<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. 1)
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/ / Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Windsor Real Estate Investment Trust 8
(Name of Registrant as Specified in Its Charter)
Windsor Real Estate Investment Trust 8
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ No Fee Required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
- --------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
WINDSOR REAL ESTATE INVESTMENT TRUST 8
6430 SOUTH QUEBEC STREET
ENGLEWOOD, CO 80111
September 23, 1998
Dear Shareholder:
It is a pleasure to invite you to attend the 1998 Annual Meeting of
Shareholders of Windsor Real Estate Investment Trust 8, a California business
trust (the "Trust"), to be held on October 23, 1998, at 6430 South Quebec
Street, Englewood, Colorado 80111.
At the Annual Meeting you will be asked to approve:
(i) the conversion of the Trust from a finite-life entity to an
infinite-life entity ("Proposal 1" or the "Conversion");
(ii) the amendment and restatement of the Trust's Declaration of Trust,
and the adoption of By-laws for the Trust ("Proposal 2" or the
"Related Amendments," and together with Proposal 1, the
"Organizational Amendments");
(iii) the approval of a stock option plan for the Trust, through the
approval and adoption of the proposed form of the 1998 Equity
Compensation Plan ("Proposal 3" or the "Equity Compensation Plan
Approval"); and
(iv) the annual election of trustees of the Trust (the "Election of
Trustees" or "Proposal 4").
Proposals 1 and 2 are conditioned upon shareholder approval of both
Proposals 1 and 2, meaning that if only one of such proposals is approved by the
shareholders, both proposals will be deemed to be not approved by the
shareholders. Proposals 1 and 2, if approved by the shareholders, will be
effected through the adoption of an Amended and Restated Declaration for the
Trust, and the adoption of By-laws for the Trust.
At the Annual Meeting you will also be asked to vote on such other matters
as may properly come before the meeting.
The accompanying Proxy Statement provides detailed information concerning
the proposals as well as transactions that are likely to be engaged in and
changes that are likely to be effected upon the approval of the Organizational
Amendments which you are urged to read carefully and consider, as well as other
information regarding other items on the Agenda at the Annual Meeting. It is
important that your shares be represented at the Annual Meeting, regardless of
the number of shares you hold. Therefore, you are urged to date, sign and return
your proxy card as soon as possible, whether or not you plan to attend the
Annual Meeting. If you attend the Annual Meeting and wish to revoke your proxy
and vote your shares personally, you are entitled to do so at the meeting.
THE BOARD OF TRUSTEES BELIEVES THAT THE PROPOSALS ARE IN THE BEST INTERESTS
OF THE TRUST AND THE TRUST'S SHAREHOLDERS. THE BOARD HAS UNANIMOUSLY APPROVED
THE ORGANIZATIONAL AMENDMENTS AND RECOMMENDS THAT YOU VOTE TO APPROVE THEM AND
EACH OF THE OTHER ITEMS TO BE VOTED ON AT THE ANNUAL MEETING.
Sincerely,
<TABLE>
<S> <C> <C>
GARY P. McDANIEL KENNETH G. PINDER RICHARD B. RAY
Trustee Trustee Trustee
</TABLE>
<PAGE> 3
----------------------------------
WINDSOR REAL ESTATE INVESTMENT TRUST 8
----------------------------------
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 23, 1998
----------------------------------
Notice is hereby given that the Annual Meeting of Shareholders of Windsor
Real Estate Investment Trust 8, a California business trust (the "Trust"), will
be held at 10:00 a.m., Denver time, on October 23, 1998, at 6430 South Quebec
Street, Englewood, Colorado 80111 (the "Annual Meeting"), for the following
purposes:
1. The conversion of the Trust from a finite-life entity to an
infinite-life entity ("Proposal 1" or the "Conversion");
2. The amendment and restatement of the Trust's Declaration of Trust,
and the adoption of By-laws for the Trust ("Proposal 2" or the "Related
Amendments," and together with Proposal 1, the "Organizational
Amendments");
3. The approval of an equity compensation plan for the Trust, through
the approval and adoption of the proposed form of the 1998 Equity
Compensation Plan ("Proposal 3" or the "Equity Compensation Plan
Approval");
4. The annual election of trustees of the Trust (the "Election of
Trustees"); and
5. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Proposals 1 and 2, if approved by the shareholders, will be effected
through the adoption of an amended and restated declaration of trust for the
Trust, and the adoption of By-laws for the Trust. Proposals 1 and 2 are
conditioned upon shareholder approval of both Proposals 1 and 2, meaning that if
only one of such proposals is approved by the shareholders, both proposals will
be deemed to be not approved by the shareholders.
Holders of the Trust's Common Shares and Preferred Shares of record at the
close of business on September 21, 1998, shall be entitled to notice of, and to
vote at, the Annual Meeting. The Organizational Amendments, the Equity
Compensation Plan Approval and the Election of Trustees and other items on the
agenda at the Annual Meeting are more fully described in the accompanying Proxy
Statement, and the Appendices thereto, which form a part of this Notice.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. TO
ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, HOWEVER, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE.
A POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE. ANY SHAREHOLDER
ATTENDING THE ANNUAL MEETING MAY VOTE IN PERSON EVEN IF THAT SHAREHOLDER HAS
RETURNED A PROXY.
By Order of the Board of Trustees:
Gary P. McDaniel
Chairman of the Board of Trustees
September 23, 1998
<PAGE> 4
WINDSOR REAL ESTATE INVESTMENT TRUST 8
PROXY STATEMENT
This Proxy Statement is being furnished to the holders (the "Shareholders")
of (i) common shares of beneficial interest, $.01 per share ("Common Shares");
and (ii) preferred shares of beneficial interest, $.01 per share ("Preferred
Shares" and together with the Common Shares, the "Shares"), of the Trust, in
connection with the solicitation of proxies by the Trustees of the Trust for use
at the Annual Meeting of Shareholders of the Trust to be held at 6430 South
Quebec Street, Englewood, Colorado 80111, on October 23, 1998, at 10:00 a.m.,
Denver time, and at any and all adjournments or postponements thereof (the
"Annual Meeting").
This Proxy Statement is being furnished in connection with the following
proposals: (i) the conversion of the Trust from a finite-life entity to an
infinite-life entity ("Proposal 1" or the "Conversion"); (ii) the amendment and
restatement of the Trust's Declaration of Trust (the "Existing Declaration of
Trust"), and the adoption of By-laws (the "By-laws") for the Trust ("Proposal 2"
or the "Related Amendments," and together with Proposal 1, the "Organizational
Amendments"); (iii) the approval of a stock option plan for the Trust, through
the approval and adoption of the 1998 Equity Compensation Plan ("Proposal 3" or
the "Equity Compensation Plan Approval"); and (iv) the annual election of
trustees of the Trust (the "Election of Trustees" or "Proposal 4").
Proposals 1 and 2 are conditioned upon Shareholder approval of both
Proposals 1 and 2, meaning that if only one of such proposals is approved by the
Shareholders, both proposals will be deemed to be not approved by the
Shareholders. Proposals 1 and 2, if approved by the Shareholders, will be
effected through the adoption of an Amended and Restated Declaration for the
Trust (the "Amended Declaration"), and the adoption of By-laws for the Trust.
The Organizational Amendments, and the transactions and changes to be
effected by the Trust following Shareholder approval of the Organizational
Amendments may be subject to certain risk factors described herein, including
the following:
- The fundamental change in the nature of the Shareholders' investment in
the Trust and changes in Shareholders' rights;
- The possible mandatory redemption of Preferred Shares by the Trust under
the Amended Declaration;
- The current and potential conflicts of interest arising out of the
Trust's relationship with Chateau Communities, Inc. ("Chateau"), and the
Trust's advisor, which is also owned by Chateau;
- Chateau's future control of the Trust and its affairs following the
adoption of the Amended Declaration and By-laws and the additional
Chateau investment described herein;
- Constraints on growth opportunities and the implementation of the
Business Plan (as described herein), and no assurance of the availability
of capital or other financing;
- The risk that the properties that the Trust acquires and develops may
fail to perform in accordance with the Trust's expectations; and
- The risks associated with increased indebtedness and leverage.
For additional information concerning these and other risk factors, please
see "Risk Factors" herein.
This Proxy Statement and the accompanying form of proxy are first being
mailed to the Shareholders of the Trust on or about September 23, 1998. A
Shareholder who has given a proxy may revoke it at any time prior to its
exercise.
The close of business on September 21, 1998 has been fixed as the record
date for determining Shareholders entitled to vote at the Annual Meeting.
SHAREHOLDERS ARE URGED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE
IF MAILED IN THE UNITED STATES, TO BE RECEIVED NO LATER THAN OCTOBER 22,
1998.
This Proxy Statement is dated September 23, 1998.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION................. 2
SUMMARY............................... 3
RISK FACTORS AND OTHER
CONSIDERATIONS...................... 17
Fundamental Change in Nature of
Investment....................... 17
Changes in Shareholders' Rights..... 17
Possible Mandatory Redemption of
Preferred Shares................. 17
Conflicts of Interest............... 17
Control by Chateau.................. 18
No Fairness Opinion Sought with
Respect to Organizational
Amendments....................... 19
Potential Increase in Indebtedness;
Additional Use of Leverage....... 19
Risks Related to Removal of
Investment Restrictions.......... 19
Constraints on Growth
Opportunities.................... 19
Acquisition and Development Risks... 20
Environmental Matters............... 20
PROPOSALS 1 AND 2 -- PROPOSED
ORGANIZATIONAL AMENDMENTS........... 21
Introduction........................ 21
Background of the Transaction....... 22
Recommendation of the Trustees...... 24
Certain Alternatives................ 26
TRANSACTIONS AND CHANGES TO BE
EFFECTED UPON APPROVAL OF PROPOSALS
1 AND 2............................. 28
Additional Chateau Investment....... 28
Organization of UPREIT; Contribution
Transaction...................... 28
Implementation of Business Plan;
Growth Strategy.................. 28
Future Listing of Common Shares on
Exchange; Redemption of Preferred
Shares........................... 29
COMPARISON OF PRINCIPAL TERMS OF
EXISTING DECLARATION OF TRUST AND
AMENDED DECLARATION AND BY-LAWS..... 30
Organization........................ 30
Length of Investment................ 30
Voting Rights....................... 31
Distributions; Liquidating
Proceeds......................... 31
Issuance of Additional Securities... 33
Redemption and Conversion Rights.... 34
Investment Restrictions............. 35
Limitations on Borrowing; Debt...... 35
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management Control.................. 35
Engagement of Advisor............... 36
Antitakeover Provisions............. 36
Transactions with Affiliates........ 37
Limitation on Total Operating
Expenses......................... 37
Ownership Limitations............... 38
PROPOSAL 3 -- EQUITY COMPENSATION PLAN
APPROVAL............................ 39
Terms of the 1998 Equity
Compensation Plan................ 39
Certain Benefits.................... 41
Tax Consequences of the Equity
Compensation Plan................ 41
Recommendation of the Board of
Trustees......................... 42
PROPOSAL 4 -- ANNUAL ELECTION OF
TRUSTEES............................ 42
Election of Trustees................ 42
Board of Trustees................... 43
Committees of the Board............. 43
Advisor............................. 44
Share Ownership of Directors,
Executive Officers and Certain
Shareholders..................... 44
Section 16(a) Beneficial Ownership
Reporting Compliance............. 44
Independent Trustees Compensation... 44
Executive Compensation.............. 44
Related Party Compensation and
Expense Reimbursement............ 45
VOTING PROCEDURES AND MISCELLANEOUS
MATTERS............................. 45
The Annual Meeting.................. 45
Change in Accountants............... 45
Solicitation of Proxies;
Administrative Agent............. 45
Record Date; Vote Required.......... 45
No Dissenters' or Appraisal Rights
With Respect to Organizational
Amendments....................... 46
Voting Procedures and Powers........ 46
Completion Instructions............. 47
Withdrawal or Change of Vote........ 47
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE........................... 48
Appendix A -- AMENDED AND RESTATED
DECLARATION OF TRUST................ A-1
Appendix B -- BY-LAWS OF THE TRUST.... B-1
</TABLE>
<PAGE> 6
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION NOT CONTAINED HEREIN MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT DOES NOT CONSTITUTE THE
SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO OR FROM
WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN SUCH JURISDICTION.
NEITHER THE PROPOSALS NOR THIS PROXY STATEMENT HAVE BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF THE PROPOSALS OR THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED HEREIN, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE TRUST OR THE TRUSTEES.
AVAILABLE INFORMATION
The Trust is subject to certain informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of
the Commission at 7 World Trade Center, New York, New York 10048, and Northwest
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained from the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The Commission maintains a site on the Internet
at http://www.sec.gov that contains reports, proxy and other information
statements and other information regarding registrants that file electronically
with the Commission.
Statements contained herein concerning the provisions of documents are
summaries of such documents, and each statement is qualified in its entirety by
reference to the copy of the applicable document if attached as an Appendix
hereto.
2
<PAGE> 7
SUMMARY
The following summarizes certain information contained elsewhere in this
Proxy Statement. While the purpose of this Summary is to discuss and disclose
the material aspects of the proposals, this Summary is not intended to be
complete, and is qualified in its entirety by reference to the more detailed
information contained elsewhere herein. Capitalized terms not defined in this
Summary have the meanings ascribed to them elsewhere in this Proxy Statement.
PROPOSALS 1 AND 2 -- PROPOSED ORGANIZATIONAL AMENDMENTS
INTRODUCTION
Proposal 1 is the conversion of the Trust from a finite-life entity to an
infinite-life entity ("Proposal 1" or the "Conversion"). Proposal 2 is the
amendment and restatement of the existing Declaration of Trust of the Trust (the
"Existing Declaration of Trust"), and the adoption of By-laws (the "By-laws")
for the Trust ("Proposal 2" or the "Related Amendments," and together with
Proposal 1, the "Organizational Amendments").
The principal purposes of Proposals 1 and 2 are to convert the Trust from a
finite-life to an infinite-life entity, and to remove various restrictions and
limitations and other requirements contained in the Existing Declaration of
Trust which are not typically found in the more modern organizational documents
of leading real estate investment trusts ("REITs"). These include provisions
that (i) restrict the types and amounts of equity and debt securities that the
Trust may issue; (ii) limit the nature and types of investments that the Trust
may make; and (iii) mandate that proceeds from sales or refinancings of
properties be distributed to Shareholders, and not reinvested in additional
properties (the "Capital, Investment and Other Restrictions"). The
Organizational Amendments also provide for changing the name of the Trust to "N'
Tandem Trust," a name that the Trustees believe is better suited to the Trust
given its future proposed activities. See "Comparison of Principal Terms of
Existing Declaration of Trust and Amended Declaration and By-laws," for
additional information concerning the Organizational Amendments.
If Proposals 1 and 2 are approved by the Shareholders, it is expected that
the Trust will engage in the following transactions and effect the following
changes: (i) Chateau, a publicly held REIT which is the largest owner/operator
of manufactured home communities in the United States, and which is the owner
and sole shareholder of The Windsor Corporation, which serves as the Trust's
advisor (the "Advisor"), is expected to purchase at least an additional 130,000
Common Shares or Preferred Shares, or a combination thereof (which would give
Chateau an approximate 45% ownership interest in the Trust), for a purchase
price (but not below $25 per share) equal to the aggregate fair market value of
such Shares, as determined by the independent trustees of the Trust (the
"Independent Trustees"); (ii) the Trust will form an operating partnership
subsidiary in order to facilitate tax-free and/or tax-deferred acquisitions of
additional properties; (iii) the Trust will begin implementing a growth-oriented
business plan (the "Business Plan") intended to cause the Trust to attain
greater size and asset diversity; and (iv) if successful in the implementation
of the Business Plan, the Trust anticipates that it will, within two to four
years after the adoption of the Organizational Amendments, seek to list the
Common Shares on a national securities exchange or NASDAQ, and if deemed
appropriate, raise additional capital through an underwritten public offering of
the Common Shares, or other securities of the Trust. There can be no assurance,
however, that the Trust will be successful in listing the Common Shares, or
effecting such public offering. For additional information concerning the
transactions described in (i) through (iv) above, see "Transactions and Changes
to be Effected upon Approval of Proposals 1 and 2" below.
The Amended Declaration also provides for the exchange of each Common Share
and Preferred Share of the Trust for a share of a new class of common shares and
preferred shares, respectively, which will have substantially the same rights as
the existing classes of Shares, except that (i) in keeping with the conversion
of the Trust from a finite-life to an infinite-life entity, the Trust will no
longer be required to make distributions to Shareholders of all proceeds from
sales or refinancings of properties; (ii) effective upon the listing of the
Common Shares on any national securities exchange or NASDAQ, the Trust will have
the right to redeem
3
<PAGE> 8
outstanding Preferred Shares upon 60 days' written notice to Preferred
Shareholders, at a redemption price per Preferred Share equal to the Preferred
Share Liquidation Preference, which, effective upon the adoption of the
Organizational Amendments, will equal $25.00 plus any dividends on the Preferred
Shares that are accrued and unpaid following such adoption; and (iii) each
holder of Preferred Shares shall have the right, which becomes exercisable if
the Preferred Shares are called for redemption, to convert each Preferred Share
held by such holder into one Common Share, at any time prior to the Redemption
Date, by the delivery of notice of such exercise to the Trust (the "Conversion
Rights").
The aspects of Proposal 2 that allow for the redemption of Preferred Shares
upon the listing of Common Shares are intended to allow the Trust the option of
eliminating the Preferred Shares from its capital structure if the Trust moves
ahead and pursues an underwritten public offering of its Common Shares. The
Trustees believe that the value of the Trust is likely to be enhanced if the
Preferred Shares (which rank senior to the Common Shares with regard to
dividends and distributions) are retired at the time of the offering. At the
same time, by also granting Conversion Rights to the Preferred Shareholders if
the Preferred Shares are in fact called for redemption, the holders of such
Shares will have the option of either (i) being cashed out through the
redemption; or (ii) continuing their investment in the Trust, as Common
Shareholders, through the exercise of their Conversion Rights. See "Comparison
of Principal Terms of Existing Declaration of Trust and Amended Declaration and
By-laws" for additional information.
The Trust's current portfolio of properties is comprised of a 100%
ownership interest in three manufactured home community properties and a 40%,
11% and 11% interest, respectively, in three other manufactured home community
properties. The Trust believes that significant opportunities exist to acquire
additional properties that fit the investment objectives and guidelines set
forth in its Business Plan. The Trust anticipates that it will focus on
acquisitions where the Trust believes there is substantial opportunity to
improve operational and financial results, or where for some reason, because of
poor management or otherwise, a property is operating substantially below its
potential.
If Proposals 1 and 2 are approved, Chateau has advised the Trust that it
intends to announce that the Trust will be a primary vehicle through which
Chateau will make investments in manufactured home communities that do not fit
the core asset type typical of the existing Chateau portfolio, which is
characterized by large, stable, institutional-quality, fully amenitized
properties. The Trust will employ higher levels of leverage than Chateau and
will focus primarily on "lower profile assets" meaning properties that (i) are
typically not part of a portfolio of manufactured housing community properties;
(ii) are located in tertiary demographic and geographic markets; (iii) are not
managed by a nationally known manufactured home community operator; (iv) may be
managed by an on-site owner who lives at the property; and (v) may be smaller
and are likely to have fewer amenities, and a greater proportion of single-wide
homes, than the typical Chateau community. The Trust believes that its
affiliation with Chateau will benefit the Trust by providing it with access to
Chateau's national organization, management team and investment and management
philosophies. Through its affiliation with Chateau, the Trust believes that it
will be exposed to a wider range of acquisition opportunities as a result of
Chateau's national organization and knowledge of the manufactured housing
community industry, and will benefit from Chateau's expertise in effectively and
efficiently managing properties. Chateau is widely considered a leading property
management company in the manufactured housing community industry, and in 1998,
the National Manufactured Housing Congress presented Chateau with the "National
Operator of the Year" award for an unprecedented sixth consecutive year,
confirming Chateau's outstanding reputation for excellence in property
management and operations.
SUMMARY RISK FACTORS
Fundamental Change in Nature of Investment. Proposals 1 and 2 involve a
fundamental change in the nature of the investment of the Common Shareholders
and Preferred Shareholders in the Trust in that it will transform the Trust from
a finite-life entity with a plan to liquidate its investments by no later than
December 31, 2006, and to distribute the proceeds from such liquidation to
Shareholders, to an infinite-life, growth-oriented entity which will not be
required to distribute sales or refinancings proceeds to Shareholders, but will
instead be able to reinvest such proceeds in new investments. As a result,
Shareholders can expect to have an effective avenue to liquidate their
investments only after the Trust succeeds in listing the Common
4
<PAGE> 9
Shares on a national securities exchange or on NASDAQ, and such listing is not
expected to occur until at least two to four years after the approval of the
Organizational Amendments. In addition, there can be no assurance that the Trust
will be successful in its efforts to effect such listing. For additional details
and information relating to the change in the nature of the Shareholders'
investments, see "Risk Factors" and "Comparison of Principal Terms of Existing
Declaration of Trust and Amended Declaration and By-laws."
Changes in Shareholders' Rights. The Amended Declaration effects various
changes in Shareholders' rights, including the following: under the Amended
Declaration, Shareholders no longer have (i) the right to receive distributions
from sales or refinancing of properties (which will be reinvested); (ii) the
right to vote Shares cumulatively in the election of Trustees; (iii) certain
appraisal and other rights in the event of a roll-up of the Trust that are
provided in the Existing Declaration of Trust; or (iv) the right to remove
Trustees with or without cause, upon a vote of the holders of a majority of the
Shares (under the Amended Declaration the Trustees may be removed only for
cause, and only upon a vote of the holders of at least 80% of the Shares).
Removal of Investment Restrictions. Under the Existing Declaration of
Trust, the Trust is subject to various investment restrictions and generally is
prohibited from investing in securities of other entities. The Amended
Declaration does not contain such restrictions. The Trust will remain subject to
various investment restrictions which relate to maintaining its status as a
REIT, and the Trust does not anticipate investing in securities of other
entities other than entities whose principal business is owning manufactured
home communities. To the extent that the Trust makes investments in such
entities, but does not control them, the Trust will be subject to all the risks
associated with being a minority shareholder, including not having control over
the affairs of any such entity.
Possible Mandatory Redemption of Preferred Shares. Under the Amended
Declaration, effective upon the listing of the Common Shares on any national
securities exchange or NASDAQ (and subject to each Preferred Shareholder's right
to convert each Preferred Share into one Common Share), the Trust will have the
right to redeem outstanding Preferred Shares at a redemption price per Preferred
Share equal to the Preferred Share Liquidation Preference, which, effective upon
the adoption of the Organizational Amendments, will equal $25.00 plus any
dividends on the Preferred Shares that are accrued and unpaid following such
adoption. Thus, holders of Preferred Shares may be forced to liquidate their
investments in the Trust or to convert their investment into Common Shares.
Conflicts of Interest. Proposals 1 and 2 and the recommendation of Gary P.
McDaniel, a Trustee of the Trust, set forth herein could be deemed to involve
certain conflicts of interest between Mr. McDaniel, on the one hand, and the
Shareholders on the other hand, including the following:
Relationship of the Advisor to Chateau. The Advisor is a wholly-owned
subsidiary of Chateau. Chateau and the Advisor currently collectively own
19,339 Common Shares and 984 Preferred Shares, representing a combined 9.8%
equity interest in the Trust. Gary P. McDaniel, a Trustee of the Trust, is
also the Chief Executive Officer and a shareholder of Chateau. The Trustees
expect that the implementation of the Business Plan, by increasing the size
of the Trust's portfolio of properties, will operate to substantially
increase the total aggregate compensation payable to the Advisor under the
Advisory Agreement (as defined herein).
Removal of Certain Advisory Agreement Restrictions Under the Existing
Declaration of Trust. Under the Existing Declaration of Trust, the Advisory
Agreement cannot be renewed for periods longer than one year, and must be
terminable by the Trust without cause, on 60 days' notice. No similar
restrictions are contained in the Amended Declaration. Accordingly, subject
to the approval of the Independent Trustees, the Trust may extend the
Advisory Agreement for periods beyond one year, and may modify the Advisory
Agreement's termination and other provisions.
Potential Future Conflicts of Interest. Following the adoption of the
Organizational Amendments, Chateau will continue to aggressively pursue
acquisition and development opportunities on its own behalf to add to its
portfolio. It is possible that the Advisor will find investment
opportunities in the future that may be attractive to both the Trust and
Chateau thereby creating potential conflicts of interest. This
5
<PAGE> 10
could result in the Trust not taking advantage of acquisition opportunities
identified by the Advisor and could result in the Trust's engaging in
activities which disproportionately benefit the Advisor or Chateau.
Control by Chateau. If Proposals 1 and 2 are approved by the Shareholders,
it is expected that Chateau will purchase at least an additional 130,000 Common
Shares or Preferred Shares, or a combination thereof. Upon the making of such
investment Chateau will (i) own approximately 45% of the outstanding capital
stock of the Trust; (ii) have substantial influence over the affairs of the
Trust; and (iii) have the power, with limited support from other Shareholders,
to approve or block most actions requiring the approval of the Shareholders of
the Trust, including the sale of all assets of the Trust and other extraordinary
actions. Chateau's control of the Trust and the Advisor and the potential
conflicts of interest identified above could result in the Trust not taking
advantage of acquisition opportunities identified by the Advisor and could
result in the Trust's engaging in activities which disproportionately benefit
the Advisor or Chateau.
No Fairness Opinion Sought with Respect to Organizational Amendments. The
Trustees have not in connection with the proposed Organizational Amendments
sought to obtain an opinion relating to the fairness of the proposed
Organizational Amendments to the Shareholders. The Existing Declaration does not
require that any such fairness opinion be obtained and the proposed
Organizational Amendments were approved by all of the Trustees of the Trust,
including the Independent Trustees. Had such opinion relating to fairness been
obtained, the terms of the proposed Organizational Amendments might have been
different, and possibly more favorable to the Shareholders.
Constraints on Growth Opportunities. If Proposals 1 and 2 are approved by
Shareholders, the Trust intends to pursue a full range of growth opportunities,
including acquisitions of additional properties, community expansions and, to a
lesser extent, new community development and redevelopment of existing
communities. The ability of the Trust to accomplish such growth will be subject
to a number of constraints, including the following:
Competition for Available Properties. The Trust will compete for
growth opportunities with national and regional manufactured home community
owners, most of which have greater name recognition and financial resources
than the Trust. The Trust's failure to compete successfully for
acquisitions would adversely affect the Trust's ability to expand its
portfolio of properties.
The Trust Has Not Identified a Portfolio of Properties. The Trust has
not, at the present time, identified a portfolio of properties that it
would seek to invest in if the Organizational Amendments are approved, and
if sufficient capital would be available to it. There is no assurance that
suitable communities for acquisition or development will be available or,
if available, will be on terms acceptable to the Trust.
No Assurance of Available Capital or Financing. The Trust currently
lacks commitments for any of the additional capital it needs to implement
its Business Plan and there can be no assurance that capital or other
financing will be available to the Trust, or if available, available on
favorable terms. If the Trust is not able to raise additional capital, or
obtain other financing or funding, on favorable or acceptable terms, it
will need to substantially curtail or abandon its Business Plan.
BACKGROUND OF THE TRANSACTION
The Trust was organized to invest in existing, substantially developed and
occupied manufactured home communities and to provide to its Shareholders (i)
preservation, protection, and eventual return of their investments; (ii)
quarterly dividends of cash from operations, some of which may be a return of
capital for tax purposes rather than taxable income; (iii) realization of
long-term appreciation in value of the properties acquired by the Trust; and
(iv) a hedge against inflation.
The Trust was funded through a public offering of Common Shares and
Preferred Shares, commencing in April 1992 and terminating in April 1993. An
aggregate of 98,169 Common Shares and 98,323 Preferred Shares were sold at a
price of $25.00 per share for gross proceeds aggregating approximately $2.5
million and $2.4 million, respectively.
6
<PAGE> 11
In September 1997, Chateau purchased all of the outstanding capital stock
of The Windsor Corporation, the Advisor to the Trust, for 101,239 common shares
of Chateau, and $750,000 in cash. Following Chateau's acquisition of The Windsor
Corporation shares, the Trustees of the Trust voluntarily resigned, and in
connection with such resignation, appointed the three existing Trustees of the
Trust, including the two Independent Trustees.
The Trustees believe that the Trust has been successful in achieving
certain of its objectives, especially in paying regular quarterly dividends out
of cash from operations. See "Historical and Comparative Distributions" for a
history of the Trust's payment of dividends. Based on the Estimated Liquidation
Payment of $26.89 payable to Preferred Shareholders if the Trust were liquidated
as of March 31, 1998 (versus an original investment of $25.00) (see "Certain
Alternatives -- Liquidation of the Trust" below), it appears that the Trust has
been somewhat successful in preserving the capital invested by Preferred
Shareholders but based upon an Estimated Liquidation Payment of $22.61 payable
to Common Shareholders if the Trust were liquidated as of March 31, 1998 (versus
an original investment of $25.00), the Trust has been less successful in
preserving the capital invested by Common Shareholders. Based upon the Estimated
Liquidation Payments, the Trust has not been successful in providing long-term
capital appreciation to the Common Shareholders or the Preferred Shareholders
and has not provided the Shareholders with a hedge against inflation.
In an effort to enhance Shareholder value, the Trustees in the first
quarter of 1998 authorized the Advisor to attempt to identify additional
acquisition opportunities for the Trust. The Advisor located a number of
potential acquisitions and in March 1998 the Trust entered into an agreement to
acquire a 627-site manufactured home community in Montgomery, Alabama, for $5.5
million (the "Montgomery Acquisition"). In order to enable the Trust to complete
the acquisition, Chateau offered to make an investment in the Trust. The
Trustees accepted such offer and, on March 30, 1998, entered into an agreement
with Chateau, pursuant to which Chateau invested $5.5 million in the Trust (the
"Original Chateau Investment") in exchange for the issuance within 90 days of
such investment of (i) such number of Common Shares (at a price of $25.00 per
share) as the Trustees may determine; and (ii) promissory notes in a principal
amount of the balance of the investment (the "Promissory Notes"). In connection
with the Original Chateau Investment, on May 11, 1998, the Trust issued to
Chateau (i) 19,139 Common Shares (at a price of $25.00 per share); and (ii) two
Promissory Notes with an aggregate principal amount of approximately $5.0
million.
After completing the Montgomery Acquisition, the Trustees authorized the
Advisor to identify additional acquisition opportunities for the Trust. The
Trustees determined at this time that the Trust was effectively prevented from
taking advantage of such acquisition prospects as a result of the Capital,
Investment and Other Restrictions contained in the Existing Declaration of Trust
and a lack of available capital.
Following further discussion by the Trustees in April 1998, the Trustees
determined that it would substantially enhance the Trust's capital raising
opportunities if they could restructure the Trust so that it would be organized
in a manner that is more typical of the structure employed by leading REITs.
This determination eventually led in May 1998, to the approval by the Trustees
of the Organizational Amendments and a decision to present such amendments to
the Shareholders of the Trust for their consideration and approval.
RECOMMENDATION OF THE TRUSTEES
The Trustees believe that adopting the Organizational Amendments is in the
best interests of the Trust and its Shareholders and recommend that Shareholders
vote FOR the approval of Proposals 1 and 2. In reaching this determination, the
Trustees considered, among other things, the following factors:
(i) the Trustees' belief that attractive acquisition and development
opportunities exist, and that the Trust's lack of available
capital and the Capital, Investment and Other Restrictions
effectively prevent the Trust from taking advantage of such
opportunities;
(ii) that if the Organizational Amendments are approved, the Trust's
more flexible organizational and capital structure should
position the Trust for additional growth;
7
<PAGE> 12
(iii) that if the Organizational Amendments are approved, the Trust's
portfolio will become more diversified as the Trust acquires
additional properties over time;
(iv) that if the Organizational Amendments are approved and the Trust
is successful in implementing the Business Plan, the Trust
anticipates that it may be able to list the Common Shares on a
national securities exchange or include them for quotation on
NASDAQ, within two to four years following the adoption of the
Organizational Amendments, thereby greatly enhancing
Shareholders' liquidity;
(v) the Trustees' belief that the implementation of the Trust's
Business Plan, which is expected to increase the size and
operating cash flow of the Trust, will provide opportunities for
the Trust to increase distributions to Shareholders over time;
and
(vi) that the approval of the Organizational Amendments and the
changes anticipated to be effected following the adoption of the
Organizational Amendments will provide the Trust with a capital
and operating structure that will allow it to respond more
efficiently to, and anticipate the occurrence of, changing
conditions in the United States equity markets.
In reaching their determination, the Trustees also considered potentially
negative aspects of the Proposals, including the various factors and information
set forth under "Risk Factors" and elsewhere in this Proxy Statement, including
the following:
(i) the fundamental change in the nature of the Shareholders'
investment in the Trust and changes in Shareholders' rights;
(ii) the possible mandatory redemption of Preferred Shares by the
Trust under the Amended Declaration;
(iii) the current and potential conflicts of interest arising out of
the Trust's relationship with Chateau, and the Trust's Advisor,
which is also owned by Chateau;
(iv) Chateau's future control of the Trust and its affairs following
the adoption of the Amended Declaration and By-laws and the
Additional Chateau Investment;
(v) constraints on growth opportunities and the implementation of the
Business Plan, and no assurance of the availability of capital or
other financing;
(vi) the risk that the properties that the Trust acquires and
develops may fail to perform in accordance with the Trust's
expectations; and
(vii) the risks associated with increased indebtedness and leverage.
The foregoing discussion of the positive, negative and other information
and factors considered by the Trustees is not intended to be exhaustive. The
Trustees did not assign relative weights to the above factors or determine that
any factor was of particular importance. A determination of various weightings
would, in the view of the Trustees, be impractical. Rather, the Trustees viewed
their position and recommendations as being based on the totality of the
information presented to, and considered by, them. The Trustees recommend that
the Shareholders review and consider independently the Risk Factors. In
considering the recommendation of the Trustees, Shareholders should consider
that one of the Trustees, Gary P. McDaniel, who is the Chief Executive Officer
of Chateau, could be considered to have potential conflicts of interest, and
that Chateau, which is likely to become a controlling Shareholder shortly after
the adoption of the Organizational Amendments, may also be subject to potential
conflicts of interest. See "Risk Factors -- Conflicts of Interest."
CERTAIN ALTERNATIVES
In considering the Organizational Amendments, the Trustees also analyzed
two alternatives for the Trust: (i) liquidation of the Trust; and (ii)
continuation of the Trust in accordance with its existing organizational
structure, business plan and policies.
8
<PAGE> 13
Liquidation of the Trust. In lieu of adopting the Organizational
Amendments, one option available to the Trust is for the Trust to commence an
orderly liquidation and to distribute the net proceeds from the liquidation to
Shareholders in accordance with the terms of the Existing Declaration of Trust.
The primary benefit of this strategy is that it would allow for an immediate and
final liquidation of the investments in the Trust held by, and a distribution of
cash to, Shareholders. Liquidation of the Trust at the current time would also
avoid the risks inherent in the proposed new structure for the Trust. In
addition, Shareholders would have the opportunity to reinvest the net proceeds
received in the liquidation in similar or different investments.
The Trustees have estimated, however, that the net proceeds available for
distribution to Shareholders upon completion of the liquidation would amount to
approximately $22.61 per Common Share and approximately $26.89 per Preferred
Share (each an "Estimated Liquidation Payment"). For a discussion of the
methodology employed by the Trust in developing these estimates, see "Certain
Alternatives."
In assessing the liquidation of the Trust, the Trustees observed that the
$22.61 estimated to be payable to holders of Common Shares is less than the
amount of the original offering price per Common Share in the Trust's initial
public offering. Thus, liquidating at the current time would deprive holders of
Common Shares of the ability to receive a full return of their originally
invested capital and also of the potential for enhancement in the value of their
investments in the Trust, which the Trustees believe will occur if the Trust is
successful in the implementation of its new Business Plan.
At the same time, the Trustees observed that the $26.89 estimated to be
payable to holders of Preferred Shares is slightly greater than the amount of
the original offering price of the Preferred Shares but would represent, on
average, less than a 2.0% annual appreciation in the value of the Preferred
Shares since the closing of the Trust's initial public offering. The Trustees
concluded that liquidating the Trust at the current time would deprive holders
of Preferred Shares from the further enhancement in the value of the Trust
expected to occur upon a successful implementation of the new Business Plan. In
addition to preserving for the Preferred Shareholders the potential for further
appreciation in the value of their investments, the Organizational Amendments
are also intended to protect against declines in such value. Under the terms of
the Organizational Amendments, a liquidation preference for the holders of
Preferred Shares is maintained. In addition, the Organizational Amendments
provide the Preferred Shareholders with certain options. If (i) Proposals 1 and
2 are approved by Shareholders; (ii) the Trust is successful in implementing its
new Business Plan; (iii) the Trust lists the Common Shares on a national
securities exchange or on NASDAQ; and (iv) the Trust exercises its right to
redeem the Preferred Shares at the time of the listing, holders of Preferred
Shares will be provided with a choice to either accept a cash payment for their
Shares in amount per Share equal to the Preferred Share Liquidation Preference
or to convert their shares into Common Shares on a one-for-one basis. As a
result of these factors, the Trustees concluded that the Organizational
Amendments appropriately balance the interests of the holders of the Preferred
Shares and the Common Shares and is in the overall best interests of all
Shareholders.
