<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 20, 1998)
File Pursuant to Rule 424(b)(2)
Registration No. 333-49911-01
$175,000,000
[LOGO]
DUKE REALTY LIMITED PARTNERSHIP
7.30% SENIOR NOTES DUE JUNE 30, 2003
--------------
We are offering and selling $175,000,000 in aggregate principal amount of
our 7.30% Senior Notes due June 30, 2003. We will receive the proceeds from the
sale of the notes.
We will pay interest on the notes on June 30 and December 30 of each year,
beginning December 30, 1999. The notes will mature on June 30, 2003. We have the
option to redeem all or a portion of the notes at any time at the redemption
prices described in this prospectus supplement.
The notes are unsecured and rank equally with all of our other unsecured
senior indebtedness.
------------------
<TABLE>
<CAPTION>
PER NOTE TOTAL
--------- -------------
<S> <C> <C>
Public offering price(1).............................. 99.914% $174,849,500
Underwriting discount................................. .55% $962,500
Proceeds, before expenses, to Duke Realty Limited
Partnership......................................... 99.364% $173,887,000
(1) Plus accrued interest from June 28, 1999, if settlement occurs after that
date
</TABLE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the attached prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The notes will be ready for delivery in book-entry form only through The
Depository Trust Company on or about June 28, 1999.
------------------
MERRILL LYNCH & CO.
<PAGE>
BANC ONE CAPITAL MARKETS, INC.
-----------
The date of this prospectus supplement is June 23, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PROSPECTUS SUPPLEMENT
Duke Realty Limited Partnership........................................................................... S-3
Recent Developments....................................................................................... S-5
Use of Proceeds........................................................................................... S-5
Ratios of Earnings to Fixed Charges....................................................................... S-5
Description of the Notes.................................................................................. S-6
Certain Federal Income Tax Considerations................................................................. S-13
Underwriting.............................................................................................. S-14
Legal Matters............................................................................................. S-15
Incorporation of Additional Documents by Reference........................................................ S-15
PROSPECTUS
Available Information..................................................................................... 2
Incorporation of Certain Documents by Reference........................................................... 2
The Company and the Operating Partnership................................................................. 3
Use of Proceeds........................................................................................... 3
Ratios of Earnings to Fixed Charges....................................................................... 4
Description of Debt Securities............................................................................ 4
Description of Preferred Stock............................................................................ 14
Description of Depositary Shares.......................................................................... 20
Description of Common Stock............................................................................... 24
Federal Income Tax Considerations......................................................................... 26
Plan of Distribution...................................................................................... 33
Legal Opinions............................................................................................ 34
Experts................................................................................................... 34
</TABLE>
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FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus includes and
incorporates by reference forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about us, including, among other things:
- Our anticipated future acquisition and development strategies;
- Tax risks, including our continued qualification as a real estate
investment trust;
- The limited geographic diversification of our real estate portfolio;
and
- General real estate investment risks, including local market conditions
and rental rates, competition for tenants, tenant defaults, possible
environmental liabilities and financing risks.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus supplement and discussed in or incorporated
by reference in the accompanying prospectus may not occur.
------------------------
You should rely only on the information contained in this prospectus
supplement and the accompanying prospectus. We have not, and the underwriters
have not, authorized any other person to provide you with different information.
If anyone provides you with different or inconsistent information, you should
not rely on it. We are not, and the underwriters are not, making an offer to
sell these securities in any jurisdiction where the offer or sale is not
permitted.
S-2
<PAGE>
THE FOLLOWING INFORMATION MAY NOT CONTAIN ALL THE INFORMATION THAT MAY BE
IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS SUPPLEMENT AND
ACCOMPANYING PROSPECTUS, AS WELL AS THE DOCUMENTS INCORPORATED BY REFERENCE IN
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS BEFORE MAKING AN
INVESTMENT DECISION. UNLESS INDICATED OTHERWISE, THE INFORMATION CONTAINED IN
THIS PROSPECTUS SUPPLEMENT IS PRESENTED AS OF MARCH 31, 1999. ALL REFERENCES TO
"WE" OR "DUKE" IN THIS PROSPECTUS SUPPLEMENT MEAN DUKE REALTY LIMITED
PARTNERSHIP AND ALL ENTITIES OWNED OR CONTROLLED BY DUKE REALTY LIMITED
PARTNERSHIP, EXCEPT WHERE IT IS MADE CLEAR THAT THE TERM MEANS ONLY DUKE REALTY
LIMITED PARTNERSHIP.
DUKE REALTY LIMITED PARTNERSHIP
Duke Realty Limited Partnership is managed by its general partner, Duke
Realty Investments, Inc. (the "Company"), a self-administered and self-managed
real estate investment trust (a "REIT") that began operations through a related
entity in 1972. At March 31, 1999, we owned a diversified portfolio of:
- 474 in-service industrial, office and retail properties (the
"Properties"), encompassing approximately 55.5 million square feet located
in eight states;
- 33 buildings and three building expansions encompassing approximately 5.7
million square feet under development; and
- approximately 2,200 acres of unencumbered land (the "Land") for future
development.
We provide the following services for the Properties and for certain
properties owned by third parties:
- leasing;
- management;
- construction;
- development; and
- other tenant-related services.
We have the largest commercial real estate operations in Indianapolis and
Cincinnati and are one of the largest real estate companies in the Midwest. We
believe that the Midwest offers a relatively strong and stable economy compared
to other regions of the United States and provides significant growth potential
due to its central location, established manufacturing base, skilled work force
and moderate labor costs.
We have developed approximately 65 million square feet of commercial
property since the Company was founded. During the last five years, we developed
an average of approximately 6.2 million square feet per year. Through the three
months ended March 31, 1999, we placed in service 1.9 million square feet of new
development and acquired 1.6 million square feet of property. In addition to
providing services to approximately 3,000 tenants in the Properties, we provide
services to more than 800 tenants in 84 properties owned by third parties. We
manage approximately 68 million square feet of property, including approximately
7.0 million square feet owned by third parties.
We directly or indirectly hold all of the Company's interests in the
Properties and Land and we conduct all of the operations of the Company. Holders
of our partnership units, other than the Company, may exchange them for common
stock of the Company on a one for one basis. When units are exchanged for common
stock the percentage interest of the Company in Duke increases. The Company
controls Duke as its sole general partner and owner, as of March 31, 1999, of
approximately 89% of our units. In addition, as of March 31, 1999 the senior
management team of the Company owned approximately 13% of the Company through
common stock and unit ownership.
S-3
<PAGE>
The following tables provide an overview of the Properties.
SUMMARY OF PROPERTIES
(IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
PERCENT OF
PERCENT OF ANNUAL NET TOTAL ANNUAL
SQUARE TOTAL SQUARE EFFECTIVE NET EFFECTIVE OCCUPANCY AT
TYPE OF PROPERTY FEET FEET RENT(1) RENT MARCH 31, 1998
- ------------------------------------------- --------- --------------- ------------ --------------- -----------------
<S> <C> <C> <C> <C> <C>
Industrial................................. 39,066 70% $ 148,462 43% 94.0%
Office..................................... 14,119 26 173,777 51 94.9%
Retail..................................... 2,288 4 20,534 6 93.8%
--------- --- ------------ ---
Total.................................... 55,473 100% $ 342,773 100% 94.3%
--------- --- ------------ ---
--------- --- ------------ ---
</TABLE>
- ------------------------
(1) Represents annual net effective rent due from tenants in occupancy as of
March 31, 1999. Net effective rent equals the average annual rental property
revenue over the terms of the respective leases, excluding additional rent
due as a result of operating expense reimbursements, landlord allowances for
operating expenses and percentage rents.
SQUARE FOOTAGE AND ANNUAL NET EFFECTIVE RENT OF PROPERTIES
(IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
SQUARE FEET PERCENT OF
----------------------------------------------------------- ANNUAL NET TOTAL ANNUAL
PERCENT OF EFFECTIVE NET EFFECTIVE
PRIMARY MARKET INDUSTRIAL OFFICE RETAIL TOTAL TOTAL RENT(1) RENT
- --------------------------------- ----------- --------- --------- --------- ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cincinnati....................... 6,782 3,735 1,387 11,904 21% $ 79,434 23%
Indianapolis..................... 16,165 1,908 184 18,257 33 77,721 23
St. Louis........................ 2,633 2,183 -- 4,816 9 42,491 12
Columbus......................... 3,056 2,284 219 5,559 10 40,427 12
Minneapolis...................... 5,457 698 -- 6,155 11 34,124 10
Chicago.......................... 1,521 1,415 -- 2,936 5 27,308 8
Cleveland........................ 2,256 1,550 -- 3,806 7 26,921 8
Nashville........................ 634 346 -- 980 2 7,873 2
Other(2)......................... 562 -- 498 1,060 2 6,474 2
----------- --------- --------- --------- --- ------------ ---
Total.......................... 39,066 14,119 2,288 55,473 100% $ 342,773 100%
----------- --------- --------- --------- --- ------------ ---
----------- --------- --------- --------- --- ------------ ---
</TABLE>
- ------------------------
(1) Represents annual net effective rent due from tenants in occupancy as of
March 31, 1999. Net effective rent equals the average annual rental property
revenue over the terms of the respective leases, excluding additional rent
due as a result of operating expense reimbursements, landlord allowances for
operating expenses and percentage rents.
(2) Represents properties not located in our primary markets. These properties
are located in other similar Midwestern markets.
Our Properties have a diverse and stable base of approximately 3,000
tenants. Many of the tenants are Fortune 500 companies and engage in a wide
variety of businesses, including manufacturing, retailing, wholesale trade,
distribution, and professional services. Leases for approximately 5.0 million
square feet of the Properties were up for renewal in 1998, and we renewed leases
for approximately 69% of that space. No single tenant accounts for more than 2%
of our total gross effective rent (computed using the average annual rental
property revenue over the terms of the respective leases including landlord
operating expense allowances but excluding additional rent due as a result of
operating expense reimbursements).
S-4
<PAGE>
RECENT DEVELOPMENTS
On March 1, 1999, the Company announced that it entered into an Agreement
and Plan of Merger, dated as of February 28, 1999 (the "Merger Agreement"), with
Weeks Corporation, pursuant to which Weeks will merge with and into the Company.
In the merger,
- each outstanding share of common stock of Weeks will be converted into the
right to receive 1.38 shares of common stock of the Company;
- each outstanding share of Weeks preferred stock will be converted into the
right to receive depositary shares representing preferred stock of the
Company having terms substantially identical to the terms of the
corresponding series of Weeks preferred stock; and
- Weeks' principal operating subsidiary, Weeks Realty, L.P., will be merged
with and into Duke.
The merger has been approved by the shareholders of both Weeks and the Company,
and the transactions are expected to close in early July 1999, subject to
satisfaction of customary closing conditions.
As of March 31, 1999, Weeks owned 352 properties totaling approximately 30.4
million square feet, including 43 properties that were under development, in
lease-up or under contract to acquire. All of these properties are located in
Atlanta, Georgia; Nashville, Tennessee; Raleigh-Durham-Chapel Hill, North
Carolina; Miami, Orlando, Jacksonville, Ft. Lauderdale and Tampa, Florida;
Dallas/Ft. Worth, Texas; and Spartanburg, South Carolina. At March 31, 1999,
Weeks also owned or controlled (through agreements to acquire, options and
marketing and development agreements) approximately 1,800 net usable acres of
undeveloped land located primarily in existing business parks with zoning and
infrastructure in place.
Upon completion of the merger, the combined company:
- will own 859 industrial, office and retail properties (including
properties under development), based on the real estate assets held by
Duke and Weeks as of March 31, 1999, consisting of over 90 million square
feet, including assets held by unconsolidated subsidiaries and joint
ventures;
- will own or control approximately 4,800 acres of land with an estimated
future development potential of approximately 65 million square feet of
industrial, office and retail properties;
- will have a strong combined management team that benefits from the
combined years of experience in the industrial/office real estate industry
of Duke and Weeks and will be able to leverage its skills over a broader
base of assets and a large development pipeline; and
- will have a more geographically diversified asset base which should reduce
cash flow sensitivity to local economic cycles and provide more consistent
development opportunities.
USE OF PROCEEDS
We expect to receive net proceeds from the sale of the notes of
approximately $173.7 million, after deducting commissions, discounts and
offering expenses. We presently intend to use the net proceeds to reduce the
outstanding balance on our unsecured line of credit and to fund development and
acquisition of additional rental properties. Our unsecured line of credit had an
aggregate of $142 million outstanding as of June 23, 1999, bearing interest at
LIBOR plus .80%, and matures in April 2001.
RATIOS OF EARNINGS TO FIXED CHARGES
Duke Realty Limited Partnership's ratio of earnings to fixed charges was
2.05 for the year ended December 31, 1998 and 1.89 for the three months ended
March 31, 1999. On a pro forma basis
S-5
<PAGE>
assuming the merger with Weeks Realty, L.P. had occurred as of the beginning of
the respective periods, Duke Realty Limited Partnership's ratio of earnings to
fixed charges would have been 1.83 for the year ended December 31, 1998 and 1.70
for the three months ended March 31, 1999. In computing the ratios of earnings
to fixed charges, earnings have been calculated by adding fixed charges,
excluding capitalized interest, to income before gains or losses on property
sales. Fixed charges consist (if applicable) of interest costs, whether expensed
or capitalized, the interest component of rental expense, amortization of debt
issuance costs and preferred equity distributions.
For information on the ratios of earnings to fixed charges for prior years,
see "Ratios of Earnings to Fixed Charges" in the accompanying prospectus.
DESCRIPTION OF THE NOTES
We have summarized certain terms of the notes and the indenture in this
section. This summary is not complete. The following description of the
particular terms of the notes supplements the description in the accompanying
prospectus of the general terms and provisions of the Debt Securities. To the
extent that the following description of the notes is inconsistent with that
general description in the prospectus, the following description replaces the
description in the prospectus. We urge you to read the indenture because it, and
not this description, defines your rights as holders of these notes. We have
filed copies of the indenture with the SEC. The indenture is subject to, and
governed by, the Trust Indenture Act of 1939, as amended. Capitalized terms used
but not defined in this prospectus supplement have the meanings specified in the
indenture.
GENERAL
The notes constitute a separate series of securities to be issued pursuant
to an indenture dated as of September 19, 1995 between Duke and The First
National Bank of Chicago, as trustee, as supplemented by a supplemental
indenture to be dated as of June 28, 1999, and will be limited in aggregate
principal amount to $175 million.
The notes will be our direct, unsecured obligations and will rank equal in
right of payment with all of our other unsecured and unsubordinated
indebtedness. The notes will be effectively subordinated to the prior claims of
each secured mortgage lender to any specific property which secures such
lender's mortgage. As of March 31, 1999, such mortgages aggregated approximately
$333.6 million. The notes will be issued in denominations of $1,000 principal
amount and integral multiples of that amount.
The notes will bear interest at 7.30% per year and will mature on June 30,
2003. We will pay interest on the notes in U.S. dollars semi-annually in arrears
on June 30 and December 30 of each year, commencing December 30, 1999. We will
pay interest on each interest payment date and on the maturity date to the
persons in whose names the notes are registered in the security register
applicable to the notes at the close of business 15 calendar days prior to such
payment date regardless of whether such day is a business day. Interest will be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
We will pay the principal of each note payable upon maturity in U.S. dollars
against presentation and surrender thereof at the corporate trust office of the
trustee, The First National Bank of Chicago, located initially at 14 Wall
Street, Eighth Floor, New York, New York. At our option, we may pay interest by
check mailed to the address of the person entitled thereto as it appears in the
applicable security register or by wire transfer of funds to such person at an
account maintained within the United States.
If any interest date or a maturity date falls on a day that is not a
business day, the required payment will be made on the next business day as if
it were made on the date the payment was due and no interest will accrue on the
amount so payable for the period from and after such interest
S-6
<PAGE>
payment date or such maturity date, as the case may be. For purposes of the
indenture, a "business day" is any day, other than a Saturday or Sunday, on
which banking institutions in The City of New York are open for business.
The notes are not subject to any sinking fund provisions and are not
repayable at the option of any holder prior to maturity.
Except as described under "--Certain Covenants--Limitations on Incurrence of
Debt" below and under "Description of Debt Securities--Merger, Consolidation or
Sale" in the accompanying prospectus, the indenture does not contain any other
provisions that would limit the ability of Duke to incur indebtedness or that
would afford holders of the notes protection in the event of:
(1) a highly leveraged or similar transaction involving Duke, the management
of Duke or the Company, or any affiliate of any such party,
(2) a change of control, or
(3) a reorganization, restructuring, merger or similar transaction involving
Duke that may adversely affect the holders of the Debt Securities.
In addition, subject to the limitations on merger, consolidation or sale
described in the accompanying prospectus, Duke may, in the future, enter into
certain transactions, such as the sale of all or substantially all of its assets
or the merger or consolidation of Duke, that would increase the amount of Duke's
indebtedness or substantially reduce or eliminate Duke's assets, which may have
an adverse effect on Duke's ability to service its indebtedness, including the
notes.
CERTAIN COVENANTS
LIMITATIONS ON INCURRENCE OF DEBT. Duke will not, and will not permit any
subsidiary to, incur any Debt (as defined below), other than intercompany debt
(representing Debt to which the only parties are Duke, the Company and any of
their Subsidiaries (but only so long as such Debt is held solely by any of Duke,
the Company and any Subsidiary) that is subordinate in right of payment to the
notes) if, immediately after giving effect to the incurrence of such additional
Debt, the aggregate principal amount of all outstanding Debt of Duke and its
Subsidiaries on a consolidated basis determined in accordance with generally
accepted accounting principles is greater than 55% of the sum of:
(1) Duke's Total Assets (as defined below) as of the end of the calendar
quarter covered in Duke's Annual Report on Form 10-K or Quarterly Report
on Form 10-Q, as the case may be, most recently filed with the SEC (or,
if such filing is not permitted under the Exchange Act, with the trustee)
prior to the incurrence of such additional Debt; and
(2) the increase in Total Assets from the end of such quarter including,
without limitation, any increase in Total Assets resulting from the
incurrence of such additional Debt (such increase together with Duke's
Total Assets shall be referred to as the "Adjusted Total Assets").
