SECURITIES AND EXCHANGE COMMISSION
REGISTRATION STATEMENT
Camden Property Trust
Texas Delaware |
6798 6798 |
76-6088377 56-1857809 |
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(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
Camden Property Trust
Summit Properties Partnership, L.P.
Richard J. Campo
Steven R. LeBlanc
Copies to:
Bryan L. Goolsby Toni Weinstein Locke Liddell & Sapp LLP 2200 Ross Avenue, Suite 2200 Dallas, Texas 75201 Tel: (214) 740-8000 Fax: (214) 740-8800 |
Gilbert G. Menna, P.C. John T. Haggerty Goodwin Procter LLP Exchange Place Boston, MA 02109 Tel.: (617) 570-1000 Fax: (617) 523-1231 |
Approximate date of commencement of proposed sale to the public: As promptly as possible upon effectiveness of this Registration Statement.
If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: o
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
MERGER PROPOSED YOUR VOTE IS VERY IMPORTANT
The board of trust managers of Camden Property Trust and the board of directors of Summit Properties Inc., the general partner of Summit Properties Partnership, L.P., or the Operating Partnership, have approved a merger of Camden and Summit. We are furnishing this consent solicitation/prospectus to all holders of common units of limited partnership interest in the Operating Partnership, other than Summit, to solicit consents to approve the merger and to approve the second amended and restated limited partnership agreement, or the new partnership agreement, that will govern the Operating Partnership after the merger. A wholly owned subsidiary of Camden will become the general partner of the Operating Partnership after the merger. The proposals to approve the merger and to approve the new partnership agreement are conditioned upon one another.
The closing of the merger is conditioned on approval of the merger and approval of the new partnership agreement by the holders of at least a majority of the outstanding common units of limited partnership in the Operating Partnership, other than Summit. Two such holders, holding approximately 36.4% of the outstanding common units entitled to vote on these proposals, have entered into a voting agreement agreeing to vote their units in favor of such matters. In addition, the closing of the merger is conditioned on approval of the issuance of Camden common shares in the merger by Camden shareholders and approval of the merger agreement and the merger by Summit stockholders at special meetings to be held by Camden and Summit. The merger will not be completed, nor will the new partnership agreement be adopted, even if limited partners approve the merger and the new partnership agreement, unless the required approvals of Camden shareholders and Summit stockholders are obtained.
In addition to the consent solicitation described above, if all of the conditions to the merger are satisfied and the new partnership agreement is adopted, each of your existing units in the Operating Partnership will be exchanged, at your election, for either $31.20 in cash or .6687 of a new unit that will be governed by the terms of the new partnership agreement. This exchange offer is conditioned on the closing of the merger, and it is subject to other conditions described in this consent solicitation/prospectus, but the exchange offer is not subject to any minimum amount of existing units being tendered prior to the exchange offer expiration date.
If the new partnership agreement is adopted and the merger is completed, and you do not elect to receive either $31.20 in cash or .6687 of a new unit, your existing units will automatically be converted into .6687 of a new unit and your new units will governed by the terms of the new partnership agreement.
The exchange offer will expire at 4:00 p.m., Eastern Time, on February 28, 2005, unless we extend it. We will announce any extension by press release or other permitted means no later than 9:00 a.m., Eastern Time, on the business day after expiration of the exchange offer. You may withdraw any units tendered until the exchange offer expiration date.
The existing units are not listed, and the new units will not be listed, on any national securities exchange or quoted in the over the counter market. There is no established public trading market for the existing units and we do not expect that there will be any established trading market for the new units. However, after the closing, each new unit may be redeemed for one Camden common share or its cash equivalent at Camden Summits election. Camden common shares are traded on the New York Stock Exchange under the symbol CPT. On January 24, 2005, Camden common shares closed at $47.50 per share. As explained in more detail in the attached consent solicitation/prospectus, Summit may terminate the merger agreement if the value of Camden common shares decreases below $39.31 per Camden common share, during a period leading up to the merger, unless Camden elects to increase the exchange ratio in the merger. If Camden makes such election, the exchange offer will be amended to similarly
The board of directors of Summit, in its capacity as the general partner of the Operating Partnership, unanimously recommends that limited partners vote FOR approval of the merger and FOR approval of the new partnership agreement.
We are not making, and have not authorized anyone to make, any recommendation as to whether you ought to elect to receive cash or new units in the exchange offer. You must make your own investment decision whether to receive cash or new units based on your investment objectives.
More information about Camden, Summit, the Operating Partnership, the merger and the exchange offer is contained in this consent solicitation/prospectus. We encourage you to read this entire consent solicitation/prospectus carefully, including the section entitled Risk Factors beginning on page 31.
Please take the time to vote by completing and mailing the enclosed consent form. Your consent form is due by 5:00 p.m., Eastern Time, on February 25, 2005. In addition, please take the time to complete and mail the enclosed election form. Your election form is due by 4:00 p.m., Eastern Time, on February 28, 2005.
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Richard J. Campo Chairman of the Board and Chief Executive Officer Camden Property Trust |
Steven R. LeBlanc President and Chief Executive Officer Summit Properties Inc., general partner of Summit Properties Partnership, L.P. |
EACH VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in the exchange offer or passed upon the adequacy or accuracy of this consent solicitation/prospectus. Any representation to the contrary is a criminal offense.
This consent solicitation/prospectus is dated January 25, 2005 and it is first being mailed to limited partners on or about January 27, 2005.
ADDITIONAL INFORMATION
This consent solicitation/prospectus incorporates important business and financial information about us that is not included in or delivered with this consent solicitation/prospectus. You can obtain any of the documents incorporated by reference from Camden, Summit or the Operating Partnership, as the case may be, or through the SEC or the SECs website. The address of that website is www.sec.gov. Documents incorporated by reference are available from the companies, without charge, excluding all exhibits unless specifically incorporated by reference as an exhibit to this consent solicitation/prospectus. Limited partners may obtain documents incorporated by reference in this consent solicitation/prospectus by requesting them in writing or by telephone from the appropriate company at the following addresses:
Camden Property Trust 3 Greenway Plaza, Suite 1300 Houston, Texas 77046 Attention: Investor Relations Telephone: (800) 922-6336 x2787 or (713) 354-2787 |
Summit Properties Inc. or Summit Properties Partnership, L.P. 309 East Morehead Street, Suite 200 Charlotte, North Carolina 28202 Attention: Investor Relations Telephone: (704) 334-3000 |
You can also get more information by visiting Camdens website at www.camdenliving.com and Summits website at www.summitproperties.com. We are not incorporating the contents of the websites of the SEC, Camden or Summit or any other person into this consent solicitation/prospectus.
If you would like to request documents, in order to ensure timely delivery you must do so at least five business days before the date that your consent form is due. This means you must request this information no later than February 17, 2005. If you request any incorporated documents, we will mail them to you by first class mail, or another equally prompt means, within one business day after we receive your request.
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Annex A Agreement and Plan of
Merger, as amended
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Annex B Form of Second and
Amended Agreement of Limited Partnership of Camden Summit
Partnership, L.P.
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Annex E Fairness Opinion of
J.P. Morgan Securities Inc.
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EXHIBIT 8.3 | ||||||||
Consent of Deloitte & Touche LLP - Camden Property Trust | ||||||||
Consent of Deloitte & Touche LLP - Summit Properties Inc. |
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QUESTIONS & ANSWERS ABOUT THE TRANSACTION
Q: | What am I being asked to vote on? | |
A: | You are being asked to approve the merger of Summit with and into Camden Summit, Inc., a wholly owned subsidiary of Camden, which we refer to as Camden Summit. Camden Summit will be the surviving corporation in the merger, and will continue to be a wholly owned subsidiary of Camden. You are also being asked to approve the second amended and restated agreement of limited partnership of Summit Properties Partnership, L.P., or the new partnership agreement. As a result of the merger, Camden Summit will become the general partner of Summit Properties Partnership, L.P., or the Operating Partnership, and the name of the Operating Partnership will be changed to Camden Summit Partnership, L.P. | |
Approval of the merger and the new partnership agreement each requires the affirmative vote of the holders of at least a majority of the outstanding common units, other than Summit. Two such holders, holding approximately 36.4% of the outstanding common units entitled to vote on such matters, have entered into a voting agreement agreeing to vote their units in favor of such matters. The proposal to approve the merger and the proposal to approve the new partnership agreement are conditioned upon one another. | ||
Approval of the new partnership agreement by the holders of at least a majority of the outstanding common units, other than Summit, will constitute a waiver of the provisions of Article 16 of the existing amended and restated agreement of limited partnership of the Operating Partnership, or the existing partnership agreement, which provisions are described in this consent solicitation/prospectus under the section entitled Comparison of Unitholder Rights Extraordinary Transactions on page 107. | ||
Q: | What is the exchange offer? | |
A: | If all of the conditions to the merger are satisfied, including the receipt of required approvals and the adoption of the new partnership agreement, each of your existing units in the Operating Partnership will be exchanged, at your election, for either $31.20 in cash or .6687 of a new unit. You may specify different elections with respect to different existing units held by you. For example, if you own 100 existing units, you can make a cash election with respect to 30 of your existing units and a new unit election with respect to the remaining 70 existing units. New units in the Operating Partnership will be governed by the terms of the new partnership agreement. We are not making, and have not authorized anyone to make, any recommendation as to whether you ought to elect to receive cash or new units in the exchange offer. You must make your own investment decision whether to receive cash or new units based on your investment objectives. | |
Q: | Has the board of directors of Summit or its financial advisor taken a position with respect to your election decision? | |
A: | No, although the board of directors of Summit, in its capacity as the general partner of the Operating Partnership, unanimously recommends that limited partners vote FOR approval of the merger and FOR approval of the new partnership agreement. You should refer to the reasons the Summit board considered in making this determination beginning on page 53. In considering the recommendation of the Summit board with respect to the transaction, Summit stockholders and limited partners should be aware that members of the Summit board as well as some Summit executive officers have interests in, and will receive benefits from, the transaction that differ from, or are in addition to, the interests of Summit stockholders and limited partners generally. See The Transaction Conflicts of Interest of Summit Directors and Executive Officers in the Merger beginning on page 62. However, the board of directors of Summit is not making, and has not authorized anyone to make, any recommendation as to whether you ought to elect to receive cash or new units in the exchange offer. You must make your own investment decision whether to receive cash or new units based on your investment objectives. | |
Similarly, although J.P. Morgan Securities Inc., which we refer to as JPMorgan, has opined (as of the date of their opinion) that the consideration to be received by the holders of Summit common stock |
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(including with respect to equity securities convertible into, or redeemable by Summit under certain circumstances for, shares of Summit common stock, any holders thereof on an as-converted or as-redeemed basis, as the case may be) in the merger was fair, from a financial point of view, to such holders, JPMorgan has not taken a position with respect to the exchange offer or the new partnership agreement and JPMorgans opinion does not constitute a recommendation to any limited partner as to its election to receive cash or new units in the exchange offer or whether such limited partner should approve the merger or the new partnership agreement. | ||
Q: | Are there any differences between the existing partnership agreement and the new partnership agreement? | |
A: | Yes. There are important differences between the existing partnership agreement and the new partnership agreement, including those relating to the identity of the general partner, the rights of the general partner to issue additional units, operating distributions, allocations of partnership income and loss, redemption rights, rights in the event of extraordinary transactions, transfers of partnership interests by the general partner, amendments to the partnership agreement, liquidation of the Operating Partnership, liquidating distributions and additional tax matters. Please see Comparison of Unitholder Rights beginning on page 102. | |
Q: | Are any other votes required? | |
A: | Yes. The closing of the merger is conditioned on the approval of the issuance of Camden common shares pursuant to the merger agreement by Camden common shareholders and the approval of the merger and the merger agreement by Summit stockholders. The merger will not be completed, nor will the new partnership agreement be adopted, even if limited partners approve the merger and the new partnership agreement, unless the required approvals of Camden shareholders and Summit stockholders are obtained. The closing of the exchange offer is conditioned on the closing of the merger. | |
Q: | What will happen to the exchange offer if the merger is not completed? | |
A: | The exchange offer is conditioned on the closing of the merger. As a result, the conditions to closing the merger are effectively the conditions to closing the exchange offer. You should read carefully the sections of this consent solicitation/prospectus describing the terms of the merger agreement, in particular the sections describing the conditions to the parties obligations to close the merger and the circumstances in which each party may terminate the merger agreement. Summit may terminate the merger agreement if the value of Camden common shares decreases below $39.31 per Camden common share, during a period leading up to the merger, unless Camden elects to increase the exchange ratio in the merger. If Camden makes such election, the exchange offer will be amended to similarly increase the exchange ratio in the exchange offer. See the Merger Agreement Summit Price-Based Termination Right on page 81. | |
If all of the conditions to the merger are not satisfied prior to 4:00 p.m., Eastern Time, on February 28, 2005, which we refer to in this consent solicitation/prospectus as the exchange offer expiration date, we may extend the exchange offer until a later date. In the event that the merger agreement is terminated, the merger will not be completed, we will not complete the exchange offer and the existing partnership agreement will not be amended and restated. In such event, you will remain as a limited partner of the Operating Partnership (which will continue to be governed by the terms of the existing partnership agreement) and Summit will remain the sole general partner of the Operating Partnership. | ||
Q: | How do I specify if I want cash or new units in the exchange offer? | |
A: | An election form has been sent to you together with this consent solicitation/prospectus for making an election to receive cash or new units in exchange for each of your existing units. To be effective, the election form must be properly completed, signed and received by the exchange agent, together with your unit certificates, prior to the exchange offer expiration date, which is 4:00 p.m., Eastern Time, on February 28, 2005. | |
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Q: | What will happen if I do not tender any of my existing units for exchange before the exchange offer expiration date? | |
A: | Each existing unit that is not tendered for exchange or is tendered but not accepted in connection with the exchange offer prior to the exchange offer expiration date, which is 4:00 p.m., Eastern Time, on February 28, 2005, will automatically be converted into .6687 of a new unit upon the closing of the exchange offer. | |
Q: | Can I withdraw my existing units from the exchange offer once I have tendered them or change my election? | |
A: | Yes. To withdraw your existing units from the exchange offer or to change your election, send a written or facsimile transmission notice of withdrawal or change to the exchange agent at the appropriate address specified on the election form enclosed with this consent solicitation/prospectus prior to the exchange offer expiration date, which is 4:00 p.m., Eastern Time, on February 28, 2005. Your notice must comply as to form with the requirements set forth in this consent solicitation/prospectus. | |
Q: | Will I recognize taxable gain or loss for U.S. federal income tax purposes as a result of the merger or the exchange of units? | |
A. | In general, under applicable U.S. federal income tax laws and regulations, you will most likely recognize gain or loss for federal income tax purposes with respect to existing units that are exchanged for cash in the exchange offer as if you sold these units to Camden for cash. Subject to certain limited exceptions, it is generally not expected that you will recognize gain or loss with respect to existing units that are exchanged for new units in the exchange offer. | |
Existing units that are exchanged for cash in the exchange offer will be allocated their proportionate share of Operating Partnership taxable income for the portion of the Operating Partnerships taxable year ending with the date of the closing of the exchange offer, and holders of such units will have to report such income notwithstanding the exchange of their units (but such income will increase the tax basis in such units for purposes of calculating gain and loss on the exchange of their units for cash). If you receive new units in the exchange offer, you will continue to be a limited partner in the Operating Partnership and as such will continue to report on your federal income tax return your allocable share of the Operating Partnerships income, gains, deductions and losses and credits for each taxable year irrespective of any quarterly distribution paid on the new units. | ||
Q: | Will I have the right to redeem the new units that I receive in the exchange offer? | |
A: | Yes. You will have the right to redeem the new units that you receive in the exchange offer at any time following the closing of the exchange offer in accordance with the new partnership agreement. Under the new partnership agreement, each new unit will be redeemable for one Camden common share or its cash equivalent, at the election of Camden Summit. | |
Q: | What will my distributions be before and after the exchange offer? | |
A: | Until the exchange offer is completed, you will continue to receive regular quarterly distributions in accordance with the existing partnership agreement. Summit currently intends to continue to pay regular quarterly distributions for any quarterly periods ending before the closing of the exchange offer, and expects to pay a pro rata cash distribution in the quarter in which the closing of the exchange offer occurs as authorized by the Summit board. In addition, Summit will pay, if necessary, a final dividend on its common stock equal to the minimum amount necessary to maintain Summits REIT status under the Internal Revenue Code and to avoid the payment of any corporate level tax with respect to undistributed income or gain, as required by the merger agreement. If Summit declares a final dividend as described above, the Operating Partnership will simultaneously declare a distribution to holders of existing units in an amount per unit equal to the dividend per share to be paid to holders of Summit common stock. | |
After the closing of the exchange offer, holders of new units will receive distributions in accordance with the new partnership agreement. A holder of a new unit would receive quarterly distributions on a |
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pro forma combined equivalent basis of $0.4246 per new unit for each existing unit exchanged, assuming Camdens current quarterly distribution of $0.635 per common share, or an increase of approximately 26% from the current quarterly distribution paid by the Operating Partnership on its existing units of $0.3375 per unit. Upon the closing of the exchange offer, you will cease receiving any distributions on all existing units you held before the exchange offer, other than any distributions declared before the closing of the exchange offer but not yet paid. | ||
Q: | What do I need to do now? | |
A: | Please indicate on your consent form how you want to vote, and sign and mail it in the enclosed postage-paid envelope prior to the consent expiration date, which is 5:00 p.m., Eastern Time, on February 25, 2005. | |
You should also complete, sign and return the election form, together with your unit certificates, to the exchange agent, according to the instructions printed on the election form, prior to the exchange offer expiration time, which is 4:00 p.m., Eastern Time, on February 28, 2005. In the event the proposals relating to the merger and the new partnership agreement are approved and you did not submit a properly completed election form, each of your existing units will automatically be converted into .6687 of a new unit at the closing of the exchange offer. | ||
Q: | Should I send in my unit certificates with my consent form? | |
A: | No. Please DO NOT send your unit certificates with your consent form. Rather, prior to the exchange offer expiration time, which is 4:00 p.m., Eastern Time, on February 28, 2005, please submit your unit certificates to the exchange agent, together with your completed and signed election form. | |
Q: | Do I have dissenters appraisal rights? | |
A: | No. You do not have any rights to dissent and receive the appraised value of your existing units in the transaction. | |
Q: | When will the merger and the exchange offer occur? | |
A: | If the issuance of Camden common shares pursuant to the merger agreement is approved at the Camden special meeting scheduled to be held on February 28, 2005, the merger agreement and the merger are approved at the Summit special meeting scheduled to be held on February 28, 2005, the required approvals of the limited partners of the Operating Partnership are obtained and the other conditions to the merger are satisfied or waived, we anticipate that the merger will occur as soon as practicable after the special meetings. However, because the merger is subject to some conditions that are beyond Camdens, Summits and the Operating Partnerships control, the exact timing cannot be predicted. The closing of the exchange offer will occur immediately after the closing of the merger, if all of the other conditions to the exchange offer are satisfied or waived at such time. | |
Q: | Are there any risks I should consider in deciding whether to vote for the proposals and whether to tender my existing units for cash or new units? | |
A: | Yes. In the section entitled Risk Factors beginning on page 31 of this consent solicitation/prospectus, we have described a number of risks that you should consider. | |
Q: | Who can answer my questions? | |
A: | If you have more questions about the merger or the exchange offer or desire additional copies of this consent solicitation/prospectus or additional consent or election forms, please contact: | |
Georgeson Shareholder 17 State Street, 10th Floor New York, NY 10004 Telephone: (877) 868-4970 |
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SUMMARY
This summary highlights selected information from this consent solicitation/prospectus. It may not contain all of the detailed information that may be important to you. To understand the transaction fully and for a more complete description of the legal terms of the transaction, you should carefully read this entire consent solicitation/prospectus and the other documents to which we refer, including the merger agreement, as amended, a copy of which is attached to this consent solicitation/prospectus as Annex A, and the new partnership agreement, the form of which is attached to this consent solicitation/prospectus as Annex B. In addition, we incorporate by reference important business and financial information about Camden, Summit and the Operating Partnership into this consent solicitation/prospectus. You can obtain the information incorporated by reference without charge by following the instructions in the section entitled Where You Can Find More Information beginning on page 111. Each item in this summary refers to the pages where that subject is discussed more fully.
The Entities
Camden Property Trust
Camden Property Trust, a Texas real estate investment trust, engages in activities related to the ownership, development, construction and management of multifamily apartment communities. As of September 30, 2004, Camden owned interests in, operated or was developing 148 multifamily properties containing 53,122 apartment homes located in ten states. At September 30, 2004, Camden had one recently completed multifamily property containing 538 apartment homes in lease-up. Camden had 1,114 apartment homes under development at three of its multifamily properties, including 464 apartment homes at one multifamily property owned through a joint venture, at September 30, 2004. Additionally, Camden has several sites that it intends to develop into multifamily apartment communities.
For more information on the business of Camden, please refer to Camdens Annual Report on Form 10-K for the year ended December 31, 2003 and Quarterly Report on Form 10-Q for the period ended September 30, 2004. Please refer to the section of this consent solicitation/prospectus entitled Where You Can Find More Information beginning on page 111 in order to find out where you can obtain copies of these reports as well as the other documents that Camden files with the SEC.
Summit Properties Inc.
Summit Properties Inc., a Maryland corporation, is a real estate investment trust that focuses on the operation, development and acquisition of luxury apartment communities in select neighborhoods throughout the Southeast and Mid-Atlantic United States. Summit focuses its efforts in five markets, which consist of Washington, D.C., Southeast Florida, Atlanta, Raleigh and Charlotte. As of September 30, 2004, Summits portfolio consisted of 43 completed communities comprising 13,603 apartment homes; four communities owned in a joint venture, comprised of 1,203 apartment homes; and four apartment communities with 1,715 apartment homes in various stages of development (two of which communities with 972 apartment homes were not yet in lease-up as of September 30, 2004).
Substantially all of Summits business activities are conducted through its operating partnership, Summit Properties Partnership, L.P., which we refer to in this consent solicitation/prospectus as the Operating Partnership, of which Summit is the sole general partner.
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For more information on the business of Summit, please refer to Summits Annual Report on Form 10-K for the year ended December 31, 2003, Current Report on Form 8-K filed with the SEC on November 15, 2004 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2004. For more information on the business of the Operating Partnership, please refer to the Operating Partnerships Annual Report on Form 10-K for the year ended December 31, 2003, Current Reports on Form 8-K filed with the SEC on November 16, 2004 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2004. Please refer to the section of this consent solicitation/prospectus entitled Where You Can Find More Information beginning on page 114 in order to find out where you can obtain copies of these reports as well as the other documents that Summit and the Operating Partnership file with the SEC.
The Consent Solicitation
Limited Partner Consent (see page 42)
Pursuant to the existing partnership agreement, approval of the merger and approval of the new partnership agreement each requires the affirmative vote of the holders of a majority of the outstanding common units, other than Summit. Two such holders, holding approximately 36.4% of the outstanding common units entitled to vote on these proposals, have entered into a voting agreement agreeing to vote these units in favor of such matters. As of January 24, 2005, Summits directors, executive officers and their affiliates beneficially owned 1,220,526 common units, representing 36.5% of the outstanding common units entitled to vote on these proposals. The proposal to approve the merger and the proposal to approve the new partnership agreement are conditioned upon one another.
The approval of the new partnership agreement by the holders of at least a majority of the outstanding common units, other than Summit, will constitute a waiver of the provisions of Article 16 of the existing partnership agreement, which are described in this consent solicitation/prospectus under the section entitled Comparison of Unitholder Rights Extraordinary Transactions on page 107.
As a result of the merger, Camden Summit will become the sole general partner of the Operating Partnership.
You can vote on these proposals if you owned common units at the close of business on January 24, 2005.
Summary of the Transaction
Camden and Summit, the general partner of the Operating Partnership, entered into an agreement and plan of merger on October 4, 2004, which was subsequently amended on October 6, 2004 and January 24, 2005. The merger agreement provides for the merger of Summit with and into Camden Summit, a wholly owned subsidiary of Camden, with Camden Summit as the surviving corporation. A copy of the merger agreement, as amended, is attached to this consent solicitation/prospectus as Annex A. We encourage you to read the merger agreement, as amended, because it is the legal document that governs the merger.
Upon the closing of the merger, the Operating Partnership will continue to exist, Camden Summit will become the general partner of the Operating Partnership and the existing partnership agreement will be amended and restated. The form of the new partnership agreement is attached to this consent solicitation/prospectus as Annex B. We encourage you to read the new partnership agreement because it is the legal document that will govern the Operating Partnership after the merger.
Subject to the completion of the merger, Camden is offering you the opportunity to remain as a limited partner of the Operating Partnership following the merger by exchanging your existing units for new units in the Operating Partnership. If you do not want to remain as a limited partner, Camden is offering to exchange your existing units for cash. Please refer to the section of this consent solicitation/prospectus entitled The Exchange Offer for more information on the exchange offer.
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By a separate joint proxy statement/prospectus, the Camden board is soliciting approval of the issuance of Camden common shares pursuant to the merger agreement from Camden common shareholders and the Summit board is soliciting approval of the merger agreement and the merger from Summit common stockholders. The joint proxy statement/prospectus also constitutes a prospectus of Camden with respect to the Camden common shares to be issued to Summit stockholders in the merger.
Approval of the issuance of Camden common shares requires the affirmative vote of the holders of at least a majority of the Camden common shares cast on such proposal at the Camden special meeting, provided that the total votes cast on the proposal represents more than 50% of the outstanding common shares entitled to vote on the proposal. As of January 24, 2005, Camdens trust managers, executive officers and their affiliates beneficially owned, excluding derivative securities held by them, 1,181,004 Camden common shares, representing approximately 3.0% of the outstanding Camden common shares entitled to vote at the Camden special meeting.
Approval of the merger agreement and the merger requires the affirmative vote of the holders of a majority of the outstanding shares of Summit common stock as of the record date for the Summit special meeting. As of January 24, 2005, Summits directors, executive officers and their affiliates beneficially owned, excluding stock options and partnership units held by them, 1,376,803 shares of Summit common stock, representing approximately 4.4% of the outstanding shares of Summit common stock entitled to vote at the Summit special meeting.
The merger will not be completed, nor will the new partnership agreement be adopted, even if limited partners approve the merger and the new partnership agreement, unless the required approvals of Camden shareholders and Summit stockholders are obtained. The closing of the exchange offer is conditioned on the closing of the merger.
Recommendation of the Summit Board (see page 53)
The board of directors of Summit, in its capacity as the general partner of the Operating Partnership, unanimously recommends that limited partners vote FOR approval of the merger and FOR approval of the new partnership agreement. Your should refer to the reasons the Summit board considered in making this determination beginning on page 53.
In considering the recommendation of the Summit board with respect to the transaction, Summit stockholders and limited partners should be aware that members of the Summit board as well as some Summit executive officers have interests in, and will receive benefits from, the transaction that differ from, or are in addition to, the interests of Summit stockholders and limited partners generally. See The Transaction Conflicts of Interest of Summit Directors and Executive Officers in the Merger beginning on page 62.
We are not making, and have not authorized anyone to make, any recommendation as to whether you ought to elect to receive cash or new units in the exchange offer. You must make your own investment decision whether to receive cash or new units based on your investment objectives.
Fairness Opinion (see page 56)
In deciding to approve and adopt the merger agreement and the merger, the Summit board considered the oral opinion, delivered on October 4, 2004, subsequently confirmed in writing, of its financial advisor, JPMorgan, that, as of that date and based upon and subject to the various considerations and assumptions described in the opinion, the consideration to be received by the holders of Summit common stock (including with respect to equity securities convertible into, or redeemable by Summit under certain circumstances for, shares of Summit common stock, any holders thereof on an as-converted or as-redeemed basis, as the case may be) in the merger was fair, from a financial point of view, to such holders. The JPMorgan opinion, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken by JPMorgan in connection with its opinion, is attached as Annex E to this consent solicitation/prospectus. JPMorgan did not make an independent
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Risks Associated with the Transaction (see page 31)
The Camden and Summit boards believe that the transaction is advisable and in the best interests of their respective equityholders. There are, however, risks associated with the transaction that you should consider in deciding how to vote. These risks include, among others:
| the fact that you may receive new units in the exchange offer with a market value lower than expected; | |
| the fact that the approval of the new partnership agreement will constitute a waiver of some of your rights under the existing partnership agreement; | |
| the fact that after the transaction is completed, holders of existing units who receive new units for some or all of their existing units will have different rights that may be less advantageous than their current rights; | |
| the potential inability of Camden to integrate successfully Summits portfolio and to realize the cost savings expected from the transaction; | |
| the fact that the directors and some of the executive officers of Summit have interests in the transaction that may conflict with the interests of Summit stockholders and limited partners; | |
| risks related to the operation of the Operating Partnership after the merger; | |
| there will be restrictions and limitations on the transfer of new units; | |
| the fact that holders of new units will be subject to dilution; | |
| the fact that Camden will need to refinance the new $500 million bridge facility obtained to finance the transaction costs, and may incur increased interest costs on the replacement indebtedness due to higher interest costs of longer-term debt; | |
| the risk that Camden and Summit may incur substantial expenses and payments if the transaction does not occur; | |
| the risk that the termination fee may discourage other companies from trying to acquire Summit; | |
| the fact that the tax consequences of the transaction for you will be dependent on whether you receive cash or new units in the transaction; | |
| the risk that the failure to achieve expected cost savings and anticipated costs relating to the transaction could reduce Camdens future earnings per share; and | |
| the risks associated with the lack of a requirement that the fairness opinion of Summits financial advisor be updated as a condition to closing the transaction. |
Risks Associated with the Ownership of Camden Common Shares (see page 37)
After the merger, new units may be redeemed for Camden common shares, and there are risks associated with the ownership of Camden common shares into which the new units may be redeemed that you should consider in deciding whether to elect to receive new units or cash in the exchange offer. You should carefully consider information set forth below under Risk Factors Risks Associated with the Ownership of Camden Common Shares in conjunction with the other information contained or
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Conflicts of Interest of Summit Directors and Executive Officers in the Merger (see page 62)
When you consider whether to vote in favor of the merger and in favor of the new partnership agreement, you should be aware that members of the Summit board as well as some Summit executive officers have interests in, and will receive benefits from, the transaction that differ from, or are in addition to, the interests of other Summit stockholders and limited partners generally. As a result of the transaction, Summit executive officers and directors have received or will receive the following:
| Seven of Summits executive officers, Steven R. LeBlanc (who is also a director of Summit), Michael L. Schwarz, Gregg D. Adzema, Keith L. Downey, Randall M. Ell, Todd Farrell and Michael G. Malone, will receive a total of approximately $14.5 million under severance agreements. | |
| These seven executive officers will receive a total of $10 million under retention bonus agreements. | |
| These seven executive officers are entitled to additional gross-up payments for any excess parachute payment excise tax imposed on the payments to be made to such executive officers in connection with the merger. | |
| Summit awarded performance bonuses to Messrs. LeBlanc, Schwarz, Adzema and Malone in an aggregate amount of $2 million. | |
| Messrs. LeBlanc, Schwarz, Adzema, Downey, Ell and Malone received a total of approximately $5.0 million under Summits long term incentive plan as described in the section of this consent solicitation/prospectus entitled The Transaction Conflicts of Interest of Summit Directors and Executive Officers in the Merger beginning on page 62. | |
| Messrs. LeBlanc, Schwarz, Adzema, Downey, Ell and Malone received a lump sum cash payment equal to approximately $14.2 million in the aggregate in exchange for the cancellation of certain vested and unvested stock options held by such executive officers as described in the section of this consent solicitation/prospectus entitled The Transaction Conflicts of Interest of Summit Directors and Executive Officers in the Merger beginning on page 62. | |
| Messrs. LeBlanc, Schwarz, Adzema, Downey, Ell and Malone currently hold options to purchase a total of 14,542 shares of Summit common stock. To the extent these executive officers still hold such options at the effective time of the merger, these options will be cancelled in exchange for the right to receive a single lump sum cash payment, which will vary depending on the market price of Camden common shares during a period prior to closing as described in the section of this consent solicitation/prospectus entitled The Merger Agreement Treatment of Summit Stock Options and Restricted Stock on page 74. In lieu of receiving this lump sum cash payment, at the option of the executive officer, outstanding incentive stock options may be cancelled in exchange for the right to receive Camden common shares as more fully described in the section of this consent solicitation/prospectus entitled The Merger Agreement Treatment of Summit Stock Options and Restricted Stock beginning on page 78. The issuance of Camden common shares pursuant to this election will not effect the amounts of cash and Camden common shares to be issued in the merger. | |
| Messrs. LeBlanc, Schwarz, Adzema, Downey, Ell, Malone and Farrell received a lump sum cash payment equal to approximately $3.3 million in the aggregate in exchange for the cancellation of shares of restricted stock and performance based stock awards held by such executive officers as described in the section of this consent solicitation/prospectus entitled The Transaction Conflicts of Interest of Summit Directors and Executive Officers in the Merger beginning on page 62. | |
| Camden will continue the indemnification and directors and officers liability insurance coverage for Summit directors and officers for six years after the merger. |
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| Two of Summits directors, William B. McGuire, Jr. and William F. Paulsen, own a total of 1,216,358 units of limited partnership interest in the Operating Partnership and will have the option to redeem their units for $31.20 in cash per unit or to remain in the Operating Partnership following the merger at a unit valuation equal to .6687 of a Camden common share. If either Messrs. McGuire or Paulsen elects to remain in the Operating Partnership following the merger, he will, in his capacity as a limited partner of the Operating Partnership, enter into a Tax, Asset and Income Support Agreement that will prevent the Operating Partnership from selling protected assets under certain circumstances if the limited partners would recognize a taxable gain in such a disposition. See Ancillary Agreements Tax, Asset and Income Support Agreement beginning on page 89. | |
| Messrs. McGuire and Paulsen will be appointed as trust managers of Camden following the closing of the merger. | |
| Messrs. McGuire and Paulsen currently hold options to purchase a total of 286,000 shares of Summit common stock. To the extent that Messrs. McGuire and Paulsen still hold such options at the effective time of the merger, these options will be cancelled in the merger in exchange for a single lump sum cash payment, which will vary depending on the market price of Camden common shares during a period prior to closing as described in the section of this consent solicitation/prospectus entitled The Merger Agreement Treatment of Summit Stock Options and Restricted Stock on page 74. In lieu of receiving this lump sum cash payment, at the option of Messrs. McGuire and Paulsen, outstanding incentive stock options may be cancelled in exchange for the right to receive Camden common shares as more fully described in the section of this consent solicitation/prospectus entitled The Merger Agreement Treatment of Summit Stock Options and Restricted Stock on page 74. Mr. Paulsen currently holds 36,480 incentive stock options and expects to elect to receive at the effective time of the merger Camden common shares in exchange for the cancellation of his incentive stock options. The issuance of Camden common shares pursuant to this election will not effect the amounts of cash and Camden common shares to be issued in the merger. | |
| All restricted stock held by Messrs. McGuire and Paulsen, totaling 1,614 shares, will vest at a time no later than the closing of the merger and will be entitled to receive the merger consideration, which, assuming that all such shares are converted into the cash consideration, will have a total value of approximately $50,000. | |
Comparison of Rights of Unitholders (see page 102)
The Operating Partnership is a Delaware limited partnership and, accordingly, the rights of the holders of existing units are governed by the existing partnership agreement and Delaware law. At the time of the merger, the rights of the holders of new units will be governed by the new partnership agreement and Delaware law, and Camden Summit will become the general partner of the Operating Partnership. In addition, the name of the Operating Partnership will be changed to Camden Summit Partnership, L.P.
