As filed with the Securities and Exchange Commission on December 31, 1996
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
HRE Properties, Inc.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Maryland 6798 04-2458042*
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
321 Railroad Avenue
Greenwich, Connecticut 06830
203-863-8200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------
Charles J. Urstadt
Chairman and Chief Executive Officer
HRE Properties, Inc.
321 Railroad Avenue
Greenwich, Connecticut 06830
203-863-8200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------
With copies to:
Thomas J. Drago, Esq.
Coudert Brothers
1114 Avenue of the Americas
New York, NY 10036-7703
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
------------------
* I.R.S. Employer Identification Number of HRE Properties, the predecessor to
the registrant prior to the Reorganization described herein.
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
Title of each Class Amount to be Proposed Maximum Proposed Maximum Amount of
of Securities to be Registered(1) Offering Price Per Aggregate Offering Registration Fee
Registered Share(2) Price(2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par
value $.01 per
share 5,346,081 shares $17.875 $95,561,197 $32,952.14
====================================================================================================================================
</TABLE>
(1) Based upon 5,346,081 shares of beneficial interest of HRE Properties
(the "Trust") outstanding at the close of business on December 30,
1996.
(2) Based upon the average of the high and low sales prices for shares of
beneficial interest of the Trust as reported on the New York Stock
Exchange on December 27, 1996 ($17.875) and estimated solely for the
purpose of calculating the registration fee pursuant to Rule 457 of the
Securities Act of 1933, as amended.
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
CROSS REFERENCE SHEET PURSUANT TO RULE 404(A) OF REGULATION C AND ITEM 501(B) OF
REGULATION S-K SHOWING LOCATION IN PROXY STATEMENT/PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF PART I OF FORM S-4
Item Numbers and Captions of S-4
Location of Heading in
Proxy Statement/Prospectus
Part I
<TABLE>
<CAPTION>
A. INFORMATION ABOUT THE TRANSACTION
<S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Proxy
Statement/Prospectus.............................. Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Proxy Statement/Prospectus..................... Inside Front Cover Page; Table of Contents; Available
Information; Incorporation of Certain Documents by
Reference
3. Risk Factors, Ratio of Earnings to Fixed
Charges, and Other Information.................... Not Applicable
4. Terms of the Transaction.......................... Summary; The Plan of Reorganization
5. Pro Forma Financial Information................... Not Applicable
6. Material Contacts With the Company Being
Acquired.......................................... Not Applicable
7. Additional Information Required For
Reoffering by Persons and Parties Deemed to
be Underwriters................................... Not Applicable
8. Interests of Named Experts and Counsel............ Not Applicable
9. Disclosure of Commission Position on
Indemnification For Securities Act
Liabilities....................................... The Plan of Reorganization
B. INFORMATION ABOUT THE REGISTRANT
10. Information With Respect to S-3
Registrants....................................... Not Applicable
11. Incorporation of Certain Information by
Reference......................................... Not Applicable
12. Information with Respect to S-2 or S-3
Registrants....................................... Incorporation of Certain Documents by Reference;
Available Information
13. Incorporation of Certain Information by
Reference......................................... Incorporation of Certain Documents by Reference
<PAGE>
14. Information with Respect to Registrants
Other Than S-2 or S-3 Registrants................. Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED
15. Information with Respect to S-3 Companies......... Not Applicable
16. Information with Respect to S-2 or S-3
Companies......................................... Not Applicable
17. Information with Respect to Companies
Other Than S-2 or S-3 Companies................... Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information If Proxies, Consents or
Authorizations are to be Solicited............... Outside Front Cover Page; Summary; Incorporation of
Certain Documents by Reference; Plan of
Reorganization; Election of Trustees; Solicitation of
Proxies and Voting Procedures
19. Information if Proxies, Consents or
Authorizations are not to be Solicited, or in
an Exchange Offer................................ Not Applicable
Part II
20. Indemnification of Directors and Officers......... Part II
21. Exhibits and Financial Statement Schedules........ Part II
22. Undertakings...................................... Part II
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 31, 1996
HRE PROPERTIES
321 RAILROAD AVENUE
GREENWICH, CONNECTICUT 06830
__________, 1997
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
HRE Properties (the "Trust") which will be held at the Doral Arrowwood
Conference Center, Anderson Hill Road, Rye Brook, New York, on Wednesday, March
12, 1997, at 11:00 a.m.
At the Annual Meeting, shareholders will be asked to approve: (i) a
proposed Plan of Reorganization which provides for the reorganization of the
Trust from a Massachusetts business trust into a Maryland corporation (the
"Corporation"); (ii) the election of three Trustees to serve for the ensuing
three years as Trustees of the Trust or, if the Plan of Reorganization is
approved and consummated, as Directors of the Corporation; (iii) a Restricted
Stock Award Plan providing for the grant of restricted stock awards to key
management personnel of the Trust or, if the Plan of Reorganization is approved
and consummated, key management personnel of the Corporation, on the terms and
conditions set forth therein; (iv) the ratification of the appointment of Arthur
Andersen LLP as the independent auditors of the Trust or, if the Plan of
Reorganization is approved and consummated, the Corporation, for the ensuing
fiscal year; and (v) such other matters as may properly come before the meeting
or any adjournments or postponements thereof. Details of the proposals are set
forth in the attached Proxy Statement/Prospectus.
The proposed Plan of Reorganization will be accomplished by means of the
merger (the "Merger") of the Trust with and into the Corporation. Pursuant to
the Merger, the Corporation will be the surviving entity in the Merger, the
separate existence of the Trust will terminate and each issued and outstanding
common share of the Trust (the "Trust Common Shares") will be converted into one
share of common stock of the Corporation (the "Corporation Common Stock"). This
Merger will modernize the Trust's governance procedures and provide the Trust
with a greater degree of certainty and flexibility in planning and implementing
corporate action by adopting the form of organization used by many established
real estate investment trusts. The Plan of Reorganization is conditioned upon,
among other things, the listing of the Corporation Common Stock on the New York
Stock Exchange, Inc. (the "NYSE") and it is expected that, upon approval of the
Plan of Reorganization and the consummation of the Merger, the Corporation
Common Stock will trade on the NYSE in the same manner as the Trust Common
Shares currently trade on the NYSE. The proposed Plan of Reorganization has been
approved by the Board of Trustees as being in the best interests of the Trust
and its shareholders and the Board recommends a vote "FOR" approval of the
proposal at the Annual Meeting.
The Restricted Stock Award Plan provides for the grant of awards of up to
an aggregate of 250,000 Trust Common Shares to key management personnel of the
Trust on the terms and conditions set forth therein. The Restricted Stock Award
Plan is designed to promote the long-term growth of the Trust by attracting,
retaining and motivating key management personnel and to identify further the
interests of the participants in the plan with those of the shareholders of the
Trust. If the Plan of Reorganization is approved and the Merger is consummated,
the rights and obligations of the Trust under the Restricted Stock Award Plan
will become the rights and obligations of the Corporation and the rights of the
management personnel who become participants in the Restricted Award Stock Plan
to receive grants of Trust Common Shares will become rights of such management
personnel to receive grants of shares of Corporation Common Stock. The Board of
Trustees recommends a vote "FOR" approval of the proposal at the Annual Meeting.
The Plan of Reorganization requires the affirmative vote of a majority of
the Trust Common Shares outstanding as of the close of business on January 27,
1997, the record date for the Annual Meeting. The election of Trustees, the
Restricted Stock Award Plan and the ratification of auditors requires the
affirmative vote of the holders of a majority of the Trust Common Shares
present, in person or by properly executed proxy, at the Annual
<PAGE>
Meeting. Each proposal is being presented to the Trust's shareholders as a
separate and independent proposal and no proposal is conditioned upon the
adoption or approval of any other proposal.
The Corporation has filed a registration statement with the Securities and
Exchange Commission covering the 5,346,081 shares of Corporation Common Stock
into which the Trust Common Shares will be converted upon consummation of the
Merger. The accompanying Proxy Statement/Prospectus also constitutes the
prospectus of the Corporation filed as part of the registration statement.
Whether or not you are personally able to attend the Annual Meeting,
please complete, sign, date and return the enclosed proxy card as soon as
possible. This action will not limit your right to vote in person if you wish to
attend the Annual Meeting and vote personally.
Very truly yours,
Charles J. Urstadt
Chairman and Chief Executive Officer
================================================================================
IMPORTANT
If your Trust Common Shares are registered in the name of a broker or
bank, only your broker or bank can submit the proxy card on your behalf and only
after receiving your specific instructions. Please contact the person
responsible for your account and direct him or her to submit the enclosed proxy
card on your behalf. If you have any questions about how to vote your shares,
please call our proxy solicitor:
D.F. King & Company
77 Water Street
New York, New York 10005
(800) 549-6650
================================================================================
<PAGE>
HRE PROPERTIES
321 RAILROAD AVENUE
GREENWICH, CONNECTICUT 06830
----------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual Meeting of Shareholders of HRE
Properties (the "Trust") will be held at the Doral Arrowwood Conference Center,
Anderson Hill Road, Rye Brook, New York, on Wednesday, March 12, 1997, at 11:00
a.m. for the following purposes:
1. To consider and vote upon a proposal to approve a Plan of
Reorganization, which provides for the reorganization of the Trust
from a Massachusetts business trust into a Maryland corporation by
means of the merger (the "Merger") of the Trust with and into HRE
Properties, Inc., a newly organized Maryland corporation which is
wholly-owned by the Trust (the "Corporation"), pursuant to which the
Corporation will be the surviving entity in the Merger, the separate
existence of the Trust will terminate and each issued and outstanding
common share of the Trust will be converted into one share of common
stock of the Corporation;
2. To elect three Trustees to serve for the ensuing three years as
Trustees of the Trust or, if the Plan of Reorganization is approved
and the Merger is consummated, as Directors of the Corporation;
3. To approve a Restricted Stock Award Plan providing for the grant of
restricted stock awards to key management personnel of the Trust or,
if the Plan of Reorganization is approved and the Merger is
consummated, key management personnel of the Corporation;
4. To ratify the appointment of Arthur Andersen LLP as the independent
auditors of the Trust or, if the Plan of Reorganization is approved
and the Merger is consummated, the Corporation, for the ensuing fiscal
year; and
5. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
Shareholders of record as of the close of business on January 27, 1997,
are entitled to notice of and to vote at the Annual Meeting or any adjournments
or postponements thereof.
By Order of the Trustees
JAMES R. MOORE
Secretary
_____________, 1997
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 31, 1996
HRE PROPERTIES
PROXY STATEMENT
-------------------------
HRE PROPERTIES, INC.
PROSPECTUS
This Proxy Statement/Prospectus is being furnished to the shareholders
of HRE Properties, a Massachusetts business trust (the "Trust"), in connection
with the solicitation of proxies by the Board of Trustees of the Trust (the
"Board of Trustees") for use at the Annual Meeting of Shareholders to be held at
the Doral Arrowwood Conference Center, Anderson Hill Road, Rye Brook, New York,
on Wednesday, March 12, 1997 at 11:00 a.m. (the "Annual Meeting"), and all
adjournments and postponements thereof. The Annual Meeting is being held for the
purpose of voting upon (i) a proposal to approve and adopt a Plan of
Reorganization dated December 30, 1996 (the "Plan of Reorganization") between
the Trust and HRE Properties, Inc., a newly-formed Maryland corporation which is
wholly owned by the Trust (the "Corporation"), a copy of which Plan of
Reorganization is attached as Exhibit A to this Proxy Statement/Prospectus
("Proposal 1"), (ii) the election of three Trustees to serve for the ensuing
three years as Trustees of the Trust or, if the Plan of Reorganization is
approved and consummated, as Directors of the Corporation ("Proposal 2"), (iii)
the approval of a Restricted Stock Award Plan providing for the grant of
restricted stock awards to key management personnel of the Trust or, if the Plan
of Reorganization is approved and consummated, key management personnel of the
Corporation (the "Restricted Stock Plan"), a copy of which is attached as
Exhibit B to this Proxy Statement/Prospectus ("Proposal 3"), and (iv) the
ratification of the appointment of Arthur Andersen LLP as the independent
financial auditors of the Trust or, if the Plan of Reorganization is approved
and consummated, the Corporation, for the ensuing fiscal year ("Proposal 4").
The Plan of Reorganization provides for the reorganization of the Trust
from a Massachusetts business trust into a Maryland corporation by means of the
merger (the "Merger") of the Trust with and into the Corporation, pursuant to
which the Corporation shall be the surviving entity in the Merger, the separate
existence of the Trust shall terminate and each issued and outstanding share of
beneficial interest of the Trust (the "Trust Common Shares") shall be converted
into one share of common stock, par value $.01 per share, of the Corporation
(the "Corporation Common Stock"). The Plan of Reorganization is conditioned
upon, among other things, the listing of the Corporation Common Stock on the New
York Stock Exchange, Inc. (the "NYSE") and it is expected that, upon approval of
the Plan of Reorganization and the consummation of the Merger, the Corporation
Common Stock will trade on the NYSE in the same manner as the Trust Common
Shares currently trade on the NYSE. See "THE PLAN OF REORGANIZATION". This Proxy
Statement/Prospectus also constitutes the Prospectus of the Corporation filed as
part of a Registration Statement on Form S-4 (the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), with the
Securities and Exchange Commission (the "SEC"). The Registration Statement and
the Prospectus relate to 5,346,081 shares of the Corporation Common Stock into
which the Trust Common Shares may be converted pursuant to the Plan of
Reorganization.
The Restricted Stock Plan provides for the grant of awards up to an
aggregate of 250,000 Trust Common Shares to key management personnel of the
Trust on the terms and conditions set forth therein. The Restricted Stock Plan
is designed to promote the long-term growth of the Trust by attracting,
retaining and motivating key management personnel and to identify further the
interests of the participants in the Restricted Stock Plan with those of the
shareholders of the Trust. If the Plan of Reorganization is approved and the
Merger is consummated, the rights and obligations of the Trust under the
Restricted Stock Plan will become the rights and obligations of the Corporation
and the rights of the management personnel who become participants in the
Restricted Stock Plan to receive grants of Trust Common Shares will become
rights of such management personnel to receive grants of shares of Corporation
Common Stock. See "THE RESTRICTED STOCK PLAN."
THE BOARD OF TRUSTEES HAS APPROVED THE PLAN OF REORGANIZATION AND THE
RESTRICTED STOCK PLAN, SUBJECT TO SHAREHOLDER APPROVAL, AND BELIEVES THAT THE
PLAN OF REORGANIZATION AND THE RESTRICTED STOCK PLAN ARE IN THE BEST INTERESTS
OF THE TRUST AND ITS SHAREHOLDERS. THE BOARD RECOMMENDS THAT YOU VOTE IN FAVOR
OF THE PLAN OF REORGANIZATION, THE RESTRICTED STOCK PLAN, THE ELECTION OF THE
TRUST'S THREE NOMINEES AS TRUSTEES AND THE RATIFICATION OF THE APPOINTMENT OF
THE TRUST'S AUDITORS.
[Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.]
<PAGE>
Only holders of record of Trust Common Shares as of the close of
business on January 27, 1997 (the "Record Date") shall be entitled to notice and
to vote at the Annual Meeting and any adjournments and postponements thereof.
Trust Common Shares represented by proxies in the form enclosed, if such proxies
are properly executed and returned and not revoked, will be voted as specified,
but where no specification is made, such shares will be voted for (i) the
approval of the proposed Plan of Reorganization, (ii) the election of the three
Trustees, (iii) the approval of the Restricted Stock Plan and (iv) the
ratification of the appointment of Arthur Andersen LLP as the Trust's
independent auditors for the ensuing fiscal year, and, in the named proxies'
discretion, as to any other matter which may properly come before the Annual
Meeting. To be voted, proxies must be filed with the Secretary of the Trust
prior to voting. Proxies may be revoked at any time before exercise by filing a
notice of such revocation, by filing a later dated proxy with the Secretary of
the Trust or by voting in person at the Annual Meeting.
The Annual Report to shareholders for the Trust's fiscal year ended
October 31, 1996 has been mailed with this Proxy Statement/Prospectus. This
Proxy Statement/Prospectus and the enclosed Proxy were mailed to shareholders on
or about _________, 1997. The principal executive offices of the Trust and the
Corporation are located at 321 Railroad Avenue, Greenwich, Connecticut 06830
(telephone (203-863-8200)).
--------------------
THE SECURITIES OF HRE PROPERTIES, INC. DESCRIBED HEREIN 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 PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------
The date of this Proxy Statement/Prospectus is_____________, 1997.
ii
<PAGE>
AVAILABLE INFORMATION
The Trust is subject to the informational and reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the SEC. Such reports, proxy, statements and other information may be inspected
and copied at the public reference facilities maintained by the SEC at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at the SEC's Regional
Offices at 7 World Trade Center, 13th Floor, New York, New York 10048, and
Northwestern Atrium Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois
60661, and copies may be obtained at the prescribed rates from the Public
Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20544. The address of the SEC's web site is:
http://www.sec.gov. In addition, materials filed by the Trust can be inspected
at the offices of the NYSE, 20 Broad Street, New York, New York 10005.
The Corporation has filed the Registration Statement under the
Securities Act with the SEC with respect to the shares of Corporation Common
Stock to be issued upon consummation of the Plan of Reorganization described
herein. This Proxy Statement/Prospectus does not contain all of the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. Reference is made to the
Registration Statement and to the exhibits listed therein, which can be
inspected at the public reference facilities of the SEC and the NYSE noted
above, and copies of which can be obtained from the SEC at the prescribed rates
as indicated above. Statements contained in this Proxy Statement/Prospectus as
to the contents of any contract or other document referred to are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference.
No person is authorized to give any information or make any
representation not contained in this Proxy Statement/Prospectus, and, if given
or made, such information or representation should not be relied upon as having
been authorized. This Proxy Statement/Prospectus does not constitute a
solicitation of a proxy or an offer to sell or a solicitation of an offer to buy
the securities offered by this Proxy Statement/Prospectus in any jurisdiction
where, or to or from any person to whom, it is unlawful to make such proxy
solicitation or offer or solicitation of an offer. Neither the delivery of this
Proxy Statement/Prospectus nor any distribution of the securities offered
pursuant to this Proxy Statement/Prospectus shall create an implication that
there has been no change in the affairs of the Trust or the Corporation since
the date of this Proxy Statement/Prospectus or that the information in this
Proxy Statement/Prospectus or in the documents incorporated herein by reference
is correct as of any time subsequent to the dates hereof or thereof.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Trust with the SEC are
hereby incorporated by reference into this Proxy Statement/Prospectus: (i)
Annual Report on Form 10-K for the fiscal year ended October 31, 1995; (ii)
Quarterly Reports on Form 10-Q for the fiscal quarters ended January 31, 1996,
April 30, 1996 and July 31, 1996 and (iii) Current Reports on Form 8-K dated May
2, 1996 and November 27, 1996. The Trust's annual report for the fiscal year
ended October 31, 1996, pursuant to Rule 14a-3 promulgated under the Exchange
Act, is being mailed to shareholders of the Trust concurrently with this Proxy
Statement/Prospectus. The Annual Report, however, is not a part of this Proxy
Statement/Prospectus.
In addition, all reports and other documents filed by the Trust
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date hereof and prior to the Annual Meeting shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such reports and documents. Any statement contained herein or in a document
incorporated or deemed to be incorporated herein by reference shall be deemed to
be modified or superseded for purposes of this Proxy Statement/Prospectus to the
extent that a statement contained herein or in any subsequently filed document
that is incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER
THAN EXHIBITS THERETO, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE HEREIN) ARE AVAILABLE UPON WRITTEN OR ORAL REQUEST DIRECTED TO THE
SECRETARY, HRE
iii
<PAGE>
PROPERTIES, 321 RAILROAD AVENUE, GREENWICH, CONNECTICUT 06830 (TELEPHONE NUMBER
203-863-8200). IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, SUCH
REQUESTS SHOULD BE RECEIVED NO LATER THAN _________, 1997.
iv
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
SUMMARY ....................................................................................................... 1
The Trust and the Corporation.......................................................................... 1
Date, Time and Place of Annual Meeting................................................................. 1
Purpose of the Annual Meeting.......................................................................... 1
Record Date; Quorum.................................................................................... 1
Vote Required.......................................................................................... 2
The Plan of Reorganization............................................................................. 2
Principal Reasons for the Plan of Reorganization.............................................. 2
Terms of the Plan of Reorganization........................................................... 2
Certain Changes in the Rights of Shareholders Resulting from the Plan of
Reorganization....................................................................... 3
Limitation of Liability and Indemnification of Trustees and Directors......................... 5
Interests of Certain Persons.................................................................. 6
Certain Tax Consequences of the Plan of Reorganization........................................ 7
Election of Trustees................................................................................... 7
Restricted Stock Plan.................................................................................. 7
Ratification of Appointment of Arthur Andersen LLP as Independent Auditors............................. 8
Vote Required for Proposals; Independent Proposals; No Dissenters' Rights.............................. 8
Recommendation of the Board of Trustees................................................................ 8
PROPOSAL 1. THE PLAN OF REORGANIZATION.................................................................... 9
Principal Reasons for the Plan of Reorganization....................................................... 9
Certainty/Flexibility......................................................................... 9
Investor Perception........................................................................... 9
Limitation of Liability....................................................................... 9
Protections Afforded by Maryland Law Against Hostile/Unsolicited Takeovers.................... 9
Other Considerations.......................................................................... 10
Terms of the Plan of Reorganization.................................................................... 10
Certain Changes in the Rights of Shareholders Resulting from the Plan of Reorganization................ 12
General/Authorized Shares..................................................................... 12
Dividends..................................................................................... 13
Ownership Limitation; Excess Stock............................................................ 13
Meetings of Stockholders...................................................................... 15
Advance Notice of Stockholder Proposals and Director Nominations.............................. 16
Action by Consent of Stockholders............................................................. 16
Board of Trustees of the Trust Compared to Board of Directors of the Corporation.............. 16
Amendment of Constitutional Documents of the Trust and the Corporation........................ 17
Consolidation, Merger or Sale of Assets....................................................... 17
Dissolution/Termination....................................................................... 18
Limitations on Dissenters' Appraisal Rights................................................... 18
Limitation of Liability and Indemnification of Trustees and Directors......................... 18
Inspection Rights............................................................................. 19
Certain Provisions of Massachusetts and Maryland Law................................................... 20
Business Combination.......................................................................... 20
Control Share Acquisition..................................................................... 20
Certain Tax Consequences of the Plan of Reorganization................................................. 21
General: ..................................................................................... 21
Federal Income Taxes.......................................................................... 22
State Taxes................................................................................... 22
Vote Required; No Dissenters' Rights................................................................... 22
Interest of Certain Persons............................................................................ 22
v
<PAGE>
PROPOSAL 2. ELECTION OF TRUSTEES.......................................................................... 24
PROPOSAL 3. APPROVAL OF THE RESTRICTED STOCK PLAN......................................................... 36
PROPOSAL 4. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS OF THE
TRUST......................................................................................... 37
SOLICITATION OF PROXIES AND VOTING PROCEDURES................................................................... 37
LEGAL MATTERS................................................................................................... 38
OTHER MATTERS................................................................................................... 38
Exhibit A.......................................................................................................A-1
Exhibit B.......................................................................................................B-1
Exhibit C.......................................................................................................C-1
Exhibit D.......................................................................................................D-1
</TABLE>
vi
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY
The following is a summary of certain information contained elsewhere
in this Proxy Statement/Prospectus relating to the proposed Plan of
Reorganization, the election of Trustees, the Restricted Stock Plan and the
ratification of the appointment of the Trust's auditors. This summary does not
purport to contain all of the material information relating to such proposals
and is qualified in its entirety by reference to the full text of the Proxy
Statement/Prospectus and the Exhibits hereto. Shareholders are urged to read the
Proxy Statement/Prospectus and the Exhibits in their entirety.
The Trust and the Corporation
The Trust was organized on July 7, 1969 as an unincorporated business
trust under the laws of the Commonwealth of Massachusetts pursuant to a
Declaration of Trust dated July 7, 1969, as amended (the "Declaration of
Trust"). The Trust's principal business is the ownership of real estate
investments which consist principally of equity investments in income-producing
properties, with primary emphasis on properties in the eastern part of the
United States. The Trust owns and manages a portfolio of retail properties,
office buildings, and industrial properties. As at __________, 1997, the Trust
owned or had an equity interest in 18 properties comprised of shopping centers,
single tenant retail stores, office buildings and service and distribution
facilities located in twelve states throughout the United States, containing a
total of approximately 2,769,000 square feet of gross leasable space.
The Corporation was organized on December 30, 1996 by the Trust to acquire
and succeed to, and to continue the business of, the Trust upon the consummation
of the Merger of the Trust with and into the Corporation pursuant to the Plan of
Reorganization. The Corporation has had no activities to date other than those
incident to the Plan of Reorganization.
The Trust has qualified and has elected to be taxed as a real estate
investment trust (a "REIT") under Sections 856-858 of the Internal Revenue Code
of 1986, as amended (the "Code"). The consummation of the Merger should not
adversely affect the ability of the Corporation to continue to qualify as a REIT
under Sections 856-858 of the Code. See "THE PLAN OF REORGANIZATION - Certain
Tax Consequences of the Plan of Reorganization."
The principal executive offices of both the Trust and the Corporation
are located at 321 Railroad Avenue, Greenwich, Connecticut 06830, and their
telephone number is (203) 863-8200.
Date, Time and Place of Annual Meeting
The Annual Meeting of Shareholders of the Trust will be held on
Wednesday, March 12, 1997, at 11:00 a.m. at the Doral Arrowwood Conference
Center, Anderson Hill Road, Rye Brook, New York.
Purpose of the Annual Meeting
The Annual Meeting has been called to seek approval of the shareholders
of the Trust of (i) the Plan of Reorganization (Proposal 1), (ii) the election
of three Trustees to serve for the ensuing three-year term as Trustees of the
Trust or, if the Plan of Reorganization is approved and the Merger is
consummated, as Directors of the Corporation (Proposal 2), (iii) the Restricted
Stock Plan (Proposal 3), and (iv) the ratification of the appointment of Arthur
Andersen LLP as the independent auditors of the Trust or, if the Plan of
Reorganization is approved and the Merger is consummated, the Corporation, for
the ensuing fiscal year (Proposal 4).
Record Date; Quorum
Only holders of record of Trust Common Shares as of the close of
business on the Record Date will be entitled to notice of and to vote at the
Annual Meeting and any adjournments or postponements thereof. Shareholders of
record on the Record Date are entitled to one vote per Trust Common Share on
each matter that may properly come before the Annual Meeting. As of the Record
Date, there were 5,346,081 Trust Common Shares outstanding and entitled to vote.
The presence, either in person or by properly executed proxy, of a majority of
the outstanding Trust Common Shares is necessary to constitute a quorum at the
Annual Meeting.
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Vote Required
The Plan of Reorganization requires the affirmative vote of a majority
of the Trust Common Shares outstanding as of the close of business on the Record
Date. The election of Trustees, the approval of the Restricted Stock Plan and
the ratification of the appointment of the Trust's auditors requires the
affirmative vote of the holders of a majority of the Trust Common Shares
present, in person or by properly executed proxy, at the Annual Meeting. Each
proposal is being presented to the Trust's shareholders as a separate and
independent proposal and no proposal is conditioned upon adoption or approval of
any other proposal.
The Plan of Reorganization
Principal Reasons for the Plan of Reorganization
The purpose of the Plan of Reorganization is to reorganize the Trust
from a Massachusetts business trust into a Maryland business corporation, to be
known as HRE Properties, Inc. The Board of Trustees believes that the more
well-defined Maryland corporation laws, together with the Corporation's new
Articles of Incorporation and Bylaws, will provide the Trust with a greater
degree of certainty and flexibility in planning and implementing corporate
action than is currently available to the Trust as a business trust organized
under the laws of Massachusetts. In addition, certain provisions of the Maryland
General Corporation Law (the "MGCL") are designed to deter hostile or
unsolicited takeover attempts of Maryland corporations and to increase a
Maryland corporation's flexibility in dealing with such takeover attempts. The
Board of Trustees believes that this greater degree of flexibility, together
with the favorable perception of the Maryland corporation by the experienced
REIT investor community, combine to make the Plan of Reorganization to be in the
best interests of the Trust and its shareholders. See "THE PLAN OF
REORGANIZATION - Principal Reasons for the Plan of Reorganization."
Terms of the Plan of Reorganization
The Plan of Reorganization will be effected through the Merger of the
Trust with and into the Corporation, pursuant to which the Corporation will be
the surviving entity in the Merger, the separate existence of the Trust will
terminate and each outstanding Trust Common Share will be converted into one
share of Corporation Common Stock. At the effective time of the Merger, all
properties, assets, liabilities and obligations of the Trust will become
properties, assets, liabilities and obligations of the Corporation. Upon
consummation of the Merger, the Corporation and its shareholders will be
governed by the Corporation's Articles of Incorporation and Bylaws which will
include a number of provisions which are not currently in the Declaration of
Trust. These provisions of the Articles of Incorporation and Bylaws of the
Corporation, together with certain provisions of the MGCL, may have certain
anti-takeover effects.
The Plan of Reorganization has been adopted by the Board of Trustees
pursuant to their authority under the Declaration of Trust to cause a merger of
the Trust with and into a corporation. The Merger will become effective upon the
filing of Articles of Merger with the appropriate state agencies, including,
without limitation, the State Department of Assessments and Taxation of the
State of Maryland. The Trust anticipates that the Merger will become effective
as promptly as practicable following shareholder approval of the Plan of
Reorganization at the Annual Meeting. The Plan of Reorganization provides that
the Merger may be abandoned by the Corporation or by the Trust at any time prior
to its effectiveness. The Trust has no current intention of abandoning or
causing the Corporation to abandon the Merger subsequent to the Annual Meeting
if shareholder approval is obtained.
On the effective date of the Merger, each of the persons who are then
Trustees and officers of the Trust will become directors and officers,
respectively, of the Corporation and each of the persons who are then members of
the Board of Consultants of the Trust will become members of the Board of
Consultants of the Corporation.
The Plan of Reorganization is conditioned upon, among other things, the
listing of the Corporation Common Stock on the NYSE, subject to official notice
of issuance. It is expected that the listing of the Corporation Common Stock
will occur at the time of the effectiveness of the Merger and that the listing
of the Trust Common
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Shares on the NYSE will be simultaneously terminated. The Corporation Common
Stock will thereafter continue to be listed on the NYSE in accordance with the
applicable rules of the NYSE.
If the Plan of Reorganization is approved and the Merger is
consummated, the rights and obligations of the Trust under the Restricted Stock
Plan will become the rights and obligations of the Corporation and the rights of
the management personnel who become participants in the Restricted Stock Plan to
receive grants of Trust Common Shares will become rights of such management
personnel to receive grants of shares of Corporation Common Stock.
If the Plan of Reorganization is approved and the Merger is
consummated, all rights and obligations of the Trust under the Trust's Stock
Option Plan (the "Stock Option Plan") will become rights and obligations of the
Corporation and all rights of the participants under the Stock Option Plan to
receive grants of options and to exercise options and stock appreciation rights
granted thereunder will become rights to receive grants of options and to
exercise options and stock appreciation rights in respect of shares of
Corporation Common Stock on the terms and conditions set forth in the Stock
Option Plan.
