amend1s33113.htm
As
filed with the Securities and Exchange Commission on March 26, 2010
Registration
No. 333-163113
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C.
20549
__________________
AMENDMENT
NO. 1
TO
FORM S-3
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
COGDELL
SPENCER INC.
(Exact
name of registrant as specified in its charter)
__________________
|
|
|
|
|
Maryland
|
|
20-3126457
|
|
(State
or other jurisdiction of incorporation or organization)
|
|
(I.R.S.
Employer Identification Number)
|
4401
Barclay Downs Drive, Suite 300 Charlotte, North Carolina
28209-4670
(704) 940-2900
(Address,
including zip code and telephone number, including area code, of registrant’s
principal executive offices)
__________________
Frank
C. Spencer
Chief
Executive Officer
4401
Barclay Downs Drive, Suite 300
Charlotte,
North Carolina 28209-4670
(704) 940-2900
(Name,
address, including zip code and telephone number, including area code, of agent
for service)
__________________
Copies
to:
Jay
L. Bernstein, Esq.
Andrew
S. Epstein, Esq.
Clifford
Chance US LLP
31 West
52nd Street
New
York, New York 10019
(212)
878-8000
__________________
Approximate date of commencement of
proposed sale to public: From time to time after the
effective date of the Registration Statement as determined by market
conditions.
If the
only securities being registered on this Form are being offered pursuant to
dividend or interest reinvestment plans, please check the following
box: o
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933,
other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: þ
If this
Form is filed to register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, please check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. o
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.
If this
Form is a registration statement pursuant to General Instruction I.D. or
post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box.
If this
Form is a post-effective amendment to a registration statement filed pursuant to
General Instruction I.D. filed to register additional securities or additional
classes of securities pursuant to Rule 413(b) under the Securities Act, check
the following box.
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
Large
accelerated
filer Accelerated
filer ü
Non-accelerated
filer Smaller
reporting company
(Do not check if a smaller reporting company)
The
registrant hereby amends this registration statement on the date or dates as may
be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
The
information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is
not an offer to sell these securities and is not soliciting an offer to buy
these securities in any jurisdiction where an offer or sale is not
permitted.
Subject
to Completion, dated March 26, 2010
PROSPECTUS
$500,000,000
COGDELL
SPENCER INC.
Common
Stock,
Preferred
Stock,
Depositary
Shares, Warrants and Rights
We may
from time to time offer, in one or more series or classes, separately or
together, and in amounts, at prices and on terms to be set forth in one or more
supplements to this prospectus, the following securities:
|
·
|
shares
of common stock and/or preferred stock, par value $0.01 per
share;
|
|
·
|
depositary
shares representing entitlement to all rights and preferences of fractions
of shares of preferred stock of a specified series and represented by
depositary receipts;
|
|
·
|
warrants
to purchase shares of common stock, preferred stock or depositary
shares; or
|
|
·
|
rights
to purchase common stock.
|
We refer
to the common stock, preferred stock, depositary shares, warrants and rights,
collectively, as the “securities” in this prospectus. The securities
will have an aggregate initial offering price of up to $500,000,000, or its
equivalent in a foreign currency based on the exchange rate at the time of sale,
in amounts, at initial prices and on terms determined at the time of the
offering.
The
specific terms of the securities will be set forth in the applicable prospectus
supplement and will include, as applicable: (i) in the case of our common
stock, any public offering price; (ii) in the case of our preferred stock,
the specific designation and any dividend, liquidation, redemption, conversion,
voting and other rights, and any public offering price; (iii) in the case
of depositary shares, the fractional share of preferred stock represented by
each such depositary share; (iv) in the case of warrants, the duration,
offering price, exercise price and detachability; and (v) in the case of
rights, the number being issued, the exercise price and the expiration
date. In addition, we are organized and conduct our operations so as
to qualify as a real estate investment trust, or REIT, for U.S. federal
income tax purposes, and such specific terms may include limitations on actual
or constructive ownership and restrictions on transfer of the securities, in
each case as may be appropriate to preserve our qualification as a
REIT.
The
applicable prospectus supplement will also contain information, where
applicable, about certain U.S. federal income tax consequences relating to,
and any listing on a securities exchange of, the securities covered by such
prospectus supplement. It is important that you read both this
prospectus and the applicable prospectus supplement before you
invest.
We may
offer the securities directly, through agents, or to or through
underwriters. The prospectus supplement will describe the terms of
the plan of distribution and set forth the names of any underwriters involved in
the sale of the securities. See “Plan of Distribution” beginning on
page 42 for more information on this topic. No securities may be
sold without delivery of a prospectus supplement describing the method and terms
of the offering of those securities.
Our
common stock is listed on the New York Stock Exchange, or the NYSE, under the
symbol “CSA.” On March 25, 2010, the closing sale price of our common stock on
the NYSE was $7.41 per share.
An
investment in these securities entails certain material risks and uncertainties
that should be considered. See “Risk Factors” beginning on page 10 of
our Annual Report on Form 10-K for the year ended December 31,
2009.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
Prospectus
dated ,
2010
TABLE
OF CONTENTS
|
|
|
Page
|
|
COGDELL
SPENCER INC.
|
|
1
|
|
RISK
FACTORS
|
|
1
|
|
STATEMENTS
REGARDING FORWARD-LOOKING INFORMATION
|
|
1
|
|
USE
OF PROCEEDS
|
|
1
|
|
EARNINGS
RATIOS
|
|
1
|
|
DESCRIPTION
OF COMMON STOCK
|
|
2
|
|
DESCRIPTION
OF PREFERRED STOCK
|
|
5
|
|
DESCRIPTION
OF DEPOSITARY SHARES
|
|
11
|
|
DESCRIPTION
OF WARRANTS
|
|
14
|
|
DESCRIPTION
OF RIGHTS
|
|
15
|
|
CERTAIN
PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER AND BYLAWS
|
|
15
|
|
COGDELL
SPENCER LP PARTNERSHIP AGREEMENT
|
|
19
|
|
U.S. FEDERAL
INCOME TAX CONSIDERATIONS
|
|
25
|
|
BOOK-ENTRY
SECURITIES
|
|
41
|
|
PLAN
OF DISTRIBUTION
|
|
42
|
|
LEGAL
MATTERS
|
|
42
|
|
EXPERTS
|
|
43
|
|
WHERE
YOU CAN FIND MORE INFORMATION
|
|
43
|
______________
You
should rely only on the information provided or incorporated by reference in
this prospectus or any applicable prospectus supplement. We have not
authorized anyone to provide you with different or additional
information. We are not making an offer to sell these securities in
any jurisdiction where the offer or sale of these securities is not
permitted. You should not assume that the information appearing in
this prospectus, any accompanying prospectus supplement or the documents
incorporated by reference herein or therein is accurate as of any date other
than their respective dates. Our business, financial condition,
results of operations and prospects may have changed since those
dates.
You
should read carefully the entire prospectus, as well as the documents
incorporated by reference in the prospectus, before making an investment
decision.
COGDELL
SPENCER INC.
We are a
fully-integrated, self-administered and self-managed real estate investment
trust, or REIT, that invests in specialty office buildings for the medical
profession, including medical offices, ambulatory surgery and diagnostic
centers. We focus on the ownership, delivery, acquisition and
management of strategically located medical office buildings and other
healthcare related facilities in the United States of America. We
have been built around understanding and addressing the full range of
specialized real estate needs of the healthcare industry. We operate
our business through our subsidiary, Cogdell Spencer LP, a Delaware limited
partnership, or our operating partnership, and its subsidiaries.
Our
principal executive offices are located at 4401 Barclay Downs Drive,
Suite 300, Charlotte, North Carolina 28209-4670. Our
telephone number at that location is (704) 940-2900. Our website
is located at www.cogdell.com. The information found on, or otherwise
accessible through, our website is not incorporated into, and does not form a
part of, this prospectus or any other report or document we file with or furnish
to the Securities and Exchange Commission, or the SEC.
RISK
FACTORS
Investment
in our securities involves a high degree of risk. You should
carefully consider the risks described in the section “Risk Factors” contained
in our Annual Report on Form 10-K for the year ended December 31,
2009, which has been filed with the SEC, as well as other information in this
prospectus and any accompanying prospectus supplement before purchasing our
shares of common stock. The section “Risk Factors” contained in our
Annual Report on Form 10-K for the year ended December 31, 2009, is
incorporated herein by reference. Each of the risks described could
materially adversely affect our business, financial condition, results of
operations, or ability to make distributions to our stockholders. In
such case, you could lose all or a portion of your original
investment.
STATEMENTS
REGARDING FORWARD-LOOKING INFORMATION
When used
in this discussion and elsewhere in this prospectus and the documents
incorporated by reference herein, the words “believes,” “anticipates,”
“projects,” “should,” “estimates,” “expects” and similar expressions are
intended to identify forward-looking statements within the meaning of that term
in Section 27A of the Securities Act of 1933, as amended (the “Securities
Act”), and in Section 21F of the Securities and Exchange Act of 1934, as
amended (the “Exchange Act”). Actual results may differ materially
due to uncertainties including:
|
·
|
our
ability to comply with financial covenants in our debt
instruments;
|
|
·
|
our
ability to obtain future financing
arrangements;
|
|
·
|
estimates
relating to our future
distributions;
|
|
·
|
our
understanding of our competition;
|
|
·
|
our
ability to renew our ground leases;
|
|
·
|
legislative
and regulatory changes (including changes to laws governing the taxation
of REITs and individuals);
|
|
·
|
increases
in costs of borrowing as a result of changes in interest rates and other
factors;
|
|
·
|
our
ability to maintain our qualification as a REIT due to economic, market,
legal, tax or other considerations;
|
|
·
|
changes
in the reimbursement available to our tenants by government or private
payors;
|
|
·
|
our
tenants’ ability to make rent
payments;
|
|
·
|
defaults
by tenants and customers;
|
|
·
|
access
to financing by customers;
|
|
·
|
delays
in project starts and cancellations by
customers;
|
|
·
|
projected
capital expenditures.
|
Forward-looking
statements are based on estimates as of the date of this
prospectus. We disclaim any obligation to publicly release the
results of any revisions to these forward-looking statements reflecting new
estimates, events or circumstances after the date of this
prospectus.
For more
information regarding risks that may cause our actual results to differ
materially from any forward-looking statements, see “Risk Factors” beginning on
page 10 of our Annual Report on Form 10-K for the year ended
December 31, 2009. Moreover, we operate in a very competitive
and rapidly changing environment. New risk factors emerge from time
to time and it is not possible for management to predict all such risk factors,
nor can it assess the impact of all such risk factors on our business or the
extent to which any factor, or combination of factors, may cause actual results
to differ materially from those contained in any forward-looking
statements. Given these risks and uncertainties, investors should not
place undue reliance on forward-looking statements as a prediction of actual
results.
USE
OF PROCEEDS
Unless
otherwise specified in the applicable prospectus supplement, we intend to use
the net proceeds from the sale of the securities for general corporate purposes,
which may include developing and buying additional properties, expanding and
improving certain of our existing properties and repaying
debt. Further details relating to the use of the net proceeds will be
set forth in the applicable prospectus supplement.
The
following table sets forth our ratios of earnings to combined fixed charges and
preferred stock dividends for the periods indicated.
|
|
Company
|
Predecessor
|
|
|
2009
|
2008
|
2007
|
2006
|
November
2, 2005-December 31, 2005
|
January
1, 2005-October 31, 2005
|
|
Ratio
of earnings to combined fixed charges and preferred stock
dividends
|
*
|
*
|
*
|
*
|
*
|
1.5x
|
_______________
|
*
|
Earnings
(as defined) were insufficient to cover fixed charges by $124,949,000,
$9,330,000, $9,561,000, and $14,544,000 for the years ended December 31,
2009, 2008, 2007, and 2006, respectively and $11,720,000 for the period
from November 1, 2005 through December 31, 2005, in the case of the
Company.
|
We
computed the ratio of earnings to combined fixed charges and preferred stock
dividends by dividing earnings by fixed charges. We have not issued
any preferred stock as of the date of this prospectus, and therefore there were
no preferred dividends included in our calculation of ratios of earnings to
combined fixed charges and preferred stock dividends for these
periods. Earnings have been calculated by adding fixed charges to
income before provision for income taxes. Fixed charges consist of
interest expense, amortization of deferred financing costs and the portion of
rental expense deemed to be the equivalent of interest.
DESCRIPTION
OF COMMON STOCK
The
following summary of the material terms of the stock of our company does not
purport to be complete and is subject to and qualified in its entirety by
reference to Maryland law and our charter and bylaws. See “Where You
Can Find More Information.”
General
Cogdell
Spencer Inc. was formed on July 5, 2005. Our charter provides
that we may issue up to 200,000,000 shares of common stock, $0.01 par value
per share. Our charter authorizes our board of directors to amend our
charter to increase or decrease the aggregate number of authorized shares or the
number of authorized shares of any class or series without stockholder
approval. As of March 8, 2010, 42,782,497 shares of our common stock
were issued and outstanding and no shares of preferred stock were issued and
outstanding. Under Maryland law, stockholders generally are not
liable for a corporation’s debts or obligations.
Common
Stock
All
shares of our common stock offered hereby will be duly authorized, fully paid
and nonassessable. Subject to the preferential rights of any other
class or series of stock and to the provisions of the charter regarding the
restrictions on transfer of stock, holders of shares of our common stock are
entitled to receive dividends on such stock if, when and as authorized by our
board of directors and declared by us out of assets legally available
therefor and the holders of our common stock are entitled to share ratably
in the assets of our company legally available for distribution to our
stockholders in the event of our liquidation, dissolution or winding up after
payment of or adequate provision for all of our known debts and liabilities and
to holders of any class of stock, if any, having a preference as to
distributions in the event of our liquidation, dissolution or winding
up.
Subject
to the provisions of our charter regarding the restrictions on transfer of
stock, and except as may otherwise be specified in the terms of any class or
series of common stock, each outstanding share of our common stock entitles the
holder to one vote on all matters submitted to a vote of stockholders, including
the election of directors and, except as may be provided with respect to any
other class or series of stock, the holders of such shares will possess the
exclusive voting power. There is no cumulative voting in the election
of our board of directors, which means that the holders of a majority of the
outstanding shares of our common stock can elect all of the directors then
standing for election and the holders of the remaining shares will not be able
to elect any directors.
Holders
of shares of our common stock have no preference, conversion, exchange, sinking
fund, redemption or appraisal rights and have no preemptive rights to subscribe
for any securities of our company. Subject to the provisions of the
charter regarding the restrictions on transfer of stock, shares of our common
stock will have equal dividend, liquidation and other rights.
Our
charter authorizes our board of directors to reclassify any unissued shares of
our common stock into other classes or series of classes of stock and to
establish the number of shares in each class or series and to set the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms and
conditions of redemption for each such class or series.
Power
to Increase or Decrease Authorized Stock and Issue Additional Shares of Our
Common Stock
Our
charter authorizes our board of directors to amend our charter to increase or
decrease the aggregate number of authorized shares or the number of authorized
shares of any class or series without stockholder approval. We
believe that the power of our board of directors to increase or decrease the
number of authorized shares of stock, approve additional authorized but unissued
shares of our common stock and to classify or reclassify unissued shares of our
common stock and thereafter to cause us to issue such classified or reclassified
shares of stock will provide us with increased flexibility in structuring
possible future financings and acquisitions and in meeting other needs which
might arise. The additional classes or series, as well as the common
stock, will be available for issuance without further action by our
stockholders, unless such action is required by applicable law or the rules of
any stock exchange or automated quotation system on which our securities may be
listed or traded. Although our board of directors does not intend to
do so, it could authorize us to issue a class or series that could, depending
upon the terms of the particular class or series, delay, defer or prevent a
transaction or a change of control of our company that might involve a premium
price for our stockholders or otherwise be in their best interests.
Restrictions
on Ownership and Transfer
In order
for us to qualify as a REIT under the Internal Revenue Code of 1986, as amended,
or Code, our stock must be beneficially owned by 100 or more persons during at
least 335 days of a taxable year of 12 months (other than the first
year for which an election to be a REIT has been made) or during a proportionate
part of a shorter taxable year. Also, not more than 50% of the value
of the outstanding shares of stock may be owned, directly or indirectly, by five
or fewer individuals (as defined in the Code to include certain entities such as
qualified pension plans) during the last half of a taxable year (other than the
first year for which an election to be a REIT has been made). To
qualify as a REIT, we must satisfy other requirements as well. See
“U.S. Federal Income Tax Considerations — Taxation of the
Company — Requirements for Qualification — General.”
Our
charter contains restrictions on the ownership and transfer of our common stock
and outstanding capital stock which are intended to assist us in complying with
these requirements and continuing to qualify as a REIT. The relevant
sections of our charter provide that, subject to the exceptions described below,
no person or entity may beneficially own, or be deemed to own by virtue of the
applicable constructive ownership provisions of the Code, more than 7.75% (by
value or by number of shares, whichever is more restrictive) of our outstanding
common stock (the common stock ownership limit) or 7.75% (by value or by number
of shares, whichever is more restrictive) of our outstanding capital stock (the
aggregate stock ownership limit). We refer to this restriction as the
“ownership limit.” In addition, different ownership limits apply to
Mr. Cogdell, certain of his affiliates, family members and estates and
trusts formed for the benefit of the foregoing and Mr. Spencer, certain of
his affiliates, family members and estates and trusts formed for the benefit of
the foregoing. These ownership limits, which our board has determined
do not jeopardize our REIT qualification, allow Mr. Cogdell and Mr.
Spencer, certain of their affiliates, family members and estates and trusts
formed for the benefit of the foregoing, as an excepted holder, to hold up to
18.0% (by value or by number of shares, whichever is more restrictive) of our
common stock or up to 18.0% (by value or by number of shares, whichever is more
restrictive) of our outstanding capital stock. A person or entity
that becomes subject to the ownership limit by virtue of a violative transfer
that results in a transfer to a trust, as set forth below, is referred to as a
“purported beneficial transferee” if, had the violative transfer been effective,
the person or entity would have been a record owner and beneficial owner or
solely a beneficial owner of our common stock, or is referred to as a “purported
record transferee” if, had the violative transfer been effective, the person or
entity would have been solely a record owner of our common stock.
The
constructive ownership rules under the Code are complex and may cause stock
owned actually or constructively by a group of related individuals and/or
entities to be owned constructively by one individual or entity. As a
result, the acquisition of less than 7.75% (by value or by number of shares,
whichever is more restrictive) of our outstanding common stock or 7.75% (by
value or by number of shares, whichever is more restrictive) of our outstanding
capital stock (or the acquisition by an individual or entity of an interest in
an entity that owns, actually or constructively, our capital stock) could,
nevertheless, cause that individual or entity, or another individual or entity,
to own constructively in excess of 7.75% (by value or by number of shares,
whichever is more restrictive) of our outstanding common stock or 7.75% (by
value or by number of shares, whichever is more restrictive) of our outstanding
capital stock and thereby subject the common stock or capital stock to the
applicable ownership limit.
Our board
of directors may, in its sole discretion, waive the above-referenced 7.75%
ownership limits with respect to a particular stockholder if:
|
·
|
our
board of directors obtains such representations and undertakings from such
stockholder as are reasonably necessary to ascertain that no individual’s
beneficial or constructive ownership of our stock will result in our being
“closely held” under Section 856(h) of the Code or otherwise failing
to qualify as a REIT;
|
|
|
such
stockholder does not, and represents that it will not, own, actually or
constructively, an interest in a tenant of ours (or a tenant of any entity
owned or controlled by us) that would cause us to own, actually or
constructively, more than a 9.9% interest (as set forth in
Section 856(d)(2)(B) of the Code) in such tenant (or the board of
directors determines that revenue derived from such tenant will not affect
our ability to qualify as a REIT) and our board of directors obtains such
representations and undertakings from such stockholder as are reasonably
necessary to ascertain this
fact; and
|
|
·
|
such
stockholder agrees that any violation or attempted violation of such
representations or undertakings will result in shares of stock being
automatically transferred to a charitable
trust.
|
As a
condition of its waiver, our board of directors may require the applicant to
submit such information as the board of directors may reasonably need to make
the determination regarding our REIT qualification and an opinion of counsel or
IRS ruling satisfactory to our board of directors with respect to our REIT
qualification.
In
connection with the waiver of an ownership limit or at any other time, our board
of directors may from time to time increase or decrease the ownership limit for
all other persons and entities; provided, however, that any decrease may be made
only prospectively as to subsequent holders (other than a decrease as a result
of a retroactive change in existing law, in which case the decrease shall be
effective immediately); and the ownership limit may not be increased if, after
giving effect to such increase, five individuals (including certain entities)
could beneficially own or constructively own in the aggregate, more than 49.9%
in value of the shares then outstanding.
Our
charter provisions further prohibit:
|
·
|
any
person from beneficially or constructively owning shares of our stock that
would result in us being “closely held” under Section 856(h) of the
Code or otherwise cause us to fail to qualify as a
REIT;
|
|
·
|
any
person from constructively owning shares of our stock that would cause any
of our income to be considered “related party rent” under
Section 856(d)(2)(B) of the
Code; and
|
|
·
|
any
person from transferring shares of our common stock if such transfer would
result in shares of our stock being beneficially owned by fewer than 100
persons (determined without reference to any rules of
attribution).
|
Any
person who acquires or attempts to acquire beneficial or constructive ownership
of shares of our capital stock that will or may violate any of the foregoing
restrictions on transferability and ownership will be required to give written
notice immediately to us and provide us with such other information as we may
request in order to determine the effect of such transfer on our qualification
as a REIT. The foregoing provisions on transferability and ownership
will not apply if our board of directors determines that it is no longer in our
best interests to attempt to qualify, or to continue to qualify, as a
REIT.