The Exchange Offer
The Exchange of Existing Units (see page 67)
We are offering each limited partner, other than Summit, the right to elect to receive cash or new units in exchange for all of the existing units currently outstanding. In addition, we will also pay accrued and unpaid distributions with respect to the existing units accepted for exchange up to the date of acceptance on all existing units accepted for exchange.
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You may elect to exchange some or all of your existing units for either:
| $31.20 in cash, which we refer to as the cash consideration; or | |
| .6687 of a new unit, which we refer to as the unit consideration. |
In the event that you do not make an election with respect to your existing units, each existing unit will automatically be converted into .6687 of a new unit at the closing of the exchange offer. The value of the consideration that you receive in the exchange offer may vary depending on whether you elect to receive new units or cash. The value of the cash consideration is fixed at $31.20 for each existing unit. The value of the unit consideration is not fixed and will depend on the value of .6687 of a new unit at the time of the closing of the exchange offer. You will have the right to redeem the new units that you receive in the exchange offer at any time following the completion of the exchange offer in accordance with terms and conditions of the new partnership agreement. Under the new partnership agreement, each new unit will be redeemable for one Camden common share or its cash equivalent, at the election of Camden Summit. Accordingly, the value of the unit consideration in the transaction can be determined by multiplying the trading price of a Camden common share by .6687.
As illustrated in the table below, the value of .6687 of a Camden common share at the closing of the exchange offer may be less than or greater than $31.20. In particular, if the value of a Camden common share at the closing of the exchange offer is less than $46.66, then the $31.20 in cash would be greater than the value of .6687 of a Camden common share.
Hypothetical Trading | Corresponding Value of | |||||
Price of Camden | .6687 of a Camden | |||||
Common Shares | Common Share | |||||
$ | 56.00 | $ | 37.45 | |||
$ | 55.00 | $ | 36.78 | |||
$ | 54.00 | $ | 36.11 | |||
$ | 53.00 | $ | 35.44 | |||
$ | 52.00 | $ | 34.77 | |||
$ | 51.00 | $ | 34.10 | |||
$ | 50.00 | $ | 33.44 | |||
$ | 49.00 | $ | 32.77 | |||
$ | 48.00 | $ | 32.10 | |||
$ | 47.00 | $ | 31.43 | |||
$ | 46.66 | $ | 31.20 | |||
$ | 46.00 | $ | 30.76 | |||
$ | 45.00 | $ | 30.09 | |||
$ | 44.00 | $ | 29.42 | |||
$ | 43.00 | $ | 28.75 | |||
$ | 42.00 | $ | 28.09 | |||
$ | 41.00 | $ | 27.42 | |||
$ | 40.00 | $ | 26.75 | |||
$ | 39.31 | $ | 26.29 |
You are urged to check the trading price of Camden common shares prior to completing your consent form and election form. The trading price of Camden common shares will fluctuate between the date of this consent solicitation/prospectus, the date of your election and the closing of the exchange offer. As a result, as the table above illustrates, fluctuations in the trading price of Camden common shares will alter the value of the new units that you may acquire in exchange for your existing units.
Any cash payments made to the limited partners upon redemption of their common units for $31.20 in cash per common unit will not reduce the total amount of cash that will be paid to Summit
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Summit may terminate the merger agreement if the value of Camden common shares decreases below $39.31 per Camden common share, during a period leading up to the merger, unless Camden elects to increase the exchange ratio. If Camden makes such an election, the exchange offer will be amended to similarly increase the exchange ratio in the exchange offer. See the Merger Agreement Summit Price-Based Termination Right on page 81.
The exchange offer will expire on the exchange offer expiration date, which is 4:00 p.m., Eastern Time, on February 28, 2005, unless we decide to extend it. We may extend the exchange offer expiration date for any reason. If we decide to extend the exchange offer expiration date, we will announce any extension by press release or other permitted means no later than 9:00 a.m., Eastern Time, on the business day after the previously scheduled exchange offer expiration date.
The exchange offer is not being made to, nor will we accept tenders for exchange from, holders of existing units in any jurisdiction in which the exchange offer or the acceptance of it would not be in compliance with the securities or blue sky laws of such jurisdiction.
Conditions to the Exchange Offer (see page 68)
The exchange offer is subject to various conditions, including the following:
| the closing of the merger; and | |
| the SEC declaring the registration statement of which this consent solicitation/prospectus is a part and any post-effective amendment to this registration statement effective under the Securities Act of 1933, as amended. |
Tenders and Withdrawals of Existing Units (see page 69)
If you desire to tender your existing units for cash or new units in the exchange offer, you must complete and sign an election form and send it along with your unit certificates to American Stock Transfer & Trust Company, the exchange agent for the exchange offer, prior to the exchange offer expiration date.
If all conditions to the exchange offer are satisfied or waived, promptly after the closing of the exchange offer we will exchange all existing units validly tendered and not withdrawn prior to the exchange offer expiration date for cash or new units in accordance with your election. We will determine in our reasonable discretion whether any existing units have been properly tendered. Please carefully follow the instructions contained in this consent solicitation/prospectus on how to tender your existing units.
If you decide to tender existing units in the exchange offer, you may withdraw them at any time prior to the exchange offer expiration date. Any existing units properly withdrawn will be deemed not to have been validly tendered unless such withdrawn existing units are properly re-tendered prior to the exchange offer expiration date.
Acceptance of Existing Units (see page 70)
We will accept all existing units validly tendered and not withdrawn as of the exchange offer expiration date and will issue new units and/or cash promptly after the closing of the exchange offer. Our oral or written notice of acceptance to the exchange agent will be considered our acceptance of the existing units.
Consequences to Holders Who Do Not Tender Existing Units for Exchange (see page 71)
Each existing unit that is not tendered for exchange, is withdrawn for exchange (and not validly re-tendered) or is tendered but not accepted in connection with the exchange offer prior to the exchange
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Amendment of the Exchange Offer (see page 67)
We reserve the right not to accept any of the existing units tendered, and otherwise to interpret or modify the terms of this exchange offer, not inconsistent with the terms of the merger agreement or existing partnership agreement, provided that we will comply with applicable laws that require us to extend the period during which existing units may be tendered or withdrawn as a result of changes in the terms of or information relating to the exchange offer.
Material Federal Income Tax Consequences (see page 92)
Whether you elect to receive cash or new units in exchange for your existing units, the exchange will have important and material federal income tax consequences for you. You are strongly advised to consult with your tax and other advisors regarding the exchange offer and your decision as to whether to elect to receive cash or new units. The tax discussion contained in this consent solicitation/prospectus under Material Federal Income Tax Consequences provides a general overview of the anticipated federal but not state, local or foreign income tax consequences of the exchange offer to the limited partners. However, your particular circumstances could vary significantly from those of other limited partners and, consequently, some or all of the tax disclosure in this consent solicitation/prospectus may not be applicable to you.
The Exchange Agent
American Stock Transfer & Trust Company will act as exchange agent for purposes of processing tenders and withdrawals of existing units in the exchange offer. The address of the exchange agent is set forth in the election form included with this consent solicitation/prospectus.
We will pay the exchange agent reasonable and customary fees for its services and will reimburse the exchange agent for all of its reasonable out-of-pocket expenses.
The Merger and Related Matters
Conditions to the Closing of the Merger (see page 79)
Conditions to Each Partys Obligations to Effect the Merger. The respective obligations of each party to complete the merger is subject to the fulfillment or waiver of a number of conditions, including the following:
| the receipt of the requisite approvals of Camden shareholders, Summit stockholders and limited partners of the Operating Partnership; | |
| the registration statement of which the joint proxy statement/prospectus relating to the merger forms a part having become effective and no stop order or proceedings by the SEC seeking a stop order having been entered or pending; | |
| the listing of the Camden common shares to be issued in the merger and the Camden common shares reserved for issuance upon redemption of the new units on the New York Stock Exchange, or the NYSE; | |
| the receipt of all required governmental consents and approvals necessary to complete the merger; and | |
| the absence of any court or other governmental order preventing the merger. |
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In addition, Camdens obligation to complete the merger is subject to, among other things:
| the accuracy, as of the closing, of the representations and warranties made by Summit to the extent set forth in the merger agreement; | |
| the performance in all material respects by Summit of all of its obligations under the merger agreement to be performed by it prior to the merger; and | |
| the lack of any event, change or circumstance that, individually or in the aggregate, has a material adverse change, as defined in the merger agreement, on Summit. |
In addition, Summits obligation to complete the merger is subject to, among other things:
| the accuracy, as of the closing, of the representations and warranties made by Camden to the extent set forth in the merger agreement; | |
| the performance in all material respects by Camden of all of its obligations under the merger agreement to be performed by it prior to the merger; | |
| the lack of any event, change or circumstance that, individually or in the aggregate, has a material adverse change, as defined in the merger agreement, on Camden; and | |
| the receipt by Camden of the financing necessary to satisfy any and all of Camdens or Camden Summits obligations under or arising out of the merger agreement. |
Where the law permits, Camden or Summit could decide to complete the merger even though one or more conditions were not satisfied. By law, neither Camden nor Summit can waive:
| the requirement that Camden common shareholders approve the issuance of Camden common shares in the merger and Summit common stockholders approve the merger; | |
| the requirement that the limited partners of the Operating Partnership approve the merger and the new partnership agreement of the Operating Partnership; and | |
| any court order or law preventing the closing of the merger. |
Whether any of the other conditions would be waived would depend on the facts and circumstances as determined by the reasonable business judgment of the Camden or Summit boards. If Camden or Summit waive compliance with one or more of the other conditions and the condition was deemed material to a vote of Camden common shareholders and/or Summit common stockholders, Camden and/or Summit would have to resolicit shareholder or stockholder approval, as applicable, before closing the merger. Neither Camden nor Summit intends to notify shareholders or stockholders of any waiver that, in the judgment of the Camden and Summit boards, does not require resolicitation of shareholder or stockholder approval.
It is a condition to the closing of the merger that Locke Liddell & Sapp LLP, counsel to Camden, deliver an opinion as to Camdens qualification as a REIT under the Internal Revenue Code and Camdens ability to so qualify after the merger. It is also a condition to the closing of the merger that Goodwin Procter LLP, counsel to Summit, deliver an opinion that the merger qualifies as a reorganization under the provisions of Section 368(a) of the Internal Revenue Code and as to Summits qualification as a REIT under the Internal Revenue Code. These conditions will not be waived.
No Solicitation by Summit (see page 77)
The merger agreement contains restrictions on Summits ability to solicit, initiate or encourage, or participate in any discussions or negotiations regarding an Acquisition Proposal, as defined in the section entitled The Merger Agreement No Solicitation by Summit. Notwithstanding these restrictions, the merger agreement provides that, under specified circumstances, if Summit receives an unsolicited bona fide Acquisition Proposal from a third party, Summit may furnish non-public information to that third party and may participate in discussions and negotiations regarding such Acquisition Proposal if the Summit
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Termination of the Merger Agreement (see page 80)
Camden or Summit may terminate the merger agreement, whether before or after the required shareholder, stockholder and limited partner approvals are obtained, if:
| Summit stockholders do not approve the merger agreement and the merger; | |
| the limited partners of the Operating Partnership, other than Summit, do not approve the merger and the new partnership agreement of the Operating Partnership; | |
| Camden shareholders do not approve the issuance of Camden common shares in the merger; | |
| a final, non-appealable judgment or governmental order is issued prohibiting the closing of the merger; or | |
| the merger is not completed by March 31, 2005, provided that neither Camden nor Summit may terminate the merger agreement if its breach is the reason that the merger is not completed by that date. |
Camden also may terminate the merger agreement:
| if Summit breaches or fails to perform in any material respect any of its representations, warranties or covenants contained in the merger agreement, which breach or failure to perform would give rise to a failure of the related condition to the closing of the merger and such condition would be incapable of being satisfied by March 31, 2005; or | |
| if the Summit board: |
| fails to include a recommendation in the joint proxy statement/prospectus relating to the merger that the Summit stockholders vote in favor of the merger agreement and the merger; | |
| withdraws, modifies or changes, or proposes or announces any intention to withdraw, modify or change, in any manner material and adverse to Camden, such recommendation; or | |
| approves or recommends, or announces any intention to approve or recommend, any Acquisition Proposal, as defined below in the section entitled The Merger Agreement No Solicitation by Summit. |
Summit also may terminate the merger agreement:
| if Camden breaches or fails to perform in any material respect any of its representations, warranties or covenants contained in the merger agreement, which breach or failure to perform would give rise to a failure of the related condition to the closing of the merger and such condition would be incapable of being satisfied by March 31, 2005; | |
| if, as of the date that the joint proxy statement/prospectus relating to the merger is first mailed to Summit stockholders through the closing of the merger, Camden fails to have the financing necessary to satisfy any and all of Camdens or Camden Summits obligations arising under or out of the merger agreement; or | |
| in connection with entering into a definitive agreement to effect a superior acquisition proposal so long as Summit has provided Camden with at least 48 hours prior written notice of Summits decision to so terminate, such termination is not effective until such time as the $50 million termination fee is made by Summit and Summit is not then in material breach of the no solicitation provisions contained in the merger agreement. |
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Camden and Summit also may mutually agree to terminate the merger agreement.
Summit Price-Based Termination Right (see page 81)
In addition to the termination rights described above, Summit may also terminate the merger agreement if:
| as of the third business day, which we refer to in this consent solicitation/prospectus as the Determination Date, before the business day immediately following obtaining Camden shareholder and Summit stockholder and limited partner approvals, the average of the closing prices of Camden common shares for the 14 consecutive trading days ending on the business day immediate prior to the Determination Date, discarding the two highest and two lowest closing prices and averaging the remaining closing prices, which we refer to in this consent solicitation/prospectus as the Average Camden Share Price, is less than $39.31; | |
| Summit notifies Camden of Summits intention to terminate the merger agreement; and | |
| within one business day of receipt of such notice, Camden has not delivered written notice to Summit agreeing to increase the exchange ratio such that, as of the closing date, the product of the number of shares of Summit common stock that convert into the right to receive the share consideration times the exchange ratio of .6687 times the Average Camden Share Price will be equal to the product of the number of shares of Summit common stock that convert into the right to receive the share consideration times the exchange ratio times $39.31. If Camden makes such election, the exchange offer will be amended to similarly increase the exchange ratio in the exchange offer. |
Termination Fee and Termination Expenses (see page 81)
Summit has agreed to pay to Camden a termination fee of $50 million, which represents approximately 2.3% of the total transaction value, if the merger agreement is terminated:
| by Summit under the limited circumstances described above where it is permitted to terminate the merger agreement in connection with entering into a definitive agreement to effect a superior acquisition proposal; or | |
| by Camden under the limited circumstances described above where the Summit board fails to include a recommendation in this consent solicitation/prospectus that the Summit stockholders vote in favor of the merger agreement and the merger, withdraws, modifies or changes, or proposes or announces any intention to withdraw, modify or change, in any manner material and adverse to Camden, such recommendation, or approves or recommends, or announces any intention to approve or recommend, a superior acquisition proposal. |
Under the merger agreement, Summit and Camden also may become obligated under specified circumstances to reimburse the other partys expenses if the merger agreement is terminated.
Trust Managers and Executive Officers of Camden After the Transaction (see page 62)
Following the merger, the current trust managers of Camden will remain as trust managers of Camden. In addition, the merger agreement provides that Messrs. McGuire and Paulsen will become members of the Camden board and will be nominated by the Camden board for election at the next annual meeting of Camden shareholders. Following the merger, the current executive officers of Camden will remain as executive officers of Camden. None of the current executive officers of Summit will become executive officers of Camden following the merger.
Transaction Financing (see page 66)
Camden intends to finance the estimated $519.9 million of transaction costs under a new $500 million senior unsecured bridge facility and by borrowing the remaining $19.9 million of transaction costs under
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The Spin-Off Transaction (see page 66)
In connection with the transaction, Camden expects to form a joint venture and transfer to the joint venture multifamily properties currently owned by Camden with an estimated value of $425 million to $525 million. Camden expects to retain a minority interest in the joint venture and continue to provide property management services for the properties transferred to the joint venture. Camden expects to use a portion of the proceeds from this transaction to repay the bridge facility that will finance the transaction costs, including the cash portion of the merger consideration. If the spin-off transaction is not consummated, Camden will need to repay the bridge financing by other means, which may result in Camden incurring increased interest costs on any replacement indebtedness due to higher interest costs of longer-term debt. See Risk Factors Camden will need to replace, at or before maturity, a $500 million bridge facility that will be used to finance a portion of the cash consideration and transaction costs.
Regulatory Approvals (see page 66)
Neither Camden, Summit nor the Operating Partnership is aware of any material federal or state regulatory requirements that must be complied with or approvals that must be obtained by Camden, Camden Summit, Summit or the Operating Partnership in connection with either the merger or the exchange offer.
Accounting Treatment (see page 66)
The merger will be treated as a purchase for financial accounting purposes. This means that Camden will record the assets acquired and the liabilities assumed at their estimated fair values at the time the transaction is completed.
Camden Common Shares to be Listed on the New York Stock Exchange
Camden will list the Camden common shares to be issued to holders of shares of Summit common stock in connection with the merger and the Camden common shares reserved for issuance upon redemption of the new units on the NYSE. After the closing of the merger, there will be no further trading in shares of Summit common stock and Summit will delist its common stock from the NYSE and deregister it for purposes of the Securities Exchange Act of 1934.
Dissenters Appraisal Rights (see page 68)
You do not have any rights to dissent and receive the appraised value of your existing units in the transaction.
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Selected Historical Financial Information
The following financial information is provided to assist you in your analysis of the financial aspects of the merger. The annual Camden historical information has been derived from the audited consolidated financial statements of Camden as of and for each of the years ended December 31, 1999 through 2003. The annual Operating Partnership historical information has been derived from the audited consolidated financial statements of Summit as of and for each of the years ended December 31, 1999 through 2003. The historical information as of and for the nine months ended September 30, 2003 and 2004 has been derived from interim, unaudited condensed consolidated financial statements of both Camden and the Operating Partnership that, in the opinion of each entitys management, include all adjustments that are considered necessary for the fair presentation of the respective entitys results for the interim periods. The information is only a summary and should be read in conjunction with each entitys historical consolidated financial statements and related notes contained in Camdens and the Operating Partnerships annual, quarterly and other reports that have been incorporated by reference in this consent solicitation/prospectus, as well as other information that Camden and the Operating Partnership have filed with the SEC. See Where You Can Find More Information beginning on page 114. Operating results for the nine months ended September 30, 2004 are not necessarily indicative of results for the year ending December 31, 2004. For a discussion of certain factors that may materially affect the comparability of the selected historical financial information or cause the data reflected herein not be indicative of Camdens future financial condition or results of operations, see the section in this consent solicitation/prospectus entitled Risk Factors beginning on page 31.
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CAMDEN PROPERTY TRUST
Nine Months Ended | ||||||||||||||||||||||||||||||
Years Ended December 31, | September 30, | |||||||||||||||||||||||||||||
2003 | 2002 | 2001 | 2000 | 1999 | 2004 | 2003 | ||||||||||||||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||||||||||||||||
Revenues:
|
||||||||||||||||||||||||||||||
Rental revenues
|
$ | 371,401 | $ | 365,883 | $ | 365,973 | $ | 356,396 | $ | 333,482 | $ | 289,212 | $ | 275,289 | ||||||||||||||||
Other property revenues
|
33,373 | 30,622 | 28,692 | 26,351 | 21,476 | 26,268 | 25,237 | |||||||||||||||||||||||
Total property revenues
|
404,774 | 396,505 | 394,665 | 382,747 | 354,958 | 315,480 | 300,526 | |||||||||||||||||||||||
Fee and asset management
|
7,276 | 6,264 | 7,745 | 6,537 | 6,492 | 6,639 | 5,402 | |||||||||||||||||||||||
Other revenues
|
5,685 | 8,214 | 9,117 | 5,823 | 1,924 | 7,999 | 3,447 | |||||||||||||||||||||||
Total revenues
|
417,735 | 410,983 | 411,527 | 395,107 | 363,374 | 330,118 | 309,375 | |||||||||||||||||||||||
Expenses:
|
||||||||||||||||||||||||||||||
Property operating and maintenance
|
119,811 | 108,915 | 103,154 | 100,511 | 95,794 | 95,507 | 89,815 | |||||||||||||||||||||||
Real estate taxes
|
44,128 | 41,005 | 39,760 | 38,125 | 35,451 | 34,953 | 33,448 | |||||||||||||||||||||||
Total property expenses
|
163,939 | 149,920 | 142,914 | 138,636 | 131,245 | 130,460 | 123,263 | |||||||||||||||||||||||
Property management
|
10,154 | 10,027 | 9,510 | 9,358 | 9,372 | 8,512 | 7,494 | |||||||||||||||||||||||
Fee and asset management
|
3,908 | 2,499 | 2,016 | 1,370 | 1,254 | 2,845 | 3,229 | |||||||||||||||||||||||
General and administrative
|
16,231 | 14,439 | 12,521 | 13,706 | 10,471 | 12,400 | 11,926 | |||||||||||||||||||||||
Impairment provision for technology investments
|
| | 9,864 | | | | | |||||||||||||||||||||||
Other expenses
|
1,389 | 2,790 | 1,511 | | | | 1,389 | |||||||||||||||||||||||
Losses related to early retirement of debt
|
| 234 | 388 | | | | | |||||||||||||||||||||||
Interest
|
75,414 | 71,499 | 69,841 | 69,036 | 57,856 | 59,701 | 55,459 | |||||||||||||||||||||||
Amortization of deferred financing costs
|
2,634 | 2,165 | 1,591 | 1,340 | 1,064 | 2,250 | 1,923 | |||||||||||||||||||||||
Depreciation
|
105,442 | 101,177 | 97,972 | 93,610 | 86,523 | 80,299 | 78,699 | |||||||||||||||||||||||
Total expenses
|
379,111 | 354,750 | 348,128 | 327,056 | 297,785 | 296,467 | 283,382 | |||||||||||||||||||||||
Income from continuing operations before gain
on sale of properties, impairment loss on land held for sale,
equity in income of joint ventures and minority
interests
|
38,624 | 56,233 | 63,399 | 68,051 | 65,589 | 33,651 | 25,993 | |||||||||||||||||||||||
Gain on sale of properties
|
2,590 | 359 | 2,372 | 18,323 | 2,979 | 1,255 | 2,171 | |||||||||||||||||||||||
Impairment loss on land held for sale
|
| | | | | (1,143 | ) | | ||||||||||||||||||||||
Equity in income of joint ventures
|
3,200 | 366 | 8,527 | 765 | 683 | 259 | 3,152 | |||||||||||||||||||||||
Income allocated to minority interests
Distributions on preferred units
|
(12,747 | ) | (12,872 | ) | (12,872 | ) | (12,845 | ) | (8,278 | ) | (8,350 | ) | (9,654 | ) | ||||||||||||||||
Original issuance costs on redeemed perpetual
preferred units
|
| | | | | (745 | ) | | ||||||||||||||||||||||
Income allocated to common units
|
(2,237 | ) | (1,807 | ) | (3,127 | ) | (2,461 | ) | (2,014 | ) | (2,078 | ) | (1,482 | ) | ||||||||||||||||
Income from continuing operations
|
29,430 | 42,279 | 58,299 | 71,833 | 58,959 | 22,849 | 20,180 | |||||||||||||||||||||||
Income from discontinued operations
|
| 3,134 | 2,993 | 2,591 | 2,664 | | | |||||||||||||||||||||||
Gain on sale of discontinued operations
|
| 29,199 | | | | | | |||||||||||||||||||||||
Net income
|
29,430 | 74,612 | 61,292 | 74,424 | 61,623 | 22,849 | 20,180 | |||||||||||||||||||||||
Preferred share dividends
|
| | (2,545 | ) | (9,371 | ) | (9,371 | ) | | | ||||||||||||||||||||
Net income available to common
shareholders
|
$ | 29,430 | $ | 74,612 | $ | 58,747 | $ | 65,053 | $ | 52,252 | $ | 22,849 | $ | 20,180 | ||||||||||||||||
19
Nine Months Ended | ||||||||||||||||||||||||||||||
Years Ended December 31, | September 30, | |||||||||||||||||||||||||||||
2003 | 2002 | 2001 | 2000 | 1999 | 2004 | 2003 | ||||||||||||||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||||||||||||||||
Earnings per share basic
|
||||||||||||||||||||||||||||||
Income from continuing operations
|
$ | 0.75 | $ | 1.04 | $ | 1.40 | $ | 1.64 | $ | 1.20 | $ | 0.57 | $ | 0.51 | ||||||||||||||||
Income from discontinued operations, including
gain on sale
|
| 0.80 | 0.08 | 0.07 | 0.07 | | | |||||||||||||||||||||||
Net income available to common shareholders
|
$ | 0.75 | $ | 1.84 | $ | 1.48 | $ | 1.71 | $ | 1.27 | $ | 0.57 | $ | 0.51 | ||||||||||||||||
Earnings per share
diluted
|
||||||||||||||||||||||||||||||
Income from continuing operations
|
$ | 0.71 | $ | 1.00 | $ | 1.34 | $ | 1.57 | $ | 1.17 | $ | 0.54 | $ | 0.49 | ||||||||||||||||
Income from discontinued operations, including
gain on sale
|
| 0.73 | 0.07 | 0.06 | 0.06 | | | |||||||||||||||||||||||
Net income available to common shareholders
|
$ | 0.71 | $ | 1.73 | $ | 1.41 | $ | 1.63 | $ | 1.23 | $ | 0.54 | $ | 0.49 | ||||||||||||||||
Distributions declared per common
share
|
$ | 2.54 | $ | 2.54 | $ | 2.44 | $ | 2.25 | $ | 2.08 | $ | 1.905 | $ | 1.905 | ||||||||||||||||
Weighted average number of common shares
outstanding
|
39,355 | 40,441 | 39,796 | 38,112 | 41,236 | 40,234 | 39,224 | |||||||||||||||||||||||
Weighted average number of common and common
dilutive equivalent shares outstanding
|
41,354 | 44,216 | 41,603 | 41,388 | 44,291 | 42,381 | 41,170 |
20
Nine Months Ended | |||||||||||||||||||||||||||||
Years Ended December 31, | September 30, | ||||||||||||||||||||||||||||
2003 | 2002 | 2001 | 2000 | 1999 | 2004 | 2003 | |||||||||||||||||||||||
(In thousands, except property data) | |||||||||||||||||||||||||||||
Balance Sheet Data (at end of year)
|
|||||||||||||||||||||||||||||
Real estate assets
|
$ | 3,099,856 | $ | 3,035,970 | $ | 2,823,530 | $ | 2,719,234 | $ | 2,706,163 | $ | 3,176,542 | $ | 3,105,781 | |||||||||||||||
Accumulated depreciation
|
(601,688 | ) | (498,776 | ) | (422,154 | ) | (326,723 | ) | (253,545 | ) | (680,184 | ) | (575,459 | ) | |||||||||||||||
Total assets
|
2,625,561 | 2,608,899 | 2,449,665 | 2,430,881 | 2,487,932 | 2,646,929 | 2,607,648 | ||||||||||||||||||||||
Notes payable
|
1,509,677 | 1,427,016 | 1,207,047 | 1,138,117 | 1,165,090 | 1,605,326 | 1,481,805 | ||||||||||||||||||||||
Minority interests
|
196,385 | 200,729 | 206,079 | 210,377 | 196,852 | 158,941 | 197,197 | ||||||||||||||||||||||
Convertible subordinated debentures
|
| | | 1,950 | 3,406 | | | ||||||||||||||||||||||
Shareholders equity
|
$ | 784,885 | $ | 839,453 | $ | 918,251 | $ | 974,183 | $ | 1,016,675 | $ | 742,613 | $ | 791,213 | |||||||||||||||
Common shares outstanding
|
39,658 | 39,214 | 40,799 | 38,129 | 39,093 | 39,947 | 39,613 | ||||||||||||||||||||||
Other Data
|
|||||||||||||||||||||||||||||
Cash flows provided by (used in):
|
|||||||||||||||||||||||||||||
Operating activities
|
$ | 137,962 | $ | 182,207 | $ | 180,280 | $ | 166,436 | $ | 164,021 | $ | 121,632 | $ | 105,089 | |||||||||||||||
Investing activities
|
(91,947 | ) | (220,766 | ) | (103,689 | ) | (15,751 | ) | (220,571 | ) | (92,713 | ) | (71,206 | ) | |||||||||||||||
Financing activities
|
(43,063 | ) | 35,785 | (78,348 | ) | (151,266 | ) | (56,420 | ) | (29,811 | ) | (31,947 | ) | ||||||||||||||||
Funds from operations
diluted(a) |
135,734 | 150,443 | 159,719 | 159,070 | 152,369 | 105,484 | 98,943 | ||||||||||||||||||||||
Property Data
|
|||||||||||||||||||||||||||||
Number of operating properties (at end of period)
|
|||||||||||||||||||||||||||||
Included in continuing operations
|
144 | 143 | 142 | 142 | 150 | 145 | 144 | ||||||||||||||||||||||
Included in discontinued operations
|
| | 3 | 3 | 3 | | | ||||||||||||||||||||||
Number of operating apartment homes (at end of
period)
|
|||||||||||||||||||||||||||||
Included in continuing operations
|
51,344 | 50,790 | 50,021 | 50,012 | 51,987 | 52,008 | 51,344 | ||||||||||||||||||||||
Included in discontinued operations
|
| | 1,324 | 1,324 | 1,324 | | | ||||||||||||||||||||||
Number of operating apartment homes (weighted
average)(b)
|
|||||||||||||||||||||||||||||
Included in continuing operations
|
46,382 | 45,465 | 44,164 | 45,177 | 44,282 | 47,039 | 46,237 | ||||||||||||||||||||||
Included in discontinued operations
|
| 1,285 | 1,324 | 1,324 | 1,324 | | | ||||||||||||||||||||||
Weighted average monthly total property revenue
per apartment home
|
$ | 725 | $ | 727 | $ | 745 | $ | 706 | $ | 668 | $ | 745 | $ | 722 | |||||||||||||||
Properties under development (at end of period)
|
2 | 4 | 2 | 3 | 6 | 3 | 1 |
(a) | Camden management considers FFO to be an appropriate measure of the performance of an equity REIT. The National Association of Real Estate Investment Trusts (NAREIT) currently defines FFO as net income (computed in accordance with generally accepted accounting principles in the United States of America, or GAAP), excluding gains (or losses) from sales of property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. In addition, extraordinary or unusual items, along with significant non-recurring events that materially distort the comparative measure of FFO are typically disregarded in its calculation. |
21
Camdens definition of diluted FFO also assumes conversion at the beginning of the period of all convertible securities, including minority interests, which are convertible into common equity. Camden believes that in order to facilitate a clear understanding of its consolidated historical operating results, FFO should be examined in conjunction with net income as presented in the consolidated financial statements and data incorporated by reference into this consent solicitation/prospectus. FFO is not defined by GAAP. FFO should not be considered as an alternative to net income as an indication of Camdens operating performance. Furthermore, FFO as disclosed by other REITs may not be comparable to Camdens calculation. Camdens reconciliation of net income available to common shareholders to FFO is set forth below: |
Nine Months Ended | |||||||||||||||||||||||||||||
Years Ended December 31, | September 30, | ||||||||||||||||||||||||||||
2003 | 2002 | 2001 | 2000 | 1999 | 2004 | 2003 | |||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||
Funds from operations
|
|||||||||||||||||||||||||||||
Net income available to common shareholders
|
$ | 29,430 | $ | 74,612 | $ | 58,747 | $ | 65,053 | $ | 52,252 | $ | 22,849 | $ | 20,180 | |||||||||||||||
Real estate depreciation from continuing
operations
|
103,354 | 99,206 | 96,303 | 92,261 | 85,562 | 78,987 | 77,129 | ||||||||||||||||||||||
Real estate depreciation from discontinued
operations
|
| 1,785 | 2,097 | 2,016 | 1,929 | | | ||||||||||||||||||||||
Adjustments for unconsolidated joint ventures
|
678 | 2,252 | (3,032 | ) | 3,238 | 3,936 | 1,570 | 152 | |||||||||||||||||||||
Loss (gain) on sale of properties
|
35 | (20 | ) | (105 | ) | (15,527 | ) | (2,979 | ) | | | ||||||||||||||||||
Gain on sale of discontinued operations
|
| (29,199 | ) | | | | | | |||||||||||||||||||||
Preferred share dividends
|
| | 2,545 | 9,371 | 9,371 | | | ||||||||||||||||||||||
Income allocated to common units
|
2,237 | 1,807 | 3,127 | 2,461 | 2,014 | 2,078 | 1,482 | ||||||||||||||||||||||
Adjustments for convertible subordinated
debentures
|
| | 37 | 197 | 284 | | | ||||||||||||||||||||||
Funds from Operations
|
$ | 135,734 | $ | 150,443 | $ | 159,719 | $ | 159,070 | $ | 152,369 | $ | 105,484 | $ | 98,943 | |||||||||||||||
Weighted average common shares
outstanding
|
39,355 | 40,441 | 39,796 | 38,112 | 41,236 | 40,234 | 39,224 | ||||||||||||||||||||||
Common share options and awards granted
|
1,433 | 1,313 | 1,234 | 729 | 431 | 1,585 | 1,379 | ||||||||||||||||||||||
Units convertible into common shares
|
2,446 | 2,462 | 2,509 | 2,547 | 2,624 | 2,438 | 2,447 | ||||||||||||||||||||||
Preferred shares
|
| | 1,052 | 3,207 | 3,207 | | | ||||||||||||||||||||||
Convertible subordinated debentures
|
| | 19 | 105 | 146 | | | ||||||||||||||||||||||
Weighted average common and common equivalent
shares outstanding diluted
|
43,234 | 44,216 | 44,610 | 44,700 | 47,644 | 44,257 | 43,050 | ||||||||||||||||||||||
(b) | Excludes apartment homes owned in joint ventures. |
22
SUMMIT PROPERTIES PARTNERSHIP, L.P.
