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Filed Pursuant to Rule 424(b)(2)
File No. 333-14595-01
PROSPECTUS SUPPLEMENT SUN COMMUNITIES OPERATING
(TO PROSPECTUS DATED OCTOBER 30, 1996) LIMITED PARTNERSHIP
$100,000,000
MEDIUM-TERM NOTES
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TERMS OF SALE
The following terms may apply to the notes, which we may sell at one or more
times. The final terms for each note will be included in a pricing supplement.
For more details, see "Description of Notes." We will receive between
$99,875,000 and $99,250,000 of the proceeds from the sale of the notes, after
paying commissions of between $125,000 and $750,000.
<TABLE>
<S> <C>
- - Mature 9 months or more - Remarketing features
- - Fixed, floating or zero coupon interest rate. The - Certificate or book-entry form
floating interest rate formula would be based on: - Subject to redemption or repurchase at our option
- CD Rate or yours
- CMT Rate - Interest paid on fixed rate notes on May 1 and
- Commercial Paper Rate November 1
- 11th District Cost of Funds Rate - Interest paid on floating rate notes daily,
- Federal Funds Rate weekly, monthly, quarterly, semi-annually, or annually
- LIBOR - Minimum denominations of $1,000, increased in
- Kenny Rate multiples of $1,000
- Prime Rate
- Treasury Rate
- Such other interest rate basis or interest rate
formula as may be specified in the applicable
pricing supplement
</TABLE>
WE URGE YOU TO CAREFULLY READ THE ATTACHED PROSPECTUS, THIS PROSPECTUS
SUPPLEMENT AND THE PRICING SUPPLEMENT WHICH WILL DESCRIBE THE SPECIFIC TERMS OF
THE OFFERING BEFORE YOU MAKE YOUR INVESTMENT DECISION.
SEE "RISK FACTORS" COMMENCING ON PAGE S-2 FOR A DISCUSSION OF CERTAIN RISKS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE ATTACHED PROSPECTUS OR ANY PRICING SUPPLEMENT IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The notes are being offered on a continuing basis by us to or through Lehman
Brothers Inc., our agent. The notes will not be listed on any securities
exchange and there is no assurance that the notes offered hereby will be sold
or, if sold, that there will be a secondary market for the notes or liquidity in
the secondary market if one develops. We reserve the right to withdraw, cancel
or modify the offer made hereby without notice. The agent or us may reject any
such offer to purchase notes in whole or in part. See "Plan of Distribution."
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LEHMAN BROTHERS
August 24, 1999
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ABOUT THIS PROSPECTUS SUPPLEMENT; PRICING SUPPLEMENTS
We may use this prospectus supplement, together with the attached prospectus and
an attached pricing supplement, to offer our Medium-Term Notes from time to
time. The total initial public offering price of notes that may be offered by
use of this prospectus supplement is $100,000,000 (or the equivalent in foreign
or composite currencies).
This prospectus supplement sets forth certain terms of the notes that we may
offer. It supplements the description of the Debt Securities contained in the
attached prospectus. If information in this prospectus supplement is
inconsistent with the prospectus, this prospectus supplement will apply and will
supersede that information in the prospectus.
Each time we issue notes, we will attach a pricing supplement to this prospectus
supplement. The pricing supplement will contain the specific description of the
notes being offered and the terms of the offering. The pricing supplement may
also add, update or change information in this prospectus supplement or the
attached prospectus. Any information in the pricing supplement, including any
changes in the method of calculating interest on any note, that is inconsistent
with this prospectus supplement will apply and will supersede that information
in this prospectus supplement.
It is important for you to read and consider all information contained in this
prospectus supplement and the attached prospectus and pricing supplement in
making your investment decision. You should also read and consider the
information in the documents we have referred you to in "Available Information"
on page 2 of the attached prospectus.
RISK FACTORS
Your investment in the notes will include certain risks. In consultation with
your own financial and legal advisers, you should carefully consider, among
other matters, the following discussion of risks before deciding whether an
investment in the notes is suitable for you. The notes are not an appropriate
investment for you if you are unsophisticated with respect to the significant
components of the notes.
CHANGES IN EXCHANGE RATES AND EXCHANGE CONTROLS COULD RESULT IN A SUBSTANTIAL
LOSS TO YOU.
An investment in foreign currency notes, which are notes denominated in a
specified currency other than U.S. dollars, entails significant risks that are
not associated with a similar investment in a security denominated in U.S.
dollars. Similarly, an investment in an indexed note, on which all or a part of
any payment due is based on a currency other than U.S. dollars, has significant
risks that are not associated with a similar investment in non-indexed notes.
Such risks include, but are not limited to:
- the possibility of significant market changes in rates of exchange
between U.S. dollars and such specified currency;
- the possibility of significant changes in rates of exchange between
U.S. dollars and the specified currency resulting from official
redenomination relating to such specified currency; and
- the possibility of the imposition or modification of foreign exchange
controls by either the United States or foreign governments.
Such risks generally depend on factors over which we have no control and which
cannot be readily foreseen, such as
- economic events;
- political events; and
- the supply of, and demand for, the relevant currencies.
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In recent years, rates of exchange between the U.S. dollar and some foreign
currencies in which our notes may be denominated and between these foreign
currencies and other foreign currencies, have been volatile. This volatility may
be expected in the future. Fluctuations that have occurred in any particular
exchange rate in the past are not necessarily indicative, however, of
fluctuations that may occur in the rate during the term of any foreign currency
note. Depreciation of the specified currency of a foreign currency note against
U.S. dollars would result in a decrease in the effective yield of such foreign
currency note below its coupon rate and could result in a substantial loss to
you on a U.S. dollar basis.
Governments have imposed from time to time, and may in the future impose,
exchange controls that could affect exchange rates as well as the availability
of a specified currency other than U.S. dollars at the time of payment of
principal, any premium, or interest on a foreign currency note. There can be no
assurance that exchange controls will not restrict or prohibit payments of
principal, any premium, or interest denominated in any such specified currency.
Even if there are no actual exchange controls, it is possible that such
specified currency would not be available to us when payments on such note are
due because of circumstances beyond our control. In this event, we will make
required payments in U.S. dollars on the basis described in this prospectus
supplement. You should consult your own financial and legal advisors as to the
risks of an investment in notes denominated in a currency other than U.S.
dollars. See "--The unavailability of currencies could result in a substantial
loss to you" and "Description of the Notes--General--Payments of Principal and
Interest" below.
The information set forth in this prospectus supplement is directed to
prospective purchasers of notes who are United States residents. We disclaim any
responsibility to advise prospective purchasers who are residents of countries
other than the United States regarding any matters that may affect the purchase
or holding of, or receipt of payments of principal, premium or interest on,
notes. Such persons should consult their advisors with regard to these matters.
Any pricing supplement relating to notes having a specified currency other than
U.S. dollars will contain a description of any material exchange controls
affecting such currency and any other required information concerning such
currency.
THE UNAVAILABILITY OF CURRENCIES COULD RESULT IN A SUBSTANTIAL LOSS TO YOU.
Except as set forth below, if payment on a note is required to be made in a
specified currency other than U.S. dollars and such currency is:
- unavailable due to the imposition of exchange controls or other
circumstances beyond our control;
- no longer used by the government of the country issuing such currency;
or
- no longer used for the settlement of transactions by public
institutions of the international banking community,
then all payments on such note shall be made in U.S. dollars until such currency
is again available or so used. The amounts so payable on any date in such
currency shall be converted into U.S. dollars on the basis of the most recently
available market exchange rate for such currency or as otherwise indicated in
the applicable pricing supplement. Any payment on such note made under such
circumstances in U.S. dollars will not constitute an event of default under the
indenture under which such note shall have been issued.
If the specified currency of a note is officially redenominated, other than as a
result of European Monetary Union, such as by an official redenomination of any
such specified currency that is a composite currency, then our payment
obligations on the note will be the amount of redenominated currency that
represents the amount of our obligations immediately before the redenomination.
The notes will not provide for any adjustment to any amount payable under the
notes as a result of:
- any change in the value of the specified currency of such notes
relative to any other currency due solely to fluctuations in exchange
rates; or
- any redenomination of any component currency of any composite
currency, unless the composite currency is itself officially
redenominated.
Currently, there are limited facilities in the United States for conversion of
U.S. dollars into foreign currencies, and vice versa. In addition, banks do not
generally offer non-U.S. dollar-denominated checking or savings account
facilities in the United States. Accordingly, payments on notes made in a
currency other than U.S. dollars will be
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made from an account at a bank located outside the United States, unless
otherwise specified in the applicable pricing supplement.
JUDGMENTS IN A FOREIGN CURRENCY COULD RESULT IN A SUBSTANTIAL LOSS TO YOU.
The notes will be governed by, and construed in accordance with, the laws of New
York State. Courts in the United States customarily have not rendered judgments
for money damages denominated in any currency other than the U.S. dollar. A 1987
amendment to the Judiciary Law of New York State provides, however, that an
action based upon an obligation denominated in a currency other than U.S.
dollars will be rendered in the foreign currency of the underlying obligation.
Any judgment awarded in such an action will be converted into U.S. dollars at
the rate of exchange prevailing on the date of the entry of the judgment or
decree.
CHANGES IN THE VALUE OF UNDERLYING ASSETS OF INDEXED NOTES COULD RESULT IN A
SUBSTANTIAL LOSS TO YOU.
An investment in indexed notes may have significant risks that are not
associated with a similar investment in a debt instrument that:
- has a fixed principal amount;
- is denominated in U.S. dollars; and
- bears interest at either a fixed rate or a floating rate based on
nationally published interest rate references.
The risks of a particular indexed note will depend on the terms of such indexed
note. Such risks may include, but are not limited to, the possibility of
significant changes in the prices of:
- the underlying assets;
- another objective price; and
- economic or other measures making up the relevant index.
Underlying assets could include:
- securities;
- currencies;
- intangibles;
- goods;
- articles; and
- commodities.
The risks associated with a particular indexed note generally depend on factors
over which we have no control and which cannot readily be foreseen. These risks
include:
- economic events;
- political events; and
- the supply of, and demand for, the underlying assets.
In recent years, currency exchange rates and prices for various underlying
assets have been highly volatile, and volatility may be expected in the future.
Fluctuations in rates or prices that have occurred in the past are not
necessarily indicative, however, of fluctuations that may occur during the term
of any indexed note.
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In considering whether to purchase indexed notes, you should be aware that the
calculation of amounts payable on indexed notes may involve reference to:
- - an index determined by an affiliate of the agent; or
- - prices that are published solely by third parties or entities which are not
regulated by the laws of the United States.
The risk of loss as a result of linking of principal or interest payments on
indexed notes to an index and to the underlying assets can be substantial. You
should consult your own financial and legal advisors as to the risks of an
investment in indexed notes.
THE PROSPECTUS, INCLUDING THIS PROSPECTUS SUPPLEMENT, DOES NOT DESCRIBE ALL
RISKS OF AN INVESTMENT IN MULTI-CURRENCY NOTES THAT RESULT FROM SUCH NOTES BEING
DENOMINATED IN A FOREIGN CURRENCY OR CURRENCY UNIT EITHER AS THE RISKS EXIST AT
THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS THE RISKS MAY CHANGE FROM TIME TO
TIME. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN MULTI-CURRENCY NOTES.
MULTI-CURRENCY NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
CREDIT RATINGS ASSIGNED TO THE NOTES ARE NOT NECESSARILY ACCURATE.
The credit ratings assigned to our 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, you should consult you own financial and legal
advisors as to the risks entailed by an investment in the notes and the
suitability of investing in the notes in light of your particular circumstances.
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Medium-Term Notes
supplements the description of the general terms and provisions of the debt
securities set forth in the prospectus. If any specific information regarding
the notes in this prospectus supplement is inconsistent with the more general
terms of the debt securities described in the prospectus, you should rely on the
information in this prospectus supplement.
The pricing supplement for each offering of notes will contain the specific
information and terms for that offering. If any information in the pricing
supplement, including any changes in the method of calculating interest on any
note, is inconsistent with this prospectus supplement, you should rely on the
information in the pricing supplement. The pricing supplement may also add,
update or change information contained in the prospectus and this prospectus
supplement. It is important for you to consider the information contained in the
prospectus, this prospectus supplement and the pricing supplement in making your
investment decision.
GENERAL
We will issue the notes under an indenture between us, Sun Communities, Inc.,
our general partner ("Sun"), and Bankers Trust Company, as trustee, dated April
24, 1996 and supplemented August 20, 1997. The indenture is subject to, and
governed by, the Trust Indenture Act of 1939. This prospectus briefly outlines
some of the indenture provisions. If you would like more information on these
provisions, review the indenture and its supplement that we filed with the
Securities and Exchange Commission (the "SEC"). 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 notes will apply to each note offered hereby unless otherwise
specified in the applicable pricing supplement.
