===============================================================================
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
---------------
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number 01-12846
PROLOGIS TRUST
(Exact name of registrant as specified in its charter)
Maryland 74-2604728
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14100 East 35th Place, Aurora, Colorado 80011
(Address or principal executive offices) (Zip Code)
(303) 375-9292
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing for the past 90 days. Yes X No _____
The number of shares outstanding of the Registrant's common stock as of
August 10, 1999 was 161,412,347.
===============================================================================
<PAGE>
PROLOGIS TRUST
INDEX
<TABLE>
<CAPTION>
Page
Number(s)
--------
<S> <C>
PART I. Financial Information
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets--June 30, 1999 and December 31, 1998.......... 3
Consolidated Statements of Earnings and Comprehensive Income--Three
and six months ended June 30, 1999 and 1998........................... 4
Consolidated Statements of Cash Flows--Six months ended June 30, 1999
and 1998.............................................................. 5
Notes to Financial Statements............................................. 6 - 22
Report of Independent Public Accountants.................................. 23
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................. 24 - 36
Item 3. Quantitative and Qualitative Disclosure About Market Risk................. 36
Part II. Other Information
Item 4. Submission of Matters to a Vote of Securities Holders..................... 37
Item 5. Other Information......................................................... 37
Item 6. Exhibits.................................................................. 37
</TABLE>
<PAGE>
PROLOGIS TRUST
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- -----------
ASSETS (Unaudited) (Audited)
<S> <C> <C>
Real estate............................................................................... $ 5,476,988 $ 3,657,500
Less accumulated depreciation.......................................................... 315,598 254,288
----------- -----------
5,161,390 3,403,212
Investments in and advances to unconsolidated subsidiaries................................ 780,165 733,863
Cash and cash equivalents................................................................. 60,432 63,140
Accounts and notes receivable............................................................. 32,541 11,648
Other assets.............................................................................. 187,214 118,866
----------- -----------
Total assets................................................................ $ 6,221,742 $ 4,330,729
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Lines of credit........................................................................ $ 266,600 $ 344,300
Short-term borrowings.................................................................. -- 150,000
Senior unsecured notes................................................................. 1,729,449 1,083,641
Other unsecured debt................................................................... 31,800 --
Mortgage notes......................................................................... 886,797 184,964
Assessment bonds....................................................................... 10,970 11,281
Securitized debt....................................................................... 31,050 31,559
Accounts payable and accrued expenses.................................................. 137,314 117,506
Construction payable................................................................... 16,937 34,025
Amount due to affiliate................................................................ 635 395
Distributions payable.................................................................. 729 39,283
Other liabilities...................................................................... 38,253 26,112
----------- -----------
Total liabilities........................................................... 3,150,534 2,023,066
----------- -----------
Minority interest......................................................................... 64,429 51,295
Shareholders' equity:
Series A Preferred Shares; $0.01 par value; 5,400,000 shares issued and
outstanding at June 30, 1999 and December 31, 1998; stated liquidation
preference of $25.00 per share....................................................... 135,000 135,000
Series B Convertible Preferred Shares; $0.01 par value; 7,155,701 shares
issued and outstanding at June 30, 1999 and 7,537,300 shares issued and
outstanding at December 31, 1998; stated liquidation preference of
$25.00 per share..................................................................... 178,892 188,440
Series C Preferred Shares; $0.01 par value; 2,000,000 shares issued and
outstanding at June 30, 1999 and December 31, 1998; stated liquidation
preference of $50.00 per share....................................................... 100,000 100,000
Series D Preferred Shares; $0.01 par value; 10,000,000 shares issued and
outstanding at June 30, 1999 and December 31, 1998; stated liquidation
preference of $25.00 per share........................................................ 250,000 250,000
Series E Preferred Shares; $0.01 par value; 2,000,000 shares issued and
outstanding at June 30, 1999; stated liquidation preference of $25.00
per share............................................................................ 50,000 --
Common shares of beneficial interest; $0.01 par value; 161,404,501 shares
