<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-25575 and No. 333-25575-01
PROSPECTUS SUPPLEMENT
(To Prospectus dated July 29, 1997)
LOGO
SUMMIT PROPERTIES LOGO
SUMMIT PROPERTIES PARTNERSHIP, L.P.
$95,000,000
Medium-Term Notes
Due Nine Months or More from Date of Issue
Summit Properties Partnership, L.P., a Delaware limited partnership (the
"Operating Partnership"), may offer from time to time up to $95,000,000
aggregate initial offering price, or the equivalent thereof in one or more
foreign or composite currencies, of its Medium-Term Notes Due Nine Months or
More from Date of Issue (the "Notes"). Each Note will mature on any day nine
months or more from the date of issue, as specified in the applicable pricing
supplement hereto (each, a "Pricing Supplement"), and may be subject to
redemption at the option of the Operating Partnership or repayment at the option
of the Holder thereof, in each case, in whole or in part, prior to its Stated
Maturity Date, as specified in the applicable Pricing Supplement. In addition,
each Note may be denominated and/or payable in United States dollars or a
foreign or composite currency ("Foreign Currency Notes"), as specified in the
applicable Pricing Supplement. The Notes, other than Foreign Currency Notes,
will be issued in minimum denominations of $1,000 and integral multiples
thereof, unless otherwise specified in the applicable Pricing Supplement, while
Foreign Currency Notes will be issued in the minimum denominations specified in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the rate of
interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually, as specified in the applicable Pricing
Supplement. Interest on each Fixed Rate Note will accrue from its date of issue
and will be payable in arrears as specified in the applicable Pricing Supplement
and on the Maturity Date. Notes may also be issued that do not bear any interest
currently or that bear interest at a below market rate. See "Description of
Notes."
The interest rate, or formula for the determination of the interest rate,
applicable to each Note and the other variable terms thereof will be established
by the Operating Partnership on the date of issue of such Note and will be
specified in the applicable Pricing Supplement. Interest rates or formulas and
other terms of Notes are subject to change by the Operating Partnership, but no
change will affect any Note already issued or as to which an offer to purchase
has been accepted by the Operating Partnership.
Each Note will be issued in fully registered book-entry form (a "Book-Entry
Note") or in certificated form (a "Certificated Note"), as specified in the
applicable Pricing Supplement. Each Book-Entry Note will be represented by one
or more fully registered global securities (the "Global Securities") deposited
with or on behalf of The Depository Trust Company ("DTC") and registered in the
name of DTC or DTC's nominee. Interests in the Global Securities will be shown
on, and transfers thereof will be effected only through, records maintained by
DTC (with respect to its participants) and DTC's participants (with respect to
beneficial owners).
SEE "RISK FACTORS" COMMENCING ON PAGE S-4 OF THE PROSPECTUS SUPPLEMENT AND PAGE
3 OF THE PROSPECTUS FOR A DISCUSSION OF CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, THE PROSPECTUS OR ANY
PRICING SUPPLEMENT HERETO. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
PRICE TO AGENTS' DISCOUNTS PROCEEDS TO OPERATING
PUBLIC (1) AND COMMISSIONS (1)(2) PARTNERSHIP (1)(3)
- -------------------------------------------------------------------------------------------------------------------------
Per Note 100% .125%-.750% 99.875%-99.25%
- -------------------------------------------------------------------------------------------------------------------------
Total (4) $95,000,000 $118,750-$712,500 $94,881,250-$94,287,500
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Unless otherwise specified in the applicable Pricing Supplement, any Note
sold to an Agent as principal will be purchased by such Agent at a price
equal to 100% of the principal amount thereof less a percentage of the
principal amount equal to the commission applicable to an agency sale (as
described below) of a Note of identical maturity. If agreed to by the
Operating Partnership and an Agent, such Agent may utilize its reasonable
efforts on an agency basis to solicit offers to purchase the Notes at 100%
of the principal amount thereof, unless otherwise specified in the
applicable Pricing Supplement. If the Operating Partnership issues any Note
at a discount from or at a premium over its principal amount, the Price to
Public of any Note issued at a discount or premium will be set forth in the
applicable Pricing Supplement.
(2) The Operating Partnership will pay a commission to the applicable Agent,
ranging from .125% to .750% of the principal amount of any Note, depending
upon its stated maturity, sold through such Agent. The Operating Partnership
and Summit Properties Inc., a Maryland corporation and sole general partner
of the Operating Partnership ("Summit Properties"), have agreed to indemnify
the Agents against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Supplemental Plan of Distribution."
(3) Before deducting expenses payable by the Operating Partnership estimated at
$750,000.
(4) Or the equivalent thereof in one or more foreign or composite currencies.
The Notes are being offered on a continuous basis by the Operating Partnership
to or through the Agents. Unless otherwise specified in the applicable Pricing
Supplement, the Notes will not be listed on any securities exchange and there
can be no assurance that the Notes offered hereby will be sold or that there
will be a secondary market for the Notes or that there will be liquidity in such
market if one develops. The Operating Partnership reserves the right to cancel
or modify the offer made hereby without notice. The Operating Partnership or an
Agent, if it solicits the offer on an agency basis, may reject any offer to
purchase Notes in whole or in part. See "Supplemental Plan of Distribution."
J.P. MORGAN & CO.
FIRST UNION CAPITAL MARKETS
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
May 29, 1998
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SPECIFICALLY,
THE AGENTS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING AND MAY BID FOR, AND
PURCHASE, THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "SUPPLEMENTAL PLAN OF DISTRIBUTION."
No dealer, salesperson, or any other individual has been authorized to give any
information or to make any representations other than those contained in or
incorporated by reference in this Prospectus Supplement, the applicable Pricing
Supplement or the Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Operating Partnership or the Agents. This Prospectus Supplement, the applicable
Pricing Supplement and the Prospectus do not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the Notes in any
jurisdiction by any persons not authorized or qualified to make such offer or
solicitation or to any persons to whom it is unlawful to make such offer or
solicitation. Neither the delivery of this Prospectus Supplement, the applicable
Pricing Supplement or the Prospectus, nor any sale made hereunder or thereunder,
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Operating Partnership since the date hereof or
thereof or that the information herein or therein is correct as of any time
subsequent to the date of such information.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors................................................ S-3
Description of Notes........................................ S-5
Special Provisions Relating to Foreign Currency Notes....... S-23
Certain United States Federal Income Tax Considerations..... S-25
Supplemental Plan of Distribution........................... S-33
Legal Matters............................................... S-35
PROSPECTUS
Available Information....................................... 2
Incorporation of Certain Documents by Reference............. 2
Risk Factors................................................ 3
The Company and the Operating Partnership................... 8
Use of Proceeds............................................. 8
Ratio of Earnings to Fixed Charges.......................... 8
Description of Debt Securities.............................. 9
Description of Preferred Stock.............................. 20
Description of Common Stock................................. 25
Restrictions on Transfers of Capital Stock.................. 26
Federal Income Tax Considerations........................... 27
Plan of Distribution........................................ 29
Legal Matters............................................... 30
Experts..................................................... 30
</TABLE>
S-2
<PAGE> 3
RISK FACTORS
THIS PROSPECTUS SUPPLEMENT DOES NOT DESCRIBE ALL OF THE RISKS OF AN INVESTMENT
IN NOTES THAT RESULT FROM SUCH NOTES BEING DENOMINATED OR PAYABLE IN OR
DETERMINED BY REFERENCE TO A CURRENCY OR COMPOSITE CURRENCY OTHER THAN UNITED
STATES DOLLARS OR TO ONE OR MORE INTEREST RATE, CURRENCY OR OTHER INDICES OR
FORMULAS. THE OPERATING PARTNERSHIP AND THE AGENTS DISCLAIM ANY RESPONSIBILITY
TO ADVISE PROSPECTIVE INVESTORS OF SUCH RISKS AS THEY EXIST AT THE DATE OF THIS
PROSPECTUS SUPPLEMENT OR AS THEY CHANGE FROM TIME TO TIME. EACH PROSPECTIVE
INVESTOR SHOULD CONSULT HIS OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS
ENTAILED BY AN INVESTMENT IN NOTES DENOMINATED OR PAYABLE IN OR DETERMINED BY
REFERENCE TO A CURRENCY OR COMPOSITE CURRENCY OTHER THAN UNITED STATES DOLLARS
OR TO ONE OR MORE INTEREST RATE, CURRENCY OR OTHER INDICES OR FORMULAS. SUCH
NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED
WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS OR TRANSACTIONS INVOLVING THE
APPLICABLE INTEREST RATE INDEX OR CURRENCY INDEX OR OTHER INDICES OR FORMULAS.
STRUCTURE RISKS
An investment in Notes indexed, as to principal, premium, if any, and/or
interest, to one or more currencies or composite currencies (including exchange
rates and swap indices between currencies or composite currencies), commodities,
interest rates or other indices or formulas, either directly or inversely,
entails significant risks that are not associated with similar investments in a
conventional fixed rate or floating rate debt security. Such risks include,
without limitation, the possibility that any such index or formula may be
subject to significant changes, that the resulting interest rate will be less
than that payable on a conventional fixed rate or floating rate debt security
issued by the Operating Partnership at the same time, that the repayment of
principal and/or premium, if any, can occur at times other than that expected by
the investor, and that the investor could lose all or a substantial portion of
principal and/or premium, if any, payable on the Maturity Date (as defined
below). Such risks depend on a number of interrelated factors, including
economic, financial and political events, over which the Operating Partnership
has no control. Additionally, if the formula used to determine the amount of
principal, premium, if any, and/or interest payable with respect to such Notes
contains a multiplier or leverage factor, the effect of any change in the
applicable index or indices or formula or formulas will be magnified. In recent
years, values of certain indices and formulas have been highly volatile and such
volatility may continue or increase in the future. Fluctuations in the value of
any particular index or formula that have occurred in the past are not
necessarily indicative, however, of fluctuations that may occur in the future.
The secondary market for Notes will be affected by a number of factors
independent of the creditworthiness of the Operating Partnership and the value
of the applicable index or indices or formula or formulas, including the
complexity and volatility of each such index or formula, the method of
calculating the principal, premium, if any, and/or interest in respect of such
Notes, the time remaining to the maturity of such Notes, the outstanding amount
of such Notes, any redemption features of such Notes, the amount of other debt
securities linked to such index or formula and the level, direction and
volatility of market interest rates generally. Such factors also will affect the
market value of such Notes. In addition, certain Notes may be designed for
specific investment objectives or strategies and, therefore, may have a more
limited secondary market and experience more price volatility than conventional
debt securities. Investors may not be able to sell such Notes readily or at
prices that will enable investors to realize their anticipated yield.
Any optional redemption feature of Notes might affect the market value of such
Notes. Since the Operating Partnership may be expected to redeem such Notes when
prevailing interest rates are relatively low, an investor might not be able to
reinvest the redemption proceeds at an effective interest rate as high as the
interest rate on such Notes.
The Notes will not have an established trading market when issued, and there can
be no assurance of a secondary market for the Notes or the liquidity of such
market if one develops. See "Supplemental Plan of Distribution."
No investor should purchase Notes unless such investor understands and is able
to bear the risk that such Notes may not be readily saleable, that the value of
Notes will fluctuate over time and that such fluctuations may be significant.
S-3
<PAGE> 4
CREDIT RATINGS
The credit ratings assigned to the Operating Partnership's medium-term note
program may not reflect the potential impact of all risks related to structure
and other factors on the value of the Notes. Accordingly, prospective investors
should consult their own financial and legal advisors as to the risks entailed
by an investment in the Notes and the suitability of such Notes in light of
their particular circumstances.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes (as defined below) entails significant
risks that are not associated with a similar investment in a debt security
denominated and payable in United States dollars. Such risks include, without
limitation, the possibility of significant changes in the rate of exchange
between the United States dollar and the applicable foreign currency or
composite currency and the possibility of the imposition or modification of
exchange controls by the applicable governments or monetary authorities. Such
risks generally depend on factors over which the Operating Partnership has no
control, such as economic, financial and political events and the supply and
demand for the applicable currencies or composite currencies. In addition, if
the formula used to determine the amount of principal, premium, if any, and/or
interest payable with respect to Foreign Currency Notes contains a multiplier or
leverage factor, the effect of any change in the applicable currencies or
composite currencies will be magnified. In recent years, rates of exchange
between the United States dollar and foreign currencies or composite currencies
have been highly volatile and such volatility may continue or increase in the
future. Fluctuations in any particular exchange rate that have occurred in the
past are not necessarily indicative, however, of fluctuations that may occur in
the future. Depreciation of the foreign currency or composite currency in which
a Foreign Currency Note is payable against the United States dollar would result
in a decrease in the United States dollar-equivalent yield of such Foreign
Currency Note, in the United States dollar-equivalent value of the principal and
premium, if any, payable on the Maturity Date of such Foreign Currency Note,
and, generally, in the United States dollar-equivalent market value of such
Foreign Currency Note.
Governments or monetary authorities have imposed from time to time, and may in
the future impose or revise, exchange controls at or prior to the date on which
any payment of principal of, or premium, if any, or interest on, a Foreign
Currency Note is due, which could affect exchange rates as well as the
availability of the foreign currency or composite currency in which such payment
is to be made on such date. Even if there are no exchange controls, it is
possible that the foreign currency or composite currency in which a payment in
respect of any particular Foreign Currency Note is to be made would not be
available on the applicable payment date due to other circumstances beyond the
reasonable control of the Operating Partnership. In such cases, the Operating
Partnership will be entitled to satisfy its obligations in respect of such
Foreign Currency Note in United States dollars. See "Special Provisions Relating
to Foreign Currency Notes--Payment Currency."
S-4
<PAGE> 5
DESCRIPTION OF NOTES
The Notes will be issued as a series of Debt Securities (as defined below) under
an Indenture, dated as of August 7, 1997, as supplemented by the Third
Supplemental Indenture dated as of May 29, 1998 and as further amended,
supplemented or modified from time to time (the "Indenture"), between the
Operating Partnership and First Union National Bank, as trustee (the "Trustee").
The Indenture is subject to, and governed by, the Trust Indenture Act of 1939,
as amended. The following summary of certain provisions of the Notes and the
Indenture, does not purport to be complete and is qualified in its entirety by
reference to the actual provisions of the Notes and the Indenture. Capitalized
terms used but not defined herein shall have the meanings given to them in the
accompanying Prospectus, the Notes or the Indenture, as the case may be. The
term "Debt Securities," as used in this Prospectus Supplement, refers to all
debt securities, including the Notes, issued and issuable from time to time
under the Indenture. The following description of the particular terms of the
Notes offered hereby (referred to in the accompanying Prospectus as the "Senior
Securities") supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Senior Securities set
forth in the Prospectus, to which description reference is hereby made.
The following description of Notes will apply to each Note offered hereby unless
otherwise specified in the applicable Pricing Supplement.
GENERAL
The Notes will be unsecured obligations of the Operating Partnership and will
rank pari passu with all other unsecured and unsubordinated indebtedness of the
Operating Partnership from time to time outstanding. The Notes are effectively
subordinated to mortgages and other secured indebtedness of the Operating
Partnership, which encumber certain assets of the Operating Partnership and to
Indebtedness and other liabilities of subsidiaries of the Operating Partnership.
Accordingly, such indebtedness will have to be satisfied in full before holders
of the Notes will be able to realize any value from encumbered or
indirectly-held communities. In addition, the Notes will be repaid solely from
the assets of the Operating Partnership; holders of the Notes will not have
recourse against any general partner or limited partner of the Operating
Partnership for repayment of the Notes.
The Indenture does not limit the aggregate initial offering price of Debt
Securities that may be issued thereunder and Debt Securities may be issued
thereunder from time to time in one or more series up to the aggregate initial
offering price from time to time authorized by the Operating Partnership for
each series. The Operating Partnership may, from time to time, without the
consent of the Holders of the Notes, provide for the issuance of Notes or other
Debt Securities under the Indenture in addition to the $95,000,000 aggregate
initial offering price of Notes offered hereby.
The Notes are currently limited to up to $95,000,000 aggregate initial offering
price, or the equivalent thereof in one or more foreign or composite currencies.
The Notes will be offered on a continuous basis and will mature on any day nine
months or more from their dates of issue (each, a "Stated Maturity Date"), as
specified in the applicable Pricing Supplement. Unless otherwise specified in
the applicable Pricing Supplement, interest-bearing Notes will either be Fixed
Rate Notes or Floating Rate Notes, as specified in the applicable Pricing
Supplement. Notes may also be issued that do not bear any interest currently or
that bear interest at a below market rate.
Unless otherwise specified in the applicable Pricing Supplement, the Notes will
be denominated in, and payments of principal, premium, if any, and/or interest
will be made in, United States dollars. The Notes also may be denominated in,
and payments of principal, premium, if any, and/or interest may be made in, one
or more foreign currencies or composite currencies ("Foreign Currency Notes").
See "Special Provisions Relating to Foreign Currency Notes-- Payment of
Principal, Premium, if any, and Interest." The currency or composite currency in
which a Note is denominated, whether United States dollars or otherwise, is
herein referred to as the "Specified Currency." References herein to "United
States dollars," "U.S. dollars" and "U.S. $" are to the lawful currency of the
United States of America (the "United States").
Unless otherwise specified in the applicable Pricing Supplement, purchasers are
required to pay for the Notes in the applicable Specified Currencies. At the
present time, there are limited facilities in the United States for the
conversion of United States dollars into foreign currencies or composite
currencies and vice versa, and commercial banks do not generally offer
non-United States dollar checking or savings account facilities in the United
States. Each applicable Agent is prepared to arrange for the conversion of
United States dollars into the applicable Specified Currency to enable the
purchaser to pay for the related Foreign Currency Note, provided that a request
is made to such Agent on or prior to
S-5
<PAGE> 6
the fifth Business Day (as defined below) preceding the date of delivery of such
Foreign Currency Note, or by such other day as determined by such Agent. Each
such conversion will be made by an Agent on such terms and subject to such
conditions, limitations and charges as such Agent may from time to time
establish in accordance with its regular foreign exchange practices. All costs
of exchange will be borne by the purchaser of each such Foreign Currency Note.
See "Special Provisions Relating to Foreign Currency Notes."
Interest rates offered by the Operating Partnership with respect to the Notes
may differ depending upon, among other things, the aggregate principal amount of
Notes purchased in any single transaction. Interest rates or formulas and other
terms of Notes are subject to change by the Operating Partnership from time to
time, but no such change will affect any Note already issued or as to which an
offer to purchase has been accepted by the Operating Partnership.
Each Note will be issued in fully registered form as a Book-Entry Note or a
Certificated Note. The authorized denominations of each Note other than a
Foreign Currency Note will be $1,000 and integral multiples thereof, unless
otherwise specified in the applicable Pricing Supplement, while the authorized
denominations of each Foreign Currency Note will be specified in the applicable
Pricing Supplement.
Payments of principal of, premium, if any, and interest on, Book-Entry Notes
will be made by the Operating Partnership through the Trustee to DTC. See
"--Book-Entry Notes." In the case of Certificated Notes, payment of principal
and premium, if any, due on the Stated Maturity Date or any prior date on which
the principal, or an installment of principal, of each Certificated Note becomes
due and payable, whether by the declaration of acceleration, notice of
redemption at the option of the Operating Partnership, notice of the Holder's
option to elect repayment or otherwise (the Stated Maturity Date or such prior
date, as the case may be, is herein referred to as the "Maturity Date" with
respect to the principal of the applicable Note repayable on such date) will be
made in immediately available funds upon presentation and surrender thereof (or,
in the case of any repayment on an Optional Repayment Date, upon presentation
and surrender thereof and a duly completed election form in accordance with the
provisions described below) at the office or agency maintained by the Operating
Partnership for such purpose in the Borough of Manhattan, The City of New York.
Payment of interest due on the Maturity Date of each Certificated Note will be
made to the person to whom payment of the principal and premium, if any, shall
be made. Payment of interest due on each Certificated Note on any Interest
Payment Date (as defined below) other than the Maturity Date will be made at the
office or agency referred to above maintained by the Operating Partnership for
such purpose or, at the option of the Operating Partnership, may be made by
check mailed to the address of the Holder entitled thereto as such address shall
appear in the Security Register of the Operating Partnership. Notwithstanding
the foregoing, a Holder of $10,000,000 (or, if the applicable Specified Currency
is other than United States dollars, the equivalent thereof in such Specified
Currency) or more in aggregate principal amount of Notes (whether having
identical or different terms and provisions) will be entitled to receive
interest payments on any Interest Payment Date other than the Maturity Date by
wire transfer of immediately available funds if appropriate wire transfer
instructions have been received in writing by the Trustee or an agent designated
by the Operating Partnership for such purpose (the "Designated Agent") not less
than fifteen days prior to such Interest Payment Date. Any such wire transfer
instructions received by the Trustee or the Designated Agent shall remain in
effect until revoked by such Holder. For special payment terms applicable to
Foreign Currency Notes, see "Special Provisions Relating to Foreign Currency
Notes-- Payment of Principal, Premium, if any, and Interest."
As used herein, "Business Day" means any day, other than a Saturday or Sunday,
that is neither a legal holiday nor a day on which banking institutions are
authorized or required by law, regulation or executive order to close in The
City of New York or the City of Charlotte; provided, however, that with respect
to Foreign Currency Notes, such day is also not a day on which banking
institutions are authorized or required by law, regulation or executive order to
close in the Principal Financial Center (as defined below) of the country
issuing the Specified Currency (or if the Specified Currency is European
Currency Units ("ECU"), such day is not a day that appears as an ECU
non-settlement day on the display designated as "ISDE" on the Reuter Monitor
Money Rates Service (or a day so designated by the ECU Banking Association), or,
if ECU non-settlement days do not appear on that page (and are not so
designated), is not a day on which payments in ECU cannot be settled in the
international interbank market); provided, further, that, with respect to Notes
as to which LIBOR is an applicable Interest Rate Basis, such day is also a
London Business Day (as defined below). "London Business Day" means any day (i)
if the Index Currency (as defined below) is other than ECU, on which dealings in
such Index Currency are transacted in the London interbank market or (ii) if the
Index Currency is ECU, that does not appear as an ECU non-settlement day on the
display designated as "ISDE" on the Reuter Monitor Money Rates Service (or a day
so designated by the ECU Banking Association, or, if ECU non-settlement days do
not appear on
S-6
<PAGE> 7
that page (and are not so designated), is not a day on which payments in ECU
cannot be settled in the international interbank market).
"Principal Financial Center" means the capital city of the country issuing the
Specified Currency or, solely with respect to the calculation of LIBOR, the
Index Currency, except that with respect to United States dollars, Australian
dollars, Deutsche marks, Dutch guilders, Italian lire, Swiss francs and ECU, the
Principal Financial Center shall be The City of New York, Sydney, Frankfurt,
Amsterdam, Milan, Zurich and Luxembourg, respectively.
Book-Entry Notes may be transferred or exchanged only through DTC. See
"--Book-Entry Notes." Registration of transfer or exchange of Certificated Notes
will be made at the office or agency maintained by the Operating Partnership for
such purpose in the Borough of Manhattan, The City of New York. No service
charge will be made by the Operating Partnership, the Designated Agent or the
Trustee for any such registration of transfer or exchange of Notes, but the
Operating Partnership may require payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection therewith (other
than exchanges pursuant to the Indenture not involving any transfer).
Notwithstanding any provisions described in this Prospectus Supplement to the
contrary, if a Note specifies that an Addendum is attached thereto or that
"Other/Additional Provisions" apply, such Note will be subject to the terms
specified in such Addendum or "Other/Additional Provisions," as the case may be,
and will be described in the applicable Pricing Supplement.
REDEMPTION AT THE OPTION OF THE OPERATING PARTNERSHIP
Unless otherwise specified in the applicable Pricing Supplement, the Notes will
not be subject to any sinking fund. The applicable Pricing Supplement will
indicate if the Notes will be redeemable prior to the Stated Maturity Date and
the terms on which such Notes will be redeemable at the option of the Operating
Partnership. If so specified, the Notes will be subject to redemption at the
option of the Operating Partnership on any date on and after the applicable
Initial Redemption Date in whole or from time to time in part in increments of
$1,000 or such other minimum denomination specified in such Pricing Supplement
(provided that any remaining principal amount thereof shall be at least $1,000
or such minimum denomination), at the applicable Redemption Price (as defined
below), together with unpaid interest accrued to the date of redemption, on
notice given not more than 60 nor less than 30 calendar days prior to the date
of redemption and in accordance with the provisions of the Indenture. Unless
otherwise specified in the applicable Pricing Supplement, "Redemption Price,"
with respect to a Note, means an amount equal to the Initial Redemption
Percentage specified in the applicable Pricing Supplement (as adjusted by the
Annual Redemption Percentage Reduction, if applicable) multiplied by the unpaid
principal amount to be redeemed. The Initial Redemption Percentage, if any,
applicable to a Note shall decline at each anniversary of the Initial Redemption
Date by an amount equal to the applicable Annual Redemption Percentage
Reduction, if any, until the Redemption Price is equal to 100% of the unpaid
principal amount to be redeemed. See also "--Original Issue Discount Notes."
REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASES BY THE OPERATING PARTNERSHIP
The applicable Pricing Supplement will indicate if the Notes will be repayable
at the option of the Holders thereof on a date specified prior to the applicable
Maturity Date and, unless otherwise specified in the Pricing Supplement, such
Notes shall be repayable at a price equal to 100% of the principal amount
thereof, together with unpaid interest accrued to the date of repayment.
In order for such a Note to be repaid, the Trustee or the Designated Agent must
receive at least 30 days but not more than 60 days prior to the repayment date
(i) such Note with the form entitled "Option to Elect Repayment" on the reverse
of such Note duly completed or (ii) a telegram, telex, facsimile transmission,
or a letter from a member of a national securities exchange or the National
Association of Securities Dealers, Inc. or a commercial bank or trust company in
the United States setting forth the name of the Holder of such Note, the
principal amount of such Note, the principal amount of such Note to be repaid,
the certificate number or a description of the tenor and terms of such Note, a
statement that the option to elect repayment is being exercised thereby, and a
guarantee that such Note to be repaid, together with the duly completed form
entitled "Option to Elect Repayment" on the reverse of such Note, will be
received by the Trustee or the Designated Agent not later than the fifth
Business Day after the date of such telegram, telex, facsimile transmission or
letter; however, such telegram, telex, facsimile transmission, or letter shall
only be effective if such Note and duly completed form are received by the
Trustee or the Designated Agent by such fifth
S-7
<PAGE> 8
Business Day. Unless otherwise specified in the applicable Pricing Supplement,
exercise of the repayment option by the Holder of a Note will be irrevocable.
The repayment option may be exercised by the Holder of a Note for less than the
entire principal amount of the Note, but in that event, the principal amount of
the Note remaining outstanding after repayment must be in an authorized
denomination.
If a Note is represented by a Global Security, DTC's nominee will be the Holder
of such Note and therefore will be the only entity that can exercise a right to
repayment. In order to ensure that DTC's nominee will timely exercise a right to
repayment with respect to a particular Note, the Beneficial Owner of such Note
must instruct the broker or other Direct Participant (as defined below) or
Indirect Participant (as defined below) through which it holds an interest in
such Note to notify DTC of its desire to exercise a right to repayment.
Different firms have different deadlines for accepting instructions from their
customers. Accordingly, each Beneficial Owner should consult the broker or other
Direct Participant or Indirect Participant through which it holds an interest in
a Note in order to ascertain the deadline by which such an instruction must be
given in order for timely notice to be delivered to DTC.
If applicable, the Operating Partnership will comply with the requirements of
Rule 14e-1 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and any other securities laws or regulations in connection with any such
repayment.
The Operating Partnership may at any time purchase Notes at any price or prices
in the open market or otherwise. Notes so purchased by the Operating Partnership
may, at the discretion of the Operating Partnership, be held, resold or
surrendered to the Trustee or the Designated Agent for cancellation.