All debt securities, including the notes, are unsecured and will rank equally
with all of our unsecured indebtedness. Unless otherwise specified in the
applicable pricing supplement, the notes will not be subject to any sinking
fund. Debt securities may be issued under the indenture from time to time up to
the aggregate initial offering price authorized by us for each series. As of the
date of this prospectus supplement, we have issued debt securities having an
aggregate initial offering price $250,000,000. The notes will be subordinate to:
- the prior claims of each secured mortgage lender to any of our
specific properties which secures such lender's mortgage; and
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- any claims of creditors of entities wholly or partly owned, directly
or indirectly, by us.
Subject to certain limitations set forth in the indenture, and as described
under "--Certain Covenants--Limitations on Incurrence of Debt" below, we may
incur additional secured and unsecured indebtedness. We may, from time to time,
without the consent of the holders of the notes, issue notes or other debt
securities under the indenture in addition to the $100,000,000 of notes offered
pursuant to this prospectus supplement and prospectus.
In the discussion that follows, whenever we talk about paying principal on the
notes, we mean at maturity, redemption or repurchase. The following terms may
apply to each note as specified in the applicable pricing supplement and the
note. The notes are currently limited to up to $100,000,000 aggregate initial
offering price, or its equivalent in one or more foreign or composite
currencies. The notes will be offered continuously, and will mature as specified
in the applicable pricing supplement. We may also issue discount notes, indexed
notes and amortizing notes.
Unless otherwise specified in the applicable pricing supplement, the notes will
be denominated in U.S. dollars and we will pay principal and interest in U.S.
dollars. The notes may also be denominated in one or more foreign or composite
currencies. Multi-currency notes will have payments of principal, premium and
interest, if any, made in the specified currency. See "Special Provisions
Relating to Multi-Currency Notes - Payment of Principal, Premium, if any, and
Interest, if any."
Unless otherwise specified in the applicable pricing supplement, you will be
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 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. The agent may be
prepared to arrange for the conversion of United States dollars into the
applicable specified currency in order to enable you to pay for such
multi-currency notes, provided that a request is made to the agent on or before
the fifth business day preceding the date of delivery of the multi-currency
note, or by such other day as determined by the agent. Each conversion will be
made by the agent on terms, conditions, limitations and charges as the 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
multi-currency note. See "Special Provisions Relating to Multi-Currency Notes."
Form of Notes; Denominations
Each note will be issued either as a book-entry note, represented by one or more
fully registered global securities, or as a certificated note registered in the
name of the holders. The minimum denominations of each note, other than a
multi-currency note, will be $1,000, and integral multiples thereof. The minimum
denominations of each multi-currency note will be specified in the applicable
pricing supplement.
Payments of Principal and Interest
Payments of principal of, and payments of premium, if any, and interest, if any,
on book-entry notes will be made by us through the trustee to the Depository
Trust Company ("DTC"). See "- Book-Entry Notes." In the case of certificated
notes, payment of principal and premium, if any, due on the maturity date will
be made in immediately available funds upon presentation and surrender thereof
at the office or agency maintained by us for such purpose in New York City,
currently the corporate trust office of the trustee located initially at Four
Albany Street, New York, New York 10006, or, in the case of any repayment on an
optional repayment date, upon presentation of such certificated note and a duly
completed election form in accordance with the provisions described below.
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 other than the maturity date will be made at the office or agency
referred to above maintained by us for such purpose or, at our option, may be
made by check mailed to the address of the holder entitled thereto as such
address shall appear in our security register. Notwithstanding the foregoing, a
holder of $10,000,000 (or, if in a currency other than United States dollars,
the equivalent thereof in such specified currency) or more in aggregate
principal amount of certificated notes, whether having identical or different
terms and provisions, will be entitled to receive interest payments, if any, 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 not less than 15 days prior to such interest
payment date. Any such wire transfer instructions received by the trustee shall
remain in effect until revoked by such holder. For special payment terms
applicable to multi-currency notes, see "Special Provisions Relating to
Multi-Currency Notes - Payment of Principal, Premium, if any, and Interest, if
any."
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As used in this prospectus supplement, "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 New York City, provided, however, that, with respect to multi-currency
notes the payment of which is to be made in a currency or composite currency
other than United States dollars, 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 of the country issuing the specified
currency (unless the specified currency is European Currency Units ("ECU")), in
which case such day is also 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 is not a day designated as an ECU non-settlement day by the ECU Banking
Association) or, if ECU non-settlement days do not appear on that page (and are
not so designated), a day that 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. "London business day" means any day on which
dealings in the Designated LIBOR Currency (as hereinafter defined) are
transacted in the London interbank market.
The term "principal financial center" means (a) the capital city of the country
issuing the specified currency (except as described in the immediately preceding
paragraph with respect to ECU) or (b) the capital city of the country to which
the Designated LIBOR Currency, if applicable, relates (or, in the case of ECU,
Luxembourg), except, in each case, that with respect to United States dollars,
Australian dollars, Canadian dollars, Deutsche marks, Dutch guilders, Italian
lire, Swiss francs and ECU's, the "principal financial center" shall be New York
City, Sydney, Toronto, Frankfurt, Amsterdam, Milan (solely in the case of clause
(a) above), Zurich, and Luxembourg, respectively.
Transfer or Exchange of Book-Entry Notes
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 us for such purpose in the Borough of
Manhattan, New York City, currently the corporate trust office of the trustee
located at Four Albany Street, New York, New York 10006. No service charge will
be made by us or the trustee for any such registration of transfer or exchange
of notes, but we may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with it. This does
not include exchanges pursuant to the indenture which do not involve any
transfer.
Defeasance
The defeasance and covenant defeasance provisions contained in the indenture
shall apply to the notes.
THE NOTES MAY PROVIDE FOR REDEMPTION AT OUR OPTION
Unless otherwise specified in the applicable pricing supplement, the notes will
not be subject to any sinking fund. The notes will be redeemable at our option
prior to stated maturity only if an initial redemption date is specified in the
applicable pricing supplement. If so specified, the notes will be subject to
redemption at our option 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, together with unpaid
interest accrued thereon to the date of redemption, on written notice given to
the holders thereof 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.
"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. For a discussion of the
redemption of Discount Notes, see "--Discount Notes."
THE NOTES MAY PROVIDE FOR REPAYMENT AT THE HOLDER'S OPTION
The notes will be repayable by us at the holder's option prior to stated
maturity only if one or more optional repayment dates are specified in the
applicable pricing supplement. If so specified, the notes will be subject to
repayment at the holders' option on any optional repayment date in whole or from
time to time in part in increments of $1,000 or such other minimum denomination
specified in the applicable pricing supplement (provided that any remaining
principal amount thereof shall be at least $1,000 or such other minimum
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denomination) at a repayment price equal to 100% of the unpaid principal amount
to be repaid, together with unpaid interest accrued thereon to the date of
repayment. For any note to be repaid, such note must be received, together with
the form thereon entitled "Option to Elect Repayment" duly completed, by the
trustee at its office maintained for such purpose in the Borough of Manhattan,
New York City, currently the corporate trust office of the trustee located at
Four Albany Street, New York, New York 10006, or such other address of which we
shall from time to time notify you not more than 60 nor less than 30 calendar
days prior to the date of repayment. Exercise of such repayment option by the
holder will be irrevocable. For a discussion of the repayment of Discount Notes,
see "-Discount Notes."
Only DTC may exercise the repayment option in respect of global securities
representing book-entry notes. Accordingly, beneficial owners of global
securities that desire to have all or any portion of the book-entry notes
represented by global securities repaid must instruct the participant through
which they own their interest and which deposited their interests with DTC to
direct DTC to exercise the repayment option on their behalf by delivering the
related global security and duly completed election form to the trustee. In
order to ensure that such global security and election form are received by the
trustee on a particular day, the actual purchaser of each book-entry note
represented by a global security (a "beneficial owner") must so instruct the
participant through which it owns its interest before such participant's
deadline for accepting instructions for that day. Different firms may have
different deadlines for accepting instructions from their customers.
Accordingly, beneficial owners should consult the participants through which
they own their respective interests for the respective deadlines for such
participants. All instructions given to participants from beneficial owners of
global securities relating to the option to elect repayment shall be
irrevocable. In addition, at the time such instructions are given, each such
beneficial owner shall cause the participant through which it owns its interest
to transfer such beneficial owner's interest in the global security or
securities representing the related book-entry notes, on DTC's records, to the
trustee. See "--Book-Entry Notes."
If applicable, we will comply with the requirements of Section 14(e) of the
Securities Exchange Act of 1934 and Rule l4e-l of the rules promulgated
thereunder, and any other securities laws or regulations in connection with any
such repayment.
We may at any time purchase notes at any price or prices in the open market or
otherwise. Notes so purchased by us may, at our discretion, be held, resold or
surrendered to the trustee for cancellation.
PAYMENT OF INTEREST
General
Unless otherwise specified in the applicable pricing supplement,
interest-bearing notes will be either fixed rate notes or floating rate notes.
Fixed rate notes will bear interest from their date of issue at the rate per
annum, and floating rate notes will bear interest according to an interest rate
formula 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 on
fixed rate notes and floating rate notes will be made in an amount equal to the
interest accrued from and including the immediately preceding interest payment
date on 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, but excluding the
applicable interest payment date or the maturity date, as the case may be.
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 note originally issued between a record date 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 the next succeeding record date.
Unless otherwise specified in the applicable pricing supplement, a "record date"
will be the fifteenth calendar day (whether or not a business day) immediately
preceding the related interest payment date.
Fixed Rate Notes
Unless otherwise specified in the applicable pricing supplement, interest on
fixed rate notes will be payable semiannually in arrears on (1) the dates set
forth in the applicable pricing supplement and (2) 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
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with the same force and effect as if made on the date such payment was due, and
no interest will accrue on the payment for the period from and after the
interest payment date or the maturity date, as the case may be, to the date of
the payment on the next succeeding business day.
Floating Rate Notes
The interest rate basis or interest rate bases used to determine the interest
rate on the floating rate notes we may issue may be based on one or more of the
following base rates:
- CD Rate;
- CMT Rate;
- Commercial Paper Rate;
- 11th District Cost of Funds Rate;
- Federal Funds Rate;
- LIBOR;
- Kenny Rate;
- Prime Rate;
- Treasury Rate; or
- such other interest rate basis or interest rate formula as may be
specified in the applicable pricing supplement;
In some cases, the base rate for a floating rate note may be adjusted by adding
or subtracting a number of basis points, called the spread, or multiplying by a
percentage, called the spread multiplier. Your pricing supplement will specify
any spread or spread multiplier applicable to your note.
The base rate, whether or not adjusted, may also be subject to a maximum rate, a
minimum rate or both. If you purchase a floating rate note, your pricing
supplement will indicate your base rate and whether any of these other features
applies and, if so, what they are.
The interest rate in effect on a floating rate note for the period, if any, from
the date of issue to the first interest reset date will be the initial interest
rate. The interest reset date is a date on which the rate of interest on a note
is reset. The interest rate on a floating rate/fixed rate note 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 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 certain terms with respect to
which each floating rate note is being 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;
- the fixed interest rate, if applicable;
- interest rate basis or bases;
- initial interest rate, if any;
- initial interest reset date;
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- interest reset dates;
- interest payment period and dates;
- index maturity (the period to maturity of the instrument or obligation
with respect to which the related interest rate basis or bases will be
calculated);
- maximum interest rate and/or minimum interest rate, if any; and
- spread and/or spread multiplier, if any.
If one or more of the applicable interest rate bases is LIBOR or the CMT Rate,
the applicable pricing supplement will also specify the Designated LIBOR
Currency, and Designated LIBOR Page or the Designated CMT Maturity Index and
Designated CMT Telerate Page, respectively, as such terms are defined below.
When Interest Rate is Determined
The interest rate borne by the floating rate notes will be determined
as follows:
- A regular floating rate note that is not designated as a
"Floating Rate/Fixed Rate Note" or an "Inverse Floating Rate
Note," and that does not have an addendum attached or
"Other/Additional Provisions" which relate to a different
interest rate formula 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, except as described below or in the
applicable pricing supplement. Commencing on the initial
interest reset date, the rate at which interest on such
regular floating rate note will be payable will be reset as
of each interest reset date; provided, however, that the
interest rate in effect for the period, if any, from the
date of issue to the initial interest reset date will be the
initial interest rate.
