FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-6103
Watermark Investors Realty Trust
(Exact name of registrant as specified in the charter)
Texas 75-1372785
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
227 West Trade Street, Suite 2320,
Charlotte, North Carolina 28202
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code
704/343-9334
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
None None
Securities registered pursuant to Section 12(g) of the Act
Shares of Beneficial Interest, $1.00 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities and Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (Section 229.405 of this
chapter) is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the 178,996 shares of
Beneficial Interest (voting securities) held by non-affiliates of
the Registrant is not ascertainable since no trading market
presently exists for such shares.
As of February 29, 1996, there were 542,413 shares of
Beneficial Interest of the Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
Item 1. Business.
Watermark Investors Realty Trust (herein referred to as the
"Trust" or "Watermark" or the "Registrant") was originally
organized as Ryan Mortgage Investors pursuant to the Texas Real
Estate Investment Trust Act under a Declaration of Trust dated
October 13, 1971. On March 6, 1984, its name was changed to
Arlington Realty Investors pursuant to an Amendment to the
Declaration of Trust. On December 5, 1995, the Trust's name was
changed to Watermark Investors Realty Trust pursuant to an
Amendment to the Declaration of Trust. The Trust has elected to
be treated as a Real Estate Investment Trust ("REIT") under
Section 856 through 860 of the Internal Revenue Code of 1986, as
amended. The Trust has, in the opinion of the Trust's
management, qualified for federal taxation as a REIT for each
fiscal year subsequent to December 31, 1971. Although not
currently active, the Trust's primary business and only industry
segment has been investing in equity interests in real estate and
related real estate activities.
During March 1995, the Trust formed a wholly owned
subsidiary, Watermark Texas 1, Inc., a Maryland corporation, and
contributed its sole property to such subsidiary.
Item 2. Properties.
At December 31, 1994, the Trust's only real estate asset was
a parcel of unimproved land consisting of approximately 4.5 acres
located on Parker Road in Houston, Harris County, Texas. During
March 1995, the Trust formed a wholly owned subsidiary and
contributed the Parker Road property to such subsidiary. At
December 31, 1995, the Trust's only significant asset was its
ownership interest in such subsidiary.
During February 1995, the Trust sold and conveyed a 4,429
square foot strip of land on the south side of the Parker Road
property to the City of Houston, Texas for $3,765 (approximately
85 cents per square foot).
Prior to contributing the Parker Road property to its subsidiary,
the Trust held the property for sale for several years, listed the
property with various brokers over that time period, and inquired of
the City of Houston as to the desire of the City to acquire such
property for a park site. Management presently intends for the
subsidiary to sell the Parker Road property at the first available
opportunity. The anticipated carrying costs associated with the
Parker Road property are currently limited to property taxes,
insurance, and maintenance.
Item 3. Legal Proceedings.
At December 31, 1995, and thereafter through the date of
this report, the Trust was not a party, nor was any property or
assets of the Trust subject, to any material pending legal
proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
The Shareholders of Watermark held their 1995 annual meeting
on December 5, 1995. At that meeting, the shareholders considered
and voted upon the following matters:
Proposal 1. A proposal to elect three Trustees (David S.
Givner, Simon Mizrachi, and Michael S. Verruto),
each to serve a specified term and until his
respective successor is duly elected and
qualified;
Proposal 2. A proposal to amend the Trust's Declaration of
Trust to establish classes of Trustees;
Proposal 3. A proposal to amend the Trust's Declaration of
Trust to allow the Trustees to fill any vacancies
on the Board of Trustees;
Proposal 4. A proposal to amend the Trust's Declaration of
Trust to authorize the Trust to issue up to ten
million (10,000,000) common shares, par value
$1.00 per share, and ten million (10,000,000)
preferred shares, par value $.01 per share;
Proposal 5. A proposal to amend the Trust's Declaration of
Trust to change the Trust's restrictions on
investment policy to authorize any investment
permitted under Texas law and under the Internal
Revenue Code of 1986, as amended, for a real
estate investment trust;
Proposal 6. A proposal to amend the Trust's Declaration of
Trust to change the name of the Trust to Watermark
Investors Realty Trust; and
Proposal 7. A proposal to amend the Trust's Bylaws to permit
the Board of Trustees to amend the Bylaws.
The number of votes cast for, against or withheld as to each
nominee and each proposal were as follows:
PROPOSAL FOR AGAINST ABSTAIN
Proposal 1 448,996 455 --
(Three Nominees for (for each) (against each)
Directors)
Proposal 2 428,910 580 50
Proposal 3 441,386 480 50
Proposal 4 433,561 680 550
Proposal 5 428,910 580 50
Proposal 6 448,746 355 350
Proposal 7 428,160 830 150
There were no other participants soliciting proxies for such
annual meeting.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The Trust's shares of Beneficial Interest (the "Shares") are
traded on a sporadic basis. The Trust believes there has been no
established independent trading market for the Shares since the
Shares were delisted from NASDAQ in 1988. A limited number of
Shares are believed to have been traded in privately negotiated
transactions.
No regular dividends on Shares were paid in 1994 or 1995.
As of February 29, 1996, 542,413 Shares were held by
approximately 316 holders of record.
Item 6. Selected Financial Data.
The following table sets forth a summary of certain selected
financial data of the Trust. This summary should be read in
conjunction with the Notes to Financial Statements included at
Item 8.
For the Years Ended December 31,
1995 1994 1993 1992 1991
____ ____ ____ ____ ____
(dollars in thousands, except per share)
Statement of
Operations
Data
Rental
Operations,
net $- $70 $- $95 $194
Real estate
sales, net - - - 244 -
Interest
Income - - 22 19 5
Gain on Sale
of Land 4 - - - -
Net earnings
<loss> <103> <44> 7 333 <112>
Earnings
<loss> per
share $<.18> $<.09> $.01 $.67 $<.22>
Distributions
per share $- $- $2.80 $- $-
Weighted
average shares
outstanding 542,413 505,172 498,985 498,985 498,985
Balance Sheet
Data
Real estate,
net of
allowances $- $- $- $- $1,105
Mortgages,
receivable,
net - - - - -
Total assets 1 33 116 1,441 1,360
Shareholders'
equity
(deficit) $<56> $<1> $<1> $1,389 $1,056
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation.
Results of Operations
Watermark's primary revenue sources for the three years
ended December 31, 1995, were net rental property operations,
interest income, and sales of real estate. Watermark's
properties consist of the Parker Road property. In February of
1995, Watermark sold a 4,429 square foot strip of land to the
City of Houston, Texas, for $3,765. Watermark did not have any
rental operations in 1995. Rental operations in 1994 consisted
of a ground lease on the Parker Road property in Houston, Texas.
On December 24, 1993, Watermark entered into a ground lease
on its Parker Road property in Houston, Texas with Plano Outlet
Mall, Ltd., a limited partnership. At the time, one of the
officers of Watermark was also an officer of a subsidiary of the
corporate general partner of Plano Outlet Mall, Ltd. The lease
was for a period of one year and expired December 23, 1994. As a
result of the lease, Watermark received a required prepayment of
$70,000, representing the total amount of the annual rental.
Although no precise comparison is available, management believes
the one-year rental represented at least the market rate. For
financial reporting purposes, the prepayment has been classified
as deferred lease revenue and has been amortized ratably over the
twelve-month life of the lease. On December 31, 1993, Watermark
advanced the $70,000 to Davister Corp., a Nevada corporation
("Davister"). In 1994, Davister agreed to pay $70,000 in legal
fees and other costs on behalf of Watermark to liquidate the
advance.
Liquidity and Capital Resources
Management currently plans for the subsidiary to sell the
Parker Road property at the first available opportunity. The
anticipated carrying costs associated with the Parker Road
property are currently limited to property taxes, insurance,
and maintenance. There are no other known material demands,
commitments, events or uncertainties that will result in or
that are reasonably likely to result in Watermark's liquidity
increasing or decreasing in any material way. However, in order
to meet corporate expenses and the carrying costs of the Parker
Road property, Watermark will have to (i) raise additional funds
(either by selling or leasing the Parker Road property) or
(ii) generate additional funds (either by selling or leasing
the Parker Road property).
On November 10, 1994, the Trust sold 43,428 newly issued
Shares for $43,428 in cash (the par value) to MIZ Investor
Associates. There are no material commitments for capital
expenditures.
Inflationary Factors
In recent years, inflation has neither increased Watermark's
revenues from operating assets nor beneficially affected the
current value of its remaining real estate assets to any
significant degree.
Item 8. Financial Statements and Supplementary Data.
INDEX TO FINANCIAL STATEMENTS
Page
Report of Farmer, Fuqua, Hunt & Munselle, P.C.
Independent Auditors . . . . . . . . . . . . . . . . . . . 7
Consolidated Balance Sheets as of December 31, 1995 and 1994 . 8
Consolidated Statements of Operations for the years ended
December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . 9
Consolidated Statements of Shareholders' Equity (Deficit)
for the years ended December 31, 1995, 1994 and 1993 . . . . 10
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . 11
Notes of Consolidated Financial Statements . . . . . . . . . 12
Schedule III - Real Estate Investments and
Accumulated Depreciation . . . . . . . . . . . . . . . . . . 16
All other schedules are omitted since they are not required, are
not applicable, or the financial information required is included
in the financial statements or the notes thereto.
INDEPENDENT AUDITORS' REPORT
To Board of Trustees and Shareholders
Watermark Investors Realty Trust
We have audited the accompanying consolidated balance sheets of
Watermark Investors Realty Trust and subsidiary as of December
31, 1995 and 1994, and the related consolidated statements of
operations, shareholders' equity (deficit) and cash flows for the
years ended December 31, 1995, 1994 and 1993. These consolidated
financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial
statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
As more fully described in Note 2, Watermark Investors Realty
Trust was operating under a Plan of Complete Liquidation and
Termination until June 30, 1994. The consolidated financial
statements include adjustments to reflect assets at their net
realizable value as determined by the Company's management. The
ultimate value of the assets will be determined at the time of
sale and may differ significantly from the value as determined by
the Company's management.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Watermark Investors Realty Trust and
subsidiary as of December 31, 1995 and 1994 and the results of
their operations and their cash flows for each of the years ended
December 31, 1995, 1994 and 1993, in conformity with generally
accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic consolidated financial statements taken as a whole. The
schedule listed in the index to the consolidated financial
statements is presented for the purpose of complying with the
Securities and Exchange Commission's rules and is not a required
part of the basic consolidated financial statements. This
schedule has been subjected to the auditing procedures applied in
our audits of the basic consolidated financial statements and, in
our opinion, fairly states in all material respects, the
financial data required to be set forth therein in relation to
the basic consolidated financial statements taken as a whole.
Farmer, Fuqua, Hunt & Munselle, P.C.
Dallas, Texas
April 8, 1996
WATERMARK INVESTORS REALTY TRUST AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS
1995 1994
Real Estate $168,588 $168,588
Less allowance for possible losses (168,588) (168,588)
Cash $ 880 $ 33,087
$ 880 $ 33,087
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Liabilities
Accrued liabilities $ 36,673 $ 13,671
Unclaimed dividends 20,174 20,174
56,847 33,845
Shareholder's Equity (Deficit)
Preferred shares of beneficial
interest; $.01 par value;
authorized, 10,000,000 shares; -
0- shares issued and outstanding
at December 31, 1995 and 1994,
respectively -- --
Common shares of beneficial interest;
$1.00 par value, authorized
10,000,000 shares; 542,413
shares issued and outstanding at
December 31, 1995 and 1994,
respectively 196,235 196,235
Additional Paid-in-Capital 44,205 --
Accumulated deficit (296,407) (196,993)
(55,967) (758)
880 33,087
The accompanying notes are an integral part of these statements.
WATERMARK INVESTORS REALTY TRUST AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31,
1995 1994 1993
Revenues
Rental operations, net $ --- $70,000 $ ---
Interest --- --- 22,143
Insurance proceeds --- 7,049 31,956
Gain on sale of land 3,765 --- ---
Other --- --- 909
3,765 77,049 55,008
Expenses
Interest --- --- 8,305
Advisory fees --- --- 7,212
Legal and other 103,179 120,703 32,046
103,179 120,703 47,563
NET EARNINGS (LOSS) $(99,414) $(43,654) $ 7,445
Earnings (loss) per share $ (.18) $ (.09) $ .01
Distributions per share $ --- $ --- $ 2.80
Weighted average shares of
beneficial interest used
in computing earnings
(loss) per share 542,413 505,172 498,985
The accompanying notes are an integral part of these statements.
WATERMARK INVESTORS REALTY TRUST AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)
Years Ended December 31, 1995, 1994 and 1993
Shares of Additional
Beneficial Paid-in- Accumulated
Interest Capital Deficit Total
Balance at
January 1,
1993 $498,985 $1,050,980 $(160,784) $1,389,181
Distribu-
tion to
Share-
holders (346,178) (1,050,980) --- (1,397,158)
Net
earnings
for the
year --- --- 7,445 7,445
Balance at
December
31, 1993 152,807 --- (153,339) (532)
Issuance of
shares 43,428 --- --- 43,428
Net loss
for the
year --- --- (43,654) (43,654)
Balance at
December
31, 1994 196,235 --- (196,993) (758)
Contribu-
tion by
Share-
holders --- 44,205 --- 44,205
Net loss
for the
year --- --- (99,414) (99,414)
Balance at
December
31, 1995 $196,235 $44,205 $(296,407) $(55,967)
The accompanying notes are an integral part of these statements.
WATERMARK INVESTORS REALTY TRUST AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
1995 1994 1993
Cash flows from operating
activities
Net earnings (loss) $(99,414) $(43,654) $7,445
Adjustments to reconcile
net earnings (loss) to
net cash provided (used)
by operating activities
Gain on sale of real estate (3,765) --- ---
Decrease in other assets --- --- 66,389
Increase (decrease) in
accrued liabilities 23,002 (13,044) 8,101
Increase (decrease) in
deferred lease revenue --- (70,000) 70,000
Expenses paid directly
by shareholder 44,205 70,000 ---
Net cash provided (used)
by operating activities (35,972) (56,698) 151,935
Cash flows from investing
activities
Proceeds from sale of
real estate 3,765 --- ---
Advance to shareholder --- --- (70,000)
Net cash provided (used)
by investing activities 3,765 --- (70,000)
Cash flows from financing
activities
Distribution to shareholders --- --- (1,410,118)
Sale of shares --- 43,428 ---
Net cash provided (used) by
financing activities --- 43,428 (1,410,118)
Decrease in cash (32,207) (13,270) (1,328,183)
Cash at beginning of year 33,087 46,357 1,374,540
Cash at end of year $ 880 $ 33,087 $ 46,357
Supplemental cash flow
information
Cash paid for interest $ --- $ --- $ 8,305
The accompanying notes are an integral part of these statements.
WATERMARK INVESTORS REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations
Watermark Investors Realty Trust (Watermark) was originally
organized as Ryan Mortgage Investors pursuant to the Texas Real
Estate Investment Trust Act under a Declaration of Trust dated
October 13, 1971. On March 6, 1984, its name was changed to
Arlington Realty Investors pursuant to an Amendment to the
Declaration of Trust. On December 5, 1995, the Trust's name was
changed to Watermark Investors Realty Trust pursuant to an
Amendment to the Declaration of Trust. The Trust has elected to
be treated as a Real Estate Investment Trust ("REIT") under
Sections 856 through 860 of the Internal Revenue Code. The Trust
has, in the opinion of the Trust's management, qualified for
federal taxation as a REIT for each fiscal year subsequent to
December 31, 1971. Although not currently active, the Trust's
primary business and only industry segment has been investing in
equity interests in real estate and related real estate
activities. Under the Trust's Declaration of Trust and Bylaws,
the Trustees, at their option, may terminate the Trust's status
as a REIT for federal income tax purposes.