INTEREST
General
Unless otherwise specified in the applicable Pricing Supplement, each
interest-bearing Note will bear interest from its date of issue at the rate per
annum, in the case of a Fixed Rate Note, or pursuant to the interest rate
formula, in the case of a Floating Rate Note, in each case, as specified in the
applicable Pricing Supplement, until the principal thereof is paid or duly made
available for payment. Unless otherwise specified in the applicable Pricing
Supplement, interest payments in respect of Fixed Rate Notes and Floating Rate
Notes will equal the amount of interest accrued from and including the
immediately preceding Interest Payment Date in respect of which interest has
been paid or duly made available for payment (or from and including the date of
issue, if no interest has been paid or duly made available for payment with
respect to the applicable Note) to but excluding the applicable Interest Payment
Date or the Maturity Date, as the case may be (each, an "Interest Period").
Interest on Fixed Rate Notes and Floating Rate Notes will be payable in arrears
on each Interest Payment Date and on the Maturity Date. Unless otherwise
specified in the applicable Pricing Supplement, the first payment of interest on
any such Note originally issued between a Record Date (as defined below) and the
related Interest Payment Date will be made on the Interest Payment Date
immediately following the next succeeding Record Date to the Holder on such next
succeeding Record Date. Unless otherwise specified in the applicable Pricing
Supplement, a "Record Date" shall be the fifteenth calendar day (whether or not
a Business Day) immediately preceding the related Interest Payment Date.
Fixed Rate Notes
Interest on Fixed Rate Notes will be payable in arrears as specified in the
applicable Pricing Supplement (each, an "Interest Payment Date") and on the
Maturity Date. Unless otherwise specified in the applicable Pricing Supplement,
interest on Fixed Rate Notes will be computed on the basis of a 360-day year of
twelve 30-day months.
If any Interest Payment Date or the Maturity Date of a Fixed Rate Note falls on
a day that is not a Business Day, the required payment of principal, premium, if
any, and/or interest will be made on the next succeeding Business Day with the
same force and effect as if made on the date such payment was due, and no
interest will accrue on such payment for the period from and after such Interest
Payment Date or the Maturity Date, as the case may be, to the date of such
payment on the next succeeding Business Day.
Floating Rate Notes
Unless otherwise specified in the applicable Pricing Supplement, Floating Rate
Notes will be issued as described below. The applicable Pricing Supplement will
specify certain terms with respect to which each Floating Rate Note is being
S-8
<PAGE> 9
delivered, including: whether such Floating Rate Note is a "Regular Floating
Rate Note," a "Floating Rate/Fixed Rate Note" or an "Inverse Floating Rate
Note," the Fixed Rate Commencement Date, if applicable, Fixed Interest Rate, if
applicable, Interest Rate Basis or Bases, Initial Interest Rate, if any, Initial
Interest Reset Date, Interest Reset Period and Dates, Interest Payment Period
and Dates, Index Maturity, Maximum Interest Rate and/or Minimum Interest Rate,
if any, and Spread and/or Spread Multiplier, if any, as such terms are defined
below. If one or more of the applicable Interest Rate Bases is LIBOR or the CMT
Rate, the applicable Pricing Supplement will specify the Index Currency, if any,
and Designated LIBOR Page or the Designated CMT Maturity Index and Designated
CMT Telerate Page, respectively, as such terms are defined below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(i) Unless such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," or an "Inverse Floating Rate Note" or as having an
Addendum attached or having "Other/Additional Provisions" apply relating to
a different interest rate formula, such Floating Rate Note will be
designated as a "Regular Floating Rate Note" and, except as described below
or in the applicable Pricing Supplement, will bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases (a)
plus or minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any. Commencing on the Initial Interest
Reset Date, the rate at which interest on such Regular Floating Rate Note
shall be payable shall be reset as of each Interest Reset Date; provided,
however, that the interest rate in effect for the period, if any, from the
date of issue to the Initial Interest Reset Date will be the Initial
Interest Rate.
(ii) If such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," then, except as described below or in the applicable
Pricing Supplement, such Floating Rate Note will bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases (a)
plus or minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any. Commencing on the Initial Interest
Reset Date, the rate at which interest on such Floating Rate/Fixed Rate
Note shall be payable shall be reset as of each Interest Reset Date;
provided, however, that (y) the interest rate in effect for the period, if
any, from the date of issue to the Initial Interest Reset Date will be the
Initial Interest Rate and (z) the interest rate in effect for the period
commencing on the Fixed Rate Commencement Date to the Maturity Date shall
be the Fixed Interest Rate, if such rate is specified in the applicable
Pricing Supplement or, if no such Fixed Interest Rate is specified, the
interest rate in effect thereon on the day immediately preceding the Fixed
Rate Commencement Date.
(iii) If such Floating Rate Note is designated as an "Inverse Floating
Rate Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest at the Fixed
Interest Rate minus the rate determined by reference to the applicable
Interest Rate Basis or Bases (a) plus or minus the applicable Spread, if
any, and/or (b) multiplied by the applicable Spread Multiplier, if any;
provided, however, that, unless otherwise specified in the applicable
Pricing Supplement, the interest rate thereon will not be less than zero.
Commencing on the Initial Interest Reset Date, the rate at which interest
on such Inverse Floating Rate Note shall be payable shall be reset as of
each Interest Reset Date; provided, however, that the interest rate in
effect for the period, if any, from the date of issue to the Initial
Interest Reset Date will be the Initial Interest Rate.
The "Spread" is the number of basis points to be added to or subtracted from the
related Interest Rate Basis or Bases applicable to such Floating Rate Note. The
"Spread Multiplier" is the percentage of the related Interest Rate Basis or
Bases applicable to such Floating Rate Note by which such Interest Rate Basis or
Bases will be multiplied to determine the applicable interest rate on such
Floating Rate Note. The "Index Maturity" is the period to maturity of the
instrument or obligation with respect to which the related Interest Rate Basis
or Bases will be calculated.
Unless otherwise specified in the applicable Pricing Supplement, the interest
rate with respect to each Interest Rate Basis will be determined in accordance
with the applicable provisions below. Except as set forth above or in the
applicable Pricing Supplement, the interest rate in effect on each day shall be
(i) if such day is an Interest Reset Date, the interest rate determined as of
the Interest Determination Date (as defined below) immediately preceding such
Interest Reset Date or (ii) if such day is not an Interest Reset Date, the
interest rate determined as of the Interest Determination Date immediately
preceding the most recent Interest Reset Date.
Interest on Floating Rate Notes will be determined by reference to the
applicable Interest Rate Basis or Interest Rate Bases, which may, as described
below, include (i) the CD Rate, (ii) the CMT Rate, (iii) the Commercial Paper
Rate,
S-9
<PAGE> 10
(iv) the Eleventh District Cost of Funds Rate, (v) the Federal Funds Rate, (vi)
LIBOR, (vii) the Prime Rate, (viii) the Treasury Rate, or (ix) such other
Interest Rate Basis or interest rate formula as may be specified in the
applicable Pricing Supplement; provided, however, that the interest rate in
effect on a Floating Rate Note for the period, if any, from the date of issue to
the Initial Interest Reset Date will be the Initial Interest Rate; provided,
further, that with respect to a Floating Rate/Fixed Rate Note the interest rate
in effect for the period commencing on the Fixed Rate Commencement Date to the
Maturity Date shall be the Fixed Interest Rate, if such rate is specified in the
applicable Pricing Supplement or, if no such Fixed Interest Rate is specified,
the interest rate in effect thereon on the day immediately preceding the Fixed
Rate Commencement Date.
The applicable Pricing Supplement will specify whether the rate of interest on
the related Floating Rate Note will be reset daily, weekly, monthly, quarterly,
semiannually or annually or on such other specified basis (each, an "Interest
Reset Period") and the dates on which such rate of interest will be reset (each,
an "Interest Reset Date"). Unless otherwise specified in the applicable Pricing
Supplement, the Interest Reset Dates will be, in the case of Floating Rate Notes
which reset: (i) daily, each Business Day; (ii) weekly, the Wednesday of each
week (with the exception of weekly reset Floating Rate Notes as to which the
Treasury Rate is an applicable Interest Rate Basis, which will reset the Tuesday
of each week, except as described below); (iii) monthly, the third Wednesday of
each month (with the exception of monthly reset Floating Rate Notes as to which
the Eleventh District Cost of Funds Rate is an applicable Interest Rate Basis,
which will reset on the first calendar day of the month); (iv) quarterly, the
third Wednesday of March, June, September and December of each year; (v)
semiannually, the third Wednesday of the two months specified in the applicable
Pricing Supplement; and (vi) annually, the third Wednesday of the month
specified in the applicable Pricing Supplement; provided, however, that, with
respect to Floating Rate/Fixed Rate Notes, the rate of interest thereon will not
reset after the applicable Fixed Rate Commencement Date. If any Interest Reset
Date for any Floating Rate Note would otherwise be a day that is not a Business
Day, such Interest Reset Date will be postponed to the next succeeding Business
Day, except that in the case of a Floating Rate Note as to which LIBOR is an
applicable Interest Rate Basis and such Business Day falls in the next
succeeding calendar month, such Interest Reset Date will be the immediately
preceding Business Day. In addition, in the case of a Floating Rate Note as to
which the Treasury Rate is an applicable Interest Rate Basis and the Interest
Determination Date would otherwise fall on an Interest Reset Date, then such
Interest Reset Date will be postponed to the next succeeding Business Day.
The interest rate applicable to each Interest Reset Period commencing on the
related Interest Reset Date will be the rate determined as of the applicable
Interest Determination Date and calculated on or prior to the Calculation Date
(as defined below), except with respect to LIBOR and the Eleventh District Cost
of Funds Rate, which will be calculated as of such Interest Determination Date.
The "Interest Determination Date" with respect to the CD Rate, the CMT Rate, the
Commercial Paper Rate, the Federal Funds Rate and the Prime Rate will be the
second Business Day immediately preceding the applicable Interest Reset Date;
the "Interest Determination Date" with respect to the Eleventh District Cost of
Funds Rate will be the last business day of the month immediately preceding the
applicable Interest Reset Date on which the Federal Home Loan Bank of San
Francisco (the "FHLB of San Francisco") publishes the Index (as defined below);
and the "Interest Determination Date" with respect to LIBOR will be the second
London Business Day immediately preceding the applicable Interest Reset Date,
unless the Index Currency is British pounds sterling, in which case the
"Interest Determination Date" will be the applicable Interest Reset Date. With
respect to the Treasury Rate, the "Interest Determination Date" will be the day
in the week in which the applicable Interest Reset Date falls on which day
Treasury Bills (as defined below) are normally auctioned (Treasury Bills are
normally sold at an auction held on Monday of each week, unless that day is a
legal holiday, in which case the auction is normally held on the following
Tuesday, except that such auction may be held on the preceding Friday);
provided, however, that if an auction is held on the Friday of the week
preceding the applicable Interest Reset Date, the Interest Determination Date
will be such preceding Friday. The "Interest Determination Date" pertaining to a
Floating Rate Note the interest rate of which is determined by reference to two
or more Interest Rate Bases will be the most recent Business Day which is at
least two Business Days prior to the applicable Interest Reset Date for such
Floating Rate Note on which each Interest Rate Basis is determinable. Each
Interest Rate Basis will be determined as of such date, and the applicable
interest rate will take effect on the applicable Interest Reset Date.
A Floating Rate Note may also have either or both of the following: (i) a
Maximum Interest Rate, or ceiling, that may accrue during any Interest Period
and (ii) a Minimum Interest Rate, or floor, that may accrue during any Interest
Period. In addition to any Maximum Interest Rate that may apply to any Floating
Rate Note, the interest rate on Floating Rate
S-10
<PAGE> 11
Notes will in no event be higher than the maximum rate permitted by New York
law, as the same may be modified by United States law of general application.
Except as provided below or in the applicable Pricing Supplement, interest will
be payable, in the case of Floating Rate Notes which reset: (i) daily, weekly or
monthly, on the third Wednesday of each month or the third Wednesday of March,
June, September and December of each year, as specified in the applicable
Pricing Supplement; (ii) quarterly, on the third Wednesday of March, June,
September and December of each year; (iii) semiannually, on the third Wednesday
of the two months of each year specified in the applicable Pricing Supplement;
and (iv) annually, on the third Wednesday of the month of each year specified in
the applicable Pricing Supplement (each, an "Interest Payment Date") and, in
each case, on the Maturity Date. If any Interest Payment Date other than the
Maturity Date for any Floating Rate Note would otherwise be a day that is not a
Business Day, such Interest Payment Date will be postponed to the next
succeeding Business Day, except that in the case of a Floating Rate Note as to
which LIBOR is an applicable Interest Rate Basis and such Business Day falls in
the next succeeding calendar month, such Interest Payment Date will be the
immediately preceding Business Day. If the Maturity Date of a Floating Rate Note
falls on a day that is not a Business Day, the required payment of principal,
premium, if any, and interest will be made on the next succeeding Business Day
with the same force and effect as if made on the date such payment was due, and
no interest will accrue on such payment for the period from and after the
Maturity Date to the date of such payment on the next succeeding Business Day.
All percentages resulting from any calculation on Floating Rate Notes will be
rounded to the nearest one hundred-thousandth of a percentage point, with
five-one millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) would be rounded to 9.87655% (or .0987655)), and all amounts used in
or resulting from such calculation on Floating Rate Notes will be rounded, in
the case of United States dollars, to the nearest cent or, in the case of a
foreign currency or composite currency, to the nearest unit (with one-half cent
or unit being rounded upwards).
With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its principal amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in the applicable Interest Period. Unless otherwise specified in the
applicable Pricing Supplement, the interest factor for each such day will be
computed by dividing the interest rate applicable to such day by 360, in the
case of Floating Rate Notes for which an applicable Interest Rate Basis is the
CD Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number of days
in the year in the case of Floating Rate Notes for which an applicable Interest
Rate Basis is the CMT Rate or the Treasury Rate. Unless otherwise specified in
the applicable Pricing Supplement, the interest factor for Floating Rate Notes
for which the interest rate is calculated with reference to two or more Interest
Rate Bases will be calculated in each period in the same manner as if only one
of the applicable Interest Rate Bases applied as specified in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, First Union
National Bank will be the "Calculation Agent" with respect to any Floating Rate
Note. Upon request of the Holder of any Floating Rate Note, the Calculation
Agent will disclose the interest rate then in effect and, if determined, the
interest rate that will become effective as a result of a determination made for
the next succeeding Interest Reset Date with respect to such Floating Rate Note.
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date," if applicable, pertaining to any Interest Determination Date
will be the earlier of (i) the tenth calendar day after such Interest
Determination Date, or, if such day is not a Business Day, the next succeeding
Business Day or (ii) the Business Day immediately preceding the applicable
Interest Payment Date or the Maturity Date, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, the Calculation
Agent shall determine each Interest Rate Basis in accordance with the following
provisions.
CD Rate. Unless otherwise specified in the applicable Pricing Supplement, "CD
Rate" means, with respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference to
the CD Rate (a "CD Rate Interest Determination Date"), the rate on such date for
negotiable United States dollar certificates of deposit having the Index
Maturity specified in the applicable Pricing Supplement as published by the
Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates" or any successor publication ("H.15(519)")
under the heading "CDs (Secondary Market)," or, if not published by 3:00 P.M.,
New York City time, on the related Calculation Date, the rate on such CD Rate
Interest Determination Date for negotiable United States dollar certificates of
deposit of the Index Maturity specified in the applicable Pricing
S-11
<PAGE> 12
Supplement as published by the Federal Reserve Bank of New York in its daily
statistical release "Composite 3:30 P.M. Quotations for U.S. Government
Securities" or any successor publication ("Composite Quotations") under the
heading "Certificates of Deposit." If such rate is not yet published in either
H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on the
related Calculation Date, then the CD Rate on such CD Rate Interest
Determination Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the secondary market offered rates as of 10:00 A.M., New York
City time, on such CD Rate Interest Determination Date, of three leading nonbank
dealers in negotiable United States dollar certificates of deposit in The City
of New York (which may include any of the Agents or their affiliates) selected
by the Calculation Agent for negotiable United States dollar certificates of
deposit of major United States money center banks in the market for negotiable
United States dollar certificates of deposit with a remaining maturity closest
to the Index Maturity specified in the applicable Pricing Supplement in an
amount that is representative for a single transaction in that market at that
time; provided, however, that if the dealers so selected by the Calculation
Agent are not quoting as mentioned in this sentence, the CD Rate determined as
of such CD Rate Interest Determination Date will be the CD Rate in effect on
such CD Rate Interest Determination Date.
CMT Rate. Unless otherwise specified in the applicable Pricing Supplement, "CMT
Rate" means, with respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference to
the CMT Rate (a "CMT Rate Interest Determination Date"), the rate displayed on
the Designated CMT Telerate Page under the caption ". . . Treasury Constant
Maturities . . . Federal Reserve Board Release H.15. . . Mondays Approximately
3:45 P.M.," under the column for the Designated CMT Maturity Index for (i) if
the Designated CMT Telerate Page is 7055, the rate on such CMT Rate Interest
Determination Date and (ii) if the Designated CMT Telerate Page is 7052, the
weekly or monthly average, as specified in the applicable Pricing Supplement,
for the week or the month, as applicable, ended immediately preceding the week
or month, as applicable, in which the related CMT Rate Interest Determination
Date occurs. If such rate is no longer displayed on the relevant page or is not
displayed by 3:00 P.M., New York City time, on the related Calculation Date,
then the CMT Rate for such CMT Rate Interest Determination Date will be such
treasury constant maturity rate for the Designated CMT Maturity Index as
published in the relevant H.15(519). If such rate is no longer published or is
not published by 3:00 P.M., New York City time, on the related Calculation Date,
then the CMT Rate on such CMT Rate Interest Determination Date will be such
treasury constant maturity rate for the Designated CMT Maturity Index (or other
United States Treasury rate for the Designated CMT Maturity Index) for the CMT
Rate Interest Determination Date with respect to such Interest Reset Date as may
then be published by either the Board of Governors of the Federal Reserve System
or the United States Department of the Treasury that the Calculation Agent
determines to be comparable to the rate formerly displayed on the Designated CMT
Telerate Page and published in the relevant H.15(519). If such information is
not provided by 3:00 P.M., New York City time, on the related Calculation Date,
then the CMT Rate on the CMT Rate Interest Determination Date will be calculated
by the Calculation Agent and will be a yield to maturity, based on the
arithmetic mean of the secondary market closing offer side prices as of
approximately 3:30 P.M., New York City time, on such CMT Rate Interest
Determination Date reported, according to their written records, by three
leading primary United States government securities dealers (each, a "Reference
Dealer") in The City of New York (which may include any of the Agents or their
affiliates) selected by the Calculation Agent (from five such Reference Dealers
selected by the Calculation Agent and eliminating the highest quotation (or, in
the event of equality, one of the highest) and the lowest quotation (or, in the
event of equality, one of the lowest)), for the most recently issued direct
noncallable fixed rate obligations of the United States ("Treasury Notes") with
an original maturity of approximately the Designated CMT Maturity Index and a
remaining term to maturity of not less than such Designated CMT Maturity Index
minus one year. If the Calculation Agent is unable to obtain three such Treasury
Note quotations, the CMT Rate on such CMT Rate Interest Determination Date will
be calculated by the Calculation Agent and will be a yield to maturity based on
the arithmetic mean of the secondary market offer side prices as of
approximately 3:30 P.M., New York City time, on such CMT Rate Interest
Determination Date of three Reference Dealers in The City of New York (from five
such Reference Dealers selected by the Calculation Agent and eliminating the
highest quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest)), for
Treasury Notes with an original maturity of the number of years that is the next
highest to the Designated CMT Maturity Index and a remaining term to maturity
closest to the Designated CMT Maturity Index and in an amount of at least
$100,000,000. If three or four (and not five) of such Reference Dealers are
quoting as described above, then the CMT Rate will be based on the arithmetic
mean of the offer prices obtained and neither the highest nor the lowest of such
quotes will be eliminated; provided, however, that if fewer than three Reference
Dealers so selected by the Calculation Agent are quoting as mentioned herein,
the CMT Rate determined as of such CMT Rate Interest
S-12
<PAGE> 13
Determination Date will be the CMT Rate in effect on such CMT Rate Interest
Determination Date. If two Treasury Notes with an original maturity as described
in the second preceding sentence have remaining terms to maturity equally close
to the Designated CMT Maturity Index, the Calculation Agent will obtain
quotations for the Treasury Note with the shorter remaining term to maturity and
will use such quotations to calculate the CMT Rate as set forth above.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service (or any successor service) on the page specified in the applicable
Pricing Supplement (or any other page as may replace such page on that service
(or any successor service) for the purpose of displaying Treasury Constant
Maturities as reported in H.15(519)) for the purpose of displaying Treasury
Constant Maturities as reported in H.15(519). If no such page is specified in
the applicable Pricing Supplement, the Designated CMT Telerate Page shall be
7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either one, two, three, five, seven, 10, 20 or 30
years) specified in the applicable Pricing Supplement with respect to which the
CMT Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be two years.
Commercial Paper Rate. Unless otherwise specified in the applicable Pricing
Supplement, "Commercial Paper Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Commercial Paper Rate (a "Commercial Paper
Rate Interest Determination Date"), the Money Market Yield (as defined below) on
such date of the rate for commercial paper having the Index Maturity specified
in the applicable Pricing Supplement as published in H.15(519) under the heading
"Commercial Paper--Non-Financial." In the event that such rate is not published
by 3:00 P.M., New York City time, on the related Calculation Date, then the
Commercial Paper Rate on such Commercial Paper Rate Interest Determination Date
will be the Money Market Yield of the rate for commercial paper having the Index
Maturity specified in the applicable Pricing Supplement as published in
Composite Quotations under the heading "Commercial Paper--Non Financial" (with
an Index Maturity of one month or three months being deemed to be equivalent to
an Index Maturity of 30 days or 90 days, respectively). If such rate is not yet
published in either H.15(519) or Composite Quotations by 3:00 P.M., New York
City time, on the related Calculation Date, then the Commercial Paper Rate on
such Commercial Paper Rate Interest Determination Date will be calculated by the
Calculation Agent and will be the Money Market Yield of the arithmetic mean of
the offered rates at approximately 11:00 A.M., New York City time, on such
Commercial Paper Rate Interest Determination Date of three leading dealers of
commercial paper in The City of New York (which may include any of the Agents or
their affiliates) selected by the Calculation Agent for commercial paper having
the Index Maturity specified in the applicable Pricing Supplement placed for an
industrial issuer whose bond rating is "AA," or the equivalent, from a
nationally recognized statistical rating organization; provided, however, that
if the dealers so selected by the Calculation Agent are not quoting as mentioned
in this sentence, the Commercial Paper Rate determined as of such Commercial
Paper Rate Interest Determination Date will be the Commercial Paper Rate in
effect on such Commercial Paper Rate Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated in
accordance with the following formula:
<TABLE>
<S> <C> <C> <C> <C>
D X 360
Money Market Yield = ------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the Interest Period for which interest is being calculated.
Eleventh District Cost of Funds Rate. Unless otherwise specified in the
applicable Pricing Supplement, "Eleventh District Cost of Funds Rate" means,
with respect to any Interest Determination Date relating to a Floating Rate Note
for which the interest rate is determined with reference to the Eleventh
District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate Interest
Determination Date"), the rate equal to the monthly weighted average cost of
funds for the calendar month immediately preceding the month in which such
Eleventh District Cost of Funds Rate Interest Determination Date falls, as set
forth under the caption "11th District" on Telerate Page 7058 as of 11:00 A.M.,
San Francisco time, on such Eleventh District Cost of Funds Rate Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on such
Eleventh District Cost of Funds Rate Interest Determination Date then the
Eleventh District Cost of Funds Rate on such Eleventh District Cost of Funds
Rate Interest Determination Date shall be the monthly weighted average cost of
funds paid by member institutions of the Eleventh Federal Home Loan Bank
District
S-13
<PAGE> 14
that was most recently announced (the "Index") by the FHLB of San Francisco, as
such cost of funds for the calendar month immediately preceding such Eleventh
District Cost of Funds Rate Interest Determination Date. If the FHLB of San
Francisco fails to announce the Index on or prior to such Eleventh District Cost
of Funds Rate Interest Determination Date for the calendar month immediately
preceding such Eleventh District Cost of Funds Rate Interest Determination Date,
the Eleventh District Cost of Funds Rate determined as of such Eleventh District
Cost of Funds Rate Interest Determination Date will be the Eleventh District
Cost of Funds Rate in effect on such Eleventh District Cost of Funds Rate
Interest Determination Date.
Federal Funds Rate. Unless otherwise specified in the applicable Pricing
Supplement, "Federal Funds Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Interest Determination Date"), the rate on such date for United States dollar
federal funds as published in H.15(519) under the heading "Federal Funds
(Effective)" or, if not published by 3:00 P.M., New York City time, on the
related Calculation Date, the rate on such Federal Funds Rate Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate." If such rate is not published in either
H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on the
related Calculation Date, then the Federal Funds Rate on such Federal Funds Rate
Interest Determination Date will be calculated by the Calculation Agent and will
be the arithmetic mean of the rates for the last transaction in overnight United
States dollar federal funds arranged by three leading brokers of federal funds
transactions in The City of New York (which may include any of the Agents or
their affiliates) selected by the Calculation Agent prior to 9:00 A.M., New York
City time, on such Federal Funds Rate Interest Determination Date; provided,
however, that if the brokers so selected by the Calculation Agent are not
quoting as mentioned in this sentence, the Federal Funds Rate determined as of
such Federal Funds Rate Interest Determination Date will be the Federal Funds
Rate in effect on such Federal Funds Rate Interest Determination Date.
LIBOR. Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
means the rate determined in accordance with the following provisions:
(i) With respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference
to LIBOR (a "LIBOR Interest Determination Date"), LIBOR will be either: (a)
if "LIBOR Reuters" is specified in the applicable Pricing Supplement, the
arithmetic mean of the offered rates (unless the Designated LIBOR Page by
its terms provides only for a single rate, in which case such single rate
shall be used) for deposits in the Index Currency having the index Maturity
specified in such Pricing Supplement, commencing on the applicable Interest
Reset Date, that appear (or, if only a single rate is required as
aforesaid, appears) on the Designated LIBOR Page as of 11:00 A.M., London
time, on such LIBOR Interest Determination Date, or (b) if "LIBOR Telerate"
is specified in the applicable Pricing Supplement or if neither "LIBOR
Reuters" nor "LIBOR Telerate" is specified in the applicable Pricing
Supplement as the method for calculating LIBOR, the rate for deposits in
the Index Currency having the Index Maturity specified in such Pricing
Supplement, commencing on such Interest Reset Date, that appears on the
Designated LIBOR Page as of 11:00 A.M., London time, on such LIBOR Interest
Determination Date. If fewer than two such offered rates appear, or if no
such rate appears, as applicable, LIBOR on such LIBOR Interest
Determination Date will be determined in accordance with the provisions
described in clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which
fewer than two offered rates appear, or no rate appears, as the case may
be, on the Designated LIBOR Page as specified in clause (i) above, the
Calculation Agent will request the principal London offices of each of four
major reference banks in the London interbank market, as selected by the
Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in the Index Currency for the period of the Index
Maturity specified in the applicable Pricing Supplement, commencing on the
applicable Interest Reset Date, to prime banks in the London interbank
market at approximately 11:00 A.M., London time, on such LIBOR Interest
Determination Date and in a principal amount that is representative for a
single transaction in such Index Currency in such market at such time. If
at least two such quotations are so provided, then LIBOR on such LIBOR
Interest Determination Date will be the arithmetic mean of such quotations.
If fewer than two such quotations are so provided, then LIBOR on such LIBOR
Interest Determination Date will be the arithmetic mean of the rates quoted
at approximately 11:00 A.M., in the applicable Principal Financial Center,
on such LIBOR Interest Determination Date by three major banks in such
Principal Financial Center selected by the Calculation Agent for loans in
the Index Currency to leading European banks,
S-14
<PAGE> 15
having the Index Maturity specified in the applicable Pricing
Supplement and in a principal amount that is representative for a
single transaction in such Index Currency in such market at such time;
provided, however, that if the banks so selected by the Calculation
Agent are not quoting as mentioned in this sentence, LIBOR determined
as of such LIBOR Interest Determination Date will be LIBOR in effect
on such LIBOR Interest Determination Date.
