27. HOW DOES A PARTICIPANT WITHDRAW FROM THE PLAN?
A Participant who wishes to withdraw from the Plan with respect to all or a
portion of the shares held in his or her Plan account must notify the Agent in
writing at its address set forth in the answer to Question 35. Upon a
Participant's withdrawal from the Plan or termination of the Plan by the
Company, certificates for the appropriate number of whole shares credited to his
or her account under the Plan will be issued free of charge. A cash payment will
be made for any fraction of a share.
Upon withdrawal from the plan, a Participant may also request in writing
that the Agent sell all or part of the shares credited to his or her Plan
account. The Agent will sell the shares as requested within ten (10) business
days after processing the request for withdrawal. The Participant will receive
the proceeds of the sale, less a nominal fee per transaction paid to the Agent,
any brokerage fees or commissions and any applicable stock transfer taxes,
generally within five (5) business days of the sale.
28. ARE THERE ANY AUTOMATIC TERMINATION PROVISIONS?
Participation in the Plan will be terminated if the Agent receives written
notice of the death or adjudicated incompetency of a Participant, together with
satisfactory supporting documentation of the appointment of a legal
representative at least five (5) business days before the next Record Date for
purchases made through the reinvestment of dividends or Optional Cash Payment
Due Date for such payments, as applicable. In the event written notice of death
or adjudicated incompetency and such supporting documentation is received by the
Agent less than five (5) business days before the next Record Date or Optional
Cash Payment Due Date for purchases made through the reinvestment of dividends
or optional cash payments, as applicable, shares will be purchased for the
Participant with the related cash dividend or optional cash payment and
participation in the Plan will not terminate until after such dividend or
payment has been reinvested. Thereafter, no additional purchase of shares will
be made for the Participant's account and the Participant's Plan Shares and any
cash dividends paid thereon will be forwarded to such Participant's legal
representative.
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<PAGE> 20
OTHER INFORMATION
29. WHAT HAPPENS TO A PARTICIPANT'S PLAN SHARES IF THE PARTICIPANT SELLS OR
TRANSFERS ALL COMPANY STOCK REGISTERED IN THE PARTICIPANT'S NAME?
If a Participant who is a Record Holder sells or transfers all of the
shares registered in the Participant's name, the Participant will still remain
in the Plan with respect to any Plan Shares held by the Agent and will continue
to earn dividends unless the Participant notifies the Agent to terminate
participation by giving the Agent a withdrawal notice prior to the next relevant
dividend Record Date. See Question 27.
30. WHAT HAPPENS IF THE COMPANY DECLARES A DIVIDEND PAYABLE IN SHARES OR
DECLARES A STOCK SPLIT?
Any dividend payable in shares and any additional shares distributed by the
Company in connection with a stock split in respect of shares credited to a
Participant's Plan account will be added to that account. Stock dividends or
split shares which are attributable to shares registered in a Participant's own
name and not in his or her Plan account will be mailed directly to the
Participant as in the case of shareholders not participating in the Plan.
31. HOW WILL SHARES HELD BY THE AGENT BE VOTED AT MEETINGS OF SHAREHOLDERS?
If the Participant is a Record Owner, the Participant will receive a proxy
card covering both directly held shares and shares held in the Plan. If the
Participant is a Beneficial Owner, the Participant should receive a proxy
covering shares held in the Plan from his or her bank, broker or other nominee.
If a proxy is returned properly signed and marked for voting, all of the
shares covered by the proxy will be voted as marked. If a proxy is returned
properly signed but no voting instructions are given, all of the Participant's
shares will be voted in accordance with recommendations of the Board of
Directors of the Company, unless applicable laws require otherwise. If the proxy
is not returned, or if it is returned unexecuted or improperly executed, shares
registered in a Participant's name may be voted only by the Participant in
person.