During March 1995, the Trust formed a wholly-owned subsidiary,
Watermark Texas 1, Inc., a Maryland corporation, and contributed
its sole property to such subsidiary.
Principles of Consolidation
The consolidated financial statements include the accounts of
Watermark, and its wholly-owned subsidiary, Watermark Texas 1,
Inc. All significant intercompany transactions and accounts have
been eliminated.
Real Estate
Watermark carries real estate at the lower of cost or estimated
net realizable value.
Allowance for Possible Losses
Watermark provides for possible losses on real estate when such
amounts are considered necessary after making periodic reviews of
the estimated net realizable values of the real estate.
Earnings (Loss) Per Share
Earnings (loss) per share is computed based upon the weighted
average number of shares of beneficial interest outstanding
during the year.
Statements of Cash Flows
The Company does not consider any of its assets to meet the
definition of a cash equivalent.
Accounting Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Legal and Other Expenses
Legal and other expenses incurred for 1995, 1994 and 1993 include
legal expenses of approximately $62,000, $100,000 and $17,000,
respectively.
Income Taxes
Watermark is qualified as a REIT. To retain its REIT
qualification, Watermark must restrict its investments
principally to rental properties or notes secured by real estate,
and must not realize more than 30% of its gross income from gain
on the sale of real estate assets held for less than four years.
In addition, Watermark must pay out at least 95% of its taxable
income, excluding capital gains, as dividends, provided that
Watermark pays tax at corporate rates on capital gains not
distributed. No distributions were required in 1995 or 1994 due
to net operating losses. Watermark made a liquidating
distribution during 1993 in order to maintain its REIT
qualification. This distribution represented a return of
capital, and resulted in a reduction of the carrying amount of
shares of beneficial interest of $346,178, and a charge to
additional paid-in capital of $1,050,980.
NOTE 2 - PLAN OF LIQUIDATION AND TERMINATION
Watermark operated under a Plan of Complete Liquidation and
Termination (the "Plan" or the "Watermark Plan") approved by the
shareholders in 1985 until June 30, 1994.
NOTE 3 - REAL ESTATE
At December 31, 1995 and 1994, Watermark's only real estate asset
was a parcel of unimproved land consisting of approximately 4.5
acres located on Parker Road in Houston, Harris County, Texas.
During 1992, a provision was made to reduce the Parker Road land
to its estimated net realizable value, which was determined to be
zero at December 31, 1992. During March 1995, the Trust formed a
wholly-owned subsidiary and contributed the Park Road property to
such subsidiary. At December 31, 1995, the Trust's only
significant asset was its ownership interest in such subsidiary.
During February 1995, the Trust sold a 4,429 square foot strip of
land on the south side of the Parker Road property to the City of
Houston, Texas for $3,765.
NOTE 4 - FEDERAL INCOME TAXES
No Federal income taxes have been provided for financial
statement purposes because Watermark was not subject to federal
income taxes. At December 31, 1995, net operating loss
carryforwards of approximately $827,000 were available for tax
purposes which, if not utilized, will expire at various dates
through 2010.
NOTE 5 - RELATED PARTY TRANSACTIONS
Southmark Corporation ("Southmark"), a real estate-based
financial services company, headquartered in Dallas, Texas, owned
approximately 64.1% of Watermark's outstanding shares. On July
14, 1989, Southmark filed a voluntary petition seeking
reorganization under Chapter 11 of the United States Bankruptcy
Code. Southmark's Fourth Amended and Restated Plan of
Reorganization became effective on August 10, 1990.
In accordance with its Reorganization Plan and in an effort to
liquidate its interest in Watermark, Southmark entered into
discussions with parties interested in acquiring Southmark's
64.1% ownership of Watermark. On November 10, 1993 Southmark's
interest was acquired by Davister Corp. Davister Corp. sold its
interest to four investor groups on November 10, 1994.
Southmark provided headquarters and legal, administrative and
accounting services to Watermark under the supervision of
Watermark's officers (who were also officers of Southmark).
Southmark received an annual advisory fee equal to 2% of
Watermark's total assets (reduced for advances to Southmark)
and had received a mortgage servicing fee of 1/4% of total
outstanding mortgages receivable. Southmark was paid an
aggregate of approximately $7,200, for rendering such
services in 1993. During 1993, Southmark reduced the
annual advisory fee charged to Watermark to an amount
equal to 1% of Watermark's total assets.
Southmark received $895,969 of the liquidating distribution made
during 1993.
On November 10, 1993 Davister Corp. replaced Southmark as the
majority shareholder and its officers became officers of
Watermark. On December 31, 1993 Watermark advanced $70,000 to
Davister. In 1994, Davister agreed to pay $70,000 of legal fees
and other costs on behalf of Watermark to liquidate the advance.
From November 10, 1993 to December 5, 1995, Davister provided
office space and legal, administrative and accounting services to
the Trust under the supervision of the Trust's officers at that
time (who were also officers of Davister or one of its
affiliates). Davister was not compensated by the Trust for any
services rendered during the years ended December 31, 1995 and
1994 or 1993
On December 24, 1993, Watermark entered into a ground lease on
its Parker Road property in Houston, Texas with Plano Outlet
Mall, Ltd., a related party. The lease expired December 23, 1994
and required prepayment of the total annual rental of $70,000.
For financial reporting purposes, the prepayment was classified
as deferred lease revenue and was amortized ratably over the life
of the lease.
Since December 5, 1995, HPI Capital, LLC has provided
administrative and accounting services to the Trust under
supervision of the Trust's officers (one of whom is also an
officer of HPI Capital, LLC). HPI Capital, LLC has not been
compensated by the Trust for any services rendered to the Trust.
NOTE 6 - ISSUANCE OF STOCK
On November 10, 1994, Watermark issued 43,428 shares of
beneficial interest for $43,428. The shares were purchased by
one of the investor groups that acquired Davister's interest in
Watermark.
<TABLE>
WATERMARK INVESTORS REALTY TRUST AND SUBSIDIARY SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1995, 1994 and 1993
<CAPTION>
Gross
Amount at
Cost which
Capitalized Carried
Initial Subsequent at Depreciable
Cost to to December Valuation Accumulated Date Life
Description Watermark Acquisition 31, 1995 Allowance Depreciation Acquired (years)
<S> <C> <C> <C> <C> <C> <C>
Undeveloped $162,729 $5,859 $168,588 $(168,588) --- Various ---
land
Houston, TX
</TABLE>
A summary of activity in real estate and accumulated depreciation for
the three years in the period ended December 31, 1995 is as follows:
REAL ESTATE 1995 1994 1993
Balance at beginning of $168,588 $168,588 $168,588
year
Sales --- --- ---
Foreclosure additions --- --- ---
Improvements --- --- ---
Balance at end of year $168,588 $168,588 $168,588
ACCUMULATED
DEPRECIATION
Balance at beginning of $ --- $ --- $ ---
year
Sales --- --- ---
Depreciation --- --- ---
Balance at end of year $ --- $ --- $ ---
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
During 1994 and 1995 there was no change in or disagreement
with the Trust's accountants, Farmer, Fuqua, Hunt & Munselle,
P.C., on accounting or financial disclosure.
On December 5, 1995, the Trust's Board of Trustees again
selected Farmer, Fuqua, Hunt & Munselle, P.C. to serve the Trust
as independent accountants to audit the Trust's financial
statements for the calendar year ended December 31, 1995.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The business affairs of the Trust are managed by, or under
the direction of, the Board of Trustees. The Trustees are
responsible for the general investment policies of the Trust and
for such general supervision of the business of the Trust
conducted by officers, agents, employees, investment advisors or
independent contractors of the Trust as may be necessary to
insure that such business conforms to the provisions of the
Declaration of Trust. Pursuant to Article II, Section 2.1 of the
Declaration of Trust, as amended, of the Trust, there shall not
be less than two (2), nor more than fifteen (15), Trustees of the
Trust. The number of Trustees shall be determined from time to
time by resolution of the Trustees and the current number of
Trustees is set at three (3). Trustees may succeed themselves in
office and are required to be individuals at least 21 years old
not under legal disability and at least a majority must be
natural persons. Commencing with the 1996 annual meeting
of shareholders, the Board of Trustees of the Trust shall be
divided into three classes, each class to consist as nearly as
possible of one-third of the Trustees. The term of office of one
class of Trustees shall expire each year. The initial term of
office of the Class I Trustees shall expire at the 1997 annual
meeting of shareholders. The initial term of office of the Class
II Trustees shall expire at the 1998 annual meeting of
shareholders. The initial term of office of the Class III
Trustees shall expire at the 1999 annual meeting of shareholders.
After the 1996 annual meeting of shareholders, the Trustees of
the class elected at each annual meeting of shareholders
thereafter shall hold office for a term of three years.
The current Trustees of the Trust (two of whom are also the
executive officers) are listed below, together with their ages,
all positions and offices with the Trust and their principal
occupations, business experience and directorships with other
companies during the last five years or more.
David S. Givner, 51, has been Trustee, President and
Treasurer of the Trust since December 5, 1995, and is also the
President/Managing Director of HPI Capital, LLC. Since 1992,
Mr. Givner has been President and Chief Operating Officer of
various affiliates of HPI Capital, LLC. From 1987 until 1992, he
was Senior Vice President/Director of Leasing and Consulting
Services for Williams Real Estate Company based in New York, New
York. Mr. Givner is also the sole shareholder and the President
of DAGI Corporation, a Delaware corporation and the general
partner of DAGI Limited Partnership, a Delaware limited
partnership. Mr. Givner beneficially owns 59,655 Shares through
DAGI Limited Partnership.
Simon Mizrachi, 47, has been Trustee of the Trust since
December 5, 1995 and is also the President of Midatlantic Agency,
Inc. a Florida corporation and financial consulting company.
Mr. Mizrachi has served as President of Midatlantic Agency, Inc.
since 1992. Mr. Mizrachi and Midatlantic Agency, Inc. are the
sole partners of MIZ Investors Associates, a Delaware general
partnership. Mr. Mizrachi has been a director and officer of PAZ
Securities, Inc., an NASD broker/dealer firm, since 1978.
Mr. Mizrachi is an officer with PAK Investors, Inc., Pudgie's
Chicken, Inc., Topaz Securities, Inc., Topaz, Inc., Cal-Mar,
Inc., TMT Hanes, Inc., and TMT Sales, Inc. Mr. Mizrachi is also
an officer of various affiliates of MIZ Investors Associates and
Midatlantic Agency, Inc. Mr. Mizrachi beneficially owns 59,655
Shares through MIZ Investors Associates.
Michael S. Verruto, 35, has been Trustee, Vice President and
Secretary of the Trust since December 5, 1995 and is also the
Vice President/Managing Director of HPI Capital, LLC, a North
Carolina limited liability company that develops real estate.
Since January 1990, Mr. Verruto has held various positions with
various affiliates of HPI Capital, LLC, all of which are active
in real estate development and management. Mr. Verruto is also
the sole shareholder and the President and Treasurer of Fletcher
Napolitano Styles and Verruto Holding Company, Inc., a Delaware
corporation and the general partner of Fletcher Napolitano Styles
and Verruto Family Property Partners, L.P., a Delaware limited
partnership. Mr. Verruto beneficially owns 59,655 Shares through
Fletcher Napolitano Styles and Verruto Family Property Partners,
L.P.
Meetings and Committees of Trustees
The business affairs of the Trust are managed by, or under the
direction of, the Board of Trustees. During the fiscal year
ended December 31, 1995, the Board of Trustees held one formal
meeting and no matters were handled by unanimous written consent.
The Board of Trustees has no standing audit, nominating or
compensation committee.
Compliance with Section 16(a) of the Securities Exchange Act of
1934
Under the securities laws of the United States, the Trust's
trustees, executive officers, and any persons holding more than
ten percent of the Trust's Shares are required to report their
ownership of the Shares and any changes in that ownership to the
Securities and Exchange Commission (the "Commission"). Specific
due dates for these reports have been established under
applicable law and the Trust is required to report any failure to
file by these dates during 1995. To the best knowledge of the
current officers of the Trust, based upon the representations of
its former trustees and executive officers and its ten percent
holders and copies of the reports that they have filed with the
Commission, all of these filing requirements were satisfied by
its trustees and executive officers and ten percent holders.
Item 11. Executive Compensation.
Neither the trustees nor the officers of the Trust received
salaries or other cash compensation from the Trust for acting in
such capacities during the year ended December 31, 1995. The
Trust has no retirement, annuity or pension plans covering its
trustees or officers. Based upon the Trust's current operations,
the Board of Trustees does not believe compensation will be paid
or given in the near future.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
Security Ownership of Certain Beneficial Owners
According to the Share transfer records of the Trust and
other information available to the Trust, the following persons
were known to be the beneficial owners, as of February 29, 1996,
of more than five percent (5%) of the outstanding Shares of the
Trust:
Percent of
Name and Address Amount of Shares
of Beneficial Owner Beneficial Ownership Outstanding (1)
Fletcher Napolitano Styles 59,665 (2) 11.0 (2)
and Verruto Family Property Shares
Partners, L.P. (3)
227 W. Trade Street
Suite 2320
Charlotte, NC 28202
Attn: Michael S. Verruto
MIZ Investors Associates (4) 59,665 (2) 11.0 (2)
6971 N. Federal Highway Shares
Suite 203
Boca Raton, FL 33487
Attn: Simon and Joseph Mizrachi
DAGI Limited Partnership (5) 59,665 (2) 11.0 (2)
227 W. Trade Street Shares
Suite 2320
Charlotte, NC 28202
Attn: David S. Givner
Antapolis N.V. 184,422 (2) 34.0 (2)
c/o MeesPierson Trust Shares
(Curacao) N.V.
Number 6 Curacao
Netherlands Antilles
Attn: John B. Goisiraweg
________________________________
(1) Based on 542,413 Shares outstanding on February 29, 1996.
(2) Does not include shares owned by others in group that filed
a Schedule 13D dated November 10, 1994. The group consists
solely of the four entities listed above, which collectively
own 363,417 Shares or 67.0% of the issued and outstanding
Shares.
(3) Through his control of Fletcher Napolitano Styles and
Verruto Family Property Partners, L.P., Michael S. Verruto
is deemed the beneficial owner of 59,665 shares.
(4) Through their control of MIZ Investors Associates, Simon and
Joseph Mizrachi are deemed to share beneficial ownership of
59,665 shares.
(5) Through his control of DAGI Limited Partnership, David S.
Givner is deemed the beneficial owner of 59,665 shares.
Security Ownership of Management
According to the Share transfer records of the Trust and
other information available to the Trust, as of February 29,
1996, the current trustees and executive officers of the trust
beneficially owned the following Shares:
Name and Offices Amount of
of Beneficial Beneficial Percent of
Owner Ownership Class (1)
David S. Givner, 59,665 (2) 11.0 (2)
Trustee, (3)
President and
Treasurer
Simon Mizrachi, 59,665 (2) 11.0 (2)
Trustee (4)
Michael S. 59,665 (2) 11.0 (2)
Verruto, Trustee,
(5) Vice
President and
Secretary
All trustees and 178,995 (2) 33.0 (2)
executive
officers as a
group
_____________________________
(1) Based on 542,413 Shares outstanding on February 29, 1996.
(2) Does not include shares owned by others in group that filed
a Schedule 13D dated November 10, 1994. The group consists
solely of the four entities listed above, which collectively
own 363,417 Shares or 67.0% of the issued and outstanding
Shares.
