SECURITIES AND EXCHANGE COMMISSION
Washington,D.C.20549
FORM S-3
REGISTRATION STATEMENT
Under The Securities Act of 1933
DUKE REALTY INVESTMENTS,INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1740409
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
8888 Keystone Crossing, Suite 1200
Indianapolis, Indiana 46240
(317) 574-3531
(Address, including zip code, and telephone number,
including area code, of principal executive offices)
Dennis D. Oklak
8888 Keystone Crossing, Suite 1200
Indianapolis, Indiana 46240
(317) 574-3531
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPY TO:
Alan W. Becker, Esq.
Bose McKinney & Evans
135 North Pennsylvania Street, Suite 2700
Indianapolis, Indiana 46204
(317) 684-5000
Approximate date of commencement of proposed sale to public:
From time to time after the effective date of this Registration
Statement.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans,
please check the following box. / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, other than securities offered
only in connection with dividend or interest reinvestment plans,
check the following box. / X /
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------
Proposed Proposed
Title of Each Amount Maximum Maximum Amount of
Class of Securities to be Offering Price Aggregate Registration
to be Registered Registered Per Share (1) Offering Price Fee
- ------------------- ---------- -------------- -------------- ------------
Common Stock, $.01 1,500,000 $21.375 $32,062,500 $9,458.44
par value
Total 1,500,000 $32,062,500 $9,458.44
- --------------------------------------------------------------------------------
(1) Estimated using August 25, 1998 data solely for the purpose of calculating
the registration fee pursuant to Rule 457(c).
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date
until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Securities and
Exchange Commission, acting pursuant to said Section 8(a), may
determine
SUBJECT TO COMPLETION, DATED AUGUST 26, 1998
PROSPECTUS
- ----------
1,500,000 Shares
LOGO
DUKE REALTY INVESTMENTS, INC.
Common Stock
-----------------------
Duke Realty Investments, Inc. (the "Company") may issue and
sell from time to time up to 1,500,000 shares of its common
stock, $.01 par value ("Common Stock"), directly or through
agents, dealers or underwriters designated from time to time. The
Common Stock offered pursuant to this Prospectus may be issued in
amounts, at prices and on terms to be determined at the time of
the offering of such Common Stock.
The Company may sell all or a portion of the Common Stock
through agents or to or through underwriters or dealers, and is a
party to a certain Distribution Agreement relating to the sale of
Common Stock. See "Plan of Distribution."
The specific terms of sales of shares of Common Stock
pursuant hereto will be set forth, from time to time, in a
Prospectus Supplement filed under the applicable paragraph of
Rule 424(b) promulgated under the Securities Act of 1933, as
amended (the "Securities Act"). Such Prospectus Supplements will
set forth the number of shares of Common Stock sold, pricing
information with respect to such sales, net proceeds to the
Company and the amount of any compensation payable by the Company
to any sales agent(s) with respect thereto.
The Common Stock is listed on the New York Stock Exchange
under the symbol DRE. In order to maintain its qualification as a
real estate investment trust ("REIT") for federal income tax
purposes, the Company's Amended and Restated Articles of
Incorporation impose limitations on the number of shares of
capital stock that may be owned by any single person or
affiliated group. See "Restrictions on Ownership of Shares."
________________________
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 , 1998.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE
HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY
UNDERWRITER, AGENT OR DEALER. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY BY ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH
AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED
OR INCORPORATED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO
THE DATE HEREOF.
-------------------
TABLE OF CONTENTS
PAGE
Available Information 3
Incorporation of Certain Documents by Reference 3
The Company 4
Use of Proceeds 4
Restrictions on Ownership of Shares 4
Federal Income Tax Considerations 5
Plan of Distribution 12
Legal Opinions 14
Experts 14
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and, in accordance therewith, files reports and other information
with the Securities and Exchange Commission (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.
The Company 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 has filed with the Commission a registration
statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933 with respect to the Common Stock offered
hereby. For further information with respect to the Company and
the Common Stock 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
or incorporated by reference 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 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 Company's Quarterly Reports on Form 10-Q (file no. 1-9044)
for the quarters ended March 31, 1998 and June 30, 1998.
