-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KPw/CEcbmJCUj5s/1s4v2Hnxg0Do4OwY11Y+tlkGryhsgX9nlTEyZuKahDV88He6 bQKL2K39Z1AavIVVI6tLrg== 0000950144-03-008456.txt : 20030710 0000950144-03-008456.hdr.sgml : 20030710 20030710115825 ACCESSION NUMBER: 0000950144-03-008456 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20030710 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COUSINS PROPERTIES INC CENTRAL INDEX KEY: 0000025232 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 580869052 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-106401 FILM NUMBER: 03781385 BUSINESS ADDRESS: STREET 1: 2500 WINDY RIDGE PKWY STE 1600 CITY: ATLANTA STATE: GA ZIP: 30339-5683 BUSINESS PHONE: 7709552200 MAIL ADDRESS: STREET 1: 2500 WINDY RIDGE PARKWAY STREET 2: SUITE 1600 CITY: ATLANTA STATE: GA ZIP: 30339-5683 S-3/A 1 g83473a1sv3za.txt COUSINS PROPERTIES INCORPORATED AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10, 2003 REGISTRATION NO. 333-106401 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- AMENDMENT NO. 1 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 COUSINS PROPERTIES INCORPORATED (Exact Name of Registrant as Specified in its Charter) --------------------- GEORGIA 58-0869052 (State or other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number)
2500 WINDY RIDGE PARKWAY ATLANTA, GEORGIA 30339 (770) 955-2200 (Address, Including Zip Code and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) TOM G. CHARLESWORTH COPY TO: EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND CHIEF INVESTMENT OFFICER ALAN J. PRINCE, ESQ. COUSINS PROPERTIES INCORPORATED KING & SPALDING LLP 2500 WINDY RIDGE PARKWAY 191 PEACHTREE STREET, N.E. ATLANTA, GEORGIA 30339 ATLANTA, GEORGIA 30303-1763 TELEPHONE: (770) 955-2200 TELEPHONE: (404) 572-4600
(Name, Address, Including Zip Code, and Telephone Number of Agent for Service) APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after the effective date of this Registration Statement. If the only securities being registered in this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"), other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE AMOUNT OF TO BE REGISTERED REGISTERED REGISTRATION FEE - ------------------------------------------------------------------------------------------------------ Common Stock................................................ Warrants.................................................... $133,140,625 $10,772 Debt Securities(1).......................................... Preferred Stock............................................. (2)(3) (4) - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------
(1) If any Debt Securities are issued at an original issue discount, there is registered hereby such greater principal amount as shall result in an aggregate initial offering price not in excess of $133,140,625. If any Debt Securities are denominated or payable in a foreign or composite currency or currencies, there is registered hereby such principal amount as shall result in a maximum aggregate initial offering price equivalent to $133,140,625 at the time of initial offering. (2) The Registrant filed a Registration Statement on Form S-3 (File No. 333-12031) (the "Prior Registration Statement"), which registered an aggregate of $200,000,000 of Common Stock, Warrants and Debt Securities of the Registrant, $132,140,625 of which remain unsold. Pursuant to Rule 429 under the Securities Act of 1933, the prospectus that forms a part of this Registration Statement relates to the unsold securities registered under the Prior Registration Statement, as well as the indeterminate number of shares of Preferred Stock registered hereby. The aggregate amount of securities to be sold pursuant to this Registration Statement shall not exceed $133,140,625. (3) This registration statement also covers such indeterminate number of shares of Common Stock as shall be issuable upon exercise of Warrants and conversion of Preferred Stock. No separate consideration will be received for Common Stock issued upon exercise of Warrants or the conversion of Preferred Stock. Each security registered hereby may be issued separately or with other securities registered hereby. (4) A registration fee of $68,966 was paid on September 16, 1996 in connection with the Prior Registration Statement. The filing fee of $80.90 being paid herewith relates to the $1,000,000 of securities newly registered hereby. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE. PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, THE PROSPECTUS INCLUDED IN THIS REGISTRATION STATEMENT ALSO CONSTITUTES A PROSPECTUS FOR UP TO $132,140,625 OF UNSOLD COMMON STOCK, WARRANTS AND DEBT SECURITIES OF THE REGISTRANT REGISTERED UNDER THE PRIOR REGISTRATION STATEMENT, WHICH WAS DECLARED EFFECTIVE ON OCTOBER 4, 1996. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED JULY 10, 2003 PROSPECTUS $133,140,625 COUSINS PROPERTIES INCORPORATED COMMON STOCK, WARRANTS, DEBT SECURITIES AND PREFERRED STOCK Cousins Properties Incorporated may from time to time offer in one or more series or classes: - shares of our common stock, - warrants to purchase shares of our common stock, - unsecured, non-convertible debt securities, - shares of our preferred stock, or - any combination of these securities, individually or as units. We will provide specific terms of these securities in supplements to this prospectus. You should read this prospectus and any prospectus supplement, as well as the documents incorporated or deemed to be incorporated by reference in this prospectus, carefully before you invest. Our principal executive offices are located at 2500 Windy Ridge Parkway, Suite 1600, Atlanta, Georgia 30339-5683 and our telephone number is (770) 955-2200. Our common stock trades on the New York Stock Exchange under the symbol "CUZ." On July 9, 2003, the last sales price of our common stock on the New York Stock Exchange was $28.65 per share. INVESTING IN OUR SECURITIES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 4. --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------------- We may sell these securities directly, through agents, dealers or underwriters as designated from time to time, or through a combination of these methods. If any agents, dealers or underwriters are involved in the sale of any securities, the relevant prospectus supplement will set forth any applicable commissions or discounts. This prospectus may not be used to consummate sales of securities unless accompanied by the applicable prospectus supplement. The date of this prospectus is , 2003. TABLE OF CONTENTS
PAGE ---- About this Prospectus....................................... 1 Where You Can Find More Information......................... 2 Cousins Properties Incorporated............................. 3 Forward-Looking Statements.................................. 3 Risk Factors................................................ 4 Use of Proceeds............................................. 10 Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed Charges and Preferred Stock Dividends............... 10 Description of Common Stock................................. 11 Description of Warrants..................................... 15 Description of Debt Securities.............................. 15 Description of Preferred Stock.............................. 26 Certain Federal Income Tax Considerations................... 28 Plan of Distribution........................................ 39 Experts..................................................... 40 Legal Matters............................................... 40
ABOUT THIS PROSPECTUS This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission, or SEC, using a "shelf" registration process. Under this shelf process, we may sell any combination of the securities described in this prospectus in one or more offerings. This prospectus provides you with a general description of the securities that we may offer. Each time we sell securities, we will provide a prospectus supplement that will contain specific information about the terms of that offering. The prospectus supplement may also add, update or change information contained in this prospectus. You should read this prospectus and the applicable prospectus supplement together with the additional information described under the heading "Where You Can Find More Information." The registration statement that contains this prospectus contains additional information about us and the securities offered under this prospectus. The registration statement can be read at the SEC's web site or at the SEC offices mentioned under the heading "Where You Can Find More Information." You should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized anyone to provide you with information that is different. This prospectus may be used only where it is legal to sell these securities. You should not assume that the information contained or incorporated by reference in this prospectus is correct at any date other than the date of the document containing the information. 1 WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public over the Internet at the SEC's web site at http://www.sec.gov. Information included in the SEC's website is not incorporated by reference into this prospectus. You may also read and copy any document we file with the SEC at its public reference facility at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facility. Our SEC filings are also available at the offices of the New York Stock Exchange. For further information on obtaining copies of our public filings at the New York Stock Exchange, you should call (212) 656-5060. We "incorporate by reference" into this prospectus some of the documents that we have filed and will file with the SEC, which means that we can disclose important information to you by referring you to these documents. The information incorporated by reference is an important part of this prospectus and any prospectus supplement, and information that we file subsequently with the SEC will automatically update this prospectus and any prospectus supplement. We incorporate by reference the documents and information listed below and any future filings we make with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, after the date of this prospectus and up until we sell all the securities offered by this prospectus and any prospectus supplement: - Annual Report on Form 10-K for the year ended December 31, 2002, - Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, - Current Report on Form 8-K, filed on June 24, 2003, - Current Report on Form 8-K, filed on July 9, 2003, - Our consolidated funds from operations, or FFO, and related reconciliations for the three years ended December 31, 2002 contained in Exhibit 99.2 to our Current Report on Form 8-K furnished to the SEC on May 5, 2003 under the headings "Net Income and Funds From Operations -- Supplemental Detail and Reconciliations" and "Funds From Operations Reconciliations -- Ten Year Summary", respectively; and the schedule entitled "Net Income and Funds From Operations for the Quarters ended March 31, 2003 and 2002" contained in Exhibit 99.1 to such Current Report on Form 8-K, and - The description of our common stock contained in our Registration Statement on Form 8-A (File No. 1-11312) dated August 4, 1992, filed under the Exchange Act, including any amendment or report filed for the purpose of updating such description. You may request a copy of these filings (other than an exhibit to a filing unless that exhibit is specifically incorporated by reference into that filing) at no cost, by contacting us at the following address or telephone number: Cousins Properties Incorporated 2500 Windy Ridge Parkway Atlanta, Georgia 30339 Attention: Investor Relations Telephone: (770) 955-2200 2 COUSINS PROPERTIES INCORPORATED We are an Atlanta, Georgia-based, fully integrated, self administered equity real estate investment trust, or REIT. We have extensive experience in the real estate industry, including the acquisition, financing, development, management and leasing of properties. We have been a public company since 1962, and our common stock trades on the New York Stock Exchange under the symbol "CUZ." We own, directly and through subsidiaries and joint ventures, a portfolio of well-located, high-quality office, medical office, retail and land development projects and hold several tracts of strategically located undeveloped land. The strategies employed to achieve our investment goals include: - the development of commercial real estate which is leased to quality tenants, - the maintenance of high levels of occupancy within owned properties, - the development of single-family residential subdivisions, - the selective sale and financing of assets, - the creation of joint venture arrangements, and - the acquisition of quality income-producing properties at attractive prices. We also seek to be opportunistic and take advantage of normal real estate business cycles. FORWARD-LOOKING STATEMENTS Certain matters contained in, or incorporated by reference in, this prospectus are forward-looking statements within the meaning of the federal securities laws and are subject to uncertainties and risks. These risks include, but are not limited to, general and local economic conditions, local real estate conditions, the activity of others developing competitive projects, the cyclical nature of the real estate industry, the financial condition of existing tenants, interest rates, our ability to obtain favorable financing or zoning, environmental matters, the effects of terrorism, the risks outlined in the section of this prospectus entitled "Risk Factors" and other risks detailed from time to time in our filings with the SEC. The words "believes," "expects," "estimates" and similar expressions are intended to identify forward-looking statements. Although we believe that our plans, intentions and expectations reflected in any forward-looking statements are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. Our forward-looking statements are based on current expectations and speak only as of the date of these statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise. 3 RISK FACTORS RISKS ASSOCIATED WITH THE DEVELOPMENT OF REAL ESTATE, SUCH AS DELAY, COST OVERRUNS AND THE POSSIBILITY THAT WE ARE UNABLE TO LEASE A LARGE PORTION OF THE SPACE THAT WE BUILD, COULD ADVERSELY AFFECT OUR RESULTS. Development is an inherently risky activity, and development risks cannot be eliminated. Some of the key factors affecting our development of commercial property are as follows: - The availability of sufficient development opportunities. Absence of sufficient development opportunities could result in us experiencing slower growth in value creation and slower growth in earnings and funds from operations per share. Development opportunities are dependent upon a wide variety of factors. From time to time, availability of these opportunities can be extremely volatile as a result of these factors, including economic conditions and product supply/demand characteristics in a particular market. - Predevelopment cost write-offs. There can be significant costs incurred for predevelopment activity for projects that are abandoned. We have procedures and controls in place that are intended to minimize this risk, but it is likely that there will be predevelopment cost write-offs on an ongoing basis. - Project costs. Construction and leasing of a project involves a variety of costs that we cannot always identify at the beginning of a project. On occasion, costs will arise that have not been anticipated or actual costs will exceed estimated costs. These additional costs can be significant and could adversely impact our return on a project and the amount of value created from the development effort on the project. - Leasing risk. The success of a commercial real estate development project is dependent upon entering into leases with acceptable terms within the predefined lease-up period. It is likely that not all the space in a project is leased at the time we commit to a project. If the space is not leased on schedule and upon the expected terms and conditions, the yields, returns and value creation on the project could be adversely impacted. Whether or not tenants are willing to enter into leases on the terms and conditions acceptable to us and on the timetable we expect will depend upon a large variety of factors, many of which are outside of our control. These factors may include: - general business conditions in the economy or in the tenants' or prospective tenants' industries, - supply and demand conditions for space in the marketplace, and - level of competition in the marketplace. - Governmental approvals. We may not be able to obtain on a timely basis, or at all, all necessary zoning, land-use, building, occupancy and other required governmental permits and authorization, which could result in possible delays, decreased profitability and increased management time and attention. IF INTEREST RATES OR OTHER MARKET CONDITIONS FOR OBTAINING CAPITAL OR BORROWING MONEY BECOME UNFAVORABLE, WE MAY BE UNABLE TO RAISE CAPITAL NEEDED TO BUILD OUR DEVELOPMENTS ON A TIMELY BASIS, OR WE MAY BE FORCED TO BORROW MONEY AT HIGHER INTEREST RATES, WHICH WOULD ADVERSELY AFFECT OUR CASH FLOW. We have various sources of capital, each of which involve a variety of risks. These sources of capital include the following: - Credit facilities. Terms and conditions available in the marketplace for credit facilities vary over time. We cannot assure you that the amount we need pursuant to a credit facility will be available at any given time, or at all, or that the rates and fees charged by the lender will be acceptable to us. Our current credit facility charges interest at a variable rate. Variable rate debt creates higher debt service requirements if market interest rates increase, which would adversely affect our cash flow. 4 - Mortgage financing. The availability of financing in the mortgage markets varies from time to time depending on various conditions, including the willingness of mortgage lenders and life insurance companies to lend at any given point in time. Interest rates may also be volatile and we may from time to time elect to not proceed with mortgage financing due to unfavorable interest rates. This could adversely affect our ability to finance our developments. In addition, if a property is mortgaged to secure payment of indebtedness and we are unable to make the mortgage payments, the lender may foreclose, resulting in loss of income and asset value for us. - Property sales. Real estate markets tend to experience market cycles. Because of these cycles, the potential terms and conditions of sales, including prices, may be unfavorable for extended periods of time. Further, the presence of mortgages on our properties could hinder property sales. This could impair our ability to raise capital through property sales at times needed to fund our development projects or other cash needs. - Financing joint ventures. Financing joint ventures tend to be complex arrangements, and there are only a limited number of parties willing to undertake such investment structures. There is no guarantee that we will be able to undertake financing ventures at the times we need capital or on terms acceptable to us. We cannot assure you that the capital we require will be available. In the past, in addition to the capital sources described above, we have obtained capital through the public markets and may do so in the future. If necessary capital is not obtained when needed, we may not be able to develop and construct all the projects available to us, which could adversely affect our results of operations. Lack of financing could also result in an inability to repay maturing debt which could result in defaults and, potentially, loss of properties, as well as an inability to make distributions to our shareholders. Unfavorable interest rates could adversely impact both the cost of projects (through capitalized interest) and our current earnings and funds from operations. OUR OWNERSHIP OF COMMERCIAL REAL ESTATE INVOLVES A NUMBER OF RISKS, INCLUDING LEASING RISK, UNINSURED LOSSES AND CONDEMNATION COSTS, ENVIRONMENTAL ISSUES AND CONCENTRATION OF REAL ESTATE, THE EFFECTS OF WHICH COULD ADVERSELY AFFECT OUR BUSINESS. Our assets may not generate income sufficient to pay our expenses, service our debt and maintain our properties, and, as a result, we may not be able to make distributions to our shareholders. Several factors may adversely affect the economic performance and value of our properties. These factors include, among other things: - changes in the national, regional and local economic climate, - local conditions such as an oversupply of properties or a reduction in demand for properties, - the attractiveness of our properties to tenants, - competition from other available properties, - changes in market rental rates, and - the need to periodically repair, renovate and re-lease space. Our performance also depends on our ability to collect rent from tenants and to pay for adequate maintenance, insurance and other operating costs, including real estate taxes, which could increase over time. Also, the expenses of owning and operating a property are not necessarily reduced when circumstances such as market factors and competition cause a reduction in income from the property. If a property is mortgaged and we are unable to meet the mortgage payments, the lender could foreclose on the mortgage and take the property. In addition, interest rate levels, the availability of financing, changes in laws and governmental regulations (including those governing usage, zoning and taxes) and financial distress or bankruptcies of tenants may adversely affect our results of operations and financial condition. 5 Leasing risk. Our operating revenues are dependent upon entering into leases with and collecting rents from tenants. National, regional and local economic conditions may adversely impact tenants and potential tenants in the various marketplaces in which projects are located, which could adversely affect their ability to continue to pay rents and possibly to occupy their space. Tenants sometimes experience bankruptcies and pursuant to the various bankruptcy laws, leases may be rejected and thereby terminated. When leases expire or are terminated, replacement tenants may or may not be available upon acceptable terms and conditions. In addition, our cash flows and net income could be adversely impacted if existing leases expire or are terminated and at such time, market rental rates are lower than the previous contractual rental rates. Our distributable cash flow and our ability to make distributions to our shareholders would be adversely affected if a significant number of our tenants fail to pay their rent due to bankruptcy, weakened financial condition or otherwise. Uninsured losses and condemnation losses. Accidents, earthquakes, terrorism incidents and other losses at our properties could materially adversely affect our operating results. Casualties may occur that significantly damage an operating property, and insurance proceeds may be materially less than the total loss to us. Although we maintain casualty insurance, which policies we believe to be adequate and appropriate, some types of losses, such as lease and other contract claims, generally are not insured. Certain types of insurance may not be available or may be available on terms that could result in large uninsured losses to us. We own property in California and other locations where property is subject to damage from earthquakes, as well as other natural catastrophes. We also own property that could be subject to loss due to terrorism incidents. The earthquake insurance and terrorism insurance markets, in particular, tend to be volatile and the availability and pricing of insurance to cover losses from earthquakes and terrorism incidents may be unfavorable from time to time. In addition, earthquakes and terrorism incidents could result in a significant loss that is uninsured due to the high level of deductibles or damage in excess of levels of coverage. Property ownership also involves potential liability to third parties for such matters as personal injuries occurring on the property. Such losses may not be fully insured. In addition to uninsured losses, various governmental authorities may condemn all or parts of operating properties. Such condemnations could adversely affect the viability of such projects. Environmental problems and costs. Environmental issues that arise at our properties could have an adverse effect on our financial condition and performance. Federal, state and local laws and regulations relating to the protection of the environment may require a current or previous owner or operator of real estate to investigate and clean up hazardous or toxic substance or petroleum product releases at the property. The owner or operator may have to pay a governmental entity or third parties for investigation and clean-up costs incurred in connection with the contamination. These laws typically impose clean-up responsibility and liability without regard to whether the owner or operator knew of or caused the presence of the contaminants. Even if more than one person may have been responsible for the contamination, each person covered by the environmental laws may be held responsible for all of the clean-up costs incurred. In addition, third parties may sue the owner or operator of a site for damages and costs resulting from environmental contamination emanating from that site. Joint venture and partnership structure risks. Our joint venture partners have rights to take some actions over which we have no control, which could aversely affect our interests in the related joint ventures and in some cases could adversely affect our overall financial condition or results of operations. We have interests in a number of joint ventures and partnerships and may in the future conduct our business through additional joint ventures and partnerships. These structures involve participation by other parties whose interests and rights may not be the same as ours. For example, a partner or co-investor might have economic and/or other business interests or goals which are unlike or incompatible with our business interests or goals and those partners or co-investors may be in a position to take action contrary to our interests. In addition, such partners or co-investors may become bankrupt and such proceedings could have an adverse impact on the operation of the partnership or joint venture. The rights of partners and co-investors could adversely impact both the operation and ownership of the underlying properties and the disposition of such underlying properties. 6 Regional concentration of properties. A large percentage of our properties are located in Atlanta, Georgia. In the future, there may be significant concentrations in Atlanta and/or other markets. If the demand for office or retail space deteriorates in any market in which we have significant holdings, our interests could be adversely affected, including, without limitation, loss in value of properties, decreased cash flows and decreased abilities to make or maintain distributions to our shareholders. ANY FAILURE TO TIMELY SELL THE LOTS DEVELOPED BY OUR LAND DIVISION COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS. Our land division develops residential subdivisions, primarily in metropolitan Atlanta, Georgia. Our land division also participates in joint ventures that develop or plan to develop subdivisions in metropolitan Atlanta, as well as Texas, Florida and other states. This division also from time to time supervises sales of unimproved properties that we own or control. Residential lot and home sales can be highly cyclical. We cannot assure you that, once a development is undertaken, we will be able to sell the various developed lots in a timely manner. Failure to sell any of these lots in a timely manner could result in significantly increased carrying costs and erosion or elimination of profit with respect to the development. In addition, actual construction and development costs with respect to subdivisions can exceed estimates for various reasons, including unknown site conditions. Subdivision lot sales and unimproved property sales generally arise and close fairly quickly and are, accordingly, difficult to predict with any precision. Additionally, some of our residential properties are multi-year projects, and market conditions may change between the time we decide to develop a property and the time that all or some of the lots or tracts may be ready for sale. Any estimates of such sales may differ substantially from the actual results of such sales and our results of operations may differ substantially from any such estimates. COVENANTS CONTAINED IN OUR CREDIT FACILITY AND MORTGAGES COULD RESTRICT OR HINDER OUR OPERATIONAL FLEXIBILITY, WHICH COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS. Our credit facility imposes specified financial and operating covenants on us, such as restrictions and limitations on our ability to incur debt and create liens, leverage ratios, a fixed charge coverage ratio and interest coverage ratios. If we fail to meet those covenants, our ability to borrow may be impaired, which could potentially harm our liquidity. Additionally, some of our properties are subject to mortgages. These mortgages contain customary negative covenants, including limitations on our ability, without the lender's prior consent, to further mortgage that property, to modify existing leases or to sell that property. Compliance with these covenants could harm our operational flexibility and our financial condition. OUR THIRD PARTY FEE BUSINESS EXPERIENCES VOLATILITY BASED ON A NUMBER OF FACTORS, INCLUDING TERMINATION OF CONTRACTS. We render development, leasing, property management, asset management and property services to unrelated third party property owners. Contracts for these services are generally short-term in nature and permit termination without extensive notice. Fees from such activity can be volatile due to unexpected terminations. Extensive unexpected terminations could materially adversely affect our results of operations. Further, the timing of the generation of new contracts for services is very difficult to predict. As a result of the foregoing, any estimates of revenues from such businesses may prove to be materially different from actual results. WE MAY NOT ADEQUATELY OR ACCURATELY ASSESS NEW OPPORTUNITIES, WHICH COULD MATERIALLY HARM OUR RESULTS OF OPERATIONS. Our estimates and expectations with respect to new lines of business and opportunities may differ substantially from actual results, and any losses from these endeavors could materially adversely affect our results of operations. We regard ourselves as entrepreneurial in nature. We seek opportunities in various sectors of real estate and in various geographical areas and from time to time we undertake new opportunities, including new lines of business. Not all opportunities or lines of business prove to be 7 profitable. We expect from time to time that some of our business ventures may have to be terminated because they do not meet our expectations. WE ARE DEPENDENT UPON KEY PERSONNEL, THE LOSS OF ANY OF WHICH COULD ADVERSELY IMPAIR OUR BUSINESS. One of our objectives is to develop and maintain a strong management group at all levels of our company. At any given time, we could lose the services of key executives and other employees. The loss of such services could have an adverse impact upon our operations, financial results and management. OUR RESTATED AND AMENDED ARTICLES OF INCORPORATION CONTAIN LIMITATIONS ON OWNERSHIP OF OUR STOCK, WHICH MAY PREVENT A TAKEOVER WHICH MIGHT OTHERWISE BE IN THE BEST INTERESTS OF OUR SHAREHOLDERS. Our Restated and Amended Articles of Incorporation, as amended, impose limitations on the ownership of our stock. In general, except for certain individuals who owned stock at the time of adoption of these limitations, no "Person" may "Own" more than 3.9% (by value) of our outstanding stock. For this purpose, "Ownership" is determined under the tax rules that apply to determine whether we satisfy the stock ownership requirements for qualification as a REIT for federal income tax purposes. The ownership limitation may have the effect of delaying, inhibiting or preventing a transaction or a change in control that might involve a premium price for our common stock or otherwise be in the best interest of our shareholders. ANY FAILURE TO CONTINUE TO QUALIFY AS A REAL ESTATE INVESTMENT TRUST FOR FEDERAL INCOME TAX PURPOSES COULD HAVE A MATERIAL ADVERSE IMPACT ON US AND OUR SHAREHOLDERS. We intend to operate in a manner to qualify as a real estate investment trust, or REIT, for federal income tax purposes. However, we cannot assure you that we have qualified or will remain qualified as a REIT. Qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code of 1986, as amended, or the Code, for which there are only limited judicial or administrative interpretations. Certain facts and circumstances not entirely within our control may affect our ability to qualify as a REIT. In addition, we cannot assure you that legislation, new regulations, administrative interpretations or court decisions will not adversely affect our qualification as a REIT or the federal income tax consequences of our REIT status. If we were to fail to qualify as a REIT, we would not be allowed to deduct our distributions to shareholders in computing our taxable income. In this case, we would be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates. Unless entitled to relief under certain Code provisions, we also would be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost. As a result, the cash available for distribution to our shareholders would be reduced for each of the years involved. Although we currently intend to operate in a manner designed to qualify as a REIT, it is possible that future economic, market, legal, tax or other considerations may cause our board of directors to revoke the REIT election. In order to qualify as a REIT, we generally will be required each taxable year to distribute to our shareholders at least 90% of our net taxable income (excluding any net capital gain). To the extent that we do not distribute all of our net capital gain or we distribute at least 90%, but less than 100%, of our other taxable income, we will be subject to tax on the undistributed amounts at regular corporate rates. In addition, we will be subject to a 4% nondeductible excise tax to the extent that distributions paid by us during the calendar year are less than the sum of the following: - 85% of our ordinary income, - 95% of our capital gain net income for that year, and - 100% of our undistributed taxable income from prior years. 8 We intend to make distributions to our shareholders to comply with the 90% distribution requirement, to avoid corporate-level tax on undistributed taxable income and to avoid the nondeductible excise tax. Differences in timing between taxable income and cash available for distribution could require us to borrow funds to meet the 90% distribution requirement, to avoid corporate-level tax on undistributed taxable income and to avoid the nondeductible excise tax. Satisfying the distribution requirements may also make it more difficult to fund new development projects. 9 USE OF PROCEEDS Unless otherwise indicated in the accompanying prospectus supplement, we intend to use the net proceeds of any sale of securities for general corporate purposes. Pending application of such net proceeds, we will invest such proceeds in interest-bearing accounts and short-term, interest-bearing securities, which are consistent with our intention to continue to qualify for taxation as a REIT. RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
YEAR ENDED DECEMBER 31, THREE MONTHS ------------------------------------- ENDED 1998 1999 2000 2001 2002 MARCH 31, 2003 ----- ----- ----- ----- ----- -------------- Ratio of Earnings to Fixed Charges....... 4.19 3.99 2.56 2.49 2.02 3.43