issued and outstanding at June 30, 1999 and 123,415,711 shares issued
and outstanding at December 31, 1998................................................. 1,614 1,234
Additional paid-in capital................................................................ 2,652,354 1,907,232
Employee share purchase notes............................................................. (23,279) (25,247)
Accumulated other comprehensive income.................................................... 1,556 23
Distributions in excess of net earnings................................................... (339,358) (300,314)
----------- -----------
Total shareholders' equity.................................................. 3,006,779 2,256,368
----------- -----------
Total liabilities and shareholders' equity.................................. $ 6,221,742 $ 4,330,729
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
PROLOGIS TRUST
CONSOLIDATED STATEMENTS OF EARNINGS
AND COMPREHENSIVE INCOME
(Unaudited)
(In thousands, except per share data)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income:
Rental income.................................................. $ 131,251 $ 84,353 $ 228,412 $ 162,918
Other real estate income....................................... 6,833 1,747 20,221 7,004
Income (loss) from unconsolidated subsidiaries................. (1,928) (1,030) (11,137) 3,208
Interest and other............................................. 1,080 700 1,879 1,325
----------- ----------- ----------- -----------
Total income.......................................... 137,236 85,770 239,375 174,455
----------- ----------- ----------- -----------
Expenses:
Rental expenses, net of recoveries of $20,993 and $37,876 for
the three and six months in 1999, respectively and $13,842
and $28,227 for the three and six months in 1998, respectively
and including amounts paid to affiliate of $242 and $492 for
the three and six months in 1999, respectively and $192 and
$445 for the three and six months in 1998, respectively...... 8,976 7,362 16,165 13,300
General and administrative, including amounts paid to affiliate
of $466 and $998 for the three and six months in 1999,
respectively and $449 and $1,021 for the three and six months
in 1998, respectively........................................ 9,390 4,742 17,811 9,913
Depreciation and amortization.................................. 39,628 23,554 66,992 46,734
Interest....................................................... 45,351 14,362 76,269 34,007
Interest rate hedge expense.................................... -- -- 945 --
Other.......................................................... 1,169 614 3,709 1,517
----------- ----------- ----------- -----------
Total expenses........................................ 104,514 50,634 181,891 105,471
----------- ----------- ----------- -----------
Earnings from operations............................................ 32,722 35,136 57,484 68,984
Minority interest share in earnings................................. 1,434 1,075 2,603 2,054
----------- ----------- ----------- -----------
Earnings before gain on disposition of real estate and foreign
currency exchange gains (losses)............................... 31,288 34,061 54,881 66,930
Gain on disposition of real estate.................................. -- 2,212 715 4,278
Foreign currency exchange gains (losses)............................ (4,029) 453 (12,402) 2,063
----------- ----------- ----------- -----------
Earnings before cumulative effect of accounting change.............. 27,259 36,726 43,194 73,271
Cumulative effect of accounting change.............................. -- -- 1,440 --
----------- ----------- ----------- -----------
Net earnings........................................................ 27,259 36,726 41,754 73,271
Less preferred share dividends...................................... 14,493 13,075 27,938 21,874
----------- ----------- ----------- -----------
Net earnings attributable to Common Shares.......................... 12,766 23,651 13,816 51,397
Other comprehensive income:
Foreign currency translation adjustments....................... 1,975 6 1,534 62
----------- ----------- ----------- -----------
Comprehensive income................................................ $ 14,741 $ 23,657 $ 15,350 $ 51,459
=========== =========== =========== ===========
Weighted average Common Shares outstanding - Basic.................. 162,004 122,445 142,974 120,236
=========== =========== =========== ===========
Weighted average Common Shares outstanding - Diluted................ 162,209 122,857 143,110 125,722
=========== =========== =========== ===========
Basic per share net earnings attributable to Common Shares:
Earnings before cumulative effect of accounting change......... $ 0.08 $ 0.19 $ 0.11 $ 0.43
Cumulative effect of accounting change......................... -- -- (0.01) --
----------- ----------- ----------- -----------
Net earnings attributable to Common Shares............ $ 0.08 $ 0.19 $ 0.10 $ 0.43
=========== =========== =========== ===========
Diluted per share net earnings attributable to Common Shares:
Earnings before cumulative effect of accounting change......... $ 0.08 $ 0.19 $ 0.11 $ 0.43
Cumulative effect of accounting change......................... -- -- (0.01) --
----------- ----------- ----------- -----------
Net earnings attributable to Common Shares............ $ 0.08 $ 0.19 $ 0.10 $ 0.43
=========== =========== =========== ===========
Distributions per Common Shares..................................... $ 0.3272 $ 0.3183 $ 0.6455 $ 0.6033
=========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
PROLOGIS TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
