<Page>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE 13, 2000)
$150,000,000
[LOGO]
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
-------------------
THE COMPANY: Duke Realty Limited Partnership. Our principal executive office is
located at 600 East 96th Street, Suite 100, Indianapolis, Indiana 46240 and our
telephone number is (317) 808-6000.
TERMS: We plan to offer and sell notes with various terms, including the
following:
- - Ranking as senior indebtedness
- - Stated maturities of nine months or more from date of issue
- - Redemption and/or repayment provisions, if applicable, whether mandatory or at
our option or the option of noteholders
- - Payments in U.S. dollars or one or more foreign currencies
- - Minimum denominations of $1,000 or other specified denominations for foreign
currencies
- - Book-entry (through The Depository Trust Company) or certificated form
- - Interest at fixed or floating rates, or no interest at all. The floating
interest rate may be based on one or more of the following indices plus or
minus a spread and/or multiplied by a spread multiplier:
- CD rate
- CMT rate
- Commercial paper rate
- Eleventh District cost of funds rate
- Federal funds rate
- LIBOR
- Prime rate
- Treasury rate
- - Interest payments on fixed rate notes semi-annually or otherwise
- - Interest payments on floating rate notes on a monthly, quarterly, semiannual
or annual basis
We will specify the final terms for each note, which may be different from the
terms described in this prospectus supplement, in the applicable pricing
supplement.
INVESTING IN THE NOTES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE S-4.
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<Caption>
AGENTS' DISCOUNTS
PUBLIC OFFERING PRICE AND COMMISSIONS
--------------------- -------------------------------------
Per Note..................................... 100% .125% - .750%
Total (1).................................... $150,000,000 $187,500 - $1,125,000
<Caption>
PROCEEDS TO US,
BEFORE EXPENSES
-------------------------------------------
Per Note..................................... 99.875% - 99.250%
Total (1).................................... $149,812,500 - $148,875,000
</Table>
(1) Or the equivalent thereof in one or more foreign currencies.
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or determined if this prospectus
supplement, the accompanying prospectus or any pricing supplement is truthful or
complete. Any representation to the contrary is a criminal offense.
We may sell notes to the agents referred to below as principal for resale at
varying or fixed offering prices or through the agents as agent using their
reasonable efforts on our behalf. We may also sell notes without the assistance
of any agent.
If we sell other securities referred to in the accompanying prospectus, we
may be limited in offering and selling the entire amount of notes referred to in
this prospectus supplement.
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MERRILL LYNCH & CO.
BANC ONE CAPITAL MARKETS, INC.
CREDIT SUISSE FIRST BOSTON
DEUTSCHE BANC ALEX. BROWN
GOLDMAN, SACHS & CO.
JPMORGAN
UBS WARBURG
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The date of this prospectus supplement is June 8, 2001
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TABLE OF CONTENTS
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PAGE
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PROSPECTUS SUPPLEMENT
About this Prospectus Supplement; Pricing Supplements....... S-3
Risk Factors................................................ S-4
Ratios of Earnings to Fixed Charges......................... S-7
Description of the Notes.................................... S-7
Certain United States Federal Income Tax Considerations..... S-27
Supplemental Plan of Distribution........................... S-37
Legal Matters............................................... S-38
PROSPECTUS
About This Prospectus....................................... 2
Duke and the Operating Partnership.......................... 2
Use of Proceeds............................................. 3
Ratios of Earnings to Fixed Charges......................... 4
Description of Debt Securities.............................. 4
Description of Preferred Stock.............................. 20
Description of Depositary Shares............................ 26
Description of Common Stock................................. 30
Federal Income Tax Considerations........................... 32
Plan of Distribution........................................ 43
Legal Opinions.............................................. 45
Experts..................................................... 45
Where You Can Find More Information......................... 45
</Table>
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FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus includes and
incorporates by reference forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about us, including, among other things:
- Our anticipated future acquisition and development strategies;
- Tax risks;
- The limited geographic diversification of our real estate
portfolio; and
- General real estate investment risks, including local market
conditions and rental rates, competition for tenants, tenant
defaults, possible environmental liabilities and financing risks.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus supplement and discussed in or incorporated
by reference in the accompanying prospectus may not occur.
-------------------
You should rely only on the information contained in this prospectus
supplement and the accompanying prospectus. We have not, and the agents have
not, authorized any other person to provide you with different information. If
anyone provides you with different or inconsistent information, you should not
rely on it. We are not, and the agents are not, making an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted.
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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 the notes from time to time. The
total initial public offering price of the notes that we may offer by use of
this prospectus supplement is $150,000,000 (or the equivalent in one or more
foreign currencies).
This prospectus supplement sets forth certain terms of the notes that we may
offer. It supplements the description of our debt securities (as defined below)
contained in the attached prospectus. If information in this prospectus
supplement is inconsistent with the prospectus, this prospectus supplement will
apply and will supersede the information in the prospectus.
Each time we issue notes under this prospectus supplement, 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 the information in this prospectus supplement.
It is important for you to read and carefully 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
carefully consider the information in the documents we have referred you to in
"Where You Can Find More Information" on page 45 of the attached prospectus.
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RISK FACTORS
IF AN ISSUE OF NOTES IS INDEXED, IT WILL INVOLVE SIGNIFICANT RISKS NOT
ASSOCIATED WITH MORE CONVENTIONAL DEBT INSTRUMENTS.
Some of the notes may be indexed to one or more currencies, commodities,
interest rates or other indices or formulas. An investment in these notes
involves significant risks that are not associated with similar investments in a
conventional fixed rate or floating rate debt security. These risks include the
possibility that any applicable index or formula may be subject to significant
changes, that the resulting interest rate will be less than that payable on a
conventional fixed rate or floating rate debt security issued by us at the same
time, and that you could lose all or a substantial portion of the principal
payable upon maturity of such notes. These risks depend on a number of factors
beyond our control, including economic, financial and political events. In
addition, if the formula used to determine the amounts payable under such notes
contains a multiplier or leverage factor, the effect of any change in any
applicable index or formula will be magnified. In recent years, values of
certain indices and formulas have been highly volatile and such volatility may
continue or increase in the future.
Some indices reference several different currencies, commodities, securities
or other financial instruments. The compiler of such an index of this type
typically reserves the right to alter the composition of the index and the
manner in which the value of the index is calculated. An alteration may result
in a decrease in the value of or return on an indexed note.
An index may become unavailable due to factors including war, natural
disasters, cessation of publication of the index, or suspension of or disruption
in trading in the currency or currencies, commodity or commodities, security or
securities or other financial instrument or instruments comprising or underlying
the index. If an index becomes unavailable, the determination of principal of or
interest on an indexed note may be delayed or an alternative method may be used
to determine the value of the unavailable index. Alternative methods of
valuation are generally intended to produce a value similar to the value
resulting from reference to the relevant index. However, it is unlikely that
alternative methods of valuation will produce values identical to those which
would be produced were the relevant index to be used. An alternative method of
valuation may result in a decrease in the value of or return on an indexed note.
Indexed notes may be linked to indices which are not commonly utilized or
have been recently developed. A lack of a trading history may make it difficult
to anticipate the volatility or other risks to which a note is subject. In
addition, there may be less trading in indices of this type or instruments
underlying indices of this type, which could increase the volatility of the
indices and decrease the value of or return on the indexed notes.
ANY OPTIONAL REDEMPTION FEATURE OF THE NOTES MIGHT AFFECT THE MARKET VALUE OF
THESE NOTES.
You should expect that we will redeem these notes when prevailing interest
rates are relatively low. In such cases, you generally will not be able to
reinvest the redemption proceeds in a comparable security at an effective
interest rate as high as the current interest rate on such notes.
WE CANNOT ASSURE YOU THAT A TRADING MARKET FOR THE NOTES WILL EVER DEVELOP OR,
IF ONE DEVELOPS, BE MAINTAINED.
Although the agents have informed us that they intend to make a market in
the notes, they are not obligated to do so and they may discontinue making a
market in the notes at any time without notice. If an active market does not
develop, the market price and liquidity of the notes may be materially and
adversely affected. Furthermore, the market value for the notes in any trading
market will be affected by a number of factors unrelated to our
creditworthiness. These factors include:
- the complexity and volatility of any index or formula applicable to the
notes;
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- the amount of other debt securities linked to the index or formula
applicable to the notes;
- the method of calculating the amounts payable under the notes;
- the time remaining to the maturity of the notes;
- the outstanding amount of the notes;
- any redemption features of the notes; and
- the level, direction and volatility of market interest rates generally.
Therefore, you may not be able to sell such notes readily or at prices that
will enable you to realize your anticipated yield. You should not purchase notes
unless you understand and are able to bear the risk that notes may not be
readily saleable, that the market value of notes will fluctuate over time and
that such fluctuations may be significant.
AN INVESTMENT IN A NOTE DENOMINATED IN A CURRENCY OTHER THAN U.S. DOLLARS
ENTAILS SIGNIFICANT RISKS, INCLUDING THE POSSIBILITY OF SIGNIFICANT CHANGES IN
RATES OF EXCHANGE BETWEEN THE U.S. DOLLAR AND SUCH CURRENCY AND THE POSSIBILITY
OF THE IMPOSITION OR MODIFICATION OF FOREIGN EXCHANGE CONTROLS BY EITHER THE
UNITED STATES OR FOREIGN GOVERNMENTS.
These risks generally depend on factors over which we have no control, such
as economic and political events and the supply of and demand for the relevant
currencies. In recent years, rates of exchange between the U.S. dollar and
certain currencies have been highly volatile, and you should be aware that
volatility may occur in the future. Fluctuations in any particular exchange rate
that have occurred in the past, however, are not necessarily indicative of
fluctuations in the rate that may occur during the term of any note.
Depreciation of the specified currency for a note against the U.S. dollar would
result in a decrease in the effective yield of such note (on a U.S. dollar
basis) below its coupon rate and, in certain circumstances, could result in a
loss to you on a U.S. dollar basis.
Except as set forth below, if payment in respect of a note is required to be
made in a currency other than U.S. dollars and such currency is unavailable to
us due to the imposition of exchange controls or other circumstances beyond our
control or is no longer used by the government of the relevant country or union
or for the settlement of transactions by public institutions of or within the
international banking community, then all payments in respect of such note will
be made in U.S. dollars until such currency is again available to us or so used.
The amounts payable on any date in such currency will 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 in respect of such note so made in U.S. dollars will not constitute
an event of default under the indenture. However, if we cannot make payment in a
specified currency solely because that currency has been replaced by a single
European currency, such as the euro, then, beginning with the date the
replacement becomes effective, we will be able to satisfy our obligations under
those notes by making payment in such single European currency in conformity
with legally applicable measures pursuant to the treaty establishing the
European Community, as amended by the treaty on European Unity.
The paying agent will make all determinations referred to above at its sole
discretion. All determinations will, in the absence of clear error, be binding
on holders of the notes.
The information set forth in this prospectus supplement with respect to
foreign currency risks is general in nature. We disclaim any responsibility to
advise prospective purchasers of foreign currency notes with respect to any
matters that may affect the purchase, holding or receipt of payments of
principal of, premium, if any, and interest on such notes. Such persons should
consult their own counsel with regard to such matters. The notes, when
denominated in a foreign currency, are not an appropriate investment for
investors who do not have experience with foreign currency transactions. Any
pricing supplement relating to notes denominated in a specified currency other
than U.S. dollars
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will contain information concerning historical exchange rates for that currency
against the U.S. dollar and a brief description of any relevant exchange
controls. We will furnish that information for informational purposes only, and
you should not regard it as indicative of the range of, or trends in,
fluctuations in currency exchange rates that may occur in the future.
JUDGMENTS ON FOREIGN CURRENCY NOTES COULD INVOLVE ADDITIONAL RISKS OF EXCHANGE
RATE FLUCTUATIONS.
The notes will be governed by and construed in accordance with the internal
laws of the State of New York. New York courts will normally enter judgments or
decrees for money damages in the foreign currency in which notes are
denominated. These amounts are then converted into U.S. dollars at the rate of
exchange in effect on the date the judgment or decree is entered. Courts in the
United States outside New York customarily have not rendered judgments for money
damages denominated in any currency other than the U.S. dollar. In such other
jurisdictions, it may not be clear whether the rate of conversion into U.S.
dollars would be determined with reference to the date of default, the date of
entry of the judgment or some other date. In either case, holders of foreign
currency notes could bear the risk of additional exchange rate fluctuations
between the time payment were originally due and the date of conversion.
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
MARKET VALUE OF THE NOTES.
The credit ratings assigned to our medium-term note program reflect the
rating agencies' opinion of our ability to make payments on the notes when due.
The ratings do not take into account fluctuations in the market value of the
notes or the possibility that payments on indexed notes may be less than
anticipated because of changes in the specified index.
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RATIOS OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges was 1.69 for the year ended
December 31, 2000. In computing the ratios of earnings to fixed charges,
earnings have been calculated by adding fixed charges, excluding capitalized
interest, to income before gains or losses on property sales. Fixed charges
consist (if applicable) of interest costs, whether expensed or capitalized, the
interest component of rental expense and amortization of debt issuance costs.
For information on the ratios of earnings to fixed charges for prior years,
see "Ratios of Earnings to Fixed Charges" in the accompanying prospectus.
DESCRIPTION OF THE NOTES
GENERAL
The following description of terms of the notes supplements the general
description of the debt securities provided in the prospectus. However, the
pricing supplement for each offering of notes will contain the specific
information and terms for that offering. The pricing supplement may also add,
update or change information contained in this prospectus supplement. It is
important for you to consider the information contained in the prospectus, the
prospectus supplement and the pricing supplement in making your investment
decision.
This section describes some technical concepts, and thus we occasionally use
defined terms. You will find an alphabetized glossary at the end of this section
that defines all of the capitalized terms used in this section that are not
defined in this section.
THE INDENTURE. We will issue the notes under the indenture between us and
Bank One Trust Company, N.A. (formerly known as The First National Bank of
Chicago), as trustee. We urge you to read the indenture because it, and not this
description, defines your rights as holders of these notes. We have filed copies
of the indenture with the SEC.
RANKING. The notes will be unsecured and will rank equally with all our
other unsecured and unsubordinated debt obligations. The notes are effectively
subordinated to mortgages and our other secured indebtedness, which was
approximately $466.6 million at December 31, 2000. The notes and the indenture
will not limit us from incurring additional debt and will not place any other
financial restrictions on us, except as described in the attached prospectus.
AMOUNT. The amount of notes we may offer with this prospectus supplement
will be reduced to the extent we issue other debt securities, preferred stock or
warrants under the prospectus. The amount of notes that we may offer with this
prospectus supplement is $150 million. In addition, we may further increase the
amount of notes of this series that we may issue from time to time. The
indenture does not limit the amount of notes that we may offer. If a note is an
Original Issue Discount Note, we will use its initial offering price to
calculate the amount issued.
REOPENING OF ISSUE. We may, from time to time, reopen an issue of notes and
issue additional notes with the same terms (including maturity and interest
payment terms) as notes issued on an earlier date. After such additional notes
are issued they will be fungible with the previously issued notes to the extent
specified in the applicable pricing supplement.
MATURITY. Each note will mature on any day 9 months or more from its date
of issue. However, each note may also be subject to redemption at our option and
repayment at your option (see "--Optional Redemption" below).
PRICING SUPPLEMENT. The pricing supplement relating to a note will describe
the following terms:
- the specified currency;
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- whether the note is a fixed rate note, a floating rate note, an indexed
note, a dual currency note, a renewable note, an extendable note or an
amortizing note;
- the issue price;
- the original issue date;
- the stated maturity date;
- for a fixed rate note, the rate per annum at which it will bear interest,
if any, and the date on which interest will be payable if other than
May 1 and November 1;
- for a floating rate note, the base rate, the initial interest rate, the
interest reset period, the interest payment dates, the Index Maturity, the
Designated LIBOR Currency, if any, the maximum interest rate, if any, the
minimum interest rate, if any, the Spread and/or Spread Multiplier, if
any, and any other terms relating to the particular method of calculating
the interest rate for the note;
- whether the note is an Original Issue Discount Note;
- for an indexed note, the manner in which interest payments and the
principal amount payable at Maturity will be determined;
- if such note is an amortizing note, an amortization schedule;
- whether the note may be redeemed at our option, or repaid at the holder's
option prior to the stated maturity date as described further under
"Optional Redemption" below, and if so, the terms of the redemption or
repayment;
- whether the notes are a reopening of notes previously issued; and
- any other terms that do not conflict with the provisions of the indenture.
FORM OF THE NOTES. We will issue the notes either in certificated form or
pursuant to a book-entry system.
BOOK-ENTRY NOTES. When we issue notes in book-entry form, we will issue one
or more global certificates representing the entire issue of notes. All of the
notes that have been issued previously have been issued in book- entry form.
These certificates will name a nominee of The Depository Trust Company, New
York, New York ("DTC") as the owner of the notes. DTC maintains a computerized
system that will reflect your ownership of the notes through an account you will
maintain with your broker/dealer, bank, trust company or other representative.
DTC's nominee will be considered the owner of your note in our records and
will be the entity entitled to cast a vote regarding your note. However, DTC and
the broker/dealers, banks, trust companies and other representatives that are
part of DTC's computerized system are required to contact you for voting
instructions.
CERTIFICATED NOTES. When we issue notes in certificated form, you will
receive a certificate evidencing your note. The trustee will issue certificated
notes on our behalf and will only prepare such certificated notes at our
request. The certificate will name you as the owner of the note, unless you
choose to have your broker/dealer, bank, trust company or other representative
hold these certificates for you. If your name appears on the certificate
evidencing your note, then you will be considered the owner of your note for all
purposes under the indenture. For example, if we need to ask the holders of the
notes to vote on a proposed amendment to the notes, you will be asked to cast
the vote regarding your note. If you have chosen to have some other entity hold
the certificates for you, that entity will be considered the owner of your note
in our records and will be entitled to cast the vote regarding your note.
However, this entity is required to contact you for voting instructions.
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EXCHANGES. Certificated notes cannot be exchanged for book-entry notes.
Book-entry notes can be exchanged for certificated notes only if:
- DTC notifies us that it is unwilling or unable to hold global certificates
or it ceases to be a clearing agency registered under the Exchange Act,
and another depositary is not appointed;
- we elect not to have the notes represented by global certificates held by
a depositary; or
- an Event of Default has occurred under the indenture and is continuing
with respect to the notes, and beneficial owners of a majority in
aggregate principal amount of the book-entry notes advise DTC to cease
acting as depositary.
In these limited circumstances, we will issue to you certificated notes in
exchange for the book-entry notes. There will be no service charge for this
exchange, but if a tax or other governmental charge is imposed, we may require
you to pay it.
DENOMINATIONS. The notes will have minimum denominations of $1,000,
increased in multiples of $1,000. The authorized denominations of notes
denominated in a foreign or composite currency will be described in the pricing
supplement.
REGISTRATION AND TRANSFER OF NOTES
BOOK-ENTRY NOTES. Each note will be deposited with, or on behalf of, DTC,
as depository, and registered in the name of Cede & Co. (DTC's partnership
nominee). If you transfer your note while it is in book-entry form, the transfer
will be reflected on the computerized system at DTC. Your broker/ dealer, bank,
trust company or other representative will arrange for the transfer to be
reflected on DTC's records.
CERTIFICATED NOTES. In addition to acting as trustee under the indenture,
the trustee also acts as our registrar for notes issued in certificated form.
You may go to the trustee's office at 14 Wall Street, Eighth Floor, New York,
New York 10005 if you want to:
- Register the transfer of any certificated note;
- Exchange certificated notes for notes of different denominations;
- Deliver payment instructions;
- Obtain a new note to replace a note that has been lost or destroyed (you
may be required to provide a document to the trustee and us agreeing to
return the new certificate if the missing one is found);
- Present notes that have matured or been redeemed in exchange for payment.
CLEARANCE AND SETTLEMENT PROCEDURES
Initial settlement for the notes will be made in immediately available
funds. Secondary market trading between DTC participants will occur in the
ordinary way in accordance with the DTC's rules and will be settled in
immediately available funds using the DTC's Same-Day Funds Settlement System.
METHODS OF PAYMENT. The trustee also acts as our paying agent, and will
make all payments on the notes on our behalf.
BOOK-ENTRY NOTES. The trustee will make payments of principal and interest
on book-entry notes to the account of DTC's nominee by wire transfer of
immediately available funds. Neither we nor the trustee will make any payments
to owners of beneficial interests in book-entry notes. Instead, DTC will credit
the funds to which you are entitled to the account of the broker/dealer, bank,
trust company or
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other participant of DTC through which you hold your note. That participant, in
turn, will credit these funds to your account (or the account of any other
intermediary through which you hold your note).
We understand that DTC's current practice is to credit interest payments
(including interest payable at maturity) and principal payments in immediately
available funds. These payments and credits will be made pursuant to the rules
of DTC, in accordance with any standing instructions you have with your
broker/dealer, bank, trust company or other participant in DTC through which you
hold your notes and with customary practice in the broker/dealer industry.
Neither we nor the trustee will be involved with, or responsible for, the
movement of funds once the trustee has paid DTC.
CERTIFICATED NOTES. If you hold certificated notes, payments of principal
and interest due at maturity or earlier redemption will be paid by wire transfer
of immediately available funds after you present the matured or redeemed note at
the trustee's office (the address is given above). Interest payable at any other
time will be paid by check mailed to your address as it appears in the trustee's
records. If you own $10,000,000 or more of notes, we will pay you interest prior
to maturity by wire transfer of immediately available funds if you give the
appropriate instructions to the trustee at least 15 calendar days before the
applicable interest payment date.
SPECIAL PAYMENT PROVISIONS FOR NOTES DENOMINATED IN A FOREIGN
CURRENCY. Regardless of whether the notes are in book-entry or certificated
form, all payments of principal and interest on foreign currency notes (other
than dual currency notes) will be made in the currency of the notes, unless
otherwise specified in the applicable pricing supplement. The trustee, or
another exchange rate agent named in the pricing supplement, will convert these
payments into U.S. dollars. However, you may elect to receive these amounts in
the applicable foreign currency as described below.
Any currency conversion will be based upon the highest bid quotation in New
York City received by the exchange rate agent at approximately 11:00 a.m.,
Eastern Time, on the second Business Day preceding the applicable payment date
from three recognized foreign exchange dealers (one of which may be the exchange
rate agent). If the exchange rate agent cannot obtain bid quotations for the
conversion of the applicable foreign currency into U.S. dollars, then payments
on the note will be made in the applicable foreign currency.
If you elect to receive payment for a foreign currency note in the
applicable foreign currency, you must submit a written request to the trustee at
its corporate office in New York City on or before the applicable record date
for an interest payment or at least 15 days before the maturity date of the note
for payments at maturity. You may elect to receive all or any portion of all
future payments in the applicable foreign currency and need not file a separate
election for each payment. Such an election will remain in effect until you
revoke it by written notice to the trustee, but the trustee must receive any
such revocation notice on or before the applicable record date for an interest
payment or at least 15 days before the maturity date of the note for payments at
maturity. If you hold a note through a broker or nominee, you should contact the
broker or nominee to determine whether and how you can make an election to
receive payments in the applicable foreign currency.
When we make payments of principal and interest on foreign currency notes in
U.S. dollars, we will make the payments in the same manner as payments on notes
denominated in U.S. dollars, as described above. When we make payments of
interest on foreign currency notes in the applicable foreign currency other than
at maturity, the payment will be made by check mailed to your address as it
appears in the trustee's records, subject to your right to receive a wire
transfer in certain cases, as described above for U.S. dollar payments. When we
make payments of principal and interest on foreign currency notes in the
applicable foreign currency at maturity, the payment will be made by wire
transfer of immediately available funds to an account with a bank you have
designated to the trustee in writing at least 15 days before maturity, provided
the bank has the appropriate facilities and you surrender the note to the
trustee in time for the trustee to make the payment in accordance with its
normal procedures.
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DTC will not accept foreign currency payments. You may elect to receive
foreign currency payments in respect of book-entry notes by notifying your
broker/dealer, bank, trust company or other participant in DTC through which you
hold notes at least 15 days prior to the payment date that you have elected to
receive all or a portion of the foreign currency payment in that foreign
currency and by providing your broker/dealer, bank, trust company or other
participant in DTC with wire transfer instructions to an account maintained in
that foreign currency. The DTC participant in turn will notify DTC of your
election and wire transfer instructions and DTC will pass those on to the
trustee. If the trustee receives those instructions from DTC in time, you will
receive payment in the foreign currency, after deduction of the trustee's
currency conversion and other costs. Otherwise, you will receive payment in U.S.
dollars through DTC.
You will be responsible for the costs of any currency conversion effected by
the trustee on your behalf.
RECIPIENTS OF PAYMENTS
Payments of interest on notes are generally payable to the person in whose
name the note is registered at the close of business on the record date before
each interest payment date. However, interest will be payable at maturity,
redemption or repayment to the person to whom principal is payable. The first
interest payment on any note originally issued between a record date and an
interest payment date or on an interest payment date will be made on the
interest payment date after the next record date. The record date for any
interest payment date will be the date (whether or not a Business Day) 15
calendar days immediately before the interest payment date, unless otherwise
specified in the applicable pricing supplement.
OPTIONAL REDEMPTION
We may issue notes that permit us to redeem them prior to their maturity
("calls") or that permit you to require us to redeem them prior to their
maturity ("puts"). Any such redemption provisions, including the date(s) on
which the call or put may occur and whether redemptions may be made in whole or
in part, will be described in the pricing supplement relating to the specific
notes. Unless otherwise specified in the applicable pricing supplement, the
notes will not be subject to any sinking fund.
If we are permitted to call any notes, we will give notice of redemption to
you (or the entity that is the registered holder of your notes) by mail at least
30 calendar days and not more than 60 calendar days prior to the date set for
redemption.
If you are permitted to put any notes, you must notify the trustee at least
30 calendar days and not more than 60 calendar days prior to the date set for
redemption. Unless otherwise specified in the applicable pricing supplement, for
any note to be repaid, the trustee must receive:
- in the case of a certificated note, the note with the attached "Option to
Elect Repayment" form completed, or a letter from a broker/dealer, bank or
trust company notifying the trustee of your intent to redeem your notes
and guaranteeing that you will deliver the note and the attached "Option
to Elect Repayment" form not later than five Business Days after the date
set for redemption; or
- in the case of a book-entry note, instructions to such effect from the
beneficial owner of the note to DTC and forwarded by DTC to the trustee.
Any notice of redemption delivered by you or by us will be irrevocable.
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OPEN-MARKET PURCHASES. We may, at any time, purchase notes at any price
from holders of notes or in the open market. If we purchase any of our notes, we
may hold them, resell them or surrender them to the trustee for cancellation.