If the Plan of Reorganization is approved and the Merger is
consummated, all rights and obligations of the Trust under the Trust's
Shareholder Rights Agreement dated as of November 4, 1988, as amended (the
"Shareholder Rights Plan"), will become the rights and obligations of the
Corporation and the rights (the "Rights") issued under the Shareholder Rights
Plan to acquire capital stock or other securities or property of the Trust under
certain circumstances will become Rights to acquire capital stock or other
securities or property of the Corporation.
See "THE PLAN OF REORGANIZATION - Terms of the Plan of Reorganization."
Certain Changes in the Rights of Shareholders Resulting from the Plan
of Reorganization
The rights of shareholders of the Trust are currently governed by the
Trust's Declaration of Trust and Bylaws, Massachusetts law and the rules of the
NYSE. If the Plan of Reorganization is approved by the shareholders of the Trust
and the Merger is consummated, the Corporation will be the surviving entity in
the Merger, the separate existence of the Trust will terminate, each outstanding
Trust Common Share will be converted into one share of Corporation Common Stock
and the rights of stockholders will be governed by the Corporation's Articles of
Incorporation and Bylaws, Maryland law, including the MGCL, and the rules of the
NYSE. While a number of the Trust's current corporate governance provisions will
be included in the Corporation's Articles of Incorporation and Bylaws and,
therefore, will not be affected by the adoption of the Plan of Reorganization
and the consummation of the Merger, certain differences between Massachusetts
law and Maryland law and between the Trust's Declaration of Trust and Bylaws and
the Corporation's Articles of Incorporation and Bylaws will result in certain
material differences between the rights of shareholders of the Trust and the
rights of stockholders of the Corporation. Accordingly, shareholders of the
Trust should carefully consider the changes in their rights that will result
from the adoption of the Plan of Reorganization and the consummation of the
Merger. The following table compares certain of the existing rights of
shareholders of the Trust with those of stockholders of the Corporation, if the
Plan of Reorganization is approved and the Merger is consummated.
<TABLE>
<CAPTION>
Trust Corporation
<S> <C> <C>
Election of Trustees/Directors Shareholders elect Trustees for staggered Stockholders elect directors for staggered
three-year terms. three-year terms.
Removal of Trustees/Directors Holders of two-thirds of outstanding Holders of two-thirds of the outstanding
shares entitled to vote on the matter shares entitled to vote on the matter may
may remove Trustees, with or without cause. remove Directors only for cause.
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<PAGE>
Dividends Shareholders entitled to receive dividends Stockholders entitled to receive dividends
as and when declared by the Trustees; such as and when declared by the Directors.
dividends may be declared even when Dividends may be declared as long as,
paid-in capital of the Trust exceeds after giving effect to the payment thereof
market/book value of the Trust's net the Corporation would be able to pay its
assets. indebtedness as such indebtedness
becomes due in the usual course of
business and the Corporation's total
assets would not be less than the sum of
the Corporation's total liabilities plus
the amount that would be needed if the
Corporation were to be dissolved at the
time of the payment in order to satisfy
the preferential rights, upon dissolution,
of stockholders whose preferential rights
on dissolution are superior to those
receiving the dividend payment.
Preferred Stock Upon the affirmative vote of at least 75% The Corporation may issue shares of
of the Trustees, the Trustees may issue preferred stock, in one or more series, as
shares of preferred stock, in one or more authorized by the Directors. Such shares
series, with such voting powers and other may be issued with such voting powers and
rights as they consider appropriate. other rights as the Directors consider
appropriate and as is permissible under
the MGCL.
Voting by Unanimous Consent Any shareholders' action may be Any stockholders' action may be effected
effected by a written consent signed by a written consent signed by all
by all the shareholders entitled to vote stockholders entitled to vote thereon.
thereon.
Amendment of Constitutional Any Proposed amendment to the Declaration Any proposed amendment to certain
Documents of Trust requires approval of a majority provisions of the Articles of
of the Trustees and the affirmative vote Incorporation requires approval of a
of the holders of a majority of the majority of the Directors (including a
outstanding shares entitled to vote on the majority of the "Continuing Directors," as
matter. Bylaws may be amended only by the defined below) and the affirmative vote of
Trustees. the holders of two-thirds of the
outstanding shares entitled to vote on the
matter. Any proposed amendment to any
other provision of the Articles of
Incorporation requires the vote of a
majority of the outstanding shares
entitled to vote on the matter. Bylaws may
be amended only by the Board of Directors.
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Voting on Other Matters Any proposed merger, sale of substantially Holders of voting stock may vote on all
all of the assets of the Trust or other matters provided for by the MGCL.
termination of the Trust requires approval Any proposed merger, share exchange,
of a majority of the Trustees and the consolidation or sale of substantially all
affirmative vote of the holders of a of the assets of the Corporation requires
majority of the outstanding shares approval of a majority of the Directors
entitled to vote on the matter. (including a majority of the "Continuing
Shareholder vote generally not required on Directors," as defined below) and the
matters other than the foregoing. affirmative vote of the holders of two-
thirds of the outstanding shares entitled
to vote on the matter.
Shareholders Rights to Call Holders of not less than 25% of the Holders of not less than a majority of the
Special Meeting outstanding shares may call a special outstanding voting shares may call a
meeting. special meeting.
Share Ownership Limit "Ownership Limit" of 9.9% of the "Ownership Limit" of 7.5% of the
outstanding shares by any holder to assure outstanding shares by any holder to assure
against "closely held" REIT against "closely held" REIT
disqualification, unless waived by disqualification, unless waived by
Trustees. Directors.
Shareholder Rights Plan Each outstanding Trust Common Share Each outstanding share of Corporation
includes and represents one Preferred Common Stock includes and represents one
Share Purchase Right. The Rights will Preferred Share Purchase Right. The Rights
become exercisable if any person or group will become exercisable if any person or
acquires 25% or more of the Trust Common group acquires 25% or more of the shares
Shares or announces or commences a tender of Corporation Common Stock or announces
offer which would result in such person or or commences a tender offer which would
group owning 30% or more of the Trust result in such person or group owning 30%
Common Shares. Following any such 25% or more of the shares of Corporation
acquisition, the Rights will be Common Stock. Following any such 25%
exercisable by the holder thereof (other acquisition, the Rights will be
than the acquiring person or group) to exercisable by the holder thereof (other
purchase Trust Common Shares at one-half than the acquiring person or group) to
of the market value of such shares. In purchase shares of Corporation Common
addition, if the Trust is involved in a Stock at one-half of the market value of
merger or other business combination at such shares. In addition, if the
any time after the Rights become Corporation is involved in a merger or
exercisable, the Rights will entitle the other business combination at any time
holder thereof to purchase shares of after the Rights become exercisable, the
common stock of the acquiring company at Rights will entitle the holder thereof to
one-half of the market value of such purchase shares of common stock of the
shares. acquiring company at one-half of the
market value of such shares.
</TABLE>
See "THE PLAN OF REORGANIZATION - Certain Changes in the Rights of
Shareholders Resulting from the Plan of Reorganization; Certain Provisions of
Massachusetts and Maryland Law."
Limitation of Liability and Indemnification of Trustees and Directors
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<PAGE>
Stockholders of a corporation are generally not responsible for its
debts and obligations. In contrast, title to the property of a Massachusetts
business trust like the Trust is vested in its trustees, and its trustees are
personally responsible for the debts and obligations of the trust, although in
the case of the Trust, the Declaration of Trust provides that (i) the Trustees
shall have no such liability unless they are considered to have acted in bad
faith or with willful malfeasance, reckless disregard of their duties or gross
negligence, or not to have acted in good faith in the reasonable belief that
their actions were in the best interests of the Trust, and (ii) the Trustees
shall be and are entitled to indemnification from the Trust assets to the extent
that they meet such required standards of conduct.
By comparison, the Corporation's Articles of Incorporation limit the
liability of the Corporation's directors and officers to the Corporation and its
stockholders to the fullest extent permitted from time to time by the MGCL. The
MGCL presently permits the liability of directors and officers to a corporation
or its stockholders for monetary damages to be limited, except (i) to the extent
that it is proved that the director or officer actually received an improper
benefit or profit, for the amount of the benefit or profit actually received, or
(ii) if a judgment or other final adjudication is entered in a proceeding based
on a finding that the director's or officer's actions or failure to act was the
result of active and deliberate dishonesty and was material to the cause of
action adjudicated in the proceeding. This provision does not limit the ability
of the Corporation or its stockholders to obtain other relief, such as an
injunction or rescission.
The Corporation's Articles of Incorporation and Bylaws require the
Corporation to indemnify its directors, officers and certain other parties to
the fullest extent permitted from time to time by the MGCL. The MGCL permits a
corporation to indemnify its directors, officers and certain other parties
against judgments, penalties, fines, settlements and reasonable expenses
actually incurred by them in connection with any proceeding to which they may be
made a party by reason of their service to or at the request of the Corporation,
unless it is established that the act or omission of the indemnified party was
material to the matter giving rise to the proceeding and (i) the act or omission
was committed in bad faith or was the result of active and deliberate
dishonesty, (ii) the indemnified party actually received an improper personal
benefit, or (iii) in the case of any criminal proceeding, the indemnified party
had reasonable cause to believe that the act or omission was unlawful.
Other than the foregoing, the Board of Trustees believes that there are
no significant substantive differences between the limitations of liability and
indemnification rights of the Trustees of the Trust and the limitations of
liability and indemnification rights of directors of the Corporation. See "THE
PLAN OF REORGANIZATION- Principal Reasons for the Plan of Reorganization;
Certain Changes in the Rights of Shareholders Resulting from the Plan of
Reorganization."
It is the position of the SEC that indemnification of directors and
officers for liabilities arising under the Securities Act is against public
policy and is unenforceable pursuant to Section 14 of the Securities Act.
Interests of Certain Persons
As noted under "ELECTION OF TRUSTEES," Mr. Charles J. Urstadt, Chairman
and Chief Executive Officer of the Trust, beneficially owns 1,148,925 Trust
Common Shares constituting approximately 20.43% of the outstanding Trust Common
Shares. If the Plan of Reorganization is approved and the Merger is consummated,
the 1,148,925 Trust Common Shares beneficially owned by Mr. Urstadt will be
converted into 1,148,925 shares of Corporation Common Stock, constituting
approximately 20.43% of the outstanding shares of Corporation Common Stock
currently anticipated to be outstanding at the effective time of the Merger.
The Corporation's Articles of Incorporation provide that directors of
the Corporation may only be removed for cause and only upon the vote of the
holders of two-thirds of the outstanding shares of Corporation Common Stock and
that any amendment of certain provisions of the Corporation's Articles of
Incorporation and any merger, share exchange, consolidation or sale of all or
substantially all of the assets of the Corporation will require approval of a
majority of the Board of Directors of the Corporation (including a majority of
those members who are Continuing Directors, as defined below) and the
affirmative vote of the holders of two-thirds of the outstanding shares of
Corporation
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<PAGE>
Common Stock. In view of Mr. Urstadt's currently anticipated percentage
ownership of the Corporation Common Stock upon consummation of the Merger and,
depending upon the number of shares of Corporation Common Stock that are
actually voted in connection with any such proposal, Mr. Urstadt will control a
number of shares of Corporation Common Stock that may be sufficient to block any
such proposal. In addition, under the MGCL certain business combinations between
the Corporation and an Interested Stockholder will require the recommendation of
the Board of Directors of the Corporation and the affirmative vote of at least
(i) 80% of the outstanding shares of Corporation Common Stock and (ii)
two-thirds of the outstanding shares of Corporation Common Stock not held by
such Interested Stockholder or its affiliates unless, among other things,
certain "fair price" and other conditions are met. In view of Mr. Urstadt's
currently anticipated percentage ownership of the Corporation Common Stock upon
consummation of the Merger, Mr. Urstadt will control a number of shares of
Corporation Common Stock sufficient to block any proposal respecting a business
combination with an Interested Stockholder unless the "fair price" and other
conditions of the MGCL are met.
Mr. Urstadt and all other Trustees and/or executives of the Trust who
in the aggregate hold 1,293,682 Trust Common Shares constituting approximately
23% of the issued and outstanding Trust Common Shares have notified the Board of
Trustees of their intention to vote FOR each of Proposals 1 through 4 at the
Annual Meeting.
See "THE PLAN OF REORGANIZATION - Interests of Certain Persons."
Certain Tax Consequences of the Plan of Reorganization
The Trust and the Corporation have received the opinion of Coudert
Brothers, counsel to the Trust and the Corporation, to the effect that, on the
basis of the facts, representations and assumptions set forth or referred to in
such opinion, the Plan of Reorganization, if consummated in the manner set forth
in the Plan of Reorganization and this Proxy Statement/Prospectus, will
constitute a tax-free reorganization under Section 368(a) of the Code and that,
accordingly, (i) no gain or loss will be recognized for Federal income tax
purposes by the shareholders of the Trust upon conversion of Trust Common Shares
into Corporation Common Stock and (ii) the basis of a shareholder of the Trust
in his shares of Corporation Common Stock will be the same as his basis in his
Trust Common Shares.
In addition, the Merger should not adversely affect the ability of the
Corporation to continue to qualify as a REIT under Sections 856-858 of the Code.
No ruling has been or will be sought from the Internal Revenue Service.
Shareholders are urged to consult their own tax advisors with respect to the tax
consequences arising under Federal law and the laws of any state, municipality
or other taxing jurisdiction, including tax consequences arising from such
shareholder's own tax characteristics and situation. See "THE PLAN OF
REORGANIZATION- Certain Tax Consequences of the Plan of Reorganization".
Election of Trustees
Pursuant to the Declaration of Trust, the Trustees are divided into
three classes serving three-year terms. Three Trustees, comprising Class III,
are to be elected at the Annual Meeting. Messrs. Douglass, Lawrence and Urstadt
have been nominated for election as Trustees to hold office until the year 2000
Annual Meeting and until their successors have been elected and shall qualify.
If the Plan of Reorganization is approved and the Merger is consummated, the
Trustees of the Trust at the time of the consummation of the Merger shall become
the directors of the Corporation serving for the same terms and in the same
classes with the Corporation as such persons are then serving with the Trust.
The affirmative vote of the holders of not less than a majority of the
Trust Common Shares entitled to vote and present, in person or by properly
executed proxy, at the Annual Meeting will be required to elect a Trustee.
See "ELECTION OF TRUSTEES."
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<PAGE>
Restricted Stock Plan
The Restricted Stock Plan provides for the grant of restricted stock
awards of up to an aggregate of 250,000 Trust Common Shares to key management
personnel of the Trust on the terms and conditions set forth therein. The
Restricted Stock Plan is designed to promote the long-term growth of the Trust
by attracting, retaining and motivating key management personnel and to identify
further the interests of the participants in the Restricted Stock Plan with
those of the shareholders of the Trust. If the Plan of Reorganization is
approved and the Merger is consummated, the rights and obligations of the Trust
under the Restricted Stock Plan will become the rights and obligations of the
Corporation and the rights of the management personnel who become participants
in the Restricted Stock Plan to receive grants of Trust Common Shares will
become rights of such management personnel to receive grants of shares of
Corporation Common Stock.
The affirmative vote of the holders of not less than a majority of the
Trust Common Shares entitled to vote and present, in person or by properly
executed proxy, at the Annual Meeting will be required to approve the Restricted
Stock Plan.
See "THE RESTRICTED STOCK PLAN."
Ratification of Appointment of Arthur Andersen LLP as Independent Auditors
The Trust is proposing that the shareholders of the Trust ratify the
appointment of Arthur Andersen LLP as the independent auditors of the Trust or,
if the Plan of Reorganization is approved and the Merger is consummated, the
Corporation, for the ensuing fiscal year. The affirmative vote of the holders of
not less than a majority of the Trust Common Shares entitled to vote and
present, in person or by properly executed proxy, at the Annual Meeting will be
required to ratify such appointment.
See "RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS OF THE TRUST."
Vote Required for Proposals; Independent Proposals; Dissenters' Rights
As noted above, the Plan of Reorganization requires the affirmative
vote of a majority of the Trust Common Shares outstanding on the Record Date.
Abstentions and broker non-votes will thus be the equivalent of negative votes
with respect to the Plan of Reorganization.
The election of the Trustees, the approval of the Restricted Stock Plan
and the ratification of the appointment of the Trust's auditors each requires
the affirmative vote of a majority of the Trust Common Shares entitled to vote
and present, in person or by properly executed proxy, at the Annual Meeting.
Abstentions will thus be the equivalent of negative votes and broker non-votes
will have no effect with respect to such proposals, as any Trust Common Shares
subject to broker non-votes will not be present and entitled to vote with
respect to any proposal to which the broker non-vote applies.
Each of the Proposals presented to the shareholders of the Trust at the
Annual Meeting is being presented as a separate and independent proposal and no
Proposal is conditioned upon adoption or approval of any other Proposal.
Shareholders of the Trust will not have any dissenters' rights of appraisal in
connection with the vote upon the Plan of Reorganization.
See "SOLICITATION OF PROXIES AND VOTING PROCEDURES."
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<PAGE>
Recommendation of the Board of Trustees
The Board of Trustees has approved the Plan of Reorganization and the
Restricted Stock Plan, subject to shareholder approval, and believes that each
of the Plan of Reorganization and the Restricted Stock Plan is in the best
interests of the Trust and its shareholders. The Board of Trustees recommends
that shareholders vote in favor of the Plan of Reorganization, the election of
Trustees, the Restricted Stock Plan and the ratification of the appointment of
the independent auditors.
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<PAGE>
PROPOSAL 1. THE PLAN OF REORGANIZATION
Principal Reasons for the Plan of Reorganization
The Trust was organized in 1969 as a Massachusetts business trust
primarily in order to take advantage of the tax treatment afforded to REITs
under the Code. At that time, only unincorporated trusts and associations
taxable as a corporation (i.e. business trusts) could qualify as REITs, and as
such would be eligible for the tax benefits conferred by such status. However,
as a result of certain subsequently effected amendments to the Code,
corporations may now also qualify as a REIT. In more recent years, an increasing
number of REITs have been incorporated as, or have been reorganized into,
corporations (and, in particular, Maryland corporations) in order to take
advantage of the more well-defined state corporation statutes which provide such
REITs with a greater degree of certainty and flexibility in planning and
implementing corporate action than would otherwise be available as a business
trust. The Board of Trustees believes that this greater degree of flexibility,
together with the favorable perception of the Maryland corporation by the
experienced REIT investor community and the other factors set forth below,
combine to make the Plan of Reorganization desirable and in the best interests
of the Trust and its shareholders.
Certainty/Flexibility: Business trusts under Massachusetts law are
entities created by agreement or under a governing document, such as the
Declaration of Trust, for which there is no prescribed form. Accordingly, the
powers, rights and obligations of trustees and shareholders are to a large
extent a matter of contractual interpretation. In states such as Maryland, there
is a modern, well-defined corporate statute as well as decisional case law
interpreting such statute on which an organization may rely in planning and
implementing its activities. The existence of such a statute and case law allows
a corporation to plan the legal aspects of its future activities with more
certainty and flexibility than do the provisions of the Declaration of Trust and
Massachusetts law currently applicable to the Trust. A modern corporate charter
also allows corporations to determine and change business strategies on an
ongoing basis as circumstances warrant, whereas such flexibility is, at times,
unavailable to business trusts which may be restricted by the more specific
provisions of their governing instruments.
Investor Perception: Corporations are far more numerous than business
trusts and are more familiar to the investor community. Additionally, in the
specific context of REITs, Maryland corporations are often perceived by the
experienced investor community as conferring the most beneficial framework
within which REITs may operate and develop. This familiarity and favorable
perception is considered by the Board of Trustees as likely to enhance the
liquidity and marketability of the Trust, providing potentially greater access
to capital and real estate markets.
Limitation of Liability: Through judicial decision it has been
established that the business trust is not a distinct legal entity, as opposed
to a corporation whose directors and stockholders generally have no personal
liability for corporate debts and obligations. Trustees and shareholders (if
they are deemed to control the actions of the Trustees) of a business trust, on
the other hand, can have personal responsibility for the debts and obligations
of the business trust.
Although the Trustees of the Trust are generally entitled to
indemnification out of the Trust assets for any loss they may suffer in the
proper performance of their services to the Trust, the possibility does,
however, remain that in the event that the Trust assets are insufficient to
cover a liability of the Trust, such persons could be left with an unreimbursed
personal obligation. By contrast, the MGCL offers directors broader protection
from personal liability. The Board of Trustees believes that the extending of
this statutory protection against personal liability should enhance the
Corporation's ability to attract and retain qualified directors.
Protections Afforded by Maryland Law Against Hostile/Unsolicited
Takeovers: As noted below under "Certain Provisions of Massachusetts and
Maryland Law," certain provisions of the MGCL are designed to deter hostile or
unsolicited takeover attempts of Maryland corporations and to encourage
potential acquirors to negotiate directly with the management of a Maryland
corporation. Massachusetts law does not currently contain any similar provisions
applicable to a Massachusetts business trust in the form and nature of the
Trust. The Board of Trustees believes that the reorganization of the Trust into
a Maryland corporation will allow the Board of Directors of the
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Corporation to avail itself of these provisions of the MGCL and to increase the
Corporation's flexibility in the face of any future takeover attempts by
encouraging the potential acquiror to negotiate directly with the Corporation's
management.
Unsolicited or hostile takeover attempts are frequently structured in
ways that may not be in the best interests of all shareholders. Although a
takeover attempt may be made at a price substantially above the then current
market prices for a target company's shares, such offers are sometimes made for
less than all of the outstanding shares of the target company. As a result,
shareholders may be presented with the alternative of either partially
liquidating their investment at a time which may be disadvantageous or retaining
their investment as minority shareholders in an enterprise which is controlled
by persons whose objectives may be different from those of the remaining
minority shareholders. A takeover attempt may also take the form of a two-tiered
offer in which cash is offered for a portion of the target company's outstanding
shares and thereafter securities that are or may be worth less than the cash
portion are offered for the remaining shares. Furthermore, hostile takeover
attempts are sometimes timed and designed to foreclose or minimize the
possibility of more favorable competing bids which frequently may result in
shareholders losing the opportunity to receive and consider alternative and
possibly more attractive proposals. On the other hand, transactions approved by
a target company's board of directors can be more carefully planned and
undertaken at an opportune time in order to obtain maximum value for the company
and all of its shareholders.
The Board of Trustees recognizes that takeover attempts which have not
been negotiated with and approved by a target company's board of directors or
other managerial body do not always have the unfavorable consequences or effects
described above. However, the Board of Trustees believes that the potential
disadvantages of unapproved takeover attempts are sufficiently great that the
protections afforded by the MGCL against hostile or unsolicited takeover
attempts are in the best interests of the Trust and its stockholders. As noted
under "Certain Provisions of Massachusetts and Maryland Law," the Corporation's
Articles of Incorporation and Bylaws provide that these provisions of the MGCL
will not apply to Mr. Charles J. Urstadt, the Chairman and Chief Executive
Officer of the Trust who beneficially owns approximately 20.43% of the
outstanding Trust Common Shares and will own approximately 20.43% of the
Corporation Common Stock currently anticipated to be outstanding upon
consummation of the Merger, because the Board of Trustees does not believe that
Mr. Urstadt will pose a threat of a hostile or unsolicited takeover attempt to
the Corporation.
Other Considerations: In addition to the foregoing, there are certain
other factors that have caused the Board of Trustees to view a Maryland
corporation as a desirable organization into which the Trust should be
reorganized. In particular, the MGCL does not limit a corporation's ability to
pay dividends to earned surplus. Such a limitation exists in many other state
corporate laws and is inappropriate for many REITs which make distributions of
funds from operations that exceed earnings. The only requirement in this respect
under Maryland law is that after giving effect to the payment of the dividend,
the Corporation would be able to pay its indebtedness as such indebtedness
becomes due in the usual course of business and the Corporation's total assets
would not be less than the sum of the Corporation's total liabilities plus the
amount that would be needed if the Corporation were to be dissolved at the time
of the payment in order to satisfy the preferential rights, upon dissolution, of
stockholders whose preferential rights on dissolution are superior to those
receiving the dividend payment. Additionally, the effectiveness of the so-called
"Excess Share" provision (intended to preserve REIT status) similar to the
existing provision of the Declaration of Trust, has been specifically upheld in
the context of a Maryland incorporated REIT, and a similar provision will be
contained in the Corporation's Articles of Incorporation. See "Certain Changes
in the Rights of Shareholders Resulting from the Plan of Reorganization -
Ownership Limitation; Excess Stock." Finally, a further advantage of Maryland
over other possible states of domicile, is that no annual franchise tax is
imposed.
Terms of the Plan of Reorganization
The Plan of Reorganization is set forth in its entirety as Exhibit A to
this Proxy Statement. The information set forth below is only a summary of its
principal provisions and is qualified in its entirety by Exhibit A.
The Plan of Reorganization will be effected through the Merger of the
Trust with and into the Corporation, pursuant to which the Corporation will be
the surviving entity in the Merger, the separate existence of the Trust will
terminate, each outstanding Trust Common Share will be converted into one share
of Corporation Common Stock and the shares of Corporation Common Stock held by
the Trust will be cancelled and retired and will cease to exist. At the
effective time of the Merger, all properties, assets, liabilities and
obligations of the Trust will
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become properties, assets, liabilities and obligations of the Corporation. For
federal income tax and financial reporting purposes, the Corporation will be
considered to be the same entity as the Trust.
The Plan of Reorganization has been adopted by the Board of Trustees
pursuant to their authority under the Declaration of Trust to cause a merger of
the Trust with and into a corporation.
The Merger will become effective upon the filing of Articles of Merger
with the appropriate state agencies, including, without limitation, the State
Department of Assessments and Taxation of the State of Maryland. The Trust
anticipates that the Merger will become effective as promptly as practicable
following shareholder approval of the Plan of Reorganization at the Annual
Meeting. The Plan of Reorganization provides that the Merger may be abandoned by
the Corporation or by the Trust at any time prior to its effectiveness. The
Trust has no current intention of abandoning or causing the Corporation to
abandon the Merger subsequent to the Annual Meeting if shareholder approval is
obtained.
Upon consummation of the Merger, the Corporation and its shareholders
will be governed by the Corporation's Articles of Incorporation and Bylaws,
which will include a number of provisions which are not currently in the
Declaration of Trust. These provisions of the Articles of Incorporation and
Bylaws of the Corporation, together with certain provisions of the MGCL, may
have certain anti-takeover effects. See "Certain Provisions of Massachusetts and
Maryland Law." A copy of the proposed Articles of Incorporation and By-laws of
the Corporation are set forth in their entirety as Exhibits C and D,
respectively.
On the effective date of the Merger, each of the persons then serving
as Trustees and officers of the Trust will become directors and officers,
respectively, of the Corporation and each of the persons who are members of the
Board of Consultants of the Trust will become members of the Board of
Consultants of the Corporation. The Board of Consultants of the Corporation will
be appointed by the Board of Directors of the Corporation to consider, advise
upon and make recommendations to the Board of Directors with respect to such
questions relating to the conduct of the business of the Corporation as may be
submitted to it by the Board of Directors. The Board of Consultants, however,
will have no binding authority or power over the Board of Directors or the
Corporation. For information concerning the Trustees and officers of the Trust,
see "ELECTION OF TRUSTEES."
If the Plan of Reorganization is approved and the Merger is
consummated, the rights and obligations of the Trust under the Restricted Stock
Plan will become the rights and obligations of the Corporation and the rights of
the management personnel who become participants in the Restricted Stock Plan to
receive grants of Trust Common Shares will become rights of such management
personnel to receive grants of shares of Corporation Common Stock.
If the Plan of Reorganization is approved and the Merger is
consummated, all rights and obligations of the Trust under the Stock Option Plan
will become rights and obligations of the Corporation and all rights of the
participants under the Stock Option Plan to receive grants of options and to
exercise options and stock appreciation rights granted thereunder will become
rights to receive grants of options and to exercise options and stock
appreciation rights in respect of shares of Corporation Common Stock on the
terms and conditions set forth in the Stock Option Plan.
If the Plan of Reorganization is approved and the Merger is
consummated, all rights and obligations of the Trust under the Shareholder
Rights Plan will become the rights and obligations of the Corporation and the
Rights issued under the Shareholder Rights Plan to acquire capital stock or
other securities or property of the Trust under certain circumstances will
become Rights to acquire capital stock or other securities or property of the
Corporation. Each outstanding share of Corporation Common Stock will include and
represent one Right. The Rights will become exercisable if any person or group
acquires 25% or more of the shares of Corporation Common Stock or announces or
commences a tender offer which would result in such person or group owning 30%
or more of the shares of Corporation Common Stock. Following any such 25%
acquisition, the Rights will be exercisable by the holder thereof (other than
the acquiring person or group) to purchase shares of Corporation Common Stock at
one-half of the market value of such shares. In addition, if the Corporation is
involved in a merger or other business
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combination at any time after the Rights become exercisable, the Rights will
entitle the holder thereof to purchase shares of common stock of the acquiring
company at one-half of the market value of such shares.
The Plan of Reorganization is conditioned upon, among other things, the
listing of the Corporation Common Stock on the NYSE, subject to official notice
of issuance. It is expected that the listing of the Corporation Common Stock
will occur on the effective date of the Merger and that the listing of the Trust
Common Shares on the NYSE will be simultaneously terminated. The Corporation
Common Stock will thereafter continue to be listed on the NYSE in accordance
with the applicable rules of the NYSE.
At the effective date of the Merger, each certificate representing
Trust Common Shares will be deemed for all purposes to evidence the same number
of shares of Corporation Common Stock and shareholders of the Trust do not need
to exchange their certificates representing their Trust Common Shares for
certificates representing the shares of Corporation Common Stock into which
Trust Common Shares will be converted in the Merger.
Certain Changes in the Rights of Shareholders Resulting from the Plan of
Reorganization
The rights of shareholders of the Trust are currently governed by the
Trust's Declaration of Trust and Bylaws, Massachusetts law and the rules of the
NYSE. If the Plan of Reorganization is approved by the shareholders of the Trust
and the Merger is consummated, the Corporation will be the surviving entity in
the Merger, the separate existence of the Trust will terminate, each outstanding
Trust Common Share will be converted into one share of Corporation Common Stock
and the rights of stockholders will be governed by the Corporation's Articles of
Incorporation and Bylaws, Maryland law, including the MGCL, and the rules of the
NYSE. While a number of the Trust's current corporate governance provisions will
be included in the Corporation's Articles of Incorporation and Bylaws and,
therefore, will not be affected by the adoption of the Plan of Reorganization
and the consummation of the Merger, certain differences between Massachusetts
law and Maryland law and between the Trust's Declaration of Trust and Bylaws and
the Corporation's Articles of Incorporation and Bylaws will result in certain
material differences between the rights of shareholders of the Trust and the
rights of stockholders of the Corporation. Accordingly, shareholders of the
Trust should carefully consider the changes in their rights that will result
from the adoption of the Plan of Reorganization and the consummation of the
Merger.
Set forth below are descriptions of the principal material differences
in this respect; the descriptions do not, however, purport to be complete and
are qualified in their entirety by reference to the Declaration of Trust and
Bylaws of the Trust, copies of which are exhibits to the Registration Statement
of which this Proxy Statement/Prospectus forms a part, and the Articles of
Incorporation and the Bylaws of the Corporation, copies of which are attached
hereto as Exhibits C and D, respectively.
General/Authorized Shares: The Trust was organized on July 7, 1969 as
an unincorporated business trust under the laws of The Commonwealth of
Massachusetts pursuant to the Declaration of Trust. The Corporation was
organized on December 30, 1996 by the Trust to acquire and succeed to, and to
continue the business of, the Trust upon the consummation of the Merger of the
Trust with and into the Corporation pursuant to the Plan of Reorganization and
has had no activities to date other than those incident to the Plan of
Reorganization.