1999 1998
----------- -----------
<S> <C> <C>
Operating activities:
Net earnings..................................................................... $ 41,754 $ 73,271
Minority interest share in earnings.............................................. 2,603 2,054
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation and amortization................................................ 66,992 46,734
Gain on disposition of real estate........................................... (715) (4,278)
Straight-lined rents......................................................... (4,632) (2,062)
Amortization of deferred loan costs.......................................... 2,046 846
Stock-based compensation..................................................... 1,125 --
Losses from unconsolidated subsidiaries...................................... 11,137 3,099
Foreign currency exchange (gains) losses, net................................ 12,402 (2,063)
Interest rate hedge expense.................................................. 945 --
Increase in accounts receivable and other assets................................. (25,914) (9,728)
Decrease in accounts payable, accrued expenses and other liabilities............. (3,571) (3,349)
Increase (decrease) in amount due to affiliate................................... 240 (430)
----------- -----------
Net cash provided by operating activities............................... 104,412 104,094
----------- -----------
Investing activities:
Real estate investments.......................................................... (197,842) (284,588)
Tenant improvements and lease commissions........................................ (8,079) (5,608)
Recurring capital expenditures................................................... (10,659) (2,004)
Proceeds from dispositions of real estate........................................ 102,392 51,878
Investments in and advances to unconsolidated subsidiaries....................... (139,841) (290,508)
Cash acquired in Meridian Merger................................................. 48,962 --
----------- -----------
Net cash used in investing activities................................... (205,067) (530,830)
----------- -----------
Financing activities:
Proceeds from sale of shares, net of expenses.................................... -- 372,090
Proceeds from exercised options, dividend reinvestment
and employee share purchase plan............................................ 946 186
Repurchase of Common Shares...................................................... -- (240)
Proceeds from secured financing transactions..................................... 466,000 --
Proceeds from issuance of senior unsecured notes................................. 500,000 --
Debt issuance and other transaction costs incurred............................... (56,258) (93)
Distributions paid on Common Shares.............................................. (103,276) (72,585)
Distributions paid to minority interest holders.................................. (3,393) (3,120)
Dividends paid on preferred shares............................................... (27,938) (21,874)
Principal payments on senior unsecured notes..................................... (12,500) (15,000)
Principal payments received on and retirements of employee share purchase notes.. 1,968 73
Payments on derivative financial instruments..................................... (26,996) (3,974)
Payments to Meridian shareholders................................................ (67,581) --
Proceeds from lines of credit and short-term borrowings.......................... 1,202,645 867,000
Payments on lines of credit and short-term borrowings............................ (1,430,345) (650,400)
Payment on line of credit assumed in Meridian Merger............................. (328,400) --
Regularly scheduled principal payments on mortgage notes......................... (6,795) (2,011)
Principal payments on mortgage notes at maturity................................. (10,130) (5,075)
----------- -----------
Net cash provided by financing activities............................... 97,947 464,977
----------- -----------
Net increase (decrease) in cash and cash equivalents.................................. (2,708) 38,241
Cash and cash equivalents, beginning of period........................................ 63,140 25,009
----------- -----------
Cash and cash equivalents, end of period.............................................. $ 60,432 $ 63,250
=========== ===========
</TABLE>
See Note 10 for information on non-cash investing and financing activities.
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE>
PROLOGIS TRUST
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
1. General:
Business
ProLogis Trust ("ProLogis"), a Maryland real estate investment trust
("REIT"), is a publicly held global owner and lessor of distribution facilities
focused exclusively on meeting the distribution space needs of international,
national, regional and local industrial real estate users through the ProLogis
Operating System(TM). ProLogis engages in the acquisition, development,
marketing, leasing and long-term ownership of industrial distribution
facilities, and the development of master-planned distribution parks and
corporate distribution facilities for its customers. ProLogis deploys capital in
markets that ProLogis believes have excellent long-term growth prospects and
where ProLogis believes it can achieve a strong market position through the
acquisition and development of generic, flexible facilities designed for both
warehousing and light manufacturing uses. In addition, ProLogis has invested in
refrigerated distribution companies in North America and Europe.