In addition to the foregoing limitation on the incurrence of Debt, Duke will
not, and will not permit any Subsidiary to, incur any Debt if the ratio of
Consolidated Income Available for Debt Service to the Annual Service Charge (in
each case as defined below) for the four consecutive fiscal quarters most
recently ended prior to the date on which such additional Debt is to be incurred
shall have been less than 2.0 to 1.0, on a pro forma basis after giving effect
to the incurrence of such Debt and to the application of the proceeds therefrom,
and calculated on the assumption that:
(1) such Debt and any other Debt incurred by Duke or its Subsidiaries since
the first day of such four-quarter period and the application of the
proceeds therefrom, including to refinance other Debt, had occurred at
the beginning of such period;
S-7
<PAGE>
(2) the repayment or retirement of any other Debt by Duke or its
Subsidiaries since the first day of such four-quarter period had been
incurred, repaid or retired at the beginning of such period (except that,
in making such computation, the amount of Debt under any revolving credit
facility shall be computed based upon the average daily balance of such
Debt during such period);
(3) the income earned on any increase in Adjusted Total Assets since the end
of such four-quarter period had been earned, on an annualized basis,
during such period; and
(4) in the case of any acquisition or disposition by Duke or any Subsidiary
of any asset or group of assets since the first day of such four-quarter
period, including, without limitation, by merger, stock purchase or sale,
or asset purchase or sale, such acquisition or disposition or any related
repayment of Debt had occurred as of the first day of such period with
the appropriate adjustments with respect to such acquisition or
disposition being included in such pro forma calculation.
In addition to the foregoing limitations on the incurrence of Debt, Duke
will not, and will not permit any Subsidiary to, incur any Debt secured by any
mortgage, lien, charge, pledge, encumbrance or security interest of any kind
upon any of the property of Duke or any Subsidiary ("Secured Debt"), whether
owned at the date of the indenture or thereafter acquired, if, immediately after
giving effect to the incurrence of such additional Secured Debt, the aggregate
principal amount of all outstanding Secured Debt of Duke and its Subsidiaries on
a consolidated basis is greater than 40% of Duke's Adjusted Total Assets.
For purposes of the foregoing provisions regarding the limitation on the
incurrence of Debt, Debt shall be deemed to be "incurred" by Duke and its
Subsidiaries on a consolidated basis whenever Duke and its Subsidiaries on a
consolidated basis shall create, assume, guarantee or otherwise become liable in
respect thereof.
MAINTENANCE OF TOTAL UNENCUMBERED ASSETS. Duke is required to maintain
Total Unencumbered Assets of not less than 185% of the aggregate outstanding
principal amount of the Unsecured Debt of Duke.
As used here:
"ANNUAL SERVICE CHARGE" as of any date means the amount which is expensed in
any 12-month period for interest on Debt.
"CONSOLIDATED INCOME AVAILABLE FOR DEBT SERVICE" for any period means
Consolidated Net Income (as defined below) of Duke and its Subsidiaries,
(1) plus amounts which have been deducted for:
(a) interest on Debt of Duke and its Subsidiaries,
(b) provision for taxes of Duke and its Subsidiaries based on income,
(c) amortization of debt discount,
(d) depreciation and amortization,
(e) the effect of any noncash charge resulting from a change in
accounting principles in determining Consolidated Net Income for such
period,
(f) amortization of deferred charges, and
(g) provisions for or realized losses on properties, and
(2) less amounts which have been included for gains on properties.
S-8
<PAGE>
"CONSOLIDATED NET INCOME" for any period means the amount of consolidated
net income (or loss) of Duke and its Subsidiaries for such period determined on
a consolidated basis in accordance with generally accepted accounting
principles.
"DEBT" of Duke or any Subsidiary means any indebtedness of Duke and its
Subsidiaries, whether or not contingent, in respect of:
(1) borrowed money evidenced by bonds, notes, debentures or similar
instruments;
(2) indebtedness secured by any mortgage, pledge, lien, charge, encumbrance
or any security interest existing on property owned by Duke and its
Subsidiaries;
(3) the reimbursement obligations, contingent or otherwise, in connection
with any letters of credit actually issued or amounts representing the
balance deferred and unpaid of the purchase price of any property except
any such balance that constitutes an accrued expense or trade payable; or
(4) any lease of property by Duke and its Subsidiaries as lessee which is
reflected in Duke's consolidated balance sheet as a capitalized lease in
accordance with generally accepted accounting principles,
in the case of items of indebtedness under (1) through (3) above to the extent
that any such items (other than letters of credit) would appear as a liability
on Duke's consolidated balance sheet in accordance with generally accepted
accounting principles, and also includes, to the extent not otherwise included,
any obligation by Duke or any Subsidiary to be liable for, or to pay, as
obligor, guarantor or otherwise (other than for purposes of collection in the
ordinary course of business), indebtedness of another person (other than Duke or
any Subsidiary) (it being understood that Debt shall be deemed to be incurred by
Duke and its Subsidiaries on a consolidated basis whenever Duke and its
Subsidiaries on a consolidated basis shall create, assume, guarantee or
otherwise become liable in respect thereof).
"FUNDS FROM OPERATIONS" for any period means the Consolidated Net Income of
Duke and its Subsidiaries for such period without giving effect to depreciation
and amortization, gains or losses from extraordinary items, gains or losses on
sales of real estate, gains or losses on investments in marketable securities
and any provision/benefit for income taxes for such period, plus the allocable
portion, based on Duke's ownership interest, of funds from operations of
unconsolidated joint ventures, all determined on a consistent basis in
accordance with generally accepted accounting principles.
"SUBSIDIARY" means a corporation, partnership or limited liability company,
a majority of the outstanding voting stock, partnership interests or membership
interests, as the case may be, of which is owned or controlled, directly or
indirectly, by Duke or by one or more other Subsidiaries of Duke. For the
purposes of this definition, "voting stock" means stock having voting power for
the election of directors, or trustees, as the case may be, whether at all times
or only so long as no senior class of stock has such voting power by reason of
any contingency.
"TOTAL ASSETS" as of any date means the sum of:
(1) Duke's and its Subsidiaries' Undepreciated Real Estate Assets and
(2) all other assets of Duke and its Subsidiaries on a consolidated basis
determined in accordance with generally accepted accounting principles
(but excluding accounts receivable and intangibles).
"TOTAL UNENCUMBERED ASSETS" means the sum of:
(1) those Undepreciated Real Estate Assets not subject to an encumbrance and
S-9
<PAGE>
(2) all other assets of Duke and its Subsidiaries not subject to an
encumbrance determined in accordance with generally accepted accounting
principles (but excluding accounts receivable and intangibles).
"UNDEPRECIATED REAL ESTATE ASSETS" as of any date means the cost (original
cost plus capital improvements) of real estate assets of Duke and its
Subsidiaries on such date, before depreciation and amortization, determined on a
consolidated basis in accordance with generally accepted accounting principles.
"UNSECURED DEBT" means Debt of Duke or any Subsidiary which is not secured
by any mortgage, lien, charge, pledge or security interest of any kind upon any
of the Properties.
The section entitled "Description of Debt Securities--Certain Covenants" in
the accompanying prospectus describes additional covenants applicable to the
notes. Compliance with the covenants described in this prospectus supplement and
the additional covenants described in the accompanying prospectus generally may
not be waived by the Board of Directors of the Company, as general partner of
Duke, or by the trustee unless the holders of at least a majority in principal
amount of all outstanding notes consent to such waiver. However, the defeasance
and covenant defeasance provisions of the indenture described under "Description
of Debt Securities--Discharge, Defeasance and Covenant Defeasance" in the
accompanying prospectus will apply to the notes, including with respect to the
covenants described in this prospectus supplement.
OPTIONAL REDEMPTION
The notes may be redeemed at any time at the option of Duke, in whole or
from time to time in part, at a redemption price equal to the sum of:
(1) the principal amount of the notes being redeemed plus accrued interest
thereon to the redemption date and
(2) the Make-Whole Amount (as defined below), if any, with respect to such
notes.
If notice has been given as provided in the indenture and funds for the
redemption of any notes called for redemption shall have been made available on
the redemption date referred to in such notice, such notes will cease to bear
interest on the date fixed for such redemption specified in such notice and the
only right of the holders of the notes will be to receive payment of the
redemption price.
Notice of any optional redemption of any notes will be given to holders at
their addresses, as shown in the security register for the notes, not more than
60 nor less than 30 days prior to the date fixed for redemption. The notice of
redemption will specify, among other items, the redemption price and the
principal amount of the notes held by such holder to be redeemed.
If less than all the notes are to be redeemed at the option of Duke, Duke
will notify the trustee at least 45 days prior to giving notice of redemption
(or such shorter period as is satisfactory to the trustee) of the aggregate
principal amount of notes to be redeemed and their redemption date. The trustee
shall select, in such manner as it shall deem fair and appropriate, the notes to
be redeemed in whole or in part.
As used here:
"MAKE-WHOLE AMOUNT" means, in connection with any optional redemption or
accelerated payment of any note, the excess, if any, of
(1) the aggregate present value as of the date of such redemption or
accelerated payment of each dollar of principal being redeemed or paid
and the amount of interest (exclusive of interest accrued to the date of
redemption or accelerated payment) that would have been payable in
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<PAGE>
respect of each such dollar if such redemption or accelerated payment had
not been made, determined by discounting, on a semi-annual basis, such
principal and interest at the Reinvestment Rate (determined on the third
business day preceding the date such notice of redemption is given or
declaration of acceleration is made) from the respective dates on which
such principal and interest would have been payable if such redemption or
accelerated payment had not been made, over
(2) the aggregate principal amount of the notes being redeemed or paid.
"REINVESTMENT RATE" means .25% plus the arithmetic mean of the yields under
the respective heading "Week Ending" published in the most recent Statistical
Release under the caption "Treasury Constant Maturities" for the maturity
(rounded to the nearest month) corresponding to the remaining life to maturity,
as of the payment date of the principal being redeemed or paid. If no maturity
exactly corresponds to such maturity, yields for the two published maturities
most closely corresponding to such maturity shall be calculated pursuant to the
immediately preceding sentence and the Reinvestment Rate shall be interpolated
or extrapolated from such yields on a straight-line basis, rounding in each of
such relevant periods to the nearest month. For the purposes of calculating the
Reinvestment Rate, the most recent Statistical Release published prior to the
date of determination of the Make-Whole Amount shall be used.
"STATISTICAL RELEASE" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded United States government
securities adjusted to constant maturities, or, if such statistical release is
not published at the time of any determination under the indenture, then such
other reasonably comparable index which shall be designated by Duke.
BOOK-ENTRY SYSTEM
The notes will be issued as global securities. See the section entitled
"Description of Debt Securities--Global Securities" in the accompanying
prospectus. The Depository Trust Company, or "DTC," will be the depository with
respect to the notes. The notes will be issued as fully registered securities in
the name of Cede & Co., DTC's partnership nominee, and will be deposited with
DTC. DTC will keep a computerized record of its participants (for example, your
broker) whose clients have purchased the notes. The participant would then keep
a record of its clients who purchased the notes. A global security may not be
transferred, except that DTC, its nominees and their successors may transfer an
entire global security to one another.
The notes will be in book-entry only form, and we will not deliver
securities in certificated form to individual purchasers of the notes, and no
person owning a beneficial interest in a global security will be treated as a
holder for any purpose under the indenture. Accordingly, owners of such
beneficial interests must rely on the procedures of DTC and the participant
through which such person owns its interest in order to exercise any rights of a
holder under such global security or the indenture. Beneficial interests in
global securities will be shown on, and transfers of global securities will be
made only through, records maintained by DTC and its participants. The laws of
some jurisdictions require that certain purchasers of securities take physical
delivery of such securities in certificated form. Such limits and laws may
impair the ability to transfer beneficial interests in a global security.
DTC has provided us with the following information: DTC is a limited-purpose
trust company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the United States
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing corporation" registered under
Section 17A of the Securities Exchange Act of 1934. DTC holds securities that
its participants ("Direct Participants") deposit with DTC. DTC also facilitates
the settlement among Direct Participants of securities transactions, such as
transfers and pledges, in deposited securities through
S-11
<PAGE>
computerized records for Direct Participants' accounts. This eliminates the need
to exchange certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations.
Other organizations, such as securities brokers and dealers, banks and trust
companies that work through a Direct Participant, also use DTC's book-entry
system. The rules that apply to DTC and its participants are on file with the
Securities and Exchange Commission.
A number of Direct Participants, together with the New York Stock Exchange,
Inc., The American Stock Exchange LLC and the National Association of Securities
Dealers, Inc., own DTC.
We will wire principal and interest payments to DTC's nominee. We and the
trustee will treat DTC's nominee as the owner of the global securities for all
purposes. Accordingly, we and the trustee will have no direct responsibility or
liability to pay amounts due on the securities to owners of beneficial interests
in the global securities.
It is DTC's current practice, when it receives any payment of principal or
interest, to credit Direct Participants' accounts on the payment date according
to their respective holdings of beneficial interests in the global securities as
shown on DTC's records. In addition, it is DTC's current practice to assign any
consenting or voting rights to Direct Participants whose accounts are credited
with securities on a record date, by using an omnibus proxy. Customary practices
between the participants and owners of beneficial interests, as in the case with
securities held for the account of customers registered in "street name," will
govern payments by participants to owners of beneficial interests in the global
securities, and voting by participants. However, these payments will be the
responsibility of the participants and not of DTC, the trustee, or us.
Notes represented by a global security will be exchangeable for notes in
certificated form with the same terms in authorized denominations only if:
- DTC notifies us that is unwilling or unable to continue as depository or
if DTC ceases to be a clearing agency registered under applicable law and
we do not appoint a successor depository within 90 days;
- An event of default under the indenture with respect to the notes has
occurred and is continuing and the beneficial owners representing a
majority in principal amount of the notes represented by the global
security advise DTC to cease acting as depository; or
- We determine at any time that all notes shall no longer be represented by
a global security.
Management of DTC is aware that some computer applications, systems and the
like for processing data ("Systems") that are dependent upon calendar dates,
including dates before, on, and after January 1, 2000, may encounter "Year 2000
problems." DTC has informed participants and other members of the financial
community (the "Industry") that it has developed and is implementing a program
so that its Systems, as the same relate to the timely payment of distributions
(including principal and interest payments) to securityholders, book-entry
deliveries, and settlement of trades within DTC ("DTC Services"), continue to
function appropriately. This program included a technical assessment and a
remediation plan, each of which is complete. Additionally, DTC's plan included a
testing phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including, but not limited to, issuers and their agents, as
well as DTC's participants, third party vendors from whom DTC licenses software
and hardware, and third party vendors on whom DTC relies for information or the
provision of services, including telecommunication and electrical utility
service providers, among others. DTC has informed the Industry that it is
contacting (and will continue to contact) third party vendors from whom DTC
acquires services to:
(1) impress upon them the importance of such services being Year 2000
compliant; and
S-12
<PAGE>
(2) determine the extent of their efforts for Year 2000 remediation (and, as
appropriate, testing) of their services. In addition, DTC is in the
process of developing such contingency plans as it deems appropriate.
According to DTC, the information in the preceding two paragraphs with
respect to DTC has been provided to the Industry for informational purposes only
and is not intended to serve as a representation, warranty, or contract
notification of any kind.
DTC may discontinue providing its services as securities depository with
respect to global securities at any time by giving reasonable notice to us or
the trustee. Under such circumstances, in the event that a successor securities
depository is not obtained, securities in certificated form are required to be
printed and delivered.
We may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor securities depository). In that event, securities in
certificated form will be printed and delivered.
The information in this section concerning DTC and DTC's system has been
obtained from sources that we believe to be reliable, but we take no
responsibility for the accuracy thereof.
SAME-DAY SETTLEMENT AND PAYMENT
The underwriters will pay for the notes in immediately available funds. We
will make all payments due on the notes in immediately available funds so long
as such notes are in book-entry form.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing house or next-day funds. In contrast, the notes
will trade in DTC's Same-Day Funds Settlement System until maturity or until the
notes are issued in certificated form, and secondary market trading activity in
the notes will therefore be required by DTC to settle in immediately available
funds. We can give no assurance as to the effect, if any, of settlement in
immediately available funds on trading activity in the notes.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
For a discussion of material federal income tax consequences applicable to
our taxation as a partnership and the election of the Company to be taxed as a
REIT, see "Federal Income Tax Considerations" in the accompanying prospectus.
IRS RESTRUCTURING ACT
You should be aware that, as discussed in the accompanying prospectus, the
Taxpayer Relief Act of 1997 (the "1997 Act") altered the taxation of capital
gain income. The recently-enacted IRS Restructuring Act reduced the holding
periods established by the 1997 Act. Under the 1997 Act, as revised by the IRS
Restructuring Act, for gains realized after December 31, 1997, and subject to
certain exceptions:
- the maximum rate of tax on net capital gains of individuals, trusts and
estates from the sale or exchange of assets held for more than 12 months
has been reduced to 20%;
- the maximum rate of tax on net capital gains of individuals, trusts and
estates from the sale or exchange of assets is reduced to 18% for assets
acquired after December 31, 2000 and held for more than five years;
- for taxpayers who would be subject to a maximum tax rate of 15%, the rate
on net capital gains is reduced to 10%;
S-13
<PAGE>
- for taxpayers who would be subject to a maximum tax rate of 15%, effective
for taxable years commencing after December 31, 2000, the rate is reduced
to 8% for assets held for more than five years;
- the maximum rate for net capital gains attributable to the sale of
depreciable real property (other than certain depreciation recapture
taxable as ordinary income) held for more than 12 months is 25% to the
extent of the deductions for depreciation with respect to such property;
and
- long-term capital gain we allocate to a shareholder will be subject to the
25% rate to the extent that the gain does not exceed depreciation on real
property we sell.
The 1997 Act provides the Internal Revenue Service with authority to issue
regulations that could, among other things, apply these rates to sales of
capital assets by "pass through entities" (including REITs) and to sales of
interests in "pass through entities." The taxation of capital gains of
corporations was not changed by the 1997 Act or the IRS Restructuring Act.
