<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 23, 1997
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
SECURITY CAPITAL INDUSTRIAL TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------- 74-2604728
MARYLAND (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
(STATE OF ORGANIZATION)14100 EAST 35TH PLACE
AURORA, COLORADO 80011
(303) 375-9292
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
JEFFREY A. KLOPF, SECRETARY
SECURITY CAPITAL INDUSTRIAL TRUST
14100 EAST 35TH PLACE
AURORA, COLORADO 80011
(303) 375-9292
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPY TO:
EDWARD J. SCHNEIDMAN
MAYER, BROWN & PLATT
190 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60603
(312) 782-0600
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE
AMOUNT AGGREGATE PRICE OFFERING PRICE AMOUNT OF
TITLE OF SHARES TO BE REGISTERED TO BE REGISTERED PER UNIT (1) (1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares of Beneficial
Interest, par value $0.01 per
share.......................... 583,508 $24.6875 $14,405,353.75 $4,365.26
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Preferred Share Purchase Rights. 583,508 N/A N/A N/A
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</TABLE>
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(1) Estimated solely for purposes of determining the registration fee, based
on the average of the high and low sales price on the New York Stock
Exchange on October 17, 1997.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED OCTOBER 23, 1997
LOGO
583,508 COMMON SHARES OF BENEFICIAL INTEREST
This Prospectus relates to the offer and sale from time to time of up to
583,508 common shares of beneficial interest, $0.01 par value per share
("Common Shares"), of Security Capital Industrial Trust, a Maryland real estate
investment trust ("SCI"), issuable to certain holders of units ("Units") of
limited partnership interests in SCI Limited Partnership-III and SCI Limited
Partnership-IV (the "Partnerships"), of which SCI, or a wholly owned subsidiary
of SCI, is the sole general partner. SCI is registering the Common Shares, as
required under the terms of the Registration Rights Agreement, dated as of
October 28, 1994 (the "Registration Rights Agreement"), by and among SCI and
certain holders of Units (the "Selling Shareholders"). See "Registration
Rights."
SCI will not receive any proceeds from the sale of any Common Shares by the
Selling Shareholders but has agreed to bear certain expenses of registration of
such Common Shares under federal and state securities laws. See "Registration
Rights."
The Common Shares are listed on the New York Stock Exchange (the "NYSE")
under the symbol "SCN." To ensure that SCI maintains its qualification as a
real estate investment trust ("REIT"), SCI has restricted ownership of more
than 9.8% of the issued and outstanding Common Shares by any single
shareholder, with certain exceptions. See "Description of Shares of Beneficial
Interest--Restrictions on Transfer."
The Selling Shareholders may from time to time offer and sell Common Shares
held by them directly or through agents or broker-dealers on terms to be
determined at the time of sale. To the extent required, the names of any agent
or broker-dealer and applicable commissions or discounts and any other required
information with respect to any particular offer will be set forth in an
accompanying Prospectus Supplement. See "Plan of Distribution." Each of the
Selling Shareholders reserves the sole right to accept or reject, in whole or
in part, any proposed purchase of the Common Shares to be made directly or
through agents or broker-dealers.
The Selling Shareholders and any agents or broker-dealers that participate in
the distribution of Common Shares may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"), and
any commissions received by them and any profit on the resale of the Common
Shares may be deemed to be underwriting commissions or discounts under the
Securities Act. See "Registration Rights" for a description of indemnification
arrangements between SCI and the Selling Shareholders.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CON-
TRARY IS A CRIMINAL OFFENSE.
-----------
The date of this Prospectus is October , 1997.
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY SCI OR ANY SELLING SHAREHOLDER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY SECURITY OTHER THAN THE COMMON SHARES OFFERED HEREBY, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.............. 2
Incorporation by Reference......... 3
Security Capital Industrial Trust.. 3
The Merger Transaction............. 4
Description of Shares of Beneficial
Interest.......................... 4
Shares Available for Future Sale... 7
Certain Provisions of Maryland Law
and of SCI's Declaration of Trust
and Bylaws........................ 8
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Registration Rights................ 10
Selling Shareholders............... 11
Federal Income Tax Considerations.. 11
Plan of Distribution............... 19
Experts............................ 19
Legal Matters...................... 19
</TABLE>
AVAILABLE INFORMATION
SCI is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy and information statements and other information
filed by SCI can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
and at its regional offices at Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661 and Seven World Trade Center, New York, New York 10048.
Copies of such material can be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Such material can also be obtained from the Commission's World Wide Web
site at http://www.sec.gov. The Common Shares are listed on the NYSE under the
symbol "SCN" and such reports, proxy and information statements and other
information concerning SCI can also be inspected at the offices of the NYSE at
20 Broad Street, New York, New York 10005.
SCI has filed with the Commission a registration statement on Form S-3
(together with all amendments and exhibits, the "Registration Statement") under
the Securities Act with respect to the Common Shares offered hereby. This
prospectus ("Prospectus"), which constitutes a part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement, certain portions of which have been omitted as permitted by the
rules and regulations of the Commission. Statements made in this Prospectus as
to the content of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed or incorporated by reference as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.
2
<PAGE>
INCORPORATION BY REFERENCE
The following documents filed by SCI with the Commission are hereby
incorporated by reference into this Prospectus:
(1) SCI's Annual Report on Form 10-K for the fiscal year ended December
31, 1996;
(2) SCI's Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 1997 and June 30, 1997;
(3) SCI's Current Reports on Form 8-K filed January 27, January 30, March
26, July 11, and September 9, 1997; and
(4) The description of the Common Shares and the related preferred share
purchase rights contained in SCI's Registration Statement on Form 8-A.
All documents subsequently filed by SCI pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act, prior to the termination of the offering, shall
be deemed to be incorporated by reference into this Prospectus. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein will be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which is or is deemed to be incorporated by
reference herein modifies or supersedes any such statement. Any such statement
so modified or superseded will not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
SCI will provide without charge to each person, including any beneficial
owner, to whom this Prospectus is delivered, upon written or oral request of
such person, a copy of any and all of the information incorporated by
reference in this Prospectus (not including exhibits to the information
incorporated by reference unless such exhibits are specifically incorporated
by reference into the information that this Prospectus incorporates). Requests
should be directed to Security Capital Industrial Trust, 14100 East 35th
Place, Aurora, Colorado 80011 Attention: Secretary, telephone number (303)
375-9292.
SECURITY CAPITAL INDUSTRIAL TRUST
SCI is the largest publicly held, global owner and operator of distribution
properties headquartered in the United States based on equity market
capitalization. SCI is an international operating company focused exclusively
on meeting the distribution space needs of international, national, regional
and local industrial real estate users through the SCI International Operating
System(TM). SCI distinguishes itself from its competition by being the only
entity that combines all of the following:
1. An international operating strategy dedicated to providing services to
the 1,000 largest users of distribution facilities globally;
2. An organizational structure and service delivery system built around
the customer. SCI believes its service approach is unique to the real
estate industry as it combines international scope and expertise with
strong local presence;
3. A disciplined investment strategy based on proprietary research that
identifies high growth markets with sustainable demand for SCI's low office
finish distribution space product; and
4. Over 270 professionals in 34 offices which SCI believes comprise the
deepest and most experienced management team in industrial real estate.
The cornerstone of SCI's operating strategy is the SCI International
Operating System(TM) which is comprised of the Market Services Group, the
Global Services Group and the Global Development Group that utilize SCI's
national and international network of distribution space to provide an
exceptional level of customer service including development on an
international, national, regional and local basis.
3
<PAGE>
SCI engages in the acquisition, development, marketing, operation and long-
term ownership of distribution facilities, and the development of master-
planned distribution parks and build-to-suit facilities for its customers. SCI
is a fully integrated operating company and has access to services, including:
(i) expertise in market research, (ii) building and land acquisition and due
diligence, (iii) master-planned distribution park design and building
construction, (iv) marketing, asset and leasing management and (v) capital
markets and financial operations.
SCI deploys capital in markets with excellent long-term growth prospects and
in markets where SCI can achieve a strong market position through the
acquisition and development of generic, flexible facilities for both
warehousing and light manufacturing uses. SCI expanded its operations into
Mexico and Europe in the first half of 1997 to meet the needs of its targeted
national and international customers as they expand and reconfigure their
distribution facility requirements globally. With six target market cities
identified in Mexico and 15 identified in Europe, SCI believes that there are
significant growth opportunities internationally. SCI is building a deep
organization in both Mexico and Europe as part of the SCI International
Operating System(TM).
SCI's executive offices are located at 14100 East 35th Place, Aurora,
Colorado 80011, and its telephone number is (303) 375-9292. SCI's predecessor
was formed in June 1991 as a Delaware corporation, and SCI was re-formed as a
Maryland real estate investment trust in January 1993.
THE MERGER TRANSACTION
Pursuant to the terms of a Merger and Issuance Agreement, dated as of March
24, 1997, as amended (the "Merger Agreement"), between SCI and Security
Capital Group Incorporated ("Security Capital"), SCI acquired, through a
series of merger transactions (the "Merger"), all of the REIT management and
property management operations formerly conducted by Security Capital. In
exchange for such assets, SCI issued Security Capital 3,692,023 Common Shares
valued at $81,870,626. As a result of the Merger, SCI became an internally
managed REIT.
DESCRIPTION OF SHARES OF BENEFICIAL INTEREST
GENERAL
SCI's Amended and Restated Declaration of Trust, as amended (the
"Declaration of Trust"), authorizes SCI to issue up to 180,000,000 Shares of
Beneficial Interest, $0.01 par value, consisting of Common Shares, preferred
shares of beneficial interest ("Preferred Shares") and such other types or
classes of shares of beneficial interest as the Trustees may create and
authorize from time to time. At October 17, 1997, approximately 108,778,419
Common Shares were issued and outstanding and held of record by approximately
1,215 shareholders.
The Declaration of Trust also provides that, subject to the provisions of
any class or series of the capital shares of SCI then outstanding, the
shareholders of SCI shall be entitled to vote only on the following matters:
(i) election or removal of Trustees; (ii) subject to certain limited
exceptions, amendment of the Declaration of Trust; (iii) termination of SCI;
(iv) reorganization of SCI; and (v) merger or consolidation of SCI or the sale
or disposition of all or substantially all of SCI's assets. Except with
respect to the foregoing matters, no action taken by the shareholders at any
meeting shall in any way bind the Trustees. See "Certain Provisions of
Maryland Law and of SCI's Declaration of Trust and Bylaws" for a discussion of
provisions related to changes in control.
The transfer agent and registrar for the Common Shares is BankBoston, N.A.,
150 Royall Street, Canton, Massachusetts 02021.
4
<PAGE>
COMMON SHARES OF BENEFICIAL INTEREST
The outstanding Common Shares are fully paid and, except as set forth below
under "--Shareholder Liability," nonassessable. Each Common Share entitles the
holder to one vote on all matters requiring a vote of shareholders, including
the election of Trustees. Shareholders do not have the right to cumulate their
votes in the election of Trustees, which means that the holders of a majority
of the outstanding Common Shares can elect all of the Trustees then standing
for election. Shareholders are entitled to such distributions as may be
declared from time to time by the Trustees out of funds legally available
therefor. SCI's current distribution policy is to pay quarterly distributions
to shareholders based on a reasonable percentage of funds from operations.
Since January 1, 1992, SCI has paid consecutive distributions of $0.2525 per
Common Share for 1996 quarters, $0.23375 per Common Share for 1995 quarters,
$0.2125 per Common Share for 1994 quarters, $0.1875 per Common Share for 1993
quarters and an annual distribution of $0.45 per Common Share for 1992. SCI
has paid a distribution of $0.2675 per Common Share for each of the first
three quarters of 1997.
Holders of Common Shares have no conversion, redemption, preemptive or
exchange rights to subscribe to any securities of SCI. In the event of any
liquidation, dissolution or winding-up of the affairs of SCI, holders of
Common Shares will be entitled to share ratably in the assets of SCI remaining
after provision for payment of liabilities to creditors and subject to the
rights of holders of Preferred Shares, if any.
All Common Shares shall have equal distribution, liquidation and other
rights and shall have no preference, preemptive, conversion or exchange
rights.
PREFERRED SHARES OF BENEFICIAL INTEREST; PURCHASE RIGHTS
The Preferred Shares authorized by the Declaration of Trust may be issued
from time to time in one or more series in such amounts and with such
preferences, conversion or other rights, voting powers, restrictions,
limitations as to distributions, qualifications and terms or conditions of
redemption as may be fixed by the Trustees. The issuance of Preferred Shares
could have the effect of delaying, deferring or preventing a change of control
of SCI and may adversely affect the voting and other rights of shareholders.
As of the date of this Prospectus, there were 5,400,000 of SCI's Series A
Cumulative Redeemable Preferred Shares of Beneficial Interest, 8,050,000 of
SCI's Series B Cumulative Convertible Redeemable Preferred Shares of
Beneficial Interest and 2,000,000 of SCI's Series C Cumulative Redeemable
Preferred Shares of Beneficial Interest issued and outstanding.
On December 7, 1993, the Board of Trustees declared a dividend of one
preferred share purchase right (a "Purchase Right") for each Common Share
outstanding, payable to holders of Shares of record at the close of business
on December 31, 1993. The holders of any additional Common Shares issued after
such date and before the redemption or expiration of the Purchase Rights are
also entitled to receive one Purchase Right for each such additional Common
Share. Each Purchase Right entitles the holder under certain circumstances to
purchase from SCI one one-hundredth of a share of Series A Junior
Participating Preferred Shares, par value $.01 per share (the "Participating
Preferred Shares") at a price of $40.00 per one one-hundredth of a
Participating Preferred Share, subject to adjustment. Purchase Rights are
exercisable when a person or group of persons (other than Security Capital)
acquires 20% or more of the outstanding Common Shares or announces a tender
offer or exchange offer for 25% or more of the outstanding Common Shares. Each
Participating Preferred Share will be entitled to an aggregate distribution
(including liquidating distributions) of 100 times the distribution made per
Common Share and will be entitled to 100 votes, voting together with the
Common Shares. Under certain circumstances, each Purchase Right entitles the
holder to purchase, at the Purchase Right's then current exercise price, a
number of Common Shares having a market value of twice the Purchase Right's
exercise price. The acquisition of SCI pursuant to certain mergers or other
business transactions would entitle each holder to purchase, at the Purchase
Right's then current exercise price, a number of the acquiring company's
common shares having a market value at that time equal to twice the Purchase
Right's exercise price. The Purchase Rights held by certain 20% shareholders
(other than Security Capital) would not be exercisable. The Purchase Rights
will expire on December 7, 2003 and are subject to redemption in whole, but
not in part, at a price of $0.01 per Purchase Right payable in cash, shares of
SCI or any other form of consideration determined by SCI's Board of Trustees.
5
<PAGE>
CLASSIFICATION OR RECLASSIFICATION OF SHARES OF BENEFICIAL INTEREST OR
PREFERRED SHARES OF BENEFICIAL INTEREST
The Declaration of Trust authorizes the Trustees to classify or reclassify
any unissued Common Shares or Preferred Shares by setting or changing the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to distributions, qualifications or terms or conditions of
redemption.
RESTRICTION ON SIZE OF HOLDINGS OF SHARES
The Declaration of Trust restricts ownership of SCI's outstanding shares of
beneficial interest by a single person, or persons acting as a group, to 9.8%
of such shares. The purposes of the provision are to assist in protecting and
preserving SCI's REIT status and to protect the interest of shareholders in
takeover transactions by preventing the acquisition of a substantial block of
shares of beneficial interest of SCI unless the acquiror makes a cash tender
offer for all outstanding shares of beneficial interest. For SCI to qualify as
a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), not
more than 50% in value of its outstanding shares of beneficial interest may be
owned by five or fewer individuals at any time during the last half of any
taxable year. The provision permits five persons to acquire up to a maximum of
9.8% each, or an aggregate of 49% of the outstanding Common Shares, and, thus,
assists the Trustees in protecting and preserving SCI's REIT status for tax
purposes. This limitation does not apply to Security Capital, which counts as
numerous holders for purposes of this tax rule, because its Common Shares are
attributed to its shareholders for purposes of this rule.
Shares of beneficial interest owned by a person or group of persons in
excess of 9.8% (other than Security Capital and 30% in the case of certain
shareholders who acquired Common Shares prior to SCI's initial public
offering) of the outstanding shares of beneficial interest ("Excess Shares")
are subject to redemption by SCI, at its option, upon 30 days' notice, at a
price equal to the average daily per Common Share closing sale price during
the 30-day period ending on the business day prior to the redemption date. SCI
may make payment of the redemption price at any time or times up to the
earlier of five years after the redemption date or liquidation of SCI. SCI may
refuse to effect the transfer of any shares of beneficial interest which would
make the transferee a holder of Excess Shares. Shareholders of SCI are
required to disclose, upon demand of the Board of Trustees, such information
with respect to their direct and indirect ownership of shares of SCI as the
Trustees deem necessary to comply with the provisions of the Code pertaining
to qualification, for tax purposes, of REITs, or to comply with the
requirements of any other appropriate taxing authority.
The 9.8% restriction does not apply to acquisitions by an underwriter in a
public offering and sale of shares of beneficial interest of SCI or to any
transaction involving the issuance of shares of beneficial interest in which a
majority of the Board of Trustees determines that the eligibility of SCI to
qualify as a REIT for federal income tax purposes will not be jeopardized or
the disqualification of SCI as a REIT is advantageous to the shareholders.
Security Capital's ownership of Common Shares is attributed to its
shareholders for purposes of the ownership test discussed above. The Board of
Trustees has exempted Security Capital from this restriction and has permitted
certain other shareholders who acquired Common Shares prior to the initial
public offering to acquire up to 30% of the outstanding Common Shares.
TRUSTEE LIABILITY
The Declaration of Trust provides that Trustees shall not be individually
liable for any obligation or liability incurred by or on behalf of SCI or by
Trustees for the benefit and on behalf of SCI. Under the Declaration of Trust
and Maryland law respecting REITs, Trustees are not liable to SCI or the
shareholders for any act or omission except for acts or omissions which
constitute bad faith, willful misfeasance or gross negligence in the conduct
of their duties.
SHAREHOLDER LIABILITY
Both Maryland statutory law governing REITs organized under the laws of that
state (the "Maryland REIT Law") and the Declaration of Trust provide that the
shareholders shall not be personally or individually liable
6
<PAGE>
for any debt, act, omission or obligation of SCI or the Trustees. The
Declaration of Trust further provides that SCI shall indemnify and hold each
shareholder harmless from all claims and liabilities to which the shareholder
may become subject by reason of his being or having been a shareholder, and
that SCI shall reimburse each shareholder for all legal and other expenses
reasonably incurred by the shareholder in connection with any such claim or
liability, except to the extent that such claim or liability arises out of the
shareholder's bad faith, willful misconduct or gross negligence and provided
that such shareholder gives SCI prompt notice of any such claim or liability
and permits SCI to conduct the defense thereof. In addition, SCI is required
to, and as a matter of practice does, insert a clause in its management leases
and other contracts providing that shareholders assume no personal liability
for obligations entered into on behalf of SCI. Nevertheless, with respect to
tort claims, contractual claims where shareholder liability is not so negated,
claims for taxes and certain statutory liability, the shareholders may, in
some jurisdictions, be personally liable to the extent that such claims are
not satisfied by SCI. Inasmuch as SCI carries public liability insurance which
it considers adequate, any risk of personal liability to shareholders is
limited to situations in which SCI's assets plus its insurance coverage would
be insufficient to satisfy the claims against SCI and its shareholders.
SHARES AVAILABLE FOR FUTURE SALE
At October 17, 1997, SCI had approximately 117,083,298 Common Shares issued
and outstanding or reserved for issuance upon exchange of partnership units or
exercise of outstanding options and warrants. All of the 583,508 Common Shares
that may be issued pursuant to this Prospectus, as well as the Common Shares
sold in SCI's prior offerings, will be tradeable without restriction under the
Securities Act (other than Common Shares held by affiliates of SCI). In
addition, SCI has "shelf" registrations effective relating to the offer and
sale from time to time of (i) up to 4,520,531 Common Shares following an
exchange for units in SCI Limited Partnership-I, (ii) up to 645,864 Common
Shares following an exchange for units in SCI Limited Partnership-II and (iii)
up to 310,000 Common Shares issued in one of SCI's prior private offerings; as
of October 17, 1997, 555,651 of such Common Shares had been issued upon
exchange of units. The remaining Common Shares currently issued and
outstanding or reserved for issuance upon exchange of partnership units or
exercise of options or warrants will be eligible for sale, subject to the
volume resale, manner of sale and notice limitations of Rule 144 of the
Securities Act.
In general, under Rule 144, a person (or persons whose Common Shares are
aggregated in accordance with the Rule) who has beneficially owned his or her
Common Shares for at least one year, including any such persons who may be
deemed "affiliates" of SCI (as defined in the Securities Act), would be
entitled to sell within any three-month period a number of Common Shares that
does not exceed the greater of 1% of the then outstanding number of Common
Shares or the average weekly trading volume of the Common Shares during the
four calendar weeks preceding each such sale. After Common Shares are held for
two years, a person who is not deemed an "affiliate" of SCI is entitled to
sell such Common Shares under Rule 144 without regard to the volume
limitations described above. Sales of Common Shares by affiliates will
continue to be subject to the volume limitations. As defined in Rule 144, an
"affiliate" of an issuer is a person that directly or indirectly, through the
use of one or more intermediaries, controls, is controlled by, or is under
common control with, such issuer.
SCI has granted Security Capital, which owns approximately 43% of the issued
and outstanding Common Shares as of October 17, 1997, the right to demand, at
any time, registration of all or any part of the Common Shares owned by it
pursuant to Rule 415 of the Securities Act. SCI has also granted certain
demand registration rights to a holder of warrants to purchase 11,764 Common
Shares and a holder of 21,846 Common Shares issued upon exercise of warrants.
Additionally, SCI has granted certain registration rights to holders of 48,809
Common Shares issued in connection with an acquisition. The persons entitled
to register their securities are responsible for all costs and expenses (other
than SCI's legal and audit fees) incident to any registration of the type
discussed in this paragraph.
SCI has issued options to acquire 26,000 Common Shares under SCI's Share
Option Plan for Outside Trustees. SCI has reserved an additional 74,000 Common
Shares for future issuance upon exercise of options under the Share Option
Plan for Outside Trustees. SCI also has adopted a dividend reinvestment and
Common Share purchase plan covering 1,400,000 Common Shares which permits
shareholders to purchase additional Common Shares through the reinvestment of
distributions or through additional cash purchases.
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<PAGE>
As of September 8, 1997, SCI adopted the 1997 Incentive Plan which
authorizes the establishment of one or more option programs and share purchase
programs and the approval of Share grants and pursuant to which no more than
9,600,000 Common Shares in the aggregate may be awarded. SCI has issued to its
employees options to acquire 3,072,857 Common Shares and granted employees the
right to acquire an additional 1,356,834 Common Shares (all of which were
issued) under the 1997 Incentive Plan.
SCI currently has a "shelf" registration statement in effect pursuant to
which it may offer to the public one or more of the following categories of
its securities in an aggregate amount not to exceed $678 million: (i) Common
Shares; (ii) preferred shares, in one or more series; and (iii) unsecured
senior debt securities, in one or more series, of which $510 million has been
issued. Such securities may be offered separately or together, in separate
series or amounts, at prices and on terms determined by the Trustees.
No prediction can be made as to the effect, if any, that future sales of
Common Shares or the availability of Common Shares for future sale will have
on the market price prevailing from time to time. Sales of substantial amounts
of Common Shares (including Common Shares issued upon the exercise of options
or warrants or upon exchange of partnership units), or the perception that
such sales could occur, could adversely affect the prevailing market price of
the Common Shares.
CERTAIN PROVISIONS OF MARYLAND LAW AND OF
SCI'S DECLARATION OF TRUST AND BYLAWS
The following paragraphs summarize certain provisions of Maryland law, the
Declaration of Trust and SCI's Bylaws (the "Bylaws"). The summary does not
purport to be complete and is subject to and qualified in its entirety by
reference to Maryland law, the Declaration of Trust and Bylaws. A copy of each
of the Declaration of Trust and Bylaws is incorporated by reference as an
exhibit to the Registration Statement of which this Prospectus is a part.
BOARD OF TRUSTEES
The Declaration of Trust provides that the number of Trustees of SCI cannot
be less than three nor more than fifteen, as determined from time to time by
the Trustees. The Trustees are divided into three classes. One class will hold
office for a term expiring at the annual meeting of shareholders in 1998, a
second class will hold office for a term expiring at the annual meeting of
shareholders to be held in 1999 and a third class will hold office for a term
expiring at the annual meeting of shareholders to be held in 2000. Each
Trustee will hold office for the term to which he is elected and until his
successor is duly elected and qualified. At each annual meeting of
shareholders, the successors to the class of Trustees whose terms expire at
such meeting will be elected to hold office for a term of three years. The
incumbent Board of Trustees is authorized to fill vacancies on the Board,
including vacancies resulting from any increase in the number of members
constituting the Board of Trustees by up to two in any calendar year. Any
members so appointed by the incumbent Trustees (whether to fill a vacancy or a
newly created trusteeship) will serve until the next annual meeting of
shareholders. At such meeting, the newly appointed Trustee will stand for
election to serve the remainder of the term for which such Trustee was
appointed.
The classified Board of Trustees could have the effect of making the removal
of incumbent Trustees time-consuming and difficult, which could discourage a
third party from making a tender offer or otherwise attempting to obtain
control of SCI, even though a change in control may be beneficial to SCI and
its shareholders.
BUSINESS COMBINATIONS
Under Maryland law, certain "business combinations" (including a merger,
consolidation, share exchange, or, in certain circumstances, an asset transfer
or issuance or reclassification of equity securities) between a Maryland real
estate investment trust and any person who beneficially owns 10% or more of
the voting power of
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the trust's shares (an "Interested Shareholder") must be (i) recommended by
the trustees of such trust and (ii) approved by the affirmative vote of at
least (a) 80% of the votes entitled to be cast by holders of outstanding
voting shares of the trust and (b) two-thirds of the votes entitled to be cast
by holders of outstanding voting shares other than shares held by the
Interested Shareholder with whom the business combination is to be effected,
unless, among other things, the trust's common shareholders receive a minimum
price (as defined in the statute) for their shares and the consideration is
received in cash or in the same form as previously paid by the Interested
Shareholder for his shares. In addition, an Interested Shareholder or any
affiliate thereof may not engage in a "business combination" with the trust
for a period for five years following the date he becomes an Interested
Shareholder. These provisions of Maryland law do not apply, however, to
business combinations that are approved or exempted by the board of trustees
of the trust prior to the time that the Interested Shareholder becomes an
Interested Shareholder.
The Declaration of Trust and Bylaws contain provisions exempting Security
Capital and its affiliates and successors from the provisions of the Maryland
business combination statute.
CONTROL SHARE ACQUISITIONS
Maryland law provides that "Control Shares" of a Maryland REIT acquired in a
"Control Share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the
matter, excluding shares of beneficial interest owned by the acquiror or by
officers or trustees who are employees of the trust. "Control Shares" are
voting shares of beneficial interest which, if aggregated with all other such
shares of beneficial interest previously acquired by the acquiror or in
respect of which the acquiror is able to exercise voting power in electing
trustees, fall within one of the following ranges of voting power: (i) one-
fifth or more but less than one-third, (ii) one-third or more but less than a
majority or (iii) a majority of all voting power. Control Shares do not
include shares of beneficial interest the acquiring person is then entitled to
vote as a result of having previously obtained shareholder approval. A
"Control Share acquisition" means the acquisition of Control Shares, subject
to certain exceptions.
A person who has made or proposes to make a Control Share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the board of trustees of the trust to call a special meeting of
shareholders to be held within 50 days of demand to consider voting rights for
the shares. If no request for a meeting is made, the trust may itself present
the question at any shareholders meeting.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute,
then, subject to certain conditions and limitations, the trust may redeem any
or all of the Control Shares (except those for which voting rights have
previously been approved) for fair value determined, without regard to the
absence of voting rights for the Control Shares, as of the date of the last
Control Share acquisition by the acquiror or of any meeting of shareholders at
which the voting rights of such shares are considered and not approved. If
voting rights for Control Shares are approved at a shareholders' meeting and
the acquiror becomes entitled to vote a majority of the shares of beneficial
interest entitled to vote, all other shareholders may exercise appraisal
rights. The fair value of the shares of beneficial interest as determined for
purposes of such appraisal rights may not be less than the highest price per
share paid by the acquiror in the Control Share acquisition.
The Control Share acquisition statute does not apply to shares acquired in a
merger, consolidation or share exchange if the trust is a party to the
transaction, or to acquisitions approved or exempted by the declaration of
trust or bylaws of the trust.
The Declaration of Trust and Bylaws contain provisions exempting Security
Capital and its affiliates and successors from the provisions of the Control
Share acquisition statute.
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SHAREHOLDERS' MEETINGS
The Declaration of Trust provides for an annual meeting of shareholders to
be held upon reasonable notice and within a reasonable period (not less than
30 days) following delivery of SCI's annual report, but in any event such
meeting must be held within six months after the end of each full fiscal year.
Special meetings of shareholders may be called by a majority of the Trustees,
a majority of the independent Trustees or by any officer of SCI and shall be
called upon the written request of shareholders holding in the aggregate not
less than 10% of the outstanding Common Shares entitled to vote. Written
notice stating the place, date and hour of the shareholders' meeting and, in
the case of a special meeting, the purpose or purposes for which the meeting
is called, shall be delivered not less than 10 nor more than 60 days before
the day of the meeting to each holder of record.
ANNUAL REPORT
The Declaration of Trust requires SCI to deliver to shareholders an annual
report concerning its operations for the preceding fiscal year containing
financial statements prepared in accordance with generally accepted accounting
principles which are audited and reported on by independent certified public
accountants. The report must include (i) the ratio of the costs of raising
capital during the period to the capital raised and (ii) full disclosure of
all material terms, factors, and circumstances surrounding any and all
transactions involving SCI, and the Trustees, sponsors and/or affiliates
thereof occurring in the year for which the annual report is made. Independent
Trustees are specifically charged with a duty to examine and comment in the
report on the fairness of such transactions.
AMENDMENT TO THE DECLARATION OF TRUST
The Trustees, by a two-thirds vote, may amend the provisions of the
Declaration of Trust from time to time to qualify SCI as a REIT. Except as set
forth in the preceding sentence, the Declaration of Trust may be amended only
by the affirmative vote or written consent of the holders of not less than a
majority of the Common Shares then outstanding and entitled to vote thereon.
TERMINATION OF THE TRUST AND REIT STATUS
The Declaration of Trust permits the termination of SCI and the
discontinuation of the operations of SCI by the affirmative vote of the
holders of not less than a majority of the outstanding Common Shares at a
meeting of shareholders called for that purpose.
REGISTRATION RIGHTS
SCI has filed the Registration Statement of which this Prospectus is a part
pursuant to its obligations under the Registration Rights Agreement. The
following summary does not purport to be complete and is subject to and
qualified in its entirety by reference to the Registration Rights Agreement. A
copy of the Registration Rights Agreement is incorporated by reference as an
exhibit to the Registration Statement of which this Prospectus is a part.
Under the Registration Rights Agreement, SCI is obligated to use its
reasonable efforts to keep the Registration Statement continuously effective
for as long as necessary to complete the distribution of at least 90% of the
aggregate Common Shares issued to the Selling Shareholders. The Registration
Rights Agreement grants these rights to holders of Common Shares and Units
specified therein. Any Common Shares that have been sold pursuant to a public
offering registered under the Securities Act or in compliance with Rule 144 or
transferred to any holders not specified in the Registration Rights Agreement
will no longer be entitled to the benefits of the Registration Rights
Agreement.
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SCI has no obligation under the Registration Rights Agreement to retain any
underwriter to effect the sale of the Common Shares covered thereby; however,
the Registration Statement is available for use for an underwritten public
offering of the Common Shares covered thereby and SCI has agreed in such event
to enter into and perform its obligations under an underwriting agreement in
usual and customary form with the managing underwriters.
Pursuant to the Registration Rights Agreement, SCI shall pay the expenses of
its counsel and accountants (including audits) to prepare the Registration
Statement and Prospectus in connection with the registration of the Common
Shares. The Selling Shareholders shall pay all other expenses incurred in such
registration on a pro rata basis based on the number of Common Shares included
in the Registration Statement, including, without limitation, underwriting and
brokerage discounts, expenses of printing, counsel for such Selling
Shareholders, federal and state securities registration and filing fees and
the expenses of SCI's independent auditors in connection with any comfort
letter required by any underwriter. SCI also agreed to indemnify each Selling
Shareholder and the respective directors and officers and any person who
controls any such Selling Shareholder against certain losses, claims, damages
and expenses arising under the securities laws. In addition, each Selling
Shareholder agreed to indemnify SCI and each other holder, and each of their
respective Trustees, directors and officers (including each Trustee and
officer of SCI who signed the Registration Statement), and any person who
controls SCI or any other holder against certain losses, liabilities, claims,
damages and expenses arising under the securities laws with respect to written
information furnished to SCI by such holder.