There was no preferred stock outstanding for any of the periods shown above. Accordingly, the ratio of earnings to combined fixed charges and preferred stock dividends is identical to the ratio of earnings to fixed charges. We compute the ratio of earnings to fixed charges and ratio of earnings to fixed charges and preferred stock dividends by dividing earnings by fixed charges. For this purpose, earnings consist of pre-tax income from continuing operations, adjusted for equity investees and minority interests, further adjusted for amortization of capitalized interest and fixed charges less capitalized interest. Fixed charges consist of interest expense (including capitalized interest) and the portion of rental expense representing interest (estimated as 30%). 10 DESCRIPTION OF COMMON STOCK GENERAL Our authorized common stock consists of 150 million shares of common stock, par value $1.00 per share. Each outstanding share of common stock entitles the holder to one vote on all matters presented to shareholders for a vote. Cumulative voting for the election of directors is not permitted, which means that holders of more than 50% of the shares of common stock voting for the election of directors can elect all of the directors if they choose to do so and the holders of the remaining shares cannot elect any directors. Holders of common stock have no preemptive rights. At May 31, 2003, there were 48,289,683 shares of common stock outstanding and 8,647,013 shares of common stock reserved for issuance under our various plans. Shares of common stock currently outstanding are listed for trading on the New York Stock Exchange, or the NYSE, under the symbol "CUZ." We will apply to the NYSE to list the additional shares of common stock to be sold pursuant to any prospectus supplement, and we anticipate that such shares will be so listed. All shares of common stock issued will be duly authorized, fully paid, and nonassessable. Distributions may be paid to the holders of common stock if and when declared by our board of directors out of funds legally available therefor. Under Georgia law, shareholders are generally not liable for our debts or obligations. If Cousins is liquidated, subject to the rights of any holders of preferred stock, if any, to receive preferential distributions, each outstanding share of common stock will be entitled to participate pro rata in the assets remaining after payment of, or adequate provision for, all of our known debts and liabilities. PROVISIONS OF OUR ARTICLES OF INCORPORATION AND BYLAWS In addition to any vote otherwise required by applicable law, our Restated and Amended Articles of Incorporation, as amended, or Articles of Incorporation, provide that: - any merger or consolidation of Cousins with or into any other corporation, - any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of related transactions) of all or substantially all of the assets of Cousins, - the adoption of any plan or proposal for the liquidation or dissolution of Cousins, or - any reclassification of our securities or recapitalization or reorganization of Cousins, requires the affirmative vote of the holders of at least two-thirds of the then outstanding shares of common stock. In addition, any amendment of or addition to our Articles of Incorporation or our Bylaws which would have the effect of amending, altering, changing or repealing the foregoing provisions of our Articles of Incorporation requires the affirmative vote of the holders of at least two-thirds of the then outstanding shares of common stock. The provisions of our Articles of Incorporation described above and those described below under the caption "Restrictions on Transfer" may make it more difficult, and thereby discourage, attempts to take over control of Cousins, and may make it more difficult to remove incumbent management. None of these provisions, however, prohibit an offer for all of the outstanding shares of our common stock or a merger of Cousins with another entity. Other than as set forth in this prospectus, our board of directors has no present plans to adopt any additional measures which would discourage a takeover or change in control of Cousins. RESTRICTIONS ON TRANSFER In order for Cousins to qualify as a REIT under the Code, not more than 50% in value of our outstanding stock may be owned, directly or indirectly, by five or fewer individuals during the last half of a 11 taxable year, and our stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year. See "Certain Federal Income Tax Considerations." Because our board of directors believes that it is essential for us to continue to qualify as a REIT, our board of directors has adopted, and our shareholders have approved, provisions of the Articles of Incorporation restricting the acquisition of shares of stock. Article 11 of our Articles of Incorporation generally prohibits any transfer of shares of stock which would cause the transferee of such shares to "Own" shares in excess of 3.9% in value of the outstanding shares of all classes of stock (the "Limit"). For purposes of Article 11, "Ownership" of shares is broadly defined to include all shares that would be attributed to a "Person" for purposes of determining whether Cousins is "closely held" under Section 856(a)(6) of the Code. A "Person" is broadly defined to include an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c)(1) of the Code), association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity and also includes a group as that term is used for purposes of Section 13(d)(3) of the Exchange Act, but does not include a corporate underwriter which participates in a public offering of our common stock for a period of seven days following the purchase by such underwriter. "Person" does not include an organization that qualifies under Section 501(c)(3) of the Code and that is not a private foundation within the meaning of Section 509(a) of the Code. Article 11 also prohibits any Person, except for Persons who Owned shares in excess of the Limit on December 31, 1986 ("Prior Owners"), from Owning shares in excess of the Limit. Article 11 further prohibits Prior Owners (including certain family members and other persons whose shares are attributed to such Prior Owners under the relevant sections of the Code) from acquiring any shares not Owned as of December 31, 1986, unless after any such acquisition, such Prior Owner would not Own a percentage of the value of our outstanding shares of stock greater than the percentage of the value of our outstanding shares of stock Owned by such Prior Owner on December 31, 1986, excluding, for the purpose of calculating such Prior Owner's Ownership percentage after such acquisition, shares acquired since December 31, 1986 through pro rata stock dividends or splits, shareholder approved stock plans or from Persons whose shares are attributed to such Prior Owner for determining compliance with the stock ownership requirement. The Articles of Incorporation allow our board of directors, in the exercise of its sole and absolute discretion, to except from the Limit certain specified shares of stock proposed to be transferred to a Person who provided our board of directors with such evidence, undertakings and assurances our board of directors may require that such transfer to such Person of the specified shares of stock will not prevent our continued qualification as a REIT under the Code. Our board of directors may, but is not required to, condition the grant of any such exemption on obtaining an opinion of counsel, a ruling from the Internal Revenue Service, assurances from one or more third parties as to future acquisitions of shares or such other assurances as our board of directors may deem to be satisfactory. If, notwithstanding the prohibitions contained in Article 11, a transfer occurs which, absent the prohibitions, would have resulted in the Ownership of shares in excess of the Limit or in excess of those owned by a Prior Owner on December 31, 1986, such transfer is void and the transferee acquires no rights in the shares. Shares attempted to be acquired in excess of the Limit or shares attempted to be acquired by a Prior Owner after December 31, 1986, as the case may be, would constitute "Excess Shares" under Article 11. Excess Shares have the following characteristics under Article 11: - Excess Shares shall be deemed to have been transferred to Cousins as Trustee of a trust (the "Trust") for the exclusive benefit of the Person or Persons to whom the Excess Shares are later transferred, - an interest in the Trust (representing the number of Excess Shares held by the Trust attributable to the particular transferee) shall be transferable by the transferee (1) at a price not exceeding the price paid by such transferee in connection with the transfer to it or (2) if the shares became Excess Shares in a transaction other than for value, at a price not exceeding the Market Price (as 12 defined) on the date of transfer, and only to a Person who could Own the shares without the shares being deemed Excess Shares, - Excess Shares shall not have any voting rights and shall not be considered for the purposes of any shareholder vote or of determining a quorum for such vote, but shall continue to be reflected as issued and outstanding stock of Cousins, - no dividends or distributions shall be paid with respect to Excess Shares, and any dividends paid in error on Excess Shares are payable back to us upon demand, and - Excess Shares shall be deemed to have been offered for sale to Cousins for the period of 90 days following the date on which the shares become Excess Shares, if notice is given by the transferee to us, or the date on which our board of directors determines that such shares are Excess Shares, if notice is not given by the transferee to Cousins. During such 90-day period, we may accept the offer and purchase any or all of such Excess Shares at the lesser of the price paid by the transferee and the Market Price (as defined) on the date we accept the offer to purchase. Before any transfer of Excess Shares to any transferee, we must (1) be notified, (2) waive our rights to accept the offer to purchase the Excess Shares, and (3) determine in good faith that the shares do not constitute Excess Shares in the hands of the transferee. Under Article 11, if any Person acquires shares in violation of the prohibitions in Article 11, and we would have qualified as a REIT under the Code but for such acquisition, that Person must indemnify us in an amount equal to the amount that will put us in the same financial position as we would have been in had we not lost our qualified REIT status. Such amount includes the full amount of all taxes, penalties, interest imposed and all costs (plus interest thereon) incurred by us as a result of losing our qualified REIT status. Such indemnification is applicable until we are again able to elect to be taxed as a REIT. If more than one Person has acquired shares in violation of Article 11 at or prior to the time of the loss of REIT qualification, then all such Persons shall be jointly and severally liable for the indemnity. Article 11 also requires our board of directors to take such action as it deems advisable to prevent or refuse to give effect to any transfer or acquisition of our stock in violation of Article 11, including refusing to make or honor on our books, or seeking to enjoin, a transfer in violation of Article 11. Article 11 does not limit the authority of our board of directors to take any other action as it deems necessary or advisable to protect us and the interests of our shareholders by preserving our qualified REIT status. Article 11 further requires any Person who acquires or attempts to acquire shares in violation of Article 11 to give us written notice of such transaction and to provide us with such other relevant information as we may request. We can request such information from any Person that we determine, in good faith, is attempting to acquire shares in violation of Article 11. All certificates representing shares of stock bear a legend referring to the restrictions described above. LIMITATION OF DIRECTORS' LIABILITY The Articles of Incorporation eliminate, subject to certain exceptions, the personal liability of a director to Cousins or our shareholders for monetary damages for breaches of such director's duty of care or other duties as a director. The Articles of Incorporation do not provide for the elimination of, or any limitation on, the personal liability of a director for (1) any appropriation, in violation of the director's duties, of any business opportunity of Cousins, (2) acts or omissions that involve intentional misconduct or a knowing violation of law, (3) unlawful corporate distributions or (4) any transaction from which the director derived an improper personal benefit. These provisions of our Articles of Incorporation will limit the remedies available to a shareholder in the event of breaches of any director's duties to such shareholder or Cousins. Under Article VI of our Bylaws, we are required to indemnify any person who is made or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal (including any action by or in the 13 right of Cousins), by reason of the fact that he is or was a director, officer, agent or employee of Cousins against expenses (including reasonable attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such proceeding provided that such person shall not be indemnified in any proceeding in which he is adjudged liable to us for: - any appropriation, in violation of his duties, or of any business opportunity of Cousins, - acts or omissions which involve intentional misconduct or knowing violation of law, - unlawful corporate distributions, or - any transaction from which such person received improper personal benefit. Expenses incurred by any person according to the foregoing provisions shall be paid by us in advance of the final disposition of such proceeding upon receipt of the written affirmation of such person's good faith belief that he has met the standards of conduct required under our Bylaws. GEORGIA ANTI-TAKEOVER STATUTES The Georgia Business Corporation Code restricts certain business combinations with "interested shareholders" and contains fair price requirements applicable to certain mergers with certain "interested shareholders" that are summarized below. The restrictions imposed by these statutes will not apply to a corporation unless it elects to be governed by these statutes. Cousins has not elected to be covered by these restrictions but, although we have no present intention to do so, could elect to do so in the future. The Georgia business combination statute regulates business combinations such as mergers, consolidations, share exchanges and asset purchases where the acquired business has at least 100 shareholders residing in Georgia and has its principal office in Georgia, and where the acquiror became an "interested shareholder" of the corporation, unless either (1) the transaction resulting in such acquiror becoming an "interested shareholder" or the business combination received the approval of the corporation's board of directors prior to the date on which the acquiror became an "interested shareholder", or (2) the acquiror became the owner of at least 90% of the outstanding voting stock of the corporation, excluding shares held by directors, officers and affiliates of the corporation and shares held by certain other persons, in the same transaction in which the acquiror became an "interested shareholder." For purposes of this statute, an "interested shareholder" generally is any person who directly or indirectly, alone or in concert with others, beneficially owns or controls 10% or more of the voting power of the outstanding voting shares of the corporation. The statute prohibits business combinations with an unapproved "interested shareholder" for a period of five years after the date on which such person became an "interested shareholder." The statute restricting business combinations is broad in its scope and is designed to inhibit unfriendly acquisitions. The Georgia fair price statute prohibits certain business combinations between a Georgia business corporation and an "interested shareholder" unless: - certain "fair price" criteria are satisfied, - the business combination is unanimously approved by the continuing directors, - the business combination is recommended by at least two-thirds of the continuing directors and approved by a majority of the votes entitled to be cast by holders of voting shares, other than voting shares beneficially owned by the "interested shareholder," or - the interested shareholder has been such for at least three years and has not increased his ownership position in such three-year period by more than one percent in any twelve-month period. The fair price statute is designed to inhibit unfriendly acquisitions that do not satisfy the specified "fair price" requirements. 14 OTHER MATTERS The transfer agent and registrar for our common stock is Wachovia Bank, N.A. DESCRIPTION OF WARRANTS We may issue warrants for the purchase of common stock. The warrants may be issued independently or together with any other securities offered by any prospectus supplement and may be attached to or separate from the common stock. Each series of warrants will be issued under a separate warrant agreement to be entered into between us and a warrant agent specified in the applicable prospectus supplement. The warrant agent will act solely as our agent in connection with the warrants of such series and will not assume any obligation or relationship of agency or trust for or with any holders or beneficial owners of warrants. The following sets forth certain general terms and provisions of the warrants offered by this prospectus. Further terms of the warrants and the applicable warrant agreement will be set forth in the applicable prospectus supplement. The applicable prospectus supplement will describe the terms of the warrants in respect of which this prospectus is being delivered, including, where applicable, the following: - the title of such warrants, - the aggregate number of such warrants, - the price or prices at which such warrants will be issued, - the designation, number and terms of shares of common stock purchasable upon exercise of such warrants, - the date, if any, on and after which such warrants and the related common stock will be separately transferable, - the price at which each share of common stock purchasable upon exercise of such warrants may be purchased, - the date on which the right to exercise such warrants shall commence and the date on which such right shall expire, - the minimum or maximum amount of such warrants which may be exercised at any one time, - information with respect to book-entry procedures, if any, - a discussion of certain federal income tax considerations, and - any other terms of such warrants, including terms, procedures and limitations relating to the exchange and exercise of such warrants. DESCRIPTION OF DEBT SECURITIES This section describes the general terms and provisions of the debt securities which may be offered by this prospectus. The debt securities will be issued under an Indenture (the "Indenture") between us and a Trustee (the "Trustee") chosen by us and qualified to act as Trustee under the Trust Indenture Act of 1939, as amended, or TIA. The Indenture has been filed as an exhibit to our Registration Statement (No. 333-12031) on September 16, 1996 and is available for inspection at the corporate trust office of the Trustee or as described above under "Where You Can Find More Information." The Indenture is subject to, and governed by, the TIA. The statements made hereunder relating to the Indenture and the debt securities to be issued thereunder are summaries of certain provisions thereof and do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all provisions of the Indenture and such debt securities. All section references appearing herein are to sections of the Indenture. 15 GENERAL The debt securities will be our direct, unsecured obligations and will rank equally with all other unsecured and unsubordinated indebtedness of Cousins. As of the date of this prospectus, we have no publicly registered debt outstanding. At March 31, 2003, our total outstanding debt (including our pro rata share of unconsolidated joint venture debt) was $949.3 million. The debt securities may be issued without limit as to aggregate principal amount, in one or more series, in each case as established from time to time in or pursuant to authority granted by a resolution of our board of directors or as established in one or more indentures supplemental to the Indenture. All debt securities of one series need not be issued at the same time and, unless otherwise provided, a series may be reopened, without the consent of the holders of the debt securities of such series, for issuances of additional debt securities of such series (Section 301). The Indenture provides that there may be more than one Trustee thereunder, each with respect to one or more series of debt securities. Any Trustee under the Indenture may resign or be removed with respect to one or more series of debt securities, and a successor Trustee may be appointed to act with respect to such series (Section 608). In the event that two or more persons are acting as Trustee with respect to different series of debt securities, each such Trustee shall be a trustee of a trust under the Indenture separate and apart from the trust administered by any other Trustee (Section 609), and, except as otherwise indicated herein, any action described herein to be taken by a Trustee may be taken by each such Trustee with respect to, and only with respect to, the one or more series of debt securities for which it is Trustee under the Indenture. Reference is made to the prospectus supplement relating to the series of debt securities offered thereby for the specific terms thereof, including: (1) the title of such debt securities, (2) the aggregate principal amount of such debt securities and any limit on such aggregate principal amount, (3) the percentage of the principal amount at which such debt securities will be issued and, if other than the principal amount thereof, the portion of the principal amount thereof payable upon declaration of acceleration of the maturity thereof, (4) the date or dates, or the method for determining such date or dates, on which the principal of such debt securities will be payable, (5) the rate or rates, or the method by which such rate or rates shall be determined, at which such debt securities will bear interest, if any, (6) the date or dates, or the method for determining such date or dates, from which any interest will accrue, the dates on which any such interest will be payable, the record dates for such interest payment dates, or the method by which any such date shall be determined, the person to whom such interest shall be payable, and the basis upon which interest shall be calculated if other than that of a 360-day year of twelve 30-day months, (7) the place or places where the principal of (and premium, if any), interest, if any, and additional amounts, if any, on such debt securities will be payable, such debt securities may be surrendered for registration of transfer or exchange and notices or demands to or upon us in respect of such debt securities and the Indenture may be served, (8) the period or periods within which, the price or prices at which, and the terms and conditions upon which such debt securities may be redeemed, as a whole or in part, at our option, if we are to have such an option, (9) the obligation, if any, of us to redeem, repay or purchase such debt securities pursuant to any sinking fund or analogous provision or at the option of a holder thereof, and the period or periods within which, the price or prices at which, and the terms and conditions upon which such debt securities will be redeemed, repaid or purchased, as a whole or in part, pursuant to such obligation, 16 (10) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which any registered debt securities ("Registered Securities") shall be issuable and, if other than denominations of $5,000 and any integral multiple thereof, the denomination or denominations in which any bearer debt securities ("Bearer Securities") shall be issuable, (11) if other than the Trustee, the identity of each security registrar and/or paying agent, (12) if other than the principal amount thereof, the portion of the principal amount of the debt securities that shall be payable upon declaration of acceleration of the maturity thereof or the method by which such portion shall be determined, (13) if other than U.S. dollars, the currency or currencies in which payment of the principal of (and premium, if any) or interest or additional amounts, if any, on the debt securities shall be payable or in which the debt securities shall be denominated, (14) whether the amount of payments of principal of (and premium, if any) or interest, if any, on the debt securities may be determined with reference to an index, formula or other method (which index, formula or method may be based, without limitation, on one or more currencies, currency units, composite currencies, commodities, equity indices or other indices), and the manner in which such amounts shall be determined, (15) whether the principal of (and premium, if any) or interest or additional amounts, if any, on the debt securities are to be payable, at our election or a holder (a "Holder") thereof, in a currency or currencies, currency unit or units or composite currency or currencies other than that in which such debt securities are denominated or stated to be payable, the period or periods within which, and the terms and conditions upon which, such election may be made, and the time and manner of, and identity of the exchange rate agent with responsibility for, determining the exchange rate between the currency or currencies, currency unit or units or composite currency or currencies in which such debt securities are denominated or stated to be payable and the currency or currencies, currency unit or units or composite currency or currencies in which such debt securities are to be so payable, (16) provisions, if any, granting special rights to the Holders of the debt securities upon the occurrence of such events as may be specified, (17) any deletions from, modifications of or additions to the events of default (the "Events of Default") or covenants of Cousins with respect to the debt securities, whether or not such Events of Default or covenants are consistent with the Events of Default or covenants set forth in the Indenture, (18) whether the debt securities are to be issuable as Registered Securities, Bearer Securities (with or without coupons) or both, any restrictions applicable to the offer, sale or delivery of Bearer Securities and the terms upon which Bearer Securities may be exchanged for Registered Securities and vice versa (if permitted by applicable laws and regulations), whether any debt securities are to be issuable initially in temporary global form and whether any debt securities are to be issuable in permanent global form with or without coupons and, if so, whether beneficial owners of interests in any such permanent global debt security may exchange such interests for debt securities of such series and of like tenor of any authorized form and denomination and the circumstances under which any such exchanges may occur, and, if Registered Securities are to be issuable as a global debt security, the identity of the depositary for such series, (19) the date as of which any Bearer Securities and any temporary global debt security representing Outstanding (as hereinafter defined) debt securities shall be dated if other than the date of original issuance of the first debt security of the series to be issued, (20) the person to whom any interest on any Registered Security shall be payable, if other than the person in whose name that debt security is registered at the close of business on the applicable record date (the "Regular Record Date") for such interest, the manner in which, or the person to whom any interest on any Bearer Security shall be payable, if otherwise than upon presentation and surrender of the coupons appertaining thereto as they severally mature, and the extent to which, or 17 the manner in which, any interest payable on a temporary global debt security on an interest payment date (an "Interest Payment Date") will be paid, (21) if the defeasance and covenant defeasance provisions described herein are to be inapplicable or any modifications of such provisions, (22) if the debt securities are to be issuable in definitive form (whether upon original issue or upon exchange of a temporary debt security) only upon receipt of certain certificates or other documents or satisfaction of other conditions, then the form and/or terms of such certificates, documents or conditions, (23) whether and under what circumstances we will pay additional amounts on the debt securities in respect of any tax, assessment or governmental charge and, if so, whether we will have the option to redeem such debt securities rather than pay such additional amounts (and the terms of any such option), (24) with respect to any debt securities that provide for optional redemption or prepayment upon the occurrence of certain events (such as a change of control of Cousins), (i) the possible effects of such provisions on the market price of our securities or in deterring certain mergers, tender offers or other takeover attempts, and our intention to comply with the requirements of Rule 14e-l under the Exchange Act and any other applicable securities laws in connection with such provisions; (ii) whether the occurrence of the specified events may give rise to cross-defaults on other indebtedness such that payment on such debt securities may be effectively subordinated; and (iii) the existence of any limitations on our financial or legal ability to repurchase such debt securities upon the occurrence of such an event (including, if true, the lack of assurance that such a repurchase can be effected) and the impact, if any, under the Indenture of such a failure, including whether and under what circumstances such a failure may constitute an Event of Default, and (25) any other terms of such debt securities not inconsistent with the terms of the Indenture. The debt securities may provide for less than the entire principal amount thereof to be payable upon declaration of acceleration of the maturity thereof ("Original Issue Discount Securities"). If material or applicable, special U.S. federal income tax, accounting and other considerations applicable to Original Issue Discount Securities will be described in the applicable prospectus supplement. Except as described under "-- Merger, Consolidation or Sale" or as may be set forth in any prospectus supplement, the Indenture does not contain any other provisions that would limit the ability of us to incur indebtedness or that would afford holders of the debt securities protection in the event of (i) a highly leveraged or similar transaction involving us, or our management, or any affiliate of any such party, (ii) a change of control, or (iii) a reorganization, restructuring, merger or similar transaction involving us that may adversely affect the holders of the debt securities. In addition, subject to the limitations set forth under "-- Merger, Consolidation or Sale," we may, in the future, enter into certain transactions, such as the sale of all or substantially all of our assets or the merger or consolidation of Cousins, that would increase the amount of our indebtedness or substantially reduce or eliminate our assets, which may have an adverse effect on our ability to service our indebtedness, including the debt securities. In addition, restrictions on ownership and transfers of our common stock are designed to preserve our status as a REIT and, therefore, may act to prevent or hinder a change of control. See "Description of Common Stock -- Restrictions on Transfer." Reference is made to the applicable prospectus supplement for information with respect to any deletions from, modifications of or additions to the events of default or covenants that are described below, including any addition of a covenant or other provision providing event risk or similar protection. The applicable prospectus supplement will summarize the nature and scope of any event risk provisions contained in any offered debt security, including the types of events protected by such provisions and any limitations on our ability to satisfy our obligations under such provisions. The applicable prospectus supplement also will summarize anti-takeover provisions in other securities of Cousins, if any, 18 which could have a material effect on the offered debt securities. Such summary will contain a detailed and quantifiable definition of any "change in control" provision. Reference is made to "-- Certain Covenants" below and to the description of any additional covenants with respect to a series of debt securities in the applicable prospectus supplement. Except as otherwise described in the applicable prospectus supplement, compliance with such covenants generally may not be waived with respect to a series of debt securities by our board of directors or by the Trustee unless the Holders of at least a majority in principal amount of all outstanding debt securities of such series consent to such waiver, except to the extent that the defeasance and covenant defeasance provisions of the Indenture described under "-- Discharge, Defeasance and Covenant Defeasance" below apply to such series of debt securities. See "-- Modification of the Indenture." DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER Unless otherwise described in the applicable prospectus supplement, the debt securities of any series which are Registered Securities, other than Registered Securities issued in global form (which may be of any denomination) shall be issuable in denominations of $1,000 and any integral multiple thereof, and the debt securities which are Bearer Securities, other than Bearer Securities issued in global form (which may be of any denomination), shall be issuable in denominations of $5,000 (Section 302). Unless otherwise specified in the applicable prospectus supplement, the principal of (and premium, if any) and interest on any series of debt securities will be payable at the corporate trust office of the Trustee, provided that, at our option, payment of interest may be made by check mailed to the address of the Person entitled thereto as it appears in the applicable Security Register or by wire transfer of funds to such Person at an account maintained within the United States (Sections 301, 307 and 1002). Any interest not punctually paid or duly provided for on any Interest Payment Date with respect to a debt security ("Defaulted Interest") will forthwith cease to be payable to the Holder on the Regular Record Date and may either be paid to the Person in whose name such debt security is registered at the close of business on a special record date (the "Special Record Date") for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to the Holder of such debt security not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner, all as more completely described in the Indenture. Subject to certain limitations imposed upon debt securities issued in book-entry form, the debt securities of any series will be exchangeable for other debt securities of the same series and of a like aggregate principal amount and tenor of different authorized denominations upon surrender of such debt securities at the corporate trust office of the Trustee. In addition, subject to certain limitations imposed upon debt securities issued in book-entry form, the debt securities of any series may be surrendered for registration of transfer thereof at the corporate trust office of the Trustee. Every debt security surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer. No service charge will be made for any registration of transfer or exchange of any debt securities, but the Trustee or we may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith (Section 305). If the applicable prospectus supplement refers to any transfer agent (in addition to the Trustee) initially designated by us with respect to any series of debt securities, we may at any time rescind the designation of any such transfer agent or approve a change in the location through which any such transfer agent acts, except that we will be required to maintain a transfer agent in each place of payment for such series. We may at any time designate additional transfer agents with respect to any series of debt securities (Section 1002). Neither we nor the Trustee shall be required (i) to issue, register the transfer of or exchange any debt security if such debt security may be among those selected for redemption during a period beginning at the opening of business 15 days before selection of the debt securities to be redeemed and ending at the close of business on (A) if such debt securities are issuable only as Registered Securities, the day of the mailing of the relevant notice of redemption and (B) if such debt securities are issuable as Bearer Securities, the day of the first publication of the relevant notice of redemption or, if such debt securities are also issuable 19 as Registered Securities and there is no publication, the mailing of the relevant notice of redemption, or (ii) to register the transfer of or exchange any Registered Security so selected for redemption in whole or in part, except, in the case of any Registered Security to be redeemed in part, the portion thereof not to be redeemed, or (iii) to exchange any Bearer Security so selected for redemption except that such a Bearer Security may be exchanged for a Registered Security of that series and like tenor, provided that such Registered Security shall be simultaneously surrendered for redemption, or (iv) to issue, register the transfer of or exchange any debt security which has been surrendered for repayment at the option of the Holder, except the portion, if any, of such debt security not to be so repaid (Section 305). MERGER, CONSOLIDATION OR SALE We may consolidate with, or sell, lease or convey all or substantially all of our assets to, or merge with or into, any other entity, provided that (a) we shall be the continuing entity, or the successor entity (if other than Cousins) formed by or resulting from any such consolidation or merger or which shall have received the transfer of such assets shall expressly assume payment of the principal of (and premium, if any) and interest on all the debt securities and the due and punctual performance and observance of all of the covenants and conditions contained in the Indenture; (b) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of us or any subsidiary of Cousins (a "Subsidiary") as a result thereof as having been incurred by us or such Subsidiary at the time of such transaction, no Event of Default under the Indenture, and no event which, after notice or the lapse of time, or both, would become such an Event of Default, shall have occurred and be continuing; and (c) an officer's certificate and legal opinion covering such conditions shall be delivered to the Trustee (Sections 801 and 803). CERTAIN COVENANTS Existence. Except as permitted under "-- Merger, Consolidation or Sale," we are required to do or cause to be done all things necessary to preserve and keep in full force and effect our existence, rights and franchises; provided, however, that we shall not be required to preserve any right or franchise if we determine that the preservation thereof is no longer desirable in the conduct of our business and that the loss thereof is not disadvantageous in any material respect to the Holders of the debt securities (Section 1006). Maintenance of Properties. We are required to cause all of our material properties used or useful in the conduct of our business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and to cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in our judgment may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that we and our Subsidiaries shall not be prevented from selling or otherwise disposing for value their respective properties in the ordinary course of business (Section 1007). Insurance. We are required to, and are required to cause each of our Subsidiaries to, keep all of our insurable properties insured against loss or damage at least equal to their then full insurable value with financially sound and reputable insurance companies (Section 1008). Payment of Taxes and Other Claims. We are required to pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (i) all taxes, assessments and governmental charges levied or imposed upon us or any Subsidiary or upon our income, profits or property or that of any Subsidiary, and (ii) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of us or any Subsidiary; provided, however, that we shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings (Section 1009). 