Filed Pursuant to Rule 424(b)(2)
Registration No. 333-106401
PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED JULY 10, 2003)
4,000,000 SHARES
(COUSINS LOGO)
COUSINS PROPERTIES INCORPORATED
7 3/4% SERIES A CUMULATIVE REDEEMABLE PREFERRED STOCK
(LIQUIDATION PREFERENCE $25.00 PER SHARE)
- --------------------------------------------------------------------------------
Cousins Properties Incorporated is offering to the public its 7 3/4% Series
A Cumulative Redeemable Preferred Stock, $1.00 par value per share, which we
refer to in this prospectus supplement as the Series A preferred stock, on terms
summarized as follows:
- We will pay cumulative dividends on the Series A preferred stock, from
the date of original issuance, in arrears, at the rate of 7 3/4% per year
of the $25.00 liquidation preference per share. This is equivalent to a
fixed annual amount of $1.9375 per share.
- We cannot redeem the Series A preferred stock before July 24, 2008,
except in certain circumstances in order to ensure that we remain
qualified as a real estate investment trust, or REIT, for U.S. federal
income tax purposes.
- On and after July 24, 2008, we may, at our option, redeem the Series A
preferred stock for cash at a redemption price of $25.00 per share, plus
all accrued and unpaid dividends to the date of the redemption.
- The Series A preferred stock has no stated maturity and will not be
subject to any sinking fund or mandatory redemption and will not be
convertible into or exchangeable for any other shares of our stock or any
other property or securities.
- Holders of the Series A preferred stock will generally have no voting
rights, except if we fail to pay dividends on any Series A preferred
stock for six or more quarterly periods.
- In an effort to protect us against the risk of losing our status as a
REIT due to a concentration of ownership among holders of our capital
stock, transfers of Series A preferred stock in some circumstances will
be restricted.
We have applied to list the Series A preferred stock on the New York Stock
Exchange, or NYSE, under the symbol "CUZ PrA." If this application is approved,
trading of the Series A preferred stock on the NYSE is expected to commence
within the 30-day period following the initial delivery of the Series A
preferred stock to the underwriters.
- --------------------------------------------------------------------------------
INVESTING IN THE SERIES A PREFERRED STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE S-7 OF THIS PROSPECTUS SUPPLEMENT AND ON PAGE 4 OF THE
ACCOMPANYING PROSPECTUS.
<Table>
<Caption>
PER SHARE TOTAL
--------- ------------
Public offering price....................................... $25.0000 $100,000,000
Underwriting discounts and commissions...................... $ 0.7875 $ 3,150,000
Proceeds to us.............................................. $24.2125 $ 96,850,000
</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 accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the Series A preferred stock on or about
July 24, 2003.
- --------------------------------------------------------------------------------
WACHOVIA SECURITIES BANC OF AMERICA SECURITIES LLC
Sole Book-Running Manager Co-Lead Manager
MCDONALD INVESTMENTS INC. RBC DAIN RAUSCHER
The date of this prospectus supplement is July 17, 2003.
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
PROSPECTUS SUPPLEMENT
About This Prospectus Supplement............................ S-2
Forward-Looking Statements.................................. S-2
Prospectus Supplement Summary............................... S-3
Risk Factors................................................ S-7
Use of Proceeds............................................. S-8
Ratio of Earnings to Fixed Charges and Ratio of Earnings to
Fixed Charges and Preferred Stock Dividends............... S-8
Description of Series A Preferred Stock..................... S-9
Certain Federal Income Tax Considerations................... S-16
Underwriting................................................ S-18
Legal Matters............................................... S-20
Experts..................................................... S-20
PROSPECTUS
About this Prospectus....................................... 1
Where You Can Find More Information......................... 2
Cousins Properties Incorporated............................. 3
Forward-Looking Statements.................................. 3
Risk Factors................................................ 4
Use of Proceeds............................................. 10
Ratio of Earnings to Fixed Charges and Ratio of Earnings to
Fixed Charges and Preferred Stock Dividends............... 10
Description of Common Stock................................. 11
Description of Warrants..................................... 15
Description of Debt Securities.............................. 15
Description of Preferred Stock.............................. 26
Certain Federal Income Tax Considerations................... 28
Plan of Distribution........................................ 39
Experts..................................................... 40
Legal Matters............................................... 40
</Table>
- --------------------------------------------------------------------------------
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not, and the underwriters have not, authorized anyone to provide you with
information that is different. If anyone provides you with different or
inconsistent information, you should not rely on it. This prospectus supplement
and the accompanying prospectus may be used only where it is legal to sell these
securities. We are not, and the underwriters are not, making an offer to sell
the securities, nor are we or the underwriters seeking an offer to buy the
securities, in any jurisdiction where the offer or sale is not permitted. You
should not assume that the information contained or incorporated by reference in
this prospectus supplement and the accompanying prospectus is correct at any
date other than the date of the document containing the information.
All references to "Cousins," "we," "our" and "us" in this prospectus
supplement and the accompanying prospectus refer to Cousins Properties
Incorporated, together with all entities owned, controlled or consolidated by
us, except where it is made clear that the term means only the parent company.
S-1
ABOUT THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first part is this prospectus
supplement, which describes the specific terms of the Series A preferred stock
we are offering and certain other matters relating to us. The second part, the
accompanying prospectus, gives more general information about securities we may
offer from time to time, some of which do not apply to the Series A preferred
stock we are offering.
If the description of the offering varies between this prospectus
supplement and the accompanying prospectus, you should rely on the information
in this prospectus supplement. This prospectus supplement incorporates by
reference important business and financial information about Cousins Properties
Incorporated that is not included in or delivered with this prospectus
supplement.
FORWARD-LOOKING STATEMENTS
Certain matters contained in, or incorporated by reference in, this
prospectus supplement and the accompanying prospectus are forward-looking
statements within the meaning of the federal securities laws and are subject to
uncertainties and risks. These risks include, but are not limited to, general
and local economic conditions, local real estate conditions, the activity of
others developing competitive projects, the cyclical nature of the real estate
industry, the financial condition of existing tenants, interest rates, our
ability to obtain favorable financing or zoning, environmental matters, the
effects of terrorism, the risks outlined in the section of this prospectus
supplement under the heading "Risk Factors," the section of the accompanying
prospectus under the heading "Risk Factors" and other risks detailed from time
to time in our filings with the Securities and Exchange Commission, or the SEC.
The words "believes," "expects," "estimates" and similar expressions are
intended to identify forward-looking statements. Although we believe that our
plans, intentions and expectations reflected in any forward-looking statements
are reasonable, we can give no assurance that these plans, intentions or
expectations will be achieved. Our forward-looking statements are based on
current expectations and speak only as of the date of these statements. We
undertake no obligation to publicly update or revise any forward-looking
statement, whether as a result of future events, new information or otherwise,
except as required by law.
S-2
PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights information contained elsewhere in this prospectus
supplement. Because this is a summary, it may not contain all of the information
that is important to you. You should read this entire prospectus supplement, the
accompanying prospectus and the documents incorporated by reference carefully
before deciding whether to invest in the Series A preferred stock. You should
consider consulting with your own legal and tax advisors to understand fully the
terms of the Series A preferred stock. This summary is qualified in its entirety
by the more detailed information and financial statements, including the notes
thereto, appearing elsewhere or incorporated by reference in this prospectus
supplement and the accompanying prospectus.
COUSINS PROPERTIES INCORPORATED
We are an Atlanta, Georgia-based, fully integrated, self administered
equity real estate investment trust, or REIT. We have extensive experience in
the real estate industry, including the acquisition, financing, development,
management and leasing of properties. We have been a public company since 1962,
and our common stock trades on the New York Stock Exchange under the symbol
"CUZ."
We own, directly and through subsidiaries and joint ventures, a portfolio
of well-located, high-quality office, medical office, retail and land
development projects and hold several tracts of strategically located
undeveloped land. The strategies employed to achieve our investment goals
include:
- the development of commercial real estate which is leased to quality
tenants,
- the maintenance of high levels of occupancy within owned properties,
- the development of single-family residential subdivisions,
- the selective sale and financing of assets,
- the creation of joint venture arrangements, and
- the acquisition of quality income-producing properties at attractive
prices.
We also seek to be opportunistic and take advantage of normal real estate
business cycles.
As of June 30, 2003:
- our office portfolio (excluding medical office) included interests in 36
commercial office buildings, with a weighted average leased percentage
(excluding a property currently under construction and in lease-up and
One Ninety One Peachtree Tower, in which we own less than 10%) of
approximately 90%,
- our medical office portfolio included interests in six medical office
properties, with a weighted average leased percentage of approximately
89%, and
- our retail portfolio included interests in 12 properties, with a weighted
average leased percentage (excluding the properties currently under
construction and in lease-up) of approximately 96%.
Our joint venture partners include, but are not limited to, either the
following companies or their affiliates: International Business Machines
Corporation, The Coca-Cola Company, Bank of America Corporation, The Prudential
Insurance Company of America, JP Morgan Chase & Co., Temple-Inland Inc., Equity
Office Properties Trust, CommonWealth Pacific, LLC and CarrAmerica Realty
Corporation.
Our executive offices are located at 2500 Windy Ridge Parkway, Atlanta,
Georgia 30339, and our telephone number is (770) 955-2200.
S-3
RECENT DEVELOPMENTS
Mirant Corporation, or Mirant, currently leases its headquarters building
from a joint venture in which we are a 50% partner, 285 Venture, LLC, or the JV.
The JV contributed 1.2% and 0.9% of our consolidated revenues for the year ended
December 31, 2002 and the quarter ended March 31, 2003, respectively. On July
14, 2003, Mirant issued a press release indicating that it has filed for
reorganization under Chapter 11 of the United States Bankruptcy Code of 1978, as
amended. The release indicates that no plan of reorganization has yet been
developed, and that the treatment of existing creditor and stockholder interests
is uncertain at this time. It is possible that in the bankruptcy, Mirant's lease
with the JV could be rejected. If this occurs, and if the JV is not able to
re-lease this space on comparable terms, the rejection of the lease could have
an adverse impact on our results of operations. For historical information
relating to the JV, see "Joint Ventures -- 285 Venture (1155 Perimeter Center
West) (100%) -- Rental Property Revenues Less Rental Property Operating
Expenses," contained under the schedule entitled "Net Income and Funds From
Operations -- Supplemental Detail and Reconciliations" contained in Exhibit 99.2
to our Current Report on Form 8-K furnished to the Securities and Exchange
Commission on May 5, 2003.
THE OFFERING
For a more complete description of the rights, preferences and other terms
of the Series A preferred stock specified in the following summary, please see
the information under the caption "Description of Series A Preferred Stock" in
this prospectus supplement and "Description of Preferred Stock" in the
accompanying prospectus.
Issuer........................ Cousins Properties Incorporated
Securities Offered............ 4,000,000 shares of our 7 3/4% Series A
Cumulative Redeemable Preferred Stock, $1.00
par value per share.
Price per share............... $25.00
Dividend Rate and Payment
Dates......................... Dividends on the Series A preferred stock are
cumulative from July 24, 2003, payable at the
rate of 7 3/4% per year of the $25.00
liquidation preference per share (equivalent to
a fixed annual amount of $1.9375 per share),
and payable quarterly in arrears on February
15, May 15, August 15 and November 15 of each
year, beginning on November 15, 2003. The first
dividend payment will be for greater than a
full quarter and will cover the period from
July 24, 2003 to November 15, 2003. Dividends
on the Series A preferred stock will accrue
regardless of whether:
- our agreements, including our credit
facilities, at any time prohibit the current
payment of dividends,
- we have earnings,
- there are funds legally available for the
payment of such dividends, or
- such dividends are declared by our board of
directors.
See "Description of Series A Preferred
Stock -- Dividends."
Liquidation Preference........ The liquidation preference for each share of
Series A preferred stock is $25.00, plus all
accrued and unpaid dividends. See "Description
of Series A Preferred Stock -- Liquidation
Preference."
S-4
Redemption.................... Except in certain circumstances relating to the
preservation of our U.S. federal income tax
status as a REIT, the Series A preferred stock
is not redeemable prior to July 24, 2008. On
and after July 24, 2008, the Series A preferred
stock may be redeemed for cash at our option,
in whole or in part, at any time and from time
to time at $25.00 per share, plus all accrued
and unpaid dividends on each share of Series A
preferred stock redeemed to the date fixed for
redemption. See "Description of Series A
Preferred Stock -- Redemption."
Maturity...................... The Series A preferred stock does not have any
stated maturity date, and we are not required
to redeem these shares. Accordingly, the Series
A preferred stock will >remain outstanding
indefinitely unless we decide to redeem it or
repurchase shares in the open market, in each
case, at our option, subject to the
restrictions on redemption described herein.
Ranking....................... The Series A preferred stock will rank senior
to our common stock with respect to the payment
of dividends and other amounts upon liquidation
and equal with our other preferred stock, none
of which is outstanding, unless a particular
series of preferred stock that we issue
specifies that it will rank junior or senior to
the Series A Preferred Stock with respect to
the payment of dividends and other amounts upon
liquidation. See "Description of Series A
Preferred Stock -- Ranking."
Voting Rights................. Holders of the Series A preferred stock will
generally have no voting rights, except as
required by law. However, if we fail to pay
dividends on any shares of Series A preferred
stock for six or more quarterly periods, the
holders of the Series A preferred stock (voting
together as a class with all other series of
our preferred stock, if any, upon which like
voting rights have been conferred and are
exercisable) will be entitled to vote for the
election of two members to our board of
directors until all dividends accumulated on
the Series A preferred stock have been fully
paid or declared and a sum sufficient for the
payment thereof set aside for payment. See
"Description of Series A Preferred
Stock -- Voting Rights."
Conversion.................... The Series A preferred stock is not convertible
into or exchangeable for any other shares of
our stock or any other property or securities.
Restrictions on Ownership..... Subject to certain exceptions, our Restated and
Amended Articles of Incorporation, as amended,
or Articles of Incorporation, limit "Ownership"
(as defined in our Articles of Incorporation)
by a single "Person" (as defined in our
Articles of Incorporation) to 3.9% of the
aggregate value of all outstanding shares of
all classes of our capital stock (including the
Series A preferred stock). See "Description of
Series A Preferred Stock -- Restrictions on
Ownership."
Use of Proceeds............... The net proceeds from the sale of the Series A
preferred stock will be used to repay our
outstanding indebtedness under our unsecured
credit facility and for general corporate
purposes. See "Use of Proceeds."
S-5
Trading....................... We have applied to list the Series A preferred
stock on the NYSE under the symbol "CUZ PrA."
If this application is approved, trading of the
Series A preferred stock on the NYSE is
expected to commence within a 30-day period
following the initial delivery of the Series A
preferred stock to the underwriters.
S-6
RISK FACTORS
In addition to the risks which are included in the accompanying prospectus,
you should carefully consider the following material risk factors before making
an investment in the Series A preferred stock.
THE SERIES A PREFERRED STOCK DOES NOT HAVE AN ESTABLISHED TRADING MARKET, WHICH
MAY NEGATIVELY AFFECT ITS MARKET VALUE AND YOUR ABILITY TO TRANSFER OR SELL YOUR
SHARES.
The Series A preferred stock is a new issue of securities with no
established trading market. Since the Series A preferred stock has no stated
maturity date, investors seeking liquidity will be limited to selling their
shares in the secondary market. We have applied to list the Series A preferred
stock on the NYSE, but we cannot assure you that the shares will be approved for
listing. If approved, trading is not expected to begin until up to 30 days after
initial delivery of the shares. In addition, an active trading market on the
NYSE for the Series A preferred stock may not develop or, even if it develops,
may not last, in which case the trading price of the shares could be adversely
affected and your ability to transfer your shares of Series A preferred stock
will be limited. The trading price of the shares will depend on many factors,
including:
- prevailing interest rates,
- the market for similar securities,
- general economic and market conditions, and
- our financial condition, performance and prospects.
For example, an increase in market interest rates may have a negative
effect on the trading value of the Series A preferred stock. The underwriters
are not obligated to make a market in the Series A preferred stock, and if they
do so, may discontinue market-making at any time without notice.
OUR SERIES A PREFERRED STOCK WILL BE SUBORDINATED TO OUR DEBT AND HAS NOT BEEN
RATED.
Our Series A preferred stock will be subordinated to all of our existing
and future indebtedness. The Series A preferred stock has not been rated by any
nationally recognized statistical rating organization.
NEW TAX LEGISLATION MAY HAVE AN EFFECT ON THE SHARE PRICES OF THE SERIES A
PREFERRED STOCK.
On May 28, 2003, President Bush signed into law the Jobs Growth Tax Relief
Reconciliation Act of 2003. Under this legislation, certain "qualified dividend
income" received by domestic non-corporate shareholders in taxable years 2003
through 2008 is subject to tax at a rate lower than the rate applicable to
ordinary income. However, dividends received from REITs (other than capital gain
dividends) -- including dividends on the Series A preferred stock (other than
capital gain dividends) -- generally are not eligible for these reduced tax
rates and, therefore, will be subject to tax at ordinary income rates, subject
to two narrow exceptions described in the accompanying prospectus under the
caption "Certain Federal Income Tax Considerations -- Taxation of Shareholders."
In addition, as under prior law, corporate shareholders will not be eligible for
the dividends received deduction as to any dividends received from a REIT.
Unlike regular taxable corporations, however, REITs generally are exempt from
federal income tax at the corporate level on taxable income that they distribute
currently to their shareholders as dividends. The new tax rates on "qualified
dividend income," therefore, have reduced, but not eliminated, some of the tax
advantages that REITs enjoy over regular taxable corporations. These rules could
make an investment in a REIT, including an investment in the Series A preferred
stock, comparatively less attractive than an investment in a REIT prior to the
enactment of the legislation, which could adversely affect the market price of
the Series A preferred stock.
S-7
USE OF PROCEEDS
We estimate that we will receive net proceeds from this offering, after all
anticipated issuance costs, of approximately $96.5 million. We intend to use the
net proceeds of this offering to repay outstanding indebtedness under our $275
million unsecured credit facility, $17.6 million of which was outstanding as of
June 30, 2003, and for general corporate purposes, including, without
limitation, repaying indebtedness from time to time and funding future
investments and developments.
The interest rate on our unsecured credit facility, which matures on August
31, 2004, is equal to LIBOR plus a spread based on the ratio of total debt to
total assets. As of June 30, 2003, the interest rate was 2.27%. Pending
application of the net proceeds, we will invest these proceeds in
interest-bearing accounts and short-term, interest-bearing securities, which are
consistent with our intention to continue to qualify for taxation as a REIT. See
"Underwriting -- Related-Party Transactions."
RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
-------------------------------- THREE MONTHS ENDED
1998 1999 2000 2001 2002 MARCH 31, 2003
---- ---- ---- ---- ---- ------------------
Ratio of Earnings to Fixed
Charges........................... 4.19 3.99 2.56 2.49 2.02 3.43
</Table>
There was no preferred stock outstanding for any of the periods shown
above. Accordingly, the ratio of earnings to combined fixed charges and
preferred stock dividends is identical to the ratio of earnings to fixed
charges.
We compute the ratio of earnings to fixed charges and ratio of earnings to
fixed charges and preferred stock dividends by dividing earnings by fixed
charges. For this purpose, earnings consist of pre-tax income from continuing
operations, adjusted for equity investees and minority interests, further
adjusted for amortization of capitalized interest and fixed charges less
capitalized interest. Fixed charges consist of interest expense (including
capitalized interest) and the portion of rental expense representing interest
(estimated as 30%).
S-8
DESCRIPTION OF SERIES A PREFERRED STOCK
The following description of the Series A preferred stock offered hereby
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the preferred stock set forth under
"Description of Preferred Stock" in the accompanying prospectus, to which
reference is hereby made. This summary does not purport to be complete and is
qualified in its entirety by reference to the Certificate of Designations
setting forth the terms of the Series A preferred stock. Copies of the
Certificate of Designations and of our Articles of Incorporation may be obtained
from us upon request.
OUR PREFERRED STOCK GENERALLY
Pursuant to our Articles of Incorporation, our board of directors has the
authority, without further shareholder action, to issue a maximum of 20 million
shares of preferred stock, $1.00 par value per share. We have no shares of
preferred stock issued or outstanding. Pursuant to our Articles of
Incorporation, our board of directors has the authority to determine or fix the
following terms with respect to shares of any series of preferred stock:
- the dividend rate, the times of payment and the date from which dividends
will accumulate, if dividends are to be cumulative,
- whether and upon what terms the shares will be redeemable,
- whether and upon what terms the shares will have a sinking fund,
- whether and upon what terms the shares will be convertible or
exchangeable,
- whether the shares will have voting rights and the terms thereof,
- the rights of the holders upon our liquidation, dissolution or
winding-up,
- restrictions on transfer to preserve our tax status as a REIT, and
- any other relative rights, powers and limitations or restrictions.
SERIES A PREFERRED STOCK -- GENERAL
The Series A preferred stock offered hereby is a series of our preferred
stock, that, when issued, will be fully paid and nonassessable and will have no
preemptive rights.
RANKING
With respect to the payment of dividends and amounts upon liquidation, the
Series A preferred stock will rank:
- senior to our common stock and to any other class or series of our
capital stock other than any class or series referred to in the next
succeeding bullet points,
- on a parity with any class or series of our capital stock the terms of
which specifically provide that such class or series of capital stock
ranks on a parity with the Series A preferred stock as to the payment of
dividends and the distribution of assets in the event of any liquidation,
dissolution or winding up,
- junior to any class or series of our capital stock the terms of which
specifically provide that such class or series of capital stock ranks
senior to the Series A preferred stock as to the payment of dividends and
the distribution of assets in the event of any liquidation, dissolution
or winding up, and
- junior to our indebtedness.
S-9
DIVIDENDS
Holders of Series A preferred stock will be entitled to receive, when and
as declared by our board of directors, out of funds legally available for the
payment of dividends, cumulative cash dividends at the rate of 7 3/4% per year
of the $25.00 liquidation preference per share, equivalent to a fixed annual
amount of $1.9375 per share. Dividends on the Series A preferred stock are
payable quarterly in arrears on February 15, May 15, August 15 and November 15
of each year, and if such day is not a business day, the next succeeding
business day, commencing on November 15, 2003. We refer to each of these dates
as a "dividend payment date" in this prospectus supplement, and the period
beginning after each dividend payment date and ending on the next succeeding
dividend payment date is referred to as the "dividend period." The first
dividend payment will be for greater than a full quarter and will cover the
period from July 24, 2003 to November 15, 2003. Such dividend and any dividend
payable on the Series A preferred stock for any partial dividend period will be
computed on the basis of a 360-day year consisting of twelve 30-day months.
Dividends will be payable to holders of record as they appear in our stock
records at the close of business on the applicable record date, which is the
first day of the calendar month in which the applicable dividend payment date
falls or on such other date designated by our board of directors for the payment
of dividends that is not more than 30 nor less than 10 days prior to such
dividend payment date. We refer to each of these dates as a "dividend record
date" in this prospectus supplement.
No dividends on Series A preferred stock may be declared by our board of
directors or paid or set apart for payment by us if such declaration or payment
is restricted or prohibited by law, or at any time at which one or more of our
contractual agreements, including any agreement relating to our outstanding
indebtedness, (1) prohibits the declaration, payment or setting apart for
payment of dividends or (2) provides that the declaration, payment or setting
apart for payment of dividends would constitute a breach thereof or a default
thereunder.
Notwithstanding the foregoing, dividends on the Series A preferred stock
will accrue regardless of whether:
- our agreements, including our credit facilities, at any time prohibit the
current payment of dividends,
- we have earnings,
- there are funds legally available for the payment of such dividends, or
- such dividends are declared.
Accrued but unpaid dividends on the Series A preferred stock will
accumulate as of the dividend payment date on which they first become payable.
No dividends will be declared or paid or set apart for payment, and no
distribution will be made, on any of our common stock or any other series of
preferred stock ranking, as to dividends, on a parity with or junior to the
Series A preferred stock (other than a dividend that consists of shares of our
common stock or shares of any other class of stock ranking junior to the Series
A preferred stock as to dividends and upon liquidation) for any period unless
full cumulative dividends on the Series A preferred stock have been, or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof is set apart for such payment for all dividend periods
ending on or prior to the date of such action with respect to our common stock
or any other series of preferred stock ranking, as to dividends, on a parity
with or junior to the Series A preferred stock.
When dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) with respect to the Series A preferred stock and
any other series of preferred stock ranking on a parity as to dividends with the
Series A preferred stock, all dividends declared upon the Series A preferred
stock and any other series of preferred stock ranking on a parity as to
dividends with the Series A preferred stock will be declared pro rata so that
the amount of dividends declared per share of Series A preferred stock 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 Series A preferred stock and such
other series of preferred stock
S-10
(which shall not include any accrual in respect of unpaid dividends for prior
dividend periods if such shares of preferred stock do not have a cumulative
dividend) bear to each other. No interest, or sum of money in lieu of interest,
will be payable in respect of any dividend payment or payments on the Series A
preferred stock which may be in arrears.
Unless full cumulative dividends on the Series A preferred stock have been
or contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof is set apart for payment, for all dividend periods ending on
or prior to the date of any action described below:
- no dividends (other than in shares of our common stock or shares of our
capital stock ranking junior to the Series A preferred stock as to
dividends and upon liquidation) shall be declared or paid or set aside
for payment,
- no other distribution may be declared or made upon shares of our common
stock or any shares of our capital stock ranking junior to or on a parity
with the Series A preferred stock as to dividends or upon liquidation,
and
- no shares of our common stock, or any other shares of our capital stock
ranking junior to or on a parity with the Series A preferred stock as to
dividends or upon liquidation may be redeemed, purchased or otherwise
acquired by us for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any such shares)
(except by conversion into or exchange for other of our shares of capital
stock ranking junior to the Series A preferred stock as to dividends and
upon liquidation, and except for our redemption, purchase or acquisition
of "Excess Shares" under our Articles of Incorporation to ensure that we
remain a qualified REIT for federal income tax purposes).
Holders of the Series A preferred stock will not be entitled to any
dividend, whether payable in cash, property or shares of capital stock, in
excess of full cumulative dividends on the Series A preferred stock as provided
above. Any dividend payment made on the Series A preferred stock will first be
credited against the earliest accrued but unpaid dividend due with respect to
such shares which remains payable.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
our affairs, the holders of Series A preferred stock will be entitled to be paid
out of our assets legally available for distribution to our shareholders a
liquidation preference of $25.00 per share, plus all accrued and unpaid
dividends to the date of payment, before any distribution of assets is made to
holders of our common stock or any other class or series of our capital stock
that ranks junior to the Series A preferred stock as to liquidation rights.
After payment of the full amount of the liquidating distributions to which they
are entitled, the holders of Series A preferred stock will have no right or
claim to any of our remaining assets.
In the event that, upon any voluntary or involuntary liquidation,
dissolution or winding up, our available assets are insufficient to pay the
amount of the liquidating distributions on all outstanding Series A preferred
stock and the corresponding amounts payable on all other classes or series of
our capital stock ranking on a parity with the Series A preferred stock in the
distribution of assets, then the holders of the Series A preferred stock and all
other such classes or series will share ratably in any such distribution of
assets in proportion to the full liquidating distributions to which they would
otherwise be respectively entitled.
Our consolidation, combination or merger with or into any other
corporation, trust or entity or consolidation or merger of any other corporation
with or into us, the sale, lease or conveyance of all or substantially all of
our assets, property or business or any statutory share exchange, will not be
deemed to constitute a liquidation, dissolution or winding up of us.
REDEMPTION
The Series A preferred stock is not redeemable before July 24, 2008.
However, in order to ensure that we remain a qualified REIT for federal income
tax purposes, shares of Series A preferred stock and
S-11
any other shares of our capital stock that are owned by a shareholder in excess
of a specified ownership limit may automatically become "Excess Shares" under
our Articles of Incorporation, which we will have the right to purchase from the
holder. See "-- Restrictions on Ownership."
On and after July 24, 2008, we, at our option upon not less than 30 nor
more than 60 days prior written notice, may redeem the Series A preferred stock,
in whole or in part, at any time or from time to time, for cash at a redemption
price of $25.00 per share, plus all accrued and unpaid dividends on such shares
to the date fixed for redemption (except as provided below), without interest.
Holders of Series A preferred stock to be redeemed must surrender the Series A
preferred stock at the place designated in the notice and will be entitled to
the redemption price and any accrued and unpaid dividends payable upon the
redemption following surrender. If notice of redemption of any Series A
preferred stock has been given and if the funds necessary for such redemption
have been set aside by us in trust for the benefit of the holders of any Series
A preferred stock called for redemption, then from and after the redemption
date:
- dividends will cease to accrue on the Series A preferred stock,
- the Series A preferred stock will no longer be deemed outstanding, and
- all rights of the holders of the Series A preferred stock will terminate,
except the holder's right to receive the redemption price.
If less than all of the outstanding Series A preferred stock is to be
redeemed, the Series A preferred stock to be redeemed will be selected pro rata
(as nearly as may be practicable without creating fractional shares) or by any
other equitable method determined by us.
Unless full cumulative dividends on all Series A preferred stock have been,
or contemporaneously are, declared and paid, or declared and a sum sufficient
for the payment thereof is set apart for payment for all dividend periods ending
on or prior to the date of any applicable redemption, purchase or acquisition,
no Series A preferred stock may be redeemed unless all outstanding shares of
Series A preferred stock are simultaneously redeemed, and we may not purchase or
otherwise acquire directly or indirectly any Series A preferred stock (except by
exchange for shares of our capital stock ranking junior to the Series A
preferred stock as to dividends and upon liquidation). This requirement will not
prevent the Series A preferred stock from becoming "Excess Shares" under our
Articles of Incorporation or the purchase by us of Excess Shares in order to
ensure that we remain qualified as a REIT for federal income tax purposes.
The terms of the Series A preferred stock will not prevent us from
conducting open-market purchases of our Series A preferred stock and/or any of
our other equity securities from time to time, in accordance with applicable law
and subject to the limitations described under the headings "-- Dividends" and
"-- Redemption" above.
Notice of redemption will be given by publication in a newspaper of general
circulation in The City of New York, such publication to be made once a week for
two successive weeks commencing not less than 30 nor more than 60 days before
the redemption date. A similar notice will be mailed by us, postage prepaid, not
less than 30 nor more than 60 days before the redemption date, addressed to the
respective holders of record of the Series A preferred stock to be redeemed at
their respective addresses as they appear on our stock transfer records. No
failure to give such notice or any defect therein or in the mailing thereof
shall affect the validity of the proceedings for the redemption of any Series A
preferred stock except as to the holder to whom notice was defective or not
given. Each notice will state:
- the redemption date,
- the redemption price,
- the number of shares of Series A preferred stock to be redeemed,
- the place or places where shares of Series A preferred stock are to be
surrendered for payment of the redemption price, and
S-12
- that dividends on the Series A preferred stock to be redeemed will cease
to accrue on such redemption date.
If less than all of the shares of Series A preferred stock held by any
holder are to be redeemed, the notice mailed to the holder will also specify the
number of shares to be redeemed.
The holders of Series A preferred stock at the close of business on a
dividend record date will be entitled to receive the dividend payable with
respect to the Series A preferred stock on the corresponding dividend payment
date notwithstanding the redemption thereof between the dividend record date and
the corresponding dividend payment date. Except as provided above, we will make
no payment or allowance for unpaid dividends, whether or not in arrears, on
shares of Series A preferred stock that are called for redemption.
The Series A preferred stock has no stated maturity and will not be subject
to any sinking fund or mandatory redemption. However, in order to ensure that we
remain a qualified REIT for federal income tax purposes, Series A preferred
stock owned by a shareholder in excess of the ownership limit specified in the
Articles of Incorporation may become "Excess Shares" under our Articles of
Incorporation, which we will have the right to purchase from the holder. See
"-- Restrictions on Ownership."
VOTING RIGHTS
Holders of the Series A preferred stock will not have any voting rights,
except as set forth below or as otherwise from time to time as required by law.
Whenever we fail to pay dividends on any Series A preferred stock for six
or more quarterly periods, which we refer to in this prospectus supplement as a
"preferred dividend default," the holders of Series A preferred stock (voting
separately as a class with all other series of preferred stock, if any, ranking
on a parity with the Series A preferred stock as to dividends or upon
liquidation, referred to in this prospectus supplement as "parity preferred,"
upon which like voting rights have been conferred and are exercisable) will be
entitled to vote for the election of a total of two members of our board of
directors, referred to in this prospectus supplement as "preferred directors:"
- at the next annual meeting of the shareholders or at a special meeting of
the shareholders called by the holders of record of at least 20% of the
Series A preferred stock or the holders of 20% of any other series of
such parity preferred 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 shareholders), and
- at each subsequent annual meeting until all dividends accrued on Series A
preferred stock for all dividend periods ending on or prior to the date
of any applicable annual meeting shall have been fully paid or declared
and a sum sufficient for the payment thereof set aside for payment.
If and when all accumulated dividends on the Series A preferred stock shall
have been declared and paid in full or declared and set aside for payment in
full, the holders thereof shall be divested of the foregoing voting rights
(subject to revesting in the event of each and every preferred dividend default)
and, if all accumulated dividends have been paid in full or declared and set
aside for payment in full on all series of parity preferred upon which like
voting rights have been conferred and are exercisable, the term of office of
each preferred director so elected shall terminate.
Any preferred director may be removed at any time with or without cause by,
and shall not be removed otherwise than by the vote of, the holders of record of
a majority of the outstanding Series A preferred stock (voting separately as a
class with all other series of parity preferred, if any, upon which like voting
rights have been conferred and are exercisable). So long as a preferred dividend
default shall continue, any vacancy in the office of a preferred director may be
filled by written consent of the preferred director remaining in office, or if
none remains in office, by a vote of the holders of record of a majority of the
outstanding Series A preferred stock when they have the voting rights described
above (voting separately as a class with all other series of parity preferred,
if any, upon which like voting rights have been conferred and are exercisable).
The preferred directors will each be entitled to one vote per director on any
matter.
S-13
So long as any shares of Series A preferred stock remain outstanding, we
will not, without the affirmative vote or consent of the holders of at least
two-thirds of the Series A preferred stock outstanding at the time, given in
person or by proxy, either in writing or at a meeting (voting separately as a
class):
- authorize or create, or increase the authorized or issued amount of, any
class or series of capital stock ranking senior to Series A preferred
stock with respect to payment of dividends or the distribution of assets
upon liquidation, dissolution or winding up or reclassify any authorized
shares of our capital stock into such shares, or create, authorize or
issue any obligation or security convertible into or evidencing the right
to purchase any such shares, or
- amend, alter or repeal the provisions of our Articles of Incorporation,
whether by merger, consolidation or otherwise (an "event"), so as to
materially and adversely affect any right, preference, privilege or
voting power of the Series A preferred stock or the holders thereof,
provided, however, with respect to the occurrence of any event set forth in the
second bullet point above, so long as any shares of Series A preferred stock
remain outstanding with the terms thereof materially unchanged, taking into
account that upon the occurrence of an event we may not be the surviving entity,
the occurrence of any such event will not be deemed to materially and adversely
affect any right, preference, privilege or voting power of the Series A
preferred stock or the holders thereof, and provided further that (1) any
increase in the amount of the authorized common stock or preferred stock or the
creation or issuance of any other series of common stock or preferred stock,
ranking on a parity with or junior to Series A preferred stock with respect to
payment of dividends or the distribution of assets upon liquidation, dissolution
or winding up, or (2) any change to the number or classification of our
directors, will not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers, and provided further that any
amendment to Article 11 of our Articles of Incorporation relating to "Excess
Shares," the ownership limit set forth therein or any other matter described
therein of any type or nature will not be deemed to materially and adversely
affect such rights, preferences, privileges or voting powers so long as after
such amendment, any single "Person" may "Own" (each as defined in Article 11 of
the Articles of Incorporation prior to or after such amendment) 3.9% of the
value of the outstanding shares of our capital stock without violating the
ownership limit set forth therein.
The foregoing voting provisions will not apply, and the Series A preferred
stock will not be entitled to vote, after any notice of redemption is mailed to
the holders and a sum sufficient to redeem the shares has been deposited with a
bank, trust company, or other financial institution under an irrevocable
obligation to pay the redemption price to the holders upon surrender of the
shares.
CONVERSION
The Series A preferred stock is not convertible into or exchangeable for
any other of our property or securities. However, to preserve our status as a
REIT for federal income tax purposes, shares of Series A preferred stock may
become "Excess Shares" under Article 11 of our Articles of Incorporation. See
"-- Restrictions on Ownership."