- A note designated as a "Floating Rate/Fixed Rate Note" will,
except as described below or in the applicable pricing
supplement, 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 fixed interest rate
is specified, the interest rate in effect thereon on the day
immediately preceding the fixed rate commencement date.
- A note designated as an "Inverse Floating Rate Note" will,
except as described below or in the applicable pricing
supplement, 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.
How Interest Rate is Determined
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
(a) if such day is an interest reset date, the interest rate determined as of
the interest determination date described below immediately preceding the
interest reset date or (b) 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.
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The applicable pricing supplement will specify whether the interest reset period
between interest reset dates will be daily, weekly, monthly, quarterly,
semiannually or annually or some other specified period. Unless otherwise
specified in the applicable pricing supplement, the interest reset dates will
be, in the case of floating rate notes which reset, as follows:
- for notes which reset daily, each business day;
- for notes which reset 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);
- for notes which reset monthly, the third Wednesday of each month
(with the exception of monthly reset floating rate notes as to
which the 11th District Cost of Funds Rate is an applicable
interest rate basis, which will reset on the first calendar day
of the month);
- for notes which reset quarterly, the third Wednesday of March,
June, September and December of each year;
- for notes which reset semiannually, the third Wednesday of the
two months specified in the applicable pricing supplement; and
- for notes which reset annually, the third Wednesday of the month
specified in the applicable pricing supplement;
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.
The interest rate applicable to each interest reset period commencing on the
related interest reset date will be the rate determined by the calculation agent
as of the applicable interest determination date and calculated on or prior to
the calculation date, except with respect to LIBOR and the 11th District Cost of
Funds Rate, which will be calculated on the interest determination date. Unless
otherwise specified in the applicable pricing supplement, Bankers Trust Company
will be the calculation agent. 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
the 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 (a) the tenth calendar day after such
interest determination date or, if such day is not a business day, the next
succeeding business day or (b) the business day immediately preceding the
applicable interest payment date or the maturity date, as the case may be.
The "interest determination date" will be:
- with respect to the CD Rate, the CMT Rate, the Commercial Paper
Rate, the Federal Funds Rate, the Kenny Rate and the Prime Rate,
the second business day immediately preceding the applicable
interest reset date;
- with respect to the 11th District Cost of Funds Rate, the last
working 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;
- with respect to LIBOR, the second London business day immediately
preceding the applicable interest reset date, unless the
designated LIBOR currency is British pounds sterling, in which
case the interest determination date will be the applicable
interest reset date;
- with respect to the Treasury Rate, the day in the week in which
the applicable interest reset date falls on which day treasury
bills are normally auctioned (treasury bills are normally sold at
an auction held on Monday of each week, unless that 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
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date, the interest determination date will be the preceding
Friday; provided, further, that if the interest determination
date would otherwise fall on an interest reset date, then the
interest reset date will be postponed to the next succeeding
business day; and
- with respect to a floating rate note the interest rate of which
is determined by reference to two or more interest rate bases,
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 the interest determination
date, and the applicable interest rate will take effect on the applicable
interest reset date.
Notwithstanding the foregoing, a floating rate note may also have either or both
of the following: (a) a maximum interest rate, or ceiling, that may accrue
during any interest period and (b) 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 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.
When Interest is Paid
Except as provided below or in the applicable pricing supplement, interest will
be payable on the maturity date and:
- in the case of floating rate notes which reset daily, weekly or
monthly, on the third Wednesday of each month or on the third
Wednesday of March, June, September and December of each year, as
specified in the applicable pricing supplement;
- in the case of floating rate notes which reset quarterly, on the
third Wednesday of March, June, September and December of each
year;
- in the case of floating rate notes which reset semiannually, on
the third Wednesday of the two months of each year specified in
the applicable pricing supplement; and
- in the case of floating rate notes which reset annually, on the
third Wednesday of the month of each year specified in the
applicable pricing supplement.
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, the 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, the
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 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 11th
District Cost of Funds Rate, the Federal Funds Rate, LIBOR or the
Prime Rate;
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- dividing the interest rate applicable to such day 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; or
- dividing the interest rate applicable to such day by 365 days in
the case of floating rate notes for which the applicable interest
rate basis is the Kenny 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 the applicable interest rate basis specified in
the applicable pricing supplement applied.
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 Notes
Each CD Rate note will bear interest for each interest reset period at an
interest rate equal to the CD Rate and any spread or spread multiplier specified
in the CD Rate note and in the applicable pricing supplement. Unless otherwise
specified in the applicable pricing supplement, the CD Rate on any interest
determination date for a floating rate note whose interest rate is determined
with reference to the CD Rate will be:
(a) The rate on the interest determination 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(5l9), Selected Interest Rates" or any
successor publication ("H.15 (519)") under the heading "CDs
(Secondary Market)".
(b) If the rate described in paragraph (a) above is not published by
3:00 P.M., New York City time, on the related calculation date,
then the CD Rate will be the rate on the CD Rate interest
determination date for negotiable United States dollar
certificates of deposit of the index maturity specified in the
applicable pricing 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."
(c) If neither of the rates described in paragraphs (a) and (b) is
published by 3:00 P.M., New York City time, on the related
calculation date, then the CD Rate on the CD Rate interest
determination date will be calculated by the calculation agent
and will be the arithmetic mean of the secondary market offered
rates as of 10:00 A.M., New York City time, on the CD Rate
interest determination date, of three leading nonbank dealers in
negotiable United States dollar certificates of deposit in New
York City (which may include the agent or its affiliates)
selected by the calculation agent after consultation with us for
negotiable United States dollar certificates of deposit of major
United States money market banks 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.
(d) If the dealers selected by the calculation agent pursuant to
paragraph (c) are not quoting as mentioned in paragraph (c), the
CD Rate determined as of the CD Rate interest determination date
will be the CD Rate in effect on the CD Rate interest
determination date.
Constant Maturity Treasury ("CMT") Rate Notes
Each CMT Rate note will bear interest for each interest reset period at an
interest rate equal to the CMT Rate and any spread or spread multiplier
specified in the CMT rate note and the applicable pricing supplement. Unless
otherwise specified in the applicable pricing supplement, the CMT rate on any
interest determination date for a floating rate note whose interest rate is
determined with reference to the CMT Rate will be:
(a) 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 (1) such CMT Rate
interest determination date if the Designated CMT Telerate Page
is 7055, and (2) the weekly or monthly average, as specified in
the applicable pricing supplement, for the week or the month, as
applicable, ended immediately preceding the week or the month, as
applicable, in which the related CMT Rate interest determination
date occurs, if the Designated CMT Telerate Page is 7052.
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(b) If the rate described in paragraph (a) is no longer displayed on
the relevant page or is not displayed by 3:00 P.M., New York City
time, on the related calculation date, then the CMT Rate for the
CMT Rate interest determination date will be the treasury
constant maturity rate for the Designated CMT Maturity Index as
published in the relevant H.15 (519).
(c) If the rate described in paragraph (b) 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 the CMT Rate interest
determination date will be the treasury constant maturity rate
for the Designated CMT Maturity Index (or other United States
Treasury rate for the Designated CMT Maturity Index) for the CMT
Rate interest determination date with respect to 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).
(d) If the information in paragraph (c) 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 the CMT Rate interest determination date reported,
according to their written records, by three leading primary
United States government securities dealers in New York City
(which may include the agent or its affiliates) (each, a
"Reference Dealer") selected by the calculation agent (from five
Reference Dealers selected by the calculation agent after
consultation with us and eliminating the highest quotation (or,
in the event of quotation equality, one of the highest) and the
lowest quotation (or, in the event of quotation 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.
(e) If the calculation agent is unable to obtain three Treasury Note
quotations pursuant to paragraph (d), 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 the CMT
Rate interest determination date of three Reference Dealers in
New York City (from five such Reference Dealers selected by the
calculation agent after consultation with us and eliminating the
highest quotation (or, in the event of quotation equality, one of
the highest) and the lowest quotation (or, in the event of
quotation 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 million. 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. If two Treasury Notes with an
original maturity as described in the 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.
(f) If fewer than three Reference Dealers selected by the calculation
agent pursuant to paragraph (e) are quoting, the CMT Rate
determined as of such CMT Rate interest determination date will
be the CMT Rate in effect on such CMT Rate interest determination
date.
"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
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 l, 2, 3, 5, 7, l0, 20 or 30 years) specified in
the applicable pricing supplement with respect to which the CMT Rate will be
calculated or, if no such maturity is specified in the applicable pricing
supplement, the designated CMT maturity index shall be 2 years.
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Commercial Paper Rate Notes
Each Commercial Paper Rate note will bear interest for each interest reset
period at an interest rate equal to the Commercial Paper Rate and any spread or
spread multiplier specified in such note and the applicable pricing supplement.
Unless otherwise specified in the applicable pricing supplement, the Commercial
Paper Rate on any interest determination date for a floating rate note whose
interest rate is determined with reference to the Commercial Paper Rate will be:
(a) The Money Market Yield (calculated as described below) on such
date of the rate for commercial paper having the index maturity
specified in the applicable pricing supplement as published by
the Board of Governors of the Federal Reserve System in H.15
(519) under the heading "Commercial Paper" or, if unavailable,
under such heading representing commercial paper issued by
non-financial entities whose bond rating is "AA" or the
equivalent from a nationally recognized statistical rating
agency.
(b) In the event that the rate described in paragraph (a) is not
published prior to 9:00 A.M., New York City time, on the
applicable calculation date, then the Commercial Paper Rate on
the 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 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 "Commercial Paper."
(c) If neither of the rates described in paragraphs (a) and (b) is
published by 3:00 P.M., New York City time, on the related
calculation date, then the Commercial Paper Rate on the
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 as of 11:00
A.M., New York City time, on the Commercial Paper Rate interest
determination date, of three leading dealers of commercial paper
in New York City (which may include the agent or its 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.
(d) If the dealers so selected by the calculation agent after
consultation with us are not quoting as mentioned in paragraph
(c), the Commercial Paper Rate determined as of the Commercial
Paper Rate interest determination date will be the Commercial
Paper Rate in effect immediately prior to the Commercial Paper
Rate determination date.
"Money Market Yield" shall be a yield (expressed as a percentage, rounded, if
necessary, to the nearest one hundred-thousandth of a percent) calculated in
accordance with the following formula:
Money Market Yield = Dx360 x 100
-----------
360 - (DxM)
where "D" refers to the 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 period for which accrued interest is being calculated.
11th District Cost of Funds Rate Notes
11th District Cost of Funds Rate notes will bear interest at a rate based on the
11th District Cost of Funds Rate and any spread and/or spread multiplier
specified in the 11th District Cost of Funds Rate notes and the applicable
pricing supplement. Unless otherwise specified in the applicable pricing
supplement, the 11th District Cost of Funds Rate on any interest determination
date for a floating rate note whose interest rate is determined with reference
to the 11th District Cost of Funds Rate will be:
(a) The rate equal to the monthly weighted average cost of funds for
the calendar month immediately preceding the month in which the
11th 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 the 11th
District Cost of Funds Rate interest determination date.
(b) If the rate described in paragraph (a) does not appear on
Telerate Page 7058 on such 11th District Cost of Funds Rate
interest determination date, then the 11th District Cost of Funds
Rate on the 11th
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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 that
was most recently announced (the "Index") by the FHLB of San
Francisco as such cost of funds for the calendar month
immediately preceding the 11th District Cost of Funds Rate
interest determination date.
(c) If the FHLB of San Francisco fails to announce the Index on or
prior to such 11th District Cost of Funds Rate interest
determination date for the calendar month immediately preceding
such 11th District Cost of Funds Rate interest determination
date, the 11th District Cost of Funds Rate determined as of such
11th District Cost of Funds Rate interest determination date will
be the 11th District Cost of Funds Rate in effect on the 11th
District Cost of Funds Rate interest determination date.
Federal Funds Rate Notes
Each Federal Funds Rate note will bear interest for each interest reset period
at an interest rate equal to the Federal Funds Rate and any spread or spread
multiplier specified in the Federal Funds Rate note and the applicable pricing
supplement. Unless otherwise specified in the applicable pricing supplement, the
Federal Funds Rate on any interest determination date for a floating rate note
whose interest rate is determined with reference to the Federal Funds Rate will
be:
(a) The rate on such date for United States dollar federal funds as
published in H.15 (519) under the heading "Federal Funds
(Effective)".
(b) If the rate described in paragraph (a) is not published by 9:00
A.M., New York City time, on the related calculation date, the
rate on the Federal Funds Rate interest determination date as
published in Composite Quotations under the heading "Federal
Funds/Effective Rate."