Continuation of the Trust. A second option available for the Trust, in
lieu of adopting the Organizational Amendments, is for the Trust to continue its
operations in accordance with its existing organizational structure, business
plan and policies. Continuing the Trust without change has a number of
characteristics that could be considered benefits, including (i) there would be
no change in the nature of the Shareholders' investments; (ii) the Shareholders'
investment in the Trust would not be exposed to the additional risks associated
with the implementation and operation of the new Business Plan; (iii) the Trust
would liquidate its holdings and distribute the net proceeds from such
liquidation by no later than 2006; and (iv) the Trust would not incur any
expenses in connection with the adoption of the Organizational Amendments, which
are estimated to be approximately $125,000.
At the same time, the Trustees believe that continuing the Trust in its
current form will deprive Shareholders of the substantial benefits of the
proposed Organizational Amendments, and the other changes expected to be
effected following their adoption, and will prevent the Trust from implementing
the Business Plan and acquiring additional manufactured housing communities. The
Trustees also considered that continuation of the Trust in its current form
would not address the liquidity needs that Shareholders may have.
9
<PAGE> 14
The Trustees also developed estimates of the values of the Common Shares
and Preferred Shares assuming the Trust would be continued in accordance with
its existing organizational structure, business plan and policies. The estimates
developed indicate values of approximately $25.57 per Common Share, which is
only marginally greater than the original offering price of the Common Shares in
the Trust's initial public offering, and $28.23 per Preferred Share (each an
"Estimated Continuation Value") which represents, on average, less than a 2.5%
annual appreciation in the value of the Preferred Shares since the closing of
such initial public offering. For a discussion of the methodology employed by
the Trust in developing these estimates, see "Certain Alternatives."
HISTORICAL AND COMPARATIVE DISTRIBUTIONS
Set forth below is certain information relating to distributions made by
the Trust since January 1, 1994, the first full year of operation of the Trust:
<TABLE>
<CAPTION>
COMMON SHARES(1) PREFERRED SHARES(2)
---------------- -------------------
AGGREGATE PER SHARE AGGREGATE PER SHARE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1998*.. $ 37,304 $0.375 $ 36,800 $0.375
1997.. $135,254 $ 1.50 $147,110 $ 1.50
1996.. $135,254 $ 1.50 $147,110 $ 1.50
1995.. $132,436 $ 1.35 $144,413 $ 1.47
1994.. $104,298 $ 1.06 $113,687 $ 1.06
</TABLE>
- ------------------------------
* Through March 31, 1998.
(1) The portion of such distribution representing a return of capital to
Shareholders is as follows: 1998 (100%); 1997 (100%); 1996 (100%); 1995
(100%); and 1994 (3%).
(2) The portion of such distribution representing a return of capital to
Shareholders is as follows: 1998 (100%); 1997 (100%); 1996 (77%); 1995
(67%); and 1994 (3%).
The Trust is not in arrears with respect to any dividends or distributions,
and the Trust has made all distributions required to be made by it under the
Existing Declaration of Trust.
With respect to distributions to Shareholders of cash from operations, if
the Organizational Amendments are approved, the Trust intends to maintain its
current dividend policies and in connection therewith, and, subject to the
availability of funds for the same, intends to continue to timely pay the
Preferred Share Dividend Preference and the Common Share Dividend Preference. If
the Organizational Amendments are approved, The Trust does not intend, in the
future, to distribute to Shareholders proceeds from the sale or refinancing of
properties, but instead intends to reinvest such proceeds in new investments.
10
<PAGE> 15
COMPARISON OF PRINCIPAL TERMS OF EXISTING DECLARATION
OF TRUST AND AMENDED DECLARATION AND BY-LAWS
Set forth below is a summary comparison of certain of the principal terms
of the Existing Declaration of Trust, as currently in effect, against those that
would be in effect if Proposals 1 and 2 are approved and accordingly the Amended
Declaration and By-laws are adopted. A more thorough comparison is set forth
elsewhere herein and the Amended Declaration and By-laws are set forth in their
entirety in Appendix A and Appendix B respectively.
<TABLE>
<CAPTION>
AMENDED DECLARATION
EXISTING DECLARATION OF TRUST AND BY-LAWS
------------------------------------- -------------------------------------
<S> <C> <C>
LENGTH OF INVESTMENT - The Trust is a finite-life entity. - The Trust would become, under the
Amended Declaration, an
infinite-life entity with the
intention of continuing its
operations for an indefinite time
period.
- The term of the Trust will expire - As an infinite-life entity, no
on December 31, 2006. Following future liquidation or dissolution
such date, all remaining assets of of the Trust would be required or
the Trust would be liquidated, and planned.
final distributions would be made
to the Shareholders.
VOTING RIGHTS - With certain limited exceptions, - Except as described below, the
each Common Share and each voting rights of the Common Shares
Preferred Share entitles each and Preferred Shares under the
holder to one vote on all matters Amended Declaration and By-laws
submitted to a vote of will remain the same as those under
Shareholders. the Existing Declaration of Trust.
- Each Shareholder has the option to - Under the Amended Declaration and
use cumulative voting in the By-laws, cumulative voting for the
Election of Trustees. election of Trustees will be
eliminated.
- Under the Existing Declaration of - The Voting Restrictions contained
Trust, the Advisor, the Trustees in the Existing Declaration of
and their Affiliates, are Trust are not included in the
restricted from voting Shares held Amended Declaration or By-laws.
by them with respect to a wide
range of affiliated transactions,
and other transactions where a
conflict of interest may exist (the
"Voting Restrictions").
</TABLE>
11
<PAGE> 16
<TABLE>
<CAPTION>
AMENDED DECLARATION
EXISTING DECLARATION OF TRUST AND BY-LAWS
------------------------------------- -------------------------------------
<S> <C> <C>
DISTRIBUTIONS; Operating Distributions Operating Distributions
LIQUIDATING PROCEEDS - Under the Existing Declaration of - Under the Amended Declaration, the
Trust, the Trustees are required to provisions relating to the
declare annually a Preferred Share Preferred Share Dividend Preference
Dividend Preference. At their and Common Share Dividend
option, they may also declare a Preference remain unchanged.
Common Share Dividend Preference.
Distributions of Cash from Sales or Distributions of Cash from Sales or
Refinancings of Properties Refinancings of Properties
- The Existing Declaration of Trust - The Amended Declaration does not
requires that all proceeds from the mandate the distribution of
sale or refinancing of any property proceeds from sales or refinancings
be promptly distributed to the of properties to Shareholders.
Shareholders as follows: first to Except upon a liquidation of the
Preferred Shareholders in the Trust, proceeds from sales or
amount of the Preferred Share refinancings of Properties will be
Liquidation Preference, second to distributed in the same manner as
the Common Shareholders in the operating distributions.
amount of the Common Share
Liquidation Preference, and third
85% of any remaining proceeds to
the Shareholders pro rata and 15%
to the Advisor.
Liquidating Proceeds Liquidating Proceeds
- Distribution of proceeds in - Upon a liquidation of the Trust's
connection with a liquidation of properties and a winding-up of the
the Trust are on a property- Trust, the distribution of proceeds
by-property basis, and are the same would be pursuant to the same
as set forth in "Distribution of general formula as under the
Cash From Sales or Refinancings of Existing Declaration of Trust,
Properties" above. except that (i) liquidating
proceeds and preferences would be
calculated from and after the
effective date of the Amended
Declaration, and (ii) rather than
distributing proceeds on a
property-by-property basis,
proceeds from all properties would
first be aggregated.
</TABLE>
12
<PAGE> 17
<TABLE>
<CAPTION>
AMENDED DECLARATION
EXISTING DECLARATION OF TRUST AND BY-LAWS
------------------------------------- -------------------------------------
<S> <C> <C>
ISSUANCE OF ADDITIONAL - The Existing Declaration of Trust - Under the Amended Declaration, the
SECURITIES authorizes the issuance of an Trust may issue an aggregate of up
unlimited amount of Common Shares to 750,000,000 shares of beneficial
and Preferred Shares only. interest, including Common Shares,
Preferred Shares, and such other
classes of securities as it sees
fit.
REDEMPTION AND CONVERSION - Other than redemption rights of the - The Amended Declaration provides
RIGHTS Trust relating to ownership the Trust with the right,
limitations, the Existing exercisable upon the listing of the
Declaration of Trust does not Common Shares on any national
provide for any rights with respect securities exchange or NASDAQ, to
to the conversion or redemption of redeem any or all Preferred Shares
any Common Shares or Preferred for a purchase price per Share
Shares. equal to the Preferred Share
Liquidation Preference.
- The Amended Declaration also
provides each holder of Preferred
Shares with the right to convert
each Preferred Share held by such
holder into one Common Share, which
may be exercised after the
Preferred Shares are called for
redemption and prior to the
Redemption Date.
INVESTMENT RESTRICTIONS - Generally, the Existing Declaration - The Amended Declaration does not
of Trust prohibits the Trust from contain any restriction on the
investing in securities of other nature or type of investments that
entities. the Trust may make.
LIMITATIONS ON BORROWING; DEBT - Under the Existing Declaration of - The Trust would not be limited with
Trust, the Trust is limited with respect to secured or unsecured
respect to secured and unsecured borrowings, or the issuance of debt
borrowings and the issuance of debt securities.
securities.
ENGAGEMENT OF ADVISOR - The current relationship between - The Advisory Agreement will remain
the Trust and the Advisor is in full force and effect.
governed by the Advisory Agreement.
</TABLE>
13
<PAGE> 18
<TABLE>
<CAPTION>
AMENDED DECLARATION
EXISTING DECLARATION OF TRUST AND BY-LAWS
------------------------------------- -------------------------------------
<S> <C> <C>
- Under the Existing Declaration of - The Renewal and Termination
Trust, the Advisory Agreement Restrictions are not included in
cannot be extended at any given the Amended Declaration.
time for more than one year, and
may be terminated by the Trust with
or without cause, on 60 days'
notice (the "Renewal and
Termination Restrictions").
ANTITAKEOVER PROVISIONS - The Existing Declaration of Trust - The Amended Declaration and By-laws
contains various "anti-takeover" contain various "antitakeover"
provisions. provisions, including the
following: (i) the authorization of
- The Existing Declaration of Trust "blank check' preferred shares;
also provides for various (ii) a requirement that Trustees be
procedures to be followed in the removed only for cause and only by
case of roll-ups involving the a vote of at least 80% of the
Trust. outstanding Shares; and (iii)
specific procedures that must be
followed to call a special meeting
of Shareholders, or to submit
proposals for a special or annual
meeting. There are no provisions
relating to roll-ups involving the
Trust.
TRANSACTIONS WITH AFFILIATES - Transactions involving any actual - There are no provisions in the
or potential conflict of interest Amended Declaration or By- laws
with a Trustee or the Advisor, or relating to transactions involving
an affiliate of any of them, are any actual or potential conflict of
required to be approved by a interest with a Trustee or the
majority of the Independent Advisor, or an affiliate of any of
Trustees of the Trust. them. The Trust's policy with
respect to such transactions will
- Certain transactions with a Trustee be to obtain the approval of a
or the Advisor, or their majority of the disinterested
affiliates, are prohibited. Trustees of the Trust.
- There are no prohibitions on
transactions with a Trustee or the
Advisor, or their affiliates.
</TABLE>
14
<PAGE> 19
<TABLE>
<CAPTION>
AMENDED DECLARATION
EXISTING DECLARATION OF TRUST AND BY-LAWS
------------------------------------- -------------------------------------
<S> <C> <C>
LIMITATION ON TOTAL OPERATING - The Existing Declaration of Trust - There are no limitations in the
EXPENSES provides that, subject to certain Amended Declaration or By- laws on
conditions, the Total Operating the total operating expenses of the
Expenses of the Trust shall not Trust.
exceed in any fiscal year the
greater of 2% of the Average
Invested Assets of the Trust or 25%
of the Trust's Net Income.
OWNERSHIP LIMITATIONS - Under the Existing Declaration of - Subject to certain exceptions, the
Trust, no entity or individual may Amended Declaration provides that
own more than 9.8% of the no holder may own more than 9.9% of
outstanding Shares. the outstanding Shares (the
"Ownership Limit").
- Under the Amended Declaration,
Chateau is exempted from the
Ownership Limit.
</TABLE>
VOTE REQUIRED
Each of Proposals 1 and 2 requires the affirmative vote of (i) the holders
of a majority of the issued and outstanding Common Shares, and (ii) the holders
of a majority of the issued and outstanding Preferred Shares, voting as separate
classes.
Proposals 1 and 2 are conditioned upon Shareholder approval of both
Proposals 1 and 2, meaning that if only one of such proposals is approved by the
Shareholders, both proposals will be deemed to be not approved by the
Shareholders. Proposals 1 and 2, if approved by the Shareholders, will be
effected through the adoption of the Amended Declaration, and the adoption of
the By-laws.
PROPOSAL 3 -- EQUITY COMPENSATION PLAN APPROVAL
Proposal 3 is the approval of a proposed form of equity compensation plan
for the Trust. The Board of Trustees has adopted the 1998 Equity Compensation
Plan (the "Equity Compensation Plan") which, subject to approval of the
Shareholders of the Trust, provides for the discretionary grant by a
compensation committee (the "Compensation Committee") of the Board of incentive
stock options which meet the requirements of Section 422 of the Code,
non-qualified stock options, restricted shares and dividend equivalent rights.
The purpose of the Equity Compensation Plan is to (i) provide incentive to
key employees, officers and trustees of the Trust and other key persons of the
Participating Entities, (ii) encourage proprietary interest in the Trust by such
persons, (iii) encourage such key employees to remain in the employ of the
Participating Entities, (iv) attract new employees with outstanding
qualifications, and (v) afford additional incentive to others to increase their
efforts in providing significant services to the Participating Entities.
The number of Common Shares that may be subject to grants under the Equity
Compensation Plan will not in the aggregate exceed the lesser of 10% of the
issued and outstanding Shares of the Trust, as the same may vary from time to
time, or 1,000,000 Common Shares.
Proposal 3 requires the affirmative vote of the holders of a majority of
the issued and outstanding Common Shares and Preferred Shares voting as a single
class.
15
<PAGE> 20
See "Proposal 3 -- Equity Compensation Plan Approval" herein for additional
details relating to the Equity Compensation Plan.
PROPOSAL 4 -- ELECTION OF TRUSTEES
Proposal 4 relates to the Annual Election of Trustees of the Trust.
Election of Trustees is decided by a plurality of the votes cast by the Shares
entitled to vote in the election. Each Shareholder has the option to use
cumulative voting in the Election of Trustees. The total number of votes
available to holders, if cumulative voting is used, is equal to three times the
number of Shares held, which may be allocated among the nominees in such
holder's discretion.
See "Proposal 4 -- Election of Trustees" herein for additional details
relating to the election of Trustees.
16
<PAGE> 21
RISK FACTORS AND OTHER CONSIDERATIONS
Proposals 1 and 2 involve certain risks, conflicts of interest and other
considerations, which are discussed below. In considering the recommendations of
the Trustees with respect to the Organizational Amendments, Shareholders are
urged to consider carefully the basis of such recommendations, the changes that
are effected, and likely to be effected, upon approval of the Organizational
Amendments, and potential conflicts of interest and other risk factors described
below.
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT
Proposals 1 and 2 involve a fundamental change in the nature of the
investment of the Common Shareholders and Preferred Shareholders in the Trust
which will transform the Trust from a finite-life entity with a plan to
liquidate its investments by no later than December 31, 2006, and to distribute
the proceeds from such liquidation to Shareholders, to an infinite-life,
growth-oriented entity which will not be required to distribute the net proceeds
from asset sales or refinancings to Shareholders but will instead be able to
reinvest the proceeds from sales and refinancings of assets in new investments.
As a result, Shareholders can expect to have an effective avenue to liquidate
their investments only after the Trust succeeds in listing the Common Shares on
a national securities exchange or on NASDAQ, and such listing is not expected to
occur until at least two to four years after the approval of the Organizational
Amendments. There can be no assurance, however, that the Trust will be
successful in its efforts to effect such listing. For additional details and
information relating to the change in the nature of Shareholder investments and
rights of Shareholders, see "Comparison of Principal Terms of Existing
Declaration of Trust and Amended Declaration and By-laws."
CHANGES IN SHAREHOLDERS' RIGHTS
The Amended Declaration effects various changes in Shareholders' rights
including the following: under the Amended Declaration, Shareholders no longer
have (i) the right to receive distributions from sales or refinancing of
properties (which will be reinvested); (ii) the right to vote shares
cumulatively in the election of Trustees; (iii) certain appraisal and other
rights in the event of a roll-up of the Trust that are provided in the Existing
Declaration of Trust; or (iv) the right to remove Trustees with or without
cause, upon a vote of the holders of a majority of the Shares (under the Amended
Declaration the Trustees may be removed only for cause, and only upon a vote of
the holders of at least 80% of the Shares).
POSSIBLE MANDATORY REDEMPTION OF PREFERRED SHARES
Under the Amended Declaration, effective upon the listing of the Common
Shares on any national securities exchange or NASDAQ (and subject to each
Preferred Shareholder's right to convert each Preferred Share into one Common
Share), the Trust will have the right to redeem outstanding Preferred Shares at
a redemption price per Preferred Share equal to the Preferred Share Liquidation
Preference, which, effective upon the adoption of the Organizational Amendments,
will equal $25.00 plus any dividends on the Preferred Shares that are accrued
and unpaid following such adoption. Should the Trust exercise such right, each
Preferred Shareholder will be faced with the choice of being cashed out at the
redemption price or converting its Preferred Shares to Common Shares thereby
altering the various preferences relating to such Shareholder's original
investment in the Trust.
CONFLICTS OF INTEREST
Proposals 1 and 2 and the recommendation of Gary P. McDaniel, a Trustee of
the Trust, set forth herein could be deemed to involve certain conflicts of
interest between Mr. McDaniel, on the one hand, and the Shareholders on the
other hand, including the following:
Relationship of the Advisor to Chateau. The Advisor is a wholly-owned
subsidiary of Chateau. Chateau and the Advisor currently collectively own
19,339 Common Shares and 984 Preferred Shares, representing a combined 9.8%
equity interest in the Trust. Gary P. McDaniel, a Trustee of the Trust, is
also the Chief Executive Officer and a shareholder of Chateau. Pursuant to
the Advisory Agreement dated January 30, 1992 (as amended), between the
Advisor and the Trust (the "Advisory Agreement"), the Advisor is
responsible for day-to-day operations and property management functions of
the Trust and performs a wide range of services and activities relating to
the assets and operations of the Trust. In
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<PAGE> 22
consideration for the rendering of these services pursuant to the Advisory
Agreement, the Advisor is entitled to the following fees: (i) annual
subordinated advisory fees of up to 1% of invested assets, and .5% of
uninvested assets of the Trust; (ii) brokerage commissions in connection
with the acquisition of properties by the Trust equal to the lesser of
one-half of the brokerage commission paid to a third party, or 3% of the
sales price; and (iii) a subordinated incentive fee on the disposition and
liquidation of the Trust's properties equal to 15% of cash remaining from
the liquidation of the Trust's properties after the Preferred Shareholders
and Common Shareholder have received their liquidation preferences. While
the adoption of the Organizational Amendments and the implementation of the
Business Plan do not affect the Advisor compensation structure under the
Advisory Agreement, the Trustees expect that the implementation of the
Business Plan, by increasing the size of the Trust's portfolio of
properties, will operate to increase the total aggregate compensation
payable to the Advisor under the Advisory Agreement. Aggregate annual
compensation payable to the Advisor in fiscal year 1997 and fiscal year
1996 was $54,500 and $112,600, respectively. If, following the adoption of
the Organizational Amendments, the Trust were able to quadruple the value
of the properties held by the Trust, through the acquisition or development
of additional properties following the adoption of the Organizational
Amendments, from $13.4 million to $53.6 million, the annual subordinated
advisory fees payable to the Advisor could increase by as much as $402,000
per year, and the Advisor could receive aggregate brokerage fees in
connection with acquisition of new properties of up to approximately $1.2
million.
Removal of Certain Advisory Agreement Restrictions Under the Existing
Declaration of Trust. Under the Existing Declaration of Trust, the Advisory
Agreement cannot be renewed for periods longer than one year, and must be
terminable by the Trust without cause, on 60 days' notice. No similar
restrictions are contained in the Amended Declaration. Accordingly, subject
to the approval of the Independent Trustees, the Trust may extend the
Advisory Agreement for periods beyond one year, and may modify the Advisory
Agreement's termination and other provisions.
Potential Future Conflicts of Interest. Chateau is the largest
publicly held REIT in the United States that is principally engaged in the
acquisition, development and management of manufactured home communities
and will continue to aggressively pursue acquisition and development
opportunities on its own behalf to add to its portfolio. It is possible
that the Advisor will find investment opportunities in the future that may
be attractive to both the Trust and Chateau thereby creating potential
conflicts of interest. The conflicts of interest identified herein and the
future control of the Trust and the Advisor by Chateau identified below
could result in the Trust not taking advantage of acquisition opportunities
identified by the Advisor and could result in the Trust's engaging in
activities which disproportionately benefit the Advisor or Chateau.
CONTROL BY CHATEAU
Chateau and the Advisor currently collectively own, in the aggregate,
19,339 Common Shares and 984 Preferred Shares, representing a combined 9.8%
equity interest in the Trust, and the Trust and Chateau anticipate that promptly
following the approval of Proposal 1 by the Shareholders, Chateau will purchase
at least an additional 130,000 Common Shares or Preferred Shares, or a
combination thereof, for a purchase price (but not below $25 per Share) equal to
the aggregate fair market value of such Shares, as determined by the Independent
Trustees, which would give Chateau an aggregate 45% equity ownership interest in
the Trust. It is expected that for at least the first two years following the
adoption of the Organizational Amendments, Chateau may seek to maintain
ownership of up to 45% of the outstanding Shares. It is anticipated that
additional investments by Chateau will be on substantially the same terms as
investments by unaffiliated third parties involved in any such investment or, if
such third parties are not involved, on such terms as the Independent Trustees
shall determine. With limited exceptions, under the Amended Declaration, matters
voted on by the Shareholders (including the Election of Trustees) are voted on
by the holders of the Common Shares and Preferred Shares, voting as a single
class. Accordingly, assuming Chateau makes the additional above described
investment, Chateau will have substantial influence over the affairs of the
Trust, and will have the power, with limited support from the other
Shareholders, to approve or block most actions requiring the approval of the
Shareholders of the Trust, including the sale of all assets of the Trust and
other extraordinary actions.
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<PAGE> 23
Chateau's control of the Trust and the Advisor and the potential conflicts
of interest identified above could result in the Trust not taking advantage of
acquisition opportunities identified by the Advisor and could result in the
Trust's engaging in activities which disproportionately benefit the Advisor or
Chateau.
NO FAIRNESS OPINION SOUGHT WITH RESPECT TO ORGANIZATIONAL AMENDMENTS
The Trustees have not in connection with the proposed Organizational
Amendments sought to obtain an opinion relating to the fairness of the proposed
Organizational Amendments to the Shareholders. The Existing Declaration of Trust
does not require any such fairness opinion be obtained and the proposed
Organizational Amendments were approved by all of the Trustees of the Trust,
including the Independent Trustees. Had such opinion relating to fairness been
obtained, the terms of the proposed Organizational Amendments might have been
different, and possibly more favorable to the Shareholders.
POTENTIAL INCREASE IN INDEBTEDNESS; ADDITIONAL USE OF LEVERAGE
Under the Existing Declaration of Trust (i) total indebtedness of the Trust
cannot exceed 300% of the net asset value of the Trust's assets; and (ii) the
net asset value of the Trust's assets must be at least 300% of the amount of
unsecured indebtedness of the Trust. In accordance with these restrictions, the
Trust currently has in the aggregate approximately $8.2 million in outstanding
indebtedness (including its pro rata share of indebtedness from joint ventures
and limited partnerships), of which approximately $6.7 million is secured by
mortgages on the Trust's assets. Currently, total indebtedness of the Trust
equals approximately 160% of the net asset value of the Trust's assets, and the
net asset value of the Trust's assets equals approximately 331% of the Trust's
unsecured indebtedness. Currently, the total indebtedness of the Trust is
approximately 62% of the value of its assets.
If the Organizational Amendments are approved, the Trust will no longer be
limited under its organizational documents in the total amount of indebtedness
that it may incur. The Trust's policy will be to limit total indebtedness of the
Trust to 80% of the value of the Trust's assets, which is slightly higher than
existing levels of indebtedness and significantly higher than the historic debt
profile of the Trust. The use of a greater amount of leverage by the Trust could
increase its vulnerability to general economic and real estate industry
conditions (including increases in interest rates) and could impair the Trust's
ability to obtain additional financing in the future and to take advantage of
significant acquisition opportunities that may arise. There is no assurance that
the Trust will be able to meet its future debt service obligations and, to the
extent that it cannot, the Trust risks the loss of some or all of its assets to
foreclosure. Adverse economic conditions could cause the terms at which
borrowings are available to be unfavorable. In such circumstances, if the Trust
is in need of capital to repay indebtedness in accordance with its terms or
otherwise, it could be required to liquidate one or more investments in its
properties at times which may not permit realization of the maximum return on
such investments. The incurrence of additional indebtedness and use of
additional leverage by the Trust could result in reduced distributions to
Shareholders and could impair the ability of the Trust to continue to timely pay
the Preferred Share Dividend Preference and Common Share Dividend Preference.
RISKS RELATED TO REMOVAL OF INVESTMENT RESTRICTIONS
Under the Existing Declaration of Trust, the Trust is subject to various
investment restrictions and generally is prohibited from investing in securities
of other entities. The Amended Declaration does not contain such restrictions.
The Trust will remain subject to various investment restrictions which relate to
maintaining its status as a REIT, and the Trust does not anticipate investing in
securities of other entities other than entities whose principal business is
owning manufactured home communities. To the extent that the Trust makes
investments in such entities, but does not control them, the Trust will be
subject to all the risks associated with being a minority shareholder, including
not having control over the affairs of any such entity.
CONSTRAINTS ON GROWTH OPPORTUNITIES
If Proposals 1 and 2 are approved by Shareholders, the Trust intends to
pursue a full range of growth opportunities, including acquisitions of
additional properties, community expansions and, to a lesser extent,
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<PAGE> 24
new community development and redevelopment of existing communities. The ability
of the Trust to accomplish such growth will be subject to a number of
constraints, including the following:
Competition for Available Properties. The Trust will compete for
growth opportunities with national and regional manufactured home community
owners, most of which have greater name recognition and financial resources
than the Trust. The Trust's failure to compete successfully for
acquisitions would adversely affect the Trust's ability to expand its
portfolio of properties.
The Trust Has Not Identified a Portfolio of Properties. The Trust's
ability to successfully pursue new growth opportunities will depend on a
number of factors, including, among other things, the Trust's ability to
identify manufactured home communities for acquisition or development, to
finance acquisitions and renovations and to successfully integrate new
communities into its operations. The Trust has not, at the present time,
identified a portfolio of properties that it would seek to invest in if the
Organizational Amendments are approved, and if sufficient capital would be
available to it. There is no assurance that suitable communities for
acquisition or development will be available or, if available, will be on
terms acceptable to the Trust.
No Assurance of Available Capital or Financing. The implementation of
the Trust's Business Plan will require substantial additional capital. The
Trust will seek additional capital through additional equity or debt
offerings, mortgage loans and other borrowings and additional investments
by Chateau or other third parties. The Trust currently lacks commitments
for any of the additional capital it needs to implement its Business Plan
and there can be no assurance that capital or other financing will be
available to the Trust on favorable terms. If the Trust is not able to
raise additional capital, or obtain other financing or funding, on
favorable or acceptable terms, it will need to substantially curtail or
abandon its Business Plan. There also can be no assurance that the Trust
will be successful in listing the Common Shares on any national securities
exchange or on NASDAQ in the future.
ACQUISITION AND DEVELOPMENT RISKS
If Proposals 1 and 2 are approved, the Trust intends to implement an
aggressive acquisition program and, to a lesser extent, to pursue the
development of new communities and the redevelopment of existing communities.
The acquisition and development of new properties entails the risk that
investments will fail to perform in accordance with the Trust's expectations.
New project development and property redevelopment activities are subject to a
number of risks, including, without limitation, risks of construction delays or
cost overruns, risks that the properties will not achieve anticipated
performance levels and new project commencement risks such as receipt of zoning,
occupancy and other required governmental permits and authorizations. These and
other risks could result in the incurrence of substantial costs for a project
that is never completed. There is no assurance that financing for these projects
will be available or, if available, will be on terms acceptable to the Trust.
Unanticipated delays or expenses in connection with the development of new
properties could have an adverse effect on the results of operations and
financial condition of the Trust. The acquisition and development risks
identified herein could result in reduced distributions to Shareholders and
could impair the ability of the Trust to continue to timely pay the Preferred
Share Dividend Preference and Common Share Dividend Preference.
ENVIRONMENTAL MATTERS
In connection with the Trust's acquisition of properties in the future, it
generally intends to conduct a Phase I environmental assessment prior to
acquisition. A Phase I environmental assessment involves researching historical
usages of a property, databases containing registered underground storage tanks
and other matters, including an on-site inspection, to determine whether an
environmental issue exists with respect to the property which needs to be
addressed. It is possible that Phase I environmental assessment will not reveal
all environmental liabilities or compliance concerns or that there will exist
material environmental problems or compliance concerns with respect to new
acquisitions of which the Trust is not aware. The Trust is not aware of any
material environmental problems at any of the properties contained in its
current portfolio. There can be no assurance, however, that environmental
problems do not actually exist at such properties, and that the liability of the
Trust with respect to any such problem would not be material.
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PROPOSALS 1 AND 2 -- PROPOSED ORGANIZATIONAL AMENDMENTS
INTRODUCTION
Proposals 1 and 2 seek (i) the conversion of the Trust from a finite-life
entity to an infinite-life entity ("Proposal 1" or the "Conversion"); and (ii)
the amendment and restatement of the Trust's Existing Declaration of Trust, and
the adoption of By-laws for the Trust ("Proposal 2" or the "Related Amendments,"
and together with Proposal 1, the "Organizational Amendments").
The principal purposes of Proposals 1 and 2 are to convert the Trust from a
finite-life to an infinite-life entity, and to remove various restrictions and
limitations and other requirements contained in the Existing Declaration of
Trust which are not typically found in the more modern organizational documents
of leading REITs. These include provisions that (i) restrict the types and
amounts of equity and debt securities that the Trust may issue; (ii) limit the
nature and types of investments that the Trust may make; and (iii) mandate that
proceeds from sales or refinancings of properties be distributed to
Shareholders, and not reinvested in assets. The Organizational Amendments also
provide for changing the name of the Trust to "N' Tandem Trust," a name that the
Trustees believe is better suited to the Trust given its future proposed
activities. See "Comparison of Principal Terms of Existing Declaration of Trust
and Amended Declaration and By-laws," for additional information concerning the
Organizational Amendments.
If Proposals 1 and 2 are approved by the Shareholders, it is expected that
the Trust will engage in the following transactions and effect the following
changes: (i) Chateau, a publicly held REIT which is the largest owner/operator
of manufactured home communities in the United States and the sole shareholder
of the Advisor, is expected to purchase at least an additional 130,000 Common
Shares or Preferred Shares, or a combination thereof, for a purchase price (but
not below $25 per share) equal to the aggregate fair market value of such
Shares, as determined by the Independent Trustees; (ii) the Trust will form the
Operating Partnership in order to facilitate tax-free and/or tax-deferred
acquisitions of additional properties; (iii) the Trust will begin implementing
the Business Plan, to cause the Trust to attain greater size and asset
diversity; and (iv) if successful in the implementation of the Business Plan in
the next two to four years, the Trust anticipates that it will seek to list the
Common Shares on a national securities exchange or NASDAQ, and if deemed
appropriate, raise additional capital through an underwritten public offering of
the Common Shares, or other securities of the Trust. There can be no assurance,
however, that the Trust will be successful in listing the Common Shares or
effecting such public offering. For additional information concerning the
transactions described in (i) through (iv) above, see "Transactions and Changes
to be Effected upon Approval of Proposals 1 and 2." below.
The Amended Declaration also provides for the exchange of each Common Share
and Preferred Share of the Trust for a share of a new class of Common Shares and
Preferred Shares, respectively, which will have substantially the same rights as
the existing classes of shares, except that (i) in keeping with the conversion
of the Trust from finite-life to infinite-life, the Trust will no longer be
required to make distributions to Shareholders of all proceeds from sales or
refinancings of properties; (ii) effective upon the listing of the Common Shares
on any national securities exchange or NASDAQ, the Trust will have the right to
redeem outstanding Preferred Shares upon 60 days' written notice to Preferred
Shareholders, at a redemption price per Preferred Share equal to the Preferred
Share Liquidation Preference, which, effective upon the adoption of the
Organizational Amendments, will equal $25.00 plus any dividends on the Preferred
Shares that are accrued and unpaid following such adoption; and (iii) each
holder of Preferred Shares shall have the right, which becomes exercisable if
the Preferred Shares are called for redemption, to convert each Preferred Share
held by such holder into one Common Share, at any time prior to the Redemption
Date, by the delivery of notice of such exercise to the Trust.
The aspects of Proposal 2 that allow for the redemption of Preferred Shares
upon the listing of Common Shares are intended to allow the Trust the option of
eliminating the Preferred Shares from its capital structure if the Trust moves
ahead and pursues an underwritten public offering of its Common Shares. The
Trustees believe that the value of the Common Shares may be enhanced if the
Preferred Shares (which rank senior to the Common Shares with regard to
dividends and distributions) are retired at the time of the offering. At the
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same time, by also granting Conversion Rights to the Preferred Shareholders as
part of the Proposal, if the Preferred Shares are in fact called for redemption,
the holders of such Shares will have the option of either (i) being cashed out
through the redemption; or (ii) continuing their investment in the Trust, as
Common Shareholders, through the exercise of their Conversion Rights. See
"Comparison of Principal Terms of Existing Declaration of Trust and Amended
Declaration and By-laws" for additional information.
The Trust's current portfolio of properties is comprised of a 100%
ownership interest in three manufactured home community properties and a 40%,
11% and 11% interest, respectively, in three other manufactured home community
properties. The Trust believes that significant opportunities exist to acquire
additional properties that fit its investment objectives and guidelines. The
Trust will focus on acquisitions where the Trust believes there is substantial
opportunity to improve operational and financial results, or where for some
reason, because of poor management or otherwise, a property is operating
substantially below its potential.
If Proposals 1 and 2 are approved, Chateau has advised the Trust that it
intends to announce that the Trust will be a primary vehicle through which
Chateau will make investments in manufactured home communities that do not fit
the core asset type typical of the existing Chateau portfolio, which is
characterized by large, stable, institutional-quality, fully amenitized
properties. The Trust will employ higher levels of leverage than Chateau and
will focus primarily on "lower profile assets", meaning properties that (i) are
typically not part of a portfolio of manufactured housing community properties;
(ii) are located in tertiary demographic and geographic markets; (iii) are not
managed by a nationally known manufactured home community operator; (iv) may be
managed by an on-site owner who lives at the property; and (v) are likely to
have fewer amenities, and a greater proportion of single-wide homes, than the
typical Chateau community. The Trust believes that its affiliation with Chateau
will benefit the Trust by providing it with access to Chateau's national
organization, management team and investment and management philosophies.
Through its affiliation with Chateau, the Trustees believe that the Trust will
be exposed to a wider range of acquisition opportunities as a result of
Chateau's national organization and knowledge of the manufactured housing
industry, and will benefit from Chateau's expertise in effectively and
efficiently managing properties. Chateau is widely considered a leading property
management company in the manufactured housing community industry, and in 1998,
the National Manufactured Housing Congress presented the Chateau with the
"National Operator of the Year" award for an unprecedented sixth consecutive
year, confirming Chateau's outstanding reputation for excellence in property
management and operations.
BACKGROUND OF THE TRANSACTION
The Trust was organized to invest in existing, substantially developed and
occupied manufactured home communities. Its investment objectives are to provide
to its Shareholders (i) preservation, protection, and eventual return of their
investments; (ii) quarterly dividends of cash from operations, some of which may
be a return of capital for tax purposes rather than taxable income; (iii)
realization of long-term appreciation in value of the properties acquired by the
Trust; and (iv) a hedge against inflation.
The Trust was funded through a public offering of Common Shares and
Preferred Shares, commencing in April 1992 and terminating in April 1993. An
aggregate of 98,169 Common Shares and 98,323 Preferred Shares were sold for an
offering price of $25.00 per share, resulting in gross proceeds to the Trust
aggregating approximately $2.5 million and $2.4 million, respectively.
Originally, the Declaration of Trust prevented the Trust from incurring any
secured or unsecured indebtedness. In October 1993, the Shareholders approved a
proposal to permit the Trust to incur secured and unsecured indebtedness within
certain prescribed limits principally for the purpose of enabling the Trust to
acquire additional properties and/or ownership interests in properties.
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<PAGE> 27
As of December 31, 1997, the Trust owned interests in the following
manufactured home communities:
<TABLE>
<CAPTION>
OWNERSHIP
NAME OF PROPERTY PERCENTAGE DATE ACQUIRED LOCATION
- ---------------- ---------- ------------- --------
<S> <C> <C> <C>
West Star 100% January 1993 Tucson, Arizona
El Frontier 100% February 1994 Tucson, Arizona
Long Lake 40% June 1995 West Palm Beach, Florida
Apache East 11% February 1997 Phoenix, Arizona
Denali Park 11% February 1997 Phoenix, Arizona
</TABLE>
The Trust believes that the proceeds from its initial public offering were
invested in accordance with the purposes set forth in the prospectus used in the
initial public offering.
In September 1997, Chateau purchased all of the outstanding capital stock
of The Windsor Corporation, the Advisor to the Trust, for 101,239 common shares
of Chateau, and $750,000 in cash. Following Chateau's acquisition of The Windsor
Corporation shares, the Trustees of the Trust voluntarily resigned, and in
connection with such resignation, appointed three new Trustees, including the
two Independent Trustees.