RESTRICTIONS ON OWNERSHIP
For us to qualify as a REIT under the Internal Revenue Code of 1986, as
amended, or the Code, not more than 50% in value of our outstanding stock 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 us in complying with this requirement, subject to certain exceptions, the
Articles of Incorporation
S-14
limit "Ownership" (as defined in the Articles of Incorporation) by a single
"Person" (as defined in the Articles of Incorporation) to 3.9% of the aggregate
value of all outstanding shares of all classes of stock (including the Series A
preferred stock). For a more complete description of the transfer restrictions
contained in our Articles of Incorporation, please see the discussion contained
in the accompanying prospectus under the heading "Description of Common
Stock -- Restrictions on Transfer."
TRANSFER AGENT
The transfer agent, registrar and dividend disbursing agent for the Series
A preferred stock will be Wachovia Bank, N.A.
S-15
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States federal income tax
considerations is based on current law, is for general information only, and is
not tax advice. The discussion does not purport to deal with all aspects of
taxation that may be relevant to particular shareholders in light of their
personal investment or tax circumstances, or to certain types of shareholders
(including insurance companies, tax-exempt organizations, 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. In addition, this section does not address foreign, state or
local taxation. King & Spalding LLP has provided opinions to the effect that the
following discussion in this prospectus supplement and the discussion in the
accompanying prospectus under the heading "Certain Federal Income Tax
Considerations," to the extent that they contain statements of applicable
federal income tax law, are correct in all material respects as of the date
hereof, with the exception that the opinion of King & Spalding LLP does not
address whether Cousins Properties Incorporated has qualified, or will qualify,
as a REIT for federal income tax purposes. Deloitte & Touche LLP has provided an
opinion as of July 10, 2003 regarding our REIT qualification, which is attached
as Exhibit 8.2 to Amendment No. 1 to our Registration Statement on Form S-3
(Registration No. 333-106401) of which this prospectus supplement and the
accompanying prospectus are a part, filed with the SEC on July 10, 2003, and
which exhibit is incorporated herein by reference. See "Where You Can Find More
Information" in the accompanying prospectus for information on how to obtain a
copy of this tax opinion. See also "Certain Federal Income Tax Considerations --
Taxation of Cousins Properties Incorporated" in the accompanying prospectus.
This prospectus supplement does not address the taxation of Cousins
Properties Incorporated or its election to be taxed as a REIT. Such matters are
addressed in the accompanying prospectus under the caption "Certain Federal
Income Tax Considerations -- Taxation of Cousins Properties Incorporated." With
respect to the taxation of shareholders, this discussion supplements, and should
be read together with, the discussion in the accompanying prospectus under the
caption "Certain Federal Income Tax Considerations -- Taxation of Shareholders."
Prospective investors should consult, and must depend on, their own tax advisors
regarding the federal, state, local, foreign and other tax consequences of
holding and disposing of the Series A preferred stock.
DIVIDENDS AND OTHER DISTRIBUTIONS; BACKUP WITHHOLDING. For a discussion
regarding the federal income taxation of dividends and other distributions with
respect to shares of our capital stock, and the backup withholding rules, see
"Certain Federal Income Tax Considerations -- Taxation of Shareholders" in the
accompanying prospectus. In determining the extent to which a distribution on
the Series A preferred stock constitutes a dividend for federal income tax
purposes, our earnings and profits will be allocated first to distributions with
respect to the Series A preferred stock and then to distributions with respect
to our common stock. If, for any taxable year, we elect to designate as capital
gain dividends any portion of the distributions paid for the year to our
shareholders, the portion of the amount so designated (not in excess of our net
capital gain for the year) that will be allocable to the holders of the Series A
preferred stock will be the amount so designated, multiplied by a fraction, the
numerator of which will be the total dividends (within the meaning of the Code)
paid to the holders of the Series A preferred stock for the year and the
denominator of which will be the total dividends paid to the holders of shares
of all classes of our stock for the year.
SALE OR EXCHANGE OF SERIES A PREFERRED STOCK. Upon the sale or exchange of
Series A preferred stock to a party other than Cousins Properties Incorporated,
a holder of Series A preferred stock will realize a capital gain or loss
measured by the difference between the amount realized on the sale or other
disposition and the holder's adjusted tax basis in the Series A preferred stock,
if the shares of Series A preferred stock are held as a capital asset. Any loss
on a sale of shares of Series A preferred stock that were held by the holder for
six months or less and with respect to which capital gain dividends have been
received will be treated as a long-term capital loss, up to the amount of the
capital gain dividends received with respect to such shares.
S-16
REDEMPTION OF SERIES A PREFERRED STOCK. The federal income tax treatment
to be accorded to any redemption by us of the Series A preferred stock can only
be determined on the basis of particular facts as to each holder of Series A
preferred stock at the time of redemption. In general, a holder of Series A
preferred stock will recognize capital gain or loss (if the Series A preferred
stock is held as a capital asset) measured by the difference between the amount
realized by the holder upon the redemption and such holder's adjusted tax basis
in the Series A preferred stock redeemed, provided that the redemption (1)
results in a "complete termination" of the holder's interest in all classes of
our capital stock under Section 302(b)(3) of the Code, (2) is "substantially
disproportionate" with respect to the holder's interest in our stock under
Section 302(b)(2) of the Code (which will not be the case if only shares of
Series A preferred stock are redeemed, since they generally do not have voting
rights), or (3) is "not essentially equivalent to a dividend" with respect to
the holder of the Series A preferred stock under Section 302(b)(1) of the Code.
In determining whether any of these tests have been met, shares considered to be
owned by the holder by reason of certain constructive ownership rules set forth
in the Code, as well as shares actually owned, generally must be taken into
account. If none of the aforementioned tests is met, the redemption will be
taxed as a distribution with respect to the Series A preferred stock and,
accordingly, will be treated as a dividend to the extent of our current and
accumulated earnings and profits. Because the determination as to whether any of
the alternative tests of Section 302(b) of the Code will be satisfied with
respect to any particular holder of Series A preferred stock depends upon the
facts and circumstances at the time when the determination must be made,
prospective investors are advised to consult their own tax advisors to determine
such tax treatment.
S-17
UNDERWRITING
We are offering the Series A preferred stock described in this prospectus
supplement through a number of underwriters. Wachovia Capital Markets, LLC, an
indirect wholly owned subsidiary of Wachovia Corporation, and Banc of America
Securities LLC are the representatives of the underwriters. We have entered into
an underwriting agreement with the underwriters. Subject to the terms and
conditions of the underwriting agreement, we have agreed to sell to the
underwriters, and each underwriter has severally agreed to purchase from us, the
number of shares of Series A preferred stock listed next to its name below at
the public offering price, less the underwriting discounts and commissions set
forth on the cover page of this prospectus supplement:
<Table>
<Caption>
UNDERWRITER NUMBER OF SHARES
- ----------- ----------------
Wachovia Capital Markets, LLC............................... 1,800,000
Banc of America Securities LLC.............................. 1,800,000
McDonald Investments Inc., a KeyCorp Company................ 200,000
RBC Dain Rauscher Inc. ..................................... 200,000
---------
Total....................................................... 4,000,000
=========
</Table>
The underwriting agreement provides that the obligations of the
underwriters to purchase the shares included in this offering are subject to
approval of legal matters by counsel and to certain other conditions. The
underwriters must buy all of these shares from us if they buy any of them. The
underwriters are offering the Series A preferred stock subject to a number of
conditions, including:
- the underwriters' receipt and acceptance of the shares from us, and
- the underwriters' right to reject orders in whole or in part.
SETTLEMENT CYCLE. We expect that delivery of the shares of Series A
preferred stock will be made against payments therefor on or about July 24,
2003, which is the fifth business day following the date hereof. Trades in the
secondary market generally are required to settle in three business days, unless
the parties to any such trade expressly agree otherwise. Accordingly, purchasers
who wish to trade shares of Series A preferred stock on any day prior to the
third business day before the date of delivery of any payment on the shares of
Series A preferred stock will be required, by virtue of the fact that the Series
A preferred stock initially will settle in five business days from the date
hereof, to specify an alternate settlement cycle at the time of any such trade
to prevent a failed settlement. Purchasers of Series A preferred stock who wish
to trade shares on the day of pricing or the next two succeeding business days
should consult their own advisor.
STOCK MARKET LISTING. We have applied to list the Series A preferred stock
on the NYSE. If approved, trading of the Series A preferred stock on the NYSE is
expected to commence within the 30-day period following the initial delivery of
the Series A preferred stock to the underwriters. The representatives have
advised us that they intend to make a market in the Series A preferred stock
prior to the commencement of trading on the NYSE. The representatives will have
no obligation to make a market, however, and may cease market-making activities,
if commenced, at any time.
The Series A preferred stock is a new issue of securities with no
established trading market. An active trading market may not develop. Even if an
active market does develop, the public price at which our shares trade in the
future may be below the offering price.
UNDERWRITING DISCOUNTS AND COMMISSIONS. The underwriting discounts and
commissions are the difference between the price the underwriters pay to us and
the price at which the underwriters initially offer the shares to the public.
The size of the underwriting discounts and commissions are determined
S-18
through arms-length negotiations between us and the representatives. The
following table shows the per share and total underwriting discounts and
commissions we will allow to the underwriters.
<Table>
<Caption>
PER SHARE TOTAL
-------------- --------------
Underwriting discounts and commissions.................... $ 0.7875 $ 3,150,000
</Table>
The expenses of this offering, not including the underwriting discount, are
estimated to be approximately $400,000 and will be paid by us. Expenses include
the NYSE listing fees, printing expenses, legal and accounting fees, transfer
agent and registrar fees and other miscellaneous fees and expenses.
COMPANY LOCK UP. We have agreed for a period of 90 days from the date of
this prospectus supplement that we will not, without the prior written consent
of the representatives, sell, dispose of, hedge or take certain other actions
with respect to any shares of the Series A preferred stock or securities
convertible into or exchangeable for the Series A preferred stock. The
representatives may, in their discretion, release us from this lock up at any
time and without notice.
INDEMNIFICATION OF THE UNDERWRITERS. We have agreed to indemnify the
underwriters against specified liabilities, including liabilities under the
Securities Act of 1933, as amended, and liabilities arising from breaches of our
representations and warranties contained in the underwriting agreement. If we
are unable to provide this indemnification, we will contribute to payments the
underwriters may be required to make in respect of those liabilities.
DEALERS' COMPENSATION. The underwriters initially will offer our shares to
the public at the price specified on the cover page of this prospectus
supplement. The underwriters may allow to selected dealers a concession of not
more than $0.50 per share. The underwriters may also allow, and any other
dealers may reallow, a concession of not more than $0.45 per share to some other
dealers. If all the shares are not sold at the public offering price, the
underwriters may change the public offering price and the other selling terms. A
change in the public offering price will not affect the amount of proceeds that
we receive.
STABILIZATION AND OTHER TRANSACTIONS. The rules of the SEC generally
prohibit the underwriters from trading in our Series A preferred stock on the
open market during this offering. However, the underwriters are allowed to
engage in some open market transactions and other activities during this
offering that may cause the market price of our Series A preferred stock to be
above or below that which would otherwise prevail in the open market. These
activities may include stabilization, short sales, syndicate covering
transactions and penalty bids, each of which is summarized in more detail below.
- Stabilizing transactions consist of bids or purchases made by the
representatives for the purpose of preventing or slowing a decline in the
market price of our Series A preferred stock while this offering is in
progress.
- Short sales occur when the representatives, on behalf of the underwriting
syndicate, sell more of our shares than they purchase from us in this
offering. The representatives must close out any short position by
purchasing shares in the open market, potentially including purchases
made as stabilizing transactions. A short position is more likely to be
created if the representatives are concerned that there may be downward
pressure on the price of the Series A preferred stock in the open market
after pricing that could adversely affect investors who purchase in the
offering.
- Syndicate covering transactions are bids for or purchases of our Series A
preferred stock on the open market by the representatives on behalf of
the underwriters in order to reduce a short position incurred by the
representatives on behalf of the underwriters. Similar to other purchase
transactions, syndicate covering transactions may have the effect of
raising or maintaining the market price of our Series A preferred stock
or preventing or retarding a decline in the market price of our Series A
preferred stock. As a result, the price of our Series A preferred stock
may be higher than the price that might otherwise exist in the open
market.
S-19
- A penalty bid is an arrangement permitting the representatives to reclaim
the selling concession that would otherwise accrue to an underwriter if
the Series A preferred stock originally sold by that underwriter was
later repurchased by the representatives and therefore was not
effectively sold to the public by such underwriter.
If the representatives commence these activities, they may discontinue them at
any time without notice. The representatives may carry out these transactions on
the NYSE, in the over-the-counter market or otherwise.
RELATED-PARTY TRANSACTIONS. In the ordinary course of their business, the
underwriters and/or their affiliates have engaged, and expect in the future to
engage, in investment banking, commercial banking, financial advisory and/or
general financing transactions with us, for which they have received, and may in
the future receive, customary fees and commissions. In particular, affiliates of
Wachovia Capital Markets, LLC and Banc of America Securities LLC (the
representatives) are lenders under, and serve as administrative agent, issuing
agent, syndication agent, joint lead arranger and joint book manager with
respect to, our credit facility. To the extent that we use the net proceeds of
this offering to reduce outstanding indebtedness under those borrowings, such
lenders (and any other participating lenders that are affiliated with the
underwriters) will receive their proportionate shares of the repayment. See "Use
of Proceeds." The underwriters and/or their affiliates also may lease space from
us from time to time.
In addition, we are partners with affiliates of Banc of America Securities,
LLC in two office joint ventures -- Bank of America Plaza and Charlotte Gateway
Village. Each venture partner owns a 50% interest in each of these joint
ventures. Affiliates of Banc of America Securities, LLC also lease approximately
46% and 100% of the rentable square feet in Bank of America Plaza and Charlotte
Gateway Village, respectively.
LEGAL MATTERS
The legality of the Series A preferred stock being offered hereby and
specified tax matters are being passed upon for us by King & Spalding LLP,
Atlanta, Georgia. Certain legal matters related to this offering are being
passed upon for the underwriters by Hunton & Williams LLP.
EXPERTS
The consolidated financial statements and the related financial statement
schedules incorporated in this prospectus supplement by reference from the
Annual Report on Form 10-K of Cousins Properties Incorporated for the year ended
December 31, 2002, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports (which reports express unqualified opinions
and include an explanatory paragraph relating to the impact of the adoption of
Statements of Financial Accounting Standard No. 133 and No. 144, and which is
based in part on the report of other auditors), which are incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
The financial statements and schedule of CSC Associates, L.P. appearing in
the Annual Report (Form 10-K) of Cousins Properties Incorporated for the year
ended December 31, 2002, have been audited by Ernst & Young, LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such financial statements are incorporated herein by
reference in reliance upon such report given on the authority of said firm as
experts in accounting and auditing.
S-20
PROSPECTUS
$133,140,625
COUSINS PROPERTIES INCORPORATED
COMMON STOCK, WARRANTS, DEBT SECURITIES AND PREFERRED STOCK
Cousins Properties Incorporated may from time to time offer in one or more
series or classes:
- shares of our common stock,
- warrants to purchase shares of our common stock,
- unsecured, non-convertible debt securities,
- shares of our preferred stock, or
- any combination of these securities, individually or as units.
We will provide specific terms of these securities in supplements to this
prospectus. You should read this prospectus and any prospectus supplement, as
well as the documents incorporated or deemed to be incorporated by reference in
this prospectus, carefully before you invest.
Our principal executive offices are located at 2500 Windy Ridge Parkway,
Suite 1600, Atlanta, Georgia 30339-5683 and our telephone number is (770)
955-2200.
Our common stock trades on the New York Stock Exchange under the symbol
"CUZ." On July 9, 2003, the last sales price of our common stock on the New York
Stock Exchange was $28.65 per share.
INVESTING IN OUR SECURITIES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 4.
---------------------
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.
---------------------
We may sell these securities directly, through agents, dealers or
underwriters as designated from time to time, or through a combination of these
methods. If any agents, dealers or underwriters are involved in the sale of any
securities, the relevant prospectus supplement will set forth any applicable
commissions or discounts. This prospectus may not be used to consummate sales of
securities unless accompanied by the applicable prospectus supplement.
The date of this prospectus is July 10, 2003.
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
About this Prospectus....................................... 1
Where You Can Find More Information......................... 2
Cousins Properties Incorporated............................. 3
Forward-Looking Statements.................................. 3
Risk Factors................................................ 4
Use of Proceeds............................................. 10
Ratio of Earnings to Fixed Charges and Ratio of Earnings to
Fixed Charges and Preferred Stock Dividends............... 10
Description of Common Stock................................. 11
Description of Warrants..................................... 15
Description of Debt Securities.............................. 15
Description of Preferred Stock.............................. 26
Certain Federal Income Tax Considerations................... 28
Plan of Distribution........................................ 39
Experts..................................................... 40
Legal Matters............................................... 40
</Table>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission, or SEC, using a "shelf" registration
process. Under this shelf process, we may sell any combination of the securities
described in this prospectus in one or more offerings. This prospectus provides
you with a general description of the securities that we may offer. Each time we
sell securities, we will provide a prospectus supplement that will contain
specific information about the terms of that offering. The prospectus supplement
may also add, update or change information contained in this prospectus. You
should read this prospectus and the applicable prospectus supplement together
with the additional information described under the heading "Where You Can Find
More Information."
The registration statement that contains this prospectus contains
additional information about us and the securities offered under this
prospectus. The registration statement can be read at the SEC's web site or at
the SEC offices mentioned under the heading "Where You Can Find More
Information."
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
information that is different. This prospectus may be used only where it is
legal to sell these securities. You should not assume that the information
contained or incorporated by reference in this prospectus is correct at any date
other than the date of the document containing the information.
1
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. Information included in
the SEC's website is not incorporated by reference into this prospectus. You may
also read and copy any document we file with the SEC at its public reference
facility at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC
at 1-800-SEC-0330 for further information on the operation of the public
reference facility. Our SEC filings are also available at the offices of the New
York Stock Exchange. For further information on obtaining copies of our public
filings at the New York Stock Exchange, you should call (212) 656-5060.
We "incorporate by reference" into this prospectus some of the documents
that we have filed and will file with the SEC, which means that we can disclose
important information to you by referring you to these documents. The
information incorporated by reference is an important part of this prospectus
and any prospectus supplement, and information that we file subsequently with
the SEC will automatically update this prospectus and any prospectus supplement.