(3) Through his control of DAGI Limited Partnership, David S.
Givner is deemed the beneficial owner of 59,665 shares.
(4) Through their control of MIZ Investors Associates, Simon and
Joseph Mizrachi are deemed to share beneficial ownership of
59,665 shares.
(5) Through his control of Fletcher Napolitano Styles and
Verruto Family Property Partners, L.P., Michael S. Verruto
is deemed the beneficial owner of 59,665 shares.
Item 13. Certain Relationships and Related Transactions.
From November 10, 1993, to December 5, 1995, Davister
provided office space and legal, administrative and accounting
services to the Trust under the supervision of the Trust's
officers at that time (who were also officers of Davister or one
of its affiliates). Except as otherwise disclosed herein,
Davister has not been compensated by the Trust for any services
rendered to the Trust.
On December 24, 1993, the Trust entered into a ground lease
on its Parker Road property in Houston, Texas with Plano Outlet
Mall, Ltd., a related party. The lease expired December 23, 1994
and required prepayment of the total annual rental of $70,000.
For financial reporting purposes, the prepayment was classified
as deferred lease revenue and has been amortized ratably over the
life of the lease. On December 31, 1993, the Trust advanced
$70,000 to Davister. Davister agreed to pay $70,000 in costs and
expenses (including legal fees) on behalf of the Trust to repay
such advance. As of December 31, 1994, the advance had been
fully paid. One of the Trust's officers at that time was also an
officer of a subsidiary of the general partner of Plano Outlet
Mall, Ltd.
Since December 5, 1995, HPI Capital, LLC has provided
administrative and accounting services to the Trust under the
supervision of the Trust's officers (two of whom are also
officers of HPI Capital, LLC). HPI Capital, LLC has not been
compensated by the Trust for any services rendered to the Trust.
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports
on Form 8-K.
(a) The following documents are filed as part of this report:
8. Consolidated Financial Statements:
Balance Sheets as of December 31, 1995 and 1994.
Statements of Operations for the years ended
December 31, 1995, 1994 and 1993.
Statements of Shareholders' Equity for the years
ended December 31, 1995, 1994 and 1993.
Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993.
Notes to Financial Statements.
9. Schedules:
Schedule III - Real Estate Investments and
Accumulated Depreciation.
All other schedules are omitted since they are not
required, are not applicable, or the information
required is included in the financial statements
or the notes thereto.
10. Exhibits:
The following documents are filed as exhibits to this
report:
Exhibit
Number Description
3.1 Declaration of Trust, as amended through
December 5, 1995.
3.2 By-laws, as amended through December 5, 1995.
27.1 Financial Data Schedule
99.1 Trust Share Purchase Agreement dated
November 10, 1994 between Watermark Realty
Investors and MIZ Investors Associates.
(Incorporated by reference to Exhibit 28.1 to
Registrant's Current Report on Form 8-K for
November 10, 1994.)
(b) Reports on Form 8-K. During the last quarter of the period
covered by this report, no reports on Form 8-K were filed.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
WATERMARK INVESTORS REALTY
TRUST
Date: April 15, 1996 By: /s/ David S. Givner
David S. Givner
Trustee, President and
Treasurer
(Principal Executive
Officer and Principal
Financial and Accounting
Officer)
By: /s/ Michael S. Verruto
Michael S. Verruto
Trustee, Vice President
and Secretary
Exhibit 3.1
Declaration of Trust
(as amended through December 5, 1995)
ARTICLE I
The Trust
Section 1.1 Name. The Trust created by this Declaration is
hereby referred to as the "Trust" and shall be known by the name
"Watermark Investors Realty Trust." Except as otherwise provided
herein, the Trustees shall conduct and transact the activities of
the Trust, make and execute all documents and instruments, and
sue and be sued in the name of the Trust or in their names as
Trustees of the Trust (but not in their names individually).
The Trust shall have the authority to operate under an
assumed name or names in such state or states or any political
subdivision thereof where it would not be legal, practical or
convenient to operate in the name of the Trust. The Trust shall
have the authority to file such assumed name certificates or
other instruments in such places as may be required by applicable
law to operate under such assumed name or names.
An assumed name certificate setting forth such name has been
filed in the manner prescribed by law and a copy of this
Declaration shall be filed with the County Clerk in Tarrant
County, Texas, the county of the principal place of business of
the Trust.
Section 1.2 Location. The initial principal office and
place of business of the Trust shall be at 301 East 5th Street,
Fort Worth, Texas 76102, unless changed by the Trustees to
another location in Texas or elsewhere. The Trust shall have
such other offices or places of business as the Trustees may from
time to time determine.
Section 1.3 Nature of Trust. The Trust shall be a real
estate investment trust organized under the Texas Real Estate
Investment Trust Act. The Trust is not intended to be, shall not
be deemed to be, and shall not be treated as, a general
partnership, limited partnership, joint venture, joint stock
company, or corporation. The Shareholders shall be beneficiaries
and their relationship to the Trustees shall be solely in that
capacity in accordance with the rights conferred upon them
hereunder.
Section 1.4 Purpose. The Trust is formed pursuant to the
provisions of, and shall have all the powers provided in, the
Texas Real Estate Investment Trust Act. Its purpose is to invest
in notes, bonds and other obligations, secured by Mortgages on
Real Property and to purchase, hold, lease, manage, sell,
exchange, develop, subdivide and improve Real Property and
interests in Real Property, and in general, to carry on any other
business and do any other acts in connection with the foregoing
and to have and exercise all powers conferred by the laws of the
State of Texas upon real estate investment trusts formed under
the Texas Real Estate Investment Trust Act, and to do any and all
of the things herein set forth to the same extent as natural
persons might or could do. The term "Real Property" and the term
"interests in Real Property" for the purposes stated herein shall
not include severed mineral, oil or gas royalty interests.
Section 1.5 Commencement of Business. The Trust will not
commence operations until the beneficial ownership is held by 100
or more persons, with no five or fewer persons owning more than
50% of the total number of outstanding Shares of the Trust. The
word "person" as used in this Section 1.5 shall not include
corporations.
Section 1.6 Definitions. As used in or in connection with
this Declaration, the term:
(a) "Additional Mortgage Consideration" shall mean any
interest, or right to acquire any interest, in Real Property
acquired by the Trust in connection with a Mortgage Loan or a
purchase-leaseback transaction in addition to the basic interest
rate on such Mortgage Loan where no consideration (except for the
exercise or option prices applicable to subsequent rights to
acquire interests in Real Property) is given by the Trust other
than the granting of such loan and the taking into account of
such interest in determining the terms of such loan. Such
interests may include, without limitation, rights to receive
additional payments based on gross income or rental income from
the Real Property, or a share in the equity or the ownership of,
or a right to acquire (by warrants, options or otherwise) a share
in such equity or ownership of, Real Property;
(b) "Adviser" shall mean the Person appointed by the
Trustees under the provisions of Article IV;
(c) "Affiliate" as used herein shall mean, as to any
corporation, partnership or trust, any person or entity which
holds beneficially, directly or indirectly, 1% or more of the
outstanding equity interests of such corporation, partnership or
trust, or is an officer, director, employee, partner or trustee
of such corporation, partnership or trust, or of any person or
entity controlling, controlled by or under common control with
such corporation, partnership or trust;
(d) "Appraisal" shall mean the market value, as of the date
of the Appraisal, of Real Property in its existing state or in a
state to be created, as determined by the Trustees or by any
Person having no economic interest in the Real Property; who, in
the sole judgment of the Trustees, is properly qualified to make
such a determination. The Trustees may in good faith rely on a
previous Appraisal made on behalf of other Persons provided it
meets the aforesaid standards and was made in connection with a
Mortgage Loan in which the Trust acquired an entire or
participating interest or which was prepared not earlier than two
years prior to the acquisition by the Trust of its interest in
the Real Property or Mortgage Loan;
(e) "By-laws" shall mean the regulations for the conduct of
the business and affairs of the Trust adopted by the Shareholders
concurrently with or immediately after the execution of this
Declaration and all amendments or modifications thereto;
(f) "Certificates of Deposit" shall mean evidence of
deposits in, or obligations of banking institutions and savings
institutions which are members of the Federal Deposit Insurance
Corporation or of the Federal Home Loan Bank System;
(g) "Commercial Paper" shall mean indebtedness of the Trust
evidenced by unsecured promissory notes maturing not more than
nine (9) months after the date of issue;
(h) "Construction Loans" shall mean Mortgage Loans incurred
to finance all or part of the cost of acquiring (including
leaseholds) and improving land and the construction or
improvement of residential, commercial industrial or public
buildings or structures of any kind, including, without
limitation, income-producing properties, such as apartments,
shopping centers, office and industrial buildings, and other
structures, or suitable for other residential, commercial,
industrial or public uses;
(i) "Declaration" shall mean this Declaration of Trust and
all amendments or modifications thereof;
(j) "Development Loans" shall mean Mortgage Loans incurred
to finance or refinance all or part of the cost of acquiring
(including leaseholds) and/or improving unimproved land and,
within a reasonable period of time, developing it into sites
suitable for the construction of dwellings or other buildings
thereon, including, without limitation, income-producing
properties, such as apartments, shopping centers, office and
industrial buildings and other structures, or suitable for other
residential, commercial, industrial or public uses;
(k) "Equity Investments in Real Property" shall mean
investment in the ownership of, or participation in the ownership
of Real Property, including the development thereof and any
interest therein, or of any type of interest in any corporate or
other entity principally involved in owning, developing,
improving, financing, operating or managing Real Property. Such
term shall not include any purchase-leaseback transaction which
is properly treated as a loan transaction for tax and accounting
purposes, such transactions being treated as Mortgage Loans for
all purposes herein, or any interests which consist of
Additional Mortgage Consideration;
(l) "FHA" shall mean the Federal Housing Administration and
The Department of Housing and Urban Development and any
successors thereto;
(m) "FHA Loans" shall mean Mortgage Loans (which may be
Construction, Development or Long Term Loans) which are insured
under the provisions of the National Housing Act of 1934, as
amended;
(n) "First Mortgage" shall mean a mortgage which takes
priority or precedence over all other charges or encumbrances
upon the same property, other than leaseholds therein, and which
must be satisfied before such other charges are entitled to
participate in the proceeds of any sale. However, such priority
shall not be deemed as abrogated by liens for taxes, assessments
which are not due or remain payable without penalty, or contracts
(other than contracts for repayment of borrowed money); by
leases, mechanics' and materialmen's liens for work performed and
materials furnished which are not in default or are in good faith
being contested; or by other claims normally deemed in the same
local jurisdiction not to abrogate the priority of a First
Mortgage;
(o) "First Mortgage Loans" shall mean Mortgage Loans
secured or collateralized, at the time of acquisition thereof, by
First Mortgages;
(p) "Fiscal Year" shall mean any period for which an income
tax return is submitted to the Internal Revenue Service and which
is treated by the Internal Revenue Service as a reporting period;
(q) "Gap Loan Commitments" shall mean undertakings by the
Trust to make Junior Mortgage Loans to finance the difference
between the maximum and minimum commitment of the First Mortgage
lender;
(r) "Gap Loans" shall mean Junior Mortgage Loans made or
acquired by the Trust to finance the difference between the
minimum amount which such permanent lender has agreed to fund and
the maximum amount which such permanent lender would fund if
certain occupancy, rental or other requirements are met;
(s) "Government Related Obligations" shall mean obligations
guaranteed or insured by Government National Mortgage Association
on or any other federal, state or local governmental agency or
instrumentality or obligations based on or backed by a special
mortgage or pool of mortgages or other instruments insured or
guaranteed by FHA, the Veterans Administration or any other
federal, state or local government agency or instrumentality;
(t) "Government Securities" shall mean Securities which are
obligations of, or guaranteed by, the United States Government,
any State or Territory of the United States of America, or any
agencies or political subdivisions thereof, including, without
limitation, all Government Securities from time to time
constituting qualified real estate investment trust assets under
the Internal Revenue Code;
(u) "Invested Assets" shall mean all of the Trust's assets
at cost, without deducting any liabilities, plus the undisbursed
commitments of the Trust in respect of closed loans and other
closed investments, but excluding good will and other intangible
assets, cash, cash items and obligations of municipal, state and
the Federal governments and governmental agencies (other than
obligations secured by a lien on real property owned, or to be
acquired, by such governments or governmental agencies and
securities backed by a pool of mortgages and guaranteed by a
governmental agency);
(v) "Junior Mortgage" shall mean a Mortgage (1) which has
the same priority or precedence over all charges or encumbrances
upon Real Property as that required for a First Mortgage except
that it is subject to the priority of one or more other Mortgages
and (2) which must be satisfied before such other charges or
encumbrances (other than prior Mortgages) are entitled to
participate in the proceeds of any sale or other disposition of
such Real Property;
(w) "Junior Mortgage Loans" shall mean Mortgage Loans
secured or collateralized, at the time of acquisition thereof, by
Junior Mortgages;
(x) "Land Loans" shall mean Mortgage Loans incurred to
finance or refinance all or part of the cost of acquiring
unimproved land for the purpose of holding such land with a view
to possible appreciation in value;
(y) "Long Term" in relation to loans shall mean loans
having a maturity (disregarding sinking fund or optional
prepayment provisions prior to the maturity date of such loan) of
at least 10 years from the date of original issue;
(z) "Mortgages" shall mean mortgages, deeds to secure debt,
deeds of trust or other evidences of a lien on Real Property or
on or in rights or interests in Real Property as a security for
indebtedness. Mortgages may be upon special interests in Real
Property including, without limitation, leaseholds, air rights
and condominiums;
(aa) "Mortgage Loans" shall mean notes, debentures, bonds,
and other evidences of indebtedness or obligation, which are
negotiable or non-negotiable, and which are secured or
collateralized by mortgages; for all purposes herein, Mortgage
Loans shall be deemed to include any purchase-leaseback
transaction which is properly treated as a loan transaction for
tax and accounting purposes;
(bb) "Net Assets" shall mean the Total Assets of the Trust
Estate after deducting therefrom any liabilities of the Trust
excluding from such liabilities the noncurrent principal amount
of indebtedness of the Trust subordinate to other moneys borrowed
and except that depreciable assets may be included therein at the
greater of either (i) the cost of such assets on the books of the
Trust less depreciation thereof or (ii) fair market value of such
assets based upon Appraisals thereof.
(cc) "Non-Recourse Indebtedness" shall mean indebtedness of
the Trust incurred in connection with the acquisition of any
asset wherein the liability of the Trust is limited to the asset
acquired and income and proceeds attributable thereto and which
does not represent a general obligation of the Trust;
(dd) "Person" shall mean and include individuals,
corporations, limited partnerships, general partnerships, joint
stock companies or associations, joint ventures, associations,
trusts, banks, trust companies, land trusts, business trusts or
other organizations, whether or not legal entities, and
governments and agencies and political subdivisions thereof;
(ee) "Prime Commercial Paper" shall mean commercial paper
rated "Prime" or accorded equivalent treatment by the National
Credit Office;
(ff) "Real Property" or "Real Estate" shall mean land,
leaseholds, air rights, and any buildings, structures,
improvements, furnishings, fixtures and equipment located on or
used in connection with land, leaseholds, air rights, or other
rights or interests therein, but does not include Mortgages,
Mortgage Loans, or interests therein;
(gg) "REIT Provisions" shall mean Part II, Subchapter M of
Chapter 1 of Subtitle A of the Internal Revenue Code or successor
statutes and the Treasury Regulations from time to time
promulgated thereunder;
(hh) "Securities" shall mean any stock, shares, voting trust
certificates, bonds, debentures, notes, or other evidence of
indebtedness, secured or unsecured, convertible, subordinated or
otherwise or in general any instruments commonly known as
"securities", or any certificates of interest, shares or
participations in temporary or interim certificates for, receipts
for guarantees of, or warrants, options or rights to subscribe
to, purchase or acquire any of the foregoing;
(ii) "Securities of the Trust" shall mean any Securities
issued by the Trust;
(jj) "Shareholders" shall mean, as of any particular time,
all holders of record of outstanding Shares at such time;
(kk) "Shares" shall mean the shares of beneficial interests
of the Trust as described in Article VI.