(c) If neither of the rates described in paragraphs (a) and (b) is
published by 3:00 P.M., New York City time, on the related
calculation date, then the Federal Funds Rate on the Federal
Funds Rate interest determination date will be calculated by the
calculation agent and will be the arithmetic mean (each as
rounded, if necessary, to the nearest one hundred-thousandth of a
percent) of the rates for the last transaction in overnight
United States dollar federal funds arranged by three leading
brokers of federal funds transactions in New York City (which may
include the agent or its affiliates) selected by the calculation
agent after consultation with us prior to 9:00 A.M., New York
City time, on the Federal Funds Rate interest determination date.
(d) If the brokers selected by the calculation agent pursuant to
paragraph (c) are not quoting, the Federal Funds Rate determined
as of such Federal Funds Rate interest determination date will be
the Federal Funds Rate in effect on the Federal Funds Rate
interest determination date.
LIBOR Notes
Each LIBOR note will bear interest for each interest reset period at an interest
rate equal to LIBOR and any spread or spread multiplier specified in the LIBOR
note and the applicable pricing supplement. Unless otherwise specified in the
applicable pricing supplement, the LIBOR rate will be determined in accordance
with the following provisions:
(1) With respect to any interest determination date relating to a
floating rate note for which the interest rate is determined with
reference to LIBOR, LIBOR will be either: (a) if "LIBOR Reuters"
is specified in the note and 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 the single rate shall be used) for deposits in the
Designated LIBOR Currency having the index maturity specified in
the note and the applicable pricing supplement, commencing on the
applicable interest reset date, that appear(s) on the Designated
LIBOR Page as of 11:00 A.M., London time, on the LIBOR interest
determination date, or (b) if "LIBOR Telerate" is specified in
the note and the applicable pricing supplement or if neither
"LIBOR Reuters" nor "LIBOR Telerate" is specified in the note and
the applicable pricing supplement as the method for calculating
LIBOR, the rate for deposits in the Designated LIBOR Currency
having the index maturity specified in the pricing supplement,
commencing on the applicable interest reset date, that appears on
the Designated LIBOR Page as of 11:00 A.M., London time, on the
LIBOR interest determination date. If fewer than two such offered
rates so appear, or if no such rate so appears, as applicable,
LIBOR on such LIBOR interest
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determination date will be determined in accordance with the
provisions described in clause (2) below.
(2) 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
(1) above, the calculation agent will request the principal
London offices of each of four major reference banks (which may
include affiliates of the agent) in the London interbank market,
as selected by the calculation agent after consultation with us,
to provide the calculation agent with its offered quotation for
deposits in the Designated LIBOR Currency for the period of the
index maturity specified in the applicable pricing supplement,
commencing on the applicable interest reset date, to prime banks
in the London interbank market at approximately 11:00 A.M.,
London time, on the LIBOR interest determination date and in a
principal amount that is representative for a single transaction
in the Designated LIBOR Currency in the market at that time. If
at least two such quotations are so provided, then LIBOR on the
LIBOR interest determination date will be the arithmetic mean of
such quotations. If fewer than two such quotations are so
provided, then LIBOR on the 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 the
LIBOR interest determination date by three major banks (which may
include affiliates of the agent) in the principal financial
center selected by the calculation agent after consultation with
us for loans in the Designated LIBOR Currency to leading European
banks, having the index maturity specified in the applicable
pricing supplement and in a principal amount that is
representative for a single transaction in the Designated LIBOR
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 the LIBOR
interest determination date will be the rate in effect for the
prior interest reset period.
"Designated LIBOR Currency" means the currency or composite currency specified
in the applicable pricing supplement as to which LIBOR shall be calculated or,
if no currency or composite currency is specified in the applicable pricing
supplement, the Designated LIBOR 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 Reuters Monitor Money Rates
Service (or any successor service) on the page specified in the pricing
supplement (or any other page as may replace such page on such service) for the
purpose of displaying the London interbank rates of major banks for the
Designated LIBOR 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 the pricing supplement (or any other page as may
replace such page on such service) for the purpose of displaying the London
interbank rates of major banks for the Designated LIBOR Currency.
Kenny Rate Notes
Each Kenny Rate note will bear interest for each interest reset period at an
interest rate equal to the Kenny Rate and any spread or spread multiplier
specified in the Kenny Rate note and the applicable pricing supplement. Unless
otherwise specified in the applicable pricing supplement, the Kenny Rate on any
interest determination date for a floating rate note for which the interest rate
is determined with reference to the Kenny Rate will be the high grade weekly
index on such date made available by Kenny Information Systems to the
calculation agent. The weekly index is, and shall be, based upon 30 day yield
evaluations at par of bonds, the interest on which is exempt from Federal income
taxation under the Internal Revenue Code, of not less than five high grade
component issuers selected by Kenny Information Systems which shall include,
without limitation, issuers of general obligation bonds. The specific issuers
included among the component issuers may be changed from time to time by Kenny
Information Systems in its discretion. The bonds on which the weekly index is
based shall not include any bonds on which the interest is subject to a minimum
tax or similar tax under the Internal Revenue Code, unless all tax-exempt bonds
are subject to such tax. In the event Kenny Information Systems ceases to make
available the weekly index, a successor indexing agent will be selected by the
calculation agent, such index to reflect the prevailing rate for bonds rated in
the highest short-term rating category by Moody's Investors Service, Inc. and
Standard & Poor's Corporation in respect of issuers most closely resembling the
high grade component issuers selected by Kenny Information Systems for its
weekly index, the interest on which is
- variable on a weekly basis;
- exempt from Federal income taxation under the Internal Revenue
Code; and
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- not subject to a minimum tax or similar tax under the Internal
Revenue Code, unless all tax-exempt bonds are subject to such
tax.
If such successor indexing agent is not available, the rate for any Kenny Rate
interest determination date shall be 67% of the rate determined if the Treasury
Rate option had been originally selected.
Prime Rate Notes
Each Prime Rate note will bear interest for each interest reset period at an
interest rate equal to the Prime Rate and any spread or spread multiplier
specified in the Prime Rate note and the applicable pricing supplement. Unless
otherwise specified in the applicable pricing supplement, the Prime Rate on any
interest determination date for a floating rate note for which the interest rate
is determined with reference to the Prime Rate will be:
(a) The rate on the interest determination date as such rate is
published in H.15(5l9) under the heading "Bank Prime Loan."
(b) If the rate described in paragraph (a) 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 hereinafter defined) as such
bank's prime rate or base lending rate as in effect for the Prime
Rate interest determination date.
(c) If fewer than four such rates appear on the Reuters Screen
USPRIME1 Page pursuant to paragraph (b) for the Prime Rate
interest determination date, then the Prime Rate shall be the
arithmetic mean of the prime rates or base lending rates quoted
on the basis of the actual number of days in the year divided by
a 360-day year as of the close of business on the Prime Rate
interest determination date by four major money center banks
(which may include affiliates of the agent) in New York City
selected by the calculation agent after consultation with us.
(d) If fewer than four such quotations are provided pursuant to
paragraph (c), 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 the Prime Rate interest determination date as
furnished in New York City by the major money center banks, if
any, that have provided such quotations and by a reasonable
number of substitute banks or trust companies (which may include
affiliates of the agent) necessary in order to obtain four such
prime rate quotations, provided the 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 million and being subject to supervision
or examination by Federal or State authority, selected by the
calculation agent after consultation with us to provide such rate
or rates.
(e) If the banks or trust companies selected by the calculation agent
are not quoting pursuant to paragraph (d), the Prime Rate
determined as of the Prime Rate interest determination date will
be the Prime Rate in effect on the Prime Rate interest
determination date.
"Reuters Screen USPRIME1 Page" means the display on the Reuters Monitor Money
Rates Service (or any successor service) on the "USPRIMEl" page (or such other
page as may replace the USPRIMEl page on such service) for the purpose of
displaying prime rates or base lending rates of major United States banks.
Treasury Rate. Each Treasury Rate Note will bear interest for each interest
reset period at an interest rate equal to the Treasury Rate and any spread or
spread multiplier specified in the Treasury Rate note and the applicable pricing
supplement. Unless otherwise specified in the applicable pricing supplement, the
Treasury Rate on any interest determination date for a floating rate note for
which the interest rate is determined by reference to the Treasury Rate will be:
(a) The rate from the auction held on such Treasury Rate interest
determination date of 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)".
(b) If the rate described in paragraph (a) is 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.
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(c) In the event that the results of the auction of Treasury Bills
having the index maturity 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 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 the agent or its
affiliates) selected by the calculation agent after consultation
with us, for the issue of Treasury Bills with a remaining
maturity closest to the index maturity specified in the
applicable pricing supplement.
(d) If the dealers selected by the calculation agent pursuant to
paragraph (c) are not quoting as mentioned in such paragraph, 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.
OTHER/ADDITIONAL PROVISIONS; ADDENDUM
Any provisions with respect to the notes, including the specification and
determination of one or more interest rate bases, the calculation of the
interest rate applicable to a floating rate note, the interest payment dates,
stated maturity, any redemption or repayment provisions or any other term
relating thereto, may be modified and/or supplemented as specified under
"Other/Additional Provisions" on the face thereof or in an addendum relating
thereto, if so specified on the face thereof and described in the applicable
pricing supplement.
DISCOUNT NOTES
We may offer 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) by more than a percentage equal to the
product of 0.25% and the number of full years to stated maturity. Discount Notes
may not bear any interest currently or may bear interest at a rate that is below
market rates at the time of issuance. The difference between the issue price of
a Discount Note and par is referred to as the discount. In the event of
redemption, repayment or acceleration of maturity of a Discount Note, the amount
payable to the holder of such Discount Note will be equal to the sum of (a) the
issue price (increased by any accruals of discount) and, in the event of any
redemption of the Discount Note (if applicable), multiplied by the initial
redemption percentage (as adjusted by the annual redemption percentage
reduction, if applicable) and (b) any unpaid interest accrued thereon to the
date of the redemption, repayment or acceleration of maturity, as the case may
be.
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,
the discount will be accrued using a constant yield method. The constant yield
will be calculated using a 30-day month, 360-day year convention, a compounding
period that, except for the period from the date of issue to the initial
interest payment date for a Discount Note (the "initial period"), 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 initial
period is shorter than the compounding period for the Discount Note, a
proportionate amount of the yield for an entire compounding period will be
accrued. If the initial period is longer than the compounding period, then such
period will be divided into a regular compounding period and a short period with
the short period being treated as provided in the preceding sentence. The
accrual of the applicable discount may differ from the accrual of original issue
discount for purposes of the Internal Revenue Code, certain Discount Notes may
not be treated as having original issue discount within the meaning of the
Internal Revenue Code, and notes other than Discount Notes may be treated as
issued with original issue discount for federal income tax purposes. See
"Certain United States Federal Income Tax Considerations."
INDEXED NOTES
We may from time to time offer Indexed Notes that have principal, premium and/or
interest amounts that are 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 other items, in each case as specified in the applicable
pricing supplement. In certain cases, holders of Indexed Notes may receive a
principal payment on the maturity date that is greater than or less than the
principal amount of the Indexed Notes depending upon the relative value on the
maturity date of the specified indexed item.
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Information as to the method for determining the amount of principal, premium,
if any, and/or interest, if any, payable in respect of Indexed Notes, certain
historical information with respect to the specified indexed item and any
material tax considerations associated with an investment in Indexed Notes will
be specified in the applicable pricing supplement. See also "Risk Factors."
AMORTIZING NOTES
We may from time to time offer Amortizing Notes with the amount of principal
thereof and interest thereon payable in installments over the term of the
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.
CERTAIN COVENANTS
The indenture contains the following covenants:
Limitations on Incurrence of Debt. We may not, and may not permit any Subsidiary
to, incur any Debt if, immediately after giving effect to the incurrence of such
Debt, the aggregate principal amount of all outstanding Debt of our Subsidiaries
and us on a consolidated basis determined in accordance with generally accepted
accounting principles is greater than 55% of the sum of (a) our Total Assets as
of the end of the calendar quarter prior to the incurrence of such additional
Debt and (b) the purchase price of all real estate assets acquired by us or any
Subsidiary since the end of such calendar quarter, including those obtained in
connection with the incurrence of such Debt (Section 1004(a) of the indenture).
In addition, we may not, and may not permit any Subsidiary to, incur any Debt if
the ratio of the Consolidated Income Available for Debt Service to the Maximum
Annual Service Charge for the four consecutive fiscal quarters most recently
ended prior to the date such additional Debt is to be incurred shall have been
less than 1.5 to 1 on a pro forma basis after giving effect thereto and to the
application of proceeds therefrom (Section 1004(b) of the indenture).