3. The Company's Current Reports on Form 8-K (file no. 1-9044)
filed February 26, 1998, March 27, 1998, April 24, 1998,
April 27, 1998 and July 31, 1998.
4. The description of the Common Stock contained in the Company's
registration statement on Form 10 (file no. 1-9044) as amended.
Each document filed 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
Common Stock 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 incorporated or deemed
to be incorporated by reference herein) 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. Subject to the foregoing,
all information appearing in this Prospectus is qualified in its
entirety by the information appearing in the documents
incorporated by reference.
THE COMPANY
The Company is a self-administered and self-managed real
estate investment trust that began operations through a related
entity in 1972. The Company owns direct or indirect interests in
a portfolio of industrial, office and retail properties (the
"Properties"), together with land (the "Land") for future
development. The Company has the largest commercial real estate
operations in Indianapolis and Cincinnati and is one of the
largest real estate companies in the Midwest.
All of the Company's interests in the Properties and the
Land are held by, and substantially all of its operations
relating to the Properties and the Land are conducted through,
Duke Realty Limited Partnership, an Indiana limited partnership
(the " Operating Partnership"). The Company controls the
Operating Partnership as the sole general partner and owner at
June 30, 1998, of in excess of 85% of the outstanding partnership
interests ("Units"). Each Unit may be exchanged by the holder
thereof (other than the Company) for 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 and owners of indirectly owned properties through Duke
Realty Services Limited Partnership (the "Services Partnership")
on a fee basis.
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 Company's executive offices
are located at 8888 Keystone Crossing, Suite 1200, Indianapolis,
Indiana 46240, and its telephone number is (317) 574-3531.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus
Supplement for any offering of Common Stock, the net proceeds
from the sale of Common Stock offered by the Company will be
available for the general corporate purposes of the Company.
These general corporate purposes may include, without limitation,
repayment of maturing obligations or obligations under lines of
credit maintained by the Company or its subsidiaries, redemption
of outstanding indebtedness, financing (in whole or in part) of
future development or acquisitions (including acquisitions of
companies and/or real estate and other assets), capital
expenditures and working capital. Pending any such uses, the
Company may invest the net proceeds from the sale of any Common
Stock or use them to reduce short-term indebtedness.
RESTRICTIONS ON OWNERSHIP OF SHARES
For the Company to qualify as a REIT for federal income tax
purposes, 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 law to include certain entities)
during the last half of a taxable year or during a proportionate
part of a shorter taxable year, and 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 Amended and Restated Articles of
Incorporation of the Company contain a restriction intended to
ensure compliance with these requirements 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.
FEDERAL INCOME TAX CONSIDERATIONS
The following summary of material federal income tax
considerations relevant to the Company and an investor in shares
of Common Stock is based upon current law, is not exhaustive of
all possible tax considerations, does not include a detailed
description of any state, local, or foreign tax considerations,
and does not describe all of the aspects of Federal income
taxation that may be relevant to a prospective shareholder in
light of his or her particular circumstances or to certain types
of shareholders (including insurance companies, tax exempt
entities, financial institutions or broker dealers, foreign
corporations and persons who are not citizens or residents of the
United States) subject to special treatment under the federal
income tax laws. As used in this section, the term "Company"
refers solely to Duke Realty Investments, Inc.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT WITH HIS OR
HER OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO
HIM OR HER OF THE ACQUISITION, OWNERSHIP AND SALE OF COMMON STOCK
IN AN ENTITY ELECTING TO BE TAXED AS A REAL ESTATE INVESTMENT
TRUST, INCLUDING THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF
SUCH ACQUISITION, 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 Code, and that the Company intends to continue to
operate in such a manner. No assurance, however, can be given
that the Company 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 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 the Company's receipt of a letter ruling
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 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 gains 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.