INTEREST AND INTEREST RATES
We will pay interest (other than defaulted interest) on the Interest Payment
Dates (as defined below) to those who are registered holders of notes on the
applicable record date as described below in "--Fixed Rate Notes" and
"--Floating Rate Notes--When Interest Is Paid" in this prospectus supplement,
except that interest payable at maturity will be payable to the person to whom
principal is payable; provided that if we would have made a regular interest
payment on the maturity date, a redemption date or a repayment date, we will
make that regular interest payment to the holder as of the regular record date,
even if it is not the same person to whom we are paying the principal amount.
Cede & Co., as nominee for The Depository Trust Company, the depositary for the
notes, will be the initial registered holder of the global notes. We will pay
interest due on a redemption date, repayment date or maturity date to the same
person to whom we are paying the principal amount. However, if we would have
made a regular interest payment on the redemption, repayment or maturity date,
we will make that regular interest payment to the registered holder as of the
applicable record date, even if it is not the same person to whom we are paying
the principal amount.
If we originally issue a note between a record date and an Interest Payment
Date, we will make the first payment of interest on the Interest Payment Date
following the next record date to the registered owner on that record date.
Unless the applicable pricing supplement specifies otherwise, payments of
interest on any note on any Interest Payment Date, maturity date, redemption
date or repayment date will include interest accrued from and including the
immediately preceding Interest Payment Date (or from and including the date of
issue if no interest has been paid or duly provided for), to, but excluding, the
Interest Payment Date, maturity date or redemption date. However, in case the
interest rate on a note is reset daily or weekly, unless the applicable pricing
supplement specifies otherwise, the interest payments will include interest
accrued only from but excluding the record date through which interest has been
paid (or from and including the date of issue, if no interest has been paid)
through and including the record date next preceding the applicable Interest
Payment Date, except that the interest payment on maturity, redemption or
repayment, as applicable, will include interest accrued to, but excluding, that
date.
The interest rates we will offer with respect to the notes may differ
depending on, among other things, the aggregate principal amount of notes
purchased in a single transaction.
FIXED RATE NOTES
Each fixed rate note will bear interest at the annual rate specified in the
note and in the applicable pricing supplement. Interest on the fixed rate notes
will be paid on May 1 and November 1 of each year or as specified in the
applicable pricing supplement. Unless we specify otherwise in the applicable
pricing supplement, the record date for fixed rate notes is April 15 for a
May 1 Interest Payment Date, October 15 for a November 1 Interest Payment Date
and the date that is 15 calendar days before any other Interest Payment Date,
whether or not those dates are business days. Interest on fixed rate notes will
be computed and paid on the basis of a 360-day year of twelve 30-day months or
as specified in the applicable pricing supplement. In the event that any
Interest Payment Date or maturity for any fixed rate note is not a Business Day,
interest on such fixed rate note will be paid on the next succeeding Business
Day; however, we will not pay any additional interest due to the delay in
payment.
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FLOATING RATE NOTES
GENERAL. Floating rate notes will bear interest based on a formula
specified in the applicable pricing supplement. The formula may be based on one
of the following interest rate indices, each of which is described in more
detail below:
- the CD Rate
- CMT Rate
- the Commercial Paper Rate
- the Eleventh District Cost of Funds Rate
- the Federal Funds Rate
- LIBOR
- the Prime Rate
- the Treasury Rate
- such other rate specified in the applicable pricing supplement.
The applicable pricing supplement will also indicate the Spread and/or
Spread Multiplier, if any. In addition, any floating rate note may have a
maximum or minimum interest rate limitation.
DATE OF INTEREST RATE CHANGE. The interest rate on each floating rate note
may be reset daily, weekly, monthly, quarterly, semiannually or annually (this
period is the "Interest Reset Period" and the first day of each Interest Reset
Period is the "Interest Reset Date"). Unless we state otherwise in the
applicable pricing supplement, the Interest Reset Dates will be:
- for floating rate notes that reset daily, each Business Day;
- for floating rate notes (other than Treasury Rate notes) that reset
weekly, Wednesday of each week;
- for Treasury Rate notes that reset weekly, Tuesday of each week (except as
provided below under "Treasury Rate Notes");
- for floating rate notes (other than Eleventh District Cost of Funds Rate
Notes) that reset monthly, the third Wednesday of each month;
- for Eleventh District Cost of Funds Rate notes, all of which reset
monthly, the first calendar day of each month;
- for floating rate notes that reset quarterly, the third Wednesday of
March, June, September and December of each year;
- for floating rate notes that reset semiannually, the third Wednesday of
each of the two months specified in the pricing supplement; and
- for floating rate notes that reset annually, the third Wednesday of the
month specified in the pricing supplement.
If an Interest Reset Date for any floating rate note falls on a day that is
not a Business Day, it will be postponed to the following Business Day, except
that, in the case of a LIBOR note, if that Business Day is in the next calendar
month, the Interest Reset Date will be the immediately preceding Business Day.
HOW INTEREST IS CALCULATED. We will appoint a calculation agent to
calculate interest rates on the floating rate notes. Unless we choose a
different party in the pricing supplement, the lead agent for an
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issue of notes will be the calculation agent for those notes. Floating rate
notes will accrue interest from and including the original issue date or the
last date to which interest has been paid or provided for, as the case may be,
to but excluding the applicable Interest Payment Date, as described below, or
maturity, as the case may be.
Accrued interest on floating rate notes will be calculated by multiplying
the principal amount of such note (or, in the case of an indexed note, unless
otherwise specified in the pricing supplement, the face amount of such indexed
note) by an accrued interest factor. The accrued interest factor will be
computed by adding the interest factors calculated for each day in the period
for which accrued interest is being calculated. The interest factor (expressed
as a decimal calculated to seven decimal places without rounding) for each day
will be computed by dividing the interest rate in effect on that day by 360, in
the case of CD Rate notes, Commercial Paper Rate notes, the Eleventh District
Cost of Funds Rate notes, Federal Funds rate notes, LIBOR notes and Prime Rate
notes, or by the actual number of days in the year, in the case of Treasury Rate
notes or CMT Rate notes. For these calculations, the interest rate in effect on
any Interest Reset Date will be the new reset rate determined as of the
applicable Interest Determination Date.
For a regular floating rate note, unless specified otherwise in the pricing
supplement, the interest factor will be based on the applicable index (1) plus
or minus any applicable Spread and/or (2) multiplied by any applicable Spread
Multiplier.
For a floating rate note designated as a "Floating Rate/Fixed Rate Note,"
unless specified otherwise in the pricing supplement, the interest factor will
be based on:
(1) the interest rate specified as the initial interest rate from the date
of issue to the first Interest Reset Date;
(2) the applicable index (a) plus or minus any applicable Spread and/or
(b) multiplied by any applicable Spread Multiplier from the first
Interest Reset Date until any specified fixed interest commencement date;
and
(3) a fixed interest rate specified in the pricing supplement from any fixed
interest commencement date until maturity.
For a floating rate note designated as an "Inverse Floating Rate Note,"
unless specified otherwise in the pricing supplement, the interest factor will
be based on a fixed interest rate specified in the pricing supplement minus the
applicable index (1) plus or minus any applicable Spread and/or (2) multiplied
by any applicable Spread Multiplier, except that unless specified otherwise in
the pricing supplement, the interest rate will not be less than zero.
The calculation agent will round all percentages resulting from any
calculation of the rate of interest on a floating rate note, if necessary, to
the nearest 1/100,000 of 1% (.0000001), with five one-millionths of a percentage
point rounded upward (e.g., 9.876545% (or .9876545) would be rounded to 9.87655%
(or .987655)) and all currency amounts used in or resulting from any calculation
on floating rate notes will be rounded to the nearest cent or, in the case of a
foreign currency note, to the nearest unit (with one-half cent or unit being
rounded upward).
WHEN INTEREST IS PAID. Unless we state otherwise in the applicable pricing
supplement, we will pay interest on floating rate notes as follows:
(1) for notes that 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 specified in the pricing supplement;
(2) for notes that reset quarterly, on the third Wednesday of March, June,
September, and December of each year specified in the pricing supplement;
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(3) for notes that reset semiannually, on the third Wednesday of each of two
months of each year specified in the pricing supplement; and
(4) for notes that reset annually, on the third Wednesday of one month of
each year specified in the pricing supplement.
Each of the above dates is an "Interest Payment Date." We will also pay
interest on all notes at maturity.
If an Interest Payment Date (other than at maturity) for any floating rate
note falls on a day that is not a Business Day, it will be postponed to the
following Business Day, except that, in the case of a LIBOR note, if that
Business Day would fall in the next calendar month, the Interest Payment Date
will be the immediately preceding Business Day.
If the maturity for a floating rate note falls on a day that is not a
Business Day, we will make the payment on the next Business Day, without
additional interest.
References below to information services include any successor information
services.
CD RATE NOTES
Each CD Rate note will bear interest at a specified rate that will be reset
periodically based on the CD Rate and any Spread and/or Spread Multiplier.
"CD Rate" means, with respect to any Interest Determination Date, the rate
on that Interest Determination Date for negotiable certificates of deposit
having the specified Index Maturity as published in H.15(519) under the heading
"CDs (secondary market)".
The following procedures will apply if the rate cannot be set as described
above:
(a) If the rate is not published in H.15(519) prior to 3:00 p.m., New York
City time, on the Calculation Date, then the CD Rate will be the rate for
negotiable certificates of deposit having the specified Index Maturity as
published in H.15 Daily Update, or such other recognized electronic
source used for the purpose of displaying such rate, under the caption
"CDs (secondary market)."
(b) If the rate is not yet published in H.15(519), H.15 Daily Update or
another recognized electronic source by 3:00 p.m., New York City time, on
the Calculation Date, the CD Rate will be the average of the secondary
market offered rates, as of 10:00 a.m., New York City time, of three
leading nonbank dealers of negotiable U.S. dollar certificates of deposit
in The City of New York (which may include an agent or its affiliates)
selected by the calculation agent for negotiable certificates of deposit
of major money market banks with a remaining maturity closest to the
specified Index Maturity in a denomination that is representative for a
single transaction in that market at that time.
(c) If fewer than three dealers are providing quotes, the rate of interest
on the CD Rate note will be the same as the rate of interest thereon in
the prior interest period.
CMT RATE NOTES
Each CMT Rate note will bear interest at a specified rate that will be reset
periodically based on the CMT Rate and any Spread or Spread Multiplier.
"CMT Rate" means, with respect to any Interest Determination Date, the rate
displayed on the Designated CMT Telerate Page under the caption ". . . Treasury
Constant Maturities. . . Federal Reserve
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Board Release H.15. . . Mondays Approximately 3:45 p.m.", under the column for
the specified Index Maturity for:
(1) if the Designated CMT Telerate Page is 7051, the rate for the Interest
Determination Date; or
(2) if the Designated CMT Telerate Page is 7052, the weekly or monthly
average, as applicable, ended immediately preceding the week or month, as
applicable, in which the Interest Determination Date occurs.
The following procedures will apply if the rate cannot be set as described
above:
(a) If we do not specify any page, the Designated CMT Telerate Page will be
7052 for the most recent week. If that rate is no longer displayed on the
relevant page, or if it is not displayed by 3:00 p.m., New York City
time, on the Calculation Date, then the CMT Rate will be the Treasury
constant maturity rate for the specified Index Maturity as published in
the relevant H.15(519).
(b) If the rate is no longer published in H.15(519), or is not published by
3:00 p.m., New York City time, on the Calculation Date, then the CMT Rate
for that determination date will be the Treasury constant maturity rate
for the specified Index Maturity (or other U.S. Treasury rate for such
Index Maturity for that Interest Determination Date) as may then be
published by either the Federal Reserve Board or the U.S. 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).
(c) If that information is not provided by 3:00 p.m., New York City time, on
the Calculation Date, then the CMT Rate will be calculated as a yield to
maturity, based on the average of the secondary market closing offer side
prices as of approximately 3:30 p.m., New York City time, on that
Interest Determination Date reported, according to their written records,
by three leading primary U.S. government securities dealers (each, a
"Reference Dealer") in The City of New York (which may include an agent
or its affiliates) selected by the calculation agent. These dealers will
be selected from five Reference Dealers.
The calculation agent will eliminate the highest quotation (or, in the
event of equality, one of the highest) and the lowest quotation (or, in
the event of equality, one of the lowest), for the most recently issued
direct noncallable fixed rate obligations of the United States ("Treasury
Notes") with an original maturity of approximately the specified Index
Maturity and a remaining term to maturity of not less than the specified
Index Maturity minus one year.
If two Treasury Notes with an original maturity as described in the
preceding sentence have remaining terms to maturity equally close to the
specified Index Maturity, the quotes for the Treasury Note with the
shorter remaining term to maturity will be used.
(d) If the calculation agent cannot obtain three Treasury Note quotations,
the CMT Rate will be calculated as a yield to maturity based on the
average of the secondary market offer side prices as of approximately
3:30 p.m., New York City time, on that Interest Determination Date of
three Reference Dealers in The City of New York selected by the
calculation agent using the same method described above, for Treasury
Notes with an original maturity of the number of years that is the next
highest to the specified Index Maturity with a remaining term to maturity
closest to such Index Maturity and in an amount of at least $100,000,000.
If three or four (and not five) of the Reference Dealers are providing
quotes, then the CMT Rate will be based on the average of the offer
prices obtained, and neither the highest nor the lowest of such quotes
will be eliminated.
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(e) If fewer than three Reference Dealers are providing quotes, the rate of
interest on CMT Rate notes will be the same as the rate of interest
thereon in the prior interest period.
COMMERCIAL PAPER RATE NOTES
Each Commercial Paper Rate note will bear interest at a specified rate that
will be reset periodically based on the Commercial Paper Rate and any Spread
and/or Spread Multiplier.
"Commercial Paper Rate" means, with respect to any Interest Determination
Date, the Money Market Yield of the rate on that Interest Determination Date for
commercial paper having the specified Index Maturity as published in H.15(519)
under the heading "Commercial Paper--Nonfinancial."
The following procedures will apply if the rate cannot be set as described
above:
(a) If the rate is not published in H.15(519) prior to 3:00 p.m., New York
City time, on the Calculation Date, then the Commercial Paper Rate will
be the Money Market Yield of the rate for commercial paper having the
specified Index Maturity as published in H.15 Daily Update, or such other
recognized electronic source used for the purpose of displaying such
rate, under the caption "Commercial Paper-Nonfinancial."
(b) If the rate is not published in H.15(519), H.15 Daily Update or another
recognized electronic source by 3:00 p.m., New York City time, on the
Calculation Date, the Commercial Paper Rate will be the Money Market
Yield of the average for the offered rates, as of 11:00 a.m., New York
City time, on that Interest Determination Date, of three leading dealers
of commercial paper in The City of New York (which may include an agent
or its affiliates) selected by the calculation agent for commercial paper
having the specified Index Maturity placed for an industrial issuer whose
bond rating is "AA," or the equivalent, by a nationally recognized rating
agency.
(c) If fewer than three dealers are providing quotes, the rate of interest
on the Commercial Paper Rate note will be the same as the rate of
interest thereon in the prior interest period.
ELEVENTH DISTRICT COST OF FUNDS RATE NOTES.
Each Eleventh District Cost of Funds Rate note will bear interest at a
specified rate that will be reset periodically based on the Eleventh District
Cost of Funds Rate and any Spread and/or Spread Multiplier).
"Eleventh District Cost of Funds Rate" means, with respect to any Interest
Determination Date, the rate equal to the monthly weighted average cost of funds
for the calendar month preceding such Interest Determination Date as set forth
under the caption "11th District" on Telerate on page 7058 (or such other page
as is specified in the applicable pricing supplement) as of 11:00 a.m., San
Francisco time, on such Interest Determination Date. If such rate does not so
appear, the Eleventh District Cost of Funds Rate shall be the FHLB Index for the
calendar month preceding the date of such announcement. If the Federal Home Loan
Bank of San Francisco fails to announce such rate for the calendar month next
preceding such Interest Determination Date, then the rate of interest on the
Eleventh District Cost of Funds Rate notes will be the same as the rate of
interest thereon in the prior interest period.
FEDERAL FUNDS RATE NOTES
Each Federal Funds Rate note will bear interest at a specified rate that
will be reset periodically based on the Federal Funds Rate and any Spread and/or
Spread Multiplier.
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"Federal Funds Rate" means, with respect to any Interest Determination Date,
the rate on specified dates for Federal Funds published in H.15(519) prior to
11:00 a.m., New York City time, under the heading "Federal Funds Effective", as
such rate is displayed on Telerate Page 120.
The following procedures will apply if the rate cannot be set as described
above:
(a) If the rate does not appear on Telerate Page 120 or is not published in
H.15(519) prior to 11:00 a.m., New York City time, on the Calculation
Date, then the Federal Funds Rate will be the rate on such Interest
Determination Date published in H.15 Daily Update, or such other
recognized electronic source used for the purpose of displaying such
rate, under the caption "Federal Funds (Effective)".
(b) If the rate does not appear on Telerate Page 120 or is not published in
H.15(519), H.15 Daily Update or another recognized electronic source by
3:00 p.m., New York City time, on the Calculation Date, the Federal Funds
Rate will be the average of the rates, as of 11:00 a.m., New York City
time, on that Interest Determination Date, for the last transaction in
overnight federal funds arranged by three leading brokers of federal
funds transactions in The City of New York (which may include an agent or
its affiliates) selected by the calculation agent.
(c) If fewer than three brokers are providing quotes, the rate of interest
on the Federal Funds Rate notes will be the same as the rate of interest
thereon in the prior interest period.
LIBOR NOTES
Each LIBOR note will bear interest at a specified rate that will be reset
periodically based on LIBOR and any Spread and/or Spread Multiplier.
The calculation agent will determine LIBOR on each Interest Determination
Date as follows:
(a) With respect to any Interest Determination Date, LIBOR will be generally
determined as either:
(1) If "LIBOR Reuters" is specified in the pricing supplement, the
average of the offered rates for deposits in the Designated LIBOR
Currency having the specified Index Maturity beginning on the second
London Business Day immediately after the Interest Determination
Date, that appear on the Designated LIBOR page as of 11:00 a.m.,
London time, on that Interest Determination Date, if at least two
offered rates appear on the Designated LIBOR Page; or
(2) If LIBOR Telerate is specified in the pricing supplement, or if
neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
applicable pricing supplement, the rate for deposits in the
Designated LIBOR Currency having the specified Index Maturity
beginning on the second London Business Day immediately after such
date (or, if pounds sterling is the Designated LIBOR Currency,
beginning on such date or, if euro is the Designated LIBOR Currency,
beginning on the second TARGET Settlement Day immediately after such
date), that appears on the Designated LIBOR Page as of 11:00 a.m.,
London time, on that Interest Determination Date.
Where (1) above applies, if fewer than two offered rates appear on the
Designated LIBOR Page, or, where (2) above applies, if no rate appears on
the Designated LIBOR Page, LIBOR for that Interest Determination Date will
be determined based on the rates on that Interest Determination Date at
approximately 11:00 a.m., London time, at which deposits on that date in the
Designated LIBOR Currency for the period of the specified Index Maturity are
offered to prime banks in the London interbank market by four major banks in
that market selected by the calculation agent and in a principal amount of
not less than $1,000,000 (or its foreign currency equivalent) that in the
calculation agent's judgment is representative for a single transaction in
the Designated LIBOR
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Currency in such market at such time (a "Representative Amount"). The
offered rates must begin on the second London Business Day immediately after
the Interest Determination Date (or if pounds sterling is the Designated
LIBOR Currency, commencing on such Interest Determination Date or, if euro
is the Designated LIBOR Currency, beginning on the second TARGET Settlement
Day immediately after such date).
The calculation agent will request the principal London office of each of
these banks to quote its rate. If the calculation agent receives at least
two quotations, LIBOR will be the average of those quotations.
(b) If the calculation agent receives fewer than two quotations, LIBOR will
be the average of the rates quoted at approximately 11:00 a.m., New York
City time, on the Interest Determination Date by three major banks in the
Principal Financial Center selected by the calculation agent. The rates
will be for loans in the Designated LIBOR Currency to leading European
banks having the specified Index Maturity beginning on the second London
Business Day after that date (or, if pounds sterling is the Designated
LIBOR Currency, commencing on such date or, if euro is the Designated
LIBOR Currency, beginning on the second TARGET Settlement Day immediately
after such date) and in a Representative Amount.
(c) If fewer than three banks provide quotes, the rate of interest on the
LIBOR notes will be the same as the rate of interest thereon in the prior
interest period.
PRIME RATE NOTES
Each Prime Rate note will bear interest at a specified rate that will be
reset periodically based on the Prime Rate and any Spread and/or Spread
Multiplier.
"Prime Rate" means, with respect to any Interest Determination Date, the
rate set forth on that Interest Determination Date in H.15(519) under the
heading "Bank Prime Loan".
The following procedures will apply if the rate cannot be set as described
above:
(a) If the rate is not published in H.15(519) by 3:00 p.m., New York City
time, on the Calculation Date, then the Prime Rate will be the rate as
published on such Interest Determination Date in H.15 Daily Update, or
such other recognized electronic source used for the purpose of
displaying such rate under the caption "Bank Prime Loan".
(b) If the rate is not published in H.15(519), H.15 Daily Update or another
recognized electronic source by 3:00 p.m., New York City time, on the
Calculation Date, then the Prime Rate will be the average (rounded
upwards, if necessary, to the next higher one-hundred thousandth of a
percentage point) of the rates publicly announced by each bank on the
Reuters Screen USPRIME1 Page as its prime rate or base lending rate for
that Interest Determination Date.
(c) If fewer than four, but more than one, rates appear on the Reuters
Screen USPRIME1 Page, the Prime Rate will be the average of the prime
rates (quoted on the basis of the actual number of days in the year
divided by a 360-day year) as of the close of business on the Interest
Determination Date by four major money center banks in The City of New
York selected by the calculation agent.
(d) If fewer than two rates appear, the Prime Rate will be determined based
on the rates furnished in The City of New York by the appropriate number
of substitute banks or trust companies organized and doing business under
the laws of the United States, or any State thereof, having total equity
capital of at least $500 million and being subject to supervision or
examination by a Federal or State authority, as selected by the
calculation agent.
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(e) If no banks are providing quotes, the rate of interest on the Prime Rate
notes will be the same as the rate of interest thereon for the prior
interest period.
TREASURY RATE NOTES
Each Treasury Rate note will bear interest at a specified rate that will be
reset periodically based on the Treasury Rate and any Spread and/or Spread
Multiplier.
"Treasury Rate" means, with respect to any Interest Determination Date, the
rate from the most recent auction of direct obligations of the United States
("Treasury bills") having the specified Index Maturity as it appears under the
caption "Investment Rate" on Telerate Page 56 or Telerate Page 57 (or any other
pages as may replace such pages on such service).
The following procedures will apply if the rate cannot be set as described
above:
(a) If, by 3:00 p.m., New York City time, on the Calculation Date for an
Interest Reset Period, Treasury bills of the specified Index Maturity
have been auctioned on an Interest Determination Date during that
Interest Reset Period, but the rate for such Interest Determination Date
does not appear on either Telerate Page 56 or Telerate Page 57, the rate
will be the Bond Equivalent Yield on such Interest Determination Date of
the rate for Treasury bills of the specified Index Maturity as set forth
in H.15 Daily Update, or such other recognized electronic source used for
the purpose of displaying such rate, for that day under the caption "U.S.
Government securities/Treasury bills/Auction high."
(b) If the rate cannot be set as described in (a) above by 3:00 p.m., New
York City time, on the Calculation Date, then the rate will be the Bond
Equivalent Yield on such Interest Determination Date of the auction rate
for Treasury bills of the specified Index Maturity as announced by the
U.S. Department of the Treasury.
(c) If the rate cannot be set as described in (b) above by 3:00 p.m., New
York City time, on the Calculation Date, then the rate will be the Bond
Equivalent Yield, on such Interest Determination Date, of the rate for
Treasury bills of the specified Index Maturity as set forth in H.15(519),
under the caption "U.S. Government securities/Treasury bills/Secondary
Market."
(d) If the rate cannot be set as described in (c) above by 3:00 p.m., New
York City time, on the Calculation Date, then the rate will be the Bond
Equivalent Yield, on such Interest Determination Date, of the rate for
Treasury bills of the specified Index Maturity as set forth in H.15 Daily
Update, or such other recognized electronic source used for the purpose
of displaying such rate, under the caption "U.S. Government
securities/Treasury bills/Secondary Market."
(e) If the rate cannot be set as described in (d) above by 3:00 p.m., New
York City time, on the Calculation Date, then the rate will be the
average of the secondary market bid rates as of approximately 3:30 p.m.,
New York City time, on the Interest Determination Date, of three leading
primary U.S. government securities dealers in The City of New York (which
may include an agent or its affiliates) selected by the calculation agent
for the issue of Treasury bills with the remaining maturity closest to
the specified Index Maturity.
(f) If the rate cannot be set as described in (e) above, then the rate of
interest on the Treasury Rate notes will be the same as the rate of
interest thereon in the prior interest period.
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INDEXED NOTES
We may offer indexed notes under which principal or interest is determined
by reference to an index related to:
(a) the rate of exchange between the specified currency for such note and
the Designated LIBOR Currency;
(b) the difference in the price of a specified commodity on specified dates;
(c) the difference in the level of a specified stock index, which may be
based on U.S. or foreign stocks, on specified dates; or
(d) any other objective price or economic measures described in the pricing
supplement.
We will describe the manner of determining principal and interest amounts in
the pricing supplement. We will also include historical and other information
regarding the index or indexes and information concerning tax consequences to
holders of indexed notes.
Interest payable on an indexed note will be based on the face amount of the
note. The pricing supplement will describe whether the principal payable upon
redemption or repayment prior to Maturity will be the face amount, the index
principal amount at the time of redemption or repayment or some other amount.
DUAL CURRENCY NOTES
We may offer dual currency notes under which we have the option to make all
payments in a currency that is different than the currency in which the notes
were issued. We can only exercise this option with respect to all dual currency
notes issued on the same day with the same terms.
The pricing supplement will include related tax information and will specify
the date on which we may exercise our option.
If we elect to exercise our option to make scheduled payments in the
alternate currency, we will notify you by mail within two Business Days. We will
not be able to withdraw such notice once it has been mailed to you.
Because of fluctuating exchange rates, you may receive less in interest
and/or principal in the alternate currency than you would if we made payments in
the notes' original currency. For further information regarding certain risks
inherent in notes denominated in currencies other than U.S. dollars, see "Risk
Factors" above.
RENEWABLE NOTES
We may issue renewable notes which will bear interest at a specified rate
that will be reset based on a base rate and any Spread and/or Spread Multiplier.
The maturity of a renewable note will be automatically extended for a twelve
month period on each maturity date unless you elect to terminate the automatic
extension. To terminate the automatic extension of your renewable note, you must
notify the trustee within the time frame specified in the pricing supplement.