Principles of Financial Presentation
The consolidated financial statements of ProLogis as of June 30, 1999
and for the three and six months ended June 30, 1999 and 1998 are unaudited, and
pursuant to the rules of the Securities and Exchange Commission, certain
information and footnote disclosures normally included in financial statements
have been omitted. While management of ProLogis believes that the disclosures
presented are adequate, these interim consolidated financial statements should
be read in conjunction with ProLogis' December 31, 1998 audited consolidated
financial statements contained in ProLogis' 1998 Annual Report on Form 10-K.
On December 29, 1998, ProLogis invested in Garonor Holdings S.A.
("Garonor Holdings") by acquiring 100% of its preferred stock. Garonor Holdings,
a Luxembourg company, owns Garonor S.A. ("ProLogis Garonor"), a real estate
operating company in France. Security Capital Group Incorporated ("Security
Capital"), ProLogis' largest shareholder, owned 100% of the common stock of
Garonor Holdings. ProLogis accounted for this investment in Garonor Holdings
under the equity method of accounting. On June 29, 1999, ProLogis acquired the
common stock of Garonor Holdings from Security Capital, resulting in ProLogis
owning all of the outstanding common and preferred stock of Garonor Holdings.
Accordingly, as of that date the accounts of Garonor Holdings are consolidated
in ProLogis' financial statements along with ProLogis' other majority owned and
controlled subsidiaries and partnerships. The results of operations of Garonor
Holdings for the period from January 1, 1999 through June 29, 1999 are reflected
by ProLogis under the equity method of accounting. As of June 30, 1999, Garonor
Holdings' real estate assets, at cost, were $282.3 million and Garonor Holdings
had third party debt of $173.0 million ($31.8 million of unsecured debt and
$141.2 million of mortgage notes).
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of ProLogis' consolidated
financial position and results of operations for the interim periods. The
consolidated results of operations for the three and six months ended June 30,
1999 and 1998 are not necessarily indicative of the results to be expected for
the entire year.
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles ("GAAP") requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Start-up and Organization Costs
Through 1998, ProLogis capitalized costs associated with start-up
activities and organization costs and amortized such costs over an appropriate
period, generally five years. Statement of Position ("SOP") 98-5, "Reporting on
the Costs of Start-Up Activities", which requires that costs associated with
organization, pre-opening, and start-up activities be expensed as incurred, was
adopted by ProLogis on January 1, 1999. Accordingly, ProLogis expensed $1.4
million of unamortized organization and start-up costs as a cumulative effect of
accounting change in the first quarter of 1999.
6
<PAGE>
PROLOGIS TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
Accounting for Derivatives
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued in June 1998 and amended in June 1999. SFAS No. 133 is
effective for fiscal years beginning after June 15, 2000 and early adoption is
allowed. SFAS No. 133 provides comprehensive guidelines for the recognition and
measurement of derivatives and hedging activities and, specifically, requires
all derivatives to be recorded on the balance sheet at fair value as an asset or
liability. Management does not believe this standard will have a significant
effect on ProLogis' consolidated financial position, results of operations or
financial statement disclosures.
Reclassifications
Certain 1998 amounts have been reclassified within the financial
statements to conform to the 1999 presentation.
2. Meridian Merger
On March 30, 1999, Meridian Industrial Trust Inc. ("Meridian"), a
publicly traded REIT that owned industrial distribution facilities in the United
States, was merged with and into ProLogis (the "Meridian Merger"). In accordance
with the terms of the Agreement and Plan of Merger dated as of November 16,
1998, as amended (the "Merger Agreement"), the approximately 33.8 million
outstanding shares of Meridian common stock were exchanged (on a 1.10 for one
basis) into approximately 37.2 million ProLogis common shares of beneficial
interest, $0.01 par value ("Common Shares"). In addition, the holders of
Meridian common stock received $2.00 in cash per outstanding share,
approximately $67.6 million in total. The holders of Meridian's Series D
cumulative redeemable preferred stock received a new series of ProLogis
cumulative redeemable preferred shares, Series E preferred shares, on a one for
one basis. The Series E preferred shares have a 8.75% annual dividend rate
($2.1875 per share) and an aggregate liquidation value of $50.0 million. The
total purchase price of Meridian was approximately $1.54 billion, which included
the assumption of the outstanding debt and liabilities of Meridian as of March
30, 1999 and the issuance of approximately 1.1 million options each to acquire
1.10 ProLogis Common Shares and $2.00 in cash. The assets acquired from Meridian
include approximately $1.44 billion of real estate assets, an investment in a
refrigerated distribution business of $28.8 million and cash and other assets
aggregating $72.3 million. The transaction was structured as a tax-free merger
and was accounted for under the purchase method.