If any
transfer of shares of our stock occurs which, if effective, would result in any
person beneficially or constructively owning shares of our stock in excess or in
violation of the above transfer or ownership limitations (other than the 100
person limit), then that number of shares of our stock the beneficial or
constructive ownership of which otherwise would cause such person to violate
such limitations (rounded up to the nearest whole share) shall be automatically
transferred to a trust for the exclusive benefit of one or more charitable
beneficiaries, and the purported beneficial transferee shall not acquire any
rights in such shares. The automatic transfer will be effective as of
the close of business on the business day prior to the date of the violative
transfer or other event that results in a transfer to the trust. Any
dividend or other distribution paid to the purported record transferee, prior to
our discovery that the shares had been automatically transferred to a trust as
described above, must be repaid to the trustee upon demand for distribution to
the beneficiary of the trust. If the transfer to the trust as
described above is not automatically effective, for any reason, to prevent
violation of the applicable ownership limit or as otherwise permitted by our
board of directors, then our charter provides that the transfer of that number
of shares that otherwise would cause a person to violate the ownership limits
will be void. Any transfer that would cause the common stock to be
beneficially owned by fewer than 100 persons shall be void ab initio .
Shares
of our common stock transferred to the trustee are deemed offered for sale to
us, or our designee, at a price per share equal to the lesser of (1) the
price paid by the purported record transferee for the shares (or, if the event
which resulted in the transfer to the trust did not involve a purchase of such
shares of our common stock at market price, the last reported sales price
reported on the NYSE on the trading day immediately preceding the day of the
event which resulted in the transfer of such shares of our common stock to the
trust) and (2) the market price on the date we, or our designee, accepts
such offer. We may reduce the amount payable to the purported record
transferee by the amount of dividends and other distributions which have been
paid to the purported record transferee and are owed by the purported record
transferee to the trustee, as discussed above. We have the right to
accept such offer until the trustee has sold the shares of our common stock held
in the trust pursuant to the clauses discussed below. Upon a sale to
us, the interest of the charitable beneficiary in the shares sold terminates and
the trustee must distribute the net proceeds of the sale to the purported record
transferee and any dividends or other distributions held by the trustee with
respect to such common stock will be paid to the charitable
beneficiary.
If we do
not buy the shares, the trustee must, within 20 days of receiving notice
from us of the transfer of shares to the trust, sell the shares to a person or
entity designated by the trustee who could own the shares without violating the
ownership limits. After that, the trustee must distribute to the
purported record transferee an amount equal to the lesser of (1) the price
paid by the purported record transferee for the shares (or, if the event which
resulted in the transfer to the trust did not involve a purchase of such shares
at market price, the last reported sales price reported on the NYSE on the
trading day immediately preceding the relevant date) and (2) the sales
proceeds (net of commissions and other expenses of sale) received by the trust
for the shares. The purported beneficial transferee or purported
record transferee has no rights in the shares held by the trustee.
The
trustee shall be designated by us and shall be unaffiliated with us and with any
purported record transferee or purported beneficial transferee. Prior
to the sale of any shares by the trust, the trustee will receive, in trust for
the beneficiary, all dividends and other distributions paid by us with respect
to the shares held in trust, and may also exercise all voting rights with
respect to such shares.
Subject
to Maryland law, effective as of the date that the shares have been transferred
to the trust, the trustee shall have the authority, at the trustee’s sole
discretion:
|
·
|
to
rescind as void any vote cast by a purported record transferee prior to
our discovery that the shares have been transferred to the
trust; and
|
|
·
|
to
recast the vote in accordance with the desires of the trustee acting for
the benefit of the beneficiary of the
trust.
|
However,
if we have already taken irreversible corporate action, then the trustee may not
rescind and recast the vote.
Any
beneficial owner or constructive owner of shares of our common stock and any
person or entity (including the stockholder of record) who is holding shares of
our common stock for a beneficial owner must, on request, provide us with a
completed questionnaire containing the information regarding their ownership of
such shares, as set forth in the applicable Treasury Regulations. In
addition, any person or entity that is a beneficial owner or constructive owner
of shares of our common stock and any person or entity (including the
stockholder of record) who is holding shares of our common stock for a
beneficial owner or constructive owner shall, on request, be required to
disclose to us in writing such information as we may request in order to
determine the effect, if any, of such stockholder’s actual and constructive
ownership of shares of our common stock on our qualification as a REIT and to
ensure compliance with the ownership limit, or as otherwise permitted by our
board of directors.
All
certificates representing shares of our common stock bear a legend referring to
the restrictions described above.
These
ownership limits could delay, defer or prevent a transaction or a change of
control of our company that might involve a premium price for our common stock
or otherwise be in the best interests of our stockholders.
Transfer Agent and
Registrar
The
transfer agent and registrar for our common stock is Continental Stock
Transfer & Trust Company.
DESCRIPTION
OF PREFERRED STOCK
General
Our
charter provides that we may issue up to 50,000,000 shares of preferred
stock, $0.01 par value per share. On March 22, 2010, we had no
outstanding series of preferred stock. Our charter authorizes our board of
directors to amend our charter to increase or decrease the aggregate number of
authorized shares or the number of authorized shares of any class or series
without stockholder approval.
The
following description of the preferred stock sets forth general terms and
provisions of the preferred stock to which any prospectus supplement may
relate. The statements below describing the preferred stock are in
all respects subject to and qualified in their entirety by reference to the
applicable provisions of our charter and bylaws and any applicable articles
supplementary to the charter designating terms of a series of preferred
stock. The issuance of preferred stock could adversely affect the
voting power, dividend rights and other rights of holders of common
stock. Although our board of directors does not have this intention
at this present time, it could establish another series of preferred stock, that
could, depending on the terms of the series, delay, defer or prevent a
transaction or a change in control of our company that might involve a premium
price for the common stock or otherwise be in the best interest of the holders
thereof. Management believes that the availability of preferred stock
will provide us with increased flexibility in structuring possible future
financing and acquisitions and in meeting other needs that might
arise.
Terms
Subject
to the limitations prescribed by our charter, our board of directors is
authorized to classify any unissued shares of preferred stock and to reclassify
any previously classified but unissued shares of any series of preferred stock
previously authorized by our board of directors. Prior to issuance of
shares of each class or series of preferred stock, our board of directors is
required by the MGCL and our charter to fix the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications and terms or conditions of redemption for each
class or series.
Reference
is made to the prospectus supplement relating to the series of preferred stock
offered thereby for the specific terms thereof, including:
|
·
|
The
title and par value of the preferred
stock;
|
|
·
|
The
number of shares of the preferred stock, the liquidation preference per
share of the preferred stock and the offering price of the preferred
stock;
|
|
·
|
The
dividend rate(s), period(s) and/or payment day(s) or method(s) of
calculation thereof applicable to the preferred
stock;
|
|
·
|
The
date from which dividends on the preferred stock shall accumulate, if
applicable;
|
|
·
|
The
procedures for any auction and remarketing, if any, for the preferred
stock;
|
|
·
|
The
provision for a sinking fund, if any, for the preferred
stock;
|
|
·
|
The
provision for redemption, if applicable, of the preferred
stock;
|
|
·
|
Any
listing of the preferred stock on any securities
exchange;
|
|
·
|
The
terms and conditions, if applicable, upon which the preferred stock may or
will be convertible into our common stock, including the conversion price
or manner of calculation thereof;
|
|
·
|
The
relative ranking and preferences of the preferred stock as to dividend
rights and rights upon liquidation, dissolution or winding up of our
affairs;
|
|
|
Any
limitations on direct or beneficial ownership and restrictions on
transfer;
|
|
·
|
A
discussion of U.S. federal income tax considerations applicable to
the preferred stock; and
|
|
·
|
Any
other specific terms, preferences, rights, limitations or restrictions of
the preferred stock.
|
Rank
Unless
otherwise specified in the applicable prospectus supplement, the preferred stock
will, with respect to dividend rights and rights upon liquidation, dissolution
or winding up of our company, rank:
(a) senior
to all classes or series of common stock and to all equity securities issued by
us the terms of which provide that the equity securities shall rank junior to
the preferred stock;
(b) on
a parity with all equity securities issued by us other than those referred to in
clauses (a) and (c); and
(c) junior
to all equity securities issued by us which the terms of the preferred stock
provide will rank senior to it. The term “equity securities” does not
include convertible debt securities.
Unless
otherwise specified in the applicable prospectus supplement, the preferred stock
will have the rights with respect to payment of dividends set forth
below.
Holders
of the preferred stock of each series will be entitled to receive, when, as and
if authorized by our board of directors and declared by us, out of our assets
legally available for payment, cash dividends in the amounts and on the dates as
will be set forth in, or pursuant to, the applicable prospectus
supplement. Each dividend shall be payable to holders of record as
they appear on our share transfer books on the record dates as shall be fixed by
our board of directors.
Dividends
on any series of preferred stock may be cumulative or non-cumulative, as
provided in the applicable prospectus supplement. Dividends, if
cumulative, will be cumulative from and after the date set forth in the
applicable prospectus supplement. If the board of directors fails to
declare a dividend payable on a dividend payment date on any series of preferred
stock for which dividends are non-cumulative, then the holders of this series of
preferred stock will have no right to receive a dividend in respect of the
related dividend period and we will have no obligation to pay the dividend
accrued for the period, whether or not dividends on this series of preferred
stock are declared payable on any future dividend payment date.
If
preferred stock of any series is outstanding, no full dividends will be declared
or paid or set apart for payment on any of our stock of any other series
ranking, as to dividends, on a parity with or junior to the preferred stock of
this series for any period unless:
|
·
|
if
this series of preferred stock has a cumulative dividend, full cumulative
dividends have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for the payment for
all past dividend periods; or
|
|
·
|
if
this series of preferred stock does not have a cumulative dividend, full
dividends for the then current dividend period have been or
contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for the payment on the preferred stock
of this series.
|
When
dividends are not paid in full or a sum sufficient for the full payment is not
so set apart upon preferred stock of any series and the shares of any other
series of preferred stock ranking on a parity as to dividends with the preferred
stock of this series, all dividends declared upon the preferred stock of this
series and any other series of preferred stock ranking on a parity as to
dividends with the preferred stock shall be declared pro rata so that the amount
of dividends declared per share of preferred stock of this series and the other
series of preferred stock shall in all cases bear to each other the same ratio
that accrued dividends per share on the preferred stock of this series and the
other series of preferred stock, which shall not include any accumulation in
respect of unpaid dividends for prior dividend periods if the preferred stock
does not have a cumulative dividend, bear to each other. No interest,
or sum of money in lieu of interest, shall be payable in respect of any dividend
payment or payments on preferred stock of this series which may be in
arrears.
Except as provided in the immediately
preceding paragraph, unless (a) if this series of preferred stock has a
cumulative dividend, full cumulative dividends on the preferred stock of this
series have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for payment for all past
dividend periods, or (b) if this series of preferred stock does not have a
cumulative dividend, full dividends on the preferred stock of this series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for payment for the then current dividend
period, no dividends, other than in shares of common stock or other stock
ranking junior to the preferred stock of this series as to dividends and upon
liquidation, shall be declared or paid or set aside for payment or other
distribution shall be declared or made upon the common stock, or any of our
other stock ranking junior to or on a parity with the preferred stock of this
series as to dividends or upon liquidation, nor shall any shares of common
stock, or any other of our capital stock ranking junior to or on a parity with
the preferred stock of this series as to dividends or upon liquidation, be
redeemed, purchased or otherwise acquired for any consideration or any moneys be
paid to or made available for a sinking fund for the redemption of any of the
shares by us except:
|
·
|
by
conversion into or exchange for other shares of our stock ranking junior
to the preferred stock of this series as to dividends and upon
liquidation; or
|
|
·
|
redemptions
for the purpose of preserving our qualification as a
REIT.
|
Redemption
If so
provided in the applicable prospectus supplement, the preferred stock will be
subject to mandatory redemption or redemption at our option, as a whole or in
part, in each case upon the terms, at the times and at the redemption prices set
forth in the prospectus supplement.
The
prospectus supplement relating to a series of preferred stock that is subject to
mandatory redemption will specify the number of shares of the preferred stock
that shall be redeemed by us in each year commencing after a date to be
specified, at a redemption price per share to be specified, together with an
amount equal to all accumulated and unpaid dividends thereon which shall not, if
the preferred stock does not have a cumulative dividend, include any
accumulation in respect of unpaid dividends for prior dividend periods, to the
date of redemption. The redemption price may be payable in cash or
other property, as specified in the applicable prospectus
supplement.
Notwithstanding
the foregoing, unless (a) if this series of preferred stock has a
cumulative dividend, full cumulative dividends on all shares of any series of
preferred stock shall have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for
all past dividend periods, or (b) if this series of preferred stock does
not have a cumulative dividend, full dividends on the preferred stock of any
series have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for payment for the then
current dividend period, no shares of any series of preferred stock shall be
redeemed unless all outstanding preferred stock of this series is simultaneously
redeemed; provided, however, that the foregoing shall not prevent the purchase
or acquisition of preferred stock of this series to preserve our REIT
qualification or pursuant to a purchase or exchange offer made on the same terms
to holders of all outstanding preferred stock of this series. In
addition, unless (a) if this series of preferred stock has a cumulative
dividend, full cumulative dividends on all outstanding shares of any series of
preferred stock have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for payment for all past
dividend periods, or (b) if this series of preferred stock does not have a
cumulative dividend, full dividends on the preferred stock of any series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for payment for the then current dividend
period, we shall not purchase or otherwise acquire, directly or indirectly, any
shares of preferred stock of this series except by conversion into or exchange
for our capital stock ranking junior to the preferred stock of this series as to
dividends and upon liquidation; provided, however, that the foregoing shall not
prevent the purchase or acquisition of preferred stock of this series to
preserve our REIT qualification or pursuant to a purchase or exchange offer made
on the same terms to holders of all outstanding preferred stock of this
series.
If fewer than all of the outstanding
shares of preferred stock of any series are to be redeemed, the number of shares
to be redeemed will be determined by us and the shares may be redeemed pro rata
from the holders of record of the shares in proportion to the number of the
shares held or for which redemption is requested by the holder, with adjustments
to avoid redemption of fractional shares, or by lot in a manner determined by
us.
Notice of
redemption will be mailed at least 30 days but not more than 60 days
before the redemption date to each holder of record of preferred stock of any
series to be redeemed at the address shown on our share transfer
books. Each notice shall state:
|
·
|
the
number of shares and series of the preferred stock to be
redeemed;
|
|
·
|
the
place or places where certificates for the preferred stock are to be
surrendered for payment of the redemption
price;
|
|
·
|
that
dividends on the shares to be redeemed will cease to accumulate on the
redemption date; and
|
|
·
|
the
date upon which the holder’s conversion rights, if any, as to the shares
shall terminate.
|
If fewer
than all the shares of preferred stock of any series are to be redeemed, the
notice mailed to each holder thereof shall also specify the number of shares of
preferred stock to be redeemed from each holder. If notice of
redemption of any preferred stock has been given and if the funds necessary for
the redemption have been set aside by us in trust for the benefit of the holders
of any preferred stock so called for redemption, then from and after the
redemption date dividends will cease to accumulate on the preferred stock, and
all rights of the holders of the preferred stock will terminate, except the
right to receive the redemption price.
Liquidation
Preference
Upon any
voluntary or involuntary liquidation, dissolution or winding up of our affairs,
then, before any distribution or payment shall be made to the holders of any
common stock or any other class or series of our stock ranking junior to the
preferred stock of this series in the distribution of assets upon any
liquidation, dissolution or winding up of our company, the holders of the
preferred stock shall be entitled to receive out of our assets of our company
legally available for distribution to stockholders liquidating distributions in
the amount of the liquidation preference per share that is set forth in the
applicable prospectus supplement, plus an amount equal to all dividends
accumulated and unpaid thereon, which shall not include any accumulation in
respect of unpaid dividends for prior dividend periods if the preferred stock
does not have a cumulative dividend. After payment of the full amount
of the liquidating distributions to which they are entitled, the holders of
preferred stock will have no rights 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 preferred
stock of this series and the corresponding amounts payable on all shares of
other classes or series of capital stock of our company ranking on a parity with
the preferred stock in the distribution of assets, then the holders of the
preferred stock and all other classes or series of capital stock shall share
ratably in any distribution of assets in proportion to the full liquidating
distributions to which they would otherwise be respectively
entitled.
Our
consolidation or merger with or into any other entity, or the merger of another
entity with or into our company, or a statutory share exchange by us, or the
sale, lease or conveyance of all or substantially all of our property or
business, shall not be deemed to constitute a liquidation, dissolution or
winding up of our company.
In
determining whether a distribution (other than upon voluntary or involuntary
liquidation), by dividend, redemption or other acquisition of shares of our
stock or otherwise, is permitted under Maryland law, amounts that would be
needed, if we were to be dissolved at the time of distribution, to satisfy the
preferential rights upon dissolution of holders of shares of the preferred stock
will not be added to our total liabilities.
Holders
of the preferred stock will not have any voting rights, except as set forth
below or as indicated in the applicable prospectus supplement.
Whenever
dividends on any series of preferred stock shall be in arrears for six or more
quarterly periods, the holders of the preferred stock, voting separately as a
class with all other series of preferred stock upon which like voting rights
have been conferred and are exercisable, will be entitled to vote for the
election of two additional directors of our company at a special meeting called
by the holders of record of at least ten percent of any series of preferred
stock so in arrears, unless the request is received less than 90 days
before the date fixed for the next annual or special meeting of the
stockholders, or at the next annual meeting of stockholders, and at each
subsequent annual meeting until (a) if this series of preferred stock has a
cumulative dividend, all dividends accumulated on these shares of preferred
stock for the past dividend periods shall have been fully paid or declared and a
sum sufficient for the payment thereof set aside for payment or (b) if this
series of preferred stock does not have a cumulative dividend, four quarterly
dividends shall have been fully paid or declared and a sum sufficient for the
payment thereof set aside for payment. In these cases, the entire
board of directors will be increased by two directors.
Unless
provided otherwise for any series of preferred stock, so long as any shares of
the preferred stock remain outstanding, we will not, without the affirmative
vote or consent of the holders of at least two-thirds of the shares of this
series of preferred stock outstanding at the time, given in person or by proxy,
either in writing or at a meeting with this series voting separately as a
class:
(a) authorize
or create, or increase the number of authorized or issued shares of, any class
or series of stock ranking senior to the preferred stock with respect to payment
of dividends or the distribution of assets upon liquidation, dissolution or
winding up of our company, or reclassify any of our authorized stock into this
series of preferred stock, or create, authorize or issue any obligation or
security convertible into or evidencing the right to purchase any of this series
of preferred stock; or
(b) amend,
alter or repeal the provisions of the charter or the articles supplementary for
this series of preferred stock, whether by merger, consolidation or otherwise,
so as to materially and adversely affect any right, preference, privilege or
voting power of this series of preferred stock;
provided,
however, with respect to the occurrence of any of the events set forth in
(b) above, so long as this series of preferred stock remains 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
similar event shall not be deemed to materially and adversely affect the rights,
preferences, privileges or voting powers of this series of preferred stock; and
provided, further, that (x) any increase in the number of authorized shares
of preferred stock or the creation or issuance of any other series of preferred
stock, or (y) any increase in the number of authorized shares of this
series of preferred stock or any other series of preferred stock, in each case
ranking on a parity with or junior to the preferred stock of this series with
respect to payment of dividends or the distribution of assets upon liquidation,
dissolution or winding up of our company, shall not be deemed to materially and
adversely affect the rights, preferences, privileges or voting
powers.
The
foregoing voting provisions will not apply if, at or prior to the time when the
act with respect to which the vote or consent would otherwise be required shall
be effected, all outstanding shares of this series of preferred stock shall have
been converted, redeemed or called for redemption and sufficient funds shall
have been deposited in trust to effect the redemption.
Conversion
Rights
The terms
and conditions, if any, upon which any series of preferred stock is convertible
into shares of common stock will be set forth in the applicable prospectus
supplement. The terms will include the number of shares of common
stock into which the shares of preferred stock are convertible, the conversion
price, or manner of calculation thereof, the conversion period, provisions as to
whether conversion will be at the option of the holders of our preferred stock
or us, the events requiring an adjustment of the conversion price and provisions
affecting conversion in the event of the redemption of the preferred
stock.
Stockholder
Liability
Maryland
law provides that no stockholder, including holders of preferred stock, shall be
personally liable for our acts and obligations and that our funds and property
shall be the only recourse for these acts or obligations.
Restrictions
on Ownership
In order
for us to qualify as a REIT under the Code, our stock must be beneficially owned
by 100 or more persons during at least 335 days of a taxable year of
12 months (other than the first year for which an election to be a REIT has
been made) or during a proportionate part of a shorter taxable
year. Also, not more than 50% of the value of the outstanding shares
of stock may be owned, directly or indirectly, by five or fewer individuals (as
defined in the Code to include certain entities such as qualified pension plans)
during the last half of a taxable year (other than the first year for which an
election to be a REIT has been made). The charter contains
restrictions on the ownership and transfer of shares of our stock, including
preferred stock. The articles supplementary for each series of
preferred stock may contain additional 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 is Continental Stock
Trust & Transfer Company.
DESCRIPTION
OF DEPOSITARY SHARES
We may,
at our option, elect to offer depositary shares rather than full shares of
preferred stock. In the event such option is exercised, each of the
depositary shares will represent ownership of and entitlement to all rights and
preferences of a fraction of a share of preferred stock of a specified series
(including dividend, voting, redemption and liquidation rights). The
applicable fraction will be specified in a prospectus supplement. The
shares of preferred stock represented by the depositary shares will be deposited
with a depositary named in the applicable prospectus supplement, under a deposit
agreement, among our company, the depositary and the holders of the certificates
evidencing depositary shares, or depositary receipts. Depositary
receipts will be delivered to those persons purchasing depositary shares in the
offering. The depositary will be the transfer agent, registrar and
dividend disbursing agent for the depositary shares. Holders of
depositary receipts agree to be bound by the deposit agreement, which requires
holders to take certain actions such as filing proof of residence and paying
certain charges.
The
summary of terms of the depositary shares contained in this prospectus does not
purport to be complete and is subject to, and qualified in its entirety by, the
provisions of the deposit agreement and the form of articles supplementary for
the applicable series of preferred stock.
Dividends
The
depositary will distribute all cash dividends or other cash distributions
received in respect of the series of preferred stock represented by the
depositary shares to the record holders of depositary receipts in proportion to
the number of depositary shares owned by such holders on the relevant record
date, which will be the same date as the record date fixed by our company for
the applicable series of preferred stock. The depositary, however,
will distribute only such amount as can be distributed without attributing to
any depositary share a fraction of one cent, and any balance not so distributed
will be added to and treated as part of the next sum received by the depositary
for distribution to record holders of depositary receipts then
outstanding.