You may choose to maintain the automatic extension provision for a portion of
your note so long as that portion equals at least $100,000 (or its foreign
currency equivalent). The maturity of the renewable notes cannot be extended
beyond the final maturity date specified in the pricing supplement. If you elect
to terminate the automatic extension of any portion of your renewable note, you
will receive payment of principal on that portion on an interest payment date
falling approximately six months after the date on which the note was scheduled
to be extended.
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You may revoke your election to terminate the automatic extension or any
portion of your renewable note if such portion equals at least $100,000 (or its
foreign currency equivalent). To revoke your election you must notify the
trustee prior to the fifteenth calendar day before the portion is scheduled to
mature. An election to terminate the automatic extension of a renewable note
will be binding on any subsequent holder of the note unless it is properly
revoked.
We may elect to redeem the total amount or a portion of a renewable note at
a redemption price of 100% of its principal amount plus accrued interest. If we
decide to redeem a renewable note we will notify you by first class mail at
least 30 calendar days but not more than 60 calendar days prior to the
redemption date.
We may also issue renewable notes under which the Spread and/or Spread
Multiplier is reset by a remarketing agent using remarketing procedures included
in the pricing supplement.
EXTENDIBLE NOTES
We may issue extendible fixed rate notes under which we have the option to
extend the notes' stated maturity date for one or more whole years up to a date
specified in the pricing supplement. If we elect to extend the notes, we must
notify the trustee at least 45 calendar days and not more than 60 calendar days
prior to the notes' original stated maturity date. The trustee will notify you
of our decision to extend the maturity of the notes by first class mail. The
notice will specify the notes' new maturity date, the interest rate applicable
to the extension period and any applicable redemption provisions.
We can increase the interest rate for the extension period by notifying the
trustee at any time prior to 10:00 a.m., New York City time, on the twentieth
calendar day before the extended notes are scheduled to mature. The trustee will
send you notice of the increase in interest rate in a manner agreed upon by us
and the trustee. We cannot revoke our election to increase the interest rate.
If we elect to extend the maturity of an extendible note, you have the
option to require us to repay such note on the maturity date then in effect at a
price equal to the principal amount of the note plus any accrued interest to
such date. To exercise this option you must notify the trustee at least 25
calendar days but not more than 60 calendar days prior to the date the notes are
scheduled to mature. You may notify the trustee either by delivering to the
trustee the note with the attached "Option to Elect Repayment" form completed,
or by delivering to the trustee a letter from a broker/dealer, bank or trust
company notifying the trustee of your intent to redeem your notes and
guaranteeing that you will deliver the note and the attached "Option to Elect
Repayment" form not later than five Business Days after the date set for
redemption. You may revoke your election to be repaid at any time before
3:00 p.m., New York City time, on the twentieth calendar day prior to the date
the notes are scheduled to mature.
AMORTIZING NOTES
We may offer amortizing notes. Unless otherwise specified in the applicable
pricing supplement, interest on an amortizing note will be computed on the basis
of a 360-day year of twelve 30-day months. Payments on amortizing notes will be
applied first to interest due and payable thereon and then to the reduction of
the unpaid principal amount. Further information about amortizing notes
including an amortization schedule will be included in the pricing supplement.
ORIGINAL ISSUE DISCOUNT NOTES
We may from time to time offer notes ("Original Issue Discount Notes") 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
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years to the maturity date. Original Issue 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 an Original
Issue Discount Note and par is referred to as the "Discount." In the event of
redemption, repayment or acceleration of maturity of an Original Issue Discount
Note, the amount payable to the holder of an Original Issue Discount Note will
be equal to the sum of:
- the issue price (increased by any accruals of Discount) and, in the event
of any redemption of the applicable Original Issue Discount Note, if
applicable, multiplied by the initial redemption percentage (as adjusted,
if applicable); and
- any unpaid interest accrued on the Original Issue Discount Note to the
date of the redemption, repayment or acceleration of maturity, as the case
may be.
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
an Original Issue Discount Note, a Discount will be accrued using a constant
yield method. The constant yield will be calculated using a 30-day month,
360-day year convention, a compounding period that, except for the Initial
Period (as defined below), corresponds to the shortest period between Interest
Payment Dates for the applicable Original Issue Discount Note (with ratable
accruals within a compounding period), a coupon rate equal to the initial coupon
rate applicable to the Original Issue Discount Note and an assumption that the
maturity of an Original Issue Discount Note will not be accelerated. If the
period from the date of issue to the first Interest Payment Date for an Original
Issue Discount Note (the "Initial Period") is shorter than the compounding
period for the Original Issue 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 the period will be divided into a
regular compounding period and a short period with the short period being
treated as provided in the preceding sentence. The accrual of the applicable
Discount may differ from the accrual of original issue discount for purposes of
the Internal Revenue Code of 1986, as amended, certain Original Issue Discount
Notes may not be treated as having original issue discount within the meaning of
the Code, and notes other than Original Issue Discount Notes may be treated as
issued with original issue discount for federal income tax purposes. See
"Certain United States Federal Income Tax Considerations."
OTHER PROVISIONS, ADDENDA
We may modify any provision of a note by using the section marked "Other
Provisions" or by providing an addendum to the note.
GLOSSARY
The following is a glossary of terms used in this section.
"Bond Equivalent Yield" means the rate for which is quoted on a bank
discount basis, a yield (expressed as a percentage) calculated in accordance
with the following formula:
<Table>
D X N
Bond Equivalent Yield = --------------- X 100
360 - (D X M)
</Table>
where "D" refers to the per annum rate for the security, quoted on a bank
discount basis and expressed as a decimal; "N" refers to 365 or 366, as the case
may be and "M" refers to the actual number of days in the period for which
interest is being calculated.
"Business Day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which commercial banks are authorized or
required by law, regulation or executive order to close in The City of New York;
provided, however, that, with respect to notes denominated in a foreign
currency, such day is also not a day on which commercial banks are authorized or
required by
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law, regulation or executive order to close in the Principal Financial Center of
the country issuing the specified currency (or, if the specified currency is
euro, such day is also a day on which the Trans-European Automated Real-Time
Gross Settlement Express Transfer (TARGET) System is open); provided, further,
that, with respect to LIBOR notes (other than those denominated in euro), such
day is also a London Business Day.
"Calculation Date" means the date by which the calculation agent calculates
an interest rate for a floating rate note, which will be in respect of any
Interest Determination Date, the earlier of (i) the tenth day after the Interest
Determination Date or, if such day is not a Business Day, the next Business Day,
or (ii) the Business Day immediately before the applicable interest payment date
or Maturity, as the case may be (except in the case of a LIBOR note where the
Calculation Date is the Interest Determination Date).
"Designated CMT Telerate Page" means the display on Telerate (or any
successor service) on the page designated in the applicable pricing supplement
(or any other page as may replace such page on such service. 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 LIBOR Currency" means the currency (including composite
currencies and euro) specified in the pricing supplement as to which LIBOR will
be calculated. If no such currency is specified in the pricing supplement, the
Designated LIBOR Currency will be U.S. dollars.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is specified in
the applicable pricing supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of major
banks for the applicable Designated LIBOR Currency, or (b) if "LIBOR Telerate"
is specified in the applicable pricing supplement or neither "LIBOR Reuters" nor
"LIBOR Telerate" is specified as the method for calculating LIBOR, the display
on Telerate (or any successor service) for the purpose of displaying the London
interbank rates of major banks for the applicable Designated LIBOR Currency.
"euro" means the lawful currency of the member states of the European Union
that adopt the single currency in accordance with the Treaty establishing the
European Communities, as amended.
"FHLB Index" means the monthly weighted average cost of funds paid by member
institutions of the Eleventh Federal Home Loan Bank District most recently
announced by the Federal Home Loan Bank.
"H.15(519)" means the publication entitled "Statistical Release H.15(519),
Selected Interest Rates", or any successor publication published by the Board of
Governors of the Federal Reserve System.
"H.15 Daily Update" means the daily update of H.15(519), available through
the world-wide-web site of the Board of Governors of the Federal Reserve System
at http://www.federalreserve.gov/releases/ h15/update, or any successor site or
publication.
"Index Maturity" for any note is the period of maturity of the instrument,
obligation or index from which the interest rate is calculated.
"Interest Determination Date" means
- with respect to the CD Rate, the Commercial Paper Rate, the Federal Funds
Rate, the Prime Rate and the CMT Rate, the second Business Day immediately
preceding the applicable Interest Reset Date;
- with respect to the Eleventh 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 publishes the FHLB
Index;
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- with respect to LIBOR, the second London Business Day immediately
preceding the applicable Interest Reset Date, unless the Index Currency is
(1) pounds sterling, in which case the "Interest Determination Date" will
be the applicable Interest Reset Date or (2) euro, in which case the
Interest Determination Date will be the second TARGET Settlement Date
preceding such 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 such Monday is a legal holiday, in which case
the auction is normally held on the immediately succeeding Tuesday
although such auction may be held on the preceding Friday); except that
(1) if an auction is held on Friday of the week preceding the applicable
Interest Reset Date, the "Interest Determination Date" will be such
preceding Friday and (2) if the Interest Determination Date would
otherwise fall on an Interest Reset Date, then such Interest Reset Date
will be postponed to the next succeeding Business Day; 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, with each interest rate basis
determined as of such date, and the applicable interest rate taking effect
on the applicable Interest Reset Date.
"IRS" means the United States Internal Revenue Service.
"London Business Day" means a day on which commercial banks are open for
business (including dealings in the Designated LIBOR Currency) in London.
"Money Market Yield" means a yield calculated in accordance with the
following formula:
<Table>
D X 360
Money Market Yield = --------------- X 100
360 - (D X M)
</Table>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the period for which accrued interest is being calculated.
"OID Regulations" means regulations issued by the United States Treasury
Department concerning the treatment of debt instruments issued with original
issue discount.
"Original Issue Discount Note" means any note that provides for an amount
less than the principal amount thereof to be due and payable upon a declaration
of acceleration of the maturity thereof pursuant to the indenture.
"Principal Financial Center" means (1) the capital city of the country
issuing the currency in which the notes are denominated or (2) the capital city
of the country to which the Designated LIBOR
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Currency relates, as applicable, except, in the case of (1) or (2) above, that
with respect to the following currencies, the "Principal Financial Center" will
be as indicated below:
<Table>
<Caption>
CURRENCY PRINCIPAL FINANCIAL CENTER
- ------------------------------------- ----------------------------------------------------
United States dollars................ The City of New York
Australian dollars................... Sydney and, if Australian dollars is the currency in
which the notes are denominated, Melbourne
Canadian dollars..................... Toronto
South African rand................... Johannesburg
Swiss francs......................... Zurich
euro................................. London
</Table>
"Reuters Screen PRIME 1 Page" means the display on the Reuter Monitor Money
Rates Service (or any successor service) on the "US PRIME 1" page (or such other
page as may replace the US PRIME 1 page on such service) for the purpose of
displaying prime rates or base lending rates of major United States banks.
"Spread" means the number of basis points (one basis point equals
one-hundredth of a percentage point) to be added to or subtracted from the
interest rate of a floating rate note.
"Spread Multiplier" means the percentage of the interest rate that may be
specified in the applicable pricing supplement by which the interest rate or a
floating rate note will be multiplied.
"TARGET Settlement Date" means any day on which the Trans-European Automated
Real-Time Gross Settlement Express Transfer (TARGET) System is open.
"Telerate" means Bridge Telerate, Inc. (or any successor service).
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the principal United States federal income tax
considerations that may be relevant to you. This summary is based on the
Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed
Treasury regulations and administrative pronouncements and judicial decisions,
all of which may change after the date of this prospectus supplement. This
summary assumes that you will acquire notes on original issue and hold them as
capital assets. It does not discuss all of the United States federal income tax
considerations that may be relevant to holders that may be subject to special
tax rules, such as certain financial institutions, insurance companies, dealers
in securities or foreign currencies, U.S. holders whose "functional currency" is
not the U.S. dollar, persons holding notes in connection with a hedging
transaction, a "straddle" transaction, conversion transaction or other
integrated transaction, traders in securities that elect to mark to market,
holders liable for alternative minimum tax or persons who have ceased to be
United States citizens or to be taxed as resident aliens. Furthermore, there can
be no assurance that the IRS will not take a contrary view, and no ruling from
the IRS has been or will be sought.
YOU SHOULD CONSULT YOUR TAX ADVISOR ABOUT THE TAX CONSEQUENCES OF ACQUIRING,
HOLDING OR DISPOSING OF NOTES, INCLUDING THE APPLICATION OF THE UNITED STATES
FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION AS WELL AS ANY TAX
CONSIDERATIONS ARISING UNDER ANY STATE, LOCAL, FOREIGN OR OTHER TAX LAW.
As used in this discussion, a U.S. holder means a beneficial owner of a note
that is for United States federal income tax purposes:
- an individual 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 of any state thereof, or the
District of Columbia;
- an estate the income of which is subject to United States federal income
taxation regardless of its source;
- a trust if (i) a court within the United States is able to exercise
primary supervision over the administration of the trust and (ii) one or
more United States persons have the authority to control all substantial
decisions of the trust; or
- certain trusts in existence on August 20, 1996, and treated as United
States persons prior to such date, that elect to continue to be treated as
United States persons.
A non-U.S. holder means a beneficial owner of notes that is not a U.S. holder.
PAYMENTS OF INTEREST
Payments of interest on a note generally will be taxable to a U.S. holder as
ordinary income at the time such holder accrues or receives such payments (in
accordance with the holder's method of tax accounting). Under the OID
Regulations, interest on a note that matures one year or less from the date it
is issued will be taxed as described below under "Original Issue Discount
Notes." Special rules concerning the payment of interest on Original Issue
Discount Notes, certain floating rate notes and foreign currency notes, are
described under "Original Issue Discount Notes" and "Foreign Currency Notes"
below.
SALE, RETIREMENT OR OTHER TAXABLE DISPOSITION OF NOTES
Upon the sale, retirement or other taxable disposition of a note, a U.S.
holder will recognize taxable gain or loss equal to the difference between the
amount realized on the transaction and the holder's adjusted tax basis in the
note. The amount realized does not include any amount attributable to accrued
interest on the note that have not previously been included in income. Such
amounts will
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instead be treated as interest as described under "Payments of Interest" above.
A U.S. holder's adjusted tax basis in a note will equal the cost of the note to
such holder, increased by the amounts of any original issue discount previously
included in income by the holder with respect to such note, and reduced by any
amortized premium and any principal payments received by the holder and, in the
case of an Original Issue Discount Note, by the amounts of any payments that do
not constitute qualified stated interest (as defined below).
Subject to the discussion regarding "Foreign Currency Notes" below, gain or
loss realized by a U.S. holder on the sale, exchange or retirement of a note
will be capital gain or loss (except to the extent of any original issue
discount not previously included in the holder's taxable income), and will be
long-term capital gain or loss if at the time of the transaction, the note has
been held for more than one year. Long term capital gain will be taxed at a rate
not to exceed 20% in the hands of a non-corporate U.S. holder, whereas capital
gain recognized by a non-corporate holder from sale, retirement or other taxable
disposition of a note held for one year or less generally will be subject to tax
at ordinary income tax rates. Capital gains recognized by a corporate U.S.
holder will be subject to tax at the ordinary income tax rates regardless of
such corporation's holding period. The distinction between capital gain or loss
and ordinary income or loss is also relevant for purposes of, among other
things, limitations on the deductibility of capital losses.
ORIGINAL ISSUE DISCOUNT NOTES
For United States federal income tax purposes, original issue discount is
the excess of the "stated redemption price" at maturity of a note over its
"issue price," if such excess equals or exceeds a DE MINIMIS amount (generally
1/4 of 1% of the note's stated redemption price at maturity multiplied by the
number of complete years to its maturity from its issue date or, in the case of
a note providing for a payment of any amount other than qualified stated
interest prior to maturity, multiplied by the weighted average maturity of such
note). The issue price of each note in an issue of notes equals the first price
at which a substantial amount of such notes has been sold (ignoring sales to
bond houses, brokers, or similar persons or organizations acting in the capacity
of underwriters, placement agents or wholesalers). The stated redemption price
at maturity of a note is the sum of all payments provided by the note other than
"qualified stated interest payments."
The term "qualified stated interest" generally means stated interest that is
unconditionally payable in cash or property (other than debt instruments of the
issuer) at least annually at a single fixed rate or, as described below, certain
floating rates. If, however, a note bears interest for one or more accrual
periods at a rate below the rate applicable for the remaining term of such note
(E.G., notes with teaser rates or interest holidays) and neither the resulting
foregone interest on such note nor any discount created by the note's stated
principal amount being in excess of its issue price equals or exceeds the DE
MINIMIS amount described above, then the stated interest on the note will be
treated as qualified stated interest. Holders of a note having DE MINIMIS
original issue discount generally must include a proportionate amount of each
payment of stated principal in income as gain realized on retirement of the
note.
Payments of qualified stated interest on a note are taxable to a holder as
ordinary interest income at the time the holder accrues or receives such
payments (in accordance with the holder's regular method of tax accounting). A
U.S. holder of a note issued with original issue discount must include original
issue discount in income as ordinary interest for United States federal income
tax purposes as it accrues under a constant yield method in advance of receipt
of the cash payments attributable to such income, regardless of such holder's
regular method of tax accounting. In general, the amount of original issue
discount included in income by the U.S. holder of a note issued with original
issue discount is the sum of the daily portions of original issue discount with
respect to such note for each day during the taxable year (or portion of the
taxable year) in which such holder held such note. The "daily portion" of
original issue discount on any note issued with original issue discount is
determined
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by allocating to each day in any accrual period a ratable portion of the
original issue discount allocable to that accrual period. An accrual period may
be of any length and the accrual period may vary in length over the term of the
note, provided that each accrual period is no longer than one year and each
scheduled payment of principal or interest occurs either on the final day of an
accrual period or on the first day of an accrual period. The amount of original
issue discount allocable to each accrual period is generally equal to the
difference between:
- the product of the note's adjusted issue price at the beginning of such
accrual period and its yield to maturity (determined on the basis of
compounding at the close of each accrual period and appropriately adjusted
to take into account the length of the particular accrual period), and
- the amount of any qualified stated interest payments allocable to such
accrual period.
The "adjusted issue price" of a note issued with original issue discount at
the beginning of any accrual period is the sum of the issue price of the note
plus the amount of original issue discount allocable to all prior accrual
periods minus the amount of any prior payments on the note that were not
qualified stated interest payments. Under these rules, U.S. holders generally
will have to include in income increasingly greater amounts of original issue
discount in successive accrual periods if there is no payment made with respect
to the note until maturity.
A U.S. holder who purchases a note for an amount that is greater than its
adjusted issue price as of the purchase date but less than or equal to the sum
of all amounts payable on the note issued with original issue discount after the
purchase date other than payments of qualified stated interest will be
considered to have purchased the note at an "acquisition premium." Under the
acquisition premium rules, the amount of original issue discount which such U.S.
holder must include in its gross income with respect to such Original Issue
Discount Note for any taxable year (or portion thereof in which the holder holds
the note) will be reduced (but not below zero) by the portion of the acquisition
premium properly allocable to the period.
Under the OID Regulations, floating rate notes are subject to special rules
whereby a floating rate note will qualify as a variable rate debt instrument if:
(a) its issue price does not exceed the total non-contingent principal
payments due under the floating rate note by more than a specified DE
MINIMIS amount, and
(b) it provides for stated interest, paid or compounded at least annually,
at current values of:
(1) one or more "qualified floating rates,"
(2) a single fixed rate and one or more qualified floating rates,
(3) a "single objective rate," or
(4) a single fixed rate and a single objective rate that is a "qualified
inverse floating rate."
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
floating rate note is denominated. Although a multiple of a qualified floating
rate will generally not itself constitute a qualified floating rate, a variable
rate equal to the product of a qualified floating rate and a fixed multiple that
is greater than 0.65 but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than 0.65 but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the floating rate note (E.G., two or more qualified floating rates with
values within 25 basis points of each other as determined on the floating rate
note's issue date) will be treated as a single qualified floating rate.
Notwithstanding the foregoing, a variable rate that would otherwise
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constitute a qualified floating rate but which is subject to one or more
restrictions such as a maximum stated interest rate (I.E., a cap), a minimum
stated interest rate (I.E., a floor) or an interest rate governor may, under
certain circumstances, fail to be treated as a qualified floating rate under the
OID Regulations unless such cap, floor or governor is fixed throughout the term
of the note or certain other conditions are met.
An "objective rate" is a rate (other than a qualified floating rate) that is
determined using a single fixed formula and that is based upon objective
financial or economic information (other than information that is within the
control of or unique to the circumstances of the issuer or a related party). The
OID Regulations also provide that other variable interest rates may be treated
as objective rates if so designated by the IRS in the future. Despite the
foregoing, a variable rate of interest on a floating rate note will not
constitute an objective rate if it is reasonably expected that the average value
of such rate during the first half of the floating rate 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 floating rate note's term.
A "qualified inverse floating rate" is any objective rate where such rate is
equal to a fixed rate minus a qualified floating rate, as long as variations in
the rate can reasonably be expected to inversely reflect contemporaneous
variations in the qualified floating rate. The OID Regulations also provide that
if a floating rate note provides for stated interest at a fixed rate for an
initial period of less than one year followed by a variable rate that is either
a qualified floating rate or an objective rate and if the variable rate on the
floating rate note's issue date is intended to approximate the fixed rate (e.g.,
the value of the variable rate on the issue date does not differ from the value
of the fixed rate by more than 25 basis points), then the fixed rate and the
variable rate together will constitute either a single qualified floating rate
or objective rate, as the case may be.
If a floating rate note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations, then
any stated interest on such note which is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually will
constitute qualified stated interest and will be taxed accordingly. Thus, a
floating rate note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
and that qualifies as a "variable rate debt instrument" under the OID
Regulations will generally not be treated as having been issued with original
issue discount unless the floating rate note is issued at a "true" discount
(I.E., at a price below the note's stated principal amount) in excess of a
specified DE MINIMIS amount. Original issue discount on such a floating rate
note arising from "true" discount is allocated to an accrual period using the
constant yield method described above by assuming that the variable rate is a
fixed rate equal to:
- in the case of a qualified floating rate or qualified inverse floating
rate, the value as of the issue date, of the qualified floating rate or
qualified inverse floating rate, or
- in the case of an objective rate (other than a qualified inverse floating
rate), a fixed rate that reflects the yield that is reasonably expected
for the floating rate note.
The qualified stated interest allocable to an accrual period is increased (or
decreased) if the interest actually paid during an accrual period exceeds (or is
less than) the interest assumed to be paid during the accrual period pursuant to
the foregoing rules.
In general, any other floating rate note that qualifies as a "variable rate
debt instrument" will be converted into an "equivalent" fixed rate debt
instrument for purposes of determining the amount and accrual of original issue
discount and qualified stated interest on the floating rate note. The OID
Regulations generally require that such a floating rate note be converted into
an "equivalent" fixed rate debt instrument by substituting any qualified
floating rate or qualified inverse floating rate provided for
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under the terms of the floating rate note with a fixed rate equal to the value
of the qualified floating rate or qualified inverse floating rate, as the case
may be, as of the floating rate note's issue date. Any objective rate (other
than a qualified inverse floating rate) provided for under the terms of the
floating rate note is converted into a fixed rate that reflects the yield that
is reasonably expected for the floating rate note.
In the case of a floating rate note that qualifies as a "variable rate debt
instrument" and provides for stated interest at a fixed rate (which is not a
fixed rate only applicable during the initial period of less than one year as
discussed above) in addition to either one or more qualified floating rates or a
qualified inverse floating rate, the fixed rate is initially converted into a
qualified floating rate (or a qualified inverse floating rate, if the floating
rate note provides for a qualified inverse floating rate). Under such
circumstances, the qualified floating rate or qualified inverse floating rate
that replaces the fixed rate must be such that the fair market value of the
floating rate note as of the floating rate note's issue date is approximately
the same as the fair market value of an otherwise identical debt instrument that
provides for either the qualified floating rate or qualified inverse floating
rate rather than the fixed rate. Subsequent to converting the fixed rate into
either a qualified floating rate or a qualified inverse floating rate, the
floating rate note is then converted into an "equivalent" fixed rate debt
instrument in the manner described above.
Once the floating rate note is converted into an "equivalent" fixed rate
debt instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S. holder
of the floating rate note will account for such original issue discount and
qualified stated interest as if the holder held the "equivalent" fixed rate debt
instrument. Each accrual period appropriate adjustments will be made to the
amount of qualified stated interest or original issue discount assumed to have
been accrued or paid with respect to the "equivalent" fixed rate debt instrument
in the event that such amounts differ from the actual amount of interest accrued
or paid on the floating rate note during the accrual period.
If a floating rate note does not qualify as a "variable rate debt
instrument" under the OID Regulations, then the floating rate note would be
treated as a contingent payment debt instrument ("CPDI"). In general, the CPDI
regulations would cause the timing and character of income, gain or loss
reported on a contingent payment debt instrument to substantially differ from
the timing and character of income, gain or loss under general principles of
current United States federal income tax law. Specifically, the CPDI regulations
would generally require a U.S. holder of such an instrument to include future
contingent and non-contingent interest payments in income as such interest
accrues based upon a projected payment schedule. Moreover, in general, under the
CPDI regulations, any gain recognized by a U.S. holder on the sale, retirement
or other taxable disposition 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). IF YOU ARE A U.S. HOLDER AND PLAN TO PURCHASE INDEXED NOTES OR
FLOATING RATE NOTES PROVIDING FOR CONTINGENT PAYMENTS, YOU SHOULD REVIEW THE
DISCUSSION REGARDING TAXATION IN THE PRICING SUPPLEMENT AND YOU SHOULD CONSULT
YOUR TAX ADVISER ABOUT THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF
PURCHASING, OWNING AND DISPOSING OF SUCH NOTES.
Certain of the notes (a) may be redeemable at our option prior to their
stated maturity (a "call"), and/or (b) may be repayable at the option of the
holder prior to their stated maturity (a "put"). Notes containing such features
may be subject to special rules. IF YOU INTEND TO PURCHASE NOTES WITH THESE
FEATURES YOU SHOULD CONSULT YOUR TAX ADVISOR, SINCE THE ORIGINAL ISSUE DISCOUNT
CONSEQUENCES WILL DEPEND, IN PART, ON THE PARTICULAR TERMS AND FEATURES OF THE
NOTES YOU BUY.
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If you are a U.S. holder, you can generally elect to include in income all
interest (including stated interest, acquisition discount, original issue
discount and DE MINIMIS original issue discount), as adjusted by any amortizable
bond premium that accrues on a note by using the constant yield method
applicable to original issue discount subject to certain limitations and
exceptions. If you make such an election, you may be deemed to have made the
elections described below in "Acquisition Premium."