We incorporate by reference the documents and information listed below and any
future filings we make with the SEC under Sections 13(a), 13(c), 14, or 15(d) of
the Securities Exchange Act of 1934, as amended, or the Exchange Act, after the
date of this prospectus and up until we sell all the securities offered by this
prospectus and any prospectus supplement:
- Annual Report on Form 10-K for the year ended December 31, 2002,
- Quarterly Report on Form 10-Q for the quarter ended March 31, 2003,
- Current Report on Form 8-K, filed on June 24, 2003,
- Current Report on Form 8-K, filed on July 9, 2003,
- Our consolidated funds from operations, or FFO, and related
reconciliations for the three years ended December 31, 2002 contained in
Exhibit 99.2 to our Current Report on Form 8-K furnished to the SEC on
May 5, 2003 under the headings "Net Income and Funds From Operations --
Supplemental Detail and Reconciliations" and "Funds From Operations
Reconciliations -- Ten Year Summary", respectively; and the schedule
entitled "Net Income and Funds From Operations for the Quarters ended
March 31, 2003 and 2002" contained in Exhibit 99.1 to such Current Report
on Form 8-K, and
- The description of our common stock contained in our Registration
Statement on Form 8-A (File No. 1-11312) dated August 4, 1992, filed
under the Exchange Act, including any amendment or report filed for the
purpose of updating such description.
You may request a copy of these filings (other than an exhibit to a filing
unless that exhibit is specifically incorporated by reference into that filing)
at no cost, by contacting us at the following address or telephone number:
Cousins Properties Incorporated
2500 Windy Ridge Parkway
Atlanta, Georgia 30339
Attention: Investor Relations
Telephone: (770) 955-2200
2
COUSINS PROPERTIES INCORPORATED
We are an Atlanta, Georgia-based, fully integrated, self administered
equity real estate investment trust, or REIT. We have extensive experience in
the real estate industry, including the acquisition, financing, development,
management and leasing of properties. We have been a public company since 1962,
and our common stock trades on the New York Stock Exchange under the symbol
"CUZ."
We own, directly and through subsidiaries and joint ventures, a portfolio
of well-located, high-quality office, medical office, retail and land
development projects and hold several tracts of strategically located
undeveloped land. The strategies employed to achieve our investment goals
include:
- the development of commercial real estate which is leased to quality
tenants,
- the maintenance of high levels of occupancy within owned properties,
- the development of single-family residential subdivisions,
- the selective sale and financing of assets,
- the creation of joint venture arrangements, and
- the acquisition of quality income-producing properties at attractive
prices.
We also seek to be opportunistic and take advantage of normal real estate
business cycles.
FORWARD-LOOKING STATEMENTS
Certain matters contained in, or incorporated by reference in, this
prospectus are forward-looking statements within the meaning of the federal
securities laws and are subject to uncertainties and risks. These risks include,
but are not limited to, general and local economic conditions, local real estate
conditions, the activity of others developing competitive projects, the cyclical
nature of the real estate industry, the financial condition of existing tenants,
interest rates, our ability to obtain favorable financing or zoning,
environmental matters, the effects of terrorism, the risks outlined in the
section of this prospectus entitled "Risk Factors" and other risks detailed from
time to time in our filings with the SEC.
The words "believes," "expects," "estimates" and similar expressions are
intended to identify forward-looking statements. Although we believe that our
plans, intentions and expectations reflected in any forward-looking statements
are reasonable, we can give no assurance that these plans, intentions or
expectations will be achieved. Our forward-looking statements are based on
current expectations and speak only as of the date of these statements. We
undertake no obligation to publicly update or revise any forward-looking
statement, whether as a result of future events, new information or otherwise.
3
RISK FACTORS
RISKS ASSOCIATED WITH THE DEVELOPMENT OF REAL ESTATE, SUCH AS DELAY, COST
OVERRUNS AND THE POSSIBILITY THAT WE ARE UNABLE TO LEASE A LARGE PORTION OF THE
SPACE THAT WE BUILD, COULD ADVERSELY AFFECT OUR RESULTS.
Development is an inherently risky activity, and development risks cannot
be eliminated. Some of the key factors affecting our development of commercial
property are as follows:
- The availability of sufficient development opportunities. Absence of
sufficient development opportunities could result in us experiencing
slower growth in value creation and slower growth in earnings and funds
from operations per share. Development opportunities are dependent upon a
wide variety of factors. From time to time, availability of these
opportunities can be extremely volatile as a result of these factors,
including economic conditions and product supply/demand characteristics
in a particular market.
- Predevelopment cost write-offs. There can be significant costs incurred
for predevelopment activity for projects that are abandoned. We have
procedures and controls in place that are intended to minimize this risk,
but it is likely that there will be predevelopment cost write-offs on an
ongoing basis.
- Project costs. Construction and leasing of a project involves a variety
of costs that we cannot always identify at the beginning of a project. On
occasion, costs will arise that have not been anticipated or actual costs
will exceed estimated costs. These additional costs can be significant
and could adversely impact our return on a project and the amount of
value created from the development effort on the project.
- Leasing risk. The success of a commercial real estate development
project is dependent upon entering into leases with acceptable terms
within the predefined lease-up period. It is likely that not all the
space in a project is leased at the time we commit to a project. If the
space is not leased on schedule and upon the expected terms and
conditions, the yields, returns and value creation on the project could
be adversely impacted. Whether or not tenants are willing to enter into
leases on the terms and conditions acceptable to us and on the timetable
we expect will depend upon a large variety of factors, many of which are
outside of our control. These factors may include:
- general business conditions in the economy or in the tenants' or
prospective tenants' industries,
- supply and demand conditions for space in the marketplace, and
- level of competition in the marketplace.
- Governmental approvals. We may not be able to obtain on a timely basis,
or at all, all necessary zoning, land-use, building, occupancy and other
required governmental permits and authorization, which could result in
possible delays, decreased profitability and increased management time
and attention.
IF INTEREST RATES OR OTHER MARKET CONDITIONS FOR OBTAINING CAPITAL OR
BORROWING MONEY BECOME UNFAVORABLE, WE MAY BE UNABLE TO RAISE CAPITAL NEEDED TO
BUILD OUR DEVELOPMENTS ON A TIMELY BASIS, OR WE MAY BE FORCED TO BORROW MONEY AT
HIGHER INTEREST RATES, WHICH WOULD ADVERSELY AFFECT OUR CASH FLOW.
We have various sources of capital, each of which involve a variety of
risks. These sources of capital include the following:
- Credit facilities. Terms and conditions available in the marketplace for
credit facilities vary over time. We cannot assure you that the amount we
need pursuant to a credit facility will be available at any given time,
or at all, or that the rates and fees charged by the lender will be
acceptable to us. Our current credit facility charges interest at a
variable rate. Variable rate debt creates higher debt service
requirements if market interest rates increase, which would adversely
affect our cash flow.
4
- Mortgage financing. The availability of financing in the mortgage
markets varies from time to time depending on various conditions,
including the willingness of mortgage lenders and life insurance
companies to lend at any given point in time. Interest rates may also be
volatile and we may from time to time elect to not proceed with mortgage
financing due to unfavorable interest rates. This could adversely affect
our ability to finance our developments. In addition, if a property is
mortgaged to secure payment of indebtedness and we are unable to make the
mortgage payments, the lender may foreclose, resulting in loss of income
and asset value for us.
- Property sales. Real estate markets tend to experience market cycles.
Because of these cycles, the potential terms and conditions of sales,
including prices, may be unfavorable for extended periods of time.
Further, the presence of mortgages on our properties could hinder
property sales. This could impair our ability to raise capital through
property sales at times needed to fund our development projects or other
cash needs.
- Financing joint ventures. Financing joint ventures tend to be complex
arrangements, and there are only a limited number of parties willing to
undertake such investment structures. There is no guarantee that we will
be able to undertake financing ventures at the times we need capital or
on terms acceptable to us.
We cannot assure you that the capital we require will be available. In the
past, in addition to the capital sources described above, we have obtained
capital through the public markets and may do so in the future. If necessary
capital is not obtained when needed, we may not be able to develop and construct
all the projects available to us, which could adversely affect our results of
operations. Lack of financing could also result in an inability to repay
maturing debt which could result in defaults and, potentially, loss of
properties, as well as an inability to make distributions to our shareholders.
Unfavorable interest rates could adversely impact both the cost of projects
(through capitalized interest) and our current earnings and funds from
operations.
OUR OWNERSHIP OF COMMERCIAL REAL ESTATE INVOLVES A NUMBER OF RISKS,
INCLUDING LEASING RISK, UNINSURED LOSSES AND CONDEMNATION COSTS, ENVIRONMENTAL
ISSUES AND CONCENTRATION OF REAL ESTATE, THE EFFECTS OF WHICH COULD ADVERSELY
AFFECT OUR BUSINESS.
Our assets may not generate income sufficient to pay our expenses, service
our debt and maintain our properties, and, as a result, we may not be able to
make distributions to our shareholders. Several factors may adversely affect the
economic performance and value of our properties. These factors include, among
other things:
- changes in the national, regional and local economic climate,
- local conditions such as an oversupply of properties or a reduction in
demand for properties,
- the attractiveness of our properties to tenants,
- competition from other available properties,
- changes in market rental rates, and
- the need to periodically repair, renovate and re-lease space.
Our performance also depends on our ability to collect rent from tenants
and to pay for adequate maintenance, insurance and other operating costs,
including real estate taxes, which could increase over time. Also, the expenses
of owning and operating a property are not necessarily reduced when
circumstances such as market factors and competition cause a reduction in income
from the property. If a property is mortgaged and we are unable to meet the
mortgage payments, the lender could foreclose on the mortgage and take the
property. In addition, interest rate levels, the availability of financing,
changes in laws and governmental regulations (including those governing usage,
zoning and taxes) and financial distress or bankruptcies of tenants may
adversely affect our results of operations and financial condition.
5
Leasing risk. Our operating revenues are dependent upon entering into
leases with and collecting rents from tenants. National, regional and local
economic conditions may adversely impact tenants and potential tenants in the
various marketplaces in which projects are located, which could adversely affect
their ability to continue to pay rents and possibly to occupy their space.
Tenants sometimes experience bankruptcies and pursuant to the various bankruptcy
laws, leases may be rejected and thereby terminated. When leases expire or are
terminated, replacement tenants may or may not be available upon acceptable
terms and conditions. In addition, our cash flows and net income could be
adversely impacted if existing leases expire or are terminated and at such time,
market rental rates are lower than the previous contractual rental rates. Our
distributable cash flow and our ability to make distributions to our
shareholders would be adversely affected if a significant number of our tenants
fail to pay their rent due to bankruptcy, weakened financial condition or
otherwise.
Uninsured losses and condemnation losses. Accidents, earthquakes,
terrorism incidents and other losses at our properties could materially
adversely affect our operating results. Casualties may occur that significantly
damage an operating property, and insurance proceeds may be materially less than
the total loss to us. Although we maintain casualty insurance, which policies we
believe to be adequate and appropriate, some types of losses, such as lease and
other contract claims, generally are not insured. Certain types of insurance may
not be available or may be available on terms that could result in large
uninsured losses to us. We own property in California and other locations where
property is subject to damage from earthquakes, as well as other natural
catastrophes. We also own property that could be subject to loss due to
terrorism incidents. The earthquake insurance and terrorism insurance markets,
in particular, tend to be volatile and the availability and pricing of insurance
to cover losses from earthquakes and terrorism incidents may be unfavorable from
time to time. In addition, earthquakes and terrorism incidents could result in a
significant loss that is uninsured due to the high level of deductibles or
damage in excess of levels of coverage. Property ownership also involves
potential liability to third parties for such matters as personal injuries
occurring on the property. Such losses may not be fully insured. In addition to
uninsured losses, various governmental authorities may condemn all or parts of
operating properties. Such condemnations could adversely affect the viability of
such projects.
Environmental problems and costs. Environmental issues that arise at our
properties could have an adverse effect on our financial condition and
performance. Federal, state and local laws and regulations relating to the
protection of the environment may require a current or previous owner or
operator of real estate to investigate and clean up hazardous or toxic substance
or petroleum product releases at the property. The owner or operator may have to
pay a governmental entity or third parties for investigation and clean-up costs
incurred in connection with the contamination. These laws typically impose
clean-up responsibility and liability without regard to whether the owner or
operator knew of or caused the presence of the contaminants. Even if more than
one person may have been responsible for the contamination, each person covered
by the environmental laws may be held responsible for all of the clean-up costs
incurred. In addition, third parties may sue the owner or operator of a site for
damages and costs resulting from environmental contamination emanating from that
site.
Joint venture and partnership structure risks. Our joint venture partners
have rights to take some actions over which we have no control, which could
aversely affect our interests in the related joint ventures and in some cases
could adversely affect our overall financial condition or results of operations.
We have interests in a number of joint ventures and partnerships and may in the
future conduct our business through additional joint ventures and partnerships.
These structures involve participation by other parties whose interests and
rights may not be the same as ours. For example, a partner or co-investor might
have economic and/or other business interests or goals which are unlike or
incompatible with our business interests or goals and those partners or
co-investors may be in a position to take action contrary to our interests. In
addition, such partners or co-investors may become bankrupt and such proceedings
could have an adverse impact on the operation of the partnership or joint
venture. The rights of partners and co-investors could adversely impact both the
operation and ownership of the underlying properties and the disposition of such
underlying properties.
6
Regional concentration of properties. A large percentage of our properties
are located in Atlanta, Georgia. In the future, there may be significant
concentrations in Atlanta and/or other markets. If the demand for office or
retail space deteriorates in any market in which we have significant holdings,
our interests could be adversely affected, including, without limitation, loss
in value of properties, decreased cash flows and decreased abilities to make or
maintain distributions to our shareholders.
ANY FAILURE TO TIMELY SELL THE LOTS DEVELOPED BY OUR LAND DIVISION COULD
ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
Our land division develops residential subdivisions, primarily in
metropolitan Atlanta, Georgia. Our land division also participates in joint
ventures that develop or plan to develop subdivisions in metropolitan Atlanta,
as well as Texas, Florida and other states. This division also from time to time
supervises sales of unimproved properties that we own or control. Residential
lot and home sales can be highly cyclical. We cannot assure you that, once a
development is undertaken, we will be able to sell the various developed lots in
a timely manner. Failure to sell any of these lots in a timely manner could
result in significantly increased carrying costs and erosion or elimination of
profit with respect to the development. In addition, actual construction and
development costs with respect to subdivisions can exceed estimates for various
reasons, including unknown site conditions. Subdivision lot sales and unimproved
property sales generally arise and close fairly quickly and are, accordingly,
difficult to predict with any precision. Additionally, some of our residential
properties are multi-year projects, and market conditions may change between the
time we decide to develop a property and the time that all or some of the lots
or tracts may be ready for sale. Any estimates of such sales may differ
substantially from the actual results of such sales and our results of
operations may differ substantially from any such estimates.
COVENANTS CONTAINED IN OUR CREDIT FACILITY AND MORTGAGES COULD RESTRICT OR
HINDER OUR OPERATIONAL FLEXIBILITY, WHICH COULD ADVERSELY AFFECT OUR RESULTS OF
OPERATIONS.
Our credit facility imposes specified financial and operating covenants on
us, such as restrictions and limitations on our ability to incur debt and create
liens, leverage ratios, a fixed charge coverage ratio and interest coverage
ratios. If we fail to meet those covenants, our ability to borrow may be
impaired, which could potentially harm our liquidity. Additionally, some of our
properties are subject to mortgages. These mortgages contain customary negative
covenants, including limitations on our ability, without the lender's prior
consent, to further mortgage that property, to modify existing leases or to sell
that property. Compliance with these covenants could harm our operational
flexibility and our financial condition.
OUR THIRD PARTY FEE BUSINESS EXPERIENCES VOLATILITY BASED ON A NUMBER OF
FACTORS, INCLUDING TERMINATION OF CONTRACTS.
We render development, leasing, property management, asset management and
property services to unrelated third party property owners. Contracts for these
services are generally short-term in nature and permit termination without
extensive notice. Fees from such activity can be volatile due to unexpected
terminations. Extensive unexpected terminations could materially adversely
affect our results of operations. Further, the timing of the generation of new
contracts for services is very difficult to predict. As a result of the
foregoing, any estimates of revenues from such businesses may prove to be
materially different from actual results.
WE MAY NOT ADEQUATELY OR ACCURATELY ASSESS NEW OPPORTUNITIES, WHICH COULD
MATERIALLY HARM OUR RESULTS OF OPERATIONS.
Our estimates and expectations with respect to new lines of business and
opportunities may differ substantially from actual results, and any losses from
these endeavors could materially adversely affect our results of operations. We
regard ourselves as entrepreneurial in nature. We seek opportunities in various
sectors of real estate and in various geographical areas and from time to time
we undertake new opportunities, including new lines of business. Not all
opportunities or lines of business prove to be
7
profitable. We expect from time to time that some of our business ventures may
have to be terminated because they do not meet our expectations.
WE ARE DEPENDENT UPON KEY PERSONNEL, THE LOSS OF ANY OF WHICH COULD ADVERSELY
IMPAIR OUR BUSINESS.
One of our objectives is to develop and maintain a strong management group
at all levels of our company. At any given time, we could lose the services of
key executives and other employees. The loss of such services could have an
adverse impact upon our operations, financial results and management.
OUR RESTATED AND AMENDED ARTICLES OF INCORPORATION CONTAIN LIMITATIONS ON
OWNERSHIP OF OUR STOCK, WHICH MAY PREVENT A TAKEOVER WHICH MIGHT OTHERWISE BE IN
THE BEST INTERESTS OF OUR SHAREHOLDERS.
Our Restated and Amended Articles of Incorporation, as amended, impose
limitations on the ownership of our stock. In general, except for certain
individuals who owned stock at the time of adoption of these limitations, no
"Person" may "Own" more than 3.9% (by value) of our outstanding stock. For this
purpose, "Ownership" is determined under the tax rules that apply to determine
whether we satisfy the stock ownership requirements for qualification as a REIT
for federal income tax purposes. The ownership limitation may have the effect of
delaying, inhibiting or preventing a transaction or a change in control that
might involve a premium price for our common stock or otherwise be in the best
interest of our shareholders.
ANY FAILURE TO CONTINUE TO QUALIFY AS A REAL ESTATE INVESTMENT TRUST FOR FEDERAL
INCOME TAX PURPOSES COULD HAVE A MATERIAL ADVERSE IMPACT ON US AND OUR
SHAREHOLDERS.