Further, we will not incur any secured Debt if immediately after giving effect
to the incurrence of that Debt, the aggregate principal amount of all
outstanding secured Debt of us and our Subsidiaries on a consolidated basis is
greater than 35% of the sum of (a) our Total Assets as of the end of the most
recent calendar quarter prior to the incurrence of such additional Debt, and (b)
the purchase price of any real estate assets acquired by us and our Subsidiaries
since the end of such calendar quarter, including those obtained in the
connection with the incurrence of such additional Debt (Section 1004(c) of the
indenture).
Restrictions on Distributions. We may not, with respect to any partnership
interest in us,
- declare or pay any distributions (other than distributions
payable in securities evidencing interests in our capital, except
for distributions in Disqualified Stock, for the purpose of
acquiring interests in real property or otherwise) thereon;
- apply any of our property or assets to the purchase, redemption
or other acquisition or retirement thereof;
- set apart any sum for the purchase, redemption or other
acquisition or retirement thereof; or
- make any other distribution thereon if,
immediately after such declaration or other action referred to above, the
aggregate of all such declarations and other actions since the date on which the
indenture was originally executed exceeds the sum of Funds from Operations from
December 15, 1993 until the end of the calendar quarter covered in our Annual
Report on Form 10-K or Quarterly Report on Form 10-Q, as the case may be, most
recently filed with the SEC (or, if such filing is not permitted under the
Securities Exchange Act of 1934 (the "Exchange Act"), with the trustee) prior to
such declaration or other action and (b) $5 million; provided, however, that the
foregoing limitation shall not apply to any declaration or other action referred
to above which is necessary to maintain Sun's status as a REIT under the
Internal Revenue Code, if the aggregate principal amount of all outstanding Debt
of us and our Subsidiaries on a consolidated basis determined in accordance with
generally accepted accounting principles at such time is less
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than 55% of our Total Assets as of the end of the calendar quarter covered in
our Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as the case may
be, most recently filed with the SEC (or, if such filing is not permitted under
the Exchange Act, with the trustee) prior to such declaration or other action
(Section 1005 of the indenture).
Notwithstanding the provisions described in the immediately preceding paragraph,
we will not be prohibited from making the payment of any distribution within 30
days after the declaration thereof if, at the date of declaration, such payment
would have complied with those provisions (Section 1005 of the indenture).
Provision of Financial Information. Whether or not we are subject to Section 13
or 15(d) of the Exchange Act, we must, to the extent permitted under the
Exchange Act, file with the SEC the annual reports, quarterly reports and other
documents which we would have been required to file with the SEC pursuant to
such Section 13 or 15(d) (the "Financial Statements") if we were so subject,
such documents to be filed with the SEC on or prior to the respective dates (the
"Required Filing Dates") by which we would have been required so to file such
documents. We will also in any event:
- within 15 days after each Required Filing Date, transmit by mail
to all holders of notes, as their names and addresses appear in
our security register, without cost to such holders, copies of
the annual reports and quarterly reports which we would have been
required to file with the SEC pursuant to Section 13 or 15(d) of
the Exchange Act if we were subject to such sections;
- within 15 days after each Required Filing Date, file with the
trustee copies of the annual reports, quarterly reports and other
documents which we would have been required to file with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act if we were
subject to such sections; and
- if filing such documents by us with the SEC 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 of the notes.
(Section 1010 of the indenture)
Maintenance of Unencumbered Real Estate Assets. We must maintain an Unencumbered
Real Estate Asset Value of not less than 150% of the aggregate principal amount
of all outstanding unsecured Debt of us and our Subsidiaries (Section 1011 of
the indenture).
Unsecured Indebtedness. Any of our Subsidiaries in which both (a) Sun or any
Subsidiary of Sun (other than us) and (b) us or any of our Subsidiaries are
partners, shareholders, or members shall not be permitted by Sun or us to incur
any unsecured Debt (Section 1012 of the indenture).
Definitions. As used herein,
"Consolidated Income Available for Debt Service" for any period means
Consolidated Net Income of our Subsidiaries and us:
- plus amounts which have been deducted for:
- interest on Debt of our Subsidiaries and us;
- provision for taxes of our Subsidiaries and us based on
income;
- amortization of debt discount; and
- depreciation and amortization; and
- adjusted, as appropriate, for
- the effect of any non-cash charge resulting from a change in
accounting principles in determining Consolidated Net Income
for such period; and
- the effect of equity in net income or loss of joint ventures
in which we own an interest to the extent not providing a
source of, or requiring a use of, cash, respectively.
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"Consolidated Net Income" for any period means the amount of net income (or
loss) of our Subsidiaries and us for such period determined on a consolidated
basis in accordance with generally accepted accounting principles.
"Debt" of any Subsidiary or us means any indebtedness of any Subsidiary or us,
whether or not contingent, in respect of:
(1) borrowed money or evidenced by bonds, notes, debentures or
similar instruments;
(2) indebtedness secured by any mortgage, pledge, lien, charge,
encumbrance or any security interest existing on property owned
by us or any Subsidiary;
(3) letters of credit or amounts representing the balance deferred
and unpaid of the purchase price of any property except any such
balance that constitutes an accrued expense or trade payable;
(4) the principal amount of all obligations of us or any Subsidiary
with respect to redemption, repayment or other repurchase of any
Disqualified Stock; or
(5) any lease of property by us or any Subsidiary as lessee which is
reflected on our consolidated balance sheet as a capitalized
lease in accordance with generally accepted accounting
principles, in the case of items of indebtedness under (1)
through (3) above to the extent that any such items (other than
letters of credit) would appear as a liability on our
consolidated balance sheet in accordance with generally accepted
accounting principles, and also includes, to the extent not
otherwise included, any obligation by us 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 us or any
Subsidiary).
Disqualified Stock" means, with respect to any person, any capital stock or
partnership interest of such person which by the terms of such capital stock or
partnership interest (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable), upon the occurrence
of any event or otherwise:
- matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise;
- is convertible into or exchangeable or exercisable for Debt or
Disqualified Stock; or
- is redeemable at the option of the holder thereof, in whole or in
part, in each case on or prior to the maturity of the relevant
series of notes.
"Funds from Operations" for any period means the Consolidated Net Income of us
and our Subsidiaries for such period excluding gains (or losses) from debt
restructuring, and sales of property, plus depreciation and amortization (other
than that related to corporate office assets or deferred financing costs), after
adjustment for unconsolidated partnerships and joint ventures, all determined on
a consistent basis for such period.
"Maximum Annual Service Charge" as of any date means the maximum amount which
may become payable in a period of 12 consecutive calendar months from such date
for interest on, and required amortization of, Debt. The amount payable for
amortization will include the amount of any sinking fund or other analogous fund
for the retirement of Debt and the amount payable on account of principal on any
such Debt which matures serially other than at the final maturity date of such
Debt.
"Subsidiary" means a corporation, partnership, joint venture, limited liability
company or other entity, a majority of the outstanding voting stock, partnership
interests or membership interests of which is owned or controlled, directly or
indirectly, by us or by one or more of our Subsidiaries. For the purposes of
this definition, "voting stock" means stock having voting power for the election
of directors, whether at all times or only so long as no senior class of stock
has such voting power by reason of any contingency.
"Total Assets" as of any date means the sum of (a) our Undepreciated Real Estate
Assets; and (b) all of our other assets determined in accordance with generally
accepted accounting principles (but excluding intangibles and accounts
receivable).
"Undepreciated Real Estate Assets" as of any date means the cost (original cost
plus capital improvements) of real estate assets of us and our Subsidiaries on
such date, before depreciation and amortization and determined on a consolidated
basis in accordance with generally accepted accounting principles.
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"Unencumbered Real Estate Asset Value" as of any date means the sum of (a) our
Undepreciated Real Estate Assets as of the end of the latest calendar quarter
covered in our Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as
the case may be, most recently filed with the SEC (or, if that filing is not
required under the Exchange Act, with the trustee) prior to such date which
Undepreciated Real Estate Assets are not encumbered by any mortgage, lien,
charge, pledge, or security interest and (b) the purchase price of any real
estate assets that are not encumbered by any mortgage, lien, charge, pledge, or
security interest and were acquired by us or any of our Subsidiaries since the
end of such calendar quarter.
Reference is made to the section entitled "Description of Debt Securities -
Certain Covenants" in the accompanying prospectus for a description of
additional covenants applicable to the notes. Compliance with the covenants
described herein and such additional covenants with respect to the notes
generally may not be waived by the Board of Directors of our general partner, or
by the trustee unless the holders of at least a majority in principal amount of
all outstanding notes consent to such waiver; provided, however, that the
defeasance and covenant defeasance provisions of the indenture described under
"Description of Debt Securities - Discharge" and "- Defeasance and Covenant
Defeasance" in the accompanying prospectus will apply to the notes, including
with respect to the covenants described in this prospectus supplement.
BOOK-ENTRY NOTES
We have established a depository arrangement with DTC regarding the book-entry
notes, the terms of which are summarized below. Any additional or differing
terms of the depository arrangement with respect to the book-entry notes will be
described in the applicable pricing supplement.
Upon issuance, all book-entry notes of up to $200,000,000 aggregate principal
amount bearing interest, if any, at the same rate or pursuant to the same
formula and having the same date of issue, currency of denomination and payment,
interest payment dates, if any, 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 below, the beneficial owners of the global security or
securities representing book-entry notes will not be entitled to receive
physical delivery of certificated notes and will not be considered the 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, 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 must take physical
delivery of such securities in certificated form. The above restrictions and
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 in a
like aggregate principal amount, only if
- DTC notifies us that it is unwilling or unable to continue as the
depository for the global securities or we become aware that DTC
has ceased to be a clearing agency registered under the Exchange
Act and, in any such case, we shall not have appointed a
successor to DTC within 60 days thereafter;
- we, in our sole discretion, determine that the global securities
shall be exchangeable for certificated notes, or
- an event of default under the indenture shall have occurred and
be continuing with respect to the notes.
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.
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DTC has provided us the following information:
- 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.
- 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 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 physical
movement of securities certificates. Direct participants of DTC
include securities brokers and dealers (including the agent),
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 referred to as
indirect participants that clear through or maintain a custodial
relationship with a direct participant, either directly or
indirectly. The rules applicable to DTC and its participants are
on file with the SEC.
- 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 is in turn to be recorded on the records of
direct participants and indirect participants. 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 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 us as soon as
possible after the applicable record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those direct
participants to whose accounts the book entry notes are credited
on the applicable record date (identified in a listing attached
to the Omnibus Proxy).
- Principal, premium, if any, and/or interest, if any, payments on
the global securities representing the book-entry notes will he
made in immediately available funds 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
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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 us, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of
principal, premium, if any, and/or interest, if any, to DTC is
the responsibility of us and 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 of like tenor and terms 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 election to have its
book-entry notes repaid by us, through its participant, to the
trustee, and shall effect delivery of such book-entry notes by
causing the direct participant to transfer the participant's
interest in the global security or securities representing such
book-entry notes, on 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 us or the trustee. Under such
circumstances, in the event that a successor securities
depository is not obtained, certificated notes are required to be
printed and delivered.
We may decide to discontinue use of the system of book-entry transfers through
DTC, or a successor securities depository. In that event, certificated notes
will be printed and delivered.
The information in this section concerning DTC and DTC's system has been
obtained from sources that we believe are reliable, but we take no
responsibility for the accuracy thereof.
SPECIAL PROVISIONS RELATING TO MULTI-CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable pricing supplement, multi-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 multi-currency notes, is by necessity incomplete. The agent and us
disclaim any responsibility to advise prospective purchasers who are residents
of countries other than the United States with respect to any matters that may
affect the purchase, holding or receipt of payments of principal of, and
premium, if any, and interest, if any, on, multi-currency notes. Such persons
should consult their own financial and legal advisors with regard to such
matters. See "Risk Factors - Changes in exchange rates and exchange controls
could result in a substantial loss to you."
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST, IF ANY
Unless otherwise specified in the applicable pricing supplement, we are
obligated to make payments of principal of, and premium, if any, and interest,
if any, on, a multi-currency note in the 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 us in
the specified currency will be converted by the exchange rate agent named in the
applicable pricing supplement into United States dollars for payment to holders
unless otherwise specified below or in the applicable pricing supplement or
unless the holder of such multi-currency note elects, in the manner hereinafter
described, to receive such amounts in the specified currency.
Any United States dollar amount to be received by a holder of a multi-currency
note will be based on the highest bid quotation in New York City 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
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dealers, one of whom may be the exchange rate agent, selected by the exchange
rate agent and approved by us for the purchase by the quoting dealer of the
specified currency for United States dollars for settlement on such payment date
in the aggregate amount of such specified currency payable to all holders of
multi-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 multi-currency notes by deductions
from such payments. If three such bid quotations are not available, payments
will be made in the specified currency unless the specified currency is not
available due to the imposition of exchange controls or other circumstances
beyond our control.