Nine Months Ended | ||||||||||||||||||||||||||||||
Years Ended December 31, | September 30, | |||||||||||||||||||||||||||||
2003 | 2002 | 2001 | 2000 | 1999 | 2004 | 2003 | ||||||||||||||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||||||||||||||||
OPERATING INFORMATION:
|
||||||||||||||||||||||||||||||
Revenues:
|
||||||||||||||||||||||||||||||
Rental
|
$ | 104,973 | $ | 93,034 | $ | 102,691 | $ | 99,133 | $ | 92,741 | $ | 95,445 | $ | 76,950 | ||||||||||||||||
Other property income
|
7,854 | 6,754 | 7,883 | 7,721 | 6,447 | 7,940 | 5,717 | |||||||||||||||||||||||
Management fees third party
communities
|
618 | 787 | 913 | 1,103 | 1,263 | 439 | 471 | |||||||||||||||||||||||
Total revenues
|
113,445 | 100,575 | 111,487 | 107,957 | 100,451 | 103,824 | 83,138 | |||||||||||||||||||||||
Expenses:
|
||||||||||||||||||||||||||||||
Property operating and maintenance expenses
(exclusive of items listed below)
|
24,659 | 22,183 | 22,574 | 20,779 | 20,969 | 20,670 | 17,162 | |||||||||||||||||||||||
Real estate taxes and insurance
|
13,343 | 9,550 | 9,714 | 10,211 | 8,992 | 13,905 | 10,628 | |||||||||||||||||||||||
Depreciation and amortization
|
30,462 | 24,230 | 23,302 | 21,677 | 20,352 | 30,191 | 22,240 | |||||||||||||||||||||||
General and administrative expense
|
6,941 | 5,937 | 6,940 | 4,752 | 3,876 | 6,099 | 5,232 | |||||||||||||||||||||||
Post-retirement benefits for former executive
officers
|
| | | | | 1,536 | | |||||||||||||||||||||||
Property management expenses
|
5,912 | 4,822 | 5,534 | 5,426 | 4,876 | 4,596 | 4,360 | |||||||||||||||||||||||
Total expenses
|
81,317 | 66,722 | 68,064 | 62,845 | 59,065 | 76,997 | 59,622 | |||||||||||||||||||||||
Operating income
|
32,128 | 33,853 | 43,423 | 45,112 | 41,386 | 26,827 | 23,516 | |||||||||||||||||||||||
Interest and other income
|
2,643 | 2,716 | 2,922 | 2,871 | 2,306 | 1,197 | 2,263 | |||||||||||||||||||||||
Interest expense and deferred financing cost
amortization
|
(29,112 | ) | (28,699 | ) | (32,209 | ) | (31,500 | ) | (30,125 | ) | (23,866 | ) | (21,745 | ) | ||||||||||||||||
Income from continuing operations before loss on
unconsolidated real estate joint ventures, (loss) gain on sale
of real estate assets and impairment loss on technology
investments
|
5,659 | 7,870 | 14,136 | 16,483 | 13,567 | 4,158 | 4,034 | |||||||||||||||||||||||
(Loss) gain on unconsolidated real estate joint
ventures
|
(326 | ) | (49 | ) | (171 | ) | (399 | ) | 104 | (275 | ) | (269 | ) | |||||||||||||||||
Gain on sale of real estate assets
|
73 | 13,831 | 34,435 | 38,718 | 17,427 | | | |||||||||||||||||||||||
Gain on sale of real estate assets
joint ventures
|
| 4,955 | 271 | | | | | |||||||||||||||||||||||
Impairment loss on technology investments
|
| | (1,217 | ) | | | | | ||||||||||||||||||||||
Income from continuing operations
|
5,406 | 26,607 | 47,454 | 54,802 | 31,098 | 3,883 | 3,765 | |||||||||||||||||||||||
Total discontinued operations
|
26,250 | 89,324 | 29,862 | 32,012 | 28,662 | 138,664 | 15,459 | |||||||||||||||||||||||
Net income
|
$ | 31,656 | $ | 115,931 | $ | 77,316 | $ | 86,814 | $ | 59,760 | $ | 142,547 | $ | 19,224 | ||||||||||||||||
Income available to common unitholders
|
$ | 18,387 | $ | 103,511 | $ | 64,896 | $ | 74,394 | $ | 53,062 | $ | 138,938 | $ | 7,157 | ||||||||||||||||
23
Nine Months Ended | ||||||||||||||||||||||||||||||
Years Ended December 31, | September 30, | |||||||||||||||||||||||||||||
2003 | 2002 | 2001 | 2000 | 1999 | 2004 | 2003 | ||||||||||||||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||||||||||||||||
Per unit data basic
|
||||||||||||||||||||||||||||||
Income from continuing operations
|
$ | 0.17 | $ | 0.86 | $ | 1.54 | $ | 1.79 | $ | 0.97 | $ | 0.11 | $ | 0.12 | ||||||||||||||||
Income from discontinued operations
|
0.84 | 2.89 | 0.97 | 1.04 | 0.89 | 3.98 | 0.51 | |||||||||||||||||||||||
Net income
|
$ | 1.02 | $ | 3.75 | $ | 2.51 | $ | 2.83 | $ | 1.86 | $ | 4.10 | $ | 0.63 | ||||||||||||||||
Net income available to common unitholders
|
$ | 0.59 | $ | 3.35 | $ | 2.11 | $ | 2.42 | $ | 1.65 | $ | 3.99 | $ | 0.23 | ||||||||||||||||
Per unit data diluted
|
||||||||||||||||||||||||||||||
Income from continuing operations
|
$ | 0.17 | $ | 0.86 | $ | 1.53 | $ | 1.77 | $ | 0.97 | $ | 0.11 | $ | 0.12 | ||||||||||||||||
Income from discontinued operations
|
0.84 | 2.87 | 0.96 | 1.04 | 0.89 | 3.95 | 0.50 | |||||||||||||||||||||||
Net income
|
$ | 1.01 | $ | 3.73 | $ | 2.49 | $ | 2.81 | $ | 1.86 | $ | 4.06 | $ | 0.63 | ||||||||||||||||
Net income available to common unitholders
|
$ | 0.59 | $ | 3.33 | $ | 2.09 | $ | 2.41 | $ | 1.65 | $ | 3.96 | $ | 0.23 | ||||||||||||||||
Distributions per common unit
|
$ | 1.35 | $ | 1.76 | $ | 1.85 | $ | 1.75 | $ | 1.67 | $ | 1.01 | $ | 1.01 | ||||||||||||||||
Weighted average common units
outstanding basic
|
31,119 | 30,937 | 30,796 | 30,697 | 32,135 | 34,803 | 30,563 | |||||||||||||||||||||||
Weighted average common units
outstanding diluted
|
31,268 | 31,107 | 31,106 | 30,897 | 32,206 | 35,099 | 30,670 | |||||||||||||||||||||||
24
Nine Months Ended | |||||||||||||||||||||||||||||
Years Ended December 31, | September 30, | ||||||||||||||||||||||||||||
2003 | 2002 | 2001 | 2000 | 1999 | 2004 | 2003 | |||||||||||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||||||||||||||||
Balance Sheet Information
|
|||||||||||||||||||||||||||||
Real estate, before accumulated depreciation
|
$ | 1,493,670 | $ | 1,410,195 | $ | 1,407,979 | $ | 1,425,367 | $ | 1,286,869 | $ | 1,591,119 | $ | 1,508,479 | |||||||||||||||
Total assets
|
1,351,885 | 1,350,257 | 1,309,299 | 1,358,877 | 1,236,014 | 1,534,559 | 1,362,326 | ||||||||||||||||||||||
Total long-term debt
|
726,152 | 702,456 | 719,345 | 764,384 | 650,077 | 791,714 | 771,033 | ||||||||||||||||||||||
Redeemable perpetual preferred units
|
53,547 | 136,260 | 136,260 | 136,260 | 136,259 | 53,547 | 53,547 | ||||||||||||||||||||||
Partners equity
|
566,322 | 584,411 | 531,847 | 531,128 | 518,270 | 672,475 | 519,217 | ||||||||||||||||||||||
Other Information
|
|||||||||||||||||||||||||||||
Cash flows provided by (used in):
|
|||||||||||||||||||||||||||||
Operating activities
|
$ | 62,826 | $ | 73,318 | $ | 77,892 | $ | 86,604 | $ | 62,653 | $ | 62,089 | $ | 55,088 | |||||||||||||||
Investing activities
|
(28,943 | ) | (8,075 | ) | 5,845 | (121,305 | ) | (36,841 | ) | (45,496 | ) | (10,519 | ) | ||||||||||||||||
Financing activities
|
(33,780 | ) | (64,903 | ) | (86,477 | ) | 33,818 | (24,675 | ) | (16,271 | ) | (45,045 | ) | ||||||||||||||||
Funds from operations(1)
|
$ | 39,482 | $ | 60,218 | $ | 70,167 | $ | 73,342 | $ | 70,707 | $ | 34,729 | $ | 28,996 | |||||||||||||||
Total completed communities (at end of period)(2)
|
46 | 51 | 54 | 59 | 65 | 43 | 50 | ||||||||||||||||||||||
Total apartment homes
developed(3) |
958 | 866 | 1,157 | 1,696 | 1,650 | 743 | 786 | ||||||||||||||||||||||
Total apartment homes acquired
|
1,095 | 222 | | 490 | | 1,133 | 405 | ||||||||||||||||||||||
Total apartment homes (at end of period)(2)
|
14,098 | 15,428 | 16,739 | 17,273 | 16,765 | 14,346 | 15,417 |
(1) | FFO, as defined by NAREIT, represents net income (loss) excluding gains from sales of property and extraordinary items, plus depreciation of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures, all determined on a consistent basis in accordance with GAAP. Summits methodology for computing FFO may differ from the methodologies utilized by other real estate companies and, accordingly, may not be comparable to other real estate companies. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of financial performance, nor is it indicative of funds available to fund our cash needs, including Summits ability to make dividend or distribution payments. Summit believes that FFO is helpful to investors as a measure of the performance of a REIT because it recognizes that historical cost accounting for real estate assets under GAAP assumes that the value of such real estate diminishes over time. Real estate values have historically risen or fallen with market conditions and, therefore, many investors have considered presentation of operating results for a real estate company using historical cost accounting to be insufficient by itself. Thus, NAREIT created FFO as a supplemental measure of a REITs operating performance. By excluding such non-operating items as depreciation and gains on sales of real estate assets, among others, we believe that an investor can more easily compare the operating performance of our real estate assets between periods or compare our operating performance to our peers. |
25
Below is a reconciliation of net income available to common unitholders to FFO for each of the years in the five-year period ended December 31, 2003 and the nine months ended September 30, 2004 and 2003.
Nine Months Ended | |||||||||||||||||||||||||||||
Years Ended December 31, | September 30, | ||||||||||||||||||||||||||||
2003 | 2002 | 2001 | 2000 | 1999 | 2004 | 2003 | |||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||
Income available to common unitholders
|
$ | 18,387 | $ | 103,511 | $ | 64,896 | $ | 74,394 | $ | 53,062 | $ | 138,938 | $ | 7,157 | |||||||||||||||
Gain on sale of real estate assets
|
(18,893 | ) | (78,738 | ) | (34,435 | ) | (38,510 | ) | (17,427 | ) | (137,482 | ) | (8,377 | ) | |||||||||||||||
Gain on sale of real estate assets
joint ventures
|
| (4,955 | ) | (271 | ) | | | | | ||||||||||||||||||||
Gain on sale of real estate
assets Summit Management Company
|
| | | (238 | ) | | | | |||||||||||||||||||||
Depreciation:
|
|||||||||||||||||||||||||||||
Real estate assets
|
39,225 | 39,281 | 38,746 | 36,413 | 34,324 | 32,702 | 29,644 | ||||||||||||||||||||||
Real estate joint venture
|
763 | 1,119 | 1,231 | 1,283 | 748 | 571 | 572 | ||||||||||||||||||||||
Funds from Operations
|
$ | 39,482 | $ | 60,218 | $ | 70,167 | $ | 73,342 | $ | 70,707 | $ | 34,729 | $ | 28,996 | |||||||||||||||
(2) | Represents the total number of completed communities and apartment homes in those completed communities owned at the end of the period (excludes joint venture communities). |
(3) | Represents the total number of apartment homes in communities completed during the period and owned at the end of the period (excludes joint venture communities). |
Equivalent Per Share Data
We have summarized below specified per common share information for Camden and Summit on a historical basis, pro forma combined basis and pro forma combined equivalent basis. The pro forma combined accounts are based on the purchase method of accounting. The Summit per common share pro forma combined equivalents are calculated by multiplying the pro forma combined per common share amounts by .6687. This amount represents the fraction of a new unit that a unitholder electing to receive only new units would receive for each existing unit assuming that there is no increase to the exchange ratio. After the closing, each new unit may be redeemed for one Camden common share or its cash equivalent, at Camden Summits option.
The following information should be read together with the historical and pro forma financial statements included or incorporated by reference in this consent solicitation/prospectus. See Where You Can Find More Information.
Year Ended | Nine Months Ended | ||||||||||||||||
December 31, 2003 | September 30, 2004 | ||||||||||||||||
Basic | Diluted | Basic | Diluted | ||||||||||||||
Income (loss) from continuing operations per
common share:
|
|||||||||||||||||
Camden
|
$ | 0.75 | $ | 0.71 | $ | 0.57 | $ | 0.54 | |||||||||
Summit
|
0.59 | 0.59 | 3.99 | 3.96 | |||||||||||||
Camden and Summit pro forma combined
|
(0.34 | ) | (0.34 | ) | (0.10 | ) | (0.10 | ) | |||||||||
Summit pro forma combined equivalent
|
(0.23 | ) | (0.23 | ) | (0.07 | ) | (0.07 | ) |
26
For the Nine | |||||||||
For the Year Ended | Months Ended | ||||||||
December 31, 2003 | September 30, 2004 | ||||||||
Cash distributions declared per common
share:
|
|||||||||
Camden
|
$ | 2.54 | $ | 1.905 | |||||
Summit
|
1.35 | 1.010 | |||||||
Camden and Summit pro forma combined
|
2.54 | 1.905 | |||||||
Shareholders equity (book value) (end of
period):
|
|||||||||
Camden
|
$ | 784,885 | $ | 742,613 | |||||
Summit
|
462,523 | 558,356 | |||||||
Camden and Summit pro forma combined
|
| 1,298,468 |
Comparative Per Share Market Price Data
The existing units are not listed, and the new units will not be listed, on any national securities exchange or quoted in the over the counter market. There is no established public trading market for the existing units and we do not expect that there will be any established trading market for the new units. However, after the closing, each new unit may be redeemed for one Camden common share or its cash equivalent at Camden Summits election. Camden common shares trade on the NYSE under the symbol CPT. Summit common stock trades on the NYSE under the symbol SMT. The table below sets forth, for the periods indicated, dividends and the range of high and low per share sales prices for Camden common shares and Summit common stock as reported on the NYSE. For current market quotations, you should consult publicly available sources. For more information on Camdens and Summits payment of dividends, see Dividend and Distribution Policies below.
Camden Common Shares | Summit Common Stock | ||||||||||||||||||||||||
Dividends | Dividends | ||||||||||||||||||||||||
High | Low | Paid | High | Low | Paid | ||||||||||||||||||||
2002
|
|||||||||||||||||||||||||
First quarter
|
$ | 39.20 | $ | 34.59 | $ | .635 | $ | 25.23 | $ | 21.65 | $ | .4750 | |||||||||||||
Second quarter
|
41.54 | 36.81 | .635 | 25.85 | 22.23 | .4750 | |||||||||||||||||||
Third quarter
|
37.25 | 30.80 | .635 | 23.13 | 19.08 | .4750 | |||||||||||||||||||
Fourth quarter
|
34.35 | 29.74 | .635 | 19.38 | 16.72 | .3375 | |||||||||||||||||||
2003
|
|||||||||||||||||||||||||
First quarter
|
33.99 | 30.70 | .635 | 18.75 | 17.00 | .3375 | |||||||||||||||||||
Second quarter
|
36.14 | 32.93 | .635 | 21.15 | 18.02 | .3375 | |||||||||||||||||||
Third quarter
|
38.99 | 34.88 | .635 | 22.98 | 20.00 | .3375 | |||||||||||||||||||
Fourth quarter
|
44.30 | 38.73 | .635 | 24.68 | 22.01 | .3375 | |||||||||||||||||||
2004
|
|||||||||||||||||||||||||
First quarter
|
45.35 | 41.37 | .635 | 24.56 | 22.10 | .3375 | |||||||||||||||||||
Second quarter
|
46.71 | 40.04 | .635 | 26.01 | 21.18 | .3375 | |||||||||||||||||||
Third quarter
|
47.75 | 44.33 | .635 | 27.75 | 24.45 | .3375 | |||||||||||||||||||
Fourth quarter
|
51.00 | 44.20 | .635 | 32.56 | 27.65 | .3375 | |||||||||||||||||||
2005
|
|||||||||||||||||||||||||
First quarter (through January 24)
|
50.70 | 47.52 | n/a | 32.55 | 31.35 | n/a |
27
The following table sets forth the price per share of Camden common shares and Summit common stock based on the last reported closing prices per share on the NYSE on October 4, 2004, the last trading day before the public announcement of the execution of the merger agreement, and on January 24, 2005, the latest practicable date before mailing this consent solicitation/prospectus.
Price Per Share | ||||||||||||
Summit Pro Forma | ||||||||||||
Camden | Summit | Equivalent(1) | ||||||||||
October 4, 2004
|
$ | 46.90 | $ | 27.84 | $ | 31.36 | ||||||
January 24, 2005
|
$ | 47.50 | $ | 31.35 | $ | 31.76 | (2) |
(1) | Computed by multiplying the Camden common share closing price by .6687. This amount represents the value of the fraction of a Camden common share that a Summit stockholder electing to receive only Camden common shares would receive for each share of Summit common stock in the merger on any of those dates, assuming that there is no reallocation requiring such Summit stockholder to receive cash and no increase to the exchange ratio. |
(2) | The average last reported closing price per Camden common share for the ten trading days preceding January 24, 2005 was $47.90. The Summit pro forma equivalent, based on such ten trading days, would be $32.03. |
The market value of the Camden common shares into which the new units may be redeemed after the closing of the exchange offer will not be known at the time you vote on the proposal to approve the merger and the new partnership agreement or at the time you make your election to exchange your existing units for cash or new units because the closing will not be completed by such times.
The above tables show only historical comparisons. Because the market prices of Camden common shares and Summit common stock will likely fluctuate prior to closing, these comparisons may not provide meaningful information to you in determining whether to approve the merger and the new partnership agreement or whether to elect to receive cash or new units in exchange for your existing units. You are encouraged to obtain current market quotations for Camden common shares and Summit common stock and to review carefully the other information contained in this consent solicitation/prospectus or incorporated by reference into this consent solicitation/prospectus in considering whether to approve the proposals before you or whether to elect to receive cash or new units in exchange for your existing units. See Where You Can Find More Information beginning on page 114.
Dividend and Distribution Policies
On January 17, 2005, Camden paid a distribution of $0.635 per share for the fourth quarter of 2004 to all holders of record as of January 3, 2005, and paid an equivalent amount per unit to holders of common units in Camden Operating, L.P. and Oasis Martinique, LLC. Camden determines the amount of cash available for distribution to unitholders in accordance with the operating agreements and has made and intends to continue to make distributions to the holders of common units in amounts equivalent to the per share distributions paid to holders of common shares. Future dividends will be declared at the discretion of the Camden board and will depend on its actual cash flow, its financial condition, its capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code and such other factors as the Camden board may deem relevant.
Until the exchange offer is completed, you will continue to receive regular distributions in accordance with the existing partnership agreement. Summit currently intends to continue to pay regular quarterly distributions for any quarterly periods ending before the closing of the exchange offer, and expects to pay a pro rata distribution in the quarter in which the closing of the exchange offer occurs as authorized by the Summit board. In addition, Summit will pay, if necessary, a final dividend on its common stock and a final distribution on the common units of the Operating Partnership equal to the minimum amount necessary to maintain Summits REIT status under the Internal Revenue Code and to avoid the payment of any corporate level tax with respect to undistributed income or gain, as required by the merger agreement.
28
Camden common shareholders will continue to receive regular dividends as authorized by the Camden board. The merger agreement permits Camden to pay a regular quarterly cash dividend in an amount not to exceed $0.635 per Camden common share. Camden currently intends to continue to pay regular quarterly dividends and expects to pay a pro rata cash dividend in the quarter in which the closing of the merger occurs as authorized by the Camden board.
After the closing of the exchange offer, holders of new units will receive distributions in accordance with the new partnership agreement. A holder of a new unit would receive quarterly distributions on a pro forma combined equivalent basis of $0.4246 per new unit for each existing unit exchanged, assuming Camdens current quarterly dividend of $0.635 per common share, or an increase of approximately 26% from the current quarterly distribution paid by the Operating Partnership on its existing units of $0.3375 per unit. Upon the closing of the exchange offer, you will cease receiving any distributions on all existing units you held before the closing, other than any distributions declared before the closing but not yet paid.
Summit and Camden will coordinate the declaration, record and payment dates of any distributions to limited partners, it being the intention of the parties that the holders of existing units not receive more than one distribution, or fail to receive one distribution, for any single calendar quarter with respect to the existing units they currently own and any new units received in the exchange offer.
Summary Unaudited Pro Forma Financial Data
The following table sets forth the summary unaudited pro forma financial data for Camden and Summit as a combined entity, giving effect to the merger, with Camden Summit as the surviving corporation, as if it had occurred on the dates indicated and after giving effect to the pro forma adjustments. The unaudited pro forma operating data are presented as if the merger had been consummated on January 1, 2003. The unaudited pro forma balance sheet data at September 30, 2004 are presented as if the merger had occurred on September 30, 2004. In the opinion of management of Camden, all adjustments necessary to reflect the effects of these transactions have been made. The merger will be accounted for under the purchase method of accounting in accordance with the Financial Accounting Standard Boards Statement of Financial Accounting Standards No. 141.
The pro forma financial information should be read together with the respective historical consolidated financial statements and financial statement notes of Camden and of Summit incorporated by reference into this consent solicitation/prospectus. See Where You Can Find More Information beginning on page 114. The unaudited pro forma operating data are presented for comparative and illustrative purposes only and are not necessarily indicative of what the actual combined results of operations of Camden and Summit would have been for the period presented, nor do these data purport to represent the results of future periods that the combined entity will experience after the merger. See Camden Property Trust Pro Forma Condensed Combined Financial Statements beginning on page F-1.
29
Camden Property Trust
Summary Unaudited Pro Forma Condensed
Pro Forma for | ||||||||||
Pro Forma for the | the Nine Months | |||||||||
Year Ended | Ended | |||||||||
December 31, 2003 | September 30, 2004 | |||||||||
(In thousands, except per share amounts) | ||||||||||
Revenues:
|
||||||||||
Rental revenues
|
$ | 478,234 | $ | 385,782 | ||||||
Other property
|
41,069 | 34,041 | ||||||||
Total property revenues
|
519,303 | 419,823 | ||||||||
Fee and asset management
|
7,894 | 7,078 | ||||||||
Other revenues
|
8,328 | 9,196 | ||||||||
Total revenues
|
535,525 | 436,097 | ||||||||
Expenses:
|
||||||||||
Total property expenses
|
202,098 | 165,027 | ||||||||
Property management
|
15,425 | 12,612 | ||||||||
Fee and asset management
|
4,549 | 3,341 | ||||||||
General and administrative
|
23,172 | 18,499 | ||||||||
Other expenses
|
1,389 | 1,536 | ||||||||
Interest
|
116,633 | 92,823 | ||||||||
Amortization of deferred financing costs
|
2,634 | 2,250 | ||||||||
Depreciation
|
170,118 | 133,410 | ||||||||
Total expenses
|
536,018 | 429,498 | ||||||||
Income from continuing operations before gain
on sale of land, impairment loss on land held for sale, equity
in income of joint ventures and minority interests
|
(493 | ) | 6,599 | |||||||
Gain on sale of land
|
2,663 | 1,255 | ||||||||
Impairment loss on land held for sale
|
| (1,143 | ) | |||||||
Equity in income (loss) of joint ventures
|
2,874 | (16 | ) | |||||||
Income allocated to minority interests
|
||||||||||
Distributions on perpetual preferred units
|
(23,053 | ) | (11,959 | ) | ||||||
Original issuance costs and premium paid on
redeemed perpetual preferred units
|
(2,963 | ) | (745 | ) | ||||||
Income allocated to common units
|
3,488 | 771 | ||||||||
Loss from continuing operations
|
$ | (17,484 | ) | $ | (5,238 | ) | ||||
Per share data:
|
||||||||||
Basic income (loss) from continuing operations
per share
|
$ | (0.34 | ) | $ | (0.10 | ) | ||||
Diluted income (loss) from continuing operations
per share
|
$ | (0.34 | ) | $ | (0.10 | ) | ||||
Weighted average number of common shares
outstanding
|
51,160 | 52,039 | ||||||||
Weighted average number of common and common
equivalent shares outstanding
|
51,160 | 52,039 | ||||||||
Balance sheet data (at end of
period):
|
||||||||||
Real estate assets
|
$ | 5,119,181 | ||||||||
Accumulated depreciation
|
(663,191 | ) | ||||||||
Total assets
|
4,638,081 | |||||||||
Notes payable
|
2,813,604 | |||||||||
Minority interests
|
329,613 | |||||||||
Shareholders equity
|
$ | 1,298,468 |
30
RISK FACTORS
In addition to the risks relating to the businesses of Camden, Summit and the Operating Partnership, which risks will also affect the combined entity, and which are incorporated by reference in this consent solicitation/prospectus from Camdens, the Operating Partnerships and Summits other filings with the SEC and the other information included in this consent solicitation/prospectus, including the matters addressed in A Warning About Forward-Looking Statements, you should carefully consider the following material risk factors to the transaction in determining whether or not to vote in favor of the merger and the new partnership agreement and in determining whether to tender your existing units in exchange for cash or new units in the exchange offer.
Risks Associated with the Transaction
You may receive new units in the exchange offer with a market value lower than expected. |
Each new unit to be received in the exchange offer may be redeemed at the option of the holder following the exchange offer expiration date. Upon exercise by a unitholder of its redemption right with respect to its new units, Camden Summit is required to acquire each new unit for one Camden common share or its cash equivalent, at Camden Summits option. Consequently, the redemption value of the new units that you receive in the exchange offer will be directly affected by price fluctuations of Camden common shares. The market price of Camden common shares at closing may vary significantly from the price on the date of execution of the merger agreement or from the price on either the date of this consent solicitation/prospectus or the exchange offer expiration date. These variances may arise due to, among other things:
| changes in the business, operations and prospects of Camden; | |
| market assessments of the likelihood that the transaction will be completed; | |
| apartment demand in Camdens or Summits markets or nationwide; and | |
| interest rates, general market and economic conditions and other factors. |
Substantially all of these factors are beyond the control of Camden, Summit and the Operating Partnership. It should be noted that during the 12-month period ending on January 24, 2005, the most recent date practicable before the mailing of this consent solicitation/prospectus, the closing per share price of Camden common shares varied from a low of $40.04 to a high of $50.70 and ended that period at $47.50. Historical market prices are not necessarily indicative of future performance.
The exchange ratio was fixed at the time of the signing of the merger agreement and there will be no change in the exchange ratio except under the limited circumstances described in the section of this consent solicitation/prospectus entitled The Merger Agreement Summit Price-Based Termination Right on page 81. Accordingly, if the market price of Camdens common shares declines prior to the closing of the exchange offer, the value of the new units that you may receive in the exchange offer will decrease. See Summary The Exchange Offer The Exchange of Existing Units.
The approval of the new partnership agreement will constitute a waiver of some of your rights under the existing partnership agreement. |
The approval of the new partnership agreement by the holders of at least a majority of the outstanding common units, other than Summit, will constitute a waiver of the provisions of Article 16 of the existing partnership agreement, which require limited partners consent to specified extraordinary transactions involving the Operating Partnership unless the limited partners will receive economic rights that are identical to the economic rights provided in the existing partnership agreement. These provisions are described in this consent solicitation/prospectus under the section entitled Comparison of Unitholder Rights Extraordinary Transactions beginning on page 107.
31
After the exchange offer is completed, holders of existing units who receive new units in the exchange offer will have different rights that may be less advantageous than their current rights. |
After the closing of the exchange offer, holders of existing units who receive new units in the exchange offer for some or all of their existing units will remain limited partners in the Operating Partnership. Differences in the new partnership agreement from the existing partnership agreement will result in changes to the rights of limited partners after the closing of the exchange offer. You may conclude that your rights under the new partnership agreement may be less advantageous than the rights you have under the existing partnership agreement. For a detailed discussion of your rights as a limited partner under the new partnership agreement and the significant differences between the existing partnership agreement and the new partnership agreement, see the sections in this consent solicitation/prospectus entitled Description of the New Partnership Agreement and the New Units and Comparison of Unitholder Rights beginning on page 82 and 102, respectively. You should read those sections carefully as well as the new partnership agreement, which is attached to this consent solicitation/prospectus as Annex B.