The Trustees believe that the Trust has been successful in achieving
certain of its objectives, especially in paying regular quarterly dividends out
of cash from operations. Based on the amounts of the Estimated Liquidation
Payments of $26.89 per Preferred Share and $22.40 per Common Share (see "Certain
Alternatives -- Liquidation of the Trust" below), it appears that the Trust has
been somewhat successful in preserving the capital invested by Preferred
Shareholders but has been less successful in preserving the capital invested by
Common Shareholders. The Trust has not been successful in providing long-term
capital appreciation to the Common Shareholders or the Preferred Shareholders
and has not provided such Shareholders with a hedge against inflation.
In an effort to enhance Shareholder value, the Trustees in the first
quarter of 1998 authorized the Advisor to identify additional properties for
acquisition by the Trust. In March 1998, the Trust entered into an agreement to
acquire a 627-site manufactured home community in Montgomery, Alabama for $5.5
million. In order to enable the Trust to complete the acquisition, Chateau
offered to make an investment in the Trust. The Trustees accepted such offer
and, on March 30, 1998, entered into an agreement with Chateau, pursuant to
which Chateau invested $5.5 million in the Trust in exchange for the issuance
within 90 days of such investment of (i) such number of Common Shares (at a
price of $25 per share) as the Trustees may determine; and (ii) Promissory Notes
in a principal amount of the balance of the investment. In connection with the
Original Chateau Investment, on May 11, 1998, the Trust issued to Chateau (i)
19,139 Common Shares (at a price of $25 per share); and (ii) two Promissory
Notes with an aggregate principal amount of approximately $5.0 million.
After completing the acquisition of the Montgomery, Alabama property, the
Trustees authorized the Advisor to identify additional acquisition opportunities
for the Trust. However, the Trustees determined at this time that the Trust was
effectively prevented from taking advantage of additional acquisition
opportunities as a result of the Trust's lack of available capital and the
Capital, Investment and Other Restrictions contained in the Declaration of
Trust.
Following further discussion by the Trustees in April 1998, the Trustees
determined that it would substantially enhance the Trust's capital raising
prospects if they could restructure the Trust so that it would be organized in a
manner that is more typical of the structure employed by leading REITs. This
determination eventually led, in May 1998, to the approval by the Trustees of
the Organizational Amendments and a decision to present such amendments to the
Shareholders of the Trust for their consideration and approval.
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<PAGE> 28
RECOMMENDATION OF THE TRUSTEES
The Trustees believe that adopting the Organizational Amendments is in the
best interests of the Trust and its Shareholders and recommend that Shareholders
vote FOR the approval of Proposals 1 and 2. In reaching this determination, the
Trustees considered, among other things, the following factors:
Availability of Attractive Investments; Inability of the Trust to
Capitalize Under Current Structure. The Advisor and the Trustees of the
Trust believe that there are significant opportunities for the Trust to
acquire additional real properties, ownership interests in real properties
and entities owning real properties, in the current market at prices that
are likely to provide attractive investment returns. However, given (i) the
Trust's lack of available capital to make such investments and (ii) the
Capital, Investment and Other Restrictions, the Trust is effectively
prevented from engaging in such acquisitions and taking advantage of such
investment opportunities. The Trustees believe that the Capital, Investment
and Other Restrictions restrict the Trust's ability to grow. The Trustees
also believe there is very limited investor demand for equity interests in
real estate investment entities with small capitalizations and limited real
estate portfolio size, especially where there are substantial and numerous
investment and other restrictions which restrict such entities' potential
growth, and return on equity. Such investments have limited appeal for the
majority of investors in the market, and almost no appeal for institutional
and other major investors. In its current form, the Trust is restricted in
its ability to raise additional equity capital or complete other financings
in the public markets, should it desire to do so.
Potential for Growth; Enhanced Access to Capital. If the
Organizational Amendments are approved, the Trust's more flexible
organizational and capital structure should position the Trust for
additional growth. In particular, the Organizational Amendments, which
exempt Chateau from the Trust's existing ownership limit, will allow
Chateau to make the Additional Chateau Investment. This additional equity
investment will enable the Trust to purchase additional manufactured
housing communities. The Trust's ability to access additional capital will
also be enhanced by the provisions of the Amended Declaration that will
permit the Trust to issue different types of equity securities (as opposed
to only the existing classes of Common Shares and Preferred Shares) and by
the Trust's association with Chateau. If the Trust is able to grow in size,
the Trustees believe that the Trust will become more attractive to
prospective investors which should further enhance its capital raising
opportunities.
Diversification. The Trust's current portfolio of properties is
comprised of a 100% ownership interest in three manufactured home community
properties and a 40%, 11% and 11% interest, respectively, in three other
manufactured home community properties. If the Organizational Amendments
are approved, the Trust's portfolio will become more diversified as it
acquires additional properties over time. The Trustees believe that the
increased size and diversity of the Trust's portfolio will reduce the
dependence of the performance of the Trust on any particular investment.
Possible Enhanced Liquidity. Currently, the Common Shares and the
Preferred Shares are not listed on any securities exchange or included for
quotation on NASDAQ. As a result, the Shares are illiquid and Shareholders
have limited opportunities to dispose of their investments in the Trust. It
is expected that if the Organizational Amendments are approved and the
Trust is successful in implementing the Business Plan, the Trust will seek
to list the Common Shares on a national securities exchange or include them
for quotation on NASDAQ within two to four years following the adoption of
the Organizational Amendments. There can, however, be no assurance that a
listing will be achieved. Although it is not expected that the Preferred
Shares will also be listed, if the listing of the Common Shares is
accomplished, the Preferred Shares will become convertible into Common
Shares, thus providing liquidity for holders of Preferred Shares.
Potential Increased Distributions. For the year ended December 31,
1997 and for the first quarter of 1998, the Trust paid quarterly
distributions to Shareholders at the rate of $0.375 per Share. The Trustees
believe that the implementation of the Trust's Business Plan, which is
expected to increase the size and operating cash flow of the Trust, will
provide opportunities for the Trust to increase distributions to
Shareholders over time.
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Flexible Operating Structure. Approval of the Organizational
Amendments and the changes anticipated to be effected following the
adoption of the Organization Amendments will provide the Trust with a
capital and operating structure that will allow it to respond more
efficiently to, and anticipate the occurrence of, changing conditions in
the United States equity markets (including interest rate fluctuations),
thereby potentially reducing the adverse effects of such changes.
In reaching their determination, the Trustees also considered potentially
negative aspects of the proposed transaction, including the various factors and
information set forth in the Risk Factors and elsewhere in this Proxy Statement,
including the following:
Fundamental Change in Nature of Investment. Proposals 1 and 2 involve
a fundamental change in the nature of the investment of the Common
Shareholders and Preferred Shareholders in the Trust in that it will
transform the Trust from a finite-life entity to an infinite-life,
growth-oriented entity which will not be required to distribute sales or
refinancings proceeds to Shareholders but will instead be able to reinvest
such proceeds in new investments.
Changes in Shareholders' Rights. The Amended Declaration effects
various changes in Shareholders rights, including the following: under the
Amended Declaration, Shareholders no longer have (i) the right to receive
distributions from sales or refinancing of properties (which will be
reinvested); (ii) the right to vote shares cumulatively in the election of
Trustees; (iii) certain appraisal and other rights in the event of a
roll-up of the Trust that are provided in the Existing Declaration of
Trust; or (iv) the right to remove Trustees with or without cause, upon a
vote of the holders of a majority of the Shares (under the Amended
Declaration the Trustees may be removed only for cause and only upon a vote
of the holders of at least 80% of the Shares).
Risks Related to Removal of Investment Restrictions. Under the
Existing Declaration of Trust, the Trust is subject to various investment
restrictions and generally is prohibited from investing in securities of
other entities. The Amended Declaration does not contain such restrictions.
Possible Mandatory Redemption of Preferred Shares. Under the Amended
Declaration, effective upon the listing of the Common Shares on any
national securities exchange or NASDAQ (and subject to each Preferred
Shareholder's right to convert each Preferred Share into one Common Share),
the Trust will have the right to redeem outstanding Preferred Shares at a
redemption price per Preferred Share equal to the Preferred Share
Liquidation Preference, which, effective upon the adoption of the
Organizational Amendments, will equal $25.00 plus any dividends on the
Preferred Shares that are accrued and unpaid following such adoption.
Conflicts of Interest. Gary P. McDaniel, a Trustee of the Trust, is
also the Chief Executive Officer and a director and shareholder of Chateau,
which is the sole shareholder of the Advisor. Mr. McDaniel, the Advisor and
Chateau all could be considered to have potential conflicts of interest.
Control by Chateau. If Proposals 1 and 2 are approved by the
Shareholders, it is expected that Chateau will purchase at least an
additional 130,000 Common Shares or Preferred Shares, or a combination
thereof, and as a result will own approximately 45% of the outstanding
Shares.
Constraints on Growth Opportunities; No Assurance of Capital or
Financing. The Trust currently lacks commitments for the additional
capital it needs to implement its Business Plan and there can be no
assurance that capital or other financing will be available to the Trust on
favorable terms.
Acquisition and Development Risks. The acquisition and development of
new properties entails the risk that investments will fail to perform in
accordance with the Trust's expectations.
Indebtedness. Neither the Amended Declaration nor the By-laws limit
the amount of indebtedness that the Trust may incur.
The foregoing discussion of the positive, negative and other information
and factors considered by the Trustees is not intended to be exhaustive. The
Trustees did not assign relative weights to the above factors or determine that
any factor was of particular importance. A determination of various weightings
would, in the
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view of the Trustees, be impractical. Rather, the Trustees viewed their position
and recommendations as being based on the totality of the information presented
to, and considered by, them. The Trustees recommend that the Shareholders review
and consider independently the Risk Factors. In considering the recommendation
of the Trustees, Shareholders should consider that one of the Trustees, Gary P.
McDaniel, who is the Chief Executive Officer of Chateau, could be considered to
have potential conflicts of interest, and that Chateau, which is likely to
become a controlling shareholder shortly after the adoption of the
Organizational Amendments, may also be subject to potential conflicts of
interest. See "Risk Factors -- Conflicts of Interest."
CERTAIN ALTERNATIVES
In considering the Organizational Amendments, the Trustees also analyzed
two alternatives for the Trust: (i) liquidation of the Trust; and (ii)
continuation of the Trust in accordance with its existing organizational
structure, business plan and policies.
Liquidation of the Trust. In lieu of adopting the Organizational
Amendments, one option available to the Trust is for the Trust to commence an
orderly liquidation and to distribute the net proceeds from the liquidation to
Shareholders in accordance with the terms of the Existing Declaration of Trust.
The primary benefit of this strategy is that it would allow for an immediate and
final liquidation of the investments in the Trust held by, and a distribution of
cash to, Shareholders. Liquidation of the Trust at the current time would also
avoid the risks inherent in the proposed new structure for the Trust. In
addition, Shareholders would have the opportunity to reinvest the net proceeds
received in the liquidation in similar or different investments.
The Trustees have estimated, however, that the net proceeds available for
distribution to Shareholders upon completion of the liquidation would amount to
approximately $22.61 per Common Share and approximately $26.89 per Preferred
Share. These estimates are based on the assumption that the manufactured housing
communities and joint venture interests held by the Trust would by sold as of
March 31, 1998 and that the following items would be paid: (a) the estimated
expenses of effecting the asset sales; (b) other liabilities of the Trust,
including existing indebtedness as of March 31, 1998; and (c) all fees required
to be paid to the Advisor pursuant to the Advisory Agreement; and that the
remaining proceeds received by the Trust would be distributed to the holders of
Common Shares and Preferred Shares in accordance with the terms of the Existing
Declaration of Trust. The estimated sales prices of the manufactured housing
communities and joint venture interests held by the Trust were determined based
on applying selected capitalization rates to each property's projected 1998 net
operating income (i.e., operating income less operating expenses, including
property management fees). The capitalization rates for the properties ranged
from 8.0% to 9.5% and were selected based on information provided by the Advisor
concerning the markets in which the Trust's properties are located. In the case
of each joint venture interest, the capitalized value of the underlying
manufactured housing community was multiplied by the percentage interest held by
the Trust in the joint venture to determine the value of the Trust's interest in
such joint venture. The Trustees believe that the methodology used to estimate
the values of the communities and joint venture interests owned by the Trust is
commonly employed to determine property valuations in the real estate industry
and therefore provides an appropriate basis for estimating the amounts that
could be expected to be realized by the Trust upon sale of its real property
assets. In determining the Estimated Liquidation Payments, the estimated cash
available for distribution was allocated among the Common Shares and Preferred
Shares in accordance with the terms of the Existing Declaration of Trust.
In assessing the liquidation of the Trust, the Trustees observed that the
$22.61 estimated to be payable to holders of Common Shares is less than the
amount of the original offering price per Common Share in the Trust's initial
public offering. Thus, liquidating at the current time would deprive holders of
Common Shares of the ability to receive a full return of their originally
invested capital and also of the potential for future enhancement in the value
of their investments in the Trust, which the Trustees believe will occur if the
Trust is successful in the implementation of its new Business Plan.
At the same time, the Trustees observed that the $26.89 estimated to be
payable to holders of Preferred Shares is slightly greater than the amount of
the original offering price of the Preferred Shares but would
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represent, on average, less than a 2.0% annual appreciation in the value of the
Preferred Shares since the closing of the initial public offering. The Trustees
concluded that liquidating the Trust at the current time would deprive holders
of Preferred Shares from the further enhancement in the value of the Trust
expected to occur upon a successful implementation of the new Business Plan. In
addition to preserving for the Preferred Shareholders the potential for further
appreciation in the value of their investments, the Organizational Amendments
are also intended to protect against declines in such value. Under the terms of
the Organizational Amendments, a liquidation preference for the holders of
Preferred Shares is maintained. In addition, the Organizational Amendments
provide the Preferred Shareholders with certain options. If Proposal 1 is
approved by Shareholders, the Trust is successful in implementing its new
Business Plan, lists the Common Shares on a national securities exchange or on
NASDAQ, and exercises its right to redeem the Preferred Shares at the time of
the listing, holders of Preferred Shares will be provided with a choice to
either accept a cash payment for their Shares in amount per Share equal to the
Preferred Share Liquidation Preference or to convert their shares into Common
Shares on a one-for-one basis. As a result of these factors, the Trustees
concluded that Proposal 1 appropriately balances the interests of the holders of
the Preferred Shares and the Common Shares and is in the overall best interests
of all Shareholders.
Continuation of the Trust. A second option available for the Trust, in
lieu of adopting the Organizational Amendments, is for the Trust to continue its
operations in accordance with its existing organizational structure, business
plan and policies. Continuing the Trust without change has a number of
characteristics that could be considered benefits, including (i) there would be
no change in the nature of the Shareholders' investments; (ii) the Shareholders'
investment in the Trust would not be exposed to the additional risks associated
with the implementation and operation of the new Business Plan; (iii) the Trust
would liquidate its holdings and distribute the net proceeds from such
liquidation in accordance with its existing policies; and (iv) the Trust would
not incur any expenses in connection with the adoption of the Organizational
Amendments, which are estimated to be approximately $125,000.
At the same time, the Trustees believe that continuing the Trust in its
current form will deprive Shareholders of the substantial benefits from the
proposed Organizational Amendments, and the other changes expected to be
effected following their adoption, and will prevent the Trust from implementing
the Business Plan and acquiring additional manufactured housing communities. The
Trustees also considered that continuation of the Trust in its current form
would not address the liquidity needs that Shareholders may have.
The Trustees also developed estimates of the values of the Common Shares
and Preferred Shares assuming the Trust would be continued in accordance with
its existing organizational structure, business plan and policies. The estimates
developed indicate values of approximately $25.57 per Common Share which is only
marginally greater than the original offering price of the Common Shares in the
Trust's initial public offering, and $28.23 per Preferred Share (each an
"Estimated Continuation Value"), which represents, on average, less than a 2.5%
annual appreciation in the value of the Preferred Shares since the closing of
such initial public offering.
The Estimated Continuation Values of the Common Shares and Preferred Shares
in the analysis are based on a discounted cash flow analysis (i.e., an analysis
utilizing a range of discount rates) of (i) the present value of the projected
operating cash flows from the manufactured housing communities and joint venture
interests held by the Trust; and (ii) the present value of the projected net
proceeds of the future liquidation of such assets after an additional five years
of operations (after payment of the expenses of the sales, other liabilities of
the Trust and fees to the Advisor). In this analysis, the Trustees utilized the
financial and operating forecasts of the net operating income of the assets for
the five years of the forecast period, and applied discount rates of 12% to
projected net operating income and to projected residual value which was based
upon capitalizing projected net operating income for the final year of the
forecast at 8.0% to 9.5%, depending on the asset. The discount and
capitalization rates were selected based on information provided by the Advisor
concerning the markets in which the Trust's properties are located. In this
analysis, it was assumed that (i) the component of the continuation value tied
to the forecasted operating cash flows from the manufactured housing communities
and joint venture interests would be distributed among the holders of Common
Shares and Preferred Shares in accordance with the provisions of the Existing
Declaration of Trust relating to operating distributions; and (ii) the component
of the continuation value tied to the residual value
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of the assets at the conclusion of the forecast period would be distributed
among the holders of Common Shares and Preferred Shares in accordance with the
provisions of the Existing Declaration of Trust relating to distributions of
cash from sale or refinancing of properties. See "Comparison of Principal Terms
of Existing Declaration of Trust and Amended Declaration and
By-laws -- Distributions; Liquidation Preferences."
TRANSACTIONS AND CHANGES TO BE EFFECTED UPON
APPROVAL OF PROPOSALS 1 AND 2
ADDITIONAL CHATEAU INVESTMENT
The Trust expects that, upon approval of Proposals 1 and 2, Chateau will
make the Additional Chateau Investment whereby Chateau will purchase at least an
additional 130,000 Common Shares or Preferred Shares, or a combination thereof,
for a purchase price (but not below $25 per Share) equal to the aggregate fair
market value of such Shares, as determined by the Independent Trustees. Any
purchase price is expected to be paid through the cancellation of a portion of
the indebtedness due under the Promissory Notes. Such cancellation will have the
effect of reducing the Trust's leverage and overall indebtedness, thereby
increasing the availability of financing to refinance existing properties or
acquire new properties.
The terms of the Additional Chateau Investment will be determined by the
Independent Trustees of the Trust. Following the closing of the Additional
Chateau Investment, it is anticipated that Chateau will own Preferred Shares and
Common Shares representing in the aggregate a 45% equity interest in the Trust.
ORGANIZATION OF UPREIT; CONTRIBUTION TRANSACTION
Promptly following the approval of Proposals 1 and 2, the Trust intends to
engage in the following restructuring transactions: (i) the Trust will form an
operating partnership subsidiary of the Trust to be named N' Tandem Operating
Partnership, L.P.(the "Operating Partnership"); and (ii) the Trust will
contribute substantially all of the assets of the Trust to the Operating
Partnership in exchange for the issuance of general and limited partnership
interests in the Operating Partnership to the Trust.
The principal purpose for creating the above described UPREIT structure is
to (i) maximize the Trust's ability to take advantage of appropriate investment
opportunities; and (ii) maximize the flexibility that the Trust has available to
it in structuring its investments to take advantage of certain available tax
benefits, or to meet the needs and requirements of particular sellers of
properties or entities owning real properties. The principal advantage of the
UPREIT structure is that it permits the Trust to engage in transactions that are
structured to delay, and in some cases avoid, capital gains taxes that would
otherwise be payable by sellers of real property.
IMPLEMENTATION OF BUSINESS PLAN; GROWTH STRATEGY
If Proposals 1 and 2 are approved by the Shareholders, the Trust intends to
pursue a full range of growth opportunities, including acquisition of additional
properties, community expansions and, to a lesser extent, new community
development and redevelopment of existing communities. The Trust anticipates
that it will utilize a substantial amount of mortgage and other debt financing
in connection with such acquisitions and the implementation of its Business
Plan. However, it will be the Trust's policy following the approval of Proposals
1 and 2 to limit total indebtedness to 80% of the value of the Trust's assets.
If Proposals 1 and 2 are approved, Chateau has advised the Trust that it
intends to announce that the Trust will be a primary vehicle through which
Chateau will make investments in manufactured home communities that do not fit
the core asset type typical of the existing Chateau portfolio, which is
characterized by large, stable, institutional-quality, fully amenitized
properties. The Trust will employ higher levels of leverage than Chateau and
will focus primarily on lower profile assets. The Trust believes that its
affiliation with Chateau will benefit the Trust by providing it with access to
Chateau's national organization, management team and investment and management
philosophies.
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FUTURE LISTING OF COMMON SHARES ON EXCHANGE; REDEMPTION OF PREFERRED SHARES
Fully implementing the Trust's Business Plan will require substantial
amounts of capital beyond that which may be available through mortgages and
private investors. If the Trust is successful in its initial efforts to
implement its Business Plan, it is likely that the Trust will seek to list the
Common Shares on a national securities exchange or NASDAQ, and to raise
additional capital through an underwritten public offering of Common Shares, or
other securities of the Trust, to enable it to continue with the Business Plan
in the next two to four years. There can be no assurance the Trust will be
successful in this regard.
Upon such listing, the Trust will have the right to redeem such of the
Preferred Shares as it may deem appropriate, for a redemption price equal to the
Preferred Share Dividend Preference, by giving Preferred Shareholders not less
than 60 days' prior written notice. Upon any proposed redemption the Preferred
Shareholders will have the right to convert each Preferred Share owned by them
to one Common Share, at any time prior to the redemption date. Although the
Trust anticipates that it would use proceeds from the issuance of equity or debt
securities or borrowings to redeem the Preferred Shares, other sources of funds
would be considered as well. To the extent applicable to any Redemption, the
Trust will comply with the provisions of the Williams Act and the rules
promulgated by the Commission thereunder in effecting such Redemption.
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COMPARISON OF PRINCIPAL TERMS OF EXISTING DECLARATION
OF TRUST AND AMENDED DECLARATION AND BY-LAWS
Set forth below is a comparison of the principal terms of the Existing
Declaration of Trust, as currently in effect, against those that would be in
effect if the Amended Declaration and By-laws, were approved and adopted.
Capitalized terms in this section that are not defined herein, or elsewhere in
this Proxy Statement, have the meanings ascribed to them in the Existing
Declaration of Trust, Amended Declaration, or By-laws, as the case may be. The
Amended Declaration and By-laws are set forth in their entirety in Appendix A
and Appendix B, respectively. For additional information relating to the Trust,
reference is made to Item 6 "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in the Trust's Annual Report on
Form 10-KSB for the year ended December 31, 1997, Item 7 "Financial Statements"
contained in the Trust's Annual Report on Form 10-KSB for the year ended
December 31, 1997, Item 2 "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in the Trust's Form 10-QSB
Quarterly Report for the quarter ended June 30, 1998, and Item 1 "Financial
Statements" contained in the Trust's Form 10-QSB Quarterly Report for the
quarter ended June 30, 1998, which sections are hereby incorporated by reference
into this Proxy Statement.
ORGANIZATION
EXISTING DECLARATION OF TRUST
The Trust is an unincorporated business trust organized on November 18, 1991
under California law, and is governed by the California REIT statute. The Trust
is qualified as a REIT under Section 856 of the Code. The Trust is an externally
advised REIT.
AMENDED DECLARATION AND BY-LAWS
Under the Amended Declaration and By-laws, the Trust would continue to be an
unincorporated business trust organized under California law, and be governed
by, the California REIT statute. The Trust would continue to qualify as a REIT
under the Code, and operate as an externally advised REIT.
LENGTH OF INVESTMENT
EXISTING DECLARATION OF TRUST
The Trust is a finite-life entity. During the term of the Trust, the Trustees
are required to distribute substantially all proceeds from the sale or
refinancing of properties to the Shareholders promptly upon the sale or
refinancing of any property. The term of the Trust will expire on December 31,
2006. Following such date, all remaining assets of the Trust would be
liquidated, and final distributions would be made to the Shareholders in
accordance with the terms and provisions of the Existing Declaration of Trust.
AMENDED DECLARATION AND BY-LAWS
The Trust would become, under the Amended Declaration, an infinite-life entity
with the intention of continuing its operations for an indefinite time period.
Proceeds from the sale or refinancing of properties would not be required to be
distributed to the Shareholders and, subject to the distribution requirements
relating to maintaining the Trust's status as a REIT, it is anticipated that
such proceeds would likely be reinvested, or held for future investment, in
additional properties. As an infinite-life entity, no future liquidation or
dissolution of the Trust would be required or planned.
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VOTING RIGHTS
EXISTING DECLARATION OF TRUST
With certain limited exceptions, each Common Share and each Preferred Share
entitles the holder thereof to one vote on all matters submitted to a vote of
Shareholders. Common Shares and Preferred Shares vote as one class except with
respect to proposals that operate to diminish the liquidation rights and
preferences of the Common Shares or Preferred Shares, as the case may be, which
proposals require the affirmative vote of a majority of the Common Shareholders,
and Preferred Shareholders, voting as separate classes. Each Shareholder has the
option to use cumulative voting in the Election of Trustees. The total number of
votes available to holders electing cumulative voting is equal to three times
the number of Shares held, which may be allocated in the holder's discretion.
Under the Existing Declaration of Trust, the Advisor, the Trustees, and their
Affiliates, are restricted from voting Shares held by them with respect to the
following matters (the "Voting Restrictions") (i) election of the Independent
Trustees; (ii) amendments to the Existing Declaration of Trust; (iii) approval
or disapproval of contracts with Affiliates; (iv) removal of any or all
Trustees; (v) dissolution of the Trust; (vi) removal of the Advisor; or (vii)
any transaction between the Trust and the Advisor, a Trustee, or their
Affiliates.
AMENDED DECLARATION AND BY-LAWS
Except as described below, the voting rights of the Common Shares and Preferred
Shares under the Amended Declaration and By-laws will remain the same as those
under the Existing Declaration of Trust.
Under the Amended Declaration and By-laws, cumulative voting for the election of
Trustees will be eliminated, and the Shareholders will be entitled to cast one
vote for or against each nominee for each Common Share or Preferred Share held.
The Voting Restrictions contained in the Existing Declaration of Trust are not
included in the Amended Declaration or By-laws. If the Organizational Amendments
are approved, the Advisor and its Affiliates will have the same voting rights as
other holders of Shares.
DISTRIBUTIONS; LIQUIDATING PROCEEDS
EXISTING DECLARATION OF TRUST
Operating Distributions
Common Shares and Preferred receive distributions of cash from operations when
and as declared by the Trustees. The Trustees are required to declare a
Preferred Share dividend on the Preferred Shares annually, equal to between 6%
and 7% of the per share original offering price of the Preferred Shares, as
adjusted for prior distributions. Once the annual Preferred Share Dividend
Preference is declared and paid, the Trustees may declare annually, in their
discretion, a Common Share dividend which may not exceed the amount of the
Preferred Share dividend for such year. Any distributions in excess of the above
amounts are required to be distributed pro rata among the Preferred Shares and
the Common Shares as a single class.
AMENDED DECLARATION AND BY-LAWS
Operating Distributions
Under the Amended Declaration the provisions providing for distributions of cash
from operations remain unchanged.
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EXISTING DECLARATION OF TRUST
Distributions of Cash from Sales or Refinancings of Properties.
The Existing Declaration of Trust requires that all proceeds from the sales or
refinancings of properties be promptly distributed following any such sales or
refinancings. The distribution of cash from the sale or refinancing of
properties is made on a property-by-property basis, and is allocated between
Preferred Shares and Common Shares in ratio to the gross proceeds of the
original offering raised from the sale of Preferred Shares and Common Shares,
respectively. The cash is distributed, first, to Preferred Shareholders in an
amount equal to 100% of their capital deemed invested in the property, plus a
return thereon of 8% per annum cumulative (not compounded), less a ratable
portion of all prior distributions of cash from operations to Preferred
Shareholders; second, to Common Shareholders in an amount equal to 100% of their
capital deemed invested in the property, plus a return thereon of 10% per annum
cumulative (not compounded), less a ratable portion of all prior distributions
of cash from operations to Common Shareholders ; third, 15% of the balance, if
any, is reserved for payment to the Advisor as an incentive fee, but is not paid
to the Advisor until the above liquidation preferences are paid to the
Shareholders, with the remaining 85% of such balance being distributed to the
Shareholders pro rata.
AMENDED DECLARATION AND BY-LAWS
Distributions of Cash from Sales or Refinancings of Properties.
The Amended Declaration does not mandate the distribution of proceeds from sales
or refinancings of properties to Shareholders.
To the extent that the Trustees determine to distribute, rather than reinvest,
proceeds from the sale or refinancing of properties, then such proceeds will be
distributed in the same manner as operating proceeds.
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EXISTING DECLARATION OF TRUST
Liquidating Proceeds.
Distributions of proceeds in connection with a liquidation of the Trust are the
same as set forth in "Distributions of Cash From Sale or Refinancings of
Properties" above.
AMENDED DECLARATION AND BY-LAWS
Liquidating Proceeds.
Upon any liquidation of the Trust's properties following the adoption of the
Amended Declaration, proceeds would be distributed as follows: (i) first, each
holder of a Preferred Share would receive $25.00 per share, plus 8% per annum
cumulative thereon (not compounded) from the effective date of the Amended
Declaration (the "Effective Date") through the liquidation date, less all
distributions on each Preferred Share from the Effective Date through the
liquidation date; (ii) second, to the extent funds are available, each holder of
a Common Share would receive $25.00 per share, plus 10% per annum cumulative
thereon (not compounded) from the Effective Date through the liquidation date,
less all distributions on each Common Share from the Effective Date through the
liquidation date; and (iii) third, any proceeds remaining thereafter would be
distributed 85% to the Shareholders pro rata, and 15% to the Advisor.
Additionally, rather than distributing proceeds on a property-by-property basis,
proceeds from all properties would first be aggregated.
ISSUANCE OF ADDITIONAL SECURITIES
EXISTING DECLARATION OF TRUST
The Existing Declaration of Trust authorizes the issuance of an unlimited amount
of Common Shares and Preferred Shares. No other classes of shares of beneficial
interest or other equity securities are authorized under the Trust or may be
issued.
AMENDED DECLARATION AND BY-LAWS
Under the Amended Declaration the Board of Trustees will have broad discretion
in the types and nature of the equity and other securities that the Trust may
authorize and issue. Under the Amended Declaration, the total number of
authorized shares of beneficial interest of the Trust is 750,000,000. The Board
of Trustees may, in its discretion, authorize the issuance of additional Common
Shares or Preferred Shares, and such other equity securities as it deems
appropriate, including other series of beneficial interests which may have
preferences and rights senior to those attaching to the Common Shares and
Preferred Shares.
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REDEMPTION AND CONVERSION RIGHTS
EXISTING DECLARATION OF TRUST
Other than redemption rights of the Trust relating to ownership limitations, the
Existing Declaration of Trust does not provide for any rights with respect to
the conversion or redemption of any Common Shares or Preferred Shares, or any
other securities of the Trust.
AMENDED DECLARATION AND BY-LAWS
The Amended Declaration provides the Trust with a redemption right (the
"Redemption Right"), exercisable upon the listing of the Common Shares on any
national securities exchange or NASDAQ, whereby the Trust may redeem such issued
and outstanding Preferred Shares as it deems appropriate on not less than 60
days' notice to such holders of Preferred Shares, as it may select (the
"Redemption Notice"), for a purchase price per share equal to the Preferred
Share Liquidation Preference (the "Redemption Price") with respect to each such
Preferred Share. Such Redemption Notice is required to specify, among other
things, (i) the number of Preferred Shares proposed to be redeemed from such
holder; (ii) the Redemption Price; and (iii) the proposed redemption date
("Redemption Date").
The Amended Declaration also provides each holder of Preferred Shares with the
right, which becomes exercisable if the Preferred Shares are called for
redemption, to convert each Preferred Share held by such holder into one Common
Share, any time prior to the Redemption Date, by the delivery of notice of such
exercise to the Trust (the "Conversion Right").
To the extent applicable to any redemption, the Trust will comply with the
provisions of the Williams Act and the rules promulgated by the Commission
thereunder in effecting such redemption.
The provisions set forth above relating to the Redemption Right and Conversion
Right are entirely new to the Amended Declaration, and no comparable provisions
are included in the Existing Declaration of Trust.
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INVESTMENT RESTRICTIONS
EXISTING DECLARATION OF TRUST
The Existing Declaration of Trust provides that the Trust will not engage in any
of the following investment practices or activities: (1) invest in commodities
or commodity future contracts; (2) invest more than 10% of its total assets in
unimproved real property or indebtedness secured by a deed of trust or mortgage
loan on unimproved real property; (3) invest in or make mortgage loans; (4)
invest in contracts for the sale of real estate; (5) engage in any short sale;
(6) acquire securities in any company holding investments or engaging in
activities prohibited by these restrictions; or (7) invest in the equity
securities of any non-governmental issuer, including other real estate
investment trusts or limited partnerships for a period in excess of 18 months.
AMENDED DECLARATION AND BY-LAWS
The Amended Declaration does not contain any restriction on the nature or type
of investments that the Trust may make. The nature and types of investments that
the Trust may make are limited only by the requirements and restrictions
relating to the Trust's maintaining its status as a REIT.
LIMITATIONS ON BORROWING; DEBT
EXISTING DECLARATION OF TRUST
Under the Existing Declaration of Trust, (i) total indebtedness of the Trust
cannot exceed 300% of the net asset value of the Trust's assets; and (ii) the
net asset value of the Trust's assets must be at least 300% of the amount of
unsecured indebtedness of the Trust.
It is also the policy of the Trust that it will not incur mortgage indebtedness
in the aggregate that exceeds 50% of the total value of the Trust's assets.
AMENDED DECLARATION AND BY-LAWS
The Trust would not be limited with respect to secured or unsecured borrowings,
or the issuance of debt securities.
The Trust's policy will be to limit total indebtedness to 80% of the value of
the Trust's assets.
MANAGEMENT CONTROL
EXISTING DECLARATION OF TRUST
The Trustees are, subject to certain narrow limitations, vested with all
management authority to conduct the business of the Trust, including authority
and responsibility for overseeing all executive, supervisory and administrative
services rendered to the Trust. The Trustees are not classified and are elected
by the Shareholders annually.
AMENDED DECLARATION AND BY-LAWS
The Board of Trustees will continue to direct the management of the Trust's
business and affairs. The Trustees are not classified and will continue to be
elected by Shareholders annually.
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<PAGE> 40
ENGAGEMENT OF ADVISOR
EXISTING DECLARATION OF TRUST
The Trust is an externally advised REIT. The Windsor Corporation has been the
advisor to the Trust since the Trust's formation. The current relationship
between the Trust and the Advisor is governed by the Advisory Agreement. Under
the Existing Declaration of Trust, the Advisory Agreement cannot be extended at
any given time for more than one year, and may be terminated by the Trust
without cause, on 60 days' notice (the "Renewal and Termination Restrictions").
AMENDED DECLARATION AND BY-LAWS
The Trust will continue as an externally advised REIT, and The Windsor
Corporation will continue as the Advisor to the REIT pursuant to the Advisory
Agreement. The Renewal and Termination restrictions are not included in the
Amended Declaration.
ANTITAKEOVER PROVISIONS
EXISTING DECLARATION OF TRUST
The Existing Declaration of Trust contains provisions that may have the effect
of delaying or discouraging an unsolicited proposal for the acquisition of the
Trust or the removal of incumbent management, including provisions designed to
avoid concentration of share ownership in a manner that would jeopardize the
Trust's status as a REIT under the Code.
The Existing Declaration of Trust also includes provisions derived from NASAA's
Real Estate Investment Trust Guidelines regarding roll-ups. These provisions,
which are set forth in Article XIX of the Existing Declaration of Trust, include
provisions for (a) appraisal of Trust assets by an independent expert, (b) the
rights of Shareholders to accept securities of a roll-up entity, or receive cash
for their Shares based on the appraised value of net assets of the Trust or
remain as Shareholders of the Trust and (c) certain democracy, access to records
and other rights to be provided by the roll-up entity.
AMENDED DECLARATION AND BY-LAWS
The Amended Declaration and By-laws of the Trust contain a number of provisions
that may have the effect of delaying or discouraging a change in control of the
Trust. The Amended Declaration and By-laws provide for the following: (i) the
authorization of shares of beneficial interest that may be classified or
reclassified and issued in the discretion of the Trustees, including securities
that have superior voting rights to the Shares; (ii) a requirement that Trustees
be removed only for cause and only by a vote of at least 80% of the outstanding
Shares; (iii) specific procedures that must be followed and requirements that
must be met to call a special meeting of Shareholders, or to submit proposals
for an annual or special meeting; and (iv) provisions designed to avoid
concentration of share ownership in a manner that would jeopardize the Trust's
status as a REIT under the Code.
There are no appraisal or compensation procedures or requirements in the Amended
Declaration and By-laws relating to roll-up transactions.
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<PAGE> 41
TRANSACTIONS WITH AFFILIATES
EXISTING DECLARATION OF TRUST
The Trust is prohibited from engaging in transactions with any Trustee, officer,
sponsor, Advisor, or any affiliates of such persons (all such persons and
entities being hereinafter referred to as "Affiliates"), unless such transaction
has, after disclosure of such affiliation, been approved by the affirmative vote
of a majority of the Independent Trustees not affiliated with a person who is a
party to the transaction, and (i) the transaction is fair and reasonable to the
Trust and its Shareholders; and (ii) the terms are at least as favorable as an
arms-length transaction would be and the price does not exceed the appraised
value of the property being acquired, if an acquisition is involved. Payments to
the Advisor, its Affiliates and the Trustees for services rendered in any
capacity other than that as Advisor or Trustee may only be made upon a
determination by the Independent Trustees that: (i) the compensation is not in
excess of compensation paid for comparable services; and (ii) the compensation
is not greater than the charges for comparable services available from others
who are competent and not affiliated with any of the parties involved.