UNDERWRITING
Subject to the terms and conditions contained in the terms agreement and
related underwriting agreement, we have agreed to sell to each of the
underwriters named below, and each of the underwriters named below has severally
agreed to purchase from us, the aggregate principal amount of the notes set
forth after its name below. The obligations of the underwriters are subject to
certain conditions. The underwriters must purchase all of the notes if they
purchase any.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITER NOTES
--------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................................................ $ 148,750,000
Banc One Capital Markets, Inc................................................. 26,250,000
--------------
Total.............................................................. $ 175,000,000
--------------
--------------
</TABLE>
The underwriters have advised us that they propose initially to offer the
notes to the public at the public offering price set forth on the cover page of
this prospectus supplement, and to certain dealers at such price less a
concession not in excess of .35% of the principal amount thereof. The
underwriters may allow, and such dealers may reallow, a discount not in excess
of .25% of the principal amount to certain other dealers. After the offering,
the public offering price, concession and discounts may be changed.
The notes are a new issue of securities with no established trading market.
We do not intend to apply for listing of the notes on a national securities
exchange. We have been advised by the underwriters that they intend to make a
market in the notes, but the underwriters are not obligated to do so and may
discontinue market-making at any time without notice. We can provide no
assurance as to the liquidity of, or any trading market for, the notes.
In connection with the offering, the underwriters are permitted to engage in
certain transactions that stabilize the price of the notes. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the notes. If the underwriters create a short position in the notes
in connection with the offering, I.E., if they sell a greater aggregate
principal amount of notes than is set forth on the cover of this prospectus
supplement, the underwriters may reduce that short
S-14
<PAGE>
position by purchasing notes in the open market. In general, purchases of a
security for the purpose of stabilization or to reduce a short position could
cause the price of the security to be higher than it might be in the absence of
such purchases.
Neither we nor any underwriter makes any representation or prediction as to
the direction or magnitude of any effect that the transactions described above
may have on the price of the notes. In addition, neither we nor any underwriter
makes any representation that the underwriters will engage in such transactions
or that such transactions, once commenced, will not be discontinued without
notice.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, or if
indemnification is not allowed, to contribute to payments the underwriters may
be required to make because of those liabilities.
Merrill Lynch, Pierce, Fenner & Smith Incorporated from time to time
provides investment banking and financial advisory services to us and to the
Company and has acted as representative of various other underwriters in
connection with public offerings of our securities and the Company's securities
in 1993 through 1999. The First National Bank of Chicago, an affiliate of Banc
One Capital Markets, Inc., is serving as trustee for the notes and is also an
agent bank for our line of credit.
We expect to incur expenses of approximately $200,000 in connection with
this offering. These expenses are estimated to include printing costs of
$20,000, legal fees of $10,000, accounting fees of $5,000, rating agency fees of
$163,125 and miscellaneous expenses of $1,875.
LEGAL MATTERS
In addition to the legal opinions referred to under "Legal Opinions" in the
accompanying prospectus, the description of Federal income tax matters contained
in this prospectus supplement entitled "Certain Federal Income Tax
Considerations" is based on the opinion of Bose McKinney & Evans LLP. Certain
legal matters in connection with the offering of the notes will be passed upon
for the underwriters by Rogers & Wells LLP, New York, New York. Rogers & Wells
LLP is also currently representing the Company and Duke in connection with the
merger of Weeks Corporation with and into the Company.
INCORPORATION OF ADDITIONAL DOCUMENTS BY REFERENCE
In addition to the documents we refer to under "Incorporation of Certain
Documents by Reference" in the accompanying prospectus, we incorporate the
following additional documents by reference and make them a part hereof:
1. The Registration Statement on Form S-4 of Duke Realty Investments, Inc.
and Weeks Corporation (file no. 333-77645).
2. The Annual Report on Form 10-K of Weeks Corporation (file no. 1-13254)
for the year ended December 31, 1998.
3. The Quarterly Report on Form 10-Q of Weeks Corporation (file no.
1-13254) for the quarter ended March 31, 1999.
4. The Annual Report on Form 10-K of Weeks Realty, L.P. (file no. 1-13969)
for the year ended December 31, 1998.
5. The Quarterly Report on Form 10-Q of Weeks Realty, L.P. (file no.
1-13969) for the quarter ended March 31, 1999.
S-15
<PAGE>
PROSPECTUS
$1,000,000,000
DUKE REALTY INVESTMENTS, INC.
COMMON STOCK, PREFERRED STOCK AND DEPOSITARY SHARES
DUKE REALTY LIMITED PARTNERSHIP
DEBT SECURITIES
Duke Realty Investments, Inc. (the "Company") may from time to time offer in
one or more series (i) shares of Common Stock, $.01 par value ("Common Stock"),
(ii) shares of preferred stock, $.01 par value ("Preferred Stock") and (iii)
shares of Preferred Stock represented by depositary shares (the "Depositary
Shares"), with an aggregate public offering price of up to $650,000,000 (or its
equivalent in another currency based on the exchange rate at the time of sale)
in amounts, at prices and on terms to be determined at the time of offering.
Duke Realty Limited Partnership (the "Operating Partnership") may from time to
time offer in one or more series unsecured non-convertible investment grade debt
securities ("Debt Securities"), with an aggregate public offering price of up to
$350,000,000 (or its equivalent in another currency based on the exchange rate
at the time of sale) in amounts, at prices and on terms to be determined at the
time of offering. The Common Stock, Preferred Stock, Depositary Shares and Debt
Securities (collectively, the "Securities") may be offered, separately or
together, in separate series, in amounts, at prices and on terms to be set forth
in one or more supplements to this Prospectus (each a "Prospectus Supplement").
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and
will include, where applicable: (i) in the case of Common Stock, any initial
public offering price; (ii) in the case of Preferred Stock, the specific title
and stated value, any dividend, liquidation, redemption, conversion, voting and
other rights, and any initial public offering price; (iii) in the case of
Depositary Shares, the fractional share of Preferred Stock represented by each
such Depositary Share; and (iv) in the case of Debt Securities, the specific
title, aggregate principal amount, currency, form (which may be registered or
bearer, or certificated or global), authorized denominations, maturity, rate (or
manner of calculation thereof) and time of payment of interest, terms for
redemption at the option of the Operating Partnership or repayment at the option
of the holder, terms for sinking fund payments, covenants and any initial public
offering price. In addition, such specific terms may include limitations on
direct or beneficial ownership and restrictions on transfer of the Securities,
in each case as may be appropriate to preserve the status of the Company as a
real estate investment trust ("REIT") for federal income tax purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities covered
by such Prospectus Supplement.
The Securities may be offered directly, through agents designated from time
to time by the Company or the Operating Partnership, or to or through
underwriters or dealers. If any agents or underwriters are involved in the sale
of any of the Securities, their names, and any applicable purchase price, fee,
commission or discount arrangement between or among them, will be set forth, or
will be calculable from the information set forth, in an accompanying Prospectus
Supplement. See "Plan of Distribution." No Securities may be sold without
delivery of a Prospectus Supplement describing the method and terms of the
offering of such series of Securities.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is April 20, 1998.
<PAGE>
AVAILABLE INFORMATION
The Company and the Operating Partnership are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, the Company files reports, proxy statements
and other information with the Securities and Exchange Commission (the
"Commission"), and the Operating Partnership files reports with the Commission.
Such reports, proxy statements and other information can be inspected and copied
at the Public Reference Section maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549; Chicago Regional Office, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and New York Regional
Office, 7 World Trade Center, New York, New York 10048. Such reports, proxy
statements and other information concerning the Company can also be inspected at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005. The Commission maintains a Web site (http:// www.sec.gov) that contains
reports, proxy and information statements and other information regarding the
Company and the Operating Partnership.
The Company and the Operating Partnership will provide without charge to
each person to whom a copy of this Prospectus is delivered, upon their written
or oral request, a copy of any or all of the documents incorporated herein by
reference (other than exhibits to such documents). Written requests for such
copies should be addressed to 8888 Keystone Crossing, Suite 1200, Indianapolis,
Indiana 46240, Attn: Investor Relations, telephone number (317) 574-3531.
The Company and the Operating Partnership have filed with the Commission a
registration statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933 as amended (the "Securities Act"), with respect to the
Securities offered hereby. For further information with respect to the Company,
the Operating Partnership and the Securities offered hereby, reference is made
to the Registration Statement and exhibits thereto. Statements contained in this
Prospectus as to the contents of any contract or other documents are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or documents filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company and the Operating Partnership
under the Exchange Act with the Commission are incorporated in this Prospectus
by reference and are made a part hereof:
1. The Company's Annual Report on Form 10-K (file no. 1-9044) for the year
ended December 31, 1997.
2. The Operating Partnership's Annual Report on Form 10-K (file no.
0-20625) for the year ended December 31, 1997.
3. The Company's proxy statement dated March 23, 1998.
4. The Company's Reports on Form 8-K (file no. 1-9044) filed February 26,
1998 and March 27, 1998.
5. The Operating Partnership's Report on Form 8-K (file no. 0-20625) filed
March 10, 1998.
6. The description of the Common Stock of the Company contained in the
Registration Statement on Form 10, File No. 1-9044, as amended.
Each document filed by the Company or the Operating Partnership subsequent
to the date of this Prospectus pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act and prior to termination of the offering of all Securities to
which this Prospectus relates shall be deemed to be incorporated by reference in
this Prospectus and shall be part hereof from the date of filing of such
document. Any statement contained herein or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained in this Prospectus (in the case of a statement in a previously-filed
document
2
<PAGE>
incorporated or deemed to be incorporated by reference herein), in any
accompanying Prospectus Supplement relating to a specific offering of Securities
or in any other subsequently filed document that is also incorporated or deemed
to be incorporated by reference herein, modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus or any
accompanying Prospectus Supplement. Subject to the foregoing, all information
appearing in this Prospectus and each accompanying Prospectus Supplement is
qualified in its entirety by the information appearing in the documents
incorporated by reference.
THE COMPANY AND THE OPERATING PARTNERSHIP
The Company is a self-administered and self-managed real estate investment
trust that began operations through a related entity in 1972. At December 31,
1997, the Company owned direct or indirect interests in a portfolio of 355
in-service industrial, office and retail properties (the "Properties"), together
with over 1,700 acres of land (the "Land") for future development. The
Properties are located in Indiana, Ohio, Illinois, Kentucky, Minnesota,
Missouri, Tennessee and Wisconsin. As of December 31, 1997, the Properties
contained approximately 40.7 million square feet, which were approximately 94.1%
leased to approximately 2,300 tenants.
All of the Company's interests in the Properties and Land are held by, and
substantially all of its operations relating to the Properties and Land are
conducted through, the Operating Partnership. The Operating Partnership holds a
100% interest in all but 74 of the Properties and substantially all of the Land.
The Company controls the Operating Partnership as the sole general partner and
owner, as of December 31, 1997, of approximately 87.4% of the outstanding units
of voting partnership interest of the Operating Partnership ("Units"). Each
Unit, other than those held by the Company, may be exchanged by the holder
thereof, subject to certain holding periods, for one share (subject to certain
adjustments) of the Common Stock. With each such exchange, the number of Units
owned by the Company and, therefore, the Company's percentage interest in the
Operating Partnership, will increase.
In addition to owning the Properties and the Land, the Operating Partnership
also provides services associated with leasing, property management, real estate
development, construction and miscellaneous tenant services (the "Related
Businesses") for the Properties. The Company also provides services associated
with the Related Businesses to third parties through Duke Realty Services
Limited Partnership on a fee basis.
The Company's experienced staff provides a full range of real estate
services from executive offices headquartered in Indianapolis, and from seven
regional offices located in the Cincinnati, Cleveland, Columbus, Decatur,
Minneapolis, Nashville and St. Louis metropolitan areas.
The Company is an Indiana corporation that was originally incorporated in
the State of Delaware in 1985, and reincorporated in the State of Indiana in
1992. The Operating Partnership is an Indiana limited partnership that was
formed in 1993. The Company's and the Operating Partnership's executive offices
are located at 8888 Keystone Crossing, Suite 1200, Indianapolis, Indiana 46240,
and their telephone number is (317) 574-3531.
USE OF PROCEEDS
The Company is required, by the terms of the partnership agreement of the
Operating Partnership, to invest the net proceeds of any sale of Common Stock,
Preferred Stock or Depositary Shares in the Operating Partnership in exchange
for additional Units or preferred Units, as the case may be. Unless otherwise
specified in the applicable Prospectus Supplement, the Company and the Operating
Partnership intend to use the net proceeds from the sale of Securities for
general corporate purposes, including the development and acquisition of
additional rental properties and other acquisition transactions, the payment of
certain outstanding debt, and improvements to certain properties in the
Company's portfolio.
3
<PAGE>
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's and the Operating Partnership's
ratios of earnings to fixed charges for the periods shown.
<TABLE>
<CAPTION>
YEAR ENDED OPERATING
DECEMBER 31, COMPANY PARTNERSHIP
- ------------------------------------------------------------------------------------------ ----------- -----------
<S> <C> <C>
1997...................................................................................... 2.12 2.11
1996...................................................................................... 2.18 2.20
1995...................................................................................... 2.38 2.38
1994...................................................................................... 2.33 2.33
1993...................................................................................... 1.58 2.51(1)
</TABLE>
- ------------------------
(1) From date of formation on October 4, 1993 to December 31, 1993.
For purposes of computing these ratios, earnings have been calculated by
adding fixed charges, excluding capitalized interest, to income (loss) before
gains or losses on property sales and (if applicable) minority interest in the
Operating Partnership. Fixed charges consist (if applicable) of interest costs,
whether expensed or capitalized, the interest component of rental expense and
amortization of debt issuance costs.
The recapitalization of the Company effected in connection with the
reorganization permitted the Company to significantly deleverage, resulting in
an improved ratio of earnings to fixed charges for periods subsequent to the
reorganization.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an Indenture (the "Indenture")
between the Operating Partnership and The First National Bank of Chicago, as
trustee. The Indenture is incorporated by reference as an exhibit to the
Registration Statement of which this Prospectus is a part and is available for
inspection at the corporate trust office of the trustee at 14 Wall Street,
Eighth Floor, New York, New York 10005 or as described above under "Available
Information." The Indenture is subject to, and governed by, the Trust Indenture
Act of 1939, as amended (the "TIA"). The statements made herein relating to the
Indenture and the Debt Securities to be issued thereunder are summaries of
certain provisions thereof and do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all provisions of the
Indenture and such Debt Securities. All section references appearing herein are
to sections of the Indenture, and capitalized terms used but not defined herein
shall have the respective meanings set forth in the Indenture.
GENERAL
The Debt Securities will be direct, unsecured obligations of the Operating
Partnership and will rank equally with all other unsecured and unsubordinated
indebtedness of the Operating Partnership. At December 31, 1997, the total
outstanding debt of the Operating Partnership was $720.1 million, of which
$367.1 million was secured debt and $353.0 million was unsecured debt. The Debt
Securities may be issued without limit as to aggregate principal amount, in one
or more series, in each case as established from time to time in or pursuant to
authority granted by a resolution of the Board of Directors of the Company as
sole general partner of the Operating Partnership or as established in one or
more indentures supplemental to the Indenture. All Debt Securities of one series
need not be issued at the same time and, unless otherwise provided, a series may
be reopened, without the consent of the holders of the Debt Securities of such
series, for issuances of additional Debt Securities of such series (Section
301).
The Indenture provides that there may be more than one trustee (the
"Trustee") thereunder, each with respect to one or more series of Debt
Securities. Any Trustee under the Indenture may resign or be removed with
respect to one or more series of Debt Securities, and a successor Trustee may be
appointed to act with respect to such series (Section 608). In the event that
two or more persons are acting as Trustee with respect
4
<PAGE>
to different series of Debt Securities, each such Trustee shall be a trustee of
a trust under the Indenture separate and apart from the trust administered by
any other Trustee (Section 609), and, except as otherwise indicated herein, any
action described herein to be taken by a Trustee may be taken by each such
Trustee with respect to, and only with respect to, the one or more series of
Debt Securities for which it is Trustee under the Indenture.
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities being offered for the specific terms thereof, including:
(1) the title of such Debt Securities;
(2) the aggregate principal amount of such Debt Securities and any limit on
such aggregate principal amount;
(3) the percentage of the principal amount at which such Debt Securities
will be issued and, if other than the principal amount thereof, the
portion of the principal amount thereof payable upon declaration of
acceleration of the maturity thereof;
(4) the date or dates, or the method for determining such date or dates, on
which the principal of such Debt Securities will be payable;
(5) the rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(6) the date or dates, or the method for determining such date or dates,
from which any interest will accrue, the dates on which any such
interest will be payable, the record dates for such interest payment
dates, or the method by which any such date shall be determined, the
person to whom such interest shall be payable, and the basis upon which
interest shall be calculated if other than that of a 360-day year of
twelve 30-day months;
(7) the place or places where the principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable, such Debt
Securities may be surrendered for registration of transfer or exchange
and notices or demands to or upon the Operating Partnership in respect
of such Debt Securities and the Indenture may be served;
(8) the period or periods within which, the price or prices at which and the
terms and conditions upon which such Debt Securities may be redeemed, as
a whole or in part, at the option of the Operating Partnership, if the
Operating Partnership is to have such an option;
(9) the obligation, if any, of the Operating Partnership to redeem, repay or
purchase such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a holder thereof, and the period or
periods within which, the price or prices at which and the terms and
conditions upon which such Debt Securities will be redeemed, repaid or
purchased, as a whole or in part, pursuant to such obligation;
(10) if other than U.S. dollars, the currency or currencies in which such
Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite
currency or currencies, and the terms and conditions relating thereto;
(11) whether the amount of payments of principal of (and premium, if any) or
interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
method may, but need not be, based on a currency, currencies, currency
unit or units or composite currency or currencies) and the manner in
which such amounts shall be determined;
(12) the events of default or covenants of such Debt Securities, to the
extent different from or in addition to those described herein;
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(13) whether such Debt Securities will be issued in certificated and/or
book-entry form;
(14) whether such Debt Securities will be in registered or bearer form and,
if in registered form, the denominations thereof if other than $1,000
and any integral multiple thereof and, if in bearer form, the
denominations thereof if other than $5,000 and terms and conditions
relating thereto;
(15) the applicability, if any, of the defeasance and covenant defeasance
provisions described herein, or any modification thereof;
(16) if such Debt Securities are to be issued upon the exercise of debt
warrants, the time, manner and place for such Debt Securities to be
authenticated and delivered;
(17) whether and under what circumstances the Operating Partnership will pay
additional amounts on such Debt Securities in respect of any tax,
assessment or governmental charge and, if so, whether the Operating
Partnership will have the option to redeem such Debt Securities in lieu
of making such payment;
(18) with respect to any Debt Securities that provide for optional redemption
or prepayment upon the occurrence of certain events (such as a change of
control of the Operating Partnership), (i) the possible effects of such
provisions on the market price of the Operating Partnership's or the
Company's securities or in deterring certain mergers, tender offers or
other takeover attempts, and the intention of the Operating Partnership
to comply with the requirements of Rule 14e-1 under the Exchange Act and
any other applicable securities laws in connection with such provisions;
(ii) whether the occurrence of the specified events may give rise to
cross-defaults on other indebtedness such that payment on such Debt
Securities may be effectively subordinated; and (iii) the existence of
any limitation on the Operating Partnership's financial or legal ability
to repurchase such Debt Securities upon the occurrence of such an event
(including, if true, the lack of assurance that such a repurchase can be
effected) and the impact, if any, under the Indenture of such a failure,
including whether and under what circumstances such a failure may
constitute an Event of Default; and
(19) any other terms of such Debt Securities.