The operations of Camden and Summit may not be integrated successfully and the intended benefits of the merger may not be realized, which could have a negative impact on the market price of Camden common shares after the merger. |
The closing of the transaction poses risks for the ongoing operations of Camden, including that:
| following the transaction, Camden may not achieve expected cost savings and operating efficiencies, such as the elimination of redundant administrative costs; | |
| the diversion of management attention to the integration of the operations of Summit could have an adverse effect on Camdens revenues, expenses and operating results; | |
| the Summit portfolio may not perform as well as Camden anticipates due to various factors, including changes in macro-economic conditions and the demand for apartments in the markets in which Summit has a substantial presence; | |
| Camden may experience difficulties and incur expenses related to the assimilation and retention of Summit non-executive employees; and | |
| Camden may not effectively integrate Summits operations. |
If Camden fails to successfully integrate Summit and/or to realize the intended benefits of the transaction, the market price of Camden common shares could decline from their market price at the time of the closing of the merger.
The directors and some of the executive officers of Summit have interests in the transaction that may conflict with the interests of Summit stockholders and limited partners. |
In considering the recommendation of the Summit board with respect to the merger agreement and the new partnership agreement, you should be aware that members of the Summit board as well as some Summit executive officers have interests in, and have received or will receive benefits from, the transaction that differ from, or are in addition to, the interests of Summit stockholders and limited partners generally, and therefore may conflict with the interests of Summit stockholders and limited partners. These interests include the following:
| Seven of Summits executive officers, Steven R. LeBlanc (who is also a director of Summit), Michael L. Schwarz, Gregg D. Adzema, Keith L. Downey, Randall M. Ell, Todd Farrell and Michael G. Malone, will receive a total of approximately $14.5 million under severance agreements. | |
| These seven executive officers will receive a total of $10 million under retention bonus agreements. |
32
| These seven executive officers are entitled to additional gross-up payments for any excess parachute payment excise tax imposed on the payments to be made to such executive officers in connection with the merger. | |
| Summit awarded performance bonuses to Messrs. LeBlanc, Schwarz, Adzema and Malone in an aggregate amount of $2 million. | |
| Messrs. LeBlanc, Schwarz, Adzema, Downey, Ell and Malone received a total of approximately $5.0 million under Summits long term incentive plan as described in the section of this consent solicitation/prospectus entitled The Transaction Conflicts of Interest of Summit Directors and Executive Officers in the Merger beginning on page 62. | |
| Messrs. LeBlanc, Schwarz, Adzema, Downey, Ell and Malone received a lump sum cash payment equal to approximately $14.2 million in the aggregate in exchange for the cancellation of certain vested and unvested stock options held by such executive officers as described in the section of this consent solicitation/prospectus entitled The Transaction Conflicts of Interest of Summit Directors and Executive Officers in the Merger beginning on page 62. | |
| Messrs. LeBlanc, Schwarz, Adzema, Downey, Ell and Malone currently hold options to purchase a total of 14,542 shares of Summit common stock. To the extent these executive officers still hold such options at the effective time of the merger, these options will be cancelled in exchange for the right to receive a single lump sum cash payment, which will vary depending on the market price of Camden common shares during a period prior to closing as described in the section of this consent solicitation/prospectus entitled The Merger Agreement Treatment of Summit Stock Options and Restricted Stock on page 74. In lieu of receiving this lump sum cash payment, at the option of the executive officer, outstanding incentive stock options may be cancelled in exchange for the right to receive Camden common shares as more fully described in the section of this consent solicitation/prospectus entitled The Merger Agreement Treatment of Summit Stock Options and Restricted Stock on page 74. The issuance of Camden common shares pursuant to this election will not effect the amounts of cash and Camden common shares to be issued in the merger. | |
| Messrs. LeBlanc, Schwarz, Adzema, Downey, Ell, Malone and Farrell received a lump sum cash payment equal to approximately $3.3 million in the aggregate in exchange for the cancellation of shares of restricted stock and performance based stock awards held by such executive officers as described in the section of this consent solicitation/prospectus entitled The Transaction Conflicts of Interest of Summit Directors and Executive Officers in the Merger beginning on page 62. | |
| Camden will continue the indemnification and directors and officers liability insurance coverage for Summit directors and officers for six years after the merger. | |
| Two of Summits directors, William B. McGuire, Jr. and William F. Paulsen, own a total of 1,216,358 units of limited partnership interest in the Operating Partnership and will have the option to redeem their units for $31.20 in cash per unit or to remain in the Operating Partnership following the merger at a unit valuation equal to .6687 of a Camden common share. If either Messrs. McGuire or Paulsen elects to remain in the Operating Partnership following the merger, he will, in his capacity as a limited partner of the Operating Partnership, enter into a Tax, Asset and Income Support Agreement that will prevent the Operating Partnership from selling protected assets under certain circumstances if the limited partners would recognize a taxable gain in such a disposition. See Ancillary Agreements Tax, Asset and Income Support Agreement beginning on page 89. | |
| Messrs. McGuire and Paulsen will be appointed as trust managers of Camden following the closing of the merger. |
33
| Messrs. McGuire and Paulsen currently hold options to purchase a total of 286,000 shares of Summit common stock. To the extent that Messrs. McGuire and Paulsen still hold such options at the effective time of the merger, these options will be cancelled in the merger in exchange for a single lump sum cash payment, which will vary depending on the market price of Camden common shares during a period prior to closing as described in the section of this consent solicitation/prospectus entitled The Merger Agreement Treatment of Summit Stock Options and Restricted Stock on page 74. In lieu of receiving this lump sum cash payment, at the option of Messrs. McGuire and Paulsen, outstanding incentive stock options may be cancelled in exchange for the right to receive Camden common shares as more fully described in the section of this consent solicitation/prospectus entitled The Merger Agreement Treatment of Summit Stock Options and Restricted Stock on page 74. Mr. Paulsen currently holds 36,480 incentive stock options and expects to elect to receive at the effective time of the merger Camden common shares in exchange for the cancellation of his incentive stock options. The issuance of Camden common shares pursuant to this election will not effect the amounts of cash and Camden common shares to be issued in the merger. | |
| All restricted stock held by Messrs. McGuire and Paulsen, totaling 1,614 shares, will vest at a time no later than the closing of the merger and will be entitled to receive the merger consideration, which, assuming that all such shares are converted into the cash consideration, will have a total value of approximately $50,000. | |
Unlike the Operating Partnerships current general partner, Camden will not operate its entire business through the Operating Partnership. This may present the possibility of conflicts of interest and may adversely affect the Operating Partnerships future opportunities, growth and performance. In addition, the Operating Partnerships new general partner and majority limited partner expects that, upon completion of the merger, it will make all future investments in properties outside of the Operating Partnership. |
The Operating Partnerships current general partner, Summit, is organized as an umbrella operating partnership real estate investment trust, or UPREIT. As an UPREIT, Summit acquires and owns substantially all of its properties through the Operating Partnership. Camden is not an UPREIT. Consequently, upon completion of the merger, Camden (or one or more of its wholly owned subsidiaries) will conduct only a portion of its business through the Operating Partnership and Camden will continue to operate its existing business independently from the Operating Partnership. In managing the Operating Partnership, Camden may pursue interests that are different from, or in addition to, those currently pursued by Summit, which because of its UPREIT structure is focused solely on managing and operating the business and assets of the Operating Partnership. This may negatively affect the Operating Partnerships future opportunities, growth and performance, both with respect to current assets and those that are, or could have been but are not, acquired in the future.
In addition, it is expected that Camden generally will conduct all new development, acquisition and other new business activities outside of the Operating Partnership. Therefore, the Operating Partnership will only represent an ongoing interest in the assets owned at the time the merger is completed (less any that may subsequently be sold).
No public market exists, or is expected to exist, for the new units, and the new units are subject to significant restrictions on transferability that may affect their value and liquidity. |
The new units are not listed and Camden currently does not intend to list them on any national securities exchange or automated quotation system. As a result, no public market will exist for the new units. In addition, transferability of the new units will continue to be subject to the consent of the general partner (except in limited cases), compliance with the terms of the new partnership agreement and applicable securities laws. Limited partners may therefore not be able to sell their new units should a need for immediate liquidity arise (except for their right to have the new units redeemed) and, even if new units are sold, the price at which they are sold may be significantly less than their fair market value.
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Limited partners who elect to receive new units will be subject to dilution from issuances of additional limited Operating Partnership interests. |
Under the terms of the new partnership agreement, the general partner will be authorized to cause the Operating Partnership, from time to time and without the consent of the limited partners, to issue additional limited Operating Partnership interests. As a holder of new units, you will not have any preemptive, preferential, first refusal or other similar rights with respect to the issuance or sale of additional Operating Partnership interests or additional capital contributions or loans to the Operating Partnership. In addition, any additional interests issued may have designations, preferences and rights senior to your limited Operating Partnership interests. As a result, in the future you may suffer a dilution in your ownership and economic interest and voting power in the Operating Partnership.
Camden will need to replace, at or before maturity, a $500 million bridge facility that will be used to finance a portion of the cash consideration and transaction costs. |
Camden has a $500 million senior unsecured bridge facility, which it expects to use to fund $500 million of the $519.9 million of cash transaction costs. Camden expects to fund the balance of the cash transaction costs under its existing line of credit. The bridge facility has a term of 364 days from the funding of the facility and an interest rate of LIBOR plus 80 basis points, which interest rate is subject to certain conditions. Camden expects to repay the bridge facility using the proceeds from the spin-off transaction within 364 days of the funding of the bridge facility. If, however, Camden is unable to so repay the bridge facility and replaces the bridge facility with indebtedness, Camden may incur increased interest costs on the replacement indebtedness due to higher interest costs of longer-term debt. The interest rate on the replacement indebtedness will depend on prevailing market conditions at the time. Each 1/8th of 1% increase in the annual interest rate on the replacement indebtedness as compared to the interest rate on the bridge facility will increase Camdens annual consolidated interest expense by approximately $625,000.
Camden and Summit may incur substantial expenses and payments if the transaction does not occur. |
It is possible that the transaction may not be completed. The closing of the transaction depends on the satisfaction or waiver of specified conditions. Some of these conditions are beyond Camdens, Summits and the Operating Partnerships control. For example, the closing of the merger and the exchange offer are conditioned on the receipt of the required approvals of Camden shareholders, Summit stockholders and limited partners in the Operating Partnership. If these approvals are not received, the transaction cannot be completed even if all the other conditions to the transaction are satisfied or waived. If the transaction is not completed, Camden, Summit and the Operating Partnership will have incurred substantial expenses without realizing the expected benefits of the transaction. In addition, Summit may incur a termination fee of $50 million if the merger agreement is terminated under specified circumstances. Further, the parties also may become obligated to reimburse the other partys expenses if the merger agreement is terminated under certain other circumstances.
The termination fee may discourage other companies from trying to acquire Summit. |
In the merger agreement, Summit agreed to pay a termination fee of $50 million in specified circumstances, including some circumstances where a third party acquires or seeks to acquire Summit. This provision could discourage other parties from trying to acquire Summit, even if those companies might be willing to offer a greater amount of consideration to Summit stockholders than Camden has offered in the merger agreement. For a detailed discussion of the specified circumstances when a termination fee could be payable by Summit, see the section of this consent solicitation/prospectus entitled The Merger Agreement Termination Fee and Termination Expenses beginning on page 81.
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The tax consequences of the exchange offer will be dependent upon whether you receive cash or new units in exchange for your existing units. You may have adverse U.S. federal income tax consequences if you receive cash in exchange for your existing units. |
The tax consequences of the exchange offer to you will depend upon whether you receive cash or new units in exchange for your existing units. Subject to certain limited exceptions, it is generally not expected that you will recognize any gain or loss on the exchange of existing units for new units. However, you generally will be taxed if your receive cash in exchange for your existing units. In general, under applicable federal income tax laws and regulations, if you exchange your existing units for cash, you will most likely recognize gain or loss for federal income tax purposes in an amount equal to the difference between (i) the number of existing units exchanged for cash multiplied by the amount of cash received per unit, plus the amount of Operating Partnership liabilities allocable at the time of the exchange to the existing units that you exchanged for cash and (ii) the portion of your aggregate basis in your existing units at the time of the exchange that is allocable to the existing units exchanged for cash. Because the calculation of gain from the sale of existing units includes the amount of Operating Partnership liabilities allocable to those units, it is possible that the amount of gain recognized on an exchange for cash, or even the tax liability resulting from an exchange for cash, could exceed the amount of cash you actually receive. For a detailed discussion of the tax consequences, see the section in this consent solicitation/prospectus entitled Material Federal Income Tax Consequences beginning on page 92. You should consult your own tax advisors as to the effect of the exchange offer on your specific interests.
The failure to achieve expected cost savings and unanticipated costs relating to the transaction could reduce Camdens future earnings per share. |
Camden believes that is has reasonably estimated the likely cost savings, the likely cost of integrating the operations of Camden and Summit, and the incremental costs of operating as a combined entity. However, it is possible that unexpected transaction costs such as taxes, fees or professional expenses or unexpected further operating expenses such as increased personnel costs or increased taxes, as well as other types of unanticipated adverse developments, could have a material adverse effect on the results of operations and financial condition of the combined entity. If the expected savings are not realized or unexpected costs are incurred, the transaction could have a dilutive effect on Camdens future earnings per share.
The merger agreement does not require that the fairness opinion of Summits financial advisor be updated as a condition to closing the merger. In addition, JPMorgans fairness opinion does not address issues related to the exchange offer or the new partnership agreement. |
The merger agreement does not require that the fairness opinion of Summits financial advisor, JPMorgan, be updated as a condition to closing the merger and Summit does not currently intend to request that the opinion be updated. As such, the fairness opinion does not reflect any changes in the relative values of Camden or Summit subsequent to the date of the merger agreement. The market price of Camden common shares and Summit common stock at the closings of the merger and the exchange offer, and the related value of the new units and the existing units, may vary significantly from the market price as of the date of the fairness opinion of the financial advisor. In addition, JPMorgans fairness opinion does not address issues related to the exchange offer or the new partnership agreement and does not constitute a recommendation to the limited partners of the Operating Partnership as to its election to receive cash, new units or a combination thereof in the exchange offer or whether such limited partner should approve the merger or the new partnership agreement.
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Risks Associated with the Ownership of Camden Common Shares
Rising interest rates would increase Camdens costs and could affect the market price of Camden common shares. |
Camden has incurred and expects to continue to incur debt in the future. Some of this debt has variable or floating interest rates. Accordingly, if interest rates increase, Camdens interest costs will also increase. In addition, an increase in market interest rates may lead purchasers of Camden common shares to demand a higher annual yield, which could adversely affect the market price of Camdens outstanding common shares.
Failure to generate sufficient cash flows could limit Camdens ability to make required payments for debt service and pay distributions to shareholders and could adversely affect Camdens ability to maintain its status as a REIT. |
The following factors, among others, may adversely affect the cash flows generated by Camdens properties:
| the national and local economic climates; | |
| local real estate market conditions, such as an oversupply of apartment homes; | |
| the perceptions by prospective residents of the safety, convenience and attractiveness of Camdens properties and the neighborhoods in which they are located; | |
| the need to periodically repair, renovate and relet space; and | |
| Camdens ability to pay for adequate maintenance and insurance and increased operating costs, including real estate taxes. |
Some significant expenditures associated with each property, such as mortgage payments, if any, real estate taxes and maintenance costs, are generally not reduced when cash flows from operations from the property decrease.
Unfavorable changes in market and economic conditions could hurt occupancy or rental rates. |
The market and economic conditions may significantly affect apartment home occupancy or rental rates. Occupancy and rental rates in the markets in which Camden operates, in turn, may significantly affect Camdens profitability and ability to satisfy its financial obligations and make distributions to shareholders. The risks that may affect conditions in these markets include the following:
| the economic climate, which may be adversely impacted by plant closings, industry slowdowns and other factors; | |
| local conditions, such as oversupply of apartments or a reduction in demand for apartments in an area; | |
| a future economic downturn that simultaneously affects more than one of Camdens geographical markets; | |
| the inability or unwillingness of residents to pay their current rent or rent increases; | |
| the potential effect of rent control or rent stabilization laws, or other laws regulating housing, which could prevent Camden from raising rents; and | |
| competition from other available apartments and changes in market rental rates. |
Difficulties of selling real estate could limit Camdens flexibility. |
Real estate investments can be hard to sell, especially if market conditions are poor. This may limit Camdens ability to vary its portfolio promptly in response to changes in economic or other conditions. In
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Development and construction risks could impact Camdens profitability. |
Camden intends to continue to develop and construct multifamily apartment communities for its own account. Camdens development and construction activities may be exposed to a number of risks that may increase its construction costs. This could adversely impact Camdens profitability and its ability to satisfy its financial obligations and make distributions to shareholders. These risks include the following:
| Camden may be unable to obtain, or may face delays in obtaining, necessary zoning, land-use, building, occupancy and other required permits and authorizations, which could result in increased costs; | |
| Camden may incur construction costs for a property that exceed its original estimates due to increased materials, labor or other costs, or due to errors and omissions that occur in the design or construction process, and it may not be able to increase rents to compensate for the increases in these costs; | |
| occupancy rates and rents at a newly completed community may fluctuate depending on a number of factors, including market and economic conditions, and may result in the community not being profitable; | |
| Camden may not be able to obtain financing with favorable terms for the development of a community, which may make it unable to proceed with its development; | |
| Camden may not be able to complete construction and lease-up of a community on schedule, which could result in increased costs; | |
| Camden may abandon development opportunities that it has already begun to explore and, as a result, may fail to recover expenses already incurred in exploring these development opportunities; and | |
| Camden relies on subcontractors to perform most of its construction activities and poor performance or defaults by a major subcontractor, or its inability to obtain adequate performance bonds for a major subcontractor, may lead to project delays and unanticipated additional costs. |
Camden also develops and constructs properties for unrelated third parties pursuant to guaranteed maximum price contracts. The terms of these contracts require Camden to estimate the time and costs to complete a project. Based on these estimates, Camden determines a time and the costs for completion of the project and assumes the risk that the time and costs associated with its performance may be greater than is anticipated. As a result, Camdens profitability on guaranteed maximum price contracts is dependent on its ability to predict these factors accurately. The time and costs may be affected by a variety of factors, including those listed above, many of which are beyond Camdens control. In addition, the terms of these contracts generally require a warranty period, which may be up to 10 years long, during which Camden may be required to repair, replace or rebuild a project in the event of a material defect in the structure of the project. If Camden does not accurately predict the time and costs of guaranteed maximum price contracts for particular projects, or if the costs of the warranty work exceed the amounts reserved for these matters, Camden could suffer losses on those projects and its profitability could be less than anticipated.
Failure to implement Camdens property acquisition strategy could impact its profitability. |
In the normal course of its business, Camden continually evaluates a number of potential acquisitions and may acquire additional operating properties. Camdens inability to successfully implement its acquisition strategy could result in its market penetration decreasing, which could adversely affect its profitability and its ability to satisfy its financial obligations and make distributions to shareholders.
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| Camden may not be able to identify properties to acquire or effect the acquisition; | |
| Camden may not be able to successfully integrate acquired properties and operations; | |
| Camdens estimate of the costs of repositioning or redeveloping the acquired property may prove inaccurate; and | |
| the acquired property may fail to perform as Camden expected in analyzing its investment. |
Insufficient cash flow could affect Camdens debt financing and create refinancing risk. |
As of September 30, 2004, Camden had outstanding debt of approximately $1.6 billion. On a pro forma basis, assuming that the merger occurred on September 30, 2004, Camden would have had outstanding debt of approximately $2.8 billion. This indebtedness could have important consequences. For example:
| if a property is mortgaged to secure payment of indebtedness, and if Camden is unable to meet its mortgage payments, Camden could sustain a loss as a result of foreclosure on the mortgage; | |
| if cash flow from operations is less than the required principal and interest payments on its existing indebtedness, which in all cases will not have been fully amortized at maturity, Camden might not be able to refinance the debt or the terms of such refinancing might not be as favorable as the terms of its existing indebtedness; | |
| Camdens vulnerability to general adverse economic and industry conditions could be increased; and | |
| Camdens flexibility in planning for, or reacting to, changes in its business and industry could be limited. |
Issuances of additional debt or equity may adversely impact Camdens financial condition. |
Camdens capital requirements depend on numerous factors, including the occupancy rates of its apartment properties, dividend payment rates to its shareholders, development and capital expenditures, costs of operations and potential acquisitions. Camden cannot accurately predict the timing and amount of its capital requirements. If its capital requirements vary materially from its plans, Camden may require additional financing sooner than anticipated. Accordingly, Camden could become more leveraged, resulting in increased risk of default on its obligations and in an increase in its debt service requirements, both of which could adversely affect its financial condition and its ability to access debt and equity capital markets in the future.
Losses from catastrophes may exceed Camdens insurance coverage. |
Camden carries comprehensive liability and property insurance on its properties, which it believes is of the type and amount customarily obtained on real property assets. Camden intends to obtain similar coverage for properties it acquires in the future. However, some losses, generally of a catastrophic nature, such as losses from floods, hurricanes or earthquakes, may be subject to limitations. Camden exercises its discretion in determining amounts, coverage limits and deductibility provisions of insurance, with a view to maintaining appropriate insurance on its investments at a reasonable cost and on suitable terms. If Camden suffers a substantial loss, its insurance coverage may not be sufficient to pay the full current market value or current replacement value of its lost investment. Inflation, changes in building codes and ordinances, environmental considerations and other factors also might make it infeasible to use insurance proceeds to replace a property after it has been damaged or destroyed.
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Potential liability for environmental contamination could result in substantial costs. |
Under various federal, state and local laws, ordinances and regulations, Camden is liable for the costs to investigate and remove or remediate hazardous or toxic substances on or in its properties, often regardless of whether it knew of or was responsible for the presence of these substances. These costs may be substantial. Also, if hazardous or toxic substances are present on a property, or if Camden fails to properly remediate such substances, its ability to sell or rent the property or to borrow using that property as collateral may be adversely affected.
Additionally, Camden occasionally develops, manages, leases and/or operates various properties for third parties. Consequently, it may be considered to have been or to be an operator of these properties and, therefore, potentially liable for removal or remediation costs or other potential costs that could relate to hazardous or toxic substances.
Compliance or failure to comply with laws requiring access to Camdens properties by disabled persons could result in substantial cost. |
The Americans with Disabilities Act, the Fair Housing Act of 1988 and other federal, state and local laws generally require that public accommodations be made accessible to disabled persons. Noncompliance could result in the imposition of fines by the government or the award of damages to private litigants. These laws may require Camden to modify its existing properties. These laws may also restrict renovations by requiring improved access to such buildings by disabled persons or may require Camden to add other structural features that increase its construction costs. Legislation or regulations adopted in the future may impose further burdens or restrictions on Camden with respect to improved access by disabled persons. Camden cannot ascertain the costs of compliance with these laws, which may be substantial.
Failure to qualify as a REIT would cause Camden to be taxed as a corporation, which would significantly lower funds available for distribution to shareholders. |
If Camden fails to qualify as a REIT for federal income tax purposes, it will be taxed as a corporation. The Internal Revenue Service may challenge Camdens qualification as a REIT for prior years, and new legislation, regulations, administrative interpretations or court decisions may change the tax laws with respect to qualification as a REIT or the federal tax consequences of such qualification.
For any taxable year that Camden fails to qualify as a REIT, it would be subject to federal income tax on its taxable income at corporate rates, plus any applicable alternative minimum tax. In addition, unless entitled to relief under applicable statutory provisions, Camden would be disqualified from treatment as a REIT for the four taxable years following the year during which qualification is lost. This treatment would reduce Camdens net earnings available for investment or distribution to shareholders because of the additional tax liability for the year or years involved. In addition, distributions would no longer qualify for the dividends paid deduction nor be required to be made in order to preserve REIT status. Camden might be required to borrow funds or to liquidate some of its investments to pay any applicable tax resulting from its failure to qualify as a REIT.
Share ownership limits and Camdens ability to issue additional equity securities may prevent takeovers beneficial to shareholders. |
For Camden to maintain its qualification as a REIT, not more than 50% in value of its outstanding shares may be owned, directly or indirectly, by five or fewer individuals. As defined for federal income tax purposes, the term individuals includes a number of specified entities. To minimize the possibility that it will fail to qualify as a REIT under this test, Camdens declaration of trust includes restrictions on transfers of its shares and ownership limits. The ownership limits, as well as Camdens ability to issue other classes of equity securities, may delay, defer or prevent a change in control. These provisions may also deter tender offers for Camden common shares, which may be attractive to you, or limit your opportunity to receive a premium for your shares that might otherwise exist if a third party were attempting to effect a change in control transaction.
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Camden makes mezzanine loans that involve risk of loss. |
Camden has made and intends to continue to make mezzanine loans to various unrelated third parties, which are typically secured by multifamily residential real estate and are subordinate to senior mortgages. While these loans are outstanding, Camden is subject to risks of borrower defaults, bankruptcies, fraud and other losses. In the event of any default under mezzanine loans held by Camden, it will bear the risk of loss of principal and non-payment of interest and fees to the extent of any deficiency between the value of the loan collateral and the principal amount of the loan. In addition, mezzanine loans involve a higher degree of risk that Camden may not recover some or all of its investment than senior mortgages due to a variety of factors, including the loan becoming unsecured as a result of foreclosure by the senior lender.
Increased competition could limit Camdens ability to lease apartments or increase or maintain rents. |
Camdens apartment communities compete with numerous housing alternatives in attracting residents, including other rental apartments, condominiums and single-family homes that are available for rent or sale. Competitive residential housing in a particular area could adversely affect Camdens ability to lease apartments and increase or maintain rents.
Attractive investment opportunities may not be available, which could adversely affect Camdens profitability. |
Camden expects that other real estate investors will compete with it to acquire existing properties and to develop new properties. These competitors, including insurance companies, pension and investment funds, partnerships, investment companies and other apartment REITs, may have greater resources than Camden. This competition could increase prices for properties of the type Camden would likely pursue. As a result, Camden may not be able, or have the opportunity, to make suitable investments on favorable terms in the future. This could adversely affect its profitability.
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A WARNING ABOUT FORWARD-LOOKING STATEMENTS
Camden, Summit and the Operating Partnership have each made forward-looking statements in this consent solicitation/prospectus, and in documents that are incorporated by reference in this consent solicitation/prospectus, which are subject to risks and uncertainties. Forward-looking statements include information concerning possible or assumed future results of operations of Camden, Summit and the Operating Partnership. Also, statements including words such as believes, expects, anticipates, intends, plans, estimates, or similar expressions are forward-looking statements. Many factors, some of which are discussed elsewhere in this consent solicitation/prospectus and in the documents incorporated by reference in this consent solicitation/prospectus, could affect the future financial results of Camden and could cause actual results to differ materially from those expressed in forward-looking statements contained or incorporated by reference in this consent solicitation/prospectus. Important factors that could cause actual results to differ materially from current expectations reflected in these forward-looking statements include, among others, the factors discussed under the caption Risk Factors beginning on page 31 and the filings made by Camden, Summit and the Operating Partnership with the SEC that are identified on page 115 and incorporated in this consent solicitation/prospectus.
Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. The future results and shareholder values of Camden following closing of the transaction may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results and values are beyond the ability of Camden, Summit and the Operating Partnership to control or predict. For these forward-looking statements, Camden, Summit and the Operating Partnership claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
THE CONSENT SOLICITATION
Purpose of the Consent Solicitation
Summit is asking holders of existing units to vote on two proposals:
| approval of the merger; and | |
| approval of the new partnership agreement. |
The proposal to approve the merger and the proposal to approve the new partnership agreement are conditioned upon one another.
The approval of the new partnership agreement by the holders of at least a majority of the outstanding common units, other than Summit, will constitute a waiver of the provisions of Article 16 of the existing partnership agreement, which are described in this consent solicitation/prospectus under the section entitled Comparison of Unitholder Rights Extraordinary Transactions beginning on page 107.
Who Can Vote
You are entitled to vote your existing units if the records of the Operating Partnership showed that you held your existing units as of the close of business on January 24, 2005. At the close of business on that date, a total of 3,343,004 existing units were outstanding and entitled to vote. Each existing unit has one vote. The enclosed consent form shows the number of existing units that you are entitled to vote.
In order to vote, please complete, sign and return your consent form to the exchange agent prior to the consent expiration date, which is 5:00 p.m., Eastern Time, on February 25, 2005.
Required Vote
Approval of each of the proposals requires the affirmative vote of the holders of at least a majority of the outstanding existing units, other than Summit.
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As of January 24, 2005, Summits directors, executive officers and their affiliates beneficially owned 1,220,526 existing units, representing approximately 36.5% of the outstanding existing units entitled to vote.
Voting Agreement
Two holders of existing units, holding approximately 36.4% of the outstanding existing units entitled to vote on these matters, have entered into a voting agreement agreeing to vote their units in favor of each proposal.
Abstentions
Under the terms of the existing partnership agreement, the general partner of the Operating Partnership may require that the limited partners respond to a consent solicitation within a reasonable specified time, but in any event not less than 15 days. If a limited partner fails to respond within the specified time, such failure to respond will constitute a vote which is consistent with the general partners recommendation with respect to each proposal. The failure of a limited partner to return a properly completed consent form prior to 5:00 p.m., Eastern Time, on February 25, 2005, will result in a vote consistent with the general partners recommendation to vote FOR the approval of the merger and FOR the approval of the new partnership agreement.
How You May Revoke Your Consent
To revoke your consent, you must (1) so advise Summits Secretary, Michael G. Malone, c/o Summit Properties Inc., 309 East Morehead Street, Suite 200, Charlotte, North Carolina 28202, in writing or by facsimile prior to the consent expiration date, which is 5:00 p.m., Eastern Time, on February 25, 2005 or (2) deliver to Summits Secretary prior to the consent expiration date your revised consent form.
Cost of this Consent Solicitation
The Operating Partnership will pay the cost of this consent solicitation. We also expect that several of Summits employees will solicit limited partners personally and by telephone. None of these employees will receive any additional or special compensation for doing this.
THE TRANSACTION
General
The merger agreement provides for merger of Summit with and into Camden Summit. Camden Summit will be the surviving corporation in the merger and Summit will cease to exist. The merger will be completed as soon as practicable following the approval by Camden shareholders of the issuance of Camden common shares pursuant to the merger agreement, the approval of Summit stockholders of the merger agreement and the merger and the approval by limited partners of the merger and the new partnership agreement and the other conditions to the merger are satisfied or waived. The closing of the merger is conditioned upon obtaining all such approvals. The exchange offer will be completed immediately after the closing of the merger, if all of the other conditions to the exchange offer are satisfied or waived at such time.
If the merger is completed, Summit stockholders will receive, at the election of each stockholder, the right to receive for each share of Summit common stock that they own, either $31.20 in cash or .6687 of a Camden common share, subject to reallocation as described under The Merger Agreement Reallocation of Stockholder Elections. Generally, the .6687 exchange ratio is fixed and may only be increased in certain limited circumstances as described under The Merger Agreement Summit Price-Based Termination Right.
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Upon the closing of the merger, the Operating Partnership will continue to exist, Camden Summit will become the general partner of the Operating Partnership and the existing partnership agreement will be amended and restated. If the merger is completed, the exchange offer will be immediately completed and you will receive, at your election, $31.20 in cash or .6687 of a new unit for each existing unit that you own. In the event you do not make an election to receive cash or new units in the exchange offer, your existing units will automatically be converted into .6687 of a new unit upon the closing of the exchange offer. Generally, the exchange ratio is fixed and may only be increased if the exchange ratio in the merger is increased as described under The Merger Agreement Summit Price-Based Termination Right.
Background of the Transaction
In pursuing their strategies for enhancing stockholder value, each of Summit and Camden have from time to time considered opportunities for acquisitions, joint ventures and other strategic alliances.
On February 26, 2004 and again on February 27, 2004, Steven R. LeBlanc, Summits president and chief executive officer, in response to an unsolicited call from the president and chief executive officer of an investment advisor (Advisor A) to a real estate fund (the Fund), met with the president and chief executive officer of Advisor A and at this meeting, Mr. LeBlanc and the president and chief executive officer of Advisor A discussed, in general terms, a potential business combination between Summit and the Fund. At the meetings, Advisor A orally proposed an all cash purchase price of $26.00 per share of Summit common stock.
On February 27, 2004, Mr. LeBlanc discussed with Summits outside legal advisor, Goodwin Procter LLP, the duties of management and the Summit board with regard to Advisor As unsolicited oral proposal.
On March 2, 2004, Mr. LeBlanc and the president and chief executive officer of Advisor A had a telephone conversation in which they discussed in further detail Advisor As unsolicited oral proposal.
Between February 26, 2004 and March 3, 2004, Mr. LeBlanc informed each member of the Summit board that he had been contacted by the president and chief executive officer of Advisor A and explained the nature of his conversations with Advisor A.
On March 4, 2004, at a regularly scheduled meeting of the Summit board, Mr. LeBlanc reported on his earlier conversations with Advisor A, as well as his discussions with Summits outside legal advisor, Goodwin Procter LLP, regarding the boards duties in reviewing an unsolicited oral proposal such as that made by Advisor A. Mr. LeBlanc also reviewed with the Summit board Summits current five-year business plan and the anticipated return to stockholders if Summit continued as an independent company and successfully implemented the five-year business plan. The Summit board discussed the oral proposal presented by Advisor A and addressed, in general, the question of which enterprise valuation measures Summit should use to evaluate the oral proposal. The Summit board determined that it would be in the best interests of Summits stockholders to decline the oral proposal of $26.00 per share in light of the substantial shortfall between the proposed price and the boards view of the range of values of Summit.