20 Provision of Financial Information. The Holders of debt securities will be provided with copies of the annual reports and quarterly reports of Cousins. Whether or not we are subject to Section 13 or 15(d) of the Exchange Act and for so long as any debt securities are outstanding, we will, to the extent permitted under the Exchange Act, be required to file with the SEC the annual reports, quarterly reports and other documents which we would have been required to file with the SEC pursuant to such Section 13 or 15(d) (the "Financial Statements") if we were so subject, such documents to be filed with the SEC on or prior to the respective dates (the "Required Filing Dates") by which we would have been required so to file such documents if we were so subject. We will also in any event (x) within 15 days of each Required Filing Date (i) transmit by mail to all Holders of debt securities, as their names and addresses appear in the security register for the debt securities (the "Security Register"), without cost to such Holders, copies of the annual reports and quarterly reports which we would have been required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act if we were subject to such Sections and (ii) file with the Trustee copies of the annual reports, quarterly reports and other documents which we would have been required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act if we were subject to such Sections and (y) if filing such documents by us with the SEC is not permitted under the Exchange Act, promptly upon written request and payment of the reasonable cost of duplication and delivery, supply copies of such documents to any prospective Holder (Section 1010). Additional Covenants. Any additional or different covenants of Cousins with respect to any series of debt securities will be set forth in the prospectus supplement relating thereto. EVENTS OF DEFAULT, NOTICE AND WAIVER The Indenture provides that the following events are "Events of Default" with respect to any series of debt securities issued thereunder: (a) default for 30 days in the payment of any installment of interest on any debt security of such series; (b) default in the payment of the principal of (or premium, if any, on) any debt security of such series at its maturity; (c) default in making any sinking fund payment as required for any debt security of such series; (d) default in the performance of any other covenant of Cousins contained in the Indenture (other than a covenant added to the Indenture solely for the benefit of a series of debt securities issued thereunder other than such series), such default having continued for 60 days after written notice as provided in the Indenture; (e) default in the payment of an aggregate principal amount exceeding $5,000,000 of any evidence of recourse indebtedness of Cousins or any mortgage, indenture or other instrument under which such indebtedness is issued or by which such indebtedness is secured, such default having occurred after the expiration of any applicable grace period and having resulted in the acceleration of the maturity of such indebtedness, but only if such indebtedness is not discharged or such acceleration is not rescinded or annulled; (f) certain events of bankruptcy, insolvency or reorganization, or court appointment of a receiver, liquidator or trustee of us or any Significant Subsidiary or any of their respective property; and (g) any other Event of Default provided with respect to a particular series of debt securities. The term "Significant Subsidiary" means each significant subsidiary (as defined in Regulation S-X promulgated under the Securities Act) of Cousins. If an Event of Default under the Indenture with respect to debt securities of any series at the time Outstanding occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding debt securities of that series may declare the principal amount (or, if the debt securities of that series are Original Issue Discount Securities or Securities, the terms of which provide that the principal amount thereof payable at maturity may be more or less than the principal face amount thereof at original issuance ("Indexed Securities"), such portion of the principal amount as may be specified in the terms thereof) of all of the debt securities of that series to be due and payable immediately by written notice thereof to us (and to the Trustee if given by the Holders). However, at any time after such a declaration of acceleration with respect to debt securities of such series (or of all debt securities then Outstanding under the Indenture, as the case may be) has been made, but before a judgment or decree for payment of the money due has been obtained by the Trustee, the Holders of not less than a majority in principal amount of Outstanding debt securities of such series (or of all debt securities then Outstanding under the Indenture, as the case may be) may rescind and annul such 21 declaration and its consequences if (a) we shall have deposited with the applicable Trustee all required payments of the principal of (and premium, if any) and interest on the debt securities of such series (or of all debt securities then Outstanding under the Indenture, as the case may be), plus certain fees, expenses, disbursements and advances of the Trustee and (b) all Events of Default, other than the nonpayment of accelerated principal of (or specified portion thereof), or premium (if any) or interest on the debt securities of such series (or of all debt securities then Outstanding under the Indenture, as the case may be) have been cured or waived as provided in the Indenture (Section 502). The Indenture also provides that the Holders of not less than a majority in principal amount of the Outstanding debt securities of any series (or of all debt securities then Outstanding under the Indenture, as the case may be) may waive any past default with respect to such series and its consequences, except a default (x) in the payment of the principal of (or premium, if any) or interest on any debt security or such series or (y) in respect of a covenant or provision contained in the Indenture that cannot be modified or amended without the consent of the Holder of each Outstanding debt security affected thereby (Section 513). The Trustee will be required to give notice to the Holders of debt securities within 90 days of a default under the Indenture unless such default has been cured or waived; provided, however, that the Trustee may withhold notice to the Holders of any series of debt securities of any default with respect to such series (except a default in the payment of the principal of (or premium, if any) or interest on any debt security of such series or in the payment of any sinking fund installment in respect of any debt security of such series) if specified Responsible Officers of the Trustee consider such withholding to be in the interest of such Holders (Section 601). The Indenture provides that no Holders of debt securities of any series may institute any proceedings, judicial or otherwise, with respect to the Indenture or for any remedy thereunder, except in the case of failure of the Trustee, for 60 days, to act after it has received a written request to institute proceedings in respect of an Event of Default from the Holders of not less than 25% in principal amount of the Outstanding debt securities of such series, as well as an offer of indemnity reasonably satisfactory to it (Section 507). This provision will not prevent, however, any holder of debt securities from instituting suit for the enforcement of payment of the principal of (and premium, if any) and interest on such debt securities at the respective due dates thereof (Section 508). Subject to provisions in the Indenture relating to the Trustee's duties in case of default, the trustee is under no obligation to exercise any of its rights or powers under the Indenture at the request or direction of any Holders of any series of debt securities then Outstanding under the Indenture, unless such Holders shall have offered to the Trustee thereunder reasonable security or indemnity (Section 602). The Holders of not less than a majority in principal amount of the Outstanding debt securities of any series (or of all debt securities then Outstanding under the Indenture, as the case may be) shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or of exercising any trust or power conferred upon the Trustee. However, the Trustee may refuse to follow any direction which is in conflict with any law or the Indenture, which may involve the Trustee in personal liability or which may be unduly prejudicial to the holders of debt securities of such series not joining therein (Section 512). Within 120 days after the close of each fiscal year, we must deliver to the Trustee a certificate, signed by one of several of our specified officers, stating whether or not such officer has knowledge of any default under the Indenture and, if so, specifying each such default and the nature and status thereof. MODIFICATION OF THE INDENTURE Modifications and amendments of the Indenture will be permitted to be made only with the consent of the Holders of not less than a majority in principal amount of all Outstanding debt securities or series of Outstanding debt securities which are affected by such modification or amendment; provided, however, that no such modification or amendment may, without the consent of the Holders of each such debt security affected thereby, (a) change the Stated Maturity of the principal of, or premium (if any) or any installment of interest on, any such debt security; (b) reduce the principal amount of, or the rate or 22 amount of interest on, or any premium payable on redemption of, any such debt security, or reduce the amount of principal of an Original Issue Discount Security that would be due and payable upon declaration of acceleration of the maturity thereof or would be provable in bankruptcy, or adversely affect any right of repayment of the holder of any such debt security; (c) change the place of payment, or the coin or currency, for payment of principal of, premium, if any, or interest on any such debt security; (d) impair the right to institute suit for the enforcement of any payment on or with respect to any such debt security; (e) reduce the above stated percentage of outstanding debt securities of any series necessary to modify or amend the Indenture, to waive compliance with certain provisions thereof or certain defaults and consequences thereunder or to reduce the quorum or voting requirements set forth in the Indenture; or (f) modify any of the foregoing provisions or any of the provisions relating to the waiver of certain past defaults or certain covenants, except to increase the required percentage to effect such action or to provide that certain other provisions may not be modified or waived without the consent of the Holders of such debt security (Section 902). A debt security shall be deemed outstanding ("Outstanding") if it has been authenticated and delivered under the Indenture unless, among other things, such debt security has been cancelled or redeemed. The Indenture provides that the Holders of not less than a majority in principal amount of a series of Outstanding debt securities have the right to waive compliance by us with certain covenants relating to such series of debt securities in the Indenture (Section 1013). Modifications and amendments of the Indenture may be made by us and the Trustee without the consent of any Holder of debt securities for any of the following purposes: (i) to evidence the succession of another Person to us as obligor under the Indenture; (ii) to add to our covenants for the benefit of the Holders of all or any series of debt securities or to surrender any right or power conferred upon us in the Indenture; (iii) to add Events of Default for the benefit of the Holders of all or any series of debt securities; (iv) to add or change any provisions of the Indenture to facilitate the issuance of, or to liberalize certain terms of, debt securities in bearer form, or to permit or facilitate the issuance of debt securities in uncertificated form, provided, that such action shall not adversely affect the interests of the Holders of the debt securities of any series in any material respect; (v) to change or eliminate any provisions of the Indenture, provided that any such change or elimination shall become effective only when there are no debt securities Outstanding of any series created prior thereto which are entitled to the benefit of such provision; (vi) to secure the debt securities; (vii) to establish the form or terms of debt securities of any series; (viii) to provide for the acceptance of appointment by a successor Trustee or facilitate the administration of the trusts under the Indenture by more than one Trustee; (ix) to cure any ambiguity, defect or inconsistency in the Indenture, provided that such action shall not adversely affect the interests of Holders of debt securities of any series in any material respect; or (x) to supplement any of the provisions of the Indenture to the extent necessary to permit or facilitate defeasance and discharge of any series of such debt securities, provided that such action shall not adversely affect the interests of the Holders of the debt securities of any series in any material respect (Section 901). The Indenture provides that in determining whether the Holders of the requisite principal amount of Outstanding debt securities of a series have given any request, demand, authorization, direction, notice, consent or waiver thereunder or whether a quorum is present at a meeting of Holders of debt securities, (i) the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon declaration of acceleration of the maturity thereof, (ii) the principal amount of a debt security denominated in a foreign currency that shall be deemed Outstanding shall be the U.S. dollar equivalent, determined on the issue date for such debt security, of the principal amount (or, in the case of an Original Issue Discount Security, the U.S. dollar equivalent on the issue date of such debt security of the amount determined as provided in (i) above), (iii) the principal amount of an Indexed Security that shall be deemed Outstanding shall be the principal face amount of such Indexed Security at original issuance, unless otherwise provided with respect to such Indexed Security pursuant to the Indenture; and (iv) debt securities owned by us or any other obligor upon the debt securities or any of our affiliates or of such other obligor shall be disregarded. 23 The Indenture contains provisions for convening meetings of the Holders of debt securities of a series (Section 1501). A meeting will be permitted to be called at any time by the Trustee, and also, upon request, by us or the holders of at least 10% in principal amount of the Outstanding debt securities of such series, in any such case upon notice given as provided in the Indenture (Section 1502). Except for any consent that must be given by the Holder of each debt security affected by certain modifications and amendments of the Indenture, any resolution presented at a meeting or adjourned meeting duly reconvened at which a quorum is present will be permitted to be adopted by the affirmative vote of the Holders of a majority in principal amount of the Outstanding debt securities of that series; provided, however, that, except as referred to above, any resolution with respect to any request, demand, authorization, direction, notice, consent, waiver or other action that may be made, given or taken by the Holders of a specified percentage, which is less than a majority, in principal amount of the Outstanding debt securities of a series may be adopted at a meeting or adjourned meeting duly reconvened at which a quorum is present by the affirmative vote of the Holders of such specified percentage in principal amount of the Outstanding debt securities of that series. Any resolution passed or decision taken at any meeting of Holders of debt securities of any series duly held in accordance with the Indenture will be binding on all Holders of debt securities of that series. The quorum at any meeting called to adopt a resolution, and at any reconvened meeting, will be Persons holding or representing a majority in principal amount of the Outstanding debt securities of a series; provided, however, that if any action is to be taken at such meeting with respect to a consent or waiver which may be given by the Holders of not less than a specified percentage in principal amount of the Outstanding debt securities of a series, the Persons holding or representing such specified percentage in principal amount of the Outstanding debt securities of such series will constitute a quorum (Section 1504). Notwithstanding the foregoing provisions, if any action is to be taken at a meeting of Holders of debt securities of any series with respect to any request, demand, authorization, direction, notice, consent, waiver or other action that the Indenture expressly provides may be made, given or taken by the Holders of a specified percentage in principal amount of all Outstanding debt securities affected thereby, or of the Holders of such series and one or more additional series: (i) there shall be no minimum quorum requirement for such meeting and (ii) the principal amount of the Outstanding debt securities of such series that vote in favor of such request, demand, authorization, direction, notice, consent, waiver or other action shall be taken into account in determining whether such request, demand, authorization, direction, notice, consent, waiver or other action has been made, given or taken under the Indenture (Section 1504). DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE We may discharge certain obligations to Holders of any series of debt securities that have not already been delivered to the Trustee for cancellation and that either have become due and payable or will become due and payable within one year (or scheduled for redemption within one year) by irrevocably depositing with the Trustee, in trust, funds in such currency or currencies, currency unit or units or composite currency or currencies in which such debt securities are payable in an amount sufficient to pay the entire indebtedness on such debt securities in respect of principal (and premium, if any) and interest to the date of such deposit (if such debt securities have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be (Sections 1401 and 1404). The Indenture provides that, if the provisions of Article Fourteen are made applicable to the debt securities of or within any series pursuant to Section 301 of the Indenture, we may elect either (a) to defease and be discharged from any and all obligations with respect to such debt securities (except for the obligation to pay additional amounts, if any, upon the occurrence of certain events of tax, assessment or governmental charge with respect to payments on such debt securities and the obligations to register the transfer or exchange of such debt securities, to replace temporary or mutilated, destroyed, lost or stolen debt securities, to maintain an office or agency in respect of such debt securities and to hold moneys for payment in trust) ("defeasance") (Section 1402) or (b) to be released from our obligations with respect to such debt securities under Sections 1004 to 1011, inclusive, of the Indenture (including the restrictions described under "Certain Covenants") and our obligation with respect to any other covenant, and any 24 omission to comply with such obligations shall not constitute a default or an Event of Default with respect to such debt securities ("covenant defeasance") (Section 1403), in either case upon the irrevocable deposit by us with the Trustee, in trust, of an amount, in such currency or currencies, currency unit or units or composite currency or currencies in which such debt securities are payable at the stated maturity date specified thereon ("Stated Maturity"), or Government Obligations (as defined below), or both, applicable to such debt securities which through the scheduled payment of principal and interest in accordance with their terms will provide money in an amount sufficient to pay the principal of (and premium, if any) and interest on such debt securities, and any mandatory sinking fund or analogous payments thereon, on the scheduled due dates therefor. Such a trust will only be permitted to be established if, among other things, we have delivered to the Trustee an Opinion of Counsel (as specified in the Indenture) to the effect that the Holders of such debt securities will not recognize income, gain or loss for U.S. Federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject to U.S. Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred, and such Opinion of Counsel, in the case of defeasance, must refer to and be based upon a ruling of the Internal Revenue Service or a change in applicable United States Federal income tax law occurring after the date of the Indenture (Section 1404). "Government Obligations" means securities which are (i) direct obligations of the United States of America or the government which issued the foreign currency in which the debt securities of a particular series are payable, for the payment of which its full faith and credit is pledged or (ii) obligations of a person controlled or supervised by and acting as an agency or instrumentality of the United States of America or such government which issued the foreign currency in which the debt securities of such series are payable, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America or such other government, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such Government Obligation or a specific payment of interest on or principal of any such Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Obligation or the specific payment of interest on or principal of the Government Obligation evidenced by such depository receipt. Unless otherwise provided in the applicable prospectus supplement, if after we have deposited funds and/or Government Obligations to effect defeasance or covenant defeasance with respect to debt securities of any series, (a) the Holder of a debt security of such series is entitled to, and does, elect pursuant to the Indenture or the terms of such debt security to receive payment in a currency, currency unit or composite currency other than that in which such deposit has been made in respect of such debt security, or (b) a Conversion Event (as defined below) occurs in respect of the currency, currency unit or composite currency in which such deposit has been made, the indebtedness represented by such debt security shall be deemed to have been, and will be, fully discharged and satisfied through the payment of the principal of (and premium, if any) and interest on such debt security as they become due out of the proceeds yielded by converting the amount so deposited in respect of such debt security into the currency, currency unit or composite currency in which such debt security becomes payable as a result of such election or such Conversion Event based on the applicable market exchange rate. "Conversion Event" means the cessation of use of (i) a currency, currency unit or composite currency both by the government of the country which issued such currency and for the settlement of transactions by a central bank or other public institutions of or within the international banking community, (ii) the ECU both within the European Monetary System and for the settlement of transactions by public institutions of or within the European Community or (iii) any currency unit or composite currency other than the ECU for the purposes for which it was established. 25 Unless otherwise provided in the applicable prospectus supplement, all payments of principal of (and premium, if any) and interest on any debt security that is payable in a foreign currency that ceases to be used by its government of issuance shall be made in U.S. dollars. In the event we effect covenant defeasance with respect to any debt securities and such debt securities are declared due and payable because of the occurrence of any Event of Default other than the Event of Default described in clause (d) under "-- Events of Default, Notice and Waiver" with respect to Sections 1004 to 1011, inclusive, of the Indenture (which Sections would no longer be applicable to such debt securities) or described in clause (g) under "-- Events of Default, Notice and Waiver" with respect to any other covenant as to which there has been covenant defeasance, the amount in such currency, currency unit or composite currency in which such debt securities are payable, and Government Obligations on deposit with the Trustee, will be sufficient to pay amounts due on such debt securities at the time of their Stated Maturity but may not be sufficient to pay amounts due on such debt securities at the time of the acceleration resulting from such Event of Default. However, we would remain liable to make payment of such amounts due at the time of acceleration. The applicable prospectus supplement may further describe the provisions, if any, permitting such defeasance or covenant defeasance, including any modifications to the provisions described above, with respect to the debt securities of or within a particular series. NO CONVERSION RIGHTS The debt securities will not be convertible into or exchangeable for any of our capital stock. GLOBAL SECURITIES The debt securities of a series may be issued in whole or in part in the form of one or more global securities (the "Global Securities") that will be deposited with, or on behalf of, a depositary (the "Depositary") identified in the applicable prospectus supplement relating to such series. Global Securities may be issued in either registered or bearer form and in either temporary or permanent form. The specific terms of the depositary arrangement with respect to a series of debt securities will be described in the applicable prospectus supplement relating to such series. DESCRIPTION OF PREFERRED STOCK This section describes the general terms and provisions of our preferred stock that may be offered by this prospectus. The prospectus supplement will describe the specific terms of the series of the preferred stock offered through that prospectus supplement and any general terms outlined in this section that will not apply to that series of preferred stock. We have summarized the terms and provisions of the preferred stock in this section. This summary is not complete. You should read our Articles of Incorporation and the Certificate of Designation, Preferences and Rights, or Certificate of Designations, relating to the applicable series of the preferred stock for additional information before you buy any preferred stock. GENERAL Pursuant to our Articles of Incorporation, our board of directors has the authority, without further shareholder action, to issue a maximum of 20 million shares of preferred stock, $1.00 par value per share. As of the date of this prospectus, we have no shares of preferred stock issued and outstanding. The board of directors has the authority to determine or fix the following terms with respect to shares of any series of preferred stock: - the dividend rate, the times of payment and the date from which dividends will accumulate, if dividends are to be cumulative, - whether and upon what terms the shares will be redeemable, 26 - whether and upon what terms the shares will have a sinking fund, - whether and upon what terms the shares will be convertible or exchangeable, - whether the shares will have voting rights and the terms thereof, - the rights of the holders upon our liquidation, dissolution or winding-up, - restrictions on transfer to preserve our tax status as a REIT, and - any other relative rights, powers and limitations or restrictions. These terms will be described in the prospectus supplement for any series of preferred stock that we offer. In addition, you should read the prospectus supplement relating to the particular series of the preferred stock offered thereby for specific terms, including: - the title of the series of preferred stock and the number of shares offered, - the initial public offering price at which we will issue the preferred stock, and - any additional dividend, liquidation, redemption, sinking fund and other rights, preferences, privileges, limitations and restrictions. When we issue the preferred stock, the shares will be fully paid and nonassessable. This means that the full purchase price for the outstanding preferred stock will have been paid and the holders of such preferred stock will not be assessed any additional monies for such preferred stock. Unless the applicable prospectus supplement specifies otherwise: - each series of preferred stock will rank senior to our common stock and equally in all respects with the outstanding shares of each other series of preferred stock, and - the preferred stock will have no preemptive rights to subscribe for any additional securities which we may issue in the future. This means that the holders of preferred stock will have no right, as holders of preferred stock, to buy any portion of those issued securities. SHAREHOLDER LIABILITY Georgia law provides that no shareholder, including holders of preferred stock, shall be personally liable for the acts and obligations of a Georgia corporation. This means that with respect to the Company, the funds and property of the Company will be the only recourse for these acts or obligations. RESTRICTIONS ON OWNERSHIP As discussed above under "Description of Common Stock -- Restrictions on Transfer," for us to qualify as a REIT under the Code, not more than 50% in value of our outstanding stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) during the last half of a taxable year. To assist us in meeting this requirement, we may take certain actions to limit the beneficial ownership, directly or indirectly, by a single person of our outstanding stock, including any of our preferred stock, in addition to the restrictions currently applicable to all classes of our stock pursuant to Article 11 of our Articles of Incorporation. Therefore, the Certificate of Designations for each series of preferred stock may contain provisions restricting the ownership and transfer of the preferred stock. The applicable prospectus supplement will specify any additional ownership limitation relating to a series of preferred stock. REGISTRAR AND TRANSFER AGENT The Registrar and Transfer Agent for the preferred stock will be set forth in the applicable prospectus supplement. 27 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS The following discussion summarizes the material federal income tax considerations relating to our taxation as a REIT under the Code. As used in this section, the terms "we" and "our" refer solely to Cousins Properties Incorporated and not to our subsidiaries and affiliates which have not elected to be taxed as REITs under the Code. This section also summarizes material federal income tax considerations relating to the ownership and disposition of our common stock. A prospectus supplement will contain information about additional federal income tax considerations, if any, relating to a particular offering of warrants, debt securities or preferred stock. This discussion is not exhaustive of all possible tax considerations and does not provide a detailed discussion of any state, local or foreign tax considerations, nor does it discuss all of the aspects of federal income taxation that may be relevant to a prospective shareholder in light of his or her particular circumstances or to shareholders (including insurance companies, tax-exempt entities, financial institutions or broker-dealers, foreign corporations and persons who are not citizens or residents of the United States) who are subject to special treatment under the federal income tax laws. The information in this section is based on the current provisions of the Code, current, temporary and proposed regulations, the legislative history of the Code, current administrative interpretations and practices of the Internal Revenue Service, and court decisions. The reference to Internal Revenue Service interpretations and practices includes Internal Revenue Service practices and policies reflected in private letter rulings issued to other taxpayers, which would not be binding on the Internal Revenue Service in any of its dealings with us. These sources are being relied upon as of the date of this prospectus. No assurance can be given that future legislation, regulations, administrative interpretations and court decisions will not significantly change current law, or adversely affect existing interpretations of law, on which the information in this section is based. Any change of this kind could apply retroactively to transactions preceding the date of the change in law. Even if there is no change in applicable law, no assurance can be provided that the statements made in the following discussion will not be challenged by the Internal Revenue Service or will be sustained by a court if so challenged. Each prospective shareholder is advised to consult with his or her own tax advisor to determine the impact of his or her personal tax situation on the anticipated tax consequences of our status as a REIT and the ownership and sale of our stock. This includes the federal, state, local, and foreign income and other tax consequences of the ownership and sale of our stock, and the potential changes in applicable tax laws. TAXATION OF COUSINS PROPERTIES INCORPORATED General. We have elected to be taxed as a REIT under Sections 856 through 860 of the Code, and we believe that we have met the requirements for qualification and taxation as a REIT since our initial REIT election in 1987. We intend to continue to operate in such a manner as to continue to so qualify, but no assurance can be given that we have qualified or will remain qualified as a REIT. We have not requested and do not intend to request a ruling from the Internal Revenue Service as to our current status as a REIT. However, we have received an opinion from Deloitte & Touche LLP stating that since the commencement of our taxable year which began January 1, 1998 through the tax year ending December 31, 2002, we have been organized and have operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and our actual method of operation has enabled, and our proposed method of organization and operation will enable, us to meet the requirements for qualification and taxation as a REIT, provided that we have been organized and have operated and continue to be organized and to operate in accordance with certain assumptions and representations made by us concerning our organization and operations. It must be emphasized that this opinion is based on various assumptions and on our representations concerning our organization and operations, including an assumption that we qualified as a REIT at all times from January 1, 1987 through December 31, 1997 and including representations regarding the nature of our assets and the conduct and method of operation of 28 our business. The opinion cannot be relied upon if any of those assumptions and representations later prove incorrect. Moreover, continued qualification and taxation as a REIT depends upon our ability to meet, through actual annual operating results, distribution levels and diversity of stock ownership, the various REIT qualification tests imposed under the Code, the results of which will not be reviewed by Deloitte & Touche LLP. Accordingly, no assurance can be given that the actual results of our operations will satisfy such requirements. Additional information regarding the risks associated with our failure to qualify as a REIT are set forth under the caption "Risk Factors." The opinion of Deloitte & Touche LLP is based upon current law, which is subject to change either prospectively or retroactively. Changes in applicable law could modify the conclusions expressed in the opinion. Moreover, unlike a tax ruling (which we will not seek), this opinion is not binding on the Internal Revenue Service, and no assurance can be given that the Internal Revenue Service could not successfully challenge our status as a REIT. If we have qualified and continue to qualify for taxation as a REIT, we generally will not be subject to federal corporate income taxes on that portion of our ordinary income or capital gain that we distribute (or are deemed to distribute) currently to our shareholders. Even if we qualify as a REIT, however, we will be subject to federal income taxes under the following circumstances. First, we will be taxed at regular corporate rates on any undistributed taxable income, including undistributed net capital gains. Second, under certain circumstances, we may be subject to the "alternative minimum tax" on certain items of tax preference. Third, if we have (i) net income from the sale or other disposition of "foreclosure property" (which is, in general, property acquired by foreclosure or otherwise on default of a loan secured by the property) which is held primarily for sale to customers in the ordinary course of business or (ii) other non-qualifying income from foreclosure property, we will be subject to tax at the highest corporate rate on such income. Fourth, if we have net income from prohibited transactions (which are, in general, certain sales or other dispositions of property (other than foreclosure property) held primarily for sale to customers in the ordinary course of business), such income will be subject to a 100% tax. Fifth, if we should fail to satisfy the 75% gross income test or the 95% gross income test (as discussed below), and nonetheless have maintained our qualification as a REIT because certain other requirements have been met, we will be subject to a 100% tax on the income attributable to the greater of the amount by which we failed the 75% or 95% test (or, for taxable years beginning in 2001, a 90% test in lieu of the 95% test), multiplied by a fraction intended to reflect our profitability. Sixth, if we should fail to distribute during each calendar year at least the sum of (i) 85% of our REIT ordinary income for such year, (ii) 95% of our REIT capital gain net income for such year, and (iii) any undistributed taxable income from prior years, we would be subject to a 4% excise tax on the excess of such required distribution over the amounts actually distributed. Seventh, if we were to acquire any asset from a C corporation (i.e., a corporation generally subject to full corporate level tax) in a transaction in which our basis in the asset is determined by reference to the basis of the asset (or any other property) in the hands of the C corporation, and we were to recognize gain on the disposition of such asset during the 10-year period beginning on the date on which we acquired such asset, then, to the extent of such property's "built-in" gain (the excess of the fair market value of such property at the time we acquired it over the adjusted basis of such property at such time), such gain will be subject to tax at the highest regular corporate rate applicable. We refer to this tax as the "Built-in Gains Tax." Activities conducted by our taxable REIT subsidiaries -- including Cousins Real Estate Corporation ("CREC"), CREC II Inc. ("CREC II") and their respective corporate subsidiaries -- are subject to federal income tax at regular corporate rates. In general, a taxable REIT subsidiary may engage in activities that, if engaged in directly by a REIT, would produce income that does not satisfy the REIT gross income tests, described below, or income that, if earned by the REIT, would be subject to the 100% tax on prohibited transactions described above. A number of constraints, however, are imposed on REITs and their taxable REIT subsidiaries to ensure that taxable REIT subsidiaries pay an appropriate corporate-level tax on their income. For example, a taxable REIT subsidiary is subject to the "earnings stripping" rules of the Code with respect to interest paid to the REIT, which could defer or disallow a portion of our taxable REIT subsidiaries' deductions for interest paid to us under certain circumstances. In addition, if 29 our taxable REIT subsidiaries make deductible payments to us (such as interest or rent), and the amount of those deductible payments is determined by the Internal Revenue Service to exceed the amount that unrelated parties would charge to each other, we would be subject to a 100% penalty tax on the excess payments. We would incur a similar 100% penalty tax on a portion of the rent we receive from our tenants, to the extent the Internal Revenue Service determines that the rent payments are attributable to certain noncustomary services provided to our tenants by our taxable REIT subsidiaries without receiving adequate compensation either from us or from our tenants. Requirements for Qualification. The Code defines a REIT as a corporation, trust or association: (1) which is managed by one or more trustees or directors, (2) the beneficial ownership of which is evidenced by transferable shares or by transferable certificates of beneficial interest, (3) which would be taxable as a domestic corporation but for Sections 856 through 859 of the Code, (4) which is neither a financial institution nor an insurance company subject to certain provisions of the Code, (5) the beneficial ownership of which is held by 100 or more persons, (6) not more than 50% in value of the outstanding stock of which is owned, directly or indirectly, by or for five or fewer individuals (as defined in the Code to include certain entities), (7) which makes an election to be a REIT (or has made such election for a previous taxable year which has not been revoked or terminated) and satisfies all relevant filing and other administrative requirements established by the Internal Revenue Service that must be met to elect and maintain REIT status, (8) which uses the calendar year as its taxable year, and (9) which meets certain other tests, described below, regarding the nature of its income and assets. The Code provides that conditions (1) through (4), inclusive, must be met during the entire taxable year, that condition (5) must be met during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months, and that condition (6) must be met during the last half of each taxable year. We have issued sufficient shares of our common stock with sufficient diversity of ownership to allow us to satisfy requirements (5) and (6). We will be treated as having met condition (6) above for a taxable year beginning after August 5, 1997, if we complied with certain Treasury Regulations for ascertaining the ownership of our stock for such year and if we did not know (or after the exercise of reasonable diligence would not have known) that our stock was sufficiently closely held during such year to cause us to fail condition (6). In addition, Article 11 of our Articles of Incorporation contains restrictions regarding the transfer and ownership of our shares that are intended to assist us in continuing to satisfy the share ownership requirements described in clauses (5) and (6) above. See "Description of Common Stock -- Restrictions on Transfer." In the case of a REIT owning an interest in a partnership, joint venture, limited liability company, or other legal entity that is classified as a partnership for federal income tax purposes (which we refer to collectively as partnerships), the REIT is deemed to own its proportionate share of the assets of the partnership and is deemed to be entitled to the income of the partnership attributable to such share (based on the REIT's capital interest in the partnership). In addition, the assets and gross income of the partnership will retain the same character in the hands of the REIT for purposes of Section 856 of the Code, including satisfying the gross income tests and asset tests that are discussed below. We own interests in a number of partnerships (the "Subsidiary Partnerships"), and thus, our proportionate share of the assets, liabilities and items of income from the Subsidiary Partnerships are treated as our assets, liabilities and items of income for purposes of applying the requirements described herein. 