32. WHAT ARE THE RESPONSIBILITIES OF THE COMPANY AND THE AGENT UNDER THE PLAN?
The Company and the Agent will not be liable in administering the Plan for
any act done in good faith or required by applicable law or for any good faith
omission to act including, without limitation, any claim of liability arising
out of failure to terminate a Participant's account upon his or her death, with
respect to the price at which shares are purchased and/or the times when such
purchases are made or with respect to any fluctuation in the market value before
or after purchase or sale of shares. Notwithstanding the foregoing, nothing
contained in the Plan limits the Company's liability with respect to alleged
violations of federal securities laws.
The Company and the Agent shall be entitled to rely on completed forms and
the proof of due authority to participate in the Plan, without further
responsibility of investigation or inquiry.
33. MAY THE PLAN BE CHANGED OR DISCONTINUED?
Yes. The Company may suspend, terminate, or amend the Plan at any time.
Notice will be sent to Participants of any suspension or termination, or of any
amendment that alters the Plan terms and conditions, as soon as practicable
after such action by the Company. The Company may also substitute another
administrator or agent in place of the Agent at any time; Participants will be
promptly informed of any such substitution. Any questions of interpretation
arising under the Plan will be determined by the Company and any such
determination will be final.
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<PAGE> 21
34. WHO BEARS THE RISK OF MARKET FLUCTUATIONS IN THE COMPANY'S COMMON STOCK?
A Participant's investment in shares held in the Plan account is no
different from his or her investment in directly held shares. The Participant
bears the risk of any loss and enjoys the benefits of any gain from market price
changes with respect to such shares.
35. WHO SHOULD BE CONTACTED WITH QUESTIONS ABOUT THE PLAN?
All correspondence regarding the Plan should be directed to:
First Union National Bank
1525 West W.T. Harris Boulevard
Charlotte, NC 28288-1153
Telephone (800) 829-8432
Attn: Shareholder Relations
Please mention Summit Properties Inc. and this Plan in all correspondence.
36. HOW IS THE PLAN INTERPRETED?
Any questions of interpretation arising under the Plan will be determined
by the Company and any such determination will be final. The Company may adopt
rules and regulations to facilitate the administration of the Plan. The terms
and conditions of the Plan and its operation will be governed by the laws of the
State of Maryland.
37. WHAT ARE SOME OF THE PARTICIPANT RESPONSIBILITIES UNDER THE PLAN?
Plan Shares are subject to escheat to the state in which the Participant
resides in the event that such shares are deemed, under such state's laws, to
have been abandoned by the Participant. Participants, therefore, should notify
the Agent promptly in writing of any change of address. Account statements and
other communications to Participants will be addressed to them at the last
address of record provided by Participants to the Agent.
Participants will have no right to draw checks or drafts against their Plan
accounts or to instruct the Agent with respect to any shares of Common Stock or
cash held by the Agent except as expressly provided herein.
38. MAY SHARES IN A PARTICIPANT'S ACCOUNT BE PLEDGED?
None of the shares of Common Stock credited to a Participant's Plan account
may be pledged and any such purported pledge will be void. If a Participant
wishes to pledge shares, those shares must be withdrawn from the Plan. See
Question 27 regarding withdrawal of Plan Shares.
39. IF THE COMPANY ISSUES RIGHTS TO PURCHASE SECURITIES TO THE HOLDERS OF COMMON
STOCK, HOW WILL THE RIGHTS ON PLAN SHARES BE HANDLED?
In the event that the Company makes available to the holders of its Common
Stock rights to purchase additional shares of Common Stock or any other
securities, the Agent will sell such rights (if such rights are saleable and
detachable from the Common Stock) accruing to shares of Common Stock held by the
Agent for Participants and invest the proceeds in additional shares of Common
Stock on the next dividend payment date for the Common Stock. In the event such
rights are not saleable or detachable, the Plan will hold such rights for the
benefit of Participants. A Participant who wishes to receive directly any such
rights may do so by sending to the Agent, at least five business days before the
rights offering record date, a written request that certificates for shares in
his or her account be sent to him or her.
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<PAGE> 22
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
40. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE PLAN?