Title to the property of the Trust is vested in the Trustees, and the
beneficial interest in such Trust property is owned by the shareholders of the
Trust. The interests of the shareholders in the Trust property is divided into
two classes of shares of beneficial interest: (i) the Trust Common Shares and
(ii) undesignated preferred shares (the "Trust Preferred Shares"). Under the
Declaration of Trust, the Trust is authorized to issue an unlimited number of
Trust Common Shares and up to 2,000,000 Trust Preferred Shares in one or more
series, with such voting powers and with such designations, preferences and
relative, participating, optional or other special rights and qualifications,
limitations or restrictions as the Trustees consider appropriate. As of
___________, 1997, there were 5,346,081 Trust Common Shares issued and
outstanding and 150,000 shares of Series A Participating Preferred Shares
reserved for issuance pursuant to the Trust's Shareholder Rights Plan.
Under its Articles of Incorporation, the Corporation has authority to
issue up to 100,000,000 shares of capital stock, consisting of 70,000,000 shares
of Corporation Common Stock, 20,000,000 shares of undesignated
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preferred stock (the "Corporation Preferred Stock") and 10,000,000 shares of
"Excess Stock" (as described below). Subject to the provisions of the Articles
of Incorporation regarding "Excess Stock", all shares of Corporation Common
Stock will have equal dividend, distribution, liquidation and other rights, and
will have no preference or exchange rights. Holders of Corporation Common Stock
have no conversion, sinking fund or redemption rights, or preemptive rights to
subscribe for any securities of the Corporation. The Board of Directors of the
Corporation generally will have the power to issue such shares of Corporation
Common Stock without stockholder approval. Other than the 1,000 shares of
Corporation Common Stock owned by the Trust which will be cancelled in the
Merger, there are currently no shares of any class of capital stock of the
Corporation issued or outstanding. The Corporation may issue shares of
Corporation Preferred Stock from time to time, in one or more series, as
authorized by the Board of Directors. The Articles of Incorporation authorize
the Board of Directors to classify any unissued shares of Corporation Preferred
Stock and to reclassify any previously classified but unissued shares of any
series of Corporation Preferred Stock, Corporation Common Stock or other capital
stock from time to time, in one or more series of preferred stock or capital
stock issued from time to time, as authorized by the Board of Directors. Prior
to the issuance of shares of each series, the Board of Directors is required by
the MGCL and the Articles of Incorporation to set for each series, subject to
the provisions of the Articles of Incorporation regarding "Excess Stock", the
terms, preferences, conversions or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms or
conditions of redemption, as permitted by Maryland law. Such rights, powers,
restrictions and limitations could include the right to receive specified
dividend payments and payments on liquidation prior to any such payments being
made to the holders of the shares of Corporation Common Stock. The Board of
Directors could authorize the issuance of shares of Corporation Preferred Stock
with terms and conditions that could have the effect of delaying, deferring or
preventing a transaction or a change of control of the Corporation that might
involve a premium price for holders of shares of Corporation Common Stock over
the then market price of such shares or otherwise be in the best interests of
such stockholders.
Since the MGCL requires that the Articles of Incorporation fix the
maximum number of shares that are authorized for issuance by the Board of
Directors without further amendment by the stockholders of the Corporation, the
authorized capital of the Corporation authorizes a significantly greater number
of shares than will be issued upon the Merger in order to anticipate current and
future needs for acquisitions, financings, employee benefit plans, stock
dividends and splits and for other corporate purposes. In the event of an
unsolicited tender offer or takeover proposal, the increased number of
authorized shares could give the Board of Directors of the Corporation a greater
ability to issue shares in one or more transactions which might impede or deter
such offer or proposal. Similarly, shares of Corporation Preferred Stock could
also be issued in a manner or with such terms, provisions and rights including,
but not limited to, extraordinary voting, dividend, redemption or conversion
rights which could make more difficult, and therefore less likely, a takeover of
the Corporation.
The transfer agent and registrar for the Corporation Common Stock will
be The Bank of New York, the Trust's current transfer agent.
Dividends: Subject to the provisions of any series of outstanding Trust
Preferred Shares, the holders of the Trust Common Shares are entitled to receive
dividends as and when declared by the Trustees. Such distributions are to be
made out of the net profits, surplus (including paid-in-surplus), and capital or
assets held by the Trustees. Such distributions may be made even if the paid-in
capital of the Trust, at the time of the dividend, exceeds the net assets of the
Trust based either on their market or book value.
Subject to the preferential rights of any other class or series of
stock and to the provisions of the Articles of Incorporation regarding "Excess
Stock", holders of shares of Corporation Common Stock are entitled to receive
dividends as and when authorized and declared by the Board of Directors out of
assets legally available therefor, and to share ratably in the assets of the
Corporation legally available for distribution to its stockholders in the event
of its liquidation, dissolution or winding-up after payment of, or adequate
provision for, all existing debts and liabilities of the Corporation.
Ownership Limitation; Excess Stock: For an entity to qualify as a REIT
under the Code, among other things, not more than 50% in value of its
outstanding capital shares may be owned, directly or indirectly, by five or
fewer individuals (defined in the Code to include certain entities) during the
last half of a taxable year (other than
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the first year) (the "Five or Fewer Requirement"), and such shares must be
beneficially owned by 100 or more persons during at least 335 days of a taxable
year of 12 months (other than the first year) or during a proportionate part of
a shorter taxable year. Pursuant to the Code, stock held by most entities, such
as, generally, tax-exempt pension trusts qualifying under Section 401(a) of the
Code (subject to certain limited exceptions), United States investment companies
registered under the Investment Corporation Act of 1940, partnerships, trusts
and corporations, will be attributed to the beneficial owners (or, as the case
may be, beneficiaries) of such entities for purposes of the Five or Fewer
Requirement (i.e., the beneficial owners, or beneficiaries, of such entities
will be deemed to own their respective proportionate interests, as specifically
determined, in the stock of the REIT). See "Certain Tax Consequences of the Plan
of Reorganization."
In order to protect the Trust against the risk of losing its REIT
status due to a concentration of ownership among its shareholders, the
Declaration of Trust contains an "Excess Shares" provision, which provides that
no person shall acquire ownership of Trust Common Shares exceeding 9.9% of the
total outstanding Trust Common Shares (the "Shares Ownership Limit"). Trust
Common Shares owned by a person in excess of the Shares Ownership Limit shall be
deemed "Excess Shares." The Trustees, by notice to the holder thereof, may
redeem any or all shares that are Excess Shares (including Trust Common Shares
that remain or become Excess Shares because of a decrease in the outstanding
Trust Common Shares resulting from such redemption), and from and after the date
of such notice of redemption (the "Redemption Date"), the holder of the Trust
Common Shares called for redemption shall cease to be entitled to dividends,
voting rights and other benefits with respect to such Trust Common Shares,
except for the right to receive payment by the Trust of the redemption price for
such shares (the "Redemption Price"). The Redemption Price for each Excess Share
called for redemption shall be equal to the fair market value of such share as
reflected in the latest bid quotation for the Trust Common Shares (if then
traded over-the-counter) or the closing sale price (if listed on a national
securities exchange) of Trust Common Shares as of the business day preceding the
day on which the notice of redemption is sent or, if no quotations or closing
sales price for Trust Common Shares are available, at a price determined in good
faith by the Trustees. The right of redemption does not apply to Excess Shares
or additional Excess Shares acquired as a result of an offer made for all
outstanding Trust Common Shares.
The Board of Trustees has determined that the current beneficial
ownership by Mr. Charles J. Urstadt, Chairman and Chief Executive Officer, of
Trust Common Shares does not present a risk of the Trust losing its REIT status
and, therefore, has determined not to redeem such shares.
The ownership restrictions contained in the Declaration of Trust may
have the effect of precluding acquisition of control of the Trust unless the
Trustees determine that maintenance of REIT status is no longer in the best
interests of the Trust.
A similar "Excess Share" provision is included in the Articles of
Incorporation of the Corporation. Subject to certain exceptions, the Articles of
Incorporation provide that no holder may acquire, directly or indirectly, or be
deemed to acquire by virtue of the attribution provisions of the Code, any class
or series of capital stock of the Corporation with an aggregate value in excess
of 7.5% of the aggregate value of all outstanding stock of the Corporation (the
"Ownership Limit"). Any transfer of shares of capital stock or any security
convertible into shares of capital stock that would create a direct or indirect
ownership of shares of capital stock in excess of the Ownership Limit or that
would result in the disqualification of the Corporation as a REIT shall be null
and void, and the intended transferee will acquire no rights to the shares of
capital stock. The foregoing restrictions on transferability and ownership will
not apply if the Board of Directors determines that it is no longer in the best
interests of the Corporation to attempt to qualify, or to continue to qualify,
as a REIT. The Board of Directors may, in its sole discretion, waive the
Ownership Limit if evidence satisfactory to the Board of Directors and the
Corporation's tax counsel is presented that the changes in ownership will not
then or in the future jeopardize the Corporation's REIT status and the Board of
Directors otherwise decides that such action is in the best interests of the
Corporation.
Shares of capital stock owned, or deemed to be owned, or transferred to
a stockholder in excess of the Ownership Limit will automatically be converted
into shares of "Excess Stock" that will be transferred, by operation of law, to
the Corporation as trustee of a trust for the exclusive benefit of the
transferees to whom such shares of capital stock may be ultimately transferred
without violating the Ownership Limit. While the Excess Stock is held
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in trust, it will not be entitled to vote, it will not be considered for
purposes of any stockholder vote or the determination of a quorum for such vote,
and except upon liquidation it will not be entitled to participate in dividends
or other distributions. Any distribution paid to a proposed transferee of Excess
Stock prior to the discovery by the Corporation that capital stock has been
transferred in violation of the provision of the Corporation's Articles of
Incorporation shall be repaid to the Corporation upon demand. The Excess Stock
is not treasury stock, but rather constitutes a separate class of issued and
outstanding stock of the Corporation. The original transferee- stockholder may,
at any time the Excess Stock is held by the Corporation in trust, transfer the
interest in the trust representing the Excess Stock to any person whose
ownership of shares of Corporation Common Stock exchanged for such Excess Stock
would be permitted under the Ownership Limit, at a price not in excess of (i)
the price paid by the original transferee-stockholder for the shares of
Corporation Common Stock that were exchanged into Excess Stock, or (ii) if the
original transferee-stockholder did not give value for such shares (e.g., the
shares were received through a gift, devise or other transaction), the average
closing price for the class of stock from which such shares of Excess Stock were
converted for the ten days immediately preceding such sale or gift. Immediately
upon the transfer to the permitted transferee, the Excess Stock will
automatically be converted back into shares of Corporation Common Stock from
which it was converted. If the foregoing transfer restrictions are determined to
be void or invalid by virtue of any legal decision, statute, rule or regulation,
then the intended transferee of any shares of Excess Stock may be deemed, at the
option of the Corporation, to have acted as an agent on behalf of the
Corporation in acquiring the Excess Stock and to hold the Excess Stock on behalf
of the Corporation.
In addition, the Corporation will have the right, for a period of 90
days during the time any shares of Excess Stock are held by the Corporation in
trust, to purchase all or any portion of the Excess Stock from the original
transferee-stockholder at the lesser of (i) the price initially paid for such
shares by the original transferee- stockholder, or if the original
transferee-stockholder did not give value for such shares (e.g., the shares were
received through a gift, devise or other transaction), the average closing price
for the class of stock from which such shares of Excess Stock were converted for
the ten days immediately preceding such sale or gift, and (ii) the average
closing price for the class of stock from which such shares of Excess Stock were
converted for the ten trading days immediately preceding the date the
Corporation elects to purchase such shares. The 90-day period begins on the date
notice is received of the violative transfer if the original
transferee-stockholder gives notice to the Corporation of the transfer or, if no
such notice is given, the date the Board of Directors determines that a
violative transfer has been made.
These restrictions will not preclude the settlement of any transaction
entered into through the facilities of the NYSE or of any other stock exchange
on which shares of stock of the Corporation may be listed. The fact that the
settlement of any transaction is permitted shall not negate the effect of any
other aspect of the Excess Share provision, and any transferee in such a
transaction and the shares so transferred shall be subject to all of the other
provisions and limitations contained in the Excess Share provision. Each
stockholder shall upon demand be required to disclose to the Corporation in
writing any information with respect to the direct, indirect and constructive
ownership of capital stock as the Board of Directors deems necessary to comply
with the provisions of the Code applicable to REITs, to comply with the
requirements of any taxing authority or governmental agency or to determine any
such compliance.
As in the case of the Trust, the Board of Directors of the Corporation
has determined that the beneficial ownership by Mr. Charles J. Urstadt, Chairman
and Chief Executive Officer of the Trust, of the shares of Corporation Common
Stock to be issued in the Merger does not present a risk of the Corporation
losing its REIT status and, therefore, has determined that it has no current
intention of redeeming such shares.
The ownership restrictions contained in the Articles of Incorporation
may have the effect of precluding acquisitions of control of the Corporation
unless the Board of Directors determines that maintenance of REIT status is no
longer in the best interests of the Corporation.
Meetings of Stockholders: The Declaration of Trust provides for an
annual meeting of shareholders to be held each year at such time and at such
place as the Trustees or the Bylaws may determine. Special meetings of
shareholders may be called by the President or by two Trustees, or, subject to
the provisions of any series of Trust
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Preferred Shares then outstanding, upon the written request of the holders of
25% of the Trust Common Shares then outstanding and entitled to vote at such
meeting.
The Bylaws of the Corporation provide for annual meetings of
stockholders to be held on such day in each year as may be established from time
to time by the Board of Directors. Special meetings of stockholders may be
called by (i) the Chairman of the Board or the President, (ii) a majority of the
Board of Directors or (iii) stockholders entitled to cast at least a majority of
the votes entitled to be cast at the meeting.
Advance Notice of Stockholder Proposals and Director Nominations: Under
the Bylaws of the Trust, any shareholder may propose business to be considered
at the Annual Meeting of shareholders provided notice thereof is delivered to
the principal executive offices of the Trust not less than 40 days prior to the
date of the Annual Meeting. Shareholders may also nominate individuals for
election as Trustees provided notice thereof (together with relevant personal
details of the individual(s) concerned) are submitted in writing to the
Secretary of the Trust not less than 60 days prior to the meeting at which the
election of Trustees is to be held.
Under the Corporation's Bylaws, in order to have a stockholder proposal
or director nomination considered at an annual meeting of stockholders,
stockholders are generally required to deliver certain information concerning
themselves and their stockholder proposal or director nomination not less than
75 days nor more than 120 days prior to the anniversary date of the immediately
preceding annual meeting (the "Anniversary Date"); provided, however, that in
the event the annual meeting is scheduled to be held on a date more than 30 days
before or more than 60 days after the Anniversary Date, notice must be so
delivered not later than the close of business on the later of (i) the 75th day
prior to the scheduled date of such annual meeting or (ii) the 15th day after
public disclosure of the date of such meeting. Failure to comply with such
timing and informational requirements will result in such proposal or director
nomination not being considered at the annual meeting. The purpose of requiring
stockholders to give the Corporation advance notice of nominations and other
business, and certain information relating thereto, is to ensure that the
Corporation and its stockholders have sufficient time and information to
consider any matters that are proposed to be voted on at an annual meeting, thus
promoting orderly and informed stockholder voting. Such By-law provisions could
have the effect of precluding a contest for the election of directors or the
stockholder proposals if the proper procedures are not followed, and of delaying
or deferring a third party from conducting a solicitation of proxies to elect
its own slate of directors or to have its own proposals approved.
Action by Consent of Stockholders: The Declaration of Trust provides
that any action required or permitted to be taken by shareholders of the Trust
may be effected by a consent in writing signed by the holders of all of the
outstanding Trust Common Shares entitled to vote on the matter. Similarly, the
MGCL and the Company's Articles of Incorporation provide that any action
required or permitted to be taken by stockholders of a corporation may be
effected by a consent in writing signed by the holders of all of the outstanding
shares of Corporation Common Stock entitled to vote on the matter.
Board of Trustees of the Trust Compared to Board of Directors of the
Corporation: The Declaration of Trust provides that the number of Trustees shall
generally be established by the Trustees, provided that there shall be no less
than three and no more than fifteen Trustees. Pursuant to the Declaration of
Trust, but subject to any contrary provisions of any series of Trust Preferred
Shares, a Trustee may be removed, with or without cause, by the vote of the
holders of two-thirds of the Trust Common Shares then outstanding and entitled
to vote in the election of Trustees. Vacancies in the office of a Trustee may be
filled by a written appointment signed by a majority of the Trustees. Trustees
are elected for staggered three-year terms.
The Corporation's Articles of Incorporation provide that the number of
Directors of the Corporation initially shall be seven, which number may
thereafter be increased or decreased from time to time by the Directors pursuant
to the Corporation's Articles of Incorporation or Bylaws; provided, however,
that the total number of Directors shall not be fewer than the greater of two or
the minimum number permitted by the MGCL. The Directors of the Corporation will
be divided into three classes to serve staggered terms of three years each.
The Articles of Incorporation of the Corporation also provide that,
subject to the rights, if any, of any series of Corporation Preferred Stock to
elect directors and to remove any director whom the holders of any such
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stock have the right to elect, any director may be removed from office (i) only
with cause and (ii) only by the affirmative vote of the holders of at least
two-thirds of the outstanding Corporation Common Stock then entitled to vote in
the election of directors. The Articles of Incorporation additionally provide
that any vacancy occurring on the Board of Directors (other than as a result of
the removal of a director) shall be filled solely by a majority of remaining
directors, except that a vacancy resulting from an increase in the number of
directors shall be filled by a majority of the entire Board of Directors. A
vacancy resulting from the removal of a director may be filled by the
affirmative vote of a majority of all the votes cast at a meeting of the
stockholders called for that purpose.
The provisions of the Articles of Incorporation relating to the removal
of directors and the filling of vacancies on the Board could preclude a third
party from removing incumbent directors without cause and simultaneously gaining
control of the Board by filling, with its own nominees, the vacancies created by
such removal. These provisions also limit the power of stockholders generally,
even those with a majority interest in the Corporation, to remove incumbent
directors and to fill vacancies on the Board without the support of the
incumbent directors.
The Declaration of Trust additionally provides that the
Trustees may, by a majority vote, appoint a Board of Consultants to provide the
Trustees with such advice as the Trustees may request with respect to the
performance of their duties as Trustees. The Board of Consultants, however, has
no binding authority or power over the Board of Trustees or the Trust. Similar
to the Declaration of Trust, the Bylaws of the Corporation also provide for the
establishment of a Board of Consultants to provide such advice with respect to
the business and affairs of the Corporation as the Directors may request. The
Board of Consultants, however, will have no binding authority or power over the
Board of Directors or the Corporation.
Amendment of Constitutional Documents of the Trust and the Corporation:
The Declaration of Trust may generally be amended by the affirmative vote of the
holders of not less than a majority of the aggregate number of Trust Common
Shares then outstanding and entitled to vote thereon, or by an instrument in
writing signed by a majority of the Trustees and the holders of a majority of
such Trust Common Shares. The Bylaws of the Trust may be amended or repealed at
any meeting of the Trustees by an affirmative vote of a majority of the
Trustees.
Under the Corporation's Articles of Incorporation, the affirmative vote
of a majority of the Board of Directors (including a majority of those members
of the Board of Directors who are "Continuing Directors," as defined below) is
required to amend any provision of the Articles of Incorporation. In addition to
such vote of the Board of Directors, the affirmative vote of the holders of at
least two-thirds of the shares of Corporation Common Stock outstanding and
entitled to vote thereon will be required to amend any of the provisions of
Article VI (Board of Directors), Article IX (Limitations on Transfer and
Ownership), Article XII (Indemnification), Article XIII (Limitation of
Liability), Article XIV (Stockholder Vote Required for Certain Transactions),
Article XVI (Amendment of Bylaws by Directors) and Article XVII (Amendment of
Articles). In all other cases, the vote of a majority of the shares of
Corporation Common Stock outstanding and entitled to vote thereon is necessary
to amend the Corporation's Articles of Incorporation. A "Continuing Director" is
defined in the Corporation's Articles of Incorporation as any member of the
Board of Directors who was a duly appointed Director immediately after the
effective time of the Merger or whose nomination for election to the Board of
Directors was recommended or approved by a majority of the Continuing Directors
then in office.
The Board of Directors may without a vote of the stockholders, amend
the Corporation's Bylaws and the stockholders of the Corporation will not have
the power to amend the Corporation's Bylaws.
These provisions could make it more difficult for stockholders of the
Corporation to amend the Corporation's Articles of Incorporation and Bylaws.
Consolidation, Merger or Sale of Assets: The Declaration of Trust
generally does not require shareholder approval of any sale, exchange or other
disposition of the assets of the Trust. Any reorganization of the Trust whether
through merger or otherwise, whereby the assets of the Trusts are conveyed to
any corporation, trust, association or organization in exchange for shares,
securities or a beneficial interest therein and pursuant to which
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<PAGE>
the Trust is terminated, does however require the approval of the holders of a
majority of the aggregate number of outstanding Trust Common Shares entitled to
vote thereon.
The MGCL generally provides that the Board of Directors of a Maryland
corporation must approve a consolidation, merger, share exchange or transfer of
all or substantially all of the Corporation's assets not in the ordinary course
of business and that the stockholders thereafter must approve such
consolidation, merger, share exchange or transfer of assets by a vote of
two-thirds of all the votes entitled to be cast on the matter at a meeting of
the stockholders, except that the articles of incorporation may provide for a
greater or lesser percentage vote, but not less than a majority of all the votes
entitled to be cast on the matter. The Corporation's Articles of Incorporation
provide that any consolidation, merger, share exchange or transfer of all or
substantially all of the assets shall first be approved by the affirmative vote
of a majority of the Board of Directors of the Corporation (including a majority
of the Continuing Directors) and thereafter shall be approved by a vote of
two-thirds of all the votes entitled to be cast on such matter at a meeting of
the stockholders.
These provisions could make it more difficult for the Corporation to
enter into any consolidation, merger or sale of assets as described above.
Dissolution/Termination: The Trust's Declaration of Trust provides that
the Trust may be terminated by the affirmative vote of the holders of a majority
of the aggregate number of outstanding Trust Common Shares entitled to vote
thereon, or by an instrument in writing signed by a majority of the Trustees and
the holders of a majority of such Trust Common Shares.
By comparison, the MGCL generally permits the dissolution of a
corporation if approved (i) first by the affirmative vote of a majority of the
entire Board of Directors declaring such dissolution to be advisable and
directing that the proposed dissolution be submitted for consideration at an
annual or special meeting of stockholders, and (ii) upon proper notice being
given as to the purpose of the meeting, then by the stockholders of the
corporation by the affirmative vote of two-thirds of all the votes entitled to
be cast on the matter.
Limitations on Dissenters' Appraisal Rights: Neither the Declaration of
Trust nor any Massachusetts statute contains provisions entitling a shareholder
of the Trust who dissents from any action taken with the authorization of a
majority or any other vote of the shareholders to receive an appraisal and
payment of the fair value for such dissenting shareholder's Trust Common Shares.
Massachusetts counsel to the Trust have additionally advised the Board of
Trustees that the Trust's shareholders will not be entitled to dissenters'
appraisal rights in connection with the Merger whether through Massachusetts
statute, common law or otherwise.
Generally, so long as the shares of the Corporation Common Stock are
listed on a national stock exchange, holders of such shares who dissent from
certain corporate transactions have no right under the MGCL to an appraisal and
payment of the fair value of their shares, except to the limited extent set
forth below under "Certain Provisions of Massachusetts and Maryland Law." Absent
such listing, as a general matter, the MGCL provides that a dissenting
stockholder of a Maryland corporation has the right to demand and receive the
fair value of such holder's stock, subject to complying with specified
procedures, if the corporation consolidates or merges with, or exchanges its
shares for shares of, another corporation, or sells substantially all of its
assets, or amends its charter in a way that alters the contract rights expressly
set forth in the charter of any outstanding stock and substantially adversely
affects the stockholder's rights (unless the corporation reserves the right to
make such an amendment in its Articles of Incorporation, in which event
stockholders will not be entitled to exercise dissenters' rights in connection
with any such amendment). Because the Corporation has reserved the right to
amend its Articles of Incorporation in a way which alters the contract rights of
holders of any outstanding capital stock, stockholders will not be entitled to
exercise dissenter's rights in connection with any such amendment.
Limitation of Liability and Indemnification of Trustees and Directors:
Stockholders and directors of a corporation are generally not responsible for
its debts and obligations. In contrast, title to the property of a Massachusetts
business trust like the Trust is vested in the trustees, and the trustees are
personally responsible for the debts and obligations of the trust, although in
the specific context of the Trust, the Declaration of Trust provides that (i)
the Trustees shall have no such liability unless they are considered to have
acted in bad faith or with willful
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malfeasance, reckless disregard of their duties or gross negligence, or not to
have acted in good faith in the reasonable belief that their actions were in the
best interests of the Trust, and (ii) the Trustees shall be and are entitled to
indemnification from the Trust assets to the extent that they meet such required
standards of conduct.
By comparison, the directors of a Maryland corporation are not
generally personally responsible for the debts and obligations of the
corporation. In addition, the Corporation's Articles of Incorporation limit the
liability for monetary damages of the Corporation's directors and officers to
the Corporation and its stockholders to the fullest extent permitted from time
to time by the MGCL. The MGCL presently permits the liability of directors and
officers to a corporation or its stockholders for monetary damages to be
limited, except (i) to the extent that it is proved that the director or officer
actually received an improper benefit or profit, for the amount of the benefit
or profit actually received, or (ii) if a judgment or other final adjudication
is entered in a proceeding based on a finding that the director's or officer's
actions or failure to act was the result of active and deliberate dishonesty and
was material to the cause of action adjudicated in the proceeding. This
provision does not limit the ability of the Corporation or its stockholders to
obtain other relief, such as an injunction or rescission.
The Corporation's Bylaws require the Corporation to indemnify its
directors, officers and certain other parties to the fullest extent permitted
from time to time by the MGCL. The MGCL permits a corporation to indemnify its
directors, officers and certain other parties against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them in
connection with any proceeding to which they may be made a party by reason of
their service to or at the request of the Corporation, unless it is established
that the act or omission of the indemnified party was material to the matter
giving rise to the proceeding and (i) the act or omission was committed in bad
faith or was the result of active and deliberate dishonesty, (ii) the
indemnified party actually received an improper personal benefit, or (iii) in
the case of any criminal proceeding, the indemnified party had reasonable cause
to believe that the act or omission was unlawful.
It is the position of the SEC that indemnification of directors and
officers for liabilities arising under the Securities Act is against public
policy and is unenforceable pursuant to Section 14 of the Securities Act.
Inspection Rights: The Declaration of Trust provides that shareholders
of record shall have the same right to inspect the records of the Trust as a
stockholder of a Massachusetts business corporation has with respect to the
records of a corporation. Under Massachusetts law, a corporation's stockholders
have the right to inspect a corporation's articles of organization, by-laws,
records of all meetings of incorporators and stockholders, and stock and
transfer records, including the stockholders list.
Under the MGCL, a corporation's stockholders have the right to inspect
and copy during usual business hours the by-laws, minutes of the proceedings of
stockholders, annual statements of affairs and voting trust agreements on file
at the corporation's principal offices. In addition, any stockholder may request
in writing a statement of all stock and securities issued by the corporation
during a specified period of not more than twelve months before the date of such
request. The MGCL also provides additional inspection rights for stockholders
who individually or together are and for at least six months have been
stockholders of record of at least 5% of the outstanding stock of any class of
the corporation. These rights include (i) the right upon written request to
inspect and copy during usual business hours the corporation's books of account
and its stock ledger, (ii) the right to require the corporation to produce a
statement of affairs verified under oath by an officer that sets forth in
reasonable detail the corporation's assets and liabilities of a reasonably
current date, and (iii) if the corporation does not maintain the original or
duplicate stock ledger at its principal office, the right to obtain from the
corporation a list of stockholders setting forth the name and address of each
stockholder and the number of shares of each class that the stockholder holds,
verified under oath by an officer of the corporation or its transfer agent or
registrar.
Certain Provisions of Massachusetts and Maryland Law
The following summary of certain provisions of Massachusetts and
Maryland law does not purport to be complete and is qualified in its entirety by
reference to Massachusetts and Maryland law.
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<PAGE>
Business Combination: Under the MGCL, certain "business combinations"
(including a merger, consolidation, share exchange, or, in certain
circumstances, an asset transfer or issuance or reclassification of equity
securities) between a Maryland corporation and any person who beneficially owns
10% or more of the voting power of the corporation's shares or an affiliate of
the corporation who, at any time within the two-year period prior to the date in
question, was the beneficial owner of 10% or more of the voting power of the
then-outstanding voting stock of the corporation (an "Interested Stockholder")
or an affiliate thereof are prohibited for five years after the most recent date
on which the Interested Stockholder becomes an Interested Stockholder.
Thereafter, any such business combination must be recommended by the board of
directors of the corporation and approved by the affirmative vote of at least
(i) 80% of the votes entitled to be cast by holders of outstanding voting shares
of the corporation and (ii) two-thirds of the votes entitled to be cast by
holders of outstanding voting shares of the corporation other than shares held
by the Interested Stockholder with whom (or with whose affiliate) the business
combination is to be effected, unless, among other conditions, the corporation's
common stockholders receive a "minimum price" (as defined in the MGCL) for their
shares and the consideration is received in cash or in the same form as
previously paid by the Interested Stockholder for its shares.
These provisions of Maryland law do not apply, however, to business
combinations that are approved or exempted by the board of directors of the
corporation prior to the time that the Interested Stockholder becomes an
Interested Stockholder or if the corporation elects not to be governed by such
provisions by so providing in its original Articles of Incorporation. No such
election is made in the Articles of Incorporation of the Corporation; provided,
however, that the Bylaws of the Corporation provide that these provisions of
Maryland law will not apply to Mr. Charles J. Urstadt, Chairman and Chief
Executive Officer of the Trust, or to any of his affiliates or associates.
Additionally, the stockholders of a corporation may exempt existing or future
Interested Stockholders from the provisions of Maryland law discussed above by
adopting an amendment to the Articles of Incorporation by a vote of at least 80%
of the votes entitled to be cast by outstanding shares of voting stock of the
corporation voting together as a single class, and 66-2/3% of the votes entitled
to be cast by persons (if any) who are not Interested Stockholders. Such an
amendment may not be effective until 18 months after the vote of stockholders
and may not apply to any business combination of the corporation with an
Interested Stockholder (or any affiliate of the Interested Stockholder) who
became an Interested Stockholder on or before the date of the vote.
Chapter 110F of the Massachusetts General Law limits the ability of a
Massachusetts corporation to engage in business combinations with "interested
stockholders" (defined as any beneficial owner of 5% or more of the outstanding
voting stock of the corporation) unless, among other things, the corporation's
board of directors has given its prior approval to either the business
combination or the transaction that resulted in the stockholder becoming an
"interested stockholder." The Massachusetts statute does not, however, apply to
a Massachusetts business trust of the form and nature of the Trust.
Control Share Acquisition: The MGCL provides that "control shares" of a
Maryland corporation acquired in a "control share acquisition" have no voting
rights except to the extent approved by a vote of two-thirds of the votes
entitled to be cast on the matter, excluding shares of stock owned by the
acquiror or by officers or directors who are employees of the corporation.