SELLING SHAREHOLDERS
The following table provides the name of each person who may receive Common
Shares upon exchange of Units and the total number of Common Shares that may
be offered by each such person pursuant to this Prospectus. Since the holders
of Units may exchange all, some or none of their Units for Common Shares and
may then sell all, some or none of such Common Shares, the number of Common
Shares that will be owned by each person identified below after completion of
this offering cannot be determined. Jeffrey H. Schwartz, a Managing Director
of SCI, may be deemed to beneficially own 128,263 of the Common Shares that
may be offered hereby. Mr. Schwartz may be deemed to own a total of 185,916
Common Shares and Units and has 122,532 options outstanding. The transaction
in which the Selling Shareholders acquired their Units was negotiated at arms'
length prior to Mr. Schwartz's affiliation with SCI.
<TABLE>
<CAPTION>
NUMBER OF
COMMON
SHARES
THAT MAY
BE
ISSUED
NAME HEREUNDER
---- ---------
<S> <C>
Jeffrey H. Schwartz............................................. 128,263
Krauss Group, Inc. ............................................. 130,301
The Krauss Portfolio, Ltd. ..................................... 199,535
Elmer J. Krauss, as Trustee .................................... 125,409
-------
Total......................................................... 583,508
=======
</TABLE>
FEDERAL INCOME TAX CONSIDERATIONS
SCI intends to operate in a manner that permits it to satisfy the
requirements for taxation as a REIT under the applicable provisions of the
Code. No assurance can be given, however, that such requirements will be met.
The following is a description of the federal income tax consequences to SCI
and its shareholders of the treatment of SCI as a REIT. Since these provisions
are highly technical and complex, each prospective purchaser of the Common
Shares is urged to consult his or her own tax advisor with respect to the
federal, state, local, foreign and other tax consequences of the purchase,
ownership and disposition of the Common Shares.
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Based upon certain representations of SCI with respect to the facts as set
forth and explained in the discussion below, in the opinion of Mayer, Brown &
Platt, counsel to SCI, SCI has been organized in conformity with the
requirements for qualification as REIT beginning with its taxable year ended
December 31, 1993, and its proposed method of operation described in this
Prospectus and as represented by management will enable it to satisfy the
requirements for such qualification.
This opinion is based on certain assumptions relating to the organization
and operation of SCI Limited Partnership-I, SCI Limited Partnership-II, and
the Partnerships (collectively, the "SCI Partnerships") and of any other
partnerships in which SCI will hold an interest, and is conditioned upon
certain representations made by SCI as to certain factual matters relating to
SCI's organization and intended or expected manner of operation. In addition,
this opinion is based on the law existing and in effect on the date hereof.
SCI's qualification and taxation as a REIT will depend upon SCI's ability to
meet on a continuing basis, through actual operating results, asset
composition, distribution levels and diversity of stock ownership, the various
qualification tests imposed under the Code discussed below. Mayer, Brown &
Platt will not review compliance with these tests on a continuing basis. No
assurance can be given that SCI will satisfy such tests on a continuing basis.
In brief, if certain detailed conditions imposed by the REIT provisions of
the Code are met, entities, such as SCI, that invest primarily in real estate
and that otherwise would be treated for federal income tax purposes as
corporations, are generally not taxed at the corporate level on their "REIT
taxable income" that is currently distributed to shareholders. This treatment
substantially eliminates the "double taxation" (at both the corporate and
shareholder levels) that generally results from the use of corporations.
If SCI fails to qualify as a REIT in any year, however, it will be subject
to federal income taxation as if it were a domestic corporation, and its
shareholders will be taxed in the same manner as shareholders of ordinary
corporations. In this event, SCI could be subject to potentially significant
tax liabilities, and therefore the amount of cash available for distribution
to its shareholders would be reduced or eliminated.
The Board of Trustees of SCI currently intends that SCI will operate in a
manner that permits it to elect, and that it has elected, REIT status
effective for the taxable year ended December 31, 1993 and in each taxable
year thereafter. There can be no assurance, however, that this expectation
will be fulfilled, since qualification as a REIT depends on SCI continuing to
satisfy numerous asset, income and distribution tests described below, which
in turn will be dependent in part on SCI's operating results.
The following summary is based on existing law, is not exhaustive of all
possible tax considerations and does not give a detailed discussion of any
state, local, or foreign tax considerations, nor does it discuss all of the
aspects of federal income taxation that may be relevant to a prospective
shareholder in light of his or her particular circumstances or to certain
types of shareholders (including insurance companies, tax-exempt entities,
financial institutions or broker-dealers, foreign corporations and persons who
are not citizens or residents of the United States) subject to special
treatment under the federal income tax laws.
TAXATION OF SCI
General
In any year in which SCI qualifies as a REIT, in general it will not be
subject to federal income tax on that portion of its REIT taxable income or
capital gain which is distributed to shareholders. SCI may, however, be
subject to tax at normal corporate rates upon any taxable income or capital
gain not distributed.
Notwithstanding its qualification as a REIT, SCI may also be subject to
taxation in certain other circumstances. If SCI should fail to satisfy either
the 75% or the 95% gross income test (as discussed below), and nonetheless
maintains its qualification as a REIT because certain other requirements are
met, it will be subject to a 100% tax on the greater of the amount by which
SCI fails to satisfy either the 75% test or the 95% test, multiplied by a
fraction intended to reflect SCI's profitability. SCI will also be subject to
a tax of 100% on
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net income from any "prohibited transaction," as described below, and if SCI
has (i) net income from the sale or other disposition of "foreclosure
property" which is held primarily for sale to customers in the ordinary course
of business or (ii) other non-qualifying income from foreclosure property, it
will be subject to tax on such income from foreclosure property at the highest
corporate rate. In addition, if SCI should fail to distribute during each
calendar year at least the sum of (i) 85% of its REIT ordinary income for such
year, (ii) 95% of its REIT capital gain net income for such year, and (iii)
any undistributed taxable income from prior years, SCI would be subject to a
4% excise tax on the excess of such required distribution over the amounts
actually distributed. SCI may also be subject to the corporate "alternative
minimum tax," as well as tax in certain situations and on certain transactions
not presently contemplated. SCI will use the calendar year both for federal
income tax purposes and for financial reporting purposes.
In order to qualify as a REIT, SCI must meet, among others, the following
requirements:
Share Ownership Test
The Common Shares must be held by a minimum of 100 persons for at least 335
days in each taxable year (or a proportional number of days in any short
taxable year). In addition, at all times during the second half of each
taxable year, no more than 50% in value of the capital shares of SCI may be
owned, directly or indirectly and by applying certain constructive ownership
rules, by five or fewer individuals (the "50% test"), which for this purpose
includes certain tax-exempt entities, and for taxable years beginning before
January 1, 1994, any stock held by a qualified domestic pension trust. For
taxable years beginning on or after January 1, 1994, any stock held by a
qualified domestic pension or other retirement trust will be treated as held
directly by its beneficiaries in proportion to their actuarial interest in
such trust rather than by such trust. These stock ownership requirements need
not be met until the second taxable year of SCI for which a REIT election is
made. Pursuant to the constructive ownership rules, Security Capital's
ownership of Common Shares is attributed to its shareholders for purposes of
the 50% test.
In order to ensure compliance with the 50% test, SCI has placed certain
restrictions on the transfer of the Common Shares to prevent additional
concentration of ownership. Moreover, to evidence compliance with these
requirements under United States Treasury Department ("Treasury") regulations,
SCI must maintain records which disclose the actual ownership of its
outstanding Common Shares. In fulfilling its obligations to maintain records,
SCI must and will demand written statements each year from the record holders
of designated percentages of its Common Shares disclosing the actual owners of
such Common Shares (as prescribed by Treasury regulations). A list of those
persons failing or refusing to comply with such demand must be maintained as a
part of SCI's records. A shareholder failing or refusing to comply with SCI's
written demand must submit with his or her tax returns a similar statement
disclosing the actual ownership of Common Shares and certain other
information. In addition, the Declaration of Trust provides restrictions
regarding the transfer of its Common Shares that are intended to assist SCI in
continuing to satisfy the Common Share ownership requirements. See
"Description of Shares of Beneficial Interest--Restrictions on Size of
Holdings of Shares." SCI intends to enforce the 9.8% limitation on ownership
of Common Shares to assure that its qualification as a REIT will not be
compromised.
Asset Tests
At the close of each quarter of SCI's taxable year, SCI must satisfy certain
tests relating to the nature of its assets (what constitutes "assets" of SCI
is determined in accordance with generally accepted accounting principles).
First, at least 75% of the value of SCI's total assets must be represented by
interests in real property, interests in mortgages on real property, shares in
other REITs, cash, cash items, and government securities (including certain
government guaranteed securities) and qualified temporary investments. Second,
although the remaining 25% of SCI's assets generally may be invested without
restriction, securities in this class may not exceed either (i) in the case of
securities of any one non-government issuer, 5% of the value of SCI's total
assets or (ii) 10% of the outstanding voting securities of any one such
issuer. Where SCI invests in a partnership
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<PAGE>
(including each of the partnerships of which SCI is the general partner), it
will be deemed to own a proportionate share of the partnership's assets. See
"Tax Aspects of SCI's Investments in Partnerships--General." Accordingly,
SCI's investment through its interest in the Partnerships is intended to
constitute an investment in qualified assets for purposes of the 75% asset
test.
SCI owns 100% of the non-voting preferred stock of SCI Development Services
Incorporated and SCI Logistics Services Incorporated. Because SCI does not own
any of the voting securities of either company and the preferred stock's
approval right in the case of either company is limited to certain fundamental
corporate actions that could adversely affect the preferred stock as a class,
the 10% limitation on holdings of voting securities of any one issuer should
not be exceeded.
Based upon its analysis of the total estimated value of (i) SCI Development
Services Incorporated stock and (ii) SCI Logistics Services Incorporated stock
owned by SCI relative to the estimated value of the total assets owned by SCI
and the other assets of SCI, SCI believes that the ownership of non-voting
preferred stock by SCI of either company does not exceed, on the date of this
Prospectus, 5% of the value of SCI's total assets. The 5% limitation must be
satisfied not only on the date that SCI acquired the securities of either
company, but also at the end of any quarter in which SCI increases its
interest in either company or so acquires other property. Although SCI plans
to take steps to ensure that it satisfies the 5% value test for any quarter
with respect to which retesting is to occur, there can be no assurance that
such steps will always be successful or will not require a reduction in SCI's
overall interest in either company.
Gross Income Tests
There are two separate percentage tests relating to the sources of SCI's
gross income which must be satisfied for each taxable year. For purposes of
these tests, where SCI invests in a partnership, including the Partnerships,
SCI will be treated as receiving its share of the income and loss of the
partnership, and the gross income of the partnership will retain the same
character in the hands of SCI as it has in the hands of the partnership. The
two tests are as follows:
1. The 75% Test. At least 75% of SCI's gross income for the taxable year
must be "qualifying income." Qualifying income generally includes: (i)
rents from real property (except as modified below); (ii) interest on
obligations collateralized by mortgages on, or interests in, real property;
(iii) gains from the sale or other disposition of interests in real
property and real estate mortgages, other than gain from property held
primarily for sale to customers in the ordinary course of SCI's trade or
business ("dealer property"); (iv) dividends or other distributions on
shares in other REITs, as well as gain from the sale of such shares; (v)
abatements and refunds of real property taxes; (vi) income from the
operation, and gain from the sale, of property acquired at or in lieu of a
foreclosure of the mortgage collateralized by such property ("foreclosure
property"); and (vii) commitment fees received for agreeing to make loans
collateralized by mortgages on real property or to purchase or lease real
property.
Rents received from a tenant will not, however, qualify as rents from
real property in satisfying the 75% test (or the 95% gross income test
described below) if SCI, or an owner of 10% or more of SCI, directly or
constructively owns 10% or more of such tenant. In addition, if rent
attributable to personal property leased in connection with a lease of real
property is greater than 15% of the total rent received under the lease,
then the portion of rent attributable to such personal property will not
qualify as rents from real property. Moreover, an amount received or
accrued will not qualify as rents from real property (or as interest
income) for purposes of the 75% and 95% gross income tests if it is based
in whole or in part on the income or profits of any person, although an
amount received or accrued generally will not be excluded from "rents from
real property" solely by reason of being based on a fixed percentage or
percentages of receipts or sales. Finally, for rents received to qualify as
rents from real property, SCI generally must not operate or manage the
property or furnish or render services to tenants, other than through an
"independent contractor" from whom SCI derives no income, except that the
"independent contractor" requirement does not apply to the extent that the
services provided by SCI are "usually or customarily rendered" in
connection with the rental of space for occupancy only, or are not
otherwise considered "rendered to the occupant for his convenience."
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<PAGE>
2. The 95% Test. In addition to deriving 75% of its gross income from the
sources listed above, at least 95% of SCI's gross income for the taxable
year must be derived from the above-described qualifying income, or from
dividends, interest, or gains from the sale or disposition of stock or
other securities that are not dealer property. Dividends and interest on
any obligations not collateralized by an interest in real property are
included for purposes of the 95% test, but not for purposes of the 75%
test.
For purposes of determining whether SCI complies with the 75% and 95%
income tests, gross income does not include income from prohibited
transactions. A "prohibited transaction" is a sale of dealer property
(excluding foreclosure property) unless such property is held by SCI for at
least four years and certain other requirements (relating to the number of
properties sold in a year, their tax bases, and the cost of improvements
made thereto) are satisfied. See "--Taxation of SCI--General."
Even if SCI fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may still qualify as a REIT for such year if
it is entitled to relief under certain provisions of the Code. These relief
provisions will generally be available if: (i) SCI's failure to comply was
due to reasonable cause and not to willful neglect; (ii) SCI reports the
nature and amount of each item of its income included in the tests on a
schedule attached to its tax return; and (iii) any incorrect information on
this schedule is not due to fraud with intent to evade tax. If these relief
provisions apply, however, SCI will nonetheless be subject to a special tax
upon the greater of the amount by which it fails either the 75% or 95%
gross income test for that year.
Annual Distribution Requirements
In order to qualify as a REIT, SCI is required to make distributions (other
than capital gain distributions) to its shareholders each year in an amount at
least equal to (i) the sum of (a) 95% of SCI's REIT taxable income (computed
without regard to the dividends paid deduction and the REIT's net capital
gain) and (b) 95% of the net income (after tax), if any, from foreclosure
property, minus (ii) the sum of certain items of non-cash income. Such
distributions must be paid in the taxable year to which they relate, or in the
following taxable year if declared before SCI timely files its tax return for
such year and if paid on or before the first regular distribution payment
after such declaration. To the extent that SCI does not distribute all of its
net capital gain or distributes at least 95%, but less than 100%, of its REIT
taxable income, as adjusted, it will be subject to tax on the undistributed
amount at regular capital gains or ordinary corporate tax rates, as the case
may be.
SCI intends to make timely distributions sufficient to satisfy the annual
distribution requirements. It is possible that SCI may not have sufficient
cash or other liquid assets to meet the 95% distribution requirement, due to
timing differences between the actual receipt of income and actual payment of
expenses on the one hand, and the inclusion of such income and deduction of
such expenses in computing SCI's REIT taxable income on the other hand. To
avoid any problem with the 95% distribution requirement, SCI will closely
monitor the relationship between its REIT taxable income and cash flow and, if
necessary, intends to borrow funds in order to satisfy the distribution
requirement. However, there can be no assurance that such borrowing would be
available at such time.
If SCI fails to meet the 95% distribution requirement as a result of an
adjustment to SCI's tax return by the Service, SCI may retroactively cure the
failure by paying a "deficiency dividend" (plus applicable penalties and
interest) within a specified period.
Failure to Qualify
If SCI fails to qualify for taxation as a REIT in any taxable year and the
relief provisions do not apply, SCI will be subject to applicable federal and
state tax (including any applicable alternative minimum tax) on its taxable
income at regular corporate rates. Distributions to shareholders in any year
in which SCI fails to qualify will not be deductible by SCI, nor generally
will they be required to be made under the Code. In such event, to the extent
of current and accumulated earnings and profits, all distributions to
shareholders will be taxable as ordinary income, and, subject to certain
limitations in the Code, corporate distributees may be eligible for the
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<PAGE>
dividends received deduction. Unless entitled to relief under specific
statutory provisions, SCI also will be disqualified from re-electing taxation
as a REIT for the four taxable years following the year during which
qualification was lost.
TAXATION OF SHAREHOLDERS
Taxation of Taxable Domestic Shareholders
As long as SCI qualifies as a REIT, distributions made to SCI's taxable
domestic shareholders out of current or accumulated earnings and profits (and
not designated as capital gain dividends) will be taken into account by them
as ordinary income and will not be eligible for the dividends received
deduction for corporations. Distributions that are designated as capital gain
distributions will be taxed as long term capital gains (to the extent they do
not exceed SCI's actual net capital gain for the taxable year) without regard
to the period for which the shareholder has held its Common Shares. However,
corporate shareholders may be required to treat up to 20% of certain capital
gain distributions as ordinary income. To the extent that SCI makes
distributions in excess of current and accumulated earnings and profits, these
distributions are treated first as a tax-free return of capital to the
shareholder, reducing the tax basis of a shareholder's Common Shares by the
amount of such distribution (but not below zero), with distributions in excess
of the shareholder's tax basis taxable as capital gains (if the Common Shares
are held as a capital asset). In addition, any distribution declared by SCI in
October, November or December of any year and payable to a shareholder of
record on a specific date in any such month shall be treated as both paid by
SCI and received by the shareholder on December 31 of such year, provided that
the distribution is actually paid by SCI during January of the following
calendar year. Shareholders may not include in their individual income tax
returns any net operating losses or capital losses of SCI. Federal income tax
rules may also require that certain minimum tax adjustments and preferences be
apportioned to SCI shareholders.
In general, any loss upon a sale or exchange of Common Shares by a
shareholder who has held such Common Shares for six months or less (after
applying certain holding period rules) will be treated as a long term capital
loss, to the extent of distributions from SCI required to be treated by such
shareholder as long term capital gains.
Backup Withholding
SCI will report to its domestic shareholders and to the Service the amount
of distributions paid during each calendar year, and the amount of tax
withheld, if any, with respect thereto. Under the backup withholding rules, a
shareholder may be subject to backup withholding at applicable rates with
respect to distributions paid unless such shareholder (i) is a corporation or
comes within certain other exempt categories and, when required, demonstrates
this fact, or (ii) provides a taxpayer identification number, certifies as to
no loss of exemption from backup withholding, and otherwise complies with
applicable requirements of the backup withholding rules. A shareholder that
does not provide SCI with its correct taxpayer identification number may also
be subject to penalties imposed by the Service. Any amount paid as backup
withholding will be credited against the shareholder's income tax liability.
In addition, SCI may be required to withhold a portion of capital gain
distributions made to any shareholders who fail to certify their non-foreign
shareholder status to SCI.
Taxation of Tax-Exempt Shareholders
The Service has issued a revenue ruling in which it held that amounts
distributed by a REIT to a tax-exempt employees' pension trust do not
constitute unrelated business taxable income ("UBTI"). Subject to the
discussion below regarding a "pension-held REIT," based upon the ruling, the
analysis therein and the statutory framework of the Code, distributions by SCI
to a shareholder that is a tax-exempt entity should also not constitute UBTI,
provided that the tax-exempt entity has not financed the acquisition of its
Common Shares with "acquisition indebtedness" within the meaning of the Code,
and that the Common Shares are not otherwise used in an unrelated trade or
business of the tax-exempt entity, and that SCI, consistent with its present
intent, does not hold a residual interest in a real estate mortgage investment
company.
16
<PAGE>
However, for taxable years beginning on or after January 1, 1994, if any
pension or other retirement trust that qualifies under Section 401(a) of the
Code ("qualified pension trust") holds more than 10% by value of the interests
in a "pension-held REIT" at any time during a taxable year, a portion of the
distributions paid to the qualified pension trust by such REIT may constitute
UBTI. For these purposes, a "pension-held REIT" is defined as a REIT if (i)
such REIT would not have qualified as a REIT but for the provisions of the
Code which look through such a qualified pension trust in determining
ownership of stock of the REIT and (ii) at least one qualified pension trust
holds more than 25% by value of the interests of such REIT or one or more
qualified pension trusts (each owning more than a 10% interest by value in the
REIT) hold in the aggregate more than 50% by value of the interests in such
REIT.
TAX ASPECTS OF SCI'S INVESTMENTS IN PARTNERSHIPS
General
SCI holds a partnership interest in the four SCI Partnerships, including the
Partnerships. In general, a partnership is a "pass-through" entity which is
not subject to federal income tax. Rather, partners are allocated their
proportionate shares of the items of income, gain, loss, deduction and credit
of a partnership, and are potentially subject to tax thereon, without regard
to whether the partners receive a distribution from the partnership. SCI will
include its proportionate share of the foregoing partnership items for
purposes of the various REIT gross income tests and in the computation of its
REIT taxable income. See "--Taxation of SCI--General" and "--Gross Income
Tests."
Accordingly, any resultant increase in SCI's REIT taxable income from its
interest in the SCI Partnerships (whether or not a corresponding cash
distribution is also received) will increase its distribution requirements
(see "--Taxation of SCI--Annual Distribution Requirements"), but will not be
subject to federal income tax in the hands of SCI provided that an amount
equal to such income is distributed by SCI to its shareholders. Moreover, for
purposes of the REIT asset tests (see "--Taxation of SCI--Asset Tests"), SCI
will include its proportionate share of assets held by the SCI Partnerships.
Entity Classification
SCI's interest in the SCI Partnerships involves special tax considerations,
including the possibility of a challenge by the Service of the status of the
partnerships as partnerships (as opposed to associations taxable as
corporations for federal income tax purposes). If a partnership were to be
treated as an association, such partnership would be taxable as a corporation
and therefore be subject to an entity-level tax on its income. In such a
situation, the character of SCI's assets and items of gross income would
change, which may preclude SCI from satisfying the REIT asset tests and may
preclude SCI from satisfying the REIT gross income tests (see "--Taxation of
SCI--Failure to Qualify" above, for a discussion of the effect of SCI's
failure to meet such tests). Based on certain representations of SCI, in the
opinion of Mayer, Brown & Platt, under existing federal income tax law and
regulations, the SCI Partnerships will be treated for federal income tax
purposes as partnerships, and not as associations taxable as corporations.
Such opinion, however, is not binding on the IRS.
OTHER TAX CONSIDERATIONS
SCI Development Services Incorporated and SCI Logistics Services Incorporated
SCI Development Services Incorporated and SCI Logistics Services
Incorporated will pay federal and state income taxes at the full applicable
corporate rates on its income prior to payment of any dividends. SCI
Development Services Incorporated and SCI Logistics Services Incorporated will
attempt to minimize the amount of such taxes, but there can be no assurance
whether or the extent to which measures taken to minimize taxes will be
successful. To the extent that SCI Development Services Incorporated or SCI
Logistics Services Incorporated is required to pay federal, state or local
taxes, the cash available for distribution by either company to its
shareholders will be reduced accordingly.
17
<PAGE>
Tax on Built-in Gain
Pursuant to Notice 88-19, 1988-1 C.B. 486, a C corporation that elects to be
taxed as a REIT has to recognize any gain that would have been realized if the
C corporation had sold all of its assets for their respective fair market
values at the end of its last taxable year before the taxable year in which it
qualifies to be taxed as a REIT and immediately liquidated unless the REIT
elects to be taxed under rules similar to the rules of Section 1374 of the
Code.
Since SCI has made this election, if during the 10-year period beginning on
the first day of the first taxable year for which SCI qualifies as a REIT (the
"Recognition Period"), SCI recognizes gain on the disposition of any asset
held by SCI as of the beginning of such Recognition Period, then, to the
extent of the excess of (a) the fair market value of such asset as of the
beginning of such Recognition Period over (b) SCI's adjusted basis in such
asset as of the beginning of such Recognition Period (the "Built-in Gain"),
such gain will be subject to tax at the highest regular corporate rate.
Because SCI acquired many of its properties in fully taxable transactions and
presently expects to hold each property beyond the Recognition Period, it is
not anticipated that SCI will pay a substantial corporate level tax on its
Built-in Gain.
The Taxpayer Relief Act of 1997 (the "1997 Act")
The 1997 Act, which was signed into law by President Clinton on August 5,
1997, modified many of the provisions relating to the requirements for
qualification as, and the taxation of, a REIT. Among other things, the 1997
Act (i) replaced the rule that disqualifies a REIT for any year in which the
REIT fails to comply with Treasury regulations to ascertain its ownership with
an intermediate penalty for failing to do so; (ii) permits a REIT to render a
de minimis amount of impermissible services to tenants, or in connection with
the management of property, and still treat amounts received with respect to
that property as rents from real property; (iii) permits a REIT to elect to
retain and pay income tax on net long-term capital gains; (iv) repealed a rule
that required that less than 30% of a REIT's gross income be derived from gain
from the sale or other disposition of stock or securities held for less than
one year, certain real property held for less than four years, and property
that is sold or disposed of in a prohibited transaction; (v) lengthened the
original grace period for foreclosure property from two years after the REIT
acquired the property to a period ending on the last day of the third full
taxable year following the election; (vi) treat income from all hedges that
reduce the interest rate risk of REIT liabilities, not just interest rate
swaps and caps, as qualifying income under the 95% gross income test; and
(vii) permits any corporation wholly-owned by a REIT to be treated as a
qualified subsidiary, regardless of whether the corporation has always been
owned by a REIT. The changes are effective for taxable years beginning after
the date of enactment. Thus, these changes will apply to SCI beginning January
1, 1998.
Possible Legislative or Other Actions Affecting Tax Consequences
Prospective shareholders should recognize that the present federal income
tax treatment of an investment in SCI may be modified by legislative, judicial
or administrative action at any time and that any such action may affect
investments and commitments previously made. The rules dealing with federal
income taxation are constantly under review by persons involved in the
legislative process and by the Service and the Treasury, resulting in
revisions of regulations and revised interpretations of established concepts
as well as statutory changes. Revisions in federal tax laws and
interpretations thereof could adversely affect the tax consequences of
investment in SCI.
State and Local Taxes
SCI and its shareholders may be subject to state or local taxation in
various jurisdictions, including those in which it or they transact business
or reside. The state and local tax treatment of SCI and its shareholders may
not conform to the federal income tax consequences discussed above.
Consequently, prospective shareholders should consult their own tax advisors
regarding the effect of state and local tax laws on an investment in the
Common Shares of SCI.
18
<PAGE>
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT WITH HIS OR HER OWN TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE,
OWNERSHIP AND SALE OF COMMON SHARES IN AN ENTITY ELECTING TO BE TAXED AS A
REAL ESTATE INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN,
AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION AND
OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
PLAN OF DISTRIBUTION
This Prospectus relates to the offer and sale from time to time of up to
583,508 Common Shares issuable to the Selling Shareholders.
SCI will not receive any proceeds from the Common Shares by the Selling
Shareholders. The Selling Shareholders and any agents or broker-dealers that
participate in the distribution of Common Shares may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commissions
received by them and any profit on the resale of the Common Shares may be
deemed to be underwriting commissions or discounts under the Securities Act.
At the time a particular offer of Common Shares is made, a Prospectus
Supplement, if required, will be distributed that will set forth the names of
any agents or broker-dealers, any commissions or discounts and other terms
constituting compensation from the Selling Shareholders and any other required
information. The Common Shares may be sold from time to time at varying prices
determined at the time of sale or at negotiated prices.
In order to comply with the securities laws of certain states, if
applicable, the Common Shares may be sold only through registered or licensed
agents or broker-dealers. In addition, in certain states, the Common Shares
may not be sold unless they have been registered or qualified for sale in such
state or an exemption from such registration or qualification requirement is
available and is complied with.
SCI may from time to time issue up to 583,508 Common Shares upon the
exchange of Units in the Partnerships. SCI will acquire one Unit in each
Partnership in exchange for each Common Share that SCI may issue to a holder
of Units in that Partnership. Consequently, with each exchange, SCI's interest
in the applicable Partnership will increase.
EXPERTS
The financial statements and related schedules of SCI incorporated by
reference herein and in the Registration Statement have been audited or
reviewed by Arthur Andersen LLP, independent public accountants, to the extent
and for the periods indicated in their reports, and have been incorporated by
reference herein and in the Registration Statement in reliance upon the
authority of that firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the Common Shares offered pursuant to this Prospectus will
be passed upon for SCI by Mayer, Brown & Platt, Chicago, Illinois. Mayer,
Brown & Platt has in the past represented and is currently representing SCI
and certain of its affiliates, including Security Capital.
19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection with the
issuance and distribution of the Common Shares registered hereby, indicating
which expenses will be borne by SCI and which expenses will be borne pro rata
by the Selling Shareholders:
<TABLE>
<CAPTION>
SELLING
SCI SHAREHOLDERS
------- ------------
<S> <C> <C>
SEC registration fee................................. $ 0 $ 4,366
Printing and duplicating expenses.................... 5,000 2,000
Legal fees........................................... 15,000 2,000
Accounting fees and expenses......................... 3,000 0
Miscellaneous expenses............................... 7,000 2,134
------- -------
Total............................................ $30,000 $10,500
======= =======
</TABLE>
ITEM 15. INDEMNIFICATION OF TRUSTEES AND OFFICERS.
Article 4, Section 11, of the Declaration of Trust provides as follows with
respect to indemnification of Trustees:
"The Trust shall indemnify and hold harmless each Trustee from and
against all claims and liabilities, whether they proceed to judgment or are
settled, to which such Trustee may become subject by reason of his being or
having been a Trustee, or by reason of any action alleged to have been
taken or omitted by him as Trustee, and shall reimburse him for all legal
and other expenses reasonably incurred by him in connection with any such
claim or liability, including any claim or liability arising under the
provisions of federal or state securities laws; provided, however, that no
Trustee shall be indemnified or reimbursed under the foregoing provisions
in relation to any matter unless it shall have been adjudicated that his
action or omission did not constitute willful misfeasance, bad faith or
gross negligence in the conduct of his duties, or, unless, in the absence
of such an adjudication, the Trust shall have received a written opinion
from independent counsel, approved by the Trustees, to the effect that if
the matter of willful misfeasance, bad faith or gross negligence in the
conduct of duties had been adjudicated, it would have been adjudicated in
favor of such Trustee. The Trust, without requiring a preliminary
determination of the ultimate entitlement to indemnification, shall pay or
reimburse reasonable expenses incurred by any Trustee in connection with
any threatened, pending or completed action, suit or proceeding to which
such Trustee is, was or at any time becomes a party or is threatened to be
made a party, as a result directly or indirectly, of serving at any time as
a Trustee. The rights accruing to a Trustee under these provisions shall
not exclude any other right to which he may be lawfully entitled, nor shall
anything herein contained restrict the right of the Trust to indemnify or
reimburse such Trustee in any proper cause even though not specifically
provided for herein."
Article 9, Section 1 of the Declaration of Trust provides as follows with
respect to the limitation of liability of Trustees and officers and
indemnification:
"A Trustee or officer of the Trust shall not be liable for monetary
damages to the Trust or its shareholders for any act or omission in the
performance of his duties unless:
(1) The Trustee or officer actually received an improper benefit in
money, property or services (in which case, such liability shall be for
the amount of the benefit in money, property or services actually
received);
(2) 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 being adjudicated;
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<PAGE>
(3) The Trustee's or officer's action or failure to act constitutes
willful misconduct or deliberate recklessness; or
(4) Such liability to the Trust is specifically imposed upon Trustees
or officers by statute."
Article 9, Section 6 of the Declaration of Trust provides as follows with
respect to the indemnification of Trustees and officers:
"Notwithstanding any other provisions of this Declaration of Trust, the
Trust, for the purpose of providing indemnification for its Trustees and
officers, shall have the authority, without specific shareholder approval,
to enter into insurance or other arrangements, with persons or entities
which are not regularly engaged in the business of providing insurance
coverage, to indemnify all Trustees and officers of the Trust against any
and all liabilities and expenses incurred by them by reason of their being
Trustees or officers of the Trust, whether or not the Trust would otherwise
have the power under this Declaration of Trust or under Maryland law to
indemnify such persons against such liability. Without limiting the power
of the Trust to procure or maintain any kind of insurance or other
arrangement, the Trust may, for the benefit of persons indemnified by it,
(i) create a trust fund, (ii) establish any form of self-insurance, (iii)
secure its indemnity obligation by grant of any security interest or other
lien on the assets of the corporation, or (iv) establish a letter of
credit, guaranty or surety arrangement. Any such insurance or other
arrangement may be procured, maintained or established within the Trust or
with any insurer or other person deemed appropriate by the Board of
Trustees regardless of whether all or part of the stock or other securities
thereof are owned in whole or in part by the Trust. In the absence of
fraud, the judgment of the Board of Trustees as to the terms and conditions
of insurance or other arrangement and the identity of the insurer or other
person participating in any arrangement shall be conclusive, and such
insurance or other arrangement shall not be subject to voidability, nor
subject the Trustees approving such insurance or other arrangement to
liability, on any ground, regardless of whether Trustees participating and
approving such insurance or other arrangement shall be beneficiaries
thereof."