On March 5, 2004, Mr. LeBlanc spoke with the president and chief executive officer of Advisor A and conveyed the determination made by the Summit board at the March 4, 2004 meeting to decline the oral proposal that was made by Advisor A.
On March 11, 2004, the president and chief executive officer of Advisor A delivered a letter to Mr. LeBlanc stating that the Fund remained interested in pursuing a business combination with Summit and conveyed Advisor As belief that there could be some flexibility with regard to the price per share offered by Advisor A if justified by its due diligence.
On March 22, 2004, Mr. LeBlanc had a conversation with the chairman of the board and chief executive officer of a public multifamily real estate investment trust (Company A). During the last several years, representatives of Summit had, from time to time, had conversations with representatives of Company A regarding a potential business combination between Summit and Company A. Although the
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On April 7, 2004, the president and chief executive officer of Advisor A delivered to Mr. LeBlanc and the members of the Summit board a written offer regarding a potential business combination with the Fund in which the public stockholders of Summit would receive $26.00 in cash for each share of Summit common stock and the limited partners of Summits operating partnership (other than Summit) would receive $26.00 in cash for each unit of limited partnership unless they elected to receive a preferred equity security in the operating partnership. The offer stated that it was not contingent on any equity or debt financing. In addition, the offer included a commitment to work with Summit with respect to appropriate employment arrangements for Summit employees, including senior management, in connection with a potential business combination. These employment arrangements would address severance, forgiveness of employee loans, including gross-up for taxes, compensation, relocation policy, employee benefits, job descriptions and other employment policies. Advisor A also stated that its offer price was based only on public information and it could be in a position to increase its offer price following appropriate due diligence.
Following the receipt of Advisor As April 7 letter, Mr. LeBlanc had informal conversations with each member of Summits board regarding Advisor As written unsolicited offer. In addition, in light of the continued expression of interest from Advisor A, Mr. LeBlanc solicited advice from certain members of the Summit board regarding the engagement of a financial advisor. Following these conversations, Summit engaged JPMorgan to act as Summits exclusive financial advisor with respect to the proposal made by Advisor A and to, among other things, assist the Summit board with its financial analysis of Summits valuation and the offer.
On April 21, 2004, the president and chief executive officer of Advisor A called Mr. LeBlanc and reaffirmed Advisor As interest in a potential business combination with Summit at an offer of $26.00 per share of Summit common stock. Mr. LeBlanc noted that he would need time to formally consult with the Summit board and Summits advisors to determine whether Summit should continue discussions with Advisor A regarding its offer. The president and chief executive officer of Advisor A agreed to give Summit more time to consider its offer.
On April 22, 2004, at a regularly scheduled meeting of the Summit board, the Summit board continued its discussions with senior management concerning Summits growth strategy. The Summit board also further discussed Advisor As written unsolicited offer.
On May 2, 2004, the president and chief executive officer of Advisor A called Mr. LeBlanc to further discuss its written offer including the possibility of beginning due diligence on Summit and to advise Mr. LeBlanc that it had engaged a financial advisor.
On May 6, 2004, Advisor As legal advisor delivered a letter to Goodwin Procter LLP that included a term sheet setting forth key transaction terms and reaffirming an offer price of $26.00 per share of Summit common stock. The term sheet also proposed that Advisor A would make every attempt to accommodate the employment goals of each member of the senior management team. Advisor A offered to meet with the Summit board at the next board meeting scheduled for May 11, 2004.
On May 11, 2004, at a regularly scheduled meeting of the Summit board, Mr. LeBlanc provided the Summit board with an update of all communications between himself and Advisor A. Goodwin Procter LLP and Summits special Maryland counsel, Venable LLP, advised the directors concerning their duties under applicable law in regard to unsolicited proposals. They also advised the directors on matters related to Summits role as the general partner of Summits operating partnership.
After this discussion, representatives of JPMorgan presented to the Summit board a summary of the proposal from Advisor A, a review of the real estate and capital markets in the multifamily industry generally, a valuation overview and an analysis of strategic alternatives that Summit might consider in order to maximize long-term stockholder value in Summit. In connection with its analysis of possible
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In addition, JPMorgan was instructed to contact Advisor As financial advisor to discuss Advisor As offer and Mr. LeBlanc was instructed to contact the president and chief executive officer of Advisor A to further discuss Advisor As offer.
On May 12, 2004, Mr. LeBlanc met with the president and chief executive officer of Advisor A to discuss Advisor As offer. At that time, Advisor A informed Mr. LeBlanc that it would not enter into a confidentiality and standstill agreement unless first having an understanding with the Summit board with regard to the key transaction terms, including an agreement on the offer price of $26.00 per share.
Between May 15, 2004 and May 19, 2004, Mr. LeBlanc updated each member of the Summit board regarding his discussions with the president and chief executive officer of Advisor A.
On May 19, 2004, representatives of JPMorgan and representatives of Advisor As financial advisor met in person to discuss Advisor As April 7 offer. Representatives of Advisor As financial advisor provided an overview of Advisor As offer to the representatives of JPMorgan, highlighting capital market reference points.
Between May 12 and May 21, 2004, representatives of JPMorgan communicated with representatives of three public residential real estate investment trusts, referred to as Company B, Company C, Company D, and a pension fund regarding a potential business combination with Summit. Following these preliminary conversations, the pension fund indicated to JPMorgan that it was not likely to be interested in pursuing a potential business combination with Summit.
On May 21, 2004, at a special telephonic meeting of the Summit board, representatives of JPMorgan summarized their discussions with Advisor As financial advisor and informed the Summit board that Advisor As valuation of Summit was based upon publicly-available information. Following a discussion, JPMorgan was instructed to contact Advisor A to determine whether Advisor A would be interested in executing a confidentiality and standstill agreement in order for Advisor A to receive confidential non-public information that might cause it to reconsider its offer price. Representatives of JPMorgan also updated the Summit board regarding its preliminary conversations with a representative of each of Company B, Company C and Company D, each of which had demonstrated an interest in continuing conversations regarding a business combination with Summit. The Summit board instructed JPMorgan to follow up with a representative of each of Company B, Company C and Company D to further discuss or determine its respective interest in pursuing a business combination with Summit and to indicate to each party that the threshold price was $30.00 per share.
Following this meeting, Company B indicated to JPMorgan that it was not interested in continuing discussions.
On May 22, 2004, Mr. LeBlanc delivered a letter to the president and chief executive officer of Advisor A offering to meet with Advisor A to explain in further detail why the Summit board believed that Advisors A offer was not adequate. Mr. LeBlanc also offered Advisor A the opportunity to meet with the Summit board and again offered Advisor A the opportunity to enter into a confidentiality and standstill agreement with Summit in order to receive non-public information.
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On May 26, 2004, at a regularly scheduled meeting of the Summit board, the Summit board discussed the status of Advisor As proposal and determined that Summits management and advisors should continue to pursue discussions with a limited number of public residential real estate investment trusts, including Company C and Company D, regardless of any further action taken by Advisor A. In addition, the Summit board instructed Mr. LeBlanc to contact Camden and solicit its interest in a business combination transaction with Summit.
On May 28, 2004, Mr. LeBlanc telephoned the president and chief executive officer of Advisor A and informed him that the Summit board had again considered Advisor As offer. Mr. LeBlanc informed Advisor A that Summit would enter into a confidentiality and standstill agreement with Advisor A. However, Advisor A did not agree to enter into a confidentiality and standstill agreement.
On May 28, 2004, the president and chief executive officer of Advisor A delivered to Mr. LeBlanc and the members of the Summit board a letter reaffirming Advisor As intention to stand behind its $26.00 per share offer. He also reaffirmed that Advisor A would not enter into a confidentiality and standstill agreement unless there was an agreement in principle on the key transaction terms, which remained unchanged from the proposed terms attached to the May 6 letter. The proposed terms included an undertaking to work with Summit as to appropriate employment arrangements for Summit employees including senior management, in connection with a potential business combination. These employment arrangements would address severance forgiveness of employee loans, including gross-up for taxes, compensation, relocation policy, employee benefits, job descriptions and other employment policies.
On June 1, 2004, Mr. LeBlanc had a discussion with Richard J. Campo, chairman of the board and chief executive officer of Camden, regarding Camdens interest in a business combination transaction at a threshold price of $30.00 per share.
From May 26, 2004 through June 8, 2004, representatives of JPMorgan contacted Company C, Company D and Camden to formally solicit their interest in a business combination transaction with Summit and requested that each company execute a confidentiality and standstill agreement. The three companies were again informed of a threshold offer of $30.00 per share. Company C, Company D and Camden each reaffirmed its interest in continuing the process. Each of Company C, Company D and Camden executed a confidentiality and standstill agreement. JPMorgan distributed select confidential information to each of Company C, Company D and Camden with instructions to each company that they had approximately two weeks to analyze the information and provide an indication of value.
On June 11, 2004, the president and chief executive officer of Advisor A called Mr. LeBlanc and made arrangements for representatives of Advisor A to make an in-person presentation on June 24, 2004 to members of the Summit board regarding its offer.
Between June 18 and 21, 2004, representatives of JPMorgan had telephone conversations with representatives of each of Company C, Company D and Camden to review its respective proposed indication of interest and underlying assumptions.
On June 22, 2004, Mr. LeBlanc received a call from a representative of Company A requesting that William B. McGuire, Jr., the co-chairman of the Summit board, speak with the chairman and chief executive officer of Company A. Shortly thereafter, Mr. McGuire spoke with the chairman and chief executive officer of Company A. They had a conversation regarding a potential business combination between the companies that did not result in the parties engaging in further discussions.
On the morning of June 24, 2004, the Summit board and certain members of Summit management that were not members of the Summit board met with representatives of Advisor A to discuss and review Advisor As offer.
Later on June 24, 2004, at a regularly scheduled meeting of the Summit board, the directors reported to senior management not present at the earlier meeting and Summits legal and financial advisors that representatives of Advisor A had not conveyed any new material information regarding Advisor As offer and Advisor A had not increased its offer from the initial offer price of $26.00 per share.
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Representatives from JPMorgan then presented to the Summit board the initial indication of interest that JPMorgan had orally received from each of Company C, Company D and Camden and also updated the Summit board on JPMorgans related conversations with each of the three companies. Following this presentation, the Summit board discussed these initial indications of interest and noted that none of the three companies had proposed a price of at least $30.00 per share. Following this discussion, JPMorgan was instructed to contact each of Company C, Company D and Camden and offer to provide additional confidential information and to determine if any of Company C, Company D or Camden would increase its respective bid. Shortly thereafter, JPMorgan distributed additional information to Company C, Company D and Camden and requested a revised indication of interest by mid-July.
On June 26, 2004, Advisor A rescinded its offer.
During the remainder of June and through early July, Mr. LeBlanc and Summits legal and financial advisors continued to have various conversations with each of Company C, Company D and Camden regarding the possibility of a business combination with Summit.
On July 13, 2004 and July 14, 2004, representatives of JPMorgan received updated indications of interest from each of Company C, Company D and Camden.
On July 22, 2004, at a special telephonic meeting of the Summit board, representatives of JPMorgan described to the Summit board the updated indications of interest received from Company C, Company D and Camden. Company C proposed an all cash transaction at $29.00 per share. Company Ds proposal, comprised of a mix of cash and stock, was valued at $29.00 per share. Camdens proposal, comprised of all stock, was valued at $28.50 per share although Camden proposed an alternative transaction comprised of stock with a value of $22.80 and the establishment of a liquidating trust with an estimated value to be equal to $7.20 per share that would require the sale of Summit assets before Summit stockholders would realize this estimated value. Following a discussion among the members of the Summit board, the board instructed Mr. LeBlanc to convey to the chief executive officer of Company C that Summit would be willing to enter into an exclusivity agreement with Company C if its all cash offer was increased to $30.00 per share.
Following the meeting, Mr. LeBlanc contacted the chief executive officer of Company C with regard to increasing its all cash offer to $30.00 per share. Company C subsequently indicated that it would not be interested in a business combination with Summit at that price. In addition, Mr. LeBlanc contacted the chief executive officer of Company D with regard to increasing its cash and stock offer to a value of $30.00 per share. Company D subsequently indicated that it would not be interested in a business combination with Summit at that price.
On August 4, 2004, a conversation took place between Messrs. LeBlanc and Campo with regard to Camden increasing its offer to $30.00 per share of Summit common stock.
On August 5, 2004, Mr. Campo sent a letter to Mr. LeBlanc revising Camdens previous indication of interest and offering a purchase price with a value of $30.00 per share of Summit common stock, payable in a mix of Camden common shares valued at $17.97 per share and cash equal to $12.03. The offer also provided that funding for a portion of the cash component of the proposed business combination would be generated through the sale of properties held by Summit and Camden.
During the week of August 9, 2004, conversations were held between representatives of JPMorgan and Mr. Campo regarding Camdens revised indication of interest.
During the week of August 23, 2004, additional conversations regarding Camdens revised indication of interest were held between Mr. Campo and representatives of JPMorgan, during which Mr. Campo requested a meeting with the Summit board.
On August 27, 2004, at a special meeting of the Summit board, Mr. LeBlanc provided the Summit board with an update on the status of ongoing discussions with Camden. Mr. LeBlanc also informed the Summit board that Company B had indicated to him that it would not be interested in a business combination with Summit at a price of $30.00 per share. At the invitation of the Summit board,
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On August 28, 2004, JPMorgan and Goodwin Procter LLP delivered to Mr. Campo, on behalf of Summit, a written list of follow-up questions requesting further details regarding, among other things: the proposed exchange ratio and potential for a price collar; planned asset sales and the timing of such sales; Camdens operating strategy; financing sources for a potential transaction; and the manner in which Camden proposed obtaining the consent of the limited partners of Summits operating partnership in light of the fact that Camden is not structured as an UPREIT similar to Summit.
On August 30, 2004, Mr. Campo responded in writing to the questions posed by Summit. On August 30 Messrs. McGuire, Paulsen, Campo and Oden met in-person to discuss Camdens responses to these questions and other matters relating to Camdens proposal and its operating strategies and philosophies. These discussions continued on August 31 among Messrs. McGuire, Paulsen, LeBlanc, Campo and Oden.
Between August 30, 2004 and September 9, 2004, Mr. LeBlanc and Mr. Campo and representatives of Summits financial and legal advisors continued to discuss proposed terms for a potential transaction between Summit and Camden.
On September 9, 2004, Summit provided Camden and its representatives with a preliminary draft of a non-binding term sheet outlining the material terms for a proposed transaction between Summit and Camden. The non-binding term sheet proposed, among other things, that Summit stockholders would be given the opportunity to elect, on a share-by-share basis, to receive either cash or Camden common shares at a fixed exchange ratio for each share of Summit common stock, subject to a limitation on the amount of cash to be issued in the proposed transaction, the rights of the parties to terminate the transaction, including Summits right to terminate the transaction and walk away if the trading price of Camden common shares decreased below a certain value, the ability of the Summit board to respond to unsolicited inquiries following announcement of the transaction, including the right of the Summit board to terminate the transaction in the exercise of its fiduciary duties, the addition of Messrs. McGuire and Paulsen as members of Camdens board of trust managers, the conditions to closing the merger, the treatment of employee compensation and benefits and the limited circumstances under which a termination fee would be paid. The non-binding term sheet also proposed that the limited partners of the Operating Partnership would be offered the opportunity to redeem their partnership units for cash in the same amount as that being offered to Summit stockholders or to remain as a limited partner following the proposed transaction.
On September 10, 2004, Mr. Campo and Alex Jessett, vice president of finance and treasurer of Camden, and Mr. LeBlanc and Gregg D. Adzema, executive vice president and chief financial officer of Summit, met in-person to discuss the September 9 non-binding term sheet.
Between September 10 and 17, 2004, the parties respective management teams and respective legal and financial advisors continued to negotiate the terms of the proposed transaction and on September 17, the parties agreed on the material terms of the transaction, including among other things, that Summit stockholders would be given the opportunity to elect, on a share-by-share basis, to receive either $31.20 in cash or Camden common shares at a fixed exchange ratio of 0.6745 for each share of Summit common stock, subject to a limitation on the amount of cash to be issued in the proposed transaction.
On September 17, 2004, at a special telephonic meeting of the Summit board, JPMorgan presented to the Summit board an overview of Camdens offer including, among other matters, the offer value of $31.20 per share, the premium to Summits stockholders, the mix of cash and stock consideration, the aggregate amount of cash consideration, Summits walk-away right if Camdens share price dropped below a certain level and the addition of Messrs. McGuire and Paulsen as members of Camdens board of
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In addition, on September 17, 2004, Summit, Camden and their respective legal advisors, Goodwin Procter LLP and Locke Liddell & Sapp LLP, commenced negotiations with regard to a non-binding term sheet that set forth the principal terms with regard to the amendment and restatement of the limited partnership agreement of the Operating Partnership in connection with the proposed merger and the treatment of the limited partners in the transaction.
On September 23, 2004, Camden, Summit and their respective legal advisors commenced negotiations with regard to the merger agreement.
Between September 20 and September 28, 2004, each of Summit and Camden and their respective advisors conducted due diligence with respect to each other. In addition, during this period, the parties respective management teams and the parties respective legal and financial advisors continued to negotiate the terms of the merger agreement and ancillary agreements, including, among other things, the second amended and restated agreement of limited partnership of Summits operating partnership, tax protection and registration rights arrangements and the voting agreement. During this period, a number of drafts of the merger agreement and ancillary documents were negotiated and exchanged between the parties.
Pursuant to an engagement letter dated September 30, 2004, Summit formally retained JPMorgan as its exclusive financial advisor in connection with the proposed merger.
On October 3, 2004, the parties agreed that, based in part on the trading price of Camden common shares during the week of September 27, 2004, the exchange ratio would be set at 0.6687.
On the morning of October 4, 2004, the Summit board held a special meeting at which all of the directors, Summits senior management and representatives of JPMorgan, Goodwin Procter LLP and Venable LLP were present in person or telephonically. Prior to the meeting, Goodwin Procter LLP had provided each member of the Summit board with a copy of the merger agreement and with summaries of the merger agreement and the related transactions. JPMorgan made a presentation of its financial analysis with respect to the possible combination of Summit and Camden, and then rendered an oral opinion to the Summit board, subsequently confirmed in writing on October 4, 2004, to the effect that as of October 4, 2004, the consideration to be received by holders of Summit common stock (including with respect to equity securities convertible into, or redeemable by Summit under certain circumstances for, shares of Summit common stock, any holders thereof on an as-converted or as-redeemed basis, as the case may be) in the merger, was fair, from a financial point of view, to such holders. Goodwin Procter LLP made a presentation to the Summit board in which it explained the material terms of the proposed merger agreement and related ancillary documents, including closing conditions, termination rights and provisions regarding break-up fees and termination expenses. Following these presentations, the Summit board engaged in a discussion and asked various questions of JPMorgan and Goodwin Procter LLP regarding the proposed merger, and after such discussion and deliberation, determined that the merger was in the best interests of Summit and its stockholders and unanimously approved the merger agreement and the merger.
On the morning of October 4, 2004, the Camden board held a special meeting at which all but one of the trust managers, Camdens senior management and representatives of Locke Liddell & Sapp LLP, Camdens legal advisor, and Deutsche Bank, Camdens financial advisor, were present in person or telephonically. Prior to the meeting, Locke Liddell & Sapp LLP had provided each member of the Camden board with a copy of the merger agreement and with summaries of the merger agreement and the related transactions. Deutsche Bank made a presentation of its financial analysis with respect to the possible combination of Camden and Summit, and then rendered an oral opinion to the Camden board, subsequently confirmed in writing on October 6, 2004, to the effect that, as of such date, based upon and subject to the assumptions made, matters considered and limits of the review undertaken by Deutsche Bank, the merger consideration was fair, from a financial point of view, to Camden. Locke Liddell & Sapp LLP made a presentation to the Camden board in which it explained the material terms of the proposed merger agreement and related ancillary documents, including closing conditions, termination rights and
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The merger agreement was signed by Camden, Camden Summit and Summit on the afternoon of October 4, 2004. After the closing of the New York Stock Exchange on October 4, 2004, Camden and Summit issued a joint press release announcing the execution of the merger agreement.
On each of October 6, 2004 and January 24, 2005, an amendment to the merger agreement was signed by Camden, Camden Summit and Summit. A copy of the merger agreement, as amended, is attached to this consent solicitation/prospectus as Annex A.
Camdens Reasons for the Transaction
The Camden board has unanimously approved and adopted the merger agreement and the merger. The Camden board believes that the terms of the merger agreement, the merger and the other transactions contemplated by the merger agreement, including the issuance of Camden common shares to Summit stockholders, are advisable and in the best interests of Camden and its shareholders.
The Camden board is not making, and has not authorized anyone to make, any recommendation as to whether you ought to elect to receive cash or new units in the exchange offer. You must make your own investment decision to receive cash or new units based on your investment objectives.
Set forth below is a discussion of all material positive and negative factors considered by the Camden board in making its determination to approve and adopt the merger agreement and the merger.
Positive Factors Considered by the Camden Board |
In making its determination with respect to the merger agreement and the merger, the Camden board discussed with Camden senior management, as well as its financial and legal advisors, and considered a number of factors, including the following material positive factors:
| the uniqueness of the opportunity presented by the merger for Camden to acquire a significant portfolio of high-quality apartment properties, most of which are located in new, East coast markets such as Southeast Florida, metro Washington, D.C. and Atlanta, which complements Camdens existing footprint in Florida and North Carolina while further diversifying Camdens portfolio with the addition of new regions, and the view of Camden senior management that this portfolio likely could not be replicated through acquisitions of individual assets; | |
| the acceleration of Camdens strategic plan of lowering its concentration in Las Vegas, Houston and Dallas and increasing its presence on the East coast, and accomplishing this diversification strategy in a matter of months rather than what would have otherwise taken years to accomplish; | |
| the alignment with Camdens strategy to increase its presence in core markets with high employment growth, which Camden management believes is intrinsically linked to multifamily performance, by acquiring well- located properties in metro Washington, D.C., Southeast Florida, Atlanta, Raleigh and Charlotte, all of which are projected to be in the top 26 employment growth markets for the next five years and some of which have significant impediments to new apartment supply; | |
| the potential for the merger and the spin-off transaction, by increasing the number of multifamily properties operated by Camden by approximately 28% based on number of units and decreasing the |
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average age of Camdens overall asset age from eleven to nine years, to solidify Camdens position as the fifth largest publicly-held owner and operator of multifamily properties in the United States; | ||
| the estimated operational and general and administrative cost savings of approximately 60% in the first year of operations primarily from savings in executive compensation, corporate administrative functions and regulatory costs; | |
| the opportunity presented by the merger for Camden to combine its $430 million current and future development pipeline with Summits $620 million development pipeline primarily in the metro Washington, D.C. and Southeast Florida markets; | |
| that the number of Camden common shares and new units required to be issued in the merger and the exchange offer was fixed and would not be adjusted except, at Camdens election, in the case of a significant decline in the trading price of Camden common shares during a period prior to closing; | |
| the due diligence review of Summit and its assets conducted by Camden management and its advisors, including, among other things, site tours of a significant number of Summits operating properties and all of Summits development properties, and Camden managements favorable assessment of the quality of Summits assets and the significant barriers to additional supply in many of Summits markets; | |
| managements belief that the increased size of Camden following the merger would provide greater financial flexibility to the merged company and that its increased equity market capitalization would result in greater liquidity for Camden shareholders; | |
| the report by Camden management based on conversations with the rating agencies to the effect that the rating agencies viewed the transaction favorably and confirmed that Camdens ratings would likely be affirmed, giving effect to the merger; and | |
| the opinion, analyses and presentations of Deutsche Bank. |
Negative Factors Considered by the Camden Board |
The Camden board also considered the following potentially negative factors in its deliberations concerning the transaction:
| the need to finance the cash portion of the consideration payable to Summit stockholders and limited partners and limited partners in the transaction; | |
| the risk that the anticipated benefits of the transaction to Camden and its shareholders might not be realized as a result of possible changes in the real estate market in Summits core markets; | |
| the risk that the anticipated benefits of the transaction to Camden and its shareholders might not be realized as a result of an inability to dispose of a portion of the portfolio in the spin-off transaction; | |
| the risk of a negative reaction to the transaction of financial analysts and investors and the related risk of an adverse impact on Camdens share price; | |
| the risk that the anticipated benefits of the transaction to Camden and its shareholders might not be fully realized as a result of any inability to achieve the anticipated cost savings and reduction in expenses and other potential difficulties in integrating the two companies and their respective operations; | |
| the additional expense that Camden will incur upon a sale of Summit properties acquired in the merger resulting from the tax protection agreement to be entered into with the limited partners of the Operating Partnership in connection with the transaction; |
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| the significant cost involved in connection with completing the transaction and the substantial management time and effort required to effect the merger and integrate the businesses of Camden and Summit; and | |
| the risk that the transaction might not be completed based upon the failure to satisfy covenants or closing conditions and the resulting interruption to the business of Camden. |
The above discussion is not intended to be exhaustive of all factors considered by the Camden board, but does set forth all material positive and negative factors considered by the Camden board. The Camden trust managers unanimously approved the transaction in light of the various factors described above and other factors that each such member of the Camden board felt was appropriate. In view of the wide variety of factors considered by the Camden board in connection with its evaluation of the transaction and the complexity of these matters, the Camden board did not consider it practical, and did not attempt, to quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision. Rather, the Camden board made its determination based on the totality of information presented to and the investigation conducted by it. In considering the factors discussed above, individual trust managers may have given different weights to different factors.
Summits Reasons for the Transaction; Recommendation of the Summit Board
The Summit board believes that the merger and the merger agreement are advisable and fair to, and in the best interests of, Summit and its stockholders. The Summit board also believes that the merger will establish a combined company that is a leader in the multifamily industry. As a result, at a meeting held on October 4, 2004, the Summit board unanimously approved the merger and approved and adopted the merger agreement and resolved to recommend that the stockholders vote FOR approval of the merger agreement and the merger and that the limited partners vote FOR the approval of the merger and FOR the approval of the new partnership agreement. In reaching its determination, the Summit board consulted with JPMorgan with respect to the financial aspects and fairness of the transaction, as well as Summit management and its legal and accounting advisors.
The Summit board is not making, and has not authorized anyone to make, any recommendation as to whether you ought to elect to receive cash or new units in the exchange offer. You must make your own investment decision whether to receive cash or new units based on your investment objectives.
In considering the recommendation of the Summit board with respect to the transaction, Summit stockholders and limited partners should be aware that members of the Summit board as well as some Summit executive officers have interests in, and will receive benefits from, the transaction that differ from, or are in addition to, the interests of Summit stockholders and limited partners generally. See Conflicts of Interest of Summit Directors and Executive Officers in the Merger beginning on page 62.
Positive Factors Considered by the Summit Board |
In arriving at its determination, the Summit board considered the following factors, among others, as generally supporting its decision to approve transaction:
| the terms of the merger agreement and the other documents executed in connection with the merger; | |
| the scale, scope, strength and diversification of markets and expected synergies that could be achieved by combining Summit and Camden, and an expectation that such a combination would create a leader in the multifamily industry; | |
| the opportunity for Summit stockholders and limited partners to receive a premium over the market price for shares of Summit common stock and existing units outstanding prior to the public announcement of the transaction; |
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| the value of the exchange ratio provided for in the merger agreement and the exchange offer relative to the current and historical trading prices of Summit common stock and Camden common shares; | |
| the expected increase in dividends to Summit stockholders who receive Camden common shares in the merger, based upon the historical dividends paid by each of Camden and Summit; | |
| the opinion rendered to the Summit board by JPMorgan, described under Opinion of JPMorgan beginning on page 56, that, based upon and subject to the factors and assumptions set forth in its opinion, the consideration to be received by the holders of Summit common stock (including with respect to equity securities convertible into, or redeemable by Summit under certain circumstances for, shares of Summit common stock, any holders thereof on an as-converted or as-redeemed basis, as the case may be) in the transaction was fair, from a financial point of view, to such holders; | |
| the financial analyses of JPMorgan presented to the Summit board; | |
| the fact that completion of the transaction is not conditioned on Camdens obtaining financing; | |
| the fact that Summit has a price-based termination right to terminate the merger agreement and walk away from the merger if the value of Camden common shares decreases below $39.31 per Camden share, during a period leading up to the merger, unless Camden elects to increase the exchange ratio; | |
| the social and economic effect on Summits employees, including, among other things, that Camdens benefit plans would be at least as favorable as those of Summit with a lower cost for each employee; | |
| the anticipated cost savings and efficiencies available to the combined company as a result of the transaction, as well as the increasing importance of economies of scale; | |
| the fact that the merger consideration would consist of an amount of cash and Camden common shares, and that subject to overall limitations, Summit stockholders would be able to choose to receive either cash or stock or a combination thereof; | |
| the fact that the exchange offer would consist of an amount of cash and new units and limited partners would be able to choose to receive either cash or new units or a combination thereof; | |
| the expectation that the merger would be tax free to Summit stockholders for federal income tax purposes to the extent Camden common shares are received; | |
| the expectation that the exchange offer would be tax free to limited partners of the Operating Partnership for federal income tax purposes to the extent they receive new units in the exchange offer; | |
| the ability of Summit stockholders who receive Camden common shares in the merger to continue to participate in the growth of the business conducted by Camden and Summit following the transaction and to benefit from the potential appreciation in value of Camden common shares; | |
| the fact that Camden agreed to appoint two members of the Summit board to the Camden board, so that the interests of Summits stockholders would continue to be represented following the transaction; | |
| presentations from, and discussions with, certain executive officers of Summit and outside legal counsel and financial advisors regarding the business, real estate assets, financial, accounting and legal due diligence with respect to Camden and the terms and conditions of the merger agreement and the other documents executed in connection with the transaction; and |
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| the report by Summit management based on conversations of Camden with the rating agencies to the effect that the rating agencies had viewed the transaction favorably and confirmed that Camdens ratings would not be reduced as a result of the merger. |
Negative Factors Considered by the Summit Board |
The Summit board also considered the following negative factors, among others, associated with its deliberations concerning the transaction, including:
| the risk that the benefits and expected synergies sought to be achieved by the transaction will not be realized; | |
| the fact that a significant portion of the consideration to be received by Summit common stockholders consists of Camden common shares, and as a result, a decrease in the trading price of Camden common shares before the closing of the merger will reduce the value of the share consideration that will be received by the Summit stockholders; | |
| the fact that Summit stockholders and limited partners will not receive the full benefit of any future growth in the value of their equity that Summit might have achieved as an independent company, and the potential disadvantage to Summit stockholders who receive Camden common shares and Summit limited partners who receive new units in the event that Camden does not perform as well in the future as Summit might have performed as an independent company; | |
| the possibility that some provisions of the transaction agreement, including the nonsolicitation and termination fee provisions, might have the effect of discouraging other parties potentially interested in merging with or acquiring Summit from pursuing such an opportunity; | |
| the significant cost involved in connection with completing the transaction, the substantial management time and effort required to effectuate the merger and integrate the businesses of the companies and the related disruption to Summits operations; | |
| the need to obtain Summit stockholder approval, Camden shareholder approval and the approval of the holders of limited partnership interests in the Operating Partnership; | |
| the risk that the cultures of the two companies may not be compatible resulting in a loss of key personnel following the transaction; and | |
| other applicable risks described in the section of this consent solicitation/prospectus titled Risk Factors. |
The above discussion is not intended to be exhaustive of all factors considered by the Summit board, but does set forth the material factors and potential risks considered. The Summit board unanimously approved the merger and recommended approval of the merger and the new partnership agreement in light of the various factors described above and other factors that each such member of the Summit board felt were appropriate. In the opinion of the Summit board, the potential risk factors considered by it were not sufficient, either individually or collectively, to outweigh the positive factors considered by the Summit board in its determination relating to the transaction.
In view of the wide variety of factors considered by the Summit board in connection with its evaluation of the transaction and the complexity of these matters, the Summit board did not consider it practical, and did not attempt, to quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision. In addition, the Summit board did not reach any specific conclusion on each factor considered, or any aspect of any particular factor, but conducted an overall analysis of these factors. In considering the factors discussed above, individual directors may have given different weight to different factors.
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Opinion of JPMorgan
Pursuant to an engagement letter dated September 30, 2004, Summit exclusively retained JPMorgan as its financial advisor in connection with the proposed merger.
At the meeting of the Summit board on October 4, 2004, JPMorgan rendered its oral opinion, subsequently confirmed in writing, to the Summit board that, as of such date, and based upon and subject to the various considerations and assumptions described in the opinion, the consideration to be received by the holders of Summits common stock (including with respect to equity securities convertible into, or redeemable by Summit under certain circumstances for, shares of Summit common stock, any holders thereof on an as-converted or as-redeemed basis, as the case may be) in the proposed merger was fair, from a financial point of view, to such holders. No limitations were imposed by the Summit board upon JPMorgan with respect to the investigations made or procedures followed by it in rendering its opinion.