The following summary is based upon interpretations of current federal tax
law. IT IS IMPORTANT FOR PARTICIPANTS TO CONSULT THEIR OWN TAX ADVISERS TO
DETERMINE PARTICULAR TAX CONSEQUENCES, including state income tax (and other
taxes, such as stock transfer tax) consequences, which vary from state to state
and which may result from participation in the Plan and subsequent disposition
of shares acquired pursuant to the Plan. Income tax consequences to Participants
residing outside the United States will vary from jurisdiction to jurisdiction.
Dividend Reinvestment Program
Participants in the Dividend Reinvestment Program under the Plan will be
treated for federal income tax purposes as having received, on the Investment
Date, a distribution in an amount equal to the fair market value on that date of
the shares acquired with reinvested dividends. Such shares will have a tax basis
equal to the same amount. For federal income tax purposes, the fair market value
of shares acquired under the Plan will likely be treated as equal to 100% of the
average of the high and low sale prices of shares on the related Investment
Date. The trading value on that specific date may vary from the Market Price
determined under the Plan for such shares.
Such distribution will be taxable as a dividend to the extent of the
Company's current or accumulated earnings and profits. To the extent the
distribution is in excess of the Company's current or accumulated earnings and
profits, the distribution will be treated first as a tax-free return of capital,
reducing the tax basis in a Participant's shares, and the distribution in excess
of a Participant's tax basis will be taxable as gain realized from the sale of
its shares.
EXAMPLE 1:
The following example may be helpful to illustrate the federal income tax
consequences of the reinvestment of dividends at a 3% discount from the Market
Price where the fair market value for tax purposes is the same as the Market
Price.
<TABLE>
<CAPTION>
<S> <C>
Cash dividends reinvested................................... $100.00
Assumed Market Price*....................................... $ 20.00
Less 3% discount per share.................................. $ (0.60)
-------
Net purchase price per share................................ $ 19.40
Number of shares purchased ($100.00/$19.40)................. 5.155
Total taxable dividend resulting from transaction
(20.00 X 5.155)**......................................... $103.10
</TABLE>
- ---------------
* This price is assumed for illustrative purposes only, and will vary with the
market price of the Common Stock.
** Assumes trading price on Investment Date also equals $20.00.
Stock Purchase Program
The tax consequences relating to a discount associated with an optional
cash purchase are not entirely clear under current law. Nonetheless, the
Internal Revenue Service (the "IRS") has indicated in a recent private ruling
issued to another REIT that the discount associated with an optional cash
purchase will be treated as a distribution to a participant in that REIT's
dividend reinvestment and optional cash purchase plan if and only if that
participant also is enrolled in the dividend reinvestment program aspect of that
plan at the time of the optional cash purchase. Accordingly, if the Participant
is enrolled in the Dividend Reinvestment Program, then the Participant should be
treated as having received a distribution, upon the purchase of shares with an
optional cash payment, in an amount equal to the excess, if any, of the fair
market value of the shares on the Investment Date over the amount of the
optional cash payment. However, if the Participant is not
21
<PAGE> 23
enrolled in the Dividend Reinvestment Program, then the Participant should not
be treated as having received a distribution on account of the discount
associated with the optional cash payment. Participants should be aware that the
private ruling described above is not binding on the IRS with respect to the
Plan and that the tax characterization of discounts on optional cash purchases
remains unsettled. Participants also should be aware that in the case of
Participants in the Dividend Reinvestment Program, the Company will treat the
entire amount of the excess value of shares acquired under the Dividend
Reinvestment Program and the Stock Purchase Program as a distribution for tax
reporting purposes that is taxable as a dividend. It is possible, however, that
all or a portion of such distribution should be treated as a tax-free return of
capital. Notwithstanding the private ruling described above, the Company also
may determine that it should report and/or the IRS may require that the Company
and Participants treat the excess value of shares acquired under the Stock
Purchase Program as a distribution taxable as a dividend, regardless of whether
such Participants are enrolled in the Dividend Reinvestment Plan. PARTICIPANTS
ARE STRONGLY ENCOURAGED TO CONSULT THEIR OWN TAX ADVISORS IN THIS REGARD.