After the Meridian Merger, Security Capital, which voted its shares in
favor of the Meridian Merger, owned approximately 31.0% of the outstanding
ProLogis Common Shares and remains ProLogis' largest shareholder.
The following summarized pro forma unaudited information represents the
combined historical operating results of ProLogis and Meridian with the
appropriate purchase accounting adjustments, assuming the Meridian Merger had
occurred on January 1, 1998. The pro forma financial information presented is
not necessarily indicative of what ProLogis' actual operating results would have
been had ProLogis and Meridian constituted a single entity during such periods
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------
1999 1998
---------- ----------
<S> <C> <C>
Rental income................................................................. $ 261,926 $ 217,571
Earnings from operations...................................................... $ 61,616 $ 83,497
Earnings attributable to Common Shares before
cumulative effect of accounting change................................... $ 26,278 $ 66,419
Net earnings attributable to Common Shares.................................... $ 24,838 $ 66,419
Weighted average Common Shares outstanding:
Basic.................................................................... 161,528 153,655
Diluted.................................................................. 161,723 162,526
</TABLE>
7
<PAGE>
PROLOGIS TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Basic per share net earnings attributable to Common Shares
before cumulative effect of accounting change............................ $ 0.16 $ 0.43
Cumulative effect of accounting change........................................ (0.01) --
---------- ----------
Basic per share net earnings attributable to Common Shares.................... $ 0.15 $ 0.43
========== ==========
Diluted per share net earnings attributable to Common Shares
before cumulative effect of accounting change............................ $ 0.16 $ 0.42
Cumulative effect of accounting change........................................ (0.01) --
---------- ----------
Diluted per share net earnings attributable to Common Shares.................. $ 0.15 $ 0.42
========== ==========
</TABLE>
3. Real Estate
Investments in Real Estate
Real estate investments consisting of income producing industrial
distribution facilities, facilities under development and land held for future
development, at cost, are summarized as follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---------- ----------
<S> <C> <C>
Operating facilities:
Improved land........................................................... $ 841,600 (1) $ 517,803 (1)
Buildings and improvements.............................................. 4,254,956 (1) 2,731,203 (1)
---------- ----------
5,096,556 3,249,006
---------- ----------
Facilities under development (including cost of land)........................ 160,718 (2)(3) 209,670 (2)
Land held for development.................................................... 195,868 (4) 180,796 (4)
Capitalized preacquisition costs............................................. 23,846 (5) 18,028 (5)
---------- ----------
Total real estate................................................... 5,476,988 3,657,500
Less accumulated depreciation................................................ 315,598 254,288
---------- ----------
Net real estate..................................................... $5,161,390 $3,403,212
========== ==========
- ------------
<FN>
(1) As of June 30, 1999 and December 31, 1998, ProLogis had 1,424 and 1,099
operating buildings, respectively, consisting of 146,479,000 and
104,540,000 square feet, respectively.
(2) Facilities under development consist of 41 buildings aggregating
6,970,000 square feet as of June 30, 1999 and 55 buildings aggregating
8,022,000 square feet as of December 31, 1998.
(3) In addition to the June 30, 1999 construction payable of $16.9 million,
ProLogis had unfunded commitments on its contracts for facilities under
construction totaling $143.5 million.
(4) Land held for future development consisted of 1,925 acres as of June 30,
1999 and 1,673 acres as of December 31, 1998.
(5) Capitalized preacquisition costs include $1,227,000 and $2,199,000 of funds
on deposit with title companies for future acquisitions as of June 30, 1999
and December 31, 1998, respectively.