SCI has entered into indemnity agreements with each of its officers and
Trustees which provide for reimbursement of all expenses and liabilities of
such officer or Trustee, arising out of any lawsuit or claim against such
officer or Trustee due to the fact that he was or is serving as an officer or
Trustee, except for such liabilities and expenses (a) the payment of which is
judicially determined to be unlawful, (b) relating to claims under Section
16(b) of the Exchange Act, or (c) relating to judicially determined criminal
violations. In addition, SCI has entered into indemnity agreements with each
of its Trustees who is not also an officer of SCI which provide for
indemnification and advancement of expenses to the fullest lawful extent
permitted by Maryland law in connection with any pending or completed action,
suit or proceeding by reason of serving as a Trustee and SCI has established a
trust to fund payments under the indemnification agreements.
The Registration Rights Agreement provides for the reciprocal
indemnifications by the Selling Shareholders of SCI, and its Trustees,
officers and controlling persons, and by SCI of the Selling Shareholders, and
their respective directors, officers and controlling persons, against certain
liabilities under the Securities Act.
ITEM 16. EXHIBITS.
See the Exhibit Index which is hereby incorporated herein by reference.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
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<PAGE>
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
Provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
registrant pursuant to section 13 or section 15(d) of the Exchange Act
that are incorporated by reference in the Registration Statement.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to Trustees, officers and controlling persons of the
registrant pursuant to the provisions set forth or described in Item 15 of
this Registration Statement, or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a Trustee, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
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<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of Security Capital Industrial
Trust, a Maryland real estate investment trust, and each of the undersigned
Trustees and officers of Security Capital Industrial Trust, hereby constitutes
and appoints K. Dane Brooksher, Irving F. Lyons, III, M. Gordon Keiser, Edward
F. Long, Jeffrey A. Klopf and Ariel Amir its or his true and lawful attorneys-
in-fact and agents, for it or him and in its or his name, place and stead, in
any and all capacities, with full power to act alone, to sign any and all
amendments to this registration statement, and to file each such amendment to
this registration statement with all exhibits thereto, and any and all
documents in connection therewith, with the Securities and Exchange
Commission, hereby granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform any and all acts and
things requisite and necessary to be done in and about the premises, as fully
and to all intents and purposes as it or he might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
any of them, may lawfully do or cause to be done by virtue hereof.
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<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF AURORA, STATE OF COLORADO, ON THE 22ND DAY OF
OCTOBER, 1997.
Security Capital Industrial Trust
/s/ K. Dane Brooksher
By: _________________________________
K. Dane Brooksher
Co-Chairman and Chief Operating
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ K. Dane Brooksher Co-Chairman, Chief Operating October 22, 1997
____________________________________ Officer and Trustee
K. Dane Brooksher
/s/ Irving F. Lyons III Co-Chairman, Chief October 22, 1997
____________________________________ Investment Officer and
Irving F. Lyons III Trustee
/s/ Thomas G. Wattles Non-Executive Chairman and October 22, 1997
____________________________________ Trustee
Thomas G. Wattles
/s/ M. Gordon Keiser Senior Vice President October 22, 1997
____________________________________ (Principal Financial
M. Gordon Keiser Officer)
/s/ Edward F. Long Vice President and October 22, 1997
____________________________________ Controller
Edward F. Long (Principal Accounting
Officer)
/s/ Stephen L. Feinberg Trustee October 22, 1997
____________________________________
Stephen L. Feinberg
/s/ Donald P. Jacobs Trustee October 22, 1997
____________________________________
Donald P. Jacobs
/s/ William G. Myers Trustee October 22, 1997
____________________________________
William G. Myers
/s/ John E. Robson Trustee October 22, 1997
____________________________________
John E. Robson
</TABLE>
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<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DOCUMENT DESCRIPTION NUMBER
------- -------------------- ----------
<C> <S> <C>
4.1 Restated Declaration of Trust of SCI.
4.2 Amended and Restated Declaration of Trust of SCI
(Incorporated by reference to exhibit 4.1 to SCI's
Registration Statement No. 33-73382).
4.3 First Certificate of Amendment of Amended and Restated
Declaration of Trust of SCI (Incorporated by reference
to exhibit 3.1 to SCI's Form 8-K dated June 14, 1994).
4.4 Second Articles of Amendment of Restated Declaration of
Trust of SCI (Incorporated by reference to exhibit 4.3
to SCI's Registration Statement No. 33-87306).
4.5 Articles Supplementary relating to SCI's Series A
Cumulative Redeemable Preferred Shares of Beneficial
Interest (Incorporated by reference to exhibit 4.8 to
SCI's Form 8-A registration statement relating to such
shares).
4.6 First Articles of Amendment to Articles Supplementary
relating to SCI's Series A Cumulative Redeemable
Preferred Shares of Beneficial Interest (Incorporated by
reference to exhibit 10.3 to SCI's Form 10-Q for the
quarter ended September 30, 1995).
4.7 Articles Supplementary relating to SCI's Series B
Cumulative Convertible Redeemable Preferred Shares of
Beneficial Interest (Incorporated by reference to
exhibit 4.1 to SCI's Form 8-K dated February 14, 1996).
4.8 Articles Supplementary with respect to SCI's Series C
Cumulative Redeemable Preferred Shares of Beneficial
Interest (Incorporated by reference to exhibit 4.8 to
SCI's Form 8-A dated November 13, 1996).
4.9 Third Articles of Amendment dated September 9, 1997.
4.10 Bylaws of SCI (Incorporated by reference to exhibit 4.3
to SCI's Registration Statement No. 33-83208).
4.11 Rights Agreement, dated as of December 31, 1993, between
SCI and State Street Bank and Trust Company, as Rights
Agent, including form of Rights Certificate
(Incorporated by reference to exhibit 4.4 to SCI's
Registration Statement No. 33-78080).
4.12 First Amendment to Rights Agreement, dated as of February
15, 1995, between SCI, State Street Bank and Trust
Company and The First National Bank of Boston, as
successor Rights Agent (Incorporated by reference to
exhibit 3.1 to SCI's Form 10-Q for the quarter ended
September 30, 1995).
4.13 Second Amendment to Rights Agreement, dated as of June
22, 1995, between SCI, State Street Bank and Trust
Company and the First National Bank of Boston
(Incorporated by reference to exhibit 3.1 to SCI's Form
10-Q for the quarter ended September 30, 1995).
4.14 Form of share certificate for Common Shares of Beneficial
Interest of SCI (Incorporated by reference to exhibit
4.4 to SCI's Registration Statement No. 33-73382).
4.15 Form of share certificate for Series A Cumulative
Redeemable Preferred Shares of Beneficial Interest
(Incorporated by reference to exhibit 4.7 to SCI's Form
8-A registration statement relating to such shares).
4.16 Form of share certificate for Series B Cumulative
Convertible Redeemable Preferred Shares of Beneficial
Interest (Incorporated by reference to exhibit 4.8 to
SCI's Form 8-A registration statement relating to such
shares).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DOCUMENT DESCRIPTION NUMBER
------- -------------------- ----------
<C> <S> <C>
4.17 Form of share certificate for Series C Cumulative
Redeemable Preferred Shares of Beneficial Interest of
SCI (Incorporated by reference to exhibit 4.16 to SCI's
Form 10-K for the year ended December 31, 1996).
4.18 Amended and Restated Agreement of Limited Partnership of
SCI Partnership-III, dated as of October 28, 1994, by
and among SCI, as general partner, and the limited
partners set forth therein (Incorporated by reference to
exhibit 10.3 to SCI's Form 10-Q for the quarter ended
September 30, 1994).
4.19 Amended and Restated Agreement of Limited Partnership of
SCI Limited Partnership-IV, dated as of October 28,
1994, by and among SCI IV, Inc., as general partner, and
the limited partners set forth therein (Incorporated by
reference to exhibit 10.4 to SCI's Form 10-Q for the
quarter ended September 30, 1994).
4.20 Registration Rights Agreement, dated as of October 28,
1994, among SCI and the investors listed on the
signature pages thereto (Incorporated by reference to
exhibit 10.5 to SCI's Form 10-Q for the quarter ended
September 30, 1994).
5 Opinion of Mayer, Brown & Platt as to the validity of the
shares being registered.
8 Opinion of Mayer, Brown & Platt as to certain tax
matters.
15 Letter of Arthur Andersen LLP regarding unaudited interim
financial information.
23.1 Consent of Mayer, Brown & Platt (included in the opinions
filed as Exhibit 5 and Exhibit 8).
23.2 Consent of Arthur Andersen LLP.
24.1 Power of Attorney (included on page II-4 is Registration
Statement).
</TABLE>
<PAGE>
EXHIBIT 4.1
SECURITY CAPITAL INDUSTRIAL TRUST
RESTATED DECLARATION OF TRUST
[The Declaration of Trust of Security Capital Industrial Trust, is restated
solely for purposes of filing with the Securities and Exchange Commission
pursuant to Rule 102(c) of Regulation S-T. Reference is made to the provisions
of SCI's Amended and Restated Declaration of Trust, as amended and supplemented
for the actual terms of SCI's Charter.]
RECITALS
1. This Trust is a real estate investment trust under the laws of the
State of Maryland.
2. The Trustees desire that this Trust qualify as a "real estate
investment trust" under the provisions of the Internal Revenue Code of 1986, as
now in effect or hereafter amended (the "Code"), and under Title 8 of the
Corporations and Associations Article of the Annotated Code of Maryland, as
amended ("Title 8"), so long as such qualification, in the opinion of the
Trustees, is advantageous to the Shareholders of the Trust.
3. The beneficial interest in this Trust shall be divided into
transferable shares of one or more classes evidenced by certificates.
DECLARATION
NOW, THEREFORE, the Trustees hereby declare that they assume the duties of
Trustees hereunder and hold all assets of the Trust presently existing and
hereafter to be received, and all rents, income, profits and gains therefrom,
from whatever source derived, in trust, for the Shareholders in accordance with
the terms and conditions hereinafter provided.
ARTICLE 1. THE TRUST
Section 1. Name. The Trust created by this Declaration of Trust is
herein referred to as the "Trust" and shall be known by the name "Security
Capital Industrial Trust." So far as may be practicable, legal and convenient,
the affairs of the Trust shall be conducted and transacted under that name,
which name shall not refer to the Trustees individually or personally or to the
beneficiaries or Shareholders of the Trust, or to any officers, employees or
agents of the Trust.
Under circumstances in which the Trustees determine that the use of the
name "Security Capital Industrial Trust" is not practicable, legal or
convenient, they may as appropriate use their names with suitable reference to
their trustee status, or some other suitable designation, or they may adopt
another name under which the Trust may hold property or operate in any
jurisdiction which name shall not, to the knowledge of the Trustees, refer to
beneficiaries or Shareholders
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of the Trust. Legal title to all the properties subject from time to tome to
this Declaration of Trust shall be transferred to, vested, and held by the Trust
in its own name or by the Trustees as joint tenants with right of survivorship
as Trustees of this Trust, except that the Trustees shall have the power to
cause legal title to any property of this Trust to be held by and/or in the name
of one or more of the Trustees, or any other person as nominee, on such terms,
in such manner, and with such powers as the Trustees may determine, provided
that the interest of the Trust therein is appropriately protected.
The Trust shall have the authority to operate under an assumed name or
names in such state or states or any political subdivision thereof where it
would be legal, practical or convenient to operate in the name of the Trust.
The Trust shall have the authority to file such assumed name certificates or
other instruments in such places as may be required by applicable law to operate
under such assumed name or names.
If for any reason neither Security Capital Industrial Incorporated, nor any
affiliate thereof, nor any other affiliate of Security Capital Group
Incorporated, shall any longer be rendering to the Trust the services of
Advisor, as defined in Article 5 hereof, to be rendered pursuant to the contract
referred to in Article 5 hereof, and any renewal or extension of such contract,
then, if requested in writing by Security Capital Group Incorporated or its
successor to do so, the Trustees shall forthwith and are hereby required and
authorized, without further vote or consent of the Shareholders, to (a) cease to
use the name "Security Capital" or any name or names similar thereto, (b) amend
this Section 1 to change the name of the Trust to one which does not include the
name "Security Capital" or any name or names similar thereto, and (c) cause to
be executed and delivered all instruments necessary to evidence such change of
name in each public registry where the name of the Trust shall have been
registered and to disclaim any right, title or interest in or to the name
"Security Capital."
Section 2. Resident Agent. The name and address of the Resident Agent of
the Trust in the State of Maryland is The Corporation Trust Incorporated, 32
South Street, Baltimore, Maryland 21202. The Trust may have such other offices
or places of business within or without the State of Maryland as the Trustees
may from time to time determine.
Section 3. Nature of Trust. The Trust is a real estate investment trust
within the meaning of Title 8. The Trust is not intended to be, shall not be
deemed to be, and shall not be treated as, a general partnership, limited
partnership, joint stock association or, except as contemplated in Article 8,
Section 1, a corporation. The Shareholders shall be beneficiaries in that
capacity in accordance with the rights conferred upon them hereunder.
Section 4. Purpose of the Trust.
(a) The Trust shall have all the powers granted to real estate investment
trusts generally by Title 8 or any successor statute and shall have any other
and further powers as are not inconsistent with and are appropriate to promote
and attain the purposes of the Trust as set forth in this Declaration of Trust.
Its purpose is to invest in notes, bonds and other obligations
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secured by mortgages on real property and to purchase, hold, lease, manage,
sell, exchange, develop, subdivide and improve real property and interests in
real property, and in general, to carry on any other acts in connection with the
foregoing and to have and exercise all powers conferred by the laws of the State
of Maryland upon real estate investment trusts formed under Title 8, and to do
any or all of the things herein set forth to the same extent as natural persons
might or could do. In addition, it is intended that the business of the Trust
will be conducted so that the Trust will qualify (so long as such qualification,
in the opinion of the Trustees, is advantageous to the Shareholders) as a "real
estate investment trust" as defined in the Code.
(b) The Trust shall not be primarily engaged in investing, reinvesting, or
trading in securities. In addition, the Trust will not engage in margin
transactions or short sales; invest in puts, calls, straddles, spreads or any
combination thereof; invest or trade in commodities or commodity contracts. The
Trust shall invest primarily in non-speculative, high quality, easily tradeable
securities consistent with prudent investment standards and only upon the advice
and recommendation of its investment advisor.
Section 5. Prohibited Activities. The Trust shall also conform to the
following restrictions and prohibitions in its operations:
(a) The Trust shall not invest more than twenty-five (25%) percent of its
total assets in unimproved real property, excluding property which is being
developed or will be developed within a reasonable period.
(b) The Trust shall not invest in junior mortgage loans unless, by
appraisal or other method that the Independent Trustees determine, (a) the
capital invested in such mortgage loan is adequately secured on the basis of the
equity of the borrower in the property underlining such investment and the
ability of the borrower to repay the mortgage loan, or (b) such mortgage loan of
the Trust is a financing device entered into by the Trust to establish the
priority of its capital investment over the capital invested by others investing
with the Trust in a real estate project. The Independent Trustees shall
determine that any such junior mortgage loan is not and may not be made
subordinate to a mortgage held by the Advisor, an affiliate of the Advisor, or a
Trustee of the Trust. "Independent Trustee" means a Trustee who (i) is not
affiliated, directly or indirectly, with an Advisor of the Trust, whether by
ownership of, ownership interest in, employment by, any material business or
professional relationship with, or service as an officer, or director of, such
Advisor or a business entity which is an affiliate of such Advisor, (ii) is not
serving as a Trustee or director for more than three real estate investment
trusts organized by a sponsor of the Trust, and (iii) performs no other services
for the Trust, except as Trustee. An indirect relationship shall include
circumstances in which a member of the immediate family of a Trustee has one of
the foregoing relationships with the Trust or with an Advisor of the Trust.
(c) The aggregate borrowing of the Trust, secured and unsecured, shall not
be unreasonable in relation to the net assets of the Trust and shall be reviewed
by the Trustees at least quarterly. The maximum amount of such borrowing in
relation to the net assets shall, in the absence of a satisfactory showing that
a higher level of borrowing is appropriate, not exceed
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300%. Any excess in borrowing over such 300% level shall be approved by a
majority of the Independent Trustees and disclosed to Shareholders in the next
quarterly report of the Trust, along with justification for such excess. The
term "net assets" means the total assets (other than intangibles) at cost,
before deducting depreciation or other non-cash reserves, less total
liabilities, calculated at least quarterly on a basis consistently applied.
(d) Options or warrants issuable to the Advisor, Trustees or sponsors of
the Trust or any of their affiliates shall not exceed an amount equal to 10% of
the outstanding Shares of the Trust on the date of grant of any options or
warrants.
(e) The Trust shall not compensate any independent contractor employed by
the Trust at a rate higher than the going rate, if any, for like services in the
community or locale in which such services are performed, nor shall any such
independent contractor in any event be compensated at a rate higher than a
reasonable rate for services performed for the Trust.
(f) The Advisor and Trustees shall observe the following policies in
connection with investing in or making mortgage loans:
(1) the Trust shall not invest in real estate contracts of sale,
otherwise known as land sale contracts, unless such contracts of sale are
in recordable form and are appropriately recorded in the chain of title.
(2) the Trust shall not make or invest in mortgage loans, including
construction loans, on any one property if the aggregate amount of all
mortgage loans outstanding on the property, including the loans of the
Trust, would exceed an amount equal to 85% of the fair market value of the
property as determined by the Trustees unless substantial justification
exists because of the presence of other underwriting criteria. For
purposes of this subsection, the "aggregate amount of all mortgage loans
outstanding on the property, including the loans of the Trust" shall
include all interest (excluding contingent participation in income and/or
appreciation in value or mortgaged property), the current payment of which
may be deferred pursuant to the terms of such loans, to the extent that
deferred interest on each loan exceeds 5% per annum of the principal
balance of the loan; and
(3) the Trust shall not make or invest in any mortgage loans that are
subordinate to any mortgage or equity interest of the Advisor, Trustees,
sponsors or affiliates of the Trust.
(g) Total Operating Expenses of the Trust shall (in the absence of a
satisfactory showing to the contrary) not exceed in any fiscal year the greater
of:
(1) two percent (2%) of the average of the aggregate book value of the
assets of the Trust invested, directly or indirectly, in equity interests
in and loans secured by
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<PAGE>
real estate, before reserves for depreciation or bad debts or other similar
non-cash reserves, computed by taking the average of such values at the end
of each month during such period; or
(2) twenty-five percent (25%) of the Net Income of the Trust for such
year. "Net Income" shall mean total revenues applicable to such year, less
the expenses applicable to such year other than additions to reserves for
depreciation or bad debts or other similar non-cash reserves. For the
purposes of this section, if the Advisor receives an incentive fee, Net
Income shall exclude the gain from the sale of the Trust's assets.
"Total Operating Expenses" shall mean all operating, general, and
administrative expenses of the Trust as determined under generally accepted
accounting principles, except the expenses of raising capital, interest
payments, taxes, non-cash expenditures, incentive fees paid to the Advisor and
costs related directly to asset acquisition, operation and disposition.
The Independent Trustees shall have the fiduciary responsibility of
limiting such expenses to amounts that do not exceed such limitations unless
such Independent Trustees shall have made a finding that, based on such unusual
and non-recurring factors which they deem sufficient, a higher level of expenses
is justified for such year. Any such findings and the reasons in support
thereof shall be reflected in the minutes of the meeting of the Trustees.
Within sixty (60) days after the end of any fiscal quarter of the Trust for
which Total Operating Expenses (for the twelve (12) months then ended) exceeded
2% of average invested assets (as calculated in Article 1, Section 5(g)(1)
above) or twenty-five percent of Net Income, whichever is greater, there shall
be sent to the Shareholders of the Trust a written disclosure of such fact,
together with an explanation of the facts the Independent Trustees considered in
arriving at the conclusion that such higher operating expenses were justified.
In the event that the Independent Trustees do not determine such excess expenses
are justified, the Advisor shall reimburse the Trust for the amount by which the
aggregate annual expenses paid or incurred by the Trust exceeded the limitations
herein provided.
Section 6. Conflicts of Interest. The Trust shall not purchase property
from a sponsor, Advisor, Trustee, or affiliates thereof. The Trust shall not
enter into any other principal transaction (including without limitation, the
sale of property, the making of loans, borrowing money, or investing in joint
ventures) with the sponsor, Advisor, Trustees or affiliates thereof, except for
emergency loans approved by a majority of the Independent Trustees not otherwise
interested in such transaction as being fair and reasonable to the Trust and on
terms and conditions not less favorable to the Trust than those available from
unaffiliated third parties. The Trust may employ affiliates of the Trustees or
Advisor to perform services, provided such services are at market rates for like
services and a majority of the Independent Trustees not otherwise interested in
such services approve the services as being fair and reasonable to the Trust.
ARTICLE 2. SHARES
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Section 1. Shares, Certificates of Beneficial Interest. The beneficial
interests in the Trust shall be divided into and shall be designated as Shares.
The Trust shall have authority to issue an aggregate of 150,000,000 Shares,
$0.01 par value per Share, and shall consist of common Shares and such other
types or classes of securities of the Trust as the Trustees may create and
authorize from time to time and designate as representing a beneficial interest
in the Trust. The amount and form of consideration paid for the issuance of
Shares shall be determined by the Trustees from time to time in accordance with
the laws of the State of Maryland. The Trustees shall hold the money or
property received for the issuance of Shares for the benefit of the owners of
such Shares. Shares shall not be issued until the full amount of the
consideration has been received by the Trust. The Trustees may authorize Share
dividends or Share splits. All shares issued hereunder shall be, when issued,
fully paid, and no assessment shall ever be made upon the Shareholders.
Ownership of Shares shall be evidenced by certificates in such form as shall be
determined by the Trustees from time to time in accordance with the laws of the
State of Maryland. The owners of such Shares, who are the beneficiaries of the
Trust, shall be designated as Shareholders. The certificates shall be
negotiable and title thereto shall be transferred by assignment or delivery in
all respects as a stock certificate of a Maryland corporation.
The Board of Trustees may classify or reclassify any unissued Shares from
time to time by setting or changing the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends, qualifications, or
terms or conditions of redemption of the Shares by filing articles supplementary
pursuant to the applicable laws of the State of Maryland. The Board of Trustees
is authorized to issue from the authorized but unissued Shares of the Trust
preferred Shares in series and to establish from time to time the number of
preferred Shares to be included in each such series and to fix the designation
and any preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption of the shares of each series. Except for Shares so classified or
reclassified and any preferred Shares issued hereunder, all other Shares shall
be designated as common Shares, each of which common Shares shall be equal in
all respects to every other common Share.
The authority of the Board of Trustees with respect to each unissued series
shall include, but not be limited to, determination of the following:
(a) The number of Shares constituting that series and the distinctive
designation of that series;
(b) The rate of dividend, if any, and whether (and if so, on what terms and
conditions) dividends shall be cumulative (and, if so, whether unpaid dividends
shall compound or accrue interest) or shall be payable in preference or in any
other relation to the dividends payable on any other class or classes of Shares
or any other series of the preferred Shares;
(c) Whether that series shall have voting rights in addition to the voting
rights provided by law and, if so, the terms and extent of such voting rights;
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<PAGE>
(d) Whether the Shares shall be issued with the privilege of conversion or
exchange and, if so, the terms and conditions of such conversion or exchange
(including, without limitation, the price or prices or the rate or rates of
conversion or exchange or any terms for adjustment thereof);
(e) Whether the Shares may be redeemed and, if so, the terms and conditions
on which they may be redeemed (including, without limitation, the dates upon or
after which they may be redeemed and the price or prices at which they may be
redeemed, which price or prices may be different in different circumstances or
at different redemption dates);
(f) The amounts, if any, payable upon the Shares in the event of voluntary
liquidation, dissolution or winding up of the Trust in preference of Shares of
any other class or series and whether the Shares shall be entitled to
participate generally in distributions on the common Shares under such
circumstances;
(g) The amounts, if any, payable under the Shares thereof in the event of
involuntary liquidation, dissolution or winding up of the Trust in preference of
Shares of any other class or series and whether the shares shall be entitled to
participate generally in distributions on the common Shares under such
circumstances;
(h) Sinking fund provisions, if any, for the redemption or purchase of the
Shares (the term "sinking fund" being understood to include any similar fund,
however designated); and
(i) Any other relative rights, preferences, limitations and powers of that
series.
Section 2. Sale of Shares. The Trustees, in their discretion, may from
time to time issue or sell or contract to issue or sell, Shares, including
Shares held in the treasury, to such party or parties and for money or property
actually received, as allowed by the laws of the State of Maryland, at such time
or times, and on such terms as the Trustees may deem appropriate. In connection
with any issuance of Shares, the Trustees, in their discretion, may provide for
the issuance of fractional Shares or may provide for the issuance of scrip for
fractions of Shares and determine the terms of such scrip including, without
limiting the generality of the foregoing, the time within which any such scrip
must be surrendered in exchange for Shares and the right, if any, of holders of
scrip upon the expiration of the time so fixed, the right, if any, to receive
proportional distributions, and the right, if any, to redeem scrip for cash, or
the Trustees may, in their discretion, or if they see fit at the option of each
holder, provide in lieu of scrip for the adjustment of fractions in cash. The
Shareholders shall have no preemptive rights of any kind whatsoever (preemptive
rights hereby defined as including, but not limited to, the right to purchase or
subscribe for or otherwise acquire any Shares of the Trust of any class, whether
now or hereafter authorized, or any securities or obligations convertible into
or exchangeable for, or any right, warrant or option to purchase such Shares
whether or not such Shares are issued and/or disposed of for cash, property, or
other consideration of any kind).
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Section 3. Offering of Shares. The Trustees are authorized to cause to
be made from time to time offerings of the Shares of the Trust in private
offerings or to the public at offering prices deemed appropriate by the
Trustees. For this purpose, the Trustees are authorized to enter into a
contract with an underwriter or placement agent (hereinafter referred to as the
"Distributor"), which shall be granted such commissions for its services as may
be agreed upon by the parties. Any such contract shall be for an initial term
of not more than two years, and thereafter terminable at will by the Trustees
upon 60 days' written notice to the Distributor. Such contract shall not be
assignable by the Distributor, without the written consent of the Trust.
Section 4. Treasury Shares. The Trust may repurchase or otherwise
acquire its own Shares at the prevailing market price and for this purpose the
Trust may create and maintain such reserves as are deemed necessary and proper.
Shares issued hereunder and purchased or otherwise acquired for the account of
the Trust shall not, so long as they belong to the Trust, either receive
distributions (except that they shall be entitled to receive distributions
payable in Shares of the Trust) or be voted at any meeting of the Shareholders.
Such Shares may, in the discretion of the Trustees, be held in the treasury and
be disposed of by the Trustees at such time or times, to such party or parties,
and for such consideration, as the Trustees may deem appropriate.
Section 5. Transferability of Shares. Shares in the Trust shall be
transferable in accordance with the procedure prescribed from time to time in
the Trust Bylaws. The persons in whose name the Shares are registered on the
books of the Trust shall be deemed the absolute owners thereof and, until a
transfer is effected on the books of the Trust, the Trustees shall not be
affected by any notice, actual or constructive, of any transfer. Any issuance,
redemption or transfer of Trust Shares which would operate to disqualify the
Trust as a real estate investment trust for purposes of Federal income tax, is
null and void, and such transaction will be canceled when so determined in good
faith by the Trustees.
Section 6. Effect of Transfer of Shares or Death, Insolvency or
Incapacity of Shareholders. Neither the transfer of Shares nor the death,
insolvency or incapacity of any Shareholder shall operate to dissolve or
terminate the Trust, nor shall it entitle any transferee, legal representative
or other person to a partition of the property of the Trust or to an accounting.
Section 7. Shareholders' Disclosure; Trustees' Right to Refuse to Transfer
Shares; Limitation on Holdings; Redemption of Shares.
(a) Shareholders' Disclosure. The Shareholders shall upon demand disclose
to the Trustees in writing such information with respect to direct and indirect
ownership of the Shares as the Trustees deem necessary to comply with the real
estate investment trust provisions of the Code (the "REIT Tax Provisions") or to
comply with the requirements of any taxing authority or governmental agency.
The REIT Tax Provisions shall mean Sections 856 through 860 of the Code and
other provisions of the Code referred to or incorporated in, or referring to or
incorporating any other provisions of said Sections 856 through 860, or similar
provisions of
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<PAGE>
successor statutes, and applicable regulations under and rulings with respect to
the aforesaid provisions of said Code.
(b) Right to Refuse to Transfer Shares. Whenever it is deemed by them to
be reasonably necessary to protect the tax status of the Trust as a real estate
investment trust, the Trustees may require a statement or affidavit from each
proposed transferee of Shares setting forth the number of Shares already owned
by him and any related person specified in the form prescribed by the Trustees
for that purpose. If, in the opinion of the Trustees, the proposed transfer may
jeopardize the qualification of the Trust as a real estate investment trust, the
Trustees shall have the right, but not a duty, to refuse to transfer the Shares
to the proposed transferee. All contracts for the sale or other transfer of
Shares shall be subject to this provision.
(c) Limitation on Holdings. Notwithstanding any other provisions of this
Declaration of Trust to the contrary and subject to the provisions of Sections
7(e) and 7(k), no person, or persons acting as a group, (other than Security
Capital Realty Incorporated, a Delaware corporation, and its affiliates,
successors or assigns) shall at any time directly or indirectly acquire
ownership in the aggregate of more than 9.8% of the outstanding Shares of the
Trust (the "Limit"). Shares owned by a person or group of persons in excess of
the Limit at any time shall be deemed "Excess Shares." For the purpose of this
Section 7, the term "ownership" shall be defined in accordance with or by
reference to the qualification requirements of the REIT Tax Provisions and shall
also mean ownership as defined under Rule 13(d) promulgated by the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and the term "group" shall have the same meaning as
that term has for purposes of such Rule 13(d). All Shares which any person has
the right to acquire upon exercise of outstanding rights, options and warrants,
and upon conversion of any securities convertible into Shares, if any, shall be
considered outstanding for purposes of the Limit if such inclusion will cause
such person to own more than the Limit. The term "securities" shall mean any
stock, shares, voting trust certificates, bonds, debentures, notes or other
evidences of indebtedness or ownership or in general any instruments commonly
known as "securities" or any certificates of interest, shares or participations
in temporary or interim certificates for, receipts for, guarantees of, or
warrants, options or rights to subscribe to, purchase or acquire any of the
foregoing. The term "person" shall mean and include individuals, corporations,
limited partnerships, general partnerships, joint stock companies or
associations, joint ventures, associations, consortia, companies, trusts, banks,
trust companies, land trusts, common law trusts, business trusts, or other
entities and governments and agencies and political subdivisions thereof. In
the sole discretion of the Trustees, the Trustees may from time to time adopt a
legend to be imprinted on each certificate evidencing Shares which describes the
Limit.
(d) Redemption of Excess Shares. The Trustees, upon 30 days' prior written
notice to the holder thereof of its intention to do so, may at any time or times
thereafter redeem any or all Shares that are Excess Shares (including Shares
that remain or become Excess Shares because of the decrease in outstanding
Shares resulting from such redemption) by giving written
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notice of redemption to the holder thereof, unless, prior to the giving of such
written notice of redemption, the holder thereof shall have disposed of its
ownership in the Shares that are Excess Shares; and from and after the date of
giving of such notice of redemption ("redemption date"), the Shares called for
redemption shall cease to be outstanding and the holder thereof shall cease to
be entitled to dividends, voting rights and other benefits with respect to such
Shares excepting only the right to payment by the Trust of the redemption price
determined and payable as set forth in the following two sentences. Subject to
the limitation on payment set forth in the following sentence, the redemption
price of each Excess Share called for redemption shall be the average daily per
Share closing sales price, if the Shares of the Trust are listed on a national
securities exchange or, if not, are reported on the NASDAQ National Market
System, and if the Shares are not so listed or reported, shall be the mean
between the average per Share closing bid prices and the average per Share
closing asked prices, in each case during the 30 day period ending on the
business day prior to the redemption date, or if there have been no sales on a
national securities exchange or the NASDAQ National Market System and no
published bid quotations and no published asked quotations with respect to
Shares of the Trust during such 30 day period, the redemption price shall be the
price determined by the Trustees in good faith. Unless the Trustees determine
that it is in the interest of the Trust to make earlier payment of all of the
amount determined as the redemption price per Share in accordance with the
preceding sentence, the redemption price may be payable, at the option of the
Trustees, at any time or times up to, but not later than, the earlier of (i)
five years after the redemption date, or (ii) the liquidation of the Trust, in
which latter event the redemption price shall not exceed an amount which is the
sum of the per Share distributions designated as liquidating distributions and
return of capital distributions declared with respect to unredeemed Shares of
the Trust of record subsequent to the redemption date; and in any event, no
interest shall accrue with respect to the period subsequent to the redemption
date to the date of such payment.