REQUIREMENTS FOR QUALIFICATION. The Code defines a REIT as
a corporation, trust or association: (1) which is managed by one
or more trustees or directors; (2) the beneficial ownership of
which is evidenced by transferable shares or by transferable
certificates of beneficial interest; (3) which would be taxable
as a domestic corporation but for Sections 856 through 859 of the
Code; (4) which is neither a financial institution nor an
insurance company subject to certain provisions of the Code; (5)
which has the calendar year as its taxable year; (6) the
beneficial ownership of which is held by 100 or more persons; (7)
during the last half of each taxable year not more than 50% in
value of the outstanding stock of which is owned, directly or
indirectly, by five or fewer individuals (as defined in the Code
to include certain entities); and (8) which meets certain income
and assets tests, described below. The Company believes it
currently satisfies all requirements.
INCOME TESTS. In order to qualify as a REIT, there are two
gross income tests that must be satisfied annually. For purposes
of these tests, 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 test 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;
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 material services
provided to tenants by the Operating Partnership are Permissible
Services. To the extent services to tenants do not constitute
Permissible Services, such services are performed by independent
contractors.
Under the Taxpayer Relief Act of 1997 (the "1997 Act"), in
determining whether a REIT satisfies the income tests, a REIT's
rental income from a property will not cease to qualify as "rents
from real property" merely because the REIT performs services for
a tenant other than permitted customary services if the amount
that the REIT is deemed to have received as a result of
performing impermissible services does not exceed one percent of
all amounts received directly or indirectly by the REIT with
respect to such property. The amount that a REIT will be
deemed to have received for performing impermissible services is
at least 150% of the direct cost to the REIT of providing those
services.
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 directly by the Operating Partnership and fees
in consideration for the performance of management and
administrative services with respect to Properties that are not
entirely owned by the Operating Partnership. All or a portion of
such fees will not qualify as "rents from real property" for
purposes of the 75% or 95% gross income tests. Pursuant to
Treasury Regulations, a partner's capital interest in a
partnership determines its proportionate interest in the
partnership's gross income from partnership assets for purposes
of the 75% and 95% gross income tests. For this purpose, the
capital interest of a partner is determined by dividing its
capital account by the sum of all partners' capital accounts.
The partnership agreement of the Services Partnership provides,
however, for varying allocations of income which differ from
capital interests, subject to certain limitations on the
aggregate amount of gross income which may be allocated to the
Operating Partnership and DSI. 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).
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 fail to qualify as a REIT.
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 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, dividend
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. 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.
Distributions in excess of current and accumulated earnings
and profits will not be taxable to a holder to the extent that
they do not exceed the adjusted basis of the holder's shares, but
rather will reduce the adjusted basis of such shares. To the
extent that such distributions exceed the adjusted basis of a
holder's shares, they will be included in income as long-term
capital gain (or short-term capital gain if the shares have been
held for one year or less) assuming the shares are a capital
asset in the hands of the holder. Shareholders may not include in
their individual income tax returns any 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 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 general UBTI, the IRS has issued a
publishing 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 than 25% of the value of the Company's shares of
(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 against the shareholder's income tax liability. In
addition, the Company may be required to withhold a portion of
capital gain distributions made 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.
Shareholders to the extent that they do not exceed the adjusted
basis of the shareholder's common stock, but rather will reduce
that 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.
Shareholders' 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 corporation
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 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 may from time to time offer and sell Common
Stock in one or more transactions (which may involve block
transactions) on the New York Stock Exchange (the "NYSE") or
otherwise, in special offerings, exchange distributions or
secondary distributions pursuant to and in accordance with the
rules of the NYSE, on other securities exchanges, in the over-the-
counter market, in negotiated transactions, through the writing
of options on the Common Stock (whether such options are listed
on an options exchange or otherwise), or a combination of such
methods of sale, at market prices prevailing at the time of sale,
at prices related to such prevailing market prices or at
negotiated prices.
The Company may effect such transactions by selling Common
Stock to or through broker-dealers or through other agents, and
such broker-dealers or agents may receive compensation in the
form of commissions from the Company, which will not exceed those
customary in the types of transactions involved, and/or the
purchasers of Common Stock for whom they may act as agent. Any
dealers or agents that participate in the distribution of Common
Stock may be deemed to be "underwriters" within the meaning of
the Securities Act, and any profit on the sale of Common Stock by
them and any commissions received by any such dealers or agents
might be deemed to be underwriting commissions under the
Securities Act.