</FN>
</TABLE>
ProLogis Development Services
ProLogis Development Services Incorporated ("ProLogis Development
Services") develops corporate distribution facilities for future sale or on a
fee basis for customers or third parties. ProLogis owns 100% of the preferred
stock of ProLogis Development Services and realizes substantially all economic
benefits of its activities. Because ProLogis advances mortgage loans to ProLogis
Development Services to fund its acquisition, development and construction
8
<PAGE>
PROLOGIS TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
activities, ProLogis Development Services is consolidated with the accounts of
ProLogis. Accordingly, these loans ($273.0 million as of June 30, 1999) are
reflected as real estate investments in ProLogis' consolidated balance sheet.
ProLogis Development Services is not a qualified REIT subsidiary of ProLogis.
Accordingly, provisions for federal income taxes are recognized, as appropriate.
The gains recognized on disposition of undepreciated property by ProLogis
Development Services and the fees generated by ProLogis Development Services are
reflected as other real estate income by ProLogis.
Operating Lease Agreements
ProLogis leases its facilities to customers under agreements which are
classified as operating leases. The leases generally provide for payment of all
or a portion of utilities, property taxes and insurance by the tenant. As of
June 30, 1999, minimum lease payments receivable on leases with lease periods
greater than one year are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Remainder of 1999................................. $ 261,609
2000.............................................. 469,363
2001.............................................. 391,672
2002.............................................. 313,247
2003.............................................. 242,185
Thereafter........................................ 694,364
-------------
$ 2,372,440
=============
</TABLE>
4. Unconsolidated Subsidiaries:
Investments in and advances to unconsolidated subsidiaries are as
follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------- -------------
<S> <C> <C>
Insight......................................................................... $ 1,959 $ 1,520
------------- -------------
ProLogis Logistics:
Investment (1)(2)........................................................... 41,542 13,241
Note receivable............................................................. 130,134 128,634
Accrued interest and other receivables...................................... 14,312 9,146
------------- -------------
185,988 151,021
------------- -------------
Frigoscandia S.A.:
Investment (1).............................................................. (9,133) 2,900
Notes receivable............................................................ 209,314 206,667
Accrued interest and other receivables...................................... 17,438 11,998
------------- -------------
217,619 221,565
------------- -------------
Kingspark S.A.:
Investment (1).............................................................. 18,837 22,413
Notes receivable............................................................ 242,598 146,135
Mortgage notes receivable................................................... 102,155 52,371
Accrued interest and other receivables...................................... 11,009 3,850
------------- -------------
374,599 224,769
------------- -------------
Garonor Holdings (3):
Investment (1).............................................................. -- 5,508
Note receivable............................................................. -- 129,395
Accrued interest receivable................................................. -- 85
------------- -------------
-- 134,988
------------- -------------
Total $ 780,165 $ 733,863
============= =============
9
<PAGE>
PROLOGIS TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
- ---------------
<FN>
(1) Investment represents ProLogis' investment in the preferred stock of the
respective companies as adjusted for ProLogis' share of each company's net
earnings or loss.
(2) Includes $28.8 million representing ProLogis' investment in the preferred
stock of Meridian Refrigeration Incorporated ("MRI") which was acquired as
part of the Meridian Merger. CS Integrated LLC ("CSI"), which is owned by
ProLogis Logistics, acquired 100% of the common stock of MRI on March 30,
1999. ProLogis intends to sell its interest in MRI to CSI.
(3) Garonor Holdings was acquired on December 29, 1998 and was accounted for
under the equity method of accounting from that date to June 29, 1999.
After June 29, 1999, Garonor Holdings is consolidated with the accounts of
ProLogis. See Note 1.
</FN>
</TABLE>
Insight
As of June 30, 1999, ProLogis Development Services had a 28.6%
ownership interest in Insight, Inc. ("Insight"), a privately owned logistics
optimization consulting company. On July 2, 1999, ProLogis invested an
additional $500,000 in Insight which brought its ownership interest to 33.3%.
This investment is accounted for under the equity method. ProLogis recognized a
loss of $60,000 from its investment in Insight for the six months ended June 30,
1999. Prior to July 1, 1998, this investment was accounted for under the cost
method.