"Index Currency" means the currency or composite currency specified in the
applicable Pricing Supplement as to which LIBOR shall be calculated. If no such
currency or composite currency is specified in the applicable Pricing
Supplement, the Index Currency shall be United States dollars.
"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the
applicable Pricing Supplement, the display on the Reuter Monitor Money Rates
Service (or any successor service) on the page specified in such Pricing
Supplement (or any other page as may replace such page or such service (or any
successor service)) for the purpose of displaying the London interbank rates of
major banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is
specified in the applicable Pricing Supplement or neither "LIBOR Reuters" nor
"LIBOR Telerate" is specified in the applicable Pricing Supplement as the method
for calculating LIBOR, the display on the Dow Jones Telerate Service (or any
successor service) on the page specified in such Pricing Supplement (or any
other page as may replace such page or such service (or any successor service))
for the purpose of displaying the London interbank rates of major banks for the
applicable Index Currency.
Prime Rate. Unless otherwise specified in the applicable Pricing Supplement,
"Prime Rate" means, with respect to any Interest Determination Date relating to
a Floating Rate Note for which the interest rate is determined with reference to
the Prime Rate (a "Prime Rate Interest Determination Date"), the rate on such
date as is published in H.15(519) under the heading "Bank Prime Loan." If such
rate is not published prior to 3:00 P.M., New York City time, on the related
Calculation Date, then the Prime Rate shall be the arithmetic mean of the rates
of interest publicly announced by each bank that appears on the Reuters Screen
USPRIME1 Page (as defined below) as such bank's prime rate or base lending rate
as in effect for such Prime Rate Interest Determination Date. If fewer than four
such rates appear on the Reuters Screen USPRIME1 Page for such Prime Rate
Interest Determination Date, then the Prime Rate shall be the arithmetic mean of
the prime rates quoted on the basis of the actual number of days in the year
divided by a 360-day year as of the close of business on such Prime Rate
Interest Determination Date by four major money center banks in The City of New
York selected by the Calculation Agent. If fewer than four such quotations are
so provided, then the Prime Rate shall be the arithmetic mean of four prime
rates quoted on the basis of the actual number of days in the year divided by a
360-day year as of the close of business on such Prime Rate Interest
Determination Date as furnished in The City of New York by the major money
center banks, if any, that have provided such quotations and by a reasonable
number of substitute banks or trust companies to obtain four such prime rate
quotations, provided such substitute banks or trust companies are organized and
doing business under the laws of the United States, or any State thereof, each
having total equity capital of at least $500,000,000 and being subject to
supervision or examination by Federal or State authority, selected by the
Calculation Agent to provide such rate or rates; provided, however, that if the
banks or trust companies so selected by the Calculation Agent are not quoting as
mentioned in this sentence, the Prime Rate determined as of such Prime Rate
Interest Determination Date will be the Prime Rate in effect on such Prime Rate
Interest Determination Date.
"Reuters Screen USPRIME1 Page" means the display designated as page "USPRIME1"
on the Reuter Monitor Money Rates Service (or any successor service) or such
other page as may replace the USPRIME1 Page on the Reuter Monitor Money Rates
Service (or any successor service) for the purpose of displaying prime rates or
base lending rates of major United States banks.
Treasury Rate. Unless otherwise specified in the applicable Pricing Supplement,
"Treasury Rate" means, with respect to any Interest Determination Date relating
to a Floating Rate Note for which the interest rate is determined by reference
to the Treasury Rate (a "Treasury Rate Interest Determination Date"), the rate
from the auction held on such Treasury Rate Interest Determination Date (the
"Auction") of direct obligations of the United States ("Treasury Bills") having
the Index Maturity specified in the applicable Pricing Supplement, as such rate
is published in H.15(519) under the heading "Treasury bills-auction average
(investment)" or, if not published by 3:00 P.M., New York City time, on the
related Calculation Date, the auction average rate of such Treasury Bills
(expressed as a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) as otherwise announced by the United
States Department of the Treasury. In the event that the results of the Auction
of Treasury Bills having the Index Maturity
S-15
<PAGE> 16
specified in the applicable Pricing Supplement are not reported as provided by
3:00 P.M., New York City time, on the related Calculation Date, or if no such
Auction is held, then the Treasury Rate will be calculated by the Calculation
Agent and will be a yield to maturity (expressed as a bond equivalent on the
basis of a year of 365 or 366 days, as applicable, and applied on a daily basis)
of the arithmetic mean of the secondary market bid rates, as of approximately
3:30 P.M., New York City time, on such Treasury Rate Interest Determination
Date, of three leading primary United States government securities dealers
(which may include any of the Agents or their affiliates) selected by the
Calculation Agent, for the issue of Treasury Bills with a remaining maturity
closest to the Index Maturity specified in the applicable Pricing Supplement;
provided, however, that if the dealers so selected by the Calculation Agent are
not quoting as mentioned in this sentence, the Treasury Rate determined as of
such Treasury Rate Interest Determination Date will be the Treasury Rate in
effect on such Treasury Rate Interest Determination Date.
AMORTIZING NOTES
The Operating Partnership may from time to time offer amortizing notes
("Amortizing Notes"). Unless otherwise specified in the applicable Pricing
Supplement, interest on each Amortizing Note will be computed on the basis of a
360-day year of twelve 30-day months. Payments with respect to Amortizing Notes
will be applied first to interest due and payable thereon and then to the
reduction of the unpaid principal amount thereof. Further information concerning
additional terms and provisions of Amortizing Notes will be specified in the
applicable Pricing Supplement, including a table setting forth repayment
information for such Amortizing Notes.
ORIGINAL ISSUE DISCOUNT NOTES
The Operating Partnership may offer Notes ("Discount Notes") from time to time
that have an Issue Price (as specified in the applicable Pricing Supplement)
that is less than 100% of the principal amount thereof (i.e., par). Discount
Notes may not bear any interest currently or may bear interest at a rate that is
below market rates at the time of issuance. The difference between the Issue
Price of a Discount Note and par is referred to herein as the "Discount." In the
event of redemption, repayment or acceleration of maturity of a Discount Note,
the amount payable to the Holder of such Discount Note will be equal to the sum
of: (i) the Issue Price (increased by any accruals of Discount) and, in the
event of any redemption of such Discount Note (if applicable), multiplied by the
Initial Redemption Percentage specified in the applicable Pricing Supplement (as
adjusted by the Annual Redemption Percentage Reduction, if applicable); and (ii)
any unpaid interest on such Discount Note accrued from the date of issue to the
date of such redemption, repayment or acceleration of maturity.
Unless otherwise specified in the applicable Pricing Supplement, for purposes of
determining the amount of Discount that has accrued as of any date on which a
redemption, repayment or acceleration of maturity occurs for a Discount Note,
such Discount will be accrued using a constant yield method. The constant yield
will be calculated using a 30-day month, 360-day year convention, a compounding
period that, except for the Initial Period (as defined below), corresponds to
the shortest period between Interest Payment Dates for the applicable Discount
Note (with ratable accruals within a compounding period), a coupon rate equal to
the initial coupon rate applicable to such Discount Note and an assumption that
the maturity of such Discount Note will not be accelerated. If the period from
the date of issue to the initial Interest Payment Date for a Discount Note (the
"Initial Period") is shorter than the compounding period for such Discount Note,
a proportionate amount of the yield for an entire compounding period will be
accrued. If the Initial Period is longer than the compounding period, then such
period will be divided into a regular compounding period and a short period with
the short period being treated as provided in the preceding sentence. The
accrual of the applicable Discount may differ from the accrual of original issue
discount for purposes of the Internal Revenue Code of 1986, as amended (the
"Code"), certain Discount Notes may not be treated as having original issue
discount within the meaning of the Code, and Notes other than Discount Notes may
be treated as issued with original issue discount for federal income tax
purposes. See "Certain United States Federal Income Tax Considerations" herein.
INDEXED NOTES
Notes may be issued with the amount of principal, premium and/or interest
payable in respect thereof to be determined with reference to the price or
prices of specified commodities or stocks, to the exchange rate of one or more
designated currencies (including a composite currency such as the ECU) relative
to an indexed currency or to such other price(s) or exchange rate(s) ("Indexed
Notes"), as specified in the applicable Pricing Supplement. In certain cases,
Holders of
S-16
<PAGE> 17
Indexed Notes may receive a principal payment on the Maturity Date that is
greater than or less than the principal amount of such Indexed Notes depending
upon the relative value on the Maturity Date of the specified indexed item.
Information as to the method for determining the amount of principal, premium,
if any, and/or interest payable in respect of Indexed Notes, certain historical
information with respect to the specified indexed item and certain tax
considerations associated with an investment in Indexed Notes will be specified
in the applicable Pricing Supplement. See also "Risk Factors."
CERTAIN COVENANTS
Limitations on Incurrence of Indebtedness. The Operating Partnership will not,
and will not permit any Subsidiary (as defined below) to, incur any Indebtedness
(as defined below) if, immediately after giving effect to the incurrence of such
additional Indebtedness and the application of the proceeds thereof, the
aggregate principal amount of all outstanding Indebtedness of the Operating
Partnership and its Subsidiaries on a consolidated basis determined in
accordance with GAAP is greater than 60% of the sum of (without duplication) (i)
the Total Assets (as defined below) of the Operating Partnership and its
Subsidiaries as of the end of the calendar quarter covered in the Operating
Partnership's Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as
the case may be, most recently filed with the Securities and Exchange Commission
(the "Commission") (or, if such filing is not permitted under the Exchange Act,
with the Trustee) prior to the incurrence of such additional Indebtedness and
(ii) the purchase price of any real estate assets or mortgages receivable
acquired, and the amount of any securities offering proceeds received (to the
extent that such proceeds were not used to acquire real estate assets or
mortgages receivable or used to reduce Indebtedness), by the Operating
Partnership or any Subsidiary since the end of such calendar quarter, including
those proceeds obtained in connection with the incurrence of such additional
Indebtedness.
In addition to the foregoing limitation on the incurrence of Indebtedness, the
Operating Partnership will not, and will not permit any Subsidiary to, incur any
Indebtedness secured by any Encumbrance (as defined below) upon any of the
property of the Operating Partnership or any Subsidiary if, immediately after
giving effect to the incurrence of such additional Indebtedness and the
application of the proceeds thereof, the aggregate principal amount of all
outstanding Indebtedness of the Operating Partnership and its Subsidiaries on a
consolidated basis which is secured by any Encumbrance on property of the
Operating Partnership or any Subsidiary is greater than 40% of the sum of
(without duplication) (i) the Total Assets of the Operating Partnership and its
Subsidiaries as of the end of the calendar quarter covered in the Operating
Partnership's Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as
the case may be, most recently filed with the Commission (or, if such filing is
not permitted under the Exchange Act, with the Trustee) prior to the incurrence
of such additional Indebtedness and (ii) the purchase price of any real estate
assets or mortgages receivable acquired, and the amount of any securities
offering proceeds received (to the extent that such proceeds were not used to
acquire real estate assets or mortgages receivable or used to reduce
Indebtedness), by the Operating Partnership or any Subsidiary since the end of
such calendar quarter, including those proceeds obtained in connection with the
incurrence of such additional Indebtedness.
The Operating Partnership and its Subsidiaries may not at any time own Total
Unencumbered Assets (as defined below) equal to less than 150% of the aggregate
outstanding principal amount of the Unsecured Indebtedness (as defined below) of
the Operating Partnership and its Subsidiaries on a consolidated basis.
In addition to the foregoing limitation on the incurrence of Indebtedness, the
Operating Partnership will not, and will not permit any Subsidiary to, incur any
Indebtedness if the ratio of Consolidated Income Available for Debt Service (as
defined below) to the Annual Service Charge (as defined below) for the four
consecutive fiscal quarters most recently ended prior to the date on which such
additional Indebtedness is to be incurred shall have been less that 1.5:1 on a
pro forma basis after giving effect thereto and to the application of the
proceeds therefrom, and calculated on the assumption that (i) such Indebtedness
and any other Indebtedness incurred by the Operating Partnership and its
Subsidiaries since the first day of such four-quarter period and the application
of the proceeds therefrom, including to refinance other Indebtedness, had
occurred at the beginning of such period; (ii) the repayment or retirement of
any other Indebtedness by the Operating Partnership and its Subsidiaries since
the first day of such four-quarter period had been repaid or retired at the
beginning of such period (except that, in making such computation, the amount of
Indebtedness under any revolving credit facility shall be computed based upon
the average daily balance of such Indebtedness during such period); (iii) in the
case of Acquired Indebtedness (as defined below) or Indebtedness incurred in
connection with any acquisition since the first day of such four-quarter period,
the related acquisition had occurred as of the first day of such
S-17
<PAGE> 18
period with the appropriate adjustments with respect to such acquisition being
included in such pro forma calculation; and (iv) in the case of any acquisition
or disposition by the Operating Partnership or its Subsidiaries of any asset or
group of assets since the first day of such four-quarter period, whether by
merger, stock purchase or sale, or asset purchase or sale, such acquisition or
disposition or any related repayment of Indebtedness had occurred as of the
first day of such period with the appropriate adjustments with respect to such
acquisition or disposition being included in such pro forma calculation.
Provision of Financial Information. Whether or not the Operating Partnership is
subject to Section 13 or 15(d) of the Exchange Act, the Operating Partnership
will, to the extent permitted under the Exchange Act, file with the Commission
the annual reports, quarterly reports and other documents which the Operating
Partnership would have been required to file with the Commission pursuant to
such Section 13 or 15(d) if the Operating Partnership were so subject, such
documents to be filed with the Commission on or prior to the respective dates
(the "Required Filing Dates") by which the Operating Partnership would have been
required to file such documents if the Operating Partnership were so subject.
The Operating Partnership will also in any event (x) within 15 days of each
Required Filing Date (i) if the Operating Partnership is not then subject to
such Section 13 or 15(d), transmit by mail to all Holders of Notes, as their
names and addresses appear in the Security Register, without cost to such
Holders, copies of the annual reports and quarterly reports that the Operating
Partnership would have been required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act if the Operating Partnership were
subject to such Sections, (ii) file with the Trustee copies of the annual
reports, quarterly reports and other documents that the Operating Partnership
would have been required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act if the Operating were subject to such Section and (y)
if filing such documents by the Operating Partnership with the Commission is not
permitted under the Exchange Act, promptly upon written request and payment of
the reasonable cost of duplication and delivery, supply copies of such documents
to any prospective Holder.
Waiver of Certain Covenants. The Operating Partnership may omit to comply with
any term, provision or condition of the foregoing covenants, and with any other
term, provision or condition with respect to Notes (except any such term,
provision or condition which could not be amended without the consent of all
Holders of Notes), if before or after the time for such compliance the Holders
of at least a majority in principal amount of all the outstanding Notes, by Act
of such Holders, either waive such compliance in such instance or generally
waive compliance with such covenant or condition. Except to the extent so
expressly waived, and until such waiver shall become effective, the obligations
of the Operating Partnership and the duties of the Trustee in respect of any
such term, provision or condition shall remain in full force and effect.
As used herein, and in the Indenture:
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the time
such Person becomes a Subsidiary or (ii) assumed in connection with the
acquisition of assets from such Person, in each case, other than Indebtedness
incurred in connection with, or in contemplation of, such Person becoming a
Subsidiary or such acquisition. Acquired Indebtedness shall be deemed to be
incurred on the date of the related acquisition of assets from any person or the
date the acquired Person becomes a Subsidiary.
"Annual Service Charge" for any period means the aggregate interest expense for
such period in respect of, and the amortization during such period of any
original issue discount of, Indebtedness of the Operating Partnership and its
Subsidiaries and the amount of dividends which are payable during such period in
respect of any Disqualified Stock.
"Capital Stock" means, with respect to any Person, any capital stock (including
preferred stock), shares, interests, participations or other ownership interests
(however designated) of such Person and any rights (other than debt securities
convertible into or exchangeable for corporate stock), warrants or options to
purchase any thereof.
"Consolidated Income Available for Debt Service" for any period means Earnings
from Operations (as defined below) of the Operating Partnership and its
Subsidiaries plus amounts which have been deducted, and minus amounts which have
been added, for the following (without duplication): (i) interest on
Indebtedness of the Operating Partnership and its Subsidiaries, (ii) provision
for taxes of the Operating Partnership and its Subsidiaries based on income,
(iii) amortization of debt discount, (iv) provisions for gains and losses on
properties and property depreciation and amortization, (v) the effect of any
noncash charge resulting from a change in accounting principles in determining
Earnings from Operations for such period and (vi) amortization of deferred
charges.
S-18
<PAGE> 19
"Disqualified Stock" means, with respect to any Person, any Capital Stock of
such Person which by the terms of such Capital Stock (or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise (i) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise
(other than Capital Stock which is redeemable solely in exchange for common
stock), (ii) is convertible into or exchangeable or exercisable for Indebtedness
or Disqualified Stock or (iii) is redeemable at the option of the holder
thereof, in whole or in part (other than Capital Stock which is redeemable
solely in exchange for Capital Stock which is not Disqualified Stock or the
redemption price of which may, at the option of such Person, be paid in Capital
Stock which is not Disqualified Stock), in each case on or prior to the Stated
Maturity of the Notes.
"Earnings from Operations" for any period means net earnings excluding gains and
losses on sales of investments, extraordinary items and property valuation
losses, net as reflected in the financial statements of the Operating
Partnership and its Subsidiaries for such period determined on a consolidated
basis in accordance with GAAP.
"Encumbrance" means any mortgage, lien, charge, pledge or security interest of
any kind.
"Indebtedness" of the Operating Partnership or any Subsidiary means any
indebtedness of the Operating Partnership or any Subsidiary, whether or not
contingent, in respect of (i) borrowed money or evidenced by bonds, notes,
debentures or similar instruments whether or not such indebtedness is secured by
an Encumbrance existing on property owned by the Operating Partnership or any
Subsidiary, (ii) indebtedness for borrowed money of a Person other than the
Operating Partnership or a Subsidiary, which is secured by an Encumbrance
existing on property owned by the Operating Partnership or any Subsidiary, to
the extent of the lesser of (x) the amount of indebtedness so secured and (y)
the fair market value of the property subject to such Encumbrance, (iii) the
reimbursement obligations, contingent or otherwise, in connection with any
letters of credit actually issued or amounts representing the balance deferred
and unpaid of the purchase price of any property or services except, any such
balance that constitutes an accrued expense or trade payable, or all conditional
sale obligations or obligations under any title retention agreement, (iv) the
principal amount of all obligations of the Operating Partnership or any
Subsidiary with respect to redemption, repayment or other repurchase of any
Disqualified Stock, (v) any lease of property by the Operating Partnership or
any Subsidiary as lessee which is reflected on the Operating Partnership's
consolidated balance sheet as a capitalized lease in accordance with GAAP, or
(vi) interest rate swaps, caps or similar agreements and foreign exchange
contracts, currency swaps or similar agreements, to the extent, in the case of
items of indebtedness under (i) through (iii) above, that any such items (other
than letters of credit) would appear as a liability on the Operating
Partnership's consolidated balance sheet in accordance with GAAP, and also
includes, to the extent not otherwise included, any obligation by the Operating
Partnership or any Subsidiary to be liable for, or to pay, as obligor, guarantor
or otherwise (other than for purposes of collection in the ordinary course of
business), Indebtedness of another Person (other than the Operating Partnership
or any Subsidiary) (it being understood that Indebtedness shall be deemed to be
incurred by the Operating Partnership or any Subsidiary whenever the Operating
Partnership or such Subsidiary shall create, assume, guarantee or otherwise
become liable in respect thereof).
"Subsidiary" means, with respect to any Person, any corporation or other entity
of which a majority of (i) the voting power of the voting equity securities or
(ii) the outstanding equity interests of which are owned, directly or
indirectly, by such Person. For the purposes of this definition, "voting equity
securities" means equity securities having voting power for the election of
directors, whether at all times or only so long as no senior class of security
has such voting power by reason of any contingency.
"Total Assets" as of any date means the sum of (i) the Undepreciated Real Estate
Assets and (ii) all other assets of the Operating Partnership and its
Subsidiaries determined in accordance with GAAP (but excluding accounts
receivable and intangibles).
"Total Unencumbered Assets" means the sum of (i) those Undepreciated Real Estate
Assets not subject to an Encumbrance for borrowed money and (ii) all other
assets of the Operating Partnership and its Subsidiaries not subject to an
Encumbrance for borrowed money, determined in accordance with GAAP (but
excluding accounts receivable and intangibles).
"Undepreciated Real Estate Assets" as of any date means the cost (original cost
plus capital improvements) of real estate assets of the Operating Partnership
and its Subsidiaries on such date, before depreciation and amortization,
determined on a consolidated basis in accordance with GAAP.
S-19
<PAGE> 20
"Unsecured Indebtedness" means Indebtedness which is not secured by any
Encumbrance upon any of the properties of the Operating Partnership or any
Subsidiary.
See "Description of Debt Securities--Certain Covenants" in the accompanying
Prospectus for a description of additional covenants applicable to the Operating
Partnership.
EVENTS OF DEFAULT
The Indenture provides that the following events are "Events of Default" with
respect to the Notes: (a) default in the payment of any interest on any Notes
when such interest becomes due and payable that continues for a period of 30
days; (b) default in the payment of the principal of any Notes when due and
payable; (c) default in the performance, or breach, of any other covenant or
warranty of the Operating Partnership in the Indenture with respect to the Notes
and continuance of such default or breach for a period of 60 days after written
notice as provided in the Indenture; (d) default under any bond, debenture,
note, mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any indebtedness for money borrowed by
the Operating Partnership (or by any Subsidiary, the repayment of which the
Operating Partnership has guaranteed or for which the Operating Partnership is
directly responsible or liable as obligor or guarantor), having an aggregate
principal amount outstanding of at least $10,000,000, whether such indebtedness
now exists or shall hereafter be created, which default shall have resulted in
such indebtedness becoming or being declared due and payable prior to the date
on which it would otherwise have become due and payable, without such
indebtedness having been discharged, or such acceleration having been rescinded
or annulled, within a period of 10 days after written notice to the Operating
Partnership as provided in the Indenture; (e) the entry by a court of competent
jurisdiction of one or more judgements, orders or decrees against the Operating
Partnership or any Subsidiary in an aggregate amount (excluding amounts covered
by insurance) in excess of $10,000,000 and such judgements, orders or decrees
remain undischarged, unstayed and unsatisfied in an aggregate amount (excluding
amounts covered by insurance) in excess of $10,000,000 for a period of 30
consecutive days; and (f) certain events of bankruptcy, insolvency or
reorganization, or court appointment of a receiver, liquidator or trustee of the
Operating Partnership or any Significant Subsidiary. The Term "Significant
Subsidiary" has the meaning ascribed to such term in Regulation S-X promulgated
under the Securities Act of 1933, as amended. If an Event of Default specified
in clause (f) above, relating to the Operating Partnership or any Significant
Subsidiary occurs, the principal amount of all outstanding Notes shall become
due and payable without any declaration or other act on the part of the Trustee
or of the Holders.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The provisions of Article 14 of the Indenture relating to defeasance and
covenant defeasance, which are described under "Description of Debt
Securities--Discharge, Defeasance and Covenant Defeasance" in the accompanying
Prospectus, will apply to the Notes. Each of the covenants described under
"--Certain Covenants" herein and "Description of Debt Securities--Certain
Covenants" in the accompanying Prospectus will be subject to covenant
defeasance.
NO PERSONAL LIABILITY OR RECOURSE
No recourse under or upon any obligation, covenant or agreement contained in the
Indenture or the Notes, or because of any indebtedness evidenced thereby, or for
any claim based thereon or otherwise in respect thereof, shall be had (i)
against Summit Properties or any other past, present or future partner in the
Operating Partnership, (ii) against any other person or entity which owns an
interest, directly or indirectly, in any partner of the Operating Partnership,
or (iii) against any past, present or future stockholder, employee, officer or
director, as such, of Summit Properties or any successor, either directly or
through the Operating Partnership or Summit Properties or any successor, under
any rule of law, statute or constitutional provision or by the enforcement of
any assessment or by any legal or equitable proceeding or otherwise. Each Holder
of Notes waives and releases all such liability by accepting such Notes. The
waiver and release are part of the consideration for the issue of the Notes.
S-20
<PAGE> 21
BOOK-ENTRY NOTES
The Operating Partnership has established a depositary arrangement with DTC with
respect to the Book-Entry Notes, the terms of which are summarized below. Any
additional or differing terms of the depositary arrangement with respect to the
Book-Entry Notes will be described in the applicable Pricing Supplement.
Upon issuance, all Book-Entry Notes up to $200,000,000 aggregate principal
amount bearing interest at the same rate or pursuant to the same formula and
having the same date of issue, Specified Currency, Interest Payment Dates,
Stated Maturity Date, redemption provisions (if any), repayment provisions (if
any) and other terms will be represented by a single Global Security. Each
Global Security representing Book-Entry Notes will be deposited with, or on
behalf of, DTC and will be registered in the name of DTC or a nominee of DTC. No
Global Security may be transferred except as a whole by a nominee of DTC to DTC
or to another nominee of DTC, or by DTC or such nominee to a successor of DTC or
a nominee of such successor.
So long as DTC or its nominee is the registered owner of a Global Security, DTC
or its nominee, as the case may be, will be the sole Holder of the Book-Entry
Notes represented thereby for all purposes under the Indenture. Except as
otherwise provided in this section, the Beneficial Owners of the Global Security
or Securities representing Book-Entry Notes will not be entitled to receive
physical delivery of Certificated Notes and will not be considered the Holders
thereof for any purpose under the Indenture, and no Global Security representing
Book-Entry Notes shall be exchangeable or transferable. Accordingly, each
Beneficial Owner must rely on the procedures of DTC and, if such Beneficial
Owner is not a Participant (as defined below), on the procedures of the
Participant through which such Beneficial Owner owns its interest in order to
exercise any rights of a Holder under such Global Security or the Indenture. The
laws of some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in certificated form. Such limits and such
laws may impair the ability to transfer beneficial interests in a Global
Security representing Book-Entry Notes.
Unless otherwise specified in the applicable Pricing Supplement, each Global
Security representing Book-Entry Notes will be exchangeable for Certificated
Notes of like tenor and terms and of differing authorized denominations
aggregating a like principal amount, only if (i) DTC notifies the Operating
Partnership that it is unwilling or unable to continue as depository for the
Global Securities or DTC ceases to be a clearing agency registered under the
Exchange Act (if so required by applicable law or regulation) and, in each case,
a successor depository is not appointed by the Operating Partnership within 90
days after the Operating Partnership receives such notice or becomes aware of
such unwillingness, inability or ineligibility, (ii) the Operating Partnership
in its sole discretion determines that the Global Securities shall be
exchangeable for Certificated Notes or (iii) there shall have occurred and be
continuing an Event of Default under the Indenture with respect to the Notes and
Beneficial Owners representing a majority in aggregate principal amount of the
Book-Entry Notes represented by Global Securities advise DTC to cease acting as
depository. Upon any such exchange, the Certificated Notes shall be registered
in the names of the Beneficial Owners of the Global Security or Securities
representing Book-Entry Notes, which names shall be provided by DTC's relevant
Participants (as identified by DTC) to the Trustee.
The information below concerning DTC and DTC's system has been furnished by DTC,
and the Operating Partnership takes no responsibility for the accuracy thereof.
DTC will act as securities depository for the Book-Entry Notes. The Book-Entry
Notes will be issued as fully registered securities registered in the name of
Cede & Co. (DTC's partnership nominee). One fully registered Global Security
will be issued for each issue of Book-Entry Notes, each in the aggregate
principal amount of such issue, and will be deposited with DTC. If, however, the
aggregate principal amount of any issue exceeds $200,000,000, one Global
Security will be issued with respect to each $200,000,000 of principal amount
and an additional Global Security will be issued with respect to any remaining
principal amount of such issue.