Additional restrictions in the Existing Declaration of Trust relating to
transactions with Affiliates include, among others, restrictions on (i)
purchasing property from Affiliates; (ii) selling property to Affiliates; (iii)
making loans or borrowing money from Affiliates; and (iv) investing in joint
ventures with Affiliates.
AMENDED DECLARATION AND BY-LAWS
There are no provisions in the Amended Declaration or By-laws relating to
transactions involving any actual or potential conflict of interest with a
Trustee or Advisor, or an affiliate of such persons. The Trust's policy with
respect to such transactions will be to obtain the approval of a majority of the
disinterested Trustees.
LIMITATION ON TOTAL OPERATING EXPENSES
EXISTING DECLARATION OF TRUST
The Existing Declaration of Trust provides that, subject to the conditions
described in the following paragraph, the Total Operating Expenses of the Trust
shall not exceed in any fiscal year the greater of 2% of the Average Invested
Assets of the Trust during such fiscal year of 25% of the Trust's Net Income
during such fiscal year.
AMENDED DECLARATION AND BY-LAWS
There are no limitations in the Amended Declaration or By-laws on the total
operating expenses of the Trust.
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<PAGE> 42
OWNERSHIP LIMITATIONS
EXISTING DECLARATION OF TRUST
Under the Existing Declaration of Trust, no entity or individual may own more
than 9.8% of the outstanding Shares. The Trustees may refuse to permit any
transfer of Shares which would violate the 9.8% ownership limit, and may redeem
Shares, subject to certain requirements, in order to remedy any violation of the
9.8% ownership limit.
AMENDED DECLARATION AND BY-LAWS
Subject to certain exceptions, the Amended Declaration provides that no holder
may own, or be deemed to own by virtue of the attribution provisions of the
Code, more than 9.9% of the lesser of the number or value of Shares outstanding
considered as a single class (the "Ownership Limit"). Chateau currently owns a
9.8% ownership interest in the Trust. Under the Amended Declaration, Chateau is
exempted from the Ownership Limit in order to enable Chateau to make the
Additional Chateau Investment, which will allow the Trust to begin promptly its
implementation of the Business Plan. The Trustees may, but in no event will be
required to, grant exemptions from the Ownership Limit with respect to
particular Shareholders in the future if it determines that such ownership will
not jeopardize the Trust's status as a REIT. As a condition of such waiver, the
Trustees may require opinions of counsel satisfactory to it and/or undertakings
or representations from the applicant with respect to preserving the REIT status
of the Trust.
VOTE REQUIRED
Each of Proposals 1 and 2 requires the affirmative vote of (i) the holders
of a majority of the issued and outstanding Common Shares, and (ii) the holders
of a majority of the issued and outstanding Preferred Shares, voting as separate
classes.
Proposals 1 and 2 are conditioned upon Shareholder approval of both
Proposals 1 and 2, meaning that if only one of such proposals is approved by the
Shareholders, both proposals will be deemed to be not approved by the
Shareholders. Proposals 1 and 2, if approved by the Shareholders, will be
effected through the adoption of the Amended Declaration and the adoption of
By-laws for the Trust.
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PROPOSAL 3 -- EQUITY COMPENSATION PLAN APPROVAL
TERMS OF THE 1998 EQUITY COMPENSATION PLAN
Proposal 3 is the approval of a proposed form of equity compensation plan
for the Trust. The Board of Trustees has adopted the 1998 Equity Compensation
Plan (the "Equity Compensation Plan") which, subject to approval of the
Shareholders, provides for the discretionary grant by a compensation committee
(the "Compensation Committee") of the Board of Trustees of (i) incentive stock
options which meet the requirements of Section 422 of the Code; (ii)
non-qualified stock options; (iii) restricted shares; and (iv) dividend
equivalent rights.
Under the Equity Compensation Plan, incentive stock options, non-qualified
stock options, restricted shares and dividend equivalent rights may be granted
to the employees of the Trust, and non-qualified stock options, restricted
shares and dividend equivalent rights may be granted to officers, trustees,
directors and employees of the Advisor and other entities expected to provide
significant services (such entities being of a type expressly approved by the
Compensation Committee as covered services for these purposes) to the Trust
(together with the Trust and the Advisor, the "Participating Entities"). The
purpose of the Equity Compensation Plan will be to (i) provide incentive to key
employees, officers and trustees of the Participating Entities; (ii) to
encourage proprietary interest by them in the Trust; (iii) to encourage such key
employees to remain in the employ of such Participating Entity; (iv) to attract
new employees with outstanding qualifications; and (v) to afford additional
incentive to others to increase their efforts in providing significant services
to the Participating Entities. The Compensation Committee will determine the
eligibility of employees, officers, trustees and others expected to provide
significant services to the Participating Entities based on, among other
factors, the position and responsibilities of such individuals, the nature and
value to the Participating Entity of such individuals' accomplishments and
potential contribution to the success of the Participating Entities whether
directly or through its subsidiaries.
The number of Common Shares that may be issued pursuant to grants under the
Equity Compensation Plan will not in the aggregate exceed the lesser of 10% of
the issued and outstanding Shares of the Trust, as the same may vary from time
to time, and 1,000,000 Common Shares (subject to adjustments in the case of
certain reorganizations and other events). The Common Shares to be issued
pursuant to any grant of restricted shares or upon exercise of an option may be
either authorized but unissued Common Shares or treasury shares of the Trust or
Common Shares purchased on the open market. If an option granted under the
Equity Compensation Plan expires or terminates, or if the restrictions on
restricted shares are not satisfied, the Common Shares subject to any restricted
share grant or any unexercised portion of that option will again become
available for the issuance of further options or restricted shares under the
Equity Compensation Plan. In no event may any optionee receive options for more
than 100,000 Common Shares over the life of the Equity Compensation Plan. Unless
previously terminated by the Board, the Equity Compensation Plan will terminate
on the tenth anniversary of its approval by Shareholders, and no grants may be
made under the Equity Compensation Plan thereafter. The Common Shares are not
listed on any securities exchange. Accordingly, the current fair market value of
the Common Shares is not easily determinable. It is expected that the initial
grant of options with respect to 1,000 Common Shares to be made to each of the
Independent Trustees (as described below) will have an exercise price of $25 per
share.
Options granted under the Equity Compensation Plan will become exercisable
in accordance with the terms of the grant made by the Compensation Committee.
The Compensation Committee will have discretionary authority to select
participants from among eligible persons and to determine at the time an option
is granted whether it is intended to be an incentive stock option or a
non-qualified stock option, and when and in what increments shares covered by
the option may be purchased. The exercise price for any option granted under the
Equity Compensation Plan may not be less than 100% of the fair market value of
the Common Shares at the time the option is granted. No options may be granted
under the Equity Compensation Plan to any person who, assuming exercise of all
options held by such person, would own or be deemed to own shares in excess of
the Trust's Ownership Limit, unless such person is exempt from such restriction.
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Each option will terminate no more than ten years from the date it is
granted. Options may be granted on terms providing that they will be exercisable
either in whole or in part at any time or times during their respective terms,
or only in specified percentages at stated time periods or intervals during the
term of the option.
The exercise price of any option granted under the Equity Compensation Plan
will be payable in full at the time of exercise, in the discretion of the
Compensation Committee, as follows: (i) by certified or bank cashier's check;
(ii) by surrender of Common Shares having a fair market value equal to the
aggregate exercise price of all Common Shares to be purchased; (iii) by
cancellation of indebtedness owed by the Trust to the optionee; (iv) by any
combination of the foregoing; or (v) by a full-recourse promissory note executed
by the optionee. The terms of the promissory note may be changed from time to
time by the Compensation Committee to comply with applicable Internal Revenue
Service or Commission regulations or other relevant pronouncements.
Subject to the terms of the Equity Compensation Plan, the Compensation
Committee may grant to eligible persons the right to receive Common Shares,
subject to restrictions on the right voluntarily or involuntarily to sell,
transfer, pledge, anticipate, encumber or assign the shares. Share certificates
relating to such restricted shares will bear restrictive legends, and will be
held by the Trust until all restrictions have lapsed or been satisfied, and such
shares will remain subject to forfeiture pending the satisfaction of all
conditions and restrictions relating to the same.
Subject to the terms of the Equity Compensation Plan, the Compensation
Committee may, in its discretion, grant dividend equivalent rights to eligible
persons. Generally, each dividend equivalent right will entitle the recipient to
receive over a specified period of time payments (in cash or Common Shares)
equal in value to the dividends paid on a single Common Share during such
period.
Upon a "change of control," restrictions and conditions on grants under the
Equity Compensation Plan may, depending on the specific terms of each grant,
automatically lapse, and such grants may otherwise become completely vested.
The total number of persons who will initially be eligible to receive
grants under the Equity Compensation Plan upon Shareholder Approval of the Plan
is five. If Proposals 1 and 2 are approved by the Shareholders, and the Trust is
successful in implementing its Business Plan, it is expected that the Trust, and
the Advisor, will hire additional employees, thereby increasing the number of
persons eligible to participate in the Equity Compensation Plan.
The Board may from time to time, with respect to any Common Shares at the
time not subject to options or grants, suspend or discontinue the Equity
Compensation Plan or, subject to applicable law, revise or amend it in any
respect whatsoever; provided, however that (i) no amendment may adversely affect
a grantee with respect to grants previously made unless such amendments are in
compliance with applicable law, (ii) the Board may not make any amendment in the
Equity Compensation Plan that would cause the Equity Compensation Plan to fail
to comply with any requirement of applicable law or regulation, unless
Shareholder approval of any such amendment is first obtained, and (iii) each of
the following amendments are subject to the approval of the holders of a
majority of the shares present in person or by proxy at any duly called meeting
of the shareholders: (a) any amendment that would increase the number of Common
Shares or other shares subject to the Equity Compensation Plan, and (b) any
amendment that would alter the classes or types of persons eligible to
participate in the Equity Compensation Plan.
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CERTAIN BENEFITS
Set forth below is a description of certain benefits to be received under
the Equity Compensation Plan:
NEW PLAN BENEFITS
1998 EQUITY COMPENSATION PLAN
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE ($) OPTIONS
----------------- ---------------- -------
<S> <C> <C>
Richard B. Ray $0 1,000 Common Shares*
Trustee
Kenneth G. Pinder $0 1,000 Common Shares*
Trustee
Non-Employee $0 2,000 Common Shares*
Trustees as a Group
</TABLE>
- ------------------------------
* Each actively serving Independent Trustee of the Trust will receive an option
to purchase 1,000 Common Shares on the date of Shareholder approval of the
Equity Compensation Plan, and each anniversary thereof.
Upon Shareholder approval of the Equity Compensation Plan, it is
anticipated that Richard B. Ray and Kenneth G. Pinder, each of whom is an
Independent Trustee of the Trust, will be appointed by the Board of Trustees as
members of the Compensation Committee. Pursuant to the terms of the Equity
Compensation Plan, each Independent Trustee of the Trust is automatically
granted an option to purchase 1000 Common Shares, for a purchase price equal to
the fair market value of such shares on the date of the grant, on the effective
date, and on each anniversary date (provided such person is still a Trustee), of
the Equity Compensation Plan.
TAX CONSEQUENCES OF THE EQUITY COMPENSATION PLAN
The following is a brief description of the principal federal income tax
consequences of the Equity Compensation Plan and grants thereunder, under
current law to the Trust and to participants in the Equity Compensation Plan,
including the consequences of the grant of options and restricted shares and the
grant and payment of dividend equivalent rights.
With respect to incentive stock options, an optionee typically will not
realize any income at the time of the grant of the option or at the time of the
purchase of Common Shares covered by such option. To receive incentive stock
option treatment as to Common Shares acquired upon exercise of an incentive
stock option, an optionee must neither dispose of such Common Shares within two
years after the option is granted nor within one year after the transfer of the
Common Shares to the optionee pursuant to exercise of the option. In addition,
the optionee generally must be an employee of the Trust at all times between the
date of grant and the date three months (one year in the case of disability)
before exercise of the option. If the Common Shares are disposed of by the
optionee at least two years after the date of grant and one year after the date
of purchase, the excess of the fair market value of the shares at the time of
such disposition over the exercise price generally will be treated as a
long-term capital gain, but the Trust will not be entitled to a tax deduction.
Generally, if the Common Shares are disposed of before the expiration of these
holding periods, the excess of the fair market value of the Common Shares
measured as of the exercise date over the exercise price will be treated as
ordinary income, and any further gains generally will be long-term or short-term
capital gains, depending on the applicable holding period. The Trust is
generally entitled to a deduction for amounts taxed as ordinary income to an
optionee. The exercise of an incentive stock option may subject the optionee to
the alternative minimum tax in an amount equal to the excess of the fair market
value of the Common Shares acquired on the date of the exercise of the option
over the exercise price.
With respect to non-qualified options, no income will be recognized by an
optionee at the time a non-qualified option is granted. Generally, taxable
income will result to an optionee on the date of option exercise in an amount
equal to the excess of the fair market value of the Common Shares over the
exercise price, and any further gains after exercise generally will be long-term
or short-term capital gains, depending on the
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applicable holding period. The Trust, assuming all applicable tax-reporting
obligations are satisfied, would generally receive a tax deduction corresponding
to the optionee's ordinary income.
With respect to dividend equivalent rights, recipients will not realize
taxable income at the time of grant, and the Trust will not be entitled to a
deduction at that time. Generally, when a dividend equivalent is paid, the
recipient will recognize ordinary income and the Trust will generally be
entitled to a corresponding deduction.
Grants of restricted shares under the Equity Compensation Plan generally
will be treated as ordinary income to the recipient in an amount equal to the
fair market value of the granted shares as of the date the restrictions lapse,
less the value of any consideration paid for the restricted shares by the
recipient. If the recipient makes a Code Section 83(b) election, within 30 days
of the grant of the restricted shares, the recipient will realize ordinary
income at the date of issuance equal to the difference between the fair market
value at that date less the purchase price therefor. The Trust is entitled to a
corresponding deduction for the amount taxed as ordinary income to the
recipient. If the shares are disposed of by the participant, any further gain
will be treated as short-term or long-term capital gain by the recipient,
depending on the applicable holding period.
Tax-withholding obligations arise upon an optionee's exercise of a
non-qualified option upon the recognition of income in connection with
restricted shares and in connection with the distribution and dividend
equivalent rights. In certain cases, the Compensation Committee may allow
optionees to satisfy these obligations by irrevocably electing either to have
the Trust withhold option shares equal in value to the required withholding
amount or to deliver to the Trust an equivalent number of Common Shares that the
optionee already owns. The satisfaction of any tax-withholding requirement by
the Compensation Committee is a condition precedent to the receipt of benefits
under the Equity Compensation Plan.
RECOMMENDATION OF THE BOARD OF TRUSTEES
The Board of Trustees recommend that shareholders vote FOR the approval of
the Equity Compensation Plan.
VOTE REQUIRED
Proposal 3 requires the affirmative vote of the holders of a majority of
the issued and outstanding Common Shares, and Preferred Shares, voting as a
single class.
PROPOSAL 4 -- ANNUAL ELECTION OF TRUSTEES
ELECTION OF TRUSTEES
All Trustees of the Trust are elected for a one-year term and continue in
office until their successors are elected and qualified. The Trust has three
Trustees, two of whom are Independent Trustees.
Kenneth G. Pinder and Richard B. Ray are currently the Trust's Independent
Trustees. On April 8, 1998, the Independent Trustees selected the following
three nominees for re-election as Trustees at the Annual Meeting, each for a
one-year term expiring on the date of the Annual Meeting in 1999, and until
their successors are elected and qualified: Kenneth G. Pinder, Richard B. Ray
and Gary P. McDaniel. Each nominee is a current Trustee of the Trust.
The Trust's Existing Declaration of Trust requires that a majority of
Trustees must be Independent Trustees, that a majority of each committee of
Trustees must be comprised of Independent Trustees, and that Independent
Trustees shall nominate successor Independent Trustees.
It is intended that proxies will be voted to elect as Trustees the three
nominees named for terms ending on the date of the 1999 Annual Meeting. If any
nominee is unable or declines to serve, an event the Board of Trustees does not
expect, proxies will be voted for the election of a substitute nominee.
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A short biography of each nominee for re-election as Trustee follows:
Gary P. McDaniel (52) became a Trustee of the Trust in September of 1997.
He has been Chief Executive Officer and a director of Chateau since February
1997. Mr. McDaniel was Chairman of the Board, President and Chief Executive
Officer of ROC Communities, Inc. at the time of its merger with Chateau in
February 1997. He had been a principal of ROC and its predecessors since 1979,
and has been active in the manufactured home industry since 1972. Mr. McDaniel
has been active in several state and national manufactured home associations,
including associations in Florida and Colorado. In 1996, he was named "Industry
Person of the Year" by the National Manufactured Housing Industry Association.
Mr. McDaniel is on the Board of Directors of the Manufactured Housing Institute.
He is a graduate of the University of Wyoming and served as a Captain in the
United States Air Force.
Richard B. Ray (58) became a Trustee of the Trust in September of 1997.
Since 1995 he has been Co-Chairman of the Board and Chief Financial Officer of
21st Century Mortgage Corporation (a lender to the manufactured home industry)
and a director of the following companies: BankFirst, Radio Systems Corporation
and Knox Housing Partnership (a not for profit developer of low income housing
in Knox County, Tennessee). Previously, he was Executive Vice President, Chief
Financial Officer, and Director of Clayton Homes Inc. (a vertically integrated
manufactured housing company) from 1982-1994 and a Director of Palm Harbor
Homes, Inc. (a national producer of manufactured homes) from 1994-1995.
Kenneth G. Pinder (62) became a Trustee of the Trust in September of 1997.
Mr. Pinder entered the manufactured housing business in 1970, managing a
manufactured housing site rental community and formed American Living Homes
Inc., a manufactured housing dealership, in 1974. He continues to be the owner
and president of this corporation. He is also sole owner of Able Mobile Housing
Inc., a temporary housing company for fire loss victims and has developed
manufactured home sites and purchased and sold numerous communities over the
past 20 years. Mr. Pinder has been a member of the Michigan Manufactured Housing
Association for over 35 years. In 1992 he was elected to the Michigan
Manufactured Housing Board of Directors, and serves on its Executive Committee.
Election of Trustees is decided by a plurality of the votes cast by the
Shares entitled to vote in the election. Each Shareholder has the option to use
cumulative voting in the Election of Trustees. The total number of votes
available to Shareholders electing cumulative voting is equal to three times the
number of Shares held, which may be allocated among the nominees in such
holder's discretion.
BOARD OF TRUSTEES
The business and affairs of the Trust are managed under the direction of
the Board of Trustees. Members of the Board keep informed of the Trust's
business and activities by reports and proposals sent to them in advance of each
Board meeting and reports made to them during these meetings by the Chairman.
Members of the Advisor and the property manager are available at Board meetings
or other times to answer questions and discuss issues.
In 1997, the Board of Trustees had two board meetings and three actions
were approved by unanimous written consent. Each Trustee attended all meetings
of the Board and committees of the Board on which such Trustee served.
COMMITTEES OF THE BOARD
The Board has two committees, the Audit Committee and the Compensation
Committee, of which the Board's two Independent Trustees are the members:
Kenneth G. Pinder and Richard B. Ray.
This Audit committee recommends to the Board of Trustees the engagement of
independent accountants; reviews with the accountants the audit plan, non-audit
services, and fees related to each; reviews the Trust's internal financial
controls and auditing; reviews annual financial statements before issuance; and
makes appropriate reports and recommendations to the Board. The Audit committee
met one time in 1997.
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<PAGE> 48
The Compensation Committee will, subject to Shareholder approval of the
Equity Compensation Plan, administer and determine the terms of any awards under
such plan, and in the future may determine the salary and compensation of the
Trust's officers. The Compensation Committee, which was established in 1998, did
not meet in 1997.
ADVISOR
The Windsor Corporation is the Advisor to the Trust. Its services include
managing the day-to-day Trust affairs and serving as financial and investment
advisor in connection with policy decisions made by the Trustees. The current
contract with the Advisor has a one-year term ending April 10, 1999, and is
renewable for successive one-year periods subject to the approval of the Board,
including a majority of the Independent Trustees. The Advisory Contract may be
terminated without cause by either the Board or the Advisor upon 60 days'
notice. Gary P. McDaniel, Chairman of the Board, is a controlling person of the
Advisor.
SHARE OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN SHAREHOLDERS
The following table contains information concerning the ownership of Common
Shares and Preferred Shares by each person or entity that is a beneficial owner
of more than five percent of the Trust:
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL SHARES OWNED PERCENTAGE OF CLASS
------------------- ----------------------- -------------------
<S> <C> <C>
Chateau Communities, Inc. 19,139 Common Shares 18.90%
6430 South Quebec Street
Englewood, CO 80111
The Windsor Corporation 200 Common Shares 0.02%
6430 South Quebec Street 984 Preferred Shares 0.10%
Englewood, CO 80111
</TABLE>
Other than these Shares, no Trustee or executive officer owns Trust Shares
either of record or beneficially, directly or indirectly, as of the date of this
Proxy Statement. If the Organizational Amendments are approved, it is
anticipated that Chateau will purchase at least an additional 130,000 Common
Shares or Preferred Shares, or a combination thereof, for a purchase price (but
not below $25 per share) equal to the aggregate fair market value of such
Shares, as determined by the Independent Trustees. Upon such purchase, Chateau
would have an approximate 45% ownership interest in the Trust. See "Transactions
and Changes to be Effected upon Approval of Proposals 1 and 2 -- Additional
Chateau Investment."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Directors and executive officers of the Trust and beneficial owners of more
than 10% of its Common Stock are required to file initial reports of ownership
and reports of changes in ownership of the Trust's securities pursuant to
Section 16(a) of the Exchange Act and to provide the Trust with copies of such
reports. Each of the Trustees who became Trustees in September 1997 and did not
directly acquire any Shares in the Trust, and Chateau, which acquired 19,139
Common Shares on May 11, 1998, filed such reports on September 23, 1998.
INDEPENDENT TRUSTEES COMPENSATION
Each of the Independent Trustees received $7,500 in trustee fees in 1997
for services rendered.
EXECUTIVE COMPENSATION
The Trust did not pay compensation to Gary P. McDaniel, Chairman of the
Board. Compensation was paid to affiliates of Mr. McDaniel as described under
the next caption. The Trust does not have any executive officers.
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RELATED PARTY COMPENSATION AND EXPENSE REIMBURSEMENT
Expense Reimbursements -- Optional Costs. The Advisor and its affiliates
were paid $34,500 in 1997 in expense reimbursements for Trust operational costs
and transfer agent service costs incurred by the Advisor.
Advisory Fee. Pursuant to the Advisory Agreement, the Advisor among other
things (i) serves as the Trust's investment and financial advisor and provides
research, economic and statistical data in connection with the Trust's
investments and investment and financial policies; (ii) is responsible for
investigating, selecting and establishing relationships with consultants, banks,
investment banks, sellers, brokers, investors, builders, developers and others
on behalf of the Trust; and (iii) consults with the Trustees and advises the
Trustees with respect to acquiring new properties and investments and
dispositions of existing properties and investments and has primary
responsibility for effecting acquisitions and dispositions of properties and
other investments of the Trust.
Under the terms of the Advisory Agreement, the Advisor earned advisory fees
from the Trust in the amount of $54,500 in 1997. None of this fee was paid to
the Advisor. This fee is being deferred by the Advisor, without interest, for
payment at a later date. As of December 31, 1997, the Trust owed the Advisor
$112,600 in respect of services rendered under the Advisory Agreement.
VOTING PROCEDURES AND MISCELLANEOUS MATTERS
THE ANNUAL MEETING
The Annual Meeting will be held at the Trust's principal executive offices
at 6430 South Quebec Street, Englewood, Colorado 80111 on October 23, 1998, at
10:00 a.m. (or at such other date and time to which the Annual Meeting is
adjourned), to consider and vote on the Organizational Amendments, the Equity
Compensation Plan Approval and the Election of Trustees, and related matters.
CHANGE IN ACCOUNTANTS
On January 21, 1998, the Trust dismissed its principal outside accounting
firm, Deloitte & Touche, LLP and hired Coopers & Lybrand, LLP as its new outside
accounting firm. For additional details please see the Trust's Form 8-K dated
January 27, 1998, and related Form 8-K/A dated February 3, 1998 which is hereby
incorporated herein in its entirety by reference.
SOLICITATION OF PROXIES; ADMINISTRATIVE AGENT
In addition to soliciting proxies by mail, proxies may be solicited by
trustees, officers and employees of the Trust and the Advisor, who will not
receive additional compensation therefor, by personal interview, telephone,
telegram, courier service, or similar means of communication. In addition, the
Trust has retained Arlen Capital, LLC as its agent to mail proxies with respect
to the proposals (the "Administrative Agent"), to administer the delivery of
information to the Shareholders and to receive and tally votes and engage in
certain other non-solicitation activities for the Trust. Whether or not the
proposals are approved by the Shareholders, the Administrative Agent will be
paid a fee by the Trust in accordance with the agreement between the Trust and
the Administrative Agent.
RECORD DATE; VOTE REQUIRED
The close of business on September 21, 1998 has been fixed as the record
date ("Record Date") for determining the Shareholders entitled to cast votes, in
person or proxy, with respect to the proposals. As of the Record Date, there
were 109,308 Common Shares outstanding held of record by a total of 180
Shareholders, and 98,073 Preferred Shares outstanding held of record by a total
of 311 Shareholders. With certain limited exceptions, each Common Share and each
Preferred Share entitles the holder thereof to one vote on all matters submitted
to a vote of Shareholders.
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Except as set forth below, at the Annual Meeting each Shareholder of record
at the close of business on the record date will be entitled to one vote for
each Common Share or Preferred Share registered in that Shareholder's name. Any
person acquiring title to Shares after that date will be entitled to one vote
for each full Share for which a proxy has been received from the Shareholder of
record. Holders of a majority of all outstanding Shares entitled to vote,
present in person or by proxy, constitute a meeting quorum.
As Proposals 1 and 2 may affect Common Shareholders and Preferred
Shareholders differently, under the Existing Declaration of Trust the
affirmative vote in person or by proxy of the holders of a majority of the
Common Shares and Preferred Shares, each voting as a separate class, is required
to approve Proposals 1 and 2. PROPOSALS 1 AND 2 ARE CONDITIONED UPON SHAREHOLDER
APPROVAL OF BOTH PROPOSALS 1 AND 2, MEANING THAT IF ONLY ONE OF SUCH PROPOSALS
IS APPROVED BY THE SHAREHOLDERS, BOTH PROPOSALS WILL BE DEEMED TO BE NOT
APPROVED BY THE SHAREHOLDERS. Proposal 3 requires the affirmative vote of the
holders of a majority of the issued and outstanding Common Shares and Preferred
Shares voting as a single class. Proposal 4, the election of Trustees, is
decided by a plurality of the votes cast by the Shares entitled to vote in the
election. Each Shareholder has the option to use cumulative voting in the
Election of Trustees. The total number of votes available to holders if
cumulative voting is used is equal to three times the number of Shares held,
which may be allocated among the nominees in such holder's discretion.
Only Shareholders of record on the Record Date will receive notice of, and
be entitled to vote with respect to, the proposals. The proxy may be used by
each Shareholder in casting his votes for or against the Conversion, the Related
Amendments, the Equity Compensation Plan Approval and for the Election of
Trustees. Each Shareholder may mark the proxy to vote "for" or "against" each of
the Proposals or may abstain with respect to its Shares with respect to the
Proposals, or any of them.
Abstentions and Broker Non-Votes. Abstentions and broker non-votes (if
any) will not count toward the number of consents required for approval and have
the effect of voting "against" the proposals for purposes of tallying the vote.
Under the Existing Declaration of Trust, the Advisor and its affiliates are
restricted from voting with respect to certain matters, including (i) the
election of Independent Trustees; and (ii) the Organizational Amendments.
Chateau, which collectively with the Advisor currently owns 19,339 Common Shares
and 984 Preferred Shares constituting in the aggregate a 9.8% ownership interest
in the Trust, has advised the Trust that it intends to (i) abstain from voting
the Shares held by it with respect to the Organizational Amendments, and the
election of the Independent Trustees; and (ii) vote for the Equity Compensation
Plan Approval and the election of Gary P. McDaniel as a Trustee.
NO DISSENTERS' OR APPRAISAL RIGHTS WITH RESPECT TO ORGANIZATIONAL AMENDMENTS
The Shareholders are not entitled to any appraisal, dissenters' or other
similar rights in connection with the adoption of the Organizational Amendments,
under the Existing Declaration of Trust, or any statute applicable to the Trust.
This means that if the Organizational Amendments are adopted the Shareholders
will have only the rights conferred to them under the Amended Declaration and
By-laws.
VOTING PROCEDURES AND POWERS
Each holder of Common Shares or Preferred Shares may grant proxies to vote
Shares held by it. This Proxy Statement is accompanied by a separate proxy. The
persons named in the proxy as proxies will vote as instructed by each
Shareholder submitting a proxy with respect to the proposals and will have
authority, as a result of holding such proxy, to vote in their discretion as to
procedural matters relating to the Annual Meeting including, without limitation,
with respect to the adjournment of the Annual Meeting from time to time.
Any Shareholder who fails to vote or "abstains" with respect to any
proposal will be deemed to have voted "against" any such proposal. A Shareholder
who submits a signed proxy but fails to indicate any vote on a proposal
presented on the proxy will be deemed to have voted "for" the proposal not voted
upon.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal (if permitted) of the proxies will be
determined by the Trustees, whose determination will be final and
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binding. The Trust reserves the right to reject any or all proxies that are not
in proper form or the acceptance of which, in the opinion of counsel, would be
unlawful. The Trust also reserves the right to waive any irregularities or
conditions of the proxy. Unless waived, any irregularities in connection with
the proxies must be cured within such time as the Trust shall determine. The
Trust shall not be under any duty to give notification of defects in such
proxies nor shall it incur liabilities for failure to give such notification.
The delivery of the proxies will not be deemed to have been made until such
irregularities have been cured or waived.
COMPLETION INSTRUCTIONS
Each Shareholder is requested to complete and execute the proxy in
accordance with the instructions contained therein. For the proxy to be
effective, each Shareholder must deliver his or her proxy at any time prior to
the Annual Meeting or any adjournment thereof to:
Arlen Capital, LLC
1650 Hotel Circle North
Suite 200
San Diego, CA 92108
Attention: Mr. Lynn Wells
Telephone: (800) 553-4039
A pre-paid self-addressed envelope for return of the proxy has been
included with this Proxy Statement.
The Trustees may elect, at their option, to require that each proxy be
accompanied by evidence (which may include an opinion of counsel acceptable to
the Trust) that the Shareholder has met all requirements of its governing
instruments, and is authorized to execute such proxy under the laws of the
jurisdiction in which such Shareholder resides.
WITHDRAWAL OR CHANGE OF VOTE
Proxies may be withdrawn or revoked at any time prior to the Annual
Meeting. In addition, subsequent to submission of a proxy but prior to the
Annual Meeting, a Shareholder may change its vote. For a withdrawal or change of
vote to be effective, however, a written or facsimile transmission notice of
withdrawal or change of vote must be timely received by the Trust prior to the
Annual Meeting at the address set forth under "Completion Instructions" above
and must specify the name of the person who executed the proxy that is to be
withdrawn or changed and the name of the registered holder, if different from
that of the person who executed the proxy.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents (or portions thereof) filed with the Commission by
the Trust (File No. 0-21470) pursuant to the Exchange Act are incorporated
herein by reference:
(i) Item 6, "Management's Discussion and Analysis," contained in the
Trust's Annual Report on Form 10-KSB for the year ended December
31, 1997;
(ii) Item 7, "Financial Statements" contained in the Trust's Annual
Report on Form 10-KSB for the year ended December 31, 1997;
(iii) The Trust's Current Report on Form 8-K filed on January 27, 1998
and the related Form 8-K/A dated February 3, 1998;
(iv) The Trust's Current Report on Form 8-K filed on June 16, 1998.
(v) Item 2, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in the Trust's
Quarterly Report on Form 10-QSB for the quarter ended June 30,
1998;
(vi) Item 1, "Financial Statements" contained in the Trust's Form
10-QSB Quarterly Report for the quarter ended June 30, 1998; and
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for the purposes of this Proxy
Statement to the extent that a statement contained herein or in any other
subsequently filed document that is incorporated by reference herein modifies or
supersedes such earlier statement. Any such statements modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Proxy Statement.
Copies of any or all of the documents specifically incorporated herein by
reference (not including the exhibits to such documents, unless such exhibits
are specifically incorporated by reference in such documents) will be furnished
without charge to each person, including any beneficial owner, to whom a copy of
this Proxy Statement is delivered upon written or oral request. Requests should
be made to: REIT 8 -- Investor Relations, 6430 S. Quebec St., Englewood,
Colorado 80111.
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APPENDIX A
WINDSOR REAL ESTATE INVESTMENT TRUST 8
AMENDED AND RESTATED DECLARATION OF TRUST
(TO BE RENAMED "N' TANDEM TRUST")
Windsor Real Estate Investment Trust 8, an unincorporated business trust
organized under the laws of California (the "Trust"), desires to amend and
restate its Declaration of Trust as currently in effect (the "Existing
Declaration of Trust" and as hereinafter amended, this "Declaration of Trust").
The following provisions of this Declaration of Trust, all of which have
been approved by the Trustees and Shareholders of the Trust in the manner
specified in the Existing Declaration of Trust and under the laws of the State
of California, are all the provisions of this Declaration of Trust currently in
effect and as hereinafter amended:
ARTICLE I
CONTINUATION
The Trust is a real estate investment trust within the meaning of Part 4,
Title 3, Sections 23000 through 23006, of the Corporations Code of California,
as the same may be amended from time to time (the "California REIT Statute").
The Trust shall not be deemed to be a general partnership, limited partnership,
joint venture, joint stock company or a corporation (but nothing herein shall
preclude the Trust from being treated for tax purposes as an association under
the Internal Revenue Code of 1986, as amended (the "Code")).
ARTICLE II
NAME
The name of the Trust is: N' Tandem Trust. Under circumstances in which the
board of trustees (the "Trustees") of the Trust (the "Board of Trustees" or
"Board") determines that the use of the name of the Trust is not practicable,
the Trust may use any other designation or name for the Trust.
ARTICLE III
PURPOSES AND POWERS
Section 3.1 Purposes. The purposes for which the Trust is formed are to
invest in and to acquire, hold, manage, administer, control and dispose of
property, including, without limitation or obligation, engaging in business as a
real estate investment trust under the Code.
Section 3.2 Powers. The Trust shall have all of the powers granted to
unincorporated business trusts under California law, and real estate investment
trusts by the California REIT Statute, and all other powers set forth in this
Declaration of Trust which are not inconsistent with applicable law and are
appropriate to promote and attain the purposes set forth in this Declaration of
Trust.
In furtherance of the foregoing, to the extent the same is permitted under
California and federal law, the Trust shall have the power to:
(a) have perpetual existence unaffected by any rule against
perpetuities;
(b) sue, be sued, complain, and defend in all courts;
(c) transact its business, carry on its operations, and exercise the
powers granted by this article in any state, territory, district, or
possession of the United States and in any foreign country;
(d) make contracts, incur liabilities, and borrow money;
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(e) sell, mortgage, lease, pledge, exchange, convey, transfer, and
otherwise dispose of all or any part of its assets;
(f) issue bonds, notes and other obligations and secure them by
mortgage or deed of trust of all or any part of its assets;
(g) acquire by purchase or in any other manner and take, receive, own,
hold, use, employ, improve, encumber, and otherwise deal with any interest
in real and personal property, wherever located;
(h) purchase, take, receive, subscribe for, or otherwise acquire, own,
hold, vote, use, employ, sell, mortgage, loan, pledge, or otherwise dispose
of and deal in and with:
(i) securities, shares, and other interests in any obligations of
domestic and foreign corporations, other real estate investment trusts,
associations, partnerships, entities and individuals; and
(ii) direct and indirect obligations of the United States, any
other government, state, territory, government district, and
municipality, and any instrumentality of them;
(i) elect or appoint officers and agents of the Trust for the period
of time this Declaration of Trust or the Trust's by-laws (the "By-laws")
provide, define their duties, and determine their compensation;
(j) engage and dismiss advisors to the Trust;
(k) adopt and implement employee and officer benefit plans;
(l) make and alter the By-laws not inconsistent with law or with this
Declaration of Trust to regulate the government of the Trust and the
administration of its affairs;
(m) exercise these powers, including the power to take, hold, and
dispose of the title to real and personal property in the name of the Trust
or in the name of its Trustees, without the filing of any bond;
(n) generally exercise the powers set forth in this declaration of
trust which are not inconsistent with law and are appropriate to promote
and attain the purposes set forth in this Declaration of Trust;
(o) enter into any business combination permitted under applicable
law; and
(p) indemnify or advance expenses to Trustees, officers, employees,
and agents of the Trust as provided herein.
ARTICLE IV
RESIDENT AGENT
The name of the resident agent of the Trust in the State of California is
, whose post office address is . The
resident agent is a citizen of and resides in the State of California. The Trust
may have such offices or places of business within or outside the State of
California as the Board of Trustees may from time to time determine.
ARTICLE V
BOARD OF TRUSTEES; ADVISOR; INDEPENDENT TRUSTEES;
ENGAGEMENT OF ADVISOR
Section 5.1 Powers. Subject to any express limitations contained in this
Declaration of Trust (a) the business and affairs of the Trust shall be managed
under the direction of the Board of Trustees and (b) the Board shall have full,
exclusive and absolute power, control and authority over any and all property of
the Trust. The Board may take any action as in its sole judgment and discretion
is necessary or appropriate to conduct the business and affairs of the Trust.