30 Income Tests. In order to maintain our qualification as a REIT, we must satisfy two gross income requirements annually. First, at least 75% of our gross income (excluding gross income from prohibited transactions) for each taxable year must be derived directly or indirectly from investments relating to real property or mortgages on real property (including "rents from real property" and, in certain circumstances, interest) or from certain types of temporary investments. Second, at least 95% of our gross income (excluding gross income from prohibited transactions) for each taxable year must be derived from such real property investments described above, and from dividends, interest and gain from the sale or disposition of stock or securities, or from any combination of the foregoing. Rents that we receive will qualify as "rents from real property" in satisfying the above gross income tests only if several conditions are met. First, the amount of rent must not be based in whole or in part on the income or profits of any person. However, an amount received or accrued generally will not be excluded from "rents from real property" solely by reason of being based on a fixed percentage or percentages of receipts or sales. Second, rents received from a tenant will not qualify as "rents from real property" if we, or an owner of 10% or more of our outstanding stock, directly or constructively were to own 10% or more of the ownership interests in such tenant (a "Related Party Tenant"), unless such tenant is our taxable REIT subsidiary and certain other conditions are satisfied. Third, if rent attributable to personal property that is leased in connection with a lease of real property is greater than 15% of the total rent received under the lease, then the portion of rent attributable to such personal property will not qualify as "rents from real property." Finally, for rent to qualify as "rents from real property," we generally must not operate or manage the property or furnish or render services to our tenants, other than through an "independent contractor" from whom we derive no revenue. The "independent contractor" requirement, however, does not apply to the extent the services we provide are "usually or customarily rendered" in connection with the rental of space for occupancy only and are not otherwise considered "rendered to the occupant." In addition, the "independent contractor" requirement will not apply to noncustomary services we provide, if the annual value of such noncustomary services does not exceed 1% of the gross income derived from the property with respect to which the noncustomary services are provided (the "1% de minimis exception"). For this purpose, such services may not be valued at less than 150% of our direct cost of providing the services, and any gross income deemed to have been derived by us from the performance of noncustomary services pursuant to the 1% de minimis exception will constitute nonqualifying gross income under the 75% and 95% gross income tests. In addition, in taxable years beginning after December 31, 2000, our taxable REIT subsidiaries are permitted provide noncustomary services to our tenants without causing the rents we receive from such tenants to be disqualified as "rents from real property." From time to time, we may derive rent from certain tenants based, in whole or in part, on the net profits of the tenant, rent from Related Party Tenants, or rent that is more than 15% attributable to personal property. However, the amount of such nonqualifying rent income, if any, is not expected to be material, and we have complied and believe we will continue to comply with the 95% and 75% gross income tests. In addition, based on our knowledge of the real estate markets in the geographic regions in which we operate, we believe that all services that are provided to the tenants of the properties generally will be considered "usually or customarily" rendered in connection with the rental of comparable real estate. Further, we intend to provide any noncustomary services only through qualifying independent contractors or taxable REIT subsidiaries or in compliance with the 1% de minimis exception. We manage certain properties held by the Subsidiary Partnerships, and in return for such services, we receive certain management and accounting fees. We obtained a ruling from the Internal Revenue Service that the portion of such fees that is apportioned to the capital interests of the other partners constitutes non-qualifying gross income for purposes of Section 856 of the Code, and the portion of each fee that is apportioned our capital interest is disregarded for purposes of Section 856 of the Code. We also expect to receive certain other types of non-qualifying income, such as dividends and interest paid by CREC or CREC II to us (which will qualify under the 95% gross income test but not under the 75% gross income test). We believe, however, that the aggregate amount of such non-qualifying income in any taxable year 31 will not cause us to exceed the limits on non-qualifying income under the 75% and 95% gross income tests. If we were to fail to satisfy one or both of the 75% or 95% gross income tests for any taxable year, we may nevertheless qualify as a REIT for such year if we are entitled to relief under certain provisions of the Code. These relief provisions generally will be available if our failure to meet such tests was due to reasonable cause and not due to willful neglect, we attach a schedule of the sources of our income to our federal income tax return, and any incorrect information on the schedules was not due to fraud with intent to evade tax. It is not possible, however, to state whether in all circumstances we would be entitled to the benefit of these relief provisions. As discussed above in "General," even if these relief provisions were to apply, a tax would be imposed with respect to the excess income. In addition to the 75% and 95% gross income tests, we had to meet a 30% gross income test for our taxable years that ended prior to January 1, 1998. The 30% gross income test required that short-term gain from the sale or other disposition of stock or securities, gain from prohibited transactions and gain from the sale or other disposition of real property held for less than four years, other than involuntary conversions and sales of foreclosure property, represent less than 30% of a REIT's gross income, including gross income from prohibited transactions. We believe that we met the 30% gross income test for relevant taxable years that ended prior to January 1, 1998. The 30% gross income test does not apply to our taxable years beginning on or after January 1, 1998. Asset Tests. At the close of each quarter of our taxable year, we must satisfy several tests relating to the nature of our assets. First, at least 75% of the value of our total assets must be represented by real estate assets (including our allocable share of real estate assets held by the Subsidiary Partnerships), stock or debt instruments held for not more than one year purchased with the proceeds of a stock offering or long-term debt offering, cash, certain cash items and government securities. Second, not more than 25% of our total assets may be represented by securities other than those in the 75% asset class. Third, of the investments included in the 25% asset class, the value of any one issuer's debt and equity securities that we own may not exceed 5% of the value of our total assets. Fourth, we may not own more than 10% of any one issuer's outstanding voting securities. Fifth, with respect to taxable years beginning after December 31, 2000, we may not own more than 10% of the total value of any one issuer's outstanding debt and equity securities, excluding certain "straight debt" issued by an individual, a partnership in which we hold at least a 20% profits interest, or an issuer in which the only securities we hold constitute "straight debt." Mortgage debt secured by real estate assets constitutes a "real estate asset" and does not constitute a "security" for purposes of the foregoing tests. For taxable years beginning after December 31, 2000, the 5% asset test, the 10% voting securities test, and the new 10% value test described above do not apply to the securities of a taxable REIT subsidiary. However, the value of the debt and equity securities of all taxable REIT subsidiaries we own (including for purposes of this test only any mortgage debt issued by a taxable REIT subsidiary that is secured by real estate assets) cannot represent more than 20% of the value of our total assets. Any corporation in which a REIT directly or indirectly owns stock (other than another REIT, a corporation which directly or indirectly operates or manages a lodging facility or a health care facility, and, with certain exceptions, a corporation which directly or indirectly provides to any person (under a franchise, license, or otherwise) rights to any brand name under which any lodging facility or health care facility is operated) may be treated as a taxable REIT subsidiary if the REIT and the corporation file a joint election with the Internal Revenue Service for the corporation to be treated as a taxable REIT subsidiary of the REIT. We own 100% of the non-voting common stock and 100% of the cumulative preferred stock of CREC and CREC II, but we do not currently own any voting stock of either corporation. We also have made loans to CREC and CREC II. We have filed joint elections with each of CREC and CREC II to have such corporations, as well as their corporate subsidiaries, treated as our taxable REIT subsidiaries, effective as of January 1, 2001. Accordingly, the debt and equity securities of CREC and CREC II that we hold are no longer subject to the 5% asset test, the 10% voting securities test, or the 10% value test described above. In addition, because the 10% voting securities test does not apply to the securities of a taxable 32 REIT subsidiary, we would be permitted to acquire the voting stock of CREC and CREC II, which we do not currently hold. We believe that our debt and equity securities of CREC and CREC II, together with the debt and equity securities of our other taxable REIT subsidiaries, have represented, at all relevant times, less than 20% of the value of our total assets. With respect to taxable years ending on or prior to December 31, 2000, we believe that the securities of each such issuer also represented less than 5% of the value of our total assets. We also believe that the value of the securities, including unsecured debt, of each other issuer in which we have owned an interest, excluding equity interests in partnerships (which are looked through rather than treated as securities for purposes of the REIT asset tests), has never exceeded 5% of the total value of our assets and that we comply with the 10% voting securities test and the 10% value test (taking into account the "straight debt" exceptions with respect to certain issuers). No independent appraisals have been obtained, however, to support these conclusions, and Deloitte & Touche LLP, in rendering the tax opinion described above, is relying upon our representations regarding the value of our securities and our other assets. Although we plan to take steps to ensure that we continue to satisfy all of the applicable REIT asset tests, there can be no assurance that such steps will always be successful or will not require a reduction in our overall interest in the taxable REIT subsidiaries or changes in our other investments. Annual Distribution Requirements. To qualify as a REIT, we are required to distribute dividends (other than capital gain dividends) to our shareholders in an amount at least equal to (A) the sum of (i) 90% (95% for taxable years before 2001) of our "REIT taxable income" (computed without regard to the dividends paid deduction and our net capital gain) and (ii) 90% (95% for taxable years before 2001) of the net income (after tax), if any, from foreclosure property, minus (B) the sum of certain items of noncash income. Such distributions must be paid in the taxable year to which they relate, or in the following taxable year if declared before we timely file our tax return for such year and if paid on or before the first regular dividend payment after such declaration. To the extent that we do not distribute all of our net capital gain or distribute at least 90% (95% for taxable years before 2001), but less than 100%, of our "REIT taxable income," as adjusted, we will be subject to tax on the undistributed amount at regular corporate tax rates. Furthermore, if we should fail to distribute during each calendar year at least the sum of (i) 85% of our REIT ordinary income for such year, (ii) 95% of our REIT capital gain income for such year, and (iii) any undistributed taxable income from prior periods, we will be subject to a 4% excise tax on the excess of such required distribution over the amounts actually distributed. We have made and intend to continue to make timely distributions sufficient to satisfy the annual distribution requirements. It is possible, however, that we may not have sufficient cash or liquid assets, from time to time, to meet the distribution requirements due to timing differences between the receipt of income and actual payment of deductible expenses and the inclusion of such income and deduction of such expenses in arriving at our taxable income, or if the amount of nondeductible expenses (such as principal amortization or capital expenses) exceeds the amount of noncash deductions (such as depreciation). In the event that such timing differences occur, we may need to borrow money, sell assets, or take other measures to permit us to pay the required dividends. Under certain circumstances, we may be able to rectify a failure to meet the distribution requirement for a year by paying "deficiency dividends" to our shareholders in a later year that may be included in our deduction for dividends paid for the earlier year. Thus, we may be able to avoid being taxed on amounts distributed as deficiency dividends; however, we will be required to pay interest to the Internal Revenue Service based upon the amount of any deduction taken for deficiency dividends. Failure to Qualify. If we were to fail to qualify for taxation as a REIT in any taxable year and no relief provisions were to apply, we would be subject to tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates. Distributions to shareholders in any year in which we fail to qualify will not be deductible from our taxable income, nor will they be required to be made. In such event, to the extent of current and accumulated earnings and profits, all distributions to our shareholders will be taxable as ordinary income. Under these circumstances, subject to certain limitations in the Code, corporate shareholders may be eligible for the dividends received deduction and individual 33 shareholders may be eligible for a reduced tax rate on "qualified dividend income" received from regular C corporations. Unless entitled to relief under specific statutory provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year during which qualification was lost. It is not possible to state whether in all circumstances we would be entitled to such statutory relief. In addition, to re-elect REIT status after being disqualified, we would have to distribute as dividends, no later than the end of our first taxable year as a re-electing REIT, all of the earnings and profits attributable to our pre-1987 taxable years (when we were a taxable C corporation). Thus, to re-elect REIT status after being disqualified, we could be required to incur substantial indebtedness or liquidate substantial investments in order to make such distributions. OTHER TAX CONSIDERATIONS We believe that each of the Subsidiary Partnerships qualifies as a partnership for federal income tax purposes and not as an association taxable as a corporation or as a publicly traded partnership (within the meaning of Section 7704 of the Code). If a Subsidiary Partnership were treated as an association taxable as a corporation, the value of our interest in such partnership would no longer qualify as a real estate asset for purposes of the 75% asset test. Further, if a Subsidiary Partnership were treated as a taxable corporation, then we would cease to qualify as a REIT if our ownership interest in such partnership exceeded 10% of the partnership's voting interests, or the value of our debt and equity interest in such partnership exceeded 5% of the value of the our total assets or 10% of the value of the partnership's outstanding debt and equity securities. Furthermore, in such a situation, distributions from the Subsidiary Partnership to us would be treated as dividends, which do not qualify in satisfying the 75% gross income test described above and which could therefore make it more difficult for us to meet such test, and we would not be able to deduct our share of losses generated by such Subsidiary Partnership in computing our taxable income. TAXATION OF SHAREHOLDERS Taxation of Taxable Domestic Shareholders. On May 28, 2003, President Bush signed into law the Jobs Growth Tax Relief Reconciliation Act of 2003. Under this legislation, certain "qualified dividend income" received by domestic non-corporate shareholders in taxable years 2003 through 2008 is subject to tax at the same tax rates as long-term capital gain (generally, under the new legislation, a maximum rate of 15% for such taxable years). Dividends received from REITs, however, generally are not eligible for these reduced tax rates and, therefore, will continue to be subject to tax at ordinary income rates (generally, a maximum rate of 35% for taxable years 2003-2008), subject to two narrow exceptions. Under the first exception, dividends received from a REIT may be treated as a "qualified dividend income" eligible for the reduced tax rates to the extent that the REIT itself has received qualified dividend income from other corporations (such as taxable REIT subsidiaries) in which the REIT has invested. Under the second exception, dividends paid by a REIT in a taxable year may be treated as qualified dividend income in an amount equal to the sum of (i) the excess of the REIT's "REIT taxable income" for the preceding taxable year over the corporate-level federal income tax payable by the REIT for such preceding taxable year and (ii) the excess of the REIT's income that was subject to the Built-in Gains Tax in the preceding taxable year over the tax payable by the REIT on such income for such preceding taxable year. We do not expect to receive a material amount of dividends from our taxable REIT subsidiaries or from other taxable corporations, and we do not expect to pay a material amount of federal income tax on undistributed REIT taxable income or a material amount of Built-in Gains Tax. Therefore, as long as we qualify as a REIT, distributions made to our taxable domestic shareholders out of current or accumulated earnings and profits (and not designated as capital gain dividends) will be taken into account by them as ordinary income (except, in the case of non-corporate shareholders, to the limited extent that we are treated as receiving "qualified dividend income" from our stock interests in CREC, CREC II, or our other taxable REIT subsidiaries or as a result of paying federal income tax on undistributed REIT taxable income or Built-in Gains Tax). In addition, as long as we qualify as a REIT, corporate shareholders will not be eligible for the dividends received deduction as to any dividends received from us. 34 Distributions that we designate as capital gain dividends will be taxed as long-term capital gains (to the extent they do not exceed our actual net capital gain for the taxable year) without regard to the period for which the shareholder has held his or her shares. However, corporate shareholders may be required to treat up to 20% of certain capital gain dividends as ordinary income. Distributions in excess of current and accumulated earnings and profits will not be taxable to a shareholder to the extent that they do not exceed the adjusted basis of the shareholder's shares of our common stock, but rather will reduce the adjusted basis of such shares. To the extent that such distributions exceed the adjusted basis of a shareholder's shares of our common stock, they will be included in income as long-term capital gain (or short-term capital gain if the shares have been held for one year or less), assuming the shares are a capital asset in the hands of the shareholder. In addition, any dividend that we declare in October, November or December of any year payable to a shareholder of record on a specific date in any such month shall be treated as both paid by us and received by the shareholder on December 31 of such year, provided that the dividend is actually paid by us during January of the following calendar year. We may make an election to treat all or part of our undistributed net capital gain as if it had been distributed to our shareholders. As described above, these undistributed amounts would be subject to corporate-level tax payable by us. If we were to make such an election, our shareholders would be required to include in their income as long-term capital gain their proportionate shares of our undistributed net capital gain. Each shareholder would be deemed to have paid his or her proportionate share of the income tax imposed on us with respect to such undistributed net capital gain, and this amount would be credited or refunded to the shareholder in computing his or her own federal income tax liability. In addition, the tax basis of the shareholder's stock would be increased by his or her proportionate share of the undistributed net capital gains included in his or her income, less his or her proportionate share of the income tax imposed on us with respect to such gains. Domestic shareholders may not include in their individual income tax returns any of our net operating losses or net capital losses. Instead, we would carry over such losses for potential offset against our future income, subject to certain limitations. Taxable distributions from us and gain from the sale of our shares will not be treated as passive activity income and, therefore, domestic shareholders generally will not be able to apply any "passive activity losses" (such as losses from certain types of limited partnerships in which a shareholder is a limited partner) against such income. In addition, taxable distributions from us generally will be treated as investment income for purposes of the investment interest limitations. Capital gains from the disposition of our stock (or distributions, if any, taxable at capital gain rates), however, will be treated as investment income only if the shareholder so elects, in which case such capital gains or distributions, as the case may be, will be taxed at ordinary income rates. For purposes of computing each shareholder's alternative minimum taxable income, certain of our "differently treated items" for each taxable year (for example, differences in computing depreciation deductions for regular tax purposes and alternative minimum tax purposes) may be apportioned to our shareholders in accordance with section 59(d)(1)(A) of the Code. In general, any gain or loss realized upon a taxable disposition of our shares by a domestic shareholder who is not a dealer in securities will be treated as a capital gain or loss. Any loss upon a sale or exchange of shares of our common stock by a shareholder who has held such shares for six months or less (after applying certain holding period rules) will be treated as a long-term capital loss to the extent of distributions from us that were required to be treated by such shareholder as long-term capital gain. All or a portion of any loss realized upon a taxable disposition of our shares may be disallowed if other shares of our stock are purchased within 30 days before or after the disposition. For non-corporate taxpayers, the tax rate differential between capital gain and ordinary income may be significant. Under current law, the highest marginal non-corporate income tax rate applicable to ordinary income is 35%. Any capital gain recognized or otherwise properly taken into account on or after May 6, 2003 and before January 1, 2009, generally will be taxed to a non-corporate taxpayer at a maximum rate of 15% with respect to capital assets held for more than one year. (The maximum rate is currently 20% for gain taken into account before May 6, 2003 or after December 31, 2008.) The tax rates applicable to ordinary income apply to gain from the sale or exchange of capital assets held for one year or 35 less. In the case of capital gain attributable to the sale or exchange of certain real property held for more than one year, an amount of such gain equal to the amount of all prior depreciation deductions not otherwise required to be taxed as ordinary depreciation recapture income will be taxed at a maximum rate of 25%. With respect to distributions designated by us as capital gain dividends (including any deemed distributions of retained capital gains), subject to certain limits, we also may designate, and will notify our shareholders, whether the dividend is taxable to non-corporate shareholders at regular long-term capital gain rates or at the 25% rate applicable to unrecaptured depreciation. The characterization of income as capital or ordinary also may affect the deductibility of capital losses. Capital losses not offset by capital gains may be deducted against a non-corporate taxpayer's ordinary income only up to a maximum annual amount of $3,000. Non-corporate taxpayers may carry forward their unused capital losses. All net capital gain of a corporate taxpayer is subject to tax at ordinary corporate rates. A corporate taxpayer may deduct capital losses only to the extent of its capital gains, with unused losses eligible to be carried back three years and forward five years. Information Reporting and Backup Withholding. We will report to our domestic shareholders and the Internal Revenue Service the amount of dividends paid during each calendar year, and the amount of tax withheld, if any, with respect thereto. Under the backup withholding rules, a shareholder may be subject to backup withholding, at a rate equal to the fourth lowest rate of federal income tax applicable to ordinary income of individuals, with respect to dividends paid unless such shareholder (a) is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact, or (b) provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding, and otherwise complies with applicable requirements of the backup withholding rules. A shareholder who does not provide his or her correct taxpayer identification number may also be subject to penalties imposed by the Internal Revenue Service. Any amount paid as backup withholding may be applied as a credit against the shareholder's federal income tax liability, which could result in a refund. In addition, we may be required to withhold a portion of capital gain distributions made to any shareholders who fail to certify their non-foreign status to us. See "Taxation of Foreign Shareholders" below. Taxation of Tax-Exempt Shareholders. The Internal Revenue Service has ruled publicly that amounts distributed by a REIT to a tax-exempt employees' pension trust do not constitute "unrelated business taxable income" ("UBTI"). Based upon this ruling and subject to the discussion below regarding qualified pension trust investors, distributions by us to a shareholder that is a tax-exempt entity should not constitute UBTI, provided that the tax-exempt entity has not financed the acquisition of its shares with "acquisition indebtedness" within the meaning of the Code and the shares of our stock are not otherwise used in an unrelated trade or business of the tax-exempt entity. Revenue rulings, however, are interpretive in nature and subject to revocation or modification by the Internal Revenue Service. A "qualified trust" (defined to be any trust described in section 401(a) of the Code and exempt from tax under section 501(a) of the Code) that holds more than 10% of the value of the shares of a REIT may be required, under certain circumstances, to treat a portion of distributions from the REIT as UBTI. This requirement will apply for a taxable year only if (i) the REIT satisfies the requirement that not more than 50% of the value of its shares be held by five or fewer individuals (the "five or fewer requirement") by relying on a special "look-through" rule under which shares held by qualified trust shareholders are treated as held by the beneficiaries of such trusts in proportion to their actuarial interests therein, and (ii) the REIT is "predominantly held" by qualified trusts. A REIT is "predominantly held" if either (i) a single qualified trust holds more than 25% of the value of the REIT shares or (ii) one or more qualified trusts, each owning more than 10% of the value of the REIT shares, hold in the aggregate more than 50% of the value of the REIT shares. If the foregoing requirements are met, the percentage of any REIT dividend treated as UBTI to a qualified trust that owns more than 10% of the value of the REIT shares is equal to the ratio of (a) the UBTI earned by the REIT (treating the REIT as if it were a qualified trust and therefore subject to tax on its UBTI) to (b) the total gross income (less certain associated expenses) of the REIT. A de minimis exception applies where the ratio set forth in the preceding sentence is less than 5% for any year. The provisions requiring qualified trusts to treat a portion of REIT distributions as 36 UBTI will not apply if the REIT is able to satisfy the five or fewer requirement without relying upon the "look-through" rule. Taxation of Foreign Shareholders. The rules governing U.S. federal income taxation of nonresident alien individuals, foreign corporations, foreign partnerships and other foreign shareholders (collectively, "Non-U.S. Shareholders") are complex, and no attempt will be made herein to provide more than a limited summary of such rules. Prospective Non-U.S. Shareholders should consult with their own tax advisors to determine the impact of U.S. federal, state and local income tax laws with regard to an investment in our common stock, including any reporting requirements. Distributions that are not attributable to gain from sales or exchanges by us of U.S. real property interests and not designated by us as capital gain dividends will be treated as dividends of ordinary income to the extent that they are made out of our current or accumulated earnings and profits. Such distributions, ordinarily, will be subject to a withholding tax equal to 30% of the gross amount of the distribution unless an applicable tax treaty reduces that tax. However, if income from the investment in our stock is treated as effectively connected with the Non-U.S. Shareholder's conduct of a U.S. trade or business, the Non-U.S. Shareholder generally will be subject to a tax at graduated rates, in the same manner as U.S. shareholders are taxed with respect to such dividends (and may also be subject to the 30% branch profits tax if the shareholder is a foreign corporation). We expect to withhold U.S. income tax at the rate of 30% on the gross amount of any dividends paid to a Non-U.S. Shareholder that are not designated as capital gain dividends unless (i) a lower treaty rate applies and the required IRS Form W-8BEN evidencing eligibility for that reduced rate is filed with us or (ii) the Non-U.S. Shareholder files an IRS Form W-8ECI with us properly claiming that the distribution is "effectively connected" income. Distributions in excess of our current and accumulated earnings and profits will not be taxable to a shareholder to the extent that they do not exceed the adjusted basis of the shareholder's shares of stock, but rather will reduce the adjusted basis of such shares. To the extent that such distributions exceed the adjusted basis of a Non-U.S. Shareholder's shares, such excess will constitute gain subject to U.S. federal income tax under the provisions of the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"), as described below. If it cannot be determined at the time a distribution is made whether or not such distribution will be in excess of current and accumulated earnings and profits, the distribution will be subject to withholding at the rate applicable to dividends. In addition, the portion of such distributions in excess of current and accumulated earnings and profits, to the extent not subject to the 30% withholding tax on dividends, will be subject to a 10% withholding tax under FIRPTA, unless the Non-U.S. Shareholder obtains a withholding certificate from the Internal Revenue Service establishing the right to a reduced amount of FIRPTA withholding. The Non-U.S. Shareholder may seek a refund from the Internal Revenue Service of excess tax withheld if it is subsequently determined that such distribution was, in fact, in excess of current and accumulated earnings and profits or, if the 10% withholding tax applied, did not give rise to taxable gain under FIRPTA. For any year in which we qualify as a REIT, distributions that are attributable to gain from sales or exchanges by us of U.S. real property interests will be taxed to a Non-U.S. Shareholder under the provisions of FIRPTA. Under FIRPTA, these distributions are taxed to a Non-U.S. Shareholder as if such gain were effectively connected with a U.S. business. Thus, Non-U.S. Shareholders will be taxed on such distributions at the normal capital gain rates applicable to U.S. shareholders (subject to applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals) and will be required to file U.S. federal income tax returns. Also, distributions subject to FIRPTA may be subject to a 30% branch profits tax in the hands of a corporate Non-U.S. Shareholder not entitled to treaty relief or exemption. We are required by applicable Treasury Regulations to withhold 35% of any distribution that could be designated by us as a capital gain dividend. This amount may be applied as a credit against the Non-U.S. Shareholder's FIRPTA tax liability. Gain recognized by a Non-U.S. Shareholder upon a sale of our stock generally will not be taxed under FIRPTA if we are a "domestically controlled REIT," defined generally as a REIT in which at all times during a specified testing period less than 50% in value of the stock was held directly or indirectly by foreign persons. We believe that we currently qualify as a "domestically controlled REIT," and that the 37 sale of common stock by a Non-U.S. Shareholder will not therefore be subject to tax under FIRPTA. Because our stock is publicly traded, however, no assurance can be given that we will continue to be a domestically controlled REIT. If we were not a domestically controlled REIT, whether a Non-U.S. Shareholder's gain would be taxed under FIRPTA would depend on whether our common stock is regularly traded on an established securities market at the time of sale and on the size of the selling shareholder's interest in our stock. In addition, gain not subject to FIRPTA will be taxable to a Non-U.S. Shareholder if (i) the investment in our common stock is treated as effectively connected with the Non-U.S. Shareholder's U.S. trade or business, in which case the Non-U.S Shareholder will be subject to the same treatment as U.S. shareholders with respect to such gain, or (ii) the Non-U.S. Shareholder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and has a "tax home" in the United States, in which case the nonresident alien individual will be subject to a 30% tax on the individual's capital gains. If the gain on the sale of our common stock were to be subject to tax under FIRPTA, the Non-U.S. Shareholder would be subject to the same treatment as U.S. shareholders with respect to such gain (subject to applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals). STATE AND LOCAL TAXES Cousins Properties Incorporated, its subsidiaries, and its shareholders may be subject to state or local taxation in various state or local jurisdictions, including those in which it or they transact business or reside (although shareholders who are individuals generally should not be required to file state income tax returns outside of their state of residence with respect to our operations and distributions), and their state and local tax treatment may not conform to the federal income tax consequences discussed above. Consequently, prospective shareholders should consult their own tax advisors regarding the effect of state and local tax laws on an investment in our securities. 