In the
event of a distribution other than in cash, the depositary will distribute
property received by it to the record holders of depositary receipts entitled
thereto, in proportion, as nearly as may be practicable, to the number of
depositary shares owned by such holders on the relevant record date, unless the
depositary determines (after consultation with our company) that it is not
feasible to make such distribution, in which case the depositary may (with the
approval of our company) adopt any other method for such distribution as it
deems equitable and appropriate, including the sale of such property (at such
place or places and upon such terms as it may deem equitable and appropriate)
and distribution of the net proceeds from such sale to such
holders.
No
distribution will be made in respect of any depositary share to the extent that
it represents any preferred stock converted into excess stock.
Liquidation
Preference
In the
event of the liquidation, dissolution or winding up of the affairs of our
company, whether voluntary or involuntary, the holders of each depositary share
will be entitled to the fraction of the liquidation preference accorded each
share of the applicable series of preferred stock as set forth in the prospectus
supplement.
Redemption
If the
series of preferred stock represented by the applicable series of depositary
shares is redeemable, such depositary shares will be redeemed from the proceeds
received by the depositary resulting from the redemption, in whole or in part,
of preferred stock held by the depositary. Whenever we redeem any
preferred stock held by the depositary, the depositary will redeem as of the
same redemption date the number of depositary shares representing the preferred
stock so redeemed. The depositary will mail the notice of redemption
promptly upon receipt of such notice from us and not less than 30 nor more than
60 days prior to the date fixed for redemption of the preferred stock and
the depositary shares to the record holders of the depositary
receipts.
Voting
Promptly
upon receipt of notice of any meeting at which the holders of the series of
preferred stock represented by the applicable series of depositary shares are
entitled to vote, the depositary will mail the information contained in such
notice of meeting to the record holders of the depositary receipts as of the
record date for such meeting. Each such record holder of depositary
receipts will be entitled to instruct the depositary as to the exercise of the
voting rights pertaining to the number of shares of preferred stock represented
by such record holder’s depositary shares. The depositary will
endeavor, insofar as practicable, to vote such preferred stock represented by
such depositary shares in accordance with such instructions, and we will agree
to take all action which may be deemed necessary by the depositary in order to
enable the depositary to do so. The depositary will abstain from
voting any of the preferred stock to the extent that it does not receive
specific instructions from the holders of depositary receipts.
Withdrawal
of Preferred Stock
Upon
surrender of depositary receipts at the principal office of the depositary, upon
payment of any unpaid amount due the depositary, and subject to the terms of the
deposit agreement, the owner of the depositary shares evidenced thereby is
entitled to delivery of the number of whole shares of preferred stock and all
money and other property, if any, represented by such depositary
shares. Partial shares of preferred stock will not be
issued. If the depositary receipts delivered by the holder evidence a
number of depositary shares in excess of the number of depositary shares
representing the number of whole shares of preferred stock to be withdrawn, the
depositary will deliver to such holder at the same time a new depositary receipt
evidencing such excess number of depositary shares. Holders of
preferred stock thus withdrawn will not thereafter be entitled to deposit such
shares under the deposit agreement or to receive depositary receipts evidencing
depositary shares therefor.
Amendment
and Termination of Deposit Agreement
The form
of depositary receipt evidencing the depositary shares and any provision of the
deposit agreement may at any time and from time to time be amended by agreement
between our company and the depositary. However, any amendment which
materially and adversely alters the rights of the holders (other than any change
in fees) of depositary shares will not be effective unless such amendment has
been approved by at least a majority of the depositary shares then
outstanding. No such amendment may impair the right, subject to the
terms of the deposit agreement, of any owner of any depositary shares to
surrender the depositary receipt evidencing such depositary shares with
instructions to the depositary to deliver to the holder of the preferred stock
and all money and other property, if any, represented thereby, except in order
to comply with mandatory provisions of applicable law.
The
deposit agreement will be permitted to be terminated by our company upon not
less than 30 days prior written notice to the applicable depositary if
(i) such termination is necessary to preserve our qualification as a REIT
or (ii) a majority of each series of preferred stock affected by such
termination consents to such termination, whereupon such depositary will be
required to deliver or make available to each holder of depositary receipts,
upon surrender of the depositary receipts held by such holder, such number of
whole or fractional shares of preferred stock as are represented by the
depositary shares evidenced by such depositary receipts together with any other
property held by such depositary with respect to such depositary
receipts. We will agree that if the deposit agreement is terminated
to preserve our qualification as a REIT, then we will use our best efforts to
list the preferred stock issued upon surrender of the related depositary shares
on a national securities exchange. In addition, the deposit agreement
will automatically terminate if (i) all outstanding depositary shares
thereunder shall have been redeemed, (ii) there shall have been a final
distribution in respect of the related preferred stock in connection with any
liquidation, dissolution or winding-up of our company and such distribution
shall have been distributed to the holders of depositary receipts evidencing the
depositary shares representing such preferred stock or (iii) each share of
the related preferred stock shall have been converted into stock of our company
not so represented by depositary shares.
Charges
of Depositary
We will
pay all transfer and other taxes and governmental charges arising solely from
the existence of the depositary arrangements. We will pay charges of
the depositary in connection with the initial deposit of the preferred stock and
initial issuance of the depositary shares, and redemption of the preferred stock
and all withdrawals of preferred stock by owners of depositary
shares. Holders of depositary receipts will pay transfer, income and
other taxes and governmental charges and certain other charges as are provided
in the deposit agreement to be for their accounts. In certain
circumstances, the depositary may refuse to transfer depositary shares, may
withhold dividends and distributions and sell the depositary shares evidenced by
such depositary receipt if such charges are not paid.
Miscellaneous
The
depositary will forward to the holders of depositary receipts all reports and
communications from us which are delivered to the depositary and which we are
required to furnish to the holders of the preferred stock. In
addition, the depositary will make available for inspection by holders of
depositary receipts at the principal office of the depositary, and at such other
places as it may from time to time deem advisable, any reports and
communications received from us which are received by the depositary as the
holder of preferred stock.
Neither
the depositary nor our company assumes any obligation or will be subject to any
liability under the deposit agreement to holders of depositary receipts other
than for its negligence or willful misconduct. Neither the depositary
nor our company will be liable if it is prevented or delayed by law or any
circumstance beyond its control in performing its obligations under the deposit
agreement. The obligations of our company and the depositary under
the deposit agreement will be limited to performance in good faith of their
duties thereunder, and they will not be obligated to prosecute or defend any
legal proceeding in respect of any depositary shares or preferred stock unless
satisfactory indemnity is furnished. Our company and the depositary
may rely on written advice of counsel or accountants, on information provided by
holders of the depositary receipts or other persons believed in good faith to be
competent to give such information and on documents believed to be genuine and
to have been signed or presented by the proper party or parties.
In the
event the depositary shall receive conflicting claims, requests or instructions
from any holders of depositary receipts, on the one hand, and our company, on
the other hand, the depositary shall be entitled to act on such claims, requests
or instructions received from our company.
Resignation
and Removal of Depositary
The
depositary may resign at any time by delivering to us notice of its election to
do so, and we may at any time remove the depositary, any such resignation or
removal to take effect upon the appointment of a successor depositary and its
acceptance of such appointment. Such successor depositary must be
appointed within 60 days after delivery of the notice for resignation or
removal and must be a bank or trust company having its principal office in the
United States of America and having a combined capital and surplus of at least
$150,000,000.
U.S. Federal
Income Tax Consequences
Owners of
depositary shares will be treated for U.S. federal income tax purposes as
if they were owners of the preferred stock represented by such depositary
shares. Accordingly, such owners will be entitled to take into
account, for U.S. federal income tax purposes, income and deductions to
which they would be entitled if they were holders of such preferred
stock. In addition, (i) no gain or loss will be recognized for
U.S. federal income tax purposes upon the withdrawal of preferred stock by
an owner of depositary shares, (ii) the tax basis of each share of
preferred stock to a withdrawing owner of depositary shares will, upon such
withdrawal, be the same as the aggregate tax basis of the depositary shares in
respect thereof, and (iii) the holding period for preferred stock in the
hands of a withdrawing owner of depositary shares will include the period during
which such person owned such depositary shares.
DESCRIPTION
OF WARRANTS
We may
issue warrants for the purchase of common stock, preferred stock or depositary
shares and may issue warrants independently or together with common stock,
preferred stock, depositary shares or attached to or separate from such
securities. We will issue each series of warrants under a separate
warrant agreement between us and a bank or trust company as warrant agent, as
specified in the applicable prospectus supplement.
The
warrant agent will act solely as our agent in connection with the warrants and
will not act for or on behalf of warrant holders. The following sets
forth certain general terms and provisions of the warrants that may be offered
under this registration statement. 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
type and number of securities purchasable upon exercise of such
warrants;
|
|
·
|
the
designation and terms of the other securities, if any, with which such
warrants are issued and the number of such warrants issued with each such
offered security;
|
|
·
|
the
date, if any, on and after which such warrants and the related securities
will be separately transferable;
|
|
·
|
the
price at which each security 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 that may be exercised at any
one time;
|
|
·
|
information
with respect to book-entry procedures, if
any;
|
|
·
|
any
anti-dilution protection;
|
|
·
|
a
discussion of certain U.S. federal income tax
considerations; and
|
|
·
|
any
other terms of such warrants, including terms, procedures and limitations
relating to the transferability, exercise and exchange of such
warrants.
|
Warrant
certificates will be exchangeable for new warrant certificates of different
denominations and warrants may be exercised at the corporate trust office of the
warrant agent or any other office indicated in the applicable prospectus
supplement. Prior to the exercise of their warrants, holders of
warrants will not have any of the rights of holders of the securities
purchasable upon such exercise or to any dividend payments or voting rights as
to which holders of the shares of common stock or preferred stock purchasable
upon such exercise may be entitled.
Each
warrant will entitle the holder to purchase for cash such number of shares of
common stock or preferred stock, at such exercise price as shall, in each case,
be set forth in, or be determinable as set forth in, the applicable prospectus
supplement relating to the warrants offered thereby. Unless otherwise
specified in the applicable prospectus supplement, warrants may be exercised at
any time up to 5:00 p.m. New York City time on the expiration date set
forth in applicable prospectus supplement. After 5:00 p.m. New
York City time on the expiration date, unexercised warrants will be
void.
Warrants
may be exercised as set forth in the applicable prospectus supplement relating
to the warrants. Upon receipt of payment and the warrant certificate
properly completed and duly executed at the corporate trust office of the
warrant agent or any other office indicated in the applicable prospectus
supplement, we will, as soon as practicable, forward the securities purchasable
upon such exercise. If less than all of the warrants are presented by
such warrant certificate of exercise, a new warrant certificate will be issued
for the remaining amount of warrants.
DESCRIPTION
OF RIGHTS
We may
issue rights to our stockholders for the purchase of shares of common
stock. Each series of rights will be issued under a separate rights
agreement to be entered into between us and a bank or trust company, as rights
agent, all as set forth in the prospectus supplement relating to the particular
issue of rights. The rights agent will act solely as our agent in
connection with the certificates relating to the rights of such series and will
not assume any obligation or relationship of agency or trust for or with any
holders of rights certificates or beneficial owners of rights. The
rights agreement and the rights certificates relating to each series of rights
will be filed with the SEC and incorporated by reference as an exhibit to the
Registration Statement of which this prospectus is a part.
The
applicable prospectus supplement will describe the terms of the rights to be
issued, including the following, where applicable:
|
·
|
the
date for determining the stockholders entitled to the rights
distribution;
|
|
·
|
the
aggregate number of shares of common stock purchasable upon exercise of
such rights and the exercise price;
|
|
·
|
the
aggregate number of rights being
issued;
|
|
·
|
the
date, if any, on and after which such rights may be transferable
separately;
|
|
·
|
the
date on which the right to exercise such rights shall commence and the
date on which such right shall
expire;
|
|
·
|
any
special U.S. federal income tax
consequences; and
|
|
·
|
any
other terms of such rights, including terms, procedures and limitations
relating to the distribution, exchange and exercise of such
rights.
|
CERTAIN
PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER AND BYLAWS
The
following summary of certain provisions of Maryland law and of our charter and
bylaws does not purport to be complete and is subject to and qualified in its
entirety by reference to Maryland law and our charter and bylaws, copies of
which are exhibits to the registration statement of which this prospectus is a
part. See “Where You Can Find More Information.”
Our
Board of Directors
Our
charter and bylaws provide that the number of directors of our company will not
be less than the minimum number permitted under the Maryland General
Corporations Law, or the MGCL, and, unless our bylaws are amended, not more than
15 and may be increased or decreased pursuant to our bylaws by a vote of the
majority of our entire board of directors. Subject to the rights of
holders of one or more classes or series of preferred stock, any vacancy may be
filled, at any regular meeting or at any special meeting called for that
purpose, only by a majority of the remaining directors, even if the remaining
directors do not constitute a quorum, and any director elected to fill a vacancy
shall serve for the full term of the directorship in which such vacancy occurred
and until a successor is elected and qualifies.
Pursuant
to our charter and bylaws, each of our directors is elected by our common
stockholders entitled to vote to serve until the next annual meeting and until
his/her successor is duly elected and qualifies. Holders of shares of
our common stock will have no right to cumulative voting in the election of
directors. Consequently, at each annual meeting of stockholders, the
holders of a majority of the shares of our common stock entitled to vote will be
able to elect all of our directors.
Removal
of Directors
Our
charter provides that a director may be removed only for cause (as defined in
our charter) and only by the affirmative vote of at least two-thirds of the
votes of common stockholders entitled to be cast generally in the election of
directors. This provision, when coupled with the exclusive power of
our board of directors to fill vacant directorships, may preclude stockholders
from removing incumbent directors and filling the vacancies created by such
removal with their own nominees.
Business
Combinations
Under the
MGCL, certain “business combinations” (including a merger, consolidation, share
exchange or, in certain circumstances, an asset transfer or issuance or
reclassification of equity securities) between a Maryland corporation and an
interested stockholder (i.e., any person who
beneficially owns 10% or more of the voting power of the corporation’s shares or
an affiliate or associate of the corporation who, at any time within the
two-year period prior to the date in question, was the beneficial owner of 10%
or more of the voting power of the then outstanding voting stock of the
corporation, or an affiliate of such an interested stockholder) are prohibited
for five years after the most recent date on which the interested stockholder
becomes an interested stockholder. Thereafter, any such business
combination must be recommended by the board of directors of such corporation
and approved by the affirmative vote of at least (1) 80% of the votes
entitled to be cast by holders of outstanding shares of voting stock of the
corporation and (2) two-thirds of the votes entitled to be cast by holders
of voting stock of the corporation other than shares held by the interested
stockholder with whom (or with whose affiliate) the business combination is to
be effected or held by an affiliate or associate of the interested stockholder,
unless, among other conditions, the corporation’s common stockholders receive a
minimum price (as defined in the MGCL) for their shares and the consideration is
received in cash or in the same form as previously paid by the interested
stockholder for its shares. A person is not an interested stockholder
under the statute if the board of directors approved in advance the transaction
by which the person otherwise would have become an interested
stockholder. The board of directors may provide that its approval is
subject to compliance with any terms and conditions determined by
it.
These
provisions of the MGCL do not apply, however, to business combinations that are
approved or exempted by a board of directors prior to the time that the
interested stockholder becomes an interested stockholder. Pursuant to
the statute, our board of directors has by resolution exempted James W. Cogdell,
his affiliates and associates and all persons acting in concert with the
foregoing and Frank C. Spencer, his affiliates and associates and all persons
acting in concert with the foregoing, from these provisions of the MGCL and,
consequently, the five-year prohibition and the supermajority vote requirements
will not apply to business combinations between us and any person described
above. As a result, any person described above may be able to enter
into business combinations with us that may not be in the best interests of our
stockholders without compliance by our company with the supermajority vote
requirements and the other provisions of the statute.
Control
Share Acquisitions
The MGCL
provides that “control shares” of a Maryland corporation acquired in a “control
share acquisition” have no voting rights except to the extent approved at a
special meeting by the affirmative vote of two-thirds of the votes entitled to
be cast on the matter, excluding shares of stock in a corporation in respect of
which any of the following persons is entitled to exercise or direct the
exercise of the voting power of shares of stock of the corporation in the
election of directors: (1) a person who makes or proposes to make a control
share acquisition, (2) an officer of the corporation or (3) an
employee of the corporation who is also a director of the corporation. “Control
shares” are voting shares of stock which, if aggregated with all other such
shares of stock previously acquired by the acquirer or in respect of which the
acquirer is able to exercise or direct the exercise of voting power (except
solely by virtue of a revocable proxy), would entitle the acquirer to exercise
voting power in electing directors within one of the following ranges of voting
power: (1) one-tenth or more but less than one-third, (2) one-third or
more but less than a majority, or (3) a majority or more of all voting
power. Control shares do not include shares the acquiring person is
then entitled to vote as a result of having previously obtained stockholder
approval. A “control share acquisition” means the acquisition of
control shares, subject to certain exceptions.
A person
who has made or proposes to make a control share acquisition, upon satisfaction
of certain conditions (including an undertaking to pay expenses), may compel the
board of directors to call a special meeting of stockholders to be held within
50 days of demand to consider the voting rights of the
shares. If no request for a meeting is made, the corporation may
itself present the question at any stockholders meeting.
If voting
rights are not approved at the meeting or if the acquiring person does not
deliver an acquiring person statement as required by the statute, then, subject
to certain conditions and limitations, the corporation may redeem any or all of
the control shares (except those for which voting rights have previously been
approved) for fair value determined, without regard to the absence of voting
rights for the control shares, as of the date of the last control share
acquisition by the acquirer or of any meeting of stockholders at which the
voting rights of such shares are considered and not approved. If
voting rights for control shares are approved at a stockholders meeting and the
acquirer becomes entitled to vote a majority of the shares entitled to vote, all
other stockholders may exercise appraisal rights. The fair value of
the shares as determined for purposes of such appraisal rights may not be less
than the highest price per share paid by the acquirer in the control share
acquisition.
The
control share acquisition statute does not apply (1) to shares acquired in
a merger, consolidation or share exchange if the corporation is a party to the
transaction or (2) to acquisitions approved or exempted by the charter or
bylaws of the corporation.
Our
bylaws contain a provision exempting from (opting out of) the control share
acquisition statute any acquisition by any person of shares of our
stock. There can be no assurance that such provision will not be
amended or eliminated at any time in the future.
Subtitle 8
Subtitle 8
of Title 3 of the MGCL permits a Maryland corporation with a class of
equity securities registered under the Exchange Act and at least three
independent directors to elect to be subject, by provision in its charter or
bylaws or a resolution of its board of directors and notwithstanding any
contrary provision in the charter or bylaws, to any or all of five of the
following provisions:
|
·
|
a
two-thirds vote requirement for removing a
director;
|
|
·
|
a
requirement that the number of directors be fixed only by vote of the
directors;
|
|
·
|
a
requirement that a vacancy on the board be filled only by the remaining
directors and for the remainder of the full term of class of directors in
which the vacancy
occurred; and
|
|
·
|
a
majority requirement for the calling of a special meeting of
stockholders.
|
Pursuant
to Subtitle 8, we have elected to provide that vacancies on our board of
directors be filled only by the remaining directors and for the remainder of the
full term of the directorship in which the vacancy occurred. Through
provisions in our charter and bylaws unrelated to Subtitle 8, we already
(1) require the affirmative vote of the holders of not less than two-thirds
of all of the votes entitled to be cast on the matter for the removal of any
director from the board, which removal shall only be allowed for cause,
(2) vest in the board the exclusive power to fix the number of
directorships and (3) require, unless called by the Chairman of our board
of directors, our president, our chief executive officer or our board of
directors, the written request of the stockholders entitled to cast not less
than 35% of all votes entitled to be cast at such meeting to call a special
meeting. We have not elected to create a classified board; however,
our board may elect to do so in the future without stockholder
approval.
Charter
Amendments and Extraordinary Transactions
Under the
MGCL, a Maryland corporation generally cannot dissolve, amend its charter,
merge, sell all or substantially all of its assets, engage in a share exchange
or engage in similar transactions outside the ordinary course of business unless
approved by the affirmative vote of stockholders entitled to cast at least
two-thirds of the votes entitled to be cast on the matter unless a lesser
percentage (but not less than a majority of all of the votes entitled to be cast
on the matter) is set forth in the corporation’s charter. Our charter
generally provides that charter amendments requiring stockholder approval must
be declared advisable by our board of directors and approved by the affirmative
vote of stockholders entitled to cast a majority of all of the votes entitled to
be cast on the matter. However, our charter’s provisions regarding
removal of directors and stock ownership restrictions may be amended only if
such amendment is declared advisable by our board of directors and approved by
the affirmative vote of stockholders entitled to cast not less than two-thirds
of all the votes entitled to be cast on the matter. In addition, we
generally may not merge with or into another company, sell all or substantially
all of our assets, engage in a share exchange or engage in similar transactions
outside the ordinary course of business unless such transaction is declared
advisable by our board of directors and approved by the affirmative vote of
stockholders entitled to cast a majority of all of the votes entitled to be cast
on the matter. However, because operating assets may be held by a
corporation’s subsidiaries, as in our situation, this may mean that a subsidiary
of a corporation can transfer all of its assets without any vote of the
corporation’s stockholders.
Bylaw
Amendments
Our board
of directors has the exclusive power to adopt, alter or repeal any provision of
our bylaws and to make new bylaws.
Advance
Notice of Director Nominations and New Business
Our
bylaws provide that with respect to an annual meeting of stockholders,
nominations of individuals for election to our board of directors and the
proposal of business to be considered by stockholders may be made only
(1) pursuant to our notice of the meeting, (2) by or at the direction
of our board of directors or (3) by a stockholder who was a stockholder of
record both at the time of provision of the stockholders’ notice and at the time
of the meeting, is entitled to vote at the meeting and has complied with the
advance notice procedures set forth in our bylaws.