"Control Shares" are voting shares of stock that, if aggregated with all other
shares of stock previously acquired by that person, or in respect of which the
acquiror is able to exercise or direct the exercise of voting power (except
solely by virtue of a revocable proxy), would entitle the acquiror to exercise
voting power in electing directors within one of the following ranges of voting
power; (i) one-fifth or more but less than one-third, (ii) one-third or more but
less than a majority, or (iii) a majority of all voting power. Control shares do
not include shares the acquiring person is then entitled to vote as a result of
having previously obtained stockholder approval. A "control share acquisition"
means the acquisition of control shares, subject to certain exception.
A person who has made or proposes to make a control share acquisition,
upon satisfaction of certain conditions (including an undertaking to pay
expenses), may compel the board of directors to call a special meeting of
stockholders to be held within 50 days of demand to consider the voting rights
of the shares. If no request for a meeting is made, the corporation may itself
present the question at any meeting of stockholders.
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If voting rights are not approved at the meeting or if the acquiring
person does not deliver an acquiring person statement as required by the
statute, then, subject to certain conditions and limitations, the corporation
may redeem any or all of the control shares (except those for which voting
rights have previously been approved) for fair value determined, without regard
to voting rights, as of the date of the last control share acquisition or of any
meeting of stockholders at which the voting rights of such shares are considered
and not approved. If voting rights for control shares are approved at a
stockholders meeting and the acquiror becomes entitled to vote a majority of the
shares entitled to vote, all other stockholders may exercise appraisal rights.
The fair value of the shares as determined for purposes of the appraisal rights
may not be less than the highest price per share paid in the control share
acquisition, and certain limitations and restrictions otherwise applicable to
the exercise of dissenters' rights do not apply in the context of a control
share acquisition.
The control share acquisition statute does not apply to shares acquired
in a merger, consolidation or share exchange if the corporation is a party to
the transaction, or to acquisitions approved or exempted by a corporation's
articles of incorporation or by-laws. Neither the Articles of Incorporation nor
the Bylaws of the Corporation contain any such exemption; provided, however,
that the Articles of Incorporation contain a limited exemption for any person
who, as of December 31, 1996, owned in excess of 20% of the outstanding Trust
Common Shares and, by virtue of the Merger, will own the same percentage of
Corporation Common Stock. As of December 31, 1996, only Mr. Charles J. Urstadt,
Chairman and Chief Executive Officer of the Trust, beneficially owned in excess
of 20% of the outstanding Trust Common Shares.
Chapter 110D of the Massachusetts General Laws also regulates "control
share acquisitions," defined as the acquisition of stock in certain "issuing
public corporations" organized in Massachusetts that increases the voting power
of the acquiror above certain specified levels (i.e. 20%, 33-1/3% and 50%).
Again, however, the applicable restrictions do not apply to a Massachusetts
business trust of the form and nature of the Trust.
Certain Tax Consequences of the Plan of Reorganization
General: The Trust believes it has operated, and the Trust (and,
subsequent to the Merger, the Corporation) intends to continue to operate, in
such a manner as to qualify as a REIT under the Code, but no assurance can be
given that it will at all times so qualify.
The provisions of the Code pertaining to REITs are highly technical and
complex. The following is a brief and general summary of certain provisions that
currently govern the federal income tax treatment of the Trust and its
shareholders and that will equally be applicable to the Corporation and its
stockholders. For the particular provisions that govern the federal income tax
treatment of a REIT and its shareholders, reference is made to Section 856
through 860 of the Code and the regulations thereunder. The following summary is
qualified in its entirety by such reference.
Under the Code, if certain requirements are met in a taxable year, a
REIT generally will not be subject to federal income tax with respect to income
that it distributes to its shareholders. If the Trust (or the Corporation) fails
to qualify during any taxable year as a REIT, unless certain relief provisions
are available, it will be subject to tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates, which could have
a material adverse effect upon its shareholders.
In any year in which the Corporation qualifies to be taxed as a REIT,
distributions made to its stockholders out of current or accumulated earnings
and profits will be taxed to stockholders as ordinary income except that
distributions of net capital gains designated by the Corporation as capital gain
dividends will be taxed as long-term capital gain income to the stockholders. To
the extent that distributions exceed current or accumulated earnings and
profits, they will constitute a return of capital, rather than dividend or
capital gain income, and will reduce the basis for the stockholder's securities
with respect to which the distribution is paid or, to the extent that they
exceed such basis, will be taxed in the same manner as gain from the sale of
those securities.
Federal Income Taxes: The Board of Trustees intends the Merger to
qualify as a "reorganization" within the meaning of the Code, which will result
in no recognition of gain or loss to the Trust or to the Corporation or
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to the shareholders of the Trust. The basis of each shareholder of the Trust in
his shares of Corporation Common Stock received in exchange for his Trust Common
Shares, and the holding period for such shares of Corporation Common Stock, will
be the same as such shareholder's basis in, and holding period for, his Trust
Common Shares. The basis and holding period for the properties of the Trust
acquired by the Corporation upon the consummation of the Merger will be the same
in the hands of the Corporation as they were in the hands of the Trust. The
Merger should not adversely affect the ability of the Corporation to continue to
qualify as a REIT under the Code.
As a condition to the consummation of the Merger, Coudert Brothers, as
tax counsel to the Trust and to the Corporation, will render an opinion to the
Trust and to the Corporation to the effect that the Merger will qualify as a
"reorganization" within the meaning of the Code and that for federal income tax
purposes the Corporation will be deemed to be the same taxpayer as the Trust.
Such opinion will be based on certain factual assumptions and representations of
officers of the Trust and the Corporation regarding the Trust, the Corporation
and their respective operations. In the event that any of such assumptions or
representations are incorrect, the treatment of the Merger as a "reorganization"
under the Code may be adversely affected.
State Taxes: Each shareholder is encouraged to check with his or her
own tax advisor to determine whether the tax consequences of the Merger to such
shareholder are the same under applicable income tax laws of the state in which
such shareholder resides as the tax consequences to such shareholder under the
Code.
The Trust has been advised that certain states exempt business trusts
from state franchise or income taxes which are or may be imposed upon corporate
entities, such as the Corporation, that own properties in such states. Based
upon the current level of activities involving the current properties of the
trust, the Board of Trustees does not expect the Trust to incur a material
increase in state franchise or income taxes.
Shareholders are urged to consult their own tax advisors with respect
generally to the tax consequences arising under Federal law and the laws of any
state, municipality or other taxing jurisdiction, including tax consequences
resulting from such shareholder's own tax characteristics and situation.
Vote Required; No Dissenters' Rights
In accordance with the Declaration of Trust, the Plan of Reorganization
provides that it is a condition of the Merger that the Plan of Reorganization be
approved by the affirmative vote of the holders of not less than a majority of
the aggregate number of Trust Common Shares outstanding and entitled to vote at
the Annual Meeting. The Trust's shareholders will not be entitled to dissenters'
rights of appraisal in connection with the Merger. See "Certain Changes in the
Rights of Shareholders resulting from the Plan of Reorganization."
Interest of Certain Persons
As noted under "ELECTION OF TRUSTEES," Mr. Charles J. Urstadt, Chairman
and Chief Executive Officer of the Trust, beneficially owns 1,148,925 Trust
Common Shares constituting approximately 20.43% of the outstanding Trust Common
Shares. If the Plan of Reorganization is approved and the Merger is consummated,
the 1,148,925 Trust Common Shares beneficially owned by Mr. Urstadt will be
converted into 1,148,925 shares of Corporation Common Stock, constituting
approximately 20.43% of the outstanding shares of Corporation Common Stock
currently anticipated to be outstanding at the effective time of the Merger.
As noted under "Certain Changes in the Rights of Shareholders Resulting
from the Plan of Reorganization-- Board of Trustees of the Trust Compared to
Board of Directors of the Corporation," the Corporation's Articles of
Incorporation provide that directors of the Corporation may only be removed for
cause and only upon the vote of the holders of two-thirds of the outstanding
shares of Corporation Common Stock. In view of Mr. Urstadt's currently
anticipated percentage ownership of the Corporation Common Stock upon
consummation of the Merger and, depending upon the number of shares of
Corporation Common Stock that are actually voted in connection with any proposal
to remove directors for cause, Mr. Urstadt will control a number of shares of
Corporation Common Stock that may be sufficient to block any such proposal.
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In addition, as noted under "Certain Changes in the Rights of
Shareholders Resulting from the Plan of Recapitalization--Amendment of
Constitutional Documents of the Trust and the Corporation; Consolidation, Merger
or Sale of Assets," the Corporation's Articles of Incorporation provide that any
amendment of certain provisions of the Corporation's Articles of Incorporation
and any merger, consolidation or sale of all or substantially all of the assets
of the Corporation will require approval of a majority of the Board of Directors
of the Corporation (including a majority of those members who are Continuing
Directors) and the affirmative vote of the holders of two-thirds of the
outstanding shares of Corporation Common Stock. In view of Mr. Urstadt's
currently anticipated percentage ownership of the Corporation Common Stock upon
consummation of the Merger and, depending upon the number of shares of
Corporation Common Stock that are actually voted in connection with any proposal
to amend certain provisions ofthe Corporation's Articles of Incorporation or to
merge, consolidate or sell all or substantially all of the Corporation's assets,
Mr. Urstadt will control a number of shares of Corporation Common Stock that may
be sufficient to block any such proposal.
Further, as noted under "Certain Provisions of Massachusetts and
Maryland Law," under the MGCL certain business combinations between the
Corporation and an Interested Stockholder will require the recommendation of the
Board of Directors of the Corporation and the affirmative vote of at least (i)
80% of the outstanding shares of Corporation Common Stock and (ii) two-thirds of
the outstanding shares of Corporation Common Stock not held by such Interested
Stockholder or its affiliates unless, among other conditions, certain "fair
price" and other conditions are met. In view of Mr. Urstadt's currently
anticipated percentage ownership of the Corporation Common Stock upon
consummation of the Merger, Mr. Urstadt will control a number of shares of
Corporation Common Stock sufficient to block any proposal respecting a business
combination with an Interested Stockholder unless the "fair price" and other
conditions of the MGCL are met.
Mr. Urstadt and all other Trustees and/or executives of the Trust who
in the aggregate hold 1,293,682 Trust Common Shares constituting approximately
23% of the issued and outstanding Trust Common Shares have notified the Board of
Trustees of their intention to vote FOR each of Proposals 1 through 4 at the
Annual Meeting.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE PLAN OF
REORGANIZATION
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PROPOSAL 2. ELECTION OF TRUSTEES
Pursuant to Section 2.2 of the Declaration of Trust, the Trustees are
divided into three classes serving three-year terms. Three Trustees, comprising
Class III, are to be elected at the 1997 Annual Meeting. Messrs. Robert R.
Douglass, George H.C. Lawrence and Charles J. Urstadt have been nominated for
election as Trustees to hold office until the year 2000 Annual Meeting and until
their successors have been elected and shall qualify. As noted above under "THE
PLAN OF REORGANIZATION", if the Plan of Reorganization is approved and the
Merger is consummated, the Trustees of the Trust will become the directors of
the Corporation serving the same terms and in the same classes with the
Corporation as such persons are then serving with the Trust.
<TABLE>
<CAPTION>
Principal Occupation Trustee Term
For the Past Five Years Continuous to
and Current Directorships Age Since Expire
CLASS III
(To be nominated for election by
holders of Common Shares to
serve for three years)
<S> <C> <C> <C>
Robert R. Douglass(C)............... Of Counsel, Milbank, Tweed Hadley and 65 1991 2000
McCloy; Chairman and Director, Cedel;
Retired Vice Chairman and Director, The
Chase Manhattan Corporation (1985 to
1993); Executive Vice President, General
Counsel and Secretary, The Chase
Manhattan Corporation (1976 to 1985);
Trustee, Dartmouth College (1983 to
1993); Chairman, Downtown Lower Manhattan
Association; Chairman of Alliance for
Downtown New York; Member, Board of
Managers, The New York Botanical Garden;
Director, Business Council for the United
Nations; Member, Council on Foreign
Relations; Director, Gryphone Holdings,
Inc.; Trustee, Managed Accounts Services
Portfolio Trust.
George H.C. Lawrence(C)............. Chairman, Chief Executive Officer and 59 1988 2000
President, Lawrence Investing Company,
Inc. (since 1970); Director, Urstadt
Property Company, Inc.; Trustee, Sarah
Lawrence College; Director, Westchester
County Association; Senior Vice President
and Director, Kensico Cemetery; Director,
CLX Energy.
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<PAGE>
Charles J. Urstadt(E)............... Chairman of the Board of Trustees and 68 1975 2000
Chief Executive Officer of the Trust
(since September 1989); Chairman,
President and Director, Urstadt Property
Company, Inc. (a real estate investment
corporation); Trustee Emeritus, Pace
University; Director, Putnam Trust
Company; Trustee, Teacher's Insurance and
Annuity Association.
<CAPTION>
Terms of office of the four Trustees named below will continue until the Annual Meeting in the years indicated.
Principal Occupation Trustee Term
For the Past Five Years Continuous to
and Current Directorships Age Since Expire
CLASS I
(Term of Office Expires in 1998)
E. Virgil Conway(C)(E) Chairman, Metropolitan Transportation 67 1989 1998
Authority (since 1995); Former Chairman,
Financial Accounting Standards Advisory
Council (1992-1995); Financial Consultant
and Corporate Director (since January
1989); Chairman and Director, The
Seamen's Bank for Savings, FSB
(1969-1989), Trustee, Consolidated Edison
Company of New York, Inc.; Director,
Union Pacific Corporation; Trustee,
Phoenix Home Life Mutual Funds; Trustee,
Atlantic Mutual Insurance Company;
Director, Centennial Insurance Company;
Director, Trism, Inc.; Director,
AccuHealth, Inc.; Chairman, New York
Housing Partnership Development
Corporation; Vice Chairman, Academy of
Political Science; Trustee, Pace
University.
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<PAGE>
<CAPTION>
Principal Occupation Trustee Term
For the Past Five Years Continuous to
and Current Directorships Age Since Expire
CLASS II
(Term of Office expires in 1999)
Peter Herrick(A)(E)................. Retired Vice Chairman (1990-1992) and 69 1990 1999
Director, The Bank of New York; President
and Chief Operating Officer, The Bank of
New York (February 1982 to June 1990);
President and Director, The Bank of New
York Company, Inc. (February 1984 to
March 1992); Member, New York State
Banking Board (June 1990 to April 1993);
Director, BNY Hamilton Funds.
Paul D. Paganucci(A)................ Chairman, Ledyard National Bank (since 65 1984 1999
April 1991); Chairman of the Executive
Committee of W.R. Grace & Co. (July 1989
to March 1991); Vice Chairman, W.R. Grace
& Co. (November 1986 to July 1989);
Executive Vice President, W.R. Grace &
Co. (January 1986 to November 1986);
formerly Vice President and Treasurer of
Dartmouth College (July 1977 to December
1985); Director, Filene's Basement, Inc.;
Director, Allmerica Securities Trust,
Inc.; Director, IGI, Inc.; Trustee, Colby
College; Director, The Grace Institute.
James O. York(A).................... Real Estate Counselor (since 1988); 68 1979 1999
Retired in 1987 as President of R. H.
Macy Properties Division and as Senior
Vice President and Director of R.H. Macy
Co., Inc.; Trustee, The International
Council of Shopping Centers Education and
Research Foundation; Trustee, Corporate
Property Investors.
</TABLE>
- ----------------------------------
(A) Member of Audit committee
(C) Member of Compensation Committee
(E) Member of Executive Committee
During the fiscal year ended October 31, 1996, the Trustees held 4
meetings. The Trustees have three standing committees: an Audit Committee, an
Executive Committee and a Compensation Committee. Each Trustee attended at least
75% of the aggregate total number of meetings held during the fiscal year by the
Trustees and by all committees of which such Trustee is a member.
The Audit Committee held 2 meetings during the fiscal year ended October
31, 1996. The Audit Committee recommends to the Trustees the independent public
accountants to be engaged by the Trust, reviews with the Trust's independent
public accountants and management of the Trust's internal accounting procedures
and controls, and
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<PAGE>
reviews with the Trust's independent public accountants the scope and results of
the auditing engagement. Messrs. Paul D. Paganucci, Peter Herrick and James O.
York are the current members of the Audit Committee.
The Executive Committee held no meetings during the fiscal year ended
October 31, 1996. In general, the Executive Committee may exercise such powers
of the Trustees between meetings of the Trustees as may be delegated to it by
the Trustees (except for certain powers of the Trustees which may not be
delegated). Messrs. E. Virgil Conway, Peter Herrick and Charles J. Urstadt are
the current members of the Executive Committee.
The Compensation Committee, which makes recommendations to the Trustees
concerning compensation and administers the Trust's Stock Option Plan and, if
approved by shareholders, the Restricted Stock Plan (see Proposal 3), held 2
meetings during the fiscal year ended October 31, 1996. Messrs. E. Virgil
Conway, George H.C. Lawrence and Robert R. Douglass are the current members of
the Compensation Committee.
The Trustees do not have a nominating committee but act as a group on such
matters.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Trustees and officers, and persons who own more than 10% of a registered
class of the Trust's equity securities, to file initial reports of ownership and
reports of changes in ownership of such equity securities with the SEC. Such
persons are also required by SEC regulations to furnish the Trust with copies of
all Section 16(a) forms they file. Based solely on a review of the copies of
such forms furnished to the Trust, or written representations that no Forms 5
were required, the Trust believes that, with respect to the period from November
1, 1995 through October 31, 1996, its Trustees, officers and greater than 10%
beneficial owners complied with all Section 16(a) filing requirements.
At the Annual Meeting, the shareholders of the Trust will be requested to
elect three Trustees, comprising Class III. The affirmative vote of the holders
of not less than a majority of the Trust Common Shares entitled to vote and be
present, in person or by properly executed proxy, at the Annual Meeting will be
required to elect a Trustee.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE NOMINEES
FOR ELECTION AS TRUSTEES.
Security Ownership of Certain Owners and Management
The following tables set forth certain information as of _________, 1997
available to the Trust with respect to the shares of the Trust (i) held by those
persons known to the Trust to be the beneficial owners (as determined under the
rules of the SEC) of more than 5% of the Trust's Common Shares then outstanding
and (ii) held by each of the Trustees, each of the executive officers named in
the Summary Compensation Table below, and by all of the Trustees and executive
officers as a group:
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<PAGE>
<TABLE>
<CAPTION>
5% BENEFICIAL OWNERS
Name and Address Common Shares Percent
of Beneficial Owner Beneficially Owned of Class
------------------- ------------------ --------
<S> <C> <C>
Charles J. Urstadt(1)........................................ 1,148,925 20.43%
HRE Properties
321 Railroad Avenue
Greenwich, Connecticut 06830
Countryside Square Limited Partnership(2).................... 600,000 10.67%
c/o HRE Properties
321 Railroad Avenue
Greenwich, Connecticut 06830
Grace & White, Inc. (3) 291,400 5.18%
515 Madison Avenue
Suite 1700
New York, New York 10022
</TABLE>
- ----------------------------------
(1) Of these shares, 15,000 are owned by Urstadt Property Company, Inc., a
company of which Mr. Urstadt is the president, a director and a principal
stockholder, 900,000 shares are owned by two irrevocable trusts established
for Mr. Urstadt's children and 40,000 shares are owned by Elinor Urstadt,
Mr. Urstadt's wife. The figure excludes 98,750 shares issuable upon
exercise of options which are not currently exercisable and will not become
exercisable within 60 days, and includes 145,000 shares issuable upon
exercise of options exercisable within 60 days. See "Compensation and
Transactions with Management and Others" below. Also excludes 25,000 cash
appreciation rights, all of which are exercisable within 60 days.
(2) Pursuant to the terms of a Limited Partnership Agreement of Countryside
Square Limited Partnership (the "Partnership") dated as of November 22,
1996 (the "Partnership Agreement") by and among the Trust, as general
partner, and the limited partners signatory thereto, the limited partners
contributed to the capital of the Partnership the 600,000 Trust Common
Shares previously held by such limited partners. As the general partner of
the Partnership, the Trust may be deemed to beneficially own the 600,000
Trust Common Shares held by the Partnership.
(3) Based upon information contained in a Schedule 13G filed with the SEC on
February 14, 1996.
TRUSTEES AND OFFICERS
Common Shares Percent
Name Beneficially Owned of Class
Charles J. Urstadt 1,148,925(1) 20.43%
Willing L. Biddle 18,200(7) *
E. Virgil Conway 11,500(2)(3) *
Robert R. Douglass 7,600(3)(8) *
Peter Herrick 17,000(2)(3) *
George H.C. Lawrence 24,400(3)(10) *
Paul D. Paganucci 7,000(2)(3) *
James O. York 6,100(2)(3) *
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<PAGE>
James R. Moore 34,041(4)(6) *
Raymond P. Argila 19,916(4)(5) *
Trustees and executive officers
as a group (10 persons) 1,293,682(9) 23.0%
- ----------------------------------
* Less than 1%
(1) Includes 15,000 shares owned by Urstadt Property Company, Inc., 900,000
Common Shares owned by two irrevocable trusts established for Mr. Urstadt's
adult children, 40,000 Common Shares owned by Elinor Urstadt, Mr. Urstadt's
wife. Excludes 101,375 Common Shares issuable upon exercise of options
which are not currently exercisable and will not become exercisable within
60 days, and includes 193,125 Common Shares issuable upon exercise of
options exercisable within 60 days. Also excludes 25,000 cash appreciation
rights all of which are exercisable within 60 days. See "Compensation and
Transactions with Management and Others" below.
(2) Includes 5,000 Common Shares issuable upon exercise of options which are
currently exercisable or which will become exercisable within 60 days. See
"Compensation and Transactions with Management and Others" below.
(3) Excludes 1,000 shares issuable upon exercise of options which are not
currently exercisable and will not become exercisable within 60 days.
(4) Represents Common Shares issuable upon exercise of options which are
currently exercisable or which will become exercisable within 60 days. See
"Compensation and Transactions with Management and Others" below.
(5) Excludes 11,750 Common Shares issuable upon exercise of options which are
not currently exercisable and will not become exercisable within 60 days.
(6) Excludes 15,125 Common Shares issuable upon exercise of options which are
not currently exercisable and will not become exercisable within 60 days.
(7) Includes 5,500 Common Shares issuable upon exercise of options which are
currently exercisable or which will become exercisable within 60 days.
Excludes 13,500 Common Shares issuable upon exercise of options which are
not currently exercisable and will not become exercisable within 60 days.
Mr. Biddle is the son-in-law of Mr. Urstadt.
(8) Includes 4,000 Common Shares issuable upon exercise of options which are
currently exercisable or will become exercisable within 60 days. See
"Compensation and Transactions with Management and Others" below.
(9) Excludes 147,750 Common Shares issuable upon exercise of options which are
not currently exercisable and will not become exercisable within 60 days,
but includes 277,582 Common Shares issuable upon exercise of options which
are exercisable within 60 days. Also excludes 25,000 cash appreciation
rights all of which are exercisable within 60 days.
-30-
<PAGE>
(10) Includes 1,000 Common Shares issuable upon exercise of options which are
currently exercisable or which will become exercisable within 60 days.
COMPENSATION AND TRANSACTIONS WITH MANAGEMENT AND OTHERS
Executive Officer Compensation
There is set forth below information concerning the annual and
long-term compensation paid by the Trust during each of the three years ended
October 31, 1996 to those persons who were, at October 31, 1996 (i) the chief
executive officer and (ii) the three other most highly compensated executive
officers of the Trust constituting the only persons who were serving as
executive officers at such date.
-31-
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards/Payouts
- --------------------------------------------------------------------------- ------------------------------
All
Other
# Com-
Options/ pens-
Name and Principal Position Year Salary Bonus Total SARs ation* Total
<S> <C> <C> <C> <C> <C> <C> <C>
Charles J. Urstadt, 1996 $240,000 $60,000 $300,000 52,000 $7,500 $307,500
Chief Executive Officer 1995 $225,000 $40,000 $265,000 50,000 $7,500 $272,500
1994 $215,000 $20,000 $235,000 50,000 $7,500 $242,500
Willing L. Biddle, 1996 $146,250 $15,000 $161,250 9,500 $7,500 $168,750
President 1995 $100,813 $10,000 $110,813 5,000 $5,541 $116,354
1994 $ 80,732 $ 3,500 $ 84,232 3,250 $4,213 $ 88,445
James R. Moore, 1996 $147,292 $15,000 $162,292 8,500 $7,500 $169,792
Executive Vice 1995 $138,813 $10,000 $148,813 7,000 $7,440 $156,253
President 1994 $132,415 $ 6,500 $138,915 6,500 $6,946 $145,861
Raymond P. Argila, 1996 $131,167 $10,000 $141,167 6,000 $7,058 $148,225
Senior Vice 1995 $126,073 $ 5,000 $131,073 6,000 $6,554 $137,627
President 1994 $121,115 $ 4,500 $125,615 5,500 $6,280 $131,895
</TABLE>
- -------------------------
* Discretionary contribution by the Trust to the Trust's Profit Sharing and
Savings Plan (the "401(k) Plan") allocated to an account of the named
executive officer.
-32-
<PAGE>
Trustee Compensation
Other than Mr. Urstadt, each Trustee is entitled to an annual retainer of
$15,000 and compensation of $ 1,000 for each Trustee meeting and each committee
meeting attended. Trustees may elect to defer payment of any Trustee fees until
they leave office. The Trust paid annual interest of 7.5% on deferred Trustee
fees during the fiscal year ended October 31, 1996 and currently accrues 7.5%
annual interest on deferred Trustee fees.
Change of Control Agreements
The Trust has agreements with each of its officers, including Messrs.
Urstadt, Biddle, Moore and Argila under which, in certain circumstances
following a Change of Control of the Trust (as defined in such agreements), the
Trust would pay severance benefits to such persons. If, within 18 months
following the Change of Control, the Trust terminates the executive's employment
other than for cause, or if the executive elects to terminate his employment
with the Trust for reasons specified in the agreement, the Trust will make a
severance payment equal to a portion of such person's base salary, together with
medical and other benefits during such period. The severance payments range from
6 months' to 12 months' salary, plus benefits. Messrs. Urstadt, Biddle, Moore
and Argila would each receive a severance payment equal to their respective
twelve month salaries plus benefits. The salaries of Messrs. Urstadt, Biddle,
Moore and Argila are currently $240,000, $160,000, $150,000 and $132,000
respectively. Each of such agreements has an indefinite term.
Stock Options
Under the Trust's Stock Option Plan ("Plan"), 453,665 shares of the Trust's
authorized but unissued Common Shares are reserved for issuance upon the
exercise of options or stock appreciation rights which have been or may be
granted under the Plan. The persons eligible to participate in the Plan are such
key employees of the Trust as may be selected from time to time by the
Compensation Committee in its discretion, as well as non-employee Trustees. The
Plan provides that each Trustee who is not a full-time employee or former
full-time employee of the Trust will automatically be awarded options covering
1,000 shares on April 1 of each year. The Plan is administered by the
Compensation Committee.
The following table sets forth, for the executive officers named in the
Summary Compensation Table, information regarding individual grants of stock
options and stock appreciation rights ("SARs") made under the Plan in the fiscal
year ended October 31, 1996.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants Grant Date Value
-------------------------------------------------------------- -----------------------------
% of Total
Options/
SARs
Options/ Granted to
SARs Employees Exercise or
Granted * in Fiscal Base Price Expiration Grant Date
Name (#) Year ($/sh) Date Present Value ($) **
- ---- ------- -------- ---------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Charles J. Urstadt 25,000 30.40% $13.75 11/08/05 $43,750
27,000 32.83% $15.38 06/12/06 $59,670
Willing L. Biddle 3,500 4.26% $13.75 11/08/05 $ 6,125
6,000 7.29% $15.38 06/12/06 $13,260
James R. Moore 3,500 4.26% $13.75 11/08/05 $ 6,125
5,000 6.08% $15.38 06/12/06 $11,050
Raymond P. Argila 3,000 3.65% $13.75 11/08/05 $ 5,250
3,000 3.65% $15.38 06/12/06 $ 6,630
</TABLE>
-33-
<PAGE>
* All options granted during the past fiscal year vest over four years.
No options granted during the past fiscal year were granted with
related stock appreciation rights.
** Based on the Black-Scholes option pricing model adapted for use in
valuing executive stock options. The actual value, if any, an executive
may realize will depend on the excess of the stock price over the
exercise price on the date the option is exercised, so that there is no
assurance the value realized by an executive will be at or near the
value estimated by the Black-Scholes model. The estimated values under
that model are based on arbitrary assumptions as to variables such as
interest rates, stock price volatility and future dividend yield.
The Compensation Committee has authorized loans to finance the exercise
of incentive stock options granted to executive officers. The loans have a
five-year term. subject to extension at the discretion of the Compensation
Committee, bear interest at the Base Rate of The First National Bank of Boston
and are secured by a pledge of the related shares. The loans become due on
termination of employment by the Trust, but are automatically extended for seven
months following termination of employment other than for cause, and for 13
months following termination of employment occurring after a Change of Control
of the Trust.
The following table sets forth, for the executive officers named in the
Summary Compensation Table, information concerning the fiscal year-end value of
unexercised options and SARS. No Common Shares of the Trust were acquired by
such executive officers through the exercise of options in fiscal 1996.
Aggregated Options/SAR Exercises in Last Fiscal Year and FY-End Option/SAR
Values
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES
Value of
Number of Unexercised
Unexercised In-The-Money
Options/SARs Options SARS
at FY-End (#) at FY-End ($)
------------- -------------
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
- ---- ------------- -------------
Charles J. Urstadt 193,125/101,375 $449,922/$42,266
Willing L. Biddle 5,500/ 13,500 $ 4,804/$ 8,602
James R. Moore 34,041/ 15,125 $ 51,513/$10,547
Raymond P. Argila 19,916/ 11,750 $ 50,794/$ 9,141
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Board of Trustees Compensation Committee, which is composed of
three independent outside Trustees, is responsible for making recommendations to
the Board concerning compensation and for administering the Trust's Stock Option
Plan. The Compensation Committee considered a variety of factors and criteria in
arriving at its recommendations for compensation of the Trust's executive
officers for fiscal 1996.
The Committee believes that compensation should be structured so as to
provide incentives to the Trust's officers to enhance the long-term
profitability of the Trust. Thus, in making its recommendations regarding
compensation, the Committee attempts to align the financial interests of the
Trust's executive officers with those of its shareholders.
Options to purchase the Trust's Common Shares are a key element in the
Trust's compensation program. Since the Trust's Stock Option Plan provides for a
one-year waiting period before options may be exercised and
-34-
<PAGE>
an exercise price of the Trust's Common Shares at fair market value as of the
date of grant, executive officers benefit from options only when the share price
increases. As a result, options help to motivate executives by providing
incentives tied to shareholder goals. The Committee determined that it was
advisable to consider the grant of options twice a year, so as to provide a more
immediate incentive to loyal employees and align more closely the award of
options to job performance.
In evaluating the potential long-term profitability of the Trust and
making its fiscal 1996 compensation recommendations, the Committee considered
stock price, projected and actual cash flow, leasing activities, new
acquisitions and other factors in arriving at its conclusions. The Committee
decided to grant options pursuant to the Trust's Stock Option Plan to purchase
the Trust's Common Shares to certain executive officers which the Committee
believed would provide such officers with a direct incentive to improve the
Trust's profitability and, consequently, shareholder value.