38 PLAN OF DISTRIBUTION We may sell any securities: - to or through underwriters or dealers, - through agents, - directly to one or more purchasers, or - through a combination of any of these methods of sale. The distribution of the securities may be effected from time to time in one or more transactions: - at a fixed price or prices, which may be changed from time to time, - at market prices prevailing at the time of sale, - at prices related to such prevailing market prices, or - at negotiated prices. For each series of securities, the prospectus supplement will set forth the terms of the offering including: - the initial public offering price, - the names of any underwriters, dealers or agents, - the purchase price of the securities, - our proceeds from the sale of the securities, - any underwriting discounts, agency fees, or other compensation payable to underwriters or agents, - any discounts or concessions allowed or reallowed or repaid to dealers, and - the securities exchanges on which the securities will be listed, if any. If we use underwriters in the sale, they will buy the securities for their own account. The underwriters may then resell the securities in one or more transactions at a fixed public offering price or at varying prices determined at the time of sale or thereafter. The obligations of the underwriters to purchase the securities will be subject to certain conditions. The underwriters will be obligated to purchase all the securities offered if they purchase any securities. Any initial public offering price and any discounts or concessions allowed or re-allowed or paid to dealers may be changed from time to time. In connection with an offering, underwriters and selling group members and their affiliates may engage in transactions to stabilize, maintain or otherwise affect the market price of the securities in accordance with applicable law. If we use dealers in the sale, we will sell securities to such dealers as principals. The dealers may then resell the securities to the public at varying prices to be determined by such dealers at the time of resale. If we use agents in the sale, they will use their reasonable best efforts to solicit purchases for the period of their appointment. If we sell directly, no underwriters or agents would be involved. We are not making an offer of securities in any state that does not permit such an offer. Underwriters, dealers and agents that participate in the securities distribution may be deemed to be underwriters as defined in the Securities Act. Any discounts, commissions, or profit they receive when they resell the securities may be treated as underwriting discounts and commissions under the Securities Act. We may have agreements with underwriters, dealers and agents to indemnify them against certain civil liabilities, including certain liabilities under the Securities Act, or to contribute with respect to payments that they may be required to make. We may authorize underwriters, dealers or agents to solicit offers from certain institutions whereby the institution contractually agrees to purchase the securities from us on a future date at a specific price. This type of contract may be made only with institutions that we specifically approve. Such institutions 39 could include banks, insurance companies, pension funds, investment companies and educational and charitable institutions. The underwriters, dealers or agents will not be responsible for the validity or performance of these contracts. We have not authorized any dealer, salesperson or other person to give any information or represent anything not contained in this prospectus. You must not rely on any unauthorized information. This prospectus does not offer to sell or buy any securities in any jurisdiction where it is unlawful. The securities, other than the common stock, will be new issues of securities with no established trading market and unless otherwise specified in the applicable prospectus supplement, we will not list any series of the securities on any exchange. It has not presently been established whether the underwriters, if any, of the securities will make a market in the securities. If the underwriters make a market in the securities, such market making may be discontinued at any time without notice. No assurance can be given as to the liquidity of the trading market for the securities. One or more of the underwriters, dealer or agents, and/or one or more of their respective affiliates, may be a lender under our credit facility and may provide other commercial banking, investment banking and other services to us and/or our subsidiaries and affiliates in the ordinary course of our business. EXPERTS The consolidated financial statements and the related financial statement schedules incorporated in this prospectus by reference from the Annual Report on Form 10-K of Cousins Properties Incorporated for the year ended December 31, 2002, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports (which reports express unqualified opinions and include an explanatory paragraph relating to the impact of the adoption of Statements of Financial Accounting Standard No. 133 and No. 144, and which is based in part on the report of other auditors), which are incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The financial statements and schedule of CSC Associates, L.P. appearing in the Annual Report (Form 10-K) of Cousins Properties Incorporated for the year ended December 31, 2002, have been audited by Ernst & Young, LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such financial statements are incorporated herein by reference in reliance upon such report given on the authority of said firm as experts in accounting and auditing. LEGAL MATTERS The legality of the securities will be passed upon for Cousins by King & Spalding LLP, Atlanta, Georgia. 40 PART II INFORMATION NOT REQUIRED IN THIS PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION Securities and Exchange Commission registration fee*........ $ 81 New York Stock Exchange Listing Fee......................... 50,000 Accounting fees and expenses................................ 150,000 Legal fees and expenses..................................... 250,000 Printing and distribution fees.............................. 100,000 Miscellaneous expenses...................................... 25,000 -------- Total Expenses.................................... $575,081 ========
- --------------- * A registration fee of $68,966 was paid on September 16, 1996 in connection with the Registrant's Registration Statement on Form S-3 (File No. 333-12031). The fee of $81.00 paid herewith relates only to the $1,000,000 of securities newly registered hereby. All fees other than the SEC registration fee are estimated. Unless otherwise specified in the applicable prospectus supplement, all of the expenses of the issuance and distribution of the securities being offered will be borne by us. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS Part 5 of Article 8 of the Georgia Business Corporation Code (the "GBCC") states: 14-2-850. PART DEFINITIONS. As used in this part, the term: (1) "Corporation" includes any domestic or foreign predecessor entity of a corporation in a merger or other transaction in which the predecessor's existence ceased upon consummation of the transaction. (2) "Director" or "officer" means an individual who is or was a director or officer, respectively, of a corporation or who, while a director or officer of the corporation, is or was serving at the corporation's request as a director, officer, partner, trustee, employee, or agent of another domestic or foreign corporation, partnership, joint venture, trust, employee benefit plan, or other entity. A director or officer is considered to be serving an employee benefit plan at the corporation's request if his or her duties to the corporation also impose duties on, or otherwise involve services by, the director or officer to the plan or to participants in or beneficiaries of the plan. Director or officer includes, unless the context otherwise requires, the estate or personal representative of a director or officer. (3) "Disinterested director" means a director who at the time of a vote referred to in subsection (c) of Code Section 14-2-853 or a vote or selection referred to in subsection (b) or (c) of Code Section 14-2-855 or subsection (a) of Code Section 14-2-856 is not: (A) A party to the proceeding; or (B) An individual who is a party to a proceeding having a familial, financial, professional, or employment relationship with the director whose indemnification or advance for expenses is the subject of the decision being made with respect to the proceeding, which relationship would, in the circumstances, reasonably be expected to exert an influence on the director's judgment when voting on the decision being made. (4) "Expenses" include counsel fees. II-1 (5) "Liability" means the obligation to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan), or reasonable expenses incurred with respect to a proceeding. (6) "Official capacity" means: (A) When used with respect to a director, the office of director in a corporation; and (B) When used with respect to an officer, as contemplated in Code Section 14-2-857, the office in a corporation held by the officer. Official capacity does not include service for any other domestic or foreign corporation or any partnership, joint venture, trust, employee benefit plan, or other entity. (7) "Party" means an individual who was, is, or is threatened to be made a named defendant or respondent in a proceeding. (8) "Proceeding" means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, arbitrative, or investigative and whether formal or informal. 14-2-851. AUTHORITY TO INDEMNIFY. (a) Except as otherwise provided in this Code section, a corporation may indemnify an individual who is a party to a proceeding because he or she is or was a director against liability incurred in the proceeding if: (1) Such individual conducted himself or herself in good faith; and (2) Such individual reasonably believed: (A) In the case of conduct in his or her official capacity, that such conduct was in the best interests of the corporation; (B) In all other cases, that such conduct was at least not opposed to the best interests of the corporation; and (C) In the case of any criminal proceeding, that the individual had no reasonable cause to believe such conduct was unlawful. (b) A director's conduct with respect to an employee benefit plan for a purpose he or she believed in good faith to be in the interests of the participants in and beneficiaries of the plan is conduct that satisfies the requirement of subparagraph (a)(2)(B) of this Code section. (c) The termination of a proceeding by judgment, order, settlement, or conviction or upon a plea of nolo contendere or its equivalent is not, of itself, determinative that the director did not meet the standard of conduct described in this Code section. (d) A corporation may not indemnify a director under this Code section: (1) In connection with a proceeding by or in the right of the corporation, except for reasonable expenses incurred in connection with the proceeding if it is determined that the director has met the relevant standard of conduct under this Code section; or (2) In connection with any proceeding with respect to conduct for which he or she was adjudged liable on the basis that personal benefit was improperly received by him or her, whether or not involving action in his or her official capacity. 14-2-852. MANDATORY INDEMNIFICATION. A corporation shall indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which he or she was a party because he or she was a director of the corporation against reasonable expenses incurred by the director in connection with the proceeding. II-2 14-2-853. ADVANCE FOR EXPENSES. (a) A corporation may, before final disposition of a proceeding, advance funds to pay for or reimburse the reasonable expenses incurred by a director who is a party to a proceeding because he or she is a director if he or she delivers to the corporation: (1) A written affirmation of his or her good faith belief that he or she has met the relevant standard of conduct described in Code Section 14-2-851 or that the proceeding involves conduct for which liability has been eliminated under a provision of the articles of incorporation as authorized by paragraph (4) of subsection (b) of Code Section 14-2-202; and (2) His or her written undertaking to repay any funds advanced if it is ultimately determined that the director is not entitled to indemnification under this part. (b) The undertaking required by paragraph (2) of subsection (a) of this Code section must be an unlimited general obligation of the director but need not be secured and may be accepted without reference to the financial ability of the director to make repayment. (c) Authorizations under this Code section shall be made: (1) By the board of directors: (A) When there are two or more disinterested directors, by a majority vote of all the disinterested directors (a majority of whom shall for such purpose constitute a quorum) or by a majority of the members of a committee of two or more disinterested directors appointed by such a vote; or (B) When there are fewer than two disinterested directors, by the vote necessary for action by the board in accordance with subsection (c) of Code Section 14-2-824, in which authorization directors who do not qualify as disinterested directors may participate; or (2) By the shareholders, but shares owned or voted under the control of a director who at the time does not qualify as a disinterested director with respect to the proceeding may not be voted on the authorization. 14-2-854. COURT-ORDERED INDEMNIFICATION AND ADVANCES FOR EXPENSES. (a) A director who is a party to a proceeding because he or she is a director may apply for indemnification or advance for expenses to the court conducting the proceeding or to another court of competent jurisdiction. After receipt of an application and after giving any notice it considers necessary, the court shall: (1) Order indemnification or advance for expenses if it determines that the director is entitled to indemnification under this part; or (2) Order indemnification or advance for expenses if it determines, in view of all the relevant circumstances, that it is fair and reasonable to indemnify the director or to advance expenses to the director, even if the director has not met the relevant standard of conduct set forth in subsections (a) and (b) of Code Section 14-2-851, failed to comply with Code Section 14-2-853, or was adjudged liable in a proceeding referred to in paragraph (1) or (2) of subsection (d) of Code Section 14-2-851, but if the director was adjudged so liable, the indemnification shall be limited to reasonable expenses incurred in connection with the proceeding. (b) If the court determines that the director is entitled to indemnification or advance for expenses under this part, it may also order the corporation to pay the director's reasonable expenses to obtain court-ordered indemnification or advance for expenses. II-3 14-2-855. DETERMINATION AND AUTHORIZATION OF INDEMNIFICATION. (a) A corporation may not indemnify a director under Code Section 14-2-851 unless authorized thereunder and a determination has been made for a specific proceeding that indemnification of the director is permissible in the circumstances because he or she has met the relevant standard of conduct set forth in Code Section 14-2-851. (b) The determination shall be made: (1) If there are two or more disinterested directors, by the board of directors by a majority vote of all the disinterested directors (a majority of whom shall for such purpose constitute a quorum) or by a majority of the members of a committee of two or more disinterested directors appointed by such a vote; (2) By special legal counsel: (A) Selected in the manner prescribed in paragraph (1) of this subsection; or (B) If there are fewer than two disinterested directors, selected by the board of directors (in which selection directors who do not qualify as disinterested directors may participate); or (3) By the shareholders, but shares owned by or voted under the control of a director who at the time does not qualify as a disinterested director may not be voted on the determination. (c) Authorization of indemnification or an obligation to indemnify and evaluation as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is permissible, except that if there are fewer than two disinterested directors or if the determination is made by special legal counsel, authorization of indemnification and evaluation as to reasonableness of expenses shall be made by those entitled under subparagraph (b)(2)(B) of this Code section to select special legal counsel. 14-2-856. SHAREHOLDER APPROVED INDEMNIFICATION. (a) If authorized by the articles of incorporation or a bylaw, contract, or resolution approved or ratified by the shareholders by a majority of the votes entitled to be cast, a corporation may indemnify or obligate itself to indemnify a director made a party to a proceeding including a proceeding brought by or in the right of the corporation, without regard to the limitations in other Code sections of this part, but shares owned or voted under the control of a director who at the time does not qualify as a disinterested director with respect to any existing or threatened proceeding that would be covered by the authorization may not be voted on the authorization. (b) The corporation shall not indemnify a director under this Code section for any liability incurred in a proceeding in which the director is adjudged liable to the corporation or is subjected to injunctive relief in favor of the corporation: (1) For any appropriation, in violation of the director's duties, of any business opportunity of the corporation; (2) For acts or omissions which involve intentional misconduct or a knowing violation of law; (3) For the types of liability set forth in Code Section 14-2-832; or (4) For any transaction from which he or she received an improper personal benefit. (c) Where approved or authorized in the manner described in subsection (a) of this Code section, a corporation may advance or reimburse expenses incurred in advance of final disposition of the proceeding only if: (1) The director furnishes the corporation a written affirmation of his or her good faith belief that his or her conduct does not constitute behavior of the kind described in subsection (b) of this Code section; and II-4 (2) The director furnishes the corporation a written undertaking, executed personally or on his or her behalf, to repay any advances if it is ultimately determined that the director is not entitled to indemnification under this Code section. 14-2-857. INDEMNIFICATION OF OFFICERS, EMPLOYEES, AND AGENTS. (a) A corporation may indemnify and advance expenses under this part to an officer of the corporation who is a party to a proceeding because he or she is an officer of the corporation: (1) To the same extent as a director; and (2) If he or she is not a director, to such further extent as may be provided by the articles of incorporation, the bylaws, a resolution of the board of directors, or contract except for liability arising out of conduct that constitutes: (A) Appropriation, in violation of his or her duties, of any business opportunity of the corporation; (B) Acts or omissions which involve intentional misconduct, or a knowing violation of law; (C) The types of liability set forth in Code Section 14-2-832; or (D) Receipt of an improper personal benefit. (b) The provisions of paragraph (2) of subsection (a) of this Code section shall apply to an officer who is also a director if the sole basis on which he or she is made a party to the proceeding is an act or omission solely as an officer. (c) An officer of the corporation who is not a director is entitled to mandatory indemnification under Code Section 14-2-852, and may apply to a court under Code Section 14-2-854 for indemnification or advances for expenses, in each case to the same extent to which a director may be entitled to indemnification or advances for expenses under those provisions. (d) A corporation may also indemnify and advance expenses to an employee or agent who is not a director to the extent, consistent with public policy, that may be provided by its articles of incorporation, bylaws, general or specific action of its board of directors, or contract. 14-2-858. INSURANCE A corporation may purchase and maintain insurance on behalf of an individual who is a director, officer, employee, or agent of the corporation or who, while a director, officer, employee, or agent of the corporation, serves at the corporation's request as a director, officer, partner, trustee, employee, or agent of another domestic or foreign corporation, partnership, joint venture, trust, employee benefit plan, or other entity against liability asserted against or incurred by him or her in that capacity or arising from his or her status as a director, officer, employee, or agent, whether or not the corporation would have power to indemnify or advance expenses to him or her against the same liability under this part. 14-2-859. APPLICATION OF PART (a) A corporation may, by a provision in its articles of incorporation or bylaws or in a resolution adopted or a contract approved by its board of directors or shareholders, obligate itself in advance of the act or omission giving rise to a proceeding to provide indemnification or advance funds to pay for or reimburse expenses consistent with this part. Any such obligatory provision shall be deemed to satisfy the requirements for authorization referred to in subsection (c) of Code Section 14-2-853 or subsection (c) of Code Section 14-2-855. Any such provision that obligates the corporation to provide indemnification to the fullest extent permitted by law shall be deemed to obligate the corporation to advance funds to pay for or reimburse expenses in accordance with Code Section 14-2-853 to the fullest extent permitted by law, unless the provision specifically provides otherwise. II-5 (b) Any provision pursuant to subsection (a) of this Code section shall not obligate the corporation to indemnify or advance expenses to a director of a predecessor of the corporation, pertaining to conduct with respect to the predecessor, unless otherwise specifically provided. Any provision for indemnification or advance for expenses in the articles of incorporation, bylaws, or a resolution of the board of directors or shareholders, partners, or, in the case of limited liability companies, members or managers of a predecessor of the corporation or other entity in a merger or in a contract to which the predecessor is a party, existing at the time the merger takes effect, shall be governed by paragraph (3) of subsection (a) of Code Section 14-2-1106. (c) A corporation may, by a provision in its articles of incorporation, limit any of the rights to indemnification or advance for expenses created by or pursuant to this part. (d) This part does not limit a corporation's power to pay or reimburse expenses incurred by a director or an officer in connection with his or her appearance as a witness in a proceeding at a time when he or she is not a party. (e) Except as expressly provided in Code Section 14-2-857, this part does not limit a corporation's power to indemnify, advance expenses to, or provide or maintain insurance on behalf of an employee or agent. RESTATED AND AMENDED ARTICLES OF INCORPORATION AND BYLAWS As permitted by the GBCC, the Registrant's Restated and Amended Articles of Incorporation provide that a director shall not be personally liable to the Registrant or its shareholders for monetary damages for breach of duty of care or other duty as a director, except that such provision shall not eliminate or limit the liability of a director (a) for any appropriation, in violation of his duties, of any business opportunity of the Registrant, (b) for acts or omissions that involve intentional misconduct or a knowing violation of law, (c) for unlawful corporate distributions under Section 14-2-832 of the GBCC or (d) for any transaction from which the director derived an improper personal benefit. Under Article VI of the Registrant's Bylaws, the Registrant is required to indemnify any person who is made or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal (including any action by or in the right of the Registrant), by reason of the fact that he is or was a director, officer, agent or employee of the Registrant against expenses (including reasonable attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such proceeding provided that such person shall not be indemnified in any proceeding in which he is adjudged liable to the Registrant for (i) any appropriation, in violation of his duties, of any business opportunity of the Registrant, (ii) acts or omissions which involve intentional misconduct or knowing violation of law, (iii) unlawful corporate distributions or (iv) any transaction from which such person received improper personal benefit. Expenses incurred by any person according to the foregoing provisions shall be paid by the Registrant in advance of the final disposition of such proceeding upon receipt of the written affirmation of such person's good faith belief that he has met the standards of conduct required under the Bylaws. II-6 ITEM 16. EXHIBITS
EXHIBIT - ------- 1.1* Form of Underwriting Agreement. 3.1 Restated and Amended Articles of Incorporation of Registrant, as amended August 9, 1999, filed as Exhibit 3.1 in the Registrant's Form 10-Q for the quarter ended June 30, 2002, and incorporated herein by reference. 3.2 By-laws of Registrant, as amended April 29, 1993, filed as Exhibit 3.2 in the Registrant's Form 10-Q for the quarter ended June 30, 2002, and incorporated herein by reference. 4.1 Form of Indenture between the Registrant and the Trustee, filed as Exhibit 4.1 to the Registrant's Registration Statement on Form S-3 (File No. 333-12031), filed on September 16, 1996 and incorporated herein by reference. 4.2* Form of Certificate of Designations relating to the Preferred Stock. 5.1** Opinion of King & Spalding LLP regarding the legality of the preferred stock being registered. 8.1** Opinion of King & Spalding LLP regarding certain tax matters. 8.2 Opinion of Deloitte & Touche LLP regarding certain tax matters. 12.1** Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed Charges and Preferred Stock Dividends. 23.1** Consent of King & Spalding LLP (included as part of its opinions filed as Exhibit 5.1 and Exhibit 8.1 hereto). 23.2 Consent of Deloitte & Touche LLP. 23.3 Consent of Ernst & Young LLP. 24.1** Power of Attorney (included on signature page). 25.1 Statement of Eligibility of Trustee on Form T-1.
- --------------- * To be filed by amendment or incorporated by reference from a Current Report on Form 8-K. ** Previously filed. 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 a 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; II-7 provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (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 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 undersigned 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. (d) The undersigned Registrant hereby undertakes that, (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus 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. (e) The undersigned Registrant hereby undertakes to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Act. II-8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to Registration Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Atlanta, State of Georgia on the 10th day of July, 2003. COUSINS PROPERTIES INCORPORATED By: /s/ JAMES A. FLEMING ------------------------------------ James A. Fleming Senior Vice President, General Counsel and Secretary Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to Registration Statement on Form S-3 has been signed by the following persons in the capacities indicated on July 10, 2003.
SIGNATURE TITLE --------- ----- * President, Chief Executive Officer - -------------------------------------- and Vice Chairman of the Board Thomas D. Bell, Jr. (Principal Executive Officer) * Executive Vice President, Chief - -------------------------------------- Financial Officer and Chief Tom G. Charlesworth Investment Officer (Principal Financial Officer) * Senior Vice President, - -------------------------------------- Chief Accounting Officer, Michael A. Quinlan Controller and Assistant Secretary (Principal Accounting Officer) * Chairman of the Board - -------------------------------------- T. G. Cousins * Director - -------------------------------------- Richard W. Courts, II * Director - -------------------------------------- Lillian C. Giornelli * Director - -------------------------------------- Terence C. Golden * Director - -------------------------------------- Boone A. Knox
II-9
SIGNATURE TITLE --------- ----- * Director - -------------------------------------- Hugh L. McColl, Jr. * Director - -------------------------------------- William Porter Payne *By: /s/ JAMES A. FLEMING ------------------------------ James A. Fleming Attorney-in-fact
II-10 EX-8.2 3 g83473a1exv8w2.txt EX-8.2 OPINION REGARDING CERTAIN TAX MATTERS Exhibit 8.2 July 10, 2003 Cousins Properties Incorporated 2500 Windy Ridge Parkway Suite 1600 Atlanta, GA 30339 Re: Federal Income Tax Status of Cousins Properties Incorporated Ladies and Gentlemen: On October 4, 1996, Cousins Properties Incorporated ("Company"), a Georgia corporation, filed a Registration Statement on Form S-3 (File No. 333-12031) with the Securities and Exchange Commission, pursuant to which the Company may offer, from time to time, common stock, warrants, and debt securities (together with all exhibits, supplements and amendments thereto, the "Prior Shelf Registration") in an amount aggregating $200,000,000 of which $132,140,625 remains unsold. The Company is filing a Registration Statement on Form S-3 pursuant to which the Company may offer, from time to time, common stock, warrants, debt securities, and preferred stock in an aggregate amount equal to the amount remaining unsold of $132,140,625 under the Prior Registration Statement plus an additional $1,000,000 (the "Registration Statement"), as more fully described in the Company's prospectus included in Amendment No. 1 to the Registration Statement dated July 10, 2003 (together with all exhibits, supplements and amendments thereto, the "Prospectus"). The Registration Statement serves as a post-effective amendment to the Prior Shelf Registration. In connection with the filing of the Registration Statement (the "Shelf Registration"), you have requested Deloitte & Touche LLP ("D&T") to issue an opinion regarding the status, for federal income tax purposes, of the Company and its Subsidiary Partnerships (as later defined). The Company intends to continue to be taxed as a real estate investment trust ("REIT") as defined in Internal Revenue Code ("IRC") Sections 856-860. D&T has not previously issued a tax opinion regarding the status, for federal income tax purposes, of the Company as a REIT or of the Subsidiary Partnerships as partnerships. As discussed below under the section entitled "LIMITATIONS ON OPINION" you understand and agree that this opinion is solely for the Company's information and benefit, is limited to the described transaction, and may not be relied upon by any other person or entity, without the prior written consent of D&T or as otherwise described herein. Except as otherwise provided herein, capitalized terms shall have the same meaning ascribed to them in the Registration Statement, the Prior Shelf Registration, the Prospectus, or the Company's Restated and Amended Articles of Incorporation. It is our understanding that the Company intends to use the net proceeds from the sale of any of the securities under the Registration Statement for general corporate purposes. In rendering our opinion, we have examined and, with your consent, have relied upon the following documents: 1. Restated and Amended Articles of Incorporation of Cousins Properties Incorporated as amended August 9, 1999 (the "Articles of Incorporation"); 2. By-Laws of Cousins Properties Incorporated, as amended April 29, 1993 (the "By-Laws") 3. The Prospectus; 4. A letter dated July 10, 2003, and signed by Tom G. Charlesworth as Executive Vice President, Chief Financial Officer, and Chief Investment Officer of the Company, on behalf of the Company, a copy of which is attached hereto (the "Certificate of Representations"); 5. A letter from King & Spalding LLP, counsel to the Company, dated July 9, 2003, consenting to our relying on its opinion dated June 24, 2003, filed as Exhibit 5.1 to the Company's Registration Statement on Form S-3 (File No. 333-106401), which states that the Company is a corporation validly existing and in good standing under the laws of the State of Georgia; and 6. Such other records, certificates, agreements, schedules and documents as we have deemed necessary or appropriate for purposes of rendering the opinion set forth herein. In our examination of the foregoing documents, we have assumed, with your consent, that (i) the documents are original documents, or true and accurate copies of original documents, and have not been subsequently amended; (ii) the signatures on each original document are genuine; (iii) where any such document required execution by a person, the person who executed the document had proper authority and capacity; (iv) all representations and statements set forth in such documents are true and correct; (v) where any such document imposes obligations on a person, such obligations have been or will be performed or satisfied in accordance with their terms; and (vi) the Company at all times has been and will be organized and operated in accordance with the terms of such documents. For purposes of rendering this opinion, we have assumed that the registration contemplated by the foregoing documents will be consummated in accordance with the operative documents, and that such documents accurately reflect the material facts of the registration. 2 I. BACKGROUND, FACTS AND REPRESENTATIONS, AND SIGNIFICANT ASSUMPTIONS A. BACKGROUND Cousins Properties Incorporated is a Georgia corporation, which since 1987 has elected to be taxed as a real estate investment trust ("REIT"). Cousins Real Estate Corporation and its subsidiaries ("CREC") is a taxable entity consolidated with the Company for financial reporting purposes, which owns, develops, and manages its own real estate portfolio and performs certain real estate related services for other parties. CREC II Inc. ("CREC II"), another taxable entity consolidated with the Company for financial reporting purposes, owns a 100% interest in Cousins Properties Services LP, a full-service real estate company headquartered in Dallas, Texas that specializes in third party property management, development and leasing of office buildings. The Company is an Atlanta-based, fully integrated, self administered equity REIT. The Company has extensive experience in the real estate industry, including the acquisition, financing, development, management and leasing of properties. Cousins Properties Incorporated has been a public company since 1962, and its common stock trades on the New York Stock Exchange under the symbol "CUZ." The Company owns a portfolio of well-located, high-quality office, medical office, retail and land development projects and holds several tracts of strategically located undeveloped land. The strategies employed to achieve the Company's investment goals include the development of properties which are precommitted to quality tenants; the maintenance of high levels of occupancy within owned properties; the selective sale of assets; the creation of joint venture arrangements and the acquisition of quality income-producing properties at attractive prices. The Company also seeks to be opportunistic and take advantage of normal real estate business cycles. B. FACTS AND REPRESENTATIONS In addition to the foregoing, our opinion is based on the factual information and assumptions contained herein and representations made to us in the Certificate of Representations attached as Attachment A. Without limiting the foregoing, we have assumed that all statements and descriptions of the Company's past and intended future activities herein and in the Certificate of Representations are true and accurate. No facts have come to our attention, however, that would cause us to question the accuracy or completeness of such facts, assumptions or documents in a material way. To the extent the representations set forth in the Certificate of Representations are with respect to matters set forth in the IRC or Treasury Regulations, we have reviewed with the Company the relevant provisions of the IRC, the applicable Treasury Regulations and published administrative interpretations thereof. 3 C. SIGNIFICANT ASSUMPTIONS Our opinion is expressly based upon any assumption set forth herein and as follows: 1. Beginning with the Company's REIT election for the taxable year beginning January 1, 1987 and ending with the Company's taxable year ending December 31, 1997, the Company met the requirements for qualification as a REIT and was taxed as such. 2. Each Subsidiary Partnership was properly classified as a partnership for federal income tax purposes at all times prior to January 1, 1998. 3. The facts and representations as made by Tom G. Charlesworth on behalf of the Company in the Certificate of Representations are true and correct. 4. The Company intends to continue to be organized and operate in a manner which will allow it to meet the requirements for qualification and taxation as a REIT for the remainder of the tax year ending December 31, 2003 and future years. 5. Each Subsidiary Partnership intends to continue to be organized and operate in a manner which will allow it to be treated as a partnership and not as an association taxable as a corporation for the remainder of the tax year ending December 31, 2003 and future years. 6. None of the securities to be issued pursuant to the Registration Statement will be issued in violation of the Limit as set forth in Article 11 of the Articles of Incorporation. 