The full text of the written opinion of JPMorgan, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as Annex E to this consent solicitation/prospectus and is incorporated herein by reference. You are urged to read the opinion in its entirety. JPMorgans written opinion is addressed to the Summit board, is directed only to the consideration to be paid in the merger and does not constitute a recommendation to any stockholder of Summit as to the form of consideration such stockholder should elect to receive or as to how such stockholder should vote at the Summit special meeting. JPMorgans written opinion does not address issues related to the exchange offer or the new partnership agreement and does not constitute a recommendation to any limited partner of the Operating Partnership as to its election to receive cash or new units in the exchange offer or whether such limited partner should approve the merger or the new partnership agreement. The summary of the opinion of JPMorgan set forth in this consent solicitation/prospectus is qualified in its entirety by reference to the full text of such opinion.
In arriving at its opinion, JPMorgan, among other things:
| reviewed the Agreement and Plan of Merger among Camden, Camden Summit and Summit dated October 4, 2004; | |
| reviewed certain publicly available business and financial information concerning Summit and Camden and the industry in which they operate; | |
| compared the proposed financial terms of the merger with the publicly available financial terms of certain transactions involving companies JPMorgan deemed relevant and the consideration received for such companies; | |
| compared the financial and operating performance of Summit and Camden with publicly available information concerning certain other companies JPMorgan deemed relevant and reviewed the current and historical market prices of Summit common stock and the Camden common shares and certain publicly traded securities of such other companies; | |
| reviewed certain internal financial analyses and forecasts prepared by the managements of Summit and Camden relating to their respective businesses; and | |
| performed such other financial studies and analyses and considered such other information as JPMorgan deemed appropriate for the purposes of its opinion. |
JPMorgan also held discussions with certain members of the management of Summit and Camden with respect to certain aspects of the merger, and the past and current business operations of Summit and Camden, the financial condition and future prospects and operations of Summit and Camden, and certain other matters JPMorgan believed necessary or appropriate to its inquiry.
In giving its opinion, JPMorgan relied upon and assumed, without independent verification, the accuracy and completeness of all information that was publicly available or that was furnished to it by Summit and Camden or otherwise reviewed by JPMorgan, and JPMorgan did not assume any responsibility or liability therefor. JPMorgan did not conduct any valuation or appraisal of any assets or
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The projections furnished to JPMorgan for Summit and Camden were prepared by the respective managements of each company. Neither Summit nor Camden publicly discloses internal management projections of the type provided to JPMorgan in connection with JPMorgans analysis of the merger, and such projections were not prepared with a view toward public disclosure. These projections were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of management, including, without limitation, factors related to general economic and competitive conditions and prevailing interest rates. Accordingly, actual results could vary significantly from those set forth in such projections.
JPMorgans opinion is based on economic, market and other conditions as in effect on, and the information made available to JPMorgan as of, the date of such opinion. It should be understood that subsequent developments may affect the written opinion dated October 4, 2004, and JPMorgan does not have any obligation to update, revise, or reaffirm such opinion. JPMorgans opinion is limited to the fairness, from a financial point of view, of the consideration to be received by the holders of Summit common stock in the proposed merger, and JPMorgan has expressed no opinion as to the underlying decision by Summit to engage in the merger. JPMorgan expressed no opinion as to the price at which Summits common stock or Camdens common shares will trade at any future time.
In accordance with customary investment banking practice, JPMorgan employed generally accepted valuation methods in reaching its opinion. The following is a summary of the material financial analyses utilized by JPMorgan in connection with providing its opinion. In calculating per share values, JPMorgan assumed outstanding common units of partnership interests were converted into common shares, unless otherwise indicated.
Stock Trading History Analysis. JPMorgan reviewed the historical trading prices for Summits common stock and noted that over the last year the low closing price was $21.18 per share and the high closing price was $27.75 per share. In addition, in order to study any meaningful price fluctuations that may have occurred in the past year, JPMorgan calculated the historical closing price averages as of September 30, 2004 (as shown below). The implied value of consideration of $31.02 per share as of September 30, 2004 (assuming conversion of partnership units to common stock) represents a 14.7% premium over Summits closing share price of $27.05 on September 30, 2004.
Period | Closing Price | Premium Paid | ||||||
60 days average
|
$ | 26.12 | 18.8 | % | ||||
Average YTD
|
$ | 24.04 | 29.0 | % | ||||
52 week high
|
$ | 27.75 | 11.8 | % | ||||
All-time high
|
$ | 27.75 | 11.8 | % |
Comparable Public Companies Analysis. Using publicly available information, JPMorgan compared selected financial data of Summit with similar data for selected publicly traded companies engaged in
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| Archstone-Smith Trust | |
| AvalonBay Communities, Inc. | |
| BRE Properties, Inc. | |
| Camden Property Trust | |
| Equity Residential | |
| Essex Property Trust, Inc. | |
| Gables Residential Trust | |
| Post Properties, Inc. | |
| United Dominion Realty Trust, Inc. |
These companies were selected, among other reasons, because of their specialization in the multifamily REIT sector, geographic location, asset quality, market capitalization and capital structure. For each comparable company, JPMorgan analyzed publicly available financial performance data through September 30, 2004. JPMorgan calculated the multiples of current stock price, as of September 30, 2004, to equity analysts estimates for 2005 consensus funds from operations (FFO) as reported by First Call for each of these companies to determine the estimated 2005 FFO trading multiples. JPMorgan selected a range of multiples around the 2005 FFO median value for each multiple, resulting in a range of 14.5x to 16.0x. These multiples were then applied to Summits 2005 FFO per common share estimate, based on both the equity analyst consensus as provided by First Call and managements projections, yielding implied trading values for Summit common stock of approximately $26.00 to $28.60 and $28.40 to $31.40 per share, respectively.
Precedent Transactions Analysis. Using publicly available information, JPMorgan examined selected transactions within both Summits industry segment and the overall REIT industry. Specifically, JPMorgan reviewed the following transactions:
Multifamily REIT Transactions
Announced Date | Acquirer | Target | ||
05/04/2001
|
Archstone Communities | Charles E Smith Residential Realty L.P. | ||
03/04/1999
|
Whitehall Street Real Estate,L.P./ Blackstone Real Estate Advisors III L.L.C. |
Berkshire Realty Company, Inc. | ||
09/24/1999
|
Olympus Real Estate Partners | Walden Residential Properties, Inc. | ||
12/02/1998
|
The Irvine Company | Irvine Apartment Communities, L.P. | ||
07/08/1998
|
Equity Residential Properties Trust | Merry Land & Investment Co. | ||
03/08/1998
|
Bay Apartment Communities | Avalon Properties Inc. | ||
12/17/1997
|
Camden Property Trust | Oasis Residential Inc. | ||
08/28/1997
|
Equity Residential Properties Trust | Evans Withycombe Residential | ||
08/04/1997
|
Post Properties, Inc. | Columbus Realty Trust | ||
01/17/1997
|
Equity Residential Properties Trust | Wellsford Residential Property Trust | ||
12/16/1996
|
Camden Property Trust | Paragon Group, Inc. |
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Recent REIT transactions
Announced Date | Acquirer | Target | ||
08/25/2004
|
Kimco Realty Corp. and DRA Advisors JV | Price Legacy Corporation | ||
08/20/2004
|
General Growth Properties, Inc. | The Rouse Company | ||
06/21/2004
|
Simon Property Group | Chelsea Property Group | ||
05/03/2004
|
Prologis and Eaton Vance Management | Keystone Property Trust | ||
05/29/2003
|
Hometown America LLC | Chateau Communities Inc. | ||
05/14/2003
|
Pennsylvania REIT | Crown America Realty Trust | ||
05/08/2003
|
CNL Hospitality Properties, Inc. | RFS Hotel Investors, Inc. |
JPMorgan selected these transactions because of their similarity to the merger. An analysis of these transactions showed a range of offer price to forward FFO per share of 11.1x to 13.4x and an estimated premium/discount of offer price to estimated net asset value (NAV) of 19.1% to 13.8% based on the median values of each metric for the two sets of comparable transactions. JPMorgan applied the range of multiples derived from such analysis to Summits First Call 2005 FFO per share and the range of premiums derived from such analysis to Summits NAV estimate reported by Green Street Advisors, Inc. as of October 1, 2004, and arrived at an estimated range of equity values for Summit common stock of between $19.90 to $24.00 and $30.40 to $31.80 per share, respectively.
Dividend Discount Model Analysis. JPMorgan performed a dividend discount analysis for Summit based upon projections and assumptions provided by Summits management of projected FFO per common share and projected annual dividend payouts per share for the years ending December 31, 2004 to December 31, 2014. Under the dividend discount model methodology, implied equity values are projected by discounting dividends per share for the years 2004 through 2014 using discount rates reflecting an expected equity total return. JPMorgan calculated a range of terminal values of Summit at the end of the ten-year period ending 2014 by applying a perpetual growth rate ranging from 4.0% to 5.0% to the projected dividend of Summit in the final year of the ten-year period. The range of terminal values was then discounted to present values using a range of discount rates from 10.5% to 11.5%. JPMorgan selected these ranges of discount rates and perpetual growth rates based on JPMorgans estimate of expected investor total returns, discussions with Summits management as well as other qualitative factors, such as characteristics of Summits properties and asset class. The present value of the dividends and the terminal value per common share were added together to determine an estimated range of equity values for Summits common stock of $22.70 to $28.90 per share.
Liquidation NAV/ Share Analysis. JPMorgan arrived at an equity NAV by (1) calculating a gross real estate value by applying a range of capitalization rates from 5.3% to 5.7% to projections for Summits forward twelve-month real estate net operating income (NOI), adjusted for an assumed management fee, a reserve for capital expenditures, and recent assets sales, per discussions with Summits management; (2) adding the gross value of other assets, less Summits outstanding debt, which was marked to market, other liabilities, and assumed transaction expenses; and (3) taking the present value of the NAV assuming an average of twelve months to liquidate assets at a 15% discount rate. The equity NAV per share was then calculated by dividing the equity NAV by the number of shares of Summit common stock outstanding. This analysis indicated an implied range for the price of Summit common stock of $27.40 to $31.40 per share. JPMorgans capitalization rate range was based on the weighted average capitalization rate for the stabilized portfolio based on a median of comparable asset sale transaction capitalization rates by relevant market for the last six months. The capitalization rates were adjusted to account for condo conversion candidates within the asset portfolio.
Historical Exchange Ratio Analysis. JPMorgan reviewed the per share daily closing market price movements of Summit common stock and Camden common shares for the two-year period ended September 30, 2004, and calculated the historical exchange ratios during this period implied by dividing the daily closing prices per share of Summit common stock by those of Camden common shares and the average of those historical trading ratios for the calendar periods of 6-month, 1-year and 2-year periods
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Calendar Period | Mean | |||
September 30, 2004
|
0.5855x | |||
6-month
|
0.5455x | |||
1-year
|
0.5448x | |||
2-year
|
0.5564x |
The highest historical exchange ratio on any single day during the 2-year period was approximately 0.6029x, and the lowest historical exchange ratio on any single day during this period was approximately 0.4858x. The proposed exchange ratio of 0.6687x is for the stock portion of the consideration only, which is no more than 60% of the total value of the merger consideration.
JPMorgan also conducted a valuation analysis of Camden common shares using generally accepted valuation methods. The following is a summary of the material financial analyses performed by JPMorgan in connection with its opinion.
Stock Trading History Analysis. JPMorgan reviewed the historical trading prices for Camden common shares and noted that over the last year the low closing price was $37.95 per share and that the high closing price was $47.96 per share.
Comparable Public Companies Analysis. Using publicly available information, JPMorgan compared selected financial data of Camden with similar data for selected publicly traded companies engaged in businesses which JPMorgan judged to be analogous to Camden. JPMorgan relied on the same set of comparable public companies as the ones used for evaluating Summit (with the exception of substituting Summit for Camden). JPMorgan selected a range of multiples around the 2005 FFO median value for each multiple, resulting in a range of 14.5x to 16.0x. These multiples were then applied to Camdens 2005 FFO per common share estimate, based on both the equity analyst consensus as provided by First Call and managements projections, yielding implied trading values for Camdens common shares of approximately $49.40 to $54.60 and $47.10 to $52.00 per share, respectively.
Dividend Discount Model Analysis. JPMorgan performed a dividend discount analysis for Camden based upon projections and assumptions provided by Camdens management and from discussions with Summits management of projected FFO per common share and projected annual dividend payouts per share for the years ending December 31, 2004 to December 31, 2014. Under the dividend discount model methodology, implied equity values are projected by discounting dividends per share for the years 2004 through 2014 using discount rates reflecting an expected equity total return. JPMorgan calculated a range of terminal values of Camden at the end of the ten-year period ending 2014 by applying a perpetual growth rate ranging from 4.0% to 5.0% of the projected dividend of Camden in the final year of the ten-year period. The range of terminal values was then discounted to present values using a range of discount rates from 10.5% to 11.5%. JPMorgan selected these ranges of discount rates and perpetual growth rates based on JPMorgans estimate of expected investor total returns, discussion with Camdens management as well as other qualitative factors, such as characteristics of Camdens properties and asset class. The present value of the dividends and the terminal value per common share were added together to determine an estimated range of equity values for Camdens common stock of $39.80 to $51.10 per common share.
Liquidation NAV/ Share Analysis. JPMorgan arrived at an equity NAV by (1) calculating a gross real estate value by applying a range of capitalization rates from 6.0% to 6.5% to projections for Camdens forward twelve-month real estate NOI adjusted for an assumed management fee and a reserve for capital expenditures; (2) adding the gross value of other assets, less Camdens outstanding debt, which was marked to market, other liabilities, and transaction expenses; and (3) taking the present value of the NAV assuming an average of twelve months to liquidate assets at a 15% discount rate. The equity NAV per share was then calculated by dividing the equity NAV by the number of Camden common shares outstanding. This analysis indicated an implied range for the price of Camdens common shares of $41.90
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Based on the valuation analyses of Summit common stock and Camden common shares, JPMorgan calculated the implied exchange ratios derived from the historical exchange ratio analysis, comparable public companies analysis, dividend discount model analysis and liquidation NAV analysis, all described above. In addition, JPMorgan calculated the implied exchange ratio derived from Summits and Camdens relative contribution of FFO and asset value. The following table is a summary of the ranges of exchange ratios implied by each valuation methodology.
Valuation Methodology | Range | ||||
Comparable Public Companies Analysis:
|
|||||
2005 FFO per share multiple based on equity
analyst consensus as provided by First Call
|
0.4762x to 0.5790x | ||||
2005 FFO per share multiple based on
managements projections
|
0.5462x to 0.6667x | ||||
Dividend Discount Model Analysis
|
0.4442x to 0.7261x | ||||
Liquidation NAV Analysis
|
0.5723x to 0.7494x | ||||
Contribution Analysis
|
0.4971x to 0.6841x |
Pro Forma Combination Analysis. Although the following analysis was not a basis for our opinion, JPMorgan also analyzed the pro forma impact of the merger on Camdens earnings per share, consolidated capitalization and financial ratios using Summits and Camdens management projections. Incorporating assumptions with respect to various structural considerations, transaction and financing costs and Camdens estimated synergies, the combination would be accretive to Camdens estimated FFO per share in 2005.
The summary set forth above does not purport to be a complete description of the analyses or data presented by JPMorgan. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. JPMorgan believes that the summary set forth above and its analyses must be considered as a whole and that selecting portions thereof, without considering all of its analyses, could create an incomplete view of the processes underlying its analyses and opinion. JPMorgan based its analyses on assumptions that it deemed reasonable, including assumptions concerning general business and economic conditions and industry-specific factors. The other principal assumptions upon which JPMorgan based its analyses are set forth above under the description of each such analysis. JPMorgans analyses are not necessarily indicative of actual values or actual future results that might be achieved, which values may be higher or lower than those indicated. Moreover, JPMorgans analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be bought or sold.
As a part of its investment banking business, JPMorgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for estate, corporate and other purposes. JPMorgan was selected to advise Summit with respect to the merger and deliver an opinion to the Summit board with respect to the merger on the basis of such experience and its familiarity with Summit.
For services rendered in connection with the merger, Summit has agreed to pay JPMorgan a fee of $9,000,000. In addition, Summit has paid JPMorgan a fee of $500,000 for corporate defense advisory services rendered in connection with an engagement letter executed in April 2004. Furthermore, Summit has agreed to reimburse JPMorgan for its expenses incurred in connection with its services, including the fees and disbursements of counsel, and will indemnify JPMorgan against certain liabilities, including liabilities arising under the Federal securities laws.
In addition, JPMorgan and its affiliates have provided investment banking and/or commercial banking services in the past for both Summit and Camden in each case for customary compensation, and currently,
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Trust Managers and Executive Officers of Camden After the Transaction
Following the transaction, the eight current trust managers of Camden will remain as trust managers of the combined entity. In addition, two current directors of Summit, Messrs. McGuire and Paulsen will become trust managers of the combined entity as of the second business day after the effective time of the merger.
Following the transaction, the current executive officers of Camden will remain as executive officers of Camden. None of the current executive officers of Summit will become executive officers of Camden following the transaction.
Conflicts of Interest of Summit Directors and Executive Officers in the Merger
In considering the recommendation of the Summit board with respect to the merger agreement and the merger, Summit stockholders should be aware that Summit directors and some of its executive officers have interests in, and have received or will receive benefits from, the merger and the partnership transaction that differ from, or are in addition to, and, therefore, may conflict with the interests of Summit stockholders generally. The Summit board was aware that these interests existed when it approved the merger. The material interests are summarized below.
Agreements with Executive Officers of Summit |
Severance Agreements. Summit is party to executive severance agreements with Steven R. LeBlanc, Michael L. Schwarz, Gregg D. Adzema, Keith L. Downey, Randall M. Ell, Todd Farrell and Michael G. Malone. These agreements provide for the payment of severance benefits equal to three times such executive officers annual base salary and cash bonus in the event of the termination of such executive officers employment under certain circumstances following a change in control of Summit or a combination transaction involving a consolidation or merger. The merger with Camden will be considered a change in control for purposes of the executive severance agreements. The benefits payable under the terms of the executive severance agreements are subject to reduction by the amount of any severance benefits payable under applicable employment agreements. The severance payment that will be made to each senior executive officer, as a result of the merger, is approximately: $3,915,000 to Mr. LeBlanc, $2,632,500 to Mr. Schwarz, $2,163,000 to Mr. Adzema, $1,425,600 to Mr. Downey, $1,557,600 to Mr. Ell, $1,620,000 to Mr. Farrell and $1,216,800 to Mr. Malone.
Retention Bonus Agreements. Summit is party to retention bonus agreements providing for the payment of retention bonuses of $3,800,000, $1,950,000, $1,000,000, $950,000, $950,000, $950,000 and $400,000 to Messrs. LeBlanc, Schwarz, Adzema, Downey, Ell, Farrell and Malone, respectively, provided such executive officer is still employed by Summit eleven months following a change in control of Summit, or such executive officers employment terminates under certain circumstances within six months before or eleven months after a change in control of Summit. The merger with Camden will be considered a change in control for purposes of the retention bonus agreements.
Under the terms of the respective agreements, the retention bonuses would be payable to the executive officers in January 2006. However, if the executive officers employment is terminated under certain circumstances before that date, the retention bonus will be payable in any event, no later than, 11 months after the change in control.
Employment Agreements. Summit also has entered into employment agreements with Messrs. LeBlanc, Schwarz, Adzema, Downey, Ell, Farrell and Malone.
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Under the terms of Summits employment agreement with Mr. LeBlanc, if Mr. LeBlancs employment is terminated either by Summit without cause or by Mr. LeBlanc for cause (each as defined in his employment agreement) during the original term or any extended term of his employment agreement, Mr. LeBlanc will be entitled to receive his base salary, as in effect on the date of termination, until the first anniversary of the date of termination. Under such circumstances, Mr. LeBlanc also will be entitled to receive an amount equal to the bonus paid to him in the calendar year immediately preceding such termination of his employment with Summit. It is not expected that Mr. LeBlanc will be paid any additional severance pursuant to his employment agreement in connection with the merger because the amount of the benefits payable to him under his severance agreement (described above) would be offset by any amount paid to him pursuant to his employment agreement.
The employment agreements with Messrs. Schwarz, Adzema, Downey, Ell, Farrell and Malone do not provide for any severance amounts to be payable upon the termination of their employment with Summit. These executive officers have entered into severance agreements with Summit, however, that entitle them to severance benefits in certain circumstances as described above.
Each of the executive officers also entered into a noncompetition agreement with Summit, or an employment agreement that includes substantially the same terms as these noncompetition agreements. Subject to certain limited exceptions, the noncompetition agreements prohibit all of the executive officers from engaging in any businesses prior to their termination of employment, other than those of Summit, without the prior written consent of the president of Summit. The noncompetition agreements also prohibit the executive officers for a two-year period following the termination of their employment with Summit, from hiring certain employees of Summit who earn more than $50,000 per year or participating in any efforts to persuade such employees to leave Summit and, for a one-year period following the termination of their employment with Summit, from engaging in any manner, directly or indirectly, in any business which engages or attempts to engage in the acquisition, development, construction, operation, management or leasing of any of Summits then existing communities or development or acquisition opportunities. Under the noncompetition agreements, such executive officers are prohibited from disclosing trade secrets and, for prescribed periods, other confidential information of Summit.
Performance Bonus. The Summit board approved the payment of performance bonuses in December 2004 to Messrs. LeBlanc, Schwarz, Adzema and Malone in an amount equal to $1,150,000, $100,000, $500,000 and $250,000, respectively.
Long Term Incentive Plan. Messrs. LeBlanc, Schwarz, Adzema, Downey, Ell and Malone participate in Summits performance bonus program, which awards a cash bonus to each executive officer determined by reference to Summits financial performance as compared to its peers over a three-year period. In December 2004, the Summit board approved an amendment to Summits performance bonus program in order to accelerate the vesting and payment of bonuses under this program to each of Messrs. LeBlanc, Schwarz, Adzema, Downey, Ell and Malone. These bonuses would have become otherwise payable at the effective time of the merger. The amounts paid to Messrs. LeBlanc, Schwarz, Adzema, Downey, Ell and Malone in December 2004 were $1,656,000, $1,215,000, $938,000, $580,000, $580,000 and $130,000, respectively.
Excise Tax Gross-up Payments. A portion of the payments to be made to Messrs. LeBlanc, Schwarz, Adzema, Downey, Ell and Malone in connection with the merger (as described herein) will constitute an excess parachute payment under current federal tax laws. Federal tax laws impose a 20% excise tax, payable by the executive, on excess parachute payments. The executives will be reimbursed for the amount of this excise tax and will receive an additional gross-up payment so that, after payment of the excise tax and all income and excise taxes imposed on the reimbursement and gross-up payments, the executive will retain approximately the same net-after tax amounts that he would have retained if there were no 20% excise tax.
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Other Benefits |
Stock Options. The merger agreement provides that, at the effective time of the merger, each outstanding option to purchase shares of Summit common stock whether or not exercisable at the effective time of the merger (and regardless of the exercise price) will be cancelled in exchange for the right to receive a single lump sum cash payment, equal to the product of (x) the number of shares of Summit common stock subject to such option and (y) the excess, if any, of the option payment over the exercise price per share of such option. The option payment is calculated based on a formula set forth in the merger agreement that takes into account the exchange ratio used to calculate the merger consideration (which is subject to further adjustment as set forth in the merger agreement) and the percentage amount of cash and Camden common shares that are payable in the merger. If the exercise price per share of any such option is equal to or greater than the option payment, such option will be canceled without any cash payment being made in respect thereof. Assuming the continued vesting through January 1, 2005, at the time of the execution of the merger agreement, Mr. LeBlanc had options to acquire 589,000 shares of Summit common stock, 428,200 of which were currently exercisable and 160,800 of which were not currently exercisable; Mr. Schwarz had options to acquire 229,000 shares of Summit common stock, 147,200 of which were currently exercisable and 81,800 of which were not currently exercisable; Mr. Adzema had options to acquire 132,400 shares of Summit common stock, 70,400 of which were currently exercisable and 62,000 of which were not currently exercisable; Mr. Downey had options to acquire 112,000 shares of Summit common stock, 73,400 of which were currently exercisable and 38,600 of which were not currently exercisable; Mr. Ell had options to acquire 189,000 shares of Summit common stock, 134,400 of which were currently exercisable and 54,600 of which were not currently exercisable; and Mr. Malone had options to acquire 41,000 shares of Summit common stock, 18,250 of which were currently exercisable and 22,750 of which were not currently exercisable.
In December 2004, the Summit board approved (i) the acceleration of the vesting of certain stock options held by Messrs. LeBlanc, Schwarz, Adzema, Downey, Ell and Malone and (ii) the right to receive a lump sum cash payment in exchange for the cancellation of certain vested and unvested stock options held by such executive officers. The unvested options would have become otherwise fully exercisable at the effective time of the merger. The cash payment was equal to the product of (x) the number of shares of Summit common stock subject to such option and (y) the amount by which $32.89 exceeded the exercise price of such option. This payment was calculated based on a formula substantially similar to that set forth in the merger agreement. This formula took into account the exchange ratio used to calculate the merger consideration and the percentage amount of cash and Camden common shares that will be payable in the merger. In consideration for the receipt of the lump sum cash payment, each executive officer entered into a letter agreement with Summit agreeing to the termination of such options. As a result of this acceleration and payment, Messrs. LeBlanc, Schwarz, Adzema, Downey, Ell and Malone received a lump sum cash payment equal to approximately $7,110,167, $2,702,197, $1,138,205, $1,139,882, $1,793,910 and $291,960, respectively. Following this payment and cancellation, Messrs. LeBlanc, Schwarz, Adzema and Ell currently hold options to acquire shares of Summit common stock in an amount equal to 4,071, 3,800, 4,071 and 2,600, respectively. To the extent that these executive officers still hold such options at the effective time of the merger, the options will be and converted as described above at the effective time of the merger. Any cash payments made upon conversion of stock options will not reduce the total amount of cash that will be paid to Summit stockholders in the merger, which is fixed at approximately $436.3 million.
In lieu of receiving this lump sum cash payment, at the option of the executive officer, outstanding incentive stock options may be cancelled in exchange for the right to receive Camden common shares as more fully described in the section of this consent solicitation/prospectus entitled The Merger Agreement Treatment of Summit Stock Options and Restricted Stock on page 74. The issuance of Camden common shares pursuant to this election will not effect the allocation of the amounts of cash and Camden common shares to be issued in the merger.
Acceleration of Restricted Stock and Other Equity-based Awards. In December 2004, the Summit board approved (i) the acceleration of the vesting of shares of restricted stock and performance based
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Indemnification and Insurance |
Indemnification. Pursuant to the merger agreement, Camden has agreed that all rights to indemnification existing in favor of, and all limitations on the personal liability of, any present and former director or officer of Summit and any subsidiary of Summit, as provided in the articles of incorporation and bylaws of Summit or similar governing documents of a subsidiary of Summit with respect to matters occurring on or prior to the effective time of the merger will continue from and after the effective time through the sixth anniversary thereof, provided that all rights to indemnification with respect to any claim asserted or made within such period will continue until the final disposition of such claim. Camden has also agreed to indemnify and hold harmless any present and former directors and officers of Summit or any subsidiary of Summit to the extent provided in any written indemnification agreements between such directors and officers and Summit or any subsidiary of Summit. The merger agreement does not preclude any rights to indemnification or limitations on liabilities provided in the Summit articles of incorporation or similar documents of its subsidiaries subsequent to the effective time to the extent the provisions establishing such rights or limitations are not otherwise amended to the contrary.
Directors and Officers Insurance. Prior to the effective time of the merger, Summit will purchase a non-cancelable extended reporting period endorsement under Summits existing directors and officers liability insurance coverage for Summits directors and officers. The extended coverage will be in the same form presently maintained by Summit, and will provide such directors and officers with coverage for six years following the effective time of the merger. The extended coverage will also have other terms not less favorable to the insured persons than the directors and officers liability insurance coverage presently maintained by Summit.
Ownership of Operating Partnership Units |
Two of Summits directors, William B. McGuire, Jr. and William F. Paulsen, own a total of 1,216,358 units of limited partnership interest in the Operating Partnership and will have the option to redeem their units for $31.20 in cash per unit or to remain in the Operating Partnership following the merger at a unit valuation equal to .6687 of a Camden common share. If either Messrs. McGuire or Paulsen elects to remain in the Operating Partnership following the merger, he will, in his capacity as a limited partner of the Operating Partnership, enter into a Tax, Asset and Income Support Agreement that will prevent the Operating Partnership from selling protected assets under certain circumstances if the limited partners would recognize a taxable gain in such a disposition. See Ancillary Agreements Tax, Asset and Income Support Agreement.
Appointment to Camden Board |
The merger agreement provides that Camden will cause Messrs. McGuire and Paulsen to be appointed to the Camden board effective as of the second business day after the effective time of the merger. Messrs. McGuire and Paulsen will serve on the Camden board until the next annual meeting of
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Transaction Financing
Camden intends to finance the estimated $519.9 million of transaction costs under a new $500 million senior unsecured bridge facility and by borrowing the remaining $19.9 million of transaction costs under Camdens existing $600 million credit facility. The new bridge facility has a term of 364 days from funding and an interest rate of LIBOR plus 80 basis points, which interest rate is subject to certain conditions. Camden Operating, L.P. and certain of Camdens other subsidiaries have guaranteed any outstanding obligation under the bridge facility. At January 24, 2005, Camden had available borrowing capacity under its existing credit facility of $489.7 million.
The Spin-Off Transaction
In connection with the transaction, Camden expects to form a joint venture and transfer to the joint venture multifamily properties currently owned by Camden with an estimated value of $425 million to $525 million. Camden expects to retain a minority interest in the joint venture and continue to provide property management services for the properties transferred to the joint venture. Camden expects to use a portion of the proceeds from this transaction to repay the bridge facility that will finance the transaction costs. If the spin-off transaction is not consummated, Camden will need to repay the bridge financing by other means, which may result in Camden incurring increased interest costs on any replacement indebtedness due to higher interest costs of longer-term debt. See Risk Factors Camden will need to replace, at or before maturity, a $500 million bridge facility that will be used to finance a portion of the cash consideration and transaction costs.
Regulatory Approvals
Neither Camden, Summit nor the Operating Partnership is aware of any material federal or state regulatory requirements that must be complied with or approvals that must be obtained by Camden, Camden Summit, Summit or the Operating Partnership in connection with either the transaction.
Accounting Treatment
Camden will treat the merger as a purchase for financial accounting purposes. This means that Camden will record the assets acquired and the liabilities assumed at their estimated fair values at the time the merger is completed.
Litigation Relating to the Transaction
On October 6, 2004, a purported class action complaint was filed in the General Court of Justice, Superior Court Division, of the State of North Carolina, County of Mecklenburg, by an alleged Summit stockholder. This complaint names as defendants Camden, Summit and each member of the Summit board and principally alleges that the merger and the acts of the Summit directors constitute a breach of the Summit defendants fiduciary duties to Summit stockholders. The plaintiff in the lawsuit seeks, among other things (1) a declaration that each defendant has committed or aided and abetted a breach of fiduciary duty to the Summit stockholders, (2) to preliminarily and permanently enjoin the merger, (3) to rescind the merger in the event that it is consummated, (4) an order to permit a stockholders committee to ensure an unspecified fair procedure, adequate procedural safe-guards and independent input by plaintiff in connection with any transaction for Summit shares, (5) unspecified compensatory damages and (6) attorneys fees. On November 3, 2004, Camden removed the lawsuit to the United States District Court for the Western District of North Carolina, Charlotte Division, and filed an Answer and Counterclaim for declaratory judgment denying the plaintiffs allegations of wrongdoing.