DTC is a limited-purpose trust company organized under the New York Banking Law,
a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for
S-21
<PAGE> 22
physical movement of securities certificates. Direct Participants of DTC
("Direct Participants") include securities brokers and dealers (including the
Agents), banks, trust companies, clearing corporations and certain other
organizations. DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. Access to DTC's system is also
available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Securities and
Exchange Commission.
Purchases of Book-Entry Notes under DTC's system must be made by or through
Direct Participants, which will receive a credit for such Book-Entry Notes on
DTC's records. The ownership interest of each actual purchaser of each Book-
Entry Note represented by a Global Security ("Beneficial Owner") is in turn to
be recorded on the Direct Participants' and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchase, but Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the Direct Participants or Indirect Participants through which
such Beneficial Owner entered into the transaction. Transfers of ownership
interests in a Global Security representing Book-Entry Notes are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners of a Global Security representing
Book-Entry Notes will not receive Certificated Notes representing their
ownership interests therein, except in the event that use of the book-entry
system for such Book-Entry Notes is discontinued.
To facilitate subsequent transfers, all Global Securities representing
Book-Entry Notes which are deposited with, or on behalf of, DTC are registered
in the name of DTC's partnership nominee, Cede & Co. The deposit of Global
Securities with, or on behalf of, DTC and their registration in the name of Cede
& Co. effect no change in beneficial ownership. DTC has no knowledge of the
actual Beneficial Owners of the Global Securities representing the Book-Entry
Notes; DTC's records reflect only the identity of the Direct Participants to
whose accounts such Book-Entry Notes are credited, which may or may not be the
Beneficial Owners. The Participants will remain responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by
Direct Participants to Indirect Participants, and by Direct Participants and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the Global
Securities representing the Book-Entry Notes. Under its usual procedures, DTC
mails an Omnibus Proxy to the Operating Partnership as soon as possible after
the applicable record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts the Book-Entry
Notes are credited on the applicable record date (identified in a listing
attached to the Omnibus Proxy).
Principal, premium, if any, and/or interest payments on Global Securities
representing the Book-Entry Notes will be made to DTC. DTC's practice is to
credit Direct Participants' accounts on the applicable payment date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payment on such date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC, the Trustee or the Operating
Partnership, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal, premium, if any, and/or interest
to DTC is the responsibility of the Operating Partnership or the Trustee,
disbursement of such payments to Direct Participants shall be the responsibility
of DTC, and disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct Participants and Indirect Participants.
If applicable, redemption notices shall be sent to Cede & Co. If less than all
of the Book-Entry Notes within an issue are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Direct Participant in such
issue to be redeemed.
A Beneficial Owner shall give notice of any option to elect to have its
Book-Entry Notes repaid by the Operating Partnership, through its Participant,
to the Trustee, and shall effect delivery of such Book-Entry Notes by causing
the Direct Participant to transfer the Participant's interest in the Global
Security or Securities representing such Book-Entry
S-22
<PAGE> 23
Notes, on DTC's records, to the Trustee. The requirement for physical delivery
of Book-Entry Notes in connection with a demand for repayment will be deemed
satisfied when the ownership rights in the Global Security or Securities
representing such Book-Entry Notes are transferred by Direct Participants on
DTC's records.
DTC may discontinue providing its services as securities depository with respect
to the Book-Entry Notes at any time by giving reasonable notice to the Operating
Partnership or the Trustee. Under such circumstances, in the event that a
successor securities depository is not obtained, Certificated Notes are required
to be printed and delivered.
The Operating Partnership may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor securities depository). In that
event, Certificated Notes will be printed and delivered.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, Foreign
Currency Notes will not be sold in, or to residents of, the country issuing the
applicable currency. The information set forth in this Prospectus Supplement is
directed to prospective purchasers who are United States residents and, with
respect to Foreign Currency Notes, is by necessity incomplete. The Operating
Partnership disclaims any responsibility to advise prospective purchasers who
are residents of countries other than the United States with respect to any
matters that may affect the purchase, holding or receipt of payments of
principal of, and premium, if any, and interest on, the Foreign Currency Notes.
Such persons should consult their own financial and legal advisors with regard
to such matters. See "Risk Factors--Exchange Rates and Exchange Controls."
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST
Unless otherwise specified in the applicable Pricing Supplement, the Operating
Partnership is obligated to make payments of principal of, and premium, if any,
and interest on, Foreign Currency Notes in the applicable Specified Currency
(or, if such Specified Currency is not at the time of such payment legal tender
for the payment of public and private debts, in such other coin or currency of
the country which issued such Specified Currency as at the time of such payment
is legal tender for the payment of such debts). Any such amounts payable by the
Operating Partnership in a foreign currency or composite currency will, unless
otherwise specified in the applicable Pricing Supplement, be converted by the
exchange rate agent named in the applicable Pricing Supplement (the "Exchange
Rate Agent") into United States dollars for payment to Holders. However, the
Holder of a Foreign Currency Note may elect to receive such amounts in the
applicable Foreign Currency or composite currency as hereinafter described.
Any United States dollar amount to be received by a Holder of a Foreign Currency
Note will be based on the highest bid quotation in The City of New York received
by the Exchange Rate Agent at approximately 11:00 A.M., New York City time, on
the second Business Day preceding the applicable payment date from three
recognized foreign exchange dealers (one of whom may be the Exchange Rate Agent)
selected by the Exchange Rate Agent and approved by the Operating Partnership
for the purchase by the quoting dealer of the Specified Currency for United
States dollars for settlement on such payment date in the aggregate amount of
such Specified Currency payable to all Holders of Foreign Currency Notes
scheduled to receive United States dollar payments and at which the applicable
dealer commits to execute a contract. All currency exchange costs will be borne
by the Holders of such Foreign Currency Notes by deductions from such payments.
If three such bid quotations are not available, payments will be made in the
Specified Currency.
A Holder of a Foreign Currency Note may elect to receive all or a specified
portion of any payment of the principal of, and premium, if any, and/or interest
on, such Foreign Currency Note in the Specified Currency by submitting a written
request for such payment to the Operating Partnership at the office or agency
maintained by the Operating Partnership for such purpose in the Borough of
Manhattan, The City of New York on or prior to the applicable Record Date or at
least fifteen calendar days prior to the Maturity Date, as the case may be. Such
written request may be mailed or hand delivered or sent by cable, telex or other
form of facsimile transmission. A Holder of a Foreign Currency Note may elect to
receive all or a specified portion of all future payments in the Specified
Currency in respect of such principal, premium, if any, and/or interest and need
not file a separate election for each payment. Such election will remain in
effect until revoked by written notice to the Trustee or the Designated Agent,
but written notice of any such revocation
S-23
<PAGE> 24
must be received by the Trustee or the Designated Agent on or prior to the
applicable Record Date or at least fifteen calendar days prior to the Maturity
Date, as the case may be. Holders of Foreign Currency Notes whose Notes are to
be held in the name of a broker or nominee should contact such broker or nominee
to determine whether and how an election to receive payments in the Specified
Currency may be made.
Payments of the principal of, and premium, if any, and/or interest on, Foreign
Currency Notes which are to be made in United States dollars will be made in the
manner specified herein with respect to Notes denominated in United States
dollars. See "Description of Notes--General." Payments of interest on Foreign
Currency Notes which are to be made in the Specified Currency on an Interest
Payment Date other than the Maturity Date will be made by check mailed to the
address of the Holders of such Foreign Currency Notes as they appear in the
Security Register, subject to the right to receive such interest payments by
wire transfer of immediately available funds under certain circumstances
described under "Description of Notes--General." Payments of principal of, and
premium, if any, and/or interest on, Foreign Currency Notes which are to be made
in the Specified Currency on the Maturity Date will be made by wire transfer of
immediately available funds to an account with a bank designated at least
fifteen calendar days prior to the Maturity Date by each Holder thereof,
provided that such bank has appropriate facilities therefor and that the
applicable Foreign Currency Note is presented and surrendered at the principal
corporate trust office of the Trustee in time for the Trustee or the Designated
Agent to make such payments in such funds in accordance with its normal
procedures.
Unless otherwise specified in the applicable Pricing Supplement, a Beneficial
Owner of a Global Security or Securities representing Book-Entry Notes payable
in a Specified Currency other than United States dollars that elects to receive
payments of principal, premium, if any, and/or interest in such Specified
Currency must notify the Participant through which it owns its interest on or
prior to the applicable Record Date or at least fifteen calendar days prior to
the Maturity Date, as the case may be, of such Beneficial Owner's election. Such
Participant must notify DTC of such election on or prior to the third Business
Day after such Record Date or at least twelve calendar days prior to the
Maturity Date, as the case may be, and DTC will notify the Trustee or the
Designated Agent of such election on or prior to the fifth Business Day after
such Record Date or at least ten calendar days prior to the Maturity Date, as
the case may be. If complete instructions are received by the Participant from
the Beneficial Owner and forwarded by the Participant to DTC, and by DTC to the
Trustee or the Designated Agent, on or prior to such dates, then such Beneficial
Owner will receive payments in the applicable Specified Currency.
PAYMENT CURRENCY
If the Specified Currency for a Foreign Currency Note is not available for the
required payment of principal, premium, if any, and/or interest due to the
imposition of exchange controls or other circumstances beyond the reasonable
control of the Operating Partnership, the Operating Partnership will be entitled
to satisfy its obligations to the Holder of such Foreign Currency Note by making
such payment in United States dollars on the basis of the Market Exchange Rate
(as defined below) on the second Business Day prior to such payment or, if such
Market Exchange Rate is not then available, on the basis of the most recently
available Market Exchange Rate or as otherwise specified in the applicable
Pricing Supplement.
If payment in respect of a Foreign Currency Note is required to be made in any
composite currency (e.g., ECU), and such composite currency is unavailable due
to the imposition of exchange controls or other circumstances beyond the
reasonable control of the Operating Partnership, the Operating Partnership will
be entitled to satisfy its obligations to the Holder of such Foreign Currency
Note by making such payment in United States dollars. The amount of each payment
in United States dollars shall be computed by the Exchange Rate Agent on the
basis of the equivalent of the composite currency in United States dollars. The
component currencies of the composite currency for this purpose (collectively,
the "Component Currencies" and each, a "Component Currency") shall be the
currency amounts that were components of the composite currency as of the last
day on which the composite currency was used. The equivalent of the composite
currency in United States dollars shall be calculated by aggregating the United
States dollar equivalents of the Component Currencies. The United States dollar
equivalent of each of the Component Currencies shall be determined by the
Exchange Rate Agent on the basis of the most recently available Market Exchange
Rate for each such Component Currency, or as otherwise specified in the
applicable Pricing Supplement.
If the official unit of any Component Currency is altered by way of combination
or subdivision, the number of units of the currency as a Component Currency
shall be divided or multiplied in the same proportion. If two or more Component
S-24
<PAGE> 25
Currencies are consolidated into a single currency, the amounts of those
currencies as Component Currencies shall be replaced by an amount in such single
currency equal to the sum of the amounts of the consolidated Component
Currencies expressed in such single currency. If any Component Currency is
divided into two or more currencies, the amount of the original Component
Currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original Component Currency.
The "Market Exchange Rate" for a Specified Currency other than United States
dollars means the noon dollar buying rate in The City of New York for cable
transfers for such Specified Currency as certified for customs purposes by (or
if not so certified, as otherwise determined by) the Federal Reserve Bank of New
York. Any payment made in United States dollars under such circumstances where
the required payment is in a Specified Currency other than United States dollars
will not constitute an Event of Default under the Indenture with respect to the
Notes.
All determinations referred to above made by the Exchange Rate Agent shall be at
its sole discretion and shall, in the absence of manifest error, be conclusive
for all purposes and binding on the Holders of the Foreign Currency Notes.
GOVERNING LAW; JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of the
State of New York. Under current New York law, where a cause of action is based
upon an obligation denominated in a non-United States currency, a state court in
the State of New York rendering a judgment on such an obligation would be
required to render such judgment in the non-United States currency, and such
judgment would be converted into United States dollars at the exchange rate
prevailing on the date of entry of the judgment. The holders of such Notes could
be subject to exchange rate fluctuations occurring after such judgment is
rendered. It is not certain, however, that a non-New York court would follow the
same rules with respect to conversion.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax consequences
of the purchase, ownership and disposition of the Notes is based upon laws,
regulations, rulings and decisions now in effect, all of which are subject to
change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, tax-exempt organizations, regulated
investment companies, dealers in securities or currencies, persons holding Notes
as a hedge against currency risks or as a position in a "straddle" for tax
purposes, or persons whose functional currency is not the United States dollar.
It also does not deal with Holders other than original purchasers (except where
otherwise specifically noted). BECAUSE THE EXACT PRICING AND OTHER TERMS OF THE
NOTES WILL VARY, NO ASSURANCE CAN BE GIVEN THAT THE CONSIDERATIONS DESCRIBED
BELOW WILL APPLY TO A PARTICULAR ISSUANCE OF NOTES. CERTAIN MATERIAL UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE OWNERSHIP OF PARTICULAR
NOTES (WHERE APPLICABLE) WILL BE SUMMARIZED IN THE PRICING SUPPLEMENT RELATING
TO SUCH NOTES. PERSONS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR
OWN TAX ADVISORS CONCERNING THE APPLICATION OF UNITED STATES FEDERAL INCOME TAX
LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF THE NOTES ARISING UNDER THE LAWS OF ANY STATE,
LOCAL OR FOREIGN TAXING JURISDICTION.
As used herein, the term "U.S. Holder" means a Beneficial Owner of a Note that
is for United States Federal income tax purposes (i) a citizen or resident of
the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof (other than a partnership that is not treated as a United
States person under any applicable Treasury regulations), (iii) an estate or
trust the income of which is subject to United States Federal income taxation
regardless of its source, (iv) a trust if (a) a U.S. court may exercise primary
supervision over its administration and (b) one or more U.S. persons have
authority to control all substantial decisions of the trust, or (v) any other
person whose income or gain in respect of a Note is effectively connected with
the conduct of a United States trade or business. Notwithstanding the preceding
sentence, to the extent provided in Treasury regulations, certain trusts in
existence on August 20, 1996, and treated as United States Persons under the
United States Internal Revenue Code of 1986, as amended (the "Code"), and
applicable Treasury regulations thereunder prior to such date, that elect to
continue to be treated as United States persons under the Code or applicable
Treasury regulations
S-25
<PAGE> 26
thereunder also will be U.S. Holders. As used herein, the term "non-U.S. Holder"
means a Beneficial Owner of a Note that is not a U.S. Holder.
U.S. HOLDERS
Payments of Interest. Except as set forth below, payments of interest on a Note
generally will be taxable to a U.S. Holder as ordinary interest income at the
time such payments are accrued or received (in accordance with the U.S. Holder's
regular method of tax accounting).
Original Issue Discount. The following summary is a general discussion of the
United States Federal income tax consequences to U.S. Holders of the purchase,
ownership and disposition of Notes issued with original issue discount
("Discount Notes"). The following summary is based upon final Treasury
regulations (the "OID Regulations") under the original issue discount provisions
of the Code.
For United States Federal income tax purposes, original issue discount is the
excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of 1%
of the Note's stated redemption price at maturity multiplied by the number of
complete years to its maturity from its issue date or, in the case of a Note
providing for the payment of any amount other than qualified stated interest (as
defined below) prior to maturity, multiplied by the weighted average maturity of
such Note). The issue price of each Note in an issue of Notes equals the first
price at which a substantial amount of such Notes has been sold to the public
(ignoring sales to bond houses, brokers, or similar persons or organizations
acting in the capacity of underwriters, placement agents, or wholesalers). The
stated redemption price at maturity of a Note is the sum of all payments
provided by the Note other than "qualified stated interest" payments. The term
"qualified stated interest" generally means stated interest that is
unconditionally payable in cash or property (other than debt instruments of the
issuer) at least annually at a single fixed rate. In addition, under the OID
Regulations, if a Note bears interest for one or more accrual periods at a rate
below the rate applicable for the remaining term of such Note (e.g., Notes with
teaser rates or interest holidays), and if the greater of either the resulting
foregone interest on such Note or any "true" discount on such Note (i.e., the
excess of the Note's stated principal amount over its issue price) equals or
exceeds a specified de minimis amount, then a portion, or in some circumstances
all, of the stated interest on the Note would be treated as original issue
discount rather than qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S. Holder as
ordinary interest income at the time such payments are accrued or are received
(in accordance with the U.S. Holder's regular method of tax accounting). In
addition, a U.S. Holder of a Discount Note must include original issue discount
in income as ordinary interest for United States Federal income tax purposes as
it accrues under a constant yield method in advance of receipt of the cash
payments attributable to such income, regardless of such U.S. Holder's regular
method of tax accounting. In general, the amount of original issue discount
included in income by the initial U.S. Holder of a Discount Note is the sum of
the daily portions of original issue discount with respect to such Discount Note
for each day during the taxable year (or portion of the taxable year) on which
such U.S. Holder held such Discount Note. The "daily portion" of original issue
discount on any Discount Note is determined by allocating to each day in any
accrual period a ratable portion of the original issue discount allocable to
that accrual period. An "accrual period" may be of any length and the accrual
periods may vary in length over the term of the Discount Note, provided that
each accrual period is no longer than one year and each scheduled payment of
principal or interest occurs either on the final day of an accrual period or on
the first day of an accrual period. The amount of original issue discount
allocable to each accrual period is generally equal to the difference between
(i) the product of the Discount Note's adjusted issue price at the beginning of
such accrual period and its yield to maturity (determined on the basis of
compounding at the close of each accrual period and appropriately adjusted to
take into account the length of the particular accrual period) and (ii) the
amount of any qualified stated interest payments allocable to such accrual
period. The "adjusted issue price" of a Discount Note at the beginning of any
accrual period is the sum of the issue price of the Discount Note plus the
amount of original issue discount allocable to all prior accrual periods minus
the amount of any prior payments on the Discount Note that were not qualified
stated interest payments. Under these rules, U.S. Holders generally will have to
include in income increasingly greater amounts of original issue discount in
successive accrual periods. These same rules apply to any Note that is not
otherwise a Discount Note, but nonetheless has been issued with original issue
discount.
S-26
<PAGE> 27
A U.S. Holder who purchases a Discount Note for an amount that is greater than
its adjusted issue price as of the purchase date and less than or equal to the
sum of all amounts payable on the Discount Note after the purchase date, other
than payments of qualified stated interest, will be considered to have purchased
the Discount Note at an "acquisition premium." Under the acquisition premium
rules, the amount of original issue discount such U.S. Holder must include in
its gross income with respect to such Discount Note for any taxable year (or
portion thereof in which the U.S. Holder holds the Discount Note) will be
reduced (but not below zero) by the portion of the acquisition premium properly
allocable to the period. These same rules apply to any Note that is not
otherwise a Discount Note, but nonetheless has been issued with original issue
discount.
Under the OID Regulations, Floating Rate Notes and Indexed Notes ("Variable
Notes") are subject to special rules whereby a Variable Note will qualify as a
"variable rate debt instrument" if (a) its issue price does not exceed the total
noncontingent principal payments due under the Variable Note by more than a
specified de minimis amount and (b) it provides for stated interest, paid or
compounded at least annually, at current values of (i) one or more qualified
floating rates, (ii) a single fixed rate and one or more qualified floating
rates, (iii) a single objective rate, or (iv) a single fixed rate and a single
objective rate that is a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the value
of such rate can reasonably be expected to measure contemporaneous variations in
the cost of newly borrowed funds in the currency in which the Variable Note is
denominated. Although a multiple of a qualified floating rate will generally not
itself constitute a qualified floating rate, a variable rate equal to the
product of a qualified floating rate and a fixed multiple that is greater than
.65 but not more than 1.35 will constitute a qualified floating rate. A variable
rate equal to the product of a qualified floating rate and a fixed multiple that
is greater than .65 but not more than 1.35, increased or decreased by a fixed
rate, will also constitute a qualified floating rate. In addition, under the OID
Regulations, two or more qualified floating rates that can reasonably be
expected to have approximately the same values throughout the term of the
Variable Note (e.g., two or more qualified floating rates with values within 25
basis points of each other as determined on the Variable Note's issue date) will
be treated as a single qualified floating rate. Notwithstanding the foregoing, a
variable rate that would otherwise constitute a qualified floating rate but
which is subject to one or more restrictions such as a maximum numerical
limitation (i.e., a cap) or a minimum numerical limitation (i.e., a floor) may,
under certain circumstances, fail to be treated as a qualified floating rate
under the OID Regulations unless such cap or floor is fixed throughout the term
of the Note. An "objective rate" is a rate that is not itself a qualified
floating rate but which is determined using a single fixed formula and which is
based upon objective financial or economic information (e.g., a rate that is
based on one or more qualified floating rates or on the yield of actively traded
personal property, other than stock or debt of the issuer or a related party). A
rate will not qualify as an objective rate if it is based on information that is
within the control of the issuer (or a related party) or that is unique to the
circumstances of the issuer (or a related party), such as dividends, profits, or
the value of the issuer's stock (although a rate does not fail to be an
objective rate merely because it is based on the credit quality of the issuer).
The OID Regulations also provide that other variable interest rates may be
treated as objective rates if so designated by the IRS in the future. Despite
the foregoing, a variable rate of interest on a Variable Note will not
constitute an objective rate if it is reasonably expected that the average value
of such rate during the first half of the Variable Note's term will be either
significantly less than or significantly greater than the average value of the
rate during the final half of the Variable Note's term. A "qualified inverse
floating rate" is any objective rate where such rate is equal to a fixed rate
minus a qualified floating rate, as long as variations in the rate can
reasonably be expected to inversely reflect contemporaneous variations in the
qualified floating rate. That OID Regulations also provide that if a Variable
Note provides for stated interest at a fixed rate for an initial period of less
than one year followed by a variable rate that is either a qualified floating
rate or an objective rate and if the variable rate on the Variable Note's issue
date is intended to approximate the fixed rate (e.g., the value of the variable
rate on the issue date does not differ from the value of the fixed rate by more
than 25 basis points), then the fixed rate and the variable rate together will
constitute either a single qualified floating rate or objective rate, as the
case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations, and if
the interest on such Note which is unconditionally payable in cash or property
(other than debt instruments of the issuer) at least annually, then all stated
interest on the Note will constitute qualified stated interest and will be taxed
accordingly. Thus, a Variable Note that provides for stated interest at either a
single qualified floating rate or a single objective rate throughout the term
thereof and that qualifies as a "variable rate debt instrument" under the OID
Regulations will
S-27
<PAGE> 28
generally not be treated as having been issued with original issue discount
unless the Variable Note is issued at a "true" discount (i.e., at a price below
the Note's stated principal amount) in excess of a specified de minimis amount.
The amount of qualified stated interest and the amount of original issue
discount, if any, that accrues during an accrual period on such a Variable Note
is determined under the rules applicable to fixed rate debt instruments by
assuming that the variable rate is a fixed rate equal to (i) in the case of a
qualified floating rate or qualified inverse floating rate, the value as of the
issue date, of the qualified floating rate or qualified inverse floating rate,
or (ii) in the case of an objective rate (other than a qualified inverse
floating rate), a fixed rate that reflects the yield that is reasonably expected
for the Variable Note. The amount of qualified stated interest allocable to an
accrual period is increased (or decreased) if the interest actually paid during
an accrual period exceeds (or is less than) the interest assumed to be paid
during the accrual period.
In general, any other Variable Note that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Variable
Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed rate
that reflects the yield that is reasonably expected for the Variable Note. In
the case of a Variable Note that qualifies as a "variable rate debt instrument"
and provides for stated interest at a fixed rate in addition to either one or
more qualified floating rates or a qualified inverse floating rate, the fixed
rate is initially converted into a qualified floating rate (or a qualified
inverse floating rate, if the Variable Note provides for a qualified inverse
floating rate). Under such circumstances, the qualified floating rate or
qualified inverse floating rate that replaces the fixed rate must be such that
the fair market value of the Variable Note as of the Variable Note's issue date
is approximately the same as the fair market value of an otherwise identical
debt instrument that provides for either the qualified floating rate or
qualified inverse floating rate rather than the fixed rate. Subsequent to
converting the fixed rate into either a qualified floating rate or a qualified
inverse floating rate, the Variable Note is then converted into an "equivalent"
fixed rate debt instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest are determined for the "equivalent" fixed
rate debt instrument by applying the general original issue discount rules to
the "equivalent" fixed rate debt instrument and a U.S. Holder of the Variable
Note will account for such original issue discount and qualified stated interest
as if the U.S. Holder held the "equivalent" fixed rate debt instrument. Each
accrual period appropriate adjustments will be made to the amount of qualified
stated interest or original issue discount assumed to have been accrued or paid
with respect to the "equivalent" fixed rate debt instrument in the event that
such amounts differ from the actual amount of interest accrued or paid on the
Variable Note during the accrual period.
If a Variable Note does not qualify as a "variable rate debt instrument" under
the OID Regulations, then the Variable Note would be treated as a contingent
payment debt obligation. On June 11, 1996, the IRS released final Treasury
regulations dealing with the treatment of contingent payment obligations (the
"Contingent Debt Regulations").
Generally, if a Variable Note is treated as a contingent payment obligation,
interest payments thereon will be treated as "contingent interest" payments. Any
contingent interest payments on a Variable Note would be includible in income in
a taxable year whether or not the amount of any payment is fixed or determinable
in that year. The amount of interest included in income in any particular
accrual period would be determined by estimating a projected payment schedule
(as determined under the Contingent Debt Regulations) for the Variable Note
based on a comparable yield based on a hypothetical fixed rate instrument having
similar terms and conditions as the Variable Note and applying daily accrual
rules similar to those for accruing original issue discount on Notes issued with
original issue discount (as discussed above). If the actual amount of contingent
interest payments is not equal to the projected amount, an adjustment to income
at the time of the payment must be made to reflect the difference.
Certain of the Notes (i) may be redeemable at the option of the Operating
Partnership prior to their stated maturity (a "call option") and/or (ii) may be
repayable at the option of the Holder prior to their stated maturity (a "put
option"). Notes containing such features may be subject to rules that differ
from the general rules discussed above. Investors
S-28
<PAGE> 29
intending to purchase Notes with such features should consult their own tax
advisors, since the original issue discount consequences will depend, in part,
on the particular terms and features of the purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
Short-Term Notes. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount. In general, a cash method U.S. Holder is not required to accrue such
original issue discount unless the U.S. Holder elects to do so. If such an
election is not made, any gain recognized by the U.S. Holder on the sale,
exchange or maturity of the Short-Term Note will be ordinary income to the
extent of the original issue discount accrued on a straight-line basis, or upon
election under the constant yield method (based on daily compounding), through
the date of sale or maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the
Short-Term Note will be deferred until a corresponding amount of income is
realized. U.S. Holders who report income for United States Federal income tax
purposes under the accrual method, and certain other Holders including banks and
dealers in securities, are required to accrue original issue discount on a
Short-Term Note on a straight-line basis unless an election is made to accrue
the original issue discount under a constant yield method (based on daily
compounding).
Market Discount. If a U.S. Holder purchases a Note, other than a Note issued
with original issue discount, for an amount that is less than its issue price
(or, in the case of a subsequent purchaser, its stated redemption price at
maturity) or, in the case of a Note issued with original issue discount, for an
amount that is less than its adjusted issue price as of the purchase date, such
U.S. Holder will be treated as having purchased such Note at a "market
discount," unless such market discount is less than a specified de minimis
amount.
Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment (or, in the case of a Note issued with original issue
discount, any payment that is part of its "revised issue price") on, or any gain
realized on the sale, exchange, retirement or other disposition of, a Note as
ordinary income to the extent of the lesser of (i) the amount of such payment or
realized gain or (ii) the market discount which has not previously been included
in income and is treated as having accrued on such Note at the time of such
payment or disposition. Market discount will be considered to accrue ratably
during the period from the date of acquisition to the Maturity Date of the Note,
unless the U.S. Holder elects to accrue market discount on the basis of a
constant interest rate.