7. The Company is duly formed and existing under the laws of the State of Georgia and is duly authorized to transact business in the State of Georgia. II. ISSUES CONSIDERED A. REIT STATUS Since the commencement of the Company's taxable year which began January 1, 1998 through the tax year ending December 31, 2002, has the Company been organized in conformity with the requirements for qualification as a REIT under the IRC, and has its actual method of operation enabled, and will its proposed method of organization and operation enable, the Company to meet the requirements for qualification and taxation as a REIT? 4 B. SUBSIDIARY PARTNERSHIP STATUS Since January 1, 1998, have the Subsidiary Partnerships been treated as partnerships and not as associations taxable as corporations for federal income tax purposes, and will their proposed method of organization and operation continue to allow them to be treated as partnerships and not as associations taxable as corporations for federal income tax purposes? III. CONCLUSIONS REACHED Based upon and subject to the foregoing, we are of the opinion that: A. REIT STATUS Since the commencement of the Company's taxable year which began January 1, 1998 through the tax year ending December 31, 2002, the Company has been organized and has operated in conformity with the requirements for qualification and taxation as a REIT under the IRC, and its actual method of operation has enabled, and its proposed method of organization and operation will enable, the Company to meet the requirements for qualification and taxation as a REIT. As noted in the Prospectus, the Company's qualification and taxation as a REIT depend upon its ability to meet, through actual, annual operating results, certain requirements including requirements relating to distribution levels, diversity of stock ownership, composition of assets and sources of income, and the various qualification tests imposed under the IRC. Accordingly, no assurance can be given that the actual results of the Company's organization and operation for any period subsequent to the date of this opinion will satisfy the requirements for taxation as a REIT under the IRC. B. SUBSIDIARY PARTNERSHIP STATUS The Subsidiary Partnerships have from January 1, 1998 through December 31, 2002 been treated as partnerships and not as associations taxable as corporations for federal income tax purposes, and their proposed method of organization and operation will continue to allow them to be treated as partnerships and not as associations taxable as corporations for federal income tax purposes. The Subsidiary Partnerships' treatment as partnerships for federal income tax purposes depends upon their form of organization and method of operation. Accordingly, no assurance can be given that the future organization and operations of the Subsidiary Partnerships will allow them to continue to be treated as partnerships for federal income tax purposes. 5 IV. LAW & ANALYSIS A. REIT STATUS 1. ORGANIZATIONAL REQUIREMENTS. In order to qualify as a REIT for federal income tax purposes, IRC Section 856 requires that an entity meet the following organizational tests: (1) it must be organized as a corporation, trust, or association; (2) it must be managed by one or more trustees or directors; (3) beneficial ownership must be evidenced by transferable shares or certificates; (4) it must be taxable as a domestic corporation but for the operation of IRC Sections 856 through 859; (5) it must not be a financial institution or insurance company; (6) beneficial ownership must be held by 100 or more persons; (7) subject to the provisions of IRC Section 856(k), it must not be closely held as determined under IRC Section 856(h); (8) it must use the calendar year as its taxable year; and (9) it must elect to be taxed as a REIT or have in effect such an election made for a previous taxable year. The requirements described in (1) through (5) above must be met during the entire taxable year. The requirement described in (6) above must exist during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months. The requirement described in (7) above must be met during the last half of each taxable year of the REIT. The requirements described in (6) and (7) above do not apply to the first taxable year for which an election is made under IRC Section 856(c)(1). The Company has represented that it has satisfied the requirements of (1) through (5) above for all years since January 1, 1987. The Company has also represented that it has satisfied the requirements of (6) and (7) above for all tax years for which it elected to be taxed as, or otherwise has calculated its taxable income as, a REIT consistent with the provisions of IRC Section 857(b)(2). Further, the Company has represented that it expects, and intends, to take all necessary measures within its control to ensure that the beneficial ownership of the Company will at all times be held by 100 or more persons. 6 In addition, subject to certain exceptions, the Company's Articles of Incorporation, Article 11 A (1), states that after December 31, 1986, shares of stock of the Company shall not be transferable to any person if such transfer would cause the person to be an owner of more than 3.9% in value of the outstanding shares, including both common and preferred stock (the "Limit"). If such a transfer occurs, the Articles provide that the transfer will be void and the intended transferee will acquire no rights to the shares. Article 11 A (2) states that other than a shareholder who already exceeded the Limit at December 31, 1986 (a "Prior Owner"), no shareholder shall at any time own shares that exceed the Limit. The Board of Directors, however, is provided authority to exempt shareholders from the operation of Articles 11 A (1) and (2). Article 11 A (3) restricts Prior Owners from receiving additional shares except in certain circumstances. The shares causing a violation of any of these provisions ("Excess Shares") are deemed transferred to the Company as trustee for a trust. The interest in the trust will be freely transferable by the intended transferee. Once the intended transferee of the Excess Shares has transferred the trust interest to an owner not violating the Limit, the shares are no longer Excess Shares and the intended transferee's interest in the trust is extinguished. Article 11 A (6) states that if a person acquires shares in excess of the Limit and such acquisition causes the Company to not qualify as a REIT under the five or fewer rule applicable for purposes of IRC Section 856(h), such person shall be liable for the corporate taxes that are due until REIT status can be re-elected. Pursuant to Treasury Regulation Section 1.856-1(d)(2), "...Provisions in the trust instrument or corporate charter or bylaws which permit the trustee or directors to redeem shares or to refuse to transfer shares in any case where the trustee or directors, in good faith, believe that a failure to redeem shares or that a transfer of shares would result in the loss of status as a real estate investment trust will not render the shares 'nontransferable'..."(1) The Company has represented that it does not and will not impose, and is not aware of, any transfer restrictions on its outstanding shares of beneficial interest other than those restrictions contained in the Company's Articles of Incorporation (as described above), which are intended to enable the Company to comply with certain REIT qualification requirements as set forth in IRC Section 856(a)(6). The Company has represented that it has used the calendar year as its taxable year since 1987. The Company has also represented that it made an election to be taxed as a REIT for each year commencing with the taxable year beginning January 1, 1987 and that it intends to take all necessary measures within its control to ensure that it meets the REIT organizational requirements in the current and future years. Furthermore, the Company has represented that it qualified as a REIT for federal income tax purposes from January 1, 1987 through December 31, 1997. - -------- (1) See e.g., Priv. Ltr. Ruls. 9430022 (April 29, 1994) (excess shares deemed transferred to a charity) and 8921067 (February 28, 1989). 7 In addition to the organizational requirements listed above, a REIT must satisfy ongoing requirements concerning the nature of its income and assets, the payment of dividends and the maintenance of records. 2. INCOME TESTS. During each taxable year, a REIT must satisfy certain income tests under IRC Section 856(c). (1) at least 75 percent of a REIT's gross income (excluding gross income from prohibited transactions) must consist of rents from real property, interest on obligations secured by mortgages on real property, gain from the sale of real property that was not held primarily for sale to customers in the ordinary course of business, dividends from other REITs and gain from the sale of REIT shares, refunds and abatements of real property taxes, income and gain from foreclosure property, loan commitment and certain other fees, qualified temporary investment (as that term is defined in IRC Section 856(c)(5)(D)) income and gain from the sale of certain other property; and (2) at least 95 percent of a REIT's gross income (excluding gross income from prohibited transactions) must consist of items that would be includible in (1) above, and dividends, interest and gain from the sale or other disposition of stocks or securities. For purposes of applying the income and the asset tests, the Company is treated as owning directly the assets and receiving the income of (i) any subsidiary (exclusive of any "taxable REIT subsidiary" as such term is defined in IRC Section 856(l)) of the Company in which: (a) with respect to all taxable years beginning on or before August 5, 1997, the Company has owned 100 percent of the stock at all times during the period of such subsidiary's existence, and (b) with respect to all taxable years beginning after August 5, 1997, the Company owns, or has owned, 100 percent of such subsidiary (a "Qualified REIT Subsidiary" or "QRS"), (ii) each of any partnership (within the meaning of (and including any limited liability company or other entity classified as a partnership for federal income tax purposes) IRC Section 7701(a)(2) and the regulations promulgated thereunder) in which the Company or any QRS has held an interest, directly or indirectly (a "Subsidiary Partnership"), and (iii) any limited liability company (which has not elected to be classified as a corporation for federal income tax purposes) all of the interests in which are held by the Company, any QRS, or any Subsidiary Partnership directly, and/or indirectly through one or more other such limited liability companies (a "Disregarded LLC").(2) - -------- (2) In the case of a real estate investment trust which is a partner in a partnership, as defined in IRC Section 7701(a)(2) and the regulations thereunder, the trust will be deemed to own its proportionate share of each of the assets of the partnership and will be deemed to be entitled to the income of the partnership attributable to such share. For purposes of IRC Section 856, the interest of a partner in the partnership's assets shall be determined in accordance with his capital interest in the partnership. The character of the various assets in the hands of the partnership and items of gross income of the partnership shall retain the same character in the hands of the partners for all purposes of IRC Section 856. Treas. Reg. Section 1.856-3(g). 8 Based upon this "look through" approach, the rents received by the Company will qualify as "rents from real property" for the 75 percent test provided they are rents from interests in real property, charges for services customarily furnished or rendered in connection with the rental of real property and rent attributable to personal property which is leased under, or in connection with, a lease of real property, but only if the rent attributable to such personal property for the taxable year does not exceed 15 percent of the total rent, for both real and personal property, for the taxable year. Specifically excluded from the definition of rents from real property is (1) rent determined on the basis, in whole or part, of any person's income or profits from the property (exclusive of rent based on a fixed percentage or percentages of receipts or sales); (2) rent received, directly or indirectly, from a tenant in which the REIT has an ownership interest (directly or indirectly) of 10 percent or more; and (3) for tax years beginning on or before August 5, 1997, rent from real property if the REIT furnishes or renders certain services to a tenant or manages or operates such property other than through an independent contractor from which the REIT receives no income (exclusive of any amount if such amount would be excluded from unrelated business taxable income under IRC Section 512(b)(3) if received by an organization described in IRC Section 511(a)(2)), and for tax years beginning after August 5, 1997, any "impermissible tenant service income" (as that term is defined in IRC Section 856(d)(7)). The Company has represented that it has satisfied both of the income tests outlined above since January 1, 1987. It has also represented that it intends to take all necessary measures within its control to ensure that it meets such tests during each of its future taxable years. In addition, the Company has represented that it qualified as a REIT for federal income tax purposes from January 1, 1987 through December 31, 1997. If the Company fails to meet either income test (1) or (2) above, it may still qualify as a REIT in such taxable year if it reports the source and nature of each item of its gross income in its federal income tax return for such year, the inclusion of any incorrect information in its return is not due to fraud with intent to evade tax and the failure to meet such tests is due to reasonable cause and not to willful neglect. The Company, however, will be subject to a tax of 100 percent based on the excess non qualifying income. The Company has represented that if it fails to meet the requirements of either IRC Sections 856(c)(2) or (c)(3) (or both) in any taxable year, it intends to avail itself of the provisions of IRC Section 856(c)(6) (whereby it will be considered to have satisfied the requirements of such paragraphs) if such failure is due to reasonable cause and not due to willful neglect. 3. ASSET TESTS. At the close of each quarter during each taxable year, a REIT must satisfy four tests under IRC Section 856(c)(4). For tax years beginning on or before December 31, 2000: 9 (1) at least 75 percent of the value of a REIT's total assets must consist of real estate assets, cash and cash items (including receivables) and Government securities; (2) not more than 25 percent of the value of a REIT's total assets may consist of securities, other than those includible under (1) above; (3) not more than 5 percent of the value of a REIT's total assets may consist of securities of any one issuer, other than those securities includible under (1) above; and (4) not more than 10 percent of the outstanding voting securities of any one issuer may be held by the REIT, other than those securities includible under (1) above. For tax years beginning after December 31, 2000: (1) at least 75 percent of the value of a REIT's total assets must consist of real estate assets, cash and cash items (including receivables) and Government securities; (2) not more than 25 percent of the value of a REIT's total assets may consist of securities, other than those includible under (1) above; (3) not more than 20 percent of the value of a REIT's total assets may consist of securities of one or more taxable REIT subsidiaries, as defined under IRC Section 856(l) ("TRS"); (4) except with respect to a TRS and securities includible under (1) above (i) no more than 5 percent of the value of a REIT's total assets may consist of securities of any one issuer; (ii) a REIT may not hold securities possessing more than 10 percent of the total voting power of the outstanding securities of any one issuer; and (iii) a REIT may not hold securities having a value of more than 10 percent of the total value of the outstanding securities of any one issuer (the "Single Issuer Security Limitation"). Failure to satisfy any one of these four tests generally results in the disqualification of the entity as a REIT. The IRC does, however, provide for mitigation.(3) In the case of a real estate investment trust which is a partner in a partnership, as defined in IRC Section 7701(a)(2) and the regulations thereunder, a REIT will be deemed to own its proportionate share of each of the assets of the partnership and will be deemed to be entitled to the income of the partnership attributable to such share. For purposes of IRC Section 856, the - ---------- (3) See IRC Section 856(c)(4), flush language. 10 interest of a partner in the partnership's assets shall be determined in accordance with his capital interest in the partnership. The character of the various assets in the hands of the partnership and items of gross income of the partnership shall retain the same character in the hands of the partners for all purposes of IRC Section 856.(4) As such, a REIT's ownership interest in a partnership is not subject to the Single Issuer Security Limitation. See discussion at 'B. Subsidiary Partnership Status' below for requirements for entities to qualify as partnerships for federal income tax purposes. The Company has represented that it has satisfied all four of the asset tests outlined above since January 1, 1987. It has also represented that it intends to take all necessary measures to ensure that it meets such tests at the end of each quarter of each of its future taxable years. In addition, the Company has represented that it qualified as a REIT for federal income tax purposes from January 1, 1987 through December 31, 1997. For purposes of this opinion, we have assumed that each Subsidiary Partnership has been properly classified as a partnership for federal income tax purposes prior to January 1, 1998. In addition, based upon the representations of the Company as set forth in the Certificate of Representations, and the assumption that the Subsidiary Partnerships were properly classified as partnerships for federal income tax purposes prior to January 1, 1998, we conclude that the Subsidiary Partnerships have since January 1, 1998 been taxable as partnerships and not as associations taxable as corporations for federal income tax purposes, and they will continue to be taxable as partnerships and not as associations taxable as corporations for federal income tax purposes. As such, the Company's ownership interests in the Subsidiary Partnerships since January 1, 1998 will not (in, and of, itself) cause it to fail to meet the Single Issuer Security Limitation. For the current and all future taxable years, the Company has represented that it expects, and the Company intends to take all necessary measures within its control to ensure, that the Company has or will revalue its assets at the end of each quarter of each taxable year in which securities or other property is acquired and will eliminate within 30 days after the end of each such quarter any discrepancy between the value of the Company's various investments and the requirements of the four asset tests outlined above, to the extent such discrepancy is attributable in whole or in part to acquisitions during such quarter. For all tax years beginning after December 31, 2000, the Company has represented that all debt securities, other than securities of a TRS, held by the Company (i) have been secured by real property (including interests in real property); (ii) have had a value of less than 10 percent of the total value of the outstanding securities of the issuer; or (iii) have otherwise met the requirements of the "straight debt" safe harbor under IRC Section 856(c)(7). In addition, the - ---------- (4) Treas. Reg. Section 1.856-3(g). 11 Company has represented that any debt securities, other than securities of a TRS, that it will hold in the future will satisfy at least one of these three requirements. The Company has represented that the Company and each of CREC, CREC II and MC Dusseldorf Holding B.V. ("Dusseldorf") joined in a timely filed election to treat each of CREC, CREC II and Dusseldorf as a TRS effective January 1, 2001. Additionally, the Company has represented that it joined in an election to treat Captivate Network, Inc. ("Captivate") as a TRS and that the Company has at all times owned less than 10% of the vote and value of Captivate's securities. 4. DISTRIBUTION REQUIREMENT. During each taxable year, in order to qualify as a REIT, the deduction for dividends paid (computed without regard to capital gain dividends) must equal or exceed the following: (1) the sum of (a) 95 percent (90 percent for taxable years beginning after December 31, 2000) of real estate investment trust taxable income computed without regard to the deduction for dividends paid and excluding net capital gain, and (b) 95 percent (90 percent for taxable years beginning after December 31, 2000) of the excess of net income from foreclosure property over the tax on such income; minus (2) any excess non-cash income. This requirement (the "Distribution Requirement") is defined by reference to the dividends paid deduction. Therefore, only distributions that qualify for that deduction will count in meeting the Distribution Requirement.(5) Such dividends must be paid in the taxable year to which they relate, or in the 12-month period following the close of such taxable year, if declared before the Company timely files it tax return for such taxable year and if paid on or before the first regular dividend payment after such declaration. Any dividend declared by the Company in October, November, or December of any calendar year and payable to shareholders of record on a specified date in such a month shall be deemed to have been paid on December 31 of such calendar year if such dividend is actually paid by the Company during January of the following calendar year. If a REIT has more than one class of stock, the Distribution Requirement must be met on an aggregate basis and not with respect to each separate class of stock. Distributions within each class of stock must be pro rata and non-preferential. Further, any distribution shall not be considered as a dividend for purposes of computing the dividends paid deduction, unless such distribution is with no preference to one class of stock as compared with another class except to the extent that the former is entitled (without reference to waivers of their rights by shareholders) to such preference. - ---------- (5) See IRC Sections 561 and 562. 12 To the extent that a REIT does not distribute all of its net capital gain or distributes at least 95 percent (90 percent for taxable years beginning after December 31, 2000), but less than 100 percent, of its REIT taxable income, it will be subject to tax at regular corporate tax rates. A REIT may also be subject to an excise tax if it fails to meet certain other distribution requirements. The Company has represented that it has satisfied the Distribution Requirement for each of its tax years commencing with the tax year beginning January 1, 1987, and it has represented that it expects and intends to take all necessary measures to continue to make dividend distributions to its shareholders on an annual basis sufficient to meet such requirement. In addition, the Company has represented that it qualified as a REIT for federal income tax purposes from January 1, 1987 through December 31, 1997. Because of timing differences between the inclusion of income and deduction of expenses in arriving at taxable income, and because the amount of nondeductible expenses, such as principal amortization and capital expenditures, could exceed the amount of non cash deductions such as depreciation, it is possible that the Company may not have sufficient cash or liquid assets at a particular time to satisfy the Distribution Requirement. In such event, the Company may declare a consent dividend, which is a hypothetical distribution to shareholders out of the earnings and profits of the Company. The effect of such a consent dividend, to those shareholders who agree to such treatment, would be that such shareholders would be treated for federal income tax purposes as if such amount had been paid to them in cash and they had then immediately contributed such amount back to the Company as additional paid-in capital. This treatment would result in taxable income to those shareholders without the receipt of any actual cash distribution, but it would also increase their tax basis in their stock by the amount of the taxable income recognized. A consent dividend does not include amounts which, if distributed in money would constitute or be part of a preferential distribution as defined in IRC Section 562(c).(6) In determining whether it has paid dividends for any year in an amount sufficient to meet the Distribution Requirement, the Company has represented that it will disregard any dividends treated as "preferential dividends" under IRC Section 562(c) and, if any dividend not so disregarded is determined to be a preferential dividend (or if the Company is determined to have failed for any other reason to pay the amount of dividends required by the preceding sentence), then the Company will pay a deficiency dividend as necessary to avoid being disqualified as a REIT. If the Company fails to meet the Distribution Requirement in any taxable year due to an adjustment to the Company's income by reason of a judicial decision or by agreement with the IRS, the Company may pay a deficiency dividend to its shareholders, which would relate back to the taxable year being adjusted for purposes of meeting the Distribution Requirement in such taxable year. In such case, the Company would also be required to pay interest plus a - ---------- (6) See IRC Section 565(b)(1). 13 penalty to the IRS.(7) The Company has represented that if it is determined to have failed, for any reason, to pay the amount of dividends sufficient to meet the Distribution Requirement, then the Company will pay a deficiency dividend as necessary to avoid being disqualified as a REIT. In the event that the Company's income is adjusted (increased) by the IRS for any taxable year, and such adjustment would otherwise result in disqualification of the Company as a REIT for failure to meet the minimum distribution requirement for such year, the Company has represented that it intends timely to declare and pay a deficiency dividend in accordance with IRC Section 860 in order to avoid being disqualified as a REIT. If the Company cannot declare a consent dividend or if it lacks sufficient cash to distribute 95 percent (90 percent for taxable years beginning after December 31, 2000) of its REIT taxable income or to pay a deficiency dividend in appropriate circumstances, the Company could be required to borrow funds or liquidate a portion of its investments in order to pay its expenses, make the required cash distributions to shareholders, or satisfy its tax liabilities. There can be no assurance that such funds will be available to the extent, and at the time, required by the Company, in which case its status as a REIT could be lost. 5. OTHER REQUIREMENTS. In addition to the foregoing, a corporation may not compute its taxable income as a real estate investment trust consistent with the provisions of IRC Section 857(b)(2) unless: (i) the provisions of the IRC, Subtitle A, Chapter 1, Subchapter M, Part II (i.e., IRC Sections 856 through 859, the "REIT Sections") applied to the corporation for all taxable years beginning after February 28, 1986, or (ii) as of the close of the taxable year, the corporation has no earnings and profits accumulated in any "non-REIT year".(8) For this purpose, the term "non-REIT year" means any taxable year to which the provisions of the REIT Sections did not apply with respect to the corporation. The Company has represented that other than earnings and profits that were grandfathered under IRC Section 857(a)(2)(A) related to taxable years beginning before February 28, 1986, it has no, and will continue to have no, accumulated earnings and profits from any taxable year for which it did not qualify as a REIT and has not succeeded by reason of any merger or other non-taxable acquisition of assets (including any deemed acquisition of assets resulting from an election to treat a subsidiary as a QRS) to the earnings and profits of any other entity taxable as a corporation. If, by reason of any merger (directly or through a QRS) or other non-taxable acquisition of assets (including any deemed acquisition of assets resulting from an election to treat a subsidiary as a QRS), the Company does succeed to the earnings and profits of any other entity taxable as a corporation, then the Company intends to distribute to the Company's shareholders all of such earnings and profits before the close of the taxable year of such merger or acquisition. If for any reason, the Company's status as a REIT is terminated for any year (and any subsequent taxable year for which the Company may not elect to be treated as a REIT as a result of such termination pursuant to IRC Sections 856(g)(3) and 856(g)(4)), the Company intends timely to declare and pay to its shareholders a dividend in an amount sufficient to eliminate so - ---------- (7) See IRC Section 860. (8) See IRC Section 857(a)(2). 14 much of any earnings and profits for the year of termination (and for any subsequent taxable year for which the Company may not elect to be treated as a REIT as a result of such termination pursuant to IRC Sections 856(g)(3) and 856(g)(4)) as is necessary to enable the Company to re-elect to be a REIT no later than its fifth taxable year after the first taxable year for which such termination was effective. Treasury Regulation Section 1.857-11(c) provides that distribution procedures similar to those in IRC Section 852(e) for regulated investment companies apply to non-REIT earnings and profits of real estate investment trusts. As such, for distributions after December 31, 2000, if there is a "determination" (as defined below) that the REIT Sections do not apply to a real estate investment trust for any taxable year (hereinafter in this subsection referred to as the "non-REIT year"), and such REIT meets the "distribution requirements" (described below) with respect to the non-REIT year, for purposes of applying IRC Section 857(a)(2) to subsequent taxable years, the provisions of the REIT Sections shall be treated as applying to such REIT for the non-REIT year. If the "determination" (as defined below) that the provisions of the REIT Sections do not apply to the REIT is solely as a result of the failure to meet the requirements of IRC Section 857(a)(2), the preceding sentence shall also apply for purposes of applying IRC Section 857(a)(2) to the non-REIT year and the "distribution requirements" (described below) shall be the portion of the accumulated earnings and profits which resulted in such failure. The distribution requirements are met with respect to any non-REIT year if, within the 90-day period beginning on the date of the "determination" (as defined below) (or within such longer period as the Secretary may permit), the REIT makes one or more "qualified designated distributions" (as defined below) and the amount of such distributions is not less than the excess of the portion of the accumulated earnings and profits of the investment company (as of the date of the "determination" (as defined below) ) which are attributable to the non-REIT year, over any interest payable as determined pursuant to the rules applied to regulated investment companies under IRC Section 852(e)(3). The term "qualified designated distribution" means any distribution made by the investment company if: (i) IRC Section 301 applies to such distribution; and (ii) such distribution is designated (at such time and in such manner as the Secretary shall by regulations prescribe) as being taken into account under this paragraph with respect to the non-REIT year. Any qualified designated distribution shall not be included in the amount of dividends paid for purposes of computing the dividends paid deduction for any taxable year. The provisions of Treasury Regulation Section 1.857-11(c) and IRC Section 852(e) shall not apply if the "determination" contains a finding that the failure to meet any requirement of the REIT Sections was due to fraud with intent to evade tax. The term "determination" has the meaning given to such term by IRC Section 860(e). Such term also includes a determination by the REIT filed with the Secretary that the REIT Sections do not apply to the REIT for a taxable year. In the event of a determination (as defined above and in IRC Section 860(e)) which causes the termination of its election as a REIT pursuant to IRC Section 856(g), the Company intends to timely avail itself of the relief provisions of Treasury Regulation Section 1.857-11(c) and IRC Section 852(e) and declare and pay to its shareholders a qualified designated distribution or distributions in an 15 amount or amounts sufficient to eliminate so much of any earnings and profits for the year of termination (and for any subsequent taxable year for which the Company may not elect to be treated as a REIT as a result of such termination pursuant to IRC Sections 856(g)(3) and 856(g)(4)) as is necessary to enable the Company to re-elect to be taxed as a REIT no later than its fifth taxable year after the first taxable year for which such termination was effective. B. SUBSIDIARY PARTNERSHIP STATUS In order to qualify as a partnership for federal income tax purposes, Treasury Regulations Sections 301.7701-2 and 301.7701-3 (as effective for periods prior to January 1, 1997) stipulated that an unincorporated organization will be treated as a partnership if it has no more than two of the following corporate characteristics: (1) limited liability; (2) continuity of life; (3) free transferability of interests; and (4) centralized management. An organization will be deemed to possess the corporate characteristic of limited liability if under local law there is no member who is personally liable for debts or claims against the organization. In the case of a limited partnership, personal liability will not exist unless the general partner has substantial assets (other than its interest in the partnership), which could be reached by a creditor of the organization. Personal liability will also not exist when the general partner is merely a "dummy" acting as an agent of the limited partners.(9) An organization formed under a statute which essentially conforms to the Uniform Limited Partnership Act will not have continuity of life. In addition, if the death, insanity, bankruptcy, retirement, resignation or expulsion of any member will cause a dissolution of the organization unless other remaining general partners agree to continue the partnership or at least a majority in interest of the remaining partners agree to continue the partnership, continuity of life does not exist.(10) An organization whose members have the power, without the consent of other members, to substitute for himself in the same organization a person who is not a member of the organization has free transferability of interests. This power of substitution does not exist unless the member is able, without the consent of other members, to confer upon his substitute all the attributes of his interests in the organization. The characteristic of free transferability - ---------- (9) Treas. Reg. Section 301.7701-2(d) (as effective prior to January 1, 1997). (10) Treas. Reg. Section 301.7701-2(b)(1) (as effective prior to January 1, 1997). 16 does not exist in a case in which each member can, without the consent of other members, assign only his right to share in profits, but cannot so assign his rights to participate in the management of the corporation.(11) The IRS has also stated that it would issue an advance ruling that a partnership lacks free transferability of interests if, throughout the life of the partnership, the partnership agreement expressly restricts the transferability of partnership interests representing more than 20 percent of all interests in partnership capital, income, gain, loss, deduction and credit.(12) An organization in which any person or group of persons that does not include all the members has the continuing exclusive authority, without ratification by the members of that organization, to make the management decisions necessary to conduct the business for which the organization was formed has the corporate characteristic of centralized management.(13) Centralized management ordinarily exists in a limited partnership subject to a statute which essentially conforms to the Uniform Limited Partnership Act, if substantially all the interests in the partnership are owned by the limited partners.(14) Effective as of January 1, 1997, the IRS adopted a classification system that permits a closely held unincorporated business to elect its tax status (the "Check-the-Box Rules"), discarding the four-factor classification system discussed immediately above. An unincorporated domestic business entity (an "Eligible Entity" as defined in Treasury Regulation Section 301-7701-3(a) (as effective January 1, 1997)) with at least two members, formed on or after January 1, 1997, will generally be classified as a partnership for federal tax purposes unless it elects to be treated as an association taxable as a corporation.(15) Under the Check-the-Box Rules, an Eligible Entity in existence prior to January 1, 1997, will have the same classification that the entity claimed under Treasury Regulations Sections 301.7701-1 through 301.7701-3 (as in effect prior to January 1, 1997).(16) In the case of a business entity that was in existence prior to January 1, 1997, the entity's claimed classification will be respected for all periods prior to January 1, 1997, if (i) it had a reasonable basis (within the meaning of IRC Section 6662) for its claimed classification for federal income tax purposes, (ii) the entity, and all members of the entity recognized the federal income tax consequences of any change in its classification within the sixty months prior to January 1, 1997, and (iii) neither the entity nor any of its - ---------- (11) Treas. Reg. Sections 301.7701-2(e) and 301.7701-3(b)(2), example 1 (as effective prior to January 1, 1997). (12) Rev. Proc. 92-33, 1992-1 C.B. 782. (13) Treas. Reg. Section 301.7701-2(c)(1). (14) Treas. Reg. Sections 301.7701-2(c)(4) and 301.7701-2(a)(5) (as effective prior to January 1, 1997). (15) See Treas. Reg. Sections 301-7701-1 through 301-7701-4 (as effective January 1, 1997). (16) Treas. Reg. Section 301-7701-3(b)(3)(i) (as effective January 1, 1997). 17 partners was notified in writing on or before May 8, 1996, that its classification was under examination.