This Declaration of Trust shall be construed with the presumption in favor of
the grant of power and authority to the Board. Any construction of this
Declaration of Trust or determination made in good faith by the Board concerning
its powers and authority hereunder shall
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be conclusive. The enumeration and definition of particular powers of the
Trustees included in this Declaration of Trust shall in no way be limited or
restricted by reference to or inference from the terms of this or any other
provision of this Declaration of Trust or construed or deemed by inference or
otherwise in any manner to exclude or limit the powers conferred upon the Board
or the Trustees under the general laws of the State of California or any other
applicable laws.
The Board, without any action by the shareholders of the Trust, shall have
and may exercise, on behalf of the Trust, without limitation, the power (i) to
determine that compliance with any restriction or limitations on ownership and
transfers of shares of the Trust's beneficial interest set forth in Article VII
of this Declaration of Trust is no longer required in order for the Trust to
qualify as a REIT; (ii) to adopt By-laws of the Trust, which may thereafter be
amended or repealed as provided therein; (iii) to elect officers in the manner
prescribed in the By-laws; (iv) to solicit proxies from holders of shares of
beneficial interest of the Trust; and (v) to do any other acts and deliver any
other documents necessary or appropriate to the foregoing powers.
Section 5.2 Number. The number of Trustees shall initially be three, and
shall not be decreased, but may be increased to a maximum of fifteen. The Board
of Trustees shall have the exclusive power to increase or decrease the number of
Trustees and fill any vacancy on the Board, whether resulting from an increase
in the number of Trustees or otherwise, with the Trustees to hold office until
their successors are duly elected and qualified. The election of Trustees by
shareholders shall require the vote and be in accordance with the procedures set
forth in the By-laws. If for any reason any or all of the Trustees cease to be
Trustees, such event shall not terminate the Trust or affect this Declaration of
Trust or the powers of the remaining Trustees. The Trustees shall be elected by
the shareholders at every annual meeting thereof in the manner provided in the
By-laws. The names and addresses of the current Trustees, who shall continue to
serve until the next annual meeting of shareholders and until their successors
are duly elected and qualify, or until such later time as determined by the
Board of Trustees as hereinafter provided, are:
<TABLE>
<CAPTION>
NAME ADDRESS
- ---- -------
<S> <C>
Gary P. McDaniel c/o N' Tandem Trust
6430 S. Quebec Street
Englewood, CO 80111
Richard B. Ray c/o N' Tandem Trust
6430 S. Quebec Street
Englewood, CO 80111
Kenneth G. Pinder c/o N' Tandem Trust
6430 S. Quebec Street
Englewood, CO 80111
</TABLE>
It shall not be necessary to list in this Declaration of Trust the names
and addresses of any Trustees hereinafter elected.
Section 5.3 Independent Trustees. A majority of the Trustees shall be
Independent Trustees. As used in this Declaration of Trust "Independent Trustee"
means a Trustee who is not affiliated, directly or indirectly, with an advisor
of the Trust, whether by ownership of, ownership in, employment by, any material
business or professional relationship with, such advisor, or an affiliate of
such advisor, or by virtue of serving as an officer or director of any advisor,
or affiliate of such advisor.
Section 5.4 Transaction with Affiliates. The Trust shall not engage in
any transaction with any Trustee or advisor, or affiliate of any Trustee or
advisor, or in which any of them have a direct or indirect interest, unless
after disclosure of any such relationship, affiliation or interest, such
transaction has been approved by the affirmative vote of a majority of the
Trustees that do not have any such relationship, affiliation or interest.
Section 5.5 Engagement of Advisor.
(a) The Trustees shall be responsible for the general policies of the Trust
and for such general supervision of the business of the Trust conducted by all
officers, agents, employees, advisors, managers or independent contractors of
the Trust as may be necessary or appropriate to insure that such business
conforms
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to the provisions of this Declaration of Trust. However, the Trustees shall not
be required personally to conduct the business of the Trust, and consistent with
their ultimate responsibility as stated above, the Trustees shall have the power
to appoint, employ or contract with any person (including one or more of
themselves or 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 proper for the transaction of the business of the
Trust (hereafter "Advisors"). The Trustees may therefore employ or contract with
such Advisor and the Trustees may grant or delegate such authority to the
Advisor 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 of real estate investment trusts.
(b) The Independent Trustees shall determine from time to time that the
compensation which the Trust agrees to pay the Advisor is reasonable in relation
to the nature and quality of services performed and that such compensation is
within the limits prescribed herein. The Independent Trustees shall also
supervise the performance of the Advisor and compensation paid to it by the
Trust to determine that the provisions of any agreement between the Trust and
any such Advisor ("Advisory Agreement") are being carried out. Each such
determination shall be based on the factors set forth below and such other
factors the Independent Trustees may deem relevant:
(i) The size of the advisory fee in relation to the size, composition
and profitability of the portfolio of the Trust;
(ii) The success of the Advisor in generating opportunities that meet
the investment objectives of the Trust;
(iii) The rates charged to other real estate investment trusts and to
investors other than real estate investment trusts by advisors performing
similar services;
(iv) Additional revenues realized by the Advisor its any affiliates
through their relationship with the Trust, including loan administration,
underwriting or broker commissions, servicing, engineering, inspection and
other fees, whether paid by the Trust or by others with whom the Trust does
business;
(v) The quality and extent of service and advice furnished by the
Advisor; and
(vi) The performance of the investment portfolio of the Trust,
including income, conservation or appreciation of capital, frequency of
problem investments and competence in dealing with distress situations.
(c) If the Advisor, a Trustee, or affiliate of either, provides a
substantial amount of services in the effort to sell any property of the Trust,
then he or she or it may receive up to one-half of the brokerage commission paid
but in no event to exceed an amount equal to 3% of the contracted for sales
price. In addition, the amount paid when added to the sums paid to unaffiliated
parties in such capacity shall not exceed the lessor of a "competitive real
estate commission" or an amount equal to 6% of the contracted paid for the
purchase or sale of a property which is reasonable, customary and competitive in
light of the size, type and location of such property.
Section 5.6 Resignation, Removal or Death. Any Trustee may resign by
written notice to the Board, effective upon execution and delivery to the Trust
of such written notice or upon any future date specified in the notice. A
Trustee may be removed at any time, only with cause, at a meeting of the
shareholders, by the affirmative vote of shareholders holding not less than 80%
of the votes entitled to vote generally in the election of Trustees, voting as a
single class. As used herein "cause" shall mean (i) engaging in (A) willful or
gross misconduct or (B) willful or gross neglect, (ii) repeatedly failing to
adhere to the written policies and practices of the Trust, (iii) the commission
of a felony or a crime of moral turpitude, or any crime involving the Trust,
(iv) fraud, misappropriation, embezzlement or material or repeated
insubordination, (v) a material breach of the Trustee's employment agreement (if
any) with the Trust (other than a termination of employment by the Trustee), or
(vi) any illegal act detrimental to the Trust.
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ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.1 Authorized Shares. (a) The beneficial interest of the Trust
shall be divided into shares of beneficial interest (the "Shares"). The Trust
shall have authority to issue 750,000,000 shares of beneficial interest, $.01
par value per share, of which 500,000,000 Shares are initially classified as
"Common Shares," and 100,000,000 Shares are initially classified as "Preferred
Shares." Subject to Article VII, the Board of Trustees may classify and
reclassify any unissued Shares, including any unissued Shares herein designated
as Common Shares or Preferred Shares, by setting or changing in any one or more
respects the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or conditions
of redemption of such shares of beneficial interest.
(b) Upon the effectiveness of this Declaration of Trust, each outstanding
common share of beneficial interest, par value $.01 per share, of the Trust
shall be exchanged for a Common Share which, subject to Article VII below, shall
have the following preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption:
(1) Each Common Share shall have one vote on all matters submitted to
holders of Common Shares and, along with for the Preferred Shares, the
exclusive voting power for all purposes. Common Shares shall not have
cumulative voting rights or preemptive rights;
(2) Subject to the provisions of law and any preferences of the
Preferred Shares described below, or any other class of Shares hereafter
classified or reclassified, dividends or other distributions, including
dividends or other distributions payable in Shares of another class of
beneficial interest of the Trust, may be paid ratably on the Common Shares
at such time and in such amounts as the Board of Trustees may deem
advisable; and
(3) Subject to provisions described below with regard to the Preferred
Shares and any payments due to the Advisor of the Trust described below,
and any other class of Shares hereafter classified or reclassified having
preference on distributions in liquidation, in the event of any
liquidation, dissolution or winding up of the Trust, whether voluntary or
involuntary, the holders of the Common Shares shall be entitled, together
with the holders of any other class of stock hereafter classified or
reclassified not having a preference on distributions in liquidation, to
share ratably in the net assets of the Trust remaining, after payment or
provision for payment of the debts and other liabilities of the Trust.
(c) Upon the effectiveness of this Declaration of Trust, each outstanding
preferred share of beneficial interest, $.01 par value, of the Trust shall be
exchanged for a Preferred Share which, subject to Article VII below, shall have
the following preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemptions:
(1) Each Preferred Share shall have one vote on all matters submitted
to holders of Preferred Shares and, except as otherwise required by law,
shall vote together with the holders of Common Shares as a single class on
all such matters. Preferred Shares shall not have cumulative voting rights
or preemptive rights;
(2) Holders of Preferred Shares shall be entitled to a Preferred Share
Annual Dividend Preference, fixed annually by the Trustees, of not less
than 6%, nor more than 7%, of the $25 initial offering price of the
preferred shares. Preferred Shares shall be paid their Preferred Share
Annual Dividend Preference cumulative (not compounded) each year before any
dividends may be paid on Common Shares. Subject to the rights of any class
of Shares hereafter classified or reclassified, if any, after the Preferred
Share Annual Dividend Preference has been declared and either paid or funds
therefor have been set aside, then dividends may be declared and paid on
Common Shares non cumulative up to an amount per Common Share that is equal
to the per share amount of the Preferred Share Annual Dividend Preference
for that year; provided, however, that quarterly dividends may be paid on
Common Shares if the Trustees, including a majority of the Independent
Trustees, reasonably and in good faith determine that the Preferred Share
Annual Dividend Preference will be covered and paid for the year, and if it
later appears
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that a shortfall in said dividend preference may occur, it will then be
made up before any further Common Share quarterly or other dividend may be
declared and paid. Thereafter, the balance of dividends for that year, if
any, will be paid equally per share on all Common Shares and Preferred
Shares as a single class.
(3) Subject to the rights of any other class of Shares hereafter
classified or reclassified, if any, in the event of any liquidation,
dissolution or winding up of the Trust, whether voluntary or involuntary,
the holders of Preferred Shares shall be entitled to receive, out of the
net assets of the Trust remaining after payment or provision for payment of
the debts and other liabilities of the Trust, and before any payments are
made to the holders of Common Shares, or any other class of Shares
hereafter classified or reclassified ranking junior to the Preferred Shares
with regard to liquidation, an amount per share equal to $25.00 plus 8% of
such amount per share per annum cumulative from the effective date of this
Declaration of Trust up to the liquidation date (not compounded), less all
prior distributions made with respect to each Preferred Share made after
the effective date of this Declaration of Trust up to the liquidation date
(the "Preferred Share Liquidation Preference"). After the payment of the
Preferred Share Liquidation Preference, subject to the rights of any other
class of Shares hereafter classified or reclassified, if any, the holders
of Common Shares shall be entitled to receive, out of the remaining net
assets of the Trust available for distribution upon liquidation,
dissolution or winding up of the Trust, an amount per Share equal to $25.00
plus 10% of such amount per Share per annum cumulative from the effective
date of this Declaration of Trust up to the liquidation date (not
compounded), less all prior distributions made with respect to each Common
Share made after the effective date of this Declaration of Trust up to the
liquidation date (the "Common Share Liquidation Preference"). The balance,
if any, of such net assets will be distributed and paid as follows: (i) 85%
of the balance will be distributed to the holders of Common Shares and
Preferred Shares, pro rata; and (ii) 15% of the balance shall be paid to
the Advisor as an incentive fee. For purposes of this paragraph, it is
assumed that all calculations shall be made as if all Common Shares and
Preferred Shares outstanding on any liquidation date were issued on the
effective date of this Declaration of Trust, and that the respective
holders thereof have received all dividends payable on such Shares from
such effective date through the liquidation date.
(4) In the event that the Common Shares shall be listed on a national
securities exchange or included for quotation on NASDAQ, the Trust shall
have the right to redeem the Preferred Shares (the "Redemption Right"). In
order to exercise the Redemption Right, the Trust must deliver a notice of
redemption (the "Redemption Notice") to the holder of Preferred Shares
specifying the date of redemption (the "Redemption Date"), which date shall
be at least 60 days after the date specified in the notice, the number of
Preferred Shares proposed to be redeemed on such Redemption Date and the
redemption price per share, which shall be equal to the Preferred Share
Liquidation Preference calculated as of the Redemption Date (the
"Redemption Price"). If a Redemption Notice is given by the Trust, each of
the Preferred Shares with respect to which the Redemption Notice shall have
been given shall be redeemed on the Redemption Date, unless prior to that
date the holder thereof exercises its conversion rights specified below and
converts the Preferred Shares held by such holder into Common Shares. On
the Redemption Date, all rights of the holders of Preferred Shares
receiving a Redemption Notice with respect to the Preferred Shares shall
cease and on that date the holders of those Shares will have no interest in
or claims against the Trust by virtue of the Preferred Shares and will have
no voting or other rights with respect to the Preferred Shares, except the
right to receive the Redemption Payment, or Common Shares (to the extent
that such holders have exercised their Conversion Rights).
(5) Upon receipt of a Redemption Notice from the Trust, each holder of
Preferred Shares shall have the right (the "Conversion Right") at any time
prior to the Redemption Date, at the holder's option, to convert each or
any of the Preferred Shares held of record by the holder into one fully
paid and non-assessable Common Share, subject to appropriate adjustment as
determined in the judgment of the Trustees to prevent dilution or
enlargement of the Preferred Shares in the event of any share dividend or
split, combination or reclassification of the Common Shares or Preferred
Shares (without a corresponding change in the Preferred Shares, or Common
Shares, respectively) after the date of the effectiveness of this
Declaration of Trust. In order to exercise the Conversion Right, the holder
of a Preferred Share to be
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converted shall, prior to the Redemption Date, surrender the certificate
representing such Shares to the Trust with the notice of election to
convert on the back of that certificate duly completed and signed, at the
principal office of the Trust. If the Shares issuable on conversion are to
be issued in a name other than the name in which the Preferred Shares are
registered, each Share surrendered for conversion must be accompanied by an
instrument of transfer, in form satisfactory to the Trust, duly executed by
the holder or the holder's duly authorized attorney and by funds in an
amount sufficient to pay any transfer or similar tax which is required to
be paid in connection with the transfer or evidence that tax has been paid.
As promptly as practicable after the surrender by a holder of certificates
representing Preferred Shares, the Trust will issue and will deliver to the
holder at the office of the Trust, or on the holder's written order, a
certificate or certificates for the number of Common Shares issuable upon
the conversion of the Preferred Shares. The Trust will at all times reserve
and keep available, out of the authorized but unissued Common Shares for
the purpose of effecting conversion of the Preferred Shares, the maximum
number of Common Shares which the Trust would be required to deliver upon
the conversion of all the outstanding Preferred Shares.
(d) A description of the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of the Excess Shares of the Trust is set forth in
Article VII.
Section 6.2 Classified or Reclassified Shares.
(a) In the event that the Board of Trustees determines to classify or
reclassify any unissued Shares into a different class or series of shares, the
Board of Trustees shall, prior to issuance of such Shares, by resolution (i)
designate that class or series to distinguish it from all other classes and
series of Shares; (ii) specify the number of Shares to be included in the class
or series; and (iii) set, subject to the provisions of Article VII and subject
to the express terms of any class or series of Shares outstanding at the time,
the preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms and
conditions of redemption for each class or series. Any of the terms of any class
or series of Shares may be made dependent upon facts ascertainable outside this
Declaration of Trust (including the occurrence of any event, including a
determination or action by the Trust or any other person or body) and may vary
among holders thereof, provided that the manner in which such facts or
variations shall operate upon the terms of such class or series of shares as so
designated shall be clearly and expressly set forth in this Declaration of
Trust.
(b) If the Board of Trustees classifies or reclassifies any unissued Shares
by setting or changing the preferences, conversion or other rights, voting power
restrictions, limitations as to dividends or distributions, qualifications, or
terms or conditions of redemption, the Board of Trustees shall, prior to the
issuance of such Shares, prepare an appendix to this Declaration of Trust which
shall include: (i) a description of the Shares so classified or reclassified,
including the preferences, conversion and other rights, voting powers,
restriction, limitations as to dividends or distributions, qualifications, and
terms and conditions of redemption, as set or changed by the Board or Trustees;
and (ii) a statement that the Shares have been classified or reclassified by the
Board of Trustees under the authority contained in this Declaration of Trust.
Section 6.3 Authorization by Board of Share Issuance. The Board of
Trustees may authorize the issuance from time to time of Shares of any class or
series, whether now or hereafter authorized, or securities or rights convertible
into Shares of beneficial interest of any class or series, whether now or
hereafter authorized, for such consideration (whether in cash, property, past or
future services, obligation for future payment or otherwise) as the Board of
Trustees may deem advisable (or without consideration in the case of a share
split or share dividend), subject to such restrictions or limitations, if any,
as may be set forth in this Declaration of Trust.
Section 6.4 Restrictions. Notwithstanding any other provision in this
Declaration of Trust, no determination shall be made by the Board of Trustees
nor shall any transaction be entered into by the Trust which would cause any
Shares or other beneficial interest in the Trust not to constitute "transferable
shares" or "transferable certificates of beneficial interest" under Section
856(a)(2) of the Code or which would cause any distribution to constitute a
preferential dividend as described in Section 562(c) of the Code.
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Section 6.5 General Nature of Shares. All Shares shall be personal
property entitling the shareholders only to those rights provided in this
Declaration of Trust. The shareholders shall have no interest in the property of
the Trust and shall have no right to compel any partition, division, dividend or
distribution of the Trust or of the property of the Trust. The death of a
shareholder shall not terminate the Trust. The Trust is entitled to treat as
shareholders only those persons in whose names Shares are registered as holders
of Shares on the beneficial interest ledger of the Trust.
Section 6.6 Fractional Shares. The Trust may, without the consent or
approval of any shareholder, issue fractional Shares, eliminate a fraction of a
Share by rounding up or down to a full Share, arrange for the disposition of a
fraction of a Share by the person entitled to it, or pay cash for the fair value
of a fraction of a Share.
Section 6.7 Declaration of Trust and By-laws. All shareholders are
subject to the provisions of this Declaration of Trust and the By-laws of the
Trust.
Section 6.8 Divisions and Combinations of Shares. Subject to an express
provision to the contrary in the terms of any class or series of Shares
hereafter authorized, the Board of Trustees shall have the power to divide or
combine the outstanding Shares of any class or series of beneficial interest,
without a vote of shareholders.
ARTICLE VII
RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES
Section 7.1 Definitions. For the purpose of this Article VII, the
following terms shall have the following meanings:
Beneficial Ownership. The term "Beneficial Ownership" shall mean ownership
of Shares by a Person, whether the interest in the Shares is held directly or
indirectly (including by a nominee), and shall include interests that would be
treated as owned through the application of Section 544 of the Code, as modified
by Section 856(h)(1)(B) of the Code. The terms "Beneficial Owner," "Beneficially
Owns" and "Beneficially Owned" shall have the correlative meanings.
Business Day. The term "Business Day" shall mean any day, other than a
Saturday or Sunday, that is neither a legal holiday nor a day on which banking
institutions in New York, New York are authorized or required by law, regulation
or executive order to close.
Charitable Beneficiary. The term "Charitable Beneficiary" shall mean one
or more beneficiaries of the Charitable Trust as determined pursuant to Section
7.3.7, provided that each such organization must be described in Section
501(c)(3) of the Code and contributions to each organization must be eligible
for deduction under Sections 170(b)(1)(A), 2055 and 2522 of the Code.
Charitable Trust. The term "Charitable Trust" shall mean any trust
provided for in Section 7.2.1(b)(i) and Section 7.3.1.
Charitable Trustee. The term "Charitable Trustee" shall mean the Person
unaffiliated with the Trust and a Prohibited Owner, that is appointed by the
Trust to serve as trustee of the Charitable Trust and any successor thereto.
Code. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
Constructive Ownership. The term "Constructive Ownership" shall mean
ownership of Shares by a Person, whether the interest in Shares is held directly
or indirectly (including by a nominee), and shall include interests that would
be treated as owned through the application of Section 318(a) of the Code, as
modified by Section 856(d)(5) of the Code. The terms "Constructive Owner,"
"Constructively Owns" and "Constructively Owned" shall have the correlative
meanings.
Declaration of Trust. The term "Declaration of Trust" shall mean this
Amended and Restated Declaration of Trust, and any amendments hereto.
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Excepted Holder. The term "Excepted Holder" shall mean a shareholder of
the Trust for whom an Excepted Holder Limit is created by the Board of Trustees
pursuant to Section 7.2.7.
Excepted Holder Limit. The term "Excepted Holder Limit" shall mean,
provided that the affected Excepted Holder agrees to comply with the
requirements established by the Board of Trustees pursuant to Section 7.2.7, and
subject to adjustment pursuant to Section 7.2.8, the percentage limit
established by the Board of Trustees pursuant to Section 7.2.7.
Initial Date. The term "Initial Date" shall mean the date upon which this
Declaration of Trust is adopted and approved by the shareholders of the Trust.
Market Price. The term "Market Price" on any date shall mean, with respect
to any class or series of outstanding Shares, the Closing Price for such Shares
on such date. The "Closing Price" on any date shall mean the last sale price for
such Shares, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, for such Shares, in
either case as reported on the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which such Shares are listed or admitted to trading or, if such
Shares are not listed or admitted to trading on any national securities
exchange, the last quoted price, or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
NASDAQ Stock Market or, if such system is no longer in use, the principal other
automated quotation system that may then be in use or, if such Shares are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in such Shares
selected by the Board of Trustees or, in the event that no trading price is
available for such Shares, the fair market value of Shares, as determined in
good faith by the Board of Trustees.
Ownership Limit. The term "Ownership Limit" shall mean 9.9% (in value or
number of Shares, whichever is more restrictive) of the outstanding Shares of
the Trust considered as a single class.
Person. The term "Person" shall mean an individual, corporation,
partnership, estate, trust (including a trust qualified under Sections 401(a) or
501(c)(17) of the Code), a portion of a trust permanently set aside for or to be
used exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 509(a) of the
Code, joint stock company or other entity and also includes a group as that term
is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended.
Prohibited Owner. The term "Prohibited Owner" shall mean, with respect to
any purported Transfer, any Person who, but for the provisions of Section 7.2.1,
would Beneficially Own or Constructively Own Shares, and if appropriate in the
context, shall also mean any Person who would have been the record owner of
Shares that the Prohibited Owner would have so owned.
REIT. The term "REIT" shall mean a real estate investment trust within the
meaning of Sections 856 through 860 of the Code.
Restriction Termination Date. The term "Restriction Termination Date"
shall mean the first day after the Initial Date on which the Board of Trustees
determines that it is no longer in the best interests of the Trust to attempt
to, or continue to, qualify as a REIT or that compliance with the restrictions
and limitations on Beneficial Ownership, Constructive Ownership and Transfers of
Shares set forth herein is no longer required in order for the Trust to qualify
as a REIT.
Transfer. The term "Transfer" shall mean any issuance, sale, transfer,
gift, assignment, devise or other disposition, as well as any other event that
causes any Person to acquire Beneficial Ownership or Constructive Ownership, or
any agreement to take any such actions or cause any such events, of Shares or
the right to vote or receive dividends on Shares, including (a) a change in the
capital structure of the Trust, (b) a change in the relationship between two or
more Persons which causes a change in ownership of Shares by application of
Section 544 of the Code, as modified by Section 856(h), (c) the granting or
exercise of any option or warrant (or any disposition of any option or warrant),
pledge, security interest, or similar right to acquire Shares, (d) any
disposition of any securities or rights convertible into or exchangeable for
Shares or any interest in
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Shares or any exercise of any such conversion or exchange right and (e)
Transfers of interests in other entities that result in changes in Beneficial or
Constructive Ownership of Shares; in each case, whether voluntary or
involuntary, whether of record, or beneficially, and whether by operation of law
or otherwise. (For purposes of this Article VII, the right of a limited partner
in N' Tandem Operating Partnership, L.P., a Delaware limited partnership, to
require the partnership to redeem such limited partner's units of partnership
interest, or exchange such limited partnership units pursuant to the Agreement
of Limited Partnership of N' Tandem Operating Partnership, L.P. shall not be
considered to be an option or similar right to acquire Shares of the Trust.) The
terms "Transferring" and "Transferred" shall have the correlative meanings.
Section 7.2 Shares.
Section 7.2.1 Ownership Limitations. During the period commencing on the
Initial Date and prior to the Restriction Termination Date:
(a) Basic Restrictions.
(i) (1) No Person, other than an Excepted Holder, shall
Beneficially Own or Constructively Own Shares in excess of the Ownership
Limit and (2) no Excepted Holder shall Beneficially Own or
Constructively Own Shares in excess of the Excepted Holder Limit for
such Excepted Holder.
(ii) No Person shall Beneficially or Constructively Own Shares to
the extent that (1) such Beneficial Ownership of Shares would result in
the Trust being "closely held" within the meaning of Section 856(h) of
the Code (without regard to whether the ownership interest is held
during the last half of a taxable year), or (2) such Beneficial or
Constructive Ownership of Shares would result in the Trust otherwise
failing to qualify as a REIT (including, but not limited to, Beneficial
or Constructive Ownership that would result in the Trust owning
(actually or Constructively) an interest in a tenant that is described
in Section 856(d)(2)(B) of the Code if the income derived by the Trust
from such tenant would cause the Trust to fail to satisfy any of the
gross income requirements of Section 856(c) of the Code).
(iii) Notwithstanding any other provision contained herein, any
Transfer of Shares that, if effective, would result in Shares being
Beneficially Owned by less than 100 Persons (determined under the
principles of Section 856(a)(5) of the Code) shall be void ab initio,
and the intended transferee shall acquire no rights in such Shares.
(b) Transfer in Trust. If any Transfer of Shares occurs which, if
effective, would result in any Person Beneficially Owning or Constructively
Owning Shares in violation of Section 7.2.1(a)(i) or (ii),
(i) then that number of Shares the Beneficial or Constructive
Ownership of which otherwise would cause such Person to violate Section
7.2.1(a)(i) or (ii)(rounded to the nearest whole Share) shall be
automatically transferred to a Charitable Trust for the benefit of a
Charitable Beneficiary, as described in Section 7.3, effective as of the
close of business on the Business Day prior to the date of such
Transfer, and such Person shall acquire no rights in such Shares; or
(ii) if the transfer to the Charitable Trust described in clause
(i) of this sentence would not be effective for any reason to prevent
the violation of Section 7.2.1(a)(i) or (ii), then the Transfer of that
number of Shares that otherwise would cause any Person to violate
Section 7.2.1(a)(i) or (ii) shall be void ab initio, and the intended
transferee shall acquire no rights in such Shares.
Section 7.2.2 Remedies for Breach. If the Board of Trustees or any duly
authorized committee thereof shall at any time determine in good faith that a
Transfer or other event has taken place that results in a violation of Section
7.2.1 or that a Person intends to acquire or has attempted to acquire Beneficial
or Constructive Ownership of any Shares in violation of Section 7.2.1 (whether
or not such violation is intended), the Board of Trustees or a committee thereof
shall take such action as it deems advisable to refuse to give effect to or to
prevent such Transfer or other event, including, without limitation, causing the
Trust to redeem Shares, refusing to give effect to such Transfer on the books of
the Trust or instituting proceedings to enjoin such Transfer or other event;
provided, however, that any Transfer or attempted Transfer or other event in
violation of Section 7.2.1 shall automatically result in the transfer to the
Charitable Trust described above,
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and, where applicable, such Transfer (or other event) shall be void ab initio as
provided above irrespective of any action (or non-action) by the Board of
Trustees or a committee thereof.
Section 7.2.3 Notice of Restricted Transfer. Any Person who acquires or
attempts or intends to acquire Beneficial Ownership or Constructive Ownership of
Shares that will or may violate Section 7.2.1(a), or any Person who would have
owned Shares that resulted in a transfer to the Charitable Trust pursuant to the
provisions of Section 7.2.1(b), shall immediately give written notice to the
Trust of such event, or in the case of such a proposed or attempted transaction,
give at least 15 days prior written notice, and shall provide to the Trust such
other information as the Trust may request in order to determine the effect, if
any, of such acquisition or ownership on the Trust's status as a REIT.
Section 7.2.4 Owners Required To Provide Information. From the Initial
Date and prior to the Restriction Termination Date:
(a) every owner of more than one percent (or such other percentage as
required by the Code or the Treasury Regulations promulgated thereunder) of
the outstanding Shares, within 30 days after the end of each taxable year,
shall give written notice to the Trust stating the name and address of such
owner, the number of Shares Beneficially Owned and a description of the
manner in which such Shares are held; provided that a shareholder of record
who holds outstanding Shares as nominee for another Person, which other
Person is required to include in gross income the dividends received on
such Shares (an "Actual Owner"), shall give written notice to the Trust
stating the name and address of such Actual Owner and the number of Shares
of such Actual Owner with respect to which the shareholder of record is
nominee. Each owner shall provide to the Trust such additional information
as the Trust may request in order to determine the effect, if any, of such
Beneficial Ownership on the Trust's status as a REIT and to ensure
compliance with the Ownership Limit.
(b) each Person who is a Beneficial or Constructive Owner of Shares
and each Person (including the shareholder of record) who is holding Shares
for a Beneficial or Constructive Owner shall provide to the Trust such
information as the Trust may request, in good faith, in order to determine
the Trust's status as a REIT and to comply with requirements of any taxing
authority or governmental authority or to determine such compliance.
Section 7.2.5 Remedies Not Limited. Nothing contained in this Section 7.2
shall limit the authority of the Board of Trustees to take such other action as
it deems necessary or advisable to protect the Trust and the interests of its
shareholders in preserving the Trust's status as a REIT or to ensure compliance
with the Ownership Limit and the Excepted Holder Limit.
Section 7.2.6 Ambiguity. In the case of an ambiguity in the application
of any of the provisions of this Article VII, the Board of Trustees shall have
the power to determine the application of the provisions of this Article VII
with respect to any situation based on the facts known to it. If this Article
VII requires an action by the Board of Trustees and this Declaration of Trust
fails to provide specific guidance with respect to such action, the Board of
Trustees shall have the power to determine the action to be taken so long as
such action is not contrary to the provisions of this Article VII.
Section 7.2.7 Exemption; Exceptions.
(a) Chateau Communities, Inc., a Maryland corporation, and its successors
and assigns, shall be exempt from the Ownership Limit. Subject to Section
7.2.1(a)(ii), the Board, in its sole discretion, may also grant to any Person
who makes a request therefor an exception to the Ownership Limit and may
establish or increase an Excepted Holder Limit for such Person if: (A) the Board
shall have determined that (x) assuming such Person would Beneficially or
Constructively Own the maximum amount of Shares permitted as a result of the
exception to be granted and (y) assuming that all other Persons who would be
treated as "individuals" for purposes of Section 542(a)(2) (determined taking
into account Section 856(h)(3)(A) of the Code) would Beneficially or
Constructively Own the maximum amount of Shares permitted under this Article VII
(taking into account any exception, waiver, or exemption granted under this
Section 7.2.7 to (or with respect to) such Persons), the Trust would not be
"closely held" within the meaning of Section 856(h) of the Code (without regard
to whether the ownership of Shares is determined during the second half of a
taxable year) and would
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not otherwise fail to qualify as a REIT; and (B) such Person provides to the
Board such representations and undertakings, if any, as the Board may, in its
sole and absolute discretion, determine to be necessary in order for it to make
the determination that the conditions set forth in clause (A) above of this
Section 7.2.7(a) have been and/or will continue to be satisfied, and (C) such
Person agrees that any violation of such representations and undertakings or any
attempted violation thereof will result in the application of the remedies set
forth in Section 7.2 with respect to Shares held in excess of the Ownership
Limit or the Excepted Holder Limit (as may be applicable) with respect to such
Person (determined without regard to the exception granted such Person under
this subparagraph (a)). If a member of the Board requests that the Board grant
an exception pursuant to this subparagraph (a) with respect to such member or
with respect to any other Person if such Board member would be considered to be
the Beneficial or Constructive Owner of Shares owned by such Person, such member
of the Board shall not participate in the decision of the Board as to whether to
grant any such exception.
(b) Prior to granting any exception pursuant to subparagraph (a), the Board
may require a ruling from the Internal Revenue Service, an opinion of counsel or
other evidence, in each case in form and substance satisfactory to the Board, in
its sole and absolute discretion as it may deem necessary or advisable in order
to determine or ensure the Trust's status as a REIT; provided, however, that the
Board shall not be obligated to require obtaining a favorable ruling or opinion
in order to grant an exception hereunder. Notwithstanding the receipt of any
ruling, opinion or other evidence, the Board may impose such conditions or
restrictions as it deems appropriate in connection with granting any exception.
(c) Subject to Section 7.2.1(a)(ii), an underwriter that participates in a
public offering or a private placement of Shares (or securities convertible into
or exchangeable for Shares) may Beneficially or Constructively Own Shares (or
securities convertible into or exchangeable for Shares) in excess of the
Ownership Limit, but only to the extent necessary to facilitate such public
offering or private placement.
(d) The Board of Trustees may only reduce the Excepted Holder Limit for an
Excepted Holder: (1) with the written consent of such Excepted Holder at any
time, or (2) pursuant to the terms and conditions of the agreements and
undertakings entered into with such Excepted Holder in connection with the
establishment of the Excepted Holder Limit for that Excepted Holder. No Excepted
Holder Limit shall be reduced to a percentage that is less than the Ownership
Limit.
Section 7.2.8 Changes in Ownership Limit. The Board of Trustees may from
time to time increase or decrease the Ownership Limit, subject to the
limitations provided in this Section 7.2.8.
(a) Any decrease may be made only prospectively as to subsequent holders
(other than a decrease as a result of a retroactive change in existing law, in
which case such decrease shall be effective immediately).
(b) The Ownership Limit may not be increased if, after giving effect to
such increase, five Persons who are considered individuals pursuant to Section
542 of the Code, as modified by Section 856(h)(3) of the Code (taking into
account all of the Excepted Holders), could Beneficially Own, in the aggregate,
more than 49.5% of the value of the outstanding Shares.
(c) Prior to the modification of the Ownership Limit pursuant to this
Section 7.2.8, the Board may require such opinions of counsel, affidavits,
undertakings or agreements as it may deem necessary or advisable in order to
determine or ensure the Trust's status as a REIT if the modification in the
Ownership Limit were to be made.
Section 7.2.9 Legend. Each certificate for Shares shall bear
substantially the following legend:
The shares represented by this certificate are subject to restrictions
on Beneficial and Constructive Ownership and Transfer for the purpose
of the Trust's maintenance of its status as a Real Estate Investment
Trust (a "REIT") under the Internal Revenue Code of 1986, as amended
(the "Code"). Subject to certain further restrictions and except as
expressly provided in the Trust's Declaration of Trust, and subject to
the exemption and exceptions granted under Section 7.2.7 of the
Declaration of Trust (i) no Person may Beneficially or Constructively
Own Shares of the Trust in excess of 9.9 percent (in value or number
of shares) of the outstanding Shares of the Trust unless
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such Person is exempt, or an Excepted Holder (in which case the
Excepted Holder Limit shall be applicable); (iii) no Person may
Beneficially or Constructively Own Shares that would result in the
Trust being "closely held" under Section 856(h) of the Code or
otherwise cause the Trust to fail to qualify as a REIT; and (iv) no
Person may Transfer Shares if such Transfer would result in Shares of
the Trust being owned by fewer than 100 Persons. Any Person who
Beneficially or Constructively Owns or attempts to Beneficially or
Constructively Own Shares which cause or will cause a Person to
Beneficially or Constructively Own Shares in excess or in violation of
the above limitations must immediately notify the Trust. If any of the
restrictions on transfer or ownership are violated, the Shares
represented hereby will be automatically transferred to a Charitable
Trustee of a Charitable Trust for the benefit of one or more
Charitable beneficiaries. In addition, upon the occurrence of certain
events, attempted Transfers in violation of the restrictions described
above may be void ab initio. A Person who attempts to Beneficially or
Constructively Own Shares in violation of the ownership limitations
described above shall have no claim, cause of action, or any recourse
whatsoever against a transferor of such Shares. All capitalized terms
in this legend have the meanings defined in the Trust's Declaration of
Trust, as the same may be amended from time to time, a copy of which,
including the restrictions on transfer and ownership, will be
furnished to each holder of Shares of the Trust on request and without
charge.
Instead of the foregoing legend, the certificate may state that the Trust
will furnish a full statement about certain restrictions on transferability to a
shareholder on request and without charge.
Section 7.2.10 Severability. If any of the restriction on transfers of
Shares contained in this Article VII are determined to be void, invalid or
unenforceable by any court of competent jurisdiction, then the Prohibited Owner
may be deemed, at the option of the Trust, to have acted as an agent of the
Trust in acquiring such Shares and to hold such Shares on behalf of the Trust.
Section 7.3 Transfer of Shares in Trust.