Shares acquired through the Stock Purchase Program under the Plan should
have a tax basis equal to the amount of the payment plus the excess, if any, of
the fair market value of the shares purchased over the amount of the payment,
but only to the extent such excess is treated as a distribution taxable as a
dividend. The fair market value on an Investment Date may differ from the Market
Price determined under the Plan for such shares.
EXAMPLE 2:
The following example may be helpful to illustrate the federal income tax
consequences of the optional cash payment feature at a 3% discount from the
Market Price where the fair market value for tax purposes differs from the
Market Price and where the Participant also is enrolled in the Dividend
Reinvestment Plan.
<TABLE>
<CAPTION>
<S> <C>
Optional cash payment....................................... $100.00
Assumed Market Price*....................................... $ 20.00
Less 3% discount per share.................................. $ (0.60)
-------
Net purchase price per share................................ $ 19.40
Number of shares purchased ($100.00/$19.40)................. 5.155
Total taxable dividend resulting from transaction
(5.155 X $20.50 - $100.00)**.............................. $ 5.678
</TABLE>
- ---------------
* This price is assumed for illustrative purposes only, and will vary with the
market price of Common Stock.
** This example assumes a trading price on the Investment Date of $20.50.
A Participant's holding period for shares acquired pursuant to either
program under the Plan will begin on the day following the Investment Date.
Dividends received by corporate shareholders will not be eligible for the
dividends received deduction.
A Participant will not realize any taxable income upon receipt of
certificates for whole shares credited to the Participant's account, either upon
the Participant's request for certain of those shares or upon termination of
participation in the Plan. A Participant will realize gain or loss upon the sale
or exchange of shares acquired under the Plan. A Participant will also realize
gain or loss upon receipt, following termination of participation in the Plan,
of a cash payment for any fractional share equivalent credited to the
Participant's account. The amount of any such gain or loss will be the
difference between the amount that the Participant received for the shares or
fractional share equivalent and the tax basis thereof.
41. HOW ARE INCOME TAX WITHHOLDING PROVISIONS APPLIED TO SHAREHOLDERS WHO
PARTICIPATE IN THE PLAN?
If a Participant fails to provide certain federal income tax certifications
in the manner required by law, dividends on shares of Common Stock, proceeds
from the sale of fractional shares and proceeds from the sale of shares held for
a Participant's account will be subject to federal income tax withholding at the
rate of 31%. If withholding is required for any reason, the appropriate amount
of tax will be withheld. Certain shareholders (including most corporations) are,
however, exempt from the above withholding requirements.
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<PAGE> 24
If a Participant is a foreign shareholder whose dividends are subject to
federal income tax withholding at the 30% rate (or a lower treaty rate), the
appropriate amount will be withheld and the balance in shares will be credited
to such Participant's account.
DIVIDENDS
The Company has paid dividends since its incorporation. In order to
accommodate the provisions of this Plan, the Company anticipates that Record
Dates are normally the tenth day of January, April, July and October. The
Company anticipates that dividends will be payable generally on the fifteen day
of the month subsequent to such Record Dates. The actual dates will be set by
the Board of Directors in its sole discretion from time to time.
PLAN OF DISTRIBUTION
Except to the extent the Agent purchases Common Stock in open market
transactions, the Common Stock acquired under the Plan will be sold directly by
the Company through the Plan. The Company may sell Common Stock to owners of
shares (including brokers or dealers) who, in connection with any resales of
such shares, may be deemed to be underwriters. Such shares, including shares
acquired pursuant to waivers granted with respect to the Stock Purchase Program
of the Plan, may be resold in market transactions (including coverage of short
positions) on any national security exchange on which shares of Common Stock
trade or in privately negotiated transactions. The Common Stock is currently
listed on the NYSE. Under certain circumstances, it is expected that a portion
of the shares of Common Stock available for issuance under the Plan will be
issued pursuant to such waivers. The difference between the price such owners
pay to the Company for shares of Common Stock acquired under the Plan, after
deduction of the applicable discount from the Market Price, and the price at
which such shares are resold, may be deemed to constitute underwriting
commissions received by such owners in connection with such transactions.