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). If material or applicable, special U.S.
federal income tax, accounting and other considerations applicable to Original
Issue Discount Securities will be described in the applicable Prospectus
Supplement.
Except as described under "Merger, Consolidation or Sale" or as may be set
forth in any Prospectus Supplement, the Indenture does not contain any other
provisions that would limit the ability of the Operating Partnership to incur
indebtedness or that would afford holders of the Debt Securities protection in
the event of (i) a highly leveraged or similar transaction involving the
Operating Partnership, the management of the Operating Partnership or the
Company, or any affiliate of any such party, (ii) a change of control, or (iii)
a reorganization, restructuring, merger or similar transaction involving the
Operating Partnership that may adversely affect the holders of the Debt
Securities. In addition, subject to the limitations set forth under "Merger,
Consolidation or Sale," the Operating Partnership may, in the future, enter into
certain transactions, such as the sale of all or substantially all of its assets
or the merger or consolidation of the Operating Partnership, that would increase
the amount of the Operating Partnership's indebtedness or substantially reduce
or eliminate the Operating Partnership's assets, which may have an adverse
effect on the Operating Partnership's ability to service its indebtedness,
including the Debt Securities. In addition, restrictions on ownership and
transfers of the Company's common stock and preferred stock are designed to
preserve its status as a REIT and, therefore, may act to prevent or hinder a
change of control. See "Description of Common Stock -- Certain Provisions
Affecting Change of Control" and "Description of Preferred Stock -- Restrictions
on Ownership." Reference is made to the applicable Prospectus Supplement
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for information with respect to any deletions from, modifications of or
additions to the events of default or covenants that are described below,
including any addition of a covenant or other provision providing event risk or
similar protection.
Reference is made to "-- Certain Covenants" below and to the description of
any additional covenants with respect to a series of Debt Securities in the
applicable Prospectus Supplement. Except as otherwise described in the
applicable Prospectus Supplement, compliance with such covenants generally may
not be waived with respect to a series of Debt Securities by the Board of
Directors of the Company as sole general partner of the Operating Partnership or
by the Trustee unless the Holders of at least a majority in principal amount of
all outstanding Debt Securities of such series consent to such waiver, except to
the extent that the defeasance and covenant defeasance provisions of the
Indenture described under "-- Discharge, Defeasance and Covenant Defeasance"
below apply to such series of Debt Securities. See "-- Modification of the
Indenture."
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series which are registered securities, other than registered
securities issued in global form (which may be of any denomination), shall be
issuable in denominations of $1,000 and any integral multiple thereof and the
Debt Securities which are bearer securities, other than bearer securities issued
in global form (which may be of any denomination), shall be issuable in
denominations of $5,000 (Section 302).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium, if any) and interest on any series of Debt Securities
will be payable at the corporate trust office of the Trustee, initially located
at 14 Wall Street, Eighth Floor, New York, New York, 10005, provided that, at
the option of the Operating Partnership, payment of interest may be made by
check mailed to the address of the Person entitled thereto as it appears in the
applicable Security Register or by wire transfer of funds to such Person at an
account maintained within the United States (Sections 301, 307 and 1002).
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable Regular Record
Date and may either be paid to the Person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to the Holder of such Debt Security not
less than 10 days prior to such Special Record Date, or may be paid at any time
in any other lawful manner, all as more completely described in the Indenture.
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of such
Debt Securities at the corporate trust office of the Trustee referred to above.
In addition, subject to certain limitations imposed upon Debt Securities issued
in book-entry form, the Debt Securities of any series may be surrendered for
registration of transfer thereof at the corporate trust office of the Trustee
referred to above. Every Debt Security surrendered for registration of transfer
or exchange shall be duly endorsed or accompanied by a written instrument of
transfer. No service charge will be made for any registration of transfer or
exchange of any Debt Securities, but the Trustee or the Operating Partnership
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith (Section 305). If the applicable
Prospectus Supplement refers to any transfer agent (in addition to the Trustee)
initially designated by the Operating Partnership with respect to any series of
Debt Securities, the Operating Partnership may at any time rescind the
designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that Operating Partnership
will be required to maintain a transfer agent in each place of payment for such
series. The Operating Partnership may at any time designate additional transfer
agents with respect to any series of Debt Securities (Section 1002).
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Neither the Operating Partnership nor the Trustee shall be required (i) to
issue, register the transfer of or exchange any Debt Security if such Debt
Security may be among those selected for redemption during a period beginning at
the opening of business 15 days before selection of the Debt Securities to be
redeemed and ending at the close of business on (A) if such Debt Securities are
issuable only as Registered Securities, the day of the mailing of the relevant
notice of redemption and (B) if such Debt Securities are issuable as Bearer
Securities, the day of the first publication of the relevant notice of
redemption or, if such Debt Securities are also issuable as Registered
Securities and there is no publication, the mailing of the relevant notice of
redemption, or (ii) to register the transfer of or exchange any Registered
Security so selected for redemption in whole or in part, except, in the case of
any Registered Security to be redeemed in part, the portion thereof not to be
redeemed, or (iii) to exchange any Bearer Security so selected for redemption
except that such a Bearer Security may be exchanged for a Registered Security of
that series and like tenor, PROVIDED that such Registered Security shall be
simultaneously surrendered for redemption, or (iv) to issue, register the
transfer of or exchange any Security which has been surrendered for repayment at
the option of the Holder, except the portion, if any, of such Debt Security not
to be so repaid (Section 305).
MERGER, CONSOLIDATION OR SALE
The Operating Partnership may consolidate with, or sell, lease or convey all
or substantially all of its assets to, or merge with or into, any other entity,
provided that (a) the Operating Partnership shall be the continuing entity, or
the successor entity (if other than the Operating Partnership) formed by or
resulting from any such consolidation or merger or which shall have received the
transfer of such assets shall expressly assume payment of the principal of (and
premium, if any) and interest on all the Debt Securities and the due and
punctual performance and observance of all of the covenants and conditions
contained in the Indenture; (b) immediately after giving effect to such
transaction and treating any indebtedness which becomes an obligation of the
Operating Partnership or any Subsidiary as a result thereof as having been
incurred by the Operating Partnership or such Subsidiary at the time of such
transaction, no Event of Default under the Indenture, and no event which, after
notice or the lapse of time, or both, would become such an Event of Default,
shall have occurred and be continuing; and (c) an officer's certificate and
legal opinion covering such conditions shall be delivered to the Trustee
(Sections 801 and 803).
CERTAIN COVENANTS
EXISTENCE. Except as permitted under "Merger, Consolidation or Sale," the
Operating Partnership is required to do or cause to be done all things necessary
to preserve and keep in full force and effect its existence, rights and
franchises; PROVIDED, HOWEVER, that the Operating Partnership shall not be
required to preserve any right or franchise if it determines that the
preservation thereof is no longer desirable in the conduct of its business and
that the loss thereof is not disadvantageous in any material respect to the
Holders of the Debt Securities (Section 1007).
MAINTENANCE OF PROPERTIES. The Operating Partnership is required to cause
all of its material properties used or useful in the conduct of its business or
the business of any Subsidiary to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment and to cause
to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Operating Partnership may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; PROVIDED, HOWEVER, that the
Operating Partnership and its Subsidiaries shall not be prevented from selling
or otherwise disposing for value their respective properties in the ordinary
course of business (Section 1008).
INSURANCE. The Operating Partnership is required to, and is required to
cause each of its Subsidiaries to, keep all of its insurable properties insured
against loss or damage at least equal to their then full insurable value with
financially sound and reputable insurance companies (Section 1009).
PAYMENT OF TAXES AND OTHER CLAIMS. The Operating Partnership is required to
pay or discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or any Subsidiary or upon its income, profits or property or
that of any
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Subsidiary, and (ii) all lawful claims for labor, materials and supplies which,
if unpaid, might by law become a lien upon the property of the Operating
Partnership or any Subsidiary; PROVIDED, HOWEVER, that the Operating Partnership
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings (Section 1010).
PROVISION OF FINANCIAL INFORMATION. The Holders of Debt Securities will be
provided with copies of the annual reports and quarterly reports of the
Operating Partnership. Whether or not the Operating Partnership is subject to
Section 13 or 15(d) of the Exchange Act and for so long as any Debt Securities
are outstanding, the Operating Partnership will, to the extent permitted under
the Exchange Act, be required to file with the Commission the annual reports,
quarterly reports and other documents which the Operating Partnership would have
been required to file with the Commission pursuant to such Section 13 or 15(d)
(the "Financial Statements") if the Operating Partnership were so subject, such
documents to be filed with the Commission on or prior to the respective dates
(the "Required Filing Dates") by which the Operating Partnership would have been
required so to file such documents if the Operating Partnership were so subject.
The Operating Partnership will also in any event (x) within 15 days of each
Required Filing Date (i) transmit by mail to all Holders of Debt Securities, as
their names and addresses appear in the Security Register, without cost to such
Holders, copies of the annual reports and quarterly reports which the Operating
Partnership would have been required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act if the Operating Partnership were
subject to such Sections and (ii) file with the Trustee copies of the annual
reports, quarterly reports and other documents which the Operating Partnership
would have been required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act if the Operating Partnership were subject to such
Sections and (y) if filing such documents by the Operating Partnership with the
Commission is not permitted under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such documents to any prospective Holder (Section 1011).
ADDITIONAL COVENANTS. Any additional or different covenants of the
Operating Partnership with respect to any series of Debt Securities will be set
forth in the Prospectus Supplement relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (a) default for
30 days in the payment of any installment of interest on any Debt Security of
such series; (b) default in the payment of the principal of (or premium, if any,
on) any Debt Security of such series at its maturity; (c) default in making any
sinking fund payment as required for any Debt Security of such series; (d)
default in the performance of any other covenant of the Operating Partnership
contained in the Indenture (other than a covenant added to the Indenture solely
for the benefit of a series of Debt Securities issued thereunder other than such
series), such default having continued for 60 days after written notice as
provided in the Indenture; (e) default in the payment of an aggregate principal
amount exceeding $5,000,000 of any evidence of recourse indebtedness of the
Operating Partnership or any mortgage, indenture or other instrument under which
such indebtedness is issued or by which such indebtedness is secured, such
default having occurred after the expiration of any applicable grace period and
having resulted in the acceleration of the maturity of such indebtedness, but
only if such indebtedness is not discharged or such acceleration is not
rescinded or annulled; (f) certain events of bankruptcy, insolvency or
reorganization, or court appointment of a receiver, liquidator or trustee of the
Operating Partnership or any Significant Subsidiary or any of their respective
property; and (g) any other Event of Default provided with respect to a
particular series of Debt Securities. The term "Significant Subsidiary" means
each significant subsidiary (as defined in Regulation S-X promulgated under the
Securities Act) of the Operating Partnership.
If an Event of Default under the Indenture with respect to Debt Securities
of any series at the time Outstanding occurs and is continuing, then in every
such case the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Debt Securities of that series may declare the principal amount
(or, if
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the Debt Securities of that series are Original Issue Discount Securities or
Indexed Securities, such portion of the principal amount as may be specified in
the terms thereof) of all of the Debt Securities of that series to be due and
payable immediately by written notice thereof to the Operating Partnership (and
to the Trustee if given by the Holders). However, at any time after such a
declaration of acceleration with respect to Debt Securities of such series (or
of all Debt Securities then Outstanding under the Indenture, as the case may be)
has been made, but before a judgment or decree for payment of the money due has
been obtained by the Trustee, the Holders of not less than a majority in
principal amount of Outstanding Debt Securities of such series (or of all Debt
Securities then Outstanding under the Indenture, as the case may be) may rescind
and annul such declaration and its consequences if (a) the Operating Partnership
shall have deposited with the applicable Trustee all required payments of the
principal of (and premium, if any) and interest on the Debt Securities of such
series (or of all Debt Securities then Outstanding under the Indenture, as the
case may be), plus certain fees, expenses, disbursements and advances of the
Trustee and (b) all Events of Default, other than the non-payment of accelerated
principal of (or specified portion thereof), or premium (if any) or interest on
the Debt Securities of such series (or of all Debt Securities then Outstanding
under the Indenture, as the case may be) have been cured or waived as provided
in the Indenture (Section 502). The Indenture also provides that the Holders of
not less than a majority in principal amount of the Outstanding Debt Securities
of any series (or of all Debt Securities then Outstanding under the Indenture,
as the case may be) may waive any past default with respect to such series and
its consequences, except a default (x) in the payment of the principal of (or
premium, if any) or interest on any Debt Security or such series or (y) in
respect of a covenant or provision contained in the Indenture that cannot be
modified or amended without the consent of the Holder of each Outstanding Debt
Security affected thereby (Section 513).
The Trustee will be required to give notice to the Holders of Debt
Securities within 90 days of a default under the Indenture unless such default
has been cured or waived; PROVIDED, HOWEVER, that the Trustee may withhold
notice to the Holders of any series of Debt Securities of any default with
respect to such series (except a default in the payment of the principal of (or
premium, if any) or interest on any Debt Security of such series or in the
payment of any sinking fund installment in respect of any Debt Security of such
series) if specified Responsible Officers of the Trustee consider such
withholding to be in the interest of such Holders (Section 601).
The Indenture provides that no Holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to the Indenture
or for any remedy thereunder, except in the case of failure of the Trustee, for
60 days, to act after it has received a written request to institute proceedings
in respect of an Event of Default from the Holders of not less than 25% in
principal amount of the Outstanding Debt Securities of such series, as well as
an offer of indemnity reasonably satisfactory to it (Section 507). This
provision will not prevent, however, any holder of Debt Securities from
instituting suit for the enforcement of payment of the principal of (and
premium, if any) and interest on such Debt Securities at the respective due
dates thereof (Section 508).
Subject to provisions in the Indenture relating to its duties in case of
default, the Trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any Holders of any
series of Debt Securities then Outstanding under the Indenture, unless such
Holders shall have offered to the Trustee thereunder reasonable security or
indemnity (Section 602). The Holders of not less than a majority in principal
amount of the Outstanding Debt Securities of any series (or of all Debt
Securities then Outstanding under the Indenture, as the case may be) shall have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or of exercising any trust or power
conferred upon the Trustee. However, the Trustee may refuse to follow any
direction which is in conflict with any law or the Indenture, which may involve
the Trustee in personal liability or which may be unduly prejudicial to the
holders of Debt Securities of such series not joining therein (Section 512).
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Within 120 days after the close of each fiscal year, the Operating
Partnership must deliver to the Trustee a certificate, signed by one of several
specified officers of the Company, stating whether or not such officer has
knowledge of any default under the Indenture and, if so, specifying each such
default and the nature and status thereof.
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture will be permitted to be made
only with the consent of the Holders of not less than a majority in principal
amount of all Outstanding Debt Securities or series of Outstanding Debt
Securities which are affected by such modification or amendment; PROVIDED,
HOWEVER, that no such modification or amendment may, without the consent of the
Holder of each such Debt Security affected thereby, (a) change the Stated
Maturity of the principal of, or premium (if any) or any installment of interest
on, any such Debt Security; (b) reduce the principal amount of, or the rate or
amount of interest on, or any premium payable on redemption of, any such Debt
Security, or reduce the amount of principal of an Original Issue Discount
Security that would be due and payable upon declaration of acceleration of the
maturity thereof or would be provable in bankruptcy, or adversely affect any
right of repayment of the holder of any such Debt Security; (c) change the place
of payment, or the coin or currency, for payment of principal of, premium, if
any, or interest on any such Debt Security; (d) impair the right to institute
suit for the enforcement of any payment on or with respect to any such Debt
Security; (e) reduce the above-stated percentage of outstanding Debt Securities
of any series necessary to modify or amend the Indenture, to waive compliance
with certain provisions thereof or certain defaults and consequences thereunder
or to reduce the quorum or voting requirements set forth in the Indenture; or
(f) modify any of the foregoing provisions or any of the provisions relating to
the waiver of certain past defaults or certain covenants, except to increase the
required percentage to effect such action or to provide that certain other
provisions may not be modified or waived without the consent of the Holder of
such Debt Security (Section 902).
The Indenture provides that the Holders of not less than a majority in
principal amount of a series of Outstanding Debt Securities have the right to
waive compliance by the Operating Partnership with certain covenants relating to
such series of Debt Securities in the Indenture (Section 1014).
Modifications and amendments of the Indenture will be permitted to be made
by the Operating Partnership and the Trustee without the consent of any Holder
of Debt Securities for any of the following purposes: (i) to evidence the
succession of another Person to the Operating Partnership as obligor under the
Indenture; (ii) to add to the covenants of the Operating Partnership for the
benefit of the Holders of all or any series of Debt Securities or to surrender
any right or power conferred upon the Operating Partnership in the Indenture;
(iii) to add Events of Default for the benefit of the Holders of all or any
series of Debt Securities; (iv) to add or change any provisions of the Indenture
to facilitate the issuance of, or to liberalize certain terms of, Debt
Securities in bearer form, or to permit or facilitate the issuance of Debt
Securities in uncertificated form, PROVIDED that such action shall not adversely
affect the interests of the Holders of the Debt Securities of any series in any
material respect; (v) to change or eliminate any provisions of the Indenture,
PROVIDED that any such change or elimination shall become effective only when
there are no Debt Securities Outstanding of any series created prior thereto
which are entitled to the benefit of such provision; (vi) to secure the Debt
Securities; (vii) to establish the form or terms of Debt Securities of any
series; (viii) to provide for the acceptance of appointment by a successor
Trustee or facilitate the administration of the trusts under the Indenture by
more than one Trustee; (ix) to cure any ambiguity, defect or inconsistency in
the Indenture, PROVIDED that such action shall not adversely affect the
interests of Holders of Debt Securities of any series in any material respect;
or (x) to supplement any of the provisions of the Indenture to the extent
necessary to permit or facilitate defeasance and discharge of any series of such
Debt Securities, PROVIDED that such action shall not adversely affect the
interests of the Holders of the Debt Securities of any series in any material
respect (Section 901).