Section 7.3.1 Ownership in Trust. Upon any purported Transfer or other
event described in Section 7.2.1(b) that would result in a transfer of Shares to
a Charitable Trust, such Shares shall be deemed to have been transferred to the
Charitable Trustee as trustee of a Charitable Trust for the exclusive benefit of
one or more Charitable Beneficiaries. Such transfer to the Charitable Trustee
shall be deemed to be effective as of the close of business on the Business Day
prior to the purported Transfer or other event that results in the transfer to
the Charitable Trust pursuant to Section 7.2.1(b). The Charitable Trustee shall
be appointed by the Trust and shall be a Person unaffiliated with the Trust and
any Prohibited Owner. Each Charitable Beneficiary shall be designated by the
Trust as provided in Section 7.3.7.
Section 7.3.2 Status of Shares Held by the Charitable Trustee. Shares
held by the Charitable Trustee shall be issued and outstanding Shares of the
Company. The Prohibited Owner shall have no rights in the Shares held by the
Charitable Trustee. The Prohibited Owner shall not benefit economically from
ownership of any Shares held in trust by the Charitable Trustee, shall have no
rights to dividends or other distributions and shall not possess any rights to
vote or other rights attributable to the Shares held in the Charitable Trust.
The Prohibited Owner shall have no claim, cause of action, or any other recourse
whatsoever against the purported transferor of such Shares.
Section 7.3.3 Dividend and Voting Rights. The Charitable Trustee shall
have all voting rights and rights to dividends or other distributions with
respect to Shares held in the Charitable Trust, which rights shall be exercised
for the exclusive benefit of the Charitable Beneficiary. Any dividend or other
distribution paid prior to the discovery by the Trust that Shares have been
transferred to the Charitable Trustee shall be paid with respect to such Shares
to the Charitable Trustee upon demand and any dividend or other distribution
authorized but unpaid shall be paid when due to the Charitable Trustee. Any
dividends or distributions so paid over to the Charitable Trustee shall be held
in trust for the Charitable Beneficiary. The Prohibited Owner shall have no
voting rights with respect to Shares held in the Charitable Trust and, subject
to California law, effective as of the date that Shares have been transferred to
the Charitable Trustee, the Charitable Trustee shall have the authority (at the
Charitable Trustee's sole discretion) (i) to rescind as void any vote cast by a
Prohibited Owner prior to the discovery by the Trust that Shares have been
transferred to the Charitable
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Trustee and (ii) to recast such vote in accordance with the desires of the
Charitable Trustee acting for the benefit of the Charitable Beneficiary;
provided, however, that if the Trust has already taken irreversible action, then
the Charitable Trustee shall not have the power to rescind and recast such vote.
Notwithstanding the provisions of this Article VII, until the Trust has received
notification that Shares have been transferred into a Charitable Trust, the
Trust shall be entitled to rely on its share transfer and other shareholder
records for purposes of preparing lists of shareholders entitled to vote at
meetings, determining the validity and authority of proxies and otherwise
conducting votes of shareholders.
Section 7.3.4 Rights Upon Liquidation. Upon any voluntary or involuntary
liquidation, dissolution or winding up of or any distribution of the assets of
the Trust, the Charitable Trustee shall be entitled to receive, ratably with
each other holder of Shares of the class or series of Shares that is held in the
Charitable Trust, that portion of the assets of the Trust available for
distribution to the holders of such class or series (determined based upon the
ratio that the number of Shares or such class or series of Shares held by the
Charitable Trustee bears to the total number of Shares of such class or series
of Shares then outstanding). The Charitable Trustee shall distribute any such
assets received in respect of the Shares held in the Charitable Trust in any
liquidation, dissolution or winding up of, or distribution of the assets of the
Trust, in accordance with Section 7.3.5.
Section 7.3.5 Sale of Shares by Charitable Trustee. Within 20 days of
receiving notice from the Trust that Shares have been transferred to the
Charitable Trust, the Charitable Trustee of the Charitable Trust shall sell the
Shares held in the Charitable Trust to a person, designated by the Charitable
Trustee, whose ownership of the Shares will not violate the ownership
limitations set forth in Section 7.2.1(a). Upon such sale, the interest of the
Charitable Beneficiary in the Shares sold shall terminate and the Charitable
Trustee shall distribute the net proceeds of the sale to the Prohibited Owner
and to the Charitable Beneficiary as provided in this Section 7.3.5. The
Prohibited Owner shall receive the lesser of (1) the price paid by the
Prohibited Owner for the Shares or, if the Prohibited Owner did not give value
for the Shares in connection with the event causing the Shares to be held in the
Charitable Trust (e.g., in the case of a gift, devise or other such
transaction), the Market Price of the Shares on the day of the event causing the
Shares to be held in the Charitable Trust and (2) the price per share received
by the Charitable Trustee from the sale or other disposition of the Shares held
in the Charitable Trust. Any net sales proceeds in excess of the amount payable
to the Prohibited Owner shall be immediately paid to the Charitable Beneficiary.
Each Prohibited Owner and Charitable Beneficiary waives any and all claims that
they may have against the Charitable Trustee and the Charitable Trust arising
out of the disposition of any Shares transferred to the Charitable Trust, except
for claims arising out of gross negligence or willful misconduct of, or any
failure to make payment in accordance with this Section 7.3.5 by, the Charitable
Trustee or the Trust. If, prior to the discovery by the Trust that Shares have
been transferred to the Charitable Trustee, such Shares are sold by a Prohibited
Owner, then (i) such Shares shall be deemed to have been sold on behalf of the
Charitable Trust and (ii) to the extent that the Prohibited Owner received an
amount for such Shares that exceeds the amount that such Prohibited Owner was
entitled to receive pursuant to this Section 7.3.5, such excess shall be paid to
the Charitable Trustee upon demand. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of, or any distribution of assets of, the
Trust, prior to the sale of Shares held in the Charitable Trust, the Prohibited
Owner shall receive the lesser of (i) the price paid by the Prohibited Owner for
the Shares, or if the Prohibited Owner did not give value for the Shares in
connection with the event causing the Shares to be held in the Charitable Trust
(e.g. in the case of gift, devise or other such transaction), the Market Price
of the Shares on the day of the event causing the Shares to be held in the
Charitable Trust and (ii) the amount of assets received in respect of the Shares
in any liquidation, dissolution, or winding up of, or any distribution of the
assets of the Trust. Any assets received in excess of the amount payable to the
Prohibited Owner shall be immediately paid to the Charitable Beneficiary.
Section 7.3.6 Purchase Right in Shares Transferred to the Charitable
Trustee. Shares transferred to the Charitable Trustee shall be deemed to have
been offered for sale to the Trust, or its designee, at a price per share equal
to the lesser of (i) the price per share in the transaction that resulted in
such transfer to the Charitable Trust (or, in the case of a devise or gift, the
Market Price at the time of such devise or gift) and (ii) the Market Price on
the date the Trust, or its designee, accepts such offer. The Trust shall have
the right
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to accept such offer until the Charitable Trustee has sold the Shares held in
the Charitable Trust pursuant to Section 7.3.5. Upon such a sale to the Trust,
the interest of the Charitable Beneficiary in the Shares sold shall terminate
and the Charitable Trustee shall distribute the net proceeds of the sale to the
Prohibited Owner.
Section 7.3.7 Designation of Charitable Beneficiaries. By written notice
to the Charitable Trustee, the Trust shall designate one or more nonprofit
organizations to be the Charitable Beneficiary of the interest in the Charitable
Trust such that (i) Shares held in the Charitable Trust would not violate the
restrictions set forth in Section 7.2.1(a) in the hands of such Charitable
Beneficiary and (ii) each such organization must be described in Sections
501(c)(3) of the Code and contributions to each such organization must be
eligible for deduction under each of Sections 170(b)(1)(A), 170(c)(2), 2055 and
2252 of the Code.
Section 7.4 Stock Exchange Transactions. Nothing in this Article VII
shall preclude the settlement of any transaction entered into through the
facilities of any national securities exchange or automated inter-dealer
quotation system. The fact that the settlement of any transaction is so
permitted shall not negate the effect of any other provision of this Article VII
and any transferee in such a transaction shall be subject to all of the
provisions and limitations set forth in this Article VII.
Section 7.5 Enforcement. The Trust is authorized specifically to seek
equitable relief, including injunctive relief, to enforce the provisions of this
Article VII.
Section 7.6 Non-Waiver. No delay or failure on the part of the Trust or
the Board of Trustees in exercising any right hereunder shall operate as a
waiver of any right of the Trust or the Board of Trustees, as the case may be,
except to the extent specifically waived in writing.
ARTICLE VIII
SHAREHOLDERS
Section 8.1 Meetings. There shall be an annual meeting of the
shareholders, to be held on proper notice at such time (after the delivery of
the annual report) and convenient location as shall be determined by or in the
manner prescribed in the By-laws, for the election of the Trustees, if required,
and for the transaction of any other business within the powers of the Trust.
Except as otherwise provided in this Declaration of Trust, special meetings of
shareholders shall be called in the manner provided in the By-laws. If there are
no Trustees, the officers of the Trust shall promptly call a special meeting of
the shareholders entitled to vote for the election of successor Trustees. Any
meeting may be adjourned and reconvened as the Trustees determine or as provided
in the By-laws.
Section 8.2 Voting Rights. Subject to the provisions of any class or
series of Shares then outstanding, the shareholders shall be entitled to vote
only on the following matters: (a) election of Trustees as provided in Section
5.2 and the removal of Trustees as provided in Section 5.6; (b) amendment of
this Declaration of Trust as provided in Article X; (c) termination of the Trust
as provided in Section 12.2; (d) except as otherwise provided in Section 8.4(a)
hereof, the merger or consolidation of the Trust, or the sale or disposition of
substantially all of the assets of the Trust; (e) such other matters with
respect to which the Board of Trustees has adopted a resolution declaring that a
proposed action is advisable and directing that the matter be submitted to the
shareholders for approval or ratification; and (f) such other matters as may be
properly brought before a meeting for a vote by shareholders, pursuant to the
By-laws. Except as otherwise provided in this Declaration of Trust, or the
By-laws, shareholders shall be entitled to one vote for each share held, and the
affirmative vote of the holders of a majority of all the votes entitled to be
cast on the matter shall be sufficient to approve any such matter submitted.
Except with respect to the foregoing matters, no action taken by the
shareholders at any meeting shall in any way bind the Board of Trustees.
Section 8.3 Preemptive and Appraisal Rights. Except as may be provided by
the Board of Trustees in setting the terms of classified or reclassified Shares
pursuant to Section 6.2, or under applicable law, no holder of Shares shall, as
such holder, (a) have any preemptive right to purchase or subscribe for any
additional Shares of the Trust or any other security of the Trust which it may
issue or sell or (b) have any right to require the Trust to pay him the fair
value of his Shares in an appraisal or similar proceeding.
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Section 8.4 Business Combinations; Transfers of Assets.
(a) Authorized Transactions. The Board of Trustees shall have full power
and authority, without the consent of the shareholders or any of them, or any
shareholder vote with respect thereto, to engage in any transaction pursuant to
which the Trust's business and assets may be transferred to another entity (a
"Transfer of Assets"), or by which the Trust's business and assets are to be
combined with one or more other entities (a "Business Combination"), on such
terms and subject to such conditions as the Board of Trustees, in its discretion
may determine (whether by merger, sale or other transfer of assets,
consolidation or exchange of securities), provided that the Trust has, or the
shareholders of the Trust existing prior to any such Transfer of Assets or
Business Combination have, majority voting power, directly or indirectly, with
respect to the entity receiving the Trust's assets in a Transfer of Assets, or
the surviving entity in any merger, consolidation or exchange with respect to
any Business Combination.
(b) Transactions Requiring Shareholder Approval. Except as otherwise
specifically provided in this Declaration of Trust, notwithstanding any
provision of law permitting or requiring any action to be taken or authorized by
the affirmative vote of the holders of a greater number of votes, any
transaction the approval of which requires by law the affirmative vote of
shareholders and pursuant to which the Trust's business and assets will be
combined with those of one or more other entities (whether by merger, sale or
other transfer of assets, consolidation or share exchange) shall be effective
and valid only if taken or authorized by the affirmative vote of shareholders
holding not less than 66 2/3% of all the votes entitled to be cast on the
matter.
(c) For purposes of this Section 8.4 "entity" shall mean any foreign or
domestic real estate investment trust, business trust, corporation, limited
liability company, general or limited partnership, or any other entity.
Section 8.5 No Action by Shareholders Without a Meeting. Any action
required to be taken by shareholders of the Trust must be taken at a meeting of
shareholders called for such purpose.
ARTICLE IX
LIABILITY LIMITATION, INDEMNIFICATION
AND TRANSACTIONS WITH THE TRUST
Section 9.1 Limitation of Shareholder Liability. No shareholder shall be
liable for any debt, claim, demand, judgment or obligation of any kind of,
against or with respect to the Trust by reason of his being a shareholder, nor
shall any shareholder be subject to any personal liability whatsoever, in tort,
contract or otherwise, to any person in connection with the property or the
affairs of the Trust by reason of his being a shareholder.
Section 9.2 Limitation of Trustee and Officer Liability. To the maximum
extent that California law in effect from time to time permits limitation of the
liability of trustees and officers of a business trust or a real estate
investment trust, no Trustee or officer of the Trust shall be liable to the
Trust or to any shareholder for money or other damages. Neither the amendment
nor repeal of this Section 9.2, nor the adoption or amendment of any other
provision of this Declaration of Trust inconsistent with this Section 9.2, shall
apply to or affect in any respect the applicability of the preceding sentence
with respect to any act or failure to act which occurred prior to such
amendment, repeal or adoption. In the absence of any California statute
permitting limitation of the liability of trustees and officers of a California
business trust or real estate investment trust for money or other damages in a
suit by or on behalf of the Trust or by any shareholder, no Trustee or officer
of the Trust shall be liable to the Trust or to any shareholder for money or
other damages except to the extent that (a) the Trustee or officer actually
received an improper benefit or profit in money, property, or services, for the
amount of the benefit or profit in money, property, or services actually
received; or (b) a judgment or other final adjudication adverse to the Trustee
or officer is entered in a proceeding based on a finding in the proceeding that
the Trustee's or officer's action or failure to act was the result of active and
deliberate dishonesty and was material to the cause of action adjudicated in the
proceeding.
Section 9.3 Indemnification. The Trust shall have the power, to the
maximum extent permitted by California law in effect from time to time, to
obligate itself to indemnify, and to pay or reimburse reasonable
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expenses in advance of final disposition of a proceeding to, (a) any individual
who is a present or former shareholder, Trustee or officer of the Trust or (b)
any individual who, while a Trustee of the Trust and at the request of the
Trust, serves or has served as a director, officer, partner, trustee, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or any other enterprise from and against any claim or liability to
which such person may become subject or which such person may incur by reason of
his status as a present or former shareholder, Trustee or officer of the Trust.
The Trust shall have the power, with the approval of its Board of Trustees, to
provide such indemnification and advancement of expenses to a person who served
a predecessor of the Trust in any of the capacities described in (a) or (b)
above and to any employee or agent of the Trust or a predecessor of the Trust.
Section 9.4 Transactions Between the Trust and its Trustees, Officers,
Employees and Agents. Subject to any express restrictions or procedures in this
Declaration of Trust or in the By-laws, or adopted by the Trustees by
resolution, the Trust may enter into any contract or transaction of any kind
with any person, including any Trustee, officer, employee or agent of the Trust
or any person affiliated with a Trustee, officer, employee or agent of the
Trust, whether or not any of them has a financial interest in such transaction.
Section 9.5 Express Exculpatory Clauses in Instruments. The Board of
Trustees shall cause to be inserted in every written agreement, undertaking or
obligation made or issued on behalf of the Trust, an appropriate provision to
the effect that neither the shareholders nor the Trustees, officers, employees
or agents of the Trust shall be liable under any written instrument creating an
obligation of the Trust, and all Persons shall look solely to the property of
the Trust for the payment of any claim under or for the performance of that
instrument. The omission of the foregoing exculpatory language from any
instrument shall not affect the validity or enforceability of such instrument
and shall not render any shareholder, Trustee, officer, employee or agent liable
thereunder to any third party nor shall the Trustees or any officer, employee or
agent of the Trust be liable to anyone for such omission.
ARTICLE X
AMENDMENTS
Section 10.1 General. The Trust reserves the right from time to time to
make any amendment to this Declaration of Trust, now or hereafter authorized by
law, including any amendment altering the terms or contract rights, as expressly
set forth in this Declaration of Trust, of any Shares. All rights and powers
conferred by this Declaration of Trust on shareholders, Trustees and officers
are granted subject to this reservation. Amendment to this Declaration of Trust
shall be signed and acknowledged by at least a majority of the Trustees, or an
officer duly authorized by at least a majority of the Trustees. All references
to this Declaration of Trust shall include all amendments hereto.
Section 10.2 By Trustee. The Trustees may amend this Declaration of Trust
from time to time, without any action by the shareholders, to qualify as a real
estate investment trust under the Code or under the California REIT Statute and
as otherwise provided in this Declaration of Trust.
Section 10.3 By Trustees and Shareholders. Except as otherwise provided
in this Declaration of Trust, any amendment to this Declaration of Trust shall
be valid only if approved by the Trustees and the affirmative vote of
shareholders holding not less than a majority of all the votes entitled to be
cast on the matter, except that amendments to Section 8.4(b), Articles XI, XII
and XIII shall require the affirmative vote of shareholders holding not less
than 66 2/3% of all votes entitled to be cast on the matter.
ARTICLE XI
MERGER, CONSOLIDATION OR SALE OF TRUST PROPERTY
Section 11.1 Subject to the provisions of any class or series of Shares at
the time outstanding, the Trust shall have the power to engage in any merger or
consolidation or other business combination or other extraordinary transaction
permitted under applicable law including without limitation (a) a merger of the
Trust with or into another entity, (b) the consolidation of the Trust with one
or more other entities into a new
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entity or otherwise, or (c) the sale, lease, exchange or other transfer of all
or substantially all of the property of the Trust. Unless otherwise provided in
Section 8.4(a) hereof, any such action must be approved by the Board of Trustees
and, after notice to all shareholders entitled to vote on the matter, by the
affirmative vote of shareholders holding not less than 66 2/3% of all the votes
entitled to be cast on the matter.
Section 11.2 Special Provisions Relating to Mergers.
11.2.1 Definitions. In this section the following words having the
meanings indicated.
(a) "Business trust" means an unincorporated trust or association,
including a real estate investment trust, a common-law trust, or a Massachusetts
trust, which is engaged in business and in which property is acquired, held,
managed, administered, controlled, invested, or disposed of for the benefit and
profit of any person who may become a holder of a transferable unit of
beneficial interest in the trust.
(b) "Foreign business trust" means a business trust organized under the
laws of the United States, another state of the United States, or a territory,
possession, or district of the United States.
(c) "California real estate investment trust" means a real estate
investment trust in compliance with the provisions of the California REIT Law.
(d) "Domestic limited partnership" means a partnership formed by two or
more persons under the laws of the State of California and having one or more
general partners and one or more limited partners.
(e) "Foreign limited partnership" means a partnership formed under the laws
of any state other than the State of California or under the laws of a foreign
country and having as partners one or more limited partners.
(f) "Domestic limited liability company" means a limited liability company
formed under the laws of the State of California.
(g) "Foreign limited liability company" means a limited liability company
formed under the laws of any state other than the State of California or under
the laws of a foreign country.
11.2.2 Merger authorized. To the extent permitted by applicable law, the
Trust may merge with or into one or more Domestic or Foreign business trusts,
Domestic or Foreign corporations or Domestic or Foreign limited partnerships or
Foreign or Domestic limited liability companies, or any other entities; or one
or more such business trusts, corporations, limited partnerships, limited
liability companies or other entities may merge with or into it (each, a
"Merger").
Any such Merger shall be approved as follows: (a) the Board shall:
(i) Adopt a resolution that declares the proposed transaction is
advisable on substantially the terms and conditions set forth or referred
to in the resolution; and
(ii) Except as otherwise provided in Section 8.4(a) hereof, direct
that the proposed transaction be submitted for consideration at either an
annual or special meeting of shareholders; and
(iii) Comply with all other procedural and other requirements required
by applicable law or this Declaration of Trust; and
(b) Except as otherwise provided in Section 8.4(a) hereof, the proposed
Merger shall be approved by the affirmative vote of shareholders holding not
less than 66 2/3% of all the votes entitled to be cast with respect to the
Merger.
11.2.3 Abandonment of proposed Merger. A proposed Merger may be abandoned
before the effective date of Merger.
11.2.4 Effect of Merger.
(a) Consummation of a Merger has the effects provided in this subsection
and under applicable law.
(b) The separate existence of each business trust, corporation, limited
partnership, limited liability company or other entity that is party to the
Merger (except the successor), ceases.
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(c) The shares or other equity interests of each entity that is a party to
the Merger which are to be converted or exchanged under the terms of the Merger
cease to exist.
(d) (i) The assets of each party to the Merger, including any legacies
which it would have been capable of taking, transfer to, vest in, and devolve on
the successor without further act or deed.
(ii) Confirmatory deeds, assignments, or similar instruments to evidence
the transfer may be executed and delivered at any time in the name of the
transferring party to the Merger by its last acting officers or trustees or by
the appropriate officers or trustees of the successor.
(e) (i) The successor is liable for all the debts and obligations of each
nonsurviving party in the Merger. An existing claim, action, or proceeding
pending by or against any nonsurviving party to the Merger may be prosecuted to
judgment as if the merger had not taken place, or, on motion of the successor or
any party, the successor may be substituted as a party and the judgment against
the nonsurviving party in the Merger constitutes a lien on the property of the
successor.
(ii) A Merger does not impair the rights of creditors or any liens on the
property of any business trust, corporation, limited partnership, or limited
liability company or other entity that is a party to the Merger.
ARTICLE XII
DURATION AND TERMINATION OF TRUST
Section 12.1 Duration. The Trust shall continue perpetually unless
terminated pursuant to Section 12.2 or pursuant to any applicable provision of
the California REIT Statute.
Section 12.2 Termination.
(a) Subject to the provisions of any class or series of Shares at the time
outstanding, the Trust may be terminated at any meeting of shareholders, by the
affirmative vote of shareholders holding not less than 66 2/3% of all the votes
entitled to be cast on the matter. Upon the termination of the Trust:
(i) The Trust shall carry on no business except for the purpose of
winding up its affairs;
(ii) The Trustees shall proceed to wind up the affairs of the Trust
and all of the powers of the Trustees under this Declaration of Trust shall
continue, including the powers to fulfill or discharge the Trust's
contracts, collect its assets, sell, convey, assign, exchange, transfer or
otherwise dispose of all or any part of the remaining property of the Trust
to one or more persons at public or private sale for consideration which
may consist in whole or in part of cash, securities or other property of
any kind, discharge or pay its liabilities and do all other acts
appropriate to liquidate its business; and
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and agreements
as they deem necessary for their protection, the Trust shall distribute the
remaining property of the Trust among the shareholders in accordance with
Article VI hereof.
(b) After termination of the Trust, the liquidation of its business and the
distribution to the shareholders as herein provided, a majority of the Trustees
shall execute and file with the Trust's records a document certifying that the
Trust has been duly terminated, and the Trustees shall be discharged from all
liabilities and duties hereunder, and the rights and interests of all
shareholders shall cease.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Governing Law. The rights of all parties and the validity,
construction and effect of every provision hereof shall be subject to and
construed according to the laws of the State of California without regard to
conflicts of laws provisions thereof.
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Section 13.2 Reliance by Third Parties. Any certificate of the Trust
shall be final and conclusive as to any person dealing with the Trust if
executed by the Secretary or an Assistant Secretary of the Trust or a Trustee,
and if certifying to: (a) the number or identity of Trustees, officers of the
Trust or shareholders; (b) the due authorization of the execution of any
document; (c) the action or vote taken, and the existence of a quorum, at a
meeting of the Board of Trustees or shareholders; (d) a copy of this Declaration
of Trust or of the By-laws as a true and complete copy as then in force; (e) an
amendment to this Declaration of Trust; (f) the termination of the Trust; or (g)
the existence of any fact or relating to the affairs of the Trust. No purchaser,
lender, transfer agent or other person shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made by the Trust on
its behalf or by any officer, employee or agent of the Trust.
Section 13.3 Severability.
(a) The provisions of this Declaration of Trust are severable, and if the
Board of Trustees shall determine, with the advice of counsel, that any one or
more of such provisions (the "Conflicting Provisions") are in conflict with the
Code, or other applicable federal or state laws, the Conflicting Provisions, to
the extent of the conflict, shall be deemed never to have constituted a part of
this Declaration of Trust, even without any amendment of this Declaration of
Trust pursuant to Article X and without affecting or impairing any of the
remaining provisions of this Declaration of Trust or rendering invalid or
improper any action taken or omitted prior to such determination. No Trustee
shall be liable for making or failing to make such a determination. In the event
of any such determination by the Board of Trustees, the Board shall amend this
Declaration of Trust in the manner provided in Section 10.2.
(b) If any provision of this Declaration of Trust shall be held invalid or
unenforceable in any jurisdiction, such holding shall apply only to the extent
of any such invalidity or purposes and shall not in any manner affect, impair or
render invalid or unenforceable such provision in any other jurisdiction or any
other provision of this Declaration of Trust in any jurisdiction.
Section 13.4 Construction. In this Declaration of Trust, unless the
context otherwise requires, words used in the singular or in the plural include
both the plural and singular and words denoting any gender include all genders.
The title and headings of different parts are inserted for convenience and shall
not affect the meaning, construction or effect of this Declaration of Trust. In
defining or interpreting the powers and duties of the Trust and its Trustees and
officers, reference may be made by the Trustees or officers, to the extent
appropriate and not inconsistent with the Code or the California REIT Statute.
Section 13.5 Annual Report. Each year, the Trust shall prepare an annual
report of its operations. The report shall include a balance sheet, an income
statement, and a surplus statement.
(a) Report to be audited. The financial statements in the annual report
shall be certified by an independent certified public accountant based on the
accountant's full examination of the books and records of the real estate
investment trust in accordance with generally accepted auditing procedure.
(b) Report to be submitted to shareholders and held on file. The annual
report: (i) shall be mailed to shareholders at or before the annual meeting of
shareholders; and (ii) within the earlier of 20 days after the annual meeting of
shareholders or 120 days after the end of the fiscal year, shall be placed on
file at the principal office of the Trust.
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IN WITNESS WHEREOF, THIS AMENDED AND RESTATED DECLARATION OF TRUST HAS BEEN
SIGNED ON THIS ____ DAY OF OCTOBER, 1998 BY ALL OF THE TRUSTEES OF THE TRUST.
WINDSOR REAL ESTATE INVESTMENT TRUST 8
------------------------------------------
TRUSTEE
------------------------------------------
TRUSTEE
------------------------------------------
TRUSTEE
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APPENDIX B
N' TANDEM TRUST
BY-LAWS
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office of N' Tandem Trust, an
unincorporated California business trust (the "Trust"), shall be located at such
place or places as the Trustees may designate.
Section 2. ADDITIONAL OFFICES. The Trust may have additional offices at
such places as the Trustees may from time to time determine or the business of
the Trust may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE. All meetings of shareholders shall be held at the
principal office of the Trust or at such other place within the United States as
shall be stated in the notice of the meeting.
Section 2. ANNUAL MEETING. An annual meeting of the shareholders for the
election of Trustees and the transaction of any business within the powers of
the Trust shall be held during the month of May of each year, or such other
month as the Trustees may designate after the delivery of the annual report
referred to in Section 12 of this Article II, at a convenient location and on
proper notice, on a date and at the time set by the Trustees. Failure to hold an
annual meeting shall not invalidate the Trust's existence or affect any
otherwise valid acts of the Trust.
Section 3. SPECIAL MEETINGS. The Chairman of the Board of Trustees or the
president or a majority of the Trustees may call special meetings of the
shareholders. Special meetings of shareholders shall also be called by the
secretary upon the written request of the holders of shares entitled to cast not
less than 25% of all the votes entitled to be cast at such meeting. Such request
shall state the purpose of such meeting and the matters proposed to be acted on
at such meeting. Within ten days of the receipt of such a request from a
shareholder, the secretary shall inform such shareholders of the reasonably
estimated cost of preparing and mailing notice of the meeting (including all
proxy materials that may be required in connection therewith) and, upon payment
by such shareholders to the Trust of such costs, the secretary shall, within 30
days of such payment, or such longer period as may be necessitated by compliance
with any applicable statutory or regulatory requirements, give notice to each
shareholder entitled to notice of the meeting.
Unless requested by shareholders entitled to cast a majority of all the
votes entitled to be cast at such meeting, a special meeting need not be called
to consider any matter which is substantially the same as a matter voted on at
any meeting of the shareholders held during the preceding 12 months.
Section 4. NOTICE. Not less than ten nor more than 90 days before each
meeting of shareholders, the secretary shall give to each shareholder entitled
to vote at such meeting and to each shareholder not entitled to vote who is
entitled to notice of the meeting written or printed notice stating the time and
place of the meeting and, in the case of a special meeting or as otherwise may
be required by any statute, the purpose for which the meeting is called, either
by mail or by presenting it to such shareholder personally or by leaving it at
his residence or usual place of business. If mailed, such notice shall be deemed
to be given when deposited in the United States mail addressed to the
shareholder at his post office address as it appears on the records of the
Trust, with postage thereon prepaid.
Section 5. SCOPE OF NOTICE. Except as otherwise required by law, no
business shall be transacted at a meeting of shareholders unless such business
was specifically designated in the notice of meeting.
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Section 6. ORGANIZATION. At every meeting of the shareholders, the
Chairman of the Board, if there be one, shall conduct the meeting or, in the
case of vacancy in office or absence of the Chairman of the Board, one of the
Trustees, or one of the following officers present shall conduct the meeting in
the order stated: the Vice Chairman of the Board, if there be one, the
President, the Vice Presidents in their order of rank and seniority, or a
Chairman chosen by the shareholders entitled to cast a majority of the votes
which all shareholders present in person or by proxy are entitled to cast, shall
act as Chairman, and the Secretary, or, in his absence, an assistant secretary,
or in the absence of both the Secretary and assistant secretaries, a person
appointed by the Chairman shall act as Secretary.
Section 7. QUORUM. At any meeting of shareholders, the presence in person
or by proxy of shareholders entitled to cast a majority of all the votes
entitled to be cast at such meeting shall constitute a quorum; but this section
shall not affect any requirement under any statute or the declaration of trust
of the Trust, as amended from time to time ("Declaration of Trust"), for the
vote necessary for the adoption of any measure. If, however, such quorum shall
not be present at any meeting of the shareholders, the shareholders entitled to
vote at such meeting, present in person or by proxy, shall have the power to
adjourn the meeting from time to time to a date not more than 120 days after the
original record date without notice other than announcement at the meeting. At
such adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 8. VOTING. A plurality of all the votes cast at a meeting of
shareholders duly called and at which a quorum is present shall be sufficient to
elect a Trustee. Each share may be voted for as many individuals as there are
Trustees to be elected and for whose election the share is entitled to be voted.
A majority of the votes cast at a meeting of shareholders duly called and at
which a quorum is present shall be sufficient to approve any other matter which
may properly come before the meeting, unless a greater vote is required herein
or by statute or by the Declaration of Trust. Unless otherwise provided in the
Declaration of Trust, each outstanding share, regardless of class, shall be
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders.
Section 9. PROXIES. A shareholder may cast the votes entitled to be cast
by the shares owned of record by him either in person or by proxy executed in
writing by the shareholder or by his duly authorized attorney in fact. Such
proxy shall be filed with the Secretary of the Trust before or at the time of
the meeting.
Section 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares of the Trust
registered in the name of a corporation, partnership, trust or other entity, if
entitled to be voted, may be voted by the president or a vice president, a
general partner or trustee thereof, as the case may be, or a proxy appointed by
any of the foregoing individuals, unless some other person who has been
appointed to vote such shares pursuant to a bylaw or a resolution of the
governing board of such corporation or other entity or agreement of the partners
of the partnership presents a certified copy of such bylaw, resolution or
agreement, in which case such person may vote such shares. Any trustee or other
fiduciary may vote shares registered in his name as such fiduciary, either in
person or by proxy.
Shares of the Trust directly or indirectly owned by the Trust shall not be
voted at any meeting and shall not be counted in determining the total number of
outstanding shares entitled to be voted at any given time, unless they are held
by it in a fiduciary capacity, in which case they may be voted and shall be
counted in determining the total number of outstanding shares at any given time.
The Trustees may adopt by resolution a procedure by which a shareholder may
certify in writing to the Trust that any shares registered in the name of the
shareholder are held for the account of a specified person other than the
shareholder. The resolution shall set forth the class of shareholders who may
make the certification, the purpose for which the certification may be made, the
form of certification and the information to be contained in it; if the
certification is with respect to a record date or closing of the share transfer
books, the time after the record date or closing of the share transfer books
within which the certification must be received by the Trust; and any other
provisions with respect to procedural matters which the Trustees consider
necessary or desirable. On receipt of such certification, the person specified
in the certification shall be regarded as, for the purposes set forth in the
certification, the shareholder of record of the specified shares in place of the
shareholder who makes the certification.
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Section 11. INSPECTORS. At any meeting of shareholders, the chairman of
the meeting may appoint one or more persons as inspectors for such meeting. Such
inspectors shall ascertain and report the number of shares represented at the
meeting based upon their determination of the validity and effect of proxies,
count all votes, report the results and perform such other acts as are proper to
conduct the election and voting with impartiality and fairness to all the
shareholders.
Each report of an inspector shall be in writing and signed by him or by a
majority of them if there is more than one inspector acting at such meeting. If
there is more than one inspector, the report of a majority shall be the report
of the inspectors. The report of the inspector or inspectors on the number of
shares represented at the meeting and the results of the voting shall be prima
facie evidence thereof.
Section 12. NOMINATIONS AND PROPOSALS BY SHAREHOLDERS.
(a) Annual Meetings of Shareholders.
(1) Nominations of persons for election to the Board of Trustees and
the proposal of business to be considered by the shareholders may be made
at an annual meeting of shareholders (i) pursuant to the Trust's notice of
meeting, (ii) by or at the direction of the Trustees, or (iii) by any
shareholder of the Trust who was a shareholder of record both at the time
of giving of notice provided for in this Section 12(a) and at the time of
the annual meeting, who is entitled to vote at the meeting and who complied
with the notice procedures set forth in this Section 12(a).
(2) For nominations or other business to be properly brought before an
annual meeting by a shareholder pursuant to clause (iii) of paragraph (a)
(1) of this Section 12, the shareholder must have given timely notice
thereof in writing to the Secretary of the Trust and such other business
must otherwise be a proper matter for action by shareholders. To be timely,
a shareholder's notice shall be delivered to the Secretary at the principal
executive offices of the Trust not later than the close of business on the
60th day nor earlier than the close of business on the 90th day prior to
the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is advanced
by more than 30 days or delayed by more than 60 days from such anniversary
date, notice by the shareholder to be timely must be so delivered not
earlier than the close of business on the 90th day prior to such annual
meeting and not later than the close of business on the later of the 60th
day prior to such annual meeting or the tenth day following the day on
which public announcement of the date of such meeting is first made by the
Trust. In no event shall the public announcement of a postponement or
adjournment of an annual meeting to a later date or time commence a new
time period for the giving of a shareholder's notice as described above.
Such shareholder's notice shall set forth (i) as to each person whom the
shareholder proposes to nominate for election or reelection as a Trustee
all information relating to such person that is required to be disclosed in
solicitations of proxies for election of Trustees in an election contest,
or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (including
such person's written consent to being named in the proxy statement as a
nominee and to serving as a Trustee if elected); (ii) as to any other
business that the shareholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material
interest in such business of such shareholder and of the beneficial owner,
if any, on whose behalf the proposal is made; and (iii) as to the
shareholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made, (x) the name and address of such
shareholder, as they appear on the Trust's books, and of such beneficial
owner and (y) the number of each class of shares of the Trust which are
owned beneficially and of record by such shareholder and such beneficial
owner.
(3) Notwithstanding anything in the second sentence of paragraph
(a)(2) of this Section 12 to the contrary, in the event that the number of
Trustees to be elected to the Board of Trustees is increased and there is
no public announcement by the Trust naming all of the nominees for Trustee
or specifying the size of the increased Board of Trustees at least 70 days
prior to the first anniversary of the preceding year's annual meeting, a
shareholder's notice required by this Section 12(a) shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be
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delivered to the Secretary at the principal executive offices of the Trust
not later than the close of business on the tenth day following the day on
which such public announcement is first made by the Trust.
(b) Special Meetings of Shareholders. Only such business shall be
conducted at a special meeting of shareholders as shall have been brought before
the meeting pursuant to the Trust's notice of meeting. Nominations of persons
for election to the Board of Trustees may be made at a special meeting of
shareholders at which Trustees are to be elected (i) pursuant to the Trust's
notice of meeting, (ii) by or at the direction of the Board of Trustees, or
(iii) provided that the Board of Trustees has determined that Trustees shall be
elected at such special meeting, by any shareholder of the Trust who was a
shareholder of record both at the time of giving of notice provided for in this
Section 12(b) and at the time of the special meeting, who is entitled to vote at
the meeting and who complied with the notice procedures set forth in this
Section 12(b). In the event the Trust calls a special meeting of shareholders
for the purpose of electing one or more Trustees to the Board of Trustees, any
such shareholder may nominate a person or persons (as the case may be) for
election to such position as specified in the Trust's notice of meeting, if the
shareholder's notice containing the information required by paragraph (a) (2) of
this Section 12 shall be delivered to the Secretary at the principal executive
offices of the Trust not earlier than the close of business on the 90th day
prior to such special meeting and not later than the close of business on the
later of the 60th day prior to such special meeting or the tenth day following
the day on which public announcement is first made of the date of the special
meeting and of the nominees proposed by the Trustees to be elected at such
meeting. In no event shall the public announcement of a postponement or
adjournment of a special meeting to a later date or time commence a new time
period for the giving of a shareholder's notice as described above.