The Committee believes that the continued focus by the Chief Executive
Officer on financing, acquisitions and sales, leasing and cost containment, in
the face of a highly competitive market, warrants special recognition and that
such focus will position the Trust for potential long-term profitability as this
strategy matures. In light of the leadership by Mr. Urstadt during 1996 in all
areas of management including particularly increasing leasing. and undertaking
acquisitions, and sales which has resulted in a 12% improvement in cash flow in
fiscal 1996, the Committee decided to award Mr. Urstadt options to purchase
52,000 of the Trust's Common Shares. The Committee believes that the Chief
Executive Officer should be able to profit directly from future increases in the
value of the Trust's Common Shares which endures to the benefit of all
shareholders.
The Committee compared the annual compensation of Mr. Urstadt with that
of Chief Executive Officers of other REITs in the comparable size category of
the Trust and determined that Mr. Urstadt's current salary was lower than the
mean annual salary of such other Chief Executive Officers. However, the
Committee decided not to increase Mr. Urstadt's annual salary of $240,000 and
awarded him a bonus of $60,000 in view of the Trust's continued improved
operating performance.
Compensation Committee
E. Virgil Conway, Chairman
George H.C. Lawrence
Robert R. Douglass
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<PAGE>
OTHER INFORMATION
PERFORMANCE GRAPH
The following graph compares, for the five-year period ended October
31, 1996, the Trust's cumulative total return to its shareholders with the
returns for the NAREIT All REIT Total Return Index published by the National
Association of Real Estate Investment Trusts (NAREIT) and for the S&P 500 Index
for the same period.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG HRE PROPERTIES, THE S&P 500 INDEX AND THE NAREIT ALL-REIT INDEX
* $100 INVESTED ON 10/31/91 IN STOCK OR INDEX-INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING OCTOBER 31.
-36-
<PAGE>
PROPOSAL 3. APPROVAL OF THE RESTRICTED STOCK PLAN
The Compensation Committee of the Board of Trustees (the "Compensation
Committee") has proposed the adoption of the Restricted Stock Plan by which
certain key management personnel of the Trust, as selected by the Compensation
Committee, will be granted restricted stock awards, generally on such terms and
conditions as the Compensation Committee may determine. If the Plan of
Reorganization is approved and the Merger is consummated, the rights and
obligations of the Trust under the Restricted Stock Plan will become the rights
and obligations of the Corporation and the rights of the management personnel
who become participants in the Restricted Stock Plan to receive grants of Trust
Common Shares will become rights of such management personnel to receive grants
of shares of Corporation Common Stock.
PRINCIPAL PURPOSE OF THE RESTRICTED STOCK PLAN
The principal purpose of the Restricted Stock Plan is to promote the
long-term growth of the Trust by attracting, retaining and motivating key
management personnel possessing outstanding ability and to further the identity
of the interests of such personnel with those of the Trust's shareholders
through stock ownership opportunities.
SUMMARY OF THE RESTRICTED STOCK PLAN
The Restricted Stock Plan is set forth in its entirety as Exhibit B to
this Proxy Statement/Prospectus. The information set forth below is only a
summary of its principal provisions and is qualified in its entirety by Exhibit
B.
Grant of Restricted Stock Awards. The Compensation Committee will be
authorized to grant restricted stock awards up to an aggregate of 250,000 Trust
Common Shares. The participants eligible to receive the restricted stock awards
will be selected by the Compensation Committee, in its discretion, from
management personnel who are considered to have significant responsibility for
the growth and profitability of the Trust.
Principal Terms and Conditions of Restricted Stock Awards. Each
restricted stock award will be evidenced by a written agreement, executed by
both the relevant participant and the Trust, setting forth all the terms and
conditions applicable to such award as determined by the Compensation Committee.
Such terms and conditions shall include (i) the length of the restricted period
of the award, (ii) the restrictions applicable to the award, including (without
limitation) the employment status rules governing forfeiture, and the
prohibition against the sale, assignment, transfer, pledge or other encumbrance
of the restricted stock during the restricted period, and (iii) the eligibility
to share in dividends and other distributions paid to the Trust's shareholders
during the restricted period.
Lapse of Restrictions. If the employment of a participant shall be
terminated prior to the lapse of the restricted period by reason of death or
disability, the restrictions shall lapse on such date. If the employment of a
participant shall be terminated prior to the lapse of the restricted period by
reason of retirement, the restricted period will continue as if that participant
had remained in the employment of the Trust.
The Compensation Committee will have the authority to accelerate the
time at which the restrictions may lapse whenever it considers that such action
is in the best interests of the Trust and of its shareholders, whether by reason
of changes in tax laws or otherwise. Restrictions will lapse immediately upon a
"change in control" (as defined in the Restricted Stock Plan) of the Trust. In
the event, however, of the approval of the Plan of Reorganization and the
consummation of the Merger related thereto, the Corporation (being the surviving
entity in the Merger) will thereupon assume all of the rights and obligations of
the Trust under the Restricted Stock Plan and any rights and/or options granted
thereunder to officers with respect to the Trust Common Shares shall be
converted into rights and/or options, granted on identical terms to those
applicable to the relevant stock award, with respect to Corporation Common
Stock. See "THE PLAN OF REORGANIZATION."
Tax Consequences. The Trust will be required to withhold taxes to
comply with Federal and state laws applicable to the value of restricted shares
when they are released from risk of forfeiture.
Upon the lapse of the applicable restrictions, the value of the
restricted stock will be taxable to the relevant participant as ordinary income
and deductible by the Trust. At the Compensation Committee's discretion, an
arrangement may be made by the Trust to assist the relevant participant in
meeting withholding taxes imposed by Federal and state authorities.
-37-
<PAGE>
Compliance with SEC Requirements. No certificates for Trust Common
Shares shall be executed and delivered to participants under the Restricted
Stock Plan until the Trust shall have taken all such action as may be required
in connection therewith to comply with the provisions of the Securities Act, the
Securities Exchange Act and applicable SEC requirements.
The affirmative vote of the holders of not less than a majority of the
Trust Common Shares entitled to vote and be present, in person or by properly
executed proxy, at the Annual Meeting will be required to approve the Restricted
Stock Plan.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
RESTRICTED STOCK PLAN.
PROPOSAL 4. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS OF THE TRUST
Arthur Andersen LLP, independent auditors, provided auditing services
to the Trust during the fiscal year ended October 31, 1996. The Trustees have,
subject to ratification by the shareholders of the Trust, appointed Arthur
Andersen to audit the financial statements of the Trust for the ensuing fiscal
year and recommend to the shareholders that such appointment be ratified.
Representatives of Arthur Andersen LLP will be present at the Annual Meeting,
with the opportunity to make a statement if they so desire. Such representatives
will also be available to respond to appropriate questions.
The affirmative vote of the holders of not less than a majority of the
Trust Common Shares present, in person or by properly executed proxy, at the
Annual Meeting will be required to ratify the appointment of Arthur Andersen LLP
as independent auditors of the Trust. If the Plan of Reorganization is approved
and the Merger is consummated, the appointment of Arthur Andersen LLP as
independent auditors of the Trust will constitute the appointment of such firm
as the independent auditors of the Corporation for the ensuing fiscal year.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS OF THE TRUST
SOLICITATION OF PROXIES AND VOTING PROCEDURES
The cost of soliciting proxies will be borne by the Trust. In addition
to solicitation by mail, solicitations may also be made by personal interview,
facsimile transmission or telephone. Trustees and officers of the Trust may
participate in such solicitation and will not receive additional compensation
for such services. Arrangements will also be made with custodians, nominees and
fiduciaries for forwarding of proxy solicitation material to beneficial owners
of Trust Common Shares and the Trust will reimburse such custodians, nominees
and fiduciaries for reasonable expenses incurred in connection therewith. To
assure the presence in person or by proxy of the largest number of shareholders
possible, D.F. King & Company has been engaged to solicit proxies on behalf of
the Trust. It is anticipated that D.F. King & Company will be paid a fee of
$7,500 for its services.
The presence, either in person or by properly executed proxy, of a
majority of the outstanding Trust Common Shares is necessary to constitute a
quorum at the Annual Meeting. Each of the Trust Common Shares outstanding on the
Record Date is entitled to one vote. An automated system administered by the
Trust's transfer agent tabulates the votes. Shares that reflect abstention or
"broker non-votes" (i.e., shares represented at the meeting held by brokers or
nominees as to which instructions have not been received from the beneficial
owners or persons entitled to vote such shares and the broker or nominee does
not have discretionary voting power to vote such shares) will be counted for
purposes of determining whether a quorum is present for the transaction of
business at the Annual Meeting.
The Plan of Reorganization requires the affirmative vote of a majority
of the Trust Common Shares outstanding on the Record Date. Abstentions and
broker non-votes will thus be the equivalent of negative votes with respect to
the Plan of Reorganization.
-38-
<PAGE>
The election of the Trustees, the approval of the Restricted Stock Plan
and the ratification of the appointment of the Trust's auditors each requires
the affirmative vote of a majority of the Trust Common Shares entitled to vote
and present, in person or by properly executed proxy, at the Annual Meeting.
Abstentions will thus be the equivalent of negative votes and broker non-votes
will have no effect with respect to such proposals, as any Trust Common Shares
subject to broker non-votes will not be present and entitled to vote with
respect to any proposal to which the broker non-vote applies.
Each of the Proposals presented to the shareholders of the Trust at the
Annual Meeting is being presented as a separate and independent proposal and no
Proposal is conditioned upon adoption or approval of any other Proposal.
Shareholders of the Trust will not have any dissenters' rights of appraisal in
connection with the vote upon the Plan of Reorganization.
LEGAL MATTERS
The validity of the Common Stock to be issued by the Corporation, and
certain related matters, will be passed upon for the Trust by Miles &
Stockbridge, a professional corporation.
OTHER MATTERS
The Trustees know of no other business to be presented at the Annual
Meeting. If other matters properly come before the meeting in accordance with
the Declaration of Trust, the persons named as proxies will vote on them in
accordance with their best judgment.
Proposals of shareholders intended to be presented to the Trust's
Annual Meeting of Shareholders to be held in 1998 must be received by the Trust
by ______________, 1997. Such proposal must also comply with the requirements as
to form and substance established by the SEC for such proposals to be included
in the proxy statement.
The Declaration of Trust provides that the name "HRE Properties" refers
to the trustees under the Declaration collectively as trustees, but not as
individuals or personally; and no trustee, shareholder, officer or agent of HRE
Properties shall be held to any personal liability; nor shall resort be had to
their private property for the satisfaction of any obligation or claim or
otherwise in connection with the affairs of said HRE Properties, but the trust
estate only shall be liable.
You are urged to complete, date, sign and return your Proxy Card
promptly to make certain your Shares will be voted at the Annual Meeting, even
if you plan to attend the meeting in person. If you desire to vote your Shares
in person at the meeting, your proxy may be revoked. For you convenience in
returning the Proxy Card, a pre-addressed and postage paid envelope has been
enclosed.
YOUR PROXY IS IMPORTANT
WHETHER YOU OWN FEW OR MANY SHARES.
Please date, sign and mail the enclosed Proxy Card today.
-39-
<PAGE>
EXHIBIT A
PLAN OF REORGANIZATION
THIS PLAN OF REORGANIZATION, is made this 30th day of December 1996,
between HRE PROPERTIES, INC., a Maryland corporation (the "Corporation"), and
HRE PROPERTIES, a Massachusetts business trust (the "Trust").
WITNESSETH:
WHEREAS, the Corporation is a corporation organized and existing under
the laws of the State of Maryland, with an authorized capital consisting of
80,000,000 shares of common stock, par value $.01 per share (the "Common
Stock"), 20,000,000 shares of undesignated preferred stock, par value $.01 per
share, and 10,000,000 of "Excess Stock" (as defined in the Articles of
Incorporation of the Corporation), of which 1,000 shares of Common Stock,
constituting all of the issued and outstanding shares of capital stock of the
Corporation, are owned by the Trust;
WHEREAS, the Trust is a business trust organized and existing under the
laws of the Commonwealth of Massachusetts, and has authorized an unlimited
number of common shares of beneficial interest, without par value, (the
"Shares"), of which 5,346,081 Shares are issued and outstanding; and
WHEREAS, Section 10.4 of the Trust's Declaration of Trust, as amended
(the "Declaration of Trust"), provides that the Board of Trustees of the Trust
(the "Board of Trustees") may direct the organization of a corporation or other
business organization into which the Trust, if permitted by law, may merge or
which shall take over the Trust Property (as defined in the Declaration of
Trust) and carry on the affairs of the Trust, and that, after receiving an
affirmative vote of the holders of not less than a majority of the aggregate
number of the Shares then outstanding and entitled to vote thereon at a meeting
of shareholders called for the purpose, and subject to receipt of an opinion of
counsel the substance of which is set forth in Section 10.4, the Trustees may
thereupon effect such merger or may sell, convey and transfer the property of
the Trust to such corporation or other business organization in exchange for
shares or securities of such transferee and the assumption by such transferee of
the liabilities of the Trust and thereupon terminate the Trust and deliver such
shares or other securities to shareholders of the Trust in accordance with the
terms of the merger or other agreement governing the transaction; and
WHEREAS, the Trustees have been advised by counsel that a merger of a
Massachusetts business trust such as the Trust into a Maryland corporation is
specifically permitted by Section 3-102(a)(2) of the Maryland General
Corporation Law ("MGCL") and that there is no provision of Massachusetts law
that prohibits such a merger, and have accordingly determined that such a merger
is permitted by law and is consistent with the aforesaid provisions of Section
10.4 of the Declaration of Trust; and
WHEREAS, the Board of Trustees and the Board of Directors of the
Corporation (the "Directors") have each determined that the Trust and the
Corporation be merged into a single corporation, with the Corporation being the
surviving entity, on the terms and conditions set forth herein, but subject to
the prior authorization of both the holders of a majority of the outstanding
Shares and of the sole stockholder of the Corporation, all under and pursuant to
the Declaration of Trust and the MGCL.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, for the purpose of prescribing the
terms and conditions of the merger, the parties hereto agree as follows:
I. TERMS AND CONDITIONS
1.1 Merger. At the Effective Date (as defined in Section 2), the Trust
shall be merged with and into the Corporation (the "Merger"), the Corporation
shall be the surviving entity, and the Trust shall terminate.
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1.2 Successor. At and from the Effective Date, the Corporation shall
succeed to all of the rights, powers and property of the Trust and shall be
liable for all the liabilities, debts and obligations of the Trust, in the
manner of and as more fully set forth in Section 3-114 of the MGCL. The Articles
of Merger evidencing the Merger shall also constitute and evidence the sale,
conveyance, transfer and assignment of all Trust Property (as defined in the
Declaration of Trust) to the Corporation and the Corporation's assumption of all
of the liabilities, debts and obligations of the Trust, including without
implied limitation, obligations to indemnify persons who are or may be entitled
to indemnification under Article 5 of the Declaration of Trust to the extent
that such persons are entitled to indemnification under such Article.
1.3 Conversion of Shares of the Trust. At the Effective Date, by virtue
of the Merger and without any action on the part of the holder thereof, each
Share outstanding immediately prior thereto shall be converted into one fully
paid and non-assessable share of the Common Stock of the Corporation and, until
further action by the Directors of the Corporation, each certificate
representing Shares shall continue to represent the same number of shares of
Common Stock of the Corporation.
1.4 Common Stock of the Corporation. At the Effective Date, by virtue
of the Merger and without any action on the part of the Trust (being the holder
thereof), the 1,000 shares of Common Stock of the Corporation issued and
outstanding immediately prior thereto, shall be cancelled and returned to the
status of authorized but unissued shares.
II. EFFECTIVE DATE
2. Effective Date. The Merger shall become effective on the day and at
the time (the "Effective Date") at which the last of the following actions shall
have been completed: (i) this Plan of Reorganization shall have been authorized
by the affirmative vote of the holders of at least a majority of the aggregate
number of Shares of the Trust then outstanding and entitled to vote thereon in
accordance with the requirements of the Declaration of Trust, and shall have
been authorized by the Trust as the sole stockholder of the Corporation in
accordance with the requirements of the laws of the State of Maryland; (ii) the
shares of the Common Stock of the Corporation issuable to the shareholders of
the Trust pursuant to this Agreement shall have been authorized for listing on
the New York Stock Exchange, upon official notice of issuance; (iii) the Trust
shall have received all consents and/or approvals (if any) required for the
Merger including, without limitation, an opinion of counsel conforming to the
opinion described in Section 10.4 of the Declaration of Trust; and (iv) Articles
of Merger reflecting the Merger shall have been executed and filed in accordance
with Section 3-107 of the MGCL. The filing of a copy of such Articles of Merger
with the Secretary of State of the Commonwealth of Massachusetts will
conclusively evidence the termination of the Trust.
III. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
3.1 Articles of Incorporation and By-Laws. The Articles of
Incorporation of the Corporation and the Bylaws of the Corporation in effect on
the Effective Date (a copy of each of which is attached hereto), shall continue
to be, respectively, the Articles of Incorporation and Bylaws of the
Corporation.
3.2 Directors. Immediately upon the consummation of the Merger, those
persons who were as at the Effective Date the Trustees of the Trust shall be
appointed to serve (if not already so appointed) as Directors of the Corporation
and shall, subject to any contrary provision in the Articles of Incorporation
and Bylaws of the Corporation, take up such office upon and subject to the same
terms and conditions subject to which they were appointed as Trustees.
3.3 Officers. The officers of the Corporation as at the Effective Date
shall continue to be the officers of the Corporation, holding such offices in
the Corporation until their successors are elected or appointed and qualified in
accordance with the Articles of Incorporation and Bylaws of the Corporation.
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3.4 Restricted Stock Award Plan and Stock Option Plan. As at and from
the Effective Date, all obligations of the Trust under the HRE Restricted Stock
Award Plan (the "Restricted Stock Plan") shall, if the same is in effect as at
the Effective Date, be assumed by the Corporation and all rights of the
participants in the Restricted Stock Plan to receive grants of Shares on the
terms and conditions set forth in the Restricted Stock Plan shall thereupon be
converted into rights to receive grants of shares of Common Stock of the
Corporation on the terms and conditions set forth in the Restricted Stock Plan.
As at and from the Effective Date, all obligations of the Trust under the HRE
Stock Option Plan (the "Stock Option Plan") shall be assumed by the Corporation
and all rights of the participants under the Stock Option Plan to receive grants
of options and to exercise the options and the stock appreciation rights granted
thereunder shall thereupon be converted into rights to receive grants of options
and to exercise options and stock appreciation rights in respect of shares of
Common Stock of the Corporation on the terms and conditions set forth in the
Stock Option Plan.
3.5 Shareholder Rights Plan. As at the Effective Date, all obligations
of the Trust under that certain Rights Agreement dated as of November 4, 1988,
as amended (the "Rights Agreement"), shall be assumed by the Corporation and all
Rights (as defined in the Rights Agreement) issued under the Rights Agreement
shall thereupon be converted into Rights in respect of the capital stock or
other securities or property of the Corporation.
IV. MISCELLANEOUS
4.1 Further Assurances. From time to time to the extent possible, as
and when required by the Corporation or by its successors and assigns, there
shall be executed and delivered on behalf of the Trust such deeds and other
instruments, and there shall be taken or caused to be taken by it such further
and other action as shall be appropriate or necessary in order to vest or
perfect, or to conform of record or otherwise, in the Corporation the title to
and possession of all the property, interests, assets, rights, privileges,
immunities, powers, franchises, and authority of the Trust, and otherwise to
carry out the purposes of this Plan of Reorganization, and the officers and
directors of the Corporation are fully authorized in the name of and on behalf
of the Trust or otherwise to take any and all such action and to execute and
deliver any and all such deeds and other statements.
4.2 Abandonment. At any time before the Effective Date, this Plan of
Reorganization may be terminated and the Merger may be abandoned by the Board of
Trustees and/or the Directors.
4.3 Counterparts. This Plan of Reorganization may be executed in any
number of counterparts, each of which shall be deemed to be an original.
4.4 Governing Law. This Plan of Reorganization shall be governed by and
construed in accordance with the laws of the State of Maryland.
IN WITNESS WHEREOF, this Plan of Reorganization, is hereby executed on
behalf of each of the parties hereto and attested by their respective officers
thereunto duly authorized.
HRE PROPERTIES, INC.
a Maryland Corporation
By:/s/ Charles J. Urstadt
-----------------------------
Charles J. Urstadt Attest:
Chairman of the Board
and Chief Executive Officer
/s/ James R. Moore
--------------------------
James R. Moore
Secretary
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<PAGE>
HRE PROPERTIES
a Massachusetts Business Trust
By:/s/ Charles J. Urstadt
-----------------------------
Charles J. Urstadt Attest:
Chairman of the Board
and Chief Executive Officer
/s/ James R. Moore
--------------------------
James R. Moore
Secretary
A-4
<PAGE>
EXHIBIT B
RESTRICTED STOCK AWARD PLAN
<PAGE>
December 31, 1996
HRE PROPERTIES
RESTRICTED STOCK AWARD PLAN
1. PURPOSES
The purposes of the HRE Properties Restricted Stock Award Plan (the "Plan") are
to promote the long-term growth of HRE Properties by attracting, retaining and
motivating executive management possessing outstanding ability and to further
the identity of Participants' interest with those of the shareholders through
stock ownership opportunities.
2. DEFINITIONS
The following terms shall have the following meanings:
|_| "Award" means an award of Restricted Stock granted under the
provisions of the Plan.
|_| "Board" means the Board of Directors of HRE Properties.
|_| "Committee" means the Compensation Committee of the Board of Directors
appointed to administer the Plan.
|_| "Company" means HRE Properties.
|_| "Disability" means total and permanent disability.
|_| "Participant" means an employee of the Company who is selected by the
Committee to participate in the Plan.
|_| "Restricted Period" means the period of time during which an Award to
Participant(s) remains subject to the restrictions imposed on the
shares as determined by the Committee.
|_| "Restrictions" mean the restrictions and conditions imposed on an Award
as determined by the Committee, which must be satisfied in order for
the Award to vest to the Participant.
|_| "Restricted Stock" means an award of shares on which are imposed a
restriction period which subjects them to a "substantial risk of
forfeiture" as defined in Section 83 of the Internal Revenue Code of
1986, as amended.
<PAGE>
|_| "Restricted Stock Award Date" means the date on which the Committee
awarded Restricted Stock to a Participant.
|_| "Retirement" means termination from active employment with the Company
pursuant to the terms of the retirement plan(s) applicable to the
Participant.
|_| "Stock" or "Share" means a share of Common Stock of HRE Properties.
3. EFFECTIVE DATE OF THE PLAN
The effective date of the Plan is __________, upon approval by the shareholders
of HRE Properties.
4. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Compensation Committee of the Board of
Directors, comprised of directors who are "disinterested persons" as defined in
Rule 16b-3 of the Securities and Exchange Commission.
The Committee shall have complete authority to (a.) select Participants, (b.)
determine the Award to be granted to a selected Participant, (c.) determine the
time or times when Awards will be granted, (d.) determine the time or times and
the conditions subject to which Awards may become vested or Restrictions will
lapse, (e.) interpret and construe the Plan for purposes of the administration
of the Plan and make determinations, subject to the provisions of Plan, in the
best interests of the Company and its stockholders.
The Committee may delegate nondiscretionary administrative duties under the Plan
to one or more agents (e.g., attorneys, consultants, etc.) as it deems necessary
and admissible at the expense of the Company.
Any power which may be exercised by the Committee may also be exercised by the
Board. No member of the Committee or the Board shall be personally liable for
any action taken or determination made in good faith with respect to the Plan or
its administration. All decisions made by the Committee as administrators of the
Plan shall be conclusive and binding upon all persons and the Company.
5. SHARES SUBJECT TO PLAN
The maximum number of shares of Restricted Stock which may be issued or
transferred under the Plan is 250,000 shares. Any shares of Restricted Stock
which have been awarded, but are later forfeited to the Company will again be
made subject to Awards under the Plan.
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<PAGE>
The Stock which may be issued or transferred under the Plan may be authorized
but unissued Shares or Shares acquired by the Company and held in its Treasury
as determined by the Committee.
6. GRANT OF RESTRICTED STOCK AWARDS
The Committee shall from time to time, in its discretion, select Participants
from management personnel who have significant responsibility for the growth and
profitability of the Company, determine the number of shares to be granted by
each Award and establish the applicable terms of each such Award.
7. AWARD AGREEMENT
Each Restricted Stock Award shall be evidenced by a written agreement, executed
by the Participant and the Company, which shall contain the terms and conditions
established by the Committee.
8. TERMS OF RESTRICTED STOCK AWARDS
Subject to the provisions of the Plan, the Committee shall determine:
|_| The terms and conditions of the Award Agreement; and,
|_| The Restricted Period of the Award; and,
|_| The Restrictions applicable to an Award, including, but not limited to
employment status rules governing forfeitures, and that Restricted
Stock may not be sold, assigned, transferred, pledged or otherwise
encumbered, during the Restricted Period; and,
|_| The issuance of stock certificates to the named Participants
representing the Restricted Stock Award to be held in custody by the
Company until the Restrictions lapse; and,
|_| That the Participant shall receive any dividends, taxable at that time
as ordinary income, and other distributions paid with respect to any
Award(s) as declared and paid to shareholders during the Restricted
Periods; and,
|_| Upon the lapse of Restrictions, the value of the Restricted Stock will
be taxable as ordinary income. At the Committee's discretion, an
arrangement may be made by the Company to assist the Participant in
meeting the withholding taxes required by Federal, State and Local
authorities.
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9. TERMINATIONS OF EMPLOYMENT DURING RESTRICTIVE PERIOD
In the event that during the term of the Restricted Period a Participant:
|_| Terminates employment with the Company for any reason other than death,
Disability or Retirement, such Participant shall forfeit any and all
Restricted Stock Awards whose Restrictions have not lapsed; or,
|_| Terminates employment by reason of death or Disability, the
Restrictions on any and all Awards shall lapse on the date of such
termination; or,
|_| Terminates employment by reason of Retirement, all Awards continue to
vest as if Retirement had not occurred until such time as the
Restrictions lapse. If the Participant, prior to the completion of any
or all Restricted Periods, accepts employment or provides services to
any organization that is competitive in nature with the Company, the
Participant will forfeit any and all Restricted Stock Awards whose
Restrictions have not lapsed.
10. CHANGE-OF-CONTROL
The Committee shall have the authority to accelerate the time at which the
Restrictions will lapse or to remove any such restriction upon the occurrence of
a "change-of-control" as defined by any one of the following events:
(a) any Person who becomes the owner of 20% or more of the Trust's Common
Shares and, thereafter, individuals who were not Trustees of the Trust
prior to the date such Person became a 20% owner are elected as
Trustees pursuant to an arrangement or understanding with, or upon the
request of or nomination by, such Person and constitute at least two of
the Trustees; or
(b) there occurs a change-of-control of the Trust of a nature that would be
required to be reported in response to Items 1a of Form 8-K pursuant to
Section 13 or 15 under the Securities Exchange Act of 1934 ("Exchange
Act"), or in any other filing by the Trust with the Securities and
Exchange Commission (the "Commission"); or
(c) there occurs any solicitation of proxies by or on behalf of any Person
other than the Trustees of the Trust and thereafter individuals who
were not Trustees prior to the commencement of such solicitation are
elected as Trustees pursuant to an arrangement or understanding with,
or upon the request of or nomination by, such Person and constitute at
least two of the Trustees.
(d) the Trust executes an agreement of acquisition, merger or
consolidation which contemplates that:
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(i) after the effective date provided for in the agreement, all or
substantially all of the business and/or assets of the Trust
shall be owned, leased or otherwise controlled by another
corporation or other entity; and
(ii) individuals who are Trustees of the Trust when such agreement
is executed shall not constitute a majority of the Trustees or
board of directors of the survivor or successor entity
immediately after the effective date provided for in such
agreement; provided, however, for purposes of this paragraph
(c), that if such agreement requires as a condition precedent
approval by the Trust's shareholders of the agreement or
transaction, a Change-of-Control shall not be deemed to have
taken place unless and until such approval is secured.
11. COMPLIANCE WITH SECURITIES AND EXCHANGE COMMISSION REQUIREMENTS
No certificate for Shares of stock distributed under the terms of the Plan shall
be executed and delivered to the Participant until the Company shall have taken
any action then required to comply with the provisions of the Securities Act of
1933, the Securities Exchange Act of 1934, as amended, or any other applicable
laws and requirements.
12. AMENDMENT AND TERMINATION
The Committee and/or Board may, at any time or from time to time, modify or
amend the Plan in any respect, except that without shareholder approval, the
Committee and/or Board may not increase the maximum number of shares of
Restricted Stock which may be Awarded under this Plan. Any modification,
amendment or termination of the Plan shall not, without the consent of a
Participant, affect his/her rights under an Award previously granted to a
Participant.
B-6
EXHIBIT C
---------
ARTICLES OF INCORPORATION
OF
HRE PROPERTIES, INC.
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<PAGE>
ARTICLES OF INCORPORATION
OF
HRE PROPERTIES, INC.
ARTICLE I
INCORPORATION
-------------
The undersigned, J. W. Thompson Webb, whose post office address is 10
Light Street, Baltimore, Maryland 21202, being at least eighteen (18) years of
age, does hereby form a corporation under the Maryland General Corporation Law
(the "MGCL").
ARTICLE II
NAME
----
The name of the corporation (the "Corporation") is:
HRE PROPERTIES, INC.
ARTICLE III
PURPOSES
--------
3.1 Purpose and Powers. The Corporation is being formed to acquire and
succeed to, and continue the business of, HRE Properties ("HRE Properties"), a
common law business trust organized under the laws of the Commonwealth of
Massachusetts that has operated so as to qualify as a real estate investment
trust ("REIT"), as that phrase is defined in Section 856 of the Internal Revenue
Code of 1986, as amended (the "Code"), through a merger of HRE Properties with
and into the Corporation pursuant to a Plan of Reorganization, dated December
30, 1996, and to engage in the business of acquiring, managing, financing,
disposing of and otherwise dealing in interests in real property and to engage
in any other lawful act or activity for which corporations may be organized
under the MGCL. The foregoing purposes shall be in no way limited or restricted
by reference to, or inference from, the terms of any other clause of the
Articles of Incorporation, as amended or supplemented from time to time (the
"Articles"), and each shall be regarded as independent. The foregoing purposes
are also to be construed as powers of the Corporation, and shall be in addition
to and not in limitation of the general powers of corporations under the laws of
the State of Maryland.
3.2 Real Estate Investment Trust. Without limiting the generality of
the foregoing purpose, business and objects, until such time as the Board of
Directors of the Corporation determines that it is no longer in the interest of
the Corporation and its Stockholders that the Corporation engage in the business
of, and conduct its business and affairs so as to qualify as, a REIT, the
purpose of the Corporation shall include engaging in the business of a REIT.
This reference to such purpose shall not make unlawful or unauthorized any
otherwise lawful act or activity that the Corporation may take that is
inconsistent with such purpose.
ARTICLE IV
PRINCIPAL PLACE OF BUSINESS
---------------------------
The address of the principal office of the Corporation is c/o The
Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202.
C-2
<PAGE>
ARTICLE V
THE RESIDENT AGENT
------------------
The Resident Agent of the Corporation is The Corporation Trust
Incorporated, whose address is 32 South Street, Baltimore, Maryland 21202.