We intend to operate in a manner to qualify as a real estate investment
trust, or REIT, for federal income tax purposes. However, we cannot assure you
that we have qualified or will remain qualified as a REIT. Qualification as a
REIT involves the application of highly technical and complex provisions of the
Internal Revenue Code of 1986, as amended, or the Code, for which there are only
limited judicial or administrative interpretations. Certain facts and
circumstances not entirely within our control may affect our ability to qualify
as a REIT. In addition, we cannot assure you that legislation, new regulations,
administrative interpretations or court decisions will not adversely affect our
qualification as a REIT or the federal income tax consequences of our REIT
status.
If we were to fail to qualify as a REIT, we would not be allowed to deduct
our distributions to shareholders in computing our taxable income. In this case,
we would be subject to federal income tax (including any applicable alternative
minimum tax) on our taxable income at regular corporate rates. Unless entitled
to relief under certain Code provisions, we also would be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification was lost. As a result, the cash available for distribution to our
shareholders would be reduced for each of the years involved. Although we
currently intend to operate in a manner designed to qualify as a REIT, it is
possible that future economic, market, legal, tax or other considerations may
cause our board of directors to revoke the REIT election.
In order to qualify as a REIT, we generally will be required each taxable
year to distribute to our shareholders at least 90% of our net taxable income
(excluding any net capital gain). To the extent that we do not distribute all of
our net capital gain or we distribute at least 90%, but less than 100%, of our
other taxable income, we will be subject to tax on the undistributed amounts at
regular corporate rates. In addition, we will be subject to a 4% nondeductible
excise tax to the extent that distributions paid by us during the calendar year
are less than the sum of the following:
- 85% of our ordinary income,
- 95% of our capital gain net income for that year, and
- 100% of our undistributed taxable income from prior years.
8
We intend to make distributions to our shareholders to comply with the 90%
distribution requirement, to avoid corporate-level tax on undistributed taxable
income and to avoid the nondeductible excise tax. Differences in timing between
taxable income and cash available for distribution could require us to borrow
funds to meet the 90% distribution requirement, to avoid corporate-level tax on
undistributed taxable income and to avoid the nondeductible excise tax.
Satisfying the distribution requirements may also make it more difficult to fund
new development projects.
9
USE OF PROCEEDS
Unless otherwise indicated in the accompanying prospectus supplement, we
intend to use the net proceeds of any sale of securities for general corporate
purposes. Pending application of such net proceeds, we will invest such proceeds
in interest-bearing accounts and short-term, interest-bearing securities, which
are consistent with our intention to continue to qualify for taxation as a REIT.
RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<Table>
<Caption>
YEAR ENDED DECEMBER 31, THREE MONTHS
------------------------------------- ENDED
1998 1999 2000 2001 2002 MARCH 31, 2003
----- ----- ----- ----- ----- --------------
Ratio of Earnings to Fixed Charges....... 4.19 3.99 2.56 2.49 2.02 3.43
</Table>
There was no preferred stock outstanding for any of the periods shown
above. Accordingly, the ratio of earnings to combined fixed charges and
preferred stock dividends is identical to the ratio of earnings to fixed
charges. We compute the ratio of earnings to fixed charges and ratio of earnings
to fixed charges and preferred stock dividends by dividing earnings by fixed
charges. For this purpose, earnings consist of pre-tax income from continuing
operations, adjusted for equity investees and minority interests, further
adjusted for amortization of capitalized interest and fixed charges less
capitalized interest. Fixed charges consist of interest expense (including
capitalized interest) and the portion of rental expense representing interest
(estimated as 30%).
10
DESCRIPTION OF COMMON STOCK
GENERAL
Our authorized common stock consists of 150 million shares of common stock,
par value $1.00 per share. Each outstanding share of common stock entitles the
holder to one vote on all matters presented to shareholders for a vote.
Cumulative voting for the election of directors is not permitted, which means
that holders of more than 50% of the shares of common stock voting for the
election of directors can elect all of the directors if they choose to do so and
the holders of the remaining shares cannot elect any directors. Holders of
common stock have no preemptive rights. At May 31, 2003, there were 48,289,683
shares of common stock outstanding and 8,647,013 shares of common stock reserved
for issuance under our various plans.
Shares of common stock currently outstanding are listed for trading on the
New York Stock Exchange, or the NYSE, under the symbol "CUZ." We will apply to
the NYSE to list the additional shares of common stock to be sold pursuant to
any prospectus supplement, and we anticipate that such shares will be so listed.
All shares of common stock issued will be duly authorized, fully paid, and
nonassessable. Distributions may be paid to the holders of common stock if and
when declared by our board of directors out of funds legally available therefor.
Under Georgia law, shareholders are generally not liable for our debts or
obligations. If Cousins is liquidated, subject to the rights 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 of our known debts
and liabilities.
PROVISIONS OF OUR ARTICLES OF INCORPORATION AND BYLAWS
In addition to any vote otherwise required by applicable law, our Restated
and Amended Articles of Incorporation, as amended, or Articles of Incorporation,
provide that:
- any merger or consolidation of Cousins with or into any other
corporation,
- any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions) of
all or substantially all of the assets of Cousins,
- the adoption of any plan or proposal for the liquidation or dissolution
of Cousins, or
- any reclassification of our securities or recapitalization or
reorganization of Cousins,
requires the affirmative vote of the holders of at least two-thirds of the then
outstanding shares of common stock. In addition, any amendment of or addition to
our Articles of Incorporation or our Bylaws which would have the effect of
amending, altering, changing or repealing the foregoing provisions of our
Articles of Incorporation requires the affirmative vote of the holders of at
least two-thirds of the then outstanding shares of common stock.
The provisions of our Articles of Incorporation described above and those
described below under the caption "Restrictions on Transfer" may make it more
difficult, and thereby discourage, attempts to take over control of Cousins, and
may make it more difficult to remove incumbent management. None of these
provisions, however, prohibit an offer for all of the outstanding shares of our
common stock or a merger of Cousins with another entity. Other than as set forth
in this prospectus, our board of directors has no present plans to adopt any
additional measures which would discourage a takeover or change in control of
Cousins.
RESTRICTIONS ON TRANSFER
In order for Cousins to qualify as a REIT under the Code, not more than 50%
in value of our outstanding stock may be owned, directly or indirectly, by five
or fewer individuals during the last half of a
11
taxable year, and our stock must be beneficially owned by 100 or more persons
during at least 335 days of a taxable year of 12 months or during a
proportionate part of a shorter taxable year. See "Certain Federal Income Tax
Considerations." Because our board of directors believes that it is essential
for us to continue to qualify as a REIT, our board of directors has adopted, and
our shareholders have approved, provisions of the Articles of Incorporation
restricting the acquisition of shares of stock.
Article 11 of our Articles of Incorporation generally prohibits any
transfer of shares of stock which would cause the transferee of such shares to
"Own" shares in excess of 3.9% in value of the outstanding shares of all classes
of stock (the "Limit"). For purposes of Article 11, "Ownership" of shares is
broadly defined to include all shares that would be attributed to a "Person" for
purposes of determining whether Cousins is "closely held" under Section
856(a)(6) of the Code. A "Person" is broadly defined to include an individual,
corporation, partnership, estate, trust (including a trust qualified under
Section 401(a) or 501(c)(1) of the Code), association, private foundation within
the meaning of Section 509(a) of the Code, joint stock company or other entity
and also includes a group as that term is used for purposes of Section 13(d)(3)
of the Exchange Act, but does not include a corporate underwriter which
participates in a public offering of our common stock for a period of seven days
following the purchase by such underwriter. "Person" does not include an
organization that qualifies under Section 501(c)(3) of the Code and that is not
a private foundation within the meaning of Section 509(a) of the Code. Article
11 also prohibits any Person, except for Persons who Owned shares in excess of
the Limit on December 31, 1986 ("Prior Owners"), from Owning shares in excess of
the Limit. Article 11 further prohibits Prior Owners (including certain family
members and other persons whose shares are attributed to such Prior Owners under
the relevant sections of the Code) from acquiring any shares not Owned as of
December 31, 1986, unless after any such acquisition, such Prior Owner would not
Own a percentage of the value of our outstanding shares of stock greater than
the percentage of the value of our outstanding shares of stock Owned by such
Prior Owner on December 31, 1986, excluding, for the purpose of calculating such
Prior Owner's Ownership percentage after such acquisition, shares acquired since
December 31, 1986 through pro rata stock dividends or splits, shareholder
approved stock plans or from Persons whose shares are attributed to such Prior
Owner for determining compliance with the stock ownership requirement.
The Articles of Incorporation allow our board of directors, in the exercise
of its sole and absolute discretion, to except from the Limit certain specified
shares of stock proposed to be transferred to a Person who provided our board of
directors with such evidence, undertakings and assurances our board of directors
may require that such transfer to such Person of the specified shares of stock
will not prevent our continued qualification as a REIT under the Code. Our board
of directors may, but is not required to, condition the grant of any such
exemption on obtaining an opinion of counsel, a ruling from the Internal Revenue
Service, assurances from one or more third parties as to future acquisitions of
shares or such other assurances as our board of directors may deem to be
satisfactory.
If, notwithstanding the prohibitions contained in Article 11, a transfer
occurs which, absent the prohibitions, would have resulted in the Ownership of
shares in excess of the Limit or in excess of those owned by a Prior Owner on
December 31, 1986, such transfer is void and the transferee acquires no rights
in the shares. Shares attempted to be acquired in excess of the Limit or shares
attempted to be acquired by a Prior Owner after December 31, 1986, as the case
may be, would constitute "Excess Shares" under Article 11.
Excess Shares have the following characteristics under Article 11:
- Excess Shares shall be deemed to have been transferred to Cousins as
Trustee of a trust (the "Trust") for the exclusive benefit of the Person
or Persons to whom the Excess Shares are later transferred,
- an interest in the Trust (representing the number of Excess Shares held
by the Trust attributable to the particular transferee) shall be
transferable by the transferee (1) at a price not exceeding the price
paid by such transferee in connection with the transfer to it or (2) if
the shares became Excess Shares in a transaction other than for value, at
a price not exceeding the Market Price (as
12
defined) on the date of transfer, and only to a Person who could Own the
shares without the shares being deemed Excess Shares,
- Excess Shares shall not have any voting rights and shall not be
considered for the purposes of any shareholder vote or of determining a
quorum for such vote, but shall continue to be reflected as issued and
outstanding stock of Cousins,
- no dividends or distributions shall be paid with respect to Excess
Shares, and any dividends paid in error on Excess Shares are payable back
to us upon demand, and
- Excess Shares shall be deemed to have been offered for sale to Cousins
for the period of 90 days following the date on which the shares become
Excess Shares, if notice is given by the transferee to us, or the date on
which our board of directors determines that such shares are Excess
Shares, if notice is not given by the transferee to Cousins. During such
90-day period, we may accept the offer and purchase any or all of such
Excess Shares at the lesser of the price paid by the transferee and the
Market Price (as defined) on the date we accept the offer to purchase.
Before any transfer of Excess Shares to any transferee, we must (1) be
notified, (2) waive our rights to accept the offer to purchase the Excess
Shares, and (3) determine in good faith that the shares do not constitute
Excess Shares in the hands of the transferee.
Under Article 11, if any Person acquires shares in violation of the
prohibitions in Article 11, and we would have qualified as a REIT under the Code
but for such acquisition, that Person must indemnify us in an amount equal to
the amount that will put us in the same financial position as we would have been
in had we not lost our qualified REIT status. Such amount includes the full
amount of all taxes, penalties, interest imposed and all costs (plus interest
thereon) incurred by us as a result of losing our qualified REIT status. Such
indemnification is applicable until we are again able to elect to be taxed as a
REIT. If more than one Person has acquired shares in violation of Article 11 at
or prior to the time of the loss of REIT qualification, then all such Persons
shall be jointly and severally liable for the indemnity.
Article 11 also requires our board of directors to take such action as it
deems advisable to prevent or refuse to give effect to any transfer or
acquisition of our stock in violation of Article 11, including refusing to make
or honor on our books, or seeking to enjoin, a transfer in violation of Article
11. Article 11 does not limit the authority of our board of directors to take
any other action as it deems necessary or advisable to protect us and the
interests of our shareholders by preserving our qualified REIT status.
Article 11 further requires any Person who acquires or attempts to acquire
shares in violation of Article 11 to give us written notice of such transaction
and to provide us with such other relevant information as we may request. We can
request such information from any Person that we determine, in good faith, is
attempting to acquire shares in violation of Article 11.
All certificates representing shares of stock bear a legend referring to
the restrictions described above.
LIMITATION OF DIRECTORS' LIABILITY
The Articles of Incorporation eliminate, subject to certain exceptions, the
personal liability of a director to Cousins or our shareholders for monetary
damages for breaches of such director's duty of care or other duties as a
director. The Articles of Incorporation do not provide for the elimination of,
or any limitation on, the personal liability of a director for (1) any
appropriation, in violation of the director's duties, of any business
opportunity of Cousins, (2) acts or omissions that involve intentional
misconduct or a knowing violation of law, (3) unlawful corporate distributions
or (4) any transaction from which the director derived an improper personal
benefit. These provisions of our Articles of Incorporation will limit the
remedies available to a shareholder in the event of breaches of any director's
duties to such shareholder or Cousins.
Under Article VI of our Bylaws, we are required to indemnify any person who
is made or threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal (including any action by or in the
13
right of Cousins), by reason of the fact that he is or was a director, officer,
agent or employee of Cousins against expenses (including reasonable attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such proceeding provided that such person
shall not be indemnified in any proceeding in which he is adjudged liable to us
for:
- any appropriation, in violation of his duties, or of any business
opportunity of Cousins,
- acts or omissions which involve intentional misconduct or knowing
violation of law,
- unlawful corporate distributions, or
- any transaction from which such person received improper personal
benefit.
Expenses incurred by any person according to the foregoing provisions shall be
paid by us in advance of the final disposition of such proceeding upon receipt
of the written affirmation of such person's good faith belief that he has met
the standards of conduct required under our Bylaws.
GEORGIA ANTI-TAKEOVER STATUTES
The Georgia Business Corporation Code restricts certain business
combinations with "interested shareholders" and contains fair price requirements
applicable to certain mergers with certain "interested shareholders" that are
summarized below. The restrictions imposed by these statutes will not apply to a
corporation unless it elects to be governed by these statutes. Cousins has not
elected to be covered by these restrictions but, although we have no present
intention to do so, could elect to do so in the future. The Georgia business
combination statute regulates business combinations such as mergers,
consolidations, share exchanges and asset purchases where the acquired business
has at least 100 shareholders residing in Georgia and has its principal office
in Georgia, and where the acquiror became an "interested shareholder" of the
corporation, unless either (1) the transaction resulting in such acquiror
becoming an "interested shareholder" or the business combination received the
approval of the corporation's board of directors prior to the date on which the
acquiror became an "interested shareholder", or (2) the acquiror became the
owner of at least 90% of the outstanding voting stock of the corporation,
excluding shares held by directors, officers and affiliates of the corporation
and shares held by certain other persons, in the same transaction in which the
acquiror became an "interested shareholder." For purposes of this statute, an
"interested shareholder" generally is any person who directly or indirectly,
alone or in concert with others, beneficially owns or controls 10% or more of
the voting power of the outstanding voting shares of the corporation. The
statute prohibits business combinations with an unapproved "interested
shareholder" for a period of five years after the date on which such person
became an "interested shareholder." The statute restricting business
combinations is broad in its scope and is designed to inhibit unfriendly
acquisitions.
The Georgia fair price statute prohibits certain business combinations
between a Georgia business corporation and an "interested shareholder" unless:
- certain "fair price" criteria are satisfied,
- the business combination is unanimously approved by the continuing
directors,
- the business combination is recommended by at least two-thirds of the
continuing directors and approved by a majority of the votes entitled to
be cast by holders of voting shares, other than voting shares
beneficially owned by the "interested shareholder," or
- the interested shareholder has been such for at least three years and has
not increased his ownership position in such three-year period by more
than one percent in any twelve-month period.
The fair price statute is designed to inhibit unfriendly acquisitions that do
not satisfy the specified "fair price" requirements.
14
OTHER MATTERS
The transfer agent and registrar for our common stock is Wachovia Bank,
N.A.
DESCRIPTION OF WARRANTS
We may issue warrants for the purchase of common stock. The warrants may be
issued independently or together with any other securities offered by any
prospectus supplement and may be attached to or separate from the common stock.
Each series of warrants will be issued under a separate warrant agreement to be
entered into between us and a warrant agent specified in the applicable
prospectus supplement. The warrant agent will act solely as our agent in
connection with the warrants of such series and will not assume any obligation
or relationship of agency or trust for or with any holders or beneficial owners
of warrants. The following sets forth certain general terms and provisions of
the warrants offered by this prospectus. Further terms of the warrants and the
applicable warrant agreement will be set forth in the applicable prospectus
supplement.
The applicable prospectus supplement will describe the terms of the
warrants in respect of which this prospectus is being delivered, including,
where applicable, the following:
- the title of such warrants,
- the aggregate number of such warrants,
- the price or prices at which such warrants will be issued,
- the designation, number and terms of shares of common stock purchasable
upon exercise of such warrants,
- the date, if any, on and after which such warrants and the related common
stock will be separately transferable,
- the price at which each share of common stock purchasable upon exercise
of such warrants may be purchased,
- the date on which the right to exercise such warrants shall commence and
the date on which such right shall expire,
- the minimum or maximum amount of such warrants which may be exercised at
any one time,
- information with respect to book-entry procedures, if any,
- a discussion of certain federal income tax considerations, and
- any other terms of such warrants, including terms, procedures and
limitations relating to the exchange and exercise of such warrants.
DESCRIPTION OF DEBT SECURITIES
This section describes the general terms and provisions of the debt
securities which may be offered by this prospectus. The debt securities will be
issued under an Indenture (the "Indenture") between us and a Trustee (the
"Trustee") chosen by us and qualified to act as Trustee under the Trust
Indenture Act of 1939, as amended, or TIA. The Indenture has been filed as an
exhibit to our Registration Statement (No. 333-12031) on September 16, 1996 and
is available for inspection at the corporate trust office of the Trustee or as
described above under "Where You Can Find More Information." The Indenture is
subject to, and governed by, the TIA. The statements made hereunder 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.