The Indenture provides that in determining whether the Holders of the
requisite principal amount of Outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of Holders of Debt
Securities,
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(i) the principal amount of an Original Issue Discount Security that shall be
deemed to be Outstanding shall be the amount of the principal thereof that would
be due and payable as of the date of such determination upon declaration of
acceleration of the maturity thereof, (ii) the principal amount of a Debt
Security denominated in a foreign currency that shall be deemed Outstanding
shall be the U.S. dollar equivalent, determined on the issue date for such Debt
Security, of the principal amount (or, in the case of an Original Issue Discount
Security, the U.S. dollar equivalent on the issue date of such Debt Security of
the amount determined as provided in (i) above), (iii) the principal amount of
an Indexed Security that shall be deemed Outstanding shall be the principal face
amount of such Indexed Security at original issuance, unless otherwise provided
with respect to such Indexed Security pursuant to the Indenture, and (iv) Debt
Securities owned by the Operating Partnership or any other obligor upon the Debt
Securities or any affiliate of the Operating Partnership or of such other
obligor shall be disregarded.
The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series (Section 1501). A meeting will be permitted to be
called at any time by the Trustee, and also, upon request, by the Operating
Partnership or the holders of at least 10% in principal amount of the
Outstanding Debt Securities of such series, in any such case upon notice given
as provided in the Indenture (Section 1502). Except for any consent that must be
given by the Holder of each Debt Security affected by certain modifications and
amendments of the Indenture, any resolution presented at a meeting or adjourned
meeting duly reconvened at which a quorum is present will be permitted to be
adopted by the affirmative vote of the Holders of a majority in principal amount
of the Outstanding Debt Securities of that series; PROVIDED, HOWEVER, that,
except as referred to above, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action that may be
made, given or taken by the Holders of a specified percentage, which is less
than a majority, in principal amount of the Outstanding Debt Securities of a
series may be adopted at a meeting or adjourned meeting duly reconvened at which
a quorum is present by the affirmative vote of the Holders of such specified
percentage in principal amount of the Outstanding Debt Securities of that
series. Any resolution passed or decision taken at any meeting of Holders of
Debt Securities of any series duly held in accordance with the Indenture will be
binding on all Holders of Debt Securities of that series. The quorum at any
meeting called to adopt a resolution, and at any reconvened meeting, will be
Persons holding or representing a majority in principal amount of the
Outstanding Debt Securities of a series; PROVIDED, HOWEVER, that if any action
is to be taken at such meeting with respect to a consent or waiver which may be
given by the Holders of not less than a specified percentage in principal amount
of the Outstanding Debt Securities of a series, the Persons holding or
representing such specified percentage in principal amount of the Outstanding
Debt Securities of such series will constitute a quorum (Section 1504).
Notwithstanding the foregoing provisions, if any action is to be taken at a
meeting of Holders of Debt Securities of any series with respect to any request,
demand, authorization, direction, notice, consent, waiver or other action that
the Indenture expressly provides may be made, given or taken by the Holders of a
specified percentage in principal amount of all Outstanding Debt Securities
affected thereby, or of the Holders of such series and one or more additional
series: (i) there shall be no minimum quorum requirement for such meeting and
(ii) the principal amount of the Outstanding Debt Securities of such series that
vote in favor of such request, demand, authorization, direction, notice,
consent, waiver or other action shall be taken into account in determining
whether such request, demand, authorization, direction, notice, consent, waiver
or other action has been made, given or taken under the Indenture (Section
1504).
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Operating Partnership may discharge certain obligations to Holders of
any series of Debt Securities that have not already been delivered to the
Trustee for cancellation and that either have become due and payable or will
become due and payable within one year (or scheduled for redemption within one
year) by irrevocably depositing with the Trustee, in trust, funds in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable in an amount sufficient to
pay
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the entire indebtedness on such Debt Securities in respect of principal (and
premium, if any) and interest to the date of such deposit (if such Debt
Securities have become due and payable) or to the Stated Maturity or Redemption
Date, as the case may be (Sections 1401 and 1404).
The Indenture provides that, if the provisions of Article Fourteen are made
applicable to the Debt Securities of or within any series pursuant to Section
301 of the Indenture, the Operating Partnership may elect either (a) to defease
and be discharged from any and all obligations with respect to such Debt
Securities (except for the obligation to pay additional amounts, if any, upon
the occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities and the obligations to register the
transfer or exchange of such Debt Securities, to replace temporary or mutilated,
destroyed, lost or stolen Debt Securities, to maintain an office or agency in
respect of such Debt Securities and to hold moneys for payment in trust)
("defeasance") (Section 1402) or (b) to be released from its obligations with
respect to such Debt Securities under Sections 1004 to 1011, inclusive, of the
Indenture (including the restrictions described under "Certain Covenants") and
its obligations with respect to any other covenant, and any omission to comply
with such obligations shall not constitute a default or an Event of Default with
respect to such Debt Securities ("covenant defeasance") (Section 1403), in
either case upon the irrevocable deposit by the Operating Partnership with the
Trustee, in trust, of an amount, in such currency or currencies, currency unit
or units or composite currency or currencies in which such Debt Securities are
payable at Stated Maturity, or Government Obligations (as defined below), or
both, applicable to such Debt Securities which through the scheduled payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium, if any) and interest on
such Debt Securities, and any mandatory sinking fund or analogous payments
thereon, on the scheduled due dates therefor.
Such a trust will only be permitted to be established if, among other
things, the Operating Partnership has delivered to the Trustee an Opinion of
Counsel (as specified in the Indenture) to the effect that the Holders of such
Debt Securities will not recognize income, gain or loss for U.S. federal income
tax purposes as a result of such defeasance or covenant defeasance and will be
subject to U.S. federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance or covenant
defeasance had not occurred, and such Opinion of Counsel, in the case of
defeasance, must refer to and be based upon a ruling of the Internal Revenue
Service or a change in applicable United States federal income tax law occurring
after the date of the Indenture (Section 1404).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations of
a person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or such government which issued the foreign
currency in which the Debt Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, PROVIDED that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt.
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Operating Partnership has deposited funds and/or Government Obligations to
effect defeasance or covenant defeasance with respect to Debt Securities of any
series, (a) the Holder of a Debt Security of such series is entitled to, and
does, elect pursuant to the Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such
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Debt Security, or (b) a Conversion Event (as defined below) occurs in respect of
the currency, currency unit or composite currency in which such deposit has been
made, the indebtedness represented by such Debt Security shall be deemed to have
been, and will be, fully discharged and satisfied through the payment of the
principal of (and premium, if any) and interest on such Debt Security as they
become due out of the proceeds yielded by converting the amount so deposited in
respect of such Debt Security into the currency, currency unit or composite
currency in which such Debt Security becomes payable as a result of such
election or such Conversion Event based on the applicable market exchange rate.
"Conversion Event" means the cessation of use of (i) a currency, currency unit
or composite currency both by the government of the country which issued such
currency and for the settlement of transactions by a central bank or other
public institutions of or within the international banking community, (ii) the
ECU both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Community or (iii)
any currency unit or composite currency other than the ECU for the purposes for
which it was established. Unless otherwise provided in the applicable Prospectus
Supplement, all payments of principal of (and premium, if any) and interest on
any Debt Security that is payable in a foreign currency that ceases to be used
by its government of issuance shall be made in U.S. dollars.
In the event the Operating Partnership effects covenant defeasance with
respect to any Debt Securities and such Debt Securities are declared due and
payable because of the occurrence of any Event of Default other than the Event
of Default described in clause (d) under "Events of Default, Notice and Waiver"
with respect to Sections 1004 to 1011, inclusive, of the Indenture (which
sections would no longer be applicable to such Debt Securities) or described in
clause (g) under "Events of Default, Notice and Waiver" with respect to any
other covenant as to which there has been covenant defeasance, the amount in
such currency, currency unit or composite currency in which such Debt Securities
are payable, and Government Obligations on deposit with the Trustee, will be
sufficient to pay amounts due on such Debt Securities at the time of their
Stated Maturity but may not be sufficient to pay amounts due on such Debt
Securities at the time of the acceleration resulting from such Event of Default.
However, the Operating Partnership would remain liable to make payment of such
amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
NO CONVERSION RIGHTS
The Debt Securities will not be convertible into or exchangeable for any
capital stock of the Company or equity interest in the Operating Partnership.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary (the "Depositary") identified in
the applicable Prospectus Supplement relating to such series. Global Securities
may be issued in either registered or bearer form and in either temporary or
permanent form. The specific terms of the depositary arrangement with respect to
a series of Debt Securities will be described in the applicable Prospectus
Supplement relating to such series.
DESCRIPTION OF PREFERRED STOCK
GENERAL
The Company is authorized to issue 5,000,000 shares of preferred stock, $.01
par value per share, of which 300,000 shares of 9.10% Series A Cumulative
Redeemable Preferred Stock and 300,000 shares of 7.99% Series B Cumulative
Step-Up Premium Rate-SM- Preferred Stock were outstanding at December 31, 1997.
The following description of the Preferred Stock sets forth certain general
terms and provisions of the Preferred Stock to which any Prospectus Supplement
may relate. The statements below describing the
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Preferred Stock are in all respects subject to and qualified in their entirety
by reference to the applicable provisions of the Company's Amended and Restated
Articles of Incorporation (the "Articles of Incorporation") and Bylaws and any
applicable amendment to the Articles of Incorporation designating terms of a
series of Preferred Stock (a "Designating Amendment").
TERMS
Subject to the limitations prescribed by the Articles of Incorporation, the
board of directors is authorized to fix the number of shares constituting each
series of Preferred Stock and the designations and powers, preferences and
relative, participating, optional or other special rights and qualifications,
limitations or restrictions thereof, including such provisions as may be desired
concerning voting, redemption, dividends, dissolution or the distribution of
assets, conversion or exchange, and such other subjects or matters as may be
fixed by resolution of the board of directors. The Preferred Stock will, when
issued, be fully paid and nonassessable by the Company (except as described
under "-- Shareholder Liability" below) and will have no preemptive rights.
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms, including:
(1) The title and stated value of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the liquidation
preference per share and the offering price of such Preferred Stock;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to such Preferred Stock;
(4) The date from which dividends on such Preferred Stock shall accumulate,
if applicable;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Stock;
(6) The provision for a sinking fund, if any, for such Preferred Stock;
(7) The provision for redemption, if applicable, of such Preferred Stock;
(8) Any listing of such Preferred Stock on any securities exchange;
(9) The terms and conditions, if applicable, upon which such Preferred Stock
will be convertible into Common Stock of the Company, including the
conversion price (or manner of calculation thereof);
(10) Whether interests in such Preferred Stock will be represented by
Depositary Shares;
(11) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock;
(12) A discussion of federal income tax considerations applicable to such
Preferred Stock;
(13) The relative ranking and preferences of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company;
(14) Any limitations on issuance of any series of Preferred Stock ranking
senior to or on a parity with such series of Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company; and
(15) Any limitations on direct or beneficial ownership and restrictions on
transfer, in each case as may be appropriate to preserve the status of
the Company as a REIT.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred Stock
will, with respect to dividend rights and rights upon liquidation, dissolution
or winding up of the Company, rank (i) senior to all classes or series of Common
Stock of the Company, and to all equity securities ranking junior to such
Preferred Stock; (ii) on a parity with all equity securities issued by the
Company the terms of which
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specifically provide that such equity securities rank on a parity with the
Preferred Stock; and (iii) junior to all equity securities issued by the Company
the terms of which specifically provide that such equity securities rank senior
to the Preferred Stock. The term "equity securities" does not include
convertible debt securities.
DIVIDENDS
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the board of directors of the Company, out of assets
of the Company legally available for payment, cash dividends at such rates and
on such dates as will be set forth in the applicable Prospectus Supplement. Each
such dividend shall be payable to holders of record as they appear on the share
transfer books of the Company on such record dates as shall be fixed by the
board of directors of the Company.
Dividends on any series of the Preferred Stock may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the board of directors of the Company fails
to declare a dividend payable on a dividend payment date on any series of the
Preferred Stock for which dividends are non-cumulative, then the holders of such
series of the Preferred Stock will have no right to receive a dividend in
respect of the dividend period ending on such dividend payment date, and the
Company will have no obligation to pay the dividend accrued for such period,
whether or not dividends on such series are declared payable on any future
dividend payment date.
If Preferred Stock of any series is outstanding, no dividends will be
declared or paid or set apart for payment on any capital stock of the Company of
any other series ranking, as to dividends, on a parity with or junior to the
Preferred Stock of such series for any period unless (i) if such series of
Preferred Stock has a cumulative dividend, full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on the Preferred Stock of such
series for all past dividend periods and the then current dividend period or
(ii) if such series of Preferred Stock does not have a cumulative dividend, full
dividends for the then current dividend period have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for such payment on the Preferred Stock of such series. When dividends
are not paid in full (or a sum sufficient for such full payment is not so set
apart) upon Preferred Stock of any series and the shares of any other series of
Preferred Stock ranking on a parity as to dividends with the Preferred Stock of
such series, all dividends declared upon Preferred Stock of such series and any
other series of Preferred Stock ranking on a parity as to dividends with such
Preferred Stock shall be declared pro rata so that the amount of dividends
declared per share of Preferred Stock of such series and such other series of
Preferred Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the Preferred Stock of such series (which shall
not include any accumulation in respect of unpaid dividends for prior dividend
periods if such Preferred Stock does not have a cumulative dividend) and such
other series of Preferred Stock bear to each other. No interest, or sum of money
in lieu of interest, shall be payable in respect of any dividend payment or
payments on Preferred Stock of such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Stock has a cumulative dividend, full cumulative
dividends on the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for all past dividend periods and the then current
dividend period, and (ii) if such series of Preferred Stock does not have a
cumulative dividend, full dividends on the Preferred Stock of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for payment for the then current dividend
period, no dividends (other than in shares of Common Stock or other capital
shares ranking junior to the Preferred Stock of such series as to dividends and
upon liquidation) shall be declared or paid or set aside for payment or other
distribution shall be declared or made upon the Common Stock, or any other
capital shares of the Company ranking junior to or on a parity with the
Preferred Stock of such series as to dividends or upon liquidation, nor shall
any shares of Common Stock, or any other capital shares of the Company ranking
junior to or on a parity with the Preferred Stock of such series as to dividends
or upon liquidation be redeemed, purchased or otherwise
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acquired for any consideration (or any moneys be paid to or made available for a
sinking fund for the redemption of any such shares) by the Company (except by
conversion into or exchange for other capital shares of the Company ranking
junior to the Preferred Stock of such series as to dividends and upon
liquidation).
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Stock
will be subject to mandatory redemption or redemption at the option of the
Company, as a whole or in part, in each case upon the terms, at the times and at
the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon (which
shall not, if such Preferred Stock does not have a cumulative dividend, include
any accumulation in respect of unpaid dividends for prior dividend periods) to
the date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable Prospectus Supplement. If the
redemption price for Preferred Stock of any series is payable only from the net
proceeds of the issuance of capital shares of the Company, the terms of such
Preferred Stock may provide that, if no such capital shares shall have been
issued or to the extent the net proceeds from any issuance are insufficient to
pay in full the aggregate redemption price then due, such Preferred Stock shall
automatically and mandatorily be converted into the applicable capital shares of
the Company pursuant to conversion provisions specified in the applicable
Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred Stock
has a cumulative dividend, full cumulative dividends on all shares of any series
of Preferred Stock shall have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for
all past dividend periods and the then current dividend period, and (ii) if such
series of Preferred Stock does not have a cumulative dividend, full dividends of
the Preferred Stock of any series have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof set apart for
payment for the then current dividend period, no shares of any series of
Preferred Stock shall be redeemed unless all outstanding Preferred Stock of such
series is simultaneously redeemed; PROVIDED, HOWEVER, that the foregoing shall
not prevent the purchase or acquisition of Preferred Stock of such series to
preserve the REIT status of the Company or pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding Preferred Stock of
such series. In addition, unless (i) if such series of Preferred Stock has a
cumulative dividend, full cumulative dividends on all outstanding shares of any
series of Preferred Stock have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set apart for payment
for all past dividends periods and the then current dividend period, and (ii) if
such series of Preferred Stock does not have a cumulative dividend, full
dividends on the Preferred Stock of any series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for the then current dividend period, the Company shall
not purchase or otherwise acquire directly or indirectly any shares of Preferred
Stock of such series (except by conversion into or exchange for capital shares
of the Company ranking junior to the Preferred Stock of such series as to
dividends and upon liquidation); PROVIDED, HOWEVER, that the foregoing shall not
prevent the purchase or acquisition of Preferred Stock of such series to
preserve the REIT status of the Company or pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding Preferred Stock of
such series.
If fewer than all of the outstanding shares of Preferred Stock of any series
are to be redeemed, the number of shares to be redeemed will be determined by
the Company and such shares may be redeemed pro rata from the holders of record
of such shares in proportion to the number of such shares held or for which
redemption is requested by such holder (with adjustments to avoid redemption of
fractional shares) or by lot in a manner determined by the Company.