(17) A partnership can nonetheless be taxed as a corporation if it is a publicly traded partnership under IRC Section 7704. In addition, the IRS had adopted final regulations that provide an anti-abuse rule ("Anti-abuse Rule") under the partnership provisions of the IRC ("Partnership Provisions"). Under the Anti-abuse Rule, if a partnership is formed or availed of in connection with a transaction with a principal purpose of substantially reducing the present value of the partners' aggregate federal tax liability in a manner that is inconsistent with the intent of the Partnership Provisions, the IRS can disregard the form of the transaction and recast it for federal income tax purposes. The Anti-abuse Rule states that the intent of the Partnership Provisions is to permit taxpayers to conduct business for joint economic profit through a flexible arrangement that accurately reflects the partners' economic agreement without incurring an entity level tax. The regulations go on to provide that the Partnership Provisions are not intended to permit taxpayers (i) to structure transactions using a partnership to achieve tax results that are inconsistent with the underlying economic arrangements of the parties or the substance of the transactions; or (ii) to use the existence of a partnership to avoid the purposes of other provisions of the IRC. The purposes for structuring a transaction involving a partnership are determined based on all of the facts and circumstances.(18) The Company has represented that, commencing on or after January 1, 1997, each of any Subsidiary Partnership in existence prior to January 1, 1997 or formed on or after January 1, 1997, has been, and will continue to be, a domestic "eligible entity" as that term is defined in Treasury Regulation Section 301.7701-3(a). For all periods prior to January 1, 1997, the Company represented that (i) each of any Subsidiary Partnership in existence prior to January 1, 1997 claimed partnership classification and had a reasonable basis (within the meaning of IRC Section 6662) for its claimed classification as a partnership (and not as an association taxable as a corporation) for federal income tax purposes; (ii) each of any Subsidiary Partnership in existence prior to January 1, 1997 and all of its respective partners recognized the federal income tax consequences of any change in its classification within the sixty months prior to January 1, 1997; and (iii) no Subsidiary Partnership in existence prior to January 1, 1997, nor any of its partners was notified in writing on or before May 8, 1996, that its classification was under examination. The Company has represented that none of the Subsidiary Partnerships has affirmatively elected or will affirmatively elect (on a Form 8832 filed with the IRS or otherwise) to be classified as an association taxable as a corporation for federal income tax purposes. Moreover, the Company has represented that none of the Subsidiary Partnerships will change its form of organization. - ---------- (17) Treas. Reg. Section 301.7701-3(h) (as effective January 1, 1997). (18) See Treas. Reg. Section 1.701-2. 18 The Company has also represented that since January 1, 1987, none of any amendments to any Subsidiary Partnership agreement have affected the rights of the respective partners under such agreement in a manner so as to alter the number of corporate characteristics applicable to the Subsidiary Partnership for all periods prior to January 1, 1997. The Company has also represented that no interests in any Subsidiary Partnership are traded on any established securities market or are readily tradable on any secondary market or the substantial equivalent of any secondary market, including any matching system or program. V. LIMITATIONS ON OPINION. NO ASSURANCES ARE OR CAN BE GIVEN THAT THE IRS WILL AGREE WITH THE FOREGOING CONCLUSIONS IN WHOLE OR IN PART ALTHOUGH IT IS OUR OPINION THAT THEY SHOULD. WHILE THE OPINION REPRESENTS OUR CONSIDERED JUDGMENT AS TO THE PROPER TAX TREATMENT TO THE PARTIES CONCERNED BASED UPON THE LAW AS IT EXISTED AT THE RELEVANT TIME PERIODS AND THE FACTS AS THEY WERE PRESENTED TO US, IT IS NOT BINDING UPON THE IRS OR THE COURTS. IN THE EVENT OF ANY CHANGE TO THE APPLICABLE LAW OR RELEVANT FACTS, ASSUMPTIONS OR REPRESENTATIONS, WE WOULD OF NECESSITY NEED TO RECONSIDER OUR VIEWS. IN RENDERING THIS OPINION, WE HAVE ALSO CONSIDERED AND RELIED UPON THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "IRC"), THE REGULATIONS PROMULGATED THEREUNDER (THE "REGULATIONS"), ADMINISTRATIVE RULINGS AND THE OTHER INTERPRETATIONS OF THE IRC AND REGULATIONS BY THE COURTS AND THE IRS, ALL AS THEY EXIST AS OF THE DATE HEREOF. IT SHOULD BE NOTED, HOWEVER, THAT THE IRC, REGULATIONS, JUDICIAL DECISIONS, AND ADMINISTRATIVE INTERPRETATIONS ARE SUBJECT TO CHANGE AT ANY TIME AND, IN SOME CIRCUMSTANCES, WITH RETROACTIVE EFFECT. WE CAN GIVE NO ASSURANCE, THEREFORE, THAT LEGISLATIVE ENACTMENTS, ADMINISTRATIVE CHANGES OR COURT DECISIONS MAY NOT BE FORTHCOMING THAT WOULD MODIFY OR SUPERCEDE THE OPINION STATED HEREIN. IN ADDITION, THERE CAN BE NO ASSURANCE THAT POSITIONS CONTRARY TO OUR OPINION WILL NOT BE TAKEN BY THE IRS, OR THAT A COURT CONSIDERING THE ISSUES WILL NOT HOLD CONTRARY TO SUCH OPINION. MOREOVER, THIS OPINION REPRESENTS OUR CONCLUSIONS BASED UPON THE DOCUMENTS, FACTS, ASSUMPTIONS AND REPRESENTATIONS REFERRED TO ABOVE. ANY MATERIAL AMENDMENTS TO SUCH DOCUMENTS OR CHANGES IN ANY SIGNIFICANT FACTS AFTER THE DATE HEREOF, OR INACCURACY OF SUCH ASSUMPTIONS OR REPRESENTATIONS COULD AFFECT THE OPINION REFERRED TO HEREIN. THIS OPINION IS EXPRESSED AS OF THE DATE HEREOF, AND WE DISCLAIM ANY UNDERTAKING TO ADVISE YOU OF ANY SUBSEQUENT CHANGES OF MATTERS STATED, REPRESENTED, COVENANTED, OR ASSUMED HEREIN OR ANY SUBSEQUENT CHANGES IN APPLICABLE LAW. YOU UNDERSTAND AND AGREE THAT THIS OPINION IS SOLELY FOR THE COMPANY'S INFORMATION AND BENEFIT, IS LIMITED TO THE DESCRIBED TRANSACTION, AND MAY NOT BE RELIED UPON, DISTRIBUTED, DISCLOSED, MADE AVAILABLE TO, OR COPIED BY ANYONE, WITHOUT PRIOR WRITTEN CONSENT OR AS DESCRIBED HEREIN. WE UNDERSTAND AND AGREE THAT OUR OPINION, IN ITS ENTIRETY, WILL BE ATTACHED AS AN EXHIBIT TO THE REGISTRATION STATEMENT AND WILL BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. WE ALSO UNDERSTAND THAT THERE WILL BE A REFERENCE TO THE DELOITTE & TOUCHE NAME UNDER THE CAPTION "CERTAIN FEDERAL INCOME TAX CONSIDERATIONS" IN THE PROSPECTUS. THE REGISTRATION STATEMENT MAY NOT USE OR OTHERWISE REFERENCE THE DELOITTE & TOUCHE NAME IN ANY OTHER MANNER WITHOUT OUR PRIOR WRITTEN APPROVAL. 19 FURTHER, SUBJECT TO THE USE PERMITTED AS DESCRIBED ABOVE, OUR OPINION AND THE DELOITTE & TOUCHE NAME MAY NOT BE USED OR OTHERWISE REFERENCED IN ANY WAY IN CONNECTION WITH FUTURE OFFERINGS UNDER THE REGISTRATION STATEMENT (INCLUDING, BY WAY OF EXAMPLE, BUT NOT BY WAY OF LIMITATION, IN ANY OFFERING DOCUMENT). IN ADDITION, THIS OPINION IS BASED UPON: a. THE REPRESENTATIONS, ASSUMPTIONS, INFORMATION, DOCUMENTS, AND FACTS THAT WE HAVE INCLUDED OR REFERENCED IN THIS OPINION LETTER; b. OUR ASSUMPTION (WITHOUT INDEPENDENT VERIFICATION) THAT ALL OF THE REPRESENTATIONS AND ALL OF THE ORIGINALS, COPIES, AND SIGNATURES OF DOCUMENTS REVIEWED BY US ARE ACCURATE, TRUE, AND AUTHENTIC; c. OUR ASSUMPTION (WITHOUT INDEPENDENT VERIFICATION) THAT THERE WAS OR WILL BE TIMELY EXECUTION AND DELIVERY OF AND PERFORMANCE AS REQUIRED BY THE REPRESENTATIONS AND DOCUMENTS; d. THE UNDERSTANDING THAT ONLY THE SPECIFIC FEDERAL INCOME TAX ISSUES AND TAX CONSEQUENCES OPINED UPON HEREIN ARE COVERED BY THIS TAX OPINION, AND NO OTHER FEDERAL, STATE, OR LOCAL TAXES OF ANY KIND WERE CONSIDERED; e. THE LAW, REGULATIONS, CASES, RULINGS, AND OTHER TAX AUTHORITY IN EFFECT AS OF THE DATE OF THIS LETTER. IF THERE ARE ANY SIGNIFICANT CHANGES IN OR TO THE FOREGOING TAX AUTHORITIES (FOR WHICH WE SHALL HAVE NO RESPONSIBILITY TO ADVISE YOU), SUCH CHANGES MAY RESULT IN OUR OPINION BEING RENDERED INVALID OR NECESSITATE (UPON YOUR REQUEST) A RECONSIDERATION OF THE OPINION. WE HAVE NOT BEEN RETAINED, NOR ARE WE OBLIGATED, TO MONITOR OR UPDATE THIS OPINION FOR FUTURE CONDITIONS THAT MAY AFFECT THIS OPINION; AND f. YOUR UNDERSTANDING THAT THIS OPINION IS NOT BINDING ON THE IRS OR THE COURTS AND SHOULD NOT BE CONSIDERED A REPRESENTATION, WARRANTY, OR GUARANTEE THAT THE IRS OR THE COURTS WILL CONCUR WITH OUR OPINION. Very truly yours, Deloitte & Touche LLP 20 ATTACHMENT A July 10, 2003 Deloitte & Touche LLP 191 Peachtree Street NE Suite 1500 Atlanta, Georgia 30303 Gentlemen: On October 4, 1996, Cousins Properties Incorporated ("Company"), a Georgia corporation, filed a Registration Statement on Form S-3 (File No. 333-12031) with the Securities and Exchange Commission, pursuant to which the Company may offer, from time to time, common stock, warrants, and debt securities (together with all exhibits, supplements and amendments thereto, the "Prior Shelf Registration") in an amount aggregating $200,000,000 of which $132,140,625 remains unsold. The Company is filing a Registration Statement on Form S-3 pursuant to which the Company may offer, from time to time, common stock, warrants, debt securities, and preferred stock in an aggregate amount equal to the amount remaining unsold of $132,140,625 under the Prior Registration Statement plus an additional $1,000,000 (the "Registration Statement"), as more fully described in the Company's prospectus included in Amendment No. 1 to the Registration Statement dated July 10, 2003 (together with all exhibits, supplements and amendments thereto, the "Prospectus"). The Registration Statement serves as a post-effective amendment to the Prior Shelf Registration. In connection with the filing of the Registration Statement (the "Shelf Registration"), we have requested Deloitte & Touche LLP ("D&T") to issue an opinion regarding the status, for federal income tax purposes, of the Company. The Company intends to continue to be taxed as a real estate investment trust ("REIT") as defined in Internal Revenue Code ("IRC") Sections 856-860. We understand and agree that this opinion (except as provided in the following sentence) is solely for the Company's information and benefit, is limited to the described registration, and may not be relied upon, distributed, disclosed, made available to, or copied by anyone, without the prior written consent of D&T. Notwithstanding the above, we understand that D&T will consent to the use of its tax opinion as an exhibit, in its entirety, to the Registration Statement, which will be filed with the Securities and Exchange Commission. 21 Except as otherwise provided herein, capitalized terms shall have the same meaning ascribed to them in the Registration Statement, the Prior Shelf Registration, the Prospectus, or the Company' Restated and Amended Articles of Incorporation. In connection with such opinion, you have requested certain representations regarding the organization and operation of (i) the Company, (ii) Cousins Real Estate Corporation and consolidated subsidiaries (a subsidiary being defined for this purpose as any corporation in which Cousins Real Estate Corporation holds (or has held) an interest) ("CREC"), (iii) CREC II Inc. and consolidated subsidiaries (a subsidiary being defined for this purpose as any corporation in which CREC II Inc. holds (or has held) an interest) ("CREC II"), (iv) Captivate Network, Inc. ("Captivate"), (v) MC Dusseldorf Holding B.V. ("Dusseldorf"), (vi) any subsidiary (exclusive of any "taxable REIT subsidiary" as such term is defined in IRC Section 856(l)) of the Company in which: (a) with respect to all taxable years beginning on or before August 5, 1997, the Company has owned 100 percent of the stock at all times during the period of such subsidiary's existence, and (b) with respect to all taxable years beginning after August 5, 1997, the Company owns, or has owned, 100 percent of such subsidiary (a "Qualified REIT Subsidiary" or "QRS"), (vii) each of any partnership (within the meaning of (and including any limited liability company or other entity classified as a partnership for federal income tax purposes) IRC Section 7701(a)(2) and the regulations promulgated thereunder) in which the Company or any QRS has held an interest, directly or indirectly (a "Subsidiary Partnership"), and (viii) any limited liability company (which has not elected to be classified as a corporation for federal income tax purposes) all of the interests in which are held by the Company, any QRS, or any Subsidiary Partnership directly, and/or indirectly through one or more other such limited liability companies (a "Disregarded LLC"). Unless the context indicates otherwise, for purposes of all representations with respect to gross income or specific items of gross income (including, but without limitation, rental income, interest income, and gains from the sale or other disposition of assets) contained in this letter: (i) the Company shall be treated as receiving or accruing (a) a proportionate share of all gross income received or accrued by any Subsidiary Partnership in accordance with the Company's proportionate IRC Section 704(b) capital account ("Capital Interest") therein, (b) all gross income received or accrued by any QRS, and (c) all gross income received or accrued by any Disregarded LLC in which the Company owns (directly and/or indirectly through one or more other Disregarded LLCs) all of the interests; (ii) each of any QRS shall be treated as receiving or accruing (a) a proportionate share of all gross income received or accrued by any Subsidiary Partnership in which it owns a direct interest, in accordance with its Capital Interest in each such partnership, and (b) all gross income received or accrued by any Disregarded LLC in which the QRS (as the case may be) owns (directly and/or indirectly through one or more other Disregarded LLCs) all of the interests; and (iii) each of any Subsidiary Partnership shall be treated as receiving or accruing (a) a proportionate share of all gross income received or accrued by any other Subsidiary Partnership in which it owns a direct interest, in accordance 22 with its Capital Interest in each such partnership, and (b) all gross income received or accrued by any Disregarded LLC in which such Subsidiary Partnership owns (directly and/or indirectly through one or more other Disregarded LLCs) all of the interests. Unless the context indicates otherwise, for purposes of all representations with respect to ownership of assets (including, but without limitation, stock and loans) contained in this letter: (i) the Company shall be treated as owning (a) its proportionate share of assets owned by any Subsidiary Partnership in which the Company owns a direct interest (as determined in accordance with the Company's Capital Interest therein), (b) the assets owned by each of any QRS, and (c) the assets owned by any Disregarded LLC in which the Company owns (directly and/or indirectly through one or more other Disregarded LLCs) all of the interests; and (ii) each of any QRS shall be treated as owning (a) a proportionate share of the assets owned by each of any Subsidiary Partnership in which it owns a direct interest, in accordance with its Capital Interest in each such partnership, and (b) the assets owned by any Disregarded LLC in which such QRS (as the case may be) owns (directly and/or indirectly through one or more other Disregarded LLCs) all of the interests; and (iii) each of any Subsidiary Partnership shall be treated as owning (a) a proportionate share of the assets owned by any other Subsidiary Partnership in which it owns a direct interest, in accordance with its Capital Interest in each such partnership, and (b) the assets owned by any Disregarded LLC in which such Subsidiary Partnership owns (directly and/or indirectly through one or more other Disregarded LLCs) all of the interests. The Company hereby represents, solely for purposes for your reliance in rendering your opinion, and authorizes you to rely on such representations in rendering your opinion, that: QUALIFICATION, AUTHORIZATION AND KNOWLEDGE 1. The individual executing this letter on behalf of the Company is the duly qualified and elected Executive Vice President, Chief Financial Officer, and Chief Investment Officer of the Company and as such is familiar with the facts herein certified and is duly authorized to certify the same. ORGANIZATIONAL MATTERS 2. Since January 1, 1987, the Company has been organized as a corporation taxable as a domestic corporation but for the operation of IRC Sections 856 through 859 and the operation of the Company has been carried out in accordance with (i) the law governing corporations formed in the state of Georgia and with all other applicable laws of the State of Georgia; (ii) the terms and conditions set forth in the Restated and Amended Articles of Incorporation dated August 9, 1999, as amended or supplemented (the "Articles of Incorporation"); and (iii) in the manner described in the Registration Statement, the Prior Shelf Registration, and the Prospectus. Additionally, in all material respects, the organizational and other required documents of the Company have been 23 properly filed pursuant to applicable state laws and the required filing fees have been paid. 3. Since January 1, 1987, (or, if later, the date of its formation), each of any QRS, each of any Disregarded LLC, and each of any Subsidiary Partnership has operated and intends to operate in accordance with the applicable laws of the state in which it was formed and its respective articles of incorporation ("QRS Articles"), articles of organization ("Disregarded LLC Articles"), or partnership agreement (a "Subsidiary Partnership Agreement"), and in the manner described in the Registration Statement, the Shelf Registration, and the Prospectus. Each of any QRS Articles, each of any Disregarded LLC Articles, and each of any Subsidiary Partnership Agreement, and all amendments thereto have been duly executed and filed. Additionally, in all material respects, the organizational and other required documents of each of any QRS, each of any Disregarded LLC, and each of any Subsidiary Partnership have been properly filed pursuant to applicable state laws and the required filing fees have been paid. 4. For all periods prior to January 1, 1997, any Subsidiary Partnership in existence prior to January 1, 1997 (i) claimed to be classified as a partnership (and not as an association taxable as a corporation) for federal income tax purposes under the law in effect (and for periods) prior to January 1, 1997; (ii) had a reasonable basis (within the meaning of IRC Section 6662 and the regulations promulgated thereunder) for claiming such classification; and (iii) recognized, along with all of its respective partners, the federal income tax consequences of any change in its classification within the sixty months prior to January 1, 1997. There were no amendments to any Subsidiary Partnership Agreement in existence prior to January 1, 1997, which would have affected the transferability of interests in, the limitations on liability of partners of, the centralization of management of, or the continuity of existence of any Subsidiary Partnership in existence prior to January 1, 1997 in a manner that would have altered the status of the entity as a partnership for federal income tax purposes. Neither (i) any Subsidiary Partnership in existence prior to January 1, 1997 nor (ii) any of the partners of any of such Subsidiary Partnership was notified in writing on or before May 8, 1996, that the classification of such Subsidiary Partnership was under examination by the Internal Revenue Service ("IRS"). Since January 1, 1997 (or, if later, the date of its formation), each Subsidiary Partnership has been a domestic "eligible entity" and will continue to be a domestic "eligible entity" within the meaning of Treasury Regulation Section 301.7701-3(a), which generally defines "eligible entity" as a business entity which is neither (i) organized under a federal or state statute that describes or refers to the entity as incorporated or as a corporation, body corporate or body politic; (ii) organized under a state statute that describes or refers to the entity as a joint-stock 24 company or joint-stock association; (iii) an insurance company; (iv) a state-chartered business entity conducting banking activities; (v) a business entity taxable as a corporation under a provision of the IRC other than IRC Section 7701 (which generally distinguishes between corporations and partnerships for federal income tax purposes); and (vi) certain foreign entities. Moreover, none of the Subsidiary Partnerships has affirmatively elected or will affirmatively elect (on a Form 8832 filed with the IRS or otherwise) to be classified as an association taxable as a corporation for federal income tax purposes, and none of the Subsidiary Partnerships will change its form of organization. No interests in any Subsidiary Partnership are traded on any established securities market or are readily tradable on any secondary market or the substantial equivalent of any secondary market, including any matching system or program. 5. Since January 1, 1987, the Company has been and will continue to be managed by its directors, and the beneficial ownership of the Company has and will continue to be evidenced by transferable shares. The Company does not and will not impose, and is not aware of, any transfer restrictions on its outstanding shares of beneficial interest other than those restrictions contained in the Articles of Incorporation, which are intended to enable the Company to comply with certain REIT qualification requirements as set forth in IRC Section 856(a)(6). 6. Since January 1, 1987, beneficial ownership of the Company has been held by 100 or more persons and the Company expects, and the Company intends to take all necessary measures within its control to ensure, that the beneficial ownership of the Company will continue to be held by 100 or more persons. 7. Since January 1, 1987, at no time during the last half of any taxable year has more than 50 percent in value of the Company's outstanding capital stock been owned directly or indirectly by five or fewer individuals within the meaning of IRC Section 856(h). 8. Since January 1, 1987, the Company was not chartered or supervised as a bank, savings and loan, or similar association under state or federal law. 9. Since January 1, 1987, the Company did not operate as a small business investment company under the Small Business Investment Act of 1958. 10. Since January 1, 1987, the Company was not engaged in the business of issuing life insurance, annuity contracts, or contracts of health or accident insurance. 11. Since January 1, 1987, the Company has used the calendar year as its taxable year. 25 12. The Company was not created by or pursuant to an act of a state legislature for the purpose of promoting, maintaining, or assisting the economy within the state by making loans that generally would not be made by banks. 13. The Company expects, and the Company intends to take all necessary measures within its control to ensure, that at no time during the last half of any taxable year, will more than 50 percent in value of the Company's outstanding capital stock be owned directly or indirectly by five or fewer individuals within the meaning of IRC Section 856(h). The Company does not intend to allow the restrictions on ownership and transfer of the Company's outstanding capital stock set forth in the Articles of Incorporation (the "Excess Shares Provision") to be violated and will use its best efforts to prevent such restrictions from being violated. The Board of Directors may, however, grant an exemption from the Limit with respect to one or more persons (an "Exemption"). The Company represents that the Board of Directors has not granted any Exemptions from the Limit since January 1, 1987. The Company also represents that none of the securities that may be issued pursuant to the Shelf Registration will be issued in violation of the Excess Shares Provision. The Company will take all necessary steps and exercise reasonable due diligence and care to ascertain that the Company is not "closely held" within the meaning of IRC Section 856(h). GROSS INCOME OF THE COMPANY 14. Since January 1, 1987, the Company has derived at least 75 percent of its gross income (excluding gross income from "prohibited transactions" (as such term is defined in IRC Section 857(b)(6)) for each taxable year from sources specified in IRC Section 856(c)(3), and not otherwise excluded therefrom by operation of IRC Sections 856(d) or 856(f). The undersigned understands that the sources of gross income specified in IRC Section 856(c)(3) include but are not limited to (i) rents from real property other than rents excluded under IRC Section 856(d)(2) by reason of (A) being dependent in whole or part on the income or profits of any person from the property, (B) deriving from a tenant 10% or more of which is owned, by vote or value (or for years beginning before December 31, 2000 and leases entered into prior to July 12, 1999, by vote or number of shares) by the REIT or (C) consisting of "impermissible tenant service income" (addressed below); (ii) gain from the sale or other disposition of real property other than (A) stock in trade of the Company, (B) other property which would properly be included in the inventory of the Company if on hand at the close of its taxable year, and (C) property held by the Company primarily for sale to customers in the ordinary course of its trade or business (as further described in paragraph 17 below); (iii) dividends or other distributions on, and gain (other than gain from "prohibited transactions") from the sale or other disposition of, transferable shares in other 26 companies which are taxed as REITs; (iv) abatements and refunds of property tax; (v) consideration for entering into agreements to purchase or lease real property (other than amounts dependent on the income or profits of any person); and (vi) "qualified temporary investment income" which is income (A) attributable to any proceeds received in exchange for stock or a publicly traded debt instrument having a maturity of at least 5 years, and (B) received or accrued during the 1-year period beginning on the date on which the REIT receives such proceeds. Section 857(b)(6) of the IRC is understood to define "prohibited transaction" generally as a sale or other disposition of property (other than certain property held at least four years) which (i) is stock in trade or other property of a kind which would properly be included in inventory if on hand at the close of the taxable year or property held primarily for sale to customers in the ordinary course of trade or business; and (ii) is not "foreclosure property" within the meaning of IRC Section 856(e) (which generally defines "foreclosure property" as real property which (i) a REIT acquires as the result of having bid in such property at foreclosure, or having otherwise reduced such property to ownership or possession by agreement or process of law, after there was a default (or default was imminent) on a lease of such property or on an indebtedness which secured such property, other than an indebtedness held by the REIT as stock in trade, inventory or primarily for sale to customers in the ordinary course of trade or business and (ii) which the REIT elects to treat as "foreclosure property" on or before the due date of its tax return for the year it acquires such property). For the current and all future taxable years, the Company expects, and the Company intends to take all necessary measures within its control to ensure that, at least 75 percent of the gross income (excluding gross income from "prohibited transactions" as such term is defined in IRC Section 857(b)(6)) of the Company will be derived from sources specified in IRC Section 856(c)(3), and not otherwise excluded therefrom by operation of IRC Sections 856(d) or 856(f). 15. Since January 1, 1987, the Company has derived at least 95 percent of its gross income (excluding gross income from "prohibited transactions" (as such term is defined in IRC Section 857(b)(6)) for each taxable year from sources specified in IRC Section 856(c)(2), and not otherwise excluded therefrom by operation of IRC Sections 856(d) or 856(f). The undersigned understands that the sources of gross income specified in IRC Section 856(c)(2) include, but are not limited to, those specified in IRC Section 856(c)(3) as described in the preceding paragraph 14, as well as dividends and interest from any source and any payment under an interest rate swap or cap agreement, option, futures contract, forward rate agreement, or any similar financial instrument, entered into by the Company in a transaction to reduce the interest rate risks with respect to any indebtedness incurred or to be incurred by the Company to acquire or carry real estate assets (and any gain from the sale or other disposition of any such investment). For the current and 27 all future taxable years, the Company expects, and the Company intends to take all necessary measures within its control to ensure, that at least 95 percent of the gross income of the Company (excluding gross income from "prohibited transactions" as such term is defined in IRC Section 857(b)(6)) for any taxable year will be derived from sources specified in IRC Section 856(c)(2) (or treated as a source so specified pursuant to IRC Section 856(c)(5)(G)), and not otherwise excluded therefrom by operation of IRC Sections 856(d) or 856(f). 16. For all taxable years ending after January 1, 1987 and before January 1, 1998, the Company derived less than 30 percent of its gross income from the sale or other disposition of (i) stock or securities held for less than one year, (ii) property in a transaction that is a prohibited transaction (as defined in IRC Section 857(b)(6)), and (iii) real property (including interests in real property and interests in mortgages on real property) held for less than four years, other than (A) property compulsorily or involuntarily converted within the meaning of IRC Section 1033, and (B) foreclosure property as defined in IRC Section 856(e) and paragraph 14 above. 17. Since January 1, 1987 (or, if later, the date of its formation), the Company, each of any QRS, each of any Disregarded LLC, and each of any Subsidiary Partnership has held substantially all of its assets for investment purposes and not as (i) stock in trade or other property of a kind which would properly be included in inventory if on hand at the close of the taxable year; or (ii) property held primarily for sale to customers in the ordinary course of its trade or business. For the current and all future taxable years, subject to paragraph 18 below, the Company expects, and the Company intends to take all necessary measures within its control to ensure, that the Company, each of any QRS, each of any Disregarded LLC, and each of any Subsidiary Partnership will hold substantially all of its assets for investment purposes and not as (i) stock in trade or other property of a kind which would properly be included in inventory if on hand at the close of the taxable year; or (ii) property held primarily for sale to customers in the ordinary course of its trade or business. 18. Since January 1, 1987, neither the Company, nor any QRS, nor any Disregarded LLC, nor any Subsidiary Partnership has engaged in any activity involving the sale or other disposition of property held primarily for sale to customers in the ordinary course of business and constituting a prohibited transaction (as defined in IRC Section 857(b)(6)); rather, any such activities have been and will continue to be conducted solely by and through CREC, CREC II, Captivate or Dusseldorf. 19. Consistent with the representations made in paragraphs 14 and 15 above: 28 a) Since January 1, 1987, the Company has not received or accrued any rent the determination of which was dependent on the income or profits of any person (exclusive of rent based on a fixed percentage or percentages of receipts or sales) which would otherwise have been excluded from the term "rents from real property" under IRC Sections 856(c)(2)(C) or 856(c)(3)(A) pursuant to IRC Section 856(d)(2)(A) and which, taking into account other non qualifying income, would have caused the Company to fail to satisfy the gross income tests described in paragraphs 14 and 15 above. The Company intends to take all necessary measures within its control to ensure that it will not receive or accrue any rent based on the income or profits of any person, including tenants and subtenants, which would cause the Company to fail to satisfy the gross income tests described in paragraphs 14 and 15 above due to failure of such rents to qualify as rents from real property for purposes of IRC Sections 856(c)(3) and 856(c)(2) and paragraphs 14 and 15, respectively. b) Since January 1, 1987, the Company has not received or accrued any interest the determination of which was dependent on the income or profits of any person (exclusive of interest based on a fixed percentage or percentages of receipts or sales) and which would otherwise have been excluded from the term "interest" under IRC Section 856(c)(2)(B) or 856(c)(3)(B) pursuant to IRC Section 856(f), if such non qualifying interest, when taking into account other non qualifying income, would have caused the Company to fail to satisfy the gross income tests described in paragraphs 14 and 15. The Company intends to take all necessary measures within its control to ensure that it will not receive or accrue any interest based on the income or profits of any person, which would cause the Company to fail to satisfy the gross income tests described in paragraphs 14 and 15 above due to failure of such interest to qualify as interest for purposes of IRC Sections 856(c)(3)(B) and 856(c)(2)(B) and paragraphs 14 and 15, respectively. c) Since January 1, 1987 (except as otherwise permitted by IRC Section 856(d)(8) for taxable years beginning after December 31, 2000), the Company has not rented and does not intend to rent any property to a tenant in which it owns, directly or indirectly, (i) in the case of any tenant which is a corporation, 10 percent or more of the total combined voting power of all classes of stock entitled to vote, or 10 percent or more of the total number (or "total value" for tax years beginning after December 31, 2000) of shares of all classes of stock; or (ii) in the case of any tenant which is not a corporation, 10 percent 29 or more of the assets or net profits, if such rental, taking into account other non qualifying income, would cause the Company to fail to satisfy the gross income tests described in paragraphs 14 and 15 above due to failure of such rents to qualify as rents from real property for purposes of IRC Sections 856(c)(3) and 856(c)(2) and paragraphs 14 and 15, respectively. In determining ownership, the attribution rules of IRC Section 318 (as modified by IRC Section 856(d)(5)) are to be taken into account. d) Since January 1, 1987, the Company has not been and is not now a party to, and does not intend to become a party to, a lease of real property where the rent under such lease attributable to personal property (as determined pursuant to IRC Section 856(d)(1)(C)) is greater that 15 percent of the total rent received under the lease and if such rental would cause the Company, taking into account other non qualifying income, to fail to satisfy the gross income tests described in paragraphs 14 and 15 above due to failure of such rents to qualify as rents from real property for purposes of IRC Sections 856(c)(3) and 856(c)(2) and paragraphs 14 and 15, respectively. For this purpose, with respect to each lease of real property, the rent attributable to personal property for the taxable year is that amount which bears the same ratio to total rent for the taxable year as the average of the fair market values (or adjusted bases for tax years beginning before December 31, 2000) of the personal property at the beginning and end of the taxable year bears to the average of the aggregate fair market values (or adjusted bases for tax years beginning before December 31, 2000) of both the real and personal property at the beginning and end of the taxable year. e) From January 1, 1987 through December 31, 2000, any services furnished or rendered to tenants and the management and operation of any property in which the Company held a beneficial interest, by the Company, any QRS, any Disregarded LLC, any Subsidiary Partnership or CREC, CREC II, or Dusseldorf, (i) were usually or customarily performed in connection with the rental of space for occupancy only for properties of a similar class in the 30 geographic market in which each real property was located; and (ii) were not rendered to the tenant primarily for his convenience. Subsequent to December 31, 2000, any services furnished or rendered to tenants and the management and operation of any property in which the Company held, or will hold a beneficial interest, by the Company, any QRS, any Disregarded LLC, or any Subsidiary Partnership (i) were, and will be, usually or customarily performed in connection with the rental of space for occupancy only for properties of a similar class in the geographic market in which each real property is located; and (ii) were not, and will not be, rendered to the tenant primarily for his convenience ("Permissible Services"). From January 1, 1987 through December 31, 2000 any services, other than Permissible Services, performed, furnished or rendered, were, performed, furnished or rendered, through an independent contractor (as such term is defined in IRC Section 856(d)(3)) from whom the Company did not derive or receive (directly or indirectly) any income. Subsequent to December 31, 2000, any services, other than Permissible Services, performed, furnished or rendered, were, and will be, performed, furnished or rendered, through either an independent contractor (as such term is defined in IRC Section 856(d)(3)) from whom the Company did not, and will not, derive or receive (directly or indirectly) any income or through a "taxable REIT subsidiary" (as such term is defined in IRC Section 856(l)) (a "TRS"). Notwithstanding the foregoing, for tax years beginning after August 5, 1997, the undersigned understands that the Company was, and is, allowed to receive or accrue (directly or indirectly) a de minimis amount of income from performing, furnishing or rendering services other than Permissible Services ("impermissible tenant service income," which does not qualify as rents from real property for purposes of IRC Sections 856(c)(3) and 856(c)(2) and paragraphs 14 and 15, respectively) so long as such income did not, or does not exceed 1 percent of all amounts received or accrued (directly or indirectly) by the Company with respect to such property and so long as such income, along with any other income not derived from sources specified in IRC Sections 856(c)(3) and 856(c)(2), did not, and does not, cause the Company to fail the gross income tests set forth in IRC Sections 856(c)(3) and 856(c)(2) and paragraphs 14 and 15, respectively. f) Since January 1, 1987, the Company has not received or accrued an amount of any gross income which does not qualify under the gross income tests described in IRC Section 856(c)(3) and paragraph 14 above, and which, in the aggregate, exceeds or exceeded 25 percent of the Company's gross income in any taxable year. For the current and all future taxable years, the Company expects that the amount of any gross income received or accrued by the Company which does not qualify under the gross income tests described in IRC Section 856(c)(3) and paragraph 14, will not, in the aggregate, exceed 25 percent of the Company's gross income in any taxable year. g) Since January 1, 1987, the Company has not received or accrued an amount of any gross income which does not qualify under the gross income tests described in IRC Section 856(c)(2) and paragraph 15 above, 31 and which, in the aggregate, exceeds or exceeded 5 percent of the Company's gross income in any taxable year. For the current and all future taxable years, the Company expects that the amount of any gross income received or accrued by the Company which does not qualify under the gross income tests described in IRC Section 856(c)(2) and paragraph 15, will not, in the aggregate, exceed 5 percent of the Company's gross income in any taxable year. h) The Company currently keeps, and intends to continue to keep, sufficient records to enable the Company to make the filings required under Treasury Regulation Section 1.856-4(b)(4) (relating to the receipt of rents from any person in which the Company, directly or indirectly, owns any proprietary interest) and Treasury Regulation Section 1.856-4(b)(5)(iv) (relating to the use of unrelated independent contractors), and the Company intends to make such required filings. 