15
GENERAL
The debt securities will be our direct, unsecured obligations and will rank
equally with all other unsecured and unsubordinated indebtedness of Cousins. As
of the date of this prospectus, we have no publicly registered debt outstanding.
At March 31, 2003, our total outstanding debt (including our pro rata share of
unconsolidated joint venture debt) was $949.3 million. 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 our board of directors 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 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 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 offered thereby 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, 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),
interest, if any, and additional amounts, 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 us 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 our option, if we are to have such an
option,
(9) the obligation, if any, of us 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,
16
(10) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which any registered debt securities
("Registered Securities") shall be issuable and, if other than
denominations of $5,000 and any integral multiple thereof, the denomination
or denominations in which any bearer debt securities ("Bearer Securities")
shall be issuable,
(11) if other than the Trustee, the identity of each security
registrar and/or paying agent,
(12) if other than the principal amount thereof, the portion of the
principal amount of the debt securities that shall be payable upon
declaration of acceleration of the maturity thereof or the method by which
such portion shall be determined,
(13) if other than U.S. dollars, the currency or currencies in which
payment of the principal of (and premium, if any) or interest or additional
amounts, if any, on the debt securities shall be payable or in which the
debt securities shall be denominated,
(14) whether the amount of payments of principal of (and premium, if
any) or interest, if any, on the debt securities may be determined with
reference to an index, formula or other method (which index, formula or
method may be based, without limitation, on one or more currencies,
currency units, composite currencies, commodities, equity indices or other
indices), and the manner in which such amounts shall be determined,
(15) whether the principal of (and premium, if any) or interest or
additional amounts, if any, on the debt securities are to be payable, at
our election or a holder (a "Holder") thereof, in a currency or currencies,
currency unit or units or composite currency or currencies other than that
in which such debt securities are denominated or stated to be payable, the
period or periods within which, and the terms and conditions upon which,
such election may be made, and the time and manner of, and identity of the
exchange rate agent with responsibility for, determining the exchange rate
between the currency or currencies, currency unit or units or composite
currency or currencies in which such debt securities are denominated or
stated to be payable and the currency or currencies, currency unit or units
or composite currency or currencies in which such debt securities are to be
so payable,
(16) provisions, if any, granting special rights to the Holders of the
debt securities upon the occurrence of such events as may be specified,
(17) any deletions from, modifications of or additions to the events
of default (the "Events of Default") or covenants of Cousins with respect
to the debt securities, whether or not such Events of Default or covenants
are consistent with the Events of Default or covenants set forth in the
Indenture,
(18) whether the debt securities are to be issuable as Registered
Securities, Bearer Securities (with or without coupons) or both, any
restrictions applicable to the offer, sale or delivery of Bearer Securities
and the terms upon which Bearer Securities may be exchanged for Registered
Securities and vice versa (if permitted by applicable laws and
regulations), whether any debt securities are to be issuable initially in
temporary global form and whether any debt securities are to be issuable in
permanent global form with or without coupons and, if so, whether
beneficial owners of interests in any such permanent global debt security
may exchange such interests for debt securities of such series and of like
tenor of any authorized form and denomination and the circumstances under
which any such exchanges may occur, and, if Registered Securities are to be
issuable as a global debt security, the identity of the depositary for such
series,
(19) the date as of which any Bearer Securities and any temporary
global debt security representing Outstanding (as hereinafter defined) debt
securities shall be dated if other than the date of original issuance of
the first debt security of the series to be issued,
(20) the person to whom any interest on any Registered Security shall
be payable, if other than the person in whose name that debt security is
registered at the close of business on the applicable record date (the
"Regular Record Date") for such interest, the manner in which, or the
person to whom any interest on any Bearer Security shall be payable, if
otherwise than upon presentation and surrender of the coupons appertaining
thereto as they severally mature, and the extent to which, or
17
the manner in which, any interest payable on a temporary global debt
security on an interest payment date (an "Interest Payment Date") will be
paid,
(21) if the defeasance and covenant defeasance provisions described
herein are to be inapplicable or any modifications of such provisions,
(22) if the debt securities are to be issuable in definitive form
(whether upon original issue or upon exchange of a temporary debt security)
only upon receipt of certain certificates or other documents or
satisfaction of other conditions, then the form and/or terms of such
certificates, documents or conditions,
(23) whether and under what circumstances we will pay additional
amounts on the debt securities in respect of any tax, assessment or
governmental charge and, if so, whether we will have the option to redeem
such debt securities rather than pay such additional amounts (and the terms
of any such option),
(24) 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 Cousins), (i) the possible effects of such provisions
on the market price of our securities or in deterring certain mergers,
tender offers or other takeover attempts, and our intention to comply with
the requirements of Rule 14e-l 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 limitations on our
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
(25) any other terms of such debt securities not inconsistent with the
terms of the Indenture.
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 us 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 us, or our management, or any
affiliate of any such party, (ii) a change of control, or (iii) a
reorganization, restructuring, merger or similar transaction involving us that
may adversely affect the holders of the debt securities. In addition, subject to
the limitations set forth under "-- Merger, Consolidation or Sale," we may, in
the future, enter into certain transactions, such as the sale of all or
substantially all of our assets or the merger or consolidation of Cousins, that
would increase the amount of our indebtedness or substantially reduce or
eliminate our assets, which may have an adverse effect on our ability to service
our indebtedness, including the debt securities. In addition, restrictions on
ownership and transfers of our common stock are designed to preserve our status
as a REIT and, therefore, may act to prevent or hinder a change of control. See
"Description of Common Stock -- Restrictions on Transfer." Reference is made to
the applicable prospectus supplement 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.
The applicable prospectus supplement will summarize the nature and scope of
any event risk provisions contained in any offered debt security, including the
types of events protected by such provisions and any limitations on our ability
to satisfy our obligations under such provisions. The applicable prospectus
supplement also will summarize anti-takeover provisions in other securities of
Cousins, if any,
18
which could have a material effect on the offered debt securities. Such summary
will contain a detailed and quantifiable definition of any "change in control"
provision.
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 our board of
directors 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, provided that, at
our option, 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 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. 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. 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 we 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 us with respect to
any series of debt securities, we 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 we will be required to maintain a transfer
agent in each place of payment for such series. We may at any time designate
additional transfer agents with respect to any series of debt securities
(Section 1002).
Neither we 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
19
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 debt 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
We may consolidate with, or sell, lease or convey all or substantially all
of our assets to, or merge with or into, any other entity, provided that (a) we
shall be the continuing entity, or the successor entity (if other than Cousins)
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 us
or any subsidiary of Cousins (a "Subsidiary") as a result thereof as having been
incurred by us 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,"
we are required to do or cause to be done all things necessary to preserve and
keep in full force and effect our existence, rights and franchises; provided,
however, that we shall not be required to preserve any right or franchise if we
determine that the preservation thereof is no longer desirable in the conduct of
our business and that the loss thereof is not disadvantageous in any material
respect to the Holders of the debt securities (Section 1006).
Maintenance of Properties. We are required to cause all of our material
properties used or useful in the conduct of our 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
our judgment may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that we and our Subsidiaries shall not be prevented from selling or
otherwise disposing for value their respective properties in the ordinary course
of business (Section 1007).
Insurance. We are required to, and are required to cause each of our
Subsidiaries to, keep all of our insurable properties insured against loss or
damage at least equal to their then full insurable value with financially sound
and reputable insurance companies (Section 1008).
Payment of Taxes and Other Claims. We are 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 us or any
Subsidiary or upon our income, profits or property or that of any Subsidiary,
and (ii) all lawful claims for labor, materials and supplies which, if unpaid,
might by law become a lien upon the property of us or any Subsidiary; provided,
however, that we 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 1009).
20
Provision of Financial Information. The Holders of debt securities will be
provided with copies of the annual reports and quarterly reports of Cousins.
Whether or not we are subject to Section 13 or 15(d) of the Exchange Act and for
so long as any debt securities are outstanding, we will, to the extent permitted
under the Exchange Act, be required to file with the SEC the annual reports,
quarterly reports and other documents which we would have been required to file
with the SEC pursuant to such Section 13 or 15(d) (the "Financial Statements")
if we were so subject, such documents to be filed with the SEC on or prior to
the respective dates (the "Required Filing Dates") by which we would have been
required so to file such documents if we were so subject. We 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 for the debt securities (the "Security Register"), without
cost to such Holders, copies of the annual reports and quarterly reports which
we would have been required to file with the SEC pursuant to Section 13 or 15(d)
of the Exchange Act if we were subject to such Sections and (ii) file with the
Trustee copies of the annual reports, quarterly reports and other documents
which we would have been required to file with the SEC pursuant to Section 13 or
15(d) of the Exchange Act if we were subject to such Sections and (y) if filing
such documents by us with the SEC is not permitted under the Exchange Act,
promptly upon written request and payment of the reasonable cost of duplication
and delivery, supply copies of such documents to any prospective Holder (Section
1010).
Additional Covenants. Any additional or different covenants of Cousins
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 Cousins 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 Cousins 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 us 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 Cousins.
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 the debt securities of that series are Original Issue Discount
Securities or Securities, the terms of which provide that the principal amount
thereof payable at maturity may be more or less than the principal face amount
thereof at original issuance ("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 us (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
21
declaration and its consequences if (a) we 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 nonpayment 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 the Trustee's 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).
Within 120 days after the close of each fiscal year, we must deliver to the
Trustee a certificate, signed by one of several of our specified officers,
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
Holders 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
22
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 Holders of
such debt security (Section 902). A debt security shall be deemed outstanding
("Outstanding") if it has been authenticated and delivered under the Indenture
unless, among other things, such debt security has been cancelled or redeemed.
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 us with certain covenants relating to such series of debt
securities in the Indenture (Section 1013).
Modifications and amendments of the Indenture may be made by us 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 us as
obligor under the Indenture; (ii) to add to our covenants for the benefit of the
Holders of all or any series of debt securities or to surrender any right or
power conferred upon us 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, (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 us or any other obligor upon the
debt securities or any of our affiliates or of such other obligor shall be
disregarded.
23
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 us 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
We 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 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, we 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 our obligations with respect to such debt
securities under Sections 1004 to 1011, inclusive, of the Indenture (including
the restrictions described under "Certain Covenants") and our obligation with
respect to any other covenant, and any
24
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 us 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 the stated maturity date specified thereon ("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, we have 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
we have 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 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.
25
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 we effect 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, we 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 of
our capital stock.
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
This section describes the general terms and provisions of our preferred
stock that may be offered by this prospectus. The prospectus supplement will
describe the specific terms of the series of the preferred stock offered through
that prospectus supplement and any general terms outlined in this section that
will not apply to that series of preferred stock.
We have summarized the terms and provisions of the preferred stock in this
section. This summary is not complete. You should read our Articles of
Incorporation and the Certificate of Designation, Preferences and Rights, or
Certificate of Designations, relating to the applicable series of the preferred
stock for additional information before you buy any preferred stock.
GENERAL
Pursuant to our Articles of Incorporation, our board of directors has the
authority, without further shareholder action, to issue a maximum of 20 million
shares of preferred stock, $1.00 par value per share. As of the date of this
prospectus, we have no shares of preferred stock issued and outstanding. The
board of directors has the authority to determine or fix the following terms
with respect to shares of any series of preferred stock:
- the dividend rate, the times of payment and the date from which dividends
will accumulate, if dividends are to be cumulative,
- whether and upon what terms the shares will be redeemable,
26
- whether and upon what terms the shares will have a sinking fund,
- whether and upon what terms the shares will be convertible or
exchangeable,
- whether the shares will have voting rights and the terms thereof,
- the rights of the holders upon our liquidation, dissolution or
winding-up,
- restrictions on transfer to preserve our tax status as a REIT, and
- any other relative rights, powers and limitations or restrictions.
These terms will be described in the prospectus supplement for any series
of preferred stock that we offer. In addition, you should read the prospectus
supplement relating to the particular series of the preferred stock offered
thereby for specific terms, including:
- the title of the series of preferred stock and the number of shares
offered,
- the initial public offering price at which we will issue the preferred
stock, and
- any additional dividend, liquidation, redemption, sinking fund and other
rights, preferences, privileges, limitations and restrictions.
When we issue the preferred stock, the shares will be fully paid and
nonassessable. This means that the full purchase price for the outstanding
preferred stock will have been paid and the holders of such preferred stock will
not be assessed any additional monies for such preferred stock. Unless the
applicable prospectus supplement specifies otherwise:
- each series of preferred stock will rank senior to our common stock and
equally in all respects with the outstanding shares of each other series
of preferred stock, and
- the preferred stock will have no preemptive rights to subscribe for any
additional securities which we may issue in the future. This means that
the holders of preferred stock will have no right, as holders of
preferred stock, to buy any portion of those issued securities.
SHAREHOLDER LIABILITY
Georgia law provides that no shareholder, including holders of preferred
stock, shall be personally liable for the acts and obligations of a Georgia
corporation. This means that with respect to the Company, the funds and property
of the Company will be the only recourse for these acts or obligations.
RESTRICTIONS ON OWNERSHIP
As discussed above under "Description of Common Stock -- Restrictions on
Transfer," for us to qualify as a REIT under the Code, not more than 50% in
value of our outstanding stock 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 us in meeting this requirement, we
may take certain actions to limit the beneficial ownership, directly or
indirectly, by a single person of our outstanding stock, including any of our
preferred stock, in addition to the restrictions currently applicable to all
classes of our stock pursuant to Article 11 of our Articles of Incorporation.
Therefore, the Certificate of Designations 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.
27
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material federal income tax
considerations relating to our taxation as a REIT under the Code. As used in
this section, the terms "we" and "our" refer solely to Cousins Properties
Incorporated and not to our subsidiaries and affiliates which have not elected
to be taxed as REITs under the Code.
This section also summarizes material federal income tax considerations
relating to the ownership and disposition of our common stock. A prospectus
supplement will contain information about additional federal income tax
considerations, if any, relating to a particular offering of warrants, debt
securities or preferred stock.
This discussion is not exhaustive of all possible tax considerations and
does not provide a detailed discussion of any state, local or foreign tax
considerations, nor does it discuss 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 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)
who are subject to special treatment under the federal income tax laws.
The information in this section is based on the current provisions of the
Code, current, temporary and proposed regulations, the legislative history of
the Code, current administrative interpretations and practices of the Internal
Revenue Service, and court decisions. The reference to Internal Revenue Service
interpretations and practices includes Internal Revenue Service practices and
policies reflected in private letter rulings issued to other taxpayers, which
would not be binding on the Internal Revenue Service in any of its dealings with
us. These sources are being relied upon as of the date of this prospectus. No
assurance can be given that future legislation, regulations, administrative
interpretations and court decisions will not significantly change current law,
or adversely affect existing interpretations of law, on which the information in
this section is based. Any change of this kind could apply retroactively to
transactions preceding the date of the change in law. Even if there is no change
in applicable law, no assurance can be provided that the statements made in the
following discussion will not be challenged by the Internal Revenue Service or
will be sustained by a court if so challenged.
Each prospective shareholder is advised to consult with his or her own tax
advisor to determine the impact of his or her personal tax situation on the
anticipated tax consequences of our status as a REIT and the ownership and sale
of our stock. This includes the federal, state, local, and foreign income and
other tax consequences of the ownership and sale of our stock, and the potential
changes in applicable tax laws.
TAXATION OF COUSINS PROPERTIES INCORPORATED
General. We have elected to be taxed as a REIT under Sections 856 through
860 of the Code, and we believe that we have met the requirements for
qualification and taxation as a REIT since our initial REIT election in 1987. We
intend to continue to operate in such a manner as to continue to so qualify, but
no assurance can be given that we have qualified or will remain qualified as a
REIT. We have not requested and do not intend to request a ruling from the
Internal Revenue Service as to our current status as a REIT. However, we have
received an opinion from Deloitte & Touche LLP stating that since the
commencement of our taxable year which began January 1, 1998 through the tax
year ending December 31, 2002, we have been organized and have operated in
conformity with the requirements for qualification and taxation as a REIT under
the Code, and our actual method of operation has enabled, and our proposed
method of organization and operation will enable, us to meet the requirements
for qualification and taxation as a REIT, provided that we have been organized
and have operated and continue to be organized and to operate in accordance with
certain assumptions and representations made by us concerning our organization
and operations. It must be emphasized that this opinion is based on various
assumptions and on our representations concerning our organization and
operations, including an assumption that we qualified as a REIT at all times
from January 1, 1987 through December 31, 1997 and including representations
regarding the nature of our assets and the conduct and method of operation of
28
our business. The opinion cannot be relied upon if any of those assumptions and
representations later prove incorrect. Moreover, continued qualification and
taxation as a REIT depends upon our ability to meet, through actual annual
operating results, distribution levels and diversity of stock ownership, the
various REIT qualification tests imposed under the Code, the results of which
will not be reviewed by Deloitte & Touche LLP. Accordingly, no assurance can be
given that the actual results of our operations will satisfy such requirements.
Additional information regarding the risks associated with our failure to
qualify as a REIT are set forth under the caption "Risk Factors."
The opinion of Deloitte & Touche LLP is based upon current law, which is
subject to change either prospectively or retroactively. Changes in applicable
law could modify the conclusions expressed in the opinion. Moreover, unlike a
tax ruling (which we will not seek), this opinion is not binding on the Internal
Revenue Service, and no assurance can be given that the Internal Revenue Service
could not successfully challenge our status as a REIT.
If we have qualified and continue to qualify for taxation as a REIT, we
generally will not be subject to federal corporate income taxes on that portion
of our ordinary income or capital gain that we distribute (or are deemed to
distribute) currently to our shareholders. Even if we qualify as a REIT,
however, we will be subject to federal income taxes under the following
circumstances. First, we will be taxed at regular corporate rates on any
undistributed taxable income, including undistributed net capital gains. Second,
under certain circumstances, we may be subject to the "alternative minimum tax"
on certain items of tax preference. Third, if we have (i) net income from the
sale or other disposition of "foreclosure property" (which is, in general,
property acquired by foreclosure or otherwise on default of a loan secured by
the property) which is held primarily for sale to customers in the ordinary
course of business or (ii) other non-qualifying income from foreclosure
property, we will be subject to tax at the highest corporate rate on such
income. Fourth, if we have net income from prohibited transactions (which are,
in general, certain sales or other dispositions of property (other than
foreclosure property) held primarily for sale to customers in the ordinary
course of business), such income will be subject to a 100% tax. Fifth, if we
should fail to satisfy the 75% gross income test or the 95% gross income test
(as discussed below), and nonetheless have maintained our qualification as a
REIT because certain other requirements have been met, we will be subject to a
100% tax on the income attributable to the greater of the amount by which we
failed the 75% or 95% test (or, for taxable years beginning in 2001, a 90% test
in lieu of the 95% test), multiplied by a fraction intended to reflect our
profitability. Sixth, if we should fail to distribute during each calendar year
at least the sum of (i) 85% of our REIT ordinary income for such year, (ii) 95%
of our REIT capital gain net income for such year, and (iii) any undistributed
taxable income from prior years, we would be subject to a 4% excise tax on the
excess of such required distribution over the amounts actually distributed.