(ll) "Short Term" in relation to loans shall mean loans
other than Long Term Loans;
(mm) "Stand-by Loan Commitments" (also known as "takeout
commitments") shall mean undertakings by the Trust to make
Mortgage Loans on projects after completion of construction and
on which commitments a fee will be earned regardless of whether
the proposed borrower takes the loan;
(nn) "Texas Real Estate Investment Trust Act" shall mean the
Texas Real Estate Investment Trust Act as in effect on the date
of this instrument, any amendment thereto applicable to real
estate investment trusts created prior to such amendment, and any
amendment thereto which real estate investment trusts created
prior to such amendment may elect to be applicable to them if,
and to the extent, that the Trustees elect to have such amendment
applicable to the Trust;
(oo) "Total Assets of the Trust Estate" shall mean the
aggregate value of all of the assets of the Trust Estate as such
value appears on the most recent quarterly balance sheet
available to the Trustees, without deduction for mortgages or
other security interests to which such assets are subject but
after deduction for depreciation and other asset valuation
reserves;
(pp) "Trust Estate" or "Trust Property" shall mean as of any
particular time any and all property, real, personal or
otherwise, tangible or intangible, which has been transferred,
conveyed, paid to or acquired by the Trust or Trustees and all
rents, income, profits and gains therefrom and which at such time
is owned or held by or for the Trust or the Trustees;
(qq) "VA" shall mean the Veterans Administration and any
successor thereto;
(rr) "VA Loans" shall mean Mortgage Loans (which may be
Construction, Development or Long Term Loans) which are
guaranteed under the provisions of the Servicemen's Readjustment
Act of 1944, as amended;
(ss) "Warehousing Loans" shall mean loans which are secured
by Mortgage Loans owned by the borrower of a conventional nature
or those insured by the FHA or guaranteed by the VA;
(tt) "Wrap Around Loan" shall mean a Junior Mortgage Loan
made or acquired by the Trust, and which is made pursuant to an
agreement obligating the borrower to pay to the Trust a combined
principal equal to the principal of any senior Mortgage Loan plus
the principal of such Junior Mortgage Loan plus interest on the
combined principal and obligating the Trust to pay, as received
from the borrower, the principal and interest due on any such
senior Mortgage Loan.
ARTICLE II
Trustees
Section 2.1 Number and Qualifications. The number of
Trustees shall not be less than one (1) nor more than thirteen
(13), as fixed from time to time by the Trustees as provided in
the Bylaws of the Trust. Each Trustee shall serve until his
successor is elected and qualified or until his death,
retirement, resignation or removal. In the event of any increase
or decrease in the authorized number of Trustees, each Trustee
then serving as such shall nevertheless continue as a Trustee
until the expiration of the Trustee's then current term, or his
prior death, retirement, resignation or removal.
Commencing with the 1996 annual meeting of shareholders, the
Board of Trustees of the Trust shall be divided into three
classes, each class to consist as nearly as possible of one-third
of the Trustees. The term of office of one class of Trustees
shall expire each year. The initial term of office of the Class
I Trustees shall expire at the 1997 annual meeting of
shareholders. The initial term of office of the Class II
Trustees shall expire at the 1998 annual meeting of shareholders.
The initial term of office of the Class III Trustees shall expire
at the 1999 annual meeting of shareholders. After the 1996
annual meeting of shareholders, the Trustees of the class elected
at each annual meeting of shareholders thereafter shall hold
officer for a term of three years.
A Trustee may be removed by the vote of the holders of two-
thirds of the outstanding Shares at a special meeting of the
shareholders called for such purpose pursuant to the Trust's
Bylaws.
Section 2.2 Resignation, Removal and Death. A Trustee may
resign at any time by giving written notice thereof in recordable
form to the other Trustees at the principal office of the Trust.
The acceptance of a resignation shall not be necessary to make it
effective. A Trustee may be removed with or without cause by the
vote of the holders of two-thirds (2/3 ) of the outstanding
Shares or with cause by the vote of a majority of the Trustees.
Upon the resignation or removal of any Trustee, he shall execute
and deliver such documents and render such accounting as the
remaining Trustees shall require and shall thereupon be
discharged as Trustee. Upon the incapacity or death of any
Trustee, his status as a Trustee shall immediately terminate at
such incapacity or death, and his legal representative shall
perform the acts set forth in the preceding sentence.
Section 2.3 Vacancies. Any vacancy occurring on the Board
of Trustees may be filled by the vote of a majority of the
remaining Trustees regardless of whether such remaining Trustees
constitute a quorum of the Board of Trustees or by the vote of
the holders of a majority of the outstanding voting shares of the
Trust.
Section 2.4 Successor Trustees. The right, title and
interest of the Trustees in and to the Trust Estate shall vest
automatically in all persons who may hereafter become Trustees
upon their due election and qualification without any further
act, and thereupon they shall have the same rights, privileges,
powers, duties and immunities as though originally named as
Trustees in this Declaration. Appropriate written evidence of
the election and qualification of successor Trustees shall be
filed with the records of the Trust and in such other offices or
places as the Trustees may deem necessary, appropriate or
desirable. Upon the resignation, removal or death of a Trustee,
he (and in the event of his death, his estate) shall
automatically cease to have any right, title or interest in or to
any of the Trust Estate, and the right, title and interest of
such Trustee in and to the Trust Estate shall vest automatically
in the remaining Trustees without any further act.
A certificate or other written instrument signed by a
majority of the Trustees stating who at any time are or were
Trustees shall constitute prima facie proof of the matters set
forth therein.
Section 2.5 Actions by and Meetings of Trustees. The
Trustees may act with or without a meeting. Except as otherwise
provided herein, any action of a majority of Trustees present at
a duly convened meeting of the Trustees shall be conclusive and
binding as an action of the Trustees. A quorum for meetings of
Trustees shall be a majority of all of the Trustees in office.
The Trustees shall hold meetings not less frequently than
quarterly. Action may be taken without a meeting only by
unanimous consent of all of the Trustees in office and shall be
evidenced by a written certificate or instrument signed by all of
the Trustees in office, and such action so taken shall not be
considered as a quarterly meeting of the Trustees. Any action
taken by the Trustees in accordance with the provisions of this
paragraph 2.5 shall be conclusive and binding upon the Trust,
upon the Trustees, and upon the Shareholders, as an action of all
the Trustees, collectively, and of the Trust.
ARTICLE III
Trustees' Powers
Section 3.1 General Power of the Trustees. The Trustees
shall have, without other or further authorization, full,
absolute and exclusive power, control and authority over the
Trust Estate and of the business and affairs of the Trust, free
from any power and control of the Shareholders, to the same
extent as if the Trustees were the sole owners of the Trust
Estate in their own right, subject only to the limitations
contained in this Declaration and to the fiduciary duties imposed
by law upon such Trustees. The Trustees may do and perform such
acts and things as in their sole judgment and discretion are
necessary and proper for carrying out the purpose of the Trust or
conducting its business and affairs. The enumeration of specific
powers shall not be construed as limiting the exercise of general
powers or any other specific power. Such powers of the Trustees
may be exercised without order of or resort to any court.
Section 3.2 Specific Power. Without restricting or
limiting the general powers granted in the preceding paragraph,
the powers of the Trustees shall include, among others, the
following (subject always to the limitations and restrictions
stated elsewhere in this Declaration):
(a) To retain, invest and reinvest the capital and funds of
the Trust in any property, real, personal or otherwise, tangible
or intangible, whether or not such property is authorized by law
for investment by trust funds and whether or not a greater
proportion of the Trust Estate is invested in such property or
any other property than is authorized by law for investment by
trust funds.
(b) To invest in, purchase or acquire for cash, other
property or, through the issuance of its Shares, notes,
debentures, bonds or other obligations, any notes, bonds or other
obligations, which are secured by Mortgage Loans (or any interest
therein) and, in connection therewith, receive a participation in
any rents, lease payments, gross income, profits, equity or
ownership of Real Property securing such Mortgages; to invest in
loans secured by the pledge or transfer of Mortgage Loans.
(c) To purchase, acquire, own, hold, manage, improve, lease
(for a term extending beyond the possible termination of the
Trust or for a lesser term), option, grant, sell, exchange,
dispose of, encumber, mortgage (with or without power of sale),
partition, surrender, release or otherwise deal in and with Real
Property and assets, real or personal, and to erect, construct,
alter, repair, demolish or otherwise physically affect any
buildings, structures or improvements situated on or comprising
any Real Property interests owned or to be owned by the Trust,
provided, the Trustees shall not acquire or otherwise permit the
Trust to own any property in contravention of the provisions of
the Texas Real Estate Investment Trust Act.
(d) To sell rent, exchange, assign, mortgage, pledge, grant
security interests in, convey, transfer or otherwise dispose of
any and all of the Trust Estate by deeds, trust deeds,
assignments, bills of sale, leases, mortgages, financing
statements, security agreements and other instruments whether the
term thereof extends beyond the term of office of the Trustees
and beyond the possible termination of the Trust or for a lesser
term.
(e) To issue Shares, warrants, options, bonds, debentures,
notes or other evidences of indebtedness, which may be secured,
unsecured, subordinated to other indebtedness of the Trust or
convertible into Shares, and rights to subscribe to, purchase or
acquire Shares, to such Persons for such cash, property or other
consideration (including Securities of any other Person), as
allowed by the Texas Real Estate Investment Trust Act, on such
terms as the Trustees may deem advisable and list any of the
foregoing Securities used by the Trust on any securities exchange
and to purchase or otherwise acquire, hold, cancel, reissue, sell
and transfer any of such Securities.
(f) To borrow or in any other manner raise such sum or sums
of money or other property as the Trustees shall deem advisable
in any manner and on any terms, and to evidence the same by
Shares, notes, debentures, bonds, securities or other evidences
of indebtedness, which may mature at any time or times even
beyond the possible duration of the Trust, to reacquire such
evidences of indebtedness, to enter into other contracts on
behalf of the Trust, and to execute and deliver any Mortgage,
pledge, or other instrument, whether similar or dissimilar, to
secure any such indebtedness or other obligations or contracts;
and further, any such notes, debentures, bonds, instruments or
other obligations of the Trust may, at the discretion of the
Trustees, without vote of the Shareholders, be convertible into
Shares of the Trust at such time and on such terms as the
Trustees may prescribe; provided, however, that after giving
effect to any proposed increase in aggregate principal amount of
outstanding obligations of the Trust for borrowed money, the
aggregate principal amount of all such obligations will not
exceed 500% of the Net Assets of the Trust.
(g) To lend money, whether secured or unsecured.
(h) To create reserve funds for any purpose.
(i) To incur and pay out of the Trust Estate any charges or
expenses and disburse any funds of the Trust, which charges,
expenses or disbursements are, in the opinion of the Trustees,
necessary or proper for carrying out the purposes of the Trust or
conducting its business and affairs.
(j) To deposit any monies or securities included in the
Trust Property with any one or more banks, trust companies, or
other banking institutions deemed by the Trustees to be
responsible, whether or not such deposits will draw interest,
regardless of whether one or more of the Trustees or officers of
the Trust shall be an officer, employee, director or shareholder
of such bank, trust company, or other banking institution; such
monies or securities to be subject to withdrawal on notice or
upon demand and in such manner as the Trustees may determine, and
the Trustees shall not be liable for any loss which may occur by
reason of the failure of the bank, trust company or other
banking institution with whom any monies or securities have been
properly deposited to account for the monies or securities so
deposited.
(k) To possess and exercise all the rights, powers and
privileges incident to the ownership of or interests in Mortgage
Loans or Securities issued or created by any person forming part
of the Trust Estate to the same extent that an individual might.
(l) To organize or assist in organizing any Person under
the laws of any jurisdiction to acquire all or any part of the
Trust Estate or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, lease,
convey, assign, exchange or transfer the Trust Estate, or any
part thereof, to any such Person in exchange for the Securities
thereof and to lend money to, subscribe for the Securities of or
enter into any contracts with any such Person.
(m) To enter into joint ventures, general or limited
partnerships and any other lawful combinations or associations.
(n) To elect a Chairman of the Board and a President, each
of whom shall have and may exercise all of the authority of the
Trustees in the business and affairs of the Trust where action of
the Trustees is specified by the Texas Real Estate Investment
Trust Act or other applicable laws, but the designation of such
officers and the delegation thereto of authority shall not
operate to relieve the Trustees of any responsibility imposed
upon them by law. The Trustees shall also have the power to
elect one or more Vice Presidents, a Secretary, a Treasurer,
Assistant Secretaries and Assistant Treasurers. The officers of
the Trust need not be Trustees. All officers and agents of the
Trust shall have such authority and perform such duties in the
management of the Trust as may be provided in the By-laws or as
may be determined by the Trustees not inconsistent with the
By-laws. Any officer or agent elected or appointed by the
Trustees may be removed by the Trustees whenever in their
judgment the best interest of the Trust will be served thereby,
but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or
appointment of any officer or agent shall not of itself create
contract rights.
(o) To engage or employ any Persons (including any Trustee
or officer and any Person who is directly or indirectly
controlled by any Trustee or officer) as agents, representatives,
employees or independent contractors (including, without
limitation, real estate advisors, investment advisors, transfer
agents, registrars, underwriters, accountants, attorneys, real
estate agents, managers, appraisers, brokers, architects,
engineers, construction managers, general contractors or
otherwise) in one or more capacities, and to pay compensation
from the Trust for services in as many capacities as such person
may be so engaged or employed; and, except as prohibited or
limited by law, to delegate any of the powers and duties of the
Trustees to any one or more Trustees, agents, representatives,
officers, employees, independent contractors or other Persons.
(p) To allocate all receipts, moneys or property between
income and capital; to amortize any premium or discount; to
apportion any profit resulting from the maturity or sale of any
asset, or the sales price thereof, between income or capital; to
determine in what manner expenses or disbursements are to be
borne as between income and capital; to apportion any dividend or
other distribution on any investment as income or capital and to
provide reserves for depreciation, amortization or obsolescence
in respect to the Trust Estate.
(q) To determine from time to time the value of the Trust
Estate and of any services, Securities, property or other
consideration to be furnished to or acquired by the Trust, and
from time to time to revalue the Trust Estate in accordance with
such Appraisals as the Trustees shall determine.
(r) To collect, sue for and receive all sums of money
coming due to the Trust, and to prosecute, join, defend,
compromise, abandon or adjust, any actions, suits, claims,
demands or other litigation relating to the Trust, the Trust
Estate or the Trust's affairs.
(s) To renew, modify, release, compromise, extend,
consolidate or cancel, in whole or in part, any obligation to or
of the Trust.
(t) To procure insurance policies insuring the Trust Estate
against any and all risks and insuring the Trust and/or any or
all of the Trustees, the Shareholders, officers, employees,
agents, investment advisers, including the Adviser, or
independent contractors of the Trust individually against all
claims and liabilities of every nature arising by reason of
holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by the
Trust or any such Person as Trustee, officer, employee, agent,
investment adviser, or independent contractor, including any
action taken or omitted that may be determined to constitute
negligence whether or not the Trust would have the power to
indemnify such Person against such liability.