ProLogis Logistics
ProLogis owns 100% of the preferred stock of ProLogis Logistics
Services Incorporated ("ProLogis Logistics"). ProLogis Logistics owns CSI, a
refrigerated distribution company operating in the United States and Canada.
Prior to June 12, 1998, ProLogis Logistics owned, at various points in time,
between 60.0% and 77.1% of CSI. As of June 30, 1999, ProLogis had invested $19.9
million in the preferred stock of ProLogis Logistics. As of June 30, 1999, CSI
owned or operated refrigerated distribution facilities aggregating 139.4 million
cubic feet. The common stock of ProLogis Logistics is owned by an unrelated
party. ProLogis recognizes 95% of the economic benefits of the activities of
ProLogis Logistics and its subsidiaries.
As of June 30, 1999, ProLogis had a $130.1 million note receivable from
ProLogis Logistics. The note is unsecured, bears interest at 8.0% per annum and
matures on April 24, 2002. Interest payments on the note are due annually.
ProLogis accounts for its investment in ProLogis Logistics under the
equity method. ProLogis recognized income (including interest income on the note
receivable and a management fee payable from CSI through June 1998) from its
investment in ProLogis Logistics of $3.1 million and $4.6 million for the three
and six months in 1999 and $1.5 million and $2.5 million for the three and six
months in 1998, respectively.
Frigoscandia S.A.
On January 16, 1998, ProLogis invested in Frigoscandia S.A. by
acquiring 100% of its preferred stock. Frigoscandia S.A. is a Luxembourg company
that acquired a refrigerated distribution company headquartered in Sweden,
Frigoscandia AB on that date. Frigoscandia AB is 100% owned by Frigoscandia
Holding AB, which is 100% owned by a wholly owned subsidiary of Frigoscandia
S.A. As of June 30, 1999, Frigoscandia AB, which operates in nine European
countries, owned or operated 188.4 million cubic feet of refrigerated
distribution facilities. As of June 30, 1999, ProLogis had invested $28.5
million in the preferred stock of Frigoscandia S.A. The common stock of
Frigoscandia S.A. is owned by a limited liability company, in which unrelated
parties own 100% of the voting interests and Security Capital owns 100% of the
non-voting interests. ProLogis recognizes 95% of the economic benefits of the
activities of Frigoscandia S.A. and its subsidiaries.
As of June 30, 1999, ProLogis had the following notes receivable
outstanding:
o $91.5 million unsecured note from Frigoscandia Holding AB; interest
at 5.0% per annum; due on demand;
o $87.8 million unsecured note from Frigoscandia S.A.; interest at
5.0% per annum; $80.0 million due July 15, 2008 with the remainder
due on demand; and
o $30.0 million unsecured, non-interest bearing note from a
subsidiary of Frigoscandia Holding AB; due March 20, 2018.
10
<PAGE>
PROLOGIS TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
ProLogis accounts for its investment in Frigoscandia S.A. under the
equity method. ProLogis recognized losses of $3.4 million and $6.9 million for
the three and six months in 1999 and a loss of $2.5 million and income of $0.7
million for the three and six months in 1998, respectively (including interest
income on the mortgage notes and notes receivable).
Frigoscandia AB has a multi-currency, three-year revolving credit
agreement through a consortium of 11 European banks in the currency equivalent
of approximately $190.2 million as of June 30, 1999. The loan bears interest at
each currency's respective LIBOR or Euribor rate plus 0.65%. ProLogis has
entered into a guaranty agreement for 25% of the loan balance.
Kingspark S.A.
On August 14, 1998, ProLogis invested in Kingspark Holding S.A.
("Kingspark S.A.") by acquiring 100% of its preferred stock. Kingspark S.A. is a
Luxembourg company that acquired an industrial real estate development company
operating in the United Kingdom, Kingspark Group Holdings Limited ("ProLogis
Kingspark"), on that date. As of June 30, 1999, ProLogis Kingspark had 484,000
square feet of operating facilities, 1,847,000 square feet of facilities under
development and 337,000 square feet of facilities being developed under
construction management agreements. Additionally, as of June 30, 1999, ProLogis
Kingspark owned 387 acres and controlled 1,416 acres of land through letters of
intent or contingent contracts for future development of 26.3 million square
feet of facilities. As of June 30, 1999, ProLogis had invested $24.0 million in
the preferred stock of Kingspark S.A. The common stock of Kingspark S.A. is
owned by a limited liability company, in which unrelated third parties own 100%
of the voting interests and Security Capital owns 100% of the non-voting
interests. ProLogis recognizes 95% of the economic benefits of the activities of
Kingspark S.A. and its subsidiaries.