Subject to the availability of shares of Common Stock registered for
issuance under the Plan, there is no total maximum number of shares that can be
issued pursuant to the reinvestment of dividends. From time to time, financial
intermediaries may engage in positioning transactions in order to benefit from
the discount from the Market Price of Common Stock acquired through the
reinvestment of dividends and optional cash payments under the Plan.
Except with respect to sales of Common Stock relating to reinvested
dividends, the Company will pay any and all brokerage commissions and related
expenses incurred in connection with purchases of common Stock under the Plan.
Upon withdrawal by a Participant from the Plan by the sale of Common Stock held
under the Plan, the Participant will receive the proceeds of such sale less a
nominal fee per transaction paid to the Agent (if such resale is made by the
Agent at the request of a Participant), any related brokerage commissions and
any applicable transfer taxes.
Common Stock may not be available under the Plan in all states. This
Prospectus does not constitute an offer to sell, or a solicitation of an offer
to buy, any Common Stock or other securities in any state or any other
jurisdiction to any person to whom it is unlawful to make such offer in such
jurisdiction.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby has been passed
upon for the Company by Goodwin, Procter & Hoar LLP, Boston, Massachusetts.
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this registration statement by reference from the Company's
Annual Report on Form 10-K for the year ended December 31, 1997, and the Annual
Report on Form 11-K of the Company's 1996 Non-Qualified Employee Stock Purchase
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<PAGE> 25
Plan for the year ended December 31, 1997, 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 reports of such firm given upon their authority as experts in accounting and
auditing.
GLOSSARY
"Agent" means a plan administrator that administers the Plan, keeps
records, sends statements of account to each Participant and performs other
duties related to the Plan. First Union National Bank currently serves as Agent
of the Plan.
"Beneficial Owners" means shareholders who beneficially own shares of
Company Stock that are registered in a name other than their own (for example,
in the name of a bank, broker or other nominee).
"B&N Form" means a Broker and Nominee form used to permit a Beneficial
Owner's bank, broker or other nominee to participate in the Stock Purchase
Program on the Beneficial Owner's behalf.
"Business day" means any day other than Saturday, Sunday or legal holiday
on which NYSE or another applicable securities exchange is closed or a day on
which the Agent is authorized or obligated by law to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, $.01 par value, of the Company.
"Company" means Summit Properties Inc., a Maryland corporation.
"Company Stock" means the Company's Common Stock and any other classes of
equity securities outstanding from time to time, collectively.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Investment Date" means, with respect to Common Stock acquired pursuant to
a dividend reinvestment, in the case of shares acquired directly from the
Company, the quarterly dividend payment date declared by the Board of Directors
(unless such date is not a business day in which case it is the first business
day immediately thereafter) or, in the case of open market purchases, the date
or dates of actual investment, but no later than ten (10) business days
following the dividend payment date; and with respect to Common Stock acquired
pursuant to an optional cash payment, in the case of shares acquired directly
from the Company, on or about the first day of each month; or in the case of
open market purchases, no later than the last business day of each month.
"Market Price" means, with respect to reinvested dividends and optional
cash payments that do not exceed $10,000 (see Question 17 for a discussion of
the discount applicable to optional cash payments in excess of $10,000) for
shares acquired directly from the Company, the average high and low sales
prices, computed to three decimal places, of the Common Stock on the NYSE or
another applicable securities exchange, as reported in the Wall Street Journal,
during the Pricing Period (i.e., the ten (10) days on which NYSE or another
applicable securities exchange is open and for which trades in the Company's
Common Stock are reported immediately preceding the relevant Investment Date,
or, if no trading occurs in the Common Stock on one or more of such days, for
the 10 days immediately preceding the Investment Date for which trades are
reported). With respect to reinvested dividends and optional cash payments that
do not exceed $10,000 (see Question 17 for a discussion of the discount
applicable to optional cash payments in excess of $10,000) for shares to be
acquired on the open market, Market Price means the weighted average of the
actual prices paid, computed to three decimal places, for all of the Common
Stock purchased by the Agent with all Participants' reinvested dividends and
optional cash payments for the related month.
"NYSE" means the New York Stock Exchange.