SHORT-TERM NOTES
Short-term notes will be treated as having been issued with original issue
discount. All payments of interest on a short-term note will be included in the
stated redemption price at maturity of the notes. In general, a U.S. holder of a
short-term note that uses the cash method of tax accounting is not required to
accrue original issue discount unless the holder elects to do so. If such
election is not made, any gain recognized by the holder on the sale, maturity or
other taxable disposition of the short-term note will be ordinary income to the
extent of the original issue discount accrued on a straight-line basis, or upon
election, under the constant yield method (based on daily compounding), reduced
by any interest received, through the date of sale or maturity, and a portion of
the deductions otherwise allowable to the holder for any interest on borrowings
allocable to the short-term note will be deferred until a corresponding amount
of income is realized. U.S. holders who report income for federal income tax
purposes under the accrual method, and certain other holders including banks and
dealers in securities, are required to accrue original issue discount on a
short-term note on a straight-line basis unless an election is made to accrue
the original issue discount under a constant yield method (based on daily
compounding).
ACQUISITION PREMIUM
If a U.S. holder purchases a note for an amount that is greater than the
amount payable at maturity, the holder will be considered to have purchased the
note with "amortizable bond premium" equal in amount to such excess, and may
elect to amortize such premium over the remaining term of the note, based on the
holder's yield to maturity with respect to the note as determined under the bond
premium rules. A U.S. holder may generally use the amortizable bond premium
allocable to an accrual period to offset qualified stated interest required to
be included in the holder's income with respect to the note in that accrual
period. Moreover, where the amortizable bond premium allocable to an accrual
period exceeds the amount of qualified stated interest allocable to such accrual
period, such excess would be allowed as a deduction for such accrual period, but
only to the extent of the U.S. holder's prior interest inclusions on the note.
Any excess is generally carried forward and allocable to the next accrual
period. A holder who elects to amortize bond premium must reduce his tax basis
in the note as described above under "Sale, Retirement or Other Taxable
Disposition of Notes". An election to amortize bond premium applies to all
taxable debt obligations held by the U.S. holder at the beginning of the first
taxable year to which the election applies or thereafter acquired and may be
revoked only with consent of the IRS.
FOREIGN CURRENCY NOTES
A U.S. holder who uses the cash method of accounting for United States
federal income tax purposes and who receives a payment of interest with respect
to a foreign currency note (other than a note issued with original issue
discount (except to the extent any qualified stated interest is received)) will
be required to include in income the U.S. dollar value of the foreign currency
payment (determined on the date such payment is received) regardless of whether
the payment in fact is converted to U.S. dollars at that time. The U.S. dollar
value will be the U.S. holder's tax basis in the foreign currency.
A U.S. holder who uses the accrual method of accounting for United States
federal income tax purposes, or who otherwise is required to accrue interest
prior to receipt, will be required to include in
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income the U.S. dollar value of the amount of interest income (including
original issue discount or market discount and reduced by amortizable bond
premium or acquisition premium to the extent applicable) that is required to be
accrued with respect to a foreign currency note while the U.S. holder owns the
note. The U.S. dollar value of such accrued income generally will be determined
by translating such income at the average rate of exchange for the accrual
period or, with respect to an accrual period that spans two taxable years, at
the average rate for the partial period within the taxable year. A U.S. holder
may also elect to translate accrued interest income using the rate of exchange
of the last day of the accrual period or, with respect to an accrual period that
spans two taxable years, using the rate of exchange on the last day of the
taxable year. If the last day of an accrual period is within five Business Days
of the date of receipt of the accrued interest, a U.S. holder may translate such
interest using the rate of exchange on the date of receipt. The above election
will apply to all other debt obligations held by the holder and may not be
changed without the consent of the IRS. U.S. holders should consult their own
tax advisors before making the above election. A U.S. holder will recognize
exchange gain or loss (which will be treated as ordinary income or loss) with
respect to accrued interest income on the date the holder receives such income.
The amount of ordinary income or loss recognized will equal the difference, if
any, between the U.S. dollar value of the foreign currency payment received
(determined on the date such payment is received) in respect of such accrual
period and the U.S. dollar value of interest income that has accrued during such
accrual period (as determined above).
With respect to a foreign currency note issued with amortizable bond
premium, such premium is determined in the relevant foreign currency and reduces
interest income in units of the foreign currency. Although not entirely clear, a
U.S. holder should recognize exchange gain or loss equal to the difference
between the U.S. dollar value of the bond premium amortized with respect to a
period, determined on the date the interest attributable to such period is
received, and the U.S. dollar value of the bond premium determined on the date
of the acquisition of the foreign currency note.
A U.S. holder who purchases a foreign currency note with previously owned
foreign currency will recognize ordinary income or loss in an amount equal to
the difference, if any, between such holder's tax basis in the foreign currency
and the U.S. dollar fair market value of the foreign currency used to purchase
the foreign currency note, determined on the date of purchase.
Upon the sale, retirement or other taxable disposition of a foreign currency
note, a U.S. holder will recognize taxable gain or loss equal to the difference
between the amount realized on the sale, retirement or other taxable disposition
and such holder's adjusted tax basis in the foreign currency note. Such gain or
loss generally will be capital gain or loss (except with respect to short-term
notes, and except to the extent of any foreign currency exchange gain or loss),
and will be long-term capital gain or loss if at the time of sale, retirement,
or other taxable disposition, the foreign currency note has been held by such
U.S. holder for more than one year. To the extent the amount realized represents
accrued but unpaid interest, however, such amounts must be taken into account as
interest income, with exchange gain or loss computed as described in the above
discussion relating to payments of interest on foreign currency notes. If a U.S.
holder receives foreign currency on such a sale, retirement or other taxable
disposition, the amount realized will be based on the U.S. dollar value of the
foreign currency on (i) the date of the receipt of the foreign currency in the
case of a cash basis U.S. holder, and (ii) the date of disposition in the case
of an accrual basis U.S. holder. In the case of a note that is denominated in a
foreign currency and is traded on an established securities market, a cash basis
U.S. holder (or, upon election, an accrual basis U.S. holder) will determine the
U.S. dollar value of the amount realized by translating the foreign currency
payment at the spot rate of exchange on the settlement date of the sale. An
accrual basis taxpayer making such an election must apply it consistently and
cannot change such election without consent of the IRS. A U.S. holder's adjusted
tax basis in a foreign currency note will equal the cost of the foreign currency
note to such holder, increased by the amounts of any original issue discount
previously included in income by the holder
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with respect to such foreign currency note and reduced by any amortized
acquisition premium and any principal payments received by the holder. A U.S.
holder's tax basis in a foreign currency note, and the amount of any subsequent
adjustments to such holder's tax basis, will be the U.S. dollar value of the
foreign currency amount paid for such foreign currency note, or of the foreign
currency amount of the adjustment, determined on the date of such purchase or
adjustment.
Gain or loss realized upon the sale, retirement or other taxable disposition
of a foreign currency note that is attributable to fluctuations in currency
exchange rates will be ordinary income or loss which will not be treated as
interest income or expense. Gain or loss attributable to fluctuations in
exchange rates will equal the difference between:
- the U.S. dollar value of the foreign currency principal amount of the
foreign currency note, and any payment with respect to accrued interest,
determined on the date such payment is received or the foreign currency
note is disposed of, and
- the U.S. dollar value of the foreign currency principal amount of the
foreign currency note, determined on the date the U.S. holder acquired the
note, and the U.S. dollar value of the accrued interest received,
determined by translating such interest at the exchange rate applicable to
the holder of the note for the accrual period.
Such foreign currency gain or loss will be recognized only to the extent of the
total gain or loss realized by the U.S. holder on the sale, retirement or other
taxable disposition of the foreign currency note. The source of such foreign
currency gain or loss will be determined by reference to the residence of the
U.S. holder or the "qualified business unit" of the U.S. holder on whose books
the note is properly reflected. Any gain or loss realized by the U.S. holder in
excess of such foreign currency gain or loss will generally be capital gain or
loss (except, in the case of a short-term note, to the extent of any original
issue discount not previously included in the holder's income).
A U.S. holder will have a tax basis in any foreign currency received as
interest or on the sale, retirement or other taxable disposition of a foreign
currency note equal to the U.S. dollar value of such foreign currency,
determined at the time such interest is received or at the time of the sale,
retirement or other taxable disposition. 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 foreign currency notes) will be
ordinary income or loss.
CERTAIN OTHER NOTES
The United States federal income tax consequences to a holder of the
ownership and disposition of indexed notes, dual currency notes, amortizing
notes, renewable notes, and extendible notes may vary depending upon the exact
terms of the notes and such consequences are not described herein. If you plan
to purchase these types of notes you should refer to the tax information
included in the pricing supplement for additional information and consult your
tax advisors as to the particular tax consequences of the purchase, ownership
and disposition of the notes.
BACKUP WITHHOLDING
Certain noncorporate U.S. holders may be subject to backup withholding at a
rate of 31% on payments of principal and interest (including original issue
discount, if any) on, and the proceeds of disposition of, a Note. Backup
withholding will apply only if the holder:
- fails to furnish its taxpayer identification number, which, for an
individual, is his Social Security number;
- furnishes an incorrect tax identification number;
- is notified by the IRS that it has failed to properly report payments of
interest; or
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- under certain circumstances, fails to certify, under penalties of perjury,
that the holder has furnished a correct tax identification number and that
the holder has not been notified by the IRS that it is subject to backup
withholding for failure to report interest payments.
YOU SHOULD CONSULT YOUR TAX ADVISER REGARDING YOUR ABILITY TO QUALIFY FOR AN
EXEMPTION FROM BACKUP WITHHOLDING AND THE PROCEDURE FOR OBTAINING SUCH AN
EXEMPTION.
In addition, upon the sale of a note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either:
- the broker determines that the seller is a corporation or other exempt
recipient; or
- the seller provides, in the required manner, certain identifying
information.
Such a sale must also be reported by the broker to the IRS, unless the broker
determines that the seller is an exempt recipient.
Any amounts withheld under the backup withholding rules from a payment to a
U. S. holder would be allowed as a refund or a credit against such U.S. holder's
United States federal income tax provided the required information is furnished
to the IRS.
NON-U.S. HOLDERS
Under present United States federal tax law, and subject to the discussion
below concerning backup withholding:
(a) Payments of interest (including original issue discount, if any) on
notes by us or our paying agent to any holder that is a non-U.S. holder
will be exempt from the United States federal income or withholding tax
(unless the non-U.S. holder is engaged in a trade or business in the
United States, as discussed below), provided that (i) such holder does
not own, actually or constructively, 10% or more of the total capital or
profits interests in us, is not a controlled foreign corporation related,
directly or indirectly, to us through stock ownership, and is not a bank
receiving interest described in Section 881(c)(3)(A) of the Code and
(ii) the statement requirement set forth in Section 871(h) or
Section 881(c) of the Code has been fulfilled with respect to the
beneficial owner, as discussed below. If this exemption does not apply,
the interest generally will be subject to a 30% withholding tax, unless
reduced or eliminated by an applicable treaty. In addition, if this
exemption does not apply, a non-U.S. holder may be subject to United
States federal income tax as described below.
(b) A non-U.S. holder of a note will not be subject to United States federal
income tax on gain realized on the sale, exchange or other disposition of
such note, unless (1) such holder is an individual who is present in the
United States for 183 days or more in the taxable year of the
disposition, and either the gain is attributable to an office or other
fixed place of business maintained by such individual in the United
States, or, generally, such individual has a "tax home" in the United
States, or (2) such gain is effectively connected with the holder's
conduct of a trade or business in the United States.
(c) A note held by an individual who is not, for United States estate tax
purposes, a resident or citizen of the United States at the time of his
death generally will not be subject to United States federal estate tax
as a result of such individual's death, provided that the individual does
not own, actually or constructively, 10% or more of the total combined
voting power of all classes of our stock entitled to vote and, at the
time of such individual's death, payments with respect to such note would
not have been effectively connected to the conduct by such individual of
a trade or business in the United States.
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The rules described in subparagraphs (a) and (c) above will not apply to
contingent interest if the amount of such interest is described in
Section 871(h)(4) of the Code (generally, interest determined with reference to
the profitability or similar indicia of our financial performance or the
financial performance of a related person).
The certification requirement referred to in subparagraph (a) will be
fulfilled if the beneficial owner of a note certifies on an IRS Form W-8BEN (or
a substantially similar form), under penalties of perjury, that it is not a
United States person and provides its name and address and (1) such beneficial
owner files such Form W-8BEN (or successor form) with the withholding agent, or
(2) in the case of a note held by a securities clearing organization, bank or
other financial institution holding customers' securities in the ordinary course
of its trade or business holding the note on behalf of the beneficial owner,
such financial institution files with the withholding agent a statement that it
has received the Form W-8BEN (or successor form) from the holder and furnishes
the withholding agent with a copy thereof. The non-U.S. holder must inform the
withholding agent of any change in the information on the statement within
30 days of such change.
If a non-U.S. holder of a note is engaged in a trade or business in the
United States, and if interest (including original issue discount) on the note
(or gain realized on its sale, exchange or other disposition) is effectively
connected with the conduct of such trade or business, the non-U.S. holder,
although exempt from the withholding tax discussed in the preceding paragraphs,
will generally be subject to regular United States federal income tax on such
effectively connected income in the same manner as if it were a U.S. holder. In
lieu of the certificate described in the preceding paragraph, such a holder will
be required to provide to the withholding agent a properly executed IRS
Form W-8ECI (or a substantially similar form) to claim an exemption from the
withholding tax. In addition, if such non-U.S. holder is a foreign corporation,
it may be subject to a 30% branch profits tax (unless reduced or eliminated by
an applicable treaty) on its earnings and profits for the taxable year
attributable to such effectively connected income, subject to certain
adjustments.
IF YOU ARE A NON-U.S. HOLDER YOU SHOULD CONSULT YOUR TAX ADVISOR REGARDING
THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES, INCLUDING STATE AND LOCAL TAX
CONSEQUENCES, SUCH AS THE APPLICATION OF INFORMATION REPORTING AND BACKUP
WITHHOLDING TO YOUR PARTICULAR SITUATION, THE AVAILABILITY OF AN EXEMPTION
THEREFROM, AND THE PROCEDURE FOR OBTAINING SUCH AN EXEMPTION, IF AVAILABLE.
Any amounts withheld from a payment to a non-U.S. holder under the backup
withholding rules will be allowed as a credit against such holder's United
States federal income tax liability and may entitle such holder to a refund,
provided that the required information is furnished to the IRS.
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SUPPLEMENTAL PLAN OF DISTRIBUTION
GENERAL
We are offering the notes on a continuous basis through agents that have
agreed to use their reasonable best efforts to solicit orders. We have the right
to accept orders or reject proposed purchases in whole or in part. The agents
also have the right, using their reasonable discretion, to reject any proposed
purchase of the notes in whole or in part. We generally will pay an agent a
commission ranging from .125% to .750% of the principal amount of notes they
sell. The exact commission paid will be determined by the stated maturity of the
notes sold. With respect to notes with stated maturities in excess of 30 years
that are sold through the agents, we will negotiate the commission at the time
of the related sale. We estimate our expenses incurred in connection with the
offering and sale of the notes, including reimbursement of certain of the
agents' expenses, will total approximately $50,000.
We may arrange for notes to be sold through any agent or may sell notes
directly to investors. If we sell notes directly to investors, no commission or
discount will be paid. We also may sell notes to any agent as principal for the
agent's account at a price agreed upon at the time of sale. These notes may be
resold by the agent to investors at a fixed public offering price or at
prevailing market prices or at a related price, as determined by the agent.
Unless otherwise specified in the pricing supplement, any note sold to an agent
as principal will be purchased at a price equal to 100% of the principal amount
minus a discount equal to the commission that would be paid on an agency sale of
a note of identical maturity.
Agents may sell notes purchased from us as principal to other dealers for
resale to investors and other purchasers and may provide any portion of the
discount received in connection with their purchase from us to such dealers.
After the initial public offering of the notes, the public offering price, the
concession and the discount may be changed.
The notes will not have an established trading market when issued. Also, the
notes will not be listed on any securities exchange. The agents may make a
market in the notes, but are not obligated to do so and may discontinue any
market-making at any time without notice. We cannot assure you that a secondary
market for any notes will develop or that any notes will be sold.
In connection with the offering of notes, the agents may engage in certain
transactions that stabilize the price of notes. Such transactions may consist of
bids or purchases for the purpose of pegging, fixing or maintaining the price of
notes. If the agents create a short position in notes, I.E., if they sell notes
in an aggregate principal amount exceeding that set forth in the applicable
pricing supplement, the agents may reduce that short position by purchasing
notes in the open market. In general, purchases of notes for the purpose of
stabilization or to reduce a short position could cause the price of notes to be
higher than it might be in the absence of such purchases.
Neither we nor any of the agents makes any representation or prediction as
to the direction or magnitude of any effect that the transactions described in
the immediately preceding paragraph may have on the price of notes. In addition,
neither we nor any of the agents makes any representation that the agents will
engage in any such transactions or that such transactions, once commenced, will
not be discontinued without notice.
The agents may be deemed to be "underwriters" within the meaning of the
Securities Act. We have agreed to indemnify the agents against certain
liabilities, including liabilities under the Securities Act, or if
indemnification is not allowed, to contribute to payments that they may be
required to make because of those liabilities.
We are offering the notes through the following agents: Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Banc One Capital Markets, Inc.,
J.P. Morgan Securities Inc., Credit Suisse First Boston,
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Deutsche Banc Alex. Brown Inc., Goldman Sachs & Co. and UBS Warburg LLC. We may
also sell notes from time to time through one or more additional agents on
substantially the same terms as those applicable to the agents named above.
Certain of the agents and dealers and their affiliates from time to time
provide investment banking and financial advisory services to us and our
affiliates. Banc One Capital Markets, Inc., one of the agents, is an affiliate
of Bank One Trust Company, N.A., which is the trustee under the indenture. In
addition, affiliates of Banc One Capital Markets, Inc., Deutsche Banc Alex.
Brown Inc. and J.P. Morgan Securities Inc. are participants in our lines of
credit.
LEGAL MATTERS
In addition to the legal opinions referred to under "Legal Opinions" in the
accompanying prospectus, the legality of the notes and description of Federal
income tax matters contained in this prospectus supplement entitled "Certain
United States Federal Income Tax Considerations" is based upon the opinion of
Bose McKinney & Evans LLP. Certain legal matters will be passed upon for the
agents by Clifford Chance Rogers & Wells LLP, New York, New York. Clifford
Chance Rogers & Wells LLP also acts from time to time as counsel to us in
matters unrelated to this offering.
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PROSPECTUS
$796,333,000
DUKE REALTY CORPORATION
COMMON STOCK, PREFERRED STOCK AND DEPOSITARY SHARES
DUKE REALTY
LIMITED PARTNERSHIP
DEBT SECURITIES
You should read this prospectus and any supplement carefully before you
invest.
This prospectus describes debt and equity securities that we may issue and
sell at various times:
- Our prospectus supplements will contain the specific terms of each
issuance of debt or equity securities.
- Duke Realty Corporation can issue common stock, preferred stock and
depositary shares with a total offering price of up to $325,748,000 under
this prospectus.
- Duke Realty Limited Partnership can issue debt securities with a total
offering price of up to $470,585,000 under this prospectus.
- We may sell the debt and equity securities to or through underwriters,
dealers or agents.
We may also sell debt and equity securities directly to investors.
The common shares of Duke Realty Corporation are listed on the New York
Stock Exchange under the trading symbol "DRE."
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this prospectus is June 13, 2000.
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC using a "shelf" registration process. Under this shelf registration process,
Duke Realty Corporation, which is sometimes referred to in this prospectus as
"Duke", may sell any combination of common stock, preferred stock and depositary
shares as described in this prospectus in one or more offerings for total
proceeds of up to $325,748,000, and Duke Realty Limited Partnership, which is
sometimes referred to in this prospectus as the "Operating Partnership", may
sell debt securities of various terms in one or more offerings for total
proceeds of up to $470,585,000. This prospectus provides you with a general
description of the securities we may offer. Each time we sell securities, we
will provide a prospectus supplement that will contain specific information
about the terms of that offering. This prospectus supplement may add, update or
change information contained in this prospectus. It is important for you to
consider the information contained in this prospectus and any prospectus
supplement together with additional information described under the heading
"Where You Can Find More Information."
DUKE AND THE OPERATING PARTNERSHIP
Duke is a self-administered and self-managed real estate investment trust (a
"REIT") that began operations through a related entity in 1972. As of March 31,
2000, we:
- Owned 933 industrial, office and retail properties (including properties
under development), consisting of over 102 million square feet located in
13 states; and
- Owned or controlled approximately 3,900 acres of land with an estimated
future development potential of approximately 60 million square feet of
industrial, office and retail properties.
Duke directly or indirectly hold all of its interests in its properties and
land and it conducts all of its operations through the Operating Partnership.
Duke controls the Operating Partnership as its sole general partner and owned,
as of March 31, 2000, approximately 87% of the Operating Partnership's common
units. Holders of common units in the Operating Partnership (other than Duke)
may exchange them for Duke common stock on a one for one basis. When common
units are exchanged for common stock, Duke's percentage interest in the
Operating Partnership increases.
In addition to owning properties and land, we provide the following services
for our properties:
- leasing;
- management;
- construction;
- development; and
- other tenant-related services.
We also provide these services on a fee basis through Duke Realty Services
Limited Partnership for certain properties owned by third parties.
Duke Realty Corporation is an Indiana corporation that was originally
incorporated in the State of Delaware in 1985, and reincorporated in the State
of Indiana in 1992. It is the successor company of the merger of Weeks
Corporation with Duke Realty Investments, Inc., which took place on July 2,
1999. Duke Realty Limited Partnership is an Indiana limited partnership that was
originally formed in 1993. It is the successor limited partnership of the merger
of Weeks Realty, L.P. with Duke Realty Limited Partnership, which took place on
July 1, 1999. Our executive offices are located at 600 East 96th Street,
Suite 100, Indianapolis, Indiana 46240, and our telephone number is (317)
808-6000.
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USE OF PROCEEDS
The terms of the partnership agreement of the Operating Partnership require
Duke to invest the net proceeds of any sale of common stock, preferred stock or
depositary shares in the Operating Partnership in exchange for additional common
units or preferred units. We will use the net proceeds from the sale of these
securities for general corporate purposes. These purposes may include the
development and acquisition of additional rental properties and other
acquisition transactions, the payment of certain outstanding debt, and
improvements to certain properties in our portfolio. If we identify a specific
purpose for the net proceeds of an offering, we will describe that purpose in
the applicable prospectus supplement.
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RATIOS OF EARNINGS TO FIXED CHARGES
The following table shows ratios of earnings to fixed charges and preference
dividends (as applicable) for Duke and the Operating Partnership for the periods
shown.
<Table>
<Caption>
YEAR ENDED OPERATING
DECEMBER 31, DUKE PARTNERSHIP
- ------------ -------- -----------
1999........................................................ 1.79 1.77
1998........................................................ 2.05 2.05
1997........................................................ 2.12 2.11
1996........................................................ 2.18 2.20
1995........................................................ 2.38 2.38
1994........................................................ 2.33 2.33
</Table>
On a pro forma basis assuming the mergers with Weeks Corporation and Weeks
Realty, L.P. had occurred as of the beginning of the respective periods, Duke's
ratio of earnings to fixed charges and preference dividends would have been 1.75
for the year ended December 31, 1999, and the Operating Partnership's ratio of
earnings to fixed charges would have been 1.72 for the year ended December 31,
1999. For the three months ended March 31, 2000, the ratios of earnings to fixed
charges for Duke and the Operating Partnership were 1.61 and 1.59, respectively.
For purposes of computing these ratios, earnings have been calculated by
adding fixed charges, excluding capitalized interest, to income (loss) before
gains or losses on property sales and (if applicable) minority interest in the
Operating Partnership. Fixed charges consist (if applicable) of interest costs,
whether expensed or capitalized, the interest component of rental expense and
amortization of debt issuance costs.
DESCRIPTION OF DEBT SECURITIES
The debt securities will be issued under an indenture between the Operating
Partnership and Bank One Trust Company, N.A. (formerly known as The First
National Bank of Chicago), as trustee. The trustee's office is currently located
at 14 Wall Street, Eighth Floor, New York, New York 10005. The indenture is
governed by the Trust Indenture Act of 1939. The following description is a
summary of the material provisions of the indenture. It does not restate those
agreements in their entirety. We urge you to read the indenture because it, and
not this description, defines your rights as holders of any debt securities
issued by the Operating Partnership. We have filed copies of the indenture with
the SEC.
GENERAL
The debt securities will be direct, unsecured obligations of the Operating
Partnership and will rank equal in right of payment with all other unsecured and
unsubordinated indebtedness of the Operating Partnership. The debt securities
will be effectively subordinated to the prior claims of each secured mortgage
lender to any specific property which secures that lender's mortgage. At March
31, 2000, the total outstanding debt of the Operating Partnership was $2.3
billion, of which $485.4 million was secured debt.
The debt securities may be issued in one or more series without limit as to
aggregate principal amount. Duke can establish an issue of debt securities as
sole general partner of the Operating Partnership by a resolution of its board
of directors or by a supplemental indenture. The Operating Partnership is not
required to issue all debt securities of one series at the same time and, unless
otherwise provided, the Operating Partnership may reopen a series of debt
securities without the consent of the holders of the debt securities of such
series to issue additional debt securities of such series.
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The indenture provides that there may be more than one trustee, each with
respect to one or more series of debt securities. Any trustee under the
indenture may resign or be removed with respect to one or more series of debt
securities, and a successor trustee may be appointed to act with respect to that
series. In the event that two or more persons are acting as trustee with respect
to different series of debt securities, each of those trustees shall be a
trustee of a trust under the indenture separate and apart from the trust
administered by any other trustee, and except as otherwise described in this
prospectus, any action described in this prospectus to be taken by a trustee may
be taken by each such trustee with respect to, and only with respect to, the one
or more series of debt securities for which it is trustee under the indenture.
The specific terms of any series of debt securities being offered will be
contained in a prospectus supplement, including:
- the title of the debt securities;
- the aggregate principal amount of the debt securities and any limit on the
aggregate principal amount;
- the price at which the Operating Partnership will issue the debt
securities;
- the fixed or variable rate at which the debt securities will bear
interest, or the method by which such rate will be determined;
- the basis upon which the Operating Partnership will calculate interest on
the debt securities if other than a 360-day year of twelve 30-day months;
- the timing and manner of making principal, interest and any premium
payments on the debt securities;
- the person to whom interest will be payable;
- the places where you may serve notices about the debt securities and the
indenture, if other than as described in this prospectus;
- the portion of the principal amount of the debt securities payable upon
acceleration, if it is other than the full principal amount;
- whether and under what conditions the debt securities are redeemable at
the option of the Operating Partnership or of the holders;
- any sinking fund or similar provisions;
- the currency or currencies in which the debt securities are payable, if
other than U.S. dollars;
- the events of default or covenants of the debt securities, if they are
different from or in addition to those described in this prospectus;
- whether the debt securities will be issued in certificated and/or
book-entry form;
- whether the debt securities will be in registered or bearer form and their
denominations if other than $1,000 for registered form or $5,000 for
bearer form;
- whether the defeasance and covenant defeasance provisions described in
this prospectus are applicable to the debt securities or are modified in
any manner;
- if the debt securities are to be issued upon the exercise of debt
warrants, the time, manner and place for the debt securities to be
authenticated and delivered;
- whether and under what circumstances the Operating Partnership will pay
additional amounts on the debt securities for any tax, assessment or
governmental charge and, if so, whether the
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Operating Partnership will have the option to redeem the debt securities
instead of making such a payment; and
- any other terms of such debt securities.