20. Since January 1, 1987, the Company has exercised and intends to continue to exercise its best efforts in attempting to comply with the gross income tests set forth in IRC Sections 856(c)(3) and 856(c)(2), and paragraphs 14 and 15, respectively. 21. If the Company fails to meet the requirements of either IRC Section 856(c)(2) or 856(c)(3) (or both) in any taxable year, it intends to avail itself of the provisions of IRC Section 856(c)(6) (whereby it will be considered to have satisfied the requirements of such paragraphs) if such failure is due to reasonable cause and not due to willful neglect. ASSETS OF THE COMPANY 22. Since January 1, 1987, at least 75 percent of the value of the Company's total assets have consisted, at the close of each quarter of each taxable year of the Company, of (a) cash and cash items (including receivables), (b) Government securities (as defined in the Investment Company Act of 1940), and (c) "real estate assets" (as such term is defined in IRC Section 856(c)(5)(B)). For the current and all future taxable years, the Company expects, and the Company intends to take all necessary measures within its control to ensure, that at least 75 percent of the value of the total assets of the Company will consist, at the close of each quarter of each taxable year of the Company, of (a) cash and cash items (including receivables), (b) Government securities (as defined in the Investment Company Act of 1940), and (c) "real estate assets" (as such term is defined in IRC Section 856(c)(5)(B)). 23. From January 1, 1987 through December 31, 2000, at the close of each quarter of each taxable year of the Company: (i) not more than 25 percent of the value of the Company's total assets have consisted of securities (other than those 32 includible under IRC Section 856(c)(4)(A)); (ii) the Company's ownership of securities has been limited in respect of any one issuer to an amount not greater in value than 5 percent of the value of the total assets of the Company; and (iii) the Company's ownership of securities has been limited to not more than 10 percent of the outstanding voting securities of any issuer. For each taxable year of the Company beginning after December 31, 2000, at the close of each quarter of each such taxable year: (i) not more than 25 percent of the value of the Company's total assets have consisted of securities (other than those includible under IRC Section 856(c)(4)(A)); (ii) not more than 20 percent of the value of its total assets have consisted of securities of one or more TRS; (iii) except with respect to a TRS and securities includible under IRC Section 856(c)(4)(A) (a) not more than 5 percent of the value of the Company's total assets has been comprised by securities of any one issuer, and (b) the Company has not held more than 10 percent of the total voting power, or 10 percent of the total value of the outstanding securities of any one issuer. For the current and all future taxable years, the Company expects and intends to take all necessary measures within its control to ensure that at the close of each quarter of each such taxable year: (i) not more than 25 percent of the value of the Company's total assets will consist of securities (other than those includible under IRC Section 856(c)(4)(A)); (ii) not more than 20 percent of the value of its total assets will consist of securities of one or more TRS; (iii) except with respect to a TRS and securities includible under IRC Section 856(c)(4)(A) (a) not more than 5 percent of the value of the Company's total assets will be comprised by securities of any one issuer, and (b) the Company will not hold more than 10 percent of the total voting power, or 10 percent of the total value of the outstanding securities of any one issuer. For taxable years beginning after December 31, 2000, and solely for the purposes of the representations set forth herein (including, without limitation, the representations set forth in this paragraph 23) applying IRC Section 856(c)(4)(B)(iii)(III), any debt securities issued to the Company by any issuer which are "straight debt" (as such term is defined in IRC Section 1361(c)(5) without regard to subparagraph (B)(iii) thereof) and: (i) the issuer is an individual; or (ii) the only securities of such issuer which are (or were) held by the Company or a TRS of the Company are straight debt (as so defined); or (iii) the issuer is a partnership and the Company holds (or held) at least a 20% profits interest in the partnership, have not been (or will not be) taken into account. For all debt securities issued to the Company, the Company has confirmed that the representations contained in this paragraph 23 with respect to such debt securities are true, correct and complete. 24. Since January 1, 1987, the Company, each of any QRS, each of any Disregarded LLC, and each of any Subsidiary Partnership have revalued their assets at the end of each quarter of each taxable year in which securities or other property was acquired and any discrepancy between the value of the 33 Company's various investments and the requirements of the 75 percent and 25 percent asset tests described in paragraphs 22 and 23 above, was eliminated within 30 days after the end of each such quarter to the extent such discrepancy was attributable, in whole or in part, to acquisitions during such quarter. For the current and all future taxable years, the Company expects, and the Company intends to take all necessary measures within its control to ensure, that the Company, each of any QRS, each of any Disregarded LLC, and each of any Subsidiary Partnership has or will revalue their assets at the end of each quarter of each taxable year in which securities or other property is acquired and will eliminate within 30 days after the end of each such quarter any discrepancy between the value of the Company's various investments and the requirements of the 75 percent and 25 percent asset tests described in paragraphs 22 and 23 above, to the extent such discrepancy is attributable, in whole or in part, to acquisitions during such quarter. 25. Since January 1, 1987, the Company, each of any QRS, each of any Disregarded LLC, and each of any Subsidiary Partnership has kept and intends to keep and retain sufficient records so as to be able to show that the Company has complied during each of its taxable years with the total asset tests contained in IRC Section 856(c)(4) and described in paragraphs 22 and 23 above. 26. The value of the assets for purposes of the representations contained in paragraphs 22, 23 and 24 are accurate and correct to the best of our knowledge and belief (except that certain assets have been valued at book value, which valuation does not alter the accuracy of the representations contained in paragraphs 22, 23, and 24). 27. Since January 1, 1987, the Company has exercised and intends to exercise its best efforts in attempting to comply with the asset tests set forth in IRC Section 856(c)(4) as described in paragraphs 22 and 23 above. DISTRIBUTIONS TO STOCKHOLDERS 28. Since January 1, 1987, the Company's deduction for dividends paid (as defined in IRC Section 561 (as modified by IRC Section 857(b)(9)), but determined without regard to capital gain dividends) to its stockholders for each taxable year has equaled or exceeded 95 percent (90 percent for taxable years beginning after December 31, 2000) of its real estate investment trust taxable income (as defined in IRC Section 857(b)(2)) for each such taxable year (as determined without regard to the deduction for dividends paid and by excluding any net capital gain), plus 95 percent (90 percent for taxable years beginning after December 31, 2000) of the excess of the Company's net income from foreclosure property, if any, over the tax imposed on such income by IRC Section 857(b)(4)(A), less any excess noncash income (within the meaning of IRC Section 857(e)). For the current and all future 34 taxable years, the Company expects, and the Company intends to take all necessary measures within its control, to pay dividends qualifying for the deduction for dividends paid (as defined in IRC Section 561 (as modified by IRC Section 857(b)(9)), but determined without regard to capital gain dividends) to its stockholders in an amount which equals or exceeds 90 percent of its real estate investment trust taxable income (as defined in IRC Section 857(b)(2)) for each such taxable year (as determined without regard to the deduction for dividends paid and by excluding any net capital gain) plus 90 percent of the excess of the Company's net income from foreclosure property, if any, over the tax imposed on such income by IRC Section 857(b)(4)(A), less any excess noncash income (within the meaning of IRC Section 857(e)). In determining whether it has paid dividends for any year in the amount required pursuant to the preceding two sentences, the Company has, and will, disregard any dividends treated as "preferential dividends" under IRC Section 562(c) and, if any dividend not so disregarded is determined to be a preferential dividend (or if the Company is determined to have failed for any other reason to pay the amount of dividends required by the preceding two sentences), then the Company will pay a deficiency dividend in accordance with IRC Section 860 as necessary to avoid being disqualified as a REIT. 29. The IRS may initiate an audit of the Company, a QRS, a Subsidiary Partnership, or a Disregarded LLC for one or more other taxable years. In the event that the Company's income is adjusted (increased) by the IRS for any taxable year, and such adjustment would otherwise result in disqualification of the Company as a REIT for failure to meet the minimum distribution requirement for such year (as summarized in the preceding paragraph 28), then the Company intends timely to declare and pay a deficiency dividend in accordance with IRC Section 860 in order to avoid being disqualified as a REIT. In the event of a determination (as defined in IRC Section 860(e)) which causes the termination of its election as a REIT pursuant to IRC Section 856(g), the Company intends to timely avail itself of the relief provisions of Treasury Regulation Section 1.857-11(c) and IRC Section 852(e) and declare and pay to its shareholders a qualified designated distribution or distributions in an amount or amounts sufficient to eliminate so much of any earnings and profits for the year of termination (and for any subsequent taxable year for which the Company may not elect to be treated as a REIT as a result of such termination pursuant to IRC Sections 856(g)(3) and 856(g)(4)) as is necessary to enable the Company to re-elect to be taxed as a REIT no later than its fifth taxable year after the first taxable year for which such termination was effective. 30. Other than earnings and profits that were grandfathered under IRC Section 857(a)(2)(A) related to taxable years beginning before February 28, 1986, the Company has no, and will continue to have no, accumulated earnings and 35 profits from any taxable year for which it did not qualify as a REIT and has not succeeded by reason of any merger or other non-taxable acquisition of assets (including any deemed acquisition of assets resulting from an election to treat a subsidiary as a QRS) to the earnings and profits of any other entity taxable as a corporation, if such earnings and profits would cause a disqualification of the Company as a REIT. If, by reason of any merger (directly or through a QRS) or other non-taxable acquisition of assets (including any deemed acquisition of assets resulting from an election to treat a subsidiary as a QRS), the Company does succeed to the earnings and profits of any other entity taxable as a corporation, then the Company intends to distribute to the Company's shareholders all of such earnings and profits before the close of the taxable year of such merger or acquisition. If, for any reason, the Company's status as a REIT is terminated for any year, the Company intends timely to declare and pay to its shareholders a dividend in an amount sufficient to eliminate so much of any earnings and profits for the year of termination (and for any subsequent taxable year for which the Company may not elect to be treated as a REIT as a result of such termination pursuant to IRC Sections 856(g)(3) and 856(g)(4)) as is necessary to enable the Company to re-elect to be a REIT no later than its fifth taxable year after the first taxable year for which such termination was effective. Without limiting the foregoing, if there is a "determination" (as defined in IRC Section 852(e)(5)) that the Company failed to qualify to be taxed as a REIT for any taxable year or years on account of having accumulated earnings and profits, the Company intends within the 90-day period beginning on the date of the "determination" to declare and pay to its shareholders a dividend or dividends (designated as being taken into account under IRC Section 852(e) with respect to the taxable year or years of disqualification) in an amount not less than the excess of the portion of the accumulated earnings and profits of the Company which are attributable to the taxable year or years of disqualification over any interest payable under IRC Section 852(e)(3). Section 852(e)(5) of the IRC is understood to define "determination" as (i) a decision by the Tax Court; or a judgment, decree, or other order by any court of competent jurisdiction which has become final; (ii) a closing agreement between the IRS and the Company made under IRC Section 7121; (iii) an agreement signed by the IRS and by (or on behalf of) the Company relating to the liability of the Company for tax; or (iv) a determination by the Company filed with the IRS that it does not qualify to be taxed as a REIT for a taxable year. INFORMATION STATEMENTS FROM SHAREHOLDERS 31. Since January 1, 1987, the Company has demanded by January 30th of each year, written statements (the "Written Statements") with respect to ownership of shares of the Company's stock, from those shareholders (if any) determined as follows: (i) if the Company had 200 or fewer holders of record of its shares 36 of stock on any dividend record date, demand has been made of each record holder holding of record one-half of one percent or more of the shares of any class of its stock; (ii) if the Company had from 201 to 1,999 holders of record of its shares of stock on any dividend record date, demand has been made of each record holder holding of record one percent or more of the shares of any class of its stock; and (iii) if the Company had 2,000 or more holders of record of its shares of stock on any dividend record date, demand has been made of each record holder holding of record five percent or more of the shares of any class of its stock. For the current and all future taxable years, the Company intends to demand by January 30th (or within 30 days after the close of the Company's taxable year, if such year closes on any date other than December 31st) of each year Written Statements with respect to ownership of shares of the Company's stock, from those holders (if any) determined as follows: (i) if the Company has 200 or fewer holders of record of its shares of stock on any dividend record date, demand will be made of each record holder holding of record one-half of one percent or more of the shares of any class of its stock; (ii) if the Company has from 201 to 1,999 holders of record of its shares of stock on any dividend record date, demand will be made of each record holder holding of record one percent or more of the shares of any class of its stock; and (iii) if the Company has 2,000 or more holders of record of its shares of stock on any dividend record date, demand will be made of each record holder holding of record five percent or more of the shares of any class of its stock. The Company has requested and intends to request that the Written Statements (a) disclose the actual ownership (as determined pursuant to Treasury Regulation Section 1.857-8(b)) of the shares of stock held by the Company's holders of record of whom demand was or will be made, and (b) show the maximum number of shares of the Company's stock actually or constructively (through application of the attribution rules of IRC Section 544, as modified by IRC Section 856(h)(1)(B)) owned by each of the actual owners of the Company's shares of stock identified in the Written Statements at any time during the last half of the Company's immediately preceding taxable year. The Company has maintained, and will maintain, Written Statements for the period of time required under the IRC, as part of the permanent records of the Company within the Internal Revenue District in which the Company is required to file its tax return, and will be kept at all times available for inspection by any internal revenue officer or employee. 32. Since January 1, 1987, the Company's prior demands for the Written Statements have informed, and the Company intends in its future demands for the Written Statements to inform, each stockholder that if it fails or refuses to supply the Company with the requested Written Statement, such stockholder will be under a duty to submit at the time it files its tax return for the taxable year ending with, or including, the last day of the Company's immediately 37 preceding taxable year, a written statement containing the following information: (i) in the case of any person holding shares of beneficial interest in the Company who is not the actual owner of such share, the name and address of each actual owner, the number of shares owned by each actual owner at any time during such person's taxable year, and the amount of dividends belonging to each actual owner; or (ii) in the case of an actual owner of shares of beneficial interest in the Company, (a) the number of shares actually owned by such person at any and all times during such person's taxable year, and the amount of dividends from the Company received during such person's taxable year, (b) if the Company's shares of beneficial interest were acquired or disposed of during such person's taxable year, the number of shares acquired or disposed of, the dates of acquisition or disposition, and the names and addresses of the person(s) from whom such shares were acquired or to whom they were transferred, (c) if any of the Company's shares of beneficial interest are also owned by any member of such person's family or by any of such person's partners, the names and addresses of such family member(s) or partner(s), and the number of shares owned by each such family member or partner at any and all times during such person's taxable year, (d) the names and addresses of any corporation, partnership, association, or trust in which such person had a beneficial interest of 10 percent or more at any time during his taxable year, and (e) to the extent required by Treasury Regulation Section 1.857-9(b)(2), the information specified in (a) through (d) above with respect to any shares of stock or shares of beneficial interest owned by such person in any other trust or entity claiming to be a REIT. 33. The Company has maintained and intends to maintain, as part of its permanent records for the period of time required under the IRC, a list of all persons failing or refusing to comply in whole or in part with the Company's demand for Written Statements from its shareholders of record with respect to the actual ownership of the Company's shares of beneficial interest. OTHER MATTERS 34. Since January 1, 1987, the Company has not elected, pursuant to IRC Section 856(e)(5), to treat any property acquired through foreclosure as "foreclosure property" (as such term is defined in IRC Section 856(e)(1)). The Company does not anticipate making an election under IRC Section 856(e)(5) to treat any property acquired through foreclosure as foreclosure property in the future except to the extent necessary to maintain its status as a REIT or to minimize its federal, state or local tax liabilities. 38 35. The Company and each of CREC, CREC II and Dusseldorf joined in a timely-filed election to treat each of CREC, CREC II and Dusseldorf as a TRS effective January 1, 2001. In addition, the Company joined in an election to treat Captivate as a TRS. As a result, each of CREC, CREC II, Captivate and Dusseldorf became and continues to be a TRS within the meaning of IRC Section 856(l). Pursuant to the operation of IRC Section 856(l)(2), the 35% owned corporate subsidiaries of CREC, CREC II, Captivate and Dusseldorf are also TRSs of the Company. The Company does not and has not owned more than 10% of the vote or value of the outstanding securities of Captivate, and the services provided by Captivate would not and have not caused the rent from the relevant property to not qualify as rents from real property under the REIT rules. 36. During taxable years beginning after December 31, 2000, neither CREC, CREC II, Captivate, Dusseldorf, nor any other TRS of the Company directly or indirectly operated or managed any lodging facility (as defined in IRC Section 856(d)(9)(D)(ii)) or health care facility (as defined in IRC Section 856(e)(6)(D)(ii)) or directly or indirectly provided to any other person (under a franchise, license, or otherwise) rights to any brand name under which any lodging facility or health care facility was operated in a manner which would cause the Company to be disqualified as a REIT. 37. The Company elected to be taxed as a REIT commencing with its taxable year beginning January 1, 1987 and computed taxable income as a REIT in its timely filed return for each of its taxable years 1987 through 2001. The Company will compute taxable income as a REIT in its timely-filed return for the taxable year which ended on December 31, 2002. The Company also intends to compute taxable income as a REIT in its timely filed return for the taxable year which commenced on January 1, 2003. 38. The Company intends to use the net proceeds from the future sale of any securities under the Shelf Registration for general business purposes, including (i) acquisition of additional properties or other acquisition transactions; (ii) repayments or refinancing of debt; (iii) redevelopment of existing portfolio properties; (iv) development of new properties; (v) working capital; (vi) stock repurchases on the open market; and (vii) potential special distributions to shareholders. The Company, however, reserves the right to change the use of such net proceeds in response to, among other things, changes in business plans, or regulatory or competitive conditions, and the Company intends to continue to meet the REIT distribution requirements, as stated in paragraph 28 above, regardless of whether any stock repurchases or special distributions are considered preferential or qualify for the dividends paid deduction. 39. The representations made by the Company to the IRS with respect to the private letter rulings received by the Company were true at the time such 39 representations were made and, to the extent the Company has continued to rely on such rulings, have continued to be true at all times thereafter, and there has been no misstatement or omission of material fact in the requests for such private letter rulings that would permit the IRS to revoke such private letter rulings. 40. Since January 1, 1987, the Company has not acquired any C corporation property in a "conversion transaction" (as such term is defined in Treasury Regulation Section 1.337(d)-7). 41. The information provided by the Company regarding each and every entity in which the Company holds, or has at any time since January 1, 1998, held, any ownership or net profits interest, directly or indirectly, through a QRS, a Disregarded LLC, or a Subsidiary Partnership is accurate. 42. The Company is duly formed and existing under the laws of the State of Georgia and is duly authorized to transact business in the State of Georgia. 43. Since January 1, 1987, the Company, any Subsidiary Partnership, and any TRS have not been and are not currently being audited by the IRS. 44. The Company has been organized and has operated in a manner which enabled it to meet the requirements for qualification and taxation as a REIT from January 1, 1987 through December 31, 1997. The Company intends to continue to be organized and operate in a manner which will allow it to meet the requirements for qualification and taxation as a REIT for the remainder of the tax year ending December 31, 2003 and future years. The facts and representations made herein are true and correct. To the extent that the foregoing representations are forward-looking, they reflect the present intention of the Company and its current business plan with respect to the Company's operations and activities (including, for this purpose, the operations and activities of each of any QRS, each of any Disregarded LLC, each of any Subsidiary Partnership and each of any TRS) based on existing and contemplated facts and circumstances. Unexpected events may cause a deviation from one or more of the intended operating principles set forth herein, and in such case, the Company, if it takes actions consistent with the business plan reflected in the foregoing representations as revised based on such deviation or deviations, currently intends to do so in a manner to preserve in all events the status of the Company as a REIT under the IRC. IN WITNESS WHEREOF, the undersigned has hereunto set his hand on behalf of the Company this 10th day of July, 2003. COUSINS PROPERTIES INCORPORATED By: /s/ Tom G. Charlesworth --------------------------------- Tom G. Charlesworth Executive Vice President, Chief Financial Officer and Chief Investment Officer 40 EX-23.2 4 g83473a1exv23w2.txt EX-23.2 CONSENT OF DELOITTE & TOUCHE LLP EXHIBIT 23.2 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Amendment No. 1 to Registration Statement No. 333-106401 of Cousins Properties Incorporated on Form S-3 of our reports dated February 14, 2003 (which reports express unqualified opinions and include an explanatory paragraph relating to the impact of the adoption of Statements of Financial Accounting Standard No. 133 and No. 144) appearing in and incorporated by reference in the Annual Report on Form 10-K of Cousins Properties Incorporated for the year ended December 31, 2002 and to the reference to us under the heading "Experts" in the Prospectus, which is part of this Registration Statement. /s/ Deloitte & Touche LLP Atlanta, Georgia July 8, 2003 EX-23.3 5 g83473a1exv23w3.txt EX-23.3 CONSENT OF ERNST & YOUNG LLP Exhibit 23.3 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated February 7, 2003, with respect to the financial statements and schedule of CSC Associates, L.P. incorporated by reference in Amendment No. 1 to the Registration Statement (Form S-3 No. 333-106401) and related Prospectus of Cousins Properties Incorporated for the registration of Common Stock, Warrants, Debt Securities and Preferred Stock. /s/ Ernst & Young LLP Atlanta, Georgia July 7, 2003 EX-25.1 6 g83473a1exv25w1.txt EX-25.1 STATEMENT OF ELIGIBILITY, FORM T-1 Exhibit 25.1 Registration No. 333-106401 FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) Wachovia Bank, National Association (Exact name of trustee as specified in its charter) United States of America (Jurisdiction of incorporation or organization if not a U.S. national bank) 22-1147033 (I.R.S. Employer Identification Number) One Wachovia Center 301 South College Street Charlotte, North Carolina (Address of principal executive offices) 28288 (Zip code) Emily E. Katt Wachovia Bank, National Association 191 Peachtree Street, 21st Floor Atlanta, Georgia 30303 (404) 371-0597 (Name, address and telephone number of agent for service) Cousins Properties Incorporated (Exact name of obligor as specified in its charter) Georgia (State or other jurisdiction of incorporation or organization) 58-0869052 (I.R.S. Employer Identification No.) 2500 Windy Ridge Parkway Atlanta, Georgia (Address of principal executive offices) -1- 30339 (Zip code) Debt Securities (Title of the indenture securities) -2- Item 1. GENERAL INFORMATION. Furnish the following information as to the trustee: a. Name and address of each examining or supervising authority to which it is subject.
NAME ADDRESS Board of Governors of the Federal Reserve System Washington, D.C. Comptroller of the Currency Washington, D.C. Federal Deposit Insurance Corporation Washington, D.C.
b. Whether it is authorized to exercise corporate trust powers. The Trustee is authorized to exercise corporate trust powers. Item 2. AFFILIATIONS WITH THE OBLIGOR. If the obligor is an affiliate of the trustee, describe each such affiliation. The obligor is not an affiliate of the trustee. (See Note 1 on page 6.) Item 3. VOTING SECURITIES OF THE TRUSTEE. Furnish the following information as to each class of voting securities of the trustee: As of June 30, 2003 (Insert date within 31 days).
COL. A COL. B TITLE OF CLASS AMOUNT OUTSTANDING Common Stock 1,345,200,000
Item 4. TRUSTEESHIPS UNDER OTHER INDENTURES. If the trustee is a trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the obligor are outstanding, furnish the following information: a. Title of the securities outstanding under each such other indenture. Not Applicable. b. A brief statement of the facts relied upon as a basis for the claim that no conflicting interest within the meaning of Section 310(b)(1) of the Act arises as a result of the trusteeship under any such other indenture, including a statement as to how the indenture securities will rank as compared with the securities issued under such other indenture. Not Applicable. -3- Item 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR OR UNDERWRITERS. If the trustee or any of the directors or executive officers of the trustee is a director, officer, partner, employee, appointee, or representative of the obligor of any underwriter for the obligor, identify each such person having any such connection and state the nature of each such connection. Not Applicable - see answer to Item 13. Item 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS. Furnish the following information as to the voting securities of the trustee owned beneficially by the obligor and each director, partner, and executive officer of the obligor. As of (Insert date within 31 days). -----------------
COL. D COL. C PERCENTAGE OF VOTING SECURITIES COL. A COL. B AMOUNT OWNED REPRESENTED BY AMOUNT GIVEN NAME OF OWNER TITLE OF CLASS BENEFICIALLY IN COL. C
Not Applicable - see answer to Item 13. Item 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR OFFICIALS. Furnish the following information as to the voting securities of the trustee owned beneficially by each underwriter for the obligor and each director, partner, and executive officer of each such underwriter: As of (Insert date within 31 days). ------------------
COL. D COL. C PERCENTAGE OF VOTING SECURITIES COL. A COL. B AMOUNT OWNED REPRESENTED BY AMOUNT GIVEN NAME OF OWNER TITLE OF CLASS BENEFICIALLY IN COL. C
Not Applicable - see answer to Item 13. Item 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE. Furnish the following information as to securities of the obligor owned beneficially or held as collateral security for obligations in default by the trustee: As of (Insert date within 31 days). ------------------
COL. C AMOUNT OWNED COL. D COL. B BENEFICIALLY OR PERCENT OF CLASS WHETHER THE SECURITIES HELD AS COLLATERAL REPRESENTED BY COL. A ARE VOTING OR SECURITY FOR AMOUNT GIVEN TITLE OF CLASS NONVOTING SECURITIES OBLIGATIONS IN DEFAULT IN COL. C
-4- Not Applicable - see answer to Item 13. Item 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE. If the trustee owns beneficially or hold as collateral security for obligations in default any securities of an underwriter for the obligor, furnish the following information as to each class of securities of such underwriter any of which are so owned or held by the trustee: As of (Insert date within 31 days). -----------------
COL. C COL. D AMOUNT OWNED BENEFICIALLY PERCENT OF CLASS COL. A COL. B OR HELD AS COLLATERAL REPRESENTED BY TITLE OF ISSUER AMOUNT SECURITY FOR OBLIGATIONS AMOUNT GIVEN AND TITLE OF CLASS OUTSTANDING IN DEFAULT BY TRUSTEE IN COL. C
Not Applicable - see answer to Item 13. Item 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR. If the trustee owns beneficially or holds as collateral security for obligations in default voting securities of a person who, to the knowledge of the trustee (1) owns 10 percent or more of the voting securities of the obligor or (2) is an affiliate, other than a subsidiary, of the obligor, furnish the following information as to the voting securities of such person: As of (Insert date within 31 days). ------------------
COL. C COL. D AMOUNT OWNED BENEFICIALLY PERCENT OF CLASS COL. A COL. B OR HELD AS COLLATERAL REPRESENTED BY TITLE OF ISSUER AMOUNT SECURITY FOR OBLIGATIONS AMOUNT GIVEN AND TITLE OF CLASS OUTSTANDING IN DEFAULT BY TRUSTEE IN COL. C
Not Applicable - see answer to Item 13. Item 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR. If the trustee owns beneficially or holds as collateral security for obligations in default any securities of a person who, to the knowledge of the trustee, owns 50 percent or more of the voting securities of the obligor, furnish the following information as to each class of securities of such person any of which are so owned or held by the trustee: As of (Insert date within 31 days). ------------------ -5-
COL. C COL. D AMOUNT OWNED BENEFICIALLY PERCENT OF CLASS COL. A COL. B OR HELD AS COLLATERAL REPRESENTED BY TITLE OF ISSUER AMOUNT SECURITY FOR OBLIGATIONS AMOUNT GIVEN AND TITLE OF CLASS OUTSTANDING IN DEFAULT BY TRUSTEE IN COL. C
Not Applicable - See answer to Item 13. Item 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE. Except as noted in the instructions, if the obligor is indebted to the trustee, furnish the following information: As of March 31, 2003 (Insert date within 31 days).
COL. A COL. B COL. C NATURE OF INDEBTEDNESS AMOUNT OUTSTANDING DATE DUE
COUSINS PROPERTIES INCORPORATED (THE "COMPANY") HAD $177 MILLION DRAWN ON ITS $275 MILLION REVOLVING CREDIT FACILITY (THE "CREDIT FACILITY") AS OF THE DATE SET FORTH ABOVE. THE CREDIT FACILITY WAS ENTERED INTO AS OF AUGUST 31, 2001, AMONG THE COMPANY, BANKS (AS DEFINED THEREIN), BANK OF AMERICA, N.A., AS ADMINISTRATIVE AGENT, WACHOVIA BANK, N.A., AS SYNDICATION AGENT AND EACH OF BANK OF AMERICA SECURITIES LLC AND WACHOVIA SECURITIES, INC., AS JOINT LEAD ARRANGERS AND JOINT BOOK MANAGERS. WACHOVIA SECURITIES IS AN AFFILIATE OF THE TRUSTEE. Item 13. DEFAULTS BY THE OBLIGOR. a. State whether there is or has been a default with respect to the securities under this indenture. Explain the nature of any such default. None. b. If the trustee is a trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the obligor are outstanding, or is trustee for more than one outstanding series of securities under the indenture, state whether there has been a default under any such indenture or series, identify the indenture or series affected, and explain the nature of any such default. None. Item 14. AFFILIATIONS WITH THE UNDERWRITERS. If any underwriter is an affiliate of the trustee, describe each such affiliation. Not Applicable. Item 15. FOREIGN TRUSTEE. Identify the order or rule pursuant to which the foreign trustee is authorized to act as sole trustee under indentures qualified or to be qualified under the Act. Not Applicable. -6- Item 16. LIST OF EXHIBITS. List below all exhibits filed as a part of this statement of eligibility. 1. Articles of Association of Wachovia Bank, National Association, as now in effect.* 2. Certificate of Authority of the trustee to commence business.* 3. Copy of the authorization of the trustee to exercise corporate trust powers.* 4. Existing bylaws of the trustee.* 5. Not Applicable. 6. The consent of the trustee required by Section 321(b) of the Act. 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority.** 8. Not Applicable. 9. Not Applicable. - ---------- * Previously filed with the Securities and Exchange Commission as an Exhibit to Form T-1 in connection with Registration Statement Number 333-54465 incorporated herein by reference. ** This report is available over the Internet at the website of the Federal Deposit Insurance Corporation and this report as therein contained is incorporated herein by reference. This website is located at HTTP://WWW3.FDIC.GOV/IDASP/MAIN.ASP. ONCE AT THAT ADDRESS, TYPE IN "WACHOVIA BANK, NATIONAL ASSOCIATION" AT THE FIELD ENTITLED "INSTITUTION NAME" THEN CLICK ON THE "FIND" FIELD ABOVE WHERE THE NAME OF THE BANK HAS BEEN TYPED IN THEN CLICK ON THE CERTIFICATE NUMBER FOR WACHOVIA CORPORATION (33869) THEN CLICK ON THE "GENERATE REPORT" FIELD. NOTES: Note 1: The trustee is a subsidiary of Wachovia Corporation, a bank holding company; all of the voting securities of the trustee are held by Wachovia Corporation. The voting securities of Wachovia Corporation are described in Item 3. Note 2: The trustee disclaims responsibility for the accuracy or completeness of information contained in this Statement of Eligibility and Qualification not known to the trustee and not obtainable by it through reasonable investigation and as to which information it has -7- obtained from the obligor and has had to rely or will obtain from the principal underwriters and will have to rely. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 the trustee, Wachovia Bank, National Association, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the city of Atlanta, and State of Georgia, on the day 7th of July, 2003. WACHOVIA BANK, NATIONAL ASSOCIATION (Trustee) By: /s/ Emily E. Katt --------------------------------- Emily E. Katt, Vice President (Name and Title) -8- EXHIBIT 6 Wachovia Bank, National Association, pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, as amended (the "Act") in connection with the proposed issuance by Cousins Properties Incorporated, consents that reports of examination by federal, state, territorial, or district authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor, as contemplated by Section 321(b) of the Act. Dated: July 7, 2003 WACHOVIA BANK, NATIONAL ASSOCIATION By: /s/ Emily E. Katt --------------------------------- Emily E. Katt, Vice President -9- -----END PRIVACY-ENHANCED MESSAGE-----