(e) Exemptions. The Limit set forth in Section 7(c) shall not apply in the
case of Security Capital Realty Incorporated, a Delaware corporation, shall be
30% in the aggregate of the outstanding Shares of the Trust in the case of other
subscribers in the Trust's February 1993 private offering, and shall not apply
to the acquisition of Shares or rights, options or warrants for or securities
convertible into Shares by an underwriter in a public offering or in any
transaction involving the issuance by the Trust of Shares or rights, options or
warrants for or securities convertible into Shares, in which a majority of the
Trustees determine that the underwriter or other person or party initially
acquiring same will make a timely distribution thereof to or among other holders
such that, following such distribution, none of such Shares will be Excess
Shares. The Trustees in their discretion may exempt from the Limit ownership of
certain designated Shares while owned by a person who has provided the Trustees
with evidence and assurances acceptable to the Trustees that the qualification
of the Trust as a real estate investment trust would not be jeopardized thereby.
The provisions of Article 3, Subtitle 6 of the Corporations and Associations
Article of the Annotated Code of Maryland entitled 'Special Voting Requirements'
shall not apply to business combinations with Security Capital Realty
Incorporated, a Delaware corporation, and its affiliates and successors, and
Article 3, Subtitle 7 of the Corporations and Associations Article of the
Annotated Code of Maryland entitled 'Voting Rights of Certain Control Shares'
shall not apply to the Shares of the Trust
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acquired by Security Capital Realty Incorporated, a Delaware corporation, and
its affiliates and successors.
(f) Disqualifying Acquisition. Notwithstanding any other provision of this
Declaration of Trust to the contrary and subject to Section 7(k), any purported
acquisition of Shares of the Trust which would result in the disqualification of
the Trust as a real estate investment trust shall be null and void, unless the
Trustees, prior to such acquisition, shall have determined that the
disqualification of the Trust is advantageous to Shareholders.
(g) Other Action. Subject to Section 7(k), nothing contained in this
Section 7 or in any other provision of this Declaration of Trust shall limit the
authority of the Trustees to take such other action as they deem necessary or
advisable to protect the Trust and the interests of the Shareholders by
preservation of the Trust's qualification as a real estate investment trust
under the REIT Tax Provisions (so long as such qualification, in the opinion of
the Trustees, is advantageous to the Shareholders). The Trustees may in their
discretion place a statement in such form as they may deem appropriate on the
face or back of certificates for Shares referring to the provisions of this
Section 7.
(h) Severability. If any provision of this Section 7 or any application of
any such provision is determined to be invalid by any Federal or state court
having jurisdiction over the issues, the validity of the remaining provisions
shall not be affected and other applications of such provision shall be affected
only to the extent necessary to comply with the determination of such court. To
the extent this Section 7 may be inconsistent with any other provision of this
Declaration of Trust, this Section 7 shall be controlling.
(i) Enforcement. The Board of Trustees is specifically authorized to seek
equitable relief, including an injunction, to enforce the provisions of this
Section 7.
(j) Non-Waiver. No delay or failure on the part of the Trust or the Board
of Trustees in exercising any rights hereunder shall operate as a waiver of any
rights of the Trust, except to the extent especially waived in writing by the
Trust.
(k) New York Stock Exchange Transactions. Nothing in this Section 7 shall
preclude the settlement of any transaction entered into through the facilities
of the New York Stock Exchange.
ARTICLE 3. SHAREHOLDERS
Section 1. Shareholders' Meetings. There shall be an annual meeting of
the Shareholders at such time and place, either within or without the State of
Maryland, as the Trustees shall prescribe, at which all Trustees shall be
elected or reelected and any other proper business may be conducted. The annual
meeting of Shareholders shall be held upon reasonable notice and within a
reasonable period (not less than 30 days) following delivery of the annual
report, but in any event such meeting must be held within six months after the
end of each full
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fiscal year. Special meetings of Shareholders may be called by a majority of
the Trustees, a majority of the Independent Trustees, or by any officer of the
Trust, and shall be called upon the written request of Shareholders holding in
the aggregate not less than ten percent (10%) of the outstanding Shares of the
Trust entitled to vote in the manner provided in the Bylaws. If there shall be
no Trustees, the officers of the Trust shall promptly call a special meeting of
the Shareholders for the election of successor Trustees. Written or printed
notice stating the place, date and hour of the Shareholders' meeting and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called, shall be delivered not less than 10 nor more than 60 days before the day
of the meeting either personally or by mail, by or at the direction of the
Trustees or any officer or person calling the meeting, to each Shareholder of
record entitled to vote in such meeting. No other business than that which is
stated in the call for a special meeting shall be considered at such meeting.
A majority of the outstanding Shares entitled to vote at any meeting
represented in person or by proxy shall constitute a quorum at any such meeting.
Whenever any action is to be taken by the Shareholders, it shall, except as
otherwise authorized by law or this Declaration of Trust or the Bylaws, be
authorized by a majority of the votes cast at a meeting of Shareholders by
holders of Shares entitled to vote thereon.
Section 2. Voting. At each meeting of the Shareholders, each Shareholder
entitled to vote shall have the right to vote, in person or by proxy, the number
of Shares of the Trust owned by him upon each matter upon which the vote of the
Shareholders is taken. In any election in which more than one vacancy for the
position of Trustee is to be filled, each Shareholder may vote the number of
Shares of the Trust owned by him for each such vacancy to be filled. There
shall be no right of cumulative voting. Each outstanding Common Share, shall be
entitled to one vote on each matter submitted to a vote at a meeting of
Shareholders, except (a) to the extent that this Declaration of Trust or
articles supplementary (to the extent permitted by Maryland law) limit or deny
voting rights to the holders of the Shares of any class or series, or (b) as
otherwise provided by Maryland law. Preferred Shares shall have such voting
rights as the Trustees shall establish in articles supplementary filed with the
State Department of Assessments and Taxation of Maryland.
Section 3. Distributions. The Trustees may from time to time declare and
pay to Shareholders such dividends or distributions in cash, property or other
assets of the Trust or in securities of the Trust or from any other source as
the Trustees in their discretion shall determine. The Trustees shall endeavor
to declare any pay such dividends and distributions as shall be necessary for
the Trust to qualify as a real estate investment trust under the REIT Tax
Provisions of the Code (so long as such qualification, in the opinion of the
Trustees, is in the best interests of the Shareholders); however, Shareholders
shall have no right to any dividend or distribution unless and until declared by
the Trustees. The exercise of the powers and rights of the Trustees pursuant to
this Section shall be subject to the provisions of any class or series of Shares
at the time outstanding. The receipt by any person in whose name any Shares are
registered on the records of the Trust or by his duly authorized agent shall be
a sufficient
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discharge for all dividends or distributions payable or deliverable in respect
of such Shares and from all liability to see to the application thereof.
Section 4. Report to Shareholders. The Trust shall prepare, file and
deliver to its Shareholders an annual report concerning its operations for the
preceding fiscal year containing financial statements prepared in accordance
with generally accepted accounting principles which are audited and reported on
by independent certified public accountants. The Trust shall include in its
annual report to Shareholders (i) the ratio of the costs of raising capital
during the period to the capital raised, and (ii) the aggregate amount of
advisory fees and the aggregate amount of other fees paid to the Advisor and all
affiliates of the Advisor by the Trust and including fees or charges paid to the
Advisor and all affiliates of the Advisor by third parties doing business with
the Trust. The Trust shall also include in its annual report, separately
stated, full disclosure of all material terms, factors, and circumstances
surrounding any and all transactions involving the Trust, and the Trustees,
Advisors, sponsors and/or affiliates thereof occurring in the year for which the
annual report is made. Independent Trustees are specifically charged with a duty
to examine and comment in the report on the fairness of such transactions.
Annual reports shall be mailed or delivered to each Shareholder as of a record
date after the end of such fiscal year and each holder of other publicly held
securities of the Trust within 90 days after the end of the fiscal year to which
it relates.
Section 5. Inspection of Trust Books. The books and records of the Trust
shall be open to inspection upon the written demand of a Shareholder at any
reasonable time for a purpose reasonably related to his interests as a
Shareholder and shall be exhibited at any time when required by the demand at
any Shareholders' meeting of 10% of the Shares represented at the meeting. Such
inspection by a Shareholder may be made in person or by agent or attorney and
the right of inspection includes the right to make extracts. Demand of
inspection other than at a Shareholders' meeting shall be made in writing upon
the President, or the Secretary, of the Trust. The duly authorized officials of
any state shall have the same right of inspection as a Shareholder.
Section 6. Nonliability and Indemnification of Shareholders. The
Shareholders shall have no legal title or interest in the property of the Trust
and no right to a partition thereof or to an accounting during the continuance
of the Trust but only to the rights expressly provided in the Declaration of
Trust. Shareholders shall not be personally or individually liable in any
manner whatsoever for any debt, act, omission or obligation incurred by the
Trust or the Trustees and shall be under no obligation to the Trust or its
creditors with respect to such Shares other than the obligation to pay to the
Trust the full amount of the consideration for which the Shares were issued or
to be issued. The Shareholders shall not be liable to assessment and the
Trustees shall have no power to bind the Shareholders personally. The Trust
shall indemnify and hold each Shareholder harmless from and against all claims
and liabilities, whether they proceed to judgment or are settled or otherwise
brought to a conclusion, to which such Shareholder may become subject by reason
of his being or having been a Shareholder, and shall reimburse such Shareholder
for all legal and other expenses reasonably incurred by him in connection with
any such claim or liability; provided, however, that no such Shareholder shall
be indemnified or
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reimbursed if such claim, obligation or liability is finally adjudged by a
competent court of law to have arisen out of the Shareholder's bad faith,
willful misconduct or gross negligence, and provided further, that such
Shareholder must give prompt notice as to any such claims or liabilities or
suits and must take such action as will permit the Trust to conduct the defense
thereof. The rights accruing to a Shareholder under this Section 6 shall not
exclude any other right to which such Shareholder may be lawfully entitled, nor
shall anything herein contained restrict the right of the Trust to indemnify or
reimburse a Shareholder in any appropriate situation even though not
specifically provided herein; provided, however, that the Trust shall have no
liability to reimburse Shareholders for taxes assessed against them by reason of
their ownership of Shares, nor for any losses suffered by reason of changes in
the market value of securities of the Trust. No amendment to the Declaration of
Trust increasing or enlarging the liability of the Shareholders shall be made
without the unanimous written consent of all of the Shareholders.
Section 7. Notice of Nonliability. The Trustees shall use every
reasonable means to assure that all persons having dealings with the Trust shall
be informed that the private property of the Shareholders and the Trustees shall
not be subject to claims against and obligations of the Trust to any extent
whatever. The Trustee 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 the Shareholders and the Trustees shall not be
personally liable thereunder, and that all parties concerned shall look solely
to the Trust property for the satisfaction of any claim thereunder, and
appropriate reference shall be made to this Declaration of Trust. The omission
of such a provision from any such agreement, undertaking or obligation, or the
failure to use any other means of giving such notice, shall not, however, render
the Shareholders or the Trustees personally liable.
ARTICLE 4. THE TRUSTEES
Section 1. Number, Terms, Qualification, Compensation and Names of
Trustees. There shall be not less than three nor more than fifteen Trustees
(referred to as the "Trustees" or the "Board of Trustees"). The number of
Trustees shall be determined from time to time by resolution of the Trustees.
Except for the initial terms of Class I and Class II Trustees, as set forth
below, the term of office of each Trustee shall be three years and until the
election and qualification of his successor. Trustees may succeed themselves in
office. Trustees shall be individuals who are at least 21 years old and not
under legal disability. No person shall qualify as a Trustee until he shall
have agreed in writing to be bound by this Declaration of Trust. No Trustee
shall be required to give bond, surety or securities to secure the performance
of his duties or obligations hereunder. Whenever a vacancy in the number of
Trustees shall occur, until such vacancy is filled as provided in Article 4,
Section 3, the Trustees or Trustee continuing in office, regardless of their
number, shall have all the powers granted to the Trustees and shall discharge
all the duties imposed upon the Trustees by this Declaration of Trust. The
Trustees shall receive such fees for their services and expenses as they shall
deem reasonable and proper, subject, however, to the fees and expenses
limitations of Article 1. After the Trust has registered Shares pursuant to
Section 12(b) or Section 12(g) of the 1934 Act, a majority of
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the Trustees shall not be affiliated with the Advisor of the Trust or with any
organization affiliated with the Advisor of the Trust. A Trustee shall have at
least three years of relevant experience demonstrating the knowledge and
experience required to successfully acquire and manage the type of assets being
acquired by the Trust. At least one of the Independent Trustees shall have three
years of relevant real estate experience.
The Trustees shall be divided into three classes, designated Class I, Class
II and Class III. Each class shall consist, as nearly as may be possible, of
one-third of the total number of Trustees constituting the entire Board of
Trustees. At the 1993 annual meeting of Shareholders, Class I Trustees shall be
elected for a one-year term, Class II Trustees for a two-year term and Class III
Trustees for a three-year term. At each succeeding annual meeting of
Shareholders, beginning in 1994, successors to the class of Trustees whose term
expires at that annual meeting shall be elected for a three-year term. If the
authorized number of Trustees is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of Trustees in each
class as nearly equal as possible, and any additional Trustee of any class
elected to fill a vacancy resulting from an increase in such class, subject to
Article 4, Section 3, shall hold office for a term that shall coincide with the
remaining term of that class, but in no case will a decrease in the number of
Trustees shorten the term of any incumbent Trustee. A Trustee shall hold office
until the annual meeting for the year in which his or her term expires and until
his or her successor shall be elected and shall qualify, subject, however, to
prior death, resignation or removal from office. A majority of the entire Board
of Trustees shall constitute a quorum for the transaction of business. The
name, address and class of each of the initial Trustees is set forth below.
<TABLE>
<CAPTION>
Name Class Address
- ---- ----- -------
<S> <C> <C>
Edward H. Austin, Jr. I 112 East Pecan, Suite 2808
San Antonio, Texas 78205
K. Dane Brooksher III 3200 Cherry Creek South Drive
Denver, Colorado 80209
Stephen L. Feinberg II 4855 North Mesa, Suite 120
El Paso, Texas 79912
John E. Robson I 555 California Street, 26th Floor
San Francisco, California 94104
Thomas G. Wattles III 125 Lincoln Avenue
Santa Fe, New Mexico 87501
</TABLE>
Section 2. Resignation, Removal and Death. A Trustee may resign at any
time by giving written notice thereof in recordable form to the other Trustees
at the principal office of the Trust. The acceptance of a resignation shall not
be necessary to make it effective. A Trustee may be removed with or without
cause by the vote of the holders of two-thirds of the outstanding Shares or by
vote of two-thirds of the Trustees then in office (which action shall be taken
only by vote at a meeting and not by authorization without a meeting, anything
in Article
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4, Section 5, to the contrary notwithstanding). Upon the resignation or removal
of any Trustee, he shall execute and deliver such documents and render such
accounting as the remaining Trustees shall require and shall thereupon be
discharged as Trustee. Upon the incapacity or death of any Trustee, his status
as a Trustee shall immediately terminate at such incapacity or death, and his
legal representatives shall perform the acts set forth in the preceding
sentence.
Section 3. Vacancies. The resignation, removal or death of any or all of
the Trustees shall not terminate the Trust or affect its continuity. During a
vacancy, the remaining Trustee or Trustees may exercise the powers of the
Trustees hereunder. Whenever there shall be a vacancy or vacancies among the
Trustees, such vacancy or vacancies shall be filled in the manner prescribed in
the second paragraph of this Section 3.
Any vacancy on the Board of Trustees that results from resignation, removal
or death or as a result of an increase of up to two additional Trustees during
any calendar year shall be filled by the Trustees then in office, even if less
than a quorum, or by a sole remaining Trustee. Independent Trustees shall
nominate replacements for vacancies amongst the Independent Trustees' positions.
Any Trustee elected to fill a vacancy as provided herein shall hold office until
the next annual meeting of Shareholders. A Trustee elected at an annual meeting
to fill a vacancy shall have the same remaining term as that of his or her
predecessor.
Section 4. Successor Trustees. The right, title and interest of the
Trustees in and to the Trust property shall vest automatically in all persons
who may hereafter become Trustees upon their due election and qualification
without any further act, and thereupon they shall have the same rights,
privileges, powers, duties and immunities as though originally named as Trustees
in this Declaration of Trust. Appropriate written evidence of the election and
qualification of Successor Trustees shall be filed with the records of the Trust
and in such other offices or places as the Trustees may deem necessary,
appropriate or desirable. Upon the resignation, removal or death of a Trustee,
he (and in the event of his death, his estate) shall automatically cease to have
any right, title or interest in or to any of the Trust property, and the right,
title and interest in such Trustee in and to the Trust property shall vest
automatically in the remaining Trustees without any further act.
Section 5. Actions by and Meetings of Trustees. The Trustees may act with
or without a meeting. Except as otherwise provided herein, any action of a
majority of Trustees present at a duly convened meeting of the Trustees shall be
conclusive and binding as an action of the Trustees. A quorum for meetings of
the Trustees shall be a majority of all of the Trustees in office. Action may
be taken without a meeting only by unanimous consent of all of the Trustees in
office and shall be evidenced by a written certificate or instrument signed by
all of the Trustees in office. Meetings may otherwise be held and conducted in
the manner prescribed by the Bylaws of the Trust. Any action taken by Trustees
in accordance with the provisions of this Section 5 shall be conclusive and
binding upon the Trust, upon the Trustees, and upon the Shareholders, as an
action of all the Trustees, collectively, and of the Trust. Any deed, mortgage,
evidence of indebtedness or other instrument, agreement or document of any
character, whether similar or dissimilar, executed by one or more of the
Trustees, when
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authorized at a meeting or by written authorization without a meeting in
accordance with the provisions of this Section 5, shall be valid and binding
upon the Trustees, the Trust and the Shareholders.
Section 6. Title and Authority of Trustees. The Trustees shall hold the
legal title to all property belonging to the Trust. They shall have absolute and
exclusive control, management and disposition thereof, and absolute and
exclusive control over the management and conduct of the business affairs of the
Trust, free from any power or control on the part of the Shareholders, in the
same manner as if they were the absolute owners thereof, subject only to the
express limitations in this Declaration of Trust.
Section 7. Powers of Trustees. The Trustees shall have all the powers
necessary, convenient or appropriate to effectuate the purposes of the Trust and
may take any action which they deem necessary or desirable and proper to carry
out such purposes. Any determination of the purposes of the Trust made by the
Trustees in good faith shall be conclusive. In construing the provisions of the
Declaration, the presumption shall be in favor of the grant of powers to the
Trustees.
Subject to the limitations contained in Article 1 hereof, the Trustees'
powers shall include the following:
(1) To purchase, acquire through the issuance of Shares in the Trust,
obligations of the Trust or otherwise, and to mortgage, sell, acquire on
lease, hold, manage, improve, lease to others, option, exchange, release
and partition real estate interests of every nature, including freehold,
leasehold, mortgage, ground rent and other interests therein, and to erect,
construct, alter, repair, demolish or otherwise change buildings and
structures of every nature.
(2) To purchase, acquire through the issuance of Shares in the Trust,
obligations of the Trust or otherwise, option, sell and exchange stocks,
bonds, notes, certificates of indebtedness and securities of every nature.
(3) To purchase, acquire through the issuance of Shares in the Trust,
obligations of the Trust or otherwise, mortgage, sell, acquire on lease,
hold, manage, improve, lease to others, option and exchange personal
property of every nature.
(4) To hold legal title to property of the Trust in the name of the
Trust, or in the name of one or more of the Trustees for the Trust, or of
any other person for the Trust, without disclosure of the interest of the
Trust therein.
(5) To borrow money for the purposes of the Trust and to give notes or
other negotiable or nonnegotiable instruments of the Trust therefor; to
enter into other obligations or guarantee the obligations of others on
behalf of and for the purposes of the Trust; and to mortgage or pledge or
cause to be mortgaged or pledged real and personal
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property of the Trust to secure such notes, debentures, bonds, instruments
or other obligations.
(6) To lend money on behalf of the Trust and to invest the funds of
the Trust.
(7) To create reserve funds for such purposes as they deem advisable.
(8) To deposit funds of the Trust in banks and other depositories
without regard to whether such accounts will draw interest.
(9) To pay taxes and assessments imposed upon or chargeable against
the Trust or the Trustees by virtue of or arising out of the existence,
property, business or activities of the Trust.
(10) To purchase, issue, sell or exchange Shares of the Trust as
provided in Article 2 hereof.
(11) To exercise with respect to property of the Trust, all options,
privileges and rights, whether to vote, assent, subscribe or convert, or of
any other nature; to grant proxies; and to participate in and accept
securities issued under any voting trust agreement.
(12) To participate in any reorganization, readjustment,
consolidation, merger, dissolution, sale or purchase of assets, lease, or
similar proceedings of any corporation, partnership or other organization
in which the Trust shall have an interest and in connection therewith to
delegate discretionary powers to any reorganization, protective or similar
committee and to pay assessments and other expenses in connection
therewith.
(13) To engage or employ agents, representatives and employees of any
nature, or independent contractors, including, without limiting the
generality of the foregoing, Transfer Agents for the transfer of Shares in
the Trust, Registrars, underwriters for the sale of Shares in the Trust,
independent certified public accountants, attorneys at law, appraisers, and
real estate agents and brokers; and to delegate to one or more Trustees,
agents, representatives, employees, independent contractors or other
persons such powers and duties as the Trustees deem appropriate.
(14) To determine conclusively the allocation between capital and
income of the receipts, holdings, expenses and disbursements of the Trust,
regardless of the allocation which might be considered appropriate in the
absence of this provision.
(15) To determine conclusively the value from time to time and to
revalue the real estate, securities and other property of the Trust by
means of independent appraisals.
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(16) To compromise or settle claims, questions, disputes and
controversies by, against or affecting the Trust.
(17) To solicit proxies of the Shareholders.
(18) To adopt a fiscal year for the Trust and to change such fiscal
year.
(19) To adopt and use a seal.
(20) To merge the Trust with or into any other trust or corporation in
accordance with the laws of the State of Maryland.
(21) To deal with the Trust property in every way, including joint
ventures, partnerships and any other combinations or associations, that it
would be lawful for an individual to deal with the same, whether similar to
or different from the ways herein and hereinabove specified.
(22) To determine whether or not, at any time or from time to time, to
attempt to cause the Trust to qualify for taxation as a "real estate
investment trust," as that term is defined in the Code.
(23) To make, adopt, amend or repeal Bylaws containing provisions
relating to the business of the Trust, the conduct of its affairs, its
rights or powers and the rights or powers of its Shareholders, Trustees or
officers not inconsistent with law or this Declaration of Trust.
(24) To do all other such act and things as are incident to the
foregoing and to exercise all powers which are necessary or useful to carry
on the business of the Trust, to promote any of the purposes of the Trust,
and to carry out the provisions of this Declaration of Trust.
Section 8. Trustees' Right to Own Shares in Trust. A Trustee may acquire,
hold and dispose of Shares in the Trust for his individual account and may
exercise all rights of a Shareholder to the same extent and in the same manner
as if he were not a Trustee. After the commencement of any offering of the
Shares of the Trust to the public (whether conducted as a publicly registered
offering or not), the Trustees may purchase Shares only at the current offering
price then prevailing in connection with such offering to the public, less all
or any part of the selling or other commission as may be agreed with the
Distributor.
Section 9. Transactions between Trustees and their Affiliates and the
Trust. No Trustee, officer, or advisor of the Trust, or any person affiliated
with any such persons, shall sell any property or assets to the Trust or
purchase any property or assets from the Trust, directly or indirectly, nor
shall any person receive any commission or other remuneration, directly or
indirectly, in connection with the purchase or sale of Trust assets, except as
permitted
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<PAGE>
under the provisions of Article 1 of this Declaration of Trust. Nothing herein,
however, shall prohibit any Trustee or any affiliate of a Trustee or Trustees,
acting as agent or counsel, from executing transactions or performing legal or
other services for the Trust and receiving the prevailing rate of commission or
other compensation for his or its services, or if there are no prevailing rates
for such services, then at such rates and on such terms as can be agreed upon
between the Trustee or his affiliate and the Trust as fair and reasonable and
such transactions are hereby expressly permitted.
Section 10. Non-liability of Trustees. The Trustees shall have no rights
of indemnity or exoneration against any Shareholder individually with respect to
any liability or obligation of the Trust; but, as hereinafter provided, the
Trustees may satisfy any claims they have against the Trust out of the Trust
assets. No Trustee shall be liable for any act or neglect of any person or firm
with respect to the performance of any duty, service or act which has been
delegated to such person or firm by the Trustees pursuant to authority contained
in this Declaration of Trust; the Trustees shall, however, use good faith in
selecting and appointing agents or representatives to whom authority to act on
behalf of the Trust is delegated. No Trustee shall be individually liable for
any obligation or liability incurred by or on behalf of the Trust or by the
Trustees for the benefit and on behalf of the Trust.
Section 11. Indemnification of Trustees. The Trust shall indemnify and
hold harmless each Trustee from and against all claims and liabilities, whether
they proceed to judgment or are settled, to which such Trustee may become
subject by reason of his being or having been a Trustee, or by reason of any
action alleged to have been taken or omitted by him as Trustee, and shall
reimburse him for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability, including any claim or liability
arising under the provisions of federal or state securities laws; provided,
however, that no Trustee shall be indemnified or reimbursed under the foregoing
provisions in relation to any matter unless it shall have been adjudicated that
his action or omission did not constitute willful misfeasance, bad faith or
gross negligence in the conduct of his duties, or, unless, in the absence of
such an adjudication, the Trust shall have received a written opinion from
independent counsel, approved by the Trustees, to the effect that if the matter
of willful misfeasance, bad faith or gross negligence in the conduct of duties
had been adjudicated, it would have been adjudicated in favor of such Trustee.
The Trust, without requiring a preliminary determination of the ultimate
entitlement to indemnification, shall pay or reimburse reasonable expenses
incurred by any Trustee in connection with any threatened, pending or completed
action, suit or proceeding to which such Trustee is, was or any time becomes a
party or is threatened to be made a party, as a result, directly or indirectly,
of serving at any time as a Trustee. The rights accruing to a Trustee under
these provisions shall not exclude any other right to which he may be lawfully
entitled, nor shall anything herein contained restrict the right of the Trust to
indemnify or reimburse such Trustee in any proper cause even though not
specifically provided for herein.
Section 12. Persons Dealing with Trustees. No corporation, person,
transfer agent or other party shall be required to examine or investigate the
trusts, terms or conditions contained in this Declaration of Trust or otherwise
applicable to the Trust, and every such corporation,
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person, transfer agent or other party may deal with Trust property and assets as
if the Trustees were the sole and exclusive owners thereof free of all trusts;
and no such corporation, person, transfer agent or other party dealing with the
Trustees or with the Trust or Trust property and assets shall be required to see
to the application of any money or property paid or delivered to any Trustee, or
nominee, agent or representative of the Trust or the Trustees. A certificate
executed by or on behalf of the Trustees or by any other duly authorized
representative of the Trust, delivered to any person or party dealing with the
Trust or Trust property and assets, or, if relating to real property, recorded
in the deed records for the county or district in which such real property lies,
certifying as to the identity and authority of the Trustees, agents, or
representatives of the Trust for the time being, or as to any action of the
Trustees or of the Trust, or of the Shareholders, or as to any other fact
affecting or relating to the Trust or this Declaration of Trust, may be treated
as conclusive evidence thereof by all persons dealing with the Trust. No
provision of this Declaration of Trust shall diminish or affect the obligation
of the Trustees and every other representative or agent of the Trust to deal
fairly and act in good faith with respect to the Trust and the Shareholders
insofar as the relationship and accounting among the parties to the Trust is
concerned; but no third party dealing with the Trust or with any Trustee, agent
or representative of the Trust shall be obliged or required to inquire into,
investigate or be responsible for the discharge and performance of such
fiduciary obligation.
Section 13. Administrative Powers of Trustees. The Trustees shall have
power to pay the expenses of organization and administration of the Trust,
including all legal and other expenses in connection with the preparation and
carrying out of the plan for the formation of the Trust, the acquisition of
properties thereunder and the issuance of Shares thereunder; and to employ such
officers, experts, counsel, managers, salesmen, agents, workmen, clerks and
other persons as they think best.
Section 14. Election of Officers. The Trustees may annually elect a
Chairman of the Board and Managing Directors of the Trust. The Trustees may
also annually elect one or more Vice Presidents, a Secretary, a Treasurer,
Assistant Secretaries, Assistant Treasurers, and such other officers as the
Trustees shall deem proper. Except as required by law, the officers of the
Trust need not be Trustees. All officers and agents of the Trust shall have
such authority and perform such duties in the management of the Trust as may be
provided in the Bylaws or as may be determined by the Trustees not inconsistent
with the Bylaws. Any officer or agent elected or appointed by the Trustees may
be removed by the Trustees whenever in their judgment the best interest of the
Trust will be served thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Election or appointment of
any officer or agent shall not of itself create contract rights. The Trustees
shall fix the compensation of all officers.
Section 15. Committees of Trustees, Delegation of Powers and Duties to
Committees, Trustees, Officers and Employees. The Trustees may, in their
discretion, by resolution passed by a majority of the Trustees, designate from
among their members one or more committees which shall consist of one or more
Trustees. The Trustees may designate one or more Trustees as alternate members
of any such committee, who may replace any absent or disqualified
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member at any meeting of the committee. Such committees shall have and may
exercise such powers as shall be conferred or authorized by the resolution
appointing them. A majority of any such committee may determine its action and
fix the time and place of its meetings, unless the Trustees shall otherwise
provide. The Trustees, by resolution passed by a majority of the Trustees, may
at any time change the membership of any such committee, fill vacancies in it,
or dissolve it. The Bylaws, or a majority of the Trustees, may authorize any
one or more of the Trustees, or any one or more of the officers or employees or
agents of the Trust, on behalf of the Trust, to exercise and perform any and all
powers granted to the Trustees, and to discharge any and all duties imposed upon
the Trustees, and to do any acts and to execute any instruments deemed by such
person or persons to be necessary or appropriate to exercise such power or to
discharge such duties, and to exercise his own sound judgment in so doing. The
authority to act upon any transaction which under the terms of this Declaration
of Trust requires the vote of a majority of the Independent Trustees may not be
delegated to any committee.
ARTICLE 5. THE ADVISOR
Section 1. The Advisor. "Advisor" means the person or entity responsible
for directing or performing the day-to-day business affairs of the Trust,
including a person or entity to which an Advisor subcontracts substantially all
such functions. In their exercise of the absolute control and management of all
of the assets of the Trust, the Trustees may contract with an Advisor to advise
them in respect of investing and reinvesting the funds of the Trust in real
property assets, interests in real property, mortgages secured by real property,
leasehold interests in real property, interests in mortgages, or other assets.
Section 2. Advisory Contract. It shall be the duty of the Trustees to
evaluate the performance of the Advisor before entering into or renewing any
advisory contract. The criteria used in such evaluation shall be reflected in
the minutes of such meeting. Each contract for the services of an Advisor
entered into by the Trustees shall have a term of no more than one year. Each
advisory contract shall be terminable by a majority of the Independent Trustees
or the Advisor on sixty days written notice without cause. The Trustees shall
determine that any Advisor possesses sufficient qualifications to perform the
advisory function for the Trust and to justify the compensation provided for it
in its contract with the Trust.
Section 3. Advisory Compensation. The Independent Trustees shall
determine from time to time and at least annually that the compensation which
the Trust contracts to pay to the Advisor is reasonable in relation to the
nature and quality of the services performed and that such compensation is
within the limits prescribed by Article 1 of this Declaration of Trust. The
Independent Trustees shall also supervise the performance of the Advisor and the
compensation paid to it by the Trust to determine that the provisions of such
contract are being carried out. Each such determination shall be based on the
factors set forth below and all other factors such Independent Trustees may deem
relevant, and the findings of such Trustees on each of such factors shall be
recorded in the minutes of the Trustees: (a) the size of the advisory fee in
relation to the size, composition and profitability of the portfolio of the
Trust; (b) the success of the Advisor in generating opportunities that meet the
investment objectives of the Trust; (c)
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the rates charged to other real estate investment trusts and to investors other
than real estate investment trusts by advisors performing similar services; (d)
additional revenues realized by the Advisor and its affiliates through the
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; (e) the
quality and extent of service and advice furnished by the Advisor; (f) 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; and (g) the quality of the
portfolio of the Trust in relationship to the investments generated by the
Advisor for its own account.
Section 4. Other Activities of Advisor. The Advisor, its directors,
officers and affiliates shall not be required to administer the Trust as their
sole and exclusive function and may have other business interests and may engage
in other activities in addition to those relating to the Trust, including the
rendering of advice or services of any kind to other investors or any other
person (including without limitation, other real estate investment trusts and
real estate investment partnerships which are affiliates of the Advisor, which
may be competitive in whole or in part with the Trust) and the management of
other investments.