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THE EXCHANGE OFFER
Terms of the Exchange Offer; Period for Tendering
This consent solicitation/prospectus and the accompanying election form contain the terms and conditions of the exchange offer. Upon the terms and subject to the conditions included in this consent solicitation/prospectus and in the accompanying election form, which together constitute the exchange offer, we will accept for exchange existing units that are properly tendered prior to 4:00 p.m., Eastern Time, on February 28, 2005, which we refer to as the exchange offer expiration date, unless you have previously withdrawn them.
| When you tender existing units as provided below, our acceptance of your existing units will constitute a binding agreement between you and us upon the terms and subject to the conditions in this consent solicitation/prospectus and in the accompanying election form. | |
| For each of the existing units you tender that are accepted by us in the exchange offer, we will issue you either $31.20 in cash, without interest, or .6687 of a new unit, as indicated on your election form. In the event that the value of Camden common shares decreases below $39.31 per Camden common share, during a period leading up to the merger, Summit may terminate the merger agreement unless Camden elects to increase the exchange ratio. If Camden makes such an election, the exchange offer will be amended to similarly increase the exchange ratio in the exchange offer. See the Merger Agreement Summit Price-Based Termination Right on page 81. | |
| If you do not return a properly completed election form prior to the exchange offer expiration date, or do not indicate your election on your election form, or your existing units are not accepted for exchange for any other reason, each of your existing units will automatically be converted into .6687 of a new unit at the closing of the exchange offer. | |
| Our obligation to accept existing units for exchange in the exchange offer is also subject to the other conditions described under Conditions to the Exchange Offer. | |
| The exchange offer expires at 4:00 p.m., Eastern Time, on February 28, 2005. We may, however, in our sole discretion, extend the period of time for which the exchange offer is open. References in this consent solicitation/prospectus to the exchange offer expiration date mean 4:00 p.m., Eastern Time, on February 28, 2005 or, if extended by us, the latest time and date to which we extend the exchange offer. | |
| We will keep the exchange offer open for no fewer than 20 business days, or longer if required by applicable law, after the date that we first mail notice of the exchange offer to the holders of the existing units. | |
| We expressly reserve the right, at any time, to extend the period of time during which the exchange offer is open, and thereby delay acceptance of any existing units, by giving oral or written notice of an extension to the exchange agent and notice of that extension to the holders as described below. During any extension, all existing units previously tendered will remain subject to the exchange offer unless withdrawal rights are exercised. | |
| We expressly reserve the right to amend or terminate the exchange offer, not inconsistent with the terms of the merger agreement or the existing partnership agreement, at any time on or before the exchange offer expiration date, and not to accept for exchange any existing units that we have not yet accepted for exchange, if any of the conditions to the exchange offer specified below under Conditions to the Exchange Offer are not satisfied. | |
| We will give oral or written notice of any extension, amendment, waiver, termination or non-acceptance described above to holders of the existing units promptly. If we amend this exchange offer in any respect or waive any condition to the exchange offer, we will give written notice of the amendment or waiver to the exchange agent and will make a public announcement of the |
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amendment or waiver as promptly as practicable thereafter. If we extend the exchange offer expiration date, we will give notice by means of a press release or other public announcement no later than 9:00 a.m., Eastern Time, on the business day after the previously scheduled exchange offer expiration date. As required by SEC rules, we will extend the exchange offer by at least five business days if we amend the offer in any material respect, including any waiver of a material condition. Without limiting the manner in which we may choose to make any public announcement and subject to applicable law, we will have no obligation to publish, advertise or otherwise communicate any public announcements other than by issuing a release to Business Wire. | ||
| Holders of existing units do not have any appraisal or dissenters rights in connection with the exchange offer. | |
| We intend to conduct the exchange offer in accordance with the applicable requirements of the Securities Exchange Act of 1934, as amended, and the applicable rules and regulations of the SEC. |
Important Reservation of Rights Regarding the Exchange Offer
You should note that:
| All questions as to the validity, form, eligibility, time of receipt and acceptance of existing units tendered for exchange will be determined by us in our sole discretion, and our determination will be final and binding. | |
| We reserve the absolute right to reject any and all tenders of any particular existing unit not properly tendered or not to accept any particular existing unit the acceptance of which might, in our judgment or the judgment of our counsel, be unlawful. | |
| We also reserve the absolute right to waive any defects or irregularities as to any particular existing unit either before or after the exchange offer expiration date, including the right to waive the ineligibility of any holder who seeks to tender existing units in the exchange offer. If we waive a condition with respect to any particular holder, we will waive it for all holders. Unless we agree to waive any defect or irregularity in connection with the tender of existing units for exchange, you must cure any defect or irregularity within any reasonable period of time as we determine. | |
| Our interpretation of the terms and conditions of the exchange offer either before or after the exchange offer expiration date will be final and binding on all parties. | |
| Neither Camden, Camden Summit, Summit, the Operating Partnership, the exchange agent nor any other person will be under any duty to give notification of any defect or irregularity with respect to any tender of existing units for exchange, nor will any of them incur any liability for failure to give any notification. |
Conditions to the Exchange Offer
We will accept for exchange all existing units validly tendered and not withdrawn before the exchange offer expiration date. We will not be required to accept for exchange any existing unit and may terminate, amend or extend the exchange offer before the acceptance of the existing units, if, on or before the exchange offer expiration date:
| the closing of the merger has not occurred; | |
| Camden, Camden Summit, Summit or the Operating Partnership does not receive or obtain any consent, authorization, approval or exemption of or from any governmental authority that may be required or advisable in connection with the completion of the exchange offer, including that the registration statement of which this consent solicitation/prospectus is a part has not been declared, or will not continue to be, effective; |
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| any action, proceeding or litigation seeking to enjoin, make illegal, delay the completion of or challenge in any respect the exchange offer, or otherwise relating in any manner to the exchange offer, is instituted or threatened; or | |
| any order, stay, judgment or decree is issued by any court, government, governmental authority or other regulatory or administrative authority and is in effect or any statute, rule, regulation, governmental order or injunction has been proposed, enacted, enforced or deemed applicable to the exchange offer, any of which would or might restrain, prohibit or delay completion of the exchange offer. |
The conditions listed above are for our sole benefit and may be asserted by us regardless of the circumstances giving rise to any of these conditions. On or before the exchange offer expiration date, we may waive these conditions in our sole discretion in whole or in part at any time and from time to time. Our failure at any time to exercise any of the above rights will not be considered a waiver of that right, and these rights will be considered to be ongoing rights that may be asserted, before the exchange offer expiration date, at any time and from time to time.
If we determine in our reasonable discretion that any of the conditions are not satisfied, we may:
| refuse to accept any existing unit, return all certificates representing tendered existing units to the tendering holders, and terminate the exchange offer; | |
| extend the exchange offer and retain all certificates representing existing units tendered before the expiration of the exchange offer, subject, however, to the rights of holders to withdraw existing units that were tendered (see Withdrawal Rights below); or | |
| waive unsatisfied conditions relating to the exchange offer and accept all properly tendered existing units that have not been withdrawn. |
If we waive any material condition to the offer, we will extend the exchange offer by at least five business days, as required by applicable law.
Procedures for Tendering
What To Submit and How |
If you, as the registered holder of existing units, wish to tender any or all of your existing units for exchange in the exchange offer, you must transmit a properly completed and duly executed election form, together with certificates representing tendered units, to American Stock Transfer & Trust Company, as exchange agent, at the address set forth in the election form enclosed with this consent solicitation/prospectus on or prior to the exchange offer expiration date.
The method of delivery of election forms and unit certificates are at your election and risk. If delivery is by mail, we recommend that registered mail, properly insured, with return receipt requested be used. In all cases, sufficient time should be allowed to assure timely delivery. No election form or unit certificates should be sent to Camden, Summit or the Operating Partnership.
How to Sign Your Election Form and Other Documents |
Signatures on an election form or a notice of withdrawal, as the case may be, must be guaranteed unless the existing units being surrendered for exchange are tendered by a registered holder of the existing units who has not completed the box entitled Special Issuance Instructions or Special Delivery Instructions on the election form.
If signatures on an election form or a notice of withdrawal, as the case may be, are required to be guaranteed, the guarantees must be guaranteed by an eligible guarantor institution meeting the requirements of the exchange agent, which requirements include membership or participation in the Security Transfer Agent Medallion Program, referred to in this consent solicitation/prospectus as STAMP,
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If the election form or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers or corporations or others acting in a fiduciary or representative capacity, the person should so indicate when signing and, unless waived by Camden, proper evidence satisfactory to Camden of those persons or entities authority to so act must be submitted.
Acceptance of Existing Units
Once all of the conditions to the exchange offer are satisfied or waived, we will accept, promptly after the closing of the exchange offer, all existing units properly tendered and will issue cash or new units, in accordance with the election form submitted by the holder. See Conditions to the Exchange Offer. No new units will be certificated and evidence of ownership will be by entry on the records of the Operating Partnership. For purposes of the exchange offer, oral or written notice of our acceptance to the exchange agent will be considered our acceptance of the exchange offer.
In all cases, we will issue cash or new units in exchange for existing units that are accepted for exchange only after timely receipt by the exchange agent of a properly completed and duly executed election form.
We will have accepted validly tendered existing units if and when we have given oral or written notice to the exchange agent. The exchange agent will act as agent for the tendering holders for the purposes of receiving cash or the new units from us, and will make the exchange on, or promptly after, the exchange offer expiration date. Following this exchange, the holders in whose names any new units will be issuable upon exchange will be deemed the holders of record of such new units.
Existing units tendered in the exchange offer may not be accepted by us if:
| the existing units were not validly tendered pursuant to the procedures for tendering. See Procedures for Tendering on page 69; | |
| we determine in our reasonable discretion that any of the conditions to the exchange offer have not been satisfied. See Conditions to the Exchange Offer beginning on page 68; | |
| a holder has validly withdrawn a tender of existing units as described under Withdrawal Rights; or | |
| we have, prior to the exchange offer expiration date of the exchange offer, delayed or terminated the exchange offer for any of the reasons set forth under the caption Conditions to the Exchange Offer. See also Terms of the Exchange Offer; Period for Tendering beginning on page 67. | |
Each existing unit that is not tendered for exchange, is withdrawn for exchange (and not validly re-tendered) or is tendered but not accepted in connection with the exchange offer will automatically be converted into .6687 of a new unit at the closing of the exchange offer.
Withdrawal Rights
You can withdraw your tender of existing units at any time on or prior to the exchange offer expiration date. You may also withdraw your tender if we have not accepted your existing units for payment after the expiration of 40 business days from the commencement of the exchange offer.
For a withdrawal to be effective, a written notice of withdrawal must be received by the exchange agent at the address set forth in the election form enclosed with this consent solicitation/prospectus. Any notice of withdrawal must specify:
| the name of the limited partner having tendered the existing units to be withdrawn; and | |
| the number of existing units to be withdrawn. |
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Please note that all questions as to the validity, form, eligibility and time of receipt of notices of withdrawal will be determined by us, and our determination will be final and binding on all parties. Any existing units so withdrawn will be considered not to have been validly tendered for exchange for purposes of the exchange offer.
If you have properly withdrawn existing units and wish to re-tender them, you may do so at any time on or prior to the exchange offer expiration date by following one of the procedures described under Procedures for Tendering.
Exchange Agent
American Stock Transfer & Trust Company has been appointed as the exchange agent for the exchange offer. All executed election forms should be directed to the exchange agent at the address set forth in the election form enclosed with this consent solicitation/prospectus.
Delivery to an address or transmission of instructions via facsimile other than as described above does not constitute a valid delivery.
Fees and Expenses
We will bear the expenses of soliciting tenders of existing units. The exchange agent will mail solicitation materials on our behalf.
Transfer Taxes
Holders who tender their existing units for exchange will not be obligated to pay any transfer taxes, except that holders who instruct us to register new units in the name of, or request that existing units not tendered or not accepted in the exchange offer be returned to, a person other than the registered tendering holder, will be responsible for the payment of any applicable transfer tax. Any such requests are subject to the restrictions on transfer of new units in the new partnership agreement and will not be honored if transferred in violation of such provisions.
Consequences of Failure to Properly Tender Existing Units in the Exchange Offer
Issuance of cash or new units in exchange for existing units in the exchange offer will be made only after timely receipt by the exchange agent of certificates representing such existing units, a properly completed and duly executed election form and all other required documents. Therefore, holders desiring to tender existing units in exchange for cash or new units should allow sufficient time to ensure timely delivery. We are under no duty to give notification of defects or irregularities of tenders of existing units for exchange.
Each existing unit that is not tendered for exchange, is withdrawn for exchange (and not validly re-tendered) or is tendered but not accepted in connection with the exchange offer will automatically be converted into .6687 of a new unit at the closing of the exchange offer.
THE MERGER AGREEMENT
The following is a summary of the material provisions of the merger agreement, as amended, but does not describe all of the provisions of the merger agreement. The full text of the merger agreement, as amended, is attached to the back of this consent solicitation/prospectus as Annex A and is incorporated by reference into this consent solicitation/prospectus. We urge you to read the merger agreement in its entirety because it is the legal document that governs the merger.
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Closing; Effective Time of the Merger
The merger agreement provides for the merger of Summit with and into Camden Summit, a wholly owned subsidiary of Camden. Camden Summit will be the surviving corporation resulting from the merger and will remain a wholly owned subsidiary of Camden.
The closing of the merger will occur no later than the second business day after the satisfaction or waiver of the conditions set forth in the merger agreement or at such other date as mutually determined by Camden, Camden Summit and Summit. If Camden shareholders approve the issuance of shares pursuant to the merger agreement, Summit stockholders approve the merger and the merger agreement and the requisite approvals of the limited partners of the Operating Partnership are obtained and the other conditions to the merger have been satisfied or waived, Camden and Summit currently expect to complete the merger promptly following the receipt of such approvals.
As soon as practicable after all conditions to the closing of the merger are satisfied or waived, Camden Summit and Summit will execute and file a certificate of merger with the Secretary of State of the State of Delaware and articles of merger with the State Department of Assessments and Taxation of the State of Maryland. The merger will be effective upon the later of the time that both the certificate of merger and the articles of merger have been accepted for record by the Secretary of State of the State of Delaware or the State Department of Assessments and Taxation of the State of Maryland, as applicable, or such later time as may be specified in such filings not to exceed 30 days after either document has been accepted for record.
Merger Consideration
If the merger is completed, each share of Summit common stock issued and outstanding prior to the effective time of the merger (other than shares owned by Summit, any subsidiary of Summit, Camden, Camden Summit or any other wholly owned subsidiary of Camden, which will be canceled) will be converted into the right to receive, at the election of the holder, either the cash consideration or the share consideration described below, subject to reallocation in the circumstances described below under Reallocation of Stockholder Elections. Upon conversion of the outstanding Summit common stock into the merger consideration, the Summit common stock will be canceled and retired and will cease to exist.
Summit stockholders may specify different elections with respect to different shares held by such stockholders. For example, a stockholder with 100 shares could make a cash election with respect to 30 shares and a share election with respect to the other 70 shares.
The value of the merger consideration that a Summit stockholder receives in the merger may vary depending on whether a Summit stockholder elects to receive Camden common shares or cash. The value of the cash portion of the merger consideration is fixed at $31.20 for each share of Summit common stock. The value of the share consideration is not fixed and will depend upon the value of .6687 of a Camden common share upon completion of the merger. See the section of this consent solicitation/prospectus entitled Summary The Merger Merger Consideration.
Cash Election. A Summit stockholder who makes a valid cash election will have the right to receive in exchange for each share of Summit common stock for which it made a valid cash election $31.20 in cash. The amount of cash to be paid in the merger is fixed and as a result, even if a Summit stockholder makes a cash election, he or she may nevertheless receive a mix of shares and cash.
Share Election. A Summit stockholder who makes a valid share election will have the right to receive in exchange for each share of Summit common stock for which you have made a valid share election .6687 of a Camden share. The .6687 exchange ratio may be increased in certain limited circumstances as described below under Summit Price-Based Termination Right. The amount of cash to be paid in the merger is fixed and as a result, even if a Summit stockholder makes a share election, he or she may nevertheless receive a mix of shares and cash.
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No Election. If a Summit stockholder makes no election to receive cash or Camden common shares in the merger, or does not make a valid election, he or she will be deemed not to have made an election. Summit stockholders not making an election will receive cash, Camden common shares or a mixture of cash and Camden common shares, based on what is available after giving effect to the valid elections made by other Summit stockholders, as well as the reallocation described below.
No Fractional Shares. Holders of Summit common stock that receive the share consideration will not receive certificates or scrip representing fractional Camden common shares. Instead, each holder of Summit common stock otherwise entitled to a fractional share interest in Camden will be paid an amount in cash, without interest, rounded to the nearest whole cent, determined by multiplying:
| the average closing prices of a Camden common share on the NYSE for the five trading days immediately preceding the effective time of the merger, by | |
| the fraction of the Camden common share that such holder of Summit common stock would otherwise be entitled to receive. |
Reallocation of Stockholder Elections
The total amount of cash that will be paid in the merger, which we refer to as the aggregate cash consideration, is fixed at approximately $436.3 million, subject to increase only if the number of shares of Summit common stock outstanding at the effective time of the merger increases. For example, if the number of outstanding shares of Summit common stock has increased by 10,000 shares then the aggregate cash consideration will increase by approximately $138,000. Therefore, the cash and share elections are subject to reallocation to preserve this limitation on the cash that will be paid by Camden in the merger. As a result, even if a Summit stockholder makes a cash election or a share election, he or she may nevertheless receive a mix of cash and shares.
Reallocation if Too Little Cash is Elected. Cash may be paid to Summit stockholders who make share elections if the number of cash election shares times $31.20 is less than the aggregate cash consideration. In this event:
| each Summit stockholder making a cash election will receive merger consideration consisting of cash; | |
| each Summit stockholder that has not made an election will be deemed to have made a cash election and will receive merger consideration consisting of cash to the extent necessary to have the total number of cash election shares times $31.20 equal the aggregate cash consideration, and if less than all of the non-election shares need to be treated as cash election shares, then the exchange agent will select on a pro rata basis which non-election shares will be treated as cash election shares, and all remaining non-election shares will be treated as share election shares and will receive merger consideration consisting of Camden common shares; | |
| if all Summit stockholders that have not made an election are deemed to have made a cash election, and the total number of cash election shares (including any non-election shares treated as cash election shares) times $31.20 remains less than the aggregate cash consideration, then the exchange agent will convert on a pro rata basis a sufficient number of share election shares into cash election shares such that the sum of the cash election shares (including any non-election shares treated as cash election shares) plus such reallocated shares times $31.20 equals the aggregate cash consideration, and stockholders holding such reallocated shares will receive merger consideration consisting of cash; and | |
| each Summit stockholder making a share election, other than with respect to shares reallocated as set forth in the preceding paragraph, will receive merger consideration consisting of Camden common shares. |
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Reallocation if Too Much Cash is Elected. Camden common shares may be issued to Summit stockholders who make cash elections if the number of cash election shares times $31.20 exceeds the aggregate cash consideration. In this event:
| each Summit stockholder making a share election or non-election will receive merger consideration consisting of Camden common shares; | |
| the exchange agent will convert on a pro rata basis a sufficient number of cash election shares into share election shares such that the number of remaining cash election shares times $31.20 equals the aggregate cash consideration, and stockholders holding such reallocated shares will receive merger consideration consisting of Camden common shares; and | |
| each Summit stockholder making a cash election, other than with respect to shares reallocated as share election shares as set forth in the preceding paragraph, will receive merger consideration consisting of cash. |
Treatment of Summit Stock Options and Restricted Stock
Each Summit stock option outstanding under any Summit employee stock option or compensation plan or arrangement, whether or not exercisable and regardless of the exercise price, will be cancelled as of the effective time of the merger in exchange for the right to receive at the effective time of the merger an amount in cash equal to the number of shares of Summit common stock subject to the Summit stock option multiplied by the excess, if any, of the option payment, as defined below, over the exercise price.
The option payment means the sum of:
| $13.8057; plus | |
| the product of the Average Camden Share Price times the exchange ratio times the quotient of (a) the Aggregate Share Consideration Value, as defined below, divided by (b) the sum of the aggregate cash consideration plus the Aggregate Share Consideration Value. |
The Aggregate Share Consideration Value means the total number of shares of Summit common stock to be exchanged for Camden common shares (after giving effect to any reallocation) multiplied by the exchange ratio multiplied by the Average Camden Share Price.
If the exercise price of a Summit stock option is equal to or greater than the option payment, such option will be cancelled without any cash payment being made in respect thereof.
Rather than receiving the cash option payment set forth above, holders of outstanding Summit incentive stock options may elect to receive Camden common shares at the effective time of the merger, in exchange for the cancellation of such incentive stock options, in an amount equal to the value of the cash option payment. The issuance of Camden common shares in lieu of the cash option payment will not effect the allocation of the amounts of cash and Camden common shares to be issued in the merger.
All Summit restricted stock awards granted under any Summit employee stock option or compensation plan or arrangement will become fully vested immediately prior to the closing of the merger and all shares of Summit common stock that are subject to a restricted stock award will be considered outstanding shares of Summit common stock for all purposes under the merger agreement, including the receipt of merger consideration.
Representations and Warranties of Camden, Camden Summit and Summit
The merger agreement contains customary representations and warranties by Camden, Camden Summit, and Summit relating to, among other things:
| due organization and good standing; | |
| authorization to enter into the merger agreement and to consummate the merger and enforceability of the merger agreement; |
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| the absence of restrictions on or impediments to the merger as a result of state anti-takeover statutes; | |
| capitalization; | |
| required governmental and third-party consents; | |
| compliance with SEC reporting requirements; | |
| no material legal proceedings; | |
| absence of certain changes since December 31, 2003; | |
| tax matters, including qualification as a REIT; | |
| real property; | |
| environmental matters; | |
| appropriate funding of employee benefit plans and compliance with applicable regulations; | |
| labor and employment matters; | |
| brokers and finders fees; | |
| required shareholder, stockholder and/or limited partner approvals, as applicable; | |
| contracts and debt instruments; and | |
| the accuracy and completeness of the information contained in Camdens registration statement relating to the merger and the joint proxy statement/prospectus that is part thereof, and the registration statement of which this consent solicitation/prospectus is a part. |
In addition to the representations and warranties made by Camden, Camden Summit, and Summit, the merger agreement also contains additional representations and warranties made by Summit relating to, among other things:
| action by the Summit board to render Summits stockholders rights plan inapplicable to the merger agreement and the merger and to terminate such plan immediately before the closing of the merger; and | |
| the amounts payable to employees, officers and directors as a result of the merger or a termination of service after the merger. |
The merger agreement contains additional representations and warranties made by Camden and Camden Summit, relating to, among other things, the receipt of a financing commitment letter.
Conduct of Business Pending the Merger
Summit. Pending closing of the merger and subject to certain exceptions, including the consent of Camden, Summit has agreed to, and to cause its subsidiaries to:
| use commercially reasonable efforts to carry on their respective businesses in the usual, regular and ordinary course, consistent with past practice; and | |
| use their commercially reasonable efforts to preserve intact their present business organizations, keep available the services of their present officers and employees and preserve their relationships with customers, suppliers and others having business dealings with them. |
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In addition, pending closing of the merger, and subject to certain exceptions, including the consent of Camden, Summit agreed that neither it nor any of its subsidiaries would take certain actions, including the following:
| split, combine or reclassify any capital shares or declare, set aside or pay any dividend or other distribution except for, among other things, its regular, quarterly cash dividend at a rate not in excess of $0.3375 per share of Summit common stock; | |
| authorize for issuance, issue or sell equity securities; | |
| acquire, sell, lease, encumber, transfer or dispose of any material assets outside of the ordinary course of business; | |
| except in the ordinary course of business pursuant to existing credit facilities, incur or guaranty indebtedness, issue or sell debt securities, make any loans, advances or capital contributions, mortgage, pledge or otherwise encumber any material assets, or create or suffer any material lien thereupon, in excess of $1,000,000 individually or $5,000,000 in the aggregate; | |
| except pursuant to any mandatory payments under any existing credit facilities, pay, discharge or satisfy any claims, liabilities or obligations, other than in the ordinary course of business consistent with past practice; | |
| change any accounting principle or practice except as required by GAAP; | |
| except as required by law, enter into, adopt, amend or terminate any employee benefit plans or arrangements with directors or executive officers, or except for normal increases in the ordinary course of business consistent with past practice, increase the compensation or fringe benefits of any non-executive officer or employee or pay any benefit not required by any existing employee benefit plan; | |
| grant to any officer, director or employee the right to receive any new severance, change of control or termination pay or termination benefits, grant any increase in the right to receive any such pay or benefits or enter into any new employment, loan, retention, consulting, indemnification, termination, change of control, severance or similar agreement with any officer, director or employee, other than the grant of compensation and fringe benefits to any newly hired non-executive officer or employee, except that Summit may accelerate the vesting and/or the payment of any existing benefits or awards and/or make any amendments to existing benefits, agreements or award in order to facilitate such accelerated vesting and/or payments; | |
| amend its articles of incorporation or bylaws or similar organizational or governance documents; | |
| adopt a plan of complete or partial liquidation or resolutions providing for or authorizing such a liquidation or a dissolution, merger, consolidation, restructuring, recapitalization or reorganization; | |
| settle or compromise any litigation other than settlements or compromises for litigation where the amount paid (after giving effect to insurance proceeds actually received) in settlement or compromise does not exceed $500,000; | |
| amend any term of any outstanding security; | |
| other than in the ordinary course of business, modify or amend any material contract or waive, release or assign any material rights or claims under any such material contract; or | |
| make any equipment purchases or capital expenditures other than in the ordinary course of business and consistent with past practice. |
Camden. Pending closing of the merger and subject to certain exceptions, including the consent of Summit, Camden has agreed to, and to cause its subsidiaries to:
| use commercially reasonable efforts to carry on their respective businesses in the usual, regular and ordinary course, consistent with past practice; and |
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| use their commercially reasonable efforts to preserve intact their present business organizations, keep available the services of their present officers and employees and preserve their relationships with customers, suppliers and others having business dealings with them. |
In addition, pending closing of the merger, and subject to certain exceptions, including the consent of Summit, Camden agreed that neither it nor any of its subsidiaries would take certain actions, including the following:
| split, combine or reclassify any capital shares or declare, set aside or pay any dividend or other distribution except for, among other things, its regular, quarterly cash dividend in an amount not in excess of $0.635 per Camden common share; | |
| authorize for issuance, issue or sell equity securities; | |
| except for, among other things, acquisitions and dispositions of real property with an aggregate net sale price of less than $250 million, acquire, sell, lease, encumber, transfer or dispose of any material assets outside of the ordinary course of business; | |
| except in the ordinary course of business pursuant to existing credit facilities, incur or guaranty indebtedness, issue or sell debt securities, make any loans, advances or capital contributions, mortgage, pledge or otherwise encumber any material assets, or create or suffer any material lien thereupon, in excess of $1,000,000 individually or $5,000,000 in the aggregate; | |
| change any accounting principle or practice except as required by GAAP; | |
| amend its declaration of trust or bylaws or similar organizational or governance documents; | |
| adopt a plan of complete or partial liquidation or resolutions providing for or authorizing such a liquidation or a dissolution, merger, consolidation, restructuring, recapitalization or reorganization; or | |
| amend any term of any outstanding security. |
Pre-Merger Dividends
The merger agreement provides that prior to the closing date, Summit will declare and pay a dividend to its stockholders distributing cash in an amount necessary for Summit to qualify as a REIT for the year that the merger occurs and to avoid to the extent reasonably possible the incurrence of income or excise tax by Summit.
The merger agreement also provides that Summit and Camden will coordinate the declaration, record and payment dates of any dividends in respect of their respective common shares, it being the intention of the parties that the holders of Camden common shares or Summit common stock not receive more than one dividend, or fail to receive one dividend, for any single calendar quarter with respect to the shares they currently own and any Camden common shares received in the merger. Accordingly, Camden and Summit expect to pay pro rata cash dividends in the quarter in which the closing of the merger occurs as authorized by their respective boards.
No Solicitation by Summit
The merger agreement provides that Summit will terminate any ongoing discussions or negotiations with any parties relating to any Acquisition Proposal, as defined below, and, except as permitted by the merger agreement, will not, and will not authorize any of its officers, directors or employees or any investment banker, financial advisor, attorney, accountant, or other representative, to:
| solicit, initiate or encourage (including by way of furnishing non-public information) any inquiries with respect to an Acquisition Proposal or the making of a proposal that constitutes an Acquisition Proposal; or | |
| participate in any discussions or negotiations regarding an Acquisition Proposal. |
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However, at any time prior to the approval of the merger by Summits stockholders, if Summit receives a bona fide Acquisition Proposal that was unsolicited or that did not otherwise result from Summits breach of the no solicitation provisions of the merger agreement, Summit may furnish non-public information with respect to it and its subsidiaries to the person who made such Acquisition Proposal and may participate in discussions and negotiations regarding such Acquisition Proposal if:
| the Summit board determines in good faith, after consultation with outside counsel, that failure to do so would be reasonably likely to be inconsistent with its duties to Summit or its stockholders under applicable law; and | |
| the Summit board determines that such Acquisition Proposal is reasonably likely to lead to a Superior Proposal, as defined below. |
The merger agreement provides that Summit must promptly notify Camden of Summits receipt of any Acquisition Proposal or any inquiry with respect to an Acquisition Proposal by the person who made such Acquisition Proposal and of the material terms and conditions of such Acquisition Proposal. The merger agreement also provides that Summit must provide to Camden copies of any written Acquisition Proposal as soon as practicable after receipt of delivery of such Acquisition Proposal. Summit is not required to disclose to Camden the identity of the person making any Acquisition Proposal and, except as otherwise provided in the merger agreement, has no duty to notify or update Camden on the status of discussions or negotiations between Summit and such person.
Subject to the provisions of the merger agreement relating to the payment of the termination fee, prior to the approval of the merger by the Summit stockholders, the Summit board may not:
| withdraw or modify, in a manner material and adverse to Camden or Camden Summit, Summits approval or recommendation of the merger; | |
| approve or recommend an Acquisition Proposal to its stockholders; or | |
| cause Summit to enter into any definitive agreement with respect to an Acquisition Proposal, |
unless, in each case, a Superior Proposal, as defined below, has been made and the Summit board determines in good faith, after consultation with outside counsel, that failure to take such action would be reasonably likely to be inconsistent with its duties to Summit or its stockholders under applicable law. If the Summit board makes such a determination, Summit may enter into a definitive agreement to effect a Superior Proposal, but not prior to 48 hours after Summit has provided Camden with written notice as specified in the merger agreement.
An Acquisition Proposal means any proposal or offer, other than the merger with Camden, for any:
| merger, consolidation or similar transaction involving Summit, the Operating Partnership or any significant subsidiary, as defined in the merger agreement, of Summit; | |
| sale, lease or other disposition, directly or indirectly, by merger, consolidation, share exchange or otherwise, of any assets of Summit or its subsidiaries representing 20% or more of the consolidated assets of Summit and its subsidiaries; | |
| issue, sale or other disposition of (including by way of merger, consolidation, share exchange or any similar transaction) securities (or options, rights or warrants to purchase, or securities convertible into, such securities) representing 20% or more of the votes associated with the outstanding securities of Summit; | |
| tender offer or exchange offer in which any person or group acquires beneficial ownership, or the right to acquire beneficial ownership, of 20% or more of the outstanding shares of Summit common stock or outstanding equity interest of the Operating Partnership; | |
| recapitalization, restructuring, liquidation, dissolution, or other similar type of transaction with respect to Summit or the Operating Partnership; or | |
| transaction which is similar in form, substance or purpose to any of the foregoing transactions. |
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A Superior Proposal means an Acquisition Proposal (substituting for purposes of such definition 50% for 20%) which the Summit board believes is more favorable to the stockholders of Summit than the merger with Camden, taking into account all of the terms and conditions of such Acquisition Proposal, including the financial terms, any conditions to consummation and the likelihood of such Acquisition Proposal being consummated.
Indemnification; Directors and Officers Insurance
Under the merger agreement, Camden and Camden Summit will indemnify and hold harmless, as and to the full extent permitted by applicable law, each former and current director, officer, employee, fiduciary or agent of Summit and of its subsidiaries against any losses, claims, damages, liabilities, costs, expenses (including reasonable attorneys fees and expenses), judgments, fines and amounts paid in settlement in connection with any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal or administrative, based in whole or in part, or arising in whole or in part out of, or pertaining to:
| the fact that he or she is or was a director, officer, employee, fiduciary or agent of Summit or any of its subsidiaries or is or was serving at the request of Summit or any of its subsidiaries as a director, officer, employee, fiduciary or agent of another corporation, joint venture, trust or other enterprise; or | |
| the negotiation, execution or performance of the merger agreement, any agreement or document contemplated by the merger agreement or delivered in connection therewith, or any of the transactions contemplated by the merger agreement. |
After the closing of the merger, Camden and Camden Summit will be obligated to promptly pay and advance expenses in advance of the final disposition of any such claim, suit, proceeding or investigation to each such indemnified party to the full extent permitted by law.
Camden also agreed to purchase prior to the effective time of the merger a non-cancelable extended reporting period endorsement under Summits existing directors and officers liability insurance coverage for Summits directors and officers in the same form as presently maintained by Summit, which will provide such directors and officers with coverage for six years of not less than the existing coverage under, and have other terms not less favorable to, the insured persons than the directors and officers liability insurance coverage presently maintained by Summit.