A U.S. Holder may be required to defer the deduction of all or a portion of the
interest paid or accrued on any indebtedness incurred or maintained to purchase
or carry a Note with market discount until the maturity of the Note or certain
earlier dispositions, because a current deduction is only allowed to the extent
the interest expense exceeds an allocable portion of market discount. A U.S.
Holder may elect to include market discount in income currently as it accrues
(on either a ratable or a constant interest rate basis), in which case the rules
described above regarding the treatment as ordinary income of gain upon the
disposition of the Note and upon the receipt of certain cash payments and
regarding the deferral of interest deductions will not apply. Generally, such
currently included market discount is treated as ordinary interest for United
States Federal income tax purposes. Such an election will apply to all debt
instruments acquired by the U.S. Holder on or after the first day of the taxable
year to which such election applies and may be revoked only with the consent of
the IRS.
Premium. If a U.S. Holder purchases a Note for an amount that is greater than
the sum of all amounts payable on the Note after the purchase date other than
payments of qualified stated interest, such U.S. Holder will be considered to
have purchased the Note with "amortizable bond premium" equal in amount to such
excess. A U.S. Holder may elect to amortize such premium using a constant yield
method over the remaining term of the Note and may offset interest otherwise
required to be included in respect of the Note during any taxable year by the
amortized amount of such excess for the taxable year. However, if the Note may
be optionally redeemed after the U.S. Holder acquires it at a price in excess of
its stated redemption price at maturity, special rules would apply which could
result in a deferral of the amortization of some bond premium until later in the
term of the Note. Any election to amortize bond premium applies to all taxable
debt obligations then owned and thereafter acquired by the U.S. Holder and may
be revoked only with the consent of the IRS.
S-29
<PAGE> 30
Disposition of a Note. Except as discussed above, upon the sale, exchange or
retirement of a Note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement (other than amounts representing accrued and unpaid interest) and
such U.S. Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax
basis in a Note generally will equal such U.S. Holder's initial investment in
the Note increased by any original issue discount included in income (and
accrued market discount, if any, if the U.S. Holder has included such market
discount in income) and decreased by the amount of any payments, other than
qualified stated interest payments, received and amortizable bond premium taken
with respect to such Note. The Taxpayer Relief Act of 1997 generally reduced
this maximum capital gains rate for individuals with respect to gain recognized
upon the disposition of capital assets held for more than 18 months to 20% and
retained the maximum capital gains rate of 28% with respect to capital assets
held for more than one year but not more than 18 months. In addition, effective
for tax years beginning after December 31, 2000, the maximum capital gains rate
for individuals relating to assets held more than five years is 18%. (The
holding period for purposes of the five year rule applies to assets whose
holding period begins after December 31, 2000, subject to certain transition
rules). Thus, gain recognized by a Holder upon the disposition of a Note may be
subject to the more favorable capital gains rate depending in part upon the
Holder's holding period for the Note. Prospective Holders should consult their
own tax advisors with respect to the tax consequences to them of the disposition
of a Note.
NOTES DENOMINATED, OR IN RESPECT OF WHICH INTEREST IS PAYABLE, IN A FOREIGN
CURRENCY
As used herein, "Foreign Currency" means a currency or currency unit other than
U.S. dollars.
Cash Method. A U.S. Holder who uses the cash method of accounting for United
States Federal income tax purposes and who receives a payment of interest on a
Note (other than original issue discount or market discount) will be required to
include in income the U.S. dollar value of the Foreign Currency payment
(determined on the date such payment is received) regardless of whether the
payment is in fact converted to U.S. dollars at that time, and such U.S. dollar
value will be the U.S. Holder's tax basis in such Foreign Currency.
Accrual Method. A U.S. Holder who uses the accrual method of accounting for
United States Federal income tax purposes, or who otherwise is required to
accrue interest prior to receipt, will be required to include in income the U.S.
dollar value of the amount of interest income (including original issue discount
or market discount and reduced by amortizable bond premium to the extent
applicable) that has accrued and is otherwise required to be taken into account
with respect to a Note during an accrual period. The U.S. dollar value of such
accrued income will be determined by translating such income at the average rate
of exchange for the accrual period or, with respect to an accrual period that
spans two taxable years, at the average rate for the partial period within the
taxable year. A U.S. Holder may elect, however, to translate such accrued
interest income using the rate of exchange on the last day of the accrual period
or, with respect to an accrual period that spans two taxable years, using the
rate of exchange on the last day of the taxable year. If the last day of an
accrual period is within five business days of the date of receipt of the
accrued interest, a U.S. Holder may translate such interest using the rate of
exchange on the date of receipt. The above election will apply to other debt
obligations held by the U.S. Holder and may not be changed without the consent
of the IRS. A U.S. Holder should consult a tax advisor before making the above
election. A U.S. Holder will recognize exchange gain or loss (which will be
treated as ordinary income or loss) with respect to accrued interest income on
the date such income is received. The amount of ordinary income or loss
recognized will equal the difference, if any, between the U.S. dollar value of
the Foreign Currency payment received (determined on the date such payment is
received) in respect of such accrual period and the U.S. dollar value of
interest income that has accrued during such accrual period (as determined
above).
Purchase, Sale and Retirement of Notes. A U.S. Holder who purchases a Note with
previously owned Foreign Currency will recognize ordinary income or loss in an
amount equal to the difference, if any, between such U.S. Holder's tax basis in
the Foreign Currency and the U.S. dollar fair market value of the Foreign
Currency used to purchase the Note, determined on the date of purchase.
Except as discussed above with respect to Short-Term Notes, upon the sale,
exchange or retirement of a Note, a U.S. Holder will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement and such U.S. Holder's adjusted tax basis in the Note. Such gain
or loss generally will be capital gain or loss (except to the extent of any
accrued market discount not previously included in the U.S. Holder's income) and
will be long-term capital gain or loss if at the time of sale, exchange or
retirement the Note has been held by such U.S. Holder
S-30
<PAGE> 31
for more than the applicable holding period. To the extent the amount realized
represents accrued but unpaid interest, however, such amounts must be taken into
account as interest income, with exchange gain or loss computed as described in
"Payments of Interest in a Foreign Currency" above. If a U.S. Holder receives
Foreign Currency on such a sale, exchange or retirement, the amount realized
will be based on the U.S. dollar value of the Foreign Currency on the date the
payment is received or the Note is disposed of (or deemed disposed of in the
case of a taxable exchange of the Note for a new Note). In the case of a Note
that is denominated in Foreign Currency and is traded on an established
securities market, a cash basis U.S. Holder (or, upon election, an accrual basis
U.S. Holder) will determine the U.S. dollar value of the amount realized by
translating the Foreign Currency payment at the spot rate of exchange on the
settlement date of the sale. A U.S. Holder's adjusted tax basis in a Note will
equal the cost of the Note to such Holder, increased by the amounts of any
market discount or original issue discount previously included in income by the
Holder with respect to such Note and reduced by any amortized acquisition or
other premium and any principal payments received by the Holder. A U.S. Holder's
tax basis in a Note, and the amount of any subsequent adjustments to such
Holder's tax basis, will be the U.S. dollar value of the Foreign Currency amount
paid for such Note, or of the Foreign Currency amount of the adjustment,
determined on the date of such purchase or adjustment.
Gain or loss realized upon the sale, exchange or retirement of a Note that is
attributable to fluctuations in currency exchange rates will be ordinary income
or loss which will not be treated as interest income or expense. Gain or loss
attributable to fluctuations in exchange rates will equal the difference between
the U.S. dollar value of the Foreign Currency principal amount of the Note,
determined on the date such payment is received or the Note is disposed of, and
the U.S. dollar value of the Foreign Currency principal amount of the Note,
determined on the date the U.S. Holder acquired the Note. Such Foreign Currency
gain or loss will be recognized only to the extent of the total gain or loss
realized by the U.S. Holder on the sale, exchange or retirement of the Note.
Original Issue Discount. In the case of a Note issued with original issue
discount, (i) original issue discount is determined in units of the Foreign
Currency, (ii) accrued original issue discount is translated into U.S. dollars
as described in "Payments of Interest in a Foreign Currency--Accrual Method"
above and (iii) the amount of Foreign Currency gain or loss on the accrued
original issue discount is determined by comparing the amount of income received
attributable to the discount (either upon payment, maturity or an earlier
disposition), as translated into U.S. dollars at the rate of exchange on the
date of such receipt, with the amount of original issue discount accrued, as
translated above.
Premium and Market Discount. In the case of a Note with market discount, (i)
market discount is determined in units of the Foreign Currency, (ii) accrued
market discount taken into account upon the receipt of any partial principal
payment or upon the sale, exchange, retirement or other disposition of the Note
(other than accrued market discount required to be taken into account currently)
is translated into U.S. dollars at the exchange rate on such disposition date
(and no part of such accrued market discount is treated as exchange gain or
loss) and (iii) accrued market discount currently includible in income by a U.S.
Holder for any accrual period is translated into U.S. dollars on the basis of
the average exchange rate in effect during such accrual period, and the exchange
gain or loss is determined upon the receipt of any partial principal payment or
upon the sale, exchange, retirement or other disposition of the Note in the
manner described in "Payments of Interest in a Foreign Currency--Accrual Method"
above with respect to computation of exchange gain or loss on accrued interest.
With respect to a Note issued with amortizable bond premium, such premium is
determined in the relevant Foreign Currency and reduces interest income in units
of the Foreign Currency. Although not entirely clear, a U.S. Holder should
recognize exchange gain or loss equal to the difference between the U.S. dollar
value of the bond premium amortized with respect to a period, determined on the
date the interest attributable to such period is received, and the U.S. dollar
value of the bond premium determined on the date of the acquisition of the Note.
Exchange of Foreign Currencies. A U.S. Holder will have a tax basis in any
Foreign Currency received as interest or on the sale, exchange or retirement of
a Note equal to the U.S. dollar value of such Foreign Currency, determined at
the time the interest is received or at the time of the sale, exchange or
retirement. Any gain or loss realized by a U.S. Holder on a sale or other
disposition of Foreign Currency (including its exchange for U.S. dollars or its
use to purchase Notes) will be ordinary income or loss.
S-31
<PAGE> 32
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes on
payments of principal, premium (if any) or interest (including original issue
discount, if any) on a Note, unless such non-U.S. Holder is a direct or indirect
10% or greater securityholder of the Operating Partnership, a controlled foreign
corporation related to the Operating Partnership or a bank receiving interest
described in Section 881(c)(3)(A) of the Code. To qualify for the exemption from
taxation, the last United States payor in the chain of payment prior to payment
to a non-U.S. Holder (the "Withholding Agent") must have received in the year in
which a payment of interest or principal occurs, or in either of the two
preceding calendar years, a statement that (i) is signed by the Beneficial Owner
of the Note under penalties of perjury, (ii) certifies that such owner is not a
U.S. Holder and (iii) provides the name and address of the Beneficial Owner. The
statement may be made on an IRS Form W-8 or a substantially similar form, and
the Beneficial Owner must inform the Withholding Agent of any change in the
information on the statement within 30 days of such change. If a Note is held
through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement to
the Withholding Agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by the
Beneficial Owner to the organization or institution.
Final regulations dealing with withholding tax on income paid to foreign
persons, backup withholding and related matters (the "New Withholding
Regulations") were issued by the Treasury Department on October 6, 1997. The New
Withholding Regulations generally will be effective for payments made after
December 31, 1998, subject to certain transition rules. Prospective U.S. Holders
are strongly urged to consult their own tax advisors with respect to the New
Withholding Regulations.
Generally, a non-U.S. Holder will not be subject to Federal income taxes on any
amount which constitutes capital gain upon retirement or disposition of a Note,
provided the gain is not effectively connected with the conduct of a trade or
business in the United States by the non-U.S. Holder. Certain other exceptions
may be applicable, and a non-U.S. Holder should consult its tax advisor in this
regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless the
individual is a direct or indirect 10% or greater securityholder of the
Operating Partnership or, at the time of such individual's death, payments in
respect of the Notes would have been effectively connected with the conduct by
such individual of a trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would establish
an exemption from backup withholding for those non-U.S. Holders who are not
exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker must
withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be reported
by the broker to the IRS, unless either (i) the broker determines that the
seller is an exempt recipient or (ii) the seller certifies its non-U.S. status
(and certain other conditions are met). Certification of the registered owner's
non-U.S. status would be made normally on an IRS Form W-8 under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence. In addition, prospective Noteholders are strongly urged to
consult their own tax advisors with respect to the New Withholding Regulations.
Any amounts withheld under the backup withholding rule from a payment to a
Beneficial Owner would be allowed as a refund or a credit against such
Beneficial Owner's United States Federal income tax provided the required
information is furnished to the IRS.
S-32
<PAGE> 33
SUPPLEMENTAL PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis for sale by the Operating
Partnership to or through J.P. Morgan Securities Inc., First Union Capital
Markets, a Division of Wheat First Securities, Inc., Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co.
Incorporated (the "Agents"). The Agents may purchase Notes, as principal, from
the Operating Partnership from time to time for resale to investors and other
purchasers at varying prices relating to prevailing market prices at the time of
resale as determined by the applicable Agent(s), or, if so specified in the
applicable Pricing Supplement, for resale at a fixed offering price. If agreed
to by the Operating Partnership and an Agent, such Agent may also utilize its
reasonable efforts on an agency basis to solicit offers to purchase the Notes at
100% of the principal amount thereof, unless otherwise specified in the
applicable Pricing Supplement. The Operating Partnership will pay a commission
to an Agent, ranging from .125% -- .750% of the principal amount of each Note,
depending upon its stated maturity, sold through such Agent. Commissions with
respect to Notes with stated maturities in excess of 30 years that are sold
through an Agent will be negotiated between the Operating Partnership and such
Agent at the time of such sale.
Unless otherwise specified in the applicable Pricing Supplement, any Note sold
to an Agent as principal will be purchased by such Agent at a price equal to
100% of the principal amount thereof less a percentage of the principal amount
equal to the commission applicable to an agency sale of a Note of identical
maturity. An Agent may sell Notes it has purchased from the Operating
Partnership as principal to other dealers for resale to investors and other
purchasers, and may allow all or any portion of the discount received in
connection with such purchase from the Operating Partnership to such dealers.
After the initial offering of Notes, the offering price (in the case of Notes to
be resold on a fixed price basis), the concession and the discount may be
changed.
The Operating Partnership has reserved the right to sell the Notes directly to
investors, and may solicit and accept offers to purchase Notes directly from
investors from time to time on its own behalf. No commission will be paid on
Notes sold directly by the Operating Partnership. In certain instances, the
Operating Partnership may offer Notes to or through additional agents named in
the applicable Pricing Supplement.
The Operating Partnership reserves the right to withdraw, cancel or modify the
offer made hereby without notice and may reject offers in whole or in part
(whether placed directly with the Operating Partnership or through the Agents).
Each Agent will have the right, in its discretion reasonably exercised, to
reject in whole or in part any offer to purchase Notes received by it on an
agency basis.
Unless otherwise specified in the applicable Pricing Supplement, payment of the
purchase price of the Notes will be required to be made in immediately available
funds in the Specified Currency in The City of New York on the date of
settlement. See "Description of Notes--General."
Upon issuance, the Notes will not have an established trading market. The Notes
will not be listed on any securities exchange. The Agents may from time to time
purchase and sell Notes in the secondary market, but the Agents are not
obligated to do so, and there can be no assurance that there will be a secondary
market for the Notes or that there will be liquidity in the secondary market if
one develops. From time to time, the Agents may make a market in the Notes, but
the Agents are not obligated to do so and may discontinue any market-making
activity at any time.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Operating
Partnership and Summit Properties have agreed to indemnify the Agents against
certain liabilities (including liabilities under the Securities Act). The
Operating Partnership and the Company have agreed to reimburse the Agents for
certain other expenses.
In the ordinary course of their respective businesses, the Agents and their
affiliates have engaged in, and may in the future engage in, investment and
commercial banking transactions with the Operating Partnership and certain of
its affiliates. In addition, First Union National Bank, an affiliate of First
Union Capital Markets Corp., is the Trustee under the Indenture and the
administrative agent for the banks and a lender under the Operating
Partnership's unsecured $175 million credit facility, with several additional
banks.
In connection with this offering, the Agents may engage in transactions that
stabilize, maintain or otherwise affect the price of the Notes. Specifically,
the Agents may overallot in connection with such offering, creating a syndicate
short position. In addition, the Agents may bid for and purchase the Notes in
the open market to cover syndicate short
S-33
<PAGE> 34
positions or to stabilize the price of the Notes. Finally, the syndicate may
reclaim selling concessions allowed for distributing Notes in the offering, if
the syndicate repurchases previously distributed Notes in the market to cover
overallotments or to stabilize the price of the Notes. Any of these activities
may stabilize or maintain the market price of the Notes above independent market
levels. The Agents are not required to engage in any of these activities and may
end any of them at any time.
Concurrently with the offering of Notes described herein, the Operating
Partnership may issue other Securities described in the accompanying Prospectus.
LEGAL MATTERS
Certain legal matters relating to the Notes will be passed upon for the
Operating Partnership by Goodwin, Procter & Hoar LLP, Boston, Massachusetts and
for the Agents by Brown & Wood LLP, New York, New York. The opinions of Goodwin,
Procter & Hoar LLP and Brown & Wood LLP will be based upon, and subject to,
certain assumptions as to future actions required to be taken in connection with
the issuance and sale of the Notes and as to other events that may affect the
validity of the Notes but that cannot be ascertained on the date of such
opinions.
S-34
<PAGE> 35
PROSPECTUS
$250,000,000
SUMMIT PROPERTIES INC.
PREFERRED STOCK
COMMON STOCK
$250,000,000
SUMMIT PROPERTIES PARTNERSHIP, L.P.
DEBT SECURITIES
---------------------
Summit Properties Inc. ("Summit" or the "Company") may offer from time to
time in one or more series (i) shares of its preferred stock, $.01 par value per
share ("Preferred Stock") and (ii) shares of its common stock, $.01 par value
per share ("Common Stock"). Summit Properties Partnership, L.P. (the "Operating
Partnership") may offer from time to time in one or more series unsecured,
non-convertible investment grade debt securities (the "Debt Securities"). The
aggregate public offering price of the Preferred Stock and the Common Stock
shall be up to $250,000,000 (or its equivalent in another currency based on the
exchange rate at the time of sale) and the aggregate public offering price of
the Debt Securities (collectively with the Preferred Stock and the Common Stock,
the "Securities") shall be up to $250,000,000 (or its equivalent in another
currency based on the exchange rate at the time of sale). The Securities will be
issued in amounts, at prices and on terms to be determined at the time of
offering. The Securities may be offered separately or together, in separate
series, in amounts, at prices and on terms to be set forth in one or more
supplements to this Prospectus (each a "Prospectus Supplement").
The specific terms of the Securities for which this Prospectus is being
delivered will be set forth in the applicable Prospectus Supplement and will
include, where applicable: (i) in the case of Preferred Stock, the specific
designation and stated value per share, any dividend, liquidation, redemption,
conversion, voting and other rights, and any initial public offering price; (ii)
in the case of Common Stock, any initial public offering price; and (iii) in the
case of Debt Securities, the specific title, aggregate principal amount,
ranking, currency, form (which may be registered or bearer, or certificated or
global), authorized denominations, maturity, rate (or manner of calculation
thereof) and time of payment of interest, terms for redemption at the option of
the Operating Partnership or repayment at the option of the holder, terms for
sinking fund payments, covenants and any initial public offering price. In
addition, such specific terms may include limitations on direct or beneficial
ownership and restrictions on transfer of the Securities, in each case as may be
consistent with the Company's Articles of Incorporation, as then in effect, or
otherwise appropriate to preserve the status of the Company as a real estate
investment trust ("REIT") for federal income tax purposes. See "Restrictions on
Transfers of Capital Stock."
The applicable Prospectus Supplement will also contain information, where
appropriate, about material United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities covered
by such Prospectus Supplement.
The Preferred Stock and Common Stock may be offered by the Company and the
Debt Securities may be offered by the Operating Partnership directly to one or
more purchasers, through agents designated from time to time by the Company or
the Operating Partnership, respectively, or to or through underwriters or
dealers. If any agents or underwriters are involved in the sale of any of the
Securities, their names, and any applicable purchase price, fee, commission or
discount arrangement between or among them, will be set forth, or will be
calculable from the information set forth, in an accompanying Prospectus
Supplement. See "Plan of Distribution." No Securities may be sold without
delivery of a Prospectus Supplement describing the method and terms of the
offering of such Securities.
SEE "RISK FACTORS" ON PAGE 3 FOR CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
THE DATE OF THIS PROSPECTUS IS JULY 29, 1997.
<PAGE> 36
AVAILABLE INFORMATION
The Company and the Operating Partnership have filed with the Securities
and Exchange Commission (the "SEC" or "Commission") a registration statement on
Form S-3 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Securities offered hereby.
This Prospectus, which constitutes part of the Registration Statement, omits
certain of the information contained in the Registration Statement and the
exhibits thereto on file with the Commission pursuant to the Securities Act and
the rules and regulations of the Commission thereunder. The Registration
Statement, including exhibits thereto, may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at the Commission's Regional Offices at 7
World Trade Center, 13th Floor, New York, New York 10048, and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and copies
may be obtained at the prescribed rates from the Public Reference Section of the
Commission at its principal office in Washington, D.C. The Commission also
maintains a Web site at http://www.sec.gov containing reports, proxy and
information statements and other information regarding registrants, including
the Company and the Operating Partnership, that file electronically with the
Commission. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference.
The Company and the Operating Partnership are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith, the Company and the Operating Partnership
file reports and proxy statements and other information with the Commission.
Such reports, proxy statements and other information can be inspected and copied
at the locations described above. Copies of such materials can be obtained by
mail from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. In addition, the
Common Stock is listed on the New York Stock Exchange (the "NYSE"), and such
materials can be inspected and copied at the NYSE, 20 Broad Street, New York,
New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the year ended December
31, 1996, filed with the Commission pursuant to the Exchange Act,
including all amendments thereto (File No. 1-12792);
(b) The Company's Current Report on Form 8-K dated March 6, 1997, filed
with the Commission pursuant to the Exchange Act, including all
amendments thereto (File No. 1-12792);
(c) The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997, filed with the Commission pursuant to the Exchange Act (File
No. 1-12792);
(d) The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1997, filed with the Commission pursuant to the Exchange Act (File
No. 1-12792);
(e) The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A filed with the Commission pursuant
to the Exchange Act (File No. 1-12792);
(f) Annual Report of the Company's 1996 Non-Qualified Employee Stock
Purchase Plan on Form 11-K for the year ended December 31, 1996, filed
with the Commission pursuant to the Exchange Act (File No. 1-12792);
(g) The Operating Partnership's Registration Statement on Form 10, dated
April 21, 1997, filed with the Commission pursuant to the Exchange Act,
including all amendments and reports updating such description (File
No. 0-22411);
(h) The Operating Partnership's Current Report on Form 8-K dated July 23,
1997, filed with the Commission pursuant to the Exchange Act (File No.
0-22411); and
2
<PAGE> 37
(i) The Operating Partnership's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997, filed with the Commission pursuant to the
Exchange Act (File No. 0-22411).
All other documents filed with the Commission by the Company or the
Operating Partnership pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Securities are to be incorporated herein by
reference and such documents shall be deemed to be a part hereof from the date
of filing of such documents. Any person receiving a copy of this Prospectus may
obtain, without charge, upon request, a copy of any of the documents
incorporated by reference herein (except for the exhibits to such documents,
unless such exhibits are specifically incorporated by reference into such
documents). Written requests for such copies should be mailed to Michael G.
Malone, Esq., Summit Properties Inc., 212 South Tryon Street, Suite 500,
Charlotte, North Carolina 28281. Telephone requests may be directed to Mr.
Malone at (704) 334-9905.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
RISK FACTORS
An investment in the Securities involves various risks. Prospective
investors should carefully consider the following information in conjunction
with the other information contained or incorporated by reference in this
Prospectus and the applicable Prospectus Supplement before making a decision to
purchase any Securities. Unless the context otherwise requires, the "Company"
shall also hereinafter refer to the Operating Partnership and its subsidiaries.
DEVELOPMENT AND ACQUISITION RISKS
The Company intends to continue to pursue the development and construction
of apartment home communities. Risks associated with the Company's development
and construction activities may include: the abandonment of development and
acquisition opportunities explored by the Company; construction costs of a
community may exceed original estimates due to increased materials, labor or
other expenses, which could make completion of the community uneconomical; the
incurrence of additional costs or liability resulting from defects in
construction material; occupancy rates and rents at a newly completed community
are dependent on a number of factors, including market and general economic
conditions, and may not be sufficient to make the community profitable;
financing may not be available on favorable terms for the development of a
community; and construction and lease-up may not be completed on schedule,
resulting in increased debt service expense and construction costs. Development
activities are also subject to risks relating to the inability to obtain, or
delays in obtaining, all necessary zoning, land-use, building, occupancy, and
other required governmental permits and authorizations. The occurrence of any of
the events described above could adversely affect the Company's ability to
achieve its projected yields on communities under development or reconstruction
and could prevent the Company from making expected distributions. See "-- Real
Estate Investment Risks."
Acquisitions entail risks that investments will fail to perform in
accordance with expectations and that judgments with respect to the costs of
improvements to bring an acquired community up to standards established for the
market position intended for that community will prove inaccurate, as well as
general investment risks associated with any new real estate investment.
Although the Company undertakes an evaluation of the physical condition of each
new community before it is acquired, certain defects or necessary repairs may
not be detected until after the community is acquired, which could significantly
increase the Company's total acquisition costs.
3
<PAGE> 38
DEPENDENCE ON PRIMARY MARKETS
Although the communities currently owned by the Company (the "Communities")
are located in four areas of the Southeast, Mid-Atlantic and Mid-West regions of
the United States, most of the Communities are concentrated in three
Southeastern regions: the I-85 Corridor connecting Atlanta, Charlotte and the
Raleigh-Durham area; the greater Washington, DC/Virginia area; and central and
south Florida. The Company's performance, therefore, is dependent upon economic
conditions in these regions. A decline in the economy in these regions or other
events that could affect the supply or demand for apartment homes, such as
increased construction of new apartment homes, may adversely affect the
Company's financial performance and its ability to perform its obligations with
respect to the Debt Securities or make distributions to its stockholders.
REAL ESTATE INVESTMENT RISKS
General Risks. Real property investments are subject to varying degrees of
risk. The yields available from equity investments in real estate depend on the
amount of income generated and expenses incurred. If the Communities do not
generate revenues sufficient to meet operating expenses, including debt service
and capital expenditures, the Company's cash flow and ability to pay
distributions to its stockholders will be adversely affected.
An apartment community's revenues and value may be adversely affected by a
number of factors, including the cyclical nature of the real estate market
(which is characterized by periods of significant expansion and contraction in
the number of housing starts, the amount of building permit activity and the
availability of financing); the national economic climate; the local economic
climate (which may be adversely impacted by plant closings, industry slowdowns,
military base closings and other factors); local real estate conditions (such as
an oversupply of or a reduced demand for apartment homes); the perceptions by
prospective residents of the safety, convenience and attractiveness of the
community; the ability of the owner to provide adequate management, maintenance
and insurance; and increased operating costs (including real estate taxes and
utilities). Certain significant expenditures associated with each equity
investment (such as mortgage payments, if any, real estate taxes, insurance and
maintenance costs) are generally not reduced when circumstances cause a
reduction in income from the investment. If a community is mortgaged to secure
payment of indebtedness, and if the Company is unable to meet its mortgage
payments, a loss could be sustained as a result of foreclosure on the community
or the exercise of other remedies by the mortgagee. In addition, real estate
values and income from communities are also affected by such factors as interest
rate levels, the availability of financing and the cost of compliance with
government regulation, including zoning, tax and rent stabilization laws.