(u) To cause legal title to the Trust Estate to be held in
the name of the Trustees or, except as prohibited by law, in the
name of the Trust or one or more of the Trustees or any person or
nominee designated by the Trustees, which person or nominee may
hold such legal title only for the exclusive benefit of the
Trust, on such terms, in such manner with such powers as the
Trustees shall determine and with or without disclosure that the
Trust or the Trustees are interested therein.
(v) To determine the Fiscal Year of the Trust and the
method or form in which its accounts shall be kept and, from time
to time, to change the Fiscal Year or method or form of accounts.
(w) To adopt and use a seal (but the use of a seal shall
not be required for the execution of instruments or obligations
of the Trust).
(x) To pay all taxes and assessments, of whatever kind or
nature, imposed upon or against the Trust Estate, or any part
thereof, or upon or against any Trustee, in connection with the
activities, affairs or business of the Trust, and in that
connection to make such returns, claims for refund, or
agreements, and to do such other acts or things, as may be deemed
necessary, appropriate or desirable by the Trustees.
(y) To exercise with respect to property of the Trust, all
options, privileges and rights, whether to vote, assent,
subscribe or convert the same; to grant proxies and to
participate in and accept Securities issued under any voting
trust agreement.
(z) To purchase, acquire through the issuance, sale or
exchange of shares, merge or consolidate with, or invest in other
real estate investment trusts or Persons.
(aa) To delegate from time to time to any one or more of
their number or to any Person or Persons the doing of all matters
and things that the Trustees are hereunder or by law authorized
or permitted to do, but no such delegation shall operate to
relieve the Trustees of any responsibility imposed upon them by
law or take from the Trustees their continuing exclusive
authority over the management of the Trust, the conduct of its
affairs and the management and disposition of the Trust property.
Nothing in this Declaration shall authorize, permit or require
the Trustees to surrender to any person or persons such
continuing exclusive authority.
The Trustees shall exercise their power of investment in
such manner that seventy-five percent (75%) of the Trust's Total
Assets shall be invested in Real Property, interests in Real
Property, interests in Mortgages, shares in other real estate
investment trusts which meet the requirements of the REIT
Provisions, cash and cash items (including receivables) and
Government Securities, so long as such investment restriction is
required by the Texas Real Estate Investment Trust Act.
In connection with the investment of funds of the Trust in
Real Property of any character or type, major capital
improvements must be made on such property within 15 years of the
purchase or the property must be sold. Such major capital
improvements must equal or exceed the purchase price of such Real
Property, if the same is unimproved property at the time of
purchase or property outside the corporate limits of a city, town
or village.
(bb) To make commitments to loan money to any natural or
legal person or to purchase any notes, debentures, bonds, or
other obligations, whether similar or dissimilar, of any natural
or legal person from any other person. The Trustees shall have
power to endorse or guarantee the payment of any notes,
debentures, bonds, or other obligations, whether similar or
dissimilar, of any natural or legal person; to make contracts by
which they guarantee, become surety for, or otherwise assume
liability for the payment of any such notes, debentures, bonds,
obligations, or contracts; and to execute and deliver any
Mortgage, pledge or other instrument, whether similar or
dissimilar, to secure any such endorsement, guaranty or contract.
(cc) To appoint a corporation authorized under the laws of
the United States or of any State to administer trusts as the
depositary of any or all instruments filed with or as part of the
Trust's records, and to revoke such appointment by a signed
instrument delivered to said corporation, with or without the
appointment of a successor depositary. While any depositary is
acting, copies of any instrument deposited with it and certified
by the depositary to be correct, and certificates of the
depositary stating who the Trustees are at any time, may be
relied on as sufficient evidence of those facts by any person or
corporation dealing with the Trustees or the Trust.
(dd) To declare and pay dividends in cash, Shares or
otherwise, and to make other distributions to Shareholders,
whether out of earnings, profits or surplus, including capital
surplus or otherwise.
(ee) To become an "FHA Approved Mortgagee", and if so
approved, to have the power to sell or otherwise dispose of any
FHA loan or any interest therein which the Trust owns in
accordance with the provisions of the National Housing Act of
1934, as amended, and regulations promulgated thereunder, and to
execute on behalf of the Trust, in connection with any project on
which FHA has insured the indebtedness, in whole or in part, any
and all deeds of trust or mortgages, and other agreements,
documents and forms which may be required by FHA in connection
with the approval of FHA of the transfer of physical assets from
any entity to the Trustees or the insurance by FHA of any
indebtedness on any project as to which the Trustees are or shall
become owners pursuant to this Declaration and the provisions of
any such agreement shall be binding upon the Trust.
Section 3.3 Remedies. Notwithstanding any provision in
this Declaration, when the Trustees deem that there is a
significant risk that an obligor to the Trustees may default or
is in default under the terms of any obligation to the Trust, the
Trustees shall have the power to enter into any investment,
commitment or obligation of the Trust resulting from the pursuit
of such remedies or necessary or desirable to dispose of property
acquired in the pursuit of such remedies.
Section 3.4 Additional Powers. The Trustees shall have
power to do all such things and execute all such instruments as
they deem necessary, proper or desirable in order to carry out,
promote or advance the purposes of this Trust although such
matters or things are not herein specifically mentioned. Any
determination of the purposes of the Trust and as to what is in
the interests of the Trust made by the Trustees in good faith
shall be conclusive. In constructing the provisions of this
Declaration, the presumption shall be in favor of the grant of
power to the Trustees.
ARTICLE IV
Adviser
Section 4.1 Employment of Adviser. The Trustees are
responsible for the general investment policies of the Trust and
for such general supervision of the business of the Trust
conducted by officers, agents, employees, investment advisers or
independent contractors of the Trust as may be necessary to
insure that such business conforms to the provisions of this
Declaration. However, the Trustees are not required personally
to conduct the business of the Trust and, consistent with their
ultimate responsibility as stated herein, the Trustees shall have
power to appoint, employ or contract with any such natural or
legal Person or Persons (including one or more of themselves and
any corporation, partnership or trust in which one or more of
them may be directors, officers, stockholders, partners or
trustees) as the Trustees may deem necessary or desirable for the
transaction of the business of the Trust. The Trustees may,
therefore, employ or contract with a corporation, partnership,
trust or individual (herein referred to as the "Adviser"), and
the Trustees may, subject to the provisions of this Declaration,
grant or delegate such authority to the Adviser as the Trustees
may, in their sole discretion, deem necessary or desirable,
without regard to whether such authority is normally granted or
delegated by trustees. The Trustees shall use their best efforts
to obtain through the Adviser or other Persons a continuing and
suitable investment program, consistent with the investment
policies and objectives of the Trust, and the Trustees shall be
responsible for reviewing and approving or rejecting investment
opportunities presented by the Adviser or such other Persons. So
long as there is such Adviser or other Person, the Trustees shall
have no responsibility for the origination of investment
opportunities for the Trust.
The Trustees shall have the power to determine the terms of
compensation of the Adviser or any other such Person or Persons
whom they may employ or with whom they may contract; provided,
however that any determination to appoint, employ, or contract
with any Trustee or any entity with which a Trustee is affiliated
by reason of a managerial or ownership interest shall be valid
only if made, approved or ratified, after disclosure of such
relationship, by a majority of the Trustees not so affiliated.
The Trustees may exercise broad discretion in allowing the
Adviser to administer and regulate the operations of the Trust,
to act as agent for the Trust, to execute documents on behalf of
the Trustees, and to make executive decisions which conform to
general policies and general principles previously established by
the Trustees.
Section 4.2 Term. The Trustees shall not enter into any
contract with the Adviser unless such contract has an initial
term of no more than one year and provides for annual renewal or
extension thereafter, except that the first contract with the
Adviser entered into by the Trustees may have an initial term not
exceeding 24 months. The Trustees shall not enter into such a
contract with any Persons in which a Trustee is a director,
officer, employee, stockholder or partner unless such contract
provides for renewal or extension thereof by the affirmative vote
of a majority of the other Trustees. Each renewal or extension
of any such contract must be executed not less than two months
nor more than six months prior to the expiration of the then
current term.
Section 4.3 Restrictions on Adviser. Subject to the
instructions and supervisions of the Trustees, the Adviser may
administer the Trust as its sole and exclusive function or engage
in other activities, including the rendering of advice to other
investors and the management of other investments. The Trustees
may request the Adviser to engage in certain other activities
which complement the Trust's investments.
ARTICLE V
(Intentionally Left Blank)
ARTICLE VI
The Shares and Shareholders
Section 6.1 Shares. The aggregate number of shares of
beneficial interest that the Trust shall have authority to issue
is ten million (10,000,000) common shares, par value $1.00 per
share ("Common Shares"), and ten million (10,000,000) preferred
shares, par value $.01 per share ("Preferred Shares"). All of
the Common Shares shall be equal in all respects to every other
such Common Share, and shall have no preference, conversion,
exchange, redemption, cumulative voting, or preemptive rights.
The Trust may issue one or more series of Preferred Shares,
each such series to consist of such number of shares as shall be
determined by resolution of the Board of Trustees creating such
series. The Preferred Shares of each such series shall have such
designations, preferences, conversion, exchange or other rights,
participation, voting powers, options, restrictions, limitations,
special rights or relations, limitations as to dividends,
qualifications or terms, or conditions of redemption thereof, as
shall be stated and expressed by the Board of Trustees in the
resolution or resolutions providing for the issuance of such
series of Preferred Shares pursuant to the authority to do so,
which is hereby expressly vested in the Board of Trustees.
Except as otherwise specifically provided in any resolution or
resolutions of the Board of Trustees providing for the issue of
any resolution or resolutions of the Board of Trustees providing
for the issue of any particular series of Preferred Shares,
holders of Preferred Shares shall have no preemptive rights.
Except as otherwise specifically provided in any resolution
or resolutions of the Board of Trustees providing for the issue
of any particular series of Preferred Shares, Preferred Shares
redeemed or otherwise acquired by the Trust shall assume the
status of authorized but unissued Preferred Shares and shall be
unclassified as to series and may thereafter, subject to the
provisions of this Article and to any restrictions contained in
any resolution or resolutions of the Board of Trustees providing
for the issuance of any such series of Preferred Shares, be
reissued in the same manner as other authorized but unissued
Preferred Shares.
Except as otherwise specifically required by law or this
Declaration of Trust or as specifically provided in any
resolution or resolutions of the Board of Trustees providing for
the issuance of any particular series of Preferred Shares, the
exclusive voting power of the Trust shall be vested in the Common
Shares. Each Common Share entitles the holder thereof to one
vote at all meetings of the shareholders of the Trust.
Section 6.2 Rights of Shareholders. The Shares shall not
entitle the holder to preference, preemptive, appraisal,
conversion, redemption, or exchange rights of any kind. The
Shareholders shall have no legal right, title or interest in or
to the Trust Estate and shall have no right to a partition
thereof during the continuance of the Trust. Shareholders shall,
however, be the equitable beneficiaries of the Trust, but shall
have only the rights provided for in this Declaration and in the
By-laws. The Shareholders shall be entitled to vote (a) upon the
merger of the Trust with a corporation or other unincorporated
entity or upon sale of substantially all the Trust's assets, both
of which shall require the affirmative vote of two-third of the
outstanding Shares of the Trust; (b) to the same extent as the
Shareholders of a Texas corporation, whether or not a court
action, proceeding or claim should be brought or maintained
derivatively or as a class action on behalf of the Trust or its
Shareholders. Except with respect to matters in which the
Shareholders are specifically given the right to vote by this
Declaration, no action taken by the Shareholders at any meeting
shall in any way bind the Trustees.
Section 6.3 Shares Deemed Personal Property. The Shares
shall be personal property. The death, insolvency or incapacity
of a Shareholder during the continuance of the Trust shall not
terminate the Trust or give the legal representative of such
Shareholder any right to any partition or accounting with respect
to the Trust Estate or any income or profits therefrom, or to
take any action in the courts or otherwise against other
Shareholders or the Trustees or the Trust Estate, but shall
simply entitle such legal representative to demand and, subject
to any requirements of law, to receive a new certificate
representing Shares in place of the certificate held by said
Shareholder, upon the receipt of which such legal representative
shall succeed to all the rights of the said Shareholder under
this Declaration.
Section 6.4 Records, Issuance and Transferability of Shares.
Share records shall be kept by the Trustees, containing the names
and addresses of the Shareholders, the number of Shares held by
each and the certificate numbers. The issuance and transfer of
all Shares shall be recorded in such Share record. The Persons in
whose names certificates are registered on such records shall be
deemed the absolute owners of the Shares for all purposes of the
Trust; but nothing herein shall preclude the Trustees from
inquiring as to the actual ownership of Shares. Until a transfer
is duly entered on the records of the Trust, the Trustees shall
not be affected by any notice of such transfer, either actual or
constructive. The receipt by the Person in whose name any Shares
are registered on the records of the Trust or of the duly
authorized agent of such Person, or if such Shares are so
registered in the names of more than one Person, the receipt of
any one of such Persons, or of the duly authorized agent of such
Person, shall be a sufficient discharge for all dividends or
distributions payable or deliverable in respect of such Shares
and from all liability to see to the application thereof.
Shares shall be transferable on the records of the Trust
only by the record holder thereof or by his agent thereunto duly
authorized in writing upon delivery to the Trustees or a transfer
agent of the certificate or certificates therefor, properly
endorsed or accompanied by all necessary documentary stamps,
together with such evidence of the genuineness of each such
endorsement, execution or authorization and of other matters as
may reasonably be required by the Trustees or such transfer
agent. Upon such delivery, the transfer shall be recorded by the
Trustees or such transfer agent. Upon such delivery, the transfer
shall be recorded in the records of the Trust and a new
certificate for the Shares so transferred shall be issued to the
transferee. Any Person entitled to any Shares because of the
death of a Shareholder or by operation of law shall receive a new
certificate therefor upon delivery to the Trustees or a transfer
agent of satisfactory proof of the right of such Person to the
receipt of such Shares, the existing certificate for such Shares
and all necessary releases from applicable governmental
authorities. In case of the loss, mutilation or destruction of
any certificate for Shares, the Trustees may issue or cause to be
issued a replacement certificate on such terms and conditions as
the Trustees shall determine.
Section 6.5 Dividends or Distributions to Shareholders. The
Trustees may from time to time declare and pay to the
Shareholders, in proportion to their respective ownership of
Shares, such dividends or distributions in cash or other
property, out of current or accumulated income, capital, capital
gains, principal surplus, or from any other source as the
Trustees in their discretion shall determine, except that no
dividends be declared or paid when the Trust is insolvent or when
payment thereof would render the Trust insolvent, or when the
declaration or payment thereof would be contrary to any
restrictions contained in this Declaration. Shareholders shall
have no right to any dividend or distribution unless and until
declared by the Trustees and the determination of the earnings,
surplus and profits available therefor shall lie wholly in the
discretion of the Trustees. The Trustees shall furnish the
Shareholders at the time of each such distribution a statement in
writing advising as to the source of the funds so distributed or,
if the source thereof has not then been determined, the
communication shall so state and in such event, the statement as
to such source shall be sent to the Shareholders not later than
30 days after the close of the Fiscal Year in which the
distribution was made.
Section 6.6 Transfer Agent, Dividend Disbursing Agent and
Registrar. The Trustees shall have power to employ one or more
transfer agents, dividend-disbursing agents, warrant agents and
registrars and to authorize them on behalf of the Trust to do and
perform such duties and acts as are performed by transfer agents,
dividend-disbursing agents, warrant agents and registrars for
Corporations.