Seventh, if we were to acquire any asset from a C corporation (i.e., a
corporation generally subject to full corporate level tax) in a transaction in
which our basis in the asset is determined by reference to the basis of the
asset (or any other property) in the hands of the C corporation, and we were to
recognize gain on the disposition of such asset during the 10-year period
beginning on the date on which we acquired such asset, then, to the extent of
such property's "built-in" gain (the excess of the fair market value of such
property at the time we acquired it over the adjusted basis of such property at
such time), such gain will be subject to tax at the highest regular corporate
rate applicable. We refer to this tax as the "Built-in Gains Tax."
Activities conducted by our taxable REIT subsidiaries -- including Cousins
Real Estate Corporation ("CREC"), CREC II Inc. ("CREC II") and their respective
corporate subsidiaries -- are subject to federal income tax at regular corporate
rates. In general, a taxable REIT subsidiary may engage in activities that, if
engaged in directly by a REIT, would produce income that does not satisfy the
REIT gross income tests, described below, or income that, if earned by the REIT,
would be subject to the 100% tax on prohibited transactions described above. A
number of constraints, however, are imposed on REITs and their taxable REIT
subsidiaries to ensure that taxable REIT subsidiaries pay an appropriate
corporate-level tax on their income. For example, a taxable REIT subsidiary is
subject to the "earnings stripping" rules of the Code with respect to interest
paid to the REIT, which could defer or disallow a portion of our taxable REIT
subsidiaries' deductions for interest paid to us under certain circumstances. In
addition, if
29
our taxable REIT subsidiaries make deductible payments to us (such as interest
or rent), and the amount of those deductible payments is determined by the
Internal Revenue Service to exceed the amount that unrelated parties would
charge to each other, we would be subject to a 100% penalty tax on the excess
payments. We would incur a similar 100% penalty tax on a portion of the rent we
receive from our tenants, to the extent the Internal Revenue Service determines
that the rent payments are attributable to certain noncustomary services
provided to our tenants by our taxable REIT subsidiaries without receiving
adequate compensation either from us or from our tenants.
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) the beneficial ownership of which is held by 100 or more persons,
(6) not more than 50% in value of the outstanding stock of which is
owned, directly or indirectly, by or for five or fewer individuals (as
defined in the Code to include certain entities),
(7) which makes an election to be a REIT (or has made such election
for a previous taxable year which has not been revoked or terminated) and
satisfies all relevant filing and other administrative requirements
established by the Internal Revenue Service that must be met to elect and
maintain REIT status,
(8) which uses the calendar year as its taxable year, and
(9) which meets certain other tests, described below, regarding the
nature of its income and assets.
The Code provides that conditions (1) through (4), inclusive, must be met
during the entire taxable year, that condition (5) must be met during at least
335 days of a taxable year of 12 months, or during a proportionate part of a
taxable year of less than 12 months, and that condition (6) must be met during
the last half of each taxable year. We have issued sufficient shares of our
common stock with sufficient diversity of ownership to allow us to satisfy
requirements (5) and (6). We will be treated as having met condition (6) above
for a taxable year beginning after August 5, 1997, if we complied with certain
Treasury Regulations for ascertaining the ownership of our stock for such year
and if we did not know (or after the exercise of reasonable diligence would not
have known) that our stock was sufficiently closely held during such year to
cause us to fail condition (6). In addition, Article 11 of our Articles of
Incorporation contains restrictions regarding the transfer and ownership of our
shares that are intended to assist us in continuing to satisfy the share
ownership requirements described in clauses (5) and (6) above. See "Description
of Common Stock -- Restrictions on Transfer."
In the case of a REIT owning an interest in a partnership, joint venture,
limited liability company, or other legal entity that is classified as a
partnership for federal income tax purposes (which we refer to collectively as
partnerships), the REIT is deemed to own its proportionate share of the assets
of the partnership and is deemed to be entitled to the income of the partnership
attributable to such share (based on the REIT's capital interest in the
partnership). In addition, the assets and gross income of the partnership will
retain the same character in the hands of the REIT for purposes of Section 856
of the Code, including satisfying the gross income tests and asset tests that
are discussed below. We own interests in a number of partnerships (the
"Subsidiary Partnerships"), and thus, our proportionate share of the assets,
liabilities and items of income from the Subsidiary Partnerships are treated as
our assets, liabilities and items of income for purposes of applying the
requirements described herein.
30
Income Tests. In order to maintain our qualification as a REIT, we must
satisfy two gross income requirements annually. First, at least 75% of our gross
income (excluding gross income from prohibited transactions) for each taxable
year must be derived directly or indirectly from investments relating to real
property or mortgages on real property (including "rents from real property"
and, in certain circumstances, interest) or from certain types of temporary
investments. Second, at least 95% of our gross income (excluding gross income
from prohibited transactions) for each taxable year must be derived from such
real property investments described above, and from dividends, interest and gain
from the sale or disposition of stock or securities, or from any combination of
the foregoing.
Rents that we receive will qualify as "rents from real property" in
satisfying the above gross income tests only if several conditions are met.
First, the amount of rent must not be based in whole or in part on the income or
profits of any person. However, an amount received or accrued generally will not
be excluded from "rents from real property" solely by reason of being based on a
fixed percentage or percentages of receipts or sales. Second, rents received
from a tenant will not qualify as "rents from real property" if we, or an owner
of 10% or more of our outstanding stock, directly or constructively were to own
10% or more of the ownership interests in such tenant (a "Related Party
Tenant"), unless such tenant is our taxable REIT subsidiary and certain other
conditions are satisfied. Third, if rent attributable to personal property that
is leased in connection with a lease of real property is greater than 15% of the
total rent received under the lease, then the portion of rent attributable to
such personal property will not qualify as "rents from real property." Finally,
for rent to qualify as "rents from real property," we generally must not operate
or manage the property or furnish or render services to our tenants, other than
through an "independent contractor" from whom we derive no revenue. The
"independent contractor" requirement, however, does not apply to the extent the
services we provide are "usually or customarily rendered" in connection with the
rental of space for occupancy only and are not otherwise considered "rendered to
the occupant." In addition, the "independent contractor" requirement will not
apply to noncustomary services we provide, if the annual value of such
noncustomary services does not exceed 1% of the gross income derived from the
property with respect to which the noncustomary services are provided (the "1%
de minimis exception"). For this purpose, such services may not be valued at
less than 150% of our direct cost of providing the services, and any gross
income deemed to have been derived by us from the performance of noncustomary
services pursuant to the 1% de minimis exception will constitute nonqualifying
gross income under the 75% and 95% gross income tests. In addition, in taxable
years beginning after December 31, 2000, our taxable REIT subsidiaries are
permitted provide noncustomary services to our tenants without causing the rents
we receive from such tenants to be disqualified as "rents from real property."
From time to time, we may derive rent from certain tenants based, in whole
or in part, on the net profits of the tenant, rent from Related Party Tenants,
or rent that is more than 15% attributable to personal property. However, the
amount of such nonqualifying rent income, if any, is not expected to be
material, and we have complied and believe we will continue to comply with the
95% and 75% gross income tests. In addition, based on our knowledge of the real
estate markets in the geographic regions in which we operate, we believe that
all services that are provided to the tenants of the properties generally will
be considered "usually or customarily" rendered in connection with the rental of
comparable real estate. Further, we intend to provide any noncustomary services
only through qualifying independent contractors or taxable REIT subsidiaries or
in compliance with the 1% de minimis exception.
We manage certain properties held by the Subsidiary Partnerships, and in
return for such services, we receive certain management and accounting fees. We
obtained a ruling from the Internal Revenue Service that the portion of such
fees that is apportioned to the capital interests of the other partners
constitutes non-qualifying gross income for purposes of Section 856 of the Code,
and the portion of each fee that is apportioned our capital interest is
disregarded for purposes of Section 856 of the Code. We also expect to receive
certain other types of non-qualifying income, such as dividends and interest
paid by CREC or CREC II to us (which will qualify under the 95% gross income
test but not under the 75% gross income test). We believe, however, that the
aggregate amount of such non-qualifying income in any taxable year
31
will not cause us to exceed the limits on non-qualifying income under the 75%
and 95% gross income tests.
If we were to fail to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, we may nevertheless qualify as a REIT for such year
if we are entitled to relief under certain provisions of the Code. These relief
provisions generally will be available if our failure to meet such tests was due
to reasonable cause and not due to willful neglect, we attach a schedule of the
sources of our income to our federal income tax return, and any incorrect
information on the schedules was not due to fraud with intent to evade tax. It
is not possible, however, to state whether in all circumstances we would be
entitled to the benefit of these relief provisions. As discussed above in
"General," even if these relief provisions were to apply, a tax would be imposed
with respect to the excess income.
In addition to the 75% and 95% gross income tests, we had to meet a 30%
gross income test for our taxable years that ended prior to January 1, 1998. The
30% gross income test required that short-term gain from the sale or other
disposition of stock or securities, gain from prohibited transactions and gain
from the sale or other disposition of real property held for less than four
years, other than involuntary conversions and sales of foreclosure property,
represent less than 30% of a REIT's gross income, including gross income from
prohibited transactions. We believe that we met the 30% gross income test for
relevant taxable years that ended prior to January 1, 1998. The 30% gross income
test does not apply to our taxable years beginning on or after January 1, 1998.
Asset Tests. At the close of each quarter of our taxable year, we must
satisfy several tests relating to the nature of our assets. First, at least 75%
of the value of our total assets must be represented by real estate assets
(including our allocable share of real estate assets held by the Subsidiary
Partnerships), stock or debt instruments held for not more than one year
purchased with the proceeds of a stock offering or long-term debt offering,
cash, certain cash items and government securities. Second, not more than 25% of
our total assets may be represented by securities other than those in the 75%
asset class. Third, of the investments included in the 25% asset class, the
value of any one issuer's debt and equity securities that we own may not exceed
5% of the value of our total assets. Fourth, we may not own more than 10% of any
one issuer's outstanding voting securities. Fifth, with respect to taxable years
beginning after December 31, 2000, we may not own more than 10% of the total
value of any one issuer's outstanding debt and equity securities, excluding
certain "straight debt" issued by an individual, a partnership in which we hold
at least a 20% profits interest, or an issuer in which the only securities we
hold constitute "straight debt." Mortgage debt secured by real estate assets
constitutes a "real estate asset" and does not constitute a "security" for
purposes of the foregoing tests.
For taxable years beginning after December 31, 2000, the 5% asset test, the
10% voting securities test, and the new 10% value test described above do not
apply to the securities of a taxable REIT subsidiary. However, the value of the
debt and equity securities of all taxable REIT subsidiaries we own (including
for purposes of this test only any mortgage debt issued by a taxable REIT
subsidiary that is secured by real estate assets) cannot represent more than 20%
of the value of our total assets. Any corporation in which a REIT directly or
indirectly owns stock (other than another REIT, a corporation which directly or
indirectly operates or manages a lodging facility or a health care facility,
and, with certain exceptions, a corporation which directly or indirectly
provides to any person (under a franchise, license, or otherwise) rights to any
brand name under which any lodging facility or health care facility is operated)
may be treated as a taxable REIT subsidiary if the REIT and the corporation file
a joint election with the Internal Revenue Service for the corporation to be
treated as a taxable REIT subsidiary of the REIT.
We own 100% of the non-voting common stock and 100% of the cumulative
preferred stock of CREC and CREC II, but we do not currently own any voting
stock of either corporation. We also have made loans to CREC and CREC II. We
have filed joint elections with each of CREC and CREC II to have such
corporations, as well as their corporate subsidiaries, treated as our taxable
REIT subsidiaries, effective as of January 1, 2001. Accordingly, the debt and
equity securities of CREC and CREC II that we hold are no longer subject to the
5% asset test, the 10% voting securities test, or the 10% value test described
above. In addition, because the 10% voting securities test does not apply to the
securities of a taxable
32
REIT subsidiary, we would be permitted to acquire the voting stock of CREC and
CREC II, which we do not currently hold.
We believe that our debt and equity securities of CREC and CREC II,
together with the debt and equity securities of our other taxable REIT
subsidiaries, have represented, at all relevant times, less than 20% of the
value of our total assets. With respect to taxable years ending on or prior to
December 31, 2000, we believe that the securities of each such issuer also
represented less than 5% of the value of our total assets. We also believe that
the value of the securities, including unsecured debt, of each other issuer in
which we have owned an interest, excluding equity interests in partnerships
(which are looked through rather than treated as securities for purposes of the
REIT asset tests), has never exceeded 5% of the total value of our assets and
that we comply with the 10% voting securities test and the 10% value test
(taking into account the "straight debt" exceptions with respect to certain
issuers). No independent appraisals have been obtained, however, to support
these conclusions, and Deloitte & Touche LLP, in rendering the tax opinion
described above, is relying upon our representations regarding the value of our
securities and our other assets. Although we plan to take steps to ensure that
we continue to satisfy all of the applicable REIT asset tests, there can be no
assurance that such steps will always be successful or will not require a
reduction in our overall interest in the taxable REIT subsidiaries or changes in
our other investments.
Annual Distribution Requirements. To qualify as a REIT, we are required to
distribute dividends (other than capital gain dividends) to our shareholders in
an amount at least equal to (A) the sum of (i) 90% (95% for taxable years before
2001) of our "REIT taxable income" (computed without regard to the dividends
paid deduction and our net capital gain) and (ii) 90% (95% for taxable years
before 2001) of the net income (after tax), if any, from foreclosure property,
minus (B) the sum of certain items of noncash income. Such distributions must be
paid in the taxable year to which they relate, or in the following taxable year
if declared before we timely file our tax return for such year and if paid on or
before the first regular dividend payment after such declaration. To the extent
that we do not distribute all of our net capital gain or distribute at least 90%
(95% for taxable years before 2001), but less than 100%, of our "REIT taxable
income," as adjusted, we will be subject to tax on the undistributed amount at
regular corporate tax rates. Furthermore, if we should fail to distribute during
each calendar year at least the sum of (i) 85% of our REIT ordinary income for
such year, (ii) 95% of our REIT capital gain income for such year, and (iii) any
undistributed taxable income from prior periods, we will be subject to a 4%
excise tax on the excess of such required distribution over the amounts actually
distributed.
We have made and intend to continue to make timely distributions sufficient
to satisfy the annual distribution requirements. It is possible, however, that
we may not have sufficient cash or liquid assets, from time to time, to meet the
distribution requirements due to timing differences between the receipt of
income and actual payment of deductible expenses and the inclusion of such
income and deduction of such expenses in arriving at our taxable income, or if
the amount of nondeductible expenses (such as principal amortization or capital
expenses) exceeds the amount of noncash deductions (such as depreciation). In
the event that such timing differences occur, we may need to borrow money, sell
assets, or take other measures to permit us to pay the required dividends.
Under certain circumstances, we may be able to rectify a failure to meet
the distribution requirement for a year by paying "deficiency dividends" to our
shareholders in a later year that may be included in our deduction for dividends
paid for the earlier year. Thus, we may be able to avoid being taxed on amounts
distributed as deficiency dividends; however, we will be required to pay
interest to the Internal Revenue Service based upon the amount of any deduction
taken for deficiency dividends.
Failure to Qualify. If we were to fail to qualify for taxation as a REIT
in any taxable year and no relief provisions were to apply, we would be subject
to tax (including any applicable alternative minimum tax) on our taxable income
at regular corporate rates. Distributions to shareholders in any year in which
we fail to qualify will not be deductible from our taxable income, nor will they
be required to be made. In such event, to the extent of current and accumulated
earnings and profits, all distributions to our shareholders will be taxable as
ordinary income. Under these circumstances, subject to certain limitations in
the Code, corporate shareholders may be eligible for the dividends received
deduction and individual
33
shareholders may be eligible for a reduced tax rate on "qualified dividend
income" received from regular C corporations. Unless entitled to relief under
specific statutory provisions, we also would 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 we would be
entitled to such statutory relief. In addition, to re-elect REIT status after
being disqualified, we would have to distribute as dividends, no later than the
end of our first taxable year as a re-electing REIT, all of the earnings and
profits attributable to our pre-1987 taxable years (when we were a taxable C
corporation). Thus, to re-elect REIT status after being disqualified, we could
be required to incur substantial indebtedness or liquidate substantial
investments in order to make such distributions.
OTHER TAX CONSIDERATIONS
We believe that each of the Subsidiary Partnerships qualifies as a
partnership for federal income tax purposes and not as an association taxable as
a corporation or as a publicly traded partnership (within the meaning of Section
7704 of the Code).
If a Subsidiary Partnership were treated as an association taxable as a
corporation, the value of our interest in such partnership would no longer
qualify as a real estate asset for purposes of the 75% asset test. Further, if a
Subsidiary Partnership were treated as a taxable corporation, then we would
cease to qualify as a REIT if our ownership interest in such partnership
exceeded 10% of the partnership's voting interests, or the value of our debt and
equity interest in such partnership exceeded 5% of the value of the our total
assets or 10% of the value of the partnership's outstanding debt and equity
securities. Furthermore, in such a situation, distributions from the Subsidiary
Partnership to us would be treated as dividends, which do not qualify in
satisfying the 75% gross income test described above and which could therefore
make it more difficult for us to meet such test, and we would not be able to
deduct our share of losses generated by such Subsidiary Partnership in computing
our taxable income.