Market Illiquidity. Equity real estate investments are relatively
illiquid. Such illiquidity will tend to limit the ability of the Company to vary
its portfolio promptly in response to changes in economic or other conditions.
Competition. The Company focuses its operations in ten markets which are
primarily located in four areas of the Southeast, Mid-Atlantic and Mid-West: the
I-85 Corridor connecting Atlanta, Charlotte and the Raleigh-Durham area; the
greater Washington, DC/Virginia area; central and south Florida; and
Indianapolis, Indiana and Columbus, Ohio. Within each market there are numerous
housing alternatives that compete with the Communities in attracting residents.
The Communities compete directly with other rental apartments, condominiums and
single-family homes that are available for rent or sale in the markets in which
the Communities are located. In addition, various entities, including insurance
companies, pension and investment funds, partnerships, investment companies and
other multifamily REITs, may compete with the Company for the acquisition of
existing properties and the development of new properties, some of which may
have greater resources than the Company. The Company has not identified any
dominant competitor, nor is it currently the dominant competitor, in its
markets.
Affordable Housing Laws or Restrictions. A number of the Communities are,
and will be in the future, subject to federal, state and local statutes or other
restrictions requiring that a percentage of apartment homes be made available to
residents satisfying certain income requirements. These laws and restrictions,
as well as
4
<PAGE> 39
any changes thereto making it more difficult to meet such requirements, or a
reduction in or elimination of certain financing advantages available in some
instances to persons satisfying such requirements, could adversely affect the
Company's profitability and its development and acquisition projects in the
future.
POTENTIAL ENVIRONMENTAL LIABILITIES
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
required to investigate and clean up hazardous or toxic substances or petroleum
product releases at such property, and may be held liable to a governmental
entity or to third parties for property damage and for investigation and
clean-up costs incurred by such parties in connection with the contamination.
Such laws, ordinances and regulations typically impose clean-up responsibility
and liability without regard to whether the owner knew of or caused the presence
of the contaminants, and the liability under such laws has been interpreted to
be joint and several, unless the harm is divisible and there is a reasonable
basis for allocation of responsibility. The cost of investigation, remediation
or removal of such substances may be substantial, and the presence of such
substances, or the failure to remediate properly the contamination on such
property, may adversely affect the owner's ability to sell or rent such property
or to borrow using such property as collateral. Persons who arrange for the
disposal or treatment of hazardous or toxic substances may also be liable for
the costs of removal or remediation of such substances at the disposal or
treatment facility, whether or not such facility is owned or operated by such
person. In addition, some environmental laws create a lien on the contaminated
site in favor of the government for damages and costs it incurs in connection
with the contamination. Finally, the owner or operator of a site may be subject
to common law claims by third parties based on damages and costs resulting from
environmental contamination emanating from a site. In connection with the
ownership, operation, management and development of the Communities and other
real properties, the Company may be potentially liable for such damages and
costs.
All of the Communities have been subjected to a Phase I or similar
environmental assessment (which involves general inspections without soil
sampling or ground water analysis and generally without radon testing). These
assessments have not revealed any environmental liability that the Company
believes would have a material adverse effect on the Company's business, assets
or results of operations, nor has the Company been notified by a governmental
authority of any noncompliance, liability or claim relating to hazardous or
toxic substances or petroleum products in connection with any of the Communities
that it believes would have a material adverse effect on the Company's business,
assets or results of operations. The Company is also not aware of any
environmental liability relating to those communities which it has, or its
predecessors have, owned or leased or otherwise managed, developed or operated
that it believes would have a material adverse effect on the Company's business,
assets or results of operations.
It is possible that the Company's assessments do not reveal all
environmental liabilities or that there are material environmental liabilities
of which the Company is unaware. Moreover, no assurances can be given that (i)
future laws, ordinances or regulations will not impose any material
environmental liability or (ii) the current environmental condition of the
Communities will not be affected by residents, by the condition of land or
operations in the vicinity of the properties (such as the presence of
underground storage tanks), or by third parties unrelated to the Company.
NO LIMITATION ON DEBT IN ORGANIZATIONAL DOCUMENTS
The Company currently has a policy of incurring debt only if upon such
incurrence the ratio of debt-to-total market capitalization (i.e., the total
consolidated debt of the Company as a percentage of the market value of
outstanding shares of capital stock of the Company including units of limited
partnership interest of the Operating Partnership) would continue to be 50% or
less. However, the organizational documents of the Company do not contain any
limitation on the amount or percentage of indebtedness the Company may incur and
the Company's Board of Directors has the power to alter the current policy.
Accordingly, the Company could become more highly leveraged, resulting in an
increase in debt service that could adversely affect the Company's ability to
make expected distributions to stockholders and in an increased risk of default
on its obligations under any Debt Securities.
5
<PAGE> 40
IMPACT ON DEBT SECURITIES OF HIGHLY LEVERAGED TRANSACTION OR CHANGE IN CONTROL
The indentures under which Debt Securities will be issued do not contain
any provision that would afford holders of Debt Securities protection in the
event of a highly leveraged transaction or change in control (through the
acquisition of securities, the election of directors or otherwise) involving the
Operating Partnership or Summit. Accordingly, except as may be set forth in any
Prospectus Supplement, the Debt Securities will not contain any protection in
the event of such a transaction. A highly leveraged transaction or a change in
control of the Company could adversely affect the Company's ability to meet its
obligations under the Debt Securities.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT
The Company intends to operate in a manner that will enable it to qualify
as a real estate investment trust (a "REIT") under the Internal Revenue Code of
1986, as amended (the "Code"). Although management of the Company believes that
the Company is organized and operates in such a manner, no assurance can be
given that the Company qualifies or will remain qualified as a REIT.
Qualification as a REIT involves the application of highly technical and complex
Code provisions for which there are only limited judicial and administrative
interpretations. The determination of various factual matters and circumstances
not entirely within the Company's control may affect the Company's ability to
qualify as a REIT. If the Company fails to qualify as a REIT, it will be subject
to federal income tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates. In addition, unless entitled to
relief under certain statutory provisions, the Company will be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification is lost. The additional tax imposed in any year during which the
Company does not qualify for treatment as a REIT would significantly reduce the
cash flow available for distribution to stockholders.
LIMITS ON CHANGES IN CONTROL
Certain provisions contained in the Company's Articles of Incorporation
(the "Articles of Incorporation") and the Company's Bylaws (the "Bylaws"), and
under Maryland law, may have the effect of discouraging a third party from
making an acquisition proposal for the Company and may thereby inhibit a change
in control of the Company. For example, such provisions may (i) deter tender
offers for the Common Stock, which offers may be attractive to the stockholders,
or (ii) deter purchases of large blocks of Common Stock, thereby limiting the
opportunity for stockholders to receive a premium for their Common Stock over
then-prevailing market prices. These provisions include the following:
Preferred Stock. The Articles of Incorporation authorize the Board of
Directors to issue up to 25 million shares of Preferred Stock (together with the
Common Stock, the "Voting Securities") and to establish the preferences and
rights (including the right to vote and the right to convert into Common Stock)
of any Preferred Stock issued.
Ownership Limit. In order for the Company to maintain its qualification as
a REIT, not more than 50% in value of its outstanding Voting Securities may be
owned, directly or indirectly, by five or fewer individuals (as defined in the
Code). For the purpose of preserving the Company's REIT qualification, the
Articles of Incorporation, subject to certain exceptions, provide that no holder
may own, directly or indirectly, more than 9.8% (or 15% for certain investors
that will be "looked through" under the Code for purposes of the foregoing REIT
qualification requirement) of the outstanding Voting Securities of the Company.
Although the Board of Directors of the Company has the authority to waive this
restriction with respect to a particular stockholder if it is satisfied, based
upon the advice of tax-counsel, that ownership in excess of this limit would not
jeopardize the Company's status as a REIT, the Board of Directors could decide
that such action would not be in the best interests of the Company in connection
with a proposed change in control.
Required Consent of Holders of Units for Certain Transactions. The
Operating Partnership may not sell, transfer or otherwise dispose of all or
substantially all of its assets or engage in any other similar transaction
(regardless of the form of such transaction) that would result in the
recognition of significant taxable gain to the holders of units of limited
partnership interest of the Operating Partnership ("Units")
6
<PAGE> 41
without the consent of the holders of 85% of all outstanding Units. Summit
currently holds approximately 84.5% of the outstanding Units. This consent
requirement could limit the possibility of an acquisition or change in control
of the Operating Partnership.
Maryland Business Combination Statute. Under the Maryland General
Corporation Law ("MGCL"), certain "business combinations" (including mergers,
consolidations, share exchanges, certain asset transfers and certain issuances
of equity securities) between a Maryland corporation and any persons who own 10%
or more of the voting power of the corporation's shares (an "Interested
Stockholder") are prohibited for five years after the most recent date on which
the Interested Stockholder became an Interested Stockholder. Thereafter, any
such business combination must be approved by the affirmative vote of at least
(a) 80% of the votes entitled to be cast by holders of outstanding voting shares
of the corporation other than shares held by the Interested Stockholder with
whom the business combination is to be effected, unless, among other things, the
holders of the corporation's shares receive a minimum price (as defined in the
MGCL) for their shares and the consideration is received in cash or in the same
form as previously paid by the Interested Stockholder for the shares that it
owns. However, these provisions of Maryland law do not apply to "business
combinations" with an Interested Stockholder that are approved or exempted by
the board of directors of the corporation before that Interested Stockholder
becomes an Interested Stockholder.
The Articles of Incorporation of the Company exempt from the Maryland
business combination statute any business combination with William F. Paulsen,
William B. McGuire, Jr., Raymond V. Jones and David F. Tufaro, or current or
future affiliates, associates or other persons acting in concert as a group with
any of the foregoing persons.
Maryland Control Share Acquisition Statute. Maryland law provides that
"control shares" of a Maryland corporation acquired in a "control share
acquisition" have no voting rights except to the extent approved by a vote of
two-thirds of the votes eligible under the statute to be cast on the matter.
"Control Shares" are voting shares that, if aggregated with all other such
shares of stock previously acquired by the acquiror, would entitle the acquiror
to exercise voting power in electing directors within one of the following
ranges of voting power: (i) one-fifth or more but less than one-third, (ii)
one-third or more but less than a majority, or (iii) a majority of all voting
power. Control Shares do not include shares the acquiring person is then
entitled to vote as a result of having previously obtained stockholder approval.
A "control share acquisition" means the acquisition of Control Shares, subject
to certain exceptions.
If voting rights are not approved at a meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute, then,
subject to certain conditions and limitations, the corporation may redeem any or
all of the Control Shares (except those for which voting rights have previously
been approved) for fair value. If voting rights for Control Shares are approved
at a stockholder meeting and the acquiror becomes entitled to vote a majority of
the shares entitled to vote, all other stockholders may exercise appraisal
rights.
The Articles of Incorporation and the Bylaws of the Company exempt from the
Maryland control share acquisition statute any future transactions which would
otherwise be subject to the statute by Messrs. Paulsen, McGuire, Jones and
Tufaro, or current or future affiliates, associates, or other persons acting in
concert or as a group with any of the foregoing persons. Consequently, this
prohibition on voting control shares will not apply to such persons.
7
<PAGE> 42
THE COMPANY AND THE OPERATING PARTNERSHIP
GENERAL
Summit is one of the largest developers and operators of luxury garden
apartment communities in the southeastern United States. The Company is a
self-administered and self-managed real estate investment trust. The Company's
Common Stock is listed on the New York Stock Exchange under the symbol "SMT."
The Company's business is conducted principally through the Operating
Partnership, of which the Company is the sole general partner and, as of June
30, 1997, the holder of approximately 84.7% of the outstanding Units. Subject to
certain holding periods, each Unit, other than those held by the Company, may be
submitted by the holder thereof for redemption by the Operating Partnership. The
Company may, at its option, satisfy any redemption request by delivering cash or
one share (subject to certain adjustments) of Common Stock for each Unit
submitted for redemption. With each such exchange, the number of Units owned by
the Company and, therefore, the Company's percentage interest in the Operating
Partnership, will increase.
The Company's third party management and certain construction and other
businesses are conducted through its subsidiaries, Summit Management Company, a
Maryland corporation (the "Management Company"), and Summit Apartment Builders,
Inc., a Florida corporation (the "Construction Company").
The Company was organized as a real estate investment trust under the laws
of the State of Maryland on December 1, 1993 and later changed to corporate form
on January 13, 1994. The Operating Partnership was organized as a limited
partnership under the laws of the State of Delaware on January 14, 1994. On
February 15, 1994, the Company completed its initial public offering of Common
Stock (the "Initial Offering"). The principal executive office of the Company
and the Operating Partnership is located at 212 South Tryon Street, Suite 500,
Charlotte, North Carolina 28281; telephone number (704) 334-9905.
USE OF PROCEEDS
The Company is required by the terms of the partnership agreement of the
Operating Partnership, to invest the net proceeds of any sale of Common Stock or
Preferred Stock in the Operating Partnership in exchange for additional Units or
preferred Units, as the case may be. As will be more fully described in the
applicable Prospectus Supplement, the Company and the Operating Partnership
intend to use the net proceeds from the sale of Securities for one or more of
the following: repayment of indebtedness, investments in new communities and new
developments, maintenance of currently owned communities and general corporate
purposes.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the consolidated ratios of earnings to fixed
charges for the Company, the Operating Partnership and the predecessor to the
Company and the Operating Partnership for the periods shown:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993 DECEMBER 31, 1992
- ---------------- ----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
2.20 1.78 1.65 1.52 0.77* 0.62*
</TABLE>
- ---------------
*Prior to the completion of the Initial Offering, the Company maintained a
different capital structure. As a result, although the original properties have
historically generated positive net cash flow, the financial statements of the
Company show net losses for the fiscal years ended December 31, 1993 and 1992.
Consequently, the computation of the ratio of earnings to fixed charges for
such periods indicates that earnings were inadequate to cover fixed charges by
approximately $6.0 million and $10.1 million for the fiscal years ended
December 31, 1993 and 1992, respectively.
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, earnings consist of pre-tax income from
continuing operations plus fixed charges. Fixed charges consist of interest
expense (whether expensed or capitalized), estimated interest component of rent
expense, and the amortization of debt issuance costs. To date, the Company has
not issued any Preferred Stock; therefore, the ratios of earnings to combined
fixed charges and preferred stock dividend requirements are the same as the
ratios of earnings to fixed charges presented above.
8
<PAGE> 43
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Company conducts its business principally through the Operating
Partnership. Consequently, the Operating Partnership, and not the Company, will
issue the Debt Securities. The Debt Securities will be direct unsecured
obligations of the Operating Partnership and may be either senior Debt
Securities ("Senior Securities") or subordinated Debt Securities ("Subordinated
Securities"). The Debt Securities will be issued under one or more indentures,
each dated as of a date prior to the issuance of the Debt Securities to which it
relates. Senior Securities and Subordinated Securities may be issued pursuant to
separate indentures (respectively, a "Senior Indenture" and a "Subordinated
Indenture"), in each case between the Operating Partnership and a trustee (a
"Trustee"), which may be the same Trustee, and in the form that has been filed
as an exhibit to the Registration Statement of which this Prospectus is a part,
subject to such amendments or supplements as may be adopted from time to time.
The Senior Indenture and the Subordinated Indenture, as amended or supplemented
from time to time, are sometimes hereinafter referred to collectively as the
"Indentures." The Indentures will be subject to and governed by the Trust
Indenture Act of 1939, as amended (the "TIA"). The statements made under this
heading relating to the Debt Securities and the Indentures are summaries of the
material provisions thereof, do not purport to be complete and are qualified in
their entirety by reference to the Indentures and such Debt Securities.
Capitalized terms used herein and not defined shall have the meanings
assigned to them in the applicable Indenture.
TERMS
The indebtedness represented by the Senior Securities will rank equally
with all other unsecured and unsubordinated indebtedness of the Operating
Partnership. The indebtedness represented by Subordinated Securities will be
subordinated in right of payment to the prior payment in full of the Senior Debt
of the Operating Partnership as described under " -- Subordination." The
particular terms of the Debt Securities offered by a Prospectus Supplement will
be described in the applicable Prospectus Supplement, along with any applicable
modifications of or additions to the general terms of the Debt Securities as
described herein and in the applicable Indenture and any applicable federal
income tax considerations. Accordingly, for a description of the terms of any
series of Debt Securities, reference must be made to both the Prospectus
Supplement relating thereto and the description of the Debt Securities set forth
in this Prospectus.
Except as set forth in any Prospectus Supplement, the Debt Securities may
be issued without limit as to aggregate principal amount, in one or more series,
in each case as established from time to time by the Operating Partnership or as
set forth in the applicable Indenture or in one or more indentures supplemental
to such Indenture. All Debt Securities of one series need not be issued at the
same time and, unless otherwise provided, a series may be reopened, without the
consent of the holders of the Debt Securities of such series, for issuance of
additional Debt Securities of such series.
Each Indenture provides that the Operating Partnership may, but need not,
designate more than one Trustee thereunder, each with respect to one or more
series of Debt Securities. Any Trustee under an Indenture may resign or be
removed with respect to one or more series of Debt Securities and a successor
Trustee may be appointed to act with respect to such series. In the event that
two or more persons are acting as Trustee with respect to different series of
Debt Securities, each such Trustee shall be a Trustee of a trust under the
applicable Indenture separate and apart from the trust administered by any other
Trustee, and, except as otherwise indicated herein, any action described herein
to be taken by each Trustee may be taken by each such Trustee with respect to,
and only with respect to, the one or more series of Debt Securities for which it
is Trustee under the applicable Indenture.
9
<PAGE> 44
The following summaries set forth the material terms and provisions of the
Indentures and the Debt Securities. The Prospectus Supplement relating to the
series of Debt Securities being offered will contain further terms of such Debt
Securities, including the following specific terms:
(1) The title of such Debt Securities and whether such Debt Securities are
Senior Securities or Subordinated Securities;
(2) The aggregate principal amount of such Debt Securities and any limit
on such aggregate principal amount;
(3) The price (expressed as a percentage of the principal amount thereof)
at which such Debt Securities will be issued and, if other than the
principal amount thereof, the portion of the principal amount thereof
payable upon declaration of acceleration of the maturity thereof;
(4) The date or dates, or the method for determining such date or dates,
on which the principal of such Debt Securities will be payable;
(5) The rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(6) The date or dates, or the method for determining such date or dates,
from which any such interest will accrue, the dates on which any such
interest will be payable, the record dates for such interest payment
dates, or the method by which such dates shall be determined, the
persons to whom such interest shall be payable, and the basis upon
which interest shall be calculated if other than that of a 360-day
year of twelve 30-day months;
(7) The place or places where the principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable, where such
Debt Securities may be surrendered for registration of transfer or
exchange and where notices or demands to or upon the Operating
Partnership in respect of such Debt Securities and the applicable
Indenture may be served;
(8) The period or periods, if any, within which, the price or prices at
which and the other terms and conditions upon which such Debt
Securities may, pursuant to any optional or mandatory redemption
provisions, be redeemed, as a whole or in part, at the option of the
Operating Partnership;
(9) The obligation, if any, of the Operating Partnership to redeem, repay
or purchase such Debt Securities pursuant to any sinking fund or
analogous provision or at the option of a holder thereof, and the
period or periods within which, the price or prices at which and the
other terms and conditions upon which such Debt Securities will be
redeemed, repaid or purchased, as a whole or in part, pursuant to such
obligation;
(10) If other than U.S. dollars, the currency or currencies in which such
Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite
currency or currencies, and the terms and conditions relating thereto;
(11) Whether the amount of payments of principal of (and premium, if any)
or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula
or method may, but need not be, based on a currency, currencies,
currency unit or units, or composite currency or currencies) and the
manner in which such amounts shall be determined;
(12) Whether such Debt Securities will be issued in certificated or
book-entry form and, if in book entry form, the identity of the
depository for such Debt Securities;
(13) Whether such Debt Securities will be in registered or bearer form and,
if in registered form, the denominations thereof if other than $1,000
and any integral multiple thereof and, if in bearer form, the
denominations thereof and terms and conditions relating thereto;
10
<PAGE> 45
(14) The applicability, if any, of the defeasance and covenant defeasance
provisions described herein or set forth in the applicable Indenture,
or any modification thereof;
(15) Whether and under what circumstances the Operating Partnership will
pay any additional amounts on such Debt Securities in respect of any
tax, assessment or governmental charge and, if so, whether the
Operating Partnership will have the option to redeem such Debt
Securities in lieu of making such payment;
(16) Any deletions from, modifications of or additions to the events of
default or covenants of the Operating Partnership, to the extent
different from those described herein or set forth in the applicable
Indenture with respect to such Debt Securities, and any change in the
right of any Trustee or any of the holders to declare the principal
amount of any of such Debt Securities due and payable;
(17) With respect to any Debt Securities that provide for optional
redemption or prepayment upon the occurrence of certain events (such
as a change of control of the Operating Partnership), (i) the possible
effects of such provisions on the market price of the Operating
Partnership's or the Company's securities or in deterring certain
mergers, tender offers or other takeover attempts, and the intention
of the Operating Partnership to comply with the requirements of Rule
14e-1 under the Exchange Act and any other applicable securities laws
in connection with such provisions; (ii) whether the occurrence of the
specified events may give rise to cross-defaults on other indebtedness
such that payment on such Debt Securities may be effectively
subordinated; and (iii) the existence of any limitation on the
Operating Partnership's financial or legal ability to repurchase such
Debt Securities upon the occurrence of such an event (including, if
true, the lack of assurance that such a repurchase can be effected)
and the impact, if any, under the Indenture of such a failure,
including whether and under what circumstances such a failure may
constitute an event of default;
(18) The name of the applicable trustee and the nature of any material
relationship with the Operating Partnership or with any of its
affiliates, and the percentage of Debt Securities of the class
necessary to require the trustee to take action; and
(19) Any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture.
If so provided in the applicable Prospectus Supplement, the Debt Securities
may be issued at a discount below their principal amount and provide for less
than the entire principal amount thereof to be payable upon declaration of
acceleration of the maturity thereof ("Original Issue Discount Securities"). In
such cases, any special U.S. federal income tax, accounting and other
considerations applicable to Original Issue Discount Securities will be
described in the applicable Prospectus Supplement.
Except as described under "Merger, Consolidation or Sale of Assets" or as
may be set forth in any Prospectus Supplement, the Debt Securities will not
contain any provisions that would limit the ability of the Operating Partnership
to incur indebtedness or that would afford holders of Debt Securities protection
in the event of (i) a highly leveraged or similar transaction involving the
Operating Partnership, the management of the Operating Partnership or the
Company, or any affiliate of any such party, (ii) a change of control, or (iii)
a reorganization, restructuring, merger or similar transaction involving the
Operating Partnership that may adversely affect the holders of the Debt
Securities. In addition, subject to the limitations set forth under "Merger,
Consolidation or Sale of Assets," the Operating Partnership may, in the future,
enter into certain transactions, such as the sale of all or substantially all of
its assets or the merger or consolidation of the Operating Partnership, that
would increase the amount of the Operating Partnership's indebtedness or
substantially reduce or eliminate the Operating Partnership's indebtedness or
substantially reduce or eliminate the Operating Partnership's assets, which may
have an adverse effect on the Operating Partnership's ability to service its
indebtedness, including the Debt Securities. Neither Maryland General
Corporation Law nor the governing instruments of the Company and the Operating
Partnership define the term "substantially all" in connection with the sale of
assets. Additionally, Maryland cases interpreting the words "substantially all"
all
11
<PAGE> 46
rely heavily upon the facts and circumstances of the particular case.
Consequently, to determine whether a sale of "substantially all" of the
Operating Partnership's assets has occurred, a holder of Debt Securities must
review the financial and other information disclosed by the Operating
Partnership to the public. Restrictions on ownership and transfers of the Common
Stock and Preferred Stock are designed to preserve the Company's status as a
REIT and, therefore, may act to prevent or hinder a change of control. See
"Restrictions on Transfers of Capital Stock." Reference is made to the
applicable Prospectus Supplement for information with respect to any deletions
from, modifications of, or additions to, the events of default or covenants that
are described below, including any addition of a covenant or other provision
providing event risk or similar protection.
DENOMINATION, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the
Debt Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof.
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for any
authorized denomination of other Debt Securities of the same series and of a
like aggregate principal amount and tenor upon surrender of such Debt Securities
at the corporate trust office of the applicable Trustee or at the office of any
transfer agent designated by the Operating Partnership for such purpose. In
addition, subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series may be surrendered for
registration of transfer or exchange thereof at the corporate trust office of
the applicable Trustee or at the office of any transfer agent designated by the
Operating Partnership for such purpose. Every Debt Security surrendered for
registration of transfer or exchange must be duly endorsed or accompanied by a
written instrument of transfer, and the person requesting such action must
provide evidence of title and identity satisfactory to the applicable Trustee or
transfer agent. No service charge will be made for any registration of transfer
or exchange of any Debt Securities, but the Trustee or the Operating Partnership
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. If the applicable Prospectus Supplement
refers to any transfer agent (in addition to the applicable Trustee) initially
designated by the Operating Partnership with respect to any series of Debt
Securities, the Operating Partnership may at any time rescind the designation of
any such transfer agent or approve a change in the location through which any
such transfer agent acts, except that the Operating Partnership will be required
to maintain a transfer agent in each place of payment for such series. The
Operating Partnership may at any time designate additional transfer agents with
respect to any series of Debt Securities.
Neither the Operating Partnership nor any Trustee shall be required (i) to
issue, register the transfer of or exchange Debt Securities of any series during
a period beginning at the opening of business 15 days before the day of mailing
of a notice of redemption of any Debt Securities that may be selected for
redemption and ending at the close of business on the day of such mailing; (ii)
to register the transfer of or exchange any Debt Security, or portion thereof,
so selected for redemption, in whole or in part, except the unredeemed portion
of any Debt Security being redeemed in part; or (iii) to issue, register the
transfer of or exchange any Debt Security that has been surrendered for
repayment at the option of the holder, except the portion, if any, of such Debt
Security not to be so repaid.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indentures provide that the Operating Partnership may, without the
consent of the holders of any outstanding Debt Securities, consolidate with, or
sell, lease or convey all or substantially all of its assets to, or merge with
or into, any other entity provided that (i) either the Operating Partnership
shall be the continuing entity, or the successor entity (if other than the
Operating Partnership) formed by or resulting from any such consolidation or
merger or which shall have received the transfer of such assets, shall expressly
assume (A) the Operating Partnership's obligations to pay principal of (and
premium, if any) and interest on all of the Debt Securities and (B) the due and
punctual performance and observance of all of the covenants and conditions
contained in each Indenture; (ii) immediately after giving effect to such
transaction and treating any indebtedness that becomes an obligation of the
Operating Partnership or any subsidiary as a result thereof
12
<PAGE> 47
as having been incurred by the Operating Partnership or such subsidiary at the
time of such transaction, no event of default under the Indentures, and no event
which, after notice or the lapse of time, or both, would become such an event of
default, shall have occurred and be continuing; and (iii) an officers'
certificate and legal opinion covering such conditions shall be delivered to
each Trustee.
CERTAIN COVENANTS
Existence. Except as permitted under "--Merger, Consolidation or Sale of
Assets," the Indentures require the Operating Partnership to do or cause to be
done all things necessary to preserve and keep in full force and effect its
existence, rights and franchises; provided, however, that the Operating
Partnership shall not be required to preserve any right or franchise if it
determines that the preservation thereof is no longer desirable in the conduct
of its business.
Maintenance of Properties. The Indentures require the Operating
Partnership to cause all of its material properties used or useful in the
conduct of its business or the business of any subsidiary to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Operating Partnership may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that the Operating Partnership and its subsidiaries shall not
be prevented from selling or otherwise disposing of their properties for value
in the ordinary course of business.