Section 6.7 Shareholders' Meetings. There shall be an annual
meeting of the Shareholders at such time and place, either within
or without the State of Texas, as the Trustees shall prescribe at
which all Trustees shall be elected or re-elected and any other
proper business may be conducted. The annual meeting of
Shareholders shall be held as soon as practicable after delivery
to the Shareholders of the annual report of the Trust described
in Section 6.9(a). Special meetings of Shareholders may be
called by a majority of the Trustees or any officer of the Trust,
and shall be called upon the written request of Shareholders
holding not less than ten percent (10%) of the outstanding Shares
of the Trust entitled to vote in the manner provided in the
By-laws. If there shall be no Trustees, the officers of the Trust
shall promptly call a special meeting of the Shareholders for the
election of successor Trustees. Written or printed notice stating
the place, date and hour of the Shareholders' meeting and, in
case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than 10 nor more
than 50 days before the date of the meeting either personally or
by mail by or at the direction of the Trustees or any officer or
person calling the meeting to each Shareholder of record entitled
to vote in such meeting.
A majority of the outstanding Shares entitled to vote at any
meeting represented in person or by proxy shall constitute a
quorum at any such meeting. Whenever any action is to be taken
by the Shareholders, it shall, except as otherwise required by
this Declaration or the By-laws, be authorized by a majority of
the votes cast at a meeting of Shareholders by holders of Shares
entitled to vote thereon.
Section 6.8 Proxies. Whenever the vote or consent of
Shareholders is required or permitted under this Declaration,
such vote or consent may be given either directly by the
Shareholder or to a proxy in the form prescribed by the Trustees.
The Trustees may solicit such proxies from the Shareholders or
any of them in any matter requiring or permitting the
Shareholders' vote or consent. No proxy shall be valid after 11
months from the date of its execution unless otherwise provided
in the proxy. Each proxy shall be revocable unless expressly
provided therein to be irrevocable, but in no event shall it
remain irrevocable for a period of more than 11 months.
Section 6.9 Reports to Shareholders.
(a) Within a reasonable period of time after the close
of each Fiscal Year of the Trust, the Trustees shall mail to the
Shareholders an annual report of the business and operations of
the Trust during such Fiscal Year containing a balance sheet and
a statement of income and surplus of the Trust. All financial
statements shall be certified by a firm of independent certified
public accountants of nationally recognized standing, based on an
examination of the books of the Trust not materially limited in
scope, and made in accordance with generally accepted accounting
procedures, consistently applied.
(b) Within a reasonable period of time after the close
of each of the first three quarters of each Fiscal Year of the
Trust, the Trustees shall submit an unaudited balance sheet and
unaudited statement of income and surplus and other pertinent
information regarding the Trust and its activities during such
quarter to the Shareholders.
(c) All reports shall be in such form and contain such
items as the Trustees shall determine and shall constitute
periodic accountings by the Trustees to the Shareholders.
Section 6.10 Fixing Record Date. The Trustees may fix, in
advance, a date as the record date for determining the
Shareholders entitled to notice of or to vote at any meeting of
Shareholders for the purpose of determining Shareholders entitled
to receive payment of any dividend or distribution (whether
before or after termination of the Trust). The record date so
fixed shall be not less than 10 nor more than 50 days prior to
the date of the meeting or event for the purposes of which it is
fixed.
Section 6.11 Sufficiency of Notice. Any notice or other
communication to any Shareholder shall be deemed duly delivered
when deposited, postage prepaid, in the United States mail,
addressed to such Shareholder at his address as it appears on the
records of the Trust.
Section 6.12 Shareholders' Disclosures, Redemption and Stop
Transfers of Shares. The Shareholders shall, upon demand,
disclose to the Trustees in writing such information with respect
to direct and indirect ownership of Shares as the Trustees deem
necessary to comply with the REIT Provisions, or to comply with
the requirements of any other governmental authority. If the
Trustees shall, at any time and in good faith, be of the opinion
that direct or indirect ownership of Shares of the Trust has or
may become concentrated to an extent which is contrary to the
requirements of Section 856(a) (5) or (6) of the Internal Revenue
Code, then the Trustees shall have the power by lot or other
means deemed equitable by them to call for redemption or to
prevent the transfer of a number of such concentrated Shares
sufficient, in the opinion of the Trustees, to maintain or bring
the direct or indirect ownership of Shares of the Trust into
conformity with the requirements of said Section 856(a) (5) or
(6). The redemption price shall be equal to the fair market value
of the Shares as reflected in the average bid quotation for the
Shares (if then traded over-the-counter) or the average closing
sale price (if then listed on a national securities exchange)
during the 30 business days preceding the day on which notice of
redemption is sent, or, if no quotations or closing sale prices
for the Shares are available, as determined in good faith by the
Trustees. From and after the date fixed for redemption by the
Trustees, the holder of any Shares so called for redemption shall
cease to be entitled to dividends, voting rights and other
benefits with respect to such shares excepting only the right to
payment of the redemption price fixed as aforesaid. For the
purpose of this Section 6.12, the term "individual" shall be
construed as provided in Section 542(a) (2) of the Internal
Revenue Code, or any successor provision and "ownership" of
Shares shall be determined as provided in Section 544 of the
Internal Revenue Code.
In furtherance of the provisions of this Section 6.12, each
certificate evidencing shares shall contain a legend imprinted
thereon to the following effect, or such other legend as the
Trustees may from time to time adopt:
"Provisions Relating to Redemption and Prohibition of
Transfer of Shares
"If necessary to effect compliance by the Trust
with certain requirements of the Internal Revenue Code,
the Shares represented by this certificate are subject
to redemption by the Trustees of the Trust and the
transfer thereof may be prohibited upon the terms and
conditions set forth in the Declaration of Trust. The
Trust will furnish a copy of such terms and conditions
to the registered holder of this certificate upon
request and without charge."
Section 6.13 Power of Trustees to Issue Warrants. Subject to
the restriction in Section 5.3(1), the Trustees, in their
discretion, may from time to time without prior authorization by
the Shareholders, issue Share purchase warrants (herein referred
to as "Warrants") which shall entitle the holders thereof to
subscribe to Shares at such time or times and on such terms as
the Trustees may prescribe including, without limiting the
generality of the foregoing, the times within which any such
Warrants must be exercised and the consideration to be paid for
such Shares. Warrants may be issued to such parties and for such
consideration as the Trustees may from time to time determine
(including the issuance of detachable or nondetachable Warrants)
as an inducement to persons acquiring or underwriting notes,
debentures, bonds, instruments or other obligations, or Shares of
the Trust.
Section 6.14 Power of Trustees to Issue Units.
Notwithstanding any other provision of this Declaration, the
Trustees may issue from time to time units consisting of
different Securities of the Trust. Any Security issued in any
such unit shall have the same characteristics and shall entitle
the registered holder thereof to the same rights as any identical
Securities issued by the Trustees, except that the Trustees may
provide (and may cause a notation to be placed on the certificate
representing such unit or securities of the Trust issued in any
such unit) that for a specified period not to exceed one year
after issuance, Securities of the Trust issued in any such unit
may be transferred upon the books of the Trust only in such unit.
ARTICLE VII
Liability and Limitation Thereof
Section 7.1 Liability of Trustees. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust, to
any Trustee, officer, employee or agent of the Trust, or to any
Shareholder for any act or omission of any other Trustee,
Shareholder, officer or agent of the Trust or be held to any
personal liability whatsoever in tort, contract or otherwise in
connection with the affairs of the Trust, except only that
arising from his own bad faith, willful misconduct, gross
negligence or reckless disregard of his duties, or for his
failure to act in good faith in the reasonable belief that his
action was in the best interest of the Trust.
Section 7.2 Limitation of Liability. Except as otherwise
provided in Section 7.1, and except as the Texas Real Estate
Investment Trust Act shall require a different result, no
Trustee, officer or Shareholder shall be subject to personal
liability for any debt, claim, demand, judgment, decree, tort,
liability or obligation of any kind of, against or with respect
to the Trust, arising out of any action taken or omitted for or
on behalf of the Trust, and the Trust shall be solely liable
therefor and resort shall be had solely to the Trust Estate for
the payment or performance thereof. The Trustees and officers, in
incurring any debt, Liability or obligation, or in taking or
omitting any other action, for or in connection with the Trust
are and shall be deemed to be acting as Trustees or officers and
not in their individual capacities. The Trustees shall use every
reasonable means to assure that all persons having dealings with
the Trust shall be informed that the private property of the
Shareholders and the Trustees shall not be subject to claims
against and obligations of the Trust to any extent whatever. The
Trustees shall cause to be inserted in every written argument,
undertaking or obligation made or issued on behalf of the Trust
(including the Shares), an appropriate provision to the effect
that the Shareholders and the Trustees shall not be personally
liable thereunder, and that all parties concerned shall look
solely to the Trust Property for the satisfaction of any claim
thereunder, and appropriate reference shall be made to this
Declaration. The omission of such a provision from any such
agreement, undertaking or obligation, or the failure to use any
other means of giving such notice, shall not, however, render the
Shareholders or the Trustees personally liable. The Trustees
shall, at all times, maintain insurance against possible
liability on the part of the Trust, ex delicto, in such amounts
and against such other risks as the Trustees shall deem adequate
to protect the Trust Estate, Shareholders, Trustees, officers and
agents.
Section 7.3 Indemnification. The trust shall indemnify and
hold each Shareholder harmless from and against all claims and
liabilities, whether they proceed to judgment or are settled or
otherwise brought to a conclusion, to which such Shareholder may
become subject by reason of his being or having been a
Shareholder, and all legal and other expenses reasonably incurred
by him in connection with any such claim or liability. Provided,
however, that no such Shareholder shall be indemnified or
reimbursed if such claim, obligation or liability is finally
adjudged by a competent court of law to have arisen out of the
Shareholder's bad faith, willful misconduct or gross negligence,
and provided further, that such Shareholder must give prompt
notice as to any such claims or liabilities or suits and must
take such action as will permit the Trust to conduct the defense
thereof. The rights accruing to a Shareholder under this Section
7.3 shall not exclude any other right to which such Shareholder
may be lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a
Shareholder in any appropriate situation even though not
specifically provided herein; provided, however, that the Trust
shall have no liability to reimburse Shareholders for taxes
assessed against them by reason of their ownership of Shares, nor
for any losses suffered by reason of changes in the market value
of Securities of the Trust.
The Trust shall indemnify each of its Trustees, officers,
employees and agents (including any Person who serves at its
request as director, officer, partner, trustee or the like of
another organization in which it has any interest as a
shareholder, creditor or otherwise), against all liabilities and
expenses, including amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and counsel fees,
reasonably incurred by him in connection with the defense or
disposition of any action, suit or other proceeding, whether
civil or criminal in which he may be involved or with which he
may be threatened, while acting as Trustee or as an officer,
employee or agent of the Trust or the Trustees, as the case may
be, or thereafter, by reason of his being or having been such a
Trustee, officer, employee or agent, except with respect to any
matter as to which he shall have been adjudicated to have acted
in bad faith or with willful misconduct or 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; provided, however, that as to any matter
disposed of by a compromise payment of such Trustee, officer,
employee or agent, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses
shall be provided unless such compromise shall be approved as in
the best interests of the Trust by a majority of the
disinterested Trustees or the Trust shall have received a written
opinion of independent legal counsel to the effect that such
Trustee, officer, employee or agent appears to have acted in good
faith in the reasonable belief that his action was in the best
interests of the Trust. The rights accruing to any Trustee,
officer, employee or agent under these provisions shall not
exclude any other right to which he may be lawfully entitled;
provided, however, that no Trustee, officer, employee or agent
may satisfy any right of indemnity or reimbursement granted
herein or to which he may be otherwise entitled except out of the
Trust Property, and no Shareholder shall be personally liable to
any Person with respect to any claim for indemnity or
reimbursement or otherwise. The Trustees may make advance
payments in connection with indemnification under this Section
7.3, provided that the indemnified Trustee, officer, employee or
agent shall have given a written undertaking to reimburse the
Trust in the event it is subsequently determined that he is not
entitled to such indemnification.
Section 7.4 Transactions With Trustees, With Advisers, and
Others.
(a) Any Trustee, Adviser, officer, employee or agent of
the Trust may acquire, hold and dispose of any Real Property
Mortgage Loan, or other property similar or dissimilar or in any
other real estate investment trust for his own individual account
and may exercise all rights of a shareholder or owner of such
property as if he were not a Trustee, Adviser, officer, employee
or agent, as the case may be. Any Trustee, Adviser, officer,
employee or agent of the Trust may have personal business
interests of any nature and may continue such activities for his
own account, and any Trustee, Adviser, officer, employee or agent
may be interested as a trustee, partner, officer, director,
stockholder, employee or otherwise, in any firm or corporation
that may be engaged by the Trust and may receive compensation
from such firm or corporation in such capacities, as well as
compensation as Trustee hereunder. None of these activities shall
be deemed to conflict with the duties of the Trustee, Adviser,
officer, employee or agent to the Trust. The failure to present
the Trust any opportunity which a Trustee, Adviser, officer,
employee or agent of the Trust may receive in any capacity other
than as Trustee, Adviser, officer, employee or agent, shall not
make such Trustee, Adviser, officer, employee or agent liable to
the Trust, to the Trustees or to any Shareholder in any way
whatsoever.
(b) The Trust shall not enter into any transaction with
any of its Trustees or officers or their Affiliated Persons, or
with the Adviser or any director, officer or employee of the
Adviser or any Affiliated Person of the Trust (other than an
Affiliated Person controlled by the Trust) or the Adviser, other
than: (a) transactions incidental to employment by the Trust or
any of its subsidiaries on terms consistent with general
personnel policies in effect from time to time; (b) the purchase
and sale of securities of the Trust on terms generally available
to unrelated parties or to the holders of specific classes of the
Trust's securities, and the exercise of voting and other rights
incidental to the ownership of such securities; (c) transactions
between the Trust and any of its subsidiaries in which no
Trustee, officer or any of their Affiliated Persons shall have
any economic interest other than through the Trust or pursuant to
employment by such subsidiary on terms consistent with its
general personnel policies in effect from time to time; (d) any
transaction that (i) has been approved or ratified by a majority
of the Trustees who are not Affiliated Persons of any party to
the transaction (other than the Trust) and who do not otherwise
have an interest in the transaction, and to whom the interest or
connection of the interested party has been disclosed or is
known, and (ii) is found by a majority of such disinterested
Trustees (after consideration of such factors as they deem
appropriate, to include but not be limited to the terms, if any,
then prevailing for comparable transactions at arm's length) to
be fair and reasonable to the shareholders at the time of such
approval or ratification under the circumstances then prevailing;
and (e) the transfer of assets to a business organization formed
by the Trustees for the purpose of holding title to property of
the Trust and as to which the Trustees have no economic interest.
For the purposes of this Section 7.4(b), an "Affiliated
Person" of any person shall mean any other person (i) which such
person directly or indirectly controls, is controlled by, or is
under common control with, or (ii) of which such person is a
director, officer, employee, partner or trustee, or (iii) of
which such person directly or indirectly owns, controls or holds
with power to vote 5% or more of the outstanding voting
securities, or (iv) which directly or indirectly owns, controls
or holds with power to vote 5% or more of the outstanding voting
securities of such person.
Section 7.5 Restriction of Duties and Liabilities. To the
extent that the nature of this Trust will permit, the duties and
liabilities of Trustees and officers shall be the same as the
duties and liabilities of directors and officers of a Texas
corporation.