Holders of multi-currency notes may elect to receive all or a specified portion
of any payment of principal, premium, if any, and/or interest, if any, in the
specified currency by submitting a written request for such payment to the
trustee at its corporate trust office in New York City on or prior to the
applicable record date or at least fifteen calendar days prior to the maturity
date, as the case may be. The written request may be mailed or hand delivered or
sent by facsimile transmission. Holders of multi-currency notes may elect to
receive all or a specified portion of all future payments in the specified
currency and need not file a separate election for each payment. The election
will remain in effect until revoked by written notice to the trustee, but
written notice of any such revocation must be received by the trustee 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 multi-currency notes 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.
Unless otherwise specified in the applicable pricing supplement, if the
specified currency is other than United States dollars, a beneficial owner of
the related global security or securities which elects to receive payments of
principal, premium, if any, and/or interest, if any, in the specified currency
must notify the participant through which it owns its interest on or prior to
the applicable record date or at least fifteen calendar days prior to the
maturity date, as the case may be, of 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 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, on or prior
to such dates, then such beneficial owner will receive payments in the specified
currency.
Payments of the principal of, and premium, if any, and/or interest, if any, on,
multi-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 the Notes - General." Payments of interest,
if any, on multi-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 multi-currency notes as they appear
in our security register, subject to the right to receive such interest payments
by wire transfer of immediately available funds under the circumstances
described under "Description of the Notes - General." Payments of principal of,
and premium, if any, and/or interest, if any, on, multi-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 multi-currency note is presented and surrendered at the office or
agency maintained by us for such purpose in New York City, currently the
corporate trust office of the trustee located at Four Albany Street, New York,
New York 10006, in time for the trustee to make such payments in such funds in
accordance with its normal procedures.
AVAILABILITY OF SPECIFIED CURRENCY
Except as set forth below, if the specified currency for a multi-currency note
is not available for the required payment of principal, premium, if any, and/or
interest, if any, in respect thereof due to the imposition of exchange controls
or other circumstances beyond our control, we will be entitled to satisfy our
obligations to the holder of such multi-currency note by making such payment in
United States dollars on the basis of the market exchange rate computed by the
exchange rate agent, on the second business day prior to 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.
The market exchange rate for a specified currency other than United States
dollars means the noon dollar buying rate in New York City for cable transfers
for such specified currency as certified for customs purposes, or, if not so
certified, as otherwise determined, by the Federal Reserve Bank of New York. Any
payment made in United
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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.
If the specified currency for a multi-currency note is a composite currency that
is not available for the required payment of principal, premium, if any, and/or
interest, if any, in respect thereof due to the imposition of exchange controls
or other circumstances beyond our control, we will be entitled to satisfy our
obligations to the holder of such multi-currency note by making such payment in
United States dollars on the basis of the equivalent of the composite currency
in United States dollars. The component currencies of the composite currency for
this purpose shall be the currency amounts that were components of the composite
currency as of the last day on which the composite currency was used. The
equivalent of the composite currency in United States dollars shall be
calculated by aggregating the United States dollar equivalents of the component
currencies. The United States dollar equivalent of each of the component
currencies shall be determined by the exchange rate agent on the basis of the
market exchange rate on the second business day prior to the required payment
or, if such market exchange rate is not then available, 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
currencies are consolidated into a single currency, the amounts of those
currencies as component currencies shall be replaced by an amount in such single
currency equal to the sum of the amounts of the consolidated component
currencies expressed in such single currency. If any component currency is
divided into two or more currencies, the amount of the original component
currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original component currency.
All determinations referred to above made by the exchange rate agent shall be at
its sole discretion and shall, in the absence of manifest error, be conclusive
for all purposes and binding on the holders of the multi-currency notes.
JUDGMENTS
The notes will be governed by and construed in accordance with the laws of the
State of New York. If an action based on multi-currency notes were commenced in
a court of the United States, it is likely that such court would grant judgment
relating to such multi-currency notes only in United States dollars. It is not
clear, however, whether, in granting such judgment, the rate of conversion into
United States dollars would be determined with reference to the date of default,
the date of entry of the judgment or some other date. Under current New York
law, a state court in the State of New York rendering a judgment in respect of a
multi-currency note would be required to render such judgment in the specified
currency, and such foreign currency judgment would be converted into United
States dollars at the exchange rate prevailing on the date of entry of such
judgment. Accordingly, the holder of a multi-currency note would be subject to
exchange rate fluctuations between the date of entry of such foreign currency
judgment and the time the amount of such foreign currency judgment is paid to
such holder in United States dollars and converted by such holder into the
specified currency. It is not certain, however, whether a non-New York state
court would follow the same rules and procedures with respect to conversions of
foreign currency judgments.
We will indemnify the holder of any note against any loss incurred by such
holder as a result of any judgment or order being given or made for any amount
due under such note and such judgment or order requiring payment in a currency
or composite currency (the "Judgment Currency") other than the specified
currency, and as a result of any variation between (1) the rate of exchange at
which the specified currency amount is converted into the Judgment Currency for
the purpose of such judgment or order, and (2) the rate of exchange at which the
holder of such note, on the date of payment of such judgment or order, is able
to purchase the specified currency with the amount of the Judgment Currency
actually received by such holder, as the case may be.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTION
The following is a summary of the material United States federal income
tax considerations that may be relevant to a holder of a note. The summary is
based on:
- laws;
- regulations;
- rulings; and
- decisions now in effect,
all of which may change, possibly with retroactive effect. This summary deals
only with holders that will hold notes as capital assets. This summary does not
address tax considerations applicable to investors to whom special tax rules may
apply, including:
- banks;
- tax-exempt entities;
- insurance companies;
- regulated investment companies;
- common trust funds;
- dealers in securities or currencies;
- persons that will hold notes as a part of an integrated investment,
including a straddle or conversion transaction, comprised of a note
and one or more other positions; or
- persons that have a functional currency other than the U.S. dollar.
Any special United States federal income tax considerations relevant to a
particular issue of notes, including any indexed notes, dual currency notes or
notes providing for contingent payments, will be provided in the applicable
pricing supplement. Purchasers of such notes should carefully examine the
applicable pricing supplement and should consult with their tax advisors with
respect to such notes.
Investors should consult their tax advisors in determining the tax consequences
to them of holding notes, including the application to their particular
situation of the United States federal income tax considerations discussed
below, as well as the application of state, local, foreign or other tax laws.
As used in this prospectus supplement, the term United States holder
means a person who is
- a citizen or resident of the United States;
- a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision;
- an estate, if United States federal income taxation is applicable to
the income of such estate regardless of its source; or
- a trust if (1) a U.S. court is able to exercise primary supervision
over the trust's administration and (2) one or more United States
persons have the authority to control all of the trust's substantial
decisions. Notwithstanding the preceding sentence, to the extent
provided in regulations issued by the Treasury Department, certain
trusts in existence on August 20, 1996 and treated as United States
persons prior to this date, which elect to continue to be treated as
United States persons, will also be considered United States holders.
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The term "non-United States holder" means a holder who is not a United States
holder. The term "United States" means the United States of America, including
the fifty states and the District of Columbia.
UNITED STATES HOLDERS
Payments of Interest
Payments of qualified stated interest, as defined below under "Original Issue
Discount," on a note will be taxable to a United States holder as ordinary
interest income at the time that such payments are accrued or are received, in
accordance with the United States holder's method of tax accounting.
If such payments of interest are made relating to a note that is denominated in
a foreign currency, the amount of interest income realized by a United States
holder that uses the cash method of tax accounting will be the U.S. dollar value
of the specified currency payment based on the spot rate of exchange on the date
of receipt regardless of whether the payment in fact is converted into U.S.
dollars. A United States holder that uses the accrual method of tax accounting
will accrue interest income on the foreign currency note in the relevant foreign
currency and translate the amount accrued into U.S. dollars based on:
- the average exchange rate in effect during the interest accrual
period, or portion thereof within such holder's taxable year; or
- at such holder's election, at the spot rate of exchange on (1)
the last day of the accrual period or the last day of the taxable
year within such accrual period if the accrual period spans more
than one taxable year, or (2) the date of receipt, if such date
is within five business days of the last day of the accrual
period.
Such election must be applied consistently by the United States holder to all
debt instruments from year to year and can be changed only with the consent of
the Internal Revenue Service. A United States holder that uses the accrual
method of tax accounting will recognize foreign currency gain or loss, which
will be treated as ordinary income or loss, on the receipt of an interest
payment made relating to a foreign currency note if the spot rate of exchange on
the date of the payment is received differs from the rate applicable to a
previous accrual of that interest income.
Purchase, Sale and Retirement of Notes
A United States holder's tax basis in a note generally will equal the cost of
such note to such holder
- increased by any amounts includable in income by the holder as
(a) OID and (b) market discount; and
- reduced by any (a) amortized premium and (b) any payments other
than payments of qualified stated interest (each as described
below) made on such note.
In the case of a foreign currency note, the cost of such note to a United States
holder will be the U.S. dollar value of the foreign currency purchase price on
the date of purchase. In the case of a foreign currency note that is traded on
an established securities market, a United States holder that uses the cash
method of tax accounting, and, if it so elects, a United States holder that uses
the accrual method of tax accounting, will determine the U.S. dollar value of
the cost of such note by translating the amount paid at the spot rate of
exchange on the settlement date of the purchase. The amount of any subsequent
adjustments to a United States holder's tax basis in a foreign currency note in
respect of OID, market discount and premium denominated in a specified currency
other than the U.S. dollar will be determined in the manner described under
"Original Issue Discount," "Market Discount" and "Notes Purchased at a Premium"
below. The conversion of U.S. dollars to another specified currency and the
immediate use of such specified currency to purchase a foreign currency note
generally will not result in taxable gain or loss for a United States holder. A
United States 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 United States holder's tax basis in the foreign currency and
the U.S. dollar value of the foreign currency used to purchase the note,
determined on the date of purchase.
Upon the sale, exchange, retirement or other taxable disposition of a note, a
United States holder generally will recognize gain or loss equal to the
difference between (1) the amount realized on the disposition, less any accrued
qualified stated interest, which will be taxable as ordinary income, and (2) the
United States holder's adjusted tax basis in such note. If a United States
holder receives a specified currency other than the U.S. dollar in respect of
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such disposition of a note, the amount realized will be the U.S. dollar value of
the specified currency received calculated at the spot rate of exchange on the
date of disposition.
In the case of a foreign currency note that is traded on an established
securities market, a United States holder that uses the cash method of tax
accounting, and if it so elects, a United States holder that uses the accrual
method of tax accounting, will determine the U.S. dollar value of the amount
realized by translating such amount at the spot rate of exchange on the
settlement date of the disposition. The election available to accrual basis
United States holders in respect of the purchase and sale of foreign currency
notes traded on an established securities market, discussed above, must be
applied consistently by the United States holder to all debt instruments from
year to year and can be changed only with the consent of IRS.
Except as discussed below in connection with foreign currency gain or loss,
market discount and short-term notes, gain or loss recognized by a United States
holder on the sale, exchange, retirement or other taxable disposition of a note
will generally be long term capital gain or loss if the United States holder's
holding period for the note exceeded one year at the time of such disposition.
Gain or loss recognized by a United States holder on the sale, exchange,
retirement or other taxable disposition of a foreign currency note generally
will be treated as ordinary income or loss to the extent that the gain or loss
is attributable to changes in exchange rates during the period in which the
holder held such note. Gain or loss attributable to changes 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 United States 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 United States holder on the
sale, exchange or retirement of the note.
Original Issue Discount
In General. Notes with a term greater than one year may be issued with OID for
United States federal income tax purposes. Such notes are called OID notes in
this prospectus supplement. United States holders generally must accrue OID in
gross income over the term of the OID notes on a constant yield basis,
regardless of their regular method of tax accounting. As a result, United States
holders generally will recognize taxable income in respect of an OID note in
advance of the receipt of cash attributable to such income.
OID generally will arise if the stated redemption price at maturity of the note
exceeds its issue price by more than a de minimis amount of 0.25% of the note's
stated redemption price at maturity multiplied by the number of complete years
to maturity. OID may also arise if a note has particular interest payment
characteristics, such as interest holidays, interest payable in additional
securities or stepped interest. For this purpose, the issue price of a note is
the first price at which a substantial amount of notes is sold for cash, other
than 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 due under the note, other
than payments of qualified stated interest. 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 during
the entire term of the OID note at a single fixed rate of interest or, under
particular conditions, based on one or more interest indices.