With
respect to special meetings of stockholders, only the business specified in our
notice of meeting may be brought before the meeting. Nominations of
individuals for election to our board of directors may be made at a special
meeting of stockholders at which directors are to be elected only
(1) pursuant to our notice of the meeting, (2) by or at the direction
of our board of directors or (3) provided that our board of directors has
determined that directors shall be elected at such meeting, by a stockholder who
was a stockholder of record both at the time of provision of the stockholders’
notice and at the time of the meeting, is entitled to vote at the meeting and
has complied with the advance notice provisions set forth in our
bylaws.
Anti-Takeover
Effect of Certain Provisions of Maryland Law and of our Charter and
Bylaws
Our
charter and bylaws and Maryland law contain provisions that may delay, defer or
prevent a change of control or other transaction that might involve a premium
price for our common stock or otherwise be in the best interests of our
stockholders, including business combination provisions, supermajority vote and
cause requirements for removal of directors, the power of our board to issue
additional shares of capital stock, ability of our board to create a classified
board, the restrictions on ownership and transfer of our shares of capital stock
and advance notice requirements for director nominations and stockholder
proposals. Likewise, if the provision in the bylaws opting out of the
control share acquisition provisions of the MGCL were rescinded, these
provisions of the MGCL could have similar anti-takeover effects.
Indemnification
and Limitation of Directors’ and Officers’ Liability
Our
charter and bylaws and the partnership agreement of our operating partnership
provide for indemnification of our officers and directors against liabilities to
the fullest extent permitted by the MGCL, as amended from time to time, and
Delaware law, as applicable.
The MGCL
permits a Maryland corporation to include in its charter a provision limiting
the liability of its directors and officers to the corporation and its
stockholders for money damages except for liability resulting from
(1) actual receipt of an improper benefit or profit in money, property or
services or (2) active and deliberate dishonesty established by a final
judgment as being material to the cause of action. Our charter
contains such a provision which eliminates such liability to the maximum extent
permitted by Maryland law.
Our
charter authorizes us and our bylaws obligate us, to the maximum extent
permitted by Maryland law in effect from time to time, to indemnify and, without
requiring a preliminary determination of the ultimate entitlement to
indemnification, pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to:
|
·
|
any
present or former director or officer who is made, or threatened to be
made, a party to the proceeding by reason of his or her service in that
capacity; or
|
|
·
|
any
individual who, while a director or officer of our company and at our
request, serves or has served another corporation, real estate investment
trust, partnership, joint venture, trust, employee benefit plan or any
other enterprise as a director, officer, partner or trustee of such
corporation, real estate investment trust, partnership, joint venture,
trust, employee benefit plan or other enterprise and who is made, or
threatened to be made, a party to the proceeding by reason of his or her
service in that capacity.
|
Our
charter and bylaws also permit us to indemnify and advance expenses to any
person who served our predecessor in any of the capacities described above and
to any employee or agent of our company or our predecessor.
The MGCL
requires a corporation (unless its charter provides otherwise, which our
company’s charter does not) to indemnify a director or officer who has been
successful, on the merits or otherwise, in the defense of any proceeding to
which he or she is made, or threatened to be made, a party by reason of his or
her service in that capacity. The MGCL permits a corporation to
indemnify its present and former directors and officers, among others, against
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by them in connection with any proceeding to which they may be made, or
threatened to be made, a party by reason of their service in those or other
capacities unless it is established that:
|
·
|
the
act or omission of the director or officer was material to the matter
giving rise to the proceeding and (a) was committed in bad
faith; or (b) was the result of active and deliberate
dishonesty;
|
|
·
|
the
director or officer actually received an improper personal benefit in
money, property or
services; or
|
|
·
|
in
the case of any criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was
unlawful.
|
However,
under the MGCL, a Maryland corporation may not indemnify for an adverse judgment
in a suit by or in the right of the corporation or for a judgment of liability
on the basis that personal benefit was improperly received, unless in either
case a court orders indemnification and then only for expenses. In
addition, the MGCL permits us to advance reasonable expenses to a director or
officer upon our receipt of:
|
·
|
a
written affirmation by the director or officer of his or her good faith
belief that he or she has met the standard of conduct necessary for
indemnification by the
corporation; and
|
|
·
|
a
written undertaking by the director or officer or on the director’s or
officer’s behalf to repay the amount paid or reimbursed by the corporation
if it is ultimately determined that the director or officer did not meet
the standard of conduct.
|
The
partnership agreement provides that our wholly owned business trust subsidiary,
the general partner, and our and its officers and directors are indemnified to
the fullest extent permitted by applicable law. See “Cogdell Spencer
LP Partnership Agreement — Management Liability and
Indemnification.”
Insofar
as the foregoing provisions permit indemnification of directors, officers or
persons controlling us for liability arising under the Securities Act, we have
been informed that in the opinion of the SEC, this indemnification is against
public policy as expressed in the Securities Act and is therefore
unenforceable.
REIT
Qualification
Our
charter provides that our board of directors may revoke or otherwise terminate
our REIT election, without approval of our stockholders, if it determines that
it is no longer in our best interests to attempt to qualify, or to continue to
qualify, as a REIT.
COGDELL
SPENCER LP PARTNERSHIP AGREEMENT
The
following is a summary of the material terms of the partnership agreement, a
copy of which is filed as an exhibit to the registration statement of which this
prospectus is a part. See “Where You Can Find More Information.” For
the purposes of this section, references to the “general partner” refer to CS
Business Trust I, our wholly owned Maryland business trust
subsidiary.
General
Management
Our
operating partnership is a Delaware limited partnership that was formed on
July 18, 2005. Our wholly owned business trust subsidiary is the
sole general partner of our operating partnership. Pursuant to the
partnership agreement, through the sole general partner of our operating
partnership, we have, subject to certain protective rights of limited partners
described below, full, exclusive and complete responsibility and discretion in
the management and control of our operating partnership, including the ability
to cause the partnership to enter into certain major transactions including a
merger of our operating partnership or a sale of substantially all of the assets
of our operating partnership. The limited partners have no power to
remove the general partner without the general partner’s consent.
Our
company is under no obligation to give priority to the separate interests of the
limited partners or our stockholders in deciding whether to cause our operating
partnership to take or decline to take any actions. If there is a
conflict between the interests of our stockholders on one hand and the limited
partners on the other, we will endeavor in good faith to resolve the conflict in
a manner not adverse to either our stockholders or the limited
partners. We are not liable under the partnership agreement to our
operating partnership or to any partner for monetary damages for losses
sustained, liabilities incurred, or benefits not derived by limited partners in
connection with such decisions, provided that we have acted in good
faith.
All of
our business activities, including all activities pertaining to the acquisition
and operation of properties, must be conducted through our operating
partnership, and our operating partnership must be operated in a manner that
will enable us to satisfy the requirements for qualification as a
REIT.
Management
Liability and Indemnification
Neither
we nor the general partner of our operating partnership, nor our directors and
officers or its trustees and officers are liable to our operating partnership
for losses sustained, liabilities incurred or benefits not derived as a result
of errors in judgment or mistakes of fact or law or of any act or omission, so
long as such person acted in good faith. The partnership agreement
provides for indemnification of us, our affiliates and each of our respective
trustees, officers, directors, employees and any persons we may designate from
time to time in our sole and absolute discretion to the fullest extent permitted
by applicable law against any and all losses, claims, damages, liabilities
(whether joint or several), expenses (including, without limitation, attorneys’
fees and other legal fees and expenses), judgments, fines, settlements and other
amounts arising from any and all claims, demands, actions, suits or proceedings,
civil, criminal, administrative or investigative, that relate to the operations
of our operating partnership, provided that our operating partnership will not
indemnify such person, for (1) willful misconduct or a knowing violation of
the law, (2) any transaction for which such person received an improper
personal benefit in violation or breach of any provision of the partnership
agreement, or (3) in the case of a criminal proceeding, the person had
reasonable cause to believe the act or omission was unlawful, as set forth in
the partnership agreement (subject to the exceptions described below under
“— Fiduciary Responsibilities”).
Fiduciary
Responsibilities
Our
directors and officers have duties under applicable Maryland law to manage us in
a manner consistent with the best interests of our stockholders. At
the same time, the general partner of our operating partnership has fiduciary
duties to manage our operating partnership in a manner beneficial to our
operating partnership and its partners. Our duties, through the
general partner, to our operating partnership and its limited partners,
therefore, may come into conflict with the duties of our directors and officers
to our stockholders. We will be under no obligation to give priority
to the separate interests of the limited partners of our operating partnership
or our stockholders in deciding whether to cause our operating partnership to
take or decline to take any actions.
The limited partners of our operating
partnership expressly acknowledged that through our wholly owned Maryland
business trust, which is the general partner of our operating partnership, we
are acting for the benefit of our operating partnership, the limited partners
and our stockholders collectively.
Distributions
The
partnership agreement provides that holders of OP units and LTIP units are
entitled to receive quarterly distributions of available cash (1) first,
with respect to any OP units and LTIP units that are entitled to any preference
in accordance with the rights of such OP unit or LTIP unit (and, within such
class, pro rata according to their respective percentage interests) and
(2) second, with respect to any OP units and LTIP units that are not
entitled to any preference in distribution, in accordance with the rights of
such class of OP unit or LTIP units (and, within such class, pro rata in
accordance with their respective percentage interests).
Allocations
of Net Income and Net Loss
Net
income and net loss of our operating partnership are determined and allocated
with respect to each fiscal year of our operating partnership as of the end of
the year. Except as otherwise provided in the partnership agreement,
an allocation of a share of net income or net loss is treated as an allocation
of the same share of each item of income, gain, loss or deduction that is taken
into account in computing net income or net loss. Except as otherwise
provided in the partnership agreement, net income and net loss are allocated to
the holders of OP units or LTIP units holding the same class of OP units or LTIP
units in accordance with their respective percentage interests in the class at
the end of each fiscal year. In particular, upon the occurrence of
certain specified events, our operating partnership will revalue its assets and
any net increase in valuation will be allocated first to the holders of LTIP
units to equalize the capital accounts of such holders with the capital accounts
of OP unit or LTIP units holders. The partnership agreement contains
provisions for special allocations intended to comply with certain regulatory
requirements, including the requirements of Treasury Regulations
Sections 1.704-1(b) and 1.704-2. Except as otherwise provided in
the partnership agreement, for U.S. federal income tax purposes under the
Code and the Treasury Regulations, each operating partnership item of income,
gain, loss and deduction is allocated among the limited partners of our
operating partnership in the same manner as its correlative item of book income,
gain, loss or deduction is allocated pursuant to the partnership
agreement. In addition, under Section 704(c) of the Code, items
of income, gain, loss and deduction with respect to appreciated or depreciated
property which is contributed to a partnership, such as our operating
partnership, in a tax-free transaction must be specially allocated among the
partners in such a manner so as to take into account such variation between tax
basis and fair market value. Our operating partnership will allocate
tax items to the holders of OP units or LTIP units taking into consideration the
requirements of Section 704(c). See “U.S. Federal Income
Tax Considerations — Tax Aspects of Investments in Partnerships — Tax
Allocations with Respect to Partnership Properties.”
Redemption Rights
After the
first anniversary of becoming a holder of OP units (including any LTIP units
that are converted into OP units), each limited partner of our operating
partnership, other than CS Business Trust II, will have the right, subject
to the terms and conditions set forth in the partnership agreement, to require
our operating partnership to redeem all or a portion of the OP units held by
such limited partner in exchange for a cash amount equal to the number of
tendered OP units multiplied by the price of a share of our common stock, unless
the terms of such OP units or a separate agreement entered into between our
operating partnership and the holder of such OP units provide that they are not
entitled to a right of redemption. On or before the close of business
on the fifth business day after we receive a notice of redemption, we may, in
our sole and absolute discretion, but subject to the restrictions on the
ownership of our common stock imposed under our charter and the transfer
restrictions and other limitations thereof, elect to acquire some or all of the
tendered OP units from the tendering partner in exchange for shares of our
common stock, based on an exchange ratio of one share of our common stock for
each OP unit (subject to antidilution adjustments provided in the partnership
agreement). It is our current intention to exercise this right in
connection with any redemption of OP units.
Transferability
of OP Units; Extraordinary Transactions
The
general partner of our operating partnership will not be able to voluntarily
withdraw from our operating partnership or transfer or assign its interest in
our operating partnership, including our limited partner interest without the
consent of limited partners holding more than 50% of the partnership interests
of the limited partners (other than those held by us or our subsidiaries),
unless the transfer is made in connection with any merger or sale of all or
substantially all of the assets or stock of our company. In addition,
subject to certain limited exceptions, the general partner will not engage in
any merger, consolidation or other combination, or sale of substantially all of
our assets, in a transaction which results in a change of control of our
operating partnership unless:
|
·
|
we
receive the consent of limited partners holding more than 50% of the
partnership interests of the limited partners (other than those held by
our company or its
subsidiaries); or
|
|
·
|
as
a result of such transaction all limited partners will receive for each
partnership unit an amount of cash, securities or other property equal in
value to the greatest amount of cash, securities or other property paid in
the transaction to a holder of one share of our common stock, provided
that if, in connection with the transaction, a purchase, tender or
exchange offer shall have been made to and accepted by the holders of more
than 50% of the outstanding shares of our common stock, each holder of
partnership units shall be given the option to exchange its partnership
units for the greatest amount of cash, securities or other property that a
limited partner would have received had it (1) exercised its
redemption right (described above) and (2) sold, tendered or
exchanged pursuant to the offer, the shares of our common stock received
upon exercise of the redemption right immediately prior to the expiration
of the offer.
|
Our
operating partnership may also merge with or into or consolidate with another
entity without the consent of the limited partners if immediately after such
merger or consolidation (1) substantially all of the assets of the
successor or surviving entity, other than partnership units held by us, are
contributed, directly or indirectly, to the partnership as a capital
contribution in exchange for partnership units with a fair market value equal to
the value of the assets so contributed as determined by the survivor in good
faith and (2) the survivor expressly agrees to assume all of the general
partner’s obligations under the partnership agreement and the partnership
agreement shall be amended after any such merger or consolidation so as to
arrive at a new method of calculating the amounts payable upon exercise of the
redemption right that approximates the existing method for such calculation as
closely as reasonably possible.
We also
may (1) transfer all or any portion of our directly or indirectly held
general partnership interest to (A) a wholly owned subsidiary or (B) a
parent company, and following such transfer may withdraw as the general partner
and (2) engage in a transaction required by law or by the rules of any
national securities exchange on which our common stock is listed.
Pursuant
to the partnership agreement, upon the issuance of our stock other than in
connection with a redemption of OP units, we will generally be obligated to
contribute or cause to be contributed the cash proceeds or other consideration
received from the issuance to our operating partnership in exchange for, in the
case of common stock, OP units, or in the case of an issuance of preferred
stock, preferred OP units with designations, preferences and other rights, terms
and provisions that are substantially the same as the designations, preferences
and other rights, terms and provisions of the preferred stock.
Tax
Matters
Pursuant
to the partnership agreement, the general partner is the tax matters partner of
our operating partnership. Accordingly, through our role as the
parent of our wholly owned Maryland business trust, the general partner of our
operating partnership, we have the authority to handle tax audits and to make
tax elections under the Code, in each case, on behalf of our operating
partnership.
Term
The term
of our operating partnership commenced on July 18, 2005 and will continue
until December 31, 2104, unless earlier terminated in the following
circumstances:
|
·
|
a
final and nonappealable judgment is entered by a court of competent
jurisdiction ruling that the general partner is bankrupt or insolvent, or
a final and nonappealable order for relief is entered by a court with
appropriate jurisdiction against the general partner, in each case under
any federal or state bankruptcy or insolvency laws as now or hereafter in
effect, unless, prior to the entry of such order or judgment, a majority
in interest of the remaining outside limited partners agree in writing, in
their sole and absolute discretion, to continue the business of the
operating partnership and to the appointment, effective as of a date prior
to the date of such order or judgment, of a successor general
partner;
|
|
·
|
an
election to dissolve our operating partnership made by the general partner
in its sole and absolute discretion, with or without the consent of a
majority in interest of the outside limited
partners;
|
|
·
|
entry
of a decree of judicial dissolution of our operating partnership pursuant
to the provisions of the Delaware Revised Uniform Limited Partnership
Act;
|
|
·
|
the
occurrence of any sale or other disposition of all or substantially all of
the assets of our operating partnership or a related series of
transactions that, taken together, result in the sale or other disposition
of all or substantially all of the assets of our operating
partnership;
|
|
·
|
the
redemption (or acquisition by the general partner) of all OP units that
the general partner has authorized other than those held by the general
partner and CS Business
Trust II; or
|
|
·
|
the
incapacity or withdrawal of the general partner, unless all of the
remaining partners in their sole and absolute discretion agree in writing
to continue the business of the operating partnership and to the
appointment, effective as of a date prior to the date of such incapacity,
of a substitute general partner.
|
Amendments
to the Partnership Agreement
Amendments
to the partnership agreement may only be proposed by the general
partner. Generally, the partnership agreement may be amended with the
general partner’s approval and the approval of the limited partners holding a
majority of all outstanding limited partner units (excluding limited partner
units held by us or our subsidiaries). Certain amendments that would,
among other things, have the following effects, must be approved by each partner
adversely affected thereby:
|
·
|
convert
a limited partner’s interest into a general partner’s interest (except as
a result of the general partner acquiring such
interest); or
|
|
·
|
modify
the limited liability of a limited
partner.
|
Notwithstanding
the foregoing, we will have the power, without the consent of the limited
partners, to amend the partnership agreement as may be required to:
|
·
|
add
to our obligations or surrender any right or power granted to us or any of
our affiliates for the benefit of the limited
partners;
|
|
·
|
reflect
the admission, substitution, or withdrawal of partners or the termination
of our operating partnership in accordance with the partnership agreement
and to amend the list of OP unit and LTIP unit holders in connection
with such admission, substitution or
withdrawal;
|
|
·
|
reflect
a change that is of an inconsequential nature and does not adversely
affect the limited partners in any material respect, or to cure any
ambiguity, correct or supplement any provision in the partnership
agreement not inconsistent with law or with other provisions, or make
other changes with respect to matters arising under the partnership
agreement that will not be inconsistent with law or with the provisions of
the partnership agreement;
|
|
·
|
satisfy
any requirements, conditions, or guidelines contained in any order,
directive, opinion, ruling or regulation of a U.S. federal or state
agency or contained in U.S. federal or state
law;
|
|
·
|
set
forth and reflect in the partnership agreement the designations, rights,
powers, duties and preferences of the holders of any additional
partnership units issued pursuant to the partnership
agreement;
|
|
·
|
reflect
such changes as are reasonably necessary for us to maintain or restore our
qualification as a REIT or to satisfy the REIT requirements or to reflect
the transfer of all or any part of a partnership interest among us, the
general partner, CS Business Trust II and any qualified REIT
subsidiary;
|
|
·
|
to
modify the manner in which capital accounts are computed (but only to the
extent set forth in the partnership agreement by the Code or applicable
income tax regulations under the
Code); and
|
|
·
|
issue
additional partnership interests.
|
Certain
provisions affecting our rights and duties as general partner, either directly
or indirectly (e.g., restrictions
relating to certain extraordinary transactions involving us or the operating
partnership) may not be amended without the approval of a majority of the
limited partnership units (excluding limited partnership units held by
us).
U.S. FEDERAL
INCOME TAX CONSIDERATIONS
The
following is a summary of the material U.S. federal income tax consequences
relating to our qualification and taxation as a REIT and the acquisition,
holding, and disposition of our common stock. For purposes of this
section under the heading “U.S. Federal Income Tax Considerations,”
references to “the company,” “we,” “our” and “us” mean only Cogdell Spencer Inc.
and not its subsidiaries or other lower-tier entities or predecessor, except as
otherwise indicated. You are urged to both review the following
discussion and to consult your tax advisor to determine the effect of ownership
and disposition of our shares on your individual tax situation, including any
state, local or non-U.S. tax consequences.
This
summary is based upon the Code, the regulations promulgated by the
U.S. Treasury Department, or the Treasury Regulations, current
administrative interpretations and practices of the IRS (including
administrative interpretations and practices expressed in private letter rulings
which are binding on the IRS only with respect to the particular taxpayers who
requested and received those rulings) and judicial decisions, all as currently
in effect, and all of which are subject to differing interpretations or to
change, possibly with retroactive effect. No assurance can be given
that the IRS would not assert, or that a court would not sustain, a position
contrary to any of the tax consequences described below. No advance
ruling has been or will be sought from the IRS regarding any matter discussed in
this summary. This summary is also based upon the assumption that the
operation of the company, and of its subsidiaries and other lower-tier and
affiliated entities, will in each case be in accordance with its applicable
organizational documents or partnership agreements. This summary is
for general information only, and does not purport to discuss all aspects of
U.S. federal income taxation that may be important to a particular
stockholder in light of its investment or tax circumstances, or to stockholders
subject to special tax rules, such as:
|
·
|
persons
who mark-to-market our common
stock;
|
|
·
|
subchapter
S corporations;
|
|
·
|
U.S. stockholders
(as defined below) whose functional currency is not the
U.S. dollar;
|
|
·
|
financial
institutions;
|
|
·
|
regulated
investment companies;
|
|
·
|
holders
who receive our common stock through the exercise of employee stock
options or otherwise as
compensation;
|
|
·
|
persons
holding our common stock as part of a “straddle,” “hedge,” “conversion
transaction,” “synthetic security” or other integrated
investment;
|
|
·
|
persons
subject to the alternative minimum tax provisions of the
Code;
|
|
·
|
persons
holding their interest through a partnership or similar pass-through
entity;
|
|
·
|
persons
holding a 10% or more (by vote or value) beneficial interest in
us;
|
and, except to the extent discussed
below:
|
·
|
tax-exempt
organizations; and
|
|
·
|
non-U.S. stockholders
(as defined below).
|
This
summary assumes that stockholders will hold our common stock as capital assets,
which generally means as property held for investment.