"Optional Cash Payment Due Date" means one business day prior to the
relevant Pricing Period.
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<PAGE> 26
"Participant" means a Record Owner of Company Stock, the Beneficial Owner
of Company Stock whose bank, broker or other nominee participates on the
Beneficial Owner's behalf, or a current non-shareholder who wishes to
participate in the Plan upon making an initial investment in the Common Stock
offered herein.
"Plan" means the Summit Properties Inc. Dividend Reinvestment and Stock
Purchase Plan.
"Plan Shares" means all shares of Common Stock held in a Participant's
account under the Plan, including shares purchased through the Stock Purchase
Program and all whole and fractional shares credited to a Participant's Plan
account as the result of reinvestment of dividends on shares of Company Stock
enrolled in the Dividend Reinvestment Program.
"Pricing Period" means the period encompassing the 10 days during which the
Common Stock is traded on the NYSE or other securities exchange preceding the
relevant dividend reinvestment or optional cash payment Investment Date.
"Record Date" means, with respect to reinvestments of dividends, the Record
Date declared by the Company's Board of Directors for such dividend.
"Record Owner" means shareholders who own shares of the Company's Stock in
their own names.
"Request for Waiver" means a written request from a Participant to make
optional cash payments in excess of $10,000.
"Securities Act" means the Securities Act of 1933, as amended.
"Threshold Price" means the minimum price, if any, established by the
Company that the average high and low prices of the Common Stock must equal or
exceed during each day of the Pricing Period for optional cash payments made
pursuant to Requests for Waiver.
"Waiver Discount" means the discount from the Market Price applicable to
optional cash payments made pursuant to Requests for Waiver. Such discount will
vary between 0% and 5% of the Market Price (based on a variety of potential
considerations as discussed in Question 17) and may vary from month to month.
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<PAGE> 27
======================================================
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, OR ANY OTHER PERSON. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE COMMON STOCK OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Company........................... 4
Use of Proceeds....................... 4
Summary of Plan....................... 4
The Plan.............................. 6
Purpose............................... 6
Options Available to Participants..... 7
Advantages and Disadvantages.......... 7
Administration........................ 8
Participation......................... 9
Purchases and Prices of Shares........ 12
Reports to Participants............... 17
Dividends on Fractions................ 17
Certificates for Shares............... 17
Withdrawals and Termination........... 18
Other Information..................... 19
Certain Federal Income Tax
Considerations...................... 21
Dividends............................. 23
Plan of Distribution.................. 23
Legal Matters......................... 23
Experts............................... 23
Glossary.............................. 24
</TABLE>
======================================================
======================================================
(Summit Properties Inc. LOGO)
SUMMIT PROPERTIES INC.
2,500,000 Shares of Common Stock
------------------------
PROSPECTUS
------------------------
June 23, 1998
======================================================
<PAGE> 28
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses expected to be incurred in connection with the issuance and
distribution of the securities being registered are as set forth below. All such
expenses, except for the SEC registration and filing fees, are estimated:
<TABLE>
<S> <C>
SEC Registration............................................ $14,267
Legal Fees and Expenses..................................... 15,000
Accounting Fees and Expenses................................ 5,000
Printing and Engraving Fees................................. 15,000
Blue Sky Fees and Expenses.................................. 500
Miscellaneous............................................... 233
-------
Total............................................. $50,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Articles of Incorporation and Bylaws limit the liability of
the Company's directors and officers to the Company and its stockholders to the
fullest extent permitted from time to time by Maryland law. Maryland law
presently permits the liability of directors and officers to a corporation or
its stockholders for money damages to be limited, except (i) to the extent that
it is proved that the director or officer actually received an improper benefit
or profit; or (ii) if a judgment or other final adjudication is entered in a
proceeding based on a finding that the director's or officer's action or failure
to act was the result of active and deliberate dishonesty and was material to
the cause of action adjudicated in the proceeding. This provision does not limit
the ability of the Company or its stockholders to obtain other relief, such as
an injunction or rescission.