ARTICLE VI
BOARD OF DIRECTORS
------------------
6.1 Number. The number of Directors of the Corporation initially shall
be seven, which number may thereafter be increased or decreased from time to
time pursuant to the Articles or Bylaws of the Corporation; provided, however,
that the total number of Directors shall be not fewer than the greater of two or
the minimum number permitted by the MGCL. No reduction in the number of
Directors shall cause the removal of any Director from office prior to the
expiration of his or her term.
6.2 Directors; Classification; Term. The initial Directors of the
Corporation shall be E. Virgil Conway, Peter Herrick, Paul D. Paganucci, James
O. York, Robert R. Douglass, George H.C. Lawrence and Charles J. Urstadt. At the
first annual meeting of stockholders, the Directors shall be divided into three
classes designated as Class I, Class II and Class III, with the term of three
years each, and the term of one class shall expire each year. Mr. Conway shall
constitute the sole Class I director and shall hold office initially for a term
expiring at the annual meeting of stockholders in 1998, Messrs. Herrick,
Paganucci and York shall comprise the Class II Directors and shall hold office
initially for a term expiring at the annual meeting of stockholders in 1999, and
Messrs. Douglass, Lawrence and Urstadt shall comprise the Class III Directors
and shall hold office initially for a term expiring at the annual meeting of
stockholders in 2000. Beginning with the annual meeting of stockholders in 1998
and at each succeeding annual meeting of stockholders, the Directors of the
class of Directors whose term expires at such meeting will be elected to hold
office for a term expiring at the third succeeding annual meeting. Each director
will hold office for the term for which he or she is elected and until his or
her successor is duly elected and qualified. If the number of Directors is
changed, any increase or decrease in directorships shall be apportioned among
the classes so as to maintain the number of Directors in each class as nearly
equal as set forth above or as may otherwise be determined by a majority of the
Board of Directors then in office, and any additional Directors of any class
elected to fill a vacancy resulting from an increase in such class shall hold
office only until the next election of Directors by the stockholders, but in no
case will a decrease in the number of Directors shorten the term of any
incumbent Director.
Notwithstanding the foregoing, whenever, pursuant to the provisions of
Article VII of the Articles, the holders of any one or more series of Preferred
Stock shall have the right, voting separately as a series or together with
holders of other such series, to elect Directors at an annual or special meeting
of Stockholders, the election, term of office, filling of vacancies and other
features of such directorships shall be governed by the terms of the Articles
and any Articles Supplementary applicable thereto, and such Directors so elected
shall not be divided into classes pursuant to this Section 6.2.
During any period when the holders of any series of Preferred Stock
have the right to elect additional Directors as provided for or fixed pursuant
to the provisions of Article VII hereof, then upon commencement and for the
duration of the period during which such right continues: (i) the then otherwise
total authorized number of Directors shall be increased, and the holders of such
Preferred Stock shall be entitled to elect the additional Directors so provided
for or fixed pursuant to said provisions, and (ii) each such additional Director
shall serve until such Director's successor shall have been duly elected and
qualified, or until such Director's right to hold such office terminates
pursuant to said provisions, whichever occurs earlier, subject to such
Director's earlier death, disqualification, resignation or removal. Except as
otherwise provided by the Board in the resolution or resolutions establishing
such series, whenever the holders of any series of Preferred Stock having such
right to elect additional Directors are divested of such right pursuant to the
provisions of such stock, the terms of office of all such
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<PAGE>
additional Directors elected by the holders of such stock, or elected to fill
any vacancies resulting from the death, resignation, disqualification or removal
of such additional Directors, shall terminate as quickly as is permissible under
the MGCL and the total and authorized number of Directors of the Corporation
shall be reduced accordingly.
6.3 Vacancies. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, newly created directorships resulting from any
increase in the authorized number of Directors shall be filled solely by the
affirmative vote of a majority of the entire Board of Directors and any
vacancies on the Board of Directors resulting from death, resignation,
retirement, disqualification or other cause (other than removal from office)
shall be filled solely by the affirmative vote of a majority of the remaining
Directors then in office, even if less than a quorum. Subject to the rights of
the holders of any series of Preferred Stock then outstanding, vacancies on the
Board of Directors resulting from the removal of a Director from office may be
filled by the affirmative vote of a majority of all the votes cast at a meeting
of Stockholders called for that purpose. A Director elected by the Board of
Directors to fill any vacancy shall serve until the next annual meeting of
stockholders and until his successor is elected and qualifies.
6.4 Resignation; Removal. Any Director may resign from the Board of
Directors or any committee thereof at any time by written notice to the Board of
Directors, effective upon execution and delivery to the Corporation of such
notice or upon any future date specified in the notice. A Director may be
removed from office, but only for cause and only by the affirmative vote of the
holders of not less than two-thirds of the Stock then outstanding and entitled
to vote generally for the election of Directors; provided, however, that in the
case of any Directors elected solely by holders of a series of Preferred Stock,
such Directors may be removed for cause and only by the affirmative vote of
two-thirds of the Stock of that series then outstanding and entitled to vote in
the election of Directors, voting together as a single class. At least 30 days
prior to any meeting of Stockholders at which it is proposed that any Director
be removed from office, written notice of such proposed removal shall be sent to
the Director whose removal will be considered at the meeting. For purposes of
the Articles, "cause," with respect to the removal of any Director, shall mean
only (i) conviction of a felony, (ii) declaration of unsound mind by order of
court, (iii) gross dereliction of duty, (iv) commission of any action involving
moral turpitude, or (v) commission of an action which constitutes intentional
misconduct or a knowing violation of law, and in the case of clause (iv) or (v),
above, such action results both in an improper substantial personal benefit and
a material injury to the Corporation.
6.5 Powers. Subject to the express limitations herein or in the Bylaws,
the business and affairs of the Corporation shall be managed under the direction
of the Board of Directors. The Articles shall be construed with a presumption in
favor of the grant of power and authority to the Directors.
ARTICLE VII
STOCK
-----
7.1 Authorized Capital Stock. The total number of shares of stock which
the Corporation has authority to issue (the "Stock") is One Hundred Million
(100,000,000) shares, initially consisting of (i) Seventy Million (70,000,000)
shares of common stock, par value $.01 per share (the "Common Stock"); (ii)
Twenty Million (20,000,000) shares of preferred stock, par value $.01 per share
(the "Preferred Stock"); and (iii) Ten Million (10,000,000) shares of excess
stock, par value $.01 per share (the "Excess Stock"). The aggregate par value of
all the shares of all classes of stock is $1,000,000.
7.2 Preferred Stock. The Board of Directors may issue the Preferred
Stock in one or more series consisting of such numbers of shares and having such
preferences, conversion and other rights, voting powers, restrictions and
limitations as to dividends, qualifications and terms and conditions of
redemption of stock as the Board of Directors may from time to time determine
when designating such series.
7.3 Common Stock.
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<PAGE>
7.3.1 Dividend Rights. Subject to the preferential dividend
rights of Preferred Stock, if any, as may be determined by the Board of
Directors, the holders of shares of Common Stock shall be entitled to
receive such dividends as may be declared by the Board of Directors out
of funds legally available therefor.
7.3.2 Voting Rights. The holders of shares of Common Stock
shall be entitled to vote on all matters submitted to the holders of
Common Stock for a vote at all meetings of the Stockholders, and each
holder of shares of Common Stock shall be entitled to one vote for each
share of Common Stock held by such Stockholder.
7.4 Classification of Stock. The Board of Directors may classify or
reclassify any unissued shares of Stock from time to time by setting or changing
the preferences, conversion and other rights, voting powers, restrictions and
limitations as to dividends, qualifications, and terms and conditions of
redemption of those shares of Stock, including, but not limited to, the
reclassification of unissued shares of Common Stock to shares of Preferred Stock
or shares of Excess Stock, or unissued shares of Preferred Stock to shares of
Common Stock or shares of Excess Stock, or unissued shares of Excess Stock to
shares of Common Stock or shares of Preferred Stock or the issuance of any
rights plan or similar plan.
7.5 Issuance of Stock. The Board of Directors may authorize the
issuance from time to time of shares of Stock of any class, whether now or
hereafter authorized, or securities or rights convertible into shares of Stock,
for such consideration as the Board of Directors may deem advisable (or without
consideration in the case of a share split or dividend), subject to such
restrictions or limitations, if any, as may be lawfully set forth in the Bylaws
of the Corporation.
7.6 Dividends or Distributions. The Directors may from time to time
declare and pay to Stockholders such dividends or distributions in cash,
property or other assets of the Corporation or in securities of the Corporation
or from any other source as the Directors in their discretion shall determine.
ARTICLE VIII
LIMITATION ON PREEMPTIVE RIGHTS
-------------------------------
No holder of any Stock or any other securities of the Corporation,
whether now or hereafter authorized, shall have any preferential or preemptive
rights to subscribe for or purchase any Stock or any other securities of the
Corporation other than such rights, if any, as the Board of Directors, in its
sole discretion may fix; and any Stock or other securities which the Board of
Directors may determine to offer for subscription may, within the Board of
Directors' sole discretion, be offered to the holders of any class, series or
type of Stock or other securities at the time outstanding to the exclusion of
holders of any or all other classes, series or types of Stock or other
securities at the time outstanding.
ARTICLE IX
LIMITATIONS ON TRANSFER AND OWNERSHIP
-------------------------------------
9.1 Limitations on Transfer. Stock (other than Excess Stock) shall be
freely transferable by the record owner thereof, subject to the provisions of
this Article IX, and provided that any purported acquisition or transfer of
Stock that would result in the disqualification of the Corporation as a REIT
shall be void ab initio, except to the extent necessary to give effect to
Section 9.10 hereof. Any purported transfer of Stock that, if effective, would
result in a violation of Section 9.2 (unless excepted from the application of
Section 9.2 pursuant to Section 9.6) shall be void ab initio as to the transfer
of that number of shares of Stock that would otherwise be beneficially owned by
a Stockholder in violation of Section 9.2, the intended transferee of such
shares shall acquire no rights therein and the transfer of such shares will not
be reflected on the Corporation's stock record books. For purposes of this
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Article IX, a "transfer" of shares of Stock shall mean any sale, transfer, gift,
hypothecation, pledge, assignment, or other disposition, whether voluntary or
involuntary, by operation of law or otherwise.
9.2 Limitations on Ownership. Except as provided by Section 9.6, no
person except as described below shall at any time directly or indirectly
acquire or hold beneficial ownership of shares of any class or series of Stock
with an aggregate value in excess of 7.5% of the aggregate value of all
outstanding Stock of the Corporation (the "Ownership Limit"). Any entity, the
ownership of whose Stock is attributed to the owners of such entity under
Sections 544 and 856(h) of the Code, will be "looked-through" for purposes of
the Ownership Limit. Notwithstanding the foregoing, the Board of Directors may,
in its sole discretion, waive the Ownership Limit with respect to any
transaction if it is satisfied, based on the advice of tax counsel, that
ownership in excess of this limit will not jeopardize the Corporation's status
as a REIT and it otherwise decides that such action is in the best interests of
the Corporation.
For purposes of this Article IX, (a) the value of any share of Stock
shall be determined in the manner established by the Board of Directors, and (b)
a person (which includes natural persons, corporations, trusts, partnerships,
and other entities) shall be deemed to be the beneficial owner of the Stock that
such person (i) actually owns, (ii) constructively owns after applying the rules
of Section 544 of the Code as modified in the case of a REIT by Section 856(h)
of the Code, and (iii) has the right to acquire upon exercise of outstanding
rights, options and warrants, and upon conversion of any securities convertible
into Stock, if any.
9.3 Stockholder Information. Each stockholder shall, upon demand of the
Corporation, disclose to the Corporation in writing such information with
respect to his or its direct and indirect beneficial ownership of the Stock as
the Board of Directors in its discretion deems necessary or appropriate in order
that the Corporation may fully comply with all provisions of the Code relating
to REITs and all regulations, rulings and cases promulgated or decided
thereunder (the "REIT Provisions") and to comply with the requirements of any
taxing authority or governmental agency.
9.4 Transferee Information. Whenever the Board of Directors deems it
reasonably necessary to protect the tax status of the Corporation as a REIT
under the REIT Provisions, the Board of Directors may require a statement or
affidavit from each stockholder or proposed transferee of Stock setting forth
the number of shares of Stock already beneficially owned by such proposed
transferee and any related person specified by the Board of Directors. If the
Board of Directors determines in good faith that any proposed transfer may
jeopardize the qualification of the Corporation as a REIT, the Board of
Directors shall have the right, but not the duty, to refuse to permit the
transfer of such Stock to the proposed transferee. All contracts for the sale or
other transfer of Stock shall be subject to this Section 9.4.
9.5 Excess Stock.
9.5.1 Exchange for Excess Stock. If, notwithstanding the other
provisions contained in this Article IX, at any time there is a
purported transfer of Stock or a change in the capital structure of the
Corporation (including any redemption of Excess Stock pursuant to
Subsection 9.5.7) as a result of which any person would beneficially
own Stock in excess of the Ownership Limit, then, except as otherwise
provided in Section 9.6, such shares of Stock in excess of the
Ownership Limit (rounded up to the nearest whole share) shall
automatically and without further action be exchanged for an equal
number of shares of Excess Stock. Such exchange shall be effective as
of the close of business on the business day prior to the date of the
purported transfer of Stock or the change in capital structure. The
shares of Common Stock which were exchanged for shares of Excess Stock
shall revert to the Corporation, subject to the provisions of
Subsection 9.5.6.
9.5.2 Ownership in Trust. Upon any purported transfer of
Stock that results in an exchange for Excess Stock pursuant to
Subsection 9.5.1, such shares of Excess Stock shall be deemed to have
been transferred to the Corporation, as trustee of a separate trust for
the exclusive benefit of the person or persons to whom such Excess
Stock can ultimately be transferred without violating the Ownership
Limit. Shares of Excess Stock so held in trust shall be issued and
outstanding Stock of the Corporation. The
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purported transferee of Excess Stock shall have no rights in such
Excess Stock, except the right to designate a transferee of its
interest in the trust created under this Subsection 9.5.2 upon the
terms specified in Subsection 9.5.6. If any of the restrictions on
transfer set forth in this Article IX are determined to be void,
invalid or unenforceable by virtue of any legal decision, statute, rule
or regulation, then the intended transferee of any Excess Stock may be
deemed, at the option of the Corporation, to have acted as an agent on
behalf of the Corporation in acquiring the Excess Stock and to hold the
Excess Stock on behalf of the Corporation.
9.5.3 Dividend Rights. Excess Stock shall not be entitled to
any dividends. Any dividend or distribution paid prior to the discovery
by the Corporation that shares of Stock have been exchanged for Excess
Stock shall be repaid to the Corporation upon demand, and any dividend
or distribution declared but unpaid shall be rescinded as void ab
initio with respect to such shares of Excess Stock.
9.5.4 Rights Upon Liquidation. Subject to the preferential
rights of Preferred Stock, if any, as may be determined by the Board of
Directors and the preferential rights of Excess Preferred Stock (as
defined below), if any, in the event of any voluntary or involuntary
liquidation, dissolution or winding up of, or any distribution of the
assets of, the Corporation, the trustee holding any shares of Excess
Common Stock shall be entitled to receive, ratably with each other
holder of shares of Common Stock or Excess Common Stock, that portion
of the assets of the Corporation available for distribution to the
holders of Common Stock and Excess Common Stock as the number of shares
of Excess Common Stock held by such holder bears to the total number of
shares of Common Stock and Excess Common Stock then outstanding. In the
event of any voluntary or involuntary liquidation, dissolution or
winding up of, or any distribution of the assets of, the Corporation,
the trustee holding any shares of Excess Stock issued upon the exchange
of Preferred Stock (the "Excess Preferred Stock") shall be entitled to
receive the pro rata share of the assets of the Corporation available
for distribution to the holders of Preferred Stock of the series for
which such Excess Stock was exchanged which such holder of Excess
Preferred Stock would be entitled to receive if such shares of Excess
Preferred Stock were shares of Preferred Stock of the series from which
such Excess Preferred Stock was exchanged. The Corporation, as the
holder of all Excess Stock in one or more trusts, or, if the
Corporation shall have been dissolved, any trustee appointed by the
Corporation prior to its dissolution, shall distribute to each
transferee of an interest in such a trust pursuant to Subsection 9.5.6
hereof, when determined, any assets received in any liquidation,
dissolution or winding up of, or any distribution of the assets of, the
Corporation in respect of the Excess Stock held in such trust and
represented by the trust interest transferred to such transferee.
9.5.5 Voting Rights. No stockholder may vote any shares of
Excess Stock. The shares of Excess Stock will not be considered to be
issued or outstanding for purposes of any Stockholder vote or for
purposes of determining a quorum for such a vote.
9.5.6 Restrictions on Transfer. Excess Stock shall not be
transferable. The purported transferee of any shares of Stock that are
exchanged for Excess Stock pursuant to Section 9.5.1 may freely
designate a transferee of the interest in the trust that represents
such shares of Excess Stock, if (a) the shares of Excess Stock held in
the trust and represented by the trust interest to be transferred would
not be Excess Stock in the hands of the transferee of the trust
interest and (b) the transferor of the trust interest does not receive
a price for the trust interest in excess of (i) the price such
transferor paid for the Stock in the purported transfer of Stock that
resulted in the Excess Stock represented by the trust interest, or (ii)
if such transferor did not give value for such Stock (e.g., the shares
were received through a gift, devise or other transaction), a price
equal to the aggregate Market Price (as defined in Subsection 9.5.7)
for all shares of the Stock that were exchanged for Excess Stock on the
date of the purported transfer that resulted in the Excess Stock. No
interest in a trust may be transferred unless the transferor of such
interest has given advance notice to the Corporation of the intended
transferee and the Corporation has agreed in writing to waive its
redemption rights under Subsection 9.5.7. Upon the transfer of an
interest in a trust in compliance with this Subsection 9.5.6, the
corresponding shares of Excess Stock that are represented by the
transferred interest in the trust shall be automatically exchanged for
an equal number of shares of Stock of the same class and series from
which they were originally exchanged and such shares of Stock
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shall be transferred of record to the transferee of the interest in the
trust. Upon any exchange of Excess Stock for Stock of another class,
the interest in the trust representing such Excess Stock shall
automatically terminate.
9.5.7 Corporation's Redemption Right. All shares of Excess
Stock shall be deemed to have been offered for sale to the Corporation,
or its designee, at a price per share equal to the lesser of (a) the
price per share of Stock in the transaction that created such Excess
Stock (or, in the case of devise or gift, the Market Price per share of
such Stock at the time of such devise or gift) or (b) the Market Price
per share of Stock of the class of Stock for which such Excess Stock
was exchanged on the date the Corporation, or its designee, accepts
such offer. The Corporation shall have the right to accept such offer
at any time until the date ninety (90) days after the date on which the
purported owner or transferee gives written notice to the Corporation
of any event (including, without limitation, redemptions or repurchases
of Stock by the Corporation) or any purported transfer that results in
the exchange of Stock for such Excess Stock and the nature and amount
of all ownership interests, direct or indirect, of record or
beneficial, of such purported owner or transferee, or, if no such
notice is given, the date the Board of Directors determines that a
purported transfer resulting in the exchange of Stock for such Excess
Stock has been made. For purposes of this Article IX, "Market Price"
means for any share of Stock, the average daily per share closing sales
price of a share of such Stock if shares of such Stock are listed on a
national securities exchange or quoted on the National Association of
Securities Dealers Automated Quotation National Market (the "NASDAQ
NM"), and if such shares are not so listed or quoted, the Market Price
shall be the mean between the average per share closing bid prices and
the average per share closing asked prices, in each case during the
30-day period ending on the business day prior to the redemption date,
or if there have been no sales on a national securities exchange or on
the NASDAQ NM and no published bid and asked quotations with respect to
shares of such Stock during the 30-day period, the Market Price shall
be the price determined by the Board of Directors in good faith. Unless
the Board of Directors determines that it is in the interest of
Corporation to make earlier payment of all of the amount determined as
the redemption payment for Stock redeemed in accordance with this
Section 9.5.7, the redemption payment shall be paid to the transferee
of the trust interest representing the redeemed Excess Stock only upon
the liquidation of the Corporation and shall not exceed an amount equal
to the lesser of the price determined pursuant to the first sentence of
this Subsection 9.5.7 or the product of (x) the number of Excess Shares
redeemed, multiplied by (y) the sum of the per share distributions
designated as liquidating distributions and return of capital
distribution declared subsequent to the redemption date with respect to
unredeemed shares of Stock of the class for which the redeemed Excess
Stock was exchanged. No interest shall accrue on any redemption payment
with respect to the period subsequent to the redemption date to the
date of the redemption payment.
9.6 Exceptions to Certain Ownership and Transfer Limitations. The
Ownership Limit set forth in Section 9.2 shall not apply to the following shares
of Stock and such shares shall not be deemed to be Excess Stock at the times and
subject to the terms and conditions set forth in this Section 9.6:
9.6.1 Subject to the provisions of Section 9.7, shares of
Stock which the Board of Directors in its sole discretion may exempt
from the Ownership Limit while owned by a person who has provided the
Corporation with evidence and assurances acceptable to the Board of
Directors that the qualification of the Corporation as a REIT would not
be jeopardized thereby.
9.6.2 Subject to the provisions of Section 9.7, shares of
Stock acquired and held by an underwriter in a public offering of
Stock, or in any transaction involving the issuance of Stock by the
Corporation in which the Board of Directors determines that the
underwriter or other person or party initially acquiring such Stock
will make a timely distribution of such Stock to or among other holders
such that, following such distribution, the Corporation will continue
to be in compliance with the REIT Provisions.
9.6.3 Shares of Stock acquired pursuant to an all cash tender
offer made for all outstanding shares of Stock of the Corporation in
conformity with applicable federal and state securities laws where
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not less than eighty percent (80%) of the outstanding Stock (not
including Stock or securities convertible into Stock held by the tender
offeror and/or any "affiliates" or "associates" thereof within the
meaning of the Securities Exchange Act of 1934, as amended) are duly
tendered and accepted pursuant to the cash tender offer and where the
tender offeror commits in such tender offer, if the tender offer is so
accepted by the holders of such eighty percent (80%) of the outstanding
Stock, as promptly as practicable thereafter to give any holders who
did not accept such tender offer a reasonable opportunity to put their
Stock to the tender offeror at a price not less than the price per
share paid for Stock tendered pursuant to the tender offer.
9.7 Authority to Revoke Exceptions to Limitations. The Board of
Directors, in its sole discretion, may at any time revoke any exception pursuant
to Subsections 9.6.1, 9.6.2 or 9.6.3 in the case of any stockholder, and upon
such revocation, the provisions of Sections 9.2 and 9.5 shall immediately become
applicable to such stockholder and all Stock of which such stockholder may be
the beneficial owner. A decision to exempt or refuse to exempt from the
Ownership Limit the ownership of certain designated shares of Stock, or to
revoke an exemption previously granted, shall be made by the Board of Directors
in its sole discretion, based on any reason whatsoever, including, but not
limited to, the preservation of the Corporation's qualification as a REIT.
9.8 Controlling Provision. Except as provided in Article 15, to the
extent this Article IX may be inconsistent with any other provision of the
Articles, this Article IX shall be controlling.
9.9 Authority of the Board of Directors. Subject to Section 9.10
hereof, nothing else contained in this Article IX or in any other provision of
the Articles shall limit the authority of the Board of Directors to take such
action as it deems necessary or advisable to protect the Corporation and the
interests of the Stockholders by preservation of the Corporation's qualification
as a REIT under the REIT Provisions. In applying the provisions of this Article
IX, the Board of Directors may take into account the lack of certainty in the
REIT Provisions relating to the ownership of stock that may prevent a
corporation from qualifying as a REIT and may make interpretations concerning
the Ownership Limit, Excess Stock, beneficial ownership and related matters on
as conservative a basis as the Board of Directors deems advisable to minimize or
eliminate uncertainty as to the Corporation's continued qualification as a REIT.
Notwithstanding any other provision of the Articles, if the Board of Directors
determines that it is no longer in the best interests of the Corporation and the
Stockholders to continue to have the Corporation qualify as a REIT, the Board of
Directors may revoke or otherwise terminate the Corporation's REIT election
pursuant to Section 856(g) of the Code.
9.10 New York Stock Exchange. Nothing in the Articles shall preclude
the settlement of any transaction entered into through the facilities of the New
York Stock Exchange or of any other stock exchange on which shares of stock of
the Corporation may be listed and which have conditioned such listing on the
inclusion in the Articles of a provision such as this Section 9.10. The fact
that the settlement of any transaction is permitted shall not negate the effect
of any other provision of this Article IX, and any transferee in such a
transaction and the shares so transferred shall be subject to all of the other
provisions and limitations of this Article IX.
ARTICLE X
RIGHTS AND POWERS OF CORPORATION,
---------------------------------
BOARD OF DIRECTORS AND OFFICERS
-------------------------------
In carrying on its business, or for the purpose of attaining or
furthering any of its objectives, the Corporation shall have all of the rights,
powers and privileges granted to corporations by the laws of the State of
Maryland, as well as the power to do any and all acts and things that a natural
person or partnership could do as now or hereafter authorized by law, either
alone or in partnership or conjunction with others. Except as otherwise provided
in the Articles or the Bylaws of the Corporation, as amended from time to time,
the business of the Corporation shall be managed by its Board of Directors. The
Board of Directors shall have and may exercise all the rights, powers and
privileges of the Corporation except those that are by law, the Articles or the
Bylaws of the Corporation, conferred upon or reserved to the Stockholders.
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ARTICLE XI
STOCKHOLDER ACTION
------------------
11.1 Quorum. At any meeting of Stockholders, the presence in person or
by proxy of Stockholders entitled to cast a majority of all the votes entitled
to be cast at the meeting shall constitute a quorum.
11.2 Vote Required. A majority of the votes cast at a meeting of
Stockholders at which a quorum is present shall be sufficient to take or
authorize action upon any matter which may properly come before the meeting,
unless more than a majority of the votes cast is specifically required by law or
the Articles. Unless otherwise provided by law or the Articles, each outstanding
share of Stock, regardless of class, shall be entitled to one vote upon each
matter submitted to a vote at a meeting of Stockholders. Shares of Stock
directly or indirectly owned by the Corporation shall not be voted in any
meeting and shall not be counted in determining the total number of outstanding
shares of Stock entitled to vote at any given time, but Stock held by it in a
fiduciary capacity (other than "Excess Stock" held by it in accordance with
Article 9.5.2) may be voted and shall be counted in determining the total number
of outstanding shares of Stock at any given time.
11.3 Informal Action. Any action required or permitted to be taken by
the Stockholders at any annual or special meeting of Stockholders may be taken
without a meeting if (i) a unanimous written consent which sets forth the action
taken and which is signed by each Stockholder entitled to vote on the matter and
(ii) a written waiver of any right to dissent signed by each Stockholder
entitled to notice of such meeting but not entitled to vote at such meeting, are
filed with the records of Stockholders meetings. Such consents and waivers may
be signed by different Stockholders on separate counterparts.
ARTICLE XII
INDEMNIFICATION
---------------
The Board of Directors shall have the power to adopt Bylaws or
resolutions for the indemnification of the Corporation's directors, officers,
employees and agents, provided that any such Bylaws or resolutions shall be
consistent with applicable law.
ARTICLE XIII
LIMITATION OF LIABILITY
-----------------------
To the fullest extent permitted under the MGCL as in effect on the date
of filing the Articles or as the MGCL is thereafter amended from time to time,
no Director or officer shall be liable to the Corporation or its Stockholders
for money damages. Neither the amendment or the repeal of this Article XIII, nor
the adoption of any other provision in the Articles inconsistent with this
Article XIII, shall eliminate or reduce the protection afforded by this Article
XIII to a Director or officer of the Corporation with respect to any matter
which occurred, or any cause of action, suit or claim which but for this Article
XIII would have accrued or arisen, prior to such amendment, repeal or adoption.
ARTICLE XIV
STOCKHOLDER VOTE REQUIRED FOR CERTAIN TRANSACTIONS
--------------------------------------------------
No (i) sale, lease or exchange of all or substantially all of the
property or assets, including goodwill, of the Corporation or (ii) share
exchange or merger or consolidation of the Corporation with or into any other
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<PAGE>
corporation, shall be effected unless the same is first approved by the Board of
Directors pursuant to a resolution adopted by the Board of Directors in
accordance with Section 3-105(b) of the MGCL and by a majority of the
"Continuing Directors" (as defined below), and, except as otherwise provided by
law, thereafter approved by the Stockholders. Whenever any vote of the holders
of voting stock is required, and in addition to any other vote of holders of
voting stock that is required by the Articles or by law, the affirmative vote of
at least two-thirds of all the votes cast on such sale, lease or exchange, share
exchange, merger or consolidation, by holders of voting stock, voting together
as a single class, at any annual meeting of Stockholders or special meeting of
Stockholders called for such purpose, shall be required to approve such sale,
lease or exchange, share exchange, merger or consolidation.
For the purpose of the Articles, the term "Continuing Directors" shall
mean any member of the Board of Directors who was a duly appointed Trustee
immediately prior to the merger of HRE Properties with and into the Corporation
(pursuant to which merger the Corporation was the surviving entity) or whose
nomination for election to the Board of Directors was recommended or approved by
a majority of the Continuing Directors then in office.
ARTICLE XV
PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS
----------------------------------------------
15.1 The provisions of the Articles are severable, and if the Directors
shall determine that any one or more of such provisions are in conflict with the
REIT Provisions, or other applicable federal or state laws, the conflicting
provisions shall be deemed never to have constituted a part of the Articles,
even without any amendment of the Articles pursuant to Article XVII hereof;
provided, however, that such determination by the Directors shall not affect or
impair any of the remaining provisions of the Articles or render invalid or
improper any action taken or omitted prior to such determination. No Director
shall be liable for making or failing to make such a determination.
15.2 If any provision of the Articles or any application of such
provision shall be held invalid or unenforceable by any federal or state court
having jurisdiction, such holding shall not in any manner affect or render
invalid or unenforceable such provision in any other jurisdiction, and the
validity of the remaining provisions of the Articles shall not be affected.
Other applications of such provision shall be affected only to the extent
necessary to comply with the determination of such court.
ARTICLE XVI
AMENDMENT OF BYLAWS BY DIRECTORS
--------------------------------
The Board of Directors shall have the power, at any regular or special
meeting of the Board of Directors, to make and adopt, or to amend, rescind,
alter or repeal, any Bylaws of the Corporation. The Bylaws may contain any
provision for the regulation and management of the affairs of the Corporation
not inconsistent with law or the provisions of the Articles of Incorporation.
ARTICLE XVII
AMENDMENT OF ARTICLES
---------------------
The Corporation reserves the right to repeal, alter, amend or rescind
any provision contained in the Articles of Incorporation, including without
limitation any amendment to change the terms or contract rights, as expressly
set forth in the Articles, of any of its outstanding stock by classification,
reclassification or otherwise, in the manner now or hereafter prescribed by
statute, and all rights conferred on Stockholders herein are granted subject to
this reservation. The affirmative vote of a majority of the Directors, including
a majority of the Continuing Directors, shall be required to amend, repeal or
modify any provision of the Articles. Notwithstanding the foregoing, any
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amendment, repeal or other modification of the provisions of Article VI, Article
IX, Article XII, Article XIII, Article XIV, Article XVI and this Article XVII
hereof shall require, in addition to the other applicable requirements of the
Articles of Incorporation and of law, the affirmative vote of at least
two-thirds of the Stock then outstanding and entitled to vote generally in this
election of directors. All other amendments to the Articles shall require the
affirmative vote of a majority of the vote entitled to be cast then outstanding
and entitled to be cast on the matter.