THE
U.S. FEDERAL INCOME TAX TREATMENT OF HOLDERS OF OUR COMMON STOCK DEPENDS IN
SOME INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF COMPLEX
PROVISIONS OF U.S. FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR
AUTHORITY MAY BE AVAILABLE. IN ADDITION, THE TAX CONSEQUENCES OF
HOLDING OUR COMMON STOCK TO ANY PARTICULAR STOCKHOLDER WILL DEPEND ON THE
STOCKHOLDER’S PARTICULAR TAX CIRCUMSTANCES. YOU ARE URGED TO CONSULT
YOUR TAX ADVISOR REGARDING THE U.S. FEDERAL, STATE, LOCAL, AND FOREIGN
INCOME AND OTHER TAX CONSEQUENCES TO YOU, IN LIGHT OF YOUR PARTICULAR INVESTMENT
OR TAX CIRCUMSTANCES, OF ACQUIRING, HOLDING, AND DISPOSING OF OUR COMMON
STOCK.
Taxation
of the Company
We
elected to be taxed as a REIT under the Code, commencing with our taxable year
ended December 31, 2005. We believe that we are organized and
will operate in a manner that will allow us to qualify for taxation as a REIT
under the Code commencing with our taxable year ended December 31, 2005,
and we intend to continue to be organized and to operate in such a
manner.
The law
firm of Clifford Chance US LLP has acted as our counsel in connection with the
offering. We have received the opinion of Clifford Chance US LLP to
the effect that, commencing with our taxable year ended December 31, 2005,
we have been organized and operated in conformity with the requirements for
qualification and taxation as a REIT under the Code, and our proposed method of
operation will enable us to continue to meet the requirements for qualification
and taxation as a REIT under the Code. It must be emphasized that the
opinion of Clifford Chance US LLP is based on various assumptions relating to
our organization and operation, including that all factual representations and
statements set forth in all relevant documents, records and instruments are true
and correct, all actions described in this prospectus are completed in a timely
fashion and that we will at all times operate in accordance with the method of
operation described in our organizational documents and this prospectus, and is
conditioned upon factual representations and covenants made by our management
and affiliated entities regarding our organization, assets, and present and
future conduct of our business operations, and assumes that such representations
and covenants are accurate and complete and that we will take no action
inconsistent with our qualification as a REIT. While we believe that
we are organized and intend to operate so that we will qualify as a REIT, given
the highly complex nature of the rules governing REITs, the ongoing importance
of factual determinations, and the possibility of future changes in our
circumstances, no assurance can be given by Clifford Chance US LLP or us that we
will so qualify for any particular year. Clifford Chance US LLP will
have no obligation to advise us or the holders of our common stock of any
subsequent change in the matters stated, represented or assumed, or of any
subsequent change in the applicable law. You should be aware that
opinions of counsel are not binding on the IRS, and no assurance can be given
that the IRS will not challenge the conclusions set forth in such
opinions.
Qualification
and taxation as a REIT depends on our ability to meet, on a continuing basis,
through actual operating results, distribution levels, and diversity of stock
ownership, various qualification requirements imposed upon REITs by the Code,
the compliance with which will not be reviewed by Clifford Chance US
LLP. Our ability to qualify as a REIT also requires that we satisfy
certain asset tests, some of which depend upon the fair market values of assets
directly or indirectly owned by us. Such values may not be
susceptible to a precise determination. Accordingly, no assurance can
be given that the actual results of our operations for any taxable year will
satisfy such requirements for qualification and taxation as a REIT.
Taxation
of REITs in General
As
indicated above, our qualification and taxation as a REIT depend upon our
ability to meet, on a continuing basis, various qualification requirements
imposed upon REITs by the Code. The material qualification
requirements are summarized below under “— Requirements for
Qualification — General.” While we intend to operate so that we qualify as
a REIT, no assurance can be given that the IRS will not challenge our
qualification as a REIT, or that we will be able to operate in accordance with
the REIT requirements in the future. See “— Failure to
Qualify.”
Provided
that we qualify as a REIT, we will generally be entitled to a deduction for
dividends that we pay and therefore will not be subject to U.S. federal
corporate income tax on our net income that is currently distributed to our
stockholders. This treatment substantially eliminates the “double
taxation” at the corporate and stockholder levels that generally results from
investment in a corporation. Rather, income generated by a REIT
generally is taxed only at the stockholder level upon a distribution of
dividends by the REIT.
For tax
years through 2010, stockholders who are individual U.S. stockholders (as
defined below) are generally taxed on corporate dividends at a maximum rate of
15% (the same as capital gains), thereby substantially reducing, though not
completely eliminating, the double taxation that has historically applied to
corporate dividends. With limited exceptions, however, dividends
received by individual U.S. stockholders from us or from other entities
that are taxed as REITs will continue to be taxed at rates applicable to
ordinary income, which will be as high as 35% through 2010.
Net
operating losses, foreign tax credits and other tax attributes of a REIT
generally do not pass through to the stockholders of the REIT, subject to
special rules for certain items such as capital gains recognized by
REITs. See “— Taxation of Stockholders.”
If we
qualify as a REIT, we will nonetheless be subject to U.S. federal tax in
the following circumstances:
|
·
|
We
will be taxed at regular corporate rates on any undistributed income,
including undistributed net capital
gains.
|
|
·
|
We
may be subject to the “alternative minimum tax” on our items of tax
preference, if any.
|
|
·
|
If
we have net income from prohibited transactions, which are, in general,
sales or other dispositions of property held primarily for sale to
customers in the ordinary course of business, other than foreclosure
property, such income will be subject to a 100% tax. See
“— Prohibited Transactions,” and “— Foreclosure Property,”
below.
|
|
·
|
If
we elect to treat property that we acquire in connection with a
foreclosure of a mortgage loan or leasehold as “foreclosure property,” we
may thereby avoid (1) the 100% tax on gain from a resale of that
property (if the sale would otherwise constitute a prohibited
transaction), and (2) the inclusion of any income from such property
not qualifying for purposes of the REIT gross income tests discussed
below, but the income from the sale or operation of the property may be
subject to corporate income tax at the highest applicable rate (currently
35%).
|
|
·
|
If
we fail to satisfy the 75% gross income test or the 95% gross income test,
as discussed below, but nonetheless maintain our qualification as a REIT
because other requirements are met, we will be subject to a 100% tax on an
amount equal to (1) the greater of (A) the amount by which we
fail the 75% gross income test or (B) the amount by which we fail the
95% gross income test, as the case may be, multiplied by (2) a
fraction intended to reflect our
profitability.
|
|
·
|
If
we fail to satisfy any of the REIT asset tests, as described below, by
larger than a de
minimis amount, but our failure is due to reasonable cause and not
due to willful negligence and we nonetheless maintain our REIT
qualification because of specified cure provisions, we will be required to
pay a tax equal to the greater of $50,000 or 35% of the net income
generated by the nonqualifying assets during the period in which we failed
to satisfy the asset tests.
|
|
|
If
we fail to satisfy any provision of the Code that would result in our
failure to qualify as a REIT (other than a gross income or asset test
requirement) and that violation is due to reasonable cause and not due to
willful negligence, we may retain our REIT qualification, but we will be
required to pay a penalty of $50,000 for each such
failure.
|
|
·
|
If
we fail to distribute during each calendar year at least the sum of
(1) 85% of our REIT ordinary income for such year, (2) 95% of
our REIT capital gain net income for such year and (3) any
undistributed taxable income from prior periods, or the “required
distribution,” we will be subject to a 4% excise tax on the excess of the
required distribution over the sum of (A) the amounts actually
distributed (taking into account excess distributions from prior years),
plus (B) retained amounts on which U.S. federal income tax is
paid at the corporate level.
|
|
·
|
We
may be required to pay monetary penalties to the IRS in certain
circumstances, including if we fail to meet record-keeping requirements
intended to monitor our compliance with rules relating to the composition
of our stockholders, as described below in “— Requirements for
Qualification — General.”
|
|
·
|
A
100% excise tax may be imposed on some items of income and expense that
are directly or constructively paid between us, our tenants and/or our
taxable REIT subsidiaries (“TRSs”) if and to the extent that the IRS
successfully adjusts the reported amounts of these
items.
|
|
·
|
If
we acquire appreciated assets from a C corporation (i.e., a corporation
taxable under subchapter C of the Code) in a transaction in which the
adjusted tax basis of the assets in our hands is determined by reference
to the adjusted tax basis of the assets in the hands of the C corporation,
we may be subject to tax on such appreciation at the highest corporate
income tax rate then applicable if we subsequently recognize gain on a
disposition of such assets during the ten-year period following their
acquisition from the C corporation. The results described in
this paragraph assume that the non-REIT corporation will not elect in lieu
of this treatment to be subject to an immediate tax when the asset is
acquired by us.
|
|
·
|
We
may elect to retain and pay income tax on our net long-term capital
gain. In that case, a stockholder would include its
proportionate share of our undistributed long-term capital gain (to the
extent we make a timely designation of such gain to the stockholder) in
its income, would be deemed to have paid the tax that we paid on such
gain, and would be allowed a credit for its proportionate share of the tax
deemed to have been paid, and an adjustment would be made to increase the
stockholders’ basis in our common
stock.
|
|
·
|
We
may have subsidiaries or own interests in other lower-tier entities that
are C corporations, including our TRSs, the earnings of which would be
subject to U.S. federal corporate income
tax.
|
In
addition, we and our subsidiaries may be subject to a variety of taxes other
than U.S. federal income tax, including payroll taxes and state, local, and
foreign income, franchise property and other taxes on assets and
operations. We could also be subject to tax in situations and on
transactions not presently contemplated.
Requirements
for Qualification — General
The Code
defines a REIT as a corporation, trust or association:
(1) that
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) that
would be taxable as a domestic corporation but for the special Code provisions
applicable to REITs;
(4) that
is neither a financial institution nor an insurance company subject to specific
provisions of the Code;
(5) the
beneficial ownership of which is held by 100 or more persons;
(6) in
which, during the last half of each taxable year, not more than 50% in value of
the outstanding stock is owned, directly or indirectly, applying attribution
rules of the Code by five or fewer “individuals” (as defined in the Code to
include specified entities);
(7) which
meets other tests described below, including with respect to the nature of its
income and assets and the amount of its distributions; and
(8) that
makes an election to be a REIT for the current taxable year or has made such an
election for a previous taxable year that has not been terminated or
revoked.
The Code
provides that conditions (1) through (4) must be met during the entire
taxable year, and 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 shorter taxable year. Conditions (5) and (6) do
not need to be satisfied for the first taxable year for which an election to
become a REIT has been made. Our charter provides restrictions
regarding the ownership and transfer of our shares, which are intended to assist
us in satisfying the share ownership requirements described in conditions (5)
and (6) above. For purposes of condition (6), an “individual”
generally includes a supplemental unemployment compensation benefit plan, a
private foundation, or a portion of a trust permanently set aside or used
exclusively for charitable purposes, but does not include a qualified pension
plan or profit sharing trust.
To
monitor compliance with the share ownership requirements, we are required to
maintain records regarding the actual ownership of our shares. To do
so, we must demand written statements each year from the record holders of
certain percentages of our stock in which the record holders are to disclose the
actual owners of the shares (i.e., the persons required to
include in gross income the dividends paid by us). A list of those
persons failing or refusing to comply with this demand must be maintained as
part of our records. Failure by us to comply with these
record-keeping requirements could subject us to monetary
penalties. If we satisfy these requirements and have no reason to
know that condition (6) is not satisfied, we will be deemed to have
satisfied such condition. A stockholder that fails or refuses to
comply with the demand is required by Treasury Regulations to submit a statement
with its tax return disclosing the actual ownership of the shares and other
information.
To qualify as a REIT, we cannot have at
the end of any taxable year any undistributed earnings and profits that are
attributable to a non-REIT
taxable year. In addition, a corporation generally may not elect to become a
REIT unless its taxable year is the calendar year. We do not believe that we have any
non-REIT earnings and profits and our taxable year is the calendar year,
therefore we believe that we satisfy both these
requirements.
Effect
of Subsidiary Entities
Ownership of
Partnership Interests. In the case of a REIT that is a
partner in a partnership, Treasury Regulations provide that the REIT is deemed
to own its proportionate share of the partnership’s assets and to earn its
proportionate share of the partnership’s gross income based on its proportionate
share of capital interest in the partnership for purposes of the asset and gross
income tests applicable to REITs, as described below. However, for
purposes of the 10% value test only, the determination of a REIT’s interest in
partnership assets will be based on the REIT’s proportionate interest in any
securities issued by the partnership, excluding, for these purposes, certain
excluded securities as described in the Code. In addition, the assets
and gross income of the partnership generally are deemed to retain the same
character in the hands of the REIT. Thus, our proportionate share,
based upon our percentage capital interest, of the assets and items of income of
partnerships in which we own an equity interest (including our interest in our
operating partnership and its equity interests in lower-tier partnerships), is
treated as our assets and items of income for purposes of applying the REIT
requirements described below. Consequently, to the extent that we
directly or indirectly hold a preferred or other equity interest in a
partnership, the partnership’s assets and operations may affect our ability to
qualify as a REIT, even though we may have no control, or only limited
influence, over the partnership. A summary of certain rules governing
the U.S. federal income taxation of partnerships and their partners is
provided below in “— Tax Aspects of Investments in
Partnerships.”
Disregarded
Subsidiaries. If a REIT owns a corporate subsidiary that is a
“qualified REIT subsidiary,” that subsidiary is disregarded for
U.S. federal income tax purposes, and all assets, liabilities and items of
income, deduction and credit of the subsidiary are treated as assets,
liabilities and items of income, deduction and credit of the REIT, including for
purposes of the gross income and asset tests applicable to REITs as summarized
below. A qualified REIT subsidiary is any corporation, other than a
TRS (as described below), that is wholly owned by a REIT, or by other
disregarded subsidiaries, or by a combination of the two. Single
member limited liability companies that are wholly owned by a REIT are also
generally disregarded subsidiaries for U.S. federal income tax purposes,
including for purposes of the REIT gross income and asset
tests. Disregarded subsidiaries, along with partnerships in which we
hold an equity interest, are sometimes referred to herein as “pass-through
subsidiaries.”
In the
event that a disregarded subsidiary ceases to be wholly owned by us — for
example, if any equity interest in the subsidiary is acquired by a person other
than us or another disregarded subsidiary of us — the subsidiary’s separate
existence would no longer be disregarded for U.S. federal income tax
purposes. Instead, it would have multiple owners and would be treated
as either a partnership or a taxable corporation. Such an event
could, depending on the circumstances, adversely affect our ability to satisfy
the various asset and gross income tests applicable to REITs, including the
requirement that REITs generally may not own, directly or indirectly, more than
10% of the value or voting power of the outstanding securities of another
entity. See “— Asset Tests” and “— Gross Income
Tests.”
Taxable
Subsidiaries. A REIT, generally may jointly elect with a
subsidiary corporation, whether or not wholly owned, to treat the subsidiary
corporation as a TRS. The separate existence of a TRS or other
taxable corporation, unlike a disregarded subsidiary as discussed above, is not
ignored for U.S. federal income tax purposes. Accordingly, such
an entity would generally be subject to corporate U.S. federal, state,
local and income and franchise tax on its earnings, which may reduce the cash
flow generated by us and our subsidiaries in the aggregate, and our ability to
make distributions to our stockholders.
A REIT is
not treated as holding the assets of a TRS or other taxable subsidiary
corporation or as receiving any income that the subsidiary
earns. Rather, the stock issued by the subsidiary is an asset in the
hands of the REIT, and the REIT recognizes as income the dividends, if any, that
it receives from the subsidiary. This treatment can affect the gross
income and asset test calculations that apply to the REIT, as described
below. Because a REIT does not include the assets and income of such
subsidiary corporations in determining the REIT’s compliance with the REIT
requirements, such entities may be used by the parent REIT to undertake
indirectly activities that the REIT rules might otherwise preclude it from doing
directly or through pass-through subsidiaries (for example, activities that give
rise to certain categories of income such as management fees or foreign currency
gains).
Certain
restrictions imposed on TRSs are intended to ensure that such entities will be
subject to appropriate levels of U.S. federal income
taxation. First, if a TRS has a debt to equity ratio as of the close
of the taxable year exceeding 1.5 to 1, it may not deduct interest payments
made in any year to an affiliated REIT to the extent that such payments exceed,
generally, 50% of the TRS’s adjusted taxable income for that year (although the
TRS may carry forward to, and deduct in, a succeeding year the disallowed
interest amount if the 50% test is satisfied in that year). In
addition, if amounts are paid to a REIT or deducted by a TRS due to transactions
between a REIT, its tenants and/or a TRS, that exceed the amount that would be
paid to or deducted by a party in an arm’s-length transaction, the REIT
generally will be subject to an excise tax equal to 100% of such
excess.
Rents we
receive that include amounts for services furnished by a TRS to any of our
tenants will not be subject to the excise tax if such amounts qualify for the
safe harbor provisions contained in the Code. Safe harbor provisions
are provided where (1) amounts are excluded from the definition of
impermissible tenants service income as a result of satisfying a 1% de minimis exception;
(2) a TRS renders a significant amount of similar services to unrelated
parties and the charges for such services are substantially comparable;
(3) rents paid to us by tenants that are not receiving services from the
TRS are substantially comparable to the rents by our tenants leasing comparable
space that are receiving such services from the TRS and the charge for the
services is separately stated; or (4) the TRS’s gross income from the
service is not less than 150% of the TRS’s direct cost of furnishing the
service.
Our TRSs
will perform certain activities that we are not permitted to perform as a REIT,
including managing properties owned by third parties. We have jointly
elected with each of Cogdell Spencer TRS Holdings, LLC, Cogdell Spencer
Advisors, LLC, Consera Healthcare Real Estate, LLC, MEA Holdings, Inc., Erdman,
MEA1, Inc., Cogdell Spencer Management Company and Erdman Purchasing Group, LLC
to treat such entity as a TRS.
Gross Income
Tests
In order
to qualify as a REIT, we annually must satisfy two gross income
tests. First, at least 75% of our gross income for each taxable year,
excluding gross income from prohibited transactions and certain hedging and
foreign currency transactions, must be derived from investments relating to real
property or mortgages on real property, including “rents from real property,”
dividends received from other REITs, interest income derived from mortgage loans
secured by real property (including certain types of mortgage-backed
securities), and gains from the sale of real estate assets, as well as income
from certain kinds of temporary investments. Second, at least 95% of
our gross income in each taxable year, excluding gross income from prohibited
transactions and certain hedging and foreign currency transactions, must be
derived from sources of income that qualify under the 75% income test described
above, as well as other dividends, interest, and gain from the sale or
disposition of stock or securities, which need not have any relation to real
property.
Rents
received by us will qualify as “rents from real property” in satisfying the 75%
gross income test described above, only if several conditions are met, including
the following. The rent must not be based in whole or in part on the
income or profits of any person. However, an amount will not be
excluded from rents from real property solely by being based on a fixed
percentage or percentages of receipts or sales or if it is based on the net
income or profits of a tenant which derives substantially all of its income with
respect to such property from subleasing of substantially all of such property,
to the extent that the rents paid by the sublessees would qualify as rents from
real property, if earned directly by us. If rent is partly
attributable to personal property leased in connection with a lease of real
property, the portion of the total rent that is attributable to the personal
property will not qualify as rents from real property unless it constitutes 15%
or less of the total rent received under the lease. Moreover, for
rents received to qualify as rents from real property, we generally must not
operate or manage the property or furnish or render certain services to the
tenants of such property, other than through an “independent contractor” who is
adequately compensated and from which we derive no income, or through a TRS, as
discussed below. We are permitted, however, to perform services that
are “usually or customarily rendered” in connection with the rental of space for
occupancy only and are not otherwise considered rendered to the occupant of the
property. In addition, we may directly or indirectly provide
non-customary services to tenants of our properties if the gross income from
such services does not exceed 1% of the total gross income from the
property. In such a case, only the amounts for non-customary services
are not treated as rents from real property and the provision of the services
does not disqualify the rents from treatment as rents from real
property. For purposes of this test, the gross income received from
such non-customary services is deemed to be at least 150% of the direct cost of
providing the services. Moreover, we are permitted to provide
services to tenants through a TRS without disqualifying the rental income
received from tenants as rents from real property. Also, rental
income will qualify as rents from real property only to the extent that we do
not directly or indirectly (through application of certain constructive
ownership rules) own, (1) in the case of any tenant which is a corporation,
stock possessing 10% or more of the total combined voting power of all classes
of stock entitled to vote, or 10% or more of the total value of shares of all
classes of stock of such tenant, or (2) in the case of any tenant which is
not a corporation, an interest of 10% or more in the assets or net profits of
such tenant. However, rental payments from a TRS will qualify as
rents from real property even if we own more than 10% of the total value or
combined voting power of the TRS if (1) at least 90% of the property is leased
to unrelated tenants and the rent paid by the taxable REIT subsidiary TRS is
substantially comparable to the rent paid by the unrelated tenants for
comparable space, or (2) the property leased is a “qualified lodging facility”
or a “qualified health care property” as those terms are defined in Section 856
of the Code, and certain other conditions are met.
Unless we
determine that the resulting nonqualifying income under any of the following
situations, taken together with all other nonqualifying income earned by us in
the taxable year, will not jeopardize our qualification as a REIT, we do not
intend to:
|
·
|
charge
rent for any property that is based in whole or in part on the income or
profits of any person, except by reason of being based on a fixed
percentage or percentages of receipts or sales, as described
above;
|
|
·
|
rent
any property to a related party tenant, including a TRS, unless the rent
from the lease to the TRS would qualify for the special exception from the
related party tenant rule applicable to certain leases with a
TRS;
|
|
·
|
derive
rental income attributable to personal property other than personal
property leased in connection with the lease of real property, the amount
of which is less than 15% of the total rent received under the
lease; or
|
|
·
|
directly
perform services considered to be noncustomary or rendered to the occupant
of the property.
|
We may
indirectly receive distributions from our TRSs or other corporations that are
not REITs or qualified REIT subsidiaries. These distributions will be
classified as dividend income to the extent of the earnings and profits of the
distributing corporation. Such distributions will generally
constitute qualifying income for purposes of the 95% gross income test, but not
for purposes of the 75% gross income test. Any dividends received by
us from a REIT, however, will be qualifying income for purposes of both the 95%
and 75% gross income tests.