(c) General.
(1) Only such persons who are nominated in accordance with the
procedures set forth in this Section 12 shall be eligible to serve as
Trustees and only such business shall be conducted at a meeting of
shareholders as shall have been brought before the meeting in accordance
with the procedures set forth in this Section 12. The chairman of the
meeting shall have the power and duty to determine whether a nomination or
any business proposed to be brought before the meeting was made or
proposed, as the case may be, in accordance with the procedures set forth
in this Section 12 and, if any proposed nomination or business is not in
compliance with this Section 12, to declare that such nomination or
proposal shall be disregarded.
(2) For purposes of this Section 12, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable news service or in a document publicly filed
by the Trust with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
(3) Notwithstanding the foregoing provisions of this Section 12, a
shareholder shall also comply with all applicable requirements of state law
and of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Section 12. Nothing in this
Section 12 shall be deemed to affect any rights of shareholders to request
inclusion of proposals in, nor any of the rights of the Trust to omit a
proposal from, the Trust's proxy statement pursuant to Rule 14a-8 under the
Exchange Act.
Section 13. NO ACTION BY SHAREHOLDERS WITHOUT A MEETING. Any action
required to be taken by Shareholders of the Trust must be taken at a meeting of
Shareholders called for such purpose.
Section 14. VOTING BY BALLOT. Voting on any question or in any election
may be viva voce unless the presiding officer shall order or any shareholder
shall demand that voting be by ballot.
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ARTICLE III
TRUSTEES
Section 1. GENERAL POWERS; QUALIFICATIONS; TRUSTEES HOLDING OVER. The
business and affairs of the Trust shall be managed under the direction of its
Board of Trustees. A Trustee shall be an individual at least 21 years of age who
is not under legal disability. In case of failure to elect Trustees at an annual
meeting of the shareholders, the Trustees holding over shall continue to direct
the management of the business and affairs of the Trust until their successors
are elected and qualify.
Section 2. NUMBER. At any regular meeting or at any special meeting
called for that purpose, a majority of the entire Board of Trustees may
establish, increase or decrease the number of Trustees, in accordance with the
provisions set forth in the Declaration of Trust. Except during the period when
a vacancy exists, at least a majority, of the Trustees shall be persons who are
not executive officers of the Trust or any advisor to the Trust or persons
affiliated with any affiliate of the Trust, or such advisor ("Independent
Trustees"). For purposes of this Section, the terms "executive officers,"
"affiliate" and "affiliated" shall have the definitions set forth in Rule 405
under the Securities Act of 1933, as amended.
Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Trustees
shall be held immediately after and at the same place as the annual meeting of
shareholders, no notice other than this By-law being necessary. The Trustees may
provide, by resolution, the time and place, either within or without the State
of California, for the holding of regular meetings of the Trustees without other
notice than such resolution.
Section 4. SPECIAL MEETINGS. Special meetings of the Trustees may be
called by or at the request of the Chairman of the Board or the president or by
a majority of the Trustees then in office. The person or persons authorized to
call special meetings of the Trustees may fix any place, either within or
without the State of California, as the place for holding any special meeting of
the Trustees called by them.
Section 5. NOTICE. Notice of any special meeting shall be given by
written notice delivered personally, telegraphed, facsimile- transmitted or
mailed to each Trustee at his business or residence address. Personally
delivered or telegraphed notices shall be given at least two days prior to the
meeting. Notice by mail shall be given at least five days prior to the meeting.
Telephone or facsimile-transmission notice shall be given at least 24 hours
prior to the meeting. If mailed, such notice shall be deemed to be given when
deposited in the United States mail properly addressed, with postage thereon
prepaid. If given by telegram, such notice shall be deemed to be given when the
telegram is delivered to the telegraph company. Telephone notice shall be deemed
given when the Trustee is personally given such notice in a telephone call to
which he is a party. Facsimile-transmission notice shall be deemed given upon
completion of the transmission of the message to the number given to the Trust
by the Trustee and receipt of a completed answer-back indicating receipt.
Neither the business to be transacted at, nor the purpose of, any annual,
regular or special meeting of the Trustees need be stated in the notice, unless
specifically required by statute or these By-laws.
Section 6. QUORUM. A majority of the Trustees shall constitute a quorum
for transaction of business at any meeting of the Trustees, provided that, if
less than a majority of such Trustees are present at said meeting, a majority of
the Trustees present may adjourn the meeting from time to time without further
notice, and provided further that if, pursuant to the Declaration of Trust or
these By-laws, the vote of a majority of a particular group of Trustees is
required for action, a quorum must also include a majority of such group.
The Trustees present at a meeting which has been duly called and convened
may continue to transact business until adjournment, notwithstanding the
withdrawal of enough Trustees to leave less than a quorum.
Section 7. VOTING. The action of the majority of the Trustees present at
a meeting at which a quorum is present shall be the action of the Trustees,
unless the concurrence of a greater or other proportion is required for such
action by applicable statute, or these By-laws.
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Section 8. TELEPHONE MEETINGS. Trustees may participate in a meeting by
means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence in person at
the meeting.
Section 9. ACTION BY TRUSTEES BY WRITTEN CONSENT. Any action required or
permitted to be taken at any meeting of the Trustees may be taken without a
meeting, if a consent in writing to such action is signed by each Trustee and
such written consent is filed with the minutes of proceedings of the Trustees.
Section 10. VACANCIES. If for any reason any or all of the Trustees cease
to be Trustees, such event shall not terminate the Trust or affect these By-laws
or the powers of the remaining Trustees hereunder (even if fewer than two
Trustees remain). Any vacancy (including a vacancy created by an increase in the
number of Trustees) shall be filled, at any regular meeting or at any special
meeting called for that purpose, by a majority of the Trustees. Any individual
so elected as Trustee shall hold office until the next annual meeting of
shareholders.
Section 11. COMPENSATION; FINANCIAL ASSISTANCE.
(a) Compensation. Trustees shall not receive any stated salary for their
services as Trustees but, by resolution of the Trustees, or any compensation
committee of the Board, may receive fixed sums per year and/or per meeting
and/or per visit to real property owned or to be acquired by the Trust and for
any service or activity they performed or engaged in as Trustees. Such fixed
sums may be paid either in cash or in shares of the Trust. The Trustees shall
also be eligible to participate in any equity compensation plan of the Trust now
existing, or adopted in the future, and to receive grants of options, shares and
other rights under any such plan to the extent that any such plan specifies that
the Trustees are so eligible to participate and to receive such grants. Trustees
may also be reimbursed for expenses of attendance, if any, at each annual,
regular or special meeting of the Trustees or of any committee thereof; and for
their expenses, if any, in connection with each property visit and any other
service or activity performed or engaged in as Trustees; but nothing herein
contained shall be construed to preclude any Trustees from serving the Trust in
any other capacity and receiving compensation therefor.
(b) Financial Assistance to Trustees. The Trust may lend money to,
guarantee an obligation of or otherwise assist a Trustee or a trustee or
director of a direct or indirect subsidiary of the Trust; provided, however,
that such Trustee or other person is also an executive officer of the Trust or
of such subsidiary, or the loan, guarantee or other assistance is in connection
with the purchase of Shares. The loan, guarantee or other assistance may be with
or without interest, unsecured, or secured in any manner that the Board of
Trustees approves, including a pledge of shares.
Section 12. LOSS OF DEPOSITS. No Trustee shall be liable for any loss
which may occur by reason of the failure of the bank, trust company, savings and
loan association, or other institution with whom moneys or shares have been
deposited.
Section 13. SURETY BONDS. Unless required by law, no Trustee shall be
obligated to give any bond or surety or other security for the performance of
any of his duties.
Section 14. RELIANCE. Each Trustee, officer, employee and agent of the
Trust shall, in the performance of his duties with respect to the Trust, be
fully justified and protected with regard to any act or failure to act in
reliance in good faith upon the books of account or other records of the Trust,
upon an opinion of counsel or upon reports made to the Trust by any of its
officers or employees or by the adviser, accountants, appraisers or other
experts or consultants selected by the Trustees or officers of the Trust,
regardless of whether such counsel or expert may also be a Trustee.
Section 15. INTERESTED TRUSTEE TRANSACTIONS. Transactions involving any
actual or potential conflict of interest with a Trustee or advisor, or an
affiliate of such persons, shall be approved by a majority of the Independent
Trustees of the Trust, or if any Independent Trustee has an actual or potential
conflict, a majority of the disinterested Trustees of the Trust.
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Section 16. CERTAIN RIGHTS OF TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS.
The Trustees shall have no responsibility to devote their full time to the
affairs of the Trust. Any Trustee or officer, employee or agent of the Trust
(other than a full-time officer, employee or agent of the Trust), in his
personal capacity or in a capacity as an affiliate, employee, or agent of any
other person, or otherwise, may have business interests and engage in business
activities similar or in addition to those of or relating to the Trust.
ARTICLE IV
COMMITTEES
Section 1. NUMBER, TENURE AND QUALIFICATION. The Trustees may appoint
from among its members an Audit Committee, a Compensation Committee and other
committees, each comprised of at least two Trustees, to serve at the pleasure of
the Trustees. The Trustees on the Compensation Committee and the Audit Committee
shall be Independent Trustees.
Section 2. POWERS. The Trustees may delegate to committees appointed
under Section 1 of this Article IV any of the powers of the Trustees, except as
prohibited by law.
Section 3. MEETINGS. In the absence of any member of any such committee,
the members thereof present at any meeting, whether or not they constitute a
quorum, may appoint another Trustee to act in the place of such absent member.
Notice of committee meetings shall be given in the same manner as notice for
special meetings of the Board of Trustees.
A majority of the members of any committee shall be present in person at
any meeting of such committee in order to constitute a quorum for the
transaction of business at such meeting, and the act of a majority present shall
be the act of such committee. The Board of Trustees may designate a chairman of
any committee, and such chairman or a majority of the members of any committee
may fix the time and place of its meetings unless the Board shall otherwise
provide. In the absence or disqualification of any member of any such committee,
the members thereof present at any meeting and not disqualified from voting,
whether or not they constitute a quorum, may unanimously appoint another Trustee
to act at the meeting in the place of such absent or disqualified members.
Each committee shall keep minutes of its proceedings and shall report the
same to the Board of Trustees at the next succeeding meeting, and any action by
the committee shall be subject to revision and alteration by the Board of
Trustees, provided that no rights of third persons shall be affected by any such
revision or alteration.
Section 4. TELEPHONE MEETINGS. Members of a committee of the Trustees may
participate in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means shall
constitute presence in person at the meeting.
Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or
permitted to be taken at any meeting of a committee of the Trustees may be taken
without a meeting, if a consent in writing to such action is signed by each
member of the committee and such written consent is filed with the minutes of
proceedings of such committee.
Section 6. VACANCIES. Subject to the provisions hereof, the Board of
Trustees shall have the power at any time to change the membership of any
committee, to fill all vacancies, to designate alternate members to replace any
absent or disqualified member or to dissolve any such committee.
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ARTICLE V
OFFICERS
Section 1. GENERAL PROVISIONS. The officers of the Trust may include a
president, a secretary, a treasurer, a chairman of the board ("Chairman of the
Board"), a vice chairman of the board ("Vice Chairman"), a chief executive
officer, a chief operating officer, a chief financial officer, a chief legal
counsel, one or more vice presidents, one or more assistant secretaries and one
or more assistant treasurers. In addition, the Trustees may from time to time
appoint such other officers with such powers and duties as they shall deem
necessary or desirable. The officers of the Trust shall be elected annually by
the Trustees at the first meeting of the Trustees held after each annual meeting
of shareholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as may be convenient. Each
officer shall hold office until his successor is elected and qualifies or until
his death, resignation or removal in the manner hereinafter provided. Any two or
more offices except president and vice president may be held by the same person.
In their discretion, the Trustees may leave any office unfilled. Election of an
officer or agent shall not of itself create contract rights between the Trust
and such officer or agent.
Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the Trust may
be removed by the Trustees if in their judgment the best interests of the Trust
would be served thereby, but such removal shall be subject to the contract
rights, if any, of the person so removed. Any officer of the Trust may resign at
any time by giving written notice of his resignation to the Trustees, the
Chairman of the Board, the president or the secretary. Any resignation shall
take effect at any time subsequent to the time specified therein or, if the time
when it shall become effective is not specified therein, immediately upon its
receipt. The acceptance of a resignation shall not be necessary to make it
effective unless otherwise stated in the resignation. Such resignation shall be
subject to the contract rights, if any, of the Trust.
Section 3. VACANCIES. A vacancy in any office may be filled by the
Trustees for the balance of the term.
Section 4. CHIEF EXECUTIVE OFFICER. The Trustees may designate a chief
executive officer from among the elected officers. The chief executive officer
shall have responsibility for implementation of the policies of the Trust, as
determined by the Trustees, and for the administration of the business affairs
of the Trust. In the absence of both the Chairman and Vice Chairman of the
Board, the chief executive officer shall preside over the meetings of the
Trustees and of the shareholders at which he shall be present.
Section 5. CHIEF OPERATING OFFICER. The Trustees may designate a chief
operating officer from among the elected officers. Said officer will have the
responsibilities and duties as set forth by the Trustees or the chief executive
officer.
Section 6. CHIEF FINANCIAL OFFICER. The Trustees may designate a chief
financial officer from among the elected officers. Said officer will have the
responsibilities and duties as set forth by the Trustees or the chief executive
officer.
Section 7. CHIEF LEGAL COUNSEL. The Trustees may designate a chief legal
counsel from among the elected officers. Said officer will have the
responsibilities and duties as set forth by the trustees or the chief executive
officer.
Section 8. CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The Chairman of the
Board shall preside over the meetings of the Trustees and of the shareholders at
which he shall be present and shall in general oversee all of the business and
affairs of the Trust. In the absence of the Chairman of the Board, the Vice
Chairman of the Board shall preside at such meetings at which he shall be
present. The Chairman and the Vice Chairman of the Board may execute any deed,
mortgage, bond, contract or other instrument, except in cases where the
execution thereof shall be expressly delegated by the Trustees or by these
By-laws to some other officer or agent of the Trust or shall be required by law
to be otherwise executed. The Chairman of the Board and the Vice Chairman of the
Board shall perform such other duties as may be assigned to him or them by the
Trustees.
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Section 9. PRESIDENT. In the absence of the Chairman, the Vice Chairman
and the chief executive officer, the president shall preside over the meetings
of the Trustees and of the shareholders at which he shall be present. The
president may execute any deed, mortgage, bond, contract or other instrument,
except in cases where the execution thereof shall be expressly delegated by the
Trustees or by these By-laws to some other officer or agent of the Trust or
shall be required by law to be otherwise executed; and in general shall perform
all duties incident to the office of president and such other duties as may be
prescribed by the Trustees from time to time.
Section 10. VICE PRESIDENTS. In the absence of the president or in the
event of a vacancy in such office, the vice president (or in the event there be
more than one vice president, the vice presidents in the order designated at the
time of their election or, in the absence of any designation, then in the order
of their election) shall perform the duties of the president and when so acting
shall have all the powers of and be subject to all the restrictions upon the
president; and shall perform such other duties as from time to time may be
assigned to him by the president or by the Trustees. The Trustees may designate
one or more vice presidents as executive vice president, senior vice president
or as vice president for particular areas of responsibility.
Section 11. SECRETARY. The secretary shall (a) keep the minutes of the
proceedings of the shareholders, the Trustees and committees of the Trustees in
one or more books provided for that purpose; (b) see that all notices are duly
given in accordance with the provisions of these By-laws or as required by law;
(c) be custodian of the trust records and of the seal of the Trust; (d) keep a
register of the post office address of each shareholder which shall be furnished
to the secretary by such shareholder; (e) have general charge of the share
transfer books of the Trust; and (f) in general perform such other duties as
from time to time may be assigned to him by the chief executive officer, the
president or by the Trustees.
Section 12. TREASURER. The treasurer shall have the custody of the funds
and securities of the Trust and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Trust 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.
The treasurer shall disburse the funds of the Trust as may be ordered by
the Trustees, taking proper vouchers for such disbursements, and shall render to
the president and Trustees, at the regular meetings of the Trustees or whenever
they may require it, an account of all transactions as treasurer and of the
financial condition of the Trust.
If required by the Trustees, the treasurer shall give the Trust a bond in
such sum and with such surety or sureties as shall be satisfactory to the
Trustees for the faithful performance of the duties of his or her office and for
the restoration to the Trust, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, moneys and other property
of whatever kind in his possession or under his or her control belonging to the
Trust.
Section 13. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The assistant
secretaries and assistant treasurers, in general, shall perform such duties as
shall be assigned to them by the secretary or treasurer, respectively, or by the
president or the Trustees. The assistant treasurers shall, if required by the
Trustees, give bonds for the faithful performance of their duties in such sums
and with such surety or sureties as shall be satisfactory to the Trustees.
Section 14. SALARIES. The salaries and other compensation of the officers
shall be fixed from time to time by the Trustees, or a compensation committee,
and no officer shall be prevented from receiving such salary or other
compensation by reason of the fact that he is also a Trustee.
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ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The Trustees may authorize any officer or agent to
enter into any contract or to execute and deliver any instrument in the name of
and on behalf of the Trust and such authority may be general or confined to
specific instances. Any agreement, deed, mortgage, lease or other document
executed by one or more of the Trustees or by an authorized person shall be
valid and binding upon the Trustees and upon the Trust when authorized or
ratified by action of the Trustees.
Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Trust shall be signed by such officer or agent of the Trust in such manner
as shall from time to time be determined by the Trustees.
Section 3. DEPOSITS. All funds of the Trust not otherwise employed shall
be deposited from time to time to the credit of the Trust in such banks, trust
companies or other depositories as the Trustees may designate.
ARTICLE VII
SHARES
Section 1. CERTIFICATES. Each shareholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
shares of each class of beneficial interest held by him in the Trust. Each
certificate shall be signed by a Trustee of the Trust, the chief executive
officer, the president or a vice president and countersigned by a Trustee, the
secretary or an assistant secretary or the treasurer or an assistant treasurer
and may be sealed with the seal, if any, of the Trust. The signatures may be
either manual or facsimile. Certificates shall be consecutively numbered; and if
the Trust shall, from time to time, issue several classes of shares, each class
may have its own number series. A certificate is valid and may be issued whether
or not an officer or Trustee who signed it is still an officer or Trustee when
it is issued. Each certificate representing shares which are restricted as to
their transferability or voting powers, which are preferred or limited as to
their dividends, or as to their allocable portion of the assets upon
liquidation, or which are redeemable at the option of the Trust, shall have a
statement of such restriction, limitation, preference or redemption provision,
or a summary thereof, plainly stated on the certificate. In lieu of such
statement or summary, the Trust may set forth upon the face or back of the
certificate a statement that the Trust will furnish to any shareholder, upon
request and without charge, a full statement of such information.
Section 2. TRANSFERS. Upon surrender to the Trust or the transfer agent
of the Trust of a share certificate duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, the Trust shall
issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
The Trust shall be entitled to treat the holder of record of any share or
shares as the holder in fact thereof and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
California.
Notwithstanding the foregoing, transfers of shares of beneficial interest
of the Trust will be subject in all respects to the Declaration of Trust and all
of the terms and conditions contained therein.
Section 3. REPLACEMENT CERTIFICATE. Any officer designated by the
Trustees may direct a new certificate to be issued in place of any certificate
previously issued by the Trust alleged to have been lost, stolen or destroyed
upon the making of an affidavit of that fact by the person claiming the
certificate to be lost, stolen or destroyed. When authorizing the issuance of a
new certificate, a Trustee, or an officer designated by the Trustees, may, in
his discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or the owner's legal
representative to advertise the same in such
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manner as he shall require and/or to give bond, with sufficient surety, to the
Trust to indemnify it against any loss or claim which may arise as a result of
the issuance of a new certificate.
Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The
Trustees may set, in advance, a record date for the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
determining shareholders entitled to receive payment of any dividend or the
allotment of any other rights, or in order to make a determination of
shareholders for any other proper purpose. Such date, in any case, shall not be
prior to the close of business on the day the record date is fixed and shall be
not more than 90 days and, in the case of a meeting of shareholders not less
than ten days, before the date on which the meeting or particular action
requiring such determination of shareholders of record is to be held or taken.
In lieu of fixing a record date, the Trustees may provide that the share
transfer books shall be closed for a stated period but not longer than 20 days.
If the share transfer books are closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders, such
books shall be closed for at least ten days before the date of such meeting.
If no record date is fixed and the share transfer books are not closed for
the determination of shareholders, (a) the record date for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders shall
be at the close of business on the day on which the notice of meeting is mailed
or the 30th day before the meeting, whichever is the closer date to the meeting;
and (b) the record date for the determination of shareholders entitled to
receive payment of a dividend or an allotment of any other rights shall be the
close of business on the day on which the resolution of the Trustees, declaring
the dividend or allotment of rights, is adopted.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, except when (i) the determination has been
made through the closing of the transfer books and the stated period of closing
has expired or (ii) the meeting is adjourned to a date more than 120 days after
the record date fixed for the original meeting, in either of which case a new
record date shall be determined as set forth herein.
Section 5. STOCK LEDGER. The Trust shall maintain at its principal office
or at the office of its counsel, accountants or transfer agent, an original or
duplicate share ledger containing the name and address of each shareholder and
the number of shares of each class held by such shareholder.
Section 6. FRACTIONAL SHARES; ISSUANCE OF UNITS. The Trustees may issue
fractional shares or provide for the issuance of scrip, all on such terms and
under such conditions as they may determine. Notwithstanding any other provision
of the Declaration of Trust or these By-laws, the Trustees may issue units
consisting of different securities of the Trust. Any security issued in a unit
shall have the same characteristics as any identical securities issued by the
Trust, except that the Trustees may provide that for a specified period
securities of the Trust issued in such unit may be transferred on the books of
the Trust only in such unit.
ARTICLE VIII
ACCOUNTING YEAR
The Trustees shall have the power, from time to time, to fix the fiscal
year of the Trust by a duly adopted resolution.
ARTICLE IX
DISTRIBUTIONS
Section 1. AUTHORIZATION. Dividends and other distributions upon the
shares of beneficial interest of the Trust may be authorized and declared by the
Trustees, subject to the provisions of law and the Declaration of Trust.
Dividends and other distributions may be paid in cash, property or shares of the
Trust, subject to the provisions of law and the Declaration of Trust.
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Section 2. CONTINGENCIES. Before payment of any dividends or other
distributions, there may be set aside out of any funds of the Trust available
for dividends or other distributions such sum or sums as the Trustees may from
time to time, in their absolute discretion, think proper as a reserve fund for
contingencies, for equalizing dividends or other distributions, for repairing or
maintaining any property of the Trust or for such other purpose as the Trustees
shall determine to be in the best interest of the Trust, and the Trustees may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
SEAL
Section 1. SEAL. The Trustees may authorize the adoption of a seal by the
Trust. The seal shall have inscribed thereon the name of the Trust and the year
of its formation. The Trustees may authorize one or more duplicate seals and
provide for the custody thereof.
Section 2. AFFIXING SEAL. Whenever the Trust is permitted or required to
affix its seal to a document, it shall be sufficient to meet the requirements of
any law, rule or regulation relating to a seal to place the word "(SEAL)"
adjacent to the signature of the person authorized to execute the document on
behalf of the Trust.
ARTICLE XI
INDEMNIFICATION AND ADVANCE OF EXPENSES
To the maximum extent permitted by California law in effect from time to
time, the Trust shall indemnify (a) any Trustee, officer or shareholder or any
former Trustee, officer or shareholder (including among the foregoing, for all
purposes of this Article XI and without limitation, any individual who, while a
Trustee, officer or shareholder and at the express request of the Trust, serves
or has served another corporation, partnership, joint venture, trust, employee
benefit plan or any other enterprise as a director, officer, shareholder,
partner or trustee of such corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise) in the defense of a proceeding to
which he was made a party by reason of service in such capacity, against
reasonable expenses incurred by him in connection with the proceeding, (b) any
Trustee or officer or any former Trustee or officer against any claim or
liability to which he may become subject by reason of such status unless it is
established that (i) his act or omission was material to the matter giving rise
to the proceeding and was committed in bad faith or was the result of active and
deliberate dishonesty, (ii) he actually received an improper personal benefit in
money, property or services or (iii) in the case of a criminal proceeding, he
had reasonable cause to believe that his act or omission was unlawful and (c)
each shareholder or former shareholder against any claim or liability to which
he may become subject by reason of such status. In addition, the Trust shall,
without requiring a preliminary determination of the ultimate entitlement to
indemnification, pay or reimburse, in advance of final disposition of a
proceeding, reasonable expenses incurred by a Trustee, officer or shareholder or
former Trustee, officer or shareholder made a party to a proceeding by reason
such status, provided that, in the case of a Trustee or officer, the Trust shall
have received (i) a written affirmation by the Trustee or officer of his good
faith belief that he has met the applicable standard of conduct necessary for
indemnification by the Trust as authorized by these By-laws and (ii) a written
undertaking by or on his behalf to repay the amount paid or reimbursed by the
Trust if it shall ultimately be determined that the applicable standard of
conduct was not met. The Trust may, with the approval of its Trustees, provide
such indemnification or payment or reimbursement of expenses to any Trustee,
officer or shareholder or any former Trustee, officer or shareholder who served
a predecessor of the Trust and to any employee or agent of the Trust or a
predecessor of the Trust. Neither the amendment nor repeal of this Article, nor
the adoption or amendment of any other provision of the Declaration of Trust or
these By-laws inconsistent with this Article, shall apply to or affect in any
respect the applicability of this Article with respect to any act or failure to
act which occurred prior to such amendment, repeal or adoption.
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The Trust shall also provide to Trustees, officers and shareholders such
other and further indemnification or payment or reimbursement of expenses, as
the case may be, to the fullest extent permitted by the California Law, as in
effect from time to time, for directors of California corporations.
ARTICLE XII
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the Declaration of
Trust or By-laws or pursuant to applicable law, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice. Neither the business to be transacted at nor the purpose of any meeting
need be set forth in the waiver of notice, unless specifically required by
statute. The attendance of any person at any meeting shall constitute a waiver
of notice of such meeting, except where such person attends a meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
ARTICLE XIII
AMENDMENT OF BY-LAWS
The Trustees shall have the power to adopt, alter or repeal any provision
of these By-laws and to make new By-laws. These By-laws may also be amended by
Shareholders holding at least 80% of the votes entitled to be cast at a meeting
of shareholders duly called and at which a quorum is present.
ARTICLE XIV
MISCELLANEOUS
All references to the Declaration of Trust shall include any amendments
thereto.
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N' TANDEM TRUST
1998 EQUITY COMPENSATION PLAN
1. PURPOSE. The N' Tandem Trust 1998 Equity Compensation Plan (the
"Plan") is intended to provide incentive to key employees, officers and trustees
of the Trust and others expected to provide significant services to the Trust,
including the employees, officers, trustees and directors of the Participating
Companies, to encourage proprietary interest in the Trust, to encourage such key
employees to remain in the employ of the Trust and the other Participating
Companies, to attract new employees with outstanding qualifications, and to
afford additional incentive to others to increase their efforts in providing
significant services to the Trust and the other Participating Companies. In
furtherance thereof, the Plan permits awards of equity-based incentives to key
employees, officers, trustees and directors of, and certain other providers of
services to, the Participating Companies.
2. DEFINITIONS.
a. "Act" shall mean the Securities Act of 1933, as amended.
b. "Advisor" shall mean The Windsor Corporation, a California
corporation and such other advisors as the Committee, in its discretion, may
determine.
c. "Agreement" shall mean a written agreement entered into
between the Company and the recipient of a Grant pursuant to section 7(b)(i)
hereof.
d. "Board" shall mean the Board of Trustees of the Trust.
e. "Cause" shall mean, unless otherwise provided in the
Grantee's Agreement, or applicable employment agreement (i) engaging in willful
or gross misconduct or willful or gross neglect, (ii) repeatedly failing to
adhere to the directions of the Grantee's superiors or the Board or the written
policies and practices of a Participating Company, (iii) the commission of a
felony or a crime of moral turpitude, or any crime involving a Participating
Company, (iv) fraud, misappropriation, embezzlement or material or repeated
insubordination, (v) a material breach of the Grantee's employment agreement (if
any) with a Participating Company (other than a termination of employment by the
Grantee), or (vi) any illegal act detrimental to a Participating Company; all as
determined by the Committee.
f. "Class I Participant" shall mean any Independent Trustee of
the Trust (as defined in the Declaration of Trust) who at the time of his
appointment qualifies as a "Non-Employee Director" under Rule 16b-3(b)(3)(i)
promulgated under the Exchange Act and, to the extent that relief from the
limitation of Section 162(m) of the Code is sought, as an "Outside
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Director" under Section 1.162-27(e)(3)(i) of the Treasury Regulations. The Plan
is intended to provide Grants to Class I Participants pursuant to the formula
set forth in Section 7(a).
g. "Class II Participant" shall mean all Eligible Persons,
except the Class I Participants.
h. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
i. "Committee" shall mean the Compensation Committee,
consisting solely of Class I Participants, appointed by the Board in accordance
with Section 4 of the Plan.
j. "Common Shares" shall mean the Trust's common shares of
beneficial interest of the Trust, par value $0.01 per share, either currently
existing or authorized hereafter.
k. "Declaration of Trust" means the Trust's Amended and
Restated Declaration of Trust, as the same may be amended from time to time.
l. "DER" shall mean a dividend equivalent right consisting of
the right to receive, as specified by the Committee at the time of Grant, cash
in an amount equal to the future dividend distributions to be paid on a single
Common Share subject to an option.
m. "Disability" shall mean the occurrence of an event which
would entitle an employee of a Participating Company to the payment of
disability income under one of the it's long-term disability income plans or a
long-term disability as determined by the Committee in its absolute discretion
pursuant to any other standard as may be adopted by the Committee.
n. "Eligible Persons" shall mean officers, directors, trustees
and employees of the Participating Companies and other persons expected to
provide significant services (of a type expressly approved by the Committee as
covered services for these purposes) to the Trust. For purposes of the Plan, a
director or trustee (other than an Independent Trustee, who shall be eligible
for Grants pursuant to Section 7(a)), in his or her capacity as such, or a
consultant, vendor, customer, or other provider of significant services to the
Trust shall be deemed to be an Eligible Person, but will be eligible to receive
only Non-qualified Stock Options, or DERs, or Restricted Shares, and only after
a finding by the Committee or Board in its discretion that the value of the
services rendered or to be rendered to the Participating Company is at least
equal to the value of the Grants being awarded.
o. "Employee" shall mean an individual, including an officer
of a Participating Company, who is employed (within the meaning of Code Section
3401 and the regulations thereunder) by a Participating Company.
p. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
q. "Exercise Price" shall mean the purchase price per Option
Share, determined by the Board or the Committee, at which an Option may be
exercised.
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r. "Fair Market Value" shall mean the value of one Common
Share, determined as follows:
i. If the Common Shares are then listed on a national
securities exchange, the closing sales price per Common Share on the
exchange for the last preceding date on which there was a sale of
Common Shares on such exchange, as determined by the Committee;
ii. If the Common Shares are not then listed on a
national securities exchange but are then traded on an over-the-counter
market, the average of the closing bid and asked prices for the Common
Shares in such over-the-counter market for the last preceding date on
which there was a sale of such Common Shares in such market, as
determined by the Committee; or
iii. If neither (i) nor (ii) applies, such value as
the Committee in its discretion may in good faith determine.
Notwithstanding the foregoing, where the Common Shares are listed or traded, the
Committee may make discretionary determinations in good faith where the Common
Shares have not been traded for 10 trading days.
s. "Grant" shall mean the issuance of an Incentive Stock
Option, Non-qualified Stock Option, Restricted Share, DER or any combination
thereof to an Eligible Person. The Committee will determine the eligibility of
employees, officers, directors, trustees and others expected to provide
significant services to the Participating Companies based on, among other
factors, the position and responsibilities of such individuals, the nature and
value to the Trust and the Participating Company of such individuals
accomplishments and potential contribution of such individuals to the success of
the Trust and the Participating Company whether directly or through its
subsidiaries.
t. "Grantee" means any Eligible Person who has received a
Grant hereunder.
u. "Incentive Stock Option" shall mean an Option of the type
described in Section 422(b) of the Code issued to an Employee of the Trust.
v. "Non-qualified Stock Option" shall mean an Option not
described in Section 422(b) of the Code.
w. "Option" shall mean any option, whether an Incentive Stock
Option or a Non-qualified Stock Option, to purchase, at a price and for the term
fixed by the Committee in accordance with the Plan, and subject to such other
limitations and restrictions in the Plan and the applicable Agreement, a number
of Common Shares determined by the Committee.
x. "Option Share" means a Common Share that is subject to an
Option, adjusted in accordance with Section 12 of the Plan (if applicable).
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y. "Optionee" shall mean any Eligible Person to whom an Option
is granted, or the Successors of the Optionee, as the context so requires.
z. "Ownership Limit" has the meaning ascribed to it in the
Declaration of Trust.
aa. "Participating Companies" shall mean the Trust, the
Advisor and any affiliate of any of them which with the consent of the Board
participates in the Plan.
bb. "Plan" shall mean the Trust's 1998 Equity Compensation
Plan, as set forth herein, and as the same may from time to time be amended.
cc. "Purchase Price" shall mean the Exercise Price times the
number of Common Shares with respect to which an Option is exercised.
dd. "Restricted Share" shall mean a Common Share that is the
subject of a grant of shares that are subject to restrictions set forth herein
or in any Agreement, adjusted in accordance with Section 12 of the Plan (if
applicable).
ee. "Retirement" shall mean, unless otherwise provided by the
Committee in the Grantee's Agreement, (i) the Termination of Services of a
Grantee at a Participating Company (other than for Cause) on or after the
Grantee's attainment of age 65, (ii) the Termination of Service (other than for
Cause) of a Grantee at a Participating Company on or after the Grantee's
attainment of age 55 following five consecutive years of service by such Grantee
with one or more of the Participating Companies, or (iii) such other
circumstance, or set of circumstances as may be determined by the Committee in
its absolute discretion pursuant to such other standard as may be adopted by the
Committee.
ff. "Subsidiary" shall mean any corporation, partnership, or
other entity at least 50% of the economic interest in the equity of which is
owned by the Trust or by another Subsidiary.
gg. "Successors of the Optionee" shall mean the legal
representative of the estate of a deceased Grantee or the person or persons who
shall acquire the right to a Grant by bequest or inheritance or by reason of the
death of the Optionee.
hh. "Termination of Service" shall mean the time when the
employee-employer relationship or directorship, or other service relationship
(sufficient to constitute service as an Eligible Person) between the Grantee and
a Participating Company is terminated for any reason, with or without Cause,
including but not limited to any termination by resignation, discharge, death or
Retirement; provided, however, Termination of Service shall not include a
termination where there is a simultaneous reemployment of the Grantee by a
Participating Company or other continuation of service (sufficient to constitute
service as an Eligible Person) at a Participating Company. The Committee, in its
absolute discretion, shall determine the effects of all matters and questions
relating to Termination of Service, including but not limited to the question of
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whether any Termination of Service was for Cause and all questions of whether
particular leaves of absence constitute Terminations of Service.
ii. "Trust" shall mean N' Tandem Trust, an unincorporated
California business trust.
3. EFFECTIVE DATE. The Plan will be submitted to shareholders of
the Trust for their approval within twelve months after Board approval of the
Plan and shall be effective upon the obtaining of approval of the Plan by the
Trust's shareholders in accordance with the Trust's Declaration of Trust, as the
same may be amended from time to time, and applicable law.
4. ADMINISTRATION.
a. Membership on Committee. The Plan shall be administered by
the Committee, which shall be appointed by the Board. If no Committee is
designated by the Board and applicable law, the full Board shall have the rights
and responsibilities of the Committee hereunder.
b. Committee Meetings. The acts of a majority of the members
present at any meeting of the Committee at which a quorum is present, or acts
approved in writing by a majority of the entire Committee, shall be the acts of
the Committee for purposes of the Plan. If and to the extent applicable, no
member of the Committee may act as to matters under the Plan specifically
relating to such member.
c. Grant Awards. The Committee shall from time to time at its
discretion (i) select the Class II Participants who are to be issued Grants,
(ii) determine the number of Common Shares (a) with respect to which Options
will be granted, or (b) with respect to which DERs and Restricted Shares will be
granted, to each Class II Participant, (iii) designate any Options granted as
Incentive Stock Options or Non-qualified Stock Options, or both, except that no
Incentive Stock Options may be granted to an Eligible Person who is not an
Employee of the Trust, and (iv) determine the restrictions with respect to any
Restricted Shares. The Committee shall (i) determine the terms and conditions,
not inconsistent with the terms of the Plan, of any Grants awarded hereunder,
(including, but not limited to the performance goals and periods applicable to
the award of Grants); (ii) determine the time or times when and the manner and
condition in which each Option shall be exercisable and the duration of the
exercise period; and (iii) determine or impose other conditions to any Grant, or
exercise of Options, under the Plan as it may deem appropriate. The Committee
shall cause each Option to be designated as an Incentive Stock Option or a
Non-qualified Stock Option. The Optionee shall take whatever additional actions
and execute whatever additional documents the Committee may in its reasonable
judgment deem necessary or advisable in order to carry or effect one or more of
the obligations or restrictions imposed on any Grantee pursuant to the express
provisions of the Plan and the applicable Agreement. Unless expressly provided
hereunder, the Committee, with respect to any Grant, may exercise its discretion
hereunder at the time of the award or thereafter. The interpretation and
construction by the Committee of any provision of the Plan or Agreement or of
any Option, Restricted Share or DER granted thereunder shall be final. Without
limiting the generality of Section 20, no member of the Committee shall be
liable for
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any action or determination made in good faith with respect to the Plan, any
Agreement or any Grant hereunder.