Conditions to the Closing of the Merger
Conditions to each Partys Obligations to Effect the Merger. The respective obligations of each party to complete the merger is subject to the fulfillment or waiver of a number of conditions, including the following:
| the receipt of the requisite approvals of Camden shareholders, Summit stockholders and limited partners of the Operating Partnership; | |
| Camdens registration statement relating to the merger of which the joint proxy statement/prospectus forms a part having become effective and no stop order or proceedings by the SEC seeking a stop order having been entered or pending; | |
| the listing of the Camden common shares to be issued in the merger and the Camden common shares reserved for issuance upon redemption of the Operating Partnership units on the NYSE; | |
| the receipt of all required governmental consents and approvals necessary to complete the merger; and | |
| the absence of any court or other governmental order preventing the merger. |
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In addition, Camdens obligation to complete the merger is subject to, among other things:
| the accuracy, as of the closing, of the representations and warranties made by Summit to the extent set forth in the merger agreement; | |
| the performance in all material respects by Summit of all of its obligations under the merger agreement to be performed by it prior to the merger; | |
| the receipt of an opinion of Summits outside counsel as to Summits qualification as a REIT under the Internal Revenue Code; and | |
| the lack of any event, change or circumstance that, individually or in the aggregate, has a material adverse change, as defined in the merger agreement, on Summit. |
In addition, Summits obligation to complete the merger is subject to, among other things:
| the accuracy, as of the closing, of the representations and warranties made by Camden to the extent set forth in the merger agreement; | |
| the performance in all material respects by Camden of all of its obligations under the merger agreement to be performed by it prior to the merger; | |
| the receipt of an opinion of Summits outside counsel to the effect that the merger will qualify as a reorganization for U.S. federal income tax purposes; | |
| the receipt of an opinion of Camdens outside counsel as to Camdens qualification as a REIT under the Internal Revenue Code and Camdens ability to continue to so qualify after the merger; | |
| the lack of any event, change or circumstance that, individually or in the aggregate, has a material adverse change, as defined in the merger agreement, on Camden; and | |
| the receipt by Camden of the financing necessary to satisfy any and all of Camdens or Camden Summits obligations under or arising out of the merger agreement. |
Termination of the Merger Agreement
Camden or Summit may terminate the merger agreement, whether before or after the required shareholder and partner approvals are obtained, if:
| Summit stockholders do not approve the merger agreement and the merger or the limited partners of the Operating Partnership, other than Summit, do not approve the merger and the second amended and restated limited partnership agreement of the Operating Partnership; | |
| Camden shareholders do not approve the issuance of Camden common shares in the merger; | |
| a final, non-appealable judgment or governmental order is issued prohibiting the closing of the merger; or | |
| the merger is not completed by March 31, 2005, provided that neither Camden nor Summit may terminate the merger agreement if its breach is the reason that the merger is not completed by that date. |
Camden also may terminate the merger agreement:
| if Summit breaches or fails to perform in any material respect any of its representations, warranties or covenants contained in the merger agreement, which breach or failure to perform would give rise to a failure of the related condition to the closing of the merger and such condition would be incapable of being satisfied by March 31, 2005; or | |
| if the Summit board: |
| fails to include a recommendation in the joint proxy statement/prospectus relating to the merger that the Summit stockholders vote in favor of the merger agreement and the merger; |
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| withdraws, modifies or changes, or proposes or announces any intention to withdraw, modify or change, in any manner material and adverse to Camden, such recommendation; or | |
| approves or recommends, or announces any intention to approve or recommend, any Acquisition Proposal. |
Summit also may terminate the merger agreement:
| if Camden breaches or fails to perform in any material respect any of its representations, warranties or covenants contained in the merger agreement, which breach or failure to perform would give rise to a failure of the related condition to the closing of the merger and such condition would be incapable of being satisfied by March 31, 2005; | |
| if, as of the date that the joint proxy statement/prospectus relating to the merger is first mailed to Summit stockholders through the closing date, Camden fails to have the financing necessary to satisfy any and all of Camdens or Camden Summits obligations arising under or out of the merger agreement; or | |
| in connection with entering into a definitive agreement to effect a Superior Proposal so long as Summit has provided Camden with at least 48 hours prior written notice of Summits decision to so terminate, such termination is not effective until such time as the $50 million termination fee is made by Summit and Summit is not then in material breach of the no solicitation provisions contained in the merger agreement. |
Camden and Summit also may mutually agree to terminate the merger agreement.
Summit Price-Based Termination Right
In addition to the termination rights described above, Summit may also terminate the merger agreement if:
| as of the third business day, referred to as the Determination Date, before the business day immediately following obtaining Camden shareholder and Summit stockholder and limited partner approvals, the average of the closing prices of Camden common shares for the 14 consecutive trading days ending on the business day immediate prior to the Determination Date, discarding the two highest and two lowest closing prices and averaging the remaining closing prices, which we refer to in this consent solicitation/prospectus as the Average Camden Share Price, is less than $39.31; | |
| Summit notifies Camden of Summits intention to terminate the merger agreement; and | |
| within one business day of receipt of such notice, Camden has not delivered written notice to Summit agreeing to increase the exchange ratio such that, as of the closing date, the product of the number of shares of Summit common stock that convert into the right to receive share consideration times the exchange ratio of .6687 times the Average Camden Share Price will be equal to the product of the number of shares of Summit common stock that convert into the right to receive the share consideration times the exchange ratio times $39.31. If Camden makes such election, the exchange offer will be amended to similarly increase the exchange ratio in the exchange offer. |
Termination Fee and Termination Expenses
Summit has agreed to pay to Camden a termination fee of $50 million if the merger agreement is terminated:
| by Summit under the limited circumstances described above where it is permitted to terminate the merger agreement in connection with entering into a definitive agreement to effect a Superior Proposal; or |
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| by Camden under the limited circumstances described above where the Summit board fails to include a recommendation in the joint proxy statement/prospectus that the Summit stockholders vote in favor of the merger agreement and the merger, withdraws, modifies or changes, or proposes or announces any intention to withdraw, modify or change, in any manner material and adverse to Camden, such recommendation or approves or recommends, or announces any intention to approve or recommend, any Superior Proposal. |
Under the merger agreement, Summit and Camden also may become obligated to reimburse the other partys documented, reasonable out-of-pocket costs and expenses incurred by the other party in connection with the entering into of the merger agreement and the carrying out of acts contemplated thereunder as follows:
| Camden will so reimburse Summit if the merger agreement is terminated: |
| by Summit or Camden if the Camden shareholders do not approve the issuance of Camden common shares in the merger; or | |
| by Summit under the limited circumstances described above where Camden breaches or fails to perform in any material respect any of its representations, warranties or covenants contained in the merger agreement; and |
| Summit will so reimburse Summit if the merger agreement is terminated: |
| by Summit or Camden if the Summit stockholders do not approve the merger agreement and the merger or the limited partners of the Operating Partnership, other than Summit, do not approve the merger or the second amended and restated limited partnership agreement of the Operating Partnership; or | |
| by Camden under the limited circumstances described above where Summit breaches or fails to perform in any material respect any of its representations, warranties or covenants contained in the merger agreement. |
The payment of expenses is not an exclusive remedy, but is in addition to any other rights or remedies available to the parties at law or in equity.
Amendment and Waiver
The merger agreement provides that, subject to compliance with applicable law, Camden, Camden Summit and Summit may agree in writing to amend the merger agreement at anytime. However, after the time of approval of the merger agreement by the Camden shareholders and the Summit stockholders, there may not be any amendment of the merger agreement that by law expressly requires the further approval of such shareholders and/or stockholders without obtaining such further approval. If the merger agreement is amended after the mailing of this consent solicitation/prospectus and limited partner approval is required to make such amendment, votes will be resolicited.
DESCRIPTION OF THE NEW PARTNERSHIP AGREEMENT AND THE NEW UNITS
The Operating Partnership is a Delaware limited partnership that was formed on January 29, 1994. As part of the merger, and pursuant to this consent solicitation/prospectus, the existing partnership agreement will be amended and restated and the name of the Operating Partnership will be changed to Camden Summit Partnership, L.P. The following is a summary of the material terms of the proposed new partnership agreement. This summary does not include all of the terms of the new partnership agreement and should be read together with the new partnership agreement, the form of which is attached to this consent solicitation/prospectus as Annex B, and applicable Delaware law.
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Capitalization
As of January 24, 2005, the Operating Partnership had 34,808,631 common units issued and outstanding. Summit, as the sole general partner of the Operating Partnership, held 348,086 general partner units and 31,117,541 limited partner units. The remaining 3,343,004 limited partner units were held by the outside limited partners to whom this consent solicitation/prospectus is being mailed.
Management of the Operating Partnership
Under the new partnership agreement and as a result of the merger, Camden Summit, a wholly owned subsidiary of Camden, will be the new sole general partner of the Operating Partnership. Camden Summit will have exclusive control over the day-to-day management of the business and affairs of the Operating Partnership. As the general partner, it will have the power to cause the Operating Partnership to enter into certain major transactions, including acquisitions, developments and dispositions of properties and the incurrence of indebtedness. Limited partners will not have voting rights relating to the operation and management of the Operating Partnership, except in connection with certain amendments to the new partnership agreement. The general partner is under no obligation to consider the tax consequences to limited partners when making decisions for the benefit of the Operating Partnership.
The new partnership agreement provides that the general partner is empowered to do any and all acts and things for the furtherance and accomplishment of the business purposes of the Operating Partnership, including all activities pertaining to the acquisition and operation of its properties, provided that the Operating Partnership does not take, or refrain from taking, any action which the general partner believes will adversely affect Camdens ability to qualify as a REIT. The limited partners have no power to remove the general partner. The general partner, however, may not take any action that is contrary to an express limitation or prohibition in the new partnership agreement without the written consent of the limited partners holding a majority of the percentage interests of the limited partners (or such other percentage as provided in the new partnership agreement).
Issuance of Additional Units
The general partner is authorized to cause the Operating Partnership to issue additional units to the partners (including itself) for the consideration and on the terms and conditions that the general partner deems appropriate. These additional units may be issued in one or more classes, or one or more series of any such classes, with such designations, preferences, rights, powers and duties as the general partner may determine in its sole and absolute discretion subject to Delaware law, subject to the limitations described below.
No partnership unit or partnership interest may be issued to Camden, the general partner or any of their respective subsidiaries or affiliates unless:
| Camden, the general partner or the applicable subsidiary or affiliate makes a capital contribution to the Operating Partnership in an amount equal to the fair market value of such partnership unit or partnership interest (as determined in good faith by the general partner); or | |
| the additional partnership units or partnership interests are issued to all partners in proportion to their respective partnership interests. |
In addition, no partnership units or partnership interests may be issued to Camden, the general partner or a subsidiary or affiliate thereof if such partnership units or partnership interests (i) would have distribution rights senior to the limited partners currently holding limited partnership units or (ii) would have rights to net losses that would result in a change in the priority of allocation of net losses in a manner that adversely affects the limited partners currently holding limited partnership units.
No limited partner will have any preemptive, preferential or other similar purchase right with respect to additional capital contributions to the Operating Partnership or the issuance or sale of any partnership units.
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Capital Contributions
Partners in the Operating Partnership are generally not required to make any additional capital contributions or loans to the Operating Partnership.
Operating Distributions
Subject to certain exceptions, the general partner generally must, at least on a quarterly basis, distribute 100% of the available cash generated by the Operating Partnership during such quarter or shorter period as follows:
| first, to the common unitholders (other than the general partner, Camden or any of their subsidiaries or affiliates) who are partners on the applicable record date, the pro rata amount of any cumulative unpaid accrued return equal to the prime rate of interest plus 5% with respect to such common unitholders cumulative unpaid priority distribution amount until such unpaid accrued return is reduced to zero; | |
| second, to the common unitholders (other than the general partner, Camden or any of their subsidiaries or affiliates) who are partners on the applicable record date, the pro rata amount of any cumulative unpaid priority distribution amount until such unpaid priority distribution amount is reduced to zero; | |
| third, to the common unitholders (other than the general partner, Camden or any of their subsidiaries or affiliates) who are partners on the applicable record date, the pro rata amount of the priority distribution amount (generally equal to the amount of dividends that a holder of common units would receive if it held an equivalent amount of Camden common shares, based on the then-applicable conversion factor) due to such common unitholder; and | |
| thereafter, 100% to the general partner, Camden or any of their subsidiaries or affiliates, pro rata in proportion to the common units held by the general partner, Camden or any of their subsidiaries or affiliates. |
No partner will receive any distributions with respect to any cumulative unpaid accrued return attributable to a failure of the partner to receive any priority distribution amount due to its failure to provide the general partner with accurate information regarding its address for payment of distributions.
The payment of any subordinated amounts, which include payments of principal or interest on debt, reimbursement of expenses and compensation for services rendered, by the Operating Partnership to the general partner or Camden or its subsidiaries or affiliates is subordinated to the cumulative accrued return amounts and cumulative unpaid priority distribution amounts of the holders of common units (other than Camden, the general partner and their subsidiaries and affiliates). The general partner and its affiliates may receive reasonable compensation for services rendered to the Operating Partnership.
Allocations of Partnership Income and Loss
After reversing prior allocations of net losses to the partners and allocations of net income to holders of preferred units in accordance with the rights of each such class of preferred units, net income is allocated as follows:
| first, to the holders of common units pro rata in proportion to the distributions received by the holders of common units for the current taxable year or other taxable period (provided that the general partner may elect to treat any distribution received by the partners on or before the thirtieth day following the end of any taxable year or other taxable period as having been received by the partners in such taxable year or other period); and | |
| second, to the general partner, Camden and their subsidiaries and affiliates. |
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Net losses are allocated as follows:
| first, to the general partner and Camden to reverse prior excess net income allocations, which are allocations of net income in the second tier of the net income allocations described above; | |
| second, to the holders of common units (pro rata in proportion to the common units held by them) until their adjusted capital accounts are reduced to zero; | |
| third, to the holders of preferred units in accordance with the rights of each class of preferred units until their adjusted capital accounts are reduced to zero; and | |
| fourth, to the general partner. |
Upon the liquidation of the Operating Partnership, items of income, gain loss or deduction are specially allocated to the partners as required to cause the capital account of each limited partner other than the general partner, Camden or their affiliates to equal the value of the Camden common shares into which such limited partners common units may be converted pursuant to the redemption right as determined immediately following the merger plus a return thereon that results in an 8% internal rate of return.
Redemption Rights
Limited partners have the right, prior to the expiration of the 30-day period following delivery by the general partner of notice of the occurrence of a liquidating event, to require the Operating Partnership to redeem all or a portion of their respective units for either (i) cash or (ii) Camden common shares on a one-for-one basis, subject to adjustment in the event of share splits, share dividends, and similar events, as determined by the Operating Partnership or Camden. The cash redemption amount per unit is based on an average market price of Camden common shares at the time of redemption. A limited partner may not exercise the redemption right for less than 2,000 partnership units or, if the limited partner holds less than 2,000 partnership units, all of the partnership units held by such limited partner, and no limited partner may exercise the redemption right if delivery of Camden common shares would be prohibited by Camdens declaration of trust. To the extent that Camden elects to purchase any common units of a limited partner exercising its redemption right, Camden will become the holder of such common units for all purposes except that Camden will not be entitled to receive any priority distribution amounts, cumulative unpaid accrued return amounts or cumulative unpaid priority distribution amounts with respect to such common units.
Each limited partner that exercises its redemption right must deliver its respective common units to the Operating Partnership or Camden, as applicable, free and clear of all liens, encumbrances, liabilities, claims or charges of any kind. Neither the Operating Partnership nor Camden will be under any obligation to acquire common units upon a limited partners exercise of its redemption right to the extent that any such common units are subject to any liens, encumbrances, liabilities, claims or charges of any kind or in the event that the limited partner fails to give the Operating Partnership and Camden adequate assurances that the common units are not subject to any liens, encumbrances, liabilities, claims or changes of any kind.
In connection with the exercise of a redemption right by a limited partner, the Operating Partnership or Camden, as applicable, may redeem common units for either cash or Camden common shares, but not a combination of the two, except that the Operating Partnership may deliver cash in lieu of a fractional Camden common share even in cases in which the limited partner otherwise receives Camden common shares for its common units.
Extraordinary Transactions
The following events will be deemed to be triggering events:
| if Camden consolidates with, or merges into, any other person, and Camden is not the surviving entity; |
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| if Camden engages in a going private transaction under the Exchange Act; | |
| if any person becomes the beneficial owner of 33.3% or more of the then-outstanding Camden common shares; | |
| if any person consolidates with, or merges into, Camden, and Camden is the surviving entity and, in connection with such merger or consolidation, all or portion of the outstanding Camden common shares are converted into stock or other securities of any other person or cash or other property; or | |
| if Camden sells or otherwise transfers (or one or more of its subsidiaries sells or otherwise transfers) to any person or persons, in one or more transactions, assets aggregating more than 50% of the value of the assets of Camden and its subsidiaries as a whole. |
In the event that Camden proposes to engage in a transaction that constitutes a triggering event, the prior consent of the partners holding a majority of the percentage interests of the limited partners (excluding the general partner, Camden and any Camden subsidiary) will be required unless the issuer of replacement shares agrees to provide the limited partners (other than the general partner, Camden or any affiliate thereof) with economic rights that are identical to the economic rights provided pursuant to the new partnership agreement (or adjusted to reflect any applicable change in the issuer of shares for which units maybe exchanged or a change in the capital structure of Camden).
The general partner will not cause the Operating Partnership to merge or consolidate with any entity without the consent of limited partners holding a majority of the percentage interests of the limited partners (other than limited partner interests held by the general partner, Camden or any subsidiary or affiliate of Camden), except in a transaction in which the Summit limited partners are granted economic rights that are identical to their economic rights under the new partnership agreement (as adjusted to reflect any applicable change in the issuer of the shares or securities for which the units may be exchanged or other changes in the outstanding securities or capital structure of the Operating Partnership or Camden).
Transfers of Partnership Interests
The new partnership agreement provides that the general partner may not:
| transfer any of its general partnership interest or withdraw as general partner; or | |
| transfer any of its limited partnership interest if such transfer would result in the general partner and its subsidiaries directly or indirectly owning less than 50% of the outstanding common units, |
unless limited partners holding a majority of the percentage interests of the limited partners (excluding those held by the general partner, Camden or any subsidiary or affiliate of Camden) consent to such transfer or withdrawal.
In addition, Camden cannot directly or indirectly own less than 100% of the capital stock of the general partner or directly or indirectly control less than all of the voting securities of the general partner unless limited partners holding a majority of the percentage interests of the limited partners (excluding those held by the general partner, Camden or any subsidiary or affiliate of Camden) consent to the related transfer of such interests.
The limited partners generally may transfer their partnership interests or economic rights in the Operating Partnership, in whole or in part, without the consent of the general partner, provided that no limited partner will have the right to substitute a transferee as a limited partner in its place without the consent of the general partner, which consent may be withheld in the sole and absolute discretion of the general partner. The general partner may prohibit a transfer of partnership interests by a limited partner if such a transfer would require the filing of a registration statement under the Securities Act of 1933 or would violate federal or state securities laws.
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Amendments to the New Partnership Agreement
Amendments to the new partnership agreement may be proposed by the general partner or by any limited partner holding 20% or more of the partnership interests. In general, the new partnership agreement may be amended with the consent of the general partner and partners holding a majority of the percentage interests of the limited partners (including those held by the general partner, Camden and any of their respective subsidiaries or affiliates).
Certain amendments that would, among other things, convert a limited partners interest into a general partner interest, modify the limited liability of a limited partner in a manner adverse to such limited partner, alter the rights of a partner to receive distributions or allocations (other than in connection with the issuance of additional interests in the Operating Partnership) except as permitted by the provisions of the new partnership agreement regarding triggering events, or alter or modify the redemption right of a partner in a manner adverse to such partner or cause the termination of the Operating Partnership prior to the time set forth in the new partnership agreement require the consent of each limited partner that would be adversely affected by such an amendment. Any amendment to the sections of the new partnership agreement related to the issuance of additional partnership interests, the outside activities of the general partner, contracts with affiliates, transfers of the general partners general or limited partner interests or with respect to the meetings of the partners requires the consent of limited partners holding a majority of the percentage interests of the limited partners (excluding those held by the general partner, Camden and any Camden subsidiary).
Notwithstanding the foregoing, the general partner will have the power, without the consent of the limited partners, to amend the new partnership agreement to:
| add to the general partners obligations or surrender any right or power granted to the general partner or any of its affiliates for the benefit of the limited partners; | |
| reflect the admission, substitution, termination or withdrawal of partners in accordance with the new partnership agreement; | |
| set forth the designations, rights, powers, duties and preferences of the holders of any additional partnership interests issued pursuant to the new partnership agreement; | |
| reflect a change that is of an inconsequential nature and does not adversely affect the limited partners in any material respect, or to cure any ambiguity, correct or supplement any provision of the new partnership agreement not inconsistent with law or other provisions, or to make other changes with respect to matters arising under the new partnership agreement that will not be inconsistent with law or with the provisions of the new partnership agreement; or | |
| satisfy any requirements, conditions, or guidelines contained in any order, directive, opinion, ruling or regulation of a federal or state agency or contained in federal or state law. |
Liquidation of the Operating Partnership
The Operating Partnership will be dissolved and its affairs wound up upon the following events:
| expiration of its term; | |
| withdrawal of the general partner, unless a majority in interest of the remaining partners elect to continue the Operating Partnership and appoint a successor general partner; | |
| an election to dissolve the Operating Partnership is made by the general partner and approved by partners holding a majority of the percentage interests of the limited partners, other than percentage interests held by the general partner, Camden or any subsidiary or affiliate of Camden; | |
| the entry of a decree of judicial dissolution with respect to the Operating Partnership; | |
| the sale of all or substantially all of the assets or properties of the Operating Partnership; or |
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| the bankruptcy of the general partner, subject to the right of the remaining partners to continue the Operating Partnership and appoint a successor general partner. |
Liquidating Distributions
Upon the liquidation of the Operating Partnership, distributions will be made as follows:
| first to pay all of the Operating Partnerships debts and liabilities to creditors other than partners; | |
| second, to the Summit limited partners in proportion to and up to the amount of their capital accounts after crediting to their capital accounts a special allocation of income as required to ensure that each Summit limited partners capital account balance is equal to the value of the Camden common shares into which the Summit limited partners common units may be converted pursuant to the redemption right as determined immediately following the merger plus a return thereon that results in an 8% internal rate of return; | |
| third, to pay the Operating Partnerships debts and liabilities to the general partner; | |
| fourth, to pay the Operating Partnerships debts and liabilities to the other partners; and | |
| fifth, the balance to the general partner and the limited partners (other than the Summit limited partners) in accordance with their capital accounts. |
Additional Tax Matters
Except as otherwise agreed to in a separate written agreement between the general partner and one or more limited partners, the general partner may but is under no obligation to take into account the tax consequences to any partner of any action taken by it.
In general, subject to the terms of any written agreement between the general partner and one or more limited partners, the general partner will, in its sole discretion, determine whether to make or revoke tax elections on behalf of the Operating Partnership. See Ancillary Agreements Tax, Asset and Income Support Agreement, for a description of the obligation of the Operating Partnership to elect to use the traditional method under Section 704(c) of the Internal Revenue Code.
Term
The Operating Partnership will continue in full force and effect until December 31, 2093, or until sooner dissolved in accordance with the terms of the new partnership agreement or as otherwise provided by law.
Exculpation and Indemnification of the General Partner
The new partnership agreement generally provides that the general partner will incur no liability to the Operating Partnership or any limited partner for losses sustained or liabilities incurred as a result of errors in judgment or any act or omission if the general partner acted in good faith. In addition, the general partner will not be responsible for any misconduct or negligence on the part of any agents appointed by the general partner in good faith. The general partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers, architects, engineers, environmental consultants and other consultants and advisers selected by it, and any act the general partner may take or omit to take in reliance upon the opinion of such persons, as to matters which the general partner reasonably believes to be within such persons professional or expert competence, will be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion.
The new partnership agreement also provides, to the fullest extent permitted by Delaware law, for indemnification of the general partner and any of the general partners officers, directors and affiliates, and such other persons as the general partner may from time to time designate against any judgments, penalties, fines, settlements and reasonable expenses actually incurred by such person or persons arising
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Meetings
The new partnership agreement provides that meetings of the partners may be called by the general partner and upon the written request of limited partners (other than Camden) holding 20% or more of the partnership interests. The call must state the nature of the business to be transacted. Notice of any meeting is required to be given to all partners not less than seven days nor more than 30 days prior to the date of the meeting. Partners may vote in person or by proxy at the meeting. Whenever the vote or consent of partners is permitted or required under the new partnership agreement, the vote or consent may be given at a meeting of the partners. Unless otherwise expressly provided in the new partnership agreement, the consent of a majority of the percentage interests held by limited partners (including those held by the general partner, Camden and their respective subsidiaries and affiliates) will control.
Any action required or permitted to be taken at a meeting of the partners may be taken without a meeting if a written consent showing the action taken is signed by a majority of the percentage interests of the partners (or such other percentage as provided in the new partnership agreement).
ANCILLARY AGREEMENTS
Tax, Asset and Income Support Agreement
At the effective time of the merger, Camden, the Operating Partnership, Camden Summit and the Summit limited partners who receive new units (other than the general partner or Camden or their affiliates) will enter into a Tax, Asset and Income Support Agreement. The following summary of the Tax, Asset and Income Support Agreement does not include all of the terms of such agreement and should be read together with such agreement, the form of which is attached to this consent solicitation/prospectus as Annex C. The discussion that follows is qualified in its entirety by the provisions of the Tax, Asset and Income Support Agreement. You should read the Tax, Asset and Income Support Agreement carefully and you should consult with your own attorney and tax advisor to determine the impact of such agreement on you.
Under the terms of this agreement, the parties have designated certain assets of the Operating Partnership to be protected assets, which are generally contributed properties with respect to which there was a book/tax disparity because their fair market value exceeded adjusted basis at the time of contribution. The Operating Partnership will use the traditional method under Section 704(c) of the Internal Revenue Code with respect to the protected assets with no curative or remedial allocations and the Operating Partnership will agree not to sell, transfer or otherwise dispose of these protected assets or any interest in any of the protected assets prior to the fifteenth anniversary of this agreement unless:
| the Operating Partnership delivers to each Summit limited partner who recognizes a taxable gain in such a disposition under Section 704(c) or 737 of the Internal Revenue Code, a cash payment equal to the sum of (i) the product of the aggregate income or gain recognized by such limited partner multiplied by the federal, state and local income tax rate applicable to such limited partner and (ii) a make whole payment that equals the aggregate amount of federal, state and local income tax payable by such limited partner as a result of the payment received pursuant to clause (i) and this clause (ii); or | |
| the disposition would not result in a recognition of income or gain by any Summit limited partner. |
This agreement also provides that during the period from the closing of the merger through the fifteenth anniversary thereof, or the protection period, the Operating Partnership will maintain nonrecourse
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After the protection period, the Operating Partnership will use its best efforts to (i) prevent any income or gain from being recognized by the Operating Partnership with respect to the protected assets such that the income or gain would be allocated to the Summit limited partners pursuant to Sections 704(c) or 737 of the Internal Revenue Code and (ii) ensure that the amount of nonrecourse indebtedness of the Operating Partnership allocable to the Summit limited partners is at least equal to the amount described above.
Pursuant to the Tax, Asset and Income Support Agreement, the Operating Partnership may not elect to be treated as an association taxable as a corporation for federal or state tax purposes without the prior written consent of Summit limited partners holding at least 80% of the common units held by the Summit limited partners.
The Tax, Asset and Income Support Agreement also provides that, in the event that the Operating Partnership fails to distribute cash to the Summit limited partners equal to the priority distribution amount set forth in the new partnership agreement and such failure continues for a period of 12 months, Camden will make a capital contribution of cash to the Operating Partnership equal to the amount of such unpaid priority distribution amount plus any outstanding cumulative unpaid return amount and the general partner will cause the cash to be distributed to the Summit limited partners.
At all times following the closing of the merger, Camden and the general partner will cause the Operating Partnership to maintain a ratio of quarterly funds from operations to the quarterly priority distribution amount of at least 8 to 1.
Pursuant to the Tax, Asset and Income Support Agreement, Camden has unconditionally guaranteed the obligation of the Operating Partnership to pay the cash or shares payable to a limited partner who has exercised the redemption right.
The Tax, Asset and Income Support Agreement may only be amended by a written instrument signed by Camden, Camden Summit and the Summit limited partners holding 66.67% of the common units held by all Summit limited partners, provided, however, any amendment to the tax matters section of the agreement requires the consent of the Summit limited partners holding 80% of the common units held by all Summit limited partners. The agreement may not be assigned by Camden, the general partner or the Operating Partnership without the written consent of the other parties, except in connection with a merger, consolidation, sale of all or substantially all assets or similar transaction effected in compliance with the new partnership agreement. The benefits of the agreement inure to any person to whom a Summit limited partner assigns its common units in a carryover basis transaction (i.e., a transaction in which the transferees adjusted tax basis in the common units is determined by reference to the Summit limited partners adjusted tax basis in the common units).
Registration Rights Agreement
At the effective time of the merger, each holder of new units will be entitled to the benefits of a registration rights agreement among each of such unitholders and Camden. The following summary of certain provisions of the registration rights agreement does not purport to be complete and is subject to, and qualified in its entirety by reference to, all of the provisions of the registration rights agreement, the form of which is attached to this consent solicitation/prospectus as Annex D.
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Pursuant to the registration rights agreement, Camden will agree, if it is necessary to ensure that the Camden common shares issuable in exchange for new units are registered on a shelf basis under Rule 415 of the Securities Act of 1933, to cause a post-effective amendment of this consent solicitation/prospectus to be filed on Form S-3, or a prospectus under Rule 424 of the Securities Act to be filed, as soon as practicable after the effective time of the merger. Camden will also agree to use its best efforts to keep any such registration statement continuously effective until the date on which all such Camden common shares, whether outstanding or issuable in exchange for new units, have been issued to a non-affiliate holder under an effective registration statement.
In addition to the registration statement described above, Camden will also agree, to the extent that the registration statement described above does not include all such Camden common shares or such registration statement becomes unavailable, to file with the SEC a registration statement on Form S-3 under Rule 415 of the Securities Act relating to the resale of such Camden common shares as soon as practicable after the effective time of the merger or as soon as practicable after the date on which the registration statement described above becomes unavailable. Camden will use its best efforts to cause such a registration statement to be declared effective by the SEC as soon as practicable, and to remain continuously effective until all such Camden common shares, whether outstanding or issuable in exchange for new units, have been issued to a non-affiliate holder under an effective registration statement.
Further, in general, at any time that new units exchangeable for Camden common shares or Camden common shares covered by the registration rights agreement are outstanding, and a registration statement covering the resale of such Camden common shares is not available, Camden will, at the written request of any holder of new units, cause a registration statement to be filed with the SEC relating to such shares. Camden must file the registration statement as soon as practicable after receiving the request, but in any event within 30 days, and Camden must use its best efforts to cause such registration statement to be declared effective by the SEC as soon as practicable. Camden will also agree to keep such a demand registration statement continuously effective until the earlier of (a) the date on which such unitholder or shareholder no longer holds any units exchangeable for Camden common shares or any Camden common shares covered by the registration rights agreement and (b) the date on which all such Camden common shares become eligible for sale pursuant to Rule 144(k) under the Securities Act.
Notwithstanding the foregoing, Camden is permitted, under certain circumstances, to suspend the use, from time to time, of the prospectus that makes up any such registration statement for certain periods, referred to as blackout periods, in the event of pending negotiations relating to, or consummation of, a transaction or an event that would:
| require additional disclosure of material information by Camden in a registration statement and which Camden has a bona fide business purpose for preserving confidentiality; | |
| render Camden unable to comply with SEC requirements; or | |
| otherwise make it impracticable or unadvisable to cause a registration statement to be filed, amended or supplemented or to become effective. |
This cumulative blackout period in any twelve-month period may not exceed 60 days.
Camden will also agree to use its reasonable best efforts to list all of the Camden common shares covered by the registration rights agreement on the principal national securities exchange (currently the New York Stock Exchange) or automated quotation system on which the Camden common shares are then listed or traded, not later than the date on which a registration statement covering such Camden common shares becomes effective. In addition, Camden will use its best efforts to continue the listing or trading privilege for all such Camden common shares on such exchange or automated quotation system.
A unitholder who elects to sell Camden common shares pursuant to the registration rights agreement described herein will be required to:
| furnish to Camden, as reasonably requested, all information concerning the unitholders plan of distribution and ownership interests with respect to its Camden common shares; |
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| deliver a prospectus to purchasers; and | |
| be subject to the provisions of the registration rights agreement, including indemnification provisions. |
Under the registration rights agreement Camden will:
| pay all expenses of registration; | |
| provide each unitholder copies of the prospectus; | |
| notify unitholders when any registration statement becomes effective; and | |
| take other reasonable actions as are required to permit unrestricted resales of the Camden common shares in accordance with the terms and conditions of the registration rights agreement. |
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material United States federal income tax consequences of the exchange offer to Operating Partnership unitholders who are United States persons as defined for United States federal income tax purposes and who hold their units as a capital asset. Goodwin Procter LLP, counsel to the Operating Partnership, has reviewed this summary and will deliver an opinion to the Operating Partnership to the effect that the discussion herein sets forth the material federal income tax consequences of the exchange offer to Operating Partnership unitholders who are United States persons, subject to the limitations and qualifications set forth in this summary and in Goodwin Procter LLPs opinion.
For United States federal income tax purposes, a United States person is:
| a United States citizen or resident alien as determined under the Internal Revenue Code; | |
| a corporation or partnership or other entity that is taxable as a corporation, association or partnership (as defined by the Internal Revenue Code) that is organized under the laws of the United States or any state or the District of Columbia; | |
| an estate, the income of which is subject to United States federal income taxation regardless of its source; and |