Interest
income constitutes qualifying mortgage interest for purposes of the 75% gross
income test (as described above) to the extent that the obligation is secured by
a mortgage on real property. If we receive interest income with
respect to a mortgage loan that is secured by both real property and other
property, and the highest principal amount of the loan outstanding during a
taxable year exceeds the fair market value of the real property on the date that
we acquired or originated the mortgage loan, the interest income will be
apportioned between the real property and the other property, and our income
from the loan will qualify for purposes of the 75% gross income test only to the
extent that the interest is allocable to the real property. Even if a
loan is not secured by real property or is undersecured, the income that it
generates may nonetheless also qualify for purposes of the 95% gross income
test.
To the
extent that the terms of a loan provide for contingent interest that is based on
the cash proceeds realized upon the sale of the property securing the loan,
income attributable to the participation feature will be treated as gain from
sale of the underlying property, which generally will be qualifying income for
purposes of both the 75% and 95% gross income tests.
If we
fail to satisfy one or both of the 75% or 95% gross income tests for any taxable
year, we may still qualify as a REIT for the year if we are entitled to relief
under applicable provisions of the Code. These relief provisions will
generally be available if the failure of our company to meet these tests was due
to reasonable cause and not due to willful neglect and, following the
identification of such failure, we set forth a description of each item of our
gross income that satisfies the gross income tests in a schedule for the taxable
year filed in accordance with regulations prescribed by the
Treasury. It is not possible to state whether we would be entitled to
the benefit of these relief provisions in all circumstances. If these
relief provisions are inapplicable to a particular set of circumstances
involving us, we will not qualify as a REIT. As discussed above under
“— Taxation of REITs in General,” even where these relief provisions apply,
a tax would be imposed upon the profit attributable to the amount by which we
fail to satisfy the particular gross income test.
Asset
Tests
At the
close of each calendar quarter we must also satisfy four tests relating to the
nature of our assets. First, at least 75% of the value of our total
assets must be represented by some combination of “real estate assets,” cash,
cash items, U.S. government securities, and, under some circumstances,
stock or debt instruments purchased with new capital. For this
purpose, real estate assets include interests in real property, such as land,
buildings, leasehold interests in real property, stock of other REITs, and
certain kinds of mortgage-backed securities and mortgage
loans. Assets that do not qualify for purposes of the 75% test are
subject to the additional asset tests described below.
Second,
the value of any one issuer’s securities owned by us may not exceed 5% of the
value of our total assets (unless the issuer is a TRS). Third, we may
not own more than 10% of any one issuer’s outstanding securities, as measured by
either voting power or value, unless the issuer is a TRS or other rules
apply. Fourth, the aggregate value of all securities of TRSs held by
us may not exceed 25% (20% for our taxable year ended on or prior to December
31, 2008) of the value of our total assets.
The 5%
and 10% asset tests do not apply to securities of TRSs, qualified REIT
subsidiaries or securities that are “real estate assets” for purposes of the 75%
gross asset test described above. The 10% value test does not apply
to certain “straight debt” and other excluded securities, as described in the
Code including, but not limited to, any loan to an individual or estate, any
obligation to pay rents from real property and any security issued by a
REIT. In addition, (1) a REIT’s interest as a partner in a
partnership is not considered a security for purposes of applying the 10% value
test to securities issued by the partnership; (2) any debt instrument
issued by a partnership (other than straight debt or another excluded security)
will not be considered a security issued by the partnership if at least 75% of
the partnership’s gross income is derived from sources that would qualify for
the 75% REIT gross income test; and (3) any debt instrument issued by a
partnership (other than straight debt or another excluded security) will not be
considered a security issued by the partnership to the extent of the REIT’s
interest as a partner in the partnership. In general, straight debt
is defined as a written, unconditional promise to pay on demand or at a specific
date a fixed principal amount, and the interest rate and payment dates on the
debt must not be contingent on profits or the discretion of the
debtor. In addition, straight debt may not contain a convertibility
feature.
In connection with our acquisition of Erdman, we acquired a new TRS, MEA
Holdings, Inc. While we believe we have properly valued the
securities we hold in MEA Holdings, Inc., and all of our TRSs, there is no
guarantee that the IRS would agree with such valuation or that a court would
agree with such determination by the IRS. In the event we have
improperly valued the securities we hold in MEA Holdings, Inc., we may fail to
satisfy the asset test limitation which may result in our failure to qualify as
a REIT.
After initially meeting the asset tests at the close of any quarter, we will not
lose our qualification as a REIT for failure to satisfy the asset tests at the
end of a later quarter solely by reason of changes in asset
values. If we fail to satisfy the asset tests because we acquire
securities during a quarter, we can cure this failure by disposing of a
sufficient amount of the non-qualifying assets within 30 days after the
close of that quarter. If we fail the 5% asset test or the 10% asset
test at the end of any quarter, and such failure is not cured within
30 days thereafter, we may dispose of sufficient assets (generally, within
six months after the last day of the quarter in which our identification of the
failure to satisfy those asset tests occurred) to cure the violation, provided
that the non-permitted assets do not exceed the lesser of 1% of our assets at
the end of the relevant quarter or $10,000,000. If we fail any of the
other asset tests, or our failure of the 5% and 10% asset tests is in excess of
this amount, as long as the failure was due to reasonable cause and not willful
neglect, we are permitted to avoid disqualification as a REIT, after the thirty
day cure period, by taking steps including the disposition of sufficient assets
to meet the asset tests (generally within six months after the last day of the
quarter in which our identification of the failure to satisfy the REIT asset
test occurred), and paying a tax equal to the greater of $50,000 per
failure or 35% (the current highest applicable corporate tax rate) of the net
income generated by the nonqualifying assets during the period in which we
failed to satisfy the relevant asset test.
We
believe that our holdings of securities and other assets will comply with the
foregoing REIT asset requirements, and we intend to monitor compliance with such
tests on an ongoing basis. However, the values of some of our assets,
including the securities of our TRSs, may not be precisely valued, and values
are subject to change in the future. Furthermore, the proper
classification of an instrument as debt or equity for U.S. federal income
tax purposes may be uncertain in some circumstances, which could affect the
application of the REIT asset tests. Accordingly, there can be no
assurance that the IRS will not contend that our assets do not meet the
requirements of the REIT asset tests.
Annual
Distribution Requirements
In order
to qualify as a REIT, we are required to distribute dividends, other than
capital gain dividends, to our stockholders in an amount at least equal
to:
(1) the
sum of:
|
·
|
90%
of our “REIT taxable income” (computed without regard to our deduction for
dividends paid and our net capital
gains), and
|
|
·
|
90%
of the net income, if any (after tax), from foreclosure property (as
described below), minus
|
(2) the
sum of specified items of non-cash income that exceeds a percentage of our
income.
These
distributions must be paid in the taxable year to which they relate, or in the
following taxable year if such distributions are declared in October, November
or December of the taxable year, are payable to stockholders of record on a
specified date in any such month, and are actually paid before the end of
January of the following year. Such distributions are treated as both
paid by us and received by our stockholders on December 31 of the year in
which they are declared. In addition, at our election, a distribution
for a taxable year may be declared before we timely file our tax return for the
year provided we pay such distribution with or before our first regular dividend
payment after such declaration, and such payment is made during the 12-month
period following the close of such taxable year. These distributions
are taxable to our stockholders in the year in which paid, even though the
distributions relate to our prior taxable year for purposes of the 90%
distribution requirement.
In order
for distributions to be counted towards our distribution requirement, and to
provide a tax deduction to us, they must not be “preferential dividends.” A
dividend is not a preferential dividend if it is pro rata among all
outstanding shares of stock within a particular class, and is in accordance with
the preferences among our different classes of stock as set forth in our
organizational documents.
To the
extent that we distribute at least 90%, but less than 100%, of our net taxable
income, we will be subject to tax at ordinary corporate tax rates on the
retained portion. In addition, we may elect to retain, rather than
distribute, our net long-term capital gains and pay tax on such
gains. In this case, we would elect to have our stockholders include
their proportionate share of such undistributed long-term capital gains in their
income and receive a corresponding credit for their proportionate share of the
tax paid by us. Our stockholders would then increase their adjusted
basis in our stock by the difference between the amount included in their
long-term capital gains and the tax deemed paid with respect to their
shares.
If we
fail to distribute during each calendar year at least the sum of (1) 85% of
our REIT ordinary income for such year, (2) 95% of our REIT capital gain
net income for such year, other than the capital gain net income which we elect
to retain and pay tax on for that year, and (3) any undistributed taxable income
from prior periods, we will be subject to a 4% nondeductible excise tax on the
excess of such amount over the sum of (A) the amounts actually distributed
(taking into account excess distributions from prior periods) and (B) the
amounts of income retained on which we have paid corporate income
tax. We intend to make timely distributions so that we are not
subject to the 4% excise tax.
It is
possible that we, from time to time, may not have sufficient cash to meet the
REIT distribution requirements due to timing differences between (1) the
actual receipt of cash, including the receipt of distributions from our
pass-through subsidiaries and (2) the inclusion of items in income by us
for U.S. federal income tax purposes. Additional potential
sources of non-cash taxable income include loans or mortgage-backed securities
held by us as assets that are issued at a discount and require the accrual of
taxable interest income in advance of our receipt in cash, loans on which the
borrower is permitted to defer cash payments of interest and distressed loans on
which we may be required to accrue taxable interest income even though the
borrower is unable to make current interest payments in cash. In the
event that such timing differences occur, in order to meet the distribution
requirements, it might be necessary to arrange for short- term, or possibly
long-term, borrowings, or to pay dividends in the form of taxable in-kind
distributions of property, including potentially, our stock.
To
satisfy the distribution requirement and to prevent the imposition of entity
level tax on any retained net income, from time to time, we may declare taxable
dividends payable in cash or our common stock at the election of each
stockholder, where the aggregate amount of cash to be distributed in such
dividend may be limited to 10% or more of the aggregate amount of such dividend.
Under IRS Revenue Procedure 2010-12, such dividends, to the extent made with
respect to any of our taxable years ending on or before December 31, 2011, will
satisfy the REIT requirements if up to 90% of the taxable dividend is payable in
our shares and other requirements are met. In such case, for U.S. federal income
tax purposes, the amount of the dividend paid in stock would be equal to the
amount of cash that could have been received instead of stock.
We may be
able to rectify a failure to meet the distribution requirements for a year by
paying “deficiency dividends” to stockholders in a later year, which may be
included in our deduction for dividends paid for the earlier year. In
this case, we may be able to avoid losing our REIT qualification or being taxed
on amounts distributed as deficiency dividends. However, we will be
required to pay interest and a penalty based on the amount of any deduction
taken for deficiency dividends.
Failure
to Qualify
In the
event we violate a provision of the Code that would result in our failure to
qualify as a REIT, specified relief provisions will be available to us to avoid
such disqualification if (1) the violation is due to reasonable cause and
not due to willful neglect, (2) we pay a penalty of $50,000 for each
failure to satisfy the provision and (3) the violation does not include a
violation under the gross income or asset tests described above (for which other
specified relief provisions are available). This cure provision
reduces the instances that could lead to our disqualification as a REIT for
violations due to reasonable cause and not due to willful neglect. If we fail to
qualify for taxation as a REIT in any taxable year, and the relief provisions of
the Code do not apply, we will be subject to tax, including any applicable
alternative minimum tax, on our taxable income at regular corporate
rates. Distributions to our stockholders in any year in which we are
not a REIT will not be deductible by us, nor will they be required to be
made. In this situation, to the extent of current and accumulated
earnings and profits, and, subject to limitations of the Code, distributions to
our stockholders through 2010 will generally be taxable to stockholders who are
individual U.S. stockholders at a maximum rate of 15%, and dividends
received by our corporate U.S. stockholders may be eligible for the
dividends received deduction. Unless we are entitled to relief under
specific statutory provisions, we will also be disqualified from re-electing to
be taxed as a REIT for the four taxable years following a year during which
qualification was lost. It is not possible to state whether, in all
circumstances, we will be entitled to this statutory relief.
Prohibited
Transactions
Net
income derived from a prohibited transactions (including certain
foreign currency gain) is subject to a 100% tax. The term “prohibited
transactions” generally includes a sale or other disposition of property (other
than foreclosure property) that is held primarily for sale to customers in the
ordinary course of a trade or business. We intend to hold our
properties for investment with a view to long-term appreciation, to engage in
the business of owning and operating properties and to make sales of properties
that are consistent with our investment objectives. Whether property
is held “primarily for sale to customers in the ordinary course of a trade or
business,” however, depends on the specific facts and
circumstances. No assurance can be given that any particular property
in which we hold a direct or indirect interest will not be treated as property
held for sale to customers, or that certain safe-harbor provisions of the Code
discussed below that prevent such treatment will apply. The 100% tax
will not apply to gains from the sale of property held through a TRS or other
taxable corporation, although such income will be subject to tax at regular
corporate income tax rates.
The Code
provides a safe harbor that, if met, allows us to avoid being treated as engaged
in a prohibited transaction. In order to meet the safe harbor, among
other things, (i) we must have held the property for at least 2 years
(and, in the case of property which consists of land or improvements not
acquired through foreclosure, we must have held the property for 2 years
for the production of rental income) and (ii) during the taxable year the
property is disposed of, we must not have made more than 7 property sales or,
alternatively, the aggregate adjusted basis or fair market value of all of the
properties sold by us during the taxable year must not exceed 10% of the
aggregate adjusted basis or 10% of the fair market value, respectively, of all
of our assets as of the beginning of the taxable year.
Foreclosure
Property
Foreclosure
property is real property (including interests in real property) and any
personal property incident to such real property (1) that is acquired by a
REIT as a result of the REIT having bid in the property at foreclosure, or
having otherwise reduced the property to ownership or possession by agreement or
process of law, after there was a default (or default was imminent) on a lease
of the property or a mortgage loan held by the REIT and secured by the property,
(2) for which the related loan or lease was made, entered into or acquired
by the REIT at a time when default was not imminent or anticipated and
(3) for which such REIT makes an election to treat the property as
foreclosure property. REITs generally are subject to tax at the
maximum corporate rate (currently 35%) on any net income from foreclosure
property, including any gain from the disposition of the foreclosure property
and certain foreign currency gain attributable to foreclosure property, other
than income that would otherwise be qualifying income for purposes of the 75%
gross income test. Any gain from the sale of property for which a
foreclosure property election has been made will not be subject to the 100% tax
on gains from prohibited transactions described above, even if the property
primarily for sale to customers in the ordinary course of a trade or
business.
Hedging
Transactions
We may
enter into hedging transactions with respect to one or more of our assets or
liabilities. Hedging transactions could take a variety of forms,
including interest rate swaps or cap agreements, options, futures contracts,
forward rate agreements or similar financial instruments. Except to
the extent provided by Treasury Regulations, any income from a hedging
transaction we enter into the normal course of our trade or business (1)
primarily to manage risk of interest rate or price changes or currency
fluctuations with respect to borrowings made or to be made, or ordinary
obligations incurred or to be incurred by us to acquire or own real estate
assets, which is clearly identified as such before the close of the day on which
it was acquired, originated or entered into, and (2) for hedging transactions
entered into after July 30, 2008, primarily to manage risk of currency
fluctuations with respect to any item of income or gain that would be qualifying
income under the 75% or 95% income tests which is clearly identified as such
before the close of the day on which it was acquired, originated, or entered
into, including gain from the disposition of such a transaction, will not
constitute gross income for purposes of the 75% (to the extent such transaction
is entered into after July 30, 2008) or 95% gross income test (income from
hedging transactions entered into on or before July 30, 2008 generally will
constitute non-qualifying gross income for purposes of the 75% income
test). To the extent we enter into other types of hedging
transactions, the income from those transactions is likely to be treated as
non-qualifying income for purposes of both the 75% and 95% gross income
tests. We intend to structure any hedging transactions in a manner
that does not jeopardize our ability to qualify as a REIT.
Foreign
Investments
To the
extent that we hold or acquire any investments and, accordingly, pay taxes in
foreign countries, taxes paid by us in foreign jurisdictions may not be passed
through to, or used by, our stockholders as a foreign tax credit or
otherwise. Foreign investments may also generate foreign currency
gains and losses. Foreign currency gains are generally treated as
income that does not qualify under the 75% or 95% gross income
tests. However, in general, if foreign currency gain is recognized
after July 30, 2008 with respect to income which otherwise qualifies for
purposes of the 75% or 95% gross income test, then such foreign currency gain
will not constitute gross income for purposes of the 75% or 95% gross income
tests, respectively. No assurance can be given that any foreign
currency gains recognized by us directly or through pass through subsidiaries
will not adversely affect our ability to satisfy the REIT qualification
requirements.
Tax
Aspects of Investments in Partnerships
General
We may
hold investments through entities that are classified as partnerships for
U.S. federal income tax purposes, including our interest in our operating
partnership and the equity interests in lower-tier partnerships. In
general, partnerships are “pass-through” entities that are not subject to
U.S. federal income tax. Rather, partners are allocated their
proportionate shares of the items of income, gain, loss, deduction and credit of
a partnership, and are subject to tax on these items without regard to whether
the partners receive a distribution from the partnership. We will
include in our income our proportionate share of these partnership items for
purposes of the various REIT income tests, based on our capital interest in such
partnership, and in the computation of our REIT taxable
income. Moreover, for purposes of the REIT asset tests, we will
include our proportionate share of assets held by subsidiary partnerships, based
on our capital interest in such partnerships (other than for purposes of the 10%
value test, for which the determination of our interest in partnership assets
will be based on our proportionate interest in any securities issued by the
partnership excluding, for these purposes, certain excluded securities as
described in the Code). Consequently, to the extent that we hold an
equity interest in a partnership, the partnership’s assets and operations may
affect our ability to qualify as a REIT, even though we may have no control, or
only limited influence, over the partnership.
Entity
Classification
The
investment by us in partnerships involves special tax considerations, including
the possibility of a challenge by the IRS of the status of any of our subsidiary
partnerships as a partnership, as opposed to an association taxable as a
corporation, for U.S. federal income tax purposes. If any of
these entities were treated as an association for U.S. federal income tax
purposes, it would be taxable as a corporation and, therefore, could be subject
to an entity-level tax on its income. In such a situation, the
character of our assets and items of our gross income would change and could
preclude us from satisfying the REIT asset tests (particularly the tests
generally preventing a REIT from owning more than 10% of the voting securities,
or more than 10% of the value of the securities, of a corporation) or the gross
income tests as discussed in “— Taxation of the Company — Asset Tests”
and “— Gross Income Tests” above, and in turn could prevent us from
qualifying as a REIT. See “— Taxation of the Company —
Failure to Qualify,” above, for a discussion of the effect of our failure to
meet these tests for a taxable year. In addition, any change in the
status of any of our subsidiary partnerships for tax purposes might be treated
as a taxable event, in which case we could have taxable income that is subject
to the REIT distribution requirements without receiving any cash.
Tax
Allocations with Respect to Partnership Properties
The
partnership agreement of our operating partnership generally provides that items
of operating income and loss will be allocated to the holders of units in
proportion to the number of units held by each holder. If an
allocation of partnership income or loss does not comply with the requirements
of Section 704(b) of the Code and the Treasury Regulations thereunder, the
item subject to the allocation will be reallocated in accordance with the
partners’ interests in the partnership. This reallocation will be
determined by taking into account all of the facts and circumstances relating to
the economic arrangement of the partners with respect to such
item. Our operating partnership’s allocations of income and loss are
intended to comply with the requirements of Section 704(b) of the Code of
the Treasury Regulations promulgated under this section of the
Code.
Under
Section 704(c) of the Code, income, gain, loss and deduction attributable
to appreciated or depreciated property that is contributed to a partnership in
exchange for an interest in the partnership must be allocated for tax purposes
in a manner such that the contributing partner is charged with, or benefits
from, the unrealized gain or unrealized loss associated with the property at the
time of the contribution. The amount of the unrealized gain or
unrealized loss is generally equal to the difference between the fair market
value, or book value, of the contributed property and the adjusted tax basis of
such property at the time of the contribution (a “book-tax
difference”). Such allocations are solely for U.S. federal
income tax purposes and do not affect partnership capital accounts or other
economic or legal arrangements among the partners.
In
connection with our formation, appreciated property was acquired by our
operating partnership in exchange for interests in our operating
partnership. The partnership agreement requires that allocations with
respect to such acquired property be made in a manner consistent with
Section 704(c) of the Code. Treasury Regulations issued under
Section 704(c) of the Code provide partnerships with a choice of several
methods of allocating book-tax differences. We and our operating
partnership have agreed to use the “traditional method” for accounting for
book-tax differences for the properties acquired by our operating partnership
during our formation. Under the traditional method, which is the
least favorable method from our perspective, the carryover basis of the acquired
properties in the hands of our operating partnership (1) may cause us to be
allocated lower amounts of depreciation and other deductions for tax purposes
than would be allocated to us if all of the acquired properties were to have a
tax basis equal to their fair market value at the time of acquisition and
(2) in the event of a sale of such properties, could cause us to be
allocated gain in excess of our corresponding economic or book gain (or taxable
loss that is less than our economic or book loss), with a corresponding benefit
to the partners transferring such properties to our operating partnership for
interests in our operating partnership. Therefore, the use of the
traditional method could result in our having taxable income that is in excess
of our economic or book income as well as our cash distributions from our
operating partnership, which might adversely affect our ability to comply with
the REIT distribution requirements or result in our stockholders
recognizing additional dividend income without an increase in
distributions.
Taxation
of Stockholders
Taxation
of Taxable U.S. Stockholders
This
section summarizes the taxation of U.S. stockholders that are not
tax-exempt organizations. For these purposes, a U.S. stockholder
is a beneficial owner of our common stock that for U.S. federal income tax
purposes is:
|
·
|
a
citizen or resident of the United
States;
|
|
·
|
a
corporation (including an entity treated as a corporation for
U.S. federal income tax purposes) created or organized in or under
the laws of the United States or of a political subdivision thereof
(including the District of
Columbia);
|
|
·
|
an
estate whose income is subject to U.S. federal income taxation
regardless of its source; or
|
|
|
any
trust if (1) a U.S. court is able to exercise primary
supervision over the administration of such trust and one or more
U.S. persons have the authority to control all substantial decisions
of the trust or (2) it has a valid election in place to be treated as
a U.S. person.
|
If an
entity or arrangement treated as a partnership for U.S. federal income tax
purposes holds our stock, the U.S. federal income tax treatment of a
partner generally will depend upon the status of the partner and the activities
of the partnership. A partner of a partnership holding our common
stock should consult its tax advisor regarding the U.S. federal income tax
consequences to the partner of the acquisition, ownership and disposition of our
stock by the partnership.