5. PARTICIPATION.
a. Eligibility. Only Eligible Persons shall be eligible to
receive Grants under the Plan.
b. Limitation of Ownership. No Options or Restricted Shares
shall be granted under the Plan to any person who after such Grant would
beneficially own more than the Ownership Limit, unless such Grantee is exempt
from the Ownership Limit, or unless expressly and specifically waived by action
of the independent Trustees of the Board.
c. Share Ownership. For purposes of (b) above, in determining
share ownership a Grantee shall be considered as owning the shares owned,
directly or indirectly, by or for his brothers, sisters, spouses, ancestors and
lineal descendants. Shares owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be considered as being owned
proportionately by or for its shareholders, partners or beneficiaries. Shares
with respect to which any person holds an Option shall be considered to be owned
by such person.
d. Outstanding Shares. For purposes of (b) above, "outstanding
shares" shall include all shares actually issued and outstanding immediately
after the grant of an Option or Restricted Shares to the Grantee. With respect
to the share ownership of any Grantee, "outstanding shares" shall include shares
authorized for issuance under outstanding Options or Restricted Shares held by
such Grantee, but not Options or Restricted Shares held by any other person.
6. SHARES. Subject to adjustments pursuant to Section 12, the number of
Common Shares subject to Grants under the Plan shall not exceed the lesser of
(i) 1,000,000 Common Shares, or (ii) 10% of the Trust's total outstanding
shares. In no event may any Optionee receive Options for more than 100,000
Common Shares over the life of the Plan. Notwithstanding the foregoing
provisions of this Section 6, Common Shares subject to a Grant that have not
been issued at the expiration, forfeiture or other termination of such Option or
Restricted Share Grant may be the subject of the Grants. Common Shares issued
hereunder may consist, in whole or in part, of authorized and unissued shares or
treasury shares. The certificates for Common Shares issued hereunder may include
any legend which the Committee deems appropriate to reflect any restrictions on
transfer hereunder or under the Agreement, or as the Committee may otherwise
deem appropriate.
7. TERMS AND CONDITIONS OF OPTIONS AND GRANTS.
a. Class I Participants.
i. Initial Awards. Awards under this Section 7(a)
shall be made to Class I Participants only. Each Class I Participant
shall, on the effective date of this Plan and on each anniversary of
this Plan, automatically be granted a Non-qualified Stock
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Option to purchase 1,000 Common Shares, at an Exercise Price equal to
the Fair Market Value of such shares on the date of such grant as an
Independent Trustee. Each such option shall vest, and be exercisable
on, the anniversary of its grant.
ii. Exercise Price. Each Option granted to Class I
Participants shall be exercisable at the Fair Market Value of the
Common Shares on the date of Grant.
iii. Option Period and Adjustments. Each Option
granted to a Class I Participant shall become exercisable commencing
one year after the date of Grant (unless otherwise provided in the
applicable Agreement) and shall expire 10 years thereafter. Options
granted to Class I Participants shall be subject to adjustment as
provided in Section 12 provided that such adjustment and any action by
the Board or the Committee with respect to the Plan and such Options
satisfies the requirements for exemption under Rule 16b-3 and does not
cause any member of the Committee to be disqualified as a Non-Employee
Director under such Rule.
iv. Additional Adjustments and Grants.
Notwithstanding the foregoing, the Board may prospectively, from time
to time, discontinue, reduce or increase the amount of any or all of
the Grants otherwise to be made under this Section 7(a), and may issue
such additional grants to Class I Participants, or any of them, that it
deems appropriate.
b. Class II Participants.
i. Agreements. Grants to Class II Participants shall
be evidenced by written Agreements in such form as the Committee shall
from time to time determine. Such Agreements shall comply with and be
subject to the terms and conditions set forth below.
ii. Number of Common Shares. Each Grant to a Class II
Participant shall state the number of Common Shares to which it
pertains and shall provide for the adjustment thereof in accordance
with the provisions of Section 12 hereof.
c. Grants. Subject to the terms and conditions of the
Plan and consistent with the Trust's intention for the Committee to exercise the
greatest permissible flexibility under Rule 16b-3 in awarding Grants, the
Committee shall have the power:
i. to determine from time to time the Grants to be
granted to Eligible Persons under the Plan and to prescribe the terms
and provisions (which need not be identical) of Grants granted under
the Plan to such persons;
ii. to construe and interpret the Plan, the
Agreements and Grants and to establish, amend, and revoke rules and
regulations for administration of the Plan. In this connection, the
Committee may correct any defect or supply any omission, or reconcile
any inconsistency in the Plan, in any Agreement or Grant, or in any
related agreements, in the manner and to the extent it shall deem
necessary or expedient to make
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the Plan fully effective. All decisions and determinations by the
Committee in the exercise of this power shall be final and binding upon
the Participating Companies and the Grantees;
iii. to amend any outstanding Grant, subject to
Section 14, and to accelerate or extend the vesting or exercisability
of any Grant and to waive conditions or restrictions on any Grants, to
the extent it shall deem appropriate; and
iv. generally to exercise such powers and to perform
such acts as are deemed necessary or expedient to promote the best
interests of the Trust with respect to the Plan.
Each Agreement with a Class II Participant shall state the Exercise
Price. The Exercise Price for any Option shall not be less than the Fair Market
Value on the date of Grant.
d. Medium and Time of Payment. Except as may otherwise be
provided below, the Purchase Price for each Option granted to a Class II
Participant shall be payable in full in United States dollars upon the exercise
of the Option. In the event the Trust determines that it is required to withhold
taxes as a result of the exercise of an Option, as a condition to the exercise
thereof, an Optionee may be required to make arrangements satisfactory to the
Trust to enable it to satisfy such withholding requirements in accordance with
Section 17. If the applicable Agreement so provides, and the Committee otherwise
so permits, the Purchase Price may be paid in one or a combination of the
following:
i. by a certified or bank cashier's check;
ii. by the surrender of Common Shares in good form
for transfer, owned by the person exercising the Option and having a
Fair Market Value on the date of exercise equal to the Purchase Price,
or in any combination of cash and Common Shares, as long as the sum of
the cash so paid and the Fair Market Value of the Common Shares so
surrendered equals the Purchase Price;
iii. by cancellation of indebtedness owed by the
Trust to the Optionee;
iv. by a loan or extension of credit from the Trust
evidenced by a full recourse promissory note executed by the Optionee.
The interest rate and other terms and conditions of such note shall be
determined by the Committee (in which case the Committee may require
that the Optionee pledge his or her Option Shares to the Trust for the
purpose of securing the payment of such note, and in no event shall the
share certificate(s) representing such Option Shares be released to the
Optionee until such note shall have been paid in full); or
v. by any combination of such methods of payment or
any other method acceptable to the Committee in its discretion.
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Except in the case of the exercise of Options where
payment is by certified or bank cashier's check, the Committee may
impose limitations and prohibitions on the exercise of Options as it
deems appropriate, including, without limitation, any limitation or
prohibition designed to avoid accounting consequences which may result
from the use of Common Shares as payment upon exercise of an Option.
Any fractional shares resulting from an Optionee's exercise and payment
of the Purchase Price shall in the discretion of the Committee be paid
in cash.
e. Term and Nontransferability of Grants and Options. Each
Option shall state the time or times which all or part thereof becomes
exercisable, subject to the following restrictions:
i. No Option shall be exercisable except by the
Optionee or a transferee permitted hereunder;
ii. No Option shall be assignable or transferable,
except by will or the laws of descent and distribution of the state
wherein the Optionee is domiciled at the time of his death; provided,
however, that the Committee may (but need not) permit other transfers,
where the Committee concludes that such transferability (i) does not
result in accelerated taxation, (ii) does not cause any Option intended
to be an Incentive Stock Option to fail to be described in Section
422(b) of the Code and (iii) is otherwise appropriate and desirable;
iii. No Option shall be exercisable until such time
as set forth in the applicable Agreement (but in no event after the
expiration of such Option); and
iv. The Committee may not modify, extend or renew any
Grant to any Class I Participant unless such modification, extension or
renewal shall satisfy any and all applicable requirements of Rule
16b-3. The foregoing notwithstanding, no modification of a Grant shall,
without the consent of the Grantee, alter or impair any rights or
obligations under any Grant.
f. Termination of Service, Except by death, Retirement or
Disability. Unless otherwise provided in the applicable Agreement, upon any
Termination of Service by the Trust other than for Cause or as a result of the
Optionee's death, Retirement or Disability, an Optionee shall have the right,
subject to the restrictions of subsection (c) above, to exercise his or her
Options at any time within three months after Termination of Service, but only
to the extent that, at the date of Termination of Service, the Optionee's right
to exercise such Options had accrued pursuant to the terms of the Agreement and
had not previously been exercised; provided, however, that, unless otherwise
provided in the Agreement, if there occurs a Termination of Service by a
Participating Company for Cause or a termination of Service by the Optionee
(other than on account of death, Retirement or Disability), any Option not
exercised in full prior to such termination shall be canceled. For this purpose,
the service relationship shall be treated as continuing intact while the
Optionee is on military leave, sick leave or other bona fide leave of absence
(to be determined in the discretion of the Committee).
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g. Death of Optionee. Unless otherwise provided in the
applicable Agreement, if the Optionee dies while an Eligible Person or within
three months after any Termination of Service other than for Cause or a
Termination of Service by the Optionee (other than on account of death,
Retirement or Disability), and has not fully exercised the Option, then the
Option may be exercised in full, subject to the restrictions of subsection (c)
above, at any time within 12 months after the Optionee's death, by the Successor
of the Optionee, but only to the extent that, at the date of death, the
Optionee's right to exercise such Option had accrued and had not been forfeited
pursuant to the terms of the Agreement and had not previously been exercised.
h. Disability or Retirement of Optionee. Unless otherwise
provided in the Agreement, upon Termination of Service for reason of Disability
or Retirement, such Optionee shall have the right, subject to the restrictions
of subsection (c) above, to exercise the Option at any time within 12 months
after Termination of Service, but only to the extent that, at the date of
Termination of Service, the Optionee's right to exercise such Option had accrued
pursuant to the terms of the applicable Agreement and had not previously been
exercised.
i. Rights as a Shareholder. Except as expressly provided in
this Plan or any Agreement. A Grantee shall have no rights as a shareholder with
respect to any Common Shares covered by his or her Grant until the date of the
issuance of a share certificate for such Common Shares. No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash, securities or
other property), distributions or other rights for which the record date is
prior to the date such stock certificate is issued, except as provided in
Section 12.
j. Modification, Extension and Renewal of Option. Within the
limitations of the Plan, and only with respect to Options granted to Class II
Participants, the Committee may modify, extend or renew outstanding Options or
accept the cancellation of outstanding Options (to the extent not previously
exercised) for the granting of new Options in substitution therefor. The
Committee may modify, extend or renew any Option granted to any Class I
Participant, unless such modification, extension or renewal would not satisfy
any applicable requirements of Rule 16b-3. The foregoing notwithstanding, no
modification of an Option shall, without the consent of the Optionee, alter or
impair any rights or obligations under any Option previously granted.
k. Other Provisions. The Agreement authorized under the Plan
may contain such other provisions not inconsistent with the terms of the Plan
(including, without limitation, restrictions upon the exercise of any Option) as
the Committee shall deem advisable.
8. SPECIAL RULES FOR INCENTIVE STOCK OPTIONS.
a. In the case of Incentive Stock Options granted hereunder,
the aggregate Fair Market Value (determined as of the date of the Grant thereof)
of the Common Shares with respect to which Incentive Stock Options become
exercisable by any Optionee for the first time during any calendar year (under
the Plan and all other plans maintained by the Participating Companies, their
parent or Subsidiaries) shall not exceed $100,000.
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b. In the case of an individual described in Section 422(b)(6)
of the Code (relating to certain 10% owners), the Exercise Price with respect to
an Incentive Stock Option shall not be less than 110% of the Fair Market Value
of a Share on the day the Option is granted and the term of an Incentive Stock
Option shall be no more than five years from the date of grant.
c. If Common Shares acquired upon exercise of an Incentive
Stock Option are disposed of in a disqualifying disposition within the meaning
of Section 422 of the Code by an Optionee prior to the expiration of either two
years from the date of grant of such Option or one year from the transfer of
Common Shares to the Optionee pursuant to the exercise of such Option, or in any
other disqualifying disposition within the meaning of Section 422 of the Code,
such Optionee shall notify the Trust in writing as soon as practicable
thereafter of the date and terms of such disposition and, if the Trust thereupon
has a tax-withholding obligation, shall pay to the Trust an amount equal to any
withholding tax the Trust is required to pay as a result of the disqualifying
disposition.
9. PROVISIONS APPLICABLE TO RESTRICTED SHARES.
a. Grant of Restricted Shares. Subject to the other terms of
the Plan, the Committee may, in its discretion as reflected by the terms of the
applicable Agreement: (i) grant Restricted Shares to Eligible Persons; (ii)
determine the restrictions applicable to Restricted Shares; and (iii) determine
or impose other conditions to the Grant of Restricted Shares under the Plan as
it may deem appropriate.
b. Certificates.
i. Each Grantee of Restricted Shares shall be issued
a share certificate in respect of Restricted Shares awarded under the
Plan. Such certificate shall be registered in the name of the Grantee.
The certificates for Restricted Shares issued hereunder may include any
legend which the Committee deems appropriate to reflect any
restrictions on transfer hereunder or under the Agreement, or as the
Committee may otherwise deem appropriate, and, without limiting the
generality of the foregoing, shall bear a legend referring to the
terms, conditions, and restrictions applicable to such Grant,
substantially in the following form:
The transferability of this certificate and the
shares represented hereby are subject to the terms
and conditions (including forfeiture) of the N'
Tandem Trust 1998 Equity Compensation Plan and an
Agreement entered into between the registered owner
and N' Tandem Trust. Copies of such Plan and
Agreement are on file in the offices of N' Tandem
Trust at 6430 S. Quebec Street, Englewood, CO 80111.
ii. The Committee shall require that the share
certificates evidencing such Restricted Shares be held in custody by
the Trust until the restrictions thereon shall
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have lapsed, and that, as a condition of any Grant of Restricted
Shares, the Grantee shall have delivered a stock power, endorsed in
blank, relating to the shares covered by such Grant. If and when such
restrictions so lapse, the share certificates shall be delivered by the
Trust to the Grantee or his or her designee as provided in Subsection
(c).
c. Restrictions and Conditions. Unless otherwise provided by
the Committee, the Restricted Shares granted pursuant to the Plan shall be
subject to the following restrictions and conditions:
(1) Subject to the provisions of the Plan
and the Agreements, during a period commencing with the date
of such Grant and ending on the date the period of forfeiture
with respect to such Restricted Shares lapses, the Grantee
shall not be permitted voluntarily or involuntarily to sell,
transfer, pledge, anticipate, alienate, encumber or assign
Restricted Shares awarded under the Plan (or have such
Restricted Shares attached or garnished). The period of
forfeiture with respect to Restricted Shares granted hereunder
shall lapse as provided in the applicable Agreement.
(2) Except as provided in any agreement (i),
the Grantee shall have, in respect of the Restricted Shares,
all of the rights of a shareholder of the Trust, including the
right to vote the Restricted Shares, and the right to receive
any cash dividends, which dividends shall be held by the Trust
(unsegregated as a part of its general assets) until the
period of forfeiture lapses (and shall be forfeited if the
underlying Restricted Shares are forfeited). Certificates for
Restricted Shares no longer subject to restrictions shall be
delivered to the Grantee or his or her designee promptly
after, and only after, the period of forfeiture shall lapse
without forfeiture in respect of such Restricted Shares.
(3) Subject to the provisions of the
Agreement, if the Grantee has a Termination of Service by the
Trust or Participating Company for Cause, or by the Grantee
for any reason, during the applicable period of forfeiture,
then all Restricted Shares still subject to restriction shall
thereupon, and with no further action, be forfeited by the
Grantee.
(4) Subject to the provisions of the
Agreement, in the event the Grantee has a Termination of
Service on account of death or Disability or Retirement, or
the Grantee has a Termination of Service by the Trust or
Participating Company for any reason other than Cause, or in
the event of a Change in Control (regardless of whether a
termination follows thereafter), during the applicable period
of forfeiture, then restrictions will immediately lapse on all
Restricted Shares granted to the applicable Grantee.
10. PROVISIONS APPLICABLE TO DERs.
a. Grant of DERs. Subject to the other terms of the Plan, the
Committee may, in its discretion as reflected by the terms of the Agreements,
authorize the granting of
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DERs to Eligible Persons based on the dividends declared on Common Shares, to be
credited as of the dividend payment dates, during the period between the date a
Grant is made, and the date such Grant expires, as determined by the Committee.
b. Certain Terms.
i. The term of a Dividend Equivalent Right shall be
set by the Committee in its discretion.
ii. Unless otherwise determined by the Committee, a
DER is payable only while the Grantee is an Employee.
iii. Payment of the applicable dividend to the holder
of a DER shall be in cash, in Common Shares or a combination of the
both, as determined by the Committee.
iv. The Committee may impose such employment-related
conditions on the grant of a DER as it deems appropriate in its
discretion.
11. TERM OF PLAN. Grants may be made pursuant to the Plan until the
expiration of 10 years from the effective date of the Plan.
12. RECAPITALIZATION AND CHANGES OF CONTROL.
a. Subject to any required action by shareholders of the
Trust, if (i) the Trust shall at any time be involved in a merger,
consolidation, dissolution, liquidation, reorganization, exchange of shares,
sale of all or substantially all of the assets or shares of the Trust or a
transaction similar thereto, (ii) any stock dividend, shares split, reverse
shares split, shares combination, reclassification, recapitalization or other
similar change in the capital structure of the Trust, or any distribution to
holders of Common Shares other than cash dividends, shall occur or (iii) any
other event shall occur which in the judgment of the Committee necessitates
action by way of adjusting the terms of the outstanding Grant, then the
Committee may forthwith take any such action as in its judgment shall be
necessary to preserve to the Grantee's rights substantially proportionate to the
rights existing prior to such event, and to maintain the continuing availability
of Common Shares with respect to such Grants (if Common Shares are otherwise
then available) in a manner consistent with the intent hereof, including,
without limitation, adjustments in (x) the number and kind of shares subject to
Grants, (y) the Exercise Price, and (z) the number and kind of shares available
under Section 6. To the extent that such action shall include an increase or
decrease in the number of shares subject to outstanding Grants, the number of
shares available under Section 6 above shall be increased or decreased, as the
case may be, proportionately.
b. Subject to any required action by shareholders of the
Trust, if the Trust is the surviving entity in any merger or consolidation, each
outstanding Option and the rights under the Grant of Restricted Shares or DERs
shall pertain and apply to the securities to which a holder of the number of
Common Shares subject to the Grant would have been entitled. In
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the event of a merger or consolidation in which the Trust is not the surviving
entity, the date of exercisability of each outstanding Grant shall be
accelerated to a date prior to such merger or consolidation, unless the
agreement of merger or consolidation provides for the assumption of the Grant by
the successor to the Trust.
c. To the extent that any adjustment pursuant to this Section
12 relates to securities of the Trust, such adjustments shall be made by the
Committee, whose determination shall be conclusive and binding on all persons.
d. Except as expressly provided in this Section 12, the
recipient of any Grant shall have no rights by reason of subdivision or
consolidation of shares of any class, the payment of any shares dividend or
shares or any other increase or decrease in the number of shares of any class or
by reason of any dissolution, liquidation, merger or consolidation or spin-off
of assets or stock of another corporation, and any issuance by the Trust of
shares of any class, or securities convertible into shares of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number or Exercise Price of Common Shares subject to a Grant.
e. Grants made pursuant to the Plan shall not affect in any
way the right or power to the Trust to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business assets.
f. Upon the occurrence of a Change of Control:
i. The Committee as constituted immediately before
the Change of Control may make such adjustments as it, in its
discretion, determines are necessary or appropriate in light of the
Change of Control (including, without limitation, the substitution of
shares other than shares of the Trust as the shares optioned hereunder,
and the acceleration of the exercisability of the Options), provided
that the Committee determines that such adjustments do not have a
substantial adverse economic impact on the Optionee as determined at
the time of the adjustments.
ii. All restrictions and conditions on each Option,
Restricted Share or DER shall automatically lapse and all Grants under
the Plan shall be deemed fully vested; provided that this provision
shall not be effective to the extent that the Trust or the Committee
determines that the accelerated vesting or other treatment or
adjustment of the Grants upon the occurrence of a Change of Control as
contemplated hereby would adversely affect the ability of the Trust or
acquiror (in the case of a Change of Control in connection with which
the Trust is not the surviving corporation) to use the pooling method
of accounting in connection with a Change of Control transaction, if
such method of accounting would otherwise be available and desired by
the Trust or acquiror.
g. "Change of Control" shall mean the occurrence of any one of
the following events:
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i. any "person," as such term is used in Sections
13(d) and 14(d) of the Act (other than the Trust, and Chateau
Communities, Inc., and any of their Affiliates, or any trustee,
fiduciary or other person or entity holding securities under any
employee benefit plan or trust of the Trust or any of its Affiliates)
together with all "affiliates" and "associates" (as such terms are
defined in Rule 12b-2 under the Act) of such person, shall become the
"beneficial owner" (as such term is defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of the Trust representing
30% or more of either (A) the combined voting power of the Trust's then
outstanding securities having the right to vote in an election of the
Board of Trustees or (B) the then outstanding shares (in either such
case other than as a result of an acquisition of securities directly
from the Trust); or
ii. persons who, as of the effective date of the
Plan, constitute the Trust's Board of Trustees (the "Incumbent
Trustees") cease for any reason, including, without limitation, as a
result of a tender offer, proxy contest, merger or similar transaction,
to constitute at least a majority of the Board, provided that any
person becoming a Trustee of the Trust subsequent to the effective date
whose election or nomination for election was approved by a vote of at
least a majority of the Incumbent Trustees shall, for purposes of the
Plan, be considered an Incumbent Trustee; or
iii. there shall occur (A) any consolidation or
merger of the Trust or any Subsidiary where the shareholders of the
Trust, immediately prior to the consolidation or merger, would not,
immediately after the consolidation or merger, beneficially own (as
such term is defined in Rule 13d-3 under the Act), directly or
indirectly, shares representing in the aggregate 50% or more of the
voting securities of the entity issuing cash or securities in the
consolidation or merger (or of its ultimate parent corporation, if
any), (B) any sale, lease, exchange or other transfer (in one
transaction or a series of transactions contemplated or arranged by any
party as a single plan) of all or substantially all of the assets of
the Trust or (C) any plan or proposal for the liquidation or
dissolution of the Trust.
Notwithstanding the foregoing, a "Change of Control" shall not be deemed to have
occurred for purposes of the foregoing clause (i) solely as the result of an
acquisition of securities by the Trust which, by reducing the number of shares
or other voting securities outstanding, increases (x) the proportionate number
of shares beneficially owned by any person to 30% or more of the shares then
outstanding or (y) the proportionate voting power represented by the voting
securities beneficially owned by any person to 30% or more of the combined
voting power of all then outstanding voting securities; provided, however, that,
subject to the exceptions set forth in sub paragraph 1 of this subsection (g),
if any person referred to in clause (x) or (y) of this sentence shall thereafter
become the beneficial owner of any additional shares or other voting securities
(other than pursuant to a stock split, stock dividend, or similar transaction),
then a "Change of Control" shall be deemed to have occurred for purposes of this
subsection (g).
13. EFFECT OF CERTAIN TRANSACTIONS. In the case of (i) the dissolution
or liquidation of the Trust, (ii) a merger, consolidation, reorganization or
other business combination in which the Trust is acquired by another entity or
in which the Trust is not the
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surviving entity, or (iii) any sale, lease, exchange or other transfer (in one
transaction or a series of transactions contemplated or arranged by any party as
a single plan) of all or substantially all of the assets of the Trust, the Plan
and the Grants issued hereunder shall terminate upon the effectiveness of any
such transaction or event, unless provision is made in connection with such
transaction for the assumption of Grants theretofore granted, or the
substitution for such Grants of new Grants, by the successor entity or parent
thereof, with appropriate adjustment as to the number and kind of shares and the
per share exercise prices, as provided in Section 12. In the event of such
termination, all outstanding Options shall be exercisable in full and all
restrictions on Restricted Shares shall be deemed waived for at least fifteen
days prior to the date of such termination whether or not otherwise exercisable
during such period.
14. SECURITIES LAW REQUIREMENTS.
a. Legality of Issuance. The issuance of any Shares subject to
a Grant, and the Grants themselves, shall be contingent upon the following:
i. the obligation of the Trust to sell Common Shares
with respect to Options granted under the Plan, or to issue Restricted
Shares or DERs, shall be subject to all applicable laws, rules and
regulations, including all applicable federal and state securities
laws, and the obtaining of all such approvals by governmental agencies
as may be deemed necessary or appropriate by the Committee;
ii. the Committee may make such changes to the Plan
as may be necessary or appropriate to comply with the rules and
regulations of any government authority or to obtain tax benefits
applicable to Options, Restricted Shares or DERs; and
iii. each Grant is subject to the requirement that,
if at any time the Committee determines, in its discretion, that the
listing, registration or qualification of Common Shares issuable
pursuant to the Plan is required by any securities exchange or under
any state or federal law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a condition
of, or in connection with, any Grant or the issuance of Common Shares,
no Options shall be granted or payment made or Common Shares issued, in
whole or in part, unless listing, registration, qualification, consent
or approval has been effected or obtained free of any conditions in a
manner acceptable to the Committee.
b. Restrictions on Transfer. Regardless of whether the
offering and sale or issuance of Common Shares under the Plan has been
registered under the Act or has been registered or qualified under the
securities laws of any state, the Trust may impose restrictions on the sale,
pledge or other transfer of such Common Shares (including the placement of
appropriate legends on share certificates) if, in the judgment of the Trust and
its counsel, such restrictions are necessary or desirable in order to achieve
compliance with the provisions of the Act, the securities laws of any state or
any other law. In the event that the sale of Common Shares under the Plan is not
registered under the Act but an exemption is available which requires an
investment representation or other representation, each Grantee shall be
required to represent that such Common Shares are being acquired for investment,
and not with a view to
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the sale or distribution thereof, and to make such other representations as are
deemed necessary or appropriate by the Trust and its counsel. Any determination
by the Trust and its counsel in connection with any of the matters set forth in
this Section 14 shall be conclusive and binding on all persons. Without limiting
the generality of the last sentence of Section 6, share certificates evidencing
Common Shares acquired under the Plan pursuant to an unregistered transaction
shall bear the following restrictive legend and such other restrictive legends
as are required or deemed advisable under the provisions of any applicable law.
"THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"). ANY TRANSFER OF SUCH
SECURITIES WILL BE INVALID UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN
EFFECT AS TO SUCH TRANSFER OR IN THE OPINION OF COUNSEL FOR THE ISSUER SUCH
REGISTRATION IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT."
c. Registration or Qualification of Securities. The Trust may,
but shall not be obligated to, register or qualify the issuance of Options
and/or the sale or issuance of Common Shares under the Act or any other
applicable law. The Trust shall not be obligated to take any affirmative action
in order to cause the issuance of Options or the sale or issuance of Common
Shares under the Plan to comply with any law.
d. Exchange of Certificates. If, in the opinion of the Trust
and its counsel, any legend placed on a share certificate representing Common
Shares sold or issued pursuant to the Plan is no longer required, the holder of
such certificate shall be entitled to exchange such certificate for a
certificate representing the same number of Common Shares but lacking such
legend.
15. AMENDMENT OF THE PLAN. The Board may from time to time, with
respect to any Common Shares at the time not subject to Grants, suspend or
discontinue the Plan or revise or amend it in any respect whatsoever. The Board
may amend the Plan as it shall deem advisable, except that no amendment may
adversely affect a Grantee with respect to Grants previously made unless such
amendments are in connection with compliance with applicable laws; provided that
the Board (i) may not increase the aggregate number of Common Shares that may be
subject to Grants under the Plan, or change the classes or types of persons that
are eligible to receive Grants under the Plan, without the prior approval of the
shareholders of the Trust, voting as a single class, and (ii) may not make any
amendment in the Plan that would, if such amendment were not approved by the
shareholders of the Trust, cause the Plan to fail to comply with any requirement
or applicable law or regulation, unless and until the approval of such
shareholders.
16. APPLICATION OF FUNDS. The proceeds received by the Trust from the
sale of Common Shares pursuant to the exercise of an Option will be used for
general corporate purposes.
17. TAX WITHHOLDING. Each recipient of a Grant shall, no later than the
date as of which the value of any Grant first becomes includable in the gross
income of the recipient
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for federal income tax purposes, pay to the Trust, or make arrangements
satisfactory to the Trust regarding payment of any federal, state or local taxes
of any kind that are required by law to be withheld with respect to such income.
Subject to the consent of the Committee, a Grantee may elect to have such tax
withholding satisfied, in whole or in part, by (i) authorizing the Company to
withhold a number of Common Shares to be issued pursuant to a Grant equal to the
Fair Market Value as of the date withholding is effected that would satisfy the
withholding amount due, (ii) transferring to the Trust Common Shares owned by
the Grantee with a Fair Market Value equal to the amount of the required
withholding tax, or (iii) in the case of an Grantee who is an Employee of the
Trust at the time such withholding is effected, by withholding the required
amount from the Grantee's cash compensation. Notwithstanding anything contained
in the Plan to the contrary, the Grantee's satisfaction of any tax-withholding
requirements imposed by the Committee shall be a condition precedent to the
Trust's obligation as may otherwise by provided hereunder to issue shares or
dividends to the Grantee and to release any instructions as may otherwise be
provided under a Grant, and the failure of the Grantee to satisfy such
requirements with respect to the (i) exercise of an Option; (ii) lapsing of
restrictions on Restricted Shares (or other income recognition event; or (iii)
distributions in respect of any DER shall cause such Option, Restricted Share or
DER to be forfeited.
18. NOTICES. All notices under the Plan shall be in writing, and if to
the Trust, shall be delivered to the Board or mailed to its principal office,
addressed to the attention of the Board; and if to the Grantee, shall be
delivered personally or mailed to the Grantee at the address of such Grantee
appearing in the records of the Participating Trust. Such addresses may be
changed at any time by written notice to the other party given in accordance
with this Section 16.
19. RIGHTS TO EMPLOYMENT OR OTHER SERVICE. Nothing in the Plan or in
any Grant made pursuant to the Plan shall confer on any individual any right to
continue in the employ or other service of the Trust (if applicable) or
interfere in any way with the right of the Trust and its shareholders to
terminate the individual's employment or other service at any time.
20. EXCULPATION AND INDEMNIFICATION. To the maximum extent permitted by
law, the Trust shall indemnify and hold harmless the members of the Board and
the members of the Committee from and against any and all liabilities, costs and
expenses incurred by such persons as a result of any act or omission to act in
connection with the performance of such person's duties, responsibilities and
obligations under the Plan, other than such liabilities, costs and expenses as
may result from the gross negligence, bad faith, willful misconduct or criminal
acts of such persons.
21. NO FUND CREATED. Any and all payments hereunder to recipients of
Grants hereunder shall be made from the general funds of the Trust (or, if
applicable, a Participating Company), and no special or separate fund shall be
established or other segregation of assets made to assure such payments;
provided that bookkeeping reserves may be established in connection with the
satisfaction of payment obligations hereunder. The obligations of the Trust
under the Plan are unsecured and constitute a mere promise by the Trust to do
things in the future, and, to the extent that any person acquires a right to
receive payments under the Plan
18
<PAGE> 105
from the Trust (or, if applicable, a Participating Company), such right shall be
no greater than the right of a general unsecured creditor of the Trust (or, if
applicable, a Participating Company).
22. CAPTIONS. The use of captions in the Plan is for convenience. The
captions are not intended to provide substantive rights.
23. GOVERNING LAW. THE PLAN SHALL BE GOVERNED BY THE LAWS OF
CALIFORNIA, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF LAWS.
24. EXECUTION. The Trust has caused the Plan to be executed in the name
and on behalf of the Trust by a Trustee of the Trust thereunto duly authorized.
N' TANDEM TRUST
By:
Name:
Title: Trustee
19
<PAGE> 106
WINDSOR REAL ESTATE INVESTMENT TRUST 8
PROXY FOR 1998 ANNUAL MEETING OF SHAREHOLDERS
The undersigned holder of Shares of beneficial interest of Windsor Real
Estate Investment Trust 8, a California business trust (the "Trust"), acting
under the laws of the State of California, hereby constitutes and appoints
Steven G. Waite and Stacey Williams and each of them, the attorneys and proxies
of the undersigned, each with the power of substitution, to attend and act for
the undersigned at the 1998 Annual Meeting of Shareholders of the Trust to be
held on October 23, 1998 at 10:00 a.m., MDT, at 6430 South Quebec Street,
Englewood, Colorado 80111, and at any adjournments thereof, and in connection
therewith to vote all of the Shares which the undersigned would be entitled to
vote, as follows on the reverse side of this proxy.
Said attorneys and proxies, and each of them, shall have all the powers
which the undersigned would have if acting in person. The undersigned hereby
revokes any other proxy to vote at such meeting and hereby ratifies and confirms
all that said attorneys and proxies and each of them, may lawfully do by virtue
hereof. Said proxies, without hereby limiting their general authority, are
specifically authorized to vote in accordance with their best judgment with
respect to all matters incident to the conduct of the meeting, all matters
presented at the meeting but which are not known to the Board of Trustees at the
time of the solicitation of this proxy and, with respect to the election of any
person as a Trustee, if a bona fide nominee for the office is named in the Proxy
Statement and such nominee is unable to serve or will not serve, to vote for any
other person.
Each of the above-named proxies present at said meeting either in person or
by substitute, shall have and exercise all the powers of said proxies hereunder.
This proxy shall be voted in accordance with the choices specified by the
undersigned on this proxy. IF NO INSTRUCTIONS TO THE CONTRARY ARE INDICATED ON
THE PROXY THE PROXY WILL BE TREATED AS A GRANT OF AUTHORITY TO VOTE FOR THE
ELECTION OF THE NOMINEES FOR THE BOARD OF TRUSTEES AND AS A GRANT OF AUTHORITY
TO VOTE FOR THE PROPOSALS AND ON ANY OTHER MATTER TO BE VOTED UPON.
PROPOSALS 1 AND 2 ARE CONDITIONED UPON SHAREHOLDER APPROVAL OF BOTH
PROPOSALS 1 AND 2, MEANING THAT IF ONLY ONE OF SUCH PROPOSALS IS APPROVED BY THE
SHAREHOLDERS, BOTH PROPOSALS WILL BE DEEMED TO BE NOT APPROVED BY THE
SHAREHOLDERS.
S FOLD AND DETACH HERE S
................................................................................
<TABLE>
<S> <C> <C>
THIS PROXY CARD IS SOLICITED ON BEHALF OF THE BOARD OF PLEASE mark
TRUSTEES OF WINDSOR REAL ESTATE INVESTMENT TRUST 8 your vote as
indicated in
the example [X]
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
1. PROPOSAL TO CONVERT THE TRUST FROM A 4. ELECTION OF TRUSTEES
FINITE LIFE ENTITY TO AN INFINITE LIFE
ENTITY PLEASE FILL OUT A OR B BELOW
FOR AGAINST ABSTAIN A. REGULAR VOTING
[ ] [ ] [ ]
2. PROPOSAL TO AMEND AND RESTATE THE FOR
TRUST'S DECLARATION OF TRUST AND ADOPT ALL NOMINEES WITHHOLD
BY-LAWS FOR THE TRUST LISTED AUTHORITY
(EXCEPT AS FOR ALL
LISTED TO RIGHT) NOMINEES
FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ]
B. CUMULATIVE VOTING OPTION
Please allocate available votes
Proposals 1 and 2 are conditioned upon among candidates (see below for
shareholder approval of both Proposals details):
1 and 2, meaning that if only one of
such proposals is approved by the ---- GARY P. MCDANIEL
shareholders, both proposals will be
deemed to be not approved by the
shareholders. ---- KENNETH G. PINDER
---- RICHARD B. RAY
Instructions for Cumulative
Voting. Each Shareholder
selecting the Cumulative Voting
Option is entitled to 3 votes per
3. PROPOSAL TO ADOPT THE 1998 EQUITY Share held, which are to be
COMPENSATION PLAN allocated among the nominees
above, in the Shareholder's
discretion.
FOR AGAINST ABSTAIN
[ ] [ ] [ ] PLEASE SIGN, DATE AND RETURN YOUR
PROXY PROMPTLY IN THE POSTAGE
PREPAID ENVELOPE PROVIDED.
<CAPTION>
<S> <C>
1. NOMINEES: GARY P. MCDANIEL
KENNETH G. PINDER
RICHARD B. RAY
2. (INSTRUCTION TO WITHHOLD AUTHORITY TO VOTE
FOR ANY INDIVIDUAL NOMINEE WRITE THE
NAME(S) OF SUCH NOMINEE(S) BELOW)
------------------------------------------
------------------------------------------
Please allocate available votes among
candidates (see below for details):
3.
PLEASE SIGN, DATE AND RETURN YOUR PROXY
PROMPTLY IN THE
</TABLE>
The undersigned acknowledges receipt of the Notice of Annual Meeting and Proxy
Statement relating to the 1998 Annual Meeting of shareholders.
Signature(s)
- ---------------------------------------------------------------------
Date:
- ---------------------
IMPORTANT: In signing this proxy, please sign your name or names on the
signature line in the same manner as it appears on your stock certificate. When
signing as an attorney, executor, administrator, trustee or guardian, please
give your full title as such. EACH JOINT TENANT SHOULD SIGN.
S FOLD AND DETACH HERE S
................................................................................