For each taxable year of a United States holder, the amount of OID that must be
included in gross income in respect of an OID note will be the sum of the daily
portions of OID for each day during such taxable year or any portion of such
taxable year in which such a United States holder held the OID note. Such daily
portions are determined by allocating to each day in an accrual period a pro
rata portion of the OID allocable to that accrual period. Accrual periods may be
of any length and may vary in length over the term of an OID note. However,
accrual periods may not be longer than one year and each scheduled payment of
principal or interest must occur on the first day or the final day of a period.
The amount of OID allocable to any accrual period generally will equal (1) the
product of the OID note's adjusted issue price at the beginning of such accrual
period multiplied by its yield to maturity, less (2) the amount, if any, of
qualified stated interest allocable to that accrual period. The adjusted issue
price of an OID note at the beginning of any accrual period will equal the issue
price of the OID note, as defined above, (1) increased by previously accrued OID
from prior accrual periods, and (2) reduced by any payment previously made on
such note, other than payments of qualified stated interest.
Foreign Currency Notes. In the case of an OID note that is also a foreign
currency note, a United States holder should determine the U.S. dollar amount
includable income as OID for each accrual period by
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- calculating the amount of OID allocable to each accrual period in the
specified currency using the constant-yield method described above;
and
- translating the amount of the specified currency so derived at the
average exchange rate in effect during the accrual period, or portion
of such accrual period within a United States holder's taxable year,
or, at the United States holder's election (as described above under
"Payments of Interest"), at the spot rate of exchange on (1) the last
day of the accrual period, or the last day of the taxable year within
such accrual period if the accrual period spans more than one taxable
year, or (2) on the date of receipt, if such date is within five
business days of the last day of the accrual period.
All payments on an OID note, other than payments of qualified stated interest,
will generally be viewed first as payments of previously accrued OID, to the
extent thereof, with payments attributed first to the earliest accrued OID, and
then as payments of principal. Upon the receipt of an amount attributable to
OID, whether in connection with a payment of an amount that is not qualified
stated interest or the disposition of the OID note, a United States holder will
recognize ordinary income or loss measured by the difference between (1) the
amount received and (2) the amount accrued. The amount received will be
translated into U.S. dollars at the spot rate of exchange on the date of receipt
or on the date of disposition of the OID note. The amount accrued will be
determined by using the rate of exchange applicable to such previous accrual.
Acquisition Premium. A United States holder that purchases an OID note for an
amount less than or equal to the remaining redemption amount, but in excess of
the OID note's adjusted issue price, generally is permitted to reduce the daily
portions of OID by a fraction. The numerator of such fraction is the excess of
the United States holder's adjusted tax basis in the OID note immediately after
its purchase over the OID note's adjusted issue price. The denominator of such
fraction is the excess of the remaining redemption amount over the OID note's
adjusted issue price. For purposes of this prospectus supplement,
- "acquisition premium" means the excess of the purchase price paid by a
holder for an OID note over the OID note's adjusted issue price; and
- "remaining redemption amount" means the sum of all amounts payable on
an OID note after the purchase date other than payments of qualified
stated interest.
The notes may have special redemption, repayment or interest rate reset
features, as indicated in the applicable pricing supplement. Notes containing
such features, in particular OID notes, may be subject to special rules that
differ from the general rules discussed above. Accordingly, purchasers of notes
with such features should carefully examine the applicable pricing supplement
and should consult their tax advisers relating to such notes.
Variable Rate Notes. A note will be a "Variable Rate Note" if:
- the note's "issue price" does not exceed the total noncontingent
principal payments by more than the lesser of:
- .015 multiplied by the product of the total noncontingent
principal payments and the number of complete years to maturity
from the issue date; or
- 15 percent of the total noncontingent principal payments; and
- the note provides for stated interest (compounded or paid at least
annually) only at:
- one or more "qualified floating rates;"
- a single fixed rate and one or more qualified floating rates;
- a single "objective rate;" or
- a single fixed rate and a single objective rate that is a
"qualified inverse floating rate."
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A note will have a variable rate that is a "qualified floating rate" if:
- variations in the value of the rate can reasonably be expected to
measure contemporaneous variations in the cost of newly borrowed funds
in the currency in which the note is denominated; or
- the rate is equal to such a rate multiplied by either:
- a fixed multiple that is greater than 0.65 but not more than
1.35; or
- a fixed multiple greater than 0.65 but not more than 1.35,
increased or decreased by a fixed rate; and
- the value of the rate on any date during the term of the note is set
no earlier than 3 months prior to the first day on which that value is
in effect and no later than 1 year following that first day.
If a note provides for two or more qualified floating rates that are within 0.25
percentage points of each other on the issue date or can reasonably be expected
to have approximately the same values throughout the term of the note, the
qualified floating rates together constitute a single qualified floating rate.
A note will not have a qualified floating rate, however, if the rate is subject
to certain restrictions (including caps, floors, governors, or other similar
restrictions) unless such restrictions are fixed throughout the term of the note
or are not reasonably expected to significantly affect the yield on the note.
A note will have a variable rate that is a single "objective rate" if:
- the rate is not a qualified floating rate;
- the rate is determined using a single, fixed formula that is based on
objective financial or economic information that is not within the
control of or unique to the circumstances of the issuer or a related
party; and
- the value of the rate on any date during the term of the note is set
no earlier than 3 months prior to the first day on which that value is
in effect and no later than 1 year following that first day.
A note will not have a variable rate that is an objective rate, however, if it
is reasonably expected that the average value of the rate during the first half
of the note's term will be either significantly less than or significantly
greater than the average value of the rate during the final half of the note's
term.
An objective rate as described above is a "qualified inverse floating rate" if:
- the rate is equal to a fixed rate minus a qualified floating rate; and
- the variations in the rate can reasonably be expected to inversely
reflect contemporaneous variations in the cost of newly borrowed
funds.
A note will also have a single qualified floating rate or an objective rate if
interest on the note is stated at a fixed rate for an initial period of one year
or less followed by either a qualified floating rate or an objective rate for a
subsequent period, and either:
- the fixed rate and the qualified floating rate or objective rate have
values on the issue date of the note that do not differ by more than
0.25 percentage points; or
- the value of the qualified floating rate or objective rate is intended
to approximate the fixed rate.
In general, if a Variable Rate Note provides for stated interest at a single
qualified floating rate or objective rate, all stated interest on the note is
qualified stated interest. In this case, the amount of OID, if any, is
determined by using, in the case of a qualified floating rate or qualified
inverse floating rate, a fixed rate that is equal to the value as of the issue
date of the qualified floating rate or qualified inverse floating rate, or in
the case of any other objective rate, a fixed rate that reflects the yield
reasonably expected for the note.
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If a Variable Rate Note does not provide for stated interest at a single
qualified floating rate or a single objective rate, and also does not provide
for interest payable at a fixed rate (other than at a single fixed rate for an
initial period), a United States holder generally must determine the interest
and OID accrual on the note by:
- determining a fixed rate substitute for each variable rate provided
under the Variable Rate Note;
- constructing the equivalent fixed rate debt instrument (using the
fixed rate substitute described above);
- determining the amount of qualified stated interest and OID with
respect to the equivalent fixed rate debt instrument; and
- adjusting for actual variable rates during the applicable accrual
period.
To determine the fixed rate substitute for each variable rate provided under the
Variable Rate Note, a United States holder generally will use the value of each
variable rate as of the issue date or, for an objective rate that is not a
qualified inverse floating rate, a rate that reflects the reasonably expected
yield on the note.
If a Variable Rate Note provides for stated interest either at one or more
qualified floating rates or at a qualified inverse floating rate, and also
provides for stated interest at a single fixed rate (other than at a single
fixed rate for an initial period), a United States holder generally must
determine interest and OID accruals by using the method described in the
previous paragraph. However, the Variable Rate Note will be treated, for
purposes of the first three steps of the determination, as if the note had
provided for a qualified floating rate (or a qualified inverse floating rate)
rather than the fixed rate. 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 Rate Note as of the issue date approximates the fair
market value of an otherwise identical debt instrument that provides for the
qualified floating rate (or qualified inverse floating rate) rather than the
fixed rate.
Contingent Payment Debt Obligations. If a note provides for a variable rate of
interest but does not qualify as a Variable Rate Note, then the note would be
treated as a contingent payment debt instrument. In general, a United States
holder of such an instrument must include contingent and noncontingent interest
payments in income as such interest accrues based upon a projected payment
schedule. Moreover, in general, any gain recognized by a United States holder on
the sale, exchange, or retirement of a contingent payment debt instrument will
be treated as ordinary income and all or a portion of any loss realized could be
treated as ordinary loss as opposed to capital loss (depending upon the
circumstances). The proper United States federal income tax treatment of notes
that are treated as contingent payment debt instruments will be more fully
described in the applicable pricing supplement. Furthermore, any other special
United States federal income tax considerations, not otherwise discussed herein,
which are applicable to any particular issue of notes will be discussed in the
applicable pricing supplement.
Certain Special Rules. Certain of the notes (a) may be redeemable at our option
prior to their stated maturity (a "call option") and/or (b) 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 special rules. Investors intending to
purchase notes with such features should consult their own tax advisors, since
OID consequences will depend, in part, on the particular terms and features of
the purchased notes.
United States holders may generally, upon election, include in income all
interest (including stated interest, acquisition discount, de minimis OID,
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 OID, subject to
certain limitations and exceptions.
Certain special rules generally allow any reasonable method to be used in
determining the amount of OID allocable to a short initial accrual period (if
all other accrual periods are of equal length) and require that the amount of
OID allocable to the final accrual period equal the excess of the amount payable
at the maturity of the OID note (other than any payment of qualified stated
interest) over the OID note's adjusted issue price as of the beginning of such
final accrual period. In addition, if an interval between payments of qualified
stated interest on an OID note contains more than one accrual period, then the
amount of qualified stated interest payable at the end of such interval is
allocated pro rata (on the basis of their relative lengths) between the accrual
periods contained in the interval.
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Market Discount
If a United States holder purchases a note, other than a short-term note, for an
amount that is less than the note's stated redemption price at maturity or, in
the case of an OID note, for an amount that is less than the note's revised
issue price, i.e., the note's issue price increased by the amount of accrued
OID, the note will be considered to have market discount. The market discount
rules are subject to a de minimis rule similar to the rule relating to de
minimis OID, described above. Any gain recognized by the United States holder on
the sale, exchange, retirement or other taxable disposition of notes having
market discount generally will be treated as ordinary income to the extent of
the market discount that accrued on the note while held by such United States
holder.
Alternatively, the United States holder may elect to include market discount in
income currently over the life of the note. Such an election will apply to
market discount notes acquired by the United States holder on or after the first
day of the first taxable year to which such election applies and is revocable
only with the consent of the IRS. Market discount will accrue on a straight-line
basis unless the United States holder elects to accrue the market discount on a
constant-yield method. Such an election will apply to the note to which it is
made and is irrevocable. Unless the United States holder elects to include
market discount in income on a current basis, as described above, the United
States holder could be required to defer the deduction of a portion of the
interest paid on any indebtedness incurred or maintained to purchase or carry
the note.
The Administration's 1999 budget proposal includes a provision which, if passed,
would require accrual basis taxpayers to include market discount in income as it
accrues. Under this proposal, a United States holder's yield for purposes of
determining and accruing market discount would be limited to the greater of:
- the original yield to maturity of the note plus 5 percent; or
- the applicable Federal rate at the time the holder acquired the note
plus 5 percent.
There can be no certainty, however, as to whether this provision of the
Administration's budget proposal will be enacted or what its effective date
would be.
In the case of a foreign currency note with market discount,
- market discount is determined in units of the foreign currency;
- 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 spot rate of exchange on such
disposition date (and no part of such accrued market discount is
treated as exchange gain or loss); and
- accrued market discount currently includable in income by a
United States 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 "--Original Issue
Discount--Foreign Currency Notes" above with respect to
computation of exchange gain or loss on accrued interest.
Short-Term Notes
The rules set forth above also will generally apply to notes having maturities
of not more than one year from the date of issuance. Those notes are called
short-term notes in this prospectus supplement. Modifications apply to these
general rules.
First, none of the interest on a short-term note is treated as qualified stated
interest but instead is treated as part of the short-term note's stated
redemption price at maturity, thereby giving rise to OID. Thus, all short-term
notes will be OID notes. OID will be treated as accruing on a short-term note
ratably, or at the election of a United States holder, under a constant yield
method.