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Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Stock of
any series to be redeemed at the address shown on the share transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
of shares and series of the Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Preferred Stock are
to be surrendered for payment of the redemption price; (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date; and (vi) the
date upon which the holder's conversion rights, if any, as to such shares shall
terminate. If fewer than all the shares of Preferred Stock of any series are to
be redeemed, the notice mailed to each such holder thereof shall also specify
the number of shares of Preferred Stock to be redeemed from each such holder. If
notice of redemption of any Preferred Stock has been given and if the funds
necessary for such redemption have been set aside by the Company in trust for
the benefit of the holders of any Preferred Stock so called for redemption, then
from and after the redemption date dividends will cease to accrue on such
Preferred Stock, and all rights of the holders of such shares will terminate,
except the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Common Stock or any other class or series of capital
shares of the Company ranking junior to the Preferred Stock in the distribution
of assets upon any liquidation, dissolution or winding up of the Company, the
holders of each series of Preferred Stock shall be entitled to receive out of
assets of the Company legally available for distribution to shareholders
liquidating distributions in the amount of the liquidation preference per share
(set forth in the applicable Prospectus Supplement), plus an amount equal to all
dividends accrued and unpaid thereon (which shall not include any accumulation
in respect of unpaid dividends for prior dividend periods if such Preferred
Stock does not have a cumulative dividend). After payment of the full amount of
the liquidating distributions to which they are entitled, the holders of
Preferred Stock will have no right or claim to any of the remaining assets of
the Company. In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the available assets of the Company are
insufficient to pay the amount of the liquidating distributions on all
outstanding Preferred Stock and the corresponding amounts payable on all shares
of other classes or series of capital shares of the Company ranking on a parity
with the Preferred Stock in the distribution of assets, then the holders of the
Preferred Stock and all other such classes or series of capital shares shall
share ratably in any such distribution of assets in proportion to the full
liquidating distributions to which they would otherwise be respectively
entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Stock, the remaining assets of the Company shall be distributed among
the holders of any other classes or series of capital shares ranking junior to
the Preferred Stock upon liquidation, dissolution or winding up, according to
their respective rights and preferences and in each case according to their
respective number of shares. For such purposes, the consolidation or merger of
the Company with or into any other corporation, trust or entity, or the sale,
lease or conveyance of all or substantially all of the property or business of
the Company, shall not be deemed to constitute a liquidation, dissolution or
winding up of the Company.
VOTING RIGHTS
Holders of the Preferred Stock will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Whenever dividends on any shares of Preferred Stock shall be in arrears for
six or more consecutive quarterly periods, the holders of such shares of
Preferred Stock (voting separately as a class with all other series of preferred
stock upon which like voting rights have been conferred and are exercisable)
will be entitled to vote for the election of two additional directors of the
Company at a special meeting called by the holders of record of at least ten
percent (10%) of any series of Preferred stock so in arrears (unless such
request is received less than 90 days before the date fixed for the next annual
or special meeting of the stockholders) or at the next annual meeting of
stockholders, and at each subsequent annual meeting until (i) if such series of
Preferred Stock has a cumulative dividend, all dividends accumulated on such
shares of
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Preferred Stock for the past dividend periods and the then current dividend
period shall have been fully paid or declared and a sum sufficient for the
payment thereof set aside for payment or (ii) if such series of Preferred Stock
does not have a cumulative dividend, four consecutive quarterly dividends shall
have been fully paid or declared and a sum sufficient for the payment thereof
set aside for payment. In such case, the entire board of directors of the
Company will be increased by two directors.
Unless provided otherwise for any series of Preferred Stock, so long as any
shares of Preferred Stock remain outstanding, the Company will not, without the
affirmative vote or consent of the holders of at least two-thirds of the shares
of each series of Preferred Stock outstanding at the time, given in person or by
proxy, either in writing or at a meeting (such series voting separately as a
class), (i) authorize or create, or increase the authorized or issued amount of,
any class or series of capital stock ranking prior to such series of Preferred
Stock with respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up or reclassify any authorized capital
stock of the Company into such shares, or create, authorize or issue any
obligation or security convertible into or evidencing the right to purchase any
such shares; or (ii) amend, alter or repeal the provisions of the Company's
Articles of Incorporation or the Designating Amendment for such series of
Preferred Stock, whether by merger, consolidation or otherwise (an "Event"), so
as to materially and adversely affect any right, preference, privilege or voting
power of such series of Preferred Stock or the holders thereof; PROVIDED,
HOWEVER, with respect to the occurrence of any of the Events set forth in (ii)
above, so long as the Preferred Stock remains outstanding with the terms thereof
materially unchanged, taking into account that upon the occurrence of an Event,
the Company may not be the surviving entity, the occurrence of any such Event
shall not be deemed to materially and adversely affect such rights, preferences,
privileges or voting power of holders of Preferred Stock and provided further
that (x) any increase in the amount of the authorized Preferred Stock or the
creation or issuance of any other series of Preferred Stock, or (y) any increase
in the amount of authorized shares of such series or any other series of
Preferred Stock, in each case ranking on a parity with or junior to the
Preferred Stock of such series with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up, shall not be
deemed to materially and adversely affect such rights, preferences, privileges
or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Stock shall have
been redeemed or called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.
Under Indiana law, notwithstanding anything to the contrary set forth above,
holders of each series of Preferred Stock will be entitled to vote as a class
upon any proposed amendment to the Articles of Incorporation, whether or not
entitled to vote thereon by the Articles of Incorporation, if the amendment
would (i) increase or decrease the aggregate number of authorized shares of such
series; (ii) effect an
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exchange or reclassification of all or part of the shares of the series into
shares of another series; (iii) effect an exchange or reclassification, or
create the right of exchange, of all or part of the shares of another class or
series into shares of the series; (iv) change the designation, rights,
preferences or limitations of all or a part of the shares of the series; (v)
change the shares of all or part of the series into a different number of shares
of the same series; (vi) create a new series having rights or preferences with
respect to distributions or dissolution that are prior, superior or
substantially equal to the shares of the series; (vii) increase the rights,
preferences or number of authorized shares of any class or series that, after
giving effect to the amendment, have rights or preferences with respect to
distributions or to dissolution that are prior, superior or substantially equal
to the shares of the series; (viii) limit or deny an existing preemptive right
of all or part of the shares of the series; or (ix) cancel or otherwise affect
rights to distributions or dividends that have accumulated but have not yet been
declared on all or part of the shares of the series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Stock
is convertible into shares of Common Stock will be set forth in the applicable
Prospectus Supplement relating thereto. Such terms will include the number of
shares of Common Stock into which the shares of Preferred Stock are convertible,
the conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of the
Preferred Stock or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such series of Preferred Stock.
SHAREHOLDER LIABILITY
As discussed below under "Description of Common Stock -- General,"
applicable Indiana law provides that no shareholder, including holders of
Preferred Stock, shall be personally liable for the acts and obligations of the
Company and that the funds and property of the Company shall be the only
recourse for such acts or obligations.
RESTRICTIONS ON OWNERSHIP
As discussed below under "Description of Common Stock -- Certain Provisions
Affecting Change of Control," for the Company to qualify as a REIT under the
Internal Revenue Code of 1986, as amended (the "Code"), not more than 50% in
value of its outstanding capital shares may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain entities)
during the last half of a taxable year. To assist the Company in meeting this
requirement, the Company may take certain actions to limit the beneficial
ownership, directly or indirectly, by a single person of the Company's
outstanding equity securities, including any Preferred Stock of the Company.
Therefore, the Designating Amendment for each series of Preferred Stock may
contain provisions restricting the ownership and transfer of the Preferred
Stock. The applicable Prospectus Supplement will specify any additional
ownership limitation relating to a series of Preferred Stock.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Preferred Stock will be set forth
in the applicable Prospectus Supplement.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
The Company may issue receipts ("Depositary Receipts") for Depositary
Shares, each of which will represent a fractional interest of a share of a
particular series of Preferred Stock, as specified in the applicable Prospectus
Supplement. Shares of Preferred Stock of each series represented by Depositary
Shares will be deposited under a separate deposit agreement (each, a "Deposit
Agreement") among the Company, the depositary named therein (a "Preferred Stock
Depositary") and the holders from time to time of the Depositary Receipts.
Subject to the terms of the applicable Deposit Agreement, each owner of a
Depositary Receipt will be entitled, in proportion to the fractional interest of
a share of a particular series of
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Preferred Stock represented by the Depositary Shares evidenced by such
Depositary Receipt, to all the rights and preferences of the Preferred Stock
represented by such Depositary Shares (including dividend, voting, conversion,
redemption and liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the issuance
and delivery of the Preferred Stock by the Company to a Preferred Stock
Depositary, the Company will cause such Preferred Stock Depositary to issue, on
behalf of the Company, the Depositary Receipts. Copies of the applicable form of
Deposit Agreement and Depositary Receipt may be obtained from the Company upon
request, and the statements made hereunder relating to Deposit Agreements and
the Depositary Receipts to be issued thereunder are summaries of certain
anticipated provisions thereof and do not purport to be complete and are subject
to, and qualified in their entirety by reference to, all of the provisions of
the applicable Deposit Agreement and related Depositary Receipts.
DIVIDENDS AND OTHER DISTRIBUTIONS
A Preferred Stock Depositary will be required to distribute all cash
dividends or other cash distributions received in respect of the applicable
Preferred Stock to the record holders of Depositary Receipts evidencing the
related Depositary Shares in proportion to the number of such Depositary
Receipts owned by such holders, subject to certain obligations of holders to
file proofs, certificates and other information and to pay certain charges and
expenses to such Preferred Stock Depositary.
In the event of a distribution other than in cash, a Preferred Stock
Depositary will be required to distribute property received by it to the record
holders of Depositary Receipts entitled thereto, subject to certain obligations
of holders to file proofs, certificates and other information and to pay certain
charges and expenses to such Preferred Stock Depositary, unless such Preferred
Stock Depositary determines that it is not feasible to make such distribution,
in which case such Preferred Stock Depositary may, with the approval of the
Company, sell such property and distribute the net proceeds from such sale to
such holders.
No distribution will be made in respect of any Depositary Share to the
extent that it represents any Preferred Stock which has been converted or
exchanged.
WITHDRAWAL OF STOCK
Upon surrender of the Depositary Receipts at the corporate trust office of
the applicable Preferred Stock Depositary (unless the related Depositary Shares
have previously been called for redemption or converted), the holders thereof
will be entitled to delivery at such office, to or upon each such holder's
order, of the number of whole or fractional shares of the applicable Preferred
Stock and any money or other property represented by the Depositary Shares
evidenced by such Depositary Receipts. Holders of Depositary Receipts will be
entitled to receive whole or fractional shares of the related Preferred Stock on
the basis of the proportion of Preferred Stock represented by each Depositary
Share as specified in the applicable Prospectus Supplement, but holders of such
shares of Preferred Stock will not thereafter be entitled to receive Depositary
Shares therefor. If the Depositary Receipts delivered by the holder evidence a
number of Depositary Shares in excess of the number of Depositary Shares
representing the number of shares of Preferred Stock to be withdrawn, the
applicable Preferred Stock Depositary will be required to deliver to such holder
at the same time a new Depositary Receipt evidencing such excess number of
Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES
Whenever the Company redeems shares of Preferred Stock held by a Preferred
Stock Depositary, such Preferred Stock Depositary will be required to redeem as
of the same redemption date the number of Depositary Shares representing shares
of the Preferred Stock so redeemed, provided the Company shall have paid in full
to such Preferred Stock Depositary the redemption price of the Preferred Stock
to be redeemed plus an amount equal to any accrued and unpaid dividends thereon
to the date fixed for redemption. The redemption price per Depositary Share will
be equal to the redemption price and any other amounts per share payable with
respect to the Preferred Stock. If fewer than all the Depositary Shares are to
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be redeemed, the Depositary Shares to be redeemed will be selected pro rata (as
nearly as may be practicable without creating fractional Depositary Shares) or
by any other equitable method determined by the Company that preserves the REIT
status of the Company.
From and after the date fixed for redemption, all dividends in respect of
the shares of Preferred Stock so called for redemption will cease to accrue, the
Depositary Shares so called for redemption will no longer be deemed to be
outstanding and all rights of the holders of the Depositary Receipts evidencing
the Depositary Shares so called for redemption will cease, except the right to
receive any moneys payable upon such redemption and any money or other property
to which the holders of such Depositary Receipts were entitled upon such
redemption upon surrender thereof to the applicable Preferred Stock Depositary.
VOTING OF THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the applicable
Preferred Stock are entitled to vote, a Preferred Stock Depositary will be
required to mail the information contained in such notice of meeting to the
record holders of the Depositary Receipts evidencing the Depositary Shares which
represent such Preferred Stock. Each record holder of Depositary Receipts
evidencing Depositary Shares on the record date (which will be the same date as
the record date for the Preferred Stock) will be entitled to instruct such
Preferred Stock Depositary as to the exercise of the voting rights pertaining to
the amount of Preferred Stock represented by such holder's Depositary Shares.
Such Preferred Stock Depositary will be required to vote the amount of Preferred
Stock represented by such Depositary Shares in accordance with such
instructions, and the Company will agree to take all reasonable action which may
be deemed necessary by such Preferred Stock Depositary in order to enable such
Preferred Stock Depositary to do so. Such Preferred Stock Depositary will be
required to abstain from voting the amount of Preferred Stock represented by
such Depositary Shares to the extent it does not receive specific instructions
from the holders of Depositary Receipts evidencing such Depositary Shares. A
Preferred Stock Depositary will not be responsible for any failure to carry out
any instruction to vote, or for the manner or effect of any such vote made, as
long as any such action or non-action is in good faith and does not result from
negligence or willful misconduct of such Preferred Stock Depositary.
LIQUIDATION PREFERENCE
In the event of the liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the holders of each Depositary Receipt will be
entitled to the fraction of the liquidation preference accorded each share of
Preferred Stock represented by the Depositary Share evidenced by such Depositary
Receipt, as set forth in the applicable Prospectus Supplement.
CONVERSION OF PREFERRED STOCK
The Depositary Shares, as such, will not be convertible into Common Stock or
any other securities or property of the Company. Nevertheless, if so specified
in the applicable Prospectus Supplement relating to an offering of Depositary
Shares, the Depositary Receipts may be surrendered by holders thereof to the
applicable Preferred Stock Depositary with written instructions to such
Preferred Stock Depositary to instruct the Company to cause conversion of the
Preferred Stock represented by the Depositary Shares evidenced by such
Depositary Receipts into whole shares of Common Stock, other shares of Preferred
Stock of the Company or other shares of stock, and the Company will agree that
upon receipt of such instructions and any amounts payable in respect thereof, it
will cause the conversion thereof utilizing the same procedures as those
provided for delivery of Preferred Stock to effect such conversion. If the
Depositary Shares evidenced by a Depositary Receipt are to be converted in part
only, a new Depositary Receipt or Receipts will be issued for any Depositary
Shares not to be converted. No fractional shares of Common Stock will be issued
upon conversion, and if such conversion will result in a fractional share being
issued, an amount will be paid in cash by the Company equal to the value of the
fractional interest based upon the closing price of the Common Stock on the last
business day prior to the conversion.
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AMENDMENT AND TERMINATION OF A DEPOSIT AGREEMENT
Any form of Depositary Receipt evidencing Depositary Shares which will
represent Preferred Stock and any provision of a Deposit Agreement will be
permitted at any time to be amended by agreement between the Company and the
applicable Preferred Stock Depositary. However, any amendment that materially
and adversely alters the rights of the holders of Depositary Receipts or that
would be materially and adversely inconsistent with the rights granted to the
holders of the related Preferred Stock will not be effective unless such
amendment has been approved by the existing holders of at least two-thirds of
the applicable Depositary Shares evidenced by the applicable Depositary Receipts
then outstanding. No amendment shall impair the right, subject to certain
anticipated exceptions in the Deposit Agreements, of any holder of Depositary
Receipts to surrender any Depositary Receipt with instructions to deliver to the
holder the related Preferred Stock and all money and other property, if any,
represented thereby, except in order to comply with law. Every holder of an
outstanding Depositary Receipt at the time any such amendment becomes effective
shall be deemed, by continuing to hold such Depositary Receipt, to consent and
agree to such amendment and to be bound by the applicable Deposit Agreement as
amended thereby.
A Deposit Agreement will be permitted to be terminated by the Company upon
not less than 30 days' prior written notice to the applicable Preferred Stock
Depositary if (i) such termination is necessary to preserve the Company's status
as a REIT or (ii) a majority of each series of Preferred Stock affected by such
termination consents to such termination, whereupon such Preferred Stock
Depositary will be required to deliver or make available to each holder of
Depositary Receipts, upon surrender of the Depositary Receipts held by such
holder, such number of whole or fractional shares of Preferred Stock as are
represented by the Depositary Shares evidenced by such Depositary Receipts
together with any other property held by such Preferred Stock Depositary with
respect to such Depositary Receipts. The Company will agree that if a Deposit
Agreement is terminated to preserve the Company's status as a REIT, then the
Company will use its best efforts to list the Preferred Stock issued upon
surrender of the related Depositary Shares on a national securities exchange. In
addition, a Deposit Agreement will automatically terminate if (i) all
outstanding Depositary Shares thereunder shall have been redeemed, (ii) there
shall have been a final distribution in respect of the related Preferred Stock
in connection with any liquidation, dissolution or winding up of the Company and
such distribution shall have been distributed to the holders of Depositary
Receipts evidencing the Depositary Shares representing such Preferred Stock or
(iii) each share of the related Preferred Stock shall have been converted into
stock of the Company not so represented by Depositary Shares.
CHARGES OF A PREFERRED STOCK DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of a Deposit Agreement. In addition, the
Company will pay the fees and expenses of a Preferred Stock Depositary in
connection with the performance of its duties under a Deposit Agreement.
However, holders of Depositary Receipts will pay the fees and expenses of a
Preferred Stock Depositary for any duties requested by such holders to be
performed which are outside of those expressly provided for in the applicable
Deposit Agreement.
RESIGNATION AND REMOVAL OF DEPOSITARY
A Preferred Stock Depositary will be permitted to resign at any time by
delivering to the Company notice of its election to do so, and the Company will
be permitted at any time to remove a Preferred Stock Depositary, any such
resignation or removal to take effect upon the appointment of a successor
Preferred Stock Depositary. A successor Preferred Stock Depositary will be
required to be appointed within 60 days after delivery of the notice of
resignation or removal and will be required to be a bank or trust company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000.
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MISCELLANEOUS
A Preferred Stock Depositary will be required to forward to holders of
Depositary Receipts any reports and communications from the Company which are
received by such Preferred Stock Depositary with respect to the related
Preferred Stock.