The provision of Section 3-602 of Title III of the MGCL, as the same
may be amended or re-enacted, or any successor provisions thereto, shall not
apply to any business combination (as defined in Section 3-601 of Title III of
the MGCL) involving (i) the Corporation and HRE Properties, a Massachusetts
business trust ("HRE Properties") or (ii) any person, who, as of December 31,
1996, was the "beneficial owner" (as such term is defined in Section 3-601 of
Title III of the MGCL) of in excess of 20% of the outstanding shares of
beneficial interests in HRE Properties, and who, by virtue of the merger of HRE
Properties with and into the Corporation, will own a similar percentage of the
Corporation Common Stock or any of such person's affiliates or associates (as
such terms are defined in Section 3-601 of Title III of the MGCL).
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IN WITNESS WHEREOF, the undersigned acknowledges these Articles of
Incorporation to be my act this 30th day of December, 1996
/s/ J. W. Thompson Webb
-------------------------------
Name: J. W. Thompson Webb
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EXHIBIT D
---------
BY-LAWS
OF
HRE PROPERTIES, INC.
D-1
<PAGE>
BYLAWS
OF
HRE PROPERTIES, INC.
TABLE OF CONTENTS
Page
----
ARTICLE I MEETINGS OF STOCKHOLDERS................................ D-4
1.01 PLACE................................................... D-4
1.02 ANNUAL MEETING.......................................... D-4
1.03 MATTERS TO BE CONSIDERED AT ANNUAL MEETING.............. D-4
1.04 SPECIAL MEETINGS........................................ D-5
1.05 NOTICE.................................................. D-5
1.06 SCOPE OF NOTICE......................................... D-5
1.07 ADJOURNMENT............................................. D-5
1.08 PROXIES................................................. D-6
1.09 CONDUCT OF MEETINGS.................................... D-6
1.10 TABULATION OF VOTES.................................... D-6
1.11 VOTING BY BALLOT....................................... D-6
ARTICLE II DIRECTORS.............................................. D-6
2.01 GENERAL POWERS......................................... D-6
2.02 OUTSIDE ACTIVITIES..................................... D-6
2.03 NUMBER, TENURE AND QUALIFICATION........................ D-7
2.04 NOMINATION OF DIRECTORS................................. D-7
2.05 ANNUAL AND REGULAR MEETINGS.............................. D-8
2.06 SPECIAL MEETINGS......................................... D-8
2.07 NOTICE................................................... D-8
2.08 QUORUM................................................... D-8
2.09 VOTING................................................... D-9
2.10 CONDUCT OF MEETINGS...................................... D-9
2.11 RESIGNATIONS............................................. D-9
2.12 REMOVAL OF DIRECTORS..................................... D-9
2.13 VACANCIES................................................ D-9
2.14 INFORMAL ACTION BY DIRECTORS............................. D-9
2.15 COMPENSATION............................................. D-9
ARTICLE III COMMITTEES............................................... D-9
3.01 NUMBER, TENURE AND QUALIFICATION......................... D-9
3.02 DELEGATION OF POWER..................................... D-10
3.03 QUORUM AND VOTING....................................... D-10
3.04 CONDUCT OF MEETINGS..................................... D-10
3.05 INFORMAL ACTION BY COMMITTEES........................... D-10
ARTICLE IV BOARD OF CONSULTANTS.................................... D-10
4.01 APPOINTMENT. ........................................... D-10
4.02 MEMBERS................................................. D-10
4.03 MEETINGS. ............................................. D-10
4.04 AUTHORITY............................................... D-10
D-2
<PAGE>
ARTICLE V OFFICERS................................................ D-11
5.01 TITLES AND ELECTION..................................... D-11
5.02 REMOVAL................................................. D-11
5.03 VACANCIES............................................... D-11
5.04 CHAIRMAN OF THE BOARD................................... D-11
5.05 PRESIDENT............................................... D-11
5.06 VICE PRESIDENTS......................................... D-11
5.07 SECRETARY............................................... D-11
5.08 TREASURER............................................... D-12
5.09 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS.......... D-12
5.10 SUBORDINATE OFFICERS.................................... D-12
5.11 COMPENSATION............................................ D-12
ARTICLE VI SHARES OF STOCK......................................... D-12
6.01 CERTIFICATES FOR STOCK.................................. D-12
6.02 STOCK LEDGER............................................ D-13
6.03 RECORDING TRANSFER OF STOCK............................. D-13
6.04 LOST CERTIFICATE........................................ D-13
6.05 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE...... D-13
ARTICLE VII DIVIDENDS AND DISTRIBUTIONS............................. D-14
7.01 DECLARATIONS........................................... D-14
7.02 CONTINGENCIES.......................................... D-14
ARTICLE VIII INDEMNIFICATION........................................ D-14
8.01 INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES... D-14
8.02 STANDARD. ............................................. D-14
8.03 ADVANCE PAYMENT OF EXPENSES................... D-15
8.04 GENERAL........................................ D-15
ARTICLE IX NOTICES................................................. D-15
9.01 NOTICES................................................. D-15
9.02 SECRETARY TO GIVE NOTICE................................ D-15
9.03 WAIVER OF NOTICE........................................ D-15
ARTICLE X MISCELLANEOUS........................................... D-16
10.01 BOOKS AND RECORDS....................................... D-16
10.03 CONTRACTS............................................... D-16
10.04 CHECKS, DRAFTS, ETC..................................... D-16
10.05 LOANS................................................... D-16
10.06 FISCAL YEAR............................................. D-16
10.07 ANNUAL REPORT........................................... D-16
10.08 INTERIM REPORTS......................................... D-16
10.09 OTHER REPORTS........................................... D-17
10.10 BYLAWS SEVERABLE........................................ D-17
ARTICLE XI AMENDMENT OF BYLAWS.................................... .D-17
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ARTICLE I
MEETINGS OF STOCKHOLDERS
------------------------
1.01 PLACE. All meetings of the holders of the issued and outstanding
common stock and preferred stock of the Corporation (the "Stockholders") shall
be held at the principal executive office of the Corporation or such other place
within the United States as shall be stated in the notice of the meetings.
1.02 ANNUAL MEETING. An annual meeting of the Stockholders for the
election of Directors and the transaction of such other business as properly may
be brought before the meeting shall be held in March of each year or at such
other date and time as may be fixed by the Board of Directors. If the date fixed
for the annual meeting shall be a legal holiday, such meeting shall be held on
the next succeeding business day. If no annual meeting is held on the date
designated, a special meeting in lieu thereof may be held, and such special
meeting shall have, for purposes of these Bylaws or otherwise, all the force and
effect of an annual meeting. Any and all references hereafter in these Bylaws to
an annual meeting or to annual meetings shall be deemed to refer also to any
special meeting(s) in lieu thereof. Failure to hold an annual meeting shall not
invalidate the Corporation's existence or affect any otherwise valid acts of the
Corporation.
1.03 MATTERS TO BE CONSIDERED AT ANNUAL MEETING. At any annual meeting
of Stockholders or any special meeting in lieu of the annual meeting of
Stockholders (the "Annual Meeting"), only such business shall be conducted, and
only such proposals shall be acted upon, as shall have been properly brought
before each Annual Meeting. To be considered as properly brought before an
Annual Meeting, business must be: (a) specified in the notice of meeting, (b)
otherwise properly brought before the meeting by, or at the direction of, the
Board of Directors, or (c) otherwise properly brought before the meeting by any
holder of record (both as of the time notice of such proposal is given by the
Stockholder as set forth below and as of the record date for the Annual Meeting
in question) of any shares of capital stock of the Corporation entitled to vote
at such Annual Meeting who complies with the requirements set forth in this
Section 1.03.
In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by a Stockholder of record of any
shares of capital stock entitled to vote at such Annual Meeting, such
Stockholder shall: (i) give timely notice as required by this Section 1.03 to
the Secretary of the Corporation and (ii) be present at such meeting, either in
person or by a representative. For the first Annual Meeting of the Corporation a
Stockholder's notice shall be timely delivered to, or mailed to and received by,
the Corporation at its principal executive office not later than the close of
business on the later of (A) the 75th day prior to the scheduled date of such
Annual Meeting or (B) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made by the
Corporation. For all subsequent Annual Meetings, a Stockholder's notice shall be
timely if delivered to, or mailed to and received by, the Corporation at its
principal executive office not less than 75 days nor more than 120 days prior to
the anniversary date of the immediately preceding Annual Meeting (the
"Anniversary Date"); provided, however, that in the event the Annual Meeting is
scheduled to be held on a date more than 30 days before the Anniversary Date or
more than 60 days after the Anniversary Date, a Stockholder's notice shall be
timely if delivered to, or mailed to and received by, the Corporation at its
principal executive office not later than the close of business on the later of
(A) the 75th day prior to the scheduled date of such Annual Meeting or (B) the
15th day following the day on which public announcement of the date of such
Annual Meeting is first made by the Corporation.
For purposes of these Bylaws, "public announcement" shall mean: (i)
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service, (ii) a report or other document filed
publicly with the Securities and Exchange Commission (including, without
limitation, a Form 8-K), or (iii) a letter or report sent to Stockholders of
record of the Corporation at the time of the mailing of such letter or report.
A Stockholder's notice to the Secretary shall set forth as to each
matter proposed to be brought before an Annual Meeting: (i) a brief description
of the business the Stockholder desires to bring before such Annual Meeting and
the reasons for conducting such business at such Annual Meeting, (ii) the name
and address, as they appear on the Corporation's stock transfer books, of the
Stockholder proposing such business, (iii) the class and number of
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shares of the Corporation's capital stock beneficially owned by the Stockholder
proposing such business, (iv) the names and addresses of the beneficial owners,
of any capital stock of the Corporation registered in such Stockholder's name on
such books, and the class and number of shares of the Corporation's capital
stock beneficially owned by such beneficial owners, (v) the names and addresses
of other Stockholders known by the Stockholder proposing such business to
support such proposal, and the class and number of shares of the Corporation's
capital stock beneficially owned by such other Stockholders; and (vi) any
material interest of the Stockholder proposing to bring such business before
such meeting (or any other Stockholders known to be supporting such proposal) in
such proposal.
If the Board of Directors or a designated committee thereof determines
that any Stockholder proposal was not made in a timely fashion in accordance
with the provisions of this Section 1.03 or that the information provided in a
Stockholder's notice does not satisfy the information requirements of this
Section 1.03 in any material respect, such proposal shall not be presented for
action at the Annual Meeting in question. If neither the Board of Directors nor
such committee makes a determination as to the validity of any Stockholder
proposal in the manner set forth above, the presiding officer of the Annual
Meeting shall determine whether the Stockholder proposal was made in accordance
with the terms of this Section 1.03. If the presiding officer determines that
any Stockholder proposal was not made in a timely fashion in accordance with the
provisions of this Section 1.03 or that the information provided in a
Stockholder's notice does not satisfy the information requirements of this
Section 1.03 in any material respect, such proposal shall not be presented for
action at the Annual Meeting in question. If the Board of Directors, a
designated committee thereof or the presiding officer determines that a
Stockholder proposal was made in accordance with the requirements of this
Section 1.03, the presiding officer shall so declare at the Annual Meeting and
ballots shall be provided for use at the meeting with respect to such proposal.
Notwithstanding the foregoing provisions of this Bylaw, a Stockholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder with respect to the matters set forth in this Bylaw, and nothing in
this Bylaw shall be deemed to affect any rights of Stockholders to request
inclusion of proposals in the Corporation's proxy statement pursuant to Rule
14a-8 under the Exchange Act.
1.04 SPECIAL MEETINGS. The Chairman of the Board, the President or a
majority of the Board of Directors may call special meetings of the
Stockholders. In addition, the Secretary of the Corporation shall call a special
meeting of the Stockholders on the written request of Stockholders entitled to
cast at least a majority of all the votes entitled to be cast at the meeting.
1.05 NOTICE. Not fewer than ten (10) nor more than ninety (90) days
before the date of every meeting of Stockholders, written or printed notice of
such meeting shall be given in accordance with Article 9, to each Stockholder
entitled to vote or entitled to notice by statute, stating the time and place of
the meeting and, in the case of a special meeting or as otherwise may be
required by statute, the purpose or purposes for which the meeting is called.
1.06 SCOPE OF NOTICE. No business shall be transacted at a special
meeting of Stockholders except that specifically designated in the notice of the
meeting. Any business of the Corporation may be transacted at the annual meeting
without being specifically designated in the notice, except such business as is
required by statute to be stated in such notice.
1.07 ADJOURNMENT. When any meeting is convened, the presiding officer
may adjourn the meeting if (a) no quorum is present for the transaction of
business, (b) the Board of Directors determines that adjournment is necessary or
appropriate to enable the Stockholders to consider full information which the
Board of Directors determines has not been made sufficiently or timely available
to Stockholders, or (c) the Board of Directors determines that adjournment is
otherwise in the best interests of the Corporation. When any Annual Meeting or
special meeting of Stockholders is adjourned to another hour, date or place,
notice need not be given of the adjourned meeting other than an announcement at
the meeting at which the adjournment is taken of the hour, date and place to
which the meeting is adjourned; provided, however, that if the adjournment is
for more than 120 days after the original record date, notice of the adjourned
meeting shall be given to each Stockholder of record entitled to vote thereat
and each Stockholder who by law or under the Articles or these Bylaws is
entitled to such notice.
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At any adjourned meeting at which a quorum is present, any business may
be transacted that might have been transacted at the meeting as originally
notified. The Stockholders present at a meeting which has been duly called and
convened and at which a quorum is present at the time counted may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
Stockholders to leave less than a quorum.
1.08 PROXIES. A Stockholder may vote the Shares owned of record by him
or her, either in person or by proxy executed in writing by the Stockholder or
by his or her duly authorized attorney in fact. Such proxy shall be filed with
the Secretary of the Corporation before or at the time of the meeting. No proxy
shall be valid after eleven (11) months from the date of its execution, unless
otherwise provided in the proxy.
1.09 CONDUCT OF MEETINGS. The Chairman of the Board or, in the absence
of the Chairman, the President or any Vice President, or, in the absence of the
Chairman, President or any Vice Presidents, a presiding officer elected at the
meeting, shall preside over meetings of Stockholders. The Secretary of the
Corporation, or, in the absence of the Secretary and Assistant Secretaries, the
person appointed by the presiding officer of the meeting shall act as secretary
of such meeting.
1.10 TABULATION OF VOTES. At any annual meeting of Stockholder, the
presiding officer shall be authorized to appoint one or more persons as tellers
for such meeting (the "Teller" or "Tellers"). The Teller may, but need not, be
an officer or employee of the Corporation. The Teller shall be responsible for
tabulating or causing to be tabulated the shares voted at the meeting and
reviewing or causing to be reviewed all proxies. In tabulating votes, the Teller
shall be entitled to rely in whole or in part on tabulations and analyses made
by personnel of the Corporation, its counsel, its transfer agent, its registrar
or such other organizations that are customarily employed to provide such
services. The Teller may be authorized by the presiding officer to determine on
a preliminary basis the legality and sufficiency of all votes cast and proxies
delivered under the Articles, Bylaws and applicable law. The presiding officer
may review all preliminary determinations made by the Teller hereunder, and in
doing so, the presiding officer shall be entitled to exercise his or her sole
judgment and discretion and he or she shall not be bound by any preliminary
determinations made by the Teller. Each report of the Teller shall be in writing
and signed by him or her or by a majority of them if there is more than one. The
report of the majority shall be the report of the Tellers.
1.11 VOTING BY BALLOT. Voting on any question or in any election may be
viva voce unless the presiding officer shall order or any Stockholder shall
demand that voting be by ballot.
ARTICLE II
DIRECTORS
---------
2.01 GENERAL POWERS. The business and affairs of the Corporation shall
be managed by its Board of Directors. All powers of the Corporation may be
exercised by or under the authority of the Board of Directors, except as
conferred on or reserved to the Stockholders by statute, the Articles or these
Bylaws.
2.02 OUTSIDE ACTIVITIES. The Board of Directors and its members are
required to spend only such time managing the business and affairs of the
Corporation as is necessary to carry out their duties in accordance with Section
2-405.1 of the Maryland General Corporation Law (the "MGCL"). The Board of
Directors, each Director, and the agents, officers and employees of the
Corporation or of the Board of Directors or of any Director may engage with or
for others in business activities of the types conducted by the Corporation.
Except as set forth in the Articles or by separate agreement, none of such
individuals has an obligation to notify or present to the Corporation or each
other any investment opportunity that may come to such person's attention even
though such investment might be within the scope of the Corporation's purposes
or various investment objectives. Any interest (including any interest as
defined in Section 2-419(a) of the MGCL) that a Director has in any investment
opportunity presented to the Corporation must be disclosed by such Director to
the Board of Directors (and, if voting thereon, to the Stockholders or to any
committee of the Board of Directors) within ten (10) days after the later of the
date upon which such Director becomes aware of such interest or the date upon
which such Director becomes aware that the Corporation is considering such
investment opportunity. If such interest comes to the
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interested Director's attention after a vote to take such investment
opportunity, the voting body shall be notified of such interest and shall
reconsider such investment opportunity if not already consummated or
implemented.
2.03 NUMBER, TENURE AND QUALIFICATION. The number of Directors of the
Corporation shall be seven. The number of directors may be changed from time to
time by an amendment of this Bylaw provision. No reduction in the number of
Directors shall cause the removal of any Director from office prior to the
expiration of his or her term. Each Director shall serve for the term set forth
in the Articles and until his or her successor is elected and qualified.
2.04 NOMINATION OF DIRECTORS. Nomination of candidates for election as
Directors of the Corporation at any Annual Meeting may be made only (a) by, or
at the direction of, a majority of the Board of Directors or (b) by any holder
of record (both as of the time notice of such nomination is given by the
Stockholder as set forth below and as of the record date for the Annual Meeting
in question) of any shares of the capital stock of the Corporation entitled to
vote at such Annual Meeting who complies with the timing, informational and
other requirements set forth in this Section 2.04. Any Stockholder who has
complied with the timing, informational and other requirements set forth in this
Section 2.04 and who seeks to make such a nomination, or his, her or its
representative, must be present in person at the Annual Meeting. Only persons
nominated in accordance with the procedures set forth in this Section 2.04 shall
be eligible for election as directors at an Annual Meeting.
Nominations, other than those made by, or at the direction of, the
Board of Directors, shall be made pursuant to timely notice in writing to the
Secretary of the Corporation as set forth in this Section 2.04. For the first
Annual Meeting of the Corporation, a stockholder's notice shall be timely if
delivered to, or mailed to and received by, the Corporation at its principal
executive office not later than the close of business on the later of (A) the
75th day prior to the scheduled date of such Annual Meeting or (B) the 15th day
following the day on which public announcement of the date of such Annual
Meeting is first made by the Corporation. For all subsequent Annual Meetings, a
stockholder's notice shall be timely if delivered to, or mailed to and received
by, the Corporation at its principal executive office not less than 75 days nor
more than 120 days prior to the Anniversary Date; provided, however, that in the
event the Annual Meeting is schedule to be held on a date more than 30 days
before the Anniversary Date or more than 60 days after the Anniversary Date, a
Stockholder's notice shall be timely if delivered to, or mailed and received by,
the Corporation at its principal executive office not later than the close of
business on the later of (i) the 75th day prior to the scheduled date of such
Annual Meeting or (ii) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made by the
Corporation.
A Stockholder's notice to the Secretary shall set forth as to each
person whom the Stockholder proposes to nominate for election or re-election as
a Director: (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of the Corporation's capital stock which are
beneficially owned by such person on the date of such Stockholder notice, and
(iv) the consent of each nominee to serve as a Director if elected. A
Stockholder's notice to the Secretary shall further set forth as to the
Stockholder giving such notice: (i) the name and address, as they appear on the
Corporation's stock transfer books, of such Stockholder and of the beneficial
owners (if any) of the Corporation's capital stock registered in such
Stockholder's name and the name and address of other Stockholders known by such
Stockholder to be supporting such nominee(s), (ii) the class and number of
shares of the Corporation's capital stock which are held of record, beneficially
owned or represented by proxy by such Stockholder and by any other Stockholders
known by such Stockholder to be supporting such nominee(s) on the record date
for the Annual Meeting in question (if such date shall then have been made
publicly available) and on the date of such Stockholder's notice, and (iii) a
description of all arrangements or understandings between such Stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by such
Stockholder.
If the Board of Directors or a designated committee thereof determines
that any Stockholder nomination was not made in accordance with the terms of
this Section 2.04 or that the information provided in a Stockholder's notice
does not satisfy the informational requirements of this Section 2.04 in any
material respect, then such nomination shall not be considered at the Annual
Meeting in question. If neither the Board of Directors nor such committee makes
a determination as to whether a nomination was made in accordance with the
provisions of this
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Section 2.04, the presiding officer of the Annual Meeting shall determine
whether a nomination was made in accordance with such provisions. If the
presiding officer determines that any Stockholder nomination was not made in
accordance with the terms of this Section 2.04 or that the information provided
in a Stockholder's notices does not satisfy the informational requirements of
this Section 2.04 in any material respect, then such nomination shall not be
considered at the Annual Meeting in question. If the Board of Directors, a
designated committee thereof or the presiding officer determines that a
nomination was made in accordance with the terms of this Section 2.04, the
presiding officer shall so declare at the Annual Meeting and ballots shall be
provided for use at the meeting with respect to such nominee.
Notwithstanding anything to the contrary in the second sentence of the
second paragraph of this Section 2.04, in the event that the number of Directors
to be elected to the Board of Directors of the Corporation is increased and
there is no public announcement by the Corporation naming all of the nominees
for Director or specifying the size of the increased Board of Directors at least
75 days prior to the Anniversary Date, a Stockholder's notice required by this
Section 2.04 shall also be considered timely, but only with respect to nominees
for any new positions created by such increase, if such notice shall be
delivered to, or mailed to and received by, the Corporation at its principal
executive office not later than the close of business on the 15th day following
the day on which such public announcement is first made by the Corporation.
No person shall be elected by the Stockholders as a Director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section. Election of Directors at the Annual Meeting need not be by written
ballot, unless otherwise provided by the Board of Directors or presiding officer
at such Annual Meeting. If written ballots are to be used, ballots bearing the
names of all the persons who have been nominated for election as Directors at
the Annual Meeting in accordance with the procedures set forth in this Section
shall be provided for use at the Annual Meeting.
2.05 ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board of
Directors may be held immediately after and at the same place as the Annual
Meeting of Stockholders, or at such other time and place, either within or
without the State of Maryland, as is selected by resolution of the Board of
Directors, and no notice other than this Bylaw or such resolution shall be
necessary. The Board of Directors may provide, by resolution, the time and
place, either within or without the State of Maryland, for the holding of
regular meetings of the Board of Directors without other notice than such
resolutions.
2.06 SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by or at the request of the Chairman of the Board, the President or a
majority of the Directors then in office. The person or persons authorized to
call special meetings of the Board of Directors may fix any place, either within
or without the State of Maryland, as the place for holding any special meeting
of the Board of Directors called by them.
2.07 NOTICE. Notice of any special meeting to be provided herein shall
be given, in accordance with Section 9, by written notice delivered personally,
telegraphed or telecopied to each Director at his or her business or residence
at least twenty-four (24) hours, or by mail at least five (5) days, prior to the
meeting. Neither the business to be transacted at, nor the purpose of, any
annual, regular or special meeting of the Board of Directors need be specified
in the notice, unless specifically required by statute, the Articles or these
Bylaws.
2.08 QUORUM. A majority of the Board of Directors then in office shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors; provided, however, that a quorum for the transaction of business
with respect to any matter in which any Director (or affiliate of such Director)
who is not an independent Director has any interest shall consist of a majority
of the Directors that includes a majority of the independent Directors then in
office. If less than a majority of the Board of Directors is present at said
meeting, a majority of the Directors present may adjourn the meeting from time
to time without further notice.
2.09 VOTING. The act of a majority of the Directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors,
unless the concurrence of a greater proportion is required for such action by
applicable statute, the Articles or these Bylaws; provided, however, that no act
relating to any matter in which a Director (or affiliate of such Director) who
is not an independent Director has any interest shall be the act
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of the Board of Directors unless such act has been approved by a majority of the
Board of Directors that includes a majority of the independent Directors.
2.10 CONDUCT OF MEETINGS. All meetings of the Board of Directors shall
be called to order and presided over by the Chairman of the Board, or in the
absence of the Chairman of the Board, by the President (if a member of the Board
of Directors) or, in the absence of the Chairman of the Board of Directors and
the President, by a member of the Board of Directors selected by the members
present. The Secretary of the Corporation, or in the absence of the Secretary,
any Assistant Secretary, shall act as secretary of all meetings of the Board of
Directors, and in the absence of the Secretary and Assistant Secretaries, the
presiding officer of the meeting shall designate any person to act as secretary
of the meeting. Members of the Board of Directors may participate in meetings of
the Board of Directors by conference telephone or similar communications
equipment by means of which all Directors participating in the meeting can hear
each other at the same time, and participation in a meeting in accordance
herewith shall constitute presence in person at such meeting for all purposes of
these Bylaws.
2.11 RESIGNATIONS. Any Director may resign from the Board of Directors
or any committee thereof at any time. Such resignation shall be made in writing
and shall take effect at the time specified therein, or if no time be specified,
at the time of the receipt of notice of such resignation by the President or the
Secretary.
2.12 REMOVAL OF DIRECTORS. Any or all of the Directors may be removed
from office in accordance with Articles of Incorporation.
2.13 VACANCIES. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, newly created directorships resulting from any
increase in the authorized number of Directors shall be filled solely by the
affirmative vote of a majority of the entire Board of Directors and any
vacancies on the Board of Directors resulting from death, resignation,
retirement, disqualification or other cause (other than removal from office)
shall be filled solely by the affirmative vote of a majority of the remaining
Directors then in office, even if less than a quorum. Subject to the rights of
the holders of any series of Preferred Stock then outstanding, vacancies on the
Board of Directors resulting from the removal of a Director from office may be
filled by the affirmative vote of a majority of all the votes cast at a meeting
of Stockholders called for that purpose. A director elected by the board of
directors to fill any vacancy shall serve until the next annual meeting of
stockholders and until his successor is elected and qualifies.
2.14 INFORMAL ACTION BY DIRECTORS. Any action required or permitted to
be taken at any meeting of the Board of Directors may be taken without a
meeting, if a consent in writing to such action is signed by all of the
Directors and such written consent is filed with the minutes of the Board of
Directors. Consents may be signed by different Directors on separate
counterparts.
2.15 COMPENSATION. An annual fee for services and payment for expenses
of attendance at each meeting of the Board of Directors, or of any committee
thereof, may be allowed to any Director by resolution of the Board of Directors.
ARTICLE III
COMMITTEES
----------
3.01 NUMBER, TENURE AND QUALIFICATION. The Board of Directors may
appoint from among its members an Executive Committee and other committees of
two or more Directors, to serve at the pleasure of the Board of Directors. If
any committee may take or authorize any act as to any matter in which any
Director (or affiliate of such Director) who is not an independent Director has
or may have any interest, a majority of the members of such committee shall be
independent Directors, except that any such committee consisting of only two
Directors may have one independent Director and one Director who is not an
independent Director.
3.02 DELEGATION OF POWER. The Board of Directors may delegate to these
committees in the intervals between meeting of the Board of Directors any of the
powers of the Board of Directors to manage the
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business and affairs of the Corporation, except those powers which the Board of
Directors is specifically prohibited from delegating pursuant to Section 2-411
of the MGCL.
3.03 QUORUM AND VOTING. A majority of the members of any committee
shall constitute a quorum for the transaction of business by such committee, and
the act of a majority of the quorum shall constitute the act of the committee,
except that no act relating to any matter in which any Director (or affiliate of
such Director) who is not an independent Director has any interest, shall be the
act of any committee unless a majority of the independent Directors on the
committee vote for such act.
3.04 CONDUCT OF MEETINGS. Each committee shall designate a presiding
officer of such committee, and if not present at a particular meeting, the
committee shall select a presiding officer for such meeting. Members of any
committee may participate in meetings of such committee by conference telephone
or similar communication equipment by means of which all Directors participating
in the meeting can hear each other at the same time, and participation in a
meeting in accordance herewith shall constitute presence in person at such
meeting for all purposes of these Bylaws. Each committee shall keep minutes of
its meetings, and report the results of any proceedings at the next succeeding
annual or regular meeting of the Board of Directors.
3.05 INFORMAL ACTION BY COMMITTEES. Any action required or permitted to
be taken at any meeting of a committee of the Board of Directors may be taken
without a meeting, if a written consent to such action is signed by all members
of the committee and such written consent is filed with the minutes of
proceedings of such committee. Consents may be signed by different members on
separate counterparts.
ARTICLE IV
BOARD OF CONSULTANTS
--------------------
4.01 APPOINTMENT. The Board of Directors may appoint a Board of
Consultants to consider, advise upon and make recommendations to the Board of
Directors with respect to such questions relating to the conduct of the business
of the Corporation as may be submitted to it by the Board of Directors.
4.02 MEMBERS. The members of the Board of Consultants, who shall not be
Directors and need not be officers or shareholders, shall serve from the date
appointed until their resignation, death or removal by a vote of the majority of
the Board of Directors, with or without cause.
4.03 MEETINGS. Meetings of the Board of Consultants shall be called by
the Chairman of the Board or Secretary on order by the Board of Directors at
such time and place as the Board of Directors may from time to time designate.
The Board of Directors shall determine with respect to each meeting which
members of the Board of Consultants should be called; all members need not be
called to every meeting. The Board of Directors may, at their discretion, invite
other participants and/or observers to such meetings. The members of the Board
of Consultants shall be entitled to a fee for attendance at such meetings, which
fee shall be fixed by resolution of the Board of Directors.
4.04 AUTHORITY. The Board of Consultants shall have no authority or
power with respect to the affairs of the Corporation, and members of the Board
of Consultants shall not be empowered by such membership to act as, or to
represent themselves to be, agents or representatives of the Corporation and/or
of the Board of Directors.
ARTICLE V
OFFICERS
--------
5.01 TITLES AND ELECTION. The Corporation shall have a Chairman of the
Board, a President, a Treasurer and a Secretary, and may have one or more Vice
Presidents, a Chief Financial Officer, a Chief
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<PAGE>
Operating Officer, one or more Assistant Secretaries, one or more Assistant
Treasurers and such other subordinate officers as the Board of Directors, or any
committee or officer appointed by the Board of Directors for such purpose, may
from time to time elect. The officers of the Corporation shall be elected from
time to time by the Board of Directors at any meeting thereof. Each officer
shall hold office until his successor is duly elected and qualified or until his
death, resignation or removal in the manner hereinafter provided. Any two or
more officers, except President and Vice President, may be held by the same
person. Election or appointment of an officer or agent shall not of itself
create contract rights between the Corporation and such officer or agent.
5.02 REMOVAL. Any officer or agent elected or appointed by the Board of
Directors may be removed, with or without cause, by the Board of Directors
whenever in its judgment the best interests of the Corporation would be served
thereby. The fact that a person is elected to office, whether or not for a
specified term, shall not by itself constitute any undertaking or evidence of
any employment obligation of the Corporation to that person.