Insurance. The Indentures require the Operating Partnership to cause each
of its and its subsidiaries' insurable properties to be insured against loss or
damage at least equal to their then full insurable value with insurers of
recognized responsibility and, if described in the applicable Prospectus
Supplement, having a specified rating from a recognized insurance rating
service.
Payment of Taxes and Other Claims. The Indentures require the Operating
Partnership to pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (i) all taxes, assessments and governmental
charges levied or imposed upon it or any subsidiary or upon the income, profits
or property of the Operating Partnership or any subsidiary and (ii) all lawful
claims for labor, materials and supplies which, if unpaid, might by law become a
lien upon the property of the Operating Partnership or any subsidiary; provided,
however, that the Operating Partnership shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith.
Additional Covenants. Any additional covenants of the Operating
Partnership with respect to any series of Debt Securities will be set forth in
the Prospectus Supplement relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture provides that the following events are "Events of Default" with
respect to any series of Debt Securities issued thereunder: (i) default for 30
days in the payment of any installment of interest on any Debt Security of such
series; (ii) default in the payment of principal of (or premium, if any, on) any
Debt Security of such series at its maturity; (iii) default in making any
sinking fund payment as required for any Debt Security of such series; (iv)
default in the performance or breach of any other covenant or warranty of the
Operating Partnership contained in the Indenture (other than a covenant added to
the Indenture solely for the benefit of a series of Debt Securities issued
thereunder other than such series), continued for 60 days after written notice
as provided in the applicable Indenture; (v) a default under any bond,
debenture, note or other evidence of indebtedness for money borrowed (except
mortgage indebtedness) by the Operating Partnership or any of its subsidiaries
in an aggregate principal amount in excess of $25,000,000 or under any indenture
or instrument under which there may be issued or by which there may be secured
or evidenced any indebtedness for money borrowed (except mortgage indebtedness)
by the Operating Partnership or any of its subsidiaries in an aggregate
principal amount in excess of $25,000,000, whether such indebtedness exists on
the date of such Indenture or shall thereafter be created, which default shall
have resulted in such indebtedness becoming or
13
<PAGE> 48
being declared due and payable prior to the date on which it would otherwise
have become due and payable or such obligations being accelerated, without such
acceleration having been rescinded or annulled; (vi) certain events of
bankruptcy, insolvency or reorganization, or court appointment of a receiver,
liquidator or trustee of the Operating Partnership or any Significant Subsidiary
of the Operating Partnership; and (vii) any other event of default provided with
respect to a particular series of Debt Securities. The term "Significant
Subsidiary" has the meaning ascribed to such term in Regulation S-X promulgated
under the Securities Act.
If an event of default under any Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in every
such case the applicable Trustee or the holders of not less than 25% in
principal amount of the Debt Securities of that series will have the right to
declare the principal amount (or, if the Debt Securities of that series are
Original Issue Discount Securities or indexed securities, such portion of the
principal amount as may be specified in the terms thereof) of all the Debt
Securities of that series to be due and payable immediately by written notice
thereof to the Operating Partnership (and to the applicable Trustee if given by
the holders). However, at any time after such a declaration of acceleration with
respect to Debt Securities of such series (or of all Debt Securities then
outstanding under any Indenture, as the case may be) has been made, but before a
judgment or decree for payment of the money due has been obtained by the
applicable Trustee, the holders of not less than a majority in principal amount
of outstanding Debt Securities of such series (or of all Debt Securities then
outstanding under the applicable Indenture, as the case may be) may rescind and
annul such declaration and its consequences if (i) the Operating Partnership
shall have deposited with the applicable Trustee all required payments of the
principal of (and premium, if any) and interest on the Debt Securities of such
series (or of all Debt Securities then outstanding under the applicable
Indenture, as the case may be), plus certain fees, expenses, disbursements and
advances of the applicable Trustee; and (ii) all events of default, other than
the non-payment of accelerated principal (or specified portion thereof), with
respect to Debt Securities of such series (or of all Debt Securities then
outstanding under the applicable Indenture, as the case may be) have been cured
or waived as provided in such Indenture. The Indentures also provide that the
holders of not less than a majority in principal amount of the outstanding Debt
Securities of any series (or of all Debt Securities then outstanding under the
applicable Indenture, as the case may be) may waive any past default with
respect to such series and its consequences, except a default (i) in the payment
of the principal of (or premium, if any) or interest on any Debt Security of
such series; or (ii) in respect of a covenant or provision contained in the
applicable Indenture that cannot be modified or amended without the consent of
the holder of each outstanding Debt Security affected thereby.
The Indentures require each Trustee to give notice to the holders of Debt
Securities within 90 days of a default under the applicable Indenture unless
such default shall have been cured or waived; provided, however, that such
Trustee may withhold notice to the holders of any series of Debt Securities of
any default with respect to such series (except a default in the payment of the
principal of (or premium, if any) or interest on any Debt Security of such
series or in the payment of any sinking fund installment in respect of any Debt
Security of such series) if specified responsible officers of such Trustee
consider such withholding to be in the interest of such holders.
The Indentures provide that no holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to such Indenture
or for any remedy thereunder, except in the case of failure of the applicable
Trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an event of default from the holders of not
less than 25% in principal amount of the outstanding Debt Securities of such
series, as well as an offer of indemnity reasonably satisfactory to it. This
provision will not prevent, however, any holder of Debt Securities from
instituting suit for the enforcement of payment of the principal of (and
premium, if any) and interest on such Debt Securities at the respective due
dates thereof.
The Indentures provide that, subject to provisions in each Indenture
relating to its duties in case of default, a Trustee will be under no obligation
to exercise any of its rights or powers under an Indenture at the request or
direction of any holders of any series of Debt Securities then outstanding under
such Indenture, unless such holders shall have offered to the Trustee thereunder
reasonable security or indemnity. The holders of not less than a majority in
principal amount of the outstanding Debt Securities of any series (or of all
Debt Securities then outstanding under an Indenture, as the case may be) shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the applicable Trustee, or of
14
<PAGE> 49
exercising any trust or power conferred upon such Trustee. However, a Trustee
may refuse to follow any direction which is in conflict with any law or the
applicable Indenture, which may involve such Trustee in personal liability or
which may be unduly prejudicial to the holders of Debt Securities of such series
not joining therein.
Within 120 days after the close of each fiscal year, the Operating
Partnership will be required to deliver to each Trustee a certificate, signed by
one of several specified officers of Summit, as general partner of the Operating
Partnership, stating whether or not such officer has knowledge of any default
under the applicable Indenture and, if so, specifying each such default and the
nature and status thereof.
MODIFICATION OF THE INDENTURES
Modifications and amendments of an Indenture will be permitted to be made
only with the consent of the holders of not less than a majority in principal
amount of all outstanding Debt Securities issued under such Indenture affected
by such modification or amendment; provided, however, that no such modification
or amendment may, without the consent of the holder of each such Debt Security
affected thereby, (i) change the stated maturity of the principal of, or any
installment of interest (or premium, if any) on, any such Debt Security; (ii)
reduce the principal amount of, or the rate or amount of interest on, or any
premium payable on redemption of, any such Debt Security, or reduce the amount
of principal of an Original Issue Discount Security that would be due and
payable upon declaration of acceleration of the maturity thereof or would be
provable in bankruptcy, or adversely affect any right of repayment of the holder
of any such Debt Security; (iii) change the place of payment, or the coin or
currency, for payment of principal of, premium, if any, or interest on any such
Debt Security; (iv) impair the right to institute suit for the enforcement of
any payment on or with respect to any such Debt Security; (v) reduce the
above-stated percentage of any outstanding Debt Securities necessary to modify
or amend the applicable Indenture with respect to such Debt Securities, to waive
compliance with certain provisions thereof or certain defaults and consequences
thereunder or to reduce the quorum or voting requirements set forth in the
applicable Indenture; or (vi) modify any of the foregoing provisions or any of
the provisions relating to the waiver of certain past defaults or certain
covenants, except to increase the required percentage to effect such action or
to provide that certain other provisions may not be modified or waived without
the consent of the holder of such Debt Security.
The holders of a majority in aggregate principal amount of the outstanding
Debt Securities of each series may, on behalf of all holders of Debt Securities
of that series, waive, insofar as that series is concerned, compliance by the
Operating Partnership with certain restrictive covenants of the applicable
Indenture.
Modifications and amendments of an Indenture will be permitted to be made
by the Operating Partnership and the respective Trustee thereunder without the
consent of any holder of Debt Securities for any of the following purposes: (i)
to evidence the succession of another person to the Operating Partnership as
obligor under such Indenture; (ii) to add to the covenants of the Operating
Partnership for the benefit of the holders of all or any series of Debt
Securities or to surrender any right or power conferred upon the Operating
Partnership in such Indenture; (iii) to add events of default for the benefit of
the holders of all or any series of Debt Securities; (iv) to add or change any
provisions of an Indenture to facilitate the issuance of, or to liberalize
certain terms of, Debt Securities in bearer form, or to permit or facilitate the
issuance of Debt Securities in uncertificated form, provided that such action
shall not adversely affect the interests of the holders of the Debt Securities
of any series in any material respect; (v) to change or eliminate any provisions
of an Indenture, provided that any such change or elimination shall become
effective only when there are no Debt Securities outstanding of any series
created prior thereto which are entitled to the benefit of such provision; (vi)
to secure the Debt Securities; (vii) to establish the form or terms of Debt
Securities of any series; (viii) to provide for the acceptance of appointment by
a successor Trustee or facilitate the administration of the trusts under an
Indenture by more than one Trustee; (ix) to cure any ambiguity, defect or
inconsistency in an Indenture, provided that such action shall not adversely
affect the interests of holders of Debt Securities of any series issued under
such Indenture; or (x) to supplement any of the provisions of an Indenture to
the extent necessary to permit or facilitate defeasance and discharge of any
series of such Debt Securities, provided that such action shall not adversely
affect the interests of the holders of the outstanding Debt Securities of any
series.
15
<PAGE> 50
The Indentures provide that in determining whether the holders of the
requisite principal amount of outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security that
shall be deemed to be outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof; (ii) the principal amount
of any Debt Security denominated in a foreign currency that shall be deemed
outstanding shall be the U.S. dollar equivalent, determined on the issue date
for such Debt Security, of the principal amount (or, in the case of an Original
Issue Discount Security, the U.S. dollar equivalent on the issue date of such
Debt Security of the amount determined as provided in (i) above); (iii) the
principal amount of an indexed security that shall be deemed outstanding shall
be the principal face amount of such indexed security at original issuance,
unless otherwise provided with respect to such indexed security pursuant to such
Indenture; and (iv) Debt Securities owned by the Operating Partnership or any
other obligor upon the Debt Securities or any affiliate of the Operating
Partnership or of such other obligor shall be disregarded.
The Indentures contain provisions for convening meetings of the holders of
Debt Securities of a series. A meeting will be permitted to be called at any
time by the applicable Trustee, and also, upon request, by the Operating
Partnership or the holders of at least 10% in principal amount of the
outstanding Debt Securities of such series, in any such case upon notice given
as provided in such Indenture. Except for any consent that must be given by the
holder of each Debt Security affected by certain modifications and amendments of
an Indenture, any resolution presented at a meeting or adjourned meeting duly
reconvened at which a quorum is present may be adopted by the affirmative vote
of the holders of a majority in principal amount of the outstanding Debt
Securities of that series; provided, however, that, except as referred to above,
any resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the
holders of a specified percentage, which is less than a majority, in principal
amount of the outstanding Debt Securities of a series may be adopted at a
meeting or adjourned meeting duly reconvened at which a quorum is present by the
affirmative vote of the holders of such specified percentage in principal amount
of the outstanding Debt Securities of that series. Any resolution passed or
decision taken at any meeting of holders of Debt Securities of any series duly
held in accordance with an Indenture will be binding on all holders of Debt
Securities of that series. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be persons holding or
representing a majority in principal amount of the outstanding Debt Securities
of a series; provided, however, that if any action is to be taken at such
meeting with respect to a consent or waiver which may be given by the holders of
not less than a specified percentage in principal amount of the outstanding Debt
Securities of a series, the persons holding or representing such specified
percentage in principal amount of the outstanding Debt Securities of such series
will constitute a quorum.
Notwithstanding the foregoing provisions, the Indentures provide that if
any action is to be taken at a meeting of holders of Debt Securities of any
series with respect to any request, demand, authorization, direction, notice,
consent, waiver and other action that such Indenture expressly provides may be
made, given or taken by the holders of a specified percentage in principal
amount of all outstanding Debt Securities affected thereby, or of the holders of
such series and one or more additional series: (i) there shall be no minimum
quorum requirement for such meeting; and (ii) the principal amount of the
outstanding Debt Securities of such series that vote in favor of such request,
demand, authorization, direction, notice, consent, waiver or other action shall
be taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has been made,
given or taken under such Indenture.
SUBORDINATION
Unless otherwise provided in the applicable Prospectus Supplement,
Subordinated Securities will be subject to the following subordination
provisions.
Upon any distribution to creditors of the Operating Partnership in a
liquidation, dissolution or reorganization, the payment of the principal of and
interest on any Subordinated Securities will be subordinated to the extent
provided in the applicable Indenture in right of payment to the prior payment in
full
16
<PAGE> 51
of all Senior Debt (as defined below), but the obligation of the Operating
Partnership to make payments of the principal of and interest on such
Subordinated Securities will not otherwise be affected. No payment of principal
or interest will be permitted to be made on Subordinated Securities at any time
if a default on Senior Debt exists that permits the holders of such Senior Debt
to accelerate its maturity and the default is the subject of judicial
proceedings or the Operating Partnership receives notice of the default. After
all Senior Debt is paid in full and until the Subordinated Securities are paid
in full, holders will be subrogated to the rights of holders of Senior Debt to
the extent that distributions otherwise payable to holders have been applied to
the payment of Senior Debt. The Subordinated Indenture will not restrict the
amount of Senior Debt or other indebtedness of the Operating Partnership and its
subsidiaries. As a result of these subordination provisions, in the event of a
distribution of assets upon insolvency, holders of Subordinated Indebtedness may
recover less, ratably, than general creditors of the Operating Partnership.
Senior Debt will be defined in the applicable Indenture as the principal of
and interest on, or substantially similar payments to be made by the Operating
Partnership in respect of, the following, whether outstanding at the date of
execution of the applicable Indenture or thereafter incurred, created or
assumed: (i) indebtedness of the Operating Partnership for money borrowed or
represented by purchase-money obligations; (ii) indebtedness of the Operating
Partnership evidenced by notes, debentures, or bonds, or other securities issued
under the provisions of an indenture, fiscal agency agreement or other
agreement; (iii) obligations of the Operating Partnership as lessee under leases
of property either made as part of any sale and leaseback transaction to which
the Operating Partnership is a party or otherwise; (iv) indebtedness,
obligations and liabilities of others in respect of which the Operating
Partnership is liable contingently or otherwise to pay or advance money or
property or as guarantor, endorser or otherwise or which the Operating
Partnership has agreed to purchase or otherwise acquire; and (v) any binding
commitment of the Operating Partnership to fund any real estate investment or to
fund any investment in any entity making such real estate investment, in each
case other than (A) any such indebtedness, obligation or liability referred to
in clauses (i) through (iv) above as to which, in the instrument creating or
evidencing the same pursuant to which the same is outstanding, it is provided
that such indebtedness, obligation or liability is not superior in right of
payment to the Subordinated Securities or ranks pari passu with the Subordinated
Securities; (B) any such indebtedness, obligation or liability which is
subordinated to indebtedness of the Operating Partnership to substantially the
same extent as or to a greater extent than the Subordinated Securities are
subordinated; and (C) the Subordinated Securities. There will not be any
restrictions in any Indenture relating to Subordinated Securities upon the
creation of additional Senior Debt.
If this Prospectus is being delivered in connection with a series of
Subordinated Securities, the accompanying Prospectus Supplement or the
information incorporated herein by reference will set forth the approximate
amount of Senior Debt outstanding as of the end of the Operating Partnership's
most recent fiscal quarter.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise indicated in the applicable Prospectus Supplement, the
Operating Partnership will be permitted, at its option, to discharge certain
obligations to holders of any series of Debt Securities issued under any
Indenture that have not already been delivered to the applicable Trustee for
cancellation and that either have become due and payable or will become due and
payable within one year (or scheduled for redemption within one year) by
irrevocably depositing with the applicable Trustee, in trust, funds in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable in an amount sufficient to
pay the entire indebtedness on such Debt Securities in respect of principal (and
premium, if any) and interest to the date of such deposit (if such Debt
Securities have become due and payable) or to the stated maturity or redemption
date, as the case may be.
The Indentures provide that, unless otherwise indicated in the applicable
Prospectus Supplement, the Operating Partnership may elect either (i) to defease
and be discharged from any and all obligations with respect to such Debt
Securities (except for the obligation to pay additional amounts, if any, upon
the occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities and the obligations to register the
transfer or exchange of such Debt Securities, to replace
17
<PAGE> 52
temporary or mutilated, destroyed, lost or stolen Debt Securities, to maintain
an office or agency in respect of such Debt Securities, to hold moneys for
payment in trust) ("defeasance"); or (ii) to be released from its obligations
with respect to such Debt Securities under the applicable Indenture (being the
restrictions described under " -- Certain Covenants") or, if provided in the
applicable Prospectus Supplement, its obligations with respect to any other
covenant, and any omission to comply with such obligations shall not constitute
an event of default with respect to such Debt Securities ("covenant
defeasance"), in either case upon the irrevocable deposit by the Operating
Partnership with the applicable Trustee, in trust, of an amount, in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable at stated maturity, or
Government Obligations (as defined below), or both, applicable to such Debt
Securities, which through the scheduled payment of principal and interest in
accordance with their terms will provide money in an amount sufficient to pay
the principal of (and premium, if any) and interest on such Debt Securities, and
any mandatory sinking fund or analogous payments thereon, on the scheduled due
dates therefor.
Such a trust will only be permitted to be established if, among other
things, the Operating Partnership has delivered to the applicable Trustee an
opinion of counsel (as specified in the applicable Indenture) to the effect that
the holders of such Debt Securities will not recognize income, gain or loss for
U.S. federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance or covenant defeasance had not occurred, and such opinion of counsel,
in the case of defeasance, will be required to refer to and be based upon a
ruling received from or published by the Internal Revenue Service (the
"Service") or a change in applicable United States federal income tax law
occurring after the date of the Indenture. In the event of such defeasance, the
holders of such Debt Securities would thereafter be able to look only to such
trust fund for payment of principal (and premium, if any) and interest.
"Government Obligations" means securities that are (i) direct obligations
of the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged; or (ii) obligations
of a person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government which issued
the foreign currency in which the Debt Securities of such series are payable,
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America or such other government, which, in
either case, are not callable or redeemable at the option of the issuer thereof,
and shall also include a depository receipt issued by a bank or trust company as
custodian with respect to any such Government Obligation or a specific payment
of interest on or principal of any such Government Obligation held by such
custodian for the account of the holder of a depository receipt; provided,
however, that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the Government
Obligation or the specific payment of interest on or principal of the Government
Obligation evidenced by such depository receipt.
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Operating Partnership has deposited funds and/or Government Obligations to
effect defeasance or covenant defeasance with respect to Debt Securities of any
series, (i) the holder of a Debt Security of such series is entitled to, and
does, elect pursuant to the applicable Indenture or the terms of such Debt
Security to receive payment in a currency, currency unit or composite currency
other than that in which such deposit has been made in respect of such Debt
Security; or (ii) a Conversion Event (as defined below) occurs in respect of the
currency, currency unit or composite currency in which such deposit has been
made, the indebtedness represented by such Debt Security will be deemed to have
been, and will be, fully discharged and satisfied through the payment of the
principal of (and premium, if any) and interest on such Debt Security as they
become due out of the proceeds yielded by converting the amount so deposited in
respect of such Debt Security into the currency, currency unit or composite
currency in which such Debt Security becomes payable as a result of such
election or such cessation of usage based on the applicable market exchange
rate. "Conversion Event" means the cessation of use of (i) a currency, currency
unit or composite currency both by the government of the country which issued
such currency and for the settlement of transactions by a central bank or other
public institutions of or within
18
<PAGE> 53
the international banking community; (ii) the European Currency Unit ("ECU")
both within the European Monetary System and for the settlement of transactions
by public institutions of or within the European Communities; or (iii) any
currency unit or composite currency other than the ECU for the purposes for
which it was established. Unless otherwise provided in the applicable Prospectus
Supplement, all payments of principal of (and premium, if any) and interest on
any Debt Security that is payable in a foreign currency that ceases to be used
by its government of issuance shall be made in U.S. dollars.
In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because of
the occurrence of any event of default other than the event of default described
in clause (iv) under "-- Events of Default, Notice and Waiver" with respect to
specified sections of an Indenture (which sections would no longer be applicable
to such Debt Securities) or described in clause (vii) under "Events of Default,
Notice and Waiver" with respect to any other covenant as to which there has been
covenant defeasance, the amount in such currency, currency unit or composite
currency in which such Debt Securities are payable, and Government Obligations
on deposit with the applicable Trustee, will be sufficient to pay amounts due on
such Debt Securities at the time of their stated maturity but may not be
sufficient to pay amounts due on such Debt Securities at the time of the
acceleration resulting from such event of default. However, the Operating
Partnership would remain liable to make payment of such amounts due at the time
of acceleration.
The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
NO CONVERSION RIGHTS
The Debt Securities will not be convertible into or exchangeable for any
capital stock of the Company or any equity interest in the Operating
Partnership.
PAYMENT
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium, if any) and interest on any series of Debt
Securities will be payable at the corporate trust office of the Trustee, the
address of which will be stated in the applicable Prospectus Supplement;
provided, however, that, at the option of the Operating Partnership, payment of
interest may be made by check mailed to the address of the person entitled
thereto as it appears in the applicable register for such Debt Securities or by
wire transfer of funds to such person at an account maintained within the United
States.
All moneys paid by the Operating Partnership to a paying agent or a Trustee
for the payment of the principal of or any premium or interest on any Debt
Security which remain unclaimed at the end of two years after such principal,
premium or interest has become due and payable will be repaid to the Operating
Partnership, and the holder of such Debt Security thereafter may look only to
the Operating Partnership for payment thereof.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary identified in the applicable
Prospectus Supplement relating to such series. Global Securities may be issued
in either registered or bearer form and in either temporary or permanent form.
The specific terms of the depositary arrangement with respect to a series of
Debt Securities will be described in the applicable Prospectus Supplement
relating to such series.
19
<PAGE> 54
DESCRIPTION OF PREFERRED STOCK
The description of the Company's Preferred Stock set forth below is a
summary of the material provisions thereof, does not purport to be complete and
is qualified in its entirety by reference to the Company's Articles of
Incorporation (the "Articles of Incorporation") and Bylaws (the "Bylaws"), as in
effect from time to time.
GENERAL
Under the Articles of Incorporation, the Company has authority to issue 25
million shares of Preferred Stock, par value $.01 per share, none of which was
outstanding as of the date of this Prospectus. Under Maryland law, stockholders
generally are not responsible for the corporation's debts or obligations. Shares
of Preferred Stock may be issued from time to time, in one or more series, as
authorized by the Board of Directors of the Company. Prior to issuance of shares
of each series, the Board of Directors is required by the Maryland General
Corporation Law ("MGCL") and the Company's Articles of Incorporation to fix for
each series, subject to the provisions of the Company's Articles of
Incorporation regarding excess stock, $.01 par value per share ("Excess Stock"),
the terms, preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms or
conditions of redemption, as are permitted by Maryland law. The Preferred Stock
will, when issued, be fully paid and nonassessable and will have no preemptive
rights. The Board of Directors could authorize the issuance of shares of
Preferred Stock with terms and conditions that could have the effect of
discouraging a takeover or other transaction that holders of Common Stock might
believe to be in their best interests or in which holders of some, or a
majority, of the shares of Common Stock might receive a premium for their shares
over the then market price of such shares of Common Stock.
TERMS
The following description of the Preferred Stock sets forth the material
terms and provisions of the Preferred Stock to which any Prospectus Supplement
may relate. The statements below describing the Preferred Stock are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of the Company's Articles of Incorporation and Bylaws and
any applicable amendment to the Articles of Incorporation designating terms of a
series of Preferred Stock (a "Designating Amendment").
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms, including:
(1) The title and stated value of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the liquidation
preference per share and the offering price of such Preferred Stock;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to such Preferred Stock;
(4) The date from which dividends on such Preferred Stock shall accumulate,
if applicable;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Stock;
(6) The provision for a sinking fund, if any, for such Preferred Stock;
(7) The provision for redemption, if applicable, of such Preferred Stock;
(8) Any listing of such Preferred Stock on any securities exchange;
(9) The terms and conditions, if applicable, upon which such Preferred
Stock will be convertible into Common Stock, including the conversion
price or rate (or manner of calculation thereof);
(10) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock;
(11) A discussion of federal income tax considerations applicable to such
Preferred Stock;
20
<PAGE> 55
(12) The relative ranking and preference of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company;
(13) Any limitations on issuance of any series of Preferred Stock ranking
senior to or on a parity with such series of Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company; and
(14) Any limitations on direct or beneficial ownership and restrictions on
transfer, in each case as may be appropriate to preserve the status of
the Company as a REIT.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred
Stock will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of the Company, rank (i) senior to all classes or
series of Common Stock of the Company, and to all equity securities ranking
junior to such Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution or winding up of the Company; (ii) on a parity with all
equity securities issued by the Company, the terms of which specifically provide
that such equity securities rank on a parity with the Preferred Stock with
respect to dividend rights or rights upon liquidation, dissolution or winding up
of the Company; and (iii) junior to all equity securities issued by the Company,
the terms of which specifically provide that such equity securities rank senior
to the Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution or winding up of the Company. The term "equity
securities" does not include convertible debt securities.
DIVIDENDS
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of assets
of the Company legally available for payment, cash dividends at such rates and
on such dates as will be set forth in the applicable Prospectus Supplement. Each
such dividend shall be payable to holders of record as they appear on the share
transfer books of the Company on such record dates as shall be fixed by the
Board of Directors of the Company.
Dividends on any series of the Preferred Stock may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Directors of the Company fails
to declare a dividend payable on a dividend payment date on any series of the
Preferred Stock for which dividends are non-cumulative, then the holders of such
series of the Preferred Stock will have no right to receive a dividend in
respect of the dividend period ending on such dividend payment date, and the
Company will have no obligation to pay the dividend accrued for such period,
whether or not dividends on such series are declared payable on any future
dividend payment date.
If Preferred Stock of any series is outstanding, no dividends will be
declared or paid or set apart for payment on any capital stock of the Company of
any other series ranking, as to dividends, on a parity with or junior to the
Preferred Stock of such series for any period unless (i) if such series of
Preferred Stock has a cumulative dividend, full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof is set apart for such payment on the Preferred Stock of such
series for all past dividend periods and the then current dividend period; or
(ii) if such series of Preferred Stock does not have a cumulative dividend, full
dividends for the then current dividend period have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for such payment on the Preferred Stock of such series. When
dividends are not paid in full (or a sum sufficient for such full payment is not
so set apart) upon Preferred Stock of any series and the shares of any other
series of Preferred Stock ranking on a parity as to dividends with the Preferred
Stock of such series, all dividends declared upon Preferred Stock of such series
and any other series of Preferred Stock ranking on a parity as to dividends with
such Preferred Stock shall be declared pro rata so that the amount of dividends
declared per share of Preferred Stock of such series and such other series of
Preferred Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the Preferred Stock of such series (which shall
not include any accumulation in respect of unpaid dividends for prior dividend
periods if such
21
<PAGE> 56
Preferred Stock does not have a cumulative dividend) and such other series of
Preferred Stock bear to each other. No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or payments on
Preferred Stock of such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Stock has a cumulative dividend, full cumulative
dividends on the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for payment for all past dividend periods and the then current
dividend period; and (ii) if such series of Preferred Stock does not have a
cumulative dividend, full dividends on the Preferred Stock of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof is set apart for payment for the then current dividend
period, no dividends (other than in shares of Common Stock or other shares of
capital stock ranking junior to the Preferred Stock of such series as to
dividends and upon liquidation) shall be declared or paid or set aside for
payment nor shall any other distribution be declared or made upon the Common
Stock, or any other capital stock of the Company ranking junior to or on a
parity with the Preferred Stock of such series as to dividends or upon
liquidation, nor shall any shares of Common Stock, or any other shares of
capital stock of the Company ranking junior to or on a parity with the Preferred
Stock of such series as to dividends or upon liquidation be redeemed, purchased
or otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any such shares) by the
Company (except by conversion into or exchange for other capital stock of the
Company ranking junior to the Preferred Stock of such series as to dividends and
upon liquidation).