Neither a Preferred Stock Depositary nor the Company will be liable if it is
prevented from or delayed in, by law or any circumstances beyond its control,
performing its obligations under a Deposit Agreement. The obligations of the
Company and a Preferred Stock Depositary under a Deposit Agreement will be
limited to performing their duties thereunder in good faith and without
negligence (in the case of any action or inaction in the voting of Preferred
Stock represented by the applicable Depositary Shares), gross negligence or
willful misconduct, and neither the Company nor any applicable Preferred Stock
Depositary will be obligated to prosecute or defend any legal proceeding in
respect of any Depositary Receipts. Depositary Shares or shares of Preferred
Stock represented thereby unless satisfactory indemnity is furnished. The
Company and any Preferred Stock Depositary will be permitted to rely on written
advice of counsel or accountants, or information provided by persons presenting
shares of Preferred Stock represented thereby for deposit, holders of Depositary
Receipts or other persons believed in good faith to be competent to give such
information, and on documents believed in good faith to be genuine and signed by
a proper party.
In the event a Preferred Stock Depositary shall receive conflicting claims,
requests or instructions from any holders of Depositary Receipts, on the one
hand, and the Company, on the other hand, such Preferred Stock Depositary shall
be entitled to act on such claims, requests or instructions received from the
Company.
DESCRIPTION OF COMMON STOCK
GENERAL
The authorized capital stock of the Company includes 150,000,000 shares of
Common Stock, $.01 par value per share. Each outstanding share of Common Stock
entitles the holder to one vote on all matters presented to shareholders for a
vote. Holders of Common Stock have no preemptive rights. At December 31, 1997,
there were 76,065,207 shares of Common Stock outstanding, 10,988,469 shares
reserved for issuance upon exchange of outstanding Units and 1,927,380 shares
reserved for issuance upon the exercise of outstanding stock options.
Shares of Common Stock currently outstanding are listed for trading on the
New York Stock Exchange (the "NYSE"). The Company will apply to the NYSE to list
the additional shares of Common Stock to be sold pursuant to any Prospectus
Supplement, and the Company anticipates that such shares will be so listed.
The Articles of Incorporation of the Company provide for the board of
directors to be divided into three classes of directors, each class to consist
as nearly as possible of one-third of the directors. At each annual meeting of
shareholders, the class of directors to be elected at such meeting will be
elected for a three-year term and the directors in the other two classes will
continue in office. The overall effect of the provisions in the Articles of
Incorporation with respect to the classified board may be to render more
difficult a change of control of the Company or removal of incumbent management.
Holders of Common Stock have no right to cumulative voting for the election of
directors. Consequently, at each annual meeting of shareholders, the holders of
a plurality of the shares of Common Stock are able to elect all of the
successors of the class of directors whose term expires at that meeting.
Directors may be removed only for cause and only with the affirmative vote of
the holders of a majority of the shares of Common Stock entitled to vote in the
election of directors.
All shares of Common Stock issued will be duly authorized, fully paid, and
non-assessable. Distributions may be paid to the holders of Common Stock if and
when declared by the board of directors of the Company out of funds legally
available therefor. The Company intends to continue to pay quarterly dividends.
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Under Indiana law, shareholders are generally not liable for the Company's
debts or obligations. If the Company is liquidated, subject to the right of any
holders of preferred stock, if any, to receive preferential distributions, each
outstanding share of Common Stock will be entitled to participate pro rata in
the assets remaining after payment of, or adequate provision for, all known
debts and liabilities of the Company.
CERTAIN PROVISIONS AFFECTING CHANGE OF CONTROL
GENERAL. Pursuant to Indiana law, the Company cannot merge with or sell all
or substantially all of the assets of the Company, except pursuant to a
resolution approved by shareholders holding a majority of the shares voting on
the resolution. The Company's Articles of Incorporation also contain provisions
which may discourage certain types of transactions involving an actual or
threatened change of control of the Company, including: (i) a requirement that,
in the case of certain mergers, sales of assets, liquidations or dissolutions,
or reclassifications or recapitalizations involving persons owning 10% or more
of the capital stock of the Company, such transactions be approved by a vote of
the holders of 80% of the issued and outstanding shares of capital stock of the
Company or three-fourths of the continuing directors, or provide for payment of
a price to affected shareholders for their shares not less than as specified in
the Articles of Incorporation; (ii) a requirement that any amendment or
alteration of certain provisions of the Articles of Incorporation affecting
change of control be approved by the holders of 80% of the issued and
outstanding capital stock of the Company; and (iii) a staggered board of
directors and a limitation on removal of directors to removal for cause as
described above.
The partnership agreement for the Operating Partnership also contains
provisions which could discourage transactions involving an actual or threatened
change of control of the Company, including (i) a requirement that holders of at
least 90% of the outstanding Units held by the Company and other Unit holders
approve any voluntary sale, exchange or other disposition, including merger or
consolidation (other than a disposition occurring upon a financing or
refinancing of the Operating Partnership), of all or substantially all of the
assets of the Operating Partnership in a single transaction or a series of
related transactions; (ii) a restriction against any assignment or transfer by
the Company of its interest in the Operating Partnership; and (iii) a
requirement that holders of more than 90% of the Units approve any merger,
consolidation or other combination of the Company with or into another entity,
or sale of all or substantially all of the Company's assets, or any
reclassification or recapitalization or change of outstanding shares of Common
Stock (other than certain changes in par value, stock splits, stock dividends or
combinations) unless after the transaction substantially all of the assets of
the surviving entity are contributed to the Operating Partnership in exchange
for Units. On these matters, the Company's Units will be voted at the discretion
of the directors of the Company who are not officers or employees of the Company
and do not hold Units.
OWNERSHIP LIMITS. For the Company to qualify as a REIT under the Code, no
more than 50% in value of its outstanding capital shares may be owned, directly
or indirectly, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of a taxable year or during a
proportionate part of a shorter taxable year. The Common Stock must also be
beneficially owned by 100 or more persons during at least 335 days of a taxable
year or during a proportionate part of a shorter taxable year. Because the
Company expects to continue to qualify as a REIT, the Articles of Incorporation
of the Company contain restrictions on the acquisition of Common Stock intended
to ensure compliance with these requirements.
The Articles of Incorporation contain a restriction which authorizes, but
does not require, the board of directors to refuse to give effect to a transfer
of Common Stock which, in its opinion, might jeopardize the status of the
Company as a REIT. This provision also renders null and void any purported
acquisition of shares which would result in the disqualification of the Company
as a REIT. The provision also gives the board of directors the authority to take
such actions as it deems advisable to enforce the provision. Such actions might
include, but are not limited to, refusing to give effect to, or seeking to
enjoin, a transfer which might jeopardize the Company's status as a REIT. The
provision also requires any shareholder to provide the Company such information
regarding his direct and indirect ownership of Common Stock as the Company may
reasonably require.
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REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Common Stock is American Stock
Transfer & Trust Company, New York, New York.
FEDERAL INCOME TAX CONSIDERATIONS
The following summary of material federal income tax considerations relevant
to the Company is based on current law, is not exhaustive of all possible tax
considerations, does not include a detailed discussion of any state, local or
foreign tax considerations and does not purport to deal with all aspects of
taxation that may be relevant to an investor in light of his or her particular
circumstances or to certain types of investors (including insurance companies,
tax-exempt entities, financial institutions or broker-dealers, foreign
corporations and persons who are not citizens or residents of the United States)
who are subject to special treatment under the federal income tax laws. The tax
treatment of an investor will also vary depending upon the terms of the specific
securities acquired by such investor. Additional federal income tax
considerations that are material to investors in securities other than common
stock may be provided in the applicable Prospectus Supplement relating thereto.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT THE APPLICABLE PROSPECTUS
SUPPLEMENT AS WELL AS HIS OR HER OWN TAX ADVISOR REGARDING THE SPECIFIC TAX
CONSEQUENCES TO HIM OR HER OF THE PURCHASE, OWNERSHIP AND SALE OF SECURITIES IN
AN ENTITY ELECTING TO BE TAXED AS A REIT, INCLUDING THE FEDERAL, STATE, LOCAL,
FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND
ELECTION, AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
TAXATION OF THE COMPANY
GENERAL. The Company expects to continue to be taxed as a REIT for Federal
income tax purposes. Management believes that the Company was organized and has
operated in such a manner as to meet the requirements for qualification and
taxation as a REIT under the Internal Revenue Code of 1986, as amended (the
"Code"), and that the Company intends to continue to operate in such a manner.
No assurance, however, can be given that the Company has qualified as a REIT or
will continue to operate in a manner so as to remain qualified as a REIT.
In the opinion of Bose McKinney & Evans which has acted as counsel to the
Company ("Counsel"), assuming the Company was organized in conformity with and
has satisfied the requirements for qualification and taxation as a REIT under
the Code for each of its taxable years from and including the first year for
which the Company made the election to be taxed as a REIT, and the assumptions
and representations referred to below are true, the proposed methods of
operation of the Company, the Operating Partnership and Duke Realty Services
Limited Partnership (the "Services Partnership") will permit the Company to
continue to qualify to be taxed as a REIT for its current and subsequent taxable
years. This opinion is based upon certain assumptions relating to the
organization and operation of Duke Services, Inc. ("DSI"), the Operating
Partnership and the Services Partnership and is conditioned upon certain
representations made by Company personnel and affiliates as to certain factual
matters relating to the Company's past operations and the intended manner of
future operation of the Company, the Operating Partnership, and the Services
Partnership. The opinion is further based upon a letter ruling received by the
Company from the IRS dated September 30, 1994, which concluded that the
Company's and the Operating Partnership's distributive shares of the gross
income of the Services Partnership will be in proportion to their respective
percentage shares of the capital interests of the partners of the Services
Partnership. Counsel is not aware of any facts or circumstances which are
inconsistent with these assumptions and representations. Unlike a tax ruling, an
opinion of counsel is not binding upon the IRS, and no assurance can be given
that the IRS will not challenge the status of the Company as a REIT for Federal
income tax purposes. The Company's qualification and taxation as a REIT has
depended and will depend upon, among other things, the Company's ability to meet
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on a continuing basis, through ownership of assets, actual annual operating
results, receipt of qualifying real estate income, distribution levels and
diversity of stock ownership, the various qualification tests imposed under the
Code discussed below. Counsel will not review compliance with these tests on a
periodic or continuing basis. Accordingly, no assurance can be given respecting
the satisfaction of such tests. See "Taxation of the Company--Failure to
Qualify."
The following is a general summary of the Code sections which govern the
Federal income tax treatment of a REIT and its shareholders. These sections of
the Code are highly technical and complex. This summary is qualified in its
entirety by the applicable Code provisions, Treasury Regulations, and
administrative and judicial interpretations thereof as currently in effect.
So long as the Company qualifies for taxation as a REIT and distributes at
least 95% of its REIT taxable income (computed without regard to net capital
gain or the dividends paid deduction) for its taxable year to its shareholders,
it will generally not be subject to federal income tax with respect to income
which it distributes to its shareholders. However, the Company may be subject to
federal income tax under certain circumstances, including taxes at regular
corporate rates on any undistributed REIT taxable income, the "alternative
minimum tax" on its items of tax preference, and taxes imposed on income and
gain generated by certain extraordinary transactions.
REQUIREMENT FOR QUALIFICATION. The Code defines a REIT as a corporation,
trust or association: (1) which is managed by one or more trustees or directors;
(2) the beneficial ownership of which is evidenced by transferable shares or by
transferable certificates of beneficial interest; (3) which would be taxable as
a domestic corporation but for Sections 856 through 859 of the Code; (4) which
is neither a financial institution nor an insurance company subject to certain
provisions of the Code; (5) which has the calendar year as its taxable year; (6)
the beneficial ownership of which is held by 100 or more persons; (7) during the
last half of each taxable year not more than 50% in value of the outstanding
stock of which is owned, directly or indirectly, by five or fewer individuals
(as defined in the Code to include certain entities); and (8) which meets
certain income and asset tests, described below. The Company believes it
currently satisfies all requirements.
DSI is a "qualified REIT subsidiary" and is not treated as a separate
corporation. Thus, in applying the requirements described herein, DSI will be
ignored for federal income tax purposes, and all of its assets, liabilities, and
items of income, deduction, and credit will be treated as assets, liabilities,
and items of income, deduction, and credit of the Company. DSI, therefore, will
not be subject to federal corporate income taxation, although it may be subject
to state and local taxation.
INCOME TESTS. In order to qualify as a REIT, there are two gross income
tests that must be satisfied annually. For purposes of these tests, the Company
is deemed to be entitled to a share of the gross income attributable to its
proportionate interest in any partnerships in which it holds an interest. First,
at least 75% of the Company's gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived directly or
indirectly from investments relating to real property (including "rents from
real property," gain from the sale of real property and, in certain
circumstances, interest) or from qualified types of temporary investments.
Second, at least 95% of the Company's gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived from the same
items which qualify under the 75% income tests or from dividends, interest and
gain from the sale or disposition of stock or securities, or from any
combination of the foregoing.
Rents received by the Company will qualify as "rents from real property" in
satisfying the gross income tests for a REIT described above only if several
conditions (related to the relationship of the tenant to the Company, the method
of determining the rent payable and nature of the property leased) are met. The
Company does not anticipate receiving rents in excess of a de minimis amount
that fail to meet these conditions. Finally, for rents received to qualify as
"rents from real property," the Company generally must not operate or manage the
property or furnish or render services to tenants, other than through an
"independent contractor" that is adequately compensated and from whom the
Company derives no income;
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provided, however, that the Company may perform services "usually or customarily
rendered" in connection with the rental of space for occupancy only and not
otherwise considered "rendered to the occupant" ("Permissible Services").
The Company provides certain management, development, construction and other
tenant-related services (collectively, "Real Estate Services") with respect to
the Properties through the Operating Partnership, which is not an independent
contractor. Management believes that the Real Estate Services provided to
tenants by the Operating Partnership are Permissible Services. To the extent
Real Estate Services to tenants do not constitute Permissible Services, such
services are performed by independent contractors.
Under the Taxpayer Relief Act of 1997 (the "1997 Act"), in determining
whether a REIT satisfies the income tests, a REIT's rental income from a
property will not cease to qualify as "rents from real property" merely because
the REIT performs services for a tenant other than permitted customary services
if the amount that the REIT is deemed to have received as a result of performing
impermissible services does not exceed one percent of all amounts received
directly or indirectly by the REIT with respect to such property. The amount
that a REIT will be deemed to have received for performing impermissible
services is at least 150% of the direct cost to the REIT of providing those
services.
The Company derives a portion of its income from the Operating Partnership's
interest as a limited partner in the Services Partnership and its ownership of
DSI which is a general partner of the Services Partnership. The Services
Partnership receives fees for Real Estate Services with respect to properties
that are not owned by the Operating Partnership and fees in consideration for
the performance of management and administrative services with respect to
Properties that are not entirely owned by the Operating Partnership. All or a
portion of such fees will not qualify as "rents from real property" for purposes
of the 75% or 95% gross income tests. Pursuant to Treasury Regulations, a
partner's capital interest in a partnership determines its proportionate
interest in the partnership's gross income from partnership assets for purposes
of the 75% and 95% gross income tests. For this purpose, the capital interest of
a partner is determined by dividing its capital account by the sum of all
partners' capital accounts. The partnership agreement of the Services
Partnership provides, however, for varying allocations of income which differ
from capital interests, subject to certain limitations on the aggregate amount
of gross income which may be allocated to the Operating Partnership and DSI. The
Company has obtained a letter ruling from the IRS that allocations according to
capital interests are proper for applying the 75% and 95% gross income tests.
Thus, for purposes of these gross income tests, the Services Partnership
allocates its gross income to the Operating Partnership and DSI based on their
capital interests in the Services Partnership. Although certain of the fees
allocated from the Services Partnership do not qualify under the 75% or 95%
gross income tests as "rents from real property," the Company believes that the
aggregate amount of such fees (and any other non-qualifying income) allocated to
the Company in any taxable year has not and will not cause the Company to exceed
the limits on non-qualifying income under the 75% or 95% gross income tests
described above.
If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. It is not
possible, however, to state whether in all circumstances the Company would be
entitled to the benefit of these relief provisions. Even if these relief
provisions apply, a tax would be imposed on certain excess net income.
ASSET TESTS. In order for the Company to maintain its qualification as a
REIT, at the close of each quarter of its taxable year, it must also satisfy
three tests relating to the nature of its assets. First, at least 75% of the
value of the Company's total assets must be represented by "real estate assets,"
cash, cash items, and government securities. Second, not more than 25% of the
Company's total assets may be represented by securities other than those in the
75% assets class. Third, of the assets held in securities other than those in
the 75% assets class, the value of any one issuer's securities owned by the
Company may not exceed 5% of the value of the Company's total assets, and the
Company may not own more than 10% of any one issuer's outstanding voting
securities (excluding securities of a qualified REIT subsidiary as defined in
the Code or another REIT).
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The Company is deemed to directly hold its proportionate share of all real
estate and other assets of the Operating Partnership as well as its
proportionate share of all assets deemed owned by the Operating Partnership and
DSI through their ownership of partnership interests in the Services Partnership
and other partnerships. As a result, management believes that more than 75% of
the company's assets are real estate assets. In addition, management does not
expect the Company to hold (1) any securities representing more than 10% of any
one issuer's voting securities other than DSI, which is a qualified REIT
subsidiary, nor (2) securities of any one issuer exceeding 5% of the value of
the Company's gross assets (determined in accordance with generally accepted
accounting principles).
ANNUAL DISTRIBUTION REQUIREMENTS. The Company, in order to qualify as a
REIT, generally must distribute dividends (other than capital gain dividends) to
its shareholders in an amount at least equal to (A) the sum of (i) 95% of the
Company's "REIT taxable income" (computed without regard to the dividends paid
deduction and the Company's net capital gain), and (ii) 95% of the net income
(after tax) if any, from foreclosure property, minus (B) the sum of certain
items of non-cash income. To the extent that the Company does not distribute all
of its net capital gain or distributes at least 95%, but less than 100%, of its
"REIT taxable income," as adjusted, it will be subject to tax on the
undistributed amount at regular capital gains and ordinary corporate tax rates.