The debt securities may provide for less than their entire principal amount
to be payable upon acceleration of their maturity. Any material special U.S.
federal income tax, accounting and other considerations applicable to such
original issue discount securities will be described in the prospectus
supplement.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Normally, the Operating Partnership will issue debt securities in
denominations of:
- $1,000 if they are in registered form;
- $5,000 if they are in bearer form; or
- any denomination if they are in global form.
If the Operating Partnership issues debt securities in denominations other than
these, they will be described in the prospectus supplement.
Unless the prospectus supplement specifies otherwise, the principal,
interest and any premium on any series of debt securities will be payable at the
corporate trust office of the trustee, initially located at 14 Wall Street,
Eighth Floor, New York, New York, 10005. The Operating Partnership may choose,
however, to pay interest by check mailed to the address of the person entitled
to the payment as it appears in the applicable security register or by wire
transfer of funds at an account maintained within the United States. The
Operating Partnership may change the paying agent or registrar for a series of
debt securities without prior notice to the holders of the debt securities, and
the Operating Partnership or any of its subsidiaries may act as paying agent or
registrar.
Any interest not punctually paid or duly provided for on any interest
payment date with respect to a debt security will immediately cease to be
payable to the holder on the applicable regular record date and may either be
paid:
- to the person in whose name the debt security is registered at the close
of business on a special record date established by the trustee, who will
provide notice to the holder of the debt security not less than 10 days
prior to such a special record date; or
- at any time in any other lawful manner.
If any interest date or a maturity date falls on a day that is not a
business day, the required payment will be made on the next business day as if
it were made on the date the payment was due and no interest will accrue on the
amount so payable for the period from and after such interest payment date or
such maturity date, as the case may be. For purposes of the indenture, a
"business day" is any day, other than a Saturday or Sunday, on which banking
institutions in The City of New York are open for business.
Subject to certain limitations imposed upon debt securities issued in
book-entry form, you may exchange debt securities for different denominations of
the same series or surrender debt securities for transfer at the corporate trust
office of the trustee. Every debt security surrendered for transfer or exchange
must be duly endorsed or accompanied by a written instrument of transfer. The
Operating Partnership will not make any service charge for any transfer or
exchange of any debt securities, but the trustee or the Operating Partnership
may require payment of a sum sufficient to cover any applicable tax or other
governmental charge. If the applicable prospectus supplement refers to any
transfer agent in addition to the trustee initially designated by the Operating
Partnership for any series
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<Page>
of debt securities, the Operating Partnership may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that Operating Partnership
will be required to maintain a transfer agent in each place of payment for a
series. The Operating Partnership may at any time designate additional transfer
agents with respect to any series of debt securities.
Neither the Operating Partnership nor the trustee is required:
- to issue, transfer or exchange any debt security if such debt security may
be among those selected for redemption during a period beginning at the
opening of business 15 days before selection of the debt securities to be
redeemed and ending at the close of business on:
- the day of the mailing of the relevant notice of redemption if such
debt securities are issuable only as registered securities; and
- the day of the first publication of the relevant notice of redemption
if such debt securities are issuable as bearer securities; or
- the mailing of the relevant notice of redemption if debt securities
issuable as bearer securities are also issuable as registered
securities and there is no publication; or
- to register the transfer of or exchange any registered security selected
for redemption in whole or in part, except, in the case of any registered
security to be redeemed in part, the portion not to be redeemed; or
- to exchange any bearer security selected for redemption except that such a
bearer security may be exchanged for a registered security of that series
and like tenor if such registered security is simultaneously surrendered
for redemption; or
- to issue, transfer or exchange any debt security which has been
surrendered for repayment at the option of the holder, except any portion
of such debt security not to be redeemed.
MERGER, CONSOLIDATION OR SALE
The Operating Partnership may consolidate with, or sell, lease or convey all
or substantially all of its assets to, or merge with or into, any other entity,
provided that:
- the Operating Partnership is the continuing entity, or the successor
entity (if other than the Operating Partnership) formed by or resulting
from any such consolidation or merger or which has received the transfer
of such assets expressly assumes payment of the principal, interest and
any premium on all the notes and the due and punctual performance and
observance of all of the covenants and conditions contained in the
indenture;
- immediately after giving effect to the transaction and treating any
indebtedness which becomes an obligation of the Operating Partnership or
any subsidiary as a result of the transaction as having been incurred by
the Operating Partnership or such subsidiary at the time of such
transaction, no event of default under the indenture, and no event which,
after notice or the lapse of time, or both, would become such an event of
default, has occurred and is continuing; and
- an officer's certificate and legal opinion covering such conditions are
delivered to the trustee.
Except for the above restrictions, the indenture does not contain any other
provisions that would limit the ability of the Operating Partnership to incur
indebtedness or that would afford holders of the notes protection in the event
of:
- a highly leveraged or similar transaction involving the Operating
Partnership, the management of the Operating Partnership or Duke, or any
affiliate of any such party;
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<Page>
- a change of control; or
- a reorganization, restructuring, merger or similar transaction involving
the Operating Partnership that may adversely affect the holders of the
debt securities.
In addition, subject to the limitations on merger, consolidation or sale
described above, the Operating Partnership may enter into certain transactions
in the future, such as the sale of all or substantially all of its assets or the
merger or consolidation of the Operating Partnership, that would increase the
amount of the Operating Partnership's indebtedness or substantially reduce or
eliminate its assets, which may have an adverse effect on the Operating
Partnership's ability to service its indebtedness, including the debt
securities.
CERTAIN FINANCIAL COVENANTS
LIMITATIONS ON INCURRENCE OF DEBT. The Operating Partnership will not, and
will not permit any subsidiary to, incur any Debt (as defined below), other than
intercompany debt (representing Debt to which the only parties are the Operating
Partnership, Duke and any of their subsidiaries (but only so long as such Debt
is held solely by any of the Operating Partnership, Duke and any subsidiary)
that is subordinate in right of payment to the debt securities) if, immediately
after giving effect to the incurrence of such additional Debt, the aggregate
principal amount of all outstanding Debt of the Operating Partnership and its
subsidiaries on a consolidated basis determined in accordance with generally
accepted accounting principles is greater than 55% of the sum of:
- the Operating Partnership's Total Assets (as defined below) as of the end
of the calendar quarter covered in the Operating Partnership's Annual
Report on Form 10-K or Quarterly Report on Form 10-Q, as the case may be,
most recently filed with the SEC (or, if such filing is not permitted
under the Exchange Act, with the trustee) prior to the incurrence of such
additional Debt; and
- the increase in Total Assets from the end of such quarter including,
without limitation, any increase in Total Assets resulting from the
incurrence of such additional Debt (such increase together with the
Operating Partnership's Total Assets is referred to as the "Adjusted Total
Assets").
In addition to the foregoing limitation on the incurrence of Debt, the
Operating Partnership will not, and will not permit any subsidiary to, incur any
Debt if the ratio of Consolidated Income Available for Debt Service (as defined
below) to the amount which is expensed for interest on Debt for the four
consecutive fiscal quarters most recently ended prior to the date on which such
additional Debt is to be incurred shall have been less than 2.0 to 1, on a pro
forma basis after giving effect to the incurrence of such Debt and to the
application of the proceeds from such Debt, and calculated on the assumption
that:
- such Debt and any other Debt incurred by the Operating Partnership or its
subsidiaries since the first day of such four-quarter period and the
application of the proceeds therefrom, including to refinance other Debt,
had occurred at the beginning of such period;
- the repayment or retirement of any other Debt by the Operating Partnership
or its subsidiaries since the first day of such four-quarter period had
been incurred, repaid or retired at the beginning of such period (except
that, in making such computation, the amount of Debt under any revolving
credit facility shall be computed based upon the average daily balance of
such Debt during such period);
- the income earned on any increase in Adjusted Total Assets since the end
of such four-quarter period had been earned, on an annualized basis,
during such period; and
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<Page>
- in the case of any acquisition or disposition by the Operating Partnership
or any subsidiary of any asset or group of assets since the first day of
such four-quarter period, including, without limitation, by merger, stock
purchase or sale, or asset purchase or sale, such acquisition or
disposition or any related repayment of Debt had occurred as of the first
day of such period with the appropriate adjustments with respect to such
acquisition or disposition being included in such pro forma calculation.
In addition to the foregoing limitations on the incurrence of Debt, the
Operating Partnership will not, and will not permit any subsidiary to, incur any
Debt secured by any mortgage, lien, charge, pledge, encumbrance or security
interest of any kind upon any of the property of the Operating Partnership or
any subsidiary, whether owned at the date of the indenture or subsequently
acquired, if, immediately after giving effect to the incurrence of such
additional secured Debt, the aggregate principal amount of all outstanding
secured Debt of the Operating Partnership and its subsidiaries on a consolidated
basis is greater than 40% of the Operating Partnership's Adjusted Total Assets.
For purposes of the above provisions regarding the limitation on the
incurrence of Debt, Debt is deemed to be "incurred" by the Operating Partnership
and its subsidiaries on a consolidated basis whenever the Operating Partnership
and its subsidiaries on a consolidated basis create, assume, guarantee or
otherwise become liable with respect to such Debt.
MAINTENANCE OF TOTAL UNENCUMBERED ASSETS. The Operating Partnership is
required to maintain Total Unencumbered Assets of not less than 185% of the
aggregate outstanding principal amount of the unsecured debt of the Operating
Partnership.
As used here:
"CONSOLIDATED INCOME AVAILABLE FOR DEBT SERVICE" for any period means
Consolidated Net Income (as defined below) of the Operating Partnership and its
subsidiaries,
- plus amounts which have been deducted for:
- interest on Debt of the Operating Partnership and its subsidiaries;
- provision for taxes of the Operating Partnership and its subsidiaries
based on income;
- amortization of debt discount;
- depreciation and amortization;
- the effect of any noncash charge resulting from a change in accounting
principles in determining Consolidated Net Income for such period;
- amortization of deferred charges; and
- provisions for or realized losses on properties; and
- less amounts which have been included for gains on properties.
"CONSOLIDATED NET INCOME" for any period means the amount of consolidated
net income (or loss) of the Operating Partnership and its subsidiaries for the
period determined on a consolidated basis in accordance with generally accepted
accounting principles.
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"DEBT" of the Operating Partnership or any subsidiary means any indebtedness
of the Operating Partnership and its subsidiaries, whether or not contingent, in
respect of:
(1) borrowed money 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 the Operating
Partnership and its subsidiaries;
(3) the reimbursement obligations, contingent or otherwise, in connection
with any letters of credit actually issued or amounts representing the
balance deferred and unpaid of the purchase price of any property except
any such balance that constitutes an accrued expense or trade payable;
(4) any lease of property by the Operating Partnership and its subsidiaries
as lessee which is reflected in the Operating Partnership's consolidated
balance sheet as a capitalized lease in accordance with generally
accepted accounting principles; or
(5) to the extent not otherwise included, any obligation by the Operating
Partnership or any subsidiary to be liable for, or to pay, as obligor,
guarantor or otherwise (other than for purposes of collection in the
ordinary course of business), indebtedness of another person other than
the Operating Partnership or any subsidiary,
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 the Operating Partnership's consolidated balance sheet in accordance with
generally accepted accounting principles.
"TOTAL ASSETS" as of any date means the sum of:
- the Operating Partnership's and its subsidiaries' Undepreciated Real
Estate Assets; and
- all other assets of the Operating Partnership and its subsidiaries on a
consolidated basis determined in accordance with generally accepted
accounting principles, but excluding intangibles and accounts receivable.
"TOTAL UNENCUMBERED ASSETS" means the sum of:
- those Undepreciated Real Estate Assets not subject to an encumbrance; and
- all other assets of the Operating Partnership and its subsidiaries not
subject to an encumbrance determined in accordance with generally accepted
accounting principles, but excluding accounts receivable and intangibles.
"UNDEPRECIATED REAL ESTATE ASSETS" as of any date means the original cost
plus capital improvements of real estate assets of the Operating Partnership and
its subsidiaries on such date, before depreciation and amortization, determined
on a consolidated basis in accordance with generally accepted accounting
principles.
CERTAIN ADDITIONAL COVENANTS
EXISTENCE. Except as permitted under "-- Merger, Consolidation or Sale,"
the Operating Partnership is required to do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
and franchises. The Operating Partnership is not, however, required to preserve
any right or franchise if it determines that its preservation is no longer
desirable in the conduct of its business and that its loss is not
disadvantageous in any material respect to the holders of the debt securities.
MAINTENANCE OF PROPERTIES. The Operating Partnership is required to cause
all of its material properties used or useful in the conduct of its business or
the business of any subsidiary to be
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maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and to cause to be made all necessary repairs,
renewals, replacements, betterments and improvements, all as in the judgment of
the Operating Partnership may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times.
The Operating Partnership and its subsidiaries are not, however, prevented from
selling or otherwise disposing for value their respective properties in the
ordinary course of business.
INSURANCE. The Operating Partnership is required to, and is required to
cause each of its subsidiaries to, keep all of its insurable properties insured
against loss or damage at least equal to their then full insurable value with
financially sound and reputable insurance companies.
PAYMENT OF TAXES AND OTHER CLAIMS. The Operating Partnership is required to
pay or discharge or cause to be paid or discharged, before they become
delinquent:
(1) all taxes, assessments and governmental charges levied or imposed upon
it or any subsidiary or upon its income, profits or property or that of
any subsidiary, and
(2) all lawful claims for labor, materials and supplies which, if unpaid,
might by law become a lien upon the property of the Operating Partnership
or any subsidiary;
The Operating Partnership is not, however, required to pay or discharge or cause
to be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
PROVISION OF FINANCIAL INFORMATION. The Operating Partnership will provide
the holders of debt securities with copies of the annual reports and quarterly
reports of the Operating Partnership. Whether or not the Operating Partnership
is subject to Section 13 or 15(d) of the Exchange Act and for so long as any
debt securities are outstanding, the Operating Partnership will, to the extent
permitted under the Exchange Act, be required to file with the SEC the annual
reports, quarterly reports and other documents which the Operating Partnership
would have been required to file with the SEC pursuant to such Section 13 or
15(d) if the Operating Partnership were so subject, such documents to be filed
with the SEC on or prior to the respective dates by which the Operating
Partnership would have been required so to file such documents if the Operating
Partnership were so subject. The Operating Partnership will also in any event:
- within 15 days of each required filing date:
- transmit by mail to all holders of debt securities, as their names and
addresses appear in the security register, without cost to such
holders, copies of the annual reports and quarterly reports which the
Operating Partnership would have been required to file with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act if the Operating
Partnership were subject to such sections; and
- file with the trustee copies of the annual reports, quarterly reports
and other documents which the Operating Partnership would have been
required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act if the Operating Partnership were subject to such
sections; and
- if filing such documents by the Operating Partnership 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.
ADDITIONAL COVENANTS. Any additional or different covenants of the
Operating Partnership with respect to any series of debt securities will be set
forth in the prospectus supplement for such debt securities.
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Compliance with the financial covenants and additional covenants described
in this prospectus may not be waived by the board of directors of Duke, as
general partner of the Operating Partnership, or by the trustee unless the
holders of at least a majority in principal amount of all outstanding debt
securities of each applicable series consent to such waiver, except to the
extent the defeasance and covenant defeasance provisions of the indenture apply
to the debt securities.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The indenture provides that the following events are "events of default"
with respect to any series of debt securities issued under the indenture:
(1) default for 30 days in the payment of any installment of interest on any
debt security of such series;
(2) default in the payment of the principal or any premium on any debt
security of such series at its maturity;
(3) default in making any sinking fund payment as required for any debt
security of such series;
(4) default in the performance of any other covenant of the Operating
Partnership contained in the indenture other than a covenant added to the
indenture solely for the benefit of a series of debt securities issued
under the indenture other than such series, and the continuation of such
default for 60 days after written notice as provided in the indenture;
(5) default in the payment of an aggregate principal amount exceeding
$5,000,000 of any evidence of recourse indebtedness of the Operating
Partnership or any mortgage, indenture or other instrument under which
such indebtedness is issued or by which such indebtedness is secured, if
such default occurred after the expiration of any applicable grace period
and resulted in the acceleration of the maturity of such indebtedness,
but only if such indebtedness is not discharged or such acceleration is
not rescinded or annulled;
(6) certain events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee of the Operating
Partnership or any significant subsidiary (as defined in Regulation S-X
promulgated under the Securities Act) or any of their respective
property; and
(7) any other event of default provided with respect to a particular series
of debt securities
If an event of default occurs and continues, the trustee or the holders of
at least 25% in principal amount of the outstanding debt securities of that
series may declare the principal amount of all of the debt securities of that
series to be due and payable immediately. If the debt securities of that series
are original issue discount securities or indexed securities, the applicable
prospectus supplement will describe the portion of the principal amount required
to make such a declaration. If this happens and the Operating Partnership cures
the default, under certain circumstances the holders of at least a majority in
principal amount of outstanding debt securities of that series can void the
acceleration.
The indenture also provides that the holders of at least a majority in
principal amount of the outstanding debt securities of a series may waive any
past default with respect to that series, except a default in payment or a
default of a covenant or other indenture provision that cannot be modified
without the consent of the holder of each outstanding debt security affected.
The indenture provides that no holders of debt securities of any series may
institute any judicial or other proceedings with respect to the indenture or for
any remedy under the indenture, except in the case of failure of the trustee to
act for 60 days after it has received a written request to institute proceedings
for an event of default from the holders of at least 25% in principal amount of
the outstanding debt securities of that series and an offer of indemnity
reasonably satisfactory to it. This
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provision will not prevent, however, any holder of debt securities from
instituting suit for the enforcement of any payment due on the debt securities.
Subject to provisions in the indenture relating to its duties in case of
default, the trustee is under no obligation to exercise any of its rights or
powers under the indenture at the request or direction of any holders of debt
securities, unless such holders offer to the trustee reasonable security or
indemnity. The holders of at least a majority in principal amount of the
outstanding debt securities of a series (or of all debt securities then
outstanding under the indenture, if applicable) have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the trustee, or of exercising any trust or power conferred upon the trustee.
However, the trustee may refuse to follow any direction which is in conflict
with any law or the indenture, which may involve the trustee in personal
liability or which may be unduly prejudicial to the holders of debt securities
not joining in the direction.
The indenture requires the Operating Partnership to file annually with the
trustee an officer's certificate as to the absence of defaults under the
indenture. The trustee is required to give notice to the holders of a series of
debt securities within 90 days of a default under the indenture unless the
default has been cured or waived. However, if the trustee considers it to be in
the interest of the holders, the trustee may withhold notice of any default
except a payment default.
MODIFICATION OF THE INDENTURE
At least a majority in principal amount of all outstanding debt securities
or series of outstanding debt securities affected by a modification or amendment
of the indenture is permitted to modify or amend the indenture. However,
modifications that have the following effects can only be made with the consent
of the holder of each of the debt securities affected by the modification:
- change the stated maturity of the principal of, or any premium or any
installment of interest on any debt security;
- reduce the principal amount of, or the rate or amount of interest on, or
any premium payable on redemption of, any debt security, or adversely
affect any right of repayment of the holder of any debt security;
- change the place of payment, or the coin or currency, for payment of
principal of, interest or any premium on any debt security;
- impair the right to institute suit for the enforcement of any payment on
or with respect to any debt security;
- reduce the percentage of outstanding debt securities of a series necessary
to modify or amend the indenture, to waive compliance with certain
provisions of the indenture or certain defaults and consequences under the
indenture or to reduce the quorum or voting requirements set forth in the
indenture; or
- modify any of the foregoing provisions or any of the provisions relating
to the waiver of certain past defaults or certain covenants, except to
increase the required percentage to effect such action or to provide that
certain other provisions may not be modified or waived without the consent
of the holder of a debt security.
The indenture provides that the holders of at least a majority in principal
amount of a series of debt securities have the right to waive compliance by the
Operating Partnership with certain covenants relating to such series of debt
securities in the indenture.
The Operating Partnership and the trustee can modify the indenture without
the consent of any holder of debt securities for any of the following purposes:
- to evidence the succession of another person to the Operating Partnership
as obligor under the indenture;
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- to add to the covenants of the Operating Partnership for the benefit of
the holders of all or any series of debt securities or to surrender any
right or power conferred upon the Operating Partnership in the indenture;
- to add events of default for the benefit of the holders of all or any
series of debt securities;
- to add or change any provisions of the indenture to facilitate the
issuance of, or to liberalize certain terms of, debt securities in bearer
form, or to permit or facilitate the issuance of debt securities in
uncertificated form, so long as it does not adversely affect the interests
of the holders of the debt securities of any series in any material
respect;
- to change or eliminate any provisions of the indenture, so long as any
such change or elimination becomes effective only when there are no debt
securities outstanding of any series previously created which are entitled
to the benefit of those provisions;
- to secure the debt securities;
- to establish the form or terms of debt securities of any series;
- to provide for the acceptance of appointment by a successor trustee or
facilitate the administration of the trusts under the indenture by more
than one trustee;
- to cure any ambiguity, defect or inconsistency in the indenture, so long
as such action does not adversely affect the interests of holders of debt
securities of any series in any material respect; or
- to supplement any of the provisions of the indenture to the extent
necessary to permit or facilitate defeasance and discharge of any series
of such debt securities, so long as such action does not adversely affect
the interests of the holders of the debt securities of any series in any
material respect.
The indenture provides that in determining whether the holders of the
requisite principal amount of outstanding debt securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver or
whether a quorum is present at a meeting of holders of debt securities:
- the principal amount of an original issue discount security that is deemed
to be outstanding is the amount of its principal that would be due and
payable as of the date of such determination upon acceleration of
maturity;
- the principal amount of a debt security denominated in a foreign currency
that is deemed outstanding is the U.S. dollar equivalent of the principal
amount, determined on the issue date for such debt security, or, in the
case of an original issue discount security, the U.S. dollar equivalent on
the issue date of such debt security of the its principal that would be
due and payable as of the date of such determination upon acceleration of
maturity;
- the principal amount of an indexed security that is deemed outstanding is
the principal face amount of such indexed security at original issuance,
unless otherwise provided with respect to such indexed security pursuant
to the indenture, and
- debt securities owned by the Operating Partnership or any affiliate of the
Operating Partnership will be disregarded.
The indenture contains provisions for convening meetings of the holders of
debt securities of a series. The trustee, the Operating Partnership or the
holders of at least 10% in principal amount of the outstanding debt securities
of a series can call a meeting by giving notice as provided in the indenture.
Except for any consent that must be given by the holder of each debt security
affected by certain modifications of the indenture, any resolution presented at
a meeting or adjourned meeting duly reconvened at which a quorum is present will
be permitted to be adopted by the affirmative vote of the holders of a majority
in principal amount of the outstanding debt securities of that series. However,
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except as referred to above, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action that may be
made, given or taken by the holders of a specified percentage less than a
majority in principal amount of the outstanding debt securities of a series may
be adopted at a meeting or adjourned meeting duly reconvened at which a quorum
is present by the affirmative vote of the holders of such specified percentage
in principal amount of the outstanding debt securities of that series. Any
resolution passed or decision taken at any meeting of holders of a series of
debt securities duly held in accordance with the indenture will be binding on
all holders of debt securities of that series. The quorum at any meeting called
to adopt a resolution, and at any reconvened meeting, will be persons holding or
representing a majority in principal amount of the outstanding debt securities
of a series. However, if any action is to be taken at such a meeting with
respect to a consent or waiver which may be given by the holders of not less
than a specified percentage in principal amount of the outstanding debt
securities of the series, the persons holding or representing such specified
percentage in principal amount of the outstanding debt securities of the series
will constitute a quorum.
Notwithstanding the foregoing provisions, if any action is to be taken at a
meeting of holders of debt securities of a series with respect to any request,
demand, authorization, direction, notice, consent, waiver or other action that
the indenture expressly provides may be made, given or taken by the holders of a
specified percentage in principal amount of all outstanding debt securities of
the series affected thereby, or of the holders of such series and one or more
additional series of debt securities:
- there will be no minimum quorum requirement for such meeting; and
- the principal amount of the outstanding debt securities of such series
that vote in favor of such request, demand, authorization, direction,
notice, consent, waiver or other action will be taken into account in
determining whether such request, demand, authorization, direction,
notice, consent, waiver or other action has been made, given or taken
under the indenture.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Operating Partnership may discharge certain obligations to holders of
any series of debt securities that have not already been delivered to the
trustee for cancellation and that either have become due and payable or will
become due and payable within one year or scheduled for redemption within one
year by irrevocably depositing with the trustee, in trust, funds in such
currency in which such debt securities are payable in an amount sufficient to
pay the entire indebtedness on such debt securities in respect of principal,
interest and any premium to the stated maturity or redemption date or, if the
debt securities have become due and payable, the date of the deposit.
The Operating Partnership may elect either:
- to defease and be discharged from any and all obligations with respect to
such debt securities (except for the obligation to pay additional amounts,
if any, upon the occurrence of certain events of tax, assessment or
governmental charge with respect to payments on such debt securities and
the obligations to register the transfer or exchange of such debt
securities, to replace temporary or mutilated, destroyed, lost or stolen
debt securities, to maintain an office or agency in respect of such debt
securities and to hold moneys for payment in trust) ("defeasance"); or
- to be released from its obligations with respect to such debt securities
under the indenture, including any covenant, and any omission to comply
with such obligations will not constitute a default or an event of default
with respect to such debt securities ("covenant defeasance"),
In order to make this election, the Operating Partnership must make an
irrevocable deposit with the trustee which will provide money in an amount
sufficient to pay the principal, interest and any premium on such debt
securities, and any mandatory sinking fund or analogous payments on the debt
securities, on the scheduled due dates. The deposit may be either an amount in
the currency in which
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such debt securities are payable at stated maturity, or Government Obligations
(as defined below), or both.