ARTICLE 6. DURATION AND TERMINATION OF TRUST
Section 1. Termination of Trust. The Trust may be terminated at any time
by a vote or written consent of the holders of a majority of the outstanding
Shares of all classes.
In connection with any termination of the Trust, the Trustees, upon receipt
of such releases or indemnity as they deem necessary for their protection, may
(1) Sell and convert into cash the property of the Trust and
distribute the net proceeds among the Shareholders ratably; or
(2) Convey the property of the Trust to one or more persons, entities,
trusts or corporations for consideration consisting in whole or in part of
cash, shares of stock, or other property of any kind, and distribute the
net proceeds among the Shareholders ratably, at valuations fixed by the
Trustees, in cash or in kind, or partly in cash and partly in kind;
provided that the proposal to proceed as described in this clause (2) shall
have been set forth in the written approval of the Shareholders holding a
two-thirds majority of the Shares issued and outstanding.
Upon termination of the Trust and distribution to the Shareholders as
herein provided, a majority of the Trustees shall execute and lodge among the
records of the Trust an instrument in writing setting forth the fact of such
termination, and the Trustees shall thereupon be discharged from all further
liabilities and duties hereunder, and the right, title and interest of all
Shareholders shall cease and be canceled and discharged.
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Section 2. Organization as a Corporation. Whenever the Trustees deem it
for the best interests of the Shareholders that the Trust be organized as a
corporation, the Trustees shall have full power to organize such corporation,
under the laws of such state as they may consider appropriate, in the place and
stead of this Trust without procuring the consent of any of the Shareholders, in
which event the capital stock of such corporation shall be and remain the same
as fixed under this Declaration of Trust and the Shareholders shall receive and
accept stock in such corporation on the same basis as they hold Shares in this
Trust.
Section 3. Merger. This Trust may merge into a Maryland or foreign
business trust or into a Maryland or foreign corporation having capital stock or
one or more such business trusts or such corporations may merge into it in
accordance with the provisions of Maryland law.
Section 4. Duration of Trust. Subject to possible earlier termination in
accordance with the provisions of Article 6 hereof, the duration of the Trust
shall be perpetual or, in any jurisdiction in which such duration is not
permitted, then the Trust shall terminate on the latest date permitted by the
law of such jurisdiction.
ARTICLE 7. AMENDMENTS
Section 1. Amendment by Shareholders. Except as provided in Section 2 of
this Article 7, this Declaration of Trust may be amended only by the affirmative
vote or written consent of the holders of at least a majority of the Shares
entitled to vote thereon.
Section 2. Amendment by Trustees. The Trustees by a two-thirds vote may
amend provisions of this Declaration of Trust from time to time to qualify as a
real estate investment trust under the Code or under Title 8.
Section 3. Requirements of Maryland Law. This Declaration of Trust may
not be amended except as provided in Section 8-501 of the Corporations and
Associations Article of the Annotated Code of Maryland, as amended.
ARTICLE 8. MISCELLANEOUS
Section 1. Construction. This Declaration of Trust shall be construed in
such a manner as to give effect to the intent and purposes of the Trust and this
Declaration of Trust. If any provisions hereof appear to be in conflict, more
specific provisions shall control over general provisions. This Declaration of
Trust shall govern all of the relationships among the Trustees and Shareholders
of the Trust; and each provision hereof should be effective for all purposes and
to all persons dealing with the Trust to the fullest extent possible under
applicable law in each jurisdiction in which the Trust shall engage in business.
In defining or interpreting the powers and duties of the Trust and the Trustees
and officers, reference may be made, to the extent appropriate and not
inconsistent with the Code or Title 8, to Titles 1 through 3 of the Corporations
and Associations Article of the Annotated Code of Maryland. In furtherance and
not in limitation of the foregoing, in accordance with the provisions of Title
3, Subtitles 6 and
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7, of the Corporations and Associations Article of the Annotated Code of
Maryland, the Trust shall be included within the definition of "corporation" for
purposes of such provision.
Section 2. Headings for Reference Only. Headings preceding the text,
articles and sections hereof have been inserted solely for convenience and
reference, and shall not be construed to affect the meaning, construction or
effect of this Declaration of Trust.
Section 3. Filing and Recording. This Declaration of Trust and any
amendment hereto shall be filed for record with the State Department of
Assessments and Taxation of Maryland and may also be filed or recorded in such
other places as the Trustees deem appropriate, but failure to file for record
this Declaration of Trust or any amendment hereto in any office other than in
the State of Maryland shall not affect or impair the validity or effectiveness
of this Declaration of Trust or any amendment hereto. An amended Declaration of
Trust shall, upon filing, be conclusive evidence of all amendments contained
therein and may thereafter be referred to in lieu of the original Declaration of
Trust and the various amendments thereto.
Section 4. Applicable Law. This Declaration of Trust has been executed
with reference to and its construction and interpretation shall be governed by
the laws of Maryland, and the rights of all parties and the construction and
effect of every provision hereof shall be subject to and construed according to
the laws of Maryland.
Section 5. Execution and Effect of Declaration of Trust. A restated
Declaration of Trust containing the original Declaration of Trust dated January
15, 1993, as amended and/or restated to the time of execution of the restated
Declaration of Trust, may be executed at any time or from time to time by a
majority of the Trustees and filed with the State Department of Assessments and
Taxation of Maryland, and such restated Declaration of Trust shall thereafter be
effective and may thereafter be referred to in lieu of the original Declaration
of Trust and/or amendments or restatements thereof.
Section 6. Certifications. Any certificates signed by a person who,
according to the records of the State Department of Assessments and Taxation of
Maryland appears to be a Trustee hereunder, shall be conclusive evidence as to
the matters so certified in favor of any person dealing with the Trust or the
Trustees or any one or more of them, and the successors or assigns of such
persons, which certificate may certify to any matter relating to the affairs of
the Trust, including but not limited to any of the following: A vacancy among
the Trustees; the number and identity of Trustees; this Declaration of Trust and
any Amendments thereto, or any restated Declaration of Trust and any Amendments
thereto, or that there are no Amendments to the Declaration of Trust or any
restated Declaration of Trust; a copy of the Bylaws of the Trust or any
Amendment thereto; the due authorization of the execution of any instrument or
writing; the vote at any meeting of Trustees or a committee thereof or
Shareholders; the fact that the number of Trustees present at any meeting or
executing any written instrument satisfies the requirements of the Declaration
of Trust; a copy of any Bylaw adopted by the Shareholders or the identity of any
officer elected by the Trustees; or the existence or nonexistence of any fact or
facts which in any manner relate to the affairs of the Trust. If the
Declaration of Trust or
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any restated Declaration of Trust is filed or recorded in any recording office
other than the State Department of Assessments and Taxation of Maryland, any one
dealing with real estate so located that instruments affecting the same should
be filed or recorded in such recording office may rely conclusively upon any
certificate of the kind described above which is signed by a person who
according to the records of such recording office appears to be a Trustee
hereunder. In addition, the Secretary or any Assistant Secretary of the Trust or
any other officer of the Trust designated by the Bylaws or by action of the
Trustees may sign any certificate of the kind described in this Section 6, and
such certificate shall be conclusive evidence as to the matters so certified in
favor of any person dealing with the Trust, and the successors and assigns of
such person.
Section 7. Severability. If any provision of the Declaration of Trust
shall be invalid or unenforceable, such invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
invalid or unenforceable any other provision of the Declaration of Trust, and
the Declaration of Trust shall be carried out, if possible, as if such invalid
or unenforceable provision were not contained therein.
Section 8. Bylaws. The Bylaws of the Trust may be altered, amended or
repealed, and new Bylaws may be adopted, at any meeting of the Board of Trustees
of the Trust by a majority vote of the Trustees, subject to repeal or change by
action of the Shareholders of the Trust entitled to vote thereon.
ARTICLE 9. LIMITATION OF LIABILITY FOR TRUSTEES
AND OFFICERS; INDEMNIFICATION
Section 1. Liability of Trustee or Officer. A Trustee or officer of the
Trust shall not be liable for monetary damages to the Trust or its Shareholders
for any act or omission in the performance of his duties unless:
(1) The Trustee or officer actually received an improper benefit in
money, property or services (in which case, such liability shall be for the
amount of the benefit in money, property or services actually received);
(2) 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
being adjudicated;
(3) The Trustee's or officer's action or failure to act constitutes
willful misconduct or deliberate recklessness; or
(4) Such liability to the Trust is specifically imposed upon Trustees
or officers by statute.
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Section 2. Conflicts. In the event that any provision or portion of a
provision of this Article 9 is determined to be in conflict with any applicable
statute, such provision or portion thereof shall be inapplicable to the extent
of such conflict.
Section 3. Severability. In the event that any provision or portion of a
provision of this Article 9 is determined to be invalid, void, illegal or
unenforceable, the remainder of the provisions of this Article 9 shall continue
to be valid and enforceable and shall in no way be affected, impaired or
invalidated.
Section 4. No Impairment. Nothing in this Article 9 shall be construed
to diminish, limit or impair any rights or defenses afforded to officers or
Trustees by common law, statute, other provisions of this Declaration of Trust,
the Bylaws of the Trust or otherwise, and the provisions of this Article 9 shall
be deemed to be cumulative thereto.
Section 5. References. References in this Article 9 to Trustees or
officers shall be deemed to refer to any person who is or was a Trustee or
officer of the Trust and any person who, while a Trustee or officer of the
Trust, is or was serving at the request of the Trust as a director, officer,
partner, venturer, proprietor, trustee, employee, agent, or similar functionary
of another corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise.
Section 6. Indemnification and Insurance. Notwithstanding any other
provisions of this Declaration of Trust, the Trust, for the purpose of providing
indemnification for its Trustees and officers, shall have the authority, without
specific Shareholder approval, to enter into insurance or other arrangements,
with persons or entities which are not regularly engaged in the business of
providing insurance coverage, to indemnify all Trustees and officers of the
Trust against any and all liabilities and expenses incurred by them by reason of
their being Trustees or officers of the Trust, whether or not the Trust would
otherwise have the power under this Declaration of Trust or under Maryland law
to indemnify such persons against such liability. Without limiting the power of
the Trust to procure or maintain any kind of insurance or other arrangement, the
Trust may, for the benefit of persons indemnified by it, (i) create a trust
fund, (ii) establish any form of self-insurance, (iii) secure its indemnity
obligation by grant of any security interest or other lien on the assets of the
corporation, or (iv) establish a letter of credit, guaranty or surety
arrangement. Any such insurance or other arrangement may be procured,
maintained or established within the Trust or with any insurer or other person
deemed appropriate by the Board of Trustees regardless of whether all or part of
the stock or other securities thereof are owned in whole or in part by the
Trust. In the absence of fraud, the judgment of the Board of Trustees as to the
terms and conditions of insurance or other arrangement and the identity of the
insurer or other person participating in any arrangement shall be conclusive,
and such insurance or other arrangement shall not be subject to voidability, nor
subject, the Trustees approving such insurance or other arrangement to
liability, on any ground, regardless of whether Trustees participating and
approving such insurance or other arrangement shall be beneficiaries thereof.
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ARTICLE 10. SECURITY CAPITAL TRANSACTION
Notwithstanding anything to the contrary contained herein, including,
without limitation, the provisions of Article 1 and Article 4 of this
Declaration of Trust, the Trust shall be authorized to perform all of its
obligations and exercise all of its rights under the terms of that certain
Merger and Issuance Agreement, dated as of March 24, 1997, as amended (the
"Merger Agreement"), between the Trust and Security Capital Group Incorporated
and each of the other agreements and transactions contemplated thereby,
including, without limitation, the following agreements (as each of such
agreements are defined in the Merger Agreement) and the transactions
contemplated by such agreements: (i) Agreement and Plan of Merger; (ii) Third
Amended and Restated Investor Agreement; (iii) Administrative Services
Agreement; (iv) Protection of Business Agreement; and (v) License Agreement.
* * * * *
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Series A Cumulative Redeemable
Preferred Shares of Beneficial Interest
ARTICLES SUPPLEMENTARY
SECURITY CAPITAL INDUSTRIAL TRUST
========================================
Articles Supplementary of Board of Trustees
Classifying and Designating a Series of Preferred
Shares of Beneficial Interest as Series A
Cumulative Redeemable Preferred Shares of
Beneficial Interest and Fixing Distribution and
Other Preferences and Rights of Such Series
=========================================
Dated as of June 16, 1995
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
=========================================
Articles Supplementary of Board of Trustees
Classifying and Designating a Series of Preferred Shares
of Beneficial Interest as Series A
Cumulative Redeemable Preferred Shares of
Beneficial Interest and Fixing Distribution and
Other Preferences and Rights of Such Series
=========================================
The undersigned, being all of the Trustees of Security Capital Industrial
Trust, a Maryland real estate investment trust (the "Trust"), hereby certify to
the State Department of Assessments and Taxation of Maryland pursuant to section
8-203(b) of the Annotated Code of Maryland that:
FIRST: The Board of Trustees has classified 5,400,000 unissued shares of
beneficial interest of the Trust as Series A Cumulative Redeemable Preferred
Shares of Beneficial Interest (the "Series A Preferred Shares").
SECOND: The following is a description of the Series A Preferred Shares,
including the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption thereof:
Section 1. Number of Shares and Designation. This class of preferred
shares of beneficial interest shall be designated as Series A Cumulative
Redeemable Preferred Shares of Beneficial Interest (the "Series A Preferred
Shares") and the number of shares which shall constitute such series shall not
be more than 5,400,000 shares, par value $0.01 per share, which number may be
decreased (but not below the number thereof then outstanding plus the number
required to fulfill the Trust's obligations under options, warrants or similar
rights issued by the Trust) from time to time by the Board of Trustees.
Section 2. Definitions. For purposes of the Series A Preferred Shares,
the following terms shall have the meanings indicated:
"Board of Trustees" shall mean the Board of Trustees of the Trust or
any committee authorized by such Board of Trustees to perform any of its
responsibilities with respect to the Series A Preferred Shares.
<PAGE>
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which state or federally chartered banking institutions in New York
City, New York are not required to be open.
"Call Date" shall mean the date specified in the notice to holders
required under subparagraph (e) of Section 5 as the Call Date.
"Common Shares" shall mean the common shares of beneficial interest of
the Trust, par value $0.01 per share.
"Dividend Payment Date" shall mean the last calendar day of March,
June, September and December in each year, commencing on September 30,
1995; provided, however, that if any Dividend Payment Date falls on any day
other than a Business Day, the dividend payment due on such Dividend
Payment Date shall be paid on the Business Day immediately following such
Dividend Payment Date.
"Dividend Periods" shall mean quarterly dividend periods commencing on
April 1, July 1, October 1, and January 1 of each year and ending on and
including the day preceding the first day of the next succeeding Dividend
Period (other than the initial Dividend Period, which shall commence on the
Issue Date and end on and include September 30, 1995).
"Fully Junior Shares" shall mean the Common Shares and any other class
or series of shares of beneficial interest of the Trust now or hereafter
issued and outstanding over which the Series A Preferred Shares have
preference or priority in both (i) the payment of dividends and (ii) the
distribution of assets on any liquidation, dissolution or winding up of the
Trust.
"Issue Date" shall mean the first date on which the Series A Preferred
Shares are issued and sold.
"Junior Shares" shall mean the Common Shares and any other class or
series of shares of beneficial interest of the Trust now or hereafter
issued and outstanding over which the Series A Preferred Shares have
preference or priority in the payment of dividends or in the distribution
of assets on any liquidation, dissolution or winding up of the Trust.
"Parity Shares" shall have the meaning set forth in paragraph (b) of
Section 7.
"Person" shall mean any individual, firm, partnership, corporation or
other entity, and shall include any successor (by merger or otherwise) of
such entity.
"Series A Preferred Shares" shall have the meaning set forth in
Section 1 hereof.
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<PAGE>
"set apart for payment" shall be deemed to include, without any action
other than the following, the recording by the Trust in its accounting
ledgers of any accounting or bookkeeping entry which indicates, pursuant to
a declaration of dividends or other distribution by the Board of Trustees,
the allocation of funds to be so paid on any series or class of shares of
beneficial interest of the Trust; provided, however, that if any funds for
any class or series of Junior Shares or any class or series of shares of
beneficial interest ranking on a parity with the Series A Preferred Shares
as to the payment of dividends are placed in a separate account of the
Trust or delivered to a disbursing, paying or other similar agent, then
"set apart for payment" with respect to the Series A Preferred Shares shall
mean placing such funds in a separate account or delivering such funds to a
disbursing, paying or other similar agent.
"Transfer Agent" means The First National Bank of Boston, Boston,
Massachusetts, or such other agent or agents of the Trust as may be
designated by the Board of Trustees or their designee as the transfer agent
for the Series A Preferred Shares.
"Voting Preferred Shares" shall have the meaning set forth in Section
8 hereof.
Section 3. Dividends.
(a) The holders of Series A Preferred Shares shall be entitled to
receive, when, as and if declared by the Board of Trustees out of funds
legally available for that purpose, dividends payable in cash in an amount
per share equal to $2.35. Such dividends shall begin to accrue and shall
be fully cumulative from the Issue Date, whether or not in any Dividend
Period or Periods there shall be funds of the Trust legally available for
the payment of such dividends, and shall be payable quarterly, when, as and
if declared by the Board of Trustees, in arrears on Dividend Payment Dates,
commencing on the first Dividend Payment Date after the Issue Date. Each
such dividend shall be payable in arrears to the holders of record of
Series A Preferred Shares, as they appear on the stock records of the Trust
at the close of business on such record dates, not less than 10 nor more
than 50 days preceding such Dividend Payment Dates thereof, as shall be
fixed by the Board of Trustees. Accrued and unpaid dividends for any past
Dividend Periods may be declared and paid at any time and for such interim
periods, without reference to any regular Dividend Payment Date, to holders
of record on such date, not less than 10 nor more than 50 days preceding
the payment date thereof, as may be fixed by the Board of Trustees.
(b) The amount of dividends payable for each full Dividend Period for
the Series A Preferred Shares shall be computed by dividing the annual
dividend rate by four. The initial Dividend Period will include a partial
dividend for the period from the Issue Date until June 30, 1995. The
amount of dividends payable for such period, or any other period shorter
than a full Dividend Period, on the Series A Preferred Shares shall be
computed on the basis of a 360-day year of twelve 30-day months. Holders
of Series
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<PAGE>
A Preferred Shares shall not be entitled to any dividends, whether payable
in cash, property or stock, in excess of cumulative dividends, as herein
provided, on the Series A Preferred Shares. No interest, or sum of money in
lieu of interest, shall be payable in respect of any dividend payment or
payments on the Series A Preferred Shares that may be in arrears.
(c) So long as any Series A Preferred Shares are outstanding, no
dividends, except as described in the immediately following sentence, shall
be declared or paid or set apart for payment on any class or series of
Parity Shares for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for such payment on the Series A
Preferred Shares for all Dividend Periods terminating on or prior to the
Dividend Payment Date on such class or series of Parity Shares. When
dividends are not paid in full or a sum sufficient for such payment is not
set apart, as aforesaid, all dividends declared upon Series A Preferred
Shares and all dividends declared upon any other class or series of Parity
Shares shall be declared ratably in proportion to the respective amounts of
dividends accumulated and unpaid on the Series A Preferred Shares and
accumulated and unpaid on such Parity Shares.
(d) So long as any Series A Preferred Shares are outstanding, no
dividends (other than dividends or distributions paid solely in shares of,
or options, warrants or rights to subscribe for or purchase shares of,
Fully Junior Shares) shall be declared or paid or set apart for payment or
other distribution declared or made upon Junior Shares, nor shall any
Junior Shares be redeemed, purchased or otherwise acquired (other than a
redemption, purchase or other acquisition of Common Shares made for
purposes of an employee incentive or benefit plan of the Trust or any
subsidiary) for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any Junior Shares) by
the Trust, directly or indirectly (except by conversion into or exchange
for Fully Junior Shares), unless in each case (i) the full cumulative
dividends on all outstanding Series A Preferred Shares and any other Parity
Shares of the Trust shall have been paid or declared and set apart for
payment for all past Dividend Periods with respect to the Series A
Preferred Shares and all past dividend periods with respect to such Parity
Shares and (ii) sufficient funds shall have been paid or declared and set
apart for the payment of the dividend for the current Dividend Period with
respect to the Series A Preferred Shares and the current dividend period
with respect to such Parity Shares.
(e) No distributions on Series A Preferred Shares shall be declared by
the Board of Trustees or paid or set apart for payment by the Trust at such
time as the terms and provisions of any agreement of the Trust, including
any agreement relating to its indebtedness, prohibits such declaration,
payment or setting apart for payment or provides that such declaration,
payment or setting apart for payment would constitute a breach thereof or a
default thereunder, or if such declaration or payment shall be restricted
or prohibited by law.
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<PAGE>
Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
Trust, whether voluntary or involuntary, before any payment or distribution
of the assets of the Trust (whether capital or surplus) shall be made to or
set apart for the holders of Junior Shares, the holders of the Series A
Preferred Shares shall be entitled to receive Twenty-Five Dollars ($25.00)
per Series A Preferred Share plus an amount equal to all dividends (whether
or not earned or declared) accrued and unpaid thereon to the date of final
distribution to such holders; but such holders shall not be entitled to any
further payment. If, upon any liquidation, dissolution or winding up of the
Trust, the assets of the Trust, or proceeds thereof, distributable among
the holders of the Series A Preferred Shares shall be insufficient to pay
in full the preferential amount aforesaid and liquidating payments on any
other shares of any class or series of Parity Shares, then such assets, or
the proceeds thereof, shall be distributed among the holders of Series A
Preferred Shares and any such other Parity Shares ratably in accordance
with the respective amounts that would be payable on such Series A
Preferred Shares and any such other Parity Shares if all amounts payable
thereon were paid in full. For the purposes of this Section 4, (i) a
consolidation or merger of the Trust with one or more corporations, real
estate investment trusts or other entities, (ii) a sale or transfer of all
or substantially all of the Trust's assets or (iii) a statutory share
exchange shall not be deemed to be a liquidation, dissolution or winding
up, voluntary or involuntary, of the Trust.
(b) Subject to the rights of the holders of shares of any series or
class or classes of shares of beneficial interest ranking on a parity with
or prior to the Series A Preferred Shares upon liquidation, dissolution or
winding up, upon any liquidation, dissolution or winding up of the Trust,
after payment shall have been made in full to the holders of the Series A
Preferred Shares, as provided in this Section 4, any other series or class
or classes of Junior Shares shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all
assets remaining to be paid or distributed, and the holders of the Series A
Preferred Shares shall not be entitled to share therein.
Section 5. Redemption at the Option of the Trust.
(a) Subject to Section 9 hereof, the Series A Preferred Shares shall
not be redeemable by the Trust prior to the fifth anniversary of the Issue
Date. On and after the fifth anniversary of the Issue Date, the Trust, at
its option, may redeem the Series A Preferred Shares, in whole at any time
or from time to time in part at the option of the Trust at a redemption
price of Twenty-Five Dollars ($25.00) per Series A Preferred Share, plus
the amounts indicated in Section 5(b).
(b) Upon any redemption of Series A Preferred Shares pursuant to this
Section 5, the Trust shall pay any accrued and unpaid dividends in arrears
for any Dividend Period ending on or prior to the Call Date. If the Call
Date falls after a
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<PAGE>
dividend payment record date and prior to the corresponding Dividend
Payment Date, then each holder of Series A Preferred Shares at the close of
business on such dividend payment record date shall be entitled to the
dividend payable on such shares on the corresponding Dividend Payment Date
notwithstanding the redemption of such shares before such Dividend Payment
Date. Except as provided above, the Trust shall make no payment or
allowance for unpaid dividends, whether or not in arrears, on Series A
Preferred Shares called for redemption.
(c) If full cumulative dividends on the Series A Preferred Shares and
any other class or series of Parity Shares of the Trust have not been paid
or declared and set apart for payment, the Series A Preferred Shares may
not be redeemed under this Section 5 in part and the Trust may not purchase
or acquire Series A Preferred Shares, otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders of Series A
Preferred Shares or pursuant to Section 9 hereof.
(d) The redemption price to be paid upon any redemption of the Series
A Preferred Shares (other than any amounts indicated in Section 5(b) and
other than a redemption pursuant to Section 9) shall be payable solely out
of the sale proceeds of other shares of beneficial interest of the Trust
and from no other source.
(e) Notice of the redemption of any Series A Preferred Shares under
this Section 5 shall be mailed by first-class mail to each holder of record
of Series A Preferred Shares to be redeemed at the address of each such
holder as shown on the Trust's stock records, not less than 30 nor more
than 90 days prior to the Call Date. Neither the failure to mail any notice
required by this paragraph (e), nor any defect therein or in the mailing
thereof, to any particular holder, shall affect the sufficiency of the
notice or the validity of the proceedings for redemption with respect to
the other holders. Any notice which was mailed in the manner herein
provided shall be conclusively presumed to have been duly given on the date
mailed whether or not the holder receives the notice. Each such mailed
notice shall state, as appropriate: (1) the Call Date; (2) the number of
Series A Preferred Shares to be redeemed and, if fewer than all the shares
held by such holder are to be redeemed, the number of such shares to be
redeemed from such holder; (3) the place or places at which certificates
for such shares are to be surrendered; and (4) that dividends on the shares
to be redeemed shall cease to accrue on such Call Date except as otherwise
provided herein. Notice having been mailed as aforesaid, from and after the
Call Date (unless the Trust shall fail to make available an amount of cash
necessary to effect such redemption), (i) except as otherwise provided
herein, dividends on the Series A Preferred Shares so called for redemption
shall cease to accrue, (ii) such shares shall no longer be deemed to be
outstanding, and (iii) all rights of the holders thereof as holders of
Series A Preferred Shares of the Trust shall cease (except the right to
receive cash payable upon such redemption, without interest thereon, upon
surrender and endorsement of their certificates if so required and to
receive any dividends payable thereon). The Trust's obligation to provide
cash in accordance with the preceding sentence shall be deemed fulfilled
if, on or before the Call
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<PAGE>
Date, the Trust shall deposit with a bank or trust company (which may be an
affiliate of the Trust) that has an office in the Borough of Manhattan,
City of New York, and that has, or is an affiliate of a bank or trust
company that has, capital and surplus of at least $50,000,000, necessary
for such redemption, in trust, with irrevocable instructions that such cash
be applied to the redemption of the Series A Preferred Shares so called for
redemption. No interest shall accrue for the benefit of the holders of
Series A Preferred Shares to be redeemed on any cash so set aside by the
Trust. Subject to applicable escheat laws, any such cash unclaimed at the
end of two years from the Call Date shall revert to the general funds of
the Trust, after which reversion the holders of such shares so called for
redemption shall look only to the general funds of the Trust for the
payment of such cash.
As promptly as practicable after the surrender in accordance with said
notice of the certificates for any such shares so redeemed (properly
endorsed or assigned for transfer, if the Trust shall so require and if the
notice shall so state), such shares shall be exchanged for any cash
(without interest thereon) for which such shares have been redeemed. If
fewer than all the outstanding Series A Preferred Shares are to redeemed,
shares to be redeemed shall be selected by the Trust from outstanding
Series A Preferred Shares not previously called for redemption by lot or
pro rata (as nearly as may be) or by any other method determined by the
Trust in its sole discretion to be equitable. If fewer than all the Series
A Preferred Shares represented by any certificate are redeemed, then new
certificates representing the unredeemed shares shall be issued without
cost to the holder thereof.
Section 6. Shares To Be Retired. All Series A Preferred Shares which
shall have been issued and reacquired in any manner by the Trust shall be
restored to the status of authorized but unissued shares of beneficial interest
of the Trust, without designation as to class or series.
Section 7. Ranking. Any class or series of shares of beneficial
interest of the Trust shall be deemed to rank:
(a) prior to the Series A Preferred Shares, as to the payment of
dividends and as to distribution of assets upon liquidation, dissolution or
winding up, if the holders of such class or series shall be entitled to the
receipt of dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or priority to
the holders of Series A Preferred Shares;
(b) on a parity with the Series A Preferred Shares, as to the payment
of dividends and as to distribution of assets upon liquidation, dissolution
or winding up, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share thereof shall be different from
those of the Series A Preferred Shares, if the holders of such class or
series and the Series A Preferred Shares shall be entitled to the receipt
of dividends and of amounts distributable upon liquidation, dissolution or
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<PAGE>
winding up in proportion to their respective amounts of accrued and unpaid
dividends per share or liquidation preferences, without preference or
priority one over the other ("Parity Shares");
(c) junior to the Series A Preferred Shares, as to the payment of
dividends or as to the distribution of assets upon liquidation, dissolution
or winding up, if such class or series shall be Junior Shares; and
(d) junior to the Series A Preferred Shares, as to the payment of
dividends and as to the distribution of assets upon liquidation,
dissolution or winding up, if such class or series shall be Fully Junior
Shares.
Section 8. Voting. If and whenever six quarterly dividends (whether or
not consecutive) payable on the Series A Preferred Shares or any series or class
of Parity Shares shall be in arrears (which shall, with respect to any such
quarterly dividend, mean that any such dividend has not been paid in full),
whether or not earned or declared, the number of trustees then constituting the
Board of Trustees shall be increased by two and the holders of Series A
Preferred Shares, together with the holders of shares of every other series of
Parity Shares (any such other series, the "Voting Preferred Shares"), voting as
a single class regardless of series, shall be entitled to elect two additional
trustees to serve on the Board of Trustees at any annual meeting of shareholders
or special meeting held in place thereof, or at a special meeting of the holders
of the Series A Preferred Shares and the Voting Preferred Shares called as
hereinafter provided. Whenever all arrears in dividends on the Series A
Preferred Shares and the Voting Preferred Shares then outstanding shall have
been paid and dividends thereon for the current quarterly dividend period shall
have been paid or declared and set apart for payment, then the right of the
holders of the Series A Preferred Shares and the Voting Preferred Shares to
elect such additional two trustees shall cease (but subject always to the same
provision for the vesting of such voting rights in the case of any similar
future arrearages in six quarterly dividends), and the terms of office of all
persons elected as trustees by the holders of the Series A Preferred Shares and
the Voting Preferred Shares shall forthwith terminate and the number of the
Board of Trustees shall be reduced accordingly. At any time after such voting
power shall have been so vested in the holders of Series A Preferred Shares and
the Voting Preferred Shares, the secretary of the Trust may, and upon the
written request of any holder of Series A Preferred Shares (addressed to the
secretary at the principal office of the Trust) shall, call a special meeting of
the holders of the Series A Preferred Shares and of the Voting Preferred Shares
for the election of the two trustees to be elected by them as herein provided,
such call to be made by notice similar to that provided in the Bylaws of the
Trust for a special meeting of the shareholders or as required by law. If any
such special meeting required to be called as above provided shall not be called
by the secretary within 20 days after receipt of any such request, then any
holder of Series A Preferred Shares may call such meeting, upon the notice above
provided, and for that purpose shall have access to the stock records of the
Trust. The trustees elected at any such special meeting shall hold office until
the next annual meeting of the shareholders or special meeting held in lieu
thereof if such office shall not have previously terminated as above provided.
If any vacancy shall occur among the trustees elected by the
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<PAGE>
holders of the Series A Preferred Shares and the Voting Preferred Shares, a
successor shall be elected by the Board of Trustees, upon the nomination of the
then-remaining trustee elected by the holders of the Series A Preferred Shares
and the Voting Preferred Shares or the successor of such remaining trustee, to
serve until the next annual meeting of the shareholders or special meeting held
in place thereof if such office shall not have previously terminated as provided
above. Notwithstanding any other provisions of this paragraph, in any vote for
the election of additional trustees hereunder, the Series A Preferred Shares and
Voting Preferred Shares beneficially owned by Security Capital Group
Incorporated, a Maryland corporation, any of its direct or indirect subsidiaries
and any of their respective directors, officers or controlling stockholders
(together, the "Restricted Parties"), shall be voted in the same respective
percentages as the Series A Preferred Shares and Voting Preferred Shares that
are not beneficially owned by the Restricted Parties. The provisions in the
preceding sentence shall cease and be of no further force and effect from and
after such time, but only as long as, the Restricted Parties together no longer
beneficially own in excess of 10% of the Trust's outstanding Common Shares.