The Company has entered in a Distribution Agreement (the
"Distribution Agreement") with Frith Brothers Investments, Inc.
("Frith Brothers") with respect to sales of Common Stock and may
in the future from time to time enter into other sales agreements
with other sales agents or underwriters. The Company expects the
sales methods under any such other agreements to be substantially
similar to those under the Distribution Agreement.
In the event of a "distribution" of the Common Stock, the
Company, any selling broker-dealer or agent and any "affiliated
purchasers" may be subject to Regulation M under the Exchange
Act, which would prohibit, with certain exceptions, each such
person from bidding for or purchasing any security which is the
subject of such distribution until his participation in that
distribution is completed. In addition, Regulation M under the
Exchange Act prohibits certain "stabilizing bids" or "stabilizing
purchases" for the purpose of pegging, fixing or stabilizing the
price of Common Stock in connection with this offering.
At a time a particular offer of Common Stock is made, a
prospectus supplement, if required, will be distributed that will
set forth the name or names of any dealers or agents and any
commissions and other terms constituting compensation from the
Company and any other required information. The Common Stock may
be sold from time to time at varying prices determined at the
time of sale or at negotiated prices.
SALES PURSUANT TO DISTRIBUTION AGREEMENT WITH FRITH BROTHERS
Pursuant to the terms of the Distribution Agreement between
the Company and Frith Brothers, which has been filed as an
exhibit to the Registration Statement of which this Prospectus is
a part and is incorporated herein by reference, the Company may
issue and sell up to 1,500,000 shares (the "Maximum Amount") of
the Common Stock from time to time through Frith Brothers, as
sales agent for the Company. Such sales, if any, will be made by
means of ordinary brokers' transactions on the NYSE or other
markets on which the Common Stock is then traded. Such sales will
be effected during a series of one or more (up to 52) pricing
periods (each, a "Pricing Period"), each consisting of five
consecutive trading days in duration, unless a shorter period has
otherwise been agreed to by the Company and Frith Brothers.
During any Pricing Period, the Company and Frith Brothers, by
mutual written agreement, will designate the number of shares of
stock to be sold as Average Market Price Shares. If the Company
does not meet the exemptive provisions set forth in Rule
101(c)(1) of Regulation M of the Exchange Act, the number of
Average Market Price Shares and any Additional Shares (as defined
below) sold on any day in any Pricing Period shall not exceed 10%
of the average daily trading volume of the Common Stock over the
preceding 60 days. For such Pricing Period, an Average Market
Price (as defined below) will be computed. With respect to any
Pricing Period, the Average Market Price is equal to the average
of the arithmetic mean of the high and low sales prices of the
Common Stock of the Company reported on the NYSE for each trading
day of such Pricing Period.
The net proceeds to the Company with respect to sales of
Average Market Price Shares will equal a percentage of the
Average Market Price (the "Company's Percent") for each share of
Common Stock sold during the Pricing Period plus Excess Proceeds
(as defined below), if any, plus Alternative Proceeds (as defined
below), if any. The Company's Percent will be 98.0% with respect
to the first 250,000 shares that may be sold under the
Distribution Agreement, 98.25% for the next 250,000 shares that
may be sold thereunder, and 98.5% for the remaining shares that
may be sold thereunder. The compensation to Frith Brothers for
such sales in any Pricing Period will equal the difference
between the aggregate gross sales prices at which such sales are
actually effected and the net proceeds to the Company for such
sales, but in no case will exceed the maximum amount permitted
pursuant to any applicable requirements of the National
Association of Securities Dealers, Inc., as determined in good
faith by Frith Brothers (the "Maximum Commission"). To the extent
that Frith Brothers' compensation under the foregoing formula
would otherwise exceed the Maximum Commission, the excess will
constitute additional net proceeds to the Company (the "Excess
Proceeds").