Furthermore, if the Company should fail to distribute during each calendar year
at least the sum of (i) 85% of its REIT ordinary income for such year, (ii) 95%
of its REIT net capital gain income for such year, and (iii) any undistributed
taxable income from prior periods, the Company will be subject to regular
capital gains and ordinary corporate tax rates on undistributed income and also
may be subject to a 4% excise tax on undistributed income in certain events.
Under the 1997 Act, certain non-cash income, including income from cancellation
of indebtedness and original issue discount, will be excluded from income in
determining the amount of dividends that a REIT is required to distribute. In
addition, a REIT may elect to retain and pay income tax on any net long-term
capital gains and require its shareholders to include such undistributed net
capital gains in their income. If a REIT made such an election, the REIT's
shareholders would receive a tax credit attributable to their share of capital
gains tax paid by the REIT on the undistributed net capital gain that was
included in the shareholders' income, and such shareholders would receive an
increase in the basis of their shares in the amount of undistributed net capital
gain included in their income reduced by the amount of the credit. The Company
believes that it has made and intends to continue to make timely distributions
sufficient to satisfy the annual distribution requirements. In this regard, the
partnership agreement of the Operating Partnership authorizes the Company, as
general partner, to take such steps as may be necessary to cause the Operating
Partnership to distribute to its partners an amount sufficient to permit the
Company to meet these distribution requirements. It is possible, however, that
the Company, from time to time, may not have sufficient cash or other liquid
assets to meet the 95% distribution requirement due primarily to the expenditure
of cash for nondeductible expenses such as principal amortization or capital
expenditures. In such event, the Company may borrow or may cause the Operating
Partnership to arrange for short-term or other borrowing to permit the payment
of required dividends or pay dividends in the form of taxable stock dividends.
If the amount of nondeductible expenses exceeds non-cash deductions, the
Operating Partnership may refinance its indebtedness to reduce principal
payments and borrow funds for capital expenditures.
FAILURE TO QUALIFY. If the Company fails to qualify for taxation as a REIT
in any taxable year, the Company will be subject to tax (including any
applicable corporate alternative minimum tax) on its taxable income at regular
corporate rates. Distributions to shareholders in any year in which the Company
fails to qualify will not be required to be made and, if made, will not be
deductible by the Company. Unless entitled to relief under specific statutory
provisions, the Company also will be disqualified from taxation as a REIT for
the four taxable years following the year during which qualification was lost.
It is not possible to state whether in all circumstances the Company would be
entitled to such statutory relief. The 1997 Act contains a number of technical
provisions that reduce the risk that a REIT will inadvertently cease to qualify
as a REIT.
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TAX ASPECTS OF THE COMPANY'S INVESTMENTS IN PARTNERSHIPS
EFFECT OF TAX STATUS OF OPERATING PARTNERSHIP AND SERVICES PARTNERSHIP AND
OTHER PARTNERSHIPS ON REIT QUALIFICATION. All of the Company's investments are
through DSI and the Operating Partnership, which in turn hold interests in other
partnerships, including the Services Partnership. The Company believes that the
Operating Partnership, and each other partnership in which it holds an interest,
is properly treated as a partnership for tax purposes (and not as an association
taxable as a corporation). If, however, the Operating Partnership, the Services
Partnership or any of the other partnerships were treated as an association
taxable as a corporation, the Company would cease to qualify as a REIT.
TAX ALLOCATIONS WITH RESPECT TO THE PROPERTIES. The Operating Partnership
was formed by way of contributions of appreciated property (including certain of
the Properties) to the Operating Partnership. When property is contributed to a
partnership in exchange for an interest in the partnership, the partnership
generally takes a carryover basis in that property for tax purposes equal to the
adjusted basis of the contributing partner in the property, rather than a basis
equal to the fair market value of the property at the time of contribution (this
difference is referred to as "Book-Tax Difference"). The partnership agreement
of the Operating Partnership requires allocations of income, gain, loss and
deduction with respect to a contributed Property be made in a manner consistent
with the special rules of Section 704(c) of the Code and the regulations
thereunder, which will tend to eliminate the Book-Tax Differences with respect
to the contributed Properties over the life of the Operating Partnership.
However, because of certain technical limitations, the special allocation rules
of Section 704(c) may not always entirely eliminate the Book-Tax Differences on
an annual basis or with respect to a specific taxable transaction such as a
sale. Thus, the carryover basis of the contributed Properties in the hands of
the Operating Partnership could cause the Company (i) to be allocated lower
amounts of depreciation and other deductions for tax purposes than would be
allocated to the Company if all Properties were to have a tax basis equal to
their fair market value at the time of contribution, and (ii) possibly to be
allocated taxable gain in the event of a sale of such contributed Properties in
excess of the economic or book income allocated to the Company as a result of
such sale. The foregoing principles also apply in determining the earnings and
profits of the Company for purposes of determining the portion of distributions
taxable as dividend income. The application of these rules over time may result
in a higher portion of distributions being taxed as dividends than would have
occurred had the Company purchased its interests in the Properties at their
agreed values.
TAXATION OF TAXABLE DOMESTIC SHAREHOLDERS
As long as the Company qualifies as a REIT, distributions made to the
Company's taxable domestic shareholders out of current or accumulated earnings
and profits (and not designated as capital gain dividends) will be taken into
account by them as ordinary income and will not be eligible for the dividends
received deduction for corporations. Distributions that are designated as
capital gain dividends will be taxed as long-term capital gains (to the extent
they do not exceed the Company's actual net capital gain for the taxable year).
However, corporate holders may be required to treat up to 20% of certain capital
gain dividends as ordinary income. Distributions in excess of current and
accumulated earnings and profits will not be taxable to a holder to the extent
that they do not exceed the adjusted tax basis of the holder's shares, but
rather will reduce the adjusted basis of such shares. To the extent that such
distributions exceed the adjusted basis of a holder's shares they will be
included in income as long-term capital gain (or short-term capital gain if the
shares have been held for one year or less) assuming the shares are a capital
asset in the hands of the holder. In addition, any dividend declared by the
Company in October, November or December of any year payable to a shareholder of
record on a specified date in any such month shall be treated as both paid by
the Company and received by the shareholder on December 31 of such year;
provided that the dividend is actually paid by the Company during January of the
following calendar year. Shareholders may not include in their individual income
tax returns any net operating losses or capital losses of the Company.
In general, a domestic shareholder will realize capital gain or loss on the
disposition of common stock equal to the difference between (i) the amount of
cash and the fair market value of any property received on such disposition and
(ii) the shareholder's adjusted basis of such common stock. Under the 1997 Act,
for
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gains realized after July 28, 1997, and subject to certain exceptions, the
maximum rate of tax on net capital gains of individuals, trusts and estates from
the sale or exchange of assets held for more than 18 months has been reduced to
20%, and the maximum rate is reduced to 18% for assets acquired after December
31, 2000 and held for more than five years. For taxpayers who would be subject
to a maximum tax rate of 15%, the rate on net capital gains is reduced to 10%,
and effective for taxable years commencing after December 31, 2000, the rate is
reduced to 8% for assets held for more than five years. The maximum rate for net
capital gains attributable to the sale of depreciable real property held for
more than 18 months is 25% to the extent of the deductions for depreciation with
respect to such property. Long-term capital gain allocated to a shareholder by
the Company will be subject to the 25% rate to the extent that the gain does not
exceed depreciation on real property sold by the Company. The maximum rate of
capital gains tax for capital assets held more than one year but not more than
18 months remains at 28%. The taxation of capital gains of corporations was not
changed by the 1997 Act. Loss upon a sale or exchange of common stock by a
shareholder who has held such common stock for six months or less (after
applying certain holding period rules) will be treated as a long-term capital
loss to the extent of distributions from the Company required to be treated by
such shareholder as long-term capital gain.
TAXATION OF TAX-EXEMPT SHAREHOLDERS
Tax-exempt entities, including qualified employee pension and profit sharing
trusts and individual retirement accounts ("Exempt Organizations"), generally
are exempt from federal income taxation. However, they are subject to taxation
on their unrelated business taxable income ("UBTI"). While many investments in
real estate generate UBTI, the IRS has issued a published ruling that dividend
distributions from a REIT to an exempt employee pension trust do not constitute
UBTI, provided that the shares of the REIT are not otherwise used in an
unrelated trade or business of the exempt employee pension trust. Based on that
ruling, amounts distributed by the Company to Exempt Organizations generally
should not constitute UBTI. However, if an Exempt Organization finances its
acquisitions of the common shares with debt, a portion of its income from the
Company will constitute UBTI pursuant to the "debt-financed property" rules.
Furthermore, social clubs, voluntary employee benefit associations, supplemental
unemployment benefit trusts, and qualified group legal services plans that are
exempt from taxation under paragraphs (7), (9), (17), and (20), respectively, of
Code section 501(c) are subject to different UBTI rules, which generally will
require them to characterize distributions from the Company as UBTI.
In addition, in certain circumstances, a pension trust that owns more than
10% of the Company's shares is required to treat a percentage of the dividends
from the Company as UBTI (the "UBTI Percentage"). The UBTI Percentage is the
gross income derived by the Company from an unrelated trade or business
(determined as if the Company were a pension trust) divided by the gross income
of the Company for the year in which the dividends are paid. The UBTI rule
applies to a pension trust holding more than 10% of the Company's stock only if
(i) the UBTI Percentage is at least 5%, (ii) the Company qualifies as a REIT by
reason of the modification of the "five or fewer" stock ownership requirement
that allows the beneficiaries of the pension trust to be treated as holding
shares of the Company in proportion to their actuarial interests in the pension
trust, and (iii) either (A) one pension trust owns more that 25% of the value of
the Company's shares or (B) a group of pension trusts individually holding more
than 10% of the value of the Company's shares collectively owns more than 50% of
the value of the Company's shares.
BACKUP WITHHOLDING
The Company will report to its domestic shareholders and the IRS the amount
of dividends paid during each calendar year, and the amount of tax withheld, if
any. Under the backup withholding rules, a shareholder may be subject to backup
withholding at the rate of 31% with respect to dividends paid unless such holder
(a) is a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact, or (b) provides a taxpayer identification
number, certifies as to no loss of exemption from backup withholding, and
otherwise complies with applicable requirements of the backup withholding rules.
A shareholder that does not provide the Company with his correct taxpayer
identification number may also be subject to penalties imposed by the IRS. Any
amount paid as backup withholding will be creditable
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against the shareholder's income tax liability. In addition, the Company may be
required to withhold a portion of capital gain distributions to any shareholders
who fail to certify their non-foreign status to the Company.
The Treasury Department recently issued proposed regulations regarding the
withholding and information reporting rules discussed above. In general, the
proposed regulations do not alter the substantive withholding requirements but
unify current certification procedures and forms, and clarify and modify
reliance standards. If finalized in their current form, the proposed regulations
would generally be effective for payments made after December 31, 1997, subject
to certain transition rules.
TAXATION OF NON-U.S. SHAREHOLDERS
The rules governing U.S. Federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships and other foreign
shareholders (collectively, "Non-U.S. Shareholders") are complex, and no attempt
will be made herein to provide more than a limited summary of such rules.
Prospective Non-U.S. Shareholders should consult with their own tax advisors to
determine the impact of U.S. Federal, state and local income tax laws with
regard to an investment in common stock, including any reporting requirements.
Distributions that are not attributable to gain from sales or exchanges by
the Company of U.S. real property interests and not designated by the Company as
capital gain dividends will be treated as dividends of ordinary income to the
extent that they are made out of current or accumulated earnings and profits of
the Company. Such distributions, ordinarily, will be subject to a withholding
tax equal to 30% of the gross amount of the distribution unless an applicable
tax treaty reduces that tax. Distributions in excess of current and accumulated
earnings and profits of the Company will not be taxable to a Non-U.S.
Shareholder to the extent that they do not exceed the adjusted basis of the
shareholder's common stock, but rather will reduce the adjusted basis of such
common stock. To the extent that such distributions exceed the adjusted tax
basis of a Non-U.S. Shareholder's common stock, they will give rise to tax
liability if the Non-U.S. Shareholder would otherwise be subject to tax on any
gain from the sale or disposition of his common stock as described below (in
which case they also may be subject to a 30% branch profits tax if the
shareholder is a foreign corporation). As a result of a legislative change made
by the Small Business Job Protection Act of 1996, effective for distributions
made after August 20, 1996, the Company is required to withhold 10% of any
distribution in excess of the Company's current accumulated earnings and
profits. Consequently, although the Company intends to withhold at a rate of 30%
on the entire amount of any distribution, to the extent that the Company does
not do so any portion of a distribution not subject to withholding at a rate of
30% will be subject to withholding at a rate of 10%. However, the Non-U.S.
Shareholder may seek a refund of such amounts from the IRS if it is subsequently
determined that such distribution was, in fact, in excess of current or
accumulated earnings and profits of the Company, and the amount withheld exceeds
the Non-U.S. Shareholder's United States tax liability, if any, with respect to
the distribution.
For any year in which the Company qualifies as a REIT, distributions that
are attributable to gain from sales or exchanges by the Company of U.S. real
property interests will be taxed to a Non-U.S. Shareholder under the provisions
of the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA") at the
normal capital gain rates applicable to domestic shareholders (subject to
applicable alternative minimum tax and a special alternative minimum tax in the
case of nonresident alien individuals). Also, distributions subject to FIRPTA
may be subject to a 30% branch profits tax in the hands of a corporate Non-U.S.
Shareholder not entitled to treaty relief or exemption. The Company is required
to withhold 35% of any distribution that is or could be designated by the
Company as a capital gain dividend. The amount withheld is creditable against
the Non-U.S. Shareholder's FIRPTA tax liability.
Gain recognized by a Non-U.S. Shareholder upon a sale of common stock
generally will not be taxed under FIRPTA if the Company is a "domestically
controlled REIT," defined generally as a REIT in which at all times during a
specified testing period less than 50% in value of the stock was held directly
or indirectly by foreign persons. The Company believes that it is a
"domestically controlled REIT," and, therefore, that the
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sale of common stock will not be subject to taxation under FIRPTA. If the gain
on the sale of common stock were to be subject to tax under FIRPTA, the Non-U.S.
Shareholder would be subject to the same treatment as domestic shareholders with
respect to such gain (subject to applicable alternative minimum tax and a
special alternative minimum tax in the case of nonresident alien individuals),
and the purchaser of the common stock would be required to withhold and remit to
the IRS 10% of the purchase price.
STATE AND LOCAL TAXES
The Company or its shareholders or both may be subject to state, local or
other taxation in various state, local or other jurisdictions, including those
in which they transact business or reside. The tax treatment in such
jurisdictions may differ from the Federal income tax consequences discussed
above. Consequently, prospective shareholders should consult their own tax
advisors regarding the effect of state and local tax laws on an investment in
shares of the Company.
PLAN OF DISTRIBUTION
The Company and the Operating Partnership may sell Securities to or through
underwriters, and also may sell Securities directly to other purchasers or
through agents.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Securities, underwriters may receive
compensation from the Company, from the Operating Partnership or from purchasers
of Securities, for whom they may act as agents, in the form of discounts,
concessions, or commissions. Underwriters may sell Securities to or through
dealers, and such dealers may receive compensation in the form of discounts,
concessions, or commissions from the underwriters and/or commissions from the
purchasers for whom they may act as agents. Underwriters, dealers, and agents
that participate in the distribution of Securities may be deemed to be
underwriters, and any discounts or commissions they receive from the Company or
the Operating Partnership, and any profit on the resale of Securities they
realize may be deemed to be underwriting discounts and commissions, under the
Securities Act. Any such underwriter or agent will be identified, and any such
compensation received from the Company or the Operating Partnership will be
described, in the Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, each series
of Securities will be a new issue with no established trading market, other than
the Common Stock which is listed on the NYSE. Any shares of Common Stock sold
pursuant to a Prospectus Supplement will be listed on such exchange, subject to
official notice of issuance. The Company or the Operating Partnership may elect
to list any series of Debt Securities, Preferred Stock or Depositary Shares on
an exchange, but neither is obligated to do so. It is possible that one or more
underwriters may make a market in a series of Securities, but will not be
obligated to do so and may discontinue any market making at any time without
notice. Therefore, no assurance can be given as to the liquidity of the trading
market for the Securities.
Under agreements the Company and the Operating Partnership may enter into,
underwriters, dealers, and agents who participate in the distribution of
Securities may be entitled to indemnification by the Company or the Operating
Partnership against certain liabilities, including liabilities under the
Securities Act.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, or be customers of, the Company or the Operating Partnership in
the ordinary course of business.
If so indicated in the applicable Prospectus Supplement, the Company or the
Operating Partnership, as the case may be, will authorize underwriters or other
persons acting as the Company's or the Operating Partnership's agents to solicit
offers by certain institutions to purchase Securities from the Company or the
Operating Partnership pursuant to contracts providing for payment and delivery
on a future date. Institutions with which such contracts may be made include
commercial and savings banks, insurance companies,
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pension funds, investment companies, educational and charitable institutions and
others, but in all cases such institutions must be approved by the Company or
the Operating Partnership, as the case may be. The obligations of any purchaser
under any such contract will be subject to the condition that the purchase of
the Securities shall not at the time of delivery be prohibited under the laws of
the jurisdiction to which such purchaser is subject. The underwriters and such
other agents will not have any responsibility in respect of the validity or
performance of such contracts.
LEGAL OPINIONS
The legality of the Securities offered hereby is being passed upon for the
Company by Bose McKinney & Evans, Indianapolis, Indiana. In addition, the
description of Federal income tax matters contained in this Prospectus entitled
"Federal Income Tax Considerations" is based upon the opinion of Bose McKinney &
Evans. John W. Wynne and Darell E. Zink, Jr., officers and directors of the
Company, were partners in Bose McKinney & Evans through 1987 and 1982,
respectively, and were of counsel to that firm until December, 1990.
EXPERTS
The Consolidated Financial Statements and related Schedules of the Company
and of the Operating Partnership as of December 31, 1997 and 1996, and for each
of the years in the three-year period ended December 31, 1997, each incorporated
herein by reference, have been incorporated herein in reliance upon the reports
of KPMG Peat Marwick LLP, independent certified public accountants, also
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
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$175,000,000
[LOGO]
DUKE REALTY
LIMITED PARTNERSHIP
7.30% SENIOR NOTES DUE 2003
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
BANC ONE CAPITAL MARKETS, INC.
JUNE 23, 1999
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