Second, a United States holder of a short-term note that uses the cash method of
tax accounting will generally not be required to include OID in respect of the
short-term note in income on a current basis. Such a United States holder may
not be allowed to deduct all of the interest paid or accrued on any indebtedness
incurred or maintained to purchase or carry such note until the maturity of the
note or its earlier disposition in a taxable transaction. In
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addition, such a United States holder will be required to treat any gain
realized on a disposition of the notes as ordinary income to the extent of the
holder's accrued OID on the note. A United States holder of a short-term note
using the cash method of tax accounting may, however, elect to accrue OID into
income on a current basis. In such case, the limitation on the deductibility of
interest described above will not apply. A United States holder using the
accrual method of tax accounting generally will be required to include OID on a
short-term note in income on a current basis.
Third, any United States holders of a short-term note, whether using the cash or
accrual method of tax accounting, can elect to accrue the acquisition discount,
if any, on the note on a current basis. If such an election is made, the
original issue discount ("OID") rules will not apply to the note. Acquisition
discount is the excess of the note's stated redemption price at maturity over
the holder's purchase price for the note. Acquisition discount will be treated
as accruing ratably or, at the election of the United States holder, under a
constant-yield method based on daily compounding.
As described above, the notes may have special redemption features. These
features may affect the determination of whether a note has a maturity of not
more than one year and thus is a short-term note. Purchasers of notes with such
features should carefully examine the applicable pricing supplement and should
consult their tax advisors in relation to such features.
Notes Purchased at a Premium
A United States holder that purchases a note for an amount in excess of the
remaining redemption amount will be considered to have purchased the note at a
premium. Such holder may elect to amortize such premium, as an offset to
interest income, using a constant-yield method, over the remaining term of the
note. Such election, once made, generally applies to all debt instruments held
or subsequently acquired by the United States holder on or after the first
taxable year to which the election applies. Such election may be revoked only
with the consent of the IRS. A United States holder that elects to amortize such
premium must reduce its tax basis in a note by the amount of the premium
amortized during its holder period. For a United States holder that does not
elect to amortize bond premium, the amount of such premium will be included in
the United States holder's tax basis when the note matures or is disposed of by
the United States holder.
Amortizable bond premium in respect of a foreign currency note will be computed
in the specified currency and will reduce interest income in the specified
currency. At the time amortized bond premium offsets interest income, exchange
gain or loss, which will be taxable as ordinary income or loss, will be realized
on the amortized bond premium on such note based on the difference between (1)
the spot rate of exchange on the date or dates such premium is recovered through
interest payments on the note and (2) the spot rate exchange on the date on
which the United States holder acquired the note. See "--Original Issue
Discount--Acquisition Premium" above for a discussion of the treatment of a note
purchased for an amount less than or equal to the remaining redemption amount
but in excess of the note's adjusted issue price.
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.
Information Reporting and Backup Withholding
The trustee will be required to file information returns with the IRS relating
to payments made to particular United States holders of notes. In addition,
United States holders may be subject to a 31 percent backup withholding tax on
such payments if they do not provide their taxpayer identification numbers to
the trustee.
NON-UNITED STATES HOLDERS
Under current United States federal income tax law:
- withholding United States federal income tax will not apply to a
payment on a note to a non-United States holder, provided that:
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- the holder does not actually or constructively own 10 percent or
more of the total combined voting power of all classes of our
stock entitled to vote and is not a controlled foreign
corporation related to us through stock ownership or a bank
receiving interest described in section 881(c)(3)(A) of the Code;
and
- the beneficial owner provides a statement signed under penalties
of perjury that includes its name and address and certifies that
it is a non-United States holder in compliance with applicable
requirements, or, with respect to payments made after December
31, 2000, satisfies documentary evidence requirements for
establishing that it is a non-United States holder; and
- a non-United States holder will not be subject to United States
federal income tax on gain realized on the sale, exchange, retirement
or other taxable disposition of a note unless, in the case of any gain
realized by an individual non-United States holder, such holder is
present in the United States for 183 days or more in the taxable year
of such sale and certain other conditions are met, or such holder is
subject to tax pursuant to the provisions of the Code applicable to
certain United States expatriates.
Despite the above, a non-United States holder that is subject to United States
federal income taxation on a net income basis generally will be taxable under
the same rules that govern the taxation of a United States holder receiving or
accruing interest on a note or realizing or recognizing gain or loss on the
sale, exchange, retirement or other taxable disposition of a note. Special rules
might also apply to a non-United States holder that is a qualified resident of a
country with which the United States has an income tax treaty.
A foreign corporation whose income or gain in respect of a note is effectively
connected with the conduct of a United States trade or business, in addition to
being subject to regular U.S. income tax, may be subject to a branch profits tax
equal to 30% of its "effectively connected earnings and profits" within the
meaning of the Code for the taxable year, as adjusted for certain items, unless
it qualifies for a lower rate under an applicable tax treaty (as modified by the
branch profits tax rules). Even though such effectively connected income is
subject to income tax, and may be subject to the branch profits tax, it is not
subject to withholding if the non-United States holder delivers a properly
executed IRS Form 4224 to the withholding agent.
United States information reporting requirements and backup withholding tax will
not apply to payments on a note if the beneficial owner (1) certifies its
non-U.S. status under penalties of perjury or, for payments made after December
31, 2000, satisfies documentary evidence requirements for establishing that it
is a non-United States person, or (2) otherwise establishes an exemption.
Payments of the proceeds from the sale by a non-United States holder of a note
made to or through a foreign office of a broker will not be subject to
information reporting or backup withholding. However, information reporting (but
not backup withholding) may apply to a payment made outside the United States of
the proceeds of a sale of a note through an office outside the United States if
the broker is:
- a United States person;
- a controlled foreign corporation for United States tax purposes;
- a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified
three-year period; or
- with respect to payments made after December 31, 2000, a foreign
partnership, if at any time during its tax year:
- one or more of its partners are "U.S. persons" (as defined in
U.S. Treasury Regulations) who in the aggregate hold more than
50% of the income or capital interest in the partnership; or
- such foreign partnership is engaged in a United States trade or
business,
unless the non-United States holder certifies its non-United States person
status under penalties of perjury or otherwise establishes an exemption.
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Information reporting requirements and backup withholding tax will apply to the
payment of the proceeds of a sale of a note by the U.S. office of a broker,
unless the beneficial owner certifies its non-U.S. person status under penalties
of perjury or otherwise establishes an exemption. Any amounts withheld under the
backup withholding rules from a payment to a recipient would be allowed as a
credit or a refund against such recipient's federal income tax liability
provided the required information is furnished to the IRS.
The U.S. Treasury Department recently issued final Treasury regulations
governing information reporting and the certification procedures regarding
withholding and backup withholding on amounts paid to non-United States persons
after December 31, 2000. Such regulations, among other things, may change the
certification procedures relating to the receipt by intermediaries of payments
on behalf of a beneficial owner of a note. Prospective investors should consult
their tax advisors regarding the effect, if any, of such new Treasury
regulations on an investment in the notes.
For payments made after December 31, 2000, for purposes of applying the above
rules for non-United States holders to a foreign partnership, the beneficial
owner means each of the ultimate beneficial owners of the entity.
PLAN OF DISTRIBUTION
The notes are being offered on a continuous basis for sale by us to or through
the agent. The agent may purchase notes, as principal, from us from time to time
for resale to investors and other purchasers at varying prices relating to
prevailing market prices at the time of resale as determined by the agent or, if
so specified in the applicable pricing supplement, for resale at a fixed
offering price. If agreed to by us and the agent, the 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. We will pay a commission to the agent, ranging
from .125% to .750% of the principal amount of each note, depending upon its
stated maturity, sold through the agent as our agent. Commissions with respect
to notes with stated maturities in excess of 30 years that are sold through the
agent as our agent will be negotiated between us and the agent at the time of
such sale.
Unless otherwise specified in the applicable pricing supplement, any note sold
to the agent as principal will be purchased by the 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. The agent may sell notes it has purchased from us as principal to
certain dealers less a concession equal to all or any portion of the discount
received in connection with such purchase. The agent may allow, and such dealers
may reallow, a discount to certain other dealers. After the initial offering of
notes, the offering price (in the case of notes to be resold on a fixed offering
price basis), the concession and the reallowance may be changed.
We have reserved the right to sell the notes through one or more other agents or
to other persons as principal. In any such events, the names of the other agents
or principals will be set forth in the applicable pricing supplement.
We reserve the right to withdraw, cancel or modify the offer made hereby without
notice and may reject offers in whole or in part whether placed directly with us
or through the agent. The 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 New York City on the date of settlement. See
"Description of the Notes - General."
Upon issuance, the notes will not have an established trading market. The notes
will not be listed on any securities exchange. The agent may from time to time
purchase and sell notes in the secondary market, but the agent is 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 agent may make a market in the notes, but the
agent is not obligated to do so and may discontinue any market-making activity
at any time.
Until the distribution of the notes is completed, rules of the SEC may limit the
ability of the agent to bid for and purchase notes. As an exception to these
rules, the agent is permitted to engage in certain transactions that stabilize
the price of the notes. Such transactions may consist of bids or purchases for
the purpose of pegging, fixing or maintaining the price of the notes.
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If the agent creates a short position in the notes in connection with the
offering, (i.e., if it sells more notes than are set forth on the cover page of
this prospectus supplement), it may reduce that short position by purchasing
notes in the open market.
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
the offering.
The agent also may impose a penalty bid on certain other agents, if any. This
means that if the agent purchases notes in the open market to reduce the agent's
short position or to stabilize the price of the notes, it may reclaim the amount
of the selling concession from the agents who sold those notes as part of the
offering.
Neither the agent nor us makes any representation or prediction as to the
direction or magnitude of any effect that the transactions described above may
have on the prices of the notes. In addition, neither the agent nor us makes any
representation that the agent will engage in such transactions or that such
transactions, once commenced, will not be discontinued without notice.
The agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). We, have agreed to
indemnify the agent against, and to provide contribution with respect to,
certain liabilities (including liabilities under the Securities Act). We have
agreed to reimburse the agent for certain other expenses.
The agent has, from time to time, provided, and may continue to provide in the
future, various investing banking, commercial banking and/or financial advisory
services to us, Sun, and certain of our affiliates, for which certain customary
compensation has been, and will be, received. The agent has acted as
representative of various underwriters in connection with public offerings of
Sun's common stock in 1993, 1995 and 1996 and of our debt securities in 1996,
1997, and 1998.
From time to time, we may issue and sell other debt securities described in the
accompanying prospectus, and the amount of notes offered hereby is subject to
reduction as a result of such sales.
LEGAL MATTERS
The legality of the notes offered hereby and the description of Federal income
tax matters contained in this prospectus supplement will be passed upon for us
by Jaffe, Raitt, Heuer & Weiss, Professional Corporation, Detroit, Michigan.
Certain legal matters will be passed upon for the agent by Skadden, Arps, Slate,
Meagher & Flom LLP, New York, New York. Jaffe, Raitt, Heuer & Weiss,
Professional Corporation will rely on the opinions of Ober, Kaler, Grimes &
Shriver, a professional corporation, Baltimore, Maryland, as to matters of
Maryland law.
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NO DEALER, SALESPERSON OR ANY OTHER PERSON 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 IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT, THE
APPLICABLE PRICING SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE US OR THE AGENT. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING
SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND
THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT WE HAVE HAD NO CHANGE IN OUR AFFAIRS SINCE THE DATE HEREOF.
THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT AND
THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION.
--------------------------
TABLE OF CONTENTS
Page
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PROSPECTUS SUPPLEMENT
About This Prospectus Supplement;
Pricing Supplements........................................2
Risk Factors...............................................2
Description of the Notes...................................5
Special Provisions Relating to
Multi-Currency Notes......................................25
Certain United States Federal
Income Tax Considerations.................................27
Plan of Distribution......................................37
Legal Matters.............................................38
PROSPECTUS
Available Information......................................2
Incorporation of Certain Documents by
Reference................................................2
The Company and the Operating Partnership..................3
Risk Factors...............................................4
Use of Proceeds............................................9
Ratios of Earnings to Fixed Charges........................9
Description of Debt Securities.............................9
Description of Common Stock...............................20
Description of Preferred Stock............................22
Description of Securities Warrants........................25
Federal Income Tax Considerations.........................27
Plan of Distribution......................................33
Legal Matters.............................................34
Experts...................................................34
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$100,000,000
SUN COMMUNITIES OPERATING
LIMITED PARTNERSHIP
[SUN LOGO]
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE
FROM DATE OF ISSUE
---------------------------
Prospectus Supplement
August 24, 1999
---------------------------
LEHMAN BROTHERS
====================================================================