"GOVERNMENT OBLIGATIONS" means securities which are:
- direct obligations of the United States of America or the government which
issued the foreign currency in which the debt securities of a particular
series are payable, for the payment of which its full faith and credit is
pledged, and which are not callable or redeemable at the option of the
issuer;
- obligations of a person controlled or supervised by and acting as an
agency or instrumentality of the United States of America or such
government which issued the foreign currency in which the debt securities
of such series are payable, the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America or such other government, and which are not callable or redeemable
at the option of the issuer; or
- depository receipts issued by a bank or trust company as custodian with
respect to any such Government Obligation described above or a specific
payment of interest on or principal of any such Government Obligation held
by such custodian for the account of the holder of a depository receipt,
so long as such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount
received by the custodian in respect of the Government Obligation or the
specific payment of interest on or principal of the Government Obligation
evidenced by such depository receipts, except as required by law.
Unless otherwise provided in the applicable prospectus supplement, if after
the Operating Partnership has deposited funds and/or Government Obligations to
effect defeasance or covenant defeasance with respect to debt securities of any
series:
- the holder of a debt security of such series is entitled to, and does,
elect pursuant to the indenture or the terms of such debt security to
receive payment in a currency other than that in which such deposit has
been made in respect of such debt security; or
- a Conversion Event (as defined below) occurs in respect of the currency in
which such deposit has been made,
the indebtedness represented by such debt security shall be deemed to have been,
and will be, fully discharged and satisfied through the payment of the
principal, interest and any premium on such debt security as they become due out
of the proceeds yielded by converting the amount so deposited in respect of such
debt security into the currency in which such debt security becomes payable as a
result of such election or such Conversion Event based on the applicable market
exchange rate.
"CONVERSION EVENT" means the cessation of use of:
- a currency both by the government of the country which issued such
currency and for the settlement of transactions by a central bank or other
public institutions of or within the international banking community;
- the ECU both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Community;
or
- any currency unit or composite currency other than the ECU for the
purposes for which it was established.
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In the event the Operating Partnership effects covenant defeasance with
respect to any debt securities and such debt securities are declared due and
payable because of the occurrence of any event of default still applicable to
such debt securities, the amount in such currency in which such debt securities
are payable, and Government Obligations on deposit with the trustee, will be
sufficient to pay amounts due on such debt securities at the time of their
stated maturity but may not be sufficient to pay amounts due on such debt
securities at the time of the acceleration resulting from such event of default.
However, the Operating Partnership would remain liable to make payment of such
amounts due at the time of acceleration.
The applicable prospectus supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the debt
securities of or within a particular series.
NO CONVERSION RIGHTS
The debt securities will not be convertible into or exchangeable for any
capital stock of Duke or equity interest in the Operating Partnership.
BOOK-ENTRY DEBT SECURITIES
The debt securities of a series may be issued in whole or in part in the
form of one or more global securities that will be deposited with, or on behalf
of, a depositary identified in the applicable prospectus supplement. Global
securities may be issued in either registered or bearer form and in either
temporary or permanent form. Payments of principal, interest and any premium on
a series of debt securities represented by a global security will be made to the
depositary.
We anticipate that any global securities will be deposited with, or on
behalf of, The Depository Trust Company, New York, New York, that the global
securities will be registered in the name of DTC's nominee, and that the
following provisions will apply to the depository arrangements with respect to
the global securities. The prospectus supplement will describe additional or
differing terms of the depository arrangement involving any series of debt
securities issued in the form of global securities.
So long as DTC or its nominee is the registered owner of a global security,
DTC or its nominee will be considered the sole holder of the debt securities
represented by the global security for all purposes under the indenture. Except
as described below, owners of beneficial interests in a global security:
- will not be entitled to have debt securities represented by the global
security registered in their names;
- will not receive or be entitled to receive physical delivery of debt
securities in the form of a certificate; and
- will not be considered the record owners or holders of debt securities
under the.
The laws of some states require that purchasers of securities take physical
delivery of the securities in certificated form. These laws may limit the
transferability of beneficial interests in a global security.
Debt securities represented by a global security will be exchangeable for
debt securities in certificated form with the same terms in authorized
denominations only if:
- DTC notifies us that is unwilling or unable to continue as depository or
if DTC ceases to be a clearing agency registered under applicable law and
the Operating Partnership does not appoint a successor depository within
90 days;
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- an event of default under the indenture with respect to the debt
securities has occurred and is continuing and the beneficial owners
representing a majority in principal amount of the debt securities
represented by the global security advise DTC to cease acting as
depository; or
- the Operating Partnership determines at any time that all debt securities
of a series will no longer be represented by a global security.
We obtained the following information concerning DTC and its book-entry
system from sources, including DTC, that we believe to be reliable, but we take
no responsibility for the accuracy of this information.
DTC will act as securities depository for the debt securities. The debt
securities will be issued as fully registered securities registered in the name
of Cede & Co., which is DTC's partnership nominee.
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 Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act. DTC
holds securities that its participants deposit with DTC. DTC also facilitates
the settlement among participants of securities transactions, including
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, banks, trust companies, clearing corporations
and other organizations. A number of the direct participants and the New York
Stock Exchange, the American Stock Exchange, and the National Association of
Securities Dealers own DTC. Access to DTC's system also is available to others,
including securities brokers and dealers and banks and trust companies 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 debt securities under the DTC system must be made by or through
direct participants, which will receive a credit for the debt securities on
DTC's records. The ownership interest of each beneficial owner or each actual
purchaser of each debt security is to be recorded on the direct and indirect
participants' records. A beneficial owner of debt securities will not receive
written confirmation from DTC of its purchase, but is expected to receive a
written confirmation providing details of the transaction, as well as periodic
statements of its holdings, from the participant through which the beneficial
owner entered into the transaction. Transfers of ownership interests in debt
securities are to be accomplished by entries made on the books of participants
acting on behalf of beneficial owners. Beneficial owners will not receive
certificates representing their ownership interests in the debt securities,
unless the use of the book-entry system for the debt securities is discontinued.
To facilitate subsequent transfers, any certificate representing debt
securities which is deposited with, or on behalf of, DTC is registered in the
name of its nominee, Cede & Co. The deposit of the certificate with, or on
behalf of, DTC and its registration in the name of Cede & Co. effect no change
in beneficial ownership. DTC has no knowledge of the actual beneficial owners of
the certificate representing the debt securities. DTC's records reflect only the
identity of the direct participants to whose accounts the debt securities 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.
Delivery of notices and other communications by DTC to direct participants,
by direct participants to indirect participants, and by direct and indirect
participants to beneficial owners, will be governed by arrangements among them
and any statutory or regulatory requirements.
Neither DTC nor Cede & Co. will consent or vote with respect to the debt
securities. Under its usual procedures, DTC mails an omnibus proxy to the
Operating Partnership as soon as possible after the record date. The omnibus
proxy assigns Cede & Co.'s consenting or voting rights to those direct
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participants identified on a list attached to the omnibus proxy to whose
accounts the debt securities are credited on the record date.
Principal, interest and any premium payments on the debt securities will be
made to DTC. DTC's practice is to credit direct participants' accounts on the
payable date with respect to their holdings as shown on DTC's records unless DTC
has reason to believe that it will not receive payment on the payment date.
Payments by participants to beneficial owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of the participant and not of DTC, the trustee, or
the paying agent, subject to any statutory or regulatory requirements. Payment
of principal and interest to DTC is the responsibility of the Operating
Partnership or the trustee or any paying agent. Disbursement of payments to
direct participants will be the responsibility of DTC. Disbursement of payments
to the beneficial owners will be the responsibility of the direct and indirect
participants.
If applicable, redemption notices will be sent to Cede & Co. If less than
all of the debt securities within an issue are being redeemed, DTC's practice is
to determine by lot the amount of the interest of each direct participant in the
issue to be redeemed.
A beneficial owner will give notice of any option to elect to have its debt
securities repaid by the Operating Partnership, through its participant, to the
trustee, and will effect delivery of the debt securities by causing the direct
participant to transfer the participant's interest in the global security or
securities representing the debt securities, on DTC's records, to the trustee.
The requirement for physical delivery of debt securities in connection with a
demand for repayment will be deemed satisfied when the ownership rights in the
global security or securities representing the debt securities are transferred
by direct participants on DTC's records.
DTC may discontinue providing its services as securities depository with
respect to a series of debt securities at any time by giving reasonable notice
to the Operating Partnership or the paying agent. If a successor securities
depository is not appointed, debt security certificates are required to be
printed and delivered.
The Operating Partnership may decide to discontinue use of the system of
book-entry transfers through DTC or a successor securities depository. In that
event, debt security certificates will be printed and delivered.
Unless stated otherwise in the applicable prospectus supplement, any
underwriters, dealers or agents with respect to any series of debt securities
issued as global securities will be direct participants in DTC.
None of the Operating Partnership, Duke, any underwriter, dealer or agent,
the trustee or any paying agent will have any responsibility or liability for
any aspect of the records relating to or payments made on account of beneficial
interests in a global security, or for maintaining, supervising or reviewing any
records relating to these beneficial interests.
Any additional or different terms of the depositary arrangement with respect
to a series of debt securities will be described in the applicable prospectus
supplement relating to such series.
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DESCRIPTION OF PREFERRED STOCK
GENERAL
Under Duke's articles of incorporation, its board of directors is authorized
to issue up to 5,000,000 shares of preferred stock with a par value of $.01 per
share in one or more series and with rights, preferences, privileges and
restrictions that they may fix or designate without any further vote or action
by Duke's stockholders. As of March 31, 2000, Duke's board of directors had
created the following series of preferred stock:
- 9.10% Series A Cumulative Redeemable Preferred Stock, of which 300,000
shares are authorized and outstanding;
- 7.99% Series B Cumulative Step-Up Premium Rate Preferred Stock, of which
300,000 shares are authorized and outstanding;
- Series C Junior Preferred Stock, of which 500,000 shares are authorized
but none are outstanding;
- 7.375% Series D Convertible Cumulative Redeemable Preferred Stock, of
which 540,000 shares are authorized and outstanding;
- 8.25% Series E Cumulative Redeemable Preferred Stock, of which 460,000
shares are authorized and outstanding;
- 8.00% Series F Cumulative Redeemable Preferred Stock, of which 7,400
shares are authorized and 6,000 shares are outstanding; and
- 8.625% Series H Cumulative Redeemable Preferred Stock, of which 2,600
shares are authorized and none are outstanding.
The following description of preferred stock sets forth general terms and
provisions of any series of preferred stock which Duke's board of directors may
create. The applicable prospectus supplement will describe the specific terms of
a particular series of preferred stock, which may differ from the following
terms. The descriptions of preferred stock in this prospectus and in any
applicable prospectus supplement are qualified in their entirety by reference to
Duke's articles of incorporation and any applicable amendments, which are filed
or incorporated by reference as an exhibit to the registration statement of
which this prospectus is a part.
TERMS
When preferred stock is issued by Duke, it will be fully paid, and Duke will
not be entitled to assess the holders of the preferred stock. The preferred
stock will not have pre-emptive rights.
The specific terms of any series of preferred stock being offered will be
contained in a prospectus supplement, including:
- the title and stated value of the preferred stock;
- the number of shares, their liquidation preference per share and their
purchase price;
- the dividend rate, dividend periods and payment dates or methods of
calculating the payment dates;
- the date on which dividends begin to accrue or accumulate;
- whether the dividends will be cumulative, and any dividend preference;
- the procedures for any auction and remarketing of the preferred stock;
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- any retirement or sinking fund requirement;
- the price and the terms and conditions of any redemption;
- the price and the terms and conditions of any conversion or exchange into
Duke's common stock;
- any listing of the preferred stock on any securities exchange;
- whether interests in the preferred stock will be represented by depositary
shares;
- any voting rights of the series;
- the relative ranking and preferences as to dividends and rights upon
liquidation, dissolution or winding up;
- any limitations on issuing any series of preferred stock ranking senior to
or on a parity with the series of preferred stock as to dividends,
liquidation, dissolution or winding up;
- any limitations on direct or beneficial ownership and restrictions on
transfer; and
- any other specific terms, preferences, rights, limitations or restrictions
of the preferred stock;
RANK
Unless otherwise specified in the prospectus supplement, the preferred stock
will have the following ranking as to dividends, liquidation, dissolution or the
winding up of Duke's affairs:
- senior to all classes or series of Duke's common stock and to all equity
securities ranking junior to such preferred stock;
- on a parity with all equity securities Duke issues, the terms of which
specifically provide that such equity securities rank on a parity with the
preferred stock; and
- junior to all equity securities Duke issues, the terms of which
specifically provide that such equity securities rank senior to the
preferred stock. The term "equity securities" does not include convertible
debt securities.
DIVIDENDS
Preferred stockholders of each series will be entitled to receive cash
dividends, if, as and when approved by Duke's board of directors, out of Duke's
assets legally available for payment to stockholders. The prospectus supplement
will list the applicable dividend rates and distribution dates. Duke will pay
each dividend to shareholders of record according to Duke's share transfer books
on the record date fixed by Duke's board of directors.
The applicable prospectus supplement will specify whether dividends on a
preferred stock series are cumulative or non-cumulative. If dividends are
cumulative, they will accumulate from the date listed in the prospectus
supplement. If dividends are non-cumulative and Duke's board of directors does
not declare a dividend payable on a dividend payment date, then the preferred
stockholders of that series will have no right to receive a dividend, and Duke
will have no obligation to pay an accrued dividend later for the missed dividend
period, whether or not dividends on the series are declared on any future date.
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If preferred stock of a series is outstanding, Duke will not declare or pay
dividends on any other series of its capital stock ranking on a parity with or
junior to those shares as to dividends for any period unless:
- if the series of preferred stock has cumulative dividends, full cumulative
dividends for all past and current dividend periods for the series must
have been declared and paid or declared and funds reserved for payment
before or at the same time as the declaration and payment on the junior
series; or
- if the series of preferred stock does not have cumulative dividends, full
dividends for the current dividend period for the series must have been
declared and paid or declared and funds reserved for payment before or at
the same time as the declaration and payment on the junior series.
When dividends on shares from more than one series of preferred stock
ranking in parity as to dividends are not paid in full (or a sufficient sum for
full payment has not been set apart), all such dividends will be declared pro
rata so that the amount of dividends declared per share in each such series will
in all cases bear the same ratio of accrued dividends owed. Such pro rata
payments per share will not include interest, nor will it include any
accumulated unpaid dividends from prior periods if the dividends in question are
non-cumulative.
Except as provided in the preceding paragraph, Duke will not declare or pay
dividends on, or redeem , purchase or otherwise acquire any shares of, its
common stock or any capital stock ranking junior to a series of preferred stock
(other than dividends paid in or conversions or exchanges for common stock or
other capital stock junior to the preferred stock) unless:
- if the series of preferred stock has cumulative dividends, full cumulative
dividends for all past and current dividend periods for the series must
have been declared and paid or declared and funds reserved for payment
before or at the same time as the declaration and payment on the junior
series; or
- if the series of preferred stock does not have cumulative dividends, full
dividends for the current dividend period for the series must have been
declared and paid or declared and funds reserved for payment before or at
the same time as the declaration and payment on the junior series.
REDEMPTION
If specified in the applicable prospectus supplement, Duke will have the
right to redeem all or any part of the preferred stock in each series at its
option, or the preferred stock will be subject to mandatory redemption.
If the series of preferred stock is subject to mandatory redemption, the
prospectus supplement will specify:
- the number of shares Duke will redeem in each year;
- the date when Duke will commence the redemption; and
- the redemption price per share, which will include all accrued and unpaid
dividends other than non-cumulative dividends for prior dividend periods.
The redemption price may be payable in cash or other property. If the
redemption price for a series of preferred stock is payable only from the net
proceeds of the issuance of Duke's capital shares, the terms of the series may
provide that if no such capital shares have been issued or the net proceeds are
insufficient to pay the full aggregate redemption price, then the preferred
stock will automatically and mandatorily convert into the applicable capital
shares pursuant to conversion provisions specified in the prospectus supplement.
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Notwithstanding the foregoing, Duke will not redeem, purchase or acquire any
shares of a series of preferred stock (other than conversions or exchanges for
common stock or other capital stock junior to the preferred stock) unless:
- in the case of a redemption, all shares of the series of preferred stock
are simultaneously redeemed;
- if the series of preferred stock has cumulative dividends, full cumulative
dividends for all past and current dividend periods for the series must
have been declared and paid or declared and funds reserved for payment; or
- if the series of preferred stock does not have cumulative dividends, full
dividends for the current dividend period for the series must have been
declared and paid or declared and funds reserved for payment.
Duke may, however, purchase or acquire preferred stock of any series to preserve
its status as a REIT or pursuant to an offer made on the same terms to all
holders of preferred stock of that series.
If Duke redeems fewer than all outstanding shares of any series of preferred
stock, it will determine the number of shares to be redeemed and whether it will
redeem shares pro rata by shares held or shares requested to be redeemed, by lot
or in some other manner to be determined by Duke.
Duke will mail redemption notices at least 30 days, but not more than 60
days, before the redemption date to each holder of record of a series of
preferred stock to be redeemed at the address shown on the share transfer books.
Each notice will state:
- the redemption date;
- the number of shares and series of the preferred stock to be redeemed;
- the redemption price;
- the place or places where certificates for such preferred stock are to be
surrendered for payment of the redemption price;
- that dividends on the shares to be redeemed will cease to accrue on such
redemption date; and
- the date upon which the holder's conversion rights, if any, as to such
shares terminate.
If Duke redeems fewer than all outstanding shares of a series of preferred
stock, the notice will also specify the number of shares to be redeemed from
each shareholder. If Duke gives notice of redemption and has set aside the funds
necessary for the redemption in a trust for the benefit of holders of stock
being redeemed, then dividends will cease to accrue from the redemption date and
all rights of the holders of the stock to be redeemed will terminate, except the
right to receive the redemption price.
LIQUIDATION PREFERENCE
If Duke liquidates, dissolves or winds up its affairs, then holders of each
series of preferred stock will be entitled to receive out of Duke's legally
available assets a liquidating distribution in the amount of the liquidation
preference per share for that series as specified in the applicable prospectus
supplement, plus an amount equal to all dividends accrued and unpaid, but not
including amounts from prior periods for non-cumulative dividends, before Duke
makes any distributions to holders of its common stock or any other capital
shares ranking junior to the preferred stock.
Once holders of outstanding preferred stock receive their respective
liquidating distributions, they will have no right or claim to any of Duke's
remaining assets. In the event that Duke's assets are not sufficient to pay the
full liquidating distributions to the holders of all Duke's outstanding
preferred
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stock and all other classes or series of its capital shares ranking on a parity
with its preferred stock, then Duke will distribute its assets to those holders
in proportion to the full liquidating distributions to which they would
otherwise have been entitled.
After Duke has paid liquidating distributions in full to all holders of its
preferred stock, it will distribute its remaining assets among holders of any
other classes or series of capital shares ranking junior to the preferred stock
according to their respective rights and preferences and number of shares. For
this purpose, a consolidation or merger of Duke with any other corporation or
entity, or a sale, lease or conveyance of all or substantially all of Duke's
property or business is not considered a liquidation, dissolution or winding up
of Duke's affairs.
VOTING RIGHTS
Holders of preferred stock will not have any voting rights, except as
described in this section or specified in a prospectus supplement or as
otherwise required by law.
Whenever dividends on any shares of preferred stock have not been paid for
six or more consecutive quarterly periods, the holders of such preferred stock
are entitled to vote separately as a class with all other holders of preferred
stock on which such dividends have not been paid for the election of two
additional directors of Duke. The holders of record of at least 10% of any
series of preferred stock on which dividends have not been so paid are entitled
to call a special meeting to elect these additional directors unless Duke
receives the request less than 90 days before the date of the next annual or
special meeting of shareholders. Whether or not such a special meeting is
called, the holders of a series of preferred stock on which dividends have not
been so paid are entitled to vote for the additional directors at the next
annual meeting of shareholders and at each subsequent annual meeting until:
- if the series of preferred stock has a cumulative dividend, Duke has fully
paid all unpaid dividends on the shares for the past dividend periods and
the then current dividend period, or Duke has declared the unpaid
dividends and set apart a sufficient sum for their payment; or
- if the series of preferred stock does not have a cumulative dividend, Duke
has fully paid four consecutive quarterly dividends, or Duke has declared
such dividends and set apart a sufficient sum for their payment.
In any case in which the holders of preferred stock elect additional directors,
the number of directors on Duke's board of directors will be increased by two.
Unless the applicable prospectus supplement provides otherwise, the holders
of at least two-thirds of the shares of each series of preferred stock
outstanding must approve before Duke can take any of the following actions:
- authorize, create or increase the authorized or issued amount of any class
or series of capital stock ranking prior to such series of preferred stock
as to dividends or liquidation distributions;
- reclassify any authorized capital stock into shares ranking prior to such
series of preferred stock as to dividends or liquidation distributions;
- issue any obligation or security convertible into or evidencing the right
to purchase any shares ranking prior to such series of preferred stock as
to dividends or liquidation distributions; or
- amend, alter or repeal Duke's articles of incorporation (including the
provision establishing such series of preferred stock) whether by merger,
consolidation or other event, in a manner that materially and adversely
affects any right, preference, privilege or voting power of the preferred
stock, unless the preferred stock remains outstanding and its terms are
not materially changed, even if Duke is not the surviving entity in a
merger, consolidation or other event.
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The following events do not materially and adversely affect a series of
preferred stock for this purpose:
- an increase in the number of authorized shares of preferred stock;
- the creation or issuance of any other series of preferred stock; or
- an increase in the number of authorized shares in such series of preferred
stock or any other series of preferred stock ranking the same as or junior
to the preferred stock of such series as to dividends or liquidation
distributions.
The holders of a series of preferred stock will have no voting rights under
these provisions, however, if Duke redeems or calls for redemption all
outstanding shares of the series and deposits sufficient funds in a trust to
effect the redemption on or before the time the act occurs requiring the vote.
Under Indiana law, holders of each series of preferred stock are entitled to
vote as a class upon any proposed amendment to Duke's articles of incorporation,
if the amendment would:
- increase or decrease the aggregate number of authorized shares of such
series;
- effect an exchange or reclassification of all or part of the shares of the
series into shares of another series;
- effect an exchange or reclassification or create the right of exchange of
all or part of the shares of another class or series into shares of the
series;
- change the designation, rights, preferences or limitations of all or a
part of the shares of the series;
- change the shares of all or part of the series into a different number of
shares of the same series;
- create a new series having rights or preferences with respect to
distributions or dissolution that are prior, superior or substantially
equal to the shares of the series;
- increase the rights, preferences or number of authorized shares of any
class or series that, after giving effect to the amendment, have rights or
preferences with respect to distributions or to dissolution that are
prior, superior or substantially equal to the shares of the series;
- limit or deny an existing preemptive right of all or part of the shares of
the series; or
- cancel or otherwise affect rights to distributions or dividends that have
accumulated but have not yet been declared on all or part of the shares of
the series.
CONVERSION RIGHTS
You will find the terms and conditions, if any, upon which any series of
preferred stock is convertible into shares of common stock in the applicable
prospectus supplement, including:
- the number of shares of common stock into which the shares of preferred
stock are convertible;
- the conversion price or manner by which Duke will calculate the conversion
price;
- the conversion period;
- whether conversion will be at the option of the holders of the preferred
stock or Duke;
- the events requiring an adjustment of the conversion price; and
- provisions affecting conversion in the event of the redemption of such
series of preferred stock.
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SHAREHOLDER LIABILITY
Indiana law provides that no shareholder, including holders of preferred
stock, will be personally liable for Duke's acts and obligations and that Duke's
funds and property are the only recourse for its acts or obligations.
RESTRICTIONS ON OWNERSHIP
As discussed below under "Description of Common Stock -- Certain Provisions
Affecting Change of Control," for Duke to qualify as a REIT under the Internal
Revenue Code, not more than 50% in value of its outstanding capital shares may
be owned, directly or indirectly, by five or fewer individuals ( including
certain entities) during the last half of a taxable year. To assist it in
meeting this requirement, Duke may take certain actions to limit the direct or
indirect beneficial ownership by a single person of its outstanding equity
securities, including any of its preferred stock. Therefore, the amendment to
Duke's articles of incorporation creating a series of preferred stock may
contain provisions restricting the ownership and transfer of the preferred
stock. The applicable prospectus supplement will specify any additional
ownership limitation relating to a series of preferred stock.
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for the preferred stock will be set forth
in the applicable prospectus supplement.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
Duke may issue receipts for depositary shares, each of which will represent
a fractional interest of a share of a particular series of preferred stock, as
specified in the applicable prospectus supplement. Shares of preferred stock of
each series represented by depositary shares will be deposited under a separate
deposit agreement among Duke, a depositary (a United States bank or trust
company having a combined capital and surplus of at least $50,000,000) and the
holders from time to time of the depositary receipts. Subject to the terms of
the applicable deposit agreement, each owner of a depositary receipt will be
entitled, in proportion to their respective fractional interests, to all the
rights and preferences of the preferred stock represented by such depositary
shares, including dividend, voting, conversion, redemption and liquidation
rights.
The depositary shares will be evidenced by depositary receipts issued under
the deposit agreement. Immediately after Duke issues and delivers its preferred
stock to a preferred stock depositary, it will issue, on its own behalf, the
depositary receipts. You may obtain copies of the applicable deposit agreement
and depositary receipts from Duke upon request.
The statements in this section are summaries of certain anticipated
provisions and are subject to, and qualified in their entirety by reference to,
all of the provisions of the applicable deposit agreement and related depositary
receipts.
DIVIDENDS AND OTHER DISTRIBUTIONS
The depositary will distribute all cash dividends or other cash
distributions on the preferred stock to the record holders of depositary shares
in proportion to the number of depositary receipts owned by such holders.
Holders of depositary shares have certain obligations to file proofs,
certificates and other information and to pay certain charges and expenses of
the depositary in connection with distributions.
If a distribution on the preferred shares is other than in cash and it is
feasible for the depositary to distribute the property it receives, the
depositary will distribute property it received to the record
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holders of depositary shares entitled to such property, subject to certain
obligations of holders to file proofs, certificates and other information and to
pay certain charges and expenses to the depositary. If such a distribution is
not feasible and Duke approves, the depositary may sell the property and
distribute the net proceeds from the sale to the holders of the depositary
shares.
The depositary will not make any distribution on any depositary share to the
extent that it represents preferred stock which has been converted or exchanged.
WITHDRAWAL OF STOCK
Unless depositary shares have previously been called for redemption or
converted, a holder of depositary shares is entitled to surrender the depositary
receipts at the corporate trust office of the depositary in exchange for whole
or fractional shares of the related preferred stock represented by the
depositary shares together with any money or other property represented by the
depositary shares, all as specified in the applicable prospectus supplement.
Once depositary shares have been so exchanged, the holder will not be entitled
to redeposit the preferred shares and receive depositary shares again. If a
depositary receipt presented for exchange into preferred stock represents more
shares of preferred stock than the number to be withdrawn, the depositary is
required to deliver a new depositary receipt for the excess number of depositary
shares.