So long as any Series A Preferred Shares are outstanding, in addition to
any other vote or consent of shareholders required by law or by the Trust's
Amended and Restated Declaration of Trust, as amended, the affirmative vote of
at least 66-2/3% of the votes entitled to be cast by the holders of the Series A
Preferred Shares and the Voting Preferred Shares, at the time outstanding,
acting as a single class regardless of series, given in person or by proxy,
either in writing without a meeting or by vote at any meeting called for the
purpose, shall be necessary for effecting or validating:
(a) Any amendment, alteration or repeal of any of the provisions of
the Trust's Amended and Restated Declaration of Trust or these Articles
Supplementary that materially and adversely affects the voting powers,
rights or preferences of the holders of the Series A Preferred Shares or
the Voting Preferred Shares; provided, however, that the amendment of the
provisions of the Trust's Amended and Restated Declaration of Trust so as
to authorize or create or to increase the authorized amount of, any Fully
Junior Shares, Junior Shares that are not senior in any respect to the
Series A Preferred Shares, or any shares of any class ranking on a parity
with the Series A Preferred Shares or the Voting Preferred Shares shall not
be deemed to materially adversely affect the voting powers, rights or
preferences of the holders of Series A Preferred Shares, and provided,
further, that if any such amendment, alteration or repeal would materially
and adversely affect any voting powers, rights or preferences of the Series
A Preferred Shares or another series of Voting Preferred Shares that are
not enjoyed by some or all of the other series otherwise entitled to vote
in accordance herewith, the affirmative vote of at least 66-2/3% of the
votes entitled to be cast by the holders of all series similarly affected,
similarly given, shall be required in lieu of the affirmative vote of at
least 66-2/3% of the votes entitled to be cast by the holders of the Series
A Preferred Shares and the Voting Preferred Shares otherwise entitled to
vote in accordance herewith; or
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<PAGE>
(b) A share exchange that affects the Series A Preferred Shares, a
consolidation with or merger of the Trust into another entity, or a
consolidation with or merger of another entity into the Trust, unless in
each such case each Series A Preferred Share (i) shall remain outstanding
without a material and adverse change to its terms and rights or (ii) shall
be converted into or exchanged for convertible preferred stock of the
surviving entity having preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms
or conditions of redemption thereof identical to that of a Series A
Preferred Share (except for changes that do not materially and adversely
affect the holders of the Series A Preferred Shares); or
(c) The authorization or creation of, or the increase in the
authorized amount of, any shares of any class or any security convertible
into shares of any class ranking prior to the Series A Preferred Shares in
the distribution of assets on any liquidation, dissolution or winding up of
the Trust or in the payment of dividends;
provided, however, that no such vote of the holders of Series A Preferred Shares
shall be required if, at or prior to the time when such amendment, alteration or
repeal is to take effect, or when the issuance of any such prior shares or
convertible security is to be made, as the case may be, provision is made for
the redemption of all Series A Preferred Shares at the time outstanding.
For purposes of the foregoing provisions of this Section 8, each Series A
Preferred Share shall have one (1) vote per share, except that when any other
series of Preferred Shares shall have the right to vote with the Series A
Preferred Shares as a single class on any matter, then the Series A Preferred
Shares and such other series shall have with respect to such matters one (1)
vote per $25.00 of stated liquidation preference. Except as otherwise required
by applicable law or as set forth herein, the Series A Preferred Shares shall
not have any relative, participating, optional or other special voting rights
and powers other than as set forth herein, and the consent of the holders
thereof shall not be required for the taking of any trust action.
Section 9. Limitation on Ownership.
(a) Limitation. Notwithstanding any other provision of the terms of
the Series A Preferred Shares, except as provided in the next sentence and
in Section 9(b), no Person, or Persons acting as a group, shall at any time
directly or indirectly acquire ownership of more than 25% of the
outstanding Series A Preferred Shares. Any Series A Preferred Shares owned
by a Person or Persons acting as a group in excess of such 25% shall be
deemed "Excess Preferred Shares," except that any such shares in excess of
25% will not be considered Excess Preferred Shares if the 25% limitation is
exceeded solely as a result of the Trust's redemption of Series A Preferred
Shares, provided that thereafter any additional Series A Preferred Shares
acquired by such Person or Persons acting as a group shall be considered
Excess Preferred Shares. Within 10 days of becoming aware of the existence
of Excess Preferred Shares (whether by notice on Schedule 13D or
otherwise), the Trust shall redeem any and all Excess Preferred
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<PAGE>
Shares by giving notice of redemption to the holder or holders thereof,
unless, prior to the giving of such notice the holder shall have disposed
of its ownership in the Excess Preferred Shares. Such notice shall set
forth the number of Series A Preferred Shares constituting Excess Preferred
shares, the redemption price and the place or places at which the
certificates representing such Excess Preferred Shares are to be
surrendered and such notice shall set forth the matters described in the
following sentence. From and after the date of giving such notice of
redemption, the Series A Preferred Shares called for redemption shall cease
to be outstanding and the holder thereof shall cease to be entitled to
dividends (other than dividends declared but unpaid prior to the notice of
redemption), voting rights and other benefits with respect to such shares
excepting the rights to payment of the redemption price determined and
payable as set forth in the next two sentences. Subject to the limitation
on payment set forth in the following sentence, the redemption price of
each Excess Preferred Share called for redemption shall be the average
daily per Series A Preferred Share closing sales price, if the Series A
Preferred Shares are listed on a national securities exchange or, if not,
are reported on the NASDAQ National Market System, and if the Series A
Preferred Shares are not so listed or reported, shall be the mean between
the average per Series A Preferred Share closing bid prices and the average
per Series A Preferred Share closing asked prices, in each case during the
30-day period ending on the business day prior to the redemption date, or
if there have been no sales on a national securities exchange or the NASDAQ
National Market System and no published bid quotations and no published
asked quotations with respect to Series A Preferred Shares during such 30-
day period, the redemption price shall be the price determined by the
Trustees in good faith. Unless the Trustees determine that it is in the
interest of the Trust to make earlier payment of all of the amount
determined as the redemption price per Series A Preferred Share in
accordance with the preceding sentence, the redemption price may be
payable, at the option of the Trustees, at any time or times up to, but not
later than the earlier of (i) five years after the redemption date, or (ii)
the liquidation of the Trust, in which latter event the redemption price
shall not exceed an amount which is the sum of the per Series A Preferred
Share distributions designated as liquidating distributions and return of
capital distributions declared with respect to unredeemed Series A
Preferred Shares of the Trust of record subsequent to the redemption date;
and in any event, no interest shall accrue with respect to the period
subsequent to the redemption date to the date of such payment. Nothing in
this Section 9(a) shall preclude the settlement of any transaction entered
into through the facilities of the New York Stock Exchange.
(b) Exemptions. The limitation on ownership set forth in Section 9(a)
shall not apply to the acquisition of Series A Preferred Shares by an
underwriter in a public offering of Series A Preferred Shares and shall not
apply to the ownership of Series A Preferred Shares by a managing
underwriter in the initial public offering of Series A Preferred Shares.
The Trustees, in their sole and absolute discretion, may exempt from the
ownership limitation set forth in Section 9(a) certain designated Series A
Preferred Shares owned by a person (other than any of the Restricted
Parties) who has provided
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the Trustees with evidence and assurances acceptable to the Trustees that
the qualification of the Trust as a real estate investment trust would not
be jeopardized thereby.
Section 10. Record Holders. The Trust and the Transfer Agent may deem
and treat the record holder of any Series A Preferred Shares as the true and
lawful owner thereof for all purposes, and neither the Trust nor the Transfer
Agent shall be affected by any notice to the contrary.
Section 11. Sinking Fund. The Series A Preferred Shares shall not be
entitled to the benefits of any retirement or sinking fund.
THIRD: The Series A Preferred Shares have been classified by the Board of
Trustees under the authority contained in Article 2, Section 1, of the Trust's
Amended and Restated Declaration of Trust dated December 15, 1993, as amended.
FOURTH: Each undersigned Trustee acknowledges these Articles Supplementary
to be the act of the Trust and further, as to all matters or facts required to
be verified under oath, each such Trustee acknowledges that to the best of his
knowledge, information and belief, these matters and facts are true in all
material respects and that this statement is made under the penalties of
perjury.
* * * * *
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<PAGE>
Series B Cumulative Convertible Redeemable
Preferred Shares of Beneficial Interest
ARTICLES SUPPLEMENTARY
SECURITY CAPITAL INDUSTRIAL TRUST
========================================
Articles Supplementary of Board of Trustees
Classifying and Designating a Series of
Preferred Shares of Beneficial Interest as
Series B Cumulative Convertible Redeemable
Preferred Shares of Beneficial Interest and
Fixing Distribution and Other Preferences
and Rights of Such Series
=========================================
Dated as of February 14, 1996
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
=========================================
Articles Supplementary of Board of Trustees
Classifying and Designating a Series of
Preferred Shares of Beneficial Interest as
Series B Cumulative Convertible Redeemable
Preferred Shares of Beneficial Interest and
Fixing Distribution and Other Preferences
and Rights of Such Series
=========================================
The undersigned, being all of the Trustees of Security Capital Industrial
Trust, a Maryland real estate investment trust (the "Trust"), hereby certify to
the State Department of Assessments and Taxation of Maryland pursuant to section
8-203(b) of the Annotated Code of Maryland that:
FIRST: The Board of Trustees has classified 8,050,000 unissued shares of
beneficial interest of the Trust as Series B Cumulative Convertible Redeemable
Preferred Shares of Beneficial Interest (the "Series B Preferred Shares").
SECOND: The following is a description of the Series B Preferred Shares,
including the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption thereof:
Section 1. Number of Shares and Designation. This class of preferred
shares of beneficial interest shall be designated as Series B Cumulative
Convertible Redeemable Preferred Shares of Beneficial Interest (the "Series B
Preferred Shares") and the number of shares which shall constitute such series
shall not be more than 8,050,000 shares, par value $0.01 per share, which number
may be decreased (but not below the number thereof then outstanding) from time
to time by the Board of Trustees.
Section 2. Definitions. For purposes of the Series B Preferred Shares,
the following terms shall have the meanings indicated:
"Board of Trustees" shall mean the Board of Trustees of the Trust or
any committee authorized by such Board of Trustees to perform any of its
responsibilities with respect to the Series B Preferred Shares.
<PAGE>
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which state or federally chartered banking institutions in New York
City, New York are not required to be open.
"Call Date" shall mean the date specified in the notice to holders
required under Section 5(d) as the Call Date.
"Common Shares" shall mean the common shares of beneficial interest of
the Trust, par value $0.01 per share.
"Constituent Person" shall have the meaning set forth in Section 6(e).
"Conversion Price" shall mean the conversion price per Common Share
for which the Series B Preferred Shares are convertible, as such Conversion
Price may be adjusted pursuant to Section 6. The initial conversion price
shall be $19.50 (equivalent to a conversion rate of 1.282 Common Shares for
each Series B Preferred Share).
"Current Market Price" of publicly traded common shares or any other
class of shares of beneficial interest or other security of the Trust or
any other issuer for any day shall mean the last reported sales price,
regular way on such day, or, if no sale takes place on such day, the
average of the reported closing bid and asked prices on such day, regular
way, in either case as reported on the New York Stock Exchange ("NYSE") or,
if such security is not listed or admitted for trading on the NYSE, on the
principal national securities exchange on which such security is listed or
admitted for trading or, if not listed or admitted for trading on any
national securities exchange, on the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or, if such security is not quoted on such National Market
System, the average of the closing bid and asked prices on such day in the
over-the-counter market as reported by NASDAQ or, if bid and asked prices
for such security on such day shall not have been reported through NASDAQ,
the average of the bid and asked prices on such day as furnished by any
NYSE member firm regularly making a market in such security selected for
such purpose by a Co-Chairman of the Board or the Board of Trustees.
"Dividend Payment Date" shall mean the last calendar day of March,
June, September and December in each year, commencing on June 30, 1996;
provided, however, that if any Dividend Payment Date falls on any day other
than a Business Day, the dividend payment due on such Dividend Payment Date
shall be paid on the Business Day immediately following such Dividend
Payment Date.
"Dividend Periods" shall mean quarterly dividend periods commencing on
January 1, April 1, July 1 and October 1 of each year and ending on and
including the day preceding the first day of the next succeeding Dividend
Period (other than the initial Dividend Period, which shall commence on the
Issue Date and end on and include
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June 30, 1996, and other than the Dividend Period during which any Series B
Preferred Shares shall be redeemed pursuant to Section 5, which shall end
on and include the Call Date with respect to the Series B Preferred Shares
being redeemed).
"Expiration Time" shall have the meaning set forth in Section
6(d)(iv).
"Fair Market Value" shall mean the average of the daily Current Market
Prices of a Common Share during the five (5) consecutive Trading Days
selected by the Trust commencing not more than 20 Trading Days before, and
ending not later than, the earlier of the day in question and the day
before the "ex date" with respect to the issuance or distribution requiring
such computation. The term "ex date," when used with respect to any
issuance or distribution, means the first day on which the Common Shares
trade regular way, without the right to receive such issuance or
distribution, on the exchange or in the market, as the case may be, used to
determine that day's Current Market Price.
"Fully Junior Shares" shall mean the Common Shares and any other class
or series of shares of beneficial interest of the Trust now or hereafter
issued and outstanding over which the Series B Preferred Shares have
preference or priority in both (i) the payment of dividends and (ii) the
distribution of assets on any liquidation, dissolution or winding up of the
Trust.
"Funds from Operations" shall mean the Trust's net earnings (computed
in accordance with generally accepted accounting principles) before
minority interest and before gains on sales of depreciated property, plus
depreciation and amortization.
"Issue Date" shall mean February 21, 1996.
"Junior Shares" shall mean the Common Shares and any other class or
series of shares of beneficial interest of the Trust now or hereafter
issued and outstanding over which the Series B Preferred Shares have
preference or priority in the payment of dividends or in the distribution
of assets on any liquidation, dissolution or winding up of the Trust.
"Non-Electing Share" shall have the meaning set forth in Section 6(e).
"Parity Shares" shall have the meaning set forth in Section 8(b).
"Person" shall mean any individual, firm, partnership, corporation,
limited liability company or other entity, and shall include any successor
(by merger or otherwise) of such entity.
"Purchased Shares" shall have the meaning set forth in Section
6(d)(iv).
"Securities" and "Security" shall have the meanings set forth in
Section 6(d)(iii).
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<PAGE>
"Series B Preferred Shares" shall have the meaning set forth in
Section 1.
"set apart for payment" shall be deemed to include, without any action
other than the following, the recording by the Trust in its accounting
ledgers of any accounting or bookkeeping entry which indicates, pursuant to
a declaration of dividends or other distribution by the Board of Trustees,
the allocation of funds to be so paid on any series or class of shares of
beneficial interest of the Trust; provided, however, that if any funds for
any class or series of Junior Shares or any class or series of shares of
beneficial interest ranking on a parity with the Series B Preferred Shares
as to the payment of dividends are placed in a separate account of the
Trust or delivered to a disbursing, paying or other similar agent, then
"set apart for payment" with respect to the Series B Preferred Shares shall
mean placing such funds in a separate account or delivering such funds to a
disbursing, paying or other similar agent.
"Trading Day" shall mean any day on which the securities in question
are traded on the NYSE, or if such securities are not listed or admitted
for trading on the NYSE, on the principal national securities exchange on
which such securities are listed or admitted, or if not listed or admitted
for trading on any national securities exchange, on the National Market
System of NASDAQ, or if such securities are not quoted on such National
Market System, in the applicable securities market in which the securities
are traded.
"Transaction" shall have the meaning set forth in Section 6(e).
"Transfer Agent" means The First National Bank of Boston, Boston,
Massachusetts, or such other agent or agents of the Trust as may be
designated by the Board of Trustees or their designee as the transfer
agent, registrar and dividend disbursing agent for the Series B Preferred
Shares.
"Voting Preferred Shares" shall have the meaning set forth in Section
9.
Section 3. Dividends.
(a) The holders of Series B Preferred Shares shall be entitled to
receive, when, as and if declared by the Board of Trustees, out of funds
legally available for the payment of dividends, cumulative preferential
dividends payable in cash in an amount per share equal to the greater of
(i) 7% of the liquidation preference per annum (equivalent to $1.75 per
share) or (ii) the dividends (determined on each Dividend Payment Date) on
the Common Shares, or portion thereof, into which a Series B Preferred
Share is convertible. Such dividends shall equal the number of Common
Shares, or portion thereof, into which a Series B Preferred Share is
convertible, multiplied by the most current quarterly dividend on a Common
Share on or before the applicable Dividend Payment Date. Such dividends
shall begin to accrue and shall be fully cumulative from the Issue Date,
whether or not in any Dividend Period or Periods there shall be funds of
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<PAGE>
the Trust legally available for the payment of such dividends, and shall be
payable quarterly, when, as and if declared by the Board of Trustees, in
arrears on Dividend Payment Dates, commencing on June 30, 1996. Each such
dividend shall be payable in arrears to the holders of record of Series B
Preferred Shares as they appear in the records of the Trust at the close of
business on such record dates, not less than 10 nor more than 50 days
preceding such Dividend Payment Dates thereof, as shall be fixed by the
Board of Trustees. Accrued and unpaid dividends for any past Dividend
Periods may be declared and paid at any time and for such interim periods,
without reference to any regular Dividend Payment Date, to holders of
record on such date, not less than 10 nor more than 50 days preceding the
payment date thereof, as may be fixed by the Board of Trustees. Any
dividend payment made on Series B Preferred Shares shall first be credited
against the earliest accrued but unpaid dividend due with respect to Series
B Preferred Shares which remains payable.
(b) The initial Dividend Period will include a partial dividend for
the period from the Issue Date until March 31, 1996. The amount of
dividends payable for such period, or any other period shorter than a full
Dividend Period, on the Series B Preferred Shares shall be computed on the
basis of a 360-day year of twelve 30-day months. Holders of Series B
Preferred Shares shall not be entitled to any dividends, whether payable in
cash, property or shares, in excess of cumulative dividends, as herein
provided, on the Series B Preferred Shares. No interest, or sum of money in
lieu of interest, shall be payable in respect of any dividend payment or
payments on the Series B Preferred Shares which may be in arrears.
(c) So long as any Series B Preferred Shares are outstanding, no
dividends, except as described in the immediately following sentence, shall
be declared or paid or set apart for payment on any class or series of
Parity Shares for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for such payment on the Series B
Preferred Shares for all Dividend Periods terminating on or prior to the
dividend payment date on such class or series of Parity Shares. When
dividends are not paid in full or a sum sufficient for such payment is not
set apart, as aforesaid, all dividends declared upon Series B Preferred
Shares and all dividends declared upon any other class or series of Parity
Shares shall be declared ratably in proportion to the respective amounts of
dividends accumulated and unpaid on the Series B Preferred Shares and
accumulated and unpaid on such Parity Shares.
(d) So long as any Series B Preferred Shares are outstanding, no
dividends (other than dividends or distributions paid solely in shares of,
or options, warrants or rights to subscribe for or purchase shares of,
Fully Junior Shares) shall be declared or paid or set apart for payment or
other distribution shall be declared or made or set apart for payment upon
Junior Shares, nor shall any Junior Shares be redeemed, purchased or
otherwise acquired (other than a redemption, purchase or other acquisition
of Common Shares made for purposes of an employee incentive or benefit plan
of the Trust or any
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subsidiary) for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any Junior Shares) by
the Trust, directly or indirectly (except by conversion into or exchange
for Fully Junior Shares), unless in each case (i) the full cumulative
dividends on all outstanding Series B Preferred Shares and any other Parity
Shares of the Trust shall have been or contemporaneously are declared and
paid or declared and set apart for payment for all past Dividend Periods
with respect to the Series B Preferred Shares and all past dividend periods
with respect to such Parity Shares and (ii) sufficient funds shall have
been or contemporaneously are declared and paid or declared and set apart
for the payment of the dividend for the current Dividend Period with
respect to the Series B Preferred Shares and the current dividend period
with respect to such Parity Shares.
(e) No distributions on Series B Preferred Shares shall be declared by
the Board of Trustees or paid or set apart for payment by the Trust at such
time as the terms and provisions of any agreement of the Trust, including
any agreement relating to its indebtedness, prohibits such declaration,
payment or setting apart for payment or provides that such declaration,
payment or setting apart for payment would constitute a breach thereof or a
default thereunder, or if such declaration or payment shall be restricted
or prohibited by law.
Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
Trust, whether voluntary or involuntary, before any payment or distribution
of the assets of the Trust (whether capital or surplus) shall be made to or
set apart for the holders of Junior Shares, the holders of the Series B
Preferred Shares shall be entitled to receive Twenty-Five Dollars ($25.00)
per Series B Preferred Share plus an amount equal to all dividends (whether
or not earned or declared) accrued and unpaid thereon to the date of final
distribution to such holders; but such holders shall not be entitled to any
further payment. If, upon any liquidation, dissolution or winding up of the
Trust, the assets of the Trust, or proceeds thereof, distributable among
the holders of the Series B Preferred Shares shall be insufficient to pay
in full the preferential amount aforesaid and liquidating payments on any
other shares of any class or series of Parity Shares, then such assets, or
the proceeds thereof, shall be distributed among the holders of Series B
Preferred Shares and any such other Parity Shares ratably in accordance
with the respective amounts that would be payable on such Series B
Preferred Shares and any such other Parity Shares if all amounts payable
thereon were paid in full. For the purposes of this Section 4, (i) a
consolidation or merger of the Trust with one or more corporations, real
estate investment trusts or other entities, (ii) a sale, lease or
conveyance of all or substantially all of the Trust's property or business
or (iii) a statutory share exchange shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Trust.
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(b) Subject to the rights of the holders of shares of any series or
class or classes of shares of beneficial interest ranking on a parity with
or prior to the Series B Preferred Shares upon liquidation, dissolution or
winding up, upon any liquidation, dissolution or winding up of the Trust,
after payment shall have been made in full to the holders of the Series B
Preferred Shares, as provided in this Section 4, any other series or class
or classes of Junior Shares shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all
assets remaining to be paid or distributed, and the holders of the Series B
Preferred Shares shall not be entitled to share therein.
Section 5. Redemption at the Option of the Trust.
(a) Subject to Section 10, the Series B Preferred Shares shall not be
redeemable by the Trust prior to the fifth anniversary of the Issue Date.
On and after the fifth anniversary of the Issue Date, the Trust, at its
option, may redeem the Series B Preferred Shares, in whole at any time or
from time to time in part at the option of the Trust, at a redemption price
of Twenty-Five Dollars ($25.00) per Series B Preferred Share, plus the
amounts indicated in Section 5(b).
(b) Upon any redemption of Series B Preferred Shares pursuant to this
Section 5, the Trust shall pay all accrued and unpaid dividends, if any,
thereon to the Call Date, without interest. If the Call Date falls after a
dividend payment record date and prior to the corresponding Dividend
Payment Date, then each holder of Series B Preferred Shares at the close of
business on such dividend payment record date shall be entitled to the
dividend payable on such shares on the corresponding Dividend Payment Date
notwithstanding the redemption of such shares before such Dividend Payment
Date. Except as provided above, the Trust shall make no payment or
allowance for unpaid dividends, whether or not in arrears, on Series B
Preferred Shares called for redemption.
(c) If full cumulative dividends on the Series B Preferred Shares and
any other class or series of Parity Shares of the Trust have not been
declared and paid or declared and set apart for payment, the Series B
Preferred Shares may not be redeemed under this Section 5 in part and the
Trust may not purchase or acquire Series B Preferred Shares, otherwise than
pursuant to a purchase or exchange offer made on the same terms to all
holders of Series B Preferred Shares or pursuant to Section 10.
(d) Notice of the redemption of any Series B Preferred Shares under
this Section 5 shall be mailed by first-class mail to each holder of record
of Series B Preferred Shares to be redeemed at the address of each such
holder as shown on the Trust's records, not less than 30 nor more than 90
days prior to the Call Date. Neither the failure to mail any notice
required by this paragraph (d), nor any defect therein or in the mailing
thereof, to any particular holder, shall affect the sufficiency of the
notice or the validity of the proceedings for redemption with respect to
the other holders. Any
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notice which was mailed in the manner herein provided shall be conclusively
presumed to have been duly given on the date mailed whether or not the
holder receives the notice. Each such mailed notice shall state, as
appropriate: (1) the Call Date; (2) the number of Series B Preferred
Shares to be redeemed and, if fewer than all the shares held by such holder
are to be redeemed, the number of such shares to be redeemed from such
holder; (3) the redemption price; (4) the place or places at which
certificates for such shares are to be surrendered; (5) the then-current
Conversion Price; and (6) that dividends on the shares to be redeemed shall
cease to accrue on such Call Date except as otherwise provided herein.
Notice having been mailed as aforesaid, from and after the Call Date
(unless the Trust shall fail to make available an amount of cash necessary
to effect such redemption), (i) except as otherwise provided herein,
dividends on the Series B Preferred Shares so called for redemption shall
cease to accrue, (ii) such shares shall no longer be deemed to be
outstanding, and (iii) all rights of the holders thereof as holders of
Series B Preferred Shares of the Trust shall cease (except the rights to
convert and to receive cash payable upon such redemption, without interest
thereon, upon surrender and endorsement of their certificates if so
required and to receive any dividends payable thereon). The Trust's
obligation to provide cash in accordance with the preceding sentence shall
be deemed fulfilled if, on or before the Call Date, the Trust shall deposit
with a bank or trust company (which may be an affiliate of the Trust) that
has an office in the Borough of Manhattan, City of New York, and that has,
or is an affiliate of a bank or trust company that has, capital and surplus
of at least $50,000,000, necessary for such redemption, in trust, with
irrevocable instructions that such cash be applied to the redemption of the
Series B Preferred Shares so called for redemption. No interest shall
accrue for the benefit of the holders of Series B Preferred Shares to be
redeemed on any cash so set aside by the Trust. Subject to applicable
escheat laws, any such cash unclaimed at the end of two years from the Call
Date shall revert to the general funds of the Trust, after which reversion
the holders of such shares so called for redemption shall look only to the
general funds of the Trust for the payment of such cash.
As promptly as practicable after the surrender in accordance with such
notice of the certificates for any such shares so redeemed (properly
endorsed or assigned for transfer, if the Trust shall so require and if the
notice shall so state), such shares shall be exchanged for any cash
(without interest thereon) for which such shares have been redeemed. If
fewer than all the outstanding Series B Preferred Shares are to be
redeemed, shares to be redeemed shall be selected by the Trust from
outstanding Series B Preferred Shares not previously called for redemption
pro rata (as nearly as may be), by lot or by any other method determined by
the Trust in its sole discretion to be equitable. If fewer than all the
Series B Preferred Shares represented by any certificate are redeemed, then
new certificates representing the unredeemed shares shall be issued without
cost to the holder thereof.
Section 6. Conversion. Holders of Series B Preferred Shares shall have
the right to convert all or a portion of such shares into Common Shares, as
follows:
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<PAGE>
(a) Subject to and upon compliance with the provisions of this Section
6, a holder of Series B Preferred Shares shall have the right, at his or
her option, at any time to convert such shares into the number of fully
paid and non-assessable Common Shares obtained by dividing the aggregate
liquidation preference of such shares by the Conversion Price (as in effect
at the time and on the date provided for in the last paragraph of paragraph
(b) of this Section 6) by surrendering such shares to be converted, such
surrender to be made in the manner provided in paragraph (b) of this
Section 6; provided, however, that the right to convert shares called for
redemption pursuant to Section 5 shall terminate at the close of business
on the fifth Business Day prior to the Call Date fixed for such redemption,
unless the Trust shall default in making payment of the cash payable upon
such redemption under Section 5.
(b) In order to exercise the conversion right, the holder of each
Series B Preferred Share to be converted shall surrender the certificate
representing such share, duly endorsed or assigned to the Trust or in
blank, at the office of the Transfer Agent, accompanied by written notice
to the Trust that the holder thereof elects to convert such Series B
Preferred Shares. Unless the shares issuable on conversion are to be
issued in the same name as the name in which such Series B Preferred Share
is registered, each share surrendered for conversion shall be accompanied
by instruments of transfer, in form satisfactory to the Trust, duly
executed by the holder or such holder's duly authorized attorney and an
amount sufficient to pay any transfer or similar tax (or evidence
reasonably satisfactory to the Trust demonstrating that such taxes have
been paid).
Holders of Series B Preferred Shares at the close of business on a
dividend payment record date shall be entitled to receive the dividend
payable on such shares on the corresponding Dividend Payment Date
notwithstanding the conversion thereof following such dividend payment
record date and prior to such Dividend Payment Date. However, Series B
Preferred Shares surrendered for conversion during the period between the
close of business on any dividend payment record date and the opening of
business on the corresponding Dividend Payment Date (except shares
converted after the issuance of notice of redemption with respect to a Call
Date during such period, such Series B Preferred Shares being entitled to
such dividend on the Dividend Payment Date) must be accompanied by payment
of an amount equal to the dividend payable on such shares on such Dividend
Payment Date. A holder of Series B Preferred Shares on a dividend payment
record date who (or whose transferee) tenders any such shares for
conversion into Common Shares on the corresponding Dividend Payment Date
will receive the dividend payable by the Trust on such Series B Preferred
Shares on such date, and the converting holder need not include payment of
the amount of such dividend upon surrender of Series B Preferred Shares for
conversion. Except as provided above, the Trust shall make no payment or
allowance for unpaid dividends, whether or not in arrears, on converted
shares or for dividends on the Common Shares issued upon such conversion.
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<PAGE>
As promptly as practicable after the surrender of certificates for
Series B Preferred Shares as aforesaid, the Trust shall issue and shall
deliver at such office to such holder, or on his or her written order, a
certificate or certificates for the number of full Common Shares issuable
upon the conversion of such shares in accordance with provisions of this
Section 6, and any fractional interest in respect of a Common Share arising
upon such conversion shall be settled as provided in paragraph (c) of this
Section 6.
Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which the certificates for
Series B Preferred Shares shall have been surrendered and such notice shall
have been received by the Trust as aforesaid (and if applicable, payment of
an amount equal to the dividend payable on such shares shall have been
received by the Trust as described above), and the person or persons in
whose name or names any certificate or certificates for Common Shares shall
be issuable upon such conversion shall be deemed to have become the holder
or holders of record of the shares represented thereby at such time on such
date and such conversion shall be at the Conversion Price in effect at such
time on such date unless the share transfer books of the Trust shall be
closed on that date, in which event such person or persons shall be deemed
to have become such holder or holders of record at the close of business on
the next succeeding day on which such share transfer books are open, but
such conversion shall be at the Conversion Price in effect on the date on
which such shares shall have been surrendered and such notice received by
the Trust.
(c) No fractional shares or scrip representing fractions of Common
Shares shall be issued upon conversion of the Series B Preferred Shares.
Instead of any fractional interest in a Common Share that would otherwise
be deliverable upon the conversion of a Series B Preferred Share, the Trust
shall pay to the holder of such share an amount in cash based upon the
Current Market Price of Common Shares on the Trading Day immediately
preceding the date of conversion. If more than one share shall be
surrendered for conversion at one time by the same holder, the number of
full Common Shares issuable upon conversion thereof shall be computed on
the basis of the aggregate number of Series B Preferred Shares so
surrendered.
(d) The Conversion Price shall be adjusted from time to time as
follows:
(i) If the Trust shall after the Issue Date (A) pay a dividend or
make a distribution on its capital shares in Common Shares, (B)
subdivide its outstanding Common Shares into a greater number of
shares, (C) combine its outstanding Common Shares into a smaller
number of shares or (D) issue any shares of beneficial interest by
reclassification of its Common Shares, the Conversion Price in effect
at the opening of business on the day following the date fixed for the
determination of shareholders entitled to receive such dividend or
distribution or at the opening of business on the Business Day next
following the day on which such subdivision, combination or
reclassification becomes
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<PAGE>
effective, as the case may be, shall be adjusted so that the holder of
any Series B Preferred Share thereafter surrendered for conversion
shall be entitled to receive the number of Common Shares that such
holder would have owned or have been entitled to receive after the
happening of any of the events described above as if such Series B
Preferred Shares had been converted immediately prior to the record
date in the case of a dividend or distribution or the effective date
in the case of a subdivision, combination or reclassification. An
adjustment made pursuant to this subparagraph (i) shall become
effective immediately after the opening of business on the Business
Day next following the record date (except as provided in paragraph
(h) below) in the case of a dividend or distribution and shall become
effective immediately after the opening of business on the Business
Day next following the effective date in the case of a subdivision,
combination or reclassification.
(ii) If the Trust shall issue after the Issue Date rights,
options or warrants to all holders of Common Shares entitling them
(for a period expiring within 45 days after the record date mentioned
below) to subscribe for or purchase Common Shares at a price per share
less than 94% (100% if a stand-by underwriter is used and charges the
Trust a commission) of the Fair Market Value per Common Share on the
record date for the determination of shareholders entitled to receive
such rights, options or warrants, then the Conversion Price in effect
at the opening of business on the Business Day next following such
record date shall be adjusted to equal the price determined by
multiplying (A) the Conversion Price in effect immediately prior to
the opening of business on the Business Day next following the date
fixed for such determination by (B) a fraction, the numerator of which
shall be the sum of (x) the number of Common Shares outstanding on the
close of business on the date fixed for such determination and (y) the
number of shares that the aggregate proceeds to the Trust from the
exercise of such rights, options or warrants for Common Shares would
purchase at 94% of such Fair Market Value (or 100% in the case of a
stand-by underwriting), and the denominator of which shall be the sum
of (x) the number of Common Shares outstanding on the close of
business on the date fixed for such determination and (y) the number
of additional Common Shares offered for subscription or purchase
pursuant to such rights, options or warrants. Such adjustment shall
become effective immediately after the opening of business on the day
next following such record date (except as provided in paragraph (h)
below). In determining whether any rights, options or warrants
entitle the holders of Common Shares to subscribe for or purchase
Common Shares at less than 94% of such Fair Market Value (or 100% in
the case of a stand-by underwriting), there shall be taken into
account any consideration received by the Trust upon issuance and upon
exercise of such rights, options or warrants, the value of such
consideration, if other than cash, to be determined by a Co-Chairman
of the Board or the Board of Trustees.