During any Pricing Period, the Company may designate a
minimum price and instruct Frith Brothers not to transact any
sales below such price. If such an instruction is given and as a
result thereof Frith Brothers is unable to sell, on a daily
basis, shares of Common Stock in any amount greater than or equal
to the daily pro rata portion (e.g., 20% as to any five-day
pricing Period) of Average Market Price Shares to be sold during
such Pricing Period, then the prices reported on the NYSE for
that day will not be computed in calculating the Average Market
Price for such Pricing Period and the net proceeds payable to the
Company (the "Alternative Proceeds") in respect of any sales of
Average Market Price Shares effected that day (the "Alternative
Shares") by Frith Brothers will be equal to the Company's Percent
times the weighted average sales prices at which Frith Brothers
has actually effected sales during that day. The compensation
payable to Frith Brothers for the sale of Alternative Shares will
be equal to the difference between the gross sales proceeds and
the net proceeds to the Company for such sales. The Alternative
Shares will be excluded from determining the net proceeds to the
Company for sales of Average Market Price Shares for such Pricing
Period.
During any Pricing Period (whether or not Average Market
Price Shares are being sold during such Pricing Period), the
Company and Frith Brothers may agree upon the sale of shares
("Additional Shares") of Common Stock in addition to or instead
of the sale of Average Market Price Shares, such Additional
Shares to be included in the computation of the Maximum Amount.
The compensation to Frith Brothers with respect to each of the
Additional Shares sold in any Pricing Period will be a fixed
percentage ("Frith Brothers' Percent") of the gross sales price
per share. Frith Brothers' Percent will equal 2% with respect to
the first 250,000 shares that may be sold under the Distribution
Agreement, 1.75% for the next 250,000 shares that may be sold
thereunder and 1.5% for the remaining shares that may be sold
thereunder. Unless otherwise indicated in a further Prospectus
Supplement, Frith Brothers as sales agent will act on a best
efforts basis.
Settlements of sales of Additional Shares will occur on the
third business day following the date on which such sales are
made. Unless the Company and Frith Brothers otherwise agree,
settlements of sales of Average Market Price Shares will also
occur on the third business day following the date on which such
sales are made. Purchases of Common Stock from Frith Brothers as
sales agent for the Company will settle the regular way on the
NYSE or other applicable market. There is no arrangement for
funds to be received in an escrow, trust or similar arrangement.
At the end of each Pricing Period, the Company will file a
Prospectus Supplement under the applicable paragraph of Rule
424(b) promulgated under the Securities Act, which Prospectus
Supplement will set forth the dates included in such Pricing
Period, the number of such shares of Common Stock sold through
Frith Brothers as sales agent (identifying separately the number
of Average Market Price Shares and the number of Additional
Shares), the highest and lowest executed sales price at which
Average Market Price Shares were sold during such Pricing Period,
the net proceeds to the Company, the compensation payable by the
Company to Frith Brothers with respect to such sales of Average
Market Price Shares and Additional Shares pursuant to the
formulas set forth above, and any other information then required
by applicable law to be included therein.
In connection with the sale of the Common Stock on behalf of
the Company, Frith Brothers may be deemed to be an underwriter
within the meaning of the Securities Act, and the compensation of
Frith Brothers may be deemed to be underwriting commissions or
discounts. The Company has agreed to provide indemnification and
contribution to Frith Brothers against certain civil liabilities,
including liabilities under the Securities Act. Frith Brothers
may engage in transactions with, or perform services for, the
Company in the ordinary course of business.
The offering of Common Stock pursuant to the Distribution
Agreement will terminate upon the earlier of (i) the sale of all
shares of Common Stock subject thereto, or (ii) termination of
the Distribution Agreement. The Distribution Agreement may be
terminated by the Company in its sole discretion after giving ten
days' written notice to Frith Brothers. Frith Brothers has the
right to terminate the Distribution Agreement in certain
circumstances specified in the Distribution Agreement.
LEGAL OPINIONS
The legality of the Common Stock offered hereby is being
passed upon for the Company by Bose McKinney & Evans,
Indianapolis, Indiana. The description of Federal income tax
matters contained in this Prospectus entitled "Federal Income Tax
Considerations" is also based on the opinion of Bose McKinney &
Evans.