Section 7.6 Persons Dealing with Trustees or Officers. Any
act of the Trustees or officers purporting to be done in their
capacity as such shall, as to any persons dealing with such
Trustees or officers, be conclusively deemed to be within the
purposes of the Trust and within the powers of the Trustees and
officers. No Person dealing with the Trustees or the authorized
officers, agents or representatives of the Trust shall be bound
to see to the application of any funds or property passing into
their hands or control. The receipt of the Trustees or any of
them or of authorized officers, agents or representatives of the
Trust for moneys or other consideration shall be binding upon the
Trust.
ARTICLE VIII
Amendment, Termination and
Qualification of Trust
Section 8.1 Termination of Trust. The Trust may be
terminated by the affirmative vote of the holders of two-thirds
(2/3) of the outstanding Shares. Upon the termination of the
Trust:
(a) The Trust shall carry on no business except for the
purpose of winding up its affairs.
(b) The Trustees shall proceed to wind up the affairs
of the Trust and sell, convey, assign, exchange, transfer or
otherwise dispose of the Trust Estate on such terms and
conditions as they shall determine, pay its liabilities and do
all other acts appropriate to liquidate its business.
(c) After paying or adequately providing for the
payment of all liabilities, and upon receipt of such releases,
indemnities and refunding agreements as they deem necessary for
their protection, the Trustees may distribute the remaining Trust
Estate, in cash or in kind or partly in each, among the
Shareholders according to their respective rights and, upon
execution of an instrument setting forth the fact of such
termination, the Trustees shall thereupon be discharged from all
further liabilities and duties hereunder and the rights and
interests of all Shareholders shall thereupon cease.
Section 8.2 Amendment.
(a) This Declaration may be amended by the affirmative
vote of the holders of two-thirds (2/3) of the outstanding Shares
entitled to vote thereon (except as to the limitations of the
personal liability of Trustees and Shareholders and the
prohibition of assessment upon Shareholders).
(b) No amendment may be made, under subparagraph 8.2(a)
above, which would change any rights with respect to any
outstanding Shares by reducing the amount payable thereon upon
liquidation of the Trust or by diminishing or eliminating any
voting rights pertaining thereto, or which would amend this
subparagraph 8.2(b) except with the affirmative vote of the
holders of two-thirds (2/3) of the outstanding Shares entitled to
vote thereon.
(c) No amendment to the Declaration shall become
effective until it has been filed in the office of the County
Clerk of the County in which the Trust at the time has its
principal office, and such other places as may be required at the
time by Texas law and in other jurisdictions where required.
Section 8.3 Savings Clause. In the event that the provision
relating to the election of Trustees by the Shareholders of the
Trust shall be deemed to be without force or effect, the Trustees
then in office shall be deemed to be the qualified and acting
Trustees until such time as the successor Trustees have been
named and qualified; provided, however, that at the next meeting
of Shareholders after the Trustees shall have notified the
Shareholders that any or all of the Shareholder's rights under
Sections 2.1, 2.2, 6.7, 8.1 and/or 8.2 created such a conflict
and therefore shall be without force and effect, these shall be
submitted to the Shareholders for their approval or disapproval
by a majority of those voting, the question as to whether such
Shareholders' right or rights should exist.
Section 8.4 Duration of Trust. Subject to possible earlier
termination in accordance with the provisions of this Article
VIII hereof, the period of duration of the Trust is perpetual
(provided, however, that as to Trust Property located in any
jurisdiction in which such duration is not permitted, the Trust
created hereby as to such property shall terminate on the latest
date permitted by the law of such state, using the Trustees and
the following named persons as measuring lives if so permitted):
Mark Beall McLean Tamara Lynn Farris
July 13, 1971 November 15, 1964
6325 Halifax Road 1716 Dakar Road West
Fort Worth, Texas 76116 Fort Worth, Texas 76106
Hunter Thorne McLean Jennifer Paige Farris
July 3, 1968 July 11, 1969
6325 Halifax Road 1716 Dakar Road West
Fort Worth, Texas 76116 Fort Worth, Texas 76106
Kelly Durst McLean Christine Marie Chambers
September 25, 1966 September 7, 1965
6325 Halifax Road 5517 El Campo Avenue
Forth Worth, Texas 76116 Forth Worth, Texas
Ashley Marie Smith Cathleen Castner Chambers
July 26, 1966 August 30, 1969
209 Crestwood Drive 5517 El Campo Avenue
Fort Worth, Texas 76107 Fort Worth, Texas
John Holt Smith, Jr. Albon O'Neal Head III
October 21, 1968 November 4, 1970
209 Crestwood Drive 5525 El Campo Avenue
Fort Worth, Texas 76107 Forth Worth, Texas
Kathleen Karbach Sanders Tracy Ann Gibson
July 29, 1964 January 29, 1971
6383 Hilldale Court 1401 Ems Road West
Fort Worth, Texas 76116 Fort Worth, Texas 76116
Elaine Van Zant Sanders
April 25, 1966
6383 Hilldale Court
Fort Worth, Texas 76116
ARTICLE IX
Miscellaneous
Section 9.1 Applicable Law. This Trust has been executed by
the Trustees in the State of Texas to take effect therein and the
rights of all parties and the construction and effect of every
provision hereof shall be subject to and construed according to
the laws of the State of Texas.
Section 9.2 Successors in Interest. This Declaration and the
By-laws shall be binding upon and inure to the benefit of the
undersigned Trustees and their successors, assigns, heirs,
distributees and legal representatives and every Shareholder and
his successors, assigns, heirs, distributees and legal
representatives.
Section 9.3 By-laws. The initial By-laws of the Trust shall
be adopted by the Shareholders in person or by proxy. The power
to alter, amend or repeal the By-laws or to adopt new By-laws
shall be vested in the Shareholders.
Section 9.4 Records. The Trust shall keep complete and
correct books of account and shall keep minutes of the
proceedings of its Shareholders and Trustees and shall keep at
its principal office or place of business a record of its
Shareholders giving the names and addresses of all Shareholders
and the number of Shares held by each.
Any person who shall have been a Shareholder of record for
at least six months immediately preceding his demand, or who
shall be the holder of record of at least five per cent (5%) of
all the outstanding Shares of the Trust, upon written demand
stating the purpose thereof shall have the right to examine, in
person or by agent or attorney, at any reasonable time or times,
for any proper purpose, its books and records of account, minutes
and record of Shareholders, and shall be entitled to make
extracts therefrom.
Nothing herein contained shall impair the power of any court
of competent jurisdiction, upon proof by a Shareholder of proper
purpose irrespective of the period of time during which such
Shareholder shall have been a Shareholder of record, and
irrespective of the number of Shares held by him, to compel
production, for examination by such Shareholder, of the books and
records of account, minutes, and record of Shareholders of the
Trust.
Section 9.5 Conflicts with Applicable Law. If any provisions
of this Declaration shall be held invalid or unenforceable, such
invalidity or unenforceability shall not affect or impair any
other provision of this Declaration.
Section 9.6 Certifications. Any Certificates executed by a
Trustee concerning the number or identity of Trustees or
Shareholders, that the execution of any instrument or writing has
been duly authorized, that any vote at a meeting of the Trustees
or Shareholders was duly taken, that the number of Trustees or
Shareholders present at any meeting or executing any written
instrument satisfies the requirements of this Declaration,
concerning the form of any By-law adopted by or the identity of
any officer elected by the Trustees, or concerning the existence
or nonexistence of any fact or facts which in any manner relate
to the affairs of the Trust shall be conclusive evidence as to
the matters so certified in favor of any Person dealing with the
Trustees.
Section 9.7 Recording and Filing. A copy of this Declaration
and any amendments shall be filed in the office of the County
Clerk of the county of the principal place of business of the
Trust and such other places as shall be required by Texas law.
This Declaration and any amendments may also be filed or recorded
in such other places as the Trustees deem appropriate.
Section 9.8 Counterparts. This Declaration may be executed
in several counterparts, each of which when so executed shall be
deemed to be an original, and such counterparts, together, shall
constitute but one and the same instrument, which shall be
sufficiently evidenced by any such counterpart.
Section 9.9 Headings for Reference Only. Headings
preceding the Text of the articles and sections hereof have been
inserted solely for convenience and reference and shall not be
construed to affect the meaning, construction or effect of any
provision of this Declaration.
Exhibit 3.2
By-laws
(as amended through December 5, 1995)
ARTICLE I
OFFICES
Section 1. Principal Office: The principal office of
the Trust shall be at 1601 LBJ, Park West Suite 800, Dallas,
Texas 75234, unless changed by the Trustees to another location
in Texas or elsewhere.
ARTICLE II
TRUSTEES
Section 1. General Powers: The Trustees shall have
the management and control of the business and affairs of the
Trust, and may exercise all such powers as are expressly or by
implication conferred on the Trustees by the Declaration of
Trust, these bylaws or the laws of the State of Texas.
Section 2. Number, Tenure and Qualifications: There
shall be not less than two nor more than fifteen Trustees. The
number of Trustees shall be determined from time to time by a
majority vote of the Trustees. All of the Trustees shall be
persons who are at least 21 years old and at least a majority
shall be citizens of the State of Texas. It shall not be
necessary for Trustees to be Shareholders.
Section 3. Election: Except for the initial Trustees,
the Trustees shall be elected by the Shareholders and shall hold
office for one year and until removed or until their successors
are elected and qualified. They shall be elected by the
Shareholders at each annual meeting. Except as provided for
filling vacancies, all Trustees shall be chosen by a majority of
the votes cast at such meeting of Shareholders for the election
of Trustees, unless a greater vote shall be required by law. If
a greater vote is required by law and in any election for
Trustees all of the Trustees designated by the Trustees to be
elected do not receive the vote required by law for election, the
Trustees receiving the vote required by law shall be deemed to
have replaced, first, Trustees on the then existing Board which
have not been nominated for election and then, secondly, Trustees
on such Board in inverse order to the number of votes received.
The Trustees not so replaced shall continue in office until their
successors shall have been elected and qualified. The election
of any Trustee (other than an individual who was serving as a
Trustee immediately prior to such election) pursuant to this
Section shall not become effective unless and until such person
shall have in writing accepted his election and agreed to be
bound by the terms of the Declaration of Trust.
Section 4. Vacancies: If the office of any Trustee
shall become vacant by reason of resignation, removal,
incompetency, death, or otherwise, or in the event in the
increase in the number of Trustees, the vacancy or vacancies so
resulting may be filled by a vote of two-thirds (2/3) of the
outstanding shares at a special meeting of the Shareholders
called for that purpose or at the next annual meeting of the
Shareholders. Trustees elected at special meetings of
Shareholders to fill vacancies shall hold office until the next
annual meeting of the Shareholders. Upon the effectiveness of
any such election as provided in this Section, the trust property
shall vest in such new Trustee jointly with the continuing or
surviving Trustees without the necessity of any further act or
conveyance; provided, however, that no such election as provided
in this Section shall become effective unless and until the new
Trustee shall have accepted in writing his election and agreed to
be bound by the terms of the Declaration of Trust.
Section 5. Resignation and Removal: Any Trustee may
resign his trust (without need for prior or subsequent
accounting) by an instrument in writing signed by him and
delivered or mailed to the Chairman, the President or the
Secretary and such resignation shall be effective upon such
delivery, or at a later date according to the terms of the
notice. Said instrument shall be filed in the Office of the
County Clerk of Tarrant County, Texas. Any or all of the
Trustees may be removed (provided the aggregate number of
Trustees after such removal shall not be less than three) with
cause, at any meeting of Shareholders, called for the purpose, by
the holders of at least two-thirds (2/3) of the outstanding
Shares entitled to vote. Upon the resignation or removal of a
Trustee, or his otherwise ceasing to be a Trustee, he shall
execute and deliver such documents as the remaining Trustees
shall require for the purpose of conveying to the Trust or the
remaining Trustees any Trust Property held in the name of the
resigning or removed Trustees and by the acceptance of the
appointment or election as Trustee delegates to any other of the
Trustees his power of attorney to execute such document on his
behalf. Upon the incapacity or death of any Trustee, his legal
representative shall execute and deliver on his behalf such
documents as the remaining Trustees shall require as provided in
the preceding sentence.
Section 6. Compensation: By resolution of the
Trustees, the Trustees may be paid their expenses, if any, of
attendance at each meeting of the Trustees, and may be paid such
sum as may be fixed by the Trustees for attendance at each
meeting of the Trustees. No such payment shall preclude any
Trustee from serving the Trust in any other capacity and
receiving compensation therefor as provided in the Declaration of
Trust.
Section 7. Advisers to the Trustees: The Trustees may
appoint any number of Advisers to the Trust to assist the Trust
and Trustees on investment policy matters. The Advisers to the
Trustees shall not be considered Trustees or officers in any
manner; they shall have no vote, shall not hold Trust Property as
Trustees, shall not be liable as Trustees or officers and shall
have no authority to act for or sign documents on behalf of the
Trust. Advisers to the Trustees may be affiliated or
unaffiliated with the Trust.
ARTICLE III
OFFICERS
Section 1. General: The officers of the Trust shall
consist of a President, such Vice Presidents as the Trustees
shall from time to time determine, a Secretary, a Treasurer and
such Assistant Secretaries and Assistant Treasurers and other
officers as the Trustees may appoint or elect. The Trustees may
designate from among their number a Chairman. Any two or more
offices may be held by one and the same person, except that of
President and Secretary. The officers of the Trust shall have
and may exercise all the authority hereinafter set forth except
that nothing herein shall operate to relieve the Trustees of any
responsibility imposed upon them by law or take from the Trustees
their continuing exclusive authority over the management of the
Trust, the conduct of its affairs, and, except as limited by
Section 856(d)(3) of the Internal Revenue Code of 1954, as the
same may from time to time be amended, the management and
disposition of the Trust Property. Nothing in these bylaws shall
authorize, permit or require the Trustees to surrender to any
officer of the Trust or other person or persons such continuing
exclusive authority.
Section 2. Chairman of the Board: The Chairman of the
Board of Trustees, if there be such an officer, shall preside at
all meetings of the Trustees and Shareholders and shall exercise
and perform such other powers and duties as may from time to time
be assigned to him by the Trustee.
Section 3. President: The President shall direct the
operations of the Trust and, in the recess of the Trustees, shall
have the general supervision, control and management of its
business and affairs. He shall, if there be no Chairman of the
Board, preside at all meetings of the Trustees and Shareholders,
shall make reports to the Shareholders and Trustees and shall
perform such other duties as are incident to his office, or are
required of him by the Trustees and the Declaration of Trust. He
shall have general supervision over other officers and may agree
upon and execute all contracts and other obligations in the name
of the Trust.
Section 4. Vice Presidents: Each Vice President shall
have such powers and duties as may be assigned to him from time
to time by the Trustees and shall exercise the powers of the
President during that officer's absence or inability to act. Any
action taken by a Vice President in the performance of the duties
of the President shall be conclusive evidence of the absence or
inability to act of the President at the time such action was
taken.
Section 5. Secretary: The Secretary shall be the
custodian of the seal of the Trust and shall be ex-officio the
clerk of the Shareholders and of the Trustees. He shall attend
all sessions of the Shareholders and the Trustees and shall keep
accurate minutes thereof in a book to be kept for that purpose.
He shall see that proper notice is given of all meetings of the
Shareholders and Trustees. He shall perform such other duties as
may be required of him by the Trustees.