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<PAGE>
(iii) If the Trust shall distribute to all holders of its Common
Shares any shares of beneficial interest of the Trust (other than
Common Shares) or evidence of its indebtedness or assets (excluding
cumulative cash dividends or distributions paid with respect to the
Common Shares after December 31, 1995 which are not in excess of the
following: the sum of (A) the Trust's cumulative undistributed Funds
from Operations at December 31, 1995, plus (B) the cumulative amount
of Funds from Operations, as determined by the Board of Trustees,
after December 31, 1995, minus (C) the cumulative amount of dividends
accrued or paid in respect of the Series B Preferred Shares or any
other class or series of preferred shares of beneficial interest of
the Trust after the Issue Date) or rights, options or warrants to
subscribe for or purchase any of its securities (excluding those
rights, options and warrants issued to all holders of Common Shares
entitling them for a period expiring within 45 days after the record
date referred to in subparagraph (ii) above to subscribe for or
purchase Common Shares, which rights and warrants are referred to in
and treated under subparagraph (ii) above) (any of the foregoing being
hereinafter in this subparagraph (iii) collectively called the
"Securities" and individually a "Security"), then in each such case
the Conversion Price shall be adjusted so that it shall equal the
price determined by multiplying (x) the Conversion Price in effect
immediately prior to the close of business on the date fixed for the
determination of shareholders entitled to receive such distribution by
(y) a fraction, the numerator of which shall be the Fair Market Value
per Common Share on the record date mentioned below less the then fair
market value (as determined by a Co-Chairman of the Board or the Board
of Trustees, whose determination shall be conclusive), of the portion
of the shares of beneficial interest or assets or evidences of
indebtedness so distributed or of such rights, options or warrants
applicable to one Common Share, and the denominator of which shall be
the Fair Market Value per Common Share on the record date mentioned
below. Such adjustment shall become effective immediately at the
opening of business on the Business Day next following (except as
provided in paragraph (h) below) the record date for the determination
of shareholders entitled to receive such distribution. For the
purposes of this subparagraph (iii), the distribution of a Security,
which is distributed not only to the holders of the Common Shares on
the date fixed for the determination of shareholders entitled to such
distribution of such Security, but also is distributed with each
Common Share delivered to a Person converting a Series B Preferred
Share after such determination date, shall not require an adjustment
of the Conversion Price pursuant to this subparagraph (iii); provided
that on the date, if any, on which a person converting a Series B
Preferred Share would no longer be entitled to receive such Security
with a Common Share (other than as a result of the termination of all
such Securities), a distribution of such Securities shall be deemed to
have occurred and the Conversion Price shall be adjusted as provided
in this subparagraph (iii) (and such day shall be deemed to be "the
date fixed for the determination of the shareholders entitled to
receive such
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distribution" and "the record date" within the meaning of the two
preceding sentences).
(iv) In case a tender or exchange offer made by the Trust or any
subsidiary of the Trust for all or any portion of the Common Shares
shall expire and such tender or exchange offer shall involve the
payment by the Trust or such subsidiary of consideration per Common
Share having a fair market value (as determined in good faith by the
Board of Trustees, whose determination shall be conclusive and
described in a resolution of the Board of Trustees), at the last time
(the "Expiration Time") tenders or exchanges may be made pursuant to
such tender or exchange offer, that exceeds the Current Market Price
per Common Share on the Trading Day next succeeding the Expiration
Time, the Conversion Price shall be reduced so that the same shall
equal the price determined by multiplying the Conversion Price in
effect immediately prior to the effectiveness of the Conversion Price
reduction contemplated by this subparagraph, by a fraction of which
the numerator shall be the number of Common Shares outstanding
(including any tendered or exchanged shares) at the Expiration Time,
multiplied by the Current Market Price per Common Share on the Trading
Day next succeeding the Expiration Time, and the denominator shall be
the sum of (A) the fair market value (determined as aforesaid) of the
aggregate consideration payable to shareholders based upon the
acceptance (up to any maximum specified in the terms of the tender or
exchange offer) of all shares validly tendered or exchanged and not
withdrawn as of the Expiration Time (the shares deemed so accepted, up
to any maximum, being referred to as the "Purchased Shares") and (B)
the product of the number of Common Shares outstanding (less any
Purchased Shares) at the Expiration Time and the Current Market Price
per Common Share on the Trading Day next succeeding the Expiration
Time, such reduction to become effective immediately prior to the
opening of business on the day following the Expiration Time.
(v) No adjustment in the Conversion Price shall be required
unless such adjustment would require a cumulative increase or decrease
of at least 1% in such price; provided, however, that any adjustments
that by reason of this subparagraph (v) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment until made; and provided, further, that any adjustment
shall be required and made in accordance with the provisions of this
Section 6 (other than this subparagraph (v)) not later than such time
as may be required in order to preserve the tax-free nature of a
distribution to the holders of Common Shares. Notwithstanding any
other provisions of this Section 6, the Trust shall not be required to
make any adjustment of the Conversion Price for the issuance of any
Common Shares pursuant to any plan providing for the reinvestment of
dividends or interest payable on securities of the Trust and the
investment of additional optional amounts in Common Shares under such
plan. All calculations under this Section 6 shall be made to the
nearest cent (with $.005
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being rounded upward) or to the nearest one-tenth of a share (with .05
of a share being rounded upward), as the case may be. Anything in
this paragraph (d) to the contrary notwithstanding, the Trust shall be
entitled, to the extent permitted by law, to make such reductions in
the Conversion Price, in addition to those required by this paragraph
(d), as it in its discretion shall determine to be advisable in order
that any share dividends, subdivision of shares, reclassification or
combination of shares, distribution of rights or warrants to purchase
shares or securities, or distribution of other assets (other than cash
dividends) hereafter made by the Trust to its shareholders shall not
be taxable.
(e) If the Trust shall be a party to any transaction (including
without limitation a merger, consolidation, statutory share exchange, self
tender offer for all or substantially all Common Shares, sale of all or
substantially all of the Trust's assets or recapitalization of the Common
Shares and excluding any transaction as to which subparagraph (d)(i) of
this Section 6 applies) (each of the foregoing being referred to herein as
a "Transaction"), in each case as a result of which all or substantially
all Common Shares are converted into the right to receive shares,
securities or other property (including cash or any combination thereof),
each Series B Preferred Share which is not redeemed or converted into the
right to receive shares, securities or other property prior to such
Transaction shall thereafter be convertible into the kind and amount of
shares, securities and other property (including cash or any combination
thereof) receivable upon the consummation of such Transaction by a holder
of that number of Common Shares into which one Series B Preferred Share was
convertible immediately prior to such Transaction, assuming such holder of
Common Shares (i) is not a Person with which the Trust consolidated or into
which the Trust merged or which merged into the Trust or to which such sale
or transfer was made, as the case may be ("Constituent Person"), or an
affiliate of a Constituent Person and (ii) failed to exercise his rights of
election, if any, as to the kind or amount of shares, securities and other
property (including cash) receivable upon such Transaction (provided that
if the kind or amount of shares, securities and other property (including
cash) receivable upon such Transaction is not the same for each Common
Share held immediately prior to such Transaction by other than a
Constituent Person or an affiliate thereof and in respect of which such
rights of election shall not have been exercised ("Non-Electing Share"),
then for the purpose of this paragraph (e) the kind and amount of shares,
securities and other property (including cash) receivable upon such
Transaction by each Non-Electing Share shall be deemed to be the kind and
amount so receivable per share by a plurality of the Non-Electing Shares).
The Trust shall not be a party to any Transaction unless the terms of such
Transaction are consistent with the provisions of this paragraph (e), and
it shall not consent or agree to the occurrence of any Transaction until
the Trust has entered into an agreement with the successor or purchasing
entity, as the case may be, for the benefit of the holders of the Series B
Preferred Shares that will contain provisions enabling the holders of the
Series B Preferred Shares that remain outstanding after such Transaction to
convert into the consideration received by holders of Common Shares at the
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Conversion Price in effect immediately prior to such Transaction. The
provisions of this paragraph (e) shall similarly apply to successive
Transactions.
(f) If:
(i) the Trust shall declare a dividend (or any other
distribution) on the Common Shares (other than cash dividends or
distributions paid with respect to the Common Shares after December
31, 1995 not in excess of the sum of the Trust's cumulative
undistributed Funds from Operations at December 31, 1995, plus the
cumulative amount of Funds from Operations, as determined by the Board
of Trustees, after December 31, 1995, minus the cumulative amount of
dividends accrued or paid in respect of the Series B Preferred Shares
or any other class or series of preferred shares of beneficial
interest of the Trust after the Issue Date); or
(ii) the Trust shall authorize the granting to the holders of
Common Shares of rights, options or warrants to subscribe for or
purchase any shares of any class or any other rights, options or
warrants; or
(iii) there shall be any reclassification of the Common Shares
(other than an event to which subparagraph (d)(i) of this Section 6
applies) or any consolidation or merger to which the Trust is a party
and for which approval of any shareholders of the Trust is required,
or a statutory share exchange, or a self tender offer by the Trust for
all or substantially all of its outstanding Common Shares or the sale
or transfer of all or substantially all of the assets of the Trust as
an entirety; or
(iv) there shall occur the voluntary or involuntary liquidation,
dissolution or winding up of the Trust;
then the Trust shall cause to be filed with the Transfer Agent and shall
cause to be mailed to the holders of Series B Preferred Shares at their
addresses as shown on the records of the Trust, as promptly as possible,
but at least 10 days prior to the applicable date hereinafter specified, a
notice stating (A) the date on which a record is to be taken for the
purpose of such dividend, distribution or granting of rights, options or
warrants, or, if a record is not to be taken, the date as of which the
holders of Common Shares of record to be entitled to such dividend,
distribution or rights, options or warrants are to be determined or (B) the
date on which such reclassification, consolidation, merger, statutory share
exchange, sale, transfer, liquidation, dissolution or winding up is
expected to become effective, and the date as of which it is expected that
holders of Common Shares of record shall be entitled to exchange their
Common Shares for securities or other property, if any, deliverable upon
such reclassification, consolidation, merger, statutory share exchange,
sale, transfer, liquidation, dissolution or winding up. Failure
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to give or receive such notice or any defect therein shall not affect the
legality or validity of the proceedings described in this Section 6.
(g) Whenever the Conversion Price is adjusted as herein provided, the
Trust shall promptly file with the Transfer Agent an officer's certificate
setting forth the Conversion Price after such adjustment and setting forth
a brief statement of the facts requiring such adjustment which certificate
shall be conclusive evidence of the correctness of such adjustment absent
manifest error. Promptly after delivery of such certificate, the Trust
shall prepare a notice of such adjustment of the Conversion Price setting
forth the adjusted Conversion Price and the effective date of such
adjustment and shall mail such notice of such adjustment of the Conversion
Price to the holder of each Series B Preferred Share at such holder's last
address as shown on the records of the Trust.
(h) In any case in which paragraph (d) of this Section 6 provides that
an adjustment shall become effective on the day next following the record
date for an event, the Trust may defer until the occurrence of such event
(A) issuing to the holder of any Series B Preferred Share converted after
such record date and before the occurrence of such event the additional
Common Shares issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Shares issuable upon such
conversion before giving effect to such adjustment and (B) paying to such
holder any amount of cash in lieu of any fraction pursuant to paragraph (c)
of this Section 6.
(i) There shall be no adjustment of the Conversion Price in case of
the issuance of any shares of beneficial interest of the Trust in a
reorganization, acquisition or other similar transaction except as
specifically set forth in this Section 6. If any action or transaction
would require adjustment of the Conversion Price pursuant to more than one
paragraph of this Section 6, only one adjustment shall be made and such
adjustment shall be the amount of adjustment that has the highest absolute
value.
(j) If the Trust shall take any action affecting the Common Shares,
other than action described in this Section 6, that in the opinion of the
Board of Trustees would materially and adversely affect the conversion
rights of the holders of the Series B Preferred Shares, the Conversion
Price for the Series B Preferred Shares may be adjusted, to the extent
permitted by law, in such manner, if any, and at such time, as the Board of
Trustees, in its sole discretion, may determine to be equitable in the
circumstances.
(k) The Trust covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its
authorized but unissued Common Shares, for the purpose of effecting
conversion of the Series B Preferred Shares, the full number of Common
Shares deliverable upon the conversion of all outstanding Series B
Preferred Shares not theretofore converted. For purposes of this paragraph
(k), the number of Common Shares that shall be deliverable upon the
conversion of all
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outstanding Series B Preferred Shares shall be computed as if at the time
of computation all such outstanding shares were held by a single holder.
The Trust covenants that any Common Shares issued upon conversion of
the Series B Preferred Shares shall be validly issued, fully paid and non-
assessable. Before taking any action that would cause an adjustment
reducing the Conversion Price below the then-par value of the Common Shares
deliverable upon conversion of the Series B Preferred Shares, the Trust
will take any trust action that, in the opinion of its counsel, may be
necessary in order that the Trust may validly and legally issue fully paid
and (subject to any customary qualification based upon the nature of a real
estate investment trust) non-assessable Common Shares at such adjusted
Conversion Price.
The Trust shall endeavor to list the Common Shares required to be
delivered upon conversion of the Series B Preferred Shares, prior to such
delivery, upon each national securities exchange, if any, upon which the
outstanding Common Shares are listed at the time of such delivery.
Prior to the delivery of any securities that the Trust shall be
obligated to deliver upon conversion of the Series B Preferred Shares, the
Trust shall endeavor to comply with all federal and state laws and
regulations thereunder requiring the registration of such securities with,
or any approval of or consent to the delivery thereof by, any governmental
authority.
(l) The Trust will pay any and all documentary stamp or similar issue
or transfer taxes payable in respect of the issue or delivery of Common
Shares or other securities or property on conversion of the Series B
Preferred Shares pursuant hereto; provided, however, that the Trust shall
not be required to pay any tax that may be payable in respect of any
transfer involved in the issue or delivery of Common Shares or other
securities or property in a name other than that of the holder of the
Series B Preferred Shares to be converted, and no such issue or delivery
shall be made unless and until the person requesting such issue or delivery
has paid to the Trust the amount of any such tax or established, to the
reasonable satisfaction of the Trust, that such tax has been paid.
Section 7. Shares To Be Retired. All Series B Preferred Shares which
shall have been issued and reacquired in any manner by the Trust shall be
restored to the status of authorized but unissued shares of beneficial interest
of the Trust, without designation as to class or series.
Section 8. Ranking. Any class or series of shares of beneficial
interest of the Trust shall be deemed to rank:
(a) prior to the Series B Preferred Shares, as to the payment of
dividends and as to distribution of assets upon liquidation, dissolution or
winding up, if the holders of
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such class or series shall be entitled to the receipt of dividends or of
amounts distributable upon liquidation, dissolution or winding up, as the
case may be, in preference or priority to the holders of Series B Preferred
Shares;
(b) on a parity with the Series B Preferred Shares, as to the payment
of dividends and as to distribution of assets upon liquidation, dissolution
or winding up, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share thereof shall be different from
those of the Series B Preferred Shares, if the holders of such class or
series and the Series B Preferred Shares shall be entitled to the receipt
of dividends and of amounts distributable upon liquidation, dissolution or
winding up in proportion to their respective amounts of accrued and unpaid
dividends per share or liquidation preferences, without preference or
priority one over the other ("Parity Shares");
(c) junior to the Series B Preferred Shares, as to the payment of
dividends or as to the distribution of assets upon liquidation, dissolution
or winding up, if such class or series shall be Junior Shares; and
(d) junior to the Series B Preferred Shares, as to the payment of
dividends and as to the distribution of assets upon liquidation,
dissolution or winding up, if such class or series shall be Fully Junior
Shares.
Section 9. Voting. If and whenever six quarterly dividends (whether or
not consecutive) payable on the Series B Preferred Shares or any series or class
of Parity Shares shall be in arrears (which shall, with respect to any such
quarterly dividend, mean that any such dividend has not been paid in full),
whether or not earned or declared, the number of trustees then constituting the
Board of Trustees shall be increased by two and the holders of Series B
Preferred Shares, together with the holders of shares of every other series of
Parity Shares (any such other series, the "Voting Preferred Shares"), voting as
a single class regardless of series, shall be entitled to elect two additional
trustees to serve on the Board of Trustees at any annual meeting of shareholders
or special meeting held in place thereof, or at a special meeting of the holders
of the Series B Preferred Shares and the Voting Preferred Shares called as
hereinafter provided. Whenever all arrears in dividends on the Series B
Preferred Shares and the Voting Preferred Shares then outstanding shall have
been paid and dividends thereon for the current quarterly dividend period shall
have been paid or declared and set apart for payment, then the right of the
holders of the Series B Preferred Shares and the Voting Preferred Shares to
elect such additional two trustees shall cease (but subject always to the same
provision for the vesting of such voting rights in the case of any similar
future arrearages in six quarterly dividends), and the terms of office of all
persons elected as trustees by the holders of the Series B Preferred Shares and
the Voting Preferred Shares shall forthwith terminate and the number of the
Board of Trustees shall be reduced accordingly. At any time after such voting
power shall have been so vested in the holders of Series B Preferred Shares and
the Voting Preferred Shares, the Secretary of the Trust may, and upon the
written request of any holder of Series B Preferred Shares (addressed to the
Secretary at the principal office of the Trust) shall, call a special
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meeting of the holders of the Series B Preferred Shares and of the Voting
Preferred Shares for the election of the two trustees to be elected by them as
herein provided, such call to be made by notice similar to that provided in the
Bylaws of the Trust for a special meeting of the shareholders or as required by
law. If any such special meeting required to be called as above provided shall
not be called by the Secretary within 20 days after receipt of any such request,
then any holder of Series B Preferred Shares may call such meeting, upon the
notice above provided, and for that purpose shall have access to the records of
the Trust. The trustees elected at any such special meeting shall hold office
until the next annual meeting of the shareholders or special meeting held in
lieu thereof if such office shall not have previously terminated as above
provided. If any vacancy shall occur among the trustees elected by the holders
of the Series B Preferred Shares and the Voting Preferred Shares, a successor
shall be elected by the Board of Trustees, upon the nomination of the then-
remaining trustee elected by the holders of the Series B Preferred Shares and
the Voting Preferred Shares or the successor of such remaining trustee, to serve
until the next annual meeting of the shareholders or special meeting held in
place thereof if such office shall not have previously terminated as provided
above. Notwithstanding any other provisions of this paragraph, in any vote for
the election of additional trustees hereunder, the Series B Preferred Shares and
Voting Preferred Shares beneficially owned by Security Capital Group
Incorporated, a Maryland corporation, any of its direct or indirect subsidiaries
and any of their respective directors, officers or controlling stockholders
(together, the "Restricted Parties"), shall be voted in the same respective
percentages as the Series B Preferred Shares and Voting Preferred Shares that
are not beneficially owned by the Restricted Parties. The provisions in the
preceding sentence shall cease and be of no further force and effect from and
after such time, but only as long as, the Restricted Parties together no longer
beneficially own in excess of 10% of the Trust's outstanding Common Shares.
So long as any Series B Preferred Shares are outstanding, in addition to
any other vote or consent of shareholders required by law or by the Trust's
Amended and Restated Declaration of Trust, as amended and supplemented, the
affirmative vote of at least 66-2/3% of the votes entitled to be cast by the
holders of the Series B Preferred Shares and the Voting Preferred Shares, at the
time outstanding, acting as a single class regardless of series, given in person
or by proxy, either in writing without a meeting or by vote at any meeting
called for the purpose, shall be necessary for effecting or validating:
(a) Any amendment, alteration or repeal of any of the provisions of
the Trust's Amended and Restated Declaration of Trust or these Articles
Supplementary that materially and adversely affects the voting powers,
rights or preferences of the holders of the Series B Preferred Shares or
the Voting Preferred Shares; provided, however, that the amendment of the
provisions of the Trust's Amended and Restated Declaration of Trust so as
to authorize or create or to increase the authorized amount of, any Fully
Junior Shares, Junior Shares that are not senior in any respect to the
Series B Preferred Shares, or any shares of any class ranking on a parity
with the Series B Preferred Shares or the Voting Preferred Shares shall not
be deemed to materially adversely affect the voting powers, rights or
preferences of the holders of Series B Preferred Shares, and provided,
further, that if any such amendment, alteration or repeal would materially
and
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adversely affect any voting powers, rights or preferences of the Series B
Preferred Shares or another series of Voting Preferred Shares that are not
enjoyed by some or all of the other series otherwise entitled to vote in
accordance herewith, the affirmative vote of at least 66-2/3% of the votes
entitled to be cast by the holders of all series similarly affected,
similarly given, shall be required in lieu of the affirmative vote of at
least 66-2/3% of the votes entitled to be cast by the holders of the Series
B Preferred Shares and the Voting Preferred Shares otherwise entitled to
vote in accordance herewith; or
(b) A share exchange that affects the Series B Preferred Shares, a
consolidation with or merger of the Trust into another entity, or a
consolidation with or merger of another entity into the Trust, unless in
each such case each Series B Preferred Share (i) shall remain outstanding
without a material and adverse change to its terms and rights or (ii) shall
be converted into or exchanged for convertible preferred shares of the
surviving entity having preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms
or conditions of redemption thereof identical to that of a Series B
Preferred Share (except for changes that do not materially and adversely
affect the holders of the Series B Preferred Shares); or
(c) The authorization, reclassification or creation of, or the
increase in the authorized amount of, any shares of any class or any
security convertible into shares of any class ranking prior to the Series B
Preferred Shares in the distribution of assets on any liquidation,
dissolution or winding up of the Trust or in the payment of dividends;
provided, however, that no such vote of the holders of Series B Preferred Shares
shall be required if, at or prior to the time when such amendment, alteration or
repeal is to take effect, or when the issuance of any such prior shares or
convertible security is to be made, as the case may be, provision is made for
the redemption of all Series B Preferred Shares at the time outstanding.
For purposes of the foregoing provisions of this Section 9, each Series B
Preferred Share shall have one (1) vote per share, except that when any other
series of Preferred Shares shall have the right to vote with the Series B
Preferred Shares as a single class on any matter, then the Series B Preferred
Shares and such other series shall have with respect to such matters one (1)
vote per $25.00 of stated liquidation preference. Except as otherwise required
by applicable law or as set forth herein, the Series B Preferred Shares shall
not have any relative, participating, optional or other special voting rights
and powers other than as set forth herein, and the consent of the holders
thereof shall not be required for the taking of any Trust action.
Section 10. Limitation on Ownership.
(a) Limitation. Notwithstanding any other provision of the terms of
the Series B Preferred Shares, except as provided in the next sentence and
in Section 10(b), no Person, or Persons acting as a group, shall at any
time directly or indirectly acquire ownership of more than 25% of the
outstanding Series B Preferred Shares. Any Series B
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Preferred Shares owned by a Person or Persons acting as a group in excess
of such 25% shall be deemed "Excess Preferred Shares," except that any such
shares in excess of 25% will not be considered Excess Preferred Shares if
the 25% limitation is exceeded solely as a result of the Trust's redemption
of Series B Preferred Shares, provided that thereafter any additional
Series B Preferred Shares acquired by such Person or Persons acting as a
group shall be considered Excess Preferred Shares. Within 10 days of
becoming aware of the existence of Excess Preferred Shares (whether by
notice on Schedule 13D or otherwise), the Trust shall redeem any and all
Excess Preferred Shares by giving notice of redemption to the holder or
holders thereof, unless, prior to the giving of such notice the holder
shall have disposed of its ownership in the Excess Preferred Shares. Such
notice shall set forth the number of Series B Preferred Shares constituting
Excess Preferred shares, the redemption price and the place or places at
which the certificates representing such Excess Preferred Shares are to be
surrendered and such notice shall set forth the matters described in the
following sentence. From and after the date of giving such notice of
redemption, the Series B Preferred Shares called for redemption shall cease
to be outstanding and the holder thereof shall cease to be entitled to
dividends (other than dividends declared but unpaid prior to the notice of
redemption), voting rights and other benefits with respect to such shares
excepting the rights to payment of the redemption price determined and
payable as set forth in the next two sentences. Subject to the limitation
on payment set forth in the following sentence, the redemption price of
each Excess Preferred Share called for redemption shall be the average
daily per Series B Preferred Share closing sales price, if the Series B
Preferred Shares are listed on a national securities exchange or, if not,
are reported on the NASDAQ National Market System, and if the Series B
Preferred Shares are not so listed or reported, shall be the mean between
the average per Series B Preferred Share closing bid prices and the average
per Series B Preferred Share closing asked prices, in each case during the
30-day period ending on the business day prior to the redemption date, or
if there have been no sales on a national securities exchange or the NASDAQ
National Market System and no published bid quotations and no published
asked quotations with respect to Series B Preferred Shares during such 30-
day period, the redemption price shall be the price determined by the
Trustees in good faith. Unless the Trustees determine that it is in the
interest of the Trust to make earlier payment of all of the amount
determined as the redemption price per Series B Preferred Share in
accordance with the preceding sentence, the redemption price may be
payable, at the option of the Trustees, at any time or times up to, but not
later than the earlier of (i) five years after the redemption date, or (ii)
the liquidation of the Trust, in which latter event the redemption price
shall not exceed an amount which is the sum of the per Series B Preferred
Share distributions designated as liquidating distributions and return of
capital distributions declared with respect to unredeemed Series B
Preferred Shares of the Trust of record subsequent to the redemption date;
and in any event, no interest shall accrue with respect to the period
subsequent to the redemption date to the date of such payment. Nothing in
this Section 10(a) shall preclude the settlement of any transaction entered
into through the facilities of the NYSE.
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(b) Exemptions. The limitation on ownership set forth in Section
10(a) shall not apply to the acquisition of Series B Preferred Shares by an
underwriter in a public offering of Series B Preferred Shares and shall not
apply to the ownership of Series B Preferred Shares by a managing
underwriter in the initial public offering of Series B Preferred Shares.
The Trustees, in their sole and absolute discretion, may exempt from the
ownership limitation set forth in Section 10(a) certain designated Series B
Preferred Shares owned by a person (other than any of the Restricted
Parties) who has provided the Trustees with evidence and assurances
acceptable to the Trustees that the qualification of the Trust as a real
estate investment trust would not be jeopardized thereby.
Section 11. Record Holders. The Trust and the Transfer Agent may deem
and treat the record holder of any Series B Preferred Shares as the true and
lawful owner thereof for all purposes, and neither the Trust nor the Transfer
Agent shall be affected by any notice to the contrary.
Section 12. Sinking Fund. The Series B Preferred Shares shall not be
entitled to the benefits of any retirement or sinking fund.
THIRD: The Series B Preferred Shares have been classified by the Board of
Trustees under the authority contained in Article 2, Section 1, of the Trust's
Amended and Restated Declaration of Trust dated December 15, 1993, as amended
and supplemented.
FOURTH: Each undersigned Trustee acknowledges these Articles Supplementary
to be the act of the Trust and further, as to all matters or facts required to
be verified under oath, each such Trustee acknowledges that to the best of his
knowledge, information and belief, these matters and facts are true in all
material respects and that this statement is made under the penalties of
perjury.
* * * * *
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Series C Cumulative Redeemable
Preferred Shares of Beneficial Interest
ARTICLES SUPPLEMENTARY
SECURITY CAPITAL INDUSTRIAL TRUST
========================================
Articles Supplementary of Board of Trustees
Classifying and Designating a Series of
Preferred Shares of Beneficial Interest as
Series C Cumulative Redeemable
Preferred Shares of Beneficial Interest and
Fixing Distribution and Other Preferences
and Rights of Such Series
=========================================
Dated as of November 7, 1996
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
=========================================
Articles Supplementary of Board of Trustees
Classifying and Designating a Series of
Preferred Shares of Beneficial Interest as
Series C Cumulative Redeemable
Preferred Shares of Beneficial Interest and
Fixing Distribution and Other Preferences
and Rights of Such Series
=========================================
The undersigned, being all of the Trustees of Security Capital Industrial
Trust, a Maryland real estate investment trust (the "Trust"), hereby certify to
the State Department of Assessments and Taxation of Maryland pursuant to section
8-203(b) of the Annotated Code of Maryland that:
FIRST: The Board of Trustees has classified 2,300,000 unissued shares of
beneficial interest of the Trust as Series C Cumulative Redeemable Preferred
Shares of Beneficial Interest (the "Series C Preferred Shares").
SECOND: The following is a description of the Series C Preferred Shares,
including the preferences, rights, voting powers, restrictions, limitations as
to dividends, qualifications, and terms and conditions of redemption thereof:
Section 1. Number of Shares and Designation. This class of preferred
shares of beneficial interest shall be designated as Series C Cumulative
Redeemable Preferred Shares of Beneficial Interest (the "Series C Preferred
Shares") and the number of shares which shall constitute such series shall not
be more than 2,300,000 shares, par value $0.01 per share, which number may be
decreased (but not below the number thereof then outstanding) from time to time
by the Board of Trustees.
Section 2. Definitions. For purposes of the Series C Preferred Shares,
the following terms shall have the meanings indicated:
"Board of Trustees" shall mean the Board of Trustees of the Trust or
any committee authorized by such Board of Trustees to perform any of its
responsibilities with respect to the Series C Preferred Shares.
<PAGE>
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which state or federally chartered banking institutions in New York
City, New York are not required to be open.
"Call Date" shall mean the date specified in the notice to holders
required under Section 5(e) as the Call Date.
"Common Shares" shall mean the common shares of beneficial interest of
the Trust, par value $0.01 per share.
"Dividend Payment Date" shall mean the last calendar day of March,
June, September and December in each year, commencing on December 31, 1996;
provided, however, that if any Dividend Payment Date falls on any day other
than a Business Day, the dividend payment due on such Dividend Payment Date
shall be paid on the Business Day immediately following such Dividend
Payment Date.
"Dividend Periods" shall mean quarterly dividend periods commencing on
January 1, April 1, July 1 and October 1 of each year and ending on and
including the day preceding the first day of the next succeeding Dividend
Period (other than the initial Dividend Period, which shall commence on the
Issue Date and end on and include December 31, 1996, and other than the
Dividend Period during which any Series C Preferred Shares shall be
redeemed pursuant to Section 5, which shall end on and include the Call
Date with respect to the Series C Preferred Shares being redeemed).
"Excess Preferred Shares" shall have the meaning set forth in Section
9(a).
"Fully Junior Shares" shall mean the Common Shares and any other class
or series of shares of beneficial interest of the Trust now or hereafter
issued and outstanding over which the Series C Preferred Shares have
preference or priority in both (i) the payment of dividends and (ii) the
distribution of assets on any liquidation, dissolution or winding up of the
Trust.
"Issue Date" shall mean November 13, 1996.
"Junior Shares" shall mean the Common Shares and any other class or
series of shares of beneficial interest of the Trust now or hereafter
issued and outstanding over which the Series C Preferred Shares have
preference or priority in the payment of dividends or in the distribution
of assets on any liquidation, dissolution or winding up of the Trust.
"Parity Shares" shall have the meaning set forth in Section 7(b).
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<PAGE>
"Person" shall mean any individual, firm, partnership, corporation,
limited liability company or other entity, and shall include any successor
(by merger or otherwise) of such entity.
"Restricted Parties" shall have the meaning set forth in Section 8.
"Series C Preferred Shares" shall have the meaning set forth in
Section 1.
"set apart for payment" shall be deemed to include, without any action
other than the following, the recording by the Trust in its accounting
ledgers of any accounting or bookkeeping entry which indicates, pursuant to
a declaration of dividends or other distribution by the Board of Trustees,
the allocation of funds to be so paid on any series or class of shares of
beneficial interest of the Trust; provided, however, that if any funds for
any class or series of Junior Shares or any class or series of shares of
beneficial interest ranking on a parity with the Series C Preferred Shares
as to the payment of dividends are placed in a separate account of the
Trust or delivered to a disbursing, paying or other similar agent, then
"set apart for payment" with respect to the Series C Preferred Shares shall
mean placing such funds in a separate account or delivering such funds to a
disbursing, paying or other similar agent.
"Transfer Agent" means The First National Bank of Boston, Boston,
Massachusetts, or such other agent or agents of the Trust as may be
designated by the Board of Trustees or their designee as the transfer
agent, registrar and dividend disbursing agent for the Series C Preferred
Shares.
"Voting Preferred Shares" shall have the meaning set forth in Section
8.
Section 3. Dividends.