Distributions. Provided
that we qualify as a REIT, distributions made to our taxable
U.S. stockholders out of our current and accumulated earnings and profits,
and not designated as capital gain dividends, will generally be taken into
account by them as ordinary dividend income and will not be eligible for the
dividends received deduction for corporations. In determining the
extent to which a distribution with respect to our common stock constitutes a
dividend for U.S. federal income tax purposes, our earnings and profits
will be allocated first to distributions with respect to our preferred stock, if
any, and then to our common stock. Dividends received from REITs are
generally not eligible to be taxed at the preferential qualified dividend income
rates applicable to individual U.S. stockholders who receive dividends from
taxable subchapter C corporations.
In
addition, distributions from us that are designated as capital gain dividends
will be taxed to U.S. stockholders as long-term capital gains, to the
extent that they do not exceed our actual net capital gain for the taxable year,
without regard to the period for which the U.S. stockholder has held its
stock. To the extent that we elect under the applicable provisions of
the Code to retain our net capital gains, U.S. stockholders will be treated
as having received, for U.S. federal income tax purposes, our undistributed
capital gains as well as a corresponding credit for taxes paid by us on such
retained capital gains. U.S. stockholders will increase their
adjusted tax basis in our common stock by the difference between their allocable
share of such retained capital gain and their share of the tax paid by
us. Corporate U.S. stockholders may be required to treat up to
20% of some capital gain dividends as ordinary income. Long-term
capital gains are generally taxable at maximum U.S. federal rates of 15%
(through 2010) in the case of U.S. stockholders who are individuals,
and 35% for corporations. Capital gains attributable to the sale of
depreciable real property held for more than 12 months are subject to a 25%
maximum U.S. federal income tax rate for individual U.S. stockholders
who are individuals, to the extent of previously claimed depreciation
deductions. Because many of our assets were contributed to us in
carryover basis transactions at the time of our formation, we may recognize
capital gain on the sale of assets that is attributable to gain that was
inherent in the asset at the time of such asset’s acquisition by our operating
partnership.
Distributions
in excess of our current and accumulated earnings and profits will not be
taxable to a U.S. stockholder to the extent that they do not exceed the
adjusted tax basis of the U.S. stockholder’s shares in respect of which the
distributions were made, but rather will reduce the adjusted tax basis of these
shares. To the extent that such distributions exceed the adjusted tax
basis of an individual U.S. stockholder’s shares, they will be included in
income as long-term capital gain, or short-term capital gain if the shares have
been held for one year or less. In addition, any dividend declared by
us in October, November or December of any year and payable to a
U.S. stockholder of record on a specified date in any such month will be
treated as both paid by us and received by the U.S. stockholder on
December 31 of such year, provided that the dividend is actually paid by us
before the end of January of the following calendar year.
With
respect to U.S. stockholders who are taxed at the rates applicable to
individuals, we may elect to designate a portion of our distributions paid to
such U.S. stockholders as “qualified dividend income.” A portion of a
distribution that is properly designated as qualified dividend income is taxable
to non-corporate U.S. stockholders as net capital gain, provided that the
U.S. stockholder has held the common stock with respect to which the
distribution is made for more than 60 days during the 120-day period
beginning on the date that is 60 days before the date on which such common
stock became ex-dividend with respect to the relevant
distribution. The maximum amount of our distributions eligible to be
designated as qualified dividend income for a taxable year is equal to the sum
of:
(1) the
qualified dividend income received by us during such taxable year from C
corporations (including our TRSs);
(2) the
excess of any “undistributed” REIT taxable income recognized during the
immediately preceding year over the U.S. federal income tax paid by us with
respect to such undistributed REIT taxable income; and
(3) the
excess of any income recognized during the immediately preceding year
attributable to the sale of a built-in-gain asset that was acquired in a
carry-over basis transaction from a C corporation over the U.S. federal
income tax paid by us with respect to such built-in gain.
Generally,
dividends that we receive will be treated as qualified dividend income for
purposes of (1) above if the dividends are received from a domestic C
corporation, such as our TRSs, and specified holding period and other
requirements are met.
To the
extent that we have available net operating losses and capital losses carried
forward from prior tax years, such losses may reduce the amount of distributions
that must be made in order to comply with the REIT distribution
requirements. See “— Taxation of the Company — Annual
Distribution Requirements.” Such losses, however, are not passed through to
U.S. stockholders and do not offset income of U.S. stockholders from
other sources, nor do they affect the character of any distributions that are
actually made by us, which are generally subject to tax in the hands of
U.S. stockholders to the extent that we have current or accumulated
earnings and profits.
Dispositions of Our Common
Stock. In general, a U.S. stockholder will realize gain
or loss upon the sale, redemption or other taxable disposition of our common
stock in an amount equal to the difference between the sum of the fair market
value of any property and the amount of cash received in such disposition and
the U.S. stockholder’s adjusted tax basis in the common stock at the time
of the disposition. In general, a U.S. stockholder’s adjusted
tax basis will equal the U.S. stockholder’s acquisition cost, increased by
the excess of net capital gains deemed distributed to the U.S. stockholder
(discussed above) less tax deemed paid on it and reduced by returns of
capital. In general, capital gains recognized by individuals and
other non-corporate U.S. stockholders upon the sale or disposition of
shares of our common stock will be subject to a maximum U.S. federal income
tax rate of 15% for taxable years through 2010, if our common stock is held for
more than 12 months, and will be taxed at ordinary income rates (of up to
35% through 2010) if our common stock is held for 12 months or
less. Gains recognized by U.S. stockholders that are
corporations are subject to U.S. federal income tax at a maximum rate of
35%, whether or not classified as long-term capital gains. The IRS
has the authority to prescribe, but has not yet prescribed, regulations that
would apply a capital gain tax rate of 25% (which is generally higher than the
long-term capital gain tax rates for non-corporate holders) to a portion of
capital gain realized by a non-corporate holder on the sale of REIT stock that
would correspond to the REIT’s “unrecaptured Section 1250 gain.” Holders
are advised to consult their tax advisors with respect to their capital gain tax
liability. Capital losses recognized by a U.S. stockholder upon
the disposition of our common stock held for more than one year at the time of
disposition will be considered long-term capital losses, and are generally
available only to offset capital gain income of the U.S. stockholder but
not ordinary income (except in the case of individuals, who may offset up to
$3,000 of ordinary income each year). In addition, any loss upon a
sale or exchange of shares of our common stock by a U.S. stockholder who
has held the shares for six months or less, after applying holding period rules,
will be treated as a long-term capital loss to the extent of distributions
received from us that were required to be treated by the U.S. stockholder
as long-term capital gain.
If a
U.S. stockholder recognizes a loss upon a subsequent disposition of our
common stock in an amount that exceeds a prescribed threshold, it is possible
that the provisions of recently adopted Treasury Regulations involving
“reportable transactions” could apply, with a resulting requirement to
separately disclose the loss generating transactions to the
IRS. While these regulations are directed towards “tax shelters,”
they are written quite broadly, and apply to transactions that would not
typically be considered tax shelters. Significant penalties apply for
failure to comply with these requirements. You should consult your
tax advisors concerning any possible disclosure obligation with respect to the
receipt or disposition of our common stock, or transactions that might be
undertaken directly or indirectly by us. Moreover, you should be
aware that we and other participants in transactions involving us (including our
advisors) might be subject to disclosure or other requirements pursuant to these
regulations. In addition, all or a portion of any loss that a U.S. stockholder
realizes upon a taxable disposition of our common stock or preferred stock may
be disallowed if the U.S. shareholder repurchases our common stock or preferred
stock within 30 days before or after the disposition.
As
discussed above in “-- Annual Distribution Requirements”, we may satisfy our
distribution requirements by declaring a taxable stock dividend. If we were to
make such a taxable distribution of shares of our stock, stockholders would be
required to include the full amount of such distribution into income. As a
result, a stockholder may be required to pay tax with respect to such dividends
in excess of cash received. Accordingly, stockholders receiving a distribution
of our shares may be required to sell shares received in such distribution or
may be required to sell other stock or assets owned by them, at a time that may
be disadvantageous, in order to satisfy any tax imposed on such distribution. If
a stockholder sells the shares it receives as a dividend in order to pay such
tax, the sale proceeds may be less than the amount included in income with
respect to the dividend, depending on the market price of shares of our stock at
the time of sale. Moreover, in the case of a taxable distribution of shares of
our stock with respect to which any withholding tax is imposed on a stockholder,
we may have to withhold or dispose of part of the shares in such distribution
and use such withheld shares or the proceeds of such disposition to satisfy the
withholding tax imposed.
Passive
Activity Losses and Investment Interest Limitations
Distributions
made by us and gain arising from the sale or exchange by a U.S. stockholder
of our common stock will not be treated as passive activity
income. As a result, U.S. stockholders will not be able to apply
any “passive losses” against income or gain relating to our common
stock. Distributions made by us, to the extent they do not constitute
a return of capital, generally will be treated as investment income for purposes
of computing the investment interest limitation. A
U.S. stockholder that elects to treat capital gain dividends, capital gains
from the disposition of stock or qualified dividend income as investment income
for purposes of the investment interest limitation will be taxed at ordinary
income rates on such amounts.
Taxation
of Tax-Exempt U.S. Stockholders
U.S. tax-exempt
entities, including qualified employee pension and profit sharing trusts and
individual retirement accounts, generally are exempt from U.S. federal
income taxation. However, they are subject to taxation on their
unrelated business taxable income or UBTI. The IRS has ruled that
dividend distributions from a REIT to an exempt employee pension trust do not
constitute UBTI. Based on that ruling, and provided that (1) a
tax-exempt U.S. stockholder has not held our common stock as “debt financed
property” within the meaning of the Code (i.e., where the acquisition
or ownership of the property is financed through a borrowing by the tax-exempt
stockholder), and (2) our common stock is not otherwise used in an
unrelated trade or business, distributions from us and income from the sale of
our common stock generally should not give rise to UBTI to a tax-exempt
U.S. stockholder.
Tax-exempt
U.S. stockholders that are social clubs, voluntary employee benefit
associations, supplemental unemployment benefit trusts, and qualified group
legal services plans exempt from U.S. federal income taxation under
sections 501(c)(7), (c)(9), (c)(17) and (c)(20) of the Code, respectively,
are subject to different UBTI rules, which generally will require them to
characterize distributions from us as UBTI.
In
certain circumstances, a pension trust (1) that is described in
Section 401(a) of the Code, (2) is tax exempt under
section 501(a) of the Code, and (3) that owns more than 10% of our
stock could be required to treat a percentage of the dividends from us as UBTI
if we are a “pension-held REIT.” We will not be a pension-held REIT unless
(1) either (A) one pension trust owns more than 25% of the value of
our stock, or (B) a group of pension trusts, each individually holding more
than 10% of the value of our stock, collectively owns more than 50% of such
stock and (2) we would not have qualified as a REIT but for the fact that
Section 856(h)(3) of the Code provides that stock owned by such trusts
shall be treated, for purposes of the requirement that not more than 50% of the
value of the outstanding stock of a REIT is owned, directly or indirectly, by
five or fewer “individuals” (as defined in the Code to include certain
entities). Certain restrictions on ownership and transfer of our
stock should generally prevent a tax-exempt entity from owning more than 10% of
the value of our stock, or us from becoming a pension-held REIT.
Tax-exempt
U.S. stockholders are urged to consult their tax advisor regarding the
U.S. federal, state, local and foreign tax consequences of the acquisition,
ownership and disposition of our stock.
Taxation
of Non-U.S. Stockholders
The
following is a summary of certain U.S. federal income tax consequences of
the acquisition, ownership and disposition of our common stock applicable to
non-U.S. stockholders. For purposes of this summary, a
non-U.S. stockholder is a beneficial owner of our common stock that is not
a U.S. stockholder. The discussion is based on current law and
is for general information only. It addresses only selective and not
all aspects of U.S. federal income taxation. Non-U.S. stockholders should
consult with their tax advisors to determine the impact of U.S. federal, state,
local and foreign income tax laws with regard to an investment in our stock,
including any reporting requirements.
Ordinary
Dividends. The portion of dividends received by
non-U.S. stockholders payable out of our earnings and profits that are not
attributable to gains from sales or exchanges of U.S. real property
interests and which are not effectively connected with a U.S. trade or
business of the non-U.S. stockholder generally will be treated as ordinary
income and will be subject to U.S. federal withholding tax at the rate of
30%, unless reduced or eliminated by an applicable income tax
treaty. Under some treaties, however, lower rates generally
applicable to dividends do not apply to dividends from REITs.
In
general, non-U.S. stockholders will not be considered to be engaged in a
U.S. trade or business solely as a result of their ownership of our
stock. In cases where the dividend income from a
non-U.S. stockholder’s investment in our common stock is, or is treated as,
effectively connected with the non-U.S. stockholder’s conduct of a
U.S. trade or business, the non-U.S. stockholder generally will be
subject to U.S. federal income tax at graduated rates, in the same manner
as U.S. stockholders are taxed with respect to such dividends, and may also
be subject to the 30% branch profits tax on the income after the application of
the income tax in the case of a non-U.S. stockholder that is a
corporation.
Non-Dividend
Distributions. Unless (1) our common stock constitutes a
U.S. real property interest (“USRPI”), or (2) either (A) the
non-U.S. stockholder’s investment in our common stock is effectively
connected with a U.S. trade or business conducted by such
non-U.S. stockholder (in which case the non-U.S. stockholder will be
subject to the same treatment as U.S. stockholders with respect to such
gain) or (B) the non-U.S. stockholder 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
non-U.S. stockholder will be subject to a 30% tax on the individual’s net
capital gain for the year), distributions by us which are not dividends out of
our earnings and profits will not be subject to U.S. federal income
tax. If it cannot be determined at the time at which a distribution
is made whether or not the distribution will exceed current and accumulated
earnings and profits, the distribution will be subject to withholding at the
rate applicable to dividends. However, the non-U.S. stockholder
may seek a refund from the IRS of any amounts withheld if it is subsequently
determined that the distribution was, in fact, in excess of our current and
accumulated earnings and profits. If our company’s common stock
constitutes a USRPI, as described below, distributions by us in excess of the
sum of our earnings and profits plus the non-U.S. stockholder’s adjusted
tax basis in our common stock will be taxed under the Foreign Investment in Real
Property Tax Act of 1980 (“FIRPTA”), at the rate of tax, including any
applicable capital gains rates, that would apply to a U.S. stockholder of
the same type (e.g., an
individual or a corporation, as the case may be), and the collection of the tax
will be enforced by a refundable withholding at a rate of 10% of the amount by
which the distribution exceeds the stockholder’s share of our earnings and
profits.
Capital Gain
Dividends. Under FIRPTA, a distribution made by us to a
non-U.S. stockholder, to the extent attributable to gains from dispositions
of USRPIs held by us directly or through pass-through subsidiaries (“USRPI
capital gains”), will be considered effectively connected with a U.S. trade
or business of the non-U.S. stockholder and will be subject to
U.S. federal income tax at the rates applicable to U.S. stockholders,
without regard to whether the distribution is designated as a capital gain
dividend. In addition, we will be required to withhold tax equal to
35% of the amount of capital gain dividends to the extent the dividends
constitute USRPI capital gains. This amount is creditable against the non-U.S.
stockholder’s FIRPTA tax liability. Distributions subject to FIRPTA may also be
subject to a 30% branch profits tax in the hands of a non-U.S. holder that
is a corporation. However, the 35% withholding tax will not apply to
any capital gain dividend with respect to any class of our stock which is
regularly traded on an established securities market located in the United
States if the non-U.S. stockholder did not own more than 5% of such class
of stock at any time during the taxable year. Instead, any capital
gain dividend will be treated as a distribution subject to the rules discussed
above under “— Taxation of Non-U.S. Stockholders — Ordinary
Dividends.” Also, the branch profits tax will not apply to such a
distribution. A distribution is not a USRPI capital gain if we
held the underlying asset solely as a creditor, although the holding of a shared
appreciation mortgage loan would not be solely as a creditor. Capital
gain dividends received by a non-U.S. stockholder from a REIT that are not
USRPI capital gains are generally not subject to U.S. federal income or
withholding tax, unless either (1) if the non-U.S. stockholder’s
investment in our common stock is effectively connected with a U.S. trade
or business conducted by such non-U.S. stockholder (in which case the
non-U.S. stockholder will be subject to the same treatment as
U.S. stockholders with respect to such gain) or (2) if the
non-U.S. stockholder 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 non-U.S. stockholder
will be subject to a 30% tax on the individual’s net capital gain for the
year).
Dispositions of Our Common
Stock. Unless our common stock constitutes a USRPI, a sale of
the stock by a non-U.S. stockholder generally will not be subject to
U.S. federal income taxation under FIRPTA.
The stock
will not be treated as a USRPI if less than 50% of our assets throughout a
prescribed testing period consist of interests in real property located within
the United States, excluding, for this purpose, interests in real property
solely in a capacity as a creditor. However, we expect that more than
50% of our assets will consist of interests in real property located in the
United States.
Nonetheless,
common stock nonetheless will not constitute a USRPI if we are a “domestically
controlled REIT.” A domestically controlled REIT is a REIT in which, at all
times during a specified testing period, less than 50% in value of its
outstanding stock is held directly or indirectly by
non-U.S. stockholders. We believe we are, and we expect to
continue to be, a domestically controlled REIT and, therefore, the sale of our
common stock should not be subject to taxation under FIRPTA. Because
our stock will be publicly-traded, however, no assurance can be given that we
will be, or that if we are, that we will remain a domestically controlled
REIT.
In the event that we do not constitute a
domestically controlled REIT, a non-U.S. stockholder’s sale of our common
stock nonetheless will generally not be subject to tax under FIRPTA as a sale of
a USRPI, provided that (1) our common stock is “regularly traded,” as
defined by applicable Treasury Regulations, on an established securities market,
and (2) the selling non-U.S. stockholder owned, actually or
constructively, 5% or less of our outstanding common stock at all times during a
specified testing period.
If gain
on the sale of our common stock were subject to taxation under FIRPTA, the
non-U.S. stockholder would be subject to the same treatment as a
U.S. stockholder with respect to such gain, subject to applicable
alternative minimum tax and a special alternative minimum tax in the case of
non-resident alien individuals, and the purchaser of the stock could be required
to withhold 10% of the purchase price and remit such amount to the
IRS.
Gain from
the sale of our common stock that would not otherwise be subject to FIRPTA will
nonetheless be taxable in the United States to a non-U.S. stockholder in
two cases: (1) if the non-U.S. stockholder’s investment in our common
stock is effectively connected with a U.S. trade or business conducted by
such non-U.S. stockholder, the non-U.S. stockholder will be subject to
the same treatment as a U.S. stockholder with respect to such gain, or
(2) if the non-U.S. stockholder 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, the nonresident alien individual
will be subject to a 30% tax on the individual’s capital gain.
Backup
Withholding and Information Reporting
We will
report to our U.S. stockholders and the IRS the amount of dividends paid
during each calendar year and the amount of any tax withheld. Under
the backup withholding rules, a U.S. stockholder may be subject to backup
withholding at the current rate of 28% with respect to dividends paid unless the
holder is (1) a corporation or comes within other exempt categories and,
when required, demonstrates this fact or (2) provides a taxpayer
identification number or social security number, certifies under penalties of
perjury that such number is correct and that such holder is not subject to
backup withholding and otherwise complies with applicable requirements of the
backup withholding rules. A U.S. stockholder that does not
provide a correct taxpayer identification number or social security number may
also be subject to penalties imposed by the IRS. In addition, we may
be required to withhold a portion of capital gain distribution to any
U.S. stockholder who fails to certify their non-foreign
status.
We must
report annually to the IRS and to each non-U.S. stockholder the amount of
dividends paid to such holder and the tax withheld with respect to such
dividends, regardless of whether withholding was required. Copies of
the information returns reporting such dividends and withholding may also be
made available to the tax authorities in the country in which the
non-U.S. stockholder resides under the provisions of an applicable income
tax treaty. A non-U.S. stockholder may be subject to backup
withholding unless applicable certification requirements are met.
Payment
of the proceeds of a sale of our common stock within the United States is
subject to both backup withholding and information reporting unless the
beneficial owner certifies under penalties of perjury that it is a
non-U.S. stockholder (and the payor does not have actual knowledge or
reason to know that the beneficial owner is a United States person) or the
holder otherwise establishes an exemption. Payment of the proceeds of
a sale of our common stock conducted through certain United States related
financial intermediaries is subject to information reporting (but not backup
withholding) unless the financial intermediary has documentary evidence in its
records that the beneficial owner is a non-U.S. stockholder and specified
conditions are met or an exemption is otherwise established.
Backup
withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be allowed as a refund or a credit against such
holder’s U.S. federal income tax liability, provided the required
information is furnished to the IRS.
New
Legislation Relating to Foreign Accounts
Newly
enacted legislation may impose withholding taxes on certain types of payments
made to “foreign financial institutions” and certain other non-U.S.
entities. Under this legislation, the failure to comply with
additional certification, information reporting and other specified requirements
could result in withholding tax being imposed on payments of dividends and sales
proceeds to U.S. stockholders (as defined in the Registration Statement) who own
shares of our common stock through foreign accounts or foreign intermediaries
and certain non-U.S. stockholders. The legislation imposes a 30%
withholding tax on dividends on, and gross proceeds from the sale or other
disposition of, our common stock paid to a foreign financial institution or to a
foreign entity other than a financial institution, unless (i) the foreign
financial institution undertakes certain diligence and reporting obligations or
(ii) the foreign entity that is not a financial institution either certifies it
does not have any substantial United States owners or furnishes identifying
information regarding each substantial United States owner. If the
payee is a foreign financial institution, it must enter into an agreement with
the United States Treasury requiring, among other things, that it undertake to
identify accounts held by certain United States persons or United States-owned
foreign entities, annually report certain information about such accounts, and
withhold 30% on payments to account holders whose actions prevent it from
complying with these reporting and other requirements. The
legislation would apply to payments made after December 31,
2012. Prospective investors should consult their tax advisors
regarding this legislation.