REDEMPTION OF DEPOSITARY SHARES
Whenever Duke redeems shares of preferred stock held by a depositary, the
depositary will redeem on that same date the same number of depositary shares
representing the preferred stock redeemed, provided Duke paid in full to the
depositary the redemption price of the preferred shares plus an amount equal to
any accrued and unpaid dividends up to the date fixed for redemption. The
redemption price per depositary share will be equal to the applicable fraction
of the redemption price and any other amounts per share payable with respect to
the related preferred stock. If fewer than all the depositary shares are to be
redeemed, Duke and the depositary will select the depositary shares to be
redeemed as nearly pro rata as may be practicable without creating fractional
depositary shares or by any other equitable method determined by Duke that
preserves its REIT status.
On the redemption date:
- all dividends relating to the shares of preferred stock called for
redemption will cease to accrue;
- the depositary shares called for redemption will no longer be deemed
outstanding; and
- all rights of the holders of the depositary shares to be redeemed will
cease, except the right to receive any money payable upon the redemption
and any money or other property to which the holders of such depositary
shares are entitled upon redemption and surrender to the depositary.
VOTING OF THE PREFERRED STOCK
When a depositary receives notice regarding a meeting in which holders of
the related preferred stock are entitled to vote, it will mail that information
to the holders of depositary shares. Each record holder of depositary shares on
the record date will then be entitled to instruct the depositary to exercise its
voting rights for the amount of preferred stock represented by that holder's
depositary shares. The depositary will vote in accordance with these
instructions, and Duke will agree to take all reasonable action which the
depositary may deem necessary to enable the depositary to do so. The depositary
will abstain from voting to the extent it does not receive specific instructions
from holders of depositary shares. A depositary will not be responsible for any
failure to carry out any instruction to vote, or for the manner or effect of any
such vote made, as long as any such action or non-action is in good faith and
does not result from negligence or willful misconduct of the depositary.
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LIQUIDATION PREFERENCE
In the event of Duke's voluntary or involuntary liquidation, dissolution or
winding up, a holder of depositary shares will be entitled to the fraction
represented by the depositary shares of the liquidation preference of the
related preferred stock as set forth in the applicable prospectus supplement.
CONVERSION OF PREFERRED STOCK
Depositary shares will not themselves be convertible into common stock or
any other of Duke's securities or property. If the related preferred stock is
convertible, however, and it is specified in the applicable prospectus
supplement, holders of depositary shares may surrender them to the applicable
depositary with written instructions that Duke is to convert the preferred stock
represented by their depositary shares into whole shares of common stock, other
shares of Duke's preferred stock or other shares of stock, as applicable. Duke
will agree that upon receiving such instructions and any amounts payable in
connection with such a conversion, it will convert the preferred stock using the
same procedures as those provided for delivery of preferred stock. If the
depositary shares are to be converted in part only, the depositary will issue a
new depositary receipt for any depositary shares not converted. Duke will not
issue fractional shares of common stock upon conversion. If a conversion will
result in a fractional share being issued, Duke will pay an amount in cash equal
to the value of the fractional interest based upon the closing price of the
common stock on the last business day prior to the conversion.
AMENDMENT AND TERMINATION OF A DEPOSIT AGREEMENT
Duke and the depository may amend any form of depositary receipts evidencing
depositary shares and any provision of a deposit agreement. Unless the amendment
has been approved by the existing holders of at least two-thirds of the
applicable depositary shares then outstanding, however, Duke and the depositary
may not make any amendment that:
- would materially and adversely alter the rights of the holders of
depositary shares; or
- would be materially and adversely inconsistent with the rights granted to
the holders of the related preferred stock.
Subject to certain anticipated exceptions in the deposit agreements and
except in order to comply with the law, no amendment may impair the right of any
holders of depositary shares to surrender their depositary receipts with
instructions to deliver to the holders the related preferred stock and all money
and other property represented by the depositary shares. Every holder of an
outstanding depositary receipt at the time any such amendment becomes effective
who continues to hold the depositary receipt will be deemed to consent and agree
to the amendment and to be bound by the applicable amended deposit agreement.
Duke may terminate a deposit agreement upon not less than 30 days' prior
written notice to the applicable depositary if:
- the termination is necessary to preserve Duke's status as a REIT; or
- a majority of each series of preferred stock affected by the termination
consents to the termination.
Upon a termination of a deposit agreement, holders of the applicable depositary
shares are entitled to surrender their depositary shares and receive in exchange
the number of whole or fractional shares of preferred stock and any other
property represented by the depositary shares. Duke will agree that if a deposit
agreement is terminated to preserve its status as a REIT, then it will use its
best efforts to list the preferred stock issued upon surrender of the related
depositary shares on a national securities exchange.
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In addition, a deposit agreement will automatically terminate if:
- all outstanding depositary shares subject to the agreement have been
redeemed;
- there has been a final distribution of the related preferred stock in
connection with any liquidation, dissolution or winding up of Duke, and
the distribution has been distributed to the holders of the depositary
shares; or
- each share of the related preferred stock has been converted into Duke
stock not represented by depositary shares.
CHARGES OF A DEPOSITARY
Duke will pay all transfer and other taxes and governmental charges arising
solely from the existence of a deposit agreement. In addition, Duke will pay the
fees and expenses of a depositary in connection with the performance of its
duties under a deposit agreement. However, holders of depositary receipts will
pay the fees and expenses of a depositary for any duties requested by such
holders to be performed which are outside those expressly provided for in the
applicable deposit agreement.
RESIGNATION AND REMOVAL OF DEPOSITARY
A depositary may resign at any time by delivering to Duke notice of its
election to resign, and Duke may at any time remove a depositary. Any such
resignation or removal would take effect upon the appointment of a successor
depositary. Duke will appoint a successor depositary within 60 days after
delivery of the notice of resignation or removal. The successor must be a bank
or trust company with its principal office in the United States and a combined
capital and surplus of at least $50 million.
MISCELLANEOUS
A depositary will be required to forward to the holders of depositary shares
any reports and communications from Duke with respect to the related preferred
stock.
Neither a depositary nor Duke will be liable if it is prevented or delayed
by law or any circumstances beyond its control from performing its obligations
under a deposit agreement. The obligations of Duke and a depositary under a
deposit agreement will be limited to performing their duties in good faith and
without negligence in regard to voting of preferred stock, gross negligence or
willful misconduct. Neither Duke nor any applicable depositary will be obligated
to prosecute or defend any legal proceeding with respect to any depositary
receipts, depositary shares or shares of related preferred stock unless they are
furnished with satisfactory indemnity.
Duke and any depositary may rely on the written advice of counsel or
accountants, or information provided by persons presenting shares of preferred
stock for deposit, holders of depositary receipts or other persons they believe
in good faith to be competent to give such information, and on documents they
believe in good faith to be genuine and signed by a proper party.
In the event a depositary receives conflicting claims, requests or
instructions from any holders of depositary shares and Duke, the depositary will
be entitled to act on the claims, requests or instructions received from Duke.
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DESCRIPTION OF COMMON STOCK
GENERAL
Duke's authorized capital stock includes 250,000,000 shares of common stock,
$.01 par value per share. Each outstanding share of common stock entitles the
holder to one vote on all matters presented to shareholders for a vote. Holders
of common stock have no preemptive rights. As of March 31, 2000, there were
126,463,274 shares of common stock outstanding, 19,187,880 shares reserved for
issuance upon exchange of outstanding units and 5,865,475 shares reserved for
issuance upon the exercise of outstanding stock options.
Duke's shares of common stock currently outstanding are listed on the New
York Stock Exchange. Duke will apply to the NYSE to list additional shares of
common stock to be sold pursuant to any prospectus supplement, and Duke
anticipates that any such shares will be listed on the NYSE.
Duke's articles of incorporation provide for the board of directors to be
divided into three classes of directors, with each class containing as nearly as
possible one-third of the directors. The class of directors elected at each
annual shareholders' meeting will begin a three-year term, and the directors in
the other two classes will continue in office. These classified board provisions
in the articles of incorporation may make it more difficult to cause a change of
control of Duke or to remove incumbent management. Holders of common stock have
no right to cumulative voting for the election of directors. Consequently, at
each annual shareholders' meeting, the holders of a majority of the shares of
common stock voting are able to elect all of the successors of the class of
directors whose term expires at that meeting. Directors may be removed only for
cause and only with the affirmative vote of the holders of a majority of the
shares of common stock entitled to vote in the election of directors.
All shares of common stock issued will be duly authorized, fully paid, and
non-assessable. Distributions may be paid to the holders of common stock if and
when declared by Duke's board of directors out of funds legally available for
such distributions. Duke intends to continue to pay quarterly dividends.
Under Indiana law, shareholders are generally not liable for Duke's debts or
obligations. If Duke is liquidated, after payment or provision for all of Duke's
known debts and liabilities and any preferential distributions required to be
made to holders of preferred stock, each outstanding share of common stock will
be entitled to participate pro rata in the remaining assets.
CERTAIN PROVISIONS AFFECTING CHANGE OF CONTROL
GENERAL. Under Indiana law, shareholders holding a majority of the shares
voting must approve for Duke to merge with or sell all or substantially all of
its assets. Duke's articles of incorporation also contain provisions which may
discourage certain types of transactions involving an actual or threatened
change of control, including:
- a requirement that certain mergers, sales of assets, liquidations or
dissolutions, or reclassifications or recapitalizations involving persons
owning 10% or more of Duke's capital stock:
- be approved by a vote of the holders of 80% of the issued and
outstanding shares of Duke's capital stock; or
- be approved by three-fourths of the continuing directors; or
- provide for payment to shareholders for their shares of at least a
specified price;
- a requirement that any amendment or alteration of certain provisions of
the articles of incorporation affecting change of control be approved by
the holders of 80% of Duke's issued and outstanding capital stock; and
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- a classified board of directors and a limitation on removal of directors
to removal for cause as described above.
The partnership agreement for the Operating Partnership also contains
provisions which could discourage transactions involving an actual or threatened
change of control of Duke, including:
- a requirement that holders of at least 90% of the outstanding partnership
units held by Duke and other unit holders approve any voluntary sale,
exchange, merger, consolidation or other disposition of all or
substantially all of the assets of the Operating Partnership in one or
more transactions other than a disposition occurring upon a financing or
refinancing of the Operating Partnership;
- a restriction against any assignment or transfer by Duke of its interest
in the Operating Partnership; and
- a requirement that holders of more than 90% of the partnership units
approve:
- any merger, consolidation or other combination of Duke with another
entity, unless after the transaction substantially all of the assets of
the surviving entity are contributed to the Operating Partnership in
exchange for units;
- any sale of all or substantially all of Duke's assets; or
- any reclassification or recapitalization or change of outstanding
shares of common stock other than certain changes in par value, stock
splits, stock dividends or combinations.
Duke's directors who are not officers or employees and who do not hold
partnership units will vote on these matters.
OWNERSHIP LIMITS. For Duke to qualify as a REIT under the Internal Revenue
Code:
- no more than 50% in value of Duke's outstanding capital shares may be
owned, directly or indirectly, by five or fewer individuals (including
certain entities) during the last half of a taxable year or during a
proportionate part of a shorter taxable year; and
- Duke's common stock must be beneficially owned by 100 or more persons
during at least 335 days of a taxable year or during a proportionate part
of a shorter taxable year.
Because Duke expects to continue to qualify as a REIT, its articles of
incorporation contain restrictions on the acquisition of common stock intended
to ensure compliance with these requirements.
Specifically, Duke's articles of incorporation contain restrictions which:
- authorize but do not require Duke's board of directors to refuse to give
effect to a transfer of common stock which, in its opinion, might
jeopardize the status of Duke as a REIT;
- nullify any attempted acquisition of shares which would result in the
disqualification of Duke as a REIT;
- give the board of directors the authority to take any actions it deems
advisable to enforce the provision, which might include refusing to give
effect to or seeking to enjoin a transfer which might jeopardize Duke's
status as a REIT; and
- require any shareholder to provide Duke such information regarding his or
her direct and indirect ownership of common stock as Duke may reasonably
require.
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for the common stock is American Stock
Transfer & Trust Company, New York, New York.
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FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of material federal income tax considerations
relevant to us and to an investor in the debt and equity securities offered by
this prospectus. You should be aware of the following about this summary:
- It is based upon current law.
- It does not cover all possible tax considerations.
- It does not include a detailed description of any state, local, or foreign
tax considerations.
- It does not describe all of the aspects of federal income taxation that
may be relevant to you in light of your particular circumstances.
- It does not describe all of the aspects of Federal income taxation that
may be relevant to certain types of security holders (including insurance
companies, tax exempt entities, financial institutions or broker dealers,
foreign corporations and persons who are not citizens or residents of the
United States) subject to special treatment under the federal income tax
laws.
You should consult with your own tax advisors regarding federal, state,
local and other tax laws applicable to your specific situation as well as any
potential changes in tax laws. As used in this section, the term "Duke" refers
solely to Duke Realty Corporation without its subsidiaries, and the term
"Operating Partnership" refers solely to Duke Realty Limited Partnership without
its subsidiaries.
TAXATION OF DUKE
GENERAL. Duke expects to continue to be taxed as a REIT for federal income
tax purposes. Duke's management believes that Duke was organized and has
operated in a manner that meets the requirements for qualification and taxation
as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), and
that Duke intends to continue to operate in such a manner. We cannot assure you,
however, that Duke will continue to operate in a manner that will allow it to
remain qualified as a REIT.
In the opinion of Bose McKinney & Evans LLP, which has acted as our counsel,
if the assumptions and representations referred to below are true, Duke's
proposed methods of operation and the proposed methods of operation of the
Operating Partnership and Duke Realty Services Limited Partnership (the
"Services Partnership") since and including 1994 have permitted and will permit
Duke to continue to qualify to be taxed as a REIT for all years since and
including 1994 and for Duke's current and subsequent taxable years. This opinion
is:
- based on an assumption that Duke was organized in conformity with and has
satisfied the requirements for qualification and taxation as a REIT under
the Code for each of its taxable years from and including the first year
for which it made the election to be taxed as a REIT through 1993;
- based upon certain assumptions relating to the organization and operation
of Duke Services, Inc. ("DSI"), the Operating Partnership and the Services
Partnership;
- conditioned upon certain representations made by Duke's personnel and
affiliates as to certain factual matters relating to Duke's past
operations and its intended manner of future operation and the intended
manner of future operation of the Operating Partnership and the Services
Partnership; and
- based upon Duke's receipt of a letter ruling from the IRS dated
September 30, 1994, which concluded that the Operating Partnership's and
Duke's distributive shares of the gross income of
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the Services Partnership will be in proportion to the respective
percentage shares of the capital interests of the partners of the Services
Partnership.
Bose McKinney & Evans LLP is not aware of any facts or circumstances which are
inconsistent with these assumptions and representations. Unlike a tax ruling, an
opinion of counsel is not binding upon the IRS, and we cannot be sure that the
IRS will not challenge Duke's status as a REIT for Federal income tax purposes.
Duke's qualification and taxation as a REIT has depended and will depend upon,
among other things, its ability to meet on a continuing basis, through ownership
of assets, actual annual operating results, receipt of qualifying real estate
income, distribution levels and diversity of stock ownership, the various
qualification tests imposed under the Internal Revenue Code discussed below.
Bose McKinney & Evans LLP will not review compliance with these tests on a
periodic or continuing basis. Accordingly, neither Bose McKinney & Evans LLP nor
we can assure you that Duke will continue to satisfy these tests. See "Taxation
of Duke -- Failure to Qualify."
The following is a general summary of the Code sections which govern the
federal income tax treatment of a REIT and its shareholders. These sections of
the Code are highly technical and complex. This summary is qualified in its
entirety by the applicable Code provisions, Treasury Regulations, and
administrative and judicial interpretations as currently in effect.
So long as Duke qualifies for taxation as a REIT and distributes at least
95% of its REIT taxable income (computed without regard to net capital gains or
the dividends paid deduction) for its taxable year to its shareholders, Duke
will generally not be subject to federal income tax with respect to income which
it distributes to its shareholders. However, Duke may be subject to federal
income tax under certain circumstances, including taxes at regular corporate
rates on any undistributed REIT taxable income, the "alternative minimum tax" on
its items of tax preference, and taxes imposed on income and gain generated by
certain extraordinary transactions.
REQUIREMENTS FOR QUALIFICATION. The Code defines a REIT as a corporation,
trust or association:
(1) which is managed by one or more trustees or directors;
(2) the beneficial ownership of which is evidenced by transferable shares or
by transferable certificates of beneficial interest;
(3) which would be taxable as a domestic corporation but for Sections 856
through 859 of the Code;
(4) which is neither a financial institution nor an insurance company
subject to certain provisions of the Code;
(5) which has the calendar year as its taxable year;
(6) the beneficial ownership of which is held by 100 or more persons;
(7) during the last half of each taxable year not more than 50% in value of
the outstanding stock of which is owned, directly or indirectly, by five
or fewer individuals (as defined in the Code to include certain
entities); and
(8) which meets certain income and assets tests, described below.
We believe Duke currently satisfies all requirements.
INCOME TESTS. In order to qualify as a REIT, there are two gross income
tests that must be satisfied annually. For purposes of these tests, Duke is
deemed to be entitled to a share of the gross
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income attributable to its proportionate interest in any partnerships in which
it holds an interest. The tests are:
- First, at least 75% of Duke's gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived directly or
indirectly from investments relating to real property (including "rents
from real property," gain from the sale of real property and, in certain
circumstances, interest) or from qualified types of temporary investments.
- Second, at least 95% of Duke's gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived from the
same items which qualify under the 75% income test or from dividends,
interest and gain from the sale or disposition of stock or securities, or
from any combination of the foregoing.
Rents Duke receives will qualify as "rents from real property" in satisfying
the gross income tests for a REIT described above only if several conditions
(related to the relationship of the tenant to Duke, the method of determining
the rent payable and nature of the property leased) are met. Duke does not
anticipate receiving rents in excess of a minimal amount that fail to meet these
conditions. Finally, for rents received to qualify as "rents from real
property," Duke generally must not operate or manage the property or furnish or
render services to tenants, other than through an "independent contractor" that
is adequately compensated and from whom Duke derives no income. However, Duke
may perform services "usually or customarily rendered" in connection with the
rental of space for occupancy only and not otherwise considered "rendered to the
occupant" ("Permissible Services").
Duke provides certain management, development, construction and other tenant
related services with respect to our properties through the Operating
Partnership, which is not an independent contractor. Our management believes
that the material services provided to tenants by the Operating Partnership are
Permissible Services. To the extent services to tenants do not constitute
Permissible Services, such services are performed by independent contractors.
Under the Taxpayer Relief Act of 1997 (the "1997 Act"), in determining
whether a REIT satisfies the income tests, a REIT's rental income from a
property will not cease to qualify as "rents from real property" merely because
the REIT performs services for a tenant other than permitted customary services
if the amount that the REIT is deemed to have received as a result of performing
impermissible services does not exceed one percent of all amounts received
directly or indirectly by the REIT with respect to such property. The amount
that a REIT will be deemed to have received for performing impermissible
services is at least 150% of the direct cost to the REIT of providing those
services.
Duke derives a portion of its income from the Operating Partnership's
interest as a limited partner in the Services Partnership and its ownership of
DSI, which is a general partner of the Services Partnership. The Services
Partnership receives fees for real estate services with respect to properties
that are not owned directly by the Operating Partnership and fees in
consideration for the performance of management and administrative services with
respect to properties that are not entirely owned by the Operating Partnership.
All or a portion of such fees will not qualify as "rents from real property" for
purposes of the 75% or 95% gross income tests. Pursuant to Treasury Regulations,
a partner's capital interest in a partnership determines its proportionate
interest in the partnership's gross income from partnership assets for purposes
of the 75% and 95% gross income tests. For this purpose, the capital interest of
a partner is determined by dividing its capital account by the sum of all
partners' capital accounts.
The partnership agreement of the Services Partnership provides, however, for
varying allocations of income which differ from capital interests, subject to
certain limitations on the aggregate amount of gross income which may be
allocated to the Operating Partnership and DSI. Duke has obtained a letter
ruling from the IRS that allocations according to capital interests are proper
for applying the 75% and
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95% gross income tests. Thus, for purposes of these gross income tests, the
Services Partnership allocates its gross income to the Operating Partnership and
DSI based on their capital interests in the Services Partnership. Although
certain of the fees allocated from the Services Partnership do not qualify under
the 75% or 95% gross income tests as "rents from real property," we believe that
the aggregate amount of such fees (and any other non-qualifying income)
allocated to Duke in any taxable year has not and will not cause Duke to exceed
the limits on non-qualifying income under the 75% or 95% gross income tests
described above.
If Duke fails to satisfy one or both of the 75% or 95% gross income tests
for any taxable year, Duke may nevertheless qualify as a REIT for such year if
it is entitled to relief under certain provisions of the Code. It is not
possible, however, to state whether in all circumstances Duke would be entitled
to the benefit of these relief provisions. Even if these relief provisions
apply, a tax would be imposed on certain excess net income.
ASSET TESTS. In order for Duke to maintain its qualification as a REIT, at
the close of each quarter of its taxable year, it must also satisfy three tests
relating to the nature of its assets. These tests are:
- First, at least 75% of the value of its total assets must be represented
by "real estate assets," cash, cash items, and government securities.
- Second, not more than 25% of its total assets may be represented by
securities other than those in the 75% assets class.
- Third, of the assets held in securities other than those in the 75% assets
class, the value of any one issuer's securities Duke owns may not exceed
5% of the value of its total assets, and it may not own more than 10% of
any one issuer's outstanding voting securities (excluding securities of a
qualified REIT subsidiary as defined in the Code or another REIT).
Duke is deemed to directly hold its proportionate share of all real estate
and other assets of the Operating Partnership as well as its proportionate share
of all assets deemed owned by the Operating Partnership and DSI through their
ownership of partnership interests in the Services Partnership and other
partnerships. As a result, Duke's management believes that more than 75% of its
assets are real estate assets. In addition, Duke's management does not expect it
to hold:
- any securities representing more than 10% of any one issuer's voting
securities other than DSI, which is a qualified REIT subsidiary; nor
- securities of any one issuer exceeding 5% of the value of Duke's gross
assets (determined in accordance with generally accepted accounting
principles).
ANNUAL DISTRIBUTION REQUIREMENTS. In order to qualify as a REIT, Duke
generally must distribute dividends (other than capital gain dividends) to its
shareholders in an amount at least equal to:
- the sum of:
- 95% of its "REIT taxable income" (computed without regard to the
dividends paid deduction and its net capital gain); and
- 95% of the net income (after tax), if any, from foreclosure property;
- minus the sum of certain items of non-cash income.
To the extent that Duke does not distribute all of its net capital gain or
distribute at least 95%, but less than 100%, of its "REIT taxable income," as
adjusted, Duke will be subject to tax on the undistributed amount at regular
capital gains and ordinary corporate tax rates. Furthermore, Duke will be
subject to regular capital gains and ordinary corporate tax rates on
undistributed income and also may be subject
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to a 4% excise tax on undistributed income in certain events if it should fail
to distribute during each calendar year at least the sum of:
- 85% of its REIT ordinary income for such year;
- 95% of its REIT net capital gain income for such year; and
- any undistributed taxable income from prior periods.
Under the 1997 Act, certain non-cash income, including income from
cancellation of indebtedness and original issue discount, will be excluded from
income in determining the amount of dividends that a REIT is required to
distribute. In addition, a REIT may elect to retain and pay income tax on any
net long-term capital gains and require its shareholders to include such
undistributed net capital gains in their income. If a REIT made such an
election, the REIT's shareholders would receive a tax credit attributable to
their share of capital gains tax paid by the REIT on the undistributed net
capital gain that was included in the shareholders' income, and such
shareholders would receive an increase in the basis of their shares in the
amount of undistributed net capital gain included in their income reduced by the
amount of the credit.
Duke believes that it has made and intends to continue to make timely
distributions sufficient to satisfy the annual distribution requirements. In
this regard, the partnership agreement of the Operating Partnership authorizes
Duke, as general partner, to take such steps as may be necessary to cause the
Operating Partnership to distribute to its partners an amount sufficient to
permit Duke to meet these distribution requirements. It is possible, however,
that from time to time Duke may not have sufficient cash or other liquid assets
to meet the 95% distribution requirement due primarily to the expenditure of
cash for nondeductible expenses such as principal amortization or capital
expenditures. In such event, Duke may borrow or may cause the Operating
Partnership to arrange for short term or other borrowing to permit the payment
of required dividends or pay dividends in the form of taxable stock dividends.
If the amount of nondeductible expenses exceeds non-cash deductions, the
Operating Partnership may refinance its indebtedness to reduce principal
payments and borrow funds for capital expenditures.
FAILURE TO QUALIFY. If Duke fails to qualify for taxation as a REIT in any
taxable year, it will be subject to tax (including any applicable corporate
alternative minimum tax) on its taxable income at regular corporate rates.
Distributions to shareholders in any year in which Duke fails to qualify will
not be required to be made and, if made, will not be deductible by Duke. Unless
entitled to relief under specific statutory provisions, Duke also will be
disqualified from taxation as a REIT for the four taxable years following the
year during which qualification was lost. It is not possible to state whether in
all circumstances Duke would be entitled to such statutory relief. The 1997 Act
contains a number of technical provisions that reduce the risk that a REIT will
inadvertently fail to qualify as a REIT.
TAX ASPECTS OF DUKE'S INVESTMENTS IN PARTNERSHIPS
EFFECT OF TAX STATUS OF OPERATING PARTNERSHIP AND SERVICES PARTNERSHIP AND
OTHER PARTNERSHIPS ON REIT QUALIFICATION. All of Duke's investments are through
DSI and the Operating Partnership, which in turn hold interests in other
partnerships, including the Services Partnership. We believe that the Operating
Partnership, and each other partnership in which it holds an interest, are
properly treated as partnerships for tax purposes (and not as an association
taxable as a corporation). If, however, the Operating Partnership were treated
as an association taxable as a corporation, Duke would cease to qualify as a
REIT.
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TAX ALLOCATIONS WITH RESPECT TO THE PROPERTIES. The Operating Partnership
was formed by way of contributions of appreciated property (including certain of
the properties it currently owns) to the Operating Partnership. When property is
contributed to a partnership in exchange for an interest in the partnership, the
partnership generally takes a carryover basis in that property for tax purposes
equal to the adjusted basis of the contributing partner in the property, rather
than a basis equal to the fair market value of the property at the time of
contribution (this difference is referred to as "Book Tax Difference"). The
partnership agreement of the Operating Partnership requires allocations of
income, gain, loss and deduction with respect to a contributed property be made
in a manner consistent with the special rules of Section 704(c) of the Code and
the associated regulations, which will tend to eliminate the Book Tax
Differences with respect to the contributed properties over the life of the
Operating Partnership. However, because of certain technical limitations, the
special allocation rules of Section 704(c) may not always entirely eliminate the
Book Tax Differences on an annual basis or with respect to a specific taxable
transaction such as a sale. Thus, the carryover basis of the contributed
properties in the hands of the Operating Partnership could cause the following
effects:
- Duke could be allocated lower amounts of depreciation and other deductions
for tax purposes than would be allocated to it if all of the Operating
Partnership's properties were to have a tax basis equal to their fair
market value at the time of contribution.