TAXATION OF SHAREHOLDERS
Taxation of Taxable Domestic Shareholders. On May 28, 2003, President Bush
signed into law the Jobs Growth Tax Relief Reconciliation Act of 2003. Under
this legislation, certain "qualified dividend income" received by domestic
non-corporate shareholders in taxable years 2003 through 2008 is subject to tax
at the same tax rates as long-term capital gain (generally, under the new
legislation, a maximum rate of 15% for such taxable years). Dividends received
from REITs, however, generally are not eligible for these reduced tax rates and,
therefore, will continue to be subject to tax at ordinary income rates
(generally, a maximum rate of 35% for taxable years 2003-2008), subject to two
narrow exceptions. Under the first exception, dividends received from a REIT may
be treated as a "qualified dividend income" eligible for the reduced tax rates
to the extent that the REIT itself has received qualified dividend income from
other corporations (such as taxable REIT subsidiaries) in which the REIT has
invested. Under the second exception, dividends paid by a REIT in a taxable year
may be treated as qualified dividend income in an amount equal to the sum of (i)
the excess of the REIT's "REIT taxable income" for the preceding taxable year
over the corporate-level federal income tax payable by the REIT for such
preceding taxable year and (ii) the excess of the REIT's income that was subject
to the Built-in Gains Tax in the preceding taxable year over the tax payable by
the REIT on such income for such preceding taxable year. We do not expect to
receive a material amount of dividends from our taxable REIT subsidiaries or
from other taxable corporations, and we do not expect to pay a material amount
of federal income tax on undistributed REIT taxable income or a material amount
of Built-in Gains Tax. Therefore, as long as we qualify as a REIT, distributions
made to our 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 (except, in the case of non-corporate
shareholders, to the limited extent that we are treated as receiving "qualified
dividend income" from our stock interests in CREC, CREC II, or our other taxable
REIT subsidiaries or as a result of paying federal income tax on undistributed
REIT taxable income or Built-in Gains Tax). In addition, as long as we qualify
as a REIT, corporate shareholders will not be eligible for the dividends
received deduction as to any dividends received from us.
34
Distributions that we designate as capital gain dividends will be taxed as
long-term capital gains (to the extent they do not exceed our actual net capital
gain for the taxable year) without regard to the period for which the
shareholder has held his or her shares. However, corporate shareholders 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 shareholder to the extent that they do not exceed the
adjusted basis of the shareholder's shares of our common stock, but rather will
reduce the adjusted basis of such shares. To the extent that such distributions
exceed the adjusted basis of a shareholder's shares of our common stock, 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 shareholder. In addition, any dividend that we
declare in October, November or December of any year payable to a shareholder of
record on a specific date in any such month shall be treated as both paid by us
and received by the shareholder on December 31 of such year, provided that the
dividend is actually paid by us during January of the following calendar year.
We may make an election to treat all or part of our undistributed net
capital gain as if it had been distributed to our shareholders. As described
above, these undistributed amounts would be subject to corporate-level tax
payable by us. If we were to make such an election, our shareholders would be
required to include in their income as long-term capital gain their
proportionate shares of our undistributed net capital gain. Each shareholder
would be deemed to have paid his or her proportionate share of the income tax
imposed on us with respect to such undistributed net capital gain, and this
amount would be credited or refunded to the shareholder in computing his or her
own federal income tax liability. In addition, the tax basis of the
shareholder's stock would be increased by his or her proportionate share of the
undistributed net capital gains included in his or her income, less his or her
proportionate share of the income tax imposed on us with respect to such gains.
Domestic shareholders may not include in their individual income tax
returns any of our net operating losses or net capital losses. Instead, we would
carry over such losses for potential offset against our future income, subject
to certain limitations. Taxable distributions from us and gain from the sale of
our shares will not be treated as passive activity income and, therefore,
domestic shareholders generally will not be able to apply any "passive activity
losses" (such as losses from certain types of limited partnerships in which a
shareholder is a limited partner) against such income. In addition, taxable
distributions from us generally will be treated as investment income for
purposes of the investment interest limitations. Capital gains from the
disposition of our stock (or distributions, if any, taxable at capital gain
rates), however, will be treated as investment income only if the shareholder so
elects, in which case such capital gains or distributions, as the case may be,
will be taxed at ordinary income rates. For purposes of computing each
shareholder's alternative minimum taxable income, certain of our "differently
treated items" for each taxable year (for example, differences in computing
depreciation deductions for regular tax purposes and alternative minimum tax
purposes) may be apportioned to our shareholders in accordance with section
59(d)(1)(A) of the Code.
In general, any gain or loss realized upon a taxable disposition of our
shares by a domestic shareholder who is not a dealer in securities will be
treated as a capital gain or loss. Any loss upon a sale or exchange of shares of
our common stock by a shareholder who has held such shares 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 us that were required
to be treated by such shareholder as long-term capital gain. All or a portion of
any loss realized upon a taxable disposition of our shares may be disallowed if
other shares of our stock are purchased within 30 days before or after the
disposition.
For non-corporate taxpayers, the tax rate differential between capital gain
and ordinary income may be significant. Under current law, the highest marginal
non-corporate income tax rate applicable to ordinary income is 35%. Any capital
gain recognized or otherwise properly taken into account on or after May 6, 2003
and before January 1, 2009, generally will be taxed to a non-corporate taxpayer
at a maximum rate of 15% with respect to capital assets held for more than one
year. (The maximum rate is currently 20% for gain taken into account before May
6, 2003 or after December 31, 2008.) The tax rates applicable to ordinary income
apply to gain from the sale or exchange of capital assets held for one year or
35
less. In the case of capital gain attributable to the sale or exchange of
certain real property held for more than one year, an amount of such gain equal
to the amount of all prior depreciation deductions not otherwise required to be
taxed as ordinary depreciation recapture income will be taxed at a maximum rate
of 25%. With respect to distributions designated by us as capital gain dividends
(including any deemed distributions of retained capital gains), subject to
certain limits, we also may designate, and will notify our shareholders, whether
the dividend is taxable to non-corporate shareholders at regular long-term
capital gain rates or at the 25% rate applicable to unrecaptured depreciation.
The characterization of income as capital or ordinary also may affect the
deductibility of capital losses. Capital losses not offset by capital gains may
be deducted against a non-corporate taxpayer's ordinary income only up to a
maximum annual amount of $3,000. Non-corporate taxpayers may carry forward their
unused capital losses. All net capital gain of a corporate taxpayer is subject
to tax at ordinary corporate rates. A corporate taxpayer may deduct capital
losses only to the extent of its capital gains, with unused losses eligible to
be carried back three years and forward five years.
Information Reporting and Backup Withholding. We will report to our
domestic shareholders and the Internal Revenue Service the amount of dividends
paid during each calendar year, and the amount of tax withheld, if any, with
respect thereto. Under the backup withholding rules, a shareholder may be
subject to backup withholding, at a rate equal to the fourth lowest rate of
federal income tax applicable to ordinary income of individuals, with respect to
dividends paid unless such shareholder (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 who does not provide
his or her correct taxpayer identification number may also be subject to
penalties imposed by the Internal Revenue Service. Any amount paid as backup
withholding may be applied as a credit against the shareholder's federal income
tax liability, which could result in a refund. In addition, we may be required
to withhold a portion of capital gain distributions made to any shareholders who
fail to certify their non-foreign status to us. See "Taxation of Foreign
Shareholders" below.
Taxation of Tax-Exempt Shareholders. The Internal Revenue Service has
ruled publicly that amounts distributed by a REIT to a tax-exempt employees'
pension trust do not constitute "unrelated business taxable income" ("UBTI").
Based upon this ruling and subject to the discussion below regarding qualified
pension trust investors, distributions by us to a shareholder that is a
tax-exempt entity should not constitute UBTI, provided that the tax-exempt
entity has not financed the acquisition of its shares with "acquisition
indebtedness" within the meaning of the Code and the shares of our stock are not
otherwise used in an unrelated trade or business of the tax-exempt entity.
Revenue rulings, however, are interpretive in nature and subject to revocation
or modification by the Internal Revenue Service.
A "qualified trust" (defined to be any trust described in section 401(a) of
the Code and exempt from tax under section 501(a) of the Code) that holds more
than 10% of the value of the shares of a REIT may be required, under certain
circumstances, to treat a portion of distributions from the REIT as UBTI. This
requirement will apply for a taxable year only if (i) the REIT satisfies the
requirement that not more than 50% of the value of its shares be held by five or
fewer individuals (the "five or fewer requirement") by relying on a special
"look-through" rule under which shares held by qualified trust shareholders are
treated as held by the beneficiaries of such trusts in proportion to their
actuarial interests therein, and (ii) the REIT is "predominantly held" by
qualified trusts. A REIT is "predominantly held" if either (i) a single
qualified trust holds more than 25% of the value of the REIT shares or (ii) one
or more qualified trusts, each owning more than 10% of the value of the REIT
shares, hold in the aggregate more than 50% of the value of the REIT shares. If
the foregoing requirements are met, the percentage of any REIT dividend treated
as UBTI to a qualified trust that owns more than 10% of the value of the REIT
shares is equal to the ratio of (a) the UBTI earned by the REIT (treating the
REIT as if it were a qualified trust and therefore subject to tax on its UBTI)
to (b) the total gross income (less certain associated expenses) of the REIT. A
de minimis exception applies where the ratio set forth in the preceding sentence
is less than 5% for any year. The provisions requiring qualified trusts to treat
a portion of REIT distributions as
36
UBTI will not apply if the REIT is able to satisfy the five or fewer requirement
without relying upon the "look-through" rule.
Taxation of Foreign 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 our common
stock, including any reporting requirements.
Distributions that are not attributable to gain from sales or exchanges by
us of U.S. real property interests and not designated by us as capital gain
dividends will be treated as dividends of ordinary income to the extent that
they are made out of our current or accumulated earnings and profits. Such
distributions, ordinarily, will be subject to a withholding tax equal to 30% of
the gross amount of the distribution unless an applicable tax treaty reduces
that tax. However, if income from the investment in our stock is treated as
effectively connected with the Non-U.S. Shareholder's conduct of a U.S. trade or
business, the Non-U.S. Shareholder generally will be subject to a tax at
graduated rates, in the same manner as U.S. shareholders are taxed with respect
to such dividends (and may also be subject to the 30% branch profits tax if the
shareholder is a foreign corporation). We expect to withhold U.S. income tax at
the rate of 30% on the gross amount of any dividends paid to a Non-U.S.
Shareholder that are not designated as capital gain dividends unless (i) a lower
treaty rate applies and the required IRS Form W-8BEN evidencing eligibility for
that reduced rate is filed with us or (ii) the Non-U.S. Shareholder files an IRS
Form W-8ECI with us properly claiming that the distribution is "effectively
connected" income. Distributions in excess of our current and accumulated
earnings and profits will not be taxable to a shareholder to the extent that
they do not exceed the adjusted basis of the shareholder's shares of stock, but
rather will reduce the adjusted basis of such shares. To the extent that such
distributions exceed the adjusted basis of a Non-U.S. Shareholder's shares, such
excess will constitute gain subject to U.S. federal income tax under the
provisions of the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"), as described below. If it cannot be determined at the time a
distribution is made whether or not such distribution will be in excess of
current and accumulated earnings and profits, the distribution will be subject
to withholding at the rate applicable to dividends. In addition, the portion of
such distributions in excess of current and accumulated earnings and profits, to
the extent not subject to the 30% withholding tax on dividends, will be subject
to a 10% withholding tax under FIRPTA, unless the Non-U.S. Shareholder obtains a
withholding certificate from the Internal Revenue Service establishing the right
to a reduced amount of FIRPTA withholding. The Non-U.S. Shareholder may seek a
refund from the Internal Revenue Service of excess tax withheld if it is
subsequently determined that such distribution was, in fact, in excess of
current and accumulated earnings and profits or, if the 10% withholding tax
applied, did not give rise to taxable gain under FIRPTA.
For any year in which we qualify as a REIT, distributions that are
attributable to gain from sales or exchanges by us of U.S. real property
interests will be taxed to a Non-U.S. Shareholder under the provisions of
FIRPTA. Under FIRPTA, these distributions are taxed to a Non-U.S. Shareholder as
if such gain were effectively connected with a U.S. business. Thus, Non-U.S.
Shareholders will be taxed on such distributions at the normal capital gain
rates applicable to U.S. shareholders (subject to applicable alternative minimum
tax and a special alternative minimum tax in the case of nonresident alien
individuals) and will be required to file U.S. federal income tax returns. 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. We are required by applicable Treasury Regulations to withhold 35% of
any distribution that could be designated by us as a capital gain dividend. This
amount may be applied as a credit against the Non-U.S. Shareholder's FIRPTA tax
liability.
Gain recognized by a Non-U.S. Shareholder upon a sale of our stock
generally will not be taxed under FIRPTA if we are 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. We believe that we currently qualify as a
"domestically controlled REIT," and that the
37
sale of common stock by a Non-U.S. Shareholder will not therefore be subject to
tax under FIRPTA. Because our stock is publicly traded, however, no assurance
can be given that we will continue to be a domestically controlled REIT. If we
were not a domestically controlled REIT, whether a Non-U.S. Shareholder's gain
would be taxed under FIRPTA would depend on whether our common stock is
regularly traded on an established securities market at the time of sale and on
the size of the selling shareholder's interest in our stock. In addition, gain
not subject to FIRPTA will be taxable to a Non-U.S. Shareholder if (i) the
investment in our common stock is treated as effectively connected with the
Non-U.S. Shareholder's U.S. trade or business, in which case the Non-U.S
Shareholder will be subject to the same treatment as U.S. shareholders with
respect to such gain, or (ii) the Non-U.S. Shareholder is a nonresident alien
individual who was present in the United States for 183 days or more during the
taxable year and has a "tax home" in the United States, in which case the
nonresident alien individual will be subject to a 30% tax on the individual's
capital gains. If the gain on the sale of our common stock were to be subject to
tax under FIRPTA, the Non-U.S. Shareholder would be subject to the same
treatment as U.S. 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).
STATE AND LOCAL TAXES
Cousins Properties Incorporated, its subsidiaries, and its shareholders may
be subject to state or local taxation in various state or local jurisdictions,
including those in which it or they transact business or reside (although
shareholders who are individuals generally should not be required to file state
income tax returns outside of their state of residence with respect to our
operations and distributions), and their state and local tax treatment may not
conform to 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 our securities.
38
PLAN OF DISTRIBUTION
We may sell any securities:
- to or through underwriters or dealers,
- through agents,
- directly to one or more purchasers, or
- through a combination of any of these methods of sale.
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 from time to time,
- at market prices prevailing at the time of sale,
- at prices related to such prevailing market prices, or
- at negotiated prices.
For each series of securities, the prospectus supplement will set forth the
terms of the offering including:
- the initial public offering price,
- the names of any underwriters, dealers or agents,
- the purchase price of the securities,
- our proceeds from the sale of the securities,
- any underwriting discounts, agency fees, or other compensation payable to
underwriters or agents,
- any discounts or concessions allowed or reallowed or repaid to dealers,
and
- the securities exchanges on which the securities will be listed, if any.
If we use underwriters in the sale, they will buy the securities for their
own account. The underwriters may then resell the securities in one or more
transactions at a fixed public offering price or at varying prices determined at
the time of sale or thereafter. The obligations of the underwriters to purchase
the securities will be subject to certain conditions. The underwriters will be
obligated to purchase all the securities offered if they purchase any
securities. Any initial public offering price and any discounts or concessions
allowed or re-allowed or paid to dealers may be changed from time to time. In
connection with an offering, underwriters and selling group members and their
affiliates may engage in transactions to stabilize, maintain or otherwise affect
the market price of the securities in accordance with applicable law.
If we use dealers in the sale, we will sell securities to such dealers as
principals. The dealers may then resell the securities to the public at varying
prices to be determined by such dealers at the time of resale. If we use agents
in the sale, they will use their reasonable best efforts to solicit purchases
for the period of their appointment. If we sell directly, no underwriters or
agents would be involved. We are not making an offer of securities in any state
that does not permit such an offer.
Underwriters, dealers and agents that participate in the securities
distribution may be deemed to be underwriters as defined in the Securities Act.
Any discounts, commissions, or profit they receive when they resell the
securities may be treated as underwriting discounts and commissions under the
Securities Act. We may have agreements with underwriters, dealers and agents to
indemnify them against certain civil liabilities, including certain liabilities
under the Securities Act, or to contribute with respect to payments that they
may be required to make.
We may authorize underwriters, dealers or agents to solicit offers from
certain institutions whereby the institution contractually agrees to purchase
the securities from us on a future date at a specific price. This type of
contract may be made only with institutions that we specifically approve. Such
institutions
39
could include banks, insurance companies, pension funds, investment companies
and educational and charitable institutions. The underwriters, dealers or agents
will not be responsible for the validity or performance of these contracts.
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You must not
rely on any unauthorized information. This prospectus does not offer to sell or
buy any securities in any jurisdiction where it is unlawful.
The securities, other than the common stock, will be new issues of
securities with no established trading market and unless otherwise specified in
the applicable prospectus supplement, we will not list any series of the
securities on any exchange. It has not presently been established whether the
underwriters, if any, of the securities will make a market in the securities. If
the underwriters make a market in the securities, such market making may be
discontinued at any time without notice. No assurance can be given as to the
liquidity of the trading market for the securities.
One or more of the underwriters, dealer or agents, and/or one or more of
their respective affiliates, may be a lender under our credit facility and may
provide other commercial banking, investment banking and other services to us
and/or our subsidiaries and affiliates in the ordinary course of our business.
EXPERTS
The consolidated financial statements and the related financial statement
schedules incorporated in this prospectus by reference from the Annual Report on
Form 10-K of Cousins Properties Incorporated for the year ended December 31,
2002, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports (which reports express unqualified opinions and include
an explanatory paragraph relating to the impact of the adoption of Statements of
Financial Accounting Standard No. 133 and No. 144, and which is based in part on
the report of other auditors), which are incorporated herein by reference, and
have been so incorporated in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
The financial statements and schedule of CSC Associates, L.P. appearing in
the Annual Report (Form 10-K) of Cousins Properties Incorporated for the year
ended December 31, 2002, have been audited by Ernst & Young, LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such financial statements are incorporated herein by
reference in reliance upon such report given on the authority of said firm as
experts in accounting and auditing.
LEGAL MATTERS
The legality of the securities will be passed upon for Cousins by King &
Spalding LLP, Atlanta, Georgia.
40
(COUSINS LOGO)
COUSINS PROPERTIES INCORPORATED
4,000,000 SHARES
7 3/4% SERIES A CUMULATIVE REDEEMABLE PREFERRED STOCK
(LIQUIDATION PREFERENCE $25.00 PER SHARE)
--------------------------------
PROSPECTUS SUPPLEMENT
JULY 17, 2003
--------------------------------
WACHOVIA SECURITIES
BANC OF AMERICA SECURITIES LLC
MCDONALD INVESTMENTS INC.
RBC DAIN RAUSCHER