State,
Local and Foreign Taxes
We and
our subsidiaries and stockholders may be subject to state, local and foreign
taxation in various jurisdictions, including those in which they or we transact
business, own property or reside. We own interests in properties
located in a number of jurisdictions, and we may be required to file tax returns
and pay taxes in certain of those jurisdictions. The state, local or
foreign tax treatment of our company and our stockholders may not conform to the
U.S. federal income tax treatment discussed above. Any foreign
taxes incurred by us would not pass through to stockholders as a credit against
their U.S. federal income tax liability. Prospective
stockholders should consult their tax advisor regarding the application and
effect of state, local and foreign income and other tax laws on an investment in
our common stock.
Other
Tax Considerations
Legislative
or Other Actions Affecting REITs
The rules
dealing with U.S. federal income taxation are constantly under review by
persons involved in the legislative process and by the IRS and the
U.S. Treasury Department. No assurance can be given as to
whether, when, or in what form, the U.S. federal income tax laws applicable
to us and our stockholders may be enacted. Changes to the U.S.
federal tax laws and interpretations of U.S. federal tax laws could adversely
affect an investment in our common stock.
BOOK-ENTRY
SECURITIES
We may
issue the securities offered by means of this prospectus in whole or in part in
book-entry form, meaning that beneficial owners of the securities will not
receive certificates representing their ownership interests in the securities,
except in the event the book-entry system for the securities is
discontinued. If securities are issued in book entry form, they will
be evidenced by one or more global securities that will be deposited with, or on
behalf of, a depositary identified in the applicable prospectus supplement
relating to the securities. The Depository Trust Company is expected
to serve as depository. Unless and until it is exchanged in whole or
in part for the individual securities represented thereby, a global security may
not be transferred except as a whole by the depository for the global security
to a nominee of such depository or by a nominee of such depository to such
depository or another nominee of such depository or by the depository or any
nominee of such depository to a successor depository or a nominee of such
successor. 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 class or series of
securities that differ from the terms described here will be described in the
applicable prospectus supplement.
Unless
otherwise indicated in the applicable prospectus supplement, we anticipate that
the following provisions will apply to depository arrangements.
Upon the
issuance of a global security, the depository for the global security or its
nominee will credit on its book-entry registration and transfer system the
respective principal amounts of the individual securities represented by such
global security to the accounts of persons that have accounts with such
depository, who are called “participants.” Such accounts shall be designated by
the underwriters, dealers or agents with respect to the securities or by us if
the securities are offered and sold directly by us. Ownership of
beneficial interests in a global security will be limited to the depository’s
participants or persons that may hold interests through such
participants. Ownership of beneficial interests in the global
security will be shown on, and the transfer of that ownership will be effected
only through, records maintained by the applicable depository or its nominee
(with respect to beneficial interests of participants) and records of the
participants (with respect to beneficial interests of persons who hold through
participants). The laws of some states require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and laws may impair the ability to own, pledge or
transfer beneficial interest in a global security.
So long
as the depository for a global security or its nominee is the registered owner
of such global security, such depository or nominee, as the case may be, will be
considered the sole owner or holder of the securities represented by such global
security for all purposes under the applicable Indenture or other instrument
defining the rights of a holder of the securities. Except as provided
below or in the applicable prospectus supplement, owners of beneficial interest
in a global security will not be entitled to have any of the individual
securities of the series represented by such global security registered in their
names, will not receive or be entitled to receive physical delivery of any such
securities in definitive form and will not be considered the owners or holders
thereof under the applicable Indenture or other instrument defining the rights
of the holders of the securities.
Payments
of amounts payable with respect to individual securities represented by a global
security registered in the name of a depository or its nominee will be made to
the depository or its nominee, as the case may be, as the registered owner of
the global security representing such securities. None of us, our
officers and board members or any trustee, paying agent or security registrar
for an individual series of securities will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests in the global security for such securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
We expect
that the depository for a series of securities offered by means of this
prospectus or its nominee, upon receipt of any payment of principal, premium,
interest, dividend or other amount in respect of a permanent global security
representing any of such securities, will immediately credit its participants’
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such global security for such securities as
shown on the records of such depository or its nominee. We also
expect that payments by participants to owners of beneficial interests in such
global security held through such participants will be governed by standing
instructions and customary practices, as is the case with securities held for
the account of customers in bearer form or registered in “street name.” Such
payments will be the responsibility of such participants.
If a
depository for a series of securities is at any time unwilling, unable or
ineligible to continue as depository and a successor depository is not appointed
by us within 90 days, we will issue individual securities of such series in
exchange for the global security representing such series of
securities. In addition, we may, at any time and in our sole
discretion, subject to any limitations described in the applicable prospectus
supplement relating to such securities, determine not to have any securities of
such series represented by one or more global securities and, in such event,
will issue individual securities of such series in exchange for the global
security or securities representing such series of securities.
PLAN
OF DISTRIBUTION
We may
sell the securities to one or more underwriters for public offering and sale by
them or may sell the securities to investors directly or through
agents. Any underwriter or agent involved in the offer and sale of
the securities will be named in the applicable prospectus
supplement. Underwriters and agents in any distribution contemplated
hereby, including but not limited to at-the-market equity offerings, may from
time to time be designated on terms to be set forth in the applicable prospectus
supplement. Underwriters or agents could make sales in privately
negotiated transactions and/or any other method permitted by law, including
sales deemed to be an “at the market” offering as defined in Rule 415
promulgated under the Securities Act, which includes sales made directly on the
New York Stock Exchange, the existing trading market for our common stock, or
sales made to or through a market maker other than on an exchange.
Underwriters
may offer and sell the securities at a fixed price or prices, which may be
changed related to the prevailing market prices at the time of sale or at
negotiated prices. We also may, from time to time, authorize
underwriters acting as our agents to offer and sell the securities upon the
terms and conditions as are set forth in the applicable prospectus
supplement. In connection with the sale of securities, underwriters
may be deemed to have received compensation from us in the form of underwriting
discounts or commissions and may also receive commissions from purchasers of
securities for whom they may act as agent. Underwriters may sell
securities to or through dealers, and the dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agent.
Any
underwriting compensation paid by us to underwriters or agents in connection
with the offering of securities, and any discounts, concessions or commissions
allowed by underwriters to participating dealers, will be set forth in the
applicable prospectus supplement. Underwriters, dealers and agents
participating in the distribution of the securities may be deemed to be
underwriters, and any discounts and commissions received by them and any profit
realized by them on resale of the securities may be deemed to be underwriting
discounts and commissions, under the Securities Act of 1933, as amended, or the
Securities Act. Underwriters, dealers and agents may be entitled,
under agreements entered into with us and our operating partnership, to
indemnification against and contribution toward civil liabilities, including
liabilities under the Securities Act.
Any
securities issued hereunder (other than common stock) will be new issues of
securities with no established trading market. Any underwriters or
agents to or through whom such securities are sold by us or the operating
partnership for public offering and sale may make a market in such securities,
but such underwriters or agents will not be obligated to do so and may
discontinue any market making at any time without notice. We cannot
assure you as to the liquidity of the trading market for any such
securities.
The
underwriters and their affiliates may be customers of, engage in transactions
with and perform services for us and the operating partnership and its
subsidiaries in the ordinary course of business.
LEGAL
MATTERS
Certain
legal matters will be passed upon for us by Clifford Chance US
LLP. In addition, the description of U.S. federal income tax
consequences contained in the section of the prospectus entitled
“U.S. Federal Income Tax Considerations” is based on the opinion of
Clifford Chance US LLP. If the validity of any securities is also passed upon by
counsel for the underwriters of an offering of those securities, that counsel
will be named in the prospectus supplement relating to that offering. As
to certain matters of Maryland law, Clifford Chance US LLP may rely on the
opinion of Venable LLP, Baltimore, Maryland.
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this prospectus by reference from our Annual Report on Form 10-K
for the year ended December 31, 2009, and the effectiveness of our internal
control over financial reporting as of December 31, 2009 have been audited by
Deloitte & Touche LLP, an independent registered public accounting firm, as
stated in their reports (which report related to the financial statements and
the related financial statement schedule expresses an unqualified opinion and
includes an explanatory paragraph relating to the Company changing its method of
accounting for noncontrolling interests on January 1, 2009, and retrospectively
adjusting all periods presented in the consolidated financial statements), which
are incorporated herein by reference. Such financial statements and
financial statement schedule have been so incorporated in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
WHERE
YOU CAN FIND MORE INFORMATION
We are
subject to the informational requirements of the Exchange Act, and, in
accordance therewith, we file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy
any reports, statements or other information we file at the SEC’s Public
Reference Room located at 100 F Street, N.E., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information
on the Public Reference Room. Our SEC filings are also available to
the public from commercial document retrieval services and at the web site
maintained by the SEC at http://www.sec.gov. We maintain a website at
www.cogdell.com. The information on our website is not, and you must
not consider the information to be, a part of this prospectus. Our
securities are listed on the NYSE and all such material filed by us with the
NYSE also can be inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005.
We have
filed with the SEC a registration statement on Form S-3, of which this
prospectus is a part, under the Securities Act with respect to the
securities. This prospectus does not contain all of the information
set forth in the registration statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. For further
information concerning us and the securities, reference is made to the
registration statement. Statements contained in this prospectus as to
the contents of any contract or other documents are not necessarily complete,
and in each instance, reference is made to the copy of such contract or
documents filed as an exhibit to the registration statement, each such statement
being qualified in all respects by such reference.
The SEC
allows us to “incorporate by reference” information into this prospectus, which
means that we can disclose important information to you by referring you to
another document filed separately with the SEC. The information
incorporated by reference herein is deemed to be part of this prospectus, except
for any information superseded by information in this
prospectus. This prospectus incorporates by reference the documents
set forth below that we have previously filed with the SEC. These
documents contain important information about us, our business and our
finances.
|
Document
|
Period
|
|
Annual
Report on Form 10-K (File No. 001-32649)
|
Year
ended December 31, 2009
|
|
|
|
|
Document
|
Filed
|
|
Definitive
Proxy Statement on Schedule 14A
(File
No. 001-32649)
|
March
19, 2010
|
|
Document
|
Filed
|
|
Description
of our common stock contained in our Registration Statement on Form
8-A
(File
No. 001-32649)
|
October
18, 2005
|
|
|
|
All documents that we file pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this prospectus but before the end of any offering of securities made under this
prospectus will also be considered to be incorporated by reference.
If you
request, either orally or in writing, we will provide you with a copy of any or
all documents that are incorporated by reference. Such documents will
be provided to you free of charge, but will not contain any exhibits, unless
those exhibits are incorporated by reference into the
document. Requests should be addressed to Cogdell Spencer Inc., 4401
Barclay Downs Drive, Suite 300, Charlotte, North Carolina, 28209,
Telephone: (704) 940-2900.
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
14.
Other Expenses of Issuance and
Distribution
The
following table itemizes the expenses incurred by us in connection with the
issuance and registration of the securities being registered
hereunder. All amounts shown are estimates except the Securities and
Exchange Commission registration fee.
|
Securities
and Exchange Commission registration fee
|
|
$
|
16,930
|
|
|
Printing
and engraving expenses*
|
|
|
10,000
|
|
|
Legal
fees and expenses*
|
|
|
60,000
|
|
|
Accounting
fees and expenses*
|
|
|
40,000
|
|
|
Blue
Sky fees and expenses
|
|
|
5,000
|
|
|
Miscellaneous
|
|
|
50,000
|
|
|
Total
|
|
$
|
|
|
___________
|
*
|
Does
not include expenses of preparing prospectus supplements and other
expenses relating to offerings of particular
securities.
|
Item 15.
Indemnification of Directors
and Officers.
Maryland
law permits a Maryland corporation to include in its charter a provision
limiting the liability of its directors and officers to the corporation and its
stockholders for money damages except for liability resulting from
(1) actual receipt of an improper benefit or profit in money, property or
services or (2) active and deliberate dishonesty established by a final
judgment as being material to the cause of action. Our charter
contains such a provision which eliminates such liability to the maximum extent
permitted by Maryland law.
Our
charter authorizes us and our bylaws obligate us, to the maximum extent
permitted by Maryland law in effect from time to time, to indemnify and, without
requiring a preliminary determination of the ultimate entitlement to
indemnification, pay or reimburse reasonable expenses in advance of financial
disposition of a proceeding to any present or former director or officer who is
made, or threatened to be made, a party to the proceeding by reason of his or
her service in that capacity, or any individual who, while one of directors or
officers and at our request, serves or has served another corporation, real
estate investment trust, partnership, joint venture, trust, employee benefit
plan or any other enterprise as a director, officer, partner or trustee and who
is made, or threatened to be made, a party to the proceeding by reason of his or
her service in that capacity from and against any claim or liability to which
that individual may become subject or which that individual may incur by reason
of his or her status as our present or former director or
officer. Our charter and bylaws also permit us to indemnify and
advance expenses to any person who served our predecessor in any of the
capacities described above and any employee or agent of our company or our
predecessor.
Maryland
law requires us (unless our charter provides otherwise, which it does not) to
indemnify a director or officer who has been successful, on the merits or
otherwise, in the defense of any proceeding to which he or she is made, or
threatened to be made, a party by reason of his or her service in that
capacity. Maryland law permits us to indemnify our present and former
directors and officers, among others, against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection with
any proceeding to which they may be made, or threatened to be made, a party by
reason of their service in those or other capacities unless it is established
that (1) the act or omission of the director or officer was material to the
matter giving rise to the proceeding and (A) was committed in bad faith or
(B) was the result of active and deliberate dishonesty, (2) the
director or officer actually received an improper personal benefit in money,
property or services or (3) in the case of any criminal proceeding, the
director or officer had reasonable cause to believe that the act or omission was
unlawful. However, under Maryland law, we may not indemnify for an
adverse judgment in a suit by or in our right or for a judgment of liability on
the basis that personal benefit was improperly received, unless in either case a
court orders indemnification and then only for expenses. In addition,
Maryland law permits us to advance reasonable expenses to a director or officer
upon our receipt of (1) a written affirmation by the director or officer of
his or her good faith belief that he or she has met the standard of conduct
necessary for indemnification by us and (2) a written undertaking by the
director or officer or on the directors or officers behalf to repay the amount
paid or reimbursed by us if it is ultimately determined that the director or
officer did not meet the standard of conduct.
In
addition, certain persons, including trustees of CS Business Trust I and CS
Business Trust II, our directors officers or employees, the officers or
employees of Cogdell Spencer LP, CS Business Trust I and CS Business Trust II,
and other persons that CS Business Trust I and CS Business Trust II designate
from time to time, are indemnified for specified liabilities and expenses
pursuant to the Cogdell Spencer LP Partnership Agreement, the partnership in
which we serve as a general partner through a wholly owned Maryland business
trust.
Item 16.
Exhibits.
|
Exhibit No.
|
|
|
1.1*
|
Form
of Underwriting Agreement by and among Cogdell Spencer Inc. and the
underwriters named therein.
|
|
4.1**
|
Form
of Certificate for Common Stock of Cogdell Spencer Inc.
|
|
4.2*
|
Form
of Certificate for Preferred Stock of Cogdell Spencer
Inc.
|
|
4.3*
|
Form
of Articles Supplementary for preferred stock.
|
|
4.4*
|
Form
of Depositary Agreement.
|
|
4.5*
|
Form
of Depositary Receipt.
|
|
4.6*
|
Form
of Warrant Agreement.
|
|
5.1
|
Opinion
of Clifford Chance US LLP with respect to the legality of the securities
being registered.
|
|
8.1
|
Opinion
of Clifford Chance US LLP with respect to tax matters.
|
|
12.1
|
Ratio
of Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
|
|
23.1
|
Consent
of Deloitte & Touche LLP.
|
|
23.2
|
Consent
of Clifford Chance US LLP (included in
Exhibit 5.1).
|
|
23.3
|
Consent
of Clifford Chance US LLP (included in
Exhibit 8.1).
|
|
24.1***
|
Power
of Attorney (included on signature page).
|
|
|
|
____________
|
*
|
To
be filed by amendment or incorporated by reference in connection with the
offering of securities.
|
|
**
|
Incorporated
by reference to our Registration Statement on Form S-11 (File
No. 333-127396).
|
Item 17. Undertakings.
(a) The
undersigned registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
i. To
include any prospectus required by section 10(a)(3) of the Securities Act
of 1933;
ii. To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price set forth in the
“Calculation of Registration Fee” table in the effective registration
statement.
iii. To
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement;
Provided, however, that:
(A) Paragraphs (a)(l)(i),
(a)(l)(ii) and (a)(l)(iii) of this section do not apply if the registration
statement is on Form S-3 or Form F-3 and the information required to
be included in a post-effective amendment by those paragraphs is contained in
reports filed with or furnished to the Commission by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement, or is
contained in a form of prospectus filed pursuant to Rule 424(b) that is
part of the registration statement.
(2) That,
for the purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(4) That,
for the purpose of determining liability under the Securities Act of 1933, as
amended, to any purchaser:
(A)
Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be
deemed to be part of the registration statement as of the date the filed
prospectus was deemed part of and included in the registration statement;
and
(B) Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or
(b)(7) as part of a registration statement in reliance on Rule 430B
relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or
(x) for the purpose of providing the information required by
section 10(a) of the Securities Act of 1933 shall be deemed to be part of
and included in the registration statement as of the earlier of the date such
form of prospectus is first used after effectiveness or the date of the first
contract of sale of securities in the offering described in the
prospectus. As provided in Rule 430B, for liability purposes of
the issuer and any person that is at that date an underwriter, such date shall
be deemed to be a new effective date of the registration statement relating to
the securities in the registration statement to which that prospectus relates,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof. Provided, however, that no
statement made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of contract of sale
prior to such effective date, supersede or modify any statement that was made in
the registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such effective date;
or
(ii) If
the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule
424(b) as part of a registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than prospectuses filed in
reliance on Rule 430A, shall be deemed to be part of and included in the
registration statement as of the date it is first used after
effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration statement
will, as to a purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in any such
document immediately prior to such date of first use.
(5) That,
for the purpose of determining liability of the registrant under the Securities
Act of 1933 to any purchaser in the initial distribution of the
securities:
The
undersigned registrant undertakes that in a primary offering of securities of
the undersigned registrant pursuant to this registration statement, regardless
of the underwriting method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to such
purchaser:
(i) Any
preliminary prospectus or prospectus of the undersigned registrant relating to
the offering required to be filed pursuant to Rule 424;
(ii) Any
free writing prospectus relating to the offering prepared by or on behalf of the
undersigned registrant or used or referred to by the undersigned
registrant;
(iii) The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned registrant or its securities provided
by or on behalf of the undersigned registrant; and
(iv) Any
other communication that is an offer in the offering made by the undersigned
registrant to the purchaser.
(b) The
undersigned registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant’s
annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan’s annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, as amended, the registrant
certifies that it has reasonable grounds to believe that the registrant meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Charlotte, in the State of North Carolina, on
this 26th day
of March, 2010.
|
|
COGDELL
SPENCER INC.
|
|
|
|
|
|
|
|
|
By:
|
/s/
Charles M. Handy
|
|
|
|
|
Name: Charles
M. Handy
|
|
|
|
|
Title: Chief
Financial Officer, Senior Vice President and
Secretary
|
|
|
|
|
|
|
|
Name
|
|
Title
|
|
Date:
|
|
|
|
|
|
|
|
*
|
|
Chairman
of the Board
|
|
March 26,
2010
|
|
James
W. Cogdell
|
|
|
|
|
|
|
|
|
|
|
|
/s/
FRANK C. SPENCER
|
|
Chief
Executive Officer, President and Director (Principal Executive
Officer)
|
|
March
26, 2010
|
|
Frank
C. Spencer
|
|
|
|
|
|
|
|
|
|
|
/s/
CHARLES M. HANDY
|
|
Chief
Financial Officer, Senior Vice President and Secretary (Principal
Financial Officer and Principal Accounting Officer)
|
|
March
26, 2010
|
|
Charles
M. Handy
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
March
26, 2010
|
|
John
R. Georgius
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
March
26, 2010
|
|
Richard
B. Jennings
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
March
26, 2010
|
|
Christopher
E. Lee
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
March
26, 2010
|
|
David
J. Lubar
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
March
26, 2010
|
|
Richard
C. Neugent
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
March
26, 2010
|
|
Scott
A. Ransom
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
March
26, 2010
|
|
Randolph
D. Smoak
|
|
|
|
|
* By Frank C. Spencer as attorney-in-fact.
EXHIBIT INDEX
|
Exhibit
No.
|
|
|
1.1*
|
Form
of Underwriting Agreement by and among Cogdell Spencer Inc. and the
underwriters named therein.
|
|
4.1**
|
Form
of Certificate for Common Stock of Cogdell Spencer Inc.
|
|
4.2*
|
Form
of Certificate for Preferred Stock of Cogdell Spencer
Inc.
|
|
4.3*
|
Form
of Articles Supplementary for preferred stock.
|
|
4.4*
|
Form
of Depositary Agreement.
|
|
4.5*
|
Form
of Depositary Receipt.
|
|
4.6*
|
Form
of Warrant Agreement.
|
|
5.1
|
Opinion
of Clifford Chance US LLP with respect to the legality of the securities
being registered.
|
|
8.1
|
Opinion
of Clifford Chance US LLP with respect to tax matters.
|
|
12.1
|
Ratio
of Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
|
|
23.1
|
Consent
of Deloitte & Touche LLP.
|
|
23.2
|
Consent
of Clifford Chance US LLP (included in
Exhibit 5.1).
|
|
23.3
|
Consent
of Clifford Chance US LLP (included in
Exhibit 8.1).
|
|
24.1***
|
Power
of Attorney (included on signature page).
|
|
|
|
____________
|
*
|
To
be filed by amendment or incorporated by reference in connection with the
offering of securities.
|
|
**
|
Incorporated
by reference to our Registration Statement on Form S-11 (File
No. 333-127396).
|