(a) The holders of Series C Preferred Shares shall be entitled to
receive, when, as and if declared by the Board of Trustees, out of funds
legally available for the payment of dividends, cumulative preferential
dividends payable in cash in an amount per share equal to 8.54% of the
liquidation preference per annum (equivalent to $4.27 per share), except as
provided in Section 3(b). Such dividends shall begin to accrue and shall
be fully cumulative from the Issue Date, whether or not in any Dividend
Period or Periods there shall be funds of the Trust legally available for
the payment of such dividends, and shall be payable quarterly, when, as and
if declared by the Board of Trustees, in arrears on Dividend Payment Dates,
commencing on December 31, 1996. Each such dividend shall be payable in
arrears to the holders of record of Series C Preferred Shares as they
appear in the records of the Trust at the close of business on such record
dates, not less than 10 nor more than 50 days preceding such Dividend
Payment Dates thereof, as shall be fixed by the Board of Trustees. Accrued
and unpaid dividends for any past Dividend Periods may be declared and paid
at any time and for such interim periods, without reference to any regular
Dividend Payment Date, to holders
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of record on such date, not less than 10 nor more than 50 days preceding
the payment date thereof, as may be fixed by the Board of Trustees. Any
dividend payment made on Series C Preferred Shares shall first be credited
against the earliest accrued but unpaid dividend due with respect to Series
C Preferred Shares which remains payable.
(b) The holders of Series C Preferred Shares shall be entitled to
receive, when, as and if declared by the Board of Trustees, a partial
dividend for the initial Dividend Period from the Issue Date until December
31, 1996. The amount of dividends payable for such period, or any other
period shorter than a full Dividend Period, on the Series C Preferred
Shares shall be computed on the basis of a 360-day year of twelve 30-day
months. Holders of Series C Preferred Shares shall not be entitled to any
dividends, whether payable in cash, property or shares, in excess of
cumulative dividends, as herein provided, on the Series C Preferred Shares.
No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the Series C Preferred
Shares which may be in arrears.
(c) So long as any Series C Preferred Shares are outstanding, no
dividends, except as described in the immediately following sentence, shall
be declared or paid or set apart for payment on any class or series of
Parity Shares for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for such payment on the Series C
Preferred Shares for all Dividend Periods terminating on or prior to the
dividend payment date on such class or series of Parity Shares. When
dividends are not paid in full or a sum sufficient for such payment is not
set apart, as aforesaid, all dividends declared upon Series C Preferred
Shares and all dividends declared upon any other class or series of Parity
Shares shall be declared ratably in proportion to the respective amounts of
dividends accumulated and unpaid on the Series C Preferred Shares and
accumulated and unpaid on such Parity Shares.
(d) So long as any Series C Preferred Shares are outstanding, no
dividends (other than dividends or distributions paid solely in shares of,
or options, warrants or rights to subscribe for or purchase shares of,
Fully Junior Shares) shall be declared or paid or set apart for payment or
other distribution shall be declared or paid or set apart for payment upon
Junior Shares, nor shall any Junior Shares be redeemed, purchased or
otherwise acquired (other than a redemption, purchase or other acquisition
of Common Shares made for purposes of an employee incentive or benefit plan
of the Trust or any subsidiary) for any consideration (or any moneys be
paid to or made available for a sinking fund for the redemption of any
Junior Shares) by the Trust, directly or indirectly (except by conversion
into or exchange for Fully Junior Shares), unless in each case (i) the full
cumulative dividends on all outstanding Series C Preferred Shares and any
other Parity Shares of the Trust shall have been or contemporaneously are
declared and paid or declared and set apart for payment for all past
Dividend Periods with respect to the Series C Preferred Shares and all past
dividend periods with respect to such Parity Shares and (ii) sufficient
funds shall have been or contemporaneously are declared and paid or
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<PAGE>
declared and set apart for the payment of the dividend for the current
Dividend Period with respect to the Series C Preferred Shares and the
current dividend period with respect to such Parity Shares.
(e) No distributions on Series C Preferred Shares shall be declared by
the Board of Trustees or paid or set apart for payment by the Trust at such
time as the terms and provisions of any agreement of the Trust, including
any agreement relating to its indebtedness, prohibits such declaration,
payment or setting apart for payment or provides that such declaration,
payment or setting apart for payment would constitute a breach thereof or a
default thereunder, or if such declaration or payment shall be restricted
or prohibited by law.
Section 4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
Trust, whether voluntary or involuntary, before any payment or distribution
of the assets of the Trust (whether capital or surplus) shall be made to or
set apart for the holders of Junior Shares, the holders of the Series C
Preferred Shares shall be entitled to receive Fifty Dollars ($50.00) per
Series C Preferred Share plus an amount equal to all dividends (whether or
not earned or declared) accrued and unpaid thereon to the date of final
distribution to such holders; but such holders shall not be entitled to any
further payment. If, upon any liquidation, dissolution or winding up of the
Trust, the assets of the Trust, or proceeds thereof, distributable among
the holders of the Series C Preferred Shares shall be insufficient to pay
in full the preferential amount aforesaid and liquidating payments on any
other shares of any class or series of Parity Shares, then such assets, or
the proceeds thereof, shall be distributed among the holders of Series C
Preferred Shares and any such other Parity Shares ratably in accordance
with the respective amounts that would be payable on such Series C
Preferred Shares and any such other Parity Shares if all amounts payable
thereon were paid in full. For the purposes of this Section 4, (i) a
consolidation or merger of the Trust with one or more corporations, real
estate investment trusts or other entities, (ii) a sale, lease or
conveyance of all or substantially all of the Trust's property or business
or (iii) a statutory share exchange shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Trust.
(b) Subject to the rights of the holders of shares of any series or
class or classes of shares of beneficial interest ranking on a parity with
or prior to the Series C Preferred Shares upon liquidation, dissolution or
winding up, upon any liquidation, dissolution or winding up of the Trust,
after payment shall have been made in full to the holders of the Series C
Preferred Shares, as provided in this Section 4, any other series or class
or classes of Junior Shares shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all
assets remaining to be paid or distributed, and the holders of the Series C
Preferred Shares shall not be entitled to share therein.
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Section 5. Redemption at the Option of the Trust.
(a) Subject to Section 9, the Series C Preferred Shares shall not be
redeemable by the Trust prior to the 30th anniversary of the Issue Date.
On and after the 30th anniversary of the Issue Date, the Trust, at its
option, may redeem the Series C Preferred Shares, in whole at any time or
from time to time in part at the option of the Trust, at a redemption price
of Fifty Dollars ($50.00) per Series C Preferred Share, plus the amounts
indicated in Section 5(b).
(b) Upon any redemption of Series C Preferred Shares pursuant to this
Section 5, the Trust shall pay all accrued and unpaid dividends, if any,
thereon to the Call Date, without interest. If the Call Date falls after a
dividend payment record date and prior to the corresponding Dividend
Payment Date, then each holder of Series C Preferred Shares at the close of
business on such dividend payment record date shall be entitled to the
dividend payable on such shares on the corresponding Dividend Payment Date
notwithstanding the redemption of such shares before such Dividend Payment
Date. Except as provided above, the Trust shall make no payment or
allowance for unpaid dividends, whether or not in arrears, on Series C
Preferred Shares called for redemption.
(c) If full cumulative dividends on the Series C Preferred Shares and
any other class or series of Parity Shares of the Trust have not been
declared and paid or declared and set apart for payment, the Series C
Preferred Shares may not be redeemed under this Section 5 in part and the
Trust may not purchase or acquire Series C Preferred Shares, otherwise than
pursuant to a purchase or exchange offer made on the same terms to all
holders of Series C Preferred Shares or pursuant to Section 9.
(d) The redemption price to be paid upon any redemption of the Series
C Preferred Shares (other than any amounts indicated in Section 5(b) and
other than a redemption pursuant to Section 9) shall be payable solely out
of the sale proceeds of other shares of beneficial interest of the Trust
and from no other source.
(e) Notice of the redemption of any Series C Preferred Shares under
this Section 5 shall be mailed by first-class mail to each holder of record
of Series C Preferred Shares to be redeemed at the address of each such
holder as shown on the Trust's records, not less than 30 nor more than 90
days prior to the Call Date. Neither the failure to mail any notice
required by this paragraph (e), nor any defect therein or in the mailing
thereof, to any particular holder, shall affect the sufficiency of the
notice or the validity of the proceedings for redemption with respect to
the other holders. Any notice which was mailed in the manner herein
provided shall be conclusively presumed to have been duly given on the date
mailed whether or not the holder receives the notice. Each such mailed
notice shall state, as appropriate: (1) the Call Date; (2) the number of
Series C Preferred Shares to be redeemed and, if fewer than all the shares
held by such holder are to be redeemed, the number of such shares to be
redeemed from such holder; (3) the redemption price; (4) the place or
places at which certificates for such
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<PAGE>
shares are to be surrendered; and (5) that dividends on the shares to be
redeemed shall cease to accrue on such Call Date except as otherwise
provided herein. Notice having been mailed as aforesaid, from and after
the Call Date (unless the Trust shall fail to make available an amount of
cash necessary to effect such redemption), (i) except as otherwise provided
herein, dividends on the Series C Preferred Shares so called for redemption
shall cease to accrue, (ii) such shares shall no longer be deemed to be
outstanding, and (iii) all rights of the holders thereof as holders of
Series C Preferred Shares of the Trust shall cease (except the right to
receive cash payable upon such redemption, without interest thereon, upon
surrender and endorsement of their certificates if so required and to
receive any dividends payable thereon). The Trust's obligation to provide
cash in accordance with the preceding sentence shall be deemed fulfilled
if, on or before the Call Date, the Trust shall deposit with a bank or
trust company (which may be an affiliate of the Trust) that has an office
in the Borough of Manhattan, City of New York, and that has, or is an
affiliate of a bank or trust company that has, capital and surplus of at
least $50,000,000, necessary for such redemption, in trust, with
irrevocable instructions that such cash be applied to the redemption of the
Series C Preferred Shares so called for redemption. No interest shall
accrue for the benefit of the holders of Series C Preferred Shares to be
redeemed on any cash so set aside by the Trust. Subject to applicable
escheat laws, any such cash unclaimed at the end of two years from the Call
Date shall revert to the general funds of the Trust, after which reversion
the holders of such shares so called for redemption shall look only to the
general funds of the Trust for the payment of such cash.
As promptly as practicable after the surrender in accordance with such
notice of the certificates for any such shares so redeemed (properly
endorsed or assigned for transfer, if the Trust shall so require and if the
notice shall so state), such shares shall be exchanged for any cash
(without interest thereon) for which such shares have been redeemed. If
fewer than all the outstanding Series C Preferred Shares are to be
redeemed, shares to be redeemed shall be selected by the Trust from
outstanding Series C Preferred Shares not previously called for redemption
pro rata (as nearly as may be), by lot or by any other method determined by
the Trust in its sole discretion to be equitable. If fewer than all the
Series C Preferred Shares represented by any certificate are redeemed, then
new certificates representing the unredeemed shares shall be issued without
cost to the holder thereof.
Section 6. Shares To Be Retired. All Series C Preferred Shares which
shall have been issued and reacquired in any manner by the Trust shall be
restored to the status of authorized but unissued shares of beneficial interest
of the Trust, without designation as to class or series.
Section 7. Ranking. Any class or series of shares of beneficial
interest of the Trust shall be deemed to rank:
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<PAGE>
(a) prior to the Series C Preferred Shares, as to the payment of
dividends and as to distribution of assets upon liquidation, dissolution or
winding up, if the holders of such class or series shall be entitled to the
receipt of dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or priority to
the holders of Series C Preferred Shares;
(b) on a parity with the Series C Preferred Shares, as to the payment
of dividends and as to distribution of assets upon liquidation, dissolution
or winding up, whether or not the dividend rates, dividend payment dates or
redemption or liquidation prices per share thereof shall be different from
those of the Series C Preferred Shares, if the holders of such class or
series and the Series C Preferred Shares shall be entitled to the receipt
of dividends and of amounts distributable upon liquidation, dissolution or
winding up in proportion to their respective amounts of accrued and unpaid
dividends per share or liquidation preferences, without preference or
priority one over the other ("Parity Shares");
(c) junior to the Series C Preferred Shares, as to the payment of
dividends or as to the distribution of assets upon liquidation, dissolution
or winding up, if such class or series shall be Junior Shares; and
(d) junior to the Series C Preferred Shares, as to the payment of
dividends and as to the distribution of assets upon liquidation,
dissolution or winding up, if such class or series shall be Fully Junior
Shares.
Section 8. Voting. If and whenever six quarterly dividends (whether or
not consecutive) payable on the Series C Preferred Shares or any series or class
of Parity Shares shall be in arrears (which shall, with respect to any such
quarterly dividend, mean that any such dividend has not been paid in full),
whether or not earned or declared, the number of trustees then constituting the
Board of Trustees shall be increased by two and the holders of Series C
Preferred Shares, together with the holders of shares of every other series of
Parity Shares (any such other series, the "Voting Preferred Shares"), voting as
a single class regardless of series, shall be entitled to elect two additional
trustees to serve on the Board of Trustees at any annual meeting of shareholders
or special meeting held in place thereof, or at a special meeting of the holders
of the Series C Preferred Shares and the Voting Preferred Shares called as
hereinafter provided. Whenever all arrears in dividends on the Series C
Preferred Shares and the Voting Preferred Shares then outstanding shall have
been paid and dividends thereon for the current quarterly dividend period shall
have been paid or declared and set apart for payment, then the right of the
holders of the Series C Preferred Shares and the Voting Preferred Shares to
elect such additional two trustees shall cease (but subject always to the same
provision for the vesting of such voting rights in the case of any similar
future arrearages in six quarterly dividends), and the terms of office of all
persons elected as trustees by the holders of the Series C Preferred Shares and
the Voting Preferred Shares shall forthwith terminate and the number of the
Board of Trustees shall be reduced accordingly. At any time after such voting
power shall have been so vested in the holders of Series C Preferred Shares and
the Voting Preferred Shares, the
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<PAGE>
Secretary of the Trust may, and upon the written request of any holder of Series
C Preferred Shares (addressed to the Secretary at the principal office of the
Trust) shall, call a special meeting of the holders of the Series C Preferred
Shares and of the Voting Preferred Shares for the election of the two trustees
to be elected by them as herein provided, such call to be made by notice similar
to that provided in the Bylaws of the Trust for a special meeting of the
shareholders or as required by law. If any such special meeting required to be
called as above provided shall not be called by the Secretary within 20 days
after receipt of any such request, then any holder of Series C Preferred Shares
may call such meeting, upon the notice above provided, and for that purpose
shall have access to the records of the Trust. The trustees elected at any such
special meeting shall hold office until the next annual meeting of the
shareholders or special meeting held in lieu thereof if such office shall not
have previously terminated as above provided. If any vacancy shall occur among
the trustees elected by the holders of the Series C Preferred Shares and the
Voting Preferred Shares, a successor shall be elected by the Board of Trustees,
upon the nomination of the then-remaining trustee elected by the holders of the
Series C Preferred Shares and the Voting Preferred Shares or the successor of
such remaining trustee, to serve until the next annual meeting of the
shareholders or special meeting held in place thereof if such office shall not
have previously terminated as provided above. Notwithstanding any other
provisions of this paragraph, in any vote for the election of additional
trustees hereunder, the Series C Preferred Shares and Voting Preferred Shares
beneficially owned by Security Capital Group Incorporated, a Maryland
corporation, any of its direct or indirect subsidiaries and any of their
respective directors, officers or controlling stockholders (together, the
"Restricted Parties"), shall be voted in the same respective percentages as the
Series C Preferred Shares and Voting Preferred Shares that are not beneficially
owned by the Restricted Parties. The provisions in the preceding sentence shall
cease and be of no further force and effect from and after such time, but only
as long as, the Restricted Parties together no longer beneficially own in excess
of 10% of the Trust's outstanding Common Shares.
So long as any Series C Preferred Shares are outstanding, in addition to
any other vote or consent of shareholders required by law or by the Trust's
Amended and Restated Declaration of Trust, as amended and supplemented, the
affirmative vote of at least 66-2/3% of the votes entitled to be cast by the
holders of the Series C Preferred Shares and the Voting Preferred Shares, at the
time outstanding, acting as a single class regardless of series, given in person
or by proxy, either in writing without a meeting or by vote at any meeting
called for the purpose, shall be necessary for effecting or validating:
(a) Any amendment, alteration or repeal of any of the provisions of
the Trust's Amended and Restated Declaration of Trust or these Articles
Supplementary that materially and adversely affects the voting powers,
rights or preferences of the holders of the Series C Preferred Shares or
the Voting Preferred Shares; provided, however, that the amendment of the
provisions of the Trust's Amended and Restated Declaration of Trust so as
to authorize or create or to increase the authorized amount of, any Fully
Junior Shares, Junior Shares that are not senior in any respect to the
Series C Preferred Shares, or any shares of any class ranking on a parity
with the Series C Preferred Shares or the Voting Preferred Shares shall not
be deemed to materially adversely affect the
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<PAGE>
voting powers, rights or preferences of the holders of Series C Preferred
Shares, and provided, further, that if any such amendment, alteration or
repeal would materially and adversely affect any voting powers, rights or
preferences of the Series C Preferred Shares or another series of Voting
Preferred Shares that are not enjoyed by some or all of the other series
otherwise entitled to vote in accordance herewith, the affirmative vote of
at least 66-2/3% of the votes entitled to be cast by the holders of all
series similarly affected, similarly given, shall be required in lieu of
the affirmative vote of at least 66-2/3% of the votes entitled to be cast
by the holders of the Series C Preferred Shares and the Voting Preferred
Shares otherwise entitled to vote in accordance herewith; or
(b) A share exchange that affects the Series C Preferred Shares, a
consolidation with or merger of the Trust into another entity, or a
consolidation with or merger of another entity into the Trust, unless in
each such case each Series C Preferred Share (i) shall remain outstanding
without a material and adverse change to its terms and rights or (ii) shall
be converted into or exchanged for convertible preferred shares of the
surviving entity having preferences, rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms or conditions of
redemption thereof identical to that of a Series C Preferred Share (except
for changes that do not materially and adversely affect the holders of the
Series C Preferred Shares); or
(c) The authorization, reclassification or creation of, or the
increase in the authorized amount of, any shares of any class or any
security convertible into shares of any class ranking prior to the Series C
Preferred Shares in the distribution of assets on any liquidation,
dissolution or winding up of the Trust or in the payment of dividends;
provided, however, that no such vote of the holders of Series C Preferred Shares
shall be required if, at or prior to the time when such amendment, alteration or
repeal is to take effect, such share exchange, consolidation or merger is to
take effect, or when the issuance of any such prior shares or convertible
security is to be made, as the case may be, provision is made for the redemption
of all Series C Preferred Shares at the time outstanding.
For purposes of the foregoing provisions of this Section 8, each Series C
Preferred Share shall have one (1) vote per share, except that when any other
series of Voting Preferred Shares shall have the right to vote with the Series C
Preferred Shares as a single class on any matter, then the Series C Preferred
Shares and such other series shall have with respect to such matters one (1)
vote per $50.00 of stated liquidation preference. Except as otherwise required
by applicable law or as set forth herein, the Series C Preferred Shares shall
not have any relative, participating, optional or other special voting rights
and powers other than as set forth herein, and the consent of the holders
thereof shall not be required for the taking of any Trust action.
Section 9. Limitation on Ownership.
(a) Limitation. Notwithstanding any other provision of the terms of
the Series C Preferred Shares, except as provided in the next sentence and
in Section 9(b), no
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<PAGE>
Person, or Persons acting as a group, shall at any time directly or
indirectly acquire ownership of more than 25% of the outstanding Series C
Preferred Shares. Any Series C Preferred Shares owned by a Person or
Persons acting as a group in excess of such 25% shall be deemed "Excess
Preferred Shares," except that any such shares in excess of 25% will not be
considered Excess Preferred Shares if the 25% limitation is exceeded solely
as a result of the Trust's redemption of Series C Preferred Shares,
provided that thereafter any additional Series C Preferred Shares acquired
by such Person or Persons acting as a group shall be considered Excess
Preferred Shares. Within 10 days of becoming aware of the existence of
Excess Preferred Shares (whether by notice on Schedule 13D or otherwise),
the Trust shall redeem any and all Excess Preferred Shares by giving notice
of redemption to the holder or holders thereof, unless, prior to the giving
of such notice the holder shall have disposed of its ownership in the
Excess Preferred Shares. Such notice shall set forth the number of Series
C Preferred Shares constituting Excess Preferred Shares, the redemption
price and the place or places at which the certificates representing such
Excess Preferred Shares are to be surrendered and such notice shall set
forth the matters described in the following sentence. From and after the
date of giving such notice of redemption (for the purposes of this Section
9, the "redemption date"), the Series C Preferred Shares called for
redemption shall cease to be outstanding and the holder thereof shall cease
to be entitled to dividends (other than dividends declared but unpaid prior
to the notice of redemption), voting rights and other benefits with respect
to such shares excepting the rights to payment of the redemption price
determined and payable as set forth in the next two sentences. Subject to
the limitation on payment set forth in the following sentence, the
redemption price of each Excess Preferred Share called for redemption shall
be the average daily per Series C Preferred Share closing sales price, if
the Series C Preferred Shares are listed on a national securities exchange
or, if not, are reported on the NASDAQ National Market System, and if the
Series C Preferred Shares are not so listed or reported, shall be the mean
between the average per Series C Preferred Share closing bid prices and the
average per Series C Preferred Share closing asked prices, in each case
during the 30-day period ending on the Business Day prior to the redemption
date, or if there have been no sales on a national securities exchange or
the NASDAQ National Market System and no published bid quotations and no
published asked quotations with respect to Series C Preferred Shares during
such 30-day period, the redemption price shall be the price determined by
the Trustees in good faith. Unless the Trustees determine that it is in
the interest of the Trust to make earlier payment of all of the amount
determined as the redemption price per Series C Preferred Share in
accordance with the preceding sentence, the redemption price may be
payable, at the option of the Trustees, at any time or times up to, but not
later than the earlier of (i) five years after the redemption date, or (ii)
the liquidation of the Trust, in which latter event the redemption price
shall not exceed an amount which is the sum of the per Series C Preferred
Share distributions designated as liquidating distributions and return of
capital distributions declared with respect to unredeemed Series C
Preferred Shares of the Trust of record subsequent to the redemption date;
and in any event, no interest shall accrue with respect to the period
subsequent to the redemption date to the date of such payment. Nothing in
this Section
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<PAGE>
9(a) shall preclude the settlement of any transaction entered into through
the facilities of the New York Stock Exchange.
(b) Exemptions. The limitation on ownership set forth in Section 9(a)
shall not apply to the acquisition of Series C Preferred Shares by an
underwriter in a public offering of Series C Preferred Shares and shall not
apply to the ownership of Series C Preferred Shares by a managing
underwriter in the initial public offering of Series C Preferred Shares.
The Trustees, in their sole and absolute discretion, may exempt from the
ownership limitation set forth in Section 9(a) certain designated Series C
Preferred Shares owned by a Person (other than any of the Restricted
Parties) who has provided the Trustees with evidence and assurances
acceptable to the Trustees that the qualification of the Trust as a real
estate investment trust would not be jeopardized thereby.
Section 10. Record Holders. The Trust and the Transfer Agent may deem
and treat the record holder of any Series C Preferred Shares as the true and
lawful owner thereof for all purposes, and neither the Trust nor the Transfer
Agent shall be affected by any notice to the contrary.
Section 11. Sinking Fund. The Series C Preferred Shares shall not be
entitled to the benefits of any retirement or sinking fund.
THIRD: The Series C Preferred Shares have been classified by the Board of
Trustees under the authority contained in Article 2, Section 1, of the Trust's
Amended and Restated Declaration of Trust dated December 15, 1993, as amended
and supplemented.
FOURTH: Each undersigned Trustee acknowledges these Articles Supplementary
to be the act of the Trust and further, as to all matters or facts required to
be verified under oath, each such Trustee acknowledges that to the best of his
knowledge, information and belief, these matters and facts are true in all
material respects and that this statement is made under the penalties of
perjury.
* * * * *
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<PAGE>
EXHIBIT 4.9
THIRD ARTICLES OF AMENDMENT
OF
AMENDED AND RESTATED DECLARATION OF TRUST
OF
SECURITY CAPITAL INDUSTRIAL TRUST
The undersigned, being the Co-Chairman and Chief Operating Officer of
Security Capital Industrial Trust, a Maryland real estate investment trust (the
"Trust"), does hereby certify pursuant to the provisions of Article 7, Section 1
of the Trust's Amended and Restated Declaration of Trust, dated as of December
15, 1993, as amended and supplemented (the "Declaration of Trust"), and Section
8-501 of the Corporations and Associations Article of the Annotated Code of
Maryland, that the Board of Trustees of the Trust has adopted a resolution
declaring this amendment to the Declaration of Trust as hereinafter set forth to
be advisable and that the shareholders of the Trust have approved such amendment
by the affirmative vote of at least a majority of all the votes entitled to be
cast on the matter.
Therefore, the Declaration of Trust is hereby amended by adding the
following new Article 10:
ARTICLE 10. SECURITY CAPITAL TRANSACTION
Notwithstanding anything to the contrary contained herein, including,
without limitation, the provisions of Article 1 and Article 4 of this
Declaration of Trust, the Trust shall be authorized to perform all of its
obligations and exercise all of its rights under the terms of that certain
Merger and Issuance Agreement, dated as of March 24, 1997, as amended (the
"Merger Agreement"), between the Trust and Security Capital Group
Incorporated and each of the other agreements and transactions contemplated
thereby, including, without limitation, the following agreements (as each
of such agreements are defined in the Merger Agreement) and the
transactions contemplated by such agreements: (i) Agreement and Plan of
Merger; (ii) Third Amended and Restated Investor Agreement; (iii)
Administrative Services Agreement; (iv) Protection of Business Agreement;
and (v) License Agreement.
The undersigned Co-Chairman and Chief Operating Officer acknowledges these
Third Articles of Amendment to be the act of the Trust and, as to all other
matters or facts required to be verified under oath, that, to the best of his
knowledge, information and belief, these matters and facts are true in all
material respects, and that this statement is made under the penalties for
perjury.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed these Third Articles of
Amendment as of this 9th day of September, 1997.
SECURITY CAPITAL INDUSTRIAL TRUST
By: /s/ K. Dane Brooksher
----------------------------------------
K. Dane Brooksher
Co-Chairman and Chief Operating Officer
ATTEST:
By: /s/ Jeffrey A. Klopf
----------------------------------------
Jeffrey A. Klopf
Secretary
S-1
<PAGE>
Exhibit 5
October 21, 1997
The Board of Trustees
Security Capital Industrial Trust
14100 East 35th Place
Aurora, Colorado 80011
Gentlemen:
We have acted as counsel to Security Capital Industrial Trust, a
Maryland real estate investment trust (the "Company"), in connection with
the proposed offering by the Company of up to an aggregate of 583,508
common shares of beneficial interest, $0.01 par value per share (the
"Shares"), of the Company as described in the Registration Statement filed
on Form S-3 with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, (together with all amendments thereto,
the "Registration Statement"). Capitalized terms used herein, unless
otherwise defined, shall have the meaning set forth in the Registration
Statement.
As counsel to the Company, we have examined originals or copies
certified to our satisfaction of the Company's Amended and Restated
Declaration of Trust, as amended, and Bylaws, resolutions of the Board of
Trustees, and such other Company records, instruments, certificates and
documents as we considered necessary to enable us to express this opinion.
As to certain facts material to our opinion, we have relied, to the extent
we deem such reliance proper, upon certificates of public officials and
officers of the Company. In rendering this opinion, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted
to us as originals and the conformity to authentic original documents of
photostatic copies.
Based upon and subject to the foregoing and to the assumptions,
limitations and conditions set forth herein, we are of the opinion that,
the Shares, when issued and when sold in the manner described in the
Registration Statement, will be validly issued, fully paid and, except
described in the Registration Statement under "Description of Shares of
Beneficial Interest--Shareholder Liability," non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to all references to our firm in the
Registration Statement.
Very truly yours,
MAYER, BROWN & PLATT
/s/ Edward J. Schneidman
By: ________________________
Edward J. Schneidman
<PAGE>
Exhibit 8
MAIN TELEPHONE
312-782-0600
MAIN FAX
312-701-7711
October 21, 1997
Board of Trustees
Security Capital Industrial Trust
14100 East 35th Place
Aurora, Colorado 80011
Re: Partnership Classification; Status
as a Real Estate Investment Trust ("REIT");
Information in the Registration Statement under
"FEDERAL INCOME TAX CONSIDERATIONS"
-----------------------------------------------
Gentlemen:
In connection with the offering of Common Shares/1/ in Security Capital
Industrial Trust, a Maryland real estate investment trust ("SCI"), pursuant to
the S-3 Registration Statement filed with the Securities and Exchange Commission
on the date hereof, as amended (the "Registration Statement"), you have
requested our opinions concerning (i) the treatment of SCI Limited Partnership-
I, SCI Limited Partnership-II, SCI Limited Partnership-III, and SCI Limited
Partnership-IV (collectively, the "Partnerships") as partnerships for Federal
income tax purposes, and not as associations taxable as corporations; (ii) the
qualification and taxation of SCI as a REIT; and (iii) the information in the
Registration Statement under the heading "FEDERAL INCOME TAX CONSIDERATIONS."
In formulating our opinions, we have reviewed and relied upon the
partnership agreements of the Partnerships, the Registration Statement, such
other documents and information provided by you, and such applicable provisions
of law as we have considered necessary or desirable for purposes of the opinions
expressed herein.
- ------------------
/1/ Unless otherwise specifically defined herein, all capitalized terms have
the meaning assigned to them in the Registration Statement.
<PAGE>
Security Capital Industrial
October 21, 1997
Page 2
In addition, we have relied upon certain representations made by SCI
relating to the organization and actual and proposed operation of SCI and the
Partnerships. For purposes of our opinions, we have not made an independent
investigation of the facts set forth in such documents, representations from
SCI, the partnership agreements for the Partnerships or the Registration
Statement. We have, consequently, relied upon your representations that the
information presented in such documents or otherwise furnished to us accurately
and completely describes all material facts.
In rendering these opinions, we have assumed that the transactions
contemplated by the foregoing documents will be consummated in accordance with
the operative documents, and that such documents accurately reflect the material
facts of such transactions. In addition, the opinions are based on the
correctness of the following specific assumptions: (i) SCI and the Partnerships
have operated and will continue to each be operated in the manner described in
the applicable partnership agreement or other organizational documents and in
the Registration Statement, and all terms and provisions of such agreements and
documents have been and will continue to be complied with by all parties
thereto; and (ii) each partner in the Partnerships has been motivated in
acquiring its partnership interest by its anticipation of economic rewards apart
from tax considerations. Our opinions expressed herein are based on the
applicable laws of the States of Maryland and Delaware, the Code, the Treasury
regulations promulgated thereunder, and the interpretations of the Code and such
regulations by the courts and the Internal Revenue Service, all as they are in
effect and exist at the date of this letter. It should be noted that statutes,
regulations, judicial decisions, and administrative interpretations are subject
to change at any time and, in some circumstances, with retroactive effect. A
material change that is made after the date hereof in any of the foregoing bases
for our opinions, could adversely affect our conclusions.
Based upon and subject to the foregoing, it is our opinion that:
1. The Partnerships will be treated, for Federal income tax purposes, as
partnerships, and not as associations taxable as corporations.
2. Beginning with SCI's taxable year ending December 31, 1993, SCI has
been organized in conformity with the requirements for qualification as a REIT
under the Code, and SCI's actual and
<PAGE>
Security Capital Industrial
October 21, 1997
Page 3
proposed method of operation, as described in the Registration Statement and as
represented by SCI, has enabled it and will continue to enable it to satisfy the
requirements for qualification as a REIT.
3. The information in the Registration Statement under the heading
"FEDERAL INCOME TAX CONSIDERATIONS," to the extent that it constitutes matters
of law or legal conclusions, has been reviewed by us and is correct in all
material respects.
Other than as expressly stated above, we express no opinion on any issue
relating to SCI and the Partnerships or to any investment therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of the name of our firm therein and under
the caption "FEDERAL INCOME TAX CONSIDERATIONS" in the Registration Statement.
Very truly yours,
/s/ Mayer, Brown & Platt
MAYER, BROWN & PLATT
<PAGE>
EXHIBIT 15
October 21, 1997
Board of Trustees and Shareholders of
Security Capital Industrial Trust:
We are aware that Security Capital Industrial Trust has incorporated by
reference in its Registration Statement on Form S-3, Security Capital Industrial
Trust's consolidated financial statements for the quarter ended June 30, 1997,
which includes our report dated August 11, 1997 covering the unaudited interim
financial information contained therein. Pursuant to Regulation C of the
Securities Act of 1933 (the "Act"), that report is not considered a part of such
registration statement prepared or certified by our firm or a report prepared or
certified by our firm within the meaning of Sections 7 and 11 the Act.
Very truly yours,
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports on the consolidated financial statements and schedule of Security
Capital Industrial Trust and to all references to our Firm included in or made
a part of this registration statement.
Arthur Andersen LLP
Chicago, Illinois
October 21, 1997