Any dividend payment made on shares of a series of Preferred Stock shall
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of such series which remains payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Stock
will be subject to mandatory redemption or redemption at the option of the
Company, as a whole or in part, in each case upon the terms, at the times and at
the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon (which
shall not, if such Preferred Stock does not have a cumulative dividend, include
any accumulation in respect of unpaid dividends for prior dividend periods) to
the date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable Prospectus Supplement. If the
redemption price for Preferred Stock of any series is payable only from the net
proceeds of the issuance of shares of capital stock of the Company, the terms of
such Preferred Stock may provide that, if no such shares of capital stock shall
have been issued or to the extent the net proceeds from any issuance are
insufficient to pay in full the aggregate redemption price then due, such
Preferred Stock shall automatically and mandatorily be converted into the
applicable shares of capital stock of the Company pursuant to conversion
provisions specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if a series of Preferred Stock
has a cumulative dividend, full cumulative dividends on all shares of such
series of Preferred Stock shall have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past dividend periods and the then current dividend period; and
(ii) if a series of Preferred Stock does not have a cumulative dividend, full
dividends on all shares of the Preferred Stock of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for the then current dividend period, no
shares of such series of Preferred Stock shall be redeemed unless all
outstanding shares of Preferred Stock of such series are simultaneously
redeemed; provided, however, that the foregoing shall not prevent the purchase
or acquisition of Preferred Stock of such series to preserve the REIT status of
the Company or pursuant to a purchase or exchange offer made on the same terms
to holders of all outstanding shares of Preferred Stock of such series. In
addition, unless (i) if such
22
<PAGE> 57
series of Preferred Stock has a cumulative dividend, full cumulative dividends
on all outstanding shares of such series of Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past dividend periods and the then
current dividend period; and (ii) if such series of Preferred Stock does not
have a cumulative dividend, full dividends on the Preferred Stock of such series
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for the then current
dividend period, the Company shall not purchase or otherwise acquire directly or
indirectly any shares of Preferred Stock of such series (except by conversion
into or exchange for capital shares of the Company ranking junior to the
Preferred Stock of such series as to dividends and upon liquidation); provided,
however, that the foregoing shall not prevent the purchase or acquisition of
shares of Preferred Stock of such series to preserve the REIT status of the
Company or pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding shares of Preferred Stock of such series.
If fewer than all of the outstanding shares of Preferred Stock of any
series are to be redeemed, the number of shares to be redeemed will be
determined by the Company and such shares may be redeemed pro rata from the
holders of record of such shares in proportion to the number of such shares held
or for which redemption is requested by such holder (with adjustments to avoid
redemption of fractional shares) or by any other equitable manner determined by
the Company.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Stock of
any series to be redeemed at the address shown on the stock transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
of shares and series of the Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Preferred Stock are
to be surrendered for payment of the redemption price; (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date; and (vi) the
date upon which the holder's conversion rights, if any, as to such shares shall
terminate. If fewer than all the shares of Preferred Stock of any series are to
be redeemed, the notice mailed to each such holder thereof shall also specify
the number of shares of Preferred Stock to be redeemed from each such holder. If
notice of redemption of any Preferred Stock has been given and if the funds
necessary for such redemption have been set aside by the Company in trust for
the benefit of the holders of any Preferred Stock so called for redemption, then
from and after the redemption date dividends will cease to accrue on such
Preferred Stock, and all rights of the holders of such shares will terminate,
except the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Common Stock or any other class or series of capital
stock of the Company ranking junior to the Preferred Stock in the distribution
of assets upon any liquidation, dissolution or winding up of the Company, the
holders of each series of Preferred Stock shall be entitled to receive out of
assets of the Company legally available for distribution to stockholders
liquidating distributions in the amount of the liquidation preference per share,
if any, set forth in the applicable Prospectus Supplement, plus an amount equal
to all dividends accrued and unpaid thereon (which shall not include any
accumulation in respect of unpaid noncumulative dividends for prior dividend
periods). After payment of the full amount of the liquidating distributions to
which they are entitled, the holders of Preferred Stock will have no right or
claim to any of the remaining assets of the Company. In the event that, upon any
such voluntary or involuntary liquidation, dissolution or winding up, the
available assets of the Company are insufficient to pay the amount of the
liquidating distributions on all outstanding shares of Preferred Stock and the
corresponding amounts payable on all shares of other classes or series of
capital stock of the Company ranking on a parity with the Preferred Stock in the
distribution of assets, then the holders of the Preferred Stock and all other
such classes or series of capital stock shall share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Stock, the remaining assets of the Company shall be distributed among
the holders of any other classes or series of capital stock ranking junior to
the Preferred Stock upon liquidation, dissolution or winding up, according to
their respective
23
<PAGE> 58
rights and preferences and in each case according to their respective number of
shares. For such purposes, the consolidation or merger of the Company with or
into any other corporation, trust or entity, or the sale, lease or conveyance of
all or substantially all of the property or business of the Company, shall not
be deemed to constitute a liquidation, dissolution or winding up of the Company.
VOTING RIGHTS
Holders of the Preferred Stock will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Unless provided otherwise for any series of Preferred Stock, so long as any
shares of Preferred Stock of a series remain outstanding, the Company will not,
without the affirmative vote or consent of the holders of at least two-thirds of
the shares of such series of Preferred Stock outstanding at the time, given in
person or by proxy, either in writing or at a meeting (such series voting
separately as a class), (i) authorize or create, or increase the authorized or
issued amount of, any class or series of capital stock ranking prior to such
series of Preferred Stock with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up or reclassify
any authorized capital stock of the Company into such shares, or create,
authorize or issue any obligation or security convertible into or evidencing the
right to purchase any such shares; or (ii) amend, alter or repeal the provisions
of the Company's Articles of Incorporation or the Designating Amendment for such
series of Preferred Stock, whether by merger, consolidation or otherwise (an
"Event"), so as to materially and adversely affect any right, preference,
privilege or voting power of such series of Preferred Stock or the holders
thereof; provided, however, with respect to the occurrence of any of the Events
set forth in (ii) above, so long as the Preferred Stock remains outstanding with
the terms thereof materially unchanged, taking into account that upon the
occurrence of an Event the Company may not be the surviving entity, the
occurrence of any such Event shall not be deemed to materially and adversely
affect such rights, preferences, privileges or voting power of holders of
Preferred Stock, and provided further that (A) any increase in the amount of the
authorized Preferred Stock or the creation or issuance of any other series of
Preferred Stock, or (B) any increase in the amount of authorized shares of such
series or any other series of Preferred Stock, in each case ranking on a parity
with or junior to the Preferred Stock of such series with respect to payment of
dividends or the distribution of assets upon liquidation, dissolution or winding
up, shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Stock shall have
been redeemed or called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Stock
is convertible into Common Stock will be set forth in the applicable Prospectus
Supplement relating thereto. Such terms will include the number of shares of
Common Stock into which the shares of Preferred Stock are convertible, the
conversion price or rate (or manner of calculation thereof), the conversion
period, provisions as to whether conversion will be at the option of the holders
of the Preferred Stock or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such series of Preferred Stock.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Code not more than 50% in
value of its outstanding capital stock may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain entities)
during the last half of a taxable year. To assist the Company in meeting this
requirement, the Company may take certain actions to limit the beneficial
ownership, directly or indirectly, by a single person of the Company's
outstanding equity securities, including any Preferred Stock of the Company.
Therefore, the Designating Amendment for each series of Preferred Stock may
contain provisions restricting
24
<PAGE> 59
the ownership and transfer of the Preferred Stock. The applicable Prospectus
Supplement will specify any additional ownership limitation relating to a series
of Preferred Stock. See "Restrictions on Transfers of Capital Stock."
TRANSFER AGENT
The transfer agent and registrar for the Preferred Stock will be set forth
in the applicable Prospectus Supplement.
DESCRIPTION OF COMMON STOCK
The description of the Company's Common Stock set forth below is a summary
of the material provisions thereof, does not purport to be complete and is
qualified in its entirety by reference to the Company's Articles of
Incorporation and Bylaws, as in effect from time to time.
GENERAL
Under the Articles of Incorporation, the Company has authority to issue 100
million shares of Common Stock, par value $.01 per share. Under Maryland law,
stockholders generally are not responsible for the corporation's debts or
obligations. At March 31, 1997, the Company had outstanding 23,078,821 shares of
Common Stock.
TERMS
The following description of the Common Stock sets forth the material terms
and provisions of the Common Stock to which any Prospectus Supplement may
relate. Subject to the preferential rights of any other class or series of stock
and to the provisions of the Company's Articles of Incorporation regarding
Excess Stock, holders of shares of Common Stock will be entitled to receive
dividends on shares of Common Stock if, as and when authorized and declared by
the Board of Directors of the Company out of assets legally available therefor
and to share ratably in the assets of the Company legally available for
distribution to its stockholders in the event of its liquidation, dissolution or
winding-up after payment of, or adequate provision for, all known debts and
liabilities of the Company.
Subject to the provisions of the Company's Articles of Incorporation
regarding Excess Stock, each outstanding share of Common Stock entitles the
holder to one vote on all matters submitted to a vote of stockholders, including
the election of Directors and, except as otherwise required by law or except as
provided with respect to any other class or series of stock, the holders of
Common Stock will possess the exclusive voting power. The Company's Board of
Directors is divided into three classes. The members of each class serve for a
term of three years. The terms for the three classes are staggered such that the
term of only one class of directors expires each year. There is no cumulative
voting in the election of Directors, which means that the holders of a majority
of the outstanding shares of Common Stock can elect all of the Directors then
standing for election, and the holders of the remaining shares of Common Stock
will not be able to elect any Directors.
Holders of Common Stock have no conversion, sinking fund or redemption
rights, or preemptive rights to subscribe for any securities of the Company.
Subject to the provisions of the Company's Articles of Incorporation
regarding Excess Stock, all shares of Common Stock will have equal dividend,
distribution, liquidation and other rights, and will have no preference,
appraisal or exchange rights.
Pursuant to the MGCL, a corporation generally cannot dissolve, amend its
Articles of Incorporation, merge, sell all or substantially all of its assets,
engage in a share exchange or engage in similar transactions outside the
ordinary course of business unless approved by the affirmative vote of
stockholders holding at least two-thirds of the shares entitled to vote on the
matter unless a lesser percentage (but not less than a majority of all of the
votes to be cast on the matter) is set forth in the corporation's Articles of
Incorporation. The
25
<PAGE> 60
Company's Articles of Incorporation provide that such transactions, with the
exception of an amendment of the Articles of Incorporation affecting
restrictions on transfer, can be effected by a vote of a majority of the shares
entitled to vote on such matters.
Provisions of the Company's Articles of Incorporation described below under
"Restrictions on Transfers of Capital Stock," together with other provisions of
the Company's Articles of Incorporation and the MGCL may discourage a change in
control and limit the opportunity for stockholders to receive a premium for
their Common Stock.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Code, not more than 50% in
value of its outstanding capital stock may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain entities)
during the last half of a taxable year. To assist the Company in meeting this
requirement, the Company may take certain actions to limit the beneficial
ownership, directly or indirectly, by a single person of the Company's
outstanding equity securities. See "Restrictions on Transfers of Capital Stock."
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is First Union
National Bank of North Carolina.
RESTRICTIONS ON TRANSFERS OF CAPITAL STOCK
For the Company to qualify as a REIT under the Code, among other things,
not more than 50% in value of its outstanding capital stock may be owned,
directly or indirectly, by five or fewer individuals (defined in the Code to
include certain entities) during the last half of a taxable year (other than the
first year) (the "Five or Fewer Test"), and such capital stock must be
beneficially owned by 100 or more persons during at least 335 days of a taxable
year of 12 months (other than the first year) or during a proportionate part of
a shorter taxable year. See "Federal Income Tax Considerations." In order to
protect the Company against the risk of losing its status as a REIT on account
of a concentration of ownership among its stockholders, the Articles of
Incorporation, subject to certain exceptions, provide that no holder who is an
individual may own, or be deemed to own by virtue of the attribution provisions
of the Code, more than 9.8% (the "Ownership Limit") of the Company's capital
stock. Pursuant to the Code, certain types of entities, such as pension trusts
qualifying under Section 401(a) of the Code, United States investment companies
registered under the Investment Company Act of 1940 and corporations will be
looked-through for the purposes of the Five or Fewer Test. The Company's
Articles of Incorporation limits such entities to holding no more than 15% of
the aggregate value of the Company's shares of capital stock (the "Look-Through
Ownership Limit"). Any transfer of capital stock or any security convertible
into capital stock that would create a direct or indirect ownership of capital
stock in excess of the Ownership Limit or the Look-Through Ownership Limit or
that would result in the disqualification of the Company as a REIT, including
any transfer that results in the capital stock being owned by fewer than 100
persons or results in the Company being "closely held" within the meaning of
Section 856(h) of the Code, shall be null and void, and the intended transferee
will acquire no rights to the capital stock. The Board of Directors in its sole
discretion may waive the Ownership Limit or the Look-Through Ownership Limit if
evidence satisfactory to the Board of Directors and the Company's tax counsel is
presented that the changes in ownership will not then or in the future
jeopardize the Company's status as a REIT and the Board of Directors otherwise
decides that such action is in the best interests of the Company. The foregoing
restrictions on transferability and ownership will not apply if the Board of
Directors determines that it is no longer in the best interests of the Company
to attempt to qualify, or to continue to qualify, as a REIT.
Capital stock owned, or deemed to be owned, or transferred to a stockholder
in excess of the Ownership Limit or the Look-Through Ownership Limit will
automatically be converted into shares of Excess Stock that will be transferred,
by operation of law, to the Company as trustee of a trust for the exclusive
benefit of the transferees to whom such capital stock may be ultimately
transferred without violating the Ownership Limit or
26
<PAGE> 61
the Look-Through Ownership Limit. While held in trust, the Excess Stock will not
be considered for purposes of any stockholder vote or the determination of a
quorum for such vote and, except upon liquidation, will not be entitled to
participate in distributions. Any distribution paid on Excess Stock, prior to
the discovery by the Company that capital stock has been transferred in
violation of the Ownership Limit or the Look-Through Ownership Limit, shall be
repaid to the Company upon demand. Shares of Excess Stock are not treasury
stock, but rather constitute a separate class of issued and outstanding stock of
the Company. The original transferee-stockholder may, at any time while the
shares of Excess Stock are held by the Company in trust, transfer the interest
in the trust representing the Excess Stock to any individual whose ownership of
the capital stock converted into such Excess Stock would be permitted under the
Ownership Limit or the Look-Through Ownership Limit, at a price not in excess of
(i) the price paid by the original transferee-stockholder for the capital stock
that was converted into Excess Stock, or (ii) if the original
transferee-stockholder did not give value for such shares (e.g. the capital
stock was received through a gift, devise or other transaction), the average
closing price for the class of shares from which such shares of Excess Stock
were converted for the ten days immediately preceding such sale or gift.
Immediately upon the transfer to the permitted transferee, the Excess Stock will
automatically be converted into capital stock of the class from which it was
converted. If the foregoing transfer restrictions are determined to be void or
invalid by virtue of any legal decision, statute, rule or regulation, then the
intended transferee of any Excess Stock may be deemed, at the option of the
Company, to have acted as an agent on behalf of the Company in acquiring the
Excess Stock and to hold the Excess Stock on behalf of the Company.
In addition, the Company will have the right, for a period of 90 days
during the time any shares of Excess Stock are held by the Company in trust, to
purchase all or any portion of the Excess Stock from the original
transferee-stockholder for the lesser of (i) the price initially paid for the
capital stock by the original transferee-stockholder, or if the original
transferee-stockholder did not give value for such shares (e.g., the shares were
received through a gift, devise or other transaction), the average closing price
for the class of capital stock from which such shares of Excess Stock were
converted for the ten days immediately preceding such sale or gift, and (ii) the
average closing price for the class of such shares of Excess Stock were
converted for the ten trading days immediately preceding the date the Company
elects to purchase such shares. The 90-day period begins on the date notice is
received of the violative transfer if the original transferee-stockholder gives
notice to the Company of the transfer or, if no such notice is given, the date
the Board of Directors determines that a violative transfer has been made.
These restrictions will not preclude settlement of transactions through the
New York Stock Exchange.
Each stockholder shall, upon demand, be required to disclose to the Company
in writing any information with respect to the direct, indirect and constructive
ownership of the Company's capital stock as the Board of Directors deems
necessary to comply with the provisions of the Code applicable to REITs, to
comply with the requirements of any taxing authority or governmental agency or
to determine any such compliance.
The Ownership Limit and the Look-Through Ownership Limit may have the
effect of precluding acquisition of control of the Company unless the Board of
Directors determines that maintenance of REIT status is no longer in the best
interests of the Company.
FEDERAL INCOME TAX CONSIDERATIONS
Based on quarterly and annual internal compliance tests, annual review of
such testing conducted by its independent accountants, and consultation with
such accountants and the Company's counsel from time to time, the Company
believes it has operated, and the Company intends to continue to operate, in
such a manner as to qualify as a REIT under the Code, but no assurance can be
given that it will at all times so qualify.
The provisions of the Code pertaining to REITs are highly technical and
complex. The following is a brief and general summary of the material federal
income tax considerations of an investment in the Company's Securities to the
extent those considerations relate to the taxation of the Company. To the extent
such considerations relate to the tax treatment of particular Securities, they
will be addressed in the applicable
27
<PAGE> 62
Prospectus Supplement. For the particular provisions that govern the federal
income tax treatment of the Company and its stockholders, reference is made to
Sections 856 through 860 of the Code and the regulations thereunder. The
following summary is qualified in its entirety by those Sections of the Code and
the regulations thereunder.
The statements in this discussion are based on current provisions of the
Code, Treasury Regulations promulgated under the Code, the legislative history
of the Code, existing administrative rulings and practices of the Service, and
judicial decisions. No assurance can be given that future legislative, judicial,
or administrative actions or decisions, which may be retroactive in effect, will
not affect the accuracy of any statements in this Prospectus with respect to the
transactions entered into or contemplated prior to the effective date of such
changes. To the extent that legal conclusions are contained in this summary, the
Company has based such conclusions on the opinion of counsel to the Company.
EACH INVESTOR IS ADVISED TO CONSULT HIS OWN TAX ADVISOR REGARDING THE
SPECIFIC TAX CONSEQUENCE TO HIM OR HER OF AN INVESTMENT IN THE COMPANY'S
SECURITIES.
Under the Code, if certain requirements are met in a taxable year, a REIT
generally will not be subject to federal income tax with respect to income that
it distributes to its stockholders. However, the Company may be subject to
federal income tax under certain circumstances including taxes at regular
corporate rates on any undistributed REIT taxable income, the "alternative
minimum tax" on its items of tax preference, and taxes imposed on income and
gain generated by certain extraordinary transactions. If the Company fails to
qualify during any taxable year as a REIT, unless certain relief provisions are
available, it will be subject to tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates, which could have
a material adverse effect upon its stockholders.
In addition to meeting a number of technical requirements, including
requirements regarding distributions to shareholders, diversification of
ownership and record keeping, to qualify as a REIT the Company must meet certain
tests regarding the nature of its assets and its gross income. The Company is
largely restricted under these tests to holding "real estate assets" (as defined
in the Code) for investment (and not for resale) and relatively small amounts of
investment securities. Accordingly, the Company's ability to diversify its
holdings outside of investments in real estate is limited. The requirements of
the statutory tests also impose certain requirements on the Company's leases
with its tenants, including restrictions on the Company's ability to provide
noncustomary services to its tenants. Because the Company's proportionate share
of the assets and items of income of the Operating Partnership and its
subsidiaries are treated as assets and gross income of the Company, the same
restrictions apply to the operations and investments of the Operating
Partnership and its subsidiaries. Further, changes in law, or in the
interpretation of the law, may change the nature and effect of these
restrictions or add additional restrictions to the manner in which the Company
conducts its business.
In the opinion of Goodwin, Procter & Hoar LLP, counsel to the Company,
commencing with the taxable year ending December 31, 1994, the Company has been
organized and operated in conformity with the requirements for qualification and
taxation as a REIT under the Code, and the Company's proposed method of
operation will enable it to continue to meet the requirements for qualification
and taxation as a REIT under the Code. Investors should be aware, however, that
opinions of counsel are not binding upon the Service or any court. Moreover,
Goodwin, Procter & Hoar LLP's opinion is based on various assumptions and is
conditioned upon certain representations made by the Company as to factual
matters, including representations regarding the nature of the Company's
properties, and the future conduct of the Company's business. The Company's
qualification and taxation as a REIT depends upon the Company's ability to meet
on a continuing basis, through actual annual operating results, the distribution
levels, stock ownership, and other various qualification tests imposed under the
Code. Goodwin, Procter & Hoar LLP will not review the Company's compliance with
those tests on a continuing basis. Accordingly, no assurance can be given that
the actual results of the Company's operation for any particular taxable year
will satisfy such requirements.
Investors are urged to consult their own tax advisors with respect to the
appropriateness of an investment in the Securities offered hereby and with
respect to the tax consequences arising under federal law and the laws of any
state, municipality or other taxing jurisdiction, including tax consequences
resulting from such
28
<PAGE> 63
investor's own tax characteristics. In particular, foreign investors should
consult their own tax advisors concerning the tax consequences of an investment
in the Company, including the possibility of United States income tax
withholding on Company distributions.
PLAN OF DISTRIBUTION
The Company may sell Preferred Stock and Common Stock and the Operating
Partnership may sell Debt Securities through underwriters or dealers, directly
to one or more purchasers, through agents or through a combination of any such
methods of sale.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, or at negotiated prices.
In connection with the sale of Securities, underwriters or agents may
receive compensation from the Company, from the Operating Partnership or from
purchasers of Securities, for whom they may act as agents, in the form of
discounts, concessions or commissions. Underwriters may sell Securities to or
through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
from the purchasers for whom they may act as agents. Underwriters, dealers, and
agents that participate in the distribution of Securities may be deemed to be
underwriters under the Securities Act, and any discounts or commissions they
receive from the Company or the Operating Partnership, and any profit on the
resale of Securities they realize may be deemed to be underwriting discounts and
commissions under the Securities Act. Any such underwriter or agent will be
identified, and any such compensation received from the Company or the Operating
Partnership will be described, in the applicable Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, each
series of Securities will be a new issue with no established trading market,
other than the Common Stock which is listed on the NYSE. Any shares of Common
Stock sold pursuant to a Prospectus Supplement will be listed on the NYSE,
subject to official notice of issuance. The Operating Partnership or the Company
may elect to list any series of Debt Securities or Preferred Stock,
respectively, on an exchange, but is not obligated to do so. It is possible that
one or more underwriters may make a market in a series of Securities, but will
not be obligated to do so and may discontinue any market making at any time
without notice. Therefore, no assurance can be given as to the liquidity of, or
the trading market for, any series of Debt Securities or Preferred Stock.
Until the distribution of the Securities is completed, rules of the
Commission may limit the ability of any underwriters and selling group members
to bid for and purchase the Securities. As an exception to these rules,
underwriters are permitted to engage in certain transactions that stabilize the
price of the Securities. Such transactions consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the Securities.
If any underwriters create a short position in the Securities in connection
with an offering, i.e., if they sell more Securities than are set forth on the
cover page of the applicable Prospectus Supplement, the underwriters may reduce
that short position by purchasing Securities in the open market.
The lead underwriters may also impose a penalty bid on certain other
underwriters and selling group members participating in an offering. This means
that if the lead underwriters purchase Securities in the open market to reduce
the underwriters' short position or to stabilize the price of the Securities,
they may reclaim the amount of any selling concession from the underwriters and
selling group members who sold those Securities as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security before the distribution is completed.
29
<PAGE> 64
Neither the Company nor the Operating Partnership makes any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above might have on the price of the Securities. In
addition, neither the Company nor the Operating Partnership makes any
representation that underwriters will engage in such transactions or that such
transactions, once commenced, will not be discontinued without notice.
Under agreements into which the Company or the Operating Partnership may
enter, underwriters, dealers and agents who participate in the distribution of
Securities may be entitled to indemnification by the Company or the Operating
Partnership against certain liabilities, including liabilities under the
Securities Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, or be tenants of, the Company or the Operating Partnership
in the ordinary course of business.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Securities from the Company
at the public offering price set forth in such Prospectus Supplement pursuant to
delayed delivery contracts ("Company Contracts") providing for payment and
delivery on the date or dates stated in such Prospectus Supplement. Institutions
with which such contracts, when authorized, may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Company. The obligations of any purchaser
under any such contract will be subject to the condition that the purchase of
the Securities shall not at the time of delivery be prohibited under the laws of
the jurisdiction to which such purchaser is subject. The underwriters and such
other agents will not have any responsibility in respect of the validity or
performance of such contracts.
If so indicated in the applicable Prospectus Supplement, the Operating
Partnership will authorize underwriters or other persons acting as the Operating
Partnership's agents to solicit offers by certain institutions to purchase Debt
Securities from the Operating Partnership at the public offering price set forth
in such Prospectus Supplement pursuant to delayed delivery contracts ("Operating
Partnership Contracts") providing for payment and delivery on the date or dates
stated in such Prospectus Supplement. Each Operating Partnership Contract will
be for an amount not less than, and the aggregate principal amount of Debt
Securities sold pursuant to Operating Partnership Contracts shall be not less
nor more than, the respective amounts stated in the applicable Prospectus
Supplement. Institutions with which such contracts, when authorized, may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions, and others, but
will in all cases be subject to the approval of the Operating Partnership. The
obligations of any purchaser under any such contract will be subject to the
conditions that (i) the purchase of the Debt Securities shall not at the time of
delivery be prohibited under the laws of any jurisdiction in the United States
to which such purchaser is subject, and (ii) if the Debt Securities are being
sold to underwriters, the Operating Partnership shall have sold to such
underwriters the total principal amount of the Debt Securities less the
principal amount thereof covered by Operating Partnership Contracts. The
underwriters and such other agents will not have any responsibility in respect
of the validity or performance of such contracts.
In order to comply with the securities laws of certain states, if
applicable, the Securities offered hereby will be sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition, in certain
states Securities may not be sold unless they have been registered or qualified
for sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
LEGAL MATTERS
Certain legal matters, including the legality of the Securities, will be
passed upon for the Company and the Operating Partnership by Goodwin, Procter &
Hoar LLP, Boston, Massachusetts.
30
<PAGE> 65
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this registration statement by reference from the Company's
Annual Report on Form 10-K for the year ended December 31, 1996, as amended, the
Annual Report on Form 11-K of the Company's 1996 Non-Qualified Employee Stock
Purchase Plan for the year ended December 31, 1996 and the Operating
Partnership's Registration Statement on Form 10, dated April 21, 1997, as
amended, have been audited by Deloitte & Touche LLP, independent accountants, as
stated in their reports which are incorporated herein by reference and have been
so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing. The financial statements
incorporated in this registration statement by reference from the Company's
Current Report on Form 8-K/A-1, dated May 1, 1997, and the Operating
Partnership's Registration Statement on Form 10/A-2, dated June 30, 1997, have
been audited by Reznick, Fedder & Silverman, Deloitte & Touche LLP and Arthur
Andersen LLP, independent accountants, as stated in their reports which are
incorporated herein by reference and have been so incorporated in reliance upon
the report of each such firm given upon their authority as experts in accounting
and auditing.
31