EXPERTS
The Consolidated Financial Statements and related Schedule
of the Company as of December 31, 1997 and 1996, and for each of
the years in the three-year period ended December 31, 1997,
incorporated herein by reference, have been incorporated herein
in reliance on the report 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.
With respect to the unaudited interim financial information
for the periods ended March 31, 1998 and 1997, and June 30, 1998
and 1997, incorporated by reference herein, the independent
certified public accountants have reported that they applied
limited procedures in accordance with their professional
standards for a review of such information. However, their
separate report included in the Company's quarterly reports on
Form 10-Q for the quarters ended March 31, 1998 and June 30, 1998,
and incorporated by reference herein, states that they did not
audit and they do not express an opinion on that interim
financial information. Accordingly, the degree of reliance on
their reports on such information should be restricted in light
of the limited nature of the review procedures applied. The
accountants are not subject to the liability provisions of
section 11 of the Securities Act of 1933 for their report on the
unaudited interim financial information because that report is
not a "report" or a "part" of the registration statement prepared
or certified by the accountants within the meaning of sections 7
and 11 of such Act.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Registration Fee $ 9,500
Printing Expenses 10,000
Professional Fees and Expenses 20,000
Miscellaneous 10,500
------
Total $50,000
======
ITEM 15.INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is an Indiana corporation. The Company's officers
and directors are and will be indemnified under Indiana law, the
Articles of Incorporation of the Company, and the partnership
agreements of the Operating Partnership and Duke Realty Services
Limited Partnership against certain liabilities. Chapter 37 of
The Indiana Business Corporation Law (the "IBCL") requires a
corporation, unless its articles of incorporation provide
otherwise, to indemnify a director or an officer of the
corporation who is wholly successful, on the merits or otherwise,
in the defense of any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal, against reasonable
expenses, including counsel fees, incurred in connection with the
proceeding. The Company's Articles of Incorporation do not
contain any provision prohibiting such indemnification.
The IBCL also permits a corporation to indemnify a director,
officer, employee or agent who is made a party to a proceeding
because the person was a director, officer, employee or agent of
the corporation against liability incurred in the proceeding if
(i) the individual's conduct was in good faith and (ii) the
individual reasonably believed (A) in the case of conduct in the
individual's official capacity with the corporation that the
conduct was in the corporation's best interests and (B) in all
other cases that the individual's conduct was at least not
opposed to the corporation's best interests and (iii) in the
case of a criminal proceeding, the individual either (A) had
reasonable cause to believe the individual's conduct was lawful
or (B) had no reasonable cause to believe the individual's
conduct was unlawful. The IBCL also permits a corporation to pay
for or reimburse reasonable expenses incurred before the final
disposition of the proceeding and permits a court of competent
jurisdiction to order a corporation to indemnify a director or
officer if the court determines that the person is fairly and
reasonably entitled to indemnification in view of all the
relevant circumstances, whether or not the person met the
standards for indemnification otherwise provided in the IBCL.
II-1
The Company's Articles of Incorporation provide for certain
additional limitations of liability and indemnification. Section
13.01 of the Articles of Incorporation provides that a director
shall not be personally liable to the Company or its shareholders
for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of
loyalty to the Company or its shareholders, (ii) for acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for voting for or
assenting to an unlawful distribution, or (iv) for any
transaction from which the director derived an improper personal
benefit. Section 13.02 of the Articles of Incorporation generally
provides that any director or officer of the Company or any
person who is serving at the request of the Company as a
director, officer, employee or agent of another entity shall be
indemnified and held harmless by the Company to the fullest
extent authorized by the IBCL against all expense, liability and
loss (including attorneys' fees, judgments, fines certain
employee benefits excise taxes or penalties and amounts paid or
to be paid in settlement) reasonably incurred or suffered in
connection with a civil, criminal, administrative or
investigative action, suit or proceeding to which such person is
a party by reason of the person's service with or at the request
of the Company. Section 13.02 of the Articles of Incorporation
also provides such persons with certain rights to be paid by the
Company the expenses incurred in defending any such proceeding in
advance of the final disposition and the right to enforce
indemnification claims against the Company by bringing suit
against the Company.