Section 6. Treasurer: The Treasurer shall have
custody of all the funds and securities of the Trust which come
into his hands, keep full and accurate accounts of receipts and
disbursements of the Trust may, when necessary or proper,
endorse, on behalf of the Trust, for cancellation, checks, notes
and other obligations and shall deposit all moneys and other
valuable effects in the name and to the credit of the Trust in
such depositories as may be designated by the Trustees. He shall
render to the President and the Trustees, at annual meetings or
whenever directed by the President or Trustees, an account of all
or any part of his transactions as Treasurer, and of the
financial condition of the Trust, and shall also perform all
other duties imposed upon him by the Trustees.
Section 7. Election of Officers: At the meeting of
Trustees held after each annual meeting of Shareholders and at
each annual meeting thereafter, the Trustees shall elect all
officers of the Trust who shall hold office for one year and
until their successors are elected and qualified.
Section 8. Vacancies: If any office shall become
vacant by reason of death, resignation, disqualification, removal
or otherwise, the Trustees, by a majority vote, may elect a
successor or successors who shall hold office for the unexpired
term.
Section 9. Removal: Any officer may be removed with
or without cause by a majority vote of the Trustees at any
meeting of the Trustees or by written designation by all of the
Trustees.
ARTICLE IV
AGENTS
Section 1. General: The Trustees shall have the
authority to designate by a majority vote of the Trustees a
Managing Agent for the Trust and such other agents as they may
from time to time designate. The Managing Agent shall have the
powers and duties set forth herein and such other powers and
duties as may be assigned to him by the Trustees and other agents
designated by the Trustees shall have such powers and duties as
the Trustees may from time to time assign to him.
Section 2. Managing Agent: The Managing Agent may be
responsible for supervising and administering the day-to-day
operations of the Trust; he may sign and execute all deeds,
conveyances, assignments, mortgages, checks, drafts, bonds,
notes, releases, contracts and other obligations and any and all
other instruments and papers of any kind or character in the name
and on behalf of the Trust. The signature of the Managing Agent
on behalf of the Trust shall be conclusive evidence of his
authority to act for and on behalf of the Trust and persons
dealing with the Trust shall be conclusively entitled to rely on
such signature as evidencing action of the Trust.
Section 3. Designation of Agents: At the meeting of
Trustees held after each annual meeting of Shareholders and at
each annual meeting thereafter, the Trustees shall designate all
agents of the Trust who shall retain such designation for one
year and until their successors are designated and qualified.
Section 4. Removal: Any agent may be removed with or
without cause by a majority vote of the Trustees at any meeting
of the Trustees or by written designation of all of the Trustees.
ARTICLE V
MEETINGS OF SHAREHOLDERS
Section 1. Annual and Special Meetings: The annual
meeting of the Shareholders of the Trust shall be held at the
principal office of the Trust in Texas (or at such other place
within or without the state of Texas as the Trustees may from
time to time designate) within a reasonable period of time after
the end of each fiscal year, as established by the Trustees, for
the election of Trustees and for such other business as may
properly come before the meeting. Special meetings of
Shareholders may be called by a majority of the Trustees or any
officer of the Trust, and shall be called upon written request of
Shareholders holding not less than ten percent (10%) of the
outstanding shares of the Trust entitled to vote.
Section 2. Notice: Notice of all Shareholders'
meetings, whether annual or special, shall be mailed to each
Shareholder of record entitled to vote at such meeting not less
than ten nor more than 50 days before such meeting. It shall be
directed to a Shareholder at his address as it appears on the
records of the Trust. In case of special meetings, all notices
shall state the object of the meetings and the business to be
transacted or considered thereat.
Section 3. Record Date: For the purpose of
determining Shareholders entitled to notice or to vote at any
meeting of Shareholders, or Shareholders entitled to receive
payment of any dividend or distribution, the Trustees shall fix a
record date of not less than ten nor more than 50 days prior to
such meeting date or prior to any dividend or distribution
payment date. If the record date is not fixed as aforesaid, the
date on which the notice of meeting is mailed or the date on
which the resolution of the Trustees declaring such dividend or
distribution is adopted, as the case may be, shall be the record
date for the determination of Shareholders.
Section 4. Quorum and Adjourned Meetings: A majority
of the shares then issued and outstanding present in person or by
proxy shall constitute a quorum at all meetings of the
Shareholders. In the absence of a quorum, those present at a
Shareholders' meeting may adjourn the same to a future date, but
until a quorum is present, no other business may be transacted.
Any meeting of Shareholders, whether or not a quorum is present,
may be adjourned from day to day or from time to time by the vote
of a majority of the Shareholders present at the meeting or
represented by proxy. It shall not be necessary to give any
notice of the time and place of any adjourned meeting or of the
business to be transacted thereat other than by announcement at
the meeting at which such adjournment is taken, except that when
a meeting is adjourned for 30 days or more, notice of the
adjourned meeting shall be given as in the case of an original
meeting.
Section 5. Voting Proxies: In all elections of
Trustees and in deciding all questions at Shareholders' meetings,
each Shareholder shall be entitled to one vote for each Share
held by him. Treasury stock shall not be voted at any meeting
and shall not be counted in determining the issued and
outstanding stock of the Trust. Shareholders may vote by proxy
duly authorized in writing which shall be filed with the
Secretary at or before the meeting.
Section 6. Reports: The Trustees shall cause to be
prepared at least annually a report of operations containing a
balance sheet and statement of income and undistributed income of
the Trust prepared in conformity with generally accepted
accounting principles and an opinion of an independent certified
public accountant or independent public accountant on the
financial statements based on an examination of the books and
records of the Trust, and made in accordance with generally
accepted auditing standards.
Section 7. Inspection: Any person who shall have been
a Shareholder of record for at least six months immediately
preceding his demand, or who shall be a holder of record of at
least 5% of the outstanding Shares, upon written demand stating
the purpose thereof may inspect the books and records of the
Trust during normal business hours for proper purposes at its
offices in Fort Worth, Texas.
Section 8. Consent of Absentees: The transactions of
any meeting of Shareholders, either annual, special or adjourned,
however called and noticed, shall be as valid as though had at a
meeting duly held after the regular call and notice if a quorum
is present and, if either before or after the meeting, each
Shareholder entitled to vote, not present in person or by proxy,
signs a written waiver of notice or a consent to the holding of
such meeting or an approval of the minutes thereof.
ARTICLE VI
MEETINGS OF TRUSTEES
Section 1. Annual and Regular Meetings: The annual
meeting of the Trustees shall be held on the same day and
immediately after the adjournment of the Shareholders' annual
meeting. Regular meetings, if any, shall be held at such other
times as shall be fixed by the Trustees. No notice shall be
required of an annual or a regular meeting.
Section 2. Special Meetings: Special meetings of the
Trustees may be called by the President upon the request of any
two Trustees, on not less than 24 hours' notice to each Trustee.
Such notice shall be by oral, telegraphic, telephonic or written
communication stating the time and place therefor. The President
may call a Special meeting of the Trustees at any time, by giving
such notice; provided, however, that notice of any such meeting
need not be given to any Trustee entitled thereto who submits a
written and signed waiver of notice, whether before or after the
meeting, or who attends the meeting without protesting, prior
thereto or at its commencement, the lack of notice to him.
Section 3. Quorum: The presence of a majority of the
Trustees shall be necessary to and constitute a quorum for the
transaction of business by the Trustees and the acts of such
majority at a meeting shall be the acts of the Trustees. In the
absence of a quorum, those present at a Trustees' meeting may
adjourn the same to a future date, but until a quorum is present
no other business may be transacted. With respect to actions of
the Trustees, Trustees who are affiliated within the meaning of
the Declaration of Trust or otherwise interested in any action to
be taken may be counted for quorum purposes and shall be entitled
to vote.
Section 4. Place and Conduct of Meetings: Regular or
special meetings of the Trustees may be held within or without
the State of Texas, at such places as shall be designated by the
Trustees. The Trustees may adopt such rules and regulations for
the conduct of the business of its meetings and management of the
affairs of the Trust as they may deem proper, not inconsistent
with the laws of Texas, the Declaration of Trust or these
Regulations.
Section 5. Consents: Any action required or permitted
to be taken at any meeting of the Trustees or any committee
thereof may be taken without a meeting if all Trustees or members
of the committee, as the case may be, consent thereof in writing
and the writing or writings are filed with the minutes of the
proceedings of the Trustees or committee.
All or any one or more Trustees may participate to the
extent permitted by law in a meeting of the Trustees or any
committee thereof by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other and
participation in a meeting pursuant to such communications shall
constitute presence in person at such meeting. The minutes of any
meeting of Trustees held by telephone shall be prepared in the
same manner as a meeting of Trustees held in person.
ARTICLE VII
INVESTMENT POLICY
The Trustees intend to follow the investment policies
described in the Declaration of Trust, which is to such extent
incorporated herein by this reference.
ARTICLE VIII
BANK ACCOUNTS AND CONTRACTS
Section 1. Depositories: The money and funds of the
Trust, not otherwise invested by the Trustees, shall be deposited
in the name and to the credit of the Trustee in such bank or
banks as the Trustees shall select. All checks, drafts, notes
and acceptances shall be signed by such officer or officers,
agent or agents of the Trust and in such manner as the Trustees
shall determine.
Section 2. Contracts: Except as otherwise provided by
the Trustees, contracts may be executed on behalf of the Trust by
the President or any Vice President, and may be attested and the
seal affixed by the Secretary or an Assistant Secretary. The
Trustees may authorize the execution of contracts by such other
officers, agents and employees as may be designated by them.
ARTICLE IX
SEAL
Section 1. Form and Use: The seal of the Trust shall
be circular in form and shall bear the words: "Arlington Realty
Investors, a Texas Real Estate Investment Trust--1971." The seal
shall be used under the direction of the Trustees, and may be a
facsimile.
ARTICLE X
SHARES AND SHAREHOLDERS
Section 1. Shares: Every Shareholder shall be
entitled to a certificate signed by the President or a Vice
President and the Secretary or an Assistant Secretary, certifying
the number of Shares represented by such certificate, which
certificate shall state on the reverse thereof such terms and
provisions of the Declaration of Trust as shall describe the
rights, duties, limitations and privileges of Shareholders. When
such certificate is countersigned by a Transfer Agent or
registered by a Registrar, either of which is other than the
Trust itself or an employee of the Trust, the signature of any
such President, Vice President, Secretary or Assistant Secretary
may be facsimile. All certificates for Shares shall be
consecutively numbered or otherwise identified.
Section 2. Share Register: A register shall be kept
by or on behalf of the Trustees, under the direction of the
Trustees, which shall contain the names and addresses of the
Shareholders and the number of Shares held by them respectively
and the number of the certificates representing such Shares and a
record of all transfers thereof. Only shareholders whose
certificates are recorded on such register shall be entitled to
vote or to receive distributions or otherwise to exercise or
enjoy the rights of Shareholders. No Shareholder shall be
entitled to receive any distribution, nor to have notice given to
him as herein provided, until he has given his address to a
transfer agent or such other officer or agent of the Trust as
shall keep the register for entry thereon.
Section 3. Transfer Agent: The Trustees shall have
power to employ in the City of Fort Worth, Texas, and/or in any
other city, a transfer agent or transfer agents and, if they so
determine, a registrar or registrars. The transfer agent or
transfer agents may keep the register and record therein the
original issues and transfers of Shares and countersign
certificates for Shares issued to the persons entitled thereto.
Any such transfer agents and registrars shall perform the duties
usually performed by transfer agents and registrars of
certificates of stock in a corporation, except as modified by the
Trustees.
Section 4. Blank Certificates: In accordance with the
usual custom of corporations having a transfer agent, signed
certificates for Shares in blank may be deposited with any
transfer agent of the Trust, to be used by such transfer agent in
accordance with authority conferred upon it as occasion may
require, and in so doing the signers of such certificates shall
not be responsible for any loss resulting therefrom.
Section 5. Owner of Record: Any person becoming
entitled to any Shares in consequence of the death, bankruptcy or
insolvency of any Shareholder, or otherwise by operation of law,
shall be recorded as the holder of such Shares and receive a new
certificate for the same upon production of the proper evidence
thereof and delivery of the existing certificate to the Trustees
or a transfer agent of the Trust. But until such record is made,
the Shareholder of record shall be deemed to he the holder of
such Shares for all purposes hereof and neither the Trustees nor
any transfer agent or registrar nor any officer or agent of the
Trust shall be affected by any notice of such death, bankruptcy,
insolvency or other event.
Section 6. Transfers of Shares: Shares shall be
transferable on the records of the Trust (other than by operation
of law) only by the record holder thereof or by his agent
thereunto duly authorized in writing upon delivery to the Trust
or a transfer agent of the Trust of the certificate or
certificates therefor, with all transfer tax stamps affixed or
duly provided for, properly endorsed or accompanied by duly
executed instrument or instruments of transfer, together with
such evidence of the genuineness of each such endorsement,
execution and authorization and of other matters as may
reasonably be required by the Trust or the transfer agent. Upon
such delivery the transfer shall be recorded on the register of
the Trust and a new certificate for the Shares so transferred
shall be issued to the transferee, and, in case of a transfer of
only a part of the Shares represented by any certificate, a new
certificate for the residue thereof shall be issued to the
transferor. But until such record is made, the Shareholder of
record shall be deemed to be the holder of such Shares for all
purposes hereof and neither the Trustees nor the Trust nor any
transfer agent or registrar nor any officer or agent of the Trust
shall be affected by any notice of the proposed transfer.
Section 7. Limitation of Fiduciary Responsibility:
The Trustees shall not, nor shall the shareholders or any
officer, transfer agent or other agent of the Trust, be bound to
see to the execution of any trust, express, implied or
constructive, or of any charge, pledge or equity to which any of
the Shares or any interest therein are subject, or to ascertain
or inquire whether any sale or transfer of any such Shares or
interest therein by any such Shareholder or his personal
representatives is authorized by such trust, charge, pledge or
equity, or to recognize any Person as having any interest therein
except the Persons recorded as such Shareholders. The receipt of
the Person in whose name any Share is recorded, or, if such Share
is recorded in the names of more than one Person, the receipt of
any one of such Persons or of the duly authorized agent of any
such Person shall be a sufficient discharge for all money,
securities and other property payable, issuable or deliverable in
respect of such Share and from all liability to see to the proper
application thereof.
Section 8. Notices: Any and all notices to which
Shareholders hereunder may be entitled and any and all
communications shall be deemed duly served or given if mailed,
postage prepaid, addressed to Shareholders of record at their
last known post office addresses as recorded on the Share
register provided for in Section 2 hereof.
Section 9. Lost Certificates: Any person claiming a
certificate of Shares to be lost or destroyed shall make an
affidavit or affirmation of that fact to the Trust in writing and
shall, if the Trustees so require, give the Trust a bond of
indemnity, in form and amount satisfactory to the Trust.
Section 10. Regulations: The Trustees shall have
power and authority to make all such rules and regulations as
they may deem expedient concerning the issue, transfer,
replacement and registration of certificates for Shares of the
Trust.
ARTICLE XI
AMENDMENTS
Except as otherwise provided by applicable law or the
Declaration of Trust, the power to alter, amend or repeal these
Bylaws or to adopt new Bylaws shall be vested in the Trustees and
the Shareholders, and such action shall be taken by the
affirmative vote of a majority of the Trustees or by the
affirmative vote of the holders of a majority of the Trust's
outstanding Shares entitled to vote.
ARTICLE XII
DEFINITIONS AND CONFLICTS
All terms defined in the Declaration of Trust dated as
of October 13, 1971, executed by Thomas M. Ryan, Thomas W.
Reilly, Dr. Richard B. Johnson, M. J. McHugh, III, and W. R. Watt
shall have the same meaning when used in these bylaws. In the
event of any conflict between these bylaws and the Declaration of
Trust, the provisions of the Declaration of Trust shall prevail.
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