5.03 VACANCIES. A vacancy in any office may be filled by the Board of
Directors for the unexpired portion of the term.
5.04 CHAIRMAN OF THE BOARD. Unless the Board of Directors shall
otherwise determine, the Chairman of the Board shall be the Chief Executive
Officer and general manager of the Corporation and shall in general supervise
and control all of the business and affairs of the Corporation. The Chairman of
the Board shall be a Director and shall preside over the meetings of the
Stockholders and the Board of Directors. The Chairman of the Board shall perform
such other duties as may be assigned to him by the Board of Directors. The
Chairman of the Board may sign and execute any deed, mortgage, bond, contract,
or other obligation or instrument on behalf of the Corporation, except in cases
where the execution thereof shall be expressly designated by the Board of
Directors or by the Articles, these Bylaws or otherwise to another officer or
agent of the Corporation.
5.05 PRESIDENT. Unless the Board of Directors shall otherwise
determine, the President shall be the Chief Operating Officer of the Corporation
and shall supervise and control the day-to-day business and affairs of the
Corporation. In the absence of the Chairman of the Board, the President shall
preside at all meetings of the Stockholders and of the Board of Directors (if a
member of the Board of Directors). The President may execute any deed, mortgage,
bond, contract or other obligation or instrument on behalf of the Corporation,
except in cases where the execution thereof shall be expressly delegated by the
Board of Directors or by the Articles, by these Bylaws or otherwise to some
other officer or agent of the Corporation. In general, the President shall
perform all duties incident to the office of President and such other duties as
may be prescribed by the Board of Directors or the Chairman of the Board from
time to time.
5.06 VICE PRESIDENTS. The Board of Directors may appoint one or more
Vice Presidents. In the absence of the President or in the event of a vacancy in
such office, the Vice President (or in the event there shall be more than one
Vice President, the Vice Presidents in the order designated at the time of their
election, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President and when so acting shall
have all the powers of and be subject to all of the restrictions upon the
President. Every Vice President shall perform such other duties as from time to
time may be assigned to him by the President or the Board of Directors. The
Board of Directors may designate one or more Vice Presidents as Executive Vice
Presidents or as Vice Presidents for particular areas of responsibility.
5.07 SECRETARY. The Secretary shall (i) keep the minutes of the
proceedings of the Stockholders and Board of Directors in one or more books
provided for that purpose; (ii) see that all notices are duly given in
accordance with the provisions of these Bylaws or as required by law; (iii) be
custodian of the records of the Corporation; (iv) unless a transfer agent is
appointed, keep a register of the post office address of each Stockholder which
shall be furnished to the Secretary by such Stockholder and have general charge
of the stock ledger of the Corporation; (v) when authorized by the Board of
Directors or the President, attest to or witness all documents requiring the
same; (vi) perform all duties as from time to time may be assigned to him by the
President or by the Board of Directors; and (vii) perform all of the duties
generally incident to the office of secretary of a corporation.
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<PAGE>
5.08 TREASURER. The Treasurer shall have the custody of the
Corporation's funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositaries as may be designated by the Board of
Directors. The Treasurer shall disburse funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
the regular meetings of the Board of Directors or whenever they may require it,
an account of all his transactions as Treasurer and of the financial condition
of the Corporation. The Board of Directors may engage a custodian to perform
some or all of the duties of the Treasurer, and if a custodian is so engaged
then the Treasurer shall be relieved of the responsibilities set forth herein to
the extent delegated to such custodian and, unless the Board of Directors
otherwise determines, shall have general supervision over the activities of the
custodian. The custodian shall not be an officer of the Corporation.
5.09 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The Board of
Directors, or any committee or officer appointed by the Board of Directors for
such purpose, may appoint one or more Assistant Secretaries or Assistant
Treasurers. The Assistant Secretaries and Assistant Treasurers (i) shall have
the power to perform and shall perform all the duties of the Secretary and the
Treasurer, respectively, in such respective officer's absence and (ii) shall
perform such duties as shall be assigned to him by the Secretary or Treasurer,
respectively, or by the President of the Board of Directors, or any such
designated committee or officer.
5.10 SUBORDINATE OFFICERS. The Corporation shall have such subordinate
officers as the Board of Directors, or any committee or officer appointed by the
Board of Directors for such purpose, may from time to time elect. Each such
officer shall hold office for such period and perform such duties as the Board
of Directors, the President or any designated committee or officer may
prescribe.
5.11 COMPENSATION. The salaries and other compensation and
remuneration, of any kind, if any, of the officers shall be fixed from time to
time by the Board of Directors. No officer shall be prevented from receiving
such compensation, if any, by reason of the fact that he is also a Director of
the Corporation. The Board of Directors may authorize any committee or officer,
upon whom the power of appointing assistant and subordinate officers may have
been conferred, to fix the compensation and remuneration of such assistant and
subordinate officer.
ARTICLE VI
SHARES OF STOCK
---------------
6.01 CERTIFICATES FOR STOCK. All shares of the classes or series of
Stock shall be represented by certificates in such form, not inconsistent with
the Articles, as shall be approved by the Board of Directors. All certificates
shall be signed by the Chairman of the Board, the President, or a Vice President
and countersigned by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary. Any signature or countersignature may be either a manual or
facsimile signature. All certificates for each class of Stock, shall be
consecutively numbered. Each certificate representing shares of Stock which are
restricted as to their transferability or voting powers, which are preferred or
limited as to their allocable portion of the assets upon liquidation or which
are redeemable at the option of the Corporation, shall have a statement of such
restriction, limitation, preference or redemption provision, or summary thereof,
plainly stated on the certificate. In lieu of such statement or summary, the
Corporation may set forth on the face or back of the certificate a statement
that the Corporation will furnish to any Stockholder, upon request and without
charge, a full statement of such information.
6.02 STOCK LEDGER. The Corporation shall maintain at its principal
executive office, at the office of its counsel, accountants or transfer agent or
at such other place designated by the Board of Directors an original or
duplicate stock ledger containing the names and addresses of all the
Stockholders and the number of shares of each class held by each Stockholder.
The stock ledger shall be maintained pursuant to a system that the Corporation
shall adopt allowing for the issuance, recordation and transfer of its Stock by
electronic or other means that can be readily converted into written form for
visual inspection and not involving any issuance of certificates. Such system
shall include provisions for notice to acquirors of Stock (whether upon issuance
or transfer of Stock) in accordance
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<PAGE>
with Sections 2-210 and 2-211 of the MGCL, and Section 8-408 of the Commercial
Law Article of the State of Maryland. The Corporation shall be entitled to treat
the holder of record of any Share or Shares as the holder in fact thereof and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such Share on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of the State of Maryland. Until a transfer is duly effected on the stock ledger,
the Corporation shall not be affected by any notice of such transfer, either
actual or constructive. Nothing herein shall impose upon the Corporation, the
Board of Directors or officers or their agents and representatives a duty or
limit to their rights to inquire as to the actual ownership of Shares.
6.03 RECORDING TRANSFER OF STOCK. If transferred in accordance with any
restrictions on transfer contained in the Articles, these Bylaws or otherwise,
Shares shall be recorded as transferred in the Stock Ledger upon provision to
the Corporation or the transfer agent of the Corporation of an executed stock
power duly guaranteed and any other documents reasonably requested by the
Corporation, and the surrender of the certificate or certificates, if any,
representing such Shares. Upon receipt of such documents, the Corporation shall
issue the statements required by Section 2-210 and 2-211 of the MGCL and Section
8-408 of the Commercial Law Article of the State of Maryland, issue as needed a
new certificate or certificates (if the transferred Shares were certificated) to
the persons entitled thereto, cancel any old certificates and record the
transaction upon its books.
6.04 LOST CERTIFICATE. The Board of Directors may direct a new
certificate to be issued in the place of any certificate theretofore issued by
the Corporation alleged to have been stolen, lost or destroyed upon the making
of an affidavit of that fact by the person claiming the certificate of Stock to
be stolen, lost or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such stolen, lost or destroyed
certificate or his legal representative to advertise the same in such manner as
it shall require and/or to give bond, with sufficient surety, to the Corporation
to indemnify it against any loss or claim which may arise by reason of the
issuance of a new certificate.
6.05 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
6.5.1. The Board of Directors may fix, in advance, a date as
the record date for the purpose of determining Stockholders entitled to notice
of, or to vote at, any meeting of Stockholders, or Stockholders entitled to
receive payment of any dividend or other allotment of any rights, or in order to
make a determination of Stockholders for any other proper purpose. Such date, in
any case, shall not be prior to the close of business on the day the record date
is fixed and shall be not more than ninety (90) days, and in the case of a
meeting of Stockholders not less than ten (10) days, prior to the date on which
the meeting or particular action requiring such determination of Stockholders is
to be held or taken.
6.5.2. In lieu of fixing a record date, the stock transfer
books may be closed by the Board of Directors in accordance with Section 2-511
of the MGCL for the purpose of determining Stockholders entitled to notice of or
to vote at a meeting of Stockholders.
6.5.3. If no record date is fixed and the stock transfer books
are not closed for the determination of Stockholders, (a) the record date for
the determination of Stockholders entitled to notice of, or to vote at, a
meeting of Stockholder shall be at the close of business on the day on which the
notice of meeting is mailed or the 30th day before the meeting, whichever is the
closer date to the meeting; and (b) the record date for the determination of
Stockholders entitled to receive payment of a dividend or an allotment of any
rights shall be at the close of business on the day on which the resolution of
the Board of Directors, declaring the dividend or allotment of rights, is
adopted, but the payment or allotment may not be made more than sixty (60) days
after the date on which the resolution is adopted.
6.5.4. When a determination of Stockholders entitled to vote
at any meeting of Stockholders has been made as provided in this section, such
determination shall apply to any adjournment thereof, except where the
determination has been made through the closing of the stock transfer books and
the stated period of closing has expired.
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<PAGE>
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
---------------------------
7.01 DECLARATIONS. Dividends and other distributions upon the Stock may
be declared by the Board of Directors as set forth in the applicable provisions
of the Articles and any applicable law, at any meeting, limited only to the
extent of Section 2-311 of the MGCL. Dividends and other distributions upon the
Stock may be paid in cash, property or Stock of the Corporation, subject to the
provisions of law and of the Articles.
7.02 CONTINGENCIES. Before payment of any dividends or other
distributions upon the Stock, there may be set aside (but there is no duty to
set aside) out of any funds of the Corporation available for dividends or other
distributions such sum or sums as the Board of Directors may from time to time,
in its absolute discretion, think proper as a reserve fund to meet
contingencies, for repairing or maintaining any property of the Corporation or
for such other purpose as the Board of Directors shall determine to be in the
best interests of the Corporation, and the Board of Directors may modify or
abolish any such reserve in the manner in which it was created.
ARTICLE VIII
INDEMNIFICATION
---------------
8.01 INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES. The
Corporation shall indemnify and hold harmless to the fullest extent permitted
by, and under, applicable law as it presently exists and as is further set forth
in Article 8.02 below or as may hereafter be amended any person who is or was a
Director, officer, employee or agent of the Corporation or who is or was serving
at the request of the Corporation as a Director, officer or employee of another
corporation or entity (including service with employee benefit plans), who by
reason of this status or service in that capacity was, is, or is threatened to
be made a party or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative, or investigative. Such indemnification
shall be against all liability and loss suffered and expenses (including, but
not limited to, attorneys' fees, judgments, fines, penalties, and amounts paid
in settlement) actually and reasonably incurred by the individual in connection
with such proceeding; provided, however, that the Corporation shall not be
required to indemnify a person in connection with an action, suit or proceeding
initiated by such person unless the action, suit or proceeding was authorized by
the Board of Directors of the Corporation.
8.02 STANDARD. Section 2.418 of the MGCL, on ______, 1996, provided
generally that a corporation may indemnify any individual made a party to a
proceeding by reason of service on behalf of the corporation unless it is
established that:
(i) the act or omission of the individual was material to the
matter giving rise to the proceeding; and
(1) was committed in bad faith; or
(2) was the result of active and deliberate dishonesty; or
(ii) the individual actually received an improper personal
benefit in money, property, or services; or
(iii) in the case of any criminal proceeding, the individual
had reasonable cause to believe that the act or omission was unlawful.
8.03 ADVANCE PAYMENT OF EXPENSES. The Corporation shall pay or
reimburse reasonable expenses in advance of a final disposition of the
proceeding and without requiring a preliminary determination of the ultimate
entitlement to indemnification provided that the individual first provides the
Corporation with: (a) a written affirmation of the individual's good faith
belief that the individual meets the standard of conduct necessary
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<PAGE>
for indemnification under the laws of the State of Maryland; and (b) a written
undertaking by or on behalf of the individual to repay the amount advanced if it
shall ultimately be determined that the applicable standard of conduct has not
been met.
8.04 GENERAL. The Board of Directors, by resolution, may authorize the
management of the Corporation to act for and on behalf of the Corporation in all
matters relating to indemnification within any such limits as may be specified
from time to time by the Board of Directors, all consistent with applicable law.
The rights conferred on any person by this Article VIII shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Articles of Incorporation of the
Corporation, these Bylaws, agreement, vote of the stockholders or disinterested
directors or otherwise.
Repeal or modification of this Article VIII or the relevant law shall
not affect adversely any rights or obligations then existing with respect to any
facts then or theretofore existing or any action, suit or proceeding theretofore
or thereafter brought or threatened based in whole or in part upon any such
facts.
ARTICLE IX
NOTICES
-------
9.01 NOTICES. Except as provided in Section 2.07, whenever notice is
required to be given pursuant to these Bylaws, it shall be construed to mean
either written notice personally served against written receipt, or notice in
writing transmitted by mail, by depositing the same in a post office or letter
box, in a post-paid sealed wrapper, addressed, if to the Corporation, to 321
Railroad Avenue, Greenwich, Connecticut 06830 (or any subsequent address
selected by the Board of Directors), attention President, or if to a
Stockholder, Director or officer, at the address at the general post office
situated in the city or county of his or her residence. Unless otherwise
specified, notice sent by mail shall be deemed to be given at the time mailed.
9.02 SECRETARY TO GIVE NOTICE. All notices required by law or these
Bylaws to be given by the Corporation shall be given by the Secretary or any
other officer of the Corporation designated by the President. If the Secretary
and Assistant Secretary are absent or refuse or neglect to act, the notice may
be given by any person directed to do so by the President or, with respect to
any meeting called pursuant to these Bylaws upon the request of any Stockholders
or Directors, by any person directed to do so by the Stockholders or Directors
upon whose request the meeting is called.
9.03 WAIVER OF NOTICE. Wherever any notice is required to be given
pursuant to the Articles or these Bylaws or pursuant to applicable law, a wavier
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice. Neither the business to be transacted at nor the
purpose of any meeting need be set forth in the waiver of notice, unless
specifically required by statute. The attendance of any person at any meeting
shall constitute a wavier of notice of such meeting, except where such person
attends a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
ARTICLE X
MISCELLANEOUS
-------------
10.01 BOOKS AND RECORDS. The Corporation shall keep correct and
complete books and records of its accounts and transactions and minutes of the
proceedings of its Stockholders and Board of Directors meetings and of its
executive and other committees when exercising any powers of authority of the
Board of Directors. The books and records of the Corporation may be in written
form or in any other form that be converted within a reasonable time into
written form for visual inspection. Minutes shall be recorded in written form,
but may be maintained in the form of a reproduction.
D-15
<PAGE>
10.03 CONTRACTS. The Board of Directors may authorize any officer(s) or
agent(s) to enter into any contract or to execute and deliver any instrument in
the name of and on behalf of the Corporation, and such authority may be general
or confined to specific instances.
10.04 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such officers or agents of the Corporation
and in such manner as shall from time to time be determined by resolution of the
Board of Directors.
10.05 LOANS.
10.5.1 Such officers or agents of the Corporation as from time
to time have been designated by the Board of Directors shall have authority (i)
to effect loans, advances, or other forms of credit at any time or times for the
Corporation, from such banks, trust companies, institutions, corporations,
firms, or persons, in such amounts and subject to such terms and conditions, as
the Board of Directors from time to time has designated; (ii) as security for
the repayment of any loans, advances, or other forms of credit so authorized, to
assign, transfer, endorse, and deliver, either originally or in addition or
substitution, any or all personal property, real property, stocks, bonds,
deposits, accounts, documents, bills, accounts receivable, and other commercial
paper and evidence of debt or other securities, or any rights or interests at
any time held by the Corporation; (iii) in connection with any loans, advances,
or other forms of credit so authorized, to make, execute, and deliver one or
more notes, mortgages, deeds of trust, statements, security agreements,
acceptances, or written obligations of the Corporation, on such terms and with
such provisions as to the security or sale or disposition of them as those
officers or agents deem proper, and (iv) to sell to, or discount or rediscount
with, the banks, trust companies, institutions, corporations, firms or persons
making those loans, advances, or other forms of credit, any and all commercial
paper, bills, accounts receivable, acceptances, and other instruments and
evidences of debt at any time held by the Corporation and, to that end, to
endorse, transfer, and deliver the same.
10.5.2. From time to time the Corporation shall certify to the
bank, trust company, institution, corporation, firm or person so designated, the
signatures of the offices or agents so authorized. Each bank, trust company,
institution, corporation, firm or person so designated is authorized to rely
upon such certification until it has received written notice that the Board of
Directors has revoked the authority of those officers or agents.
10.06 FISCAL YEAR. The Board of Directors shall have the power, from
time to time, to fix the fiscal year of the Corporation by a duly adopted
resolution, and, in the absence of such resolution, the fiscal year shall be the
period ending October 31.
10.07 ANNUAL REPORT. Not later than 120 days after the close of each
fiscal year, the Board of Directors of the Corporation shall cause to be sent to
the Stockholders an Annual Report in such form as may be deemed appropriate by
the Board of Directors. The Annual Report shall include audited financial
statements and shall be accompanied by the report thereon of an independent
certified public accountant.
10.08 INTERIM REPORTS. The Corporation may send interim reports to the
Stockholders having such form and content as the Board of Directors may deem
proper.
10.09 OTHER REPORTS. Any distributions to Stockholders of income or
capital assets shall be accompanied by a written statement disclosing the source
of the funds distributed unless at the time of distributions they are
accompanied by a written explanation of the relevant circumstances. The
statement as to such source shall be sent to the Stockholders not later than
ninety (90) days after the close of the fiscal year in which the distributions
were made.
10.10 BYLAWS SEVERABLE. The provisions of these Bylaws are severable,
and if any provision shall be held invalid or unenforceable, that invalidity or
unenforceability shall attach only to that provision and shall not in any manner
affect or render invalid or unenforceable any other provision of these Bylaws,
and these Bylaws shall be carried out as if the invalid or unenforceable
provision were not contained herein.
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ARTICLE XI
AMENDMENT OF BYLAWS
-------------------
The Board of Directors shall have the exclusive power, at any regular
or special meeting thereof, to make and adopt new Bylaws, or to amend, alter or
repeal any Bylaws of the Corporation, provided such revisions are not
inconsistent with the Articles of Incorporation or applicable law.
ARTICLE XII
EXEMPTIONS TO SECTIONS 3-701
THROUGH 3-709 OF THE MGCL
-------------------------
The provisions of Sections 3-701 through 3-709 of Title III of the
MGCL, as the same may be amended or re-enacted or any successor provisions
thereto, shall not apply to any Person (as defined in Section 3-701 of Title III
of the MGCL) who, as of December 31, 1996 beneficially owned in excess of 20% of
the outstanding shares of beneficial interest of HRE Properties and who, by
virtue of the merger of HRE Properties with and into the Corporation, will own a
similar percentage of the Corporation Common Stock.
D-17
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors, Trustees and Officers.
The Declaration of Trust provides for each of the Trustees, officers,
agents and members of the Board of Consultants to be indemnified by the Trust
against all liabilities and expenses incurred by any such individual by reason
of his having been a Trustee, officer, agent or member of the Board of
Consultants (as appropriate), except where such individual is considered to have
acted in bad faith or with wilful malfeasance, reckless disregard of his duties
or gross negligence, or not to have acted in good faith in the reasonable belief
that his action was in the best interests of the Trust. Such rights to
indemnification will be satisfied only out of the Trust assets, and no
shareholder of the Trust is to be liable to any individual with respect to any
claim for such indemnity or reimbursement. The Trustees are authorized to make
advance payments in connection with any such indemnification, provided that the
indemnified party gives a written undertaking to reimburse the Trust in the
event that it is subsequently determined that it was not entitled to such
indemnification.
The Articles of Incorporation and Bylaws of the Corporation require the
Corporation to indemnify its directors, officers and certain other parties to
the fullest extent permitted from time to time by the MGCL. The MGCL permits a
corporation to indemnify its directors, officers and certain other parties
against judgments, penalties, fines, settlements and reasonable expenses
actually incurred by them in connection with any proceeding to which they may be
made a party by reason of their service to or at the request of the Corporation,
unless it is established that the act or omission of the indemnified party was
material to the matter giving rise to the proceeding and (i) the act or omission
was committed in bad faith or was the result of active and deliberate
dishonesty, (ii) the indemnified party actually received an improper personal
benefit, or (iii) in the case of any criminal proceeding, the indemnified party
had reasonable cause to believe that the act or omission was unlawful.
<TABLE>
<CAPTION>
Item 21. Exhibits.
<S> <C> <C>
2.1 Plan of Reorganization (appended as Exhibit A to Proxy Filed Herewith
---------
Statement/Prospectus).
3.1 Articles of Incorporation of the Corporation (appended as Exhibit C to Filed Herewith
Proxy Statement/Prospectus)
3.2 Bylaws of the Corporation (appended as Exhibit D to Proxy Filed Herewith
---------
Statement/Prospectus).
3.3 Fourth Amended and Restated Declaration of Trust of the Trust, as (1)
amended to date.
3.5 Bylaws of the Trust, as amended to date. (2)
5.1 Form of opinion of Miles & Stockbridge, a professional To be Filed by
corporation, as To be Filed by to legality of shares of Common Amendment
Stock, par value $.01 each, of the Amendment Corporation and
certain related matters (including consent).
8.1 Form of opinion of Coudert Brothers as to certain tax matters To be Filed by
(including consent). Amendment
10.1 Restricted Stock Plan (appended as Exhibit B to Proxy Statement/ Filed Herewith
---------
Prospectus).
23.2 Consents of Miles & Stockbridge, a professional corporation, and To be Filed by
Coudert Brothers (included in Exhibits 5.1 and 8.1 respectively). Amendment
99.1 Form of Proxy Card in connection with the Annual Meeting. Filed Herewith
</TABLE>
- -----------------
(1) Incorporated herein by reference to Exhibit 3.1 of the Trust's Quarterly
Report on Form 10-Q for the quarter ended April 30, 1995.
(2) Incorporated herein by reference to Exhibit 4.2 of the Registrant's
Registration Statement on Form S-8 (No. 33-41408)).
II-1
<PAGE>
Item 22. Undertakings.
(a) (1) The undersigned registrant hereby undertakes as follows:
that prior to any public re-offering of the securities
registered hereunder through the use of a prospectus which is
a part of this Registration Statement, by any person or party
who is deemed to be an underwriter within the meaning of Rule
145(c), the registrant undertakes that such re-offering
prospectus will contain the information called for by the
applicable registration form with respect to re-offerings by
persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable
form.
(2) The undersigned registrant undertakes that every
prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act and is
used in connection with an offering of securities subject to
Rule 415, will be filed as part of an amendment to the
registration statement and will not be used until such
amendment is effective, and that, for purposes of determining
any liability under the Securities Act, 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.
(b) The undersigned registrant hereby undertakes to deliver or
cause to be delivered with the prospectus, to each person to
whom the prospectus is sent or given, the latest annual report
to security holders that is incorporated by reference in the
prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange
Act; and, where interim financial information is required to
be presented by Article 3 of Regulation S-X is not set forth
in the prospectus, to deliver, or cause to be delivered to
each person to whom the prospectus is sent or given, the
latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial
information.
(c) Insofar as indemnification for liabilities under the
Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the
provisions described under Item 20 above, or otherwise, the
registrant has been advised that in the opinion of the SEC
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, 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 Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective; and (2)
for the purpose of determining any liability under the
Securities Act, 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 respond to
requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b), 11 or 13 of
this form, within one business day of receipt of such request,
and to send the incorporated documents by first class mail or
other equally prompt means. This includes information
contained in the documents
II-2
<PAGE>
filed subsequent to the effective date of this Registration
Statement through the date of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning
a transaction, and the company being acquired involved
therein, that was not the subject of and included in this
Registration Statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Greenwich,
State of Connecticut on December 31, 1996.
HRE PROPERTIES, INC.
By: /s/ Charles J. Urstadt
-----------------------------
Charles J. Urstadt,
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ Charles J. Urstadt December 31, 1996
- ---------------------------------------
Charles J. Urstadt
Chairman of the Board and
Chief Executive Officer
/s/ James R. Moore December 31, 1996
- ---------------------------------------
James R. Moore
Executive Vice President - Chief
Financial Officer
/s/ E. Virgil Conway December 31, 1996
- ---------------------------------------
E. Virgil Conway
Director
/s/ Robert R. Douglass December 31, 1996
- ---------------------------------------
Robert R. Douglass
Director
/s/ Peter Herrick December 31, 1996
- ---------------------------------------
Peter Herrick
Director
/s/ George H.C. Lawrence December 31, 1996
- ---------------------------------------
George H.C. Lawrence
Director
/s/ Paul D. Paganucci December 31, 1996
- ---------------------------------------
Paul D. Paganucci
Director
II-4
<PAGE>
/s/ James O. York December 31, 1996
- ---------------------------------------
James O. York
Director
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibits.
<S> <C> <C>
2.1 Plan of Reorganization (appended as Exhibit A to Proxy Filed Herewith
---------
Statement/Prospectus).
3.1 Articles of Incorporation of the Corporation (appended as Filed Herewith
Exhibit C to Proxy Statement/Prospectus)
---------
3.2 Bylaws of the Corporation (appended as Exhibit D to Proxy Filed Herewith
---------
Statement/Prospectus).
3.3 Fourth Amended and Restated Declaration of Trust of the (1)
Trust, as amended to date.
3.5 Bylaws of the Trust, as amended to date. (2)
5.1 Form of opinion of Miles & Stockbridge, a professional To be Filed by
corporation, as to legality of shares of Common Stock, par Amendment
value $.01 each, of the Corporation and certain related matters
(including consent).
8.1 Form of opinion of Coudert Brothers as to certain tax matters To be Filed by
(including consent). Amendment
10.1 Restricted Stock Plan (appended as Exhibit B to Proxy Filed Herewith
------- -
Statement /Prospectus).
23.2 Consents of Miles & Stockbridge, a professional corporation, To be Filed by
and Coudert Brothers (included in Exhibits 5.1 and 8.1 Amendment
respectively).
99.1 Form of Proxy Card in connection with the Annual Meeting. Filed Herewith
</TABLE>
- ----------------------
(1) Incorporated herein by reference to Exhibit 3.1 of the Trust's Quarterly
Report on Form 10-Q for the quarter ended April 30, 1995.
(2) Incorporated herein by reference to Exhibit 4.2 of the Registrant's
Registration Statement on Form S-8 (No. 33-41408)).
[Form of Proxy Card-Front]
HRE PROPERTIES
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
to be held on March 12, 1997
The undersigned hereby constitutes and appoints Charles J. Urstadt and James R.
Moore, and each of them, as Proxies of the undersigned, with full power to
appoint his or her substitute, and authorizes each of them to represent and vote
all shares of beneficial interest of HRE Properties (the "Trust") held of record
as of the close of business on January 27, 1997, at the Annual Meeting of
Shareholders of the Trust (the "Annual Meeting") to be held at the Doral
Arrowwood Conference Center, Anderson Hill Road, Rye Brook, New York, on
Wednesday March 12, 1997, and at any adjournments or postponements thereof.
When properly executed, this proxy will be voted in the manner directed herein
by the undersigned shareholder(s). If no direction is given, this proxy will be
voted FOR (i) the approval of the proposed Plan of Reorganization, which
provides for the reorganization of the Trust from a Massachusetts business trust
into a Maryland corporation by the means of the merger of the Trust with and
into HRE Properties, Inc., a newly organized Maryland corporation which is
wholly owned by the Trust (the "Corporation"), as set forth in Proposal 1, (ii)
the election of three Trustees to serve for the ensuing three years or, if the
Plan of Reorganization is approved and consummated, as Directors of the
Corporation, as set forth in Proposal 2, (iii) the approval of the Restricted
Stock Award Plan providing for the grant of restricted stock awards to key
management personnel of the Trust or, if the Plan of Reorganization is approved
and consummated, key management personnel of the Corporation, as set forth in
Proposal 3, and (iv) the ratification of the appointment of Arthur Andersen LLP
as the independent financial auditors or, if the Plan of Reorganization is
approved and consummated, the Corporation, for the ensuing fiscal year, as set
forth in Proposal 4. In their discretion, the Proxies are each authorized to
vote upon such other business as may properly come before the Annual Meeting and
any adjournments or postponements thereof. A shareholder wishing to vote in
accordance with the Board of Trustees' recommendations need only sign and date
this proxy and return it in the enclosed envelope.
The undersigned hereby acknowledge(s) receipt of a copy of the accompanying
Notice of Annual Meeting of Shareholders, the Proxy Statement/Prospectus and the
Trust's Annual Report to shareholders and hereby revoke(s) any proxy or proxies
heretofore given. This proxy may be revoked at any time before it is exercised
by filing a notice of such revocation, by filing a later dated proxy with the
Secretary of the Trust or by voting in person at the Annual Meeting.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF
HRE PROPERTIES
Please vote and sign on the other side and return
promptly in the enclosed envelope. Do not
forget to date your proxy.
Please sign name exactly as shown. Where there is more than one holder, each
should sign. When signing as an attorney, administrator, guardian or trustee,
please add your title as such. If executed by a corporation or partnership, the
proxy should be signed by a duly authorized person, stating his or her title or
authority.
<PAGE>
[Form of Proxy Card - Reverse]
Please check appropriate box
Proposal 1. Proposal to approve the proposed Plan of Reorganization
which provides for the reorganization of the Trust from a Massachusetts business
trust into a Maryland corporation by the means of the merger of the Trust with
and into HRE Properties, Inc., a newly organized Maryland corporation which is
wholly owned by the Trust.
FOR |_| AGAINST |_| ABSTAIN |_|
PROPOSAL 1 PROPOSAL 1
Proposal 2. Proposal to elect three Trustees to serve for the ensuing
three years or, if the Plan of Reorganization is approved and consummated, as
Directors of the Corporation.
FOR |_| AGAINST |_| ABSTAIN |_|
PROPOSAL 2 PROPOSAL 2
Proposal 3. Proposal to approve a Restricted Stock Award Plan providing
for the grant of restricted stock awards to key management personnel of the
Trust or, if the Plan of Reorganization is approved and consummated, key
management personnel of the Corporation.
FOR |_| AGAINST |_| ABSTAIN |_|
PROPOSAL 3 PROPOSAL 3
Proposal 4. Proposal to ratify the appointment of Arthur Andersen LLP
as the independent financial auditors or, if the Plan of Reorganization is
approved and consummated, the Corporation, for the ensuing fiscal year.
FOR |_| AGAINST |_| ABSTAIN |_|
PROPOSAL 4 PROPOSAL 4
THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" EACH OF THESE PROPOSALS.
Please be sure to sign and date this proxy
Date: ______________________________
Signature(s):______________________________
______________________________