The Company's Articles of Incorporation and Bylaws also require the Company
to indemnify its directors, officers and certain other parties to the fullest
extent permitted from time to time by Maryland law. Maryland law permits a
corporation to indemnify its directors, officers and certain other parties
against judgements, penalties, fines, settlements and reasonable expenses
actually incurred by them in connection with any proceeding to which they may be
made a party by reason of their service to or at the request of the corporation,
unless it is established that (i) the act or omission was committed in bad faith
or was the result of active and deliberate dishonesty; (ii) the indemnified
party actually received an improper personal benefit; or (iii) in the case of
any criminal proceeding, the indemnified party had reasonable cause to believe
that the act or omission was unlawful.
Pursuant to the authority granted in the Company's Articles of
Incorporation and Bylaws, the Company has entered into indemnification
agreements with each of the Company's directors and executive officers. The
indemnification agreements require, among other matters, that the Company
indemnify its executive officers and directors to the fullest extent permitted
by law and advance to such officers and directors all related expenses, subject
to reimbursement if it is subsequently determined that indemnification is not
permitted. The Company must also indemnify and advance all expenses incurred by
such officers and directors seeking to enforce their rights under the
indemnification agreements and may cover such officers and directors under the
Company's directors' and officers' liability insurance. Although the form of
indemnification agreement offers substantially the same scope of coverage
afforded by law, it provides assurance to directors and officers that
indemnification will be available, because, as a contract, it cannot be modified
unilaterally in the future by the Board of Directors or the Stockholders to
eliminate the rights it provides.
II-1
<PAGE> 29
ITEM 16. EXHIBITS
<TABLE>
<C> <C> <S>
5.1* -- Opinion of Goodwin, Procter & Hoar LLP, as to legality.
8.1* -- Opinion of Goodwin, Procter & Hoar LLP, as to certain
federal income tax matters.
23.1* -- Consent of Goodwin, Procter & Hoar LLP (included in Exhibits
5.1 and 8.1).
23.2 -- Consent of Deloitte & Touche LLP, independent accountants.
24.1* -- Power of Attorney (set forth on signature page).
99.1* -- Form of Authorization form.
99.2* -- Form of Broker & Nominee form.
99.3* -- Form of Request for Waiver form.
</TABLE>
- ---------------
* Previously filed.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in the periodic reports filed by the Registrant pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act each filling of the registrant's annual
report pursuant to Section 13(a) or 15(d) of the Exchange Act that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-2
<PAGE> 30
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant, pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities begin registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE> 31
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that its has reasonable grounds to believe it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Charlotte, State of North Carolina on this 23rd day
of June, 1998.
SUMMIT PROPERTIES INC.
By: /s/ WILLIAM F. PAULSEN
------------------------------------
William F. Paulsen
President and Chief Executive
Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated. Each person listed below has signed this
registration statement in their capacity as an officer or director of Summit, on
behalf of Summit.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board of June 23, 1998
- ----------------------------------------------------- Directors
William B. McGuire, Jr.
/s/ WILLIAM F. PAULSEN President, Chief Executive June 23, 1998
- ----------------------------------------------------- Officer and Director
William F. Paulsen
* Executive Vice President and June 23, 1998
- ----------------------------------------------------- Chief Financial Officer
Michael L. Schwarz
* Director June 23, 1998
- -----------------------------------------------------
Henry H. Fishkind
Director
- -----------------------------------------------------
James H. Hance, Jr.
* Director June 23, 1998
- -----------------------------------------------------
Nelson Schwab III
* Director June 23, 1998
- -----------------------------------------------------
John Crosland, Jr.
*By: /s/ WILLIAM F. PAULSEN
------------------------------------------------
William F. Paulsen
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Pre-Effective Amendment
No. 1 to Registration Statement (No. 333-51623) of Summit Properties Inc. (the
"Company") on Form S-3 of (i) our report dated January 21, 1998 (March 6, 1998
as to Note 7) appearing in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997 and (ii) our report dated February 27, 1998
appearing in the Annual Report on Form 11-K of the Company's 1996 Non-Qualified
Employee Stock Purchase Plan for the year ended December 31, 1997.
We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Charlotte, North Carolina
June 23, 1998