- Duke could possibly be allocated taxable gain in the event of a sale of
such contributed properties in excess of the economic or book income
allocated to it as a result of such sale.
These principles also apply in determining Duke's earnings and profits for
purposes of determining the portion of distributions taxable as dividend income.
The application of these rules over time may result in a higher portion of
distributions being taxed as dividends than would have occurred had the
Operating Partnership purchased its interests in its properties at their agreed
values.
TAXATION OF TAXABLE DOMESTIC SHAREHOLDERS
As long as Duke qualifies as a REIT, dividend distributions made to its
taxable domestic shareholders out of current or accumulated earnings and profits
(and not designated as capital gain dividends) will be taken into account by
them as ordinary income and will not be eligible for the dividends received
deduction for corporations. In addition, any dividend Duke declares in October,
November or December of any year payable to a shareholder of record on a
specified date in any such month will be treated as both paid by Duke and
received by the shareholder on December 31 of such year, provided that Duke
actually pays the dividend during January of the following calendar year.
Distributions in excess of current and accumulated earnings and profits will
not be taxable to a holder to the extent that they do not exceed the adjusted
basis of the holder's shares, but rather will reduce the adjusted basis of such
shares. To the extent that such distributions exceed the adjusted basis of a
holder's shares, they will be included in income as long-term capital gain (or
short-term capital gain if the shares have been held for one year or less)
assuming the shares are a capital asset in the hands of the holder. Shareholders
may not include in their individual income tax returns any of Duke's net
operating losses or capital losses.
In general, a domestic shareholder will realize capital gain or loss on the
disposition of common stock equal to the difference between (1) the amount of
cash and the fair market value of any property received on such disposition and
(2) the shareholder's adjusted basis of such common stock. Under the 1997 Act,
as revised by the recently-enacted IRS Restructuring Act, for gains realized
after December 31, 1997, and subject to certain exceptions:
- the maximum rate of tax on net capital gains of individuals, trusts and
estates from the sale or exchange of assets held for more than 12 months
has been reduced to 20%;
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- the maximum rate of tax on net capital gains of individuals, trusts and
estates from the sale or exchange of assets is reduced to 18% for assets
acquired after December 31, 2000 and held for more than five years;
- for taxpayers who would be subject to a maximum tax rate of 15%, the rate
on net capital gains is reduced to 10%;
- for taxpayers who would be subject to a maximum tax rate of 15%, effective
for taxable years commencing after December 31, 2000, the rate is reduced
to 8% for assets held for more than five years;
- the maximum rate for net capital gains attributable to the sale of
depreciable real property held for more than 12 months is 25% to the
extent of the deductions for depreciation with respect to such property;
and
- long-term capital gain Duke allocates to a shareholder will be subject to
the 25% rate to the extent that the gain does not exceed depreciation on
real property the Operating Partnership sells.
The taxation of capital gains of corporations was not changed by the 1997 Act or
the IRS Restructuring Act. Loss upon a sale or exchange of common stock by a
shareholder who has held such common stock for six months or less (after
applying certain holding period rules) will be treated as a long-term capital
loss to the extent of distributions from Duke required to be treated by such
shareholder as long-term capital gain.
TAXATION OF TAX-EXEMPT SHAREHOLDERS
Tax-exempt entities, including qualified employee pension and profit sharing
trusts and individual retirement accounts, generally are exempt from federal
income taxation. However, they are subject to taxation on their unrelated
business taxable income ("UBTI"). While many investments in real estate generate
UBTI, the IRS has issued a published ruling that dividend distributions from a
REIT to an exempt employee pension trust do not constitute UBTI, provided that
the shares of the REIT are not otherwise used in an unrelated trade or business
of the exempt employee pension trust. Based on that ruling, amounts Duke
distributes to exempt organizations generally should not constitute UBTI.
However, if an exempt organization finances its acquisitions of the common
shares with debt, a portion of its income from Duke will constitute UBTI
pursuant to the "debt-financed property" rules. Furthermore, social clubs,
voluntary employee benefit associations, supplemental unemployment benefit
trusts, and qualified group legal services plans that are exempt from taxation
under paragraphs (7), (9), (17), and (20), respectively, of Code section 501(c)
are subject to different UBTI rules, which generally will require them to
characterize distributions from Duke as UBTI.
In addition, in certain circumstances, a pension trust that owns more than
10% of Duke's shares is required to treat a percentage of the dividends from
Duke as UBTI (the "UBTI Percentage"). The UBTI Percentage is Duke's gross income
derived from an unrelated trade or business (determined as if Duke were a
pension trust) divided by Duke's gross income for the year in which the
dividends are paid. The UBTI rule applies to a pension trust holding more than
10% of Duke's stock only if:
- the UBTI Percentage is at least 5%;
- Duke qualifies as a REIT by reason of the modification of the "five or
fewer" stock ownership requirement that allows the beneficiaries of the
pension trust to be treated as holding Duke shares in proportion to their
actuarial interests in the pension trust; and
- either:
- one pension trust owns more than 25% of the value of Duke's shares; or
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- a group of pension trusts individually holding more than 10% of the
value of Duke's shares collectively owns more than 50% of the value of
Duke's shares.
TAX RELIEF EXTENSION ACT OF 1999
The Tax Relief Extension Act of 1999, signed into law by President Clinton
on December 17, 1999, contains several provisions modifying current law as it
applies to REITs.
First, under prior law, a REIT could own not more than 10% of the
outstanding voting securities of a single issuer. Under the act, a REIT also
generally cannot own more than 10% of the total value of securities of a single
issuer. In addition, no more than 20% of the value of a REIT's assets can be
represented by securities of the taxable REIT subsidiaries permitted under the
act. However, for purposes of the new ten-percent-value test, securities are
generally defined to exclude certain safe-harbor debt owned by a REIT if the
issuer is an individual or if the REIT owns no other securities of the issuer;
where a REIT owns securities of a partnership, safe-harbor debt is excluded from
the definition of securities only if the REIT owns at least 20% or more of the
profits interest in the partnership.
Second, a broad exception to the limitations on ownership of securities of a
single issuer applies in the case of a "taxable REIT subsidiary" that meets
certain requirements. To qualify as a taxable REIT subsidiary, both the REIT and
the subsidiary corporation must join in an election. In addition, any
corporation (other than a REIT or a qualified REIT subsidiary that does properly
elect with the REIT to be a taxable REIT subsidiary) of which a taxable REIT
subsidiary owns, directly or indirectly, more than 35% of the vote or value is
automatically treated as a taxable REIT subsidiary. Securities of taxable REIT
subsidiaries cannot exceed 20% of the total value of a REIT's assets. A taxable
REIT subsidiary can engage in certain business activities that under prior law
could disqualify the REIT as a REIT because the taxable REIT subsidiary's
activities and relationship with the REIT could have prevented certain income
from qualifying as rents from real property. Under the act, the subsidiary can
provide services to tenants of REIT property (even if such services were not
considered services customarily furnished in connection with the rental of real
property), and can manage or operate properties, generally for third parties,
without causing amounts received or accrued directly or indirectly by the REIT
for such activities to fail to be treated as rents from real property. However,
rents paid to a REIT generally are not qualified rents if the REIT owns more
than 10% of the value (as well as of the vote) of a corporation paying the
rents. The exceptions are for rents that are paid by taxable rent subsidiaries
and that also meet a limited rental exception (when 90% of space is leased to
third parties at comparable rents) and an exception for rents from certain
lodging facilities (operated by an independent contractor). Furthermore,
interest paid by a taxable REIT subsidiary to the related REIT is subject to
certain rules by which the taxable REIT subsidiary cannot deduct interest in any
year that would exceed 50% of the subsidiary's adjusted gross income if the
taxable REIT subsidiary's debt/equity ratio exceeded 1.5 to 1. In addition, if
any amount of interest, rent or other deductions of the taxable REIT subsidiary
for amounts paid to the REIT is determined to be other than at arms-length, an
excise tax of 100% is imposed on the portion that was excessive. Certain safe
harbors are provided for certain rental payments.
Third, the act modifies the REIT distribution requirements to conform to the
rules for regulated investment companies; thus, a REIT is required to distribute
only 90%, rather than 95%, of its income.
Fourth, as to the definition of "independent contractor", if any class of
stock of the REIT or the person being tested as an independent contractor is
regularly traded on an established securities market, only persons who directly
or for indirectly own 5% or more of such class of stock shall be counted in
determining whether the 35% ownership limitations have been exceeded.
Fifth, the act modifies the present law rule that permits certain rents from
personal property to be treated as real estate rental income if such personal
property does not exceed 15% of the aggregate of
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real and personal property. The act replaces the prior law comparison of the
adjusted bases of properties with a comparison based on fair market values.
The effective date of the Act is two taxable years beginning after December
31, 2000. As to provisions related to permitted ownership of securities of an
issuer, special transition rules apply. Thus, the new rules forbidding a REIT to
own more than 10% of the value of securities of a single issuer do not apply to
a REIT with respect to securities held directly or indirectly by such REIT on
July 12, 1999, or acquired pursuant to the terms of a written binding contract
in effect on that date and at all times thereafter until the acquisition.
Similarly, securities received in a tax-free exchange or reorganizations with
respect to or in exchange for such grandfathered securities would also be
grandfathered. The grandfathering of such securities ceases to apply if the REIT
acquires additional securities of that issuer after that date, other than
pursuant to a binding contract in effect on that date and at all times
thereafter or in a reorganization with another corporation, the securities of
which are grandfathered.
The transition rule applicable to securities also ceases to apply to
securities of a corporation as of the first day after July 12, 1999, on which
such corporation engages in a substantial new line of business, or acquires any
substantial asset, other than pursuant to a binding contract in effect on such
date and at all times thereafter or in a reorganization or transaction in which
gain or loss is not recognized by reason of Section 1031 or 1033 of the Internal
Revenue Code. If a corporation makes an election to become a taxable REIT
subsidiary, effective before January 1, 2004, and at a time when the REIT's
ownership is grandfathered under these rules, the election is treated as a
reorganization under Section 368(a)(1)(A) of the Internal Revenue Code.
Finally, the new 10% of value limitation for purposes of defining qualified
rents is effective for taxable years beginning after December 21, 2000. However,
there is an exception for rents paid under a lease or pursuant to a binding
contract in effect on July 12, 1999, and at all times thereafter.
BACKUP WITHHOLDING
Duke will report to its domestic shareholders and the IRS the amount of
dividends paid during each calendar year, and the amount of tax withheld, if
any. Under the backup withholding rules, a shareholder may be subject to backup
withholding at the rate of 31% with respect to dividends paid unless such
holder:
- is a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact; or
- provides a taxpayer identification number, certifies as to no loss of
exemption from backup withholding, and otherwise complies with applicable
requirements of the backup withholding rules.
A shareholder that does not provide Duke with his or her correct taxpayer
identification number may also be subject to penalties imposed by the IRS. A
shareholder can credit any amount paid as backup withholding against the
shareholder's income tax liability. In addition, Duke may be required to
withhold a portion of capital gain distributions made to any shareholders who
fail to certify their non-foreign status to Duke.
The Treasury Department has issued proposed regulations regarding the
withholding and information reporting rules discussed above. In general, the
proposed regulations do not alter the substantive withholding requirements but
unify current certification procedures and forms, and clarify and modify
reliance standards. If finalized in their current form, the proposed regulations
would generally be effective for payments made after December 31, 1997, subject
to certain transition rules.
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TAXATION OF NON-U.S. SHAREHOLDERS
The rules governing U.S. federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships, and other foreign
shareholders are complex, and this is only a limited summary of those rules.
Prospective non-U.S. shareholders should consult with their own tax advisors to
determine the impact of U.S. federal, state and local income tax laws on an
investment in our securities, including any reporting requirements.
Distributions that are not attributable to gain from the Operating
Partnership's sales or exchanges of U.S. real property interests and not
designated by Duke as capital gain dividends will be treated as dividends of
ordinary income to the extent that they are made out of Duke's current or
accumulated earnings and profits. Such distributions, ordinarily, will be
subject to a withholding tax equal to 30% of the gross amount of the
distribution unless an applicable tax treaty reduces that tax. Distributions in
excess of Duke's current and accumulated earnings and profits will not be
taxable to a non-U.S. shareholder to the extent that they do not exceed the
adjusted basis of the shareholder's common stock, but rather will reduce the
adjusted basis of that common stock. To the extent that such distributions
exceed the adjusted tax basis of a non-U.S. shareholder's common stock, the
non-U.S. shareholder will have tax liability if the non-U.S. shareholder would
otherwise be subject to tax on any gain from the sale or disposition of his or
her common stock as described below (in which case the shareholder may also be
required to pay a 30% branch profits tax if the shareholder is a foreign
corporation). As a result of a legislative change made by the Small Business Job
Protection Act of 1996, Duke is required to withhold 10% of any distribution in
excess of its current accumulated earnings and profits. Consequently, although
Duke intends to withhold at a rate of 30% on the entire amount of any
distribution, to the extent that it does not do so any portion of a distribution
not subject to withholding at a rate of 30% will be subject to withholding at a
rate of 10%. However, the non-U.S. shareholder may seek a refund of such amounts
from the IRS if it is subsequently determined that such distribution was, in
fact, in excess of Duke's current or accumulated earnings and profits, and the
amount withheld exceeds the non-U.S. shareholder's United States tax liability,
if any, with respect to the distribution.
For any year in which Duke qualifies as a REIT, distributions that are
attributable to gain from the Operating Partnership's sales or exchanges of U.S.
real property interests will be taxed to a non-U.S. shareholder under the
provisions of the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA")
at the normal capital gain rates applicable to domestic shareholders (subject to
applicable alternative minimum tax and a special alternative minimum tax in the
case of nonresident alien individuals). Also, distributions subject to FIRPTA
may be subject to a 30% branch profits tax in the hands of a corporate non-U.S.
shareholder not entitled to treaty relief or exemption. Duke is required to
withhold 35% of any distribution that it designates or could designate as a
capital gain dividend. The amount withheld is creditable against the non-U.S.
shareholder's FIRPTA tax liability.
Gain recognized by a non-U.S. shareholder upon a sale of common stock
generally will not be taxed under FIRPTA if Duke is a "domestically controlled
REIT," defined generally as a REIT in which at all times during a specified
testing period less than 50% in value of the stock was held directly or
indirectly by foreign persons. Duke believes that it is a "domestically
controlled REIT," and, therefore, that the sale of common stock will not be
subject to taxation under FIRPTA. If the gain on the sale of common stock were
to be subject to tax under FIRPTA, the non-U.S. shareholder would be subject to
the same treatment as domestic shareholders with respect to such gain (subject
to applicable alternative minimum tax and a special alternative minimum tax in
the case of nonresident alien individuals), and the purchaser of the common
stock would be required to withhold and pay to the IRS 10% of the purchase
price.
REDEMPTION OF PREFERRED SHARES AND DEPOSITARY SHARES
If an issue of preferred shares or depositary shares is redeemable, a
redemption of preferred shares, and a consequent redemption of any depositary
shares representing such preferred shares, will
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be treated under Section 302 of the Code as a distribution taxable as a dividend
(to the extent of Duke's current and accumulated earnings and profits) at
ordinary income rates unless the redemption satisfies one of the tests set forth
in Section 302(b) of the Code and is therefore treated as a sale or exchange of
the redeemed shares. None of these dividend distributions will be eligible for
the dividends received deduction for corporate shareholders. The redemption will
be treated as a sale or exchange if it:
- is "substantially disproportionate" with respect to the holder;
- results in a "complete termination" of the holder's share interest in
Duke; or
- is "not essentially equivalent to a dividend" with respect to the holder,
all within the meaning of Section 302(b) of the Code.
In determining whether any of these tests have been met, preferred shares or
depositary shares considered to be owned by the holder by reason of certain
constructive ownership rules set forth in the Code, as well as preferred shares
or depositary shares actually owned by the holder, must generally be taken into
account. If a particular holder of preferred shares or depositary shares owns
(actually or constructively) no shares of Duke's common stock, or an
insubstantial percentage of the outstanding shares of Duke's common stock, a
redemption of preferred shares or depositary shares of that holder is likely to
qualify for sale or exchange treatment because the redemption would not be
"essentially equivalent to a dividend." However, because the determination as to
whether any of the alternative tests of Section 302(b) of the Code will be
satisfied with respect to any particular holder of preferred shares or
depositary shares depends upon the facts and circumstances at the time that the
determination must be made, prospective holders of preferred shares or
depositary shares are advised to consult their own tax advisors to determine
such tax treatment.
If a redemption of preferred shares or depositary shares is not treated as a
distribution taxable as a dividend to a particular holder, it will be treated as
to that holder as a taxable sale or exchange. As a result, the holder will
recognize gain or loss for federal income tax purposes in an amount equal to the
difference between:
- the amount of cash and the fair market value of any property received
(less any portion thereof attributable to accumulated and declared but
unpaid dividends, which will be taxable as a dividend to the extent of
Duke's current and accumulated earnings and profits); and
- the holder's adjusted basis in the preferred shares or depositary shares
for tax purposes.
Such gain or loss will be capital gain or loss if the preferred shares or
depositary shares have been held as a capital asset, and will be long-term gain
or loss if such preferred shares or depositary shares have been held for more
than one year.
If a redemption of preferred shares or depositary shares is treated as a
distribution taxable as a dividend, the amount of the distribution will be
measured by the amount of cash and the fair market value of any property
received by the holder. The holder's adjusted basis in the redeemed preferred
shares or depositary shares for tax purposes will be transferred to the holder's
remaining shares of Duke. If the holder owns no other shares of Duke, such basis
may, under certain circumstances, be transferred to a related person or it may
be lost entirely.
CONVERSION OF PREFERRED SHARES OR DEPOSITARY SHARES
If an issue of preferred shares or depositary shares is convertible into
Duke common shares, no gain or loss will generally be recognized for federal
income tax purposes upon the conversion of such preferred shares or depositary
shares at the option of the holder solely into common shares. The basis that a
holder will have for tax purposes in the common shares received upon the
conversion will be equal to the adjusted basis the holder had in the preferred
shares or depositary shares converted and, provided that the preferred shares or
depositary shares were held as a capital asset, the holding period
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for the common shares received will include the holding period for the preferred
shares or depositary shares converted. A holder, however, will generally
recognize gain or loss on the receipt of cash in lieu of a fractional common
share in an amount equal to the difference between the amount of cash received
and the holder's adjusted basis in the fractional share. The discussion in this
paragraph assumes that preferred shares or depositary shares will not be
converted at a time when there are distributions in arrears.
ADJUSTMENTS TO CONVERSION PRICE
If an issue of preferred shares or depositary shares is convertible into
Duke common shares, adjustments in the conversion price pursuant to
anti-dilution provisions or otherwise may result in constructive distributions
to the holders of the preferred shares or depositary shares that could, under
certain circumstances, be taxable to them as dividends pursuant to Section 305
of the Code. If such a constructive distribution were to occur, a holder of
preferred shares or depositary shares could be required to recognize ordinary
income for tax purposes without receiving a corresponding distribution of cash.
STATE AND LOCAL TAXES
Duke, the Operating Partnership or the holders of their securities may be
subject to taxation in various state, local or other jurisdictions, including
those in which they transact business or reside. The tax treatment in such
jurisdictions may differ from the federal income tax consequences discussed
above. Consequently, you should consult your own tax advisor regarding the
effect of state and local tax laws on an investment in our securities.
PLAN OF DISTRIBUTION
We may sell the securities:
- through underwriting syndicates represented by one or more managing
underwriters;
- to or through underwriters or dealers;
- through agents; or
- directly to one or more purchasers.
The distribution of the securities may be effected from time to time in one or
more transactions at:
- a fixed price or prices, which may be changed;
- at market prices prevailing at the time of sale;
- at prices related to prevailing market prices; or
- at negotiated prices.
We will describe the name or names of any underwriters, dealers or agents and
the purchase price of the securities in a prospectus supplement relating to the
securities.
In connection with the sale of the securities, underwriters may receive
compensation from Duke, from the Operating Partnership or from purchasers of the
securities, for whom they may act as agents, in the form of discounts,
concessions, or commissions. Underwriters may sell the securities to or through
dealers, and such dealers may receive compensation in the form of discounts,
concessions, or commissions from the underwriters and/or commissions from the
purchasers for whom they may act as agents. Underwriters, dealers, and agents
that participate in the distribution of the securities may be deemed to be
underwriters, and any discounts or commissions they receive from Duke or the
Operating Partnership, and any profit on the resale of the securities they
realize may be deemed to be underwriting discounts and commissions, under the
Securities Act. Any such underwriter or agent will
43
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be identified, and any such compensation received from Duke or the Operating
Partnership will be described, in the prospectus supplement for a particular
issue of securities.
Unless otherwise specified in the related prospectus supplement, each series
of the securities will be a new issue with no established trading market, other
than Duke's common stock which is listed on the NYSE. If Duke sells any shares
of common stock pursuant to a prospectus supplement, they will be listed on the
NYSE, subject to official notice of issuance. Duke or the Operating Partnership
may elect to list any series of debt securities, preferred stock or depositary
shares on an exchange, but neither is obligated to do so. It is possible that
one or more underwriters may make a market in a series of the securities, but
any such underwriters will not be obligated to do so and may discontinue any
market making at any time without notice. Therefore, we can give no assurance
about the liquidity of the trading market for any of the securities.
Under agreements Duke and the Operating Partnership may enter into,
underwriters, dealers, and agents who participate in the distribution of the
securities may be entitled to indemnification by Duke or the Operating
Partnership against certain liabilities, including liabilities under the
Securities Act, or to contribution with respect to payments that the
underwriters, dealers or agents may be required to make.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, or be customers of, Duke or the Operating Partnership in the
ordinary course of business.
If so indicated in the applicable prospectus supplement, we will authorize
underwriters or other persons acting as our agents to solicit offers by certain
institutions to purchase securities from us pursuant to contracts providing for
payment and delivery on a future date. Institutions with which such contracts
may be made include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions and others,
but in all cases such institutions must be approved by Duke or the Operating
Partnership, as the case may be. The obligations of any purchaser under any such
contract will be subject to the condition that the purchase of the securities
shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject. The underwriters and such other
agents will not have any responsibility in respect of the validity or
performance of such contracts.
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LEGAL OPINIONS
Bose McKinney & Evans LLP, Indianapolis, Indiana, will pass upon the
legality of the securities offered by this prospectus for Duke and the Operating
Partnership. The opinions with respect to the securities may be subject to
assumptions regarding future action to be taken by Duke, the Operating
Partnership, the trustee or the depositary in connection with the issuance and
sale of particular securities, the specific terms of the securities and other
matters that may affect the validity of the securities but that cannot be
determined on the date of those opinions. In addition, the description of
Federal income tax matters contained in this prospectus entitled "Federal Income
Tax Considerations" is based upon the opinion of Bose McKinney & Evans LLP.
Darell E. Zink, Jr., an executive officer and director of Duke, was a partner in
Bose McKinney & Evans LLP through 1982 and was of counsel to that firm until
December, 1990.
EXPERTS
The Consolidated Financial Statements and related Schedules of Duke and of
the Operating Partnership as of December 31, 1999 and 1998, and for each of the
years in the three-year period ended December 31, 1999, each incorporated herein
by reference, have been incorporated herein in reliance upon the reports of KPMG
LLP, independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
With respect to the unaudited interim financial information for the periods
ended March 31, 2000 and 1999, incorporated by reference herein, the independent
certified public accountants have reported that they applied limited procedures
in accordance with their professional standards for a review of such
information. However, their separate report included in our quarterly reports on
Form 10-Q of the quarter ended March 31, 2000, and incorporated by reference
herein, states that they did not audit and they do not express an opinion on
that interim financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited nature
of the review procedures applied. The accountants are not subject to the
liability provisions of section 11 of the Securities Act of 1933 for their
report on the unaudited interim financial information because that report is not
a "report" or a "part" of the registration statement prepared or certified by
the accountants within the meaning of sections 7 and 11 of such Act.
The consolidated financial statements and schedules of Weeks Corporation and
its subsidiaries and Weeks Realty, L.P. and its subsidiaries as of December 31,
1998 and 1997, and for each of the three years in the period ended December 31,
1998, incorporated by reference herein, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
following SEC public reference rooms:
<Table>
450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, New York 10048 Chicago, Illinois 60661
</Table>
Our SEC filings can also be read at the following address:
New York Stock Exchange
20 Broad Street
New York, New York 10005
Our SEC filings are also available to the public from the SEC's Web Site at
http://www.sec.gov.
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This prospectus is part of a registration statement we filed with the SEC.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and later information that we file with the SEC
will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until all the
selling shareholders sell all of the shares of common stock to which this
prospectus relates or the offering is otherwise terminated. We also specifically
incorporate by reference any such filings made after the date of the initial
registration statement and prior to effectiveness of the registration statement.
1. Duke's Annual Report on Form 10-K (file no. 1-9044) for the year ended
December 31, 1999.
2. Duke's Quarterly Report on Form 10-Q (file no. 1-9044) for the quarter
ended March 31, 2000.
3. The description of Duke's common stock contained in its registration
statement on Form 8-A (file no. 1-9044) as amended.
4. The Operating Partnership's Annual Report on Form 10-K (file
no. 0-20625) for the year ended December 31, 1999.
5. The Operating Partnership's Quarterly Report on Form 10-Q (file
no. 0-20625) for the quarter ended March 31, 2000.
6. The Operating Partnership's Current Report on Form 8-K (file
no. 0-20625) filed March 17, 2000.
7. Weeks Corporation's Annual Report on Form 10-K (file no. 1-13254) for
the year ended December 31, 1998.
8. Weeks Corporation's Quarterly Report on Form 10-Q (file no. 1-13254) for
the quarter ended March 31, 1999.
9. Weeks Realty, L.P.'s Annual Report on Form 10-K (file no. 1-13969) for
the year ended December 31, 1998.
10. Weeks Realty L.P.'s Quarterly Report on Form 10-Q (file no. 1-13969) for
the quarter ended March 31, 1999.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Investor Relations
Duke Realty Corporation
600 East 96th Street, Suite 100
Indianapolis, Indiana 46240
Telephone: (317) 808-6000
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$150,000,000
[LOGO]
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE
FROM DATE OF ISSUE
-----------------------------------
PROSPECTUS SUPPLEMENT
-----------------------------------
MERRILL LYNCH & CO.
BANC ONE CAPITAL MARKETS, INC.
CREDIT SUISSE FIRST BOSTON
DEUTSCHE BANC ALEX. BROWN
GOLDMAN, SACHS & CO.
JPMORGAN
UBS WARBURG
JUNE 8, 2001
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