The Company's Articles of Incorporation authorize the Company
to maintain insurance to protect itself and any director,
officer, employee or agent of the Company or another corporation,
partnership, joint venture, trust or other enterprise against
expense, liability or loss, whether or not the Company would have
the power to indemnify such person against such expense,
liability or loss under the IBCL.
Each of the partnership agreements for the Operating
Partnership and Duke Realty Services Limited Partnership also
provides for indemnification of the Company and its officers and
directors to substantially the same extent provided to officers
and directors of the Company in its Articles of Incorporation,
and limits the liability of the Company and its officers and
directors to the Operating Partnership and its partners and to
Duke Realty Services Limited Partnership and its partners,
respectively, to substantially the same extent limited under the
Company's Articles of Incorporation.
II-2
ITEM 16. EXHIBITS.
The following exhibits are filed with this Registration
Statement:
1 Distribution Agreement between Duke Realty Investments, Inc. and
Frith Brothers Investments, Inc.
3.1 Amended and Restated Articles of Incorporation of Duke Realty
Investments, Inc., incorporated by reference from Exhibit
3.1 to the Registration Statement on Form S-3 of Duke Realty
Investments, Inc., as amended, File No. 33-61361 (the "1995 Registration
Statement"), and amendments thereto incorporated by reference from an
exhibit to the annual report on Form 10-K of Duke Realty Investments,
Inc. for the year ended December 31, 1997 (the "1997 10-K"), from
Exhibit 3.2 to the Registration Statement on Form S-3 of Duke Realty
Investments, Inc., as amended, File No. 333-57755, and from an
exhibit to the quarterly report on Form 10-Q of Duke Realty
Investments, Inc. for the quarter ended June 30, 1998.
3.2 Amended and Restated Bylaws of Duke Realty Investments, Inc.,
incorporated by reference from Exhibit 3.2 to the 1995
Registration Statement, and amendments thereto incorporated by
reference to exhibits to the 1997 10-K, and to the current report
on Form 8-K of Duke Realty Investments, Inc. filed July 31, 1998.
5 Opinion and consent of Bose McKinney & Evans regarding legality of
the securities being registered.
8 Tax opinion and consent of Bose McKinney & Evans.
15 Letter regarding unaudited interim financial information.
23 Consent of KPMG Peat Marwick LLP.
24 Powers of Attorney.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that insofar as
indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described in
Item 15 above, or otherwise, the registrant has been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-3
The undersigned Registrant hereby further undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the registration
statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such
information in the registration statement;
PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8,
and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports
filed by the registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned Registrant further undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and
has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of Indianapolis, State of Indiana, on August 26, 1998.
DUKE REALTY INVESTMENTS, INC.
By: /s/ Dennis D. Oklak
----------------------
Executive Vice President,
Chief Administrative Officer
and Treasurer
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed as of August 26, 1998
by the following persons in the capacities indicated.
SIGNATURE TITLE
Thomas L. Hefner* Director and President and Chief Executive
- ----------------------- Officer
Thomas L. Hefner (Principal Executive Officer)
Darell E. Zink, Jr.* Director and Executive Vice President,
- ------------------------ Chief Financial Officer and Assistant
Darell E. Zink, Jr. Secretary
(Principal Accounting Officer)
Edward T. Baur* Director
- ------------------------
Edward T. Baur
Geoffrey Button* Director
- ------------------------
Geoffrey Button
Ngaire E. Cuneo* Director
- ------------------------
Ngaire E. Cuneo
II-5
Howard L. Feinsand* Director
- ------------------------
Howard L. Feinsand
L. Ben Lytle* Director
- ------------------------
L. Ben Lytle
John D. Peterson* Director
- ------------------------
John D. Peterson
James E. Rogers* Director
- ------------------------
James E. Rogers
Daniel C. Staton* Director
- ------------------------
Daniel C. Staton
Jay J. Strauss* Director
- ------------------------
Jay J. Strauss
John W. Wynne* Director
- -----------------------
John W. Wynne
* By: /s/ Dennis D. Oklak
--------------------
Dennis D. Oklak
Attorney-in-Fact
II-6