As of June 30, 1999:
o $112.3 million unsecured note receivable from Kingspark S.A.;
interest at 5.0% per annum; due January 2000;
o $130.3 million unsecured note receivable from ProLogis Kingspark;
interest at 8.0% per annum; due January 2000;
o $52.4 million mortgage note receivable from ProLogis Kingspark;
interest at 8.0% per annum; secured by land parcels; due January
2002; and
o $49.8 million of mortgage notes receivable from subsidiaries of
Kingspark S.A.; interest at 7.0% per annum; secured by land
parcels; due on demand.
ProLogis accounts for its investment in Kingspark S.A. under the equity
method. ProLogis recognized income of $5.0 million and $3.6 million for the
three and six months in 1999, respectively (including interest income on the
mortgage notes and notes receivable) from its investment in Kingspark S.A.
ProLogis Kingspark has a line of credit agreement with a bank in the
United Kingdom. The credit agreement, which provides for borrowings of up to
approximately $16.0 million, has been guaranteed by ProLogis. As of June 30,
1999, no borrowings were outstanding on the line of credit. Additionally,
ProLogis has an agreement whereby it has guaranteed the performance and
obligations of ProLogis Kingspark with respect to an infrastructure agreement
entered into by ProLogis Kingspark related to the development of a land parcel.
As of June 30, 1999, ProLogis had an unfunded commitment on this guarantee
agreement of $10.6 million.
11
<PAGE>
PROLOGIS TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
Summarized Financial Information
Summarized financial information for ProLogis' unconsolidated
subsidiaries as of and for the six months ended June 30, 1999 is presented below
(in millions of U.S. dollars).
<TABLE>
<CAPTION>
ProLogis Frigoscandia Kingspark
Logistics (1)(2) S.A. (1) S.A. (1)
--------------- ------------ -----------
<S> <C> <C> <C>
Total assets................................ $ 317.4 $ 554.7 $ 451.2
Total liabilities (3)....................... $ 275.4 $ 572.9 $ 436.0
Minority interest........................... $ -- $ 1.7 $ --
Shareholders' equity........................ $ 42.0 $ (19.9) $ 15.2
Revenues.................................... $ 123.2 $ 203.9 $ 13.7
Adjusted EBITDA (4)......................... $ 16.0 $ 23.2 $ 11.1
Net loss (5) (6)............................ $ (0.6) $ (12.7) (7) $ (3.8) (8)
- ---------------
<FN>
(1) Information presented is for the entire entity. ProLogis has a 95% economic
interest in each entity.
(2) ProLogis Logistics' balances include MRI, which was acquired on March 30,
1999. See Note 2.
(3) Includes amounts due to ProLogis of $144.4 million from ProLogis Logistics,
$226.8 million from Frigoscandia S.A. and $355.8 million from Kingspark S.A.
and loans from third parties of $88.3 million from ProLogis Logistics and
$214.5 million from Frigoscandia S.A.
(4) Adjusted EBITDA represents earnings from operations before interest
expense, interest income, current and deferred income taxes, depreciation,
amortization, cumulative effect of accounting changes, non-recurring items
and adjustments from the remeasurement of intercompany and other debt based
on current foreign currency exchange rates.
(5) ProLogis' share of the net loss and interest income on intercompany notes
and mortgage notes receivable are recognized in the Consolidated Statements
of Earnings and Comprehensive Income as "Income (loss) from unconsolidated
subsidiaries".
(6) The net loss of each company includes interest expense on intercompany notes
and mortgage notes due to ProLogis.
(7) Includes a net loss of $2.2 million from the remeasurement of intercompany
and other debt based on the foreign currency exchange rates in effect as of
June 30, 1999.
(8) Includes a net loss of $5.8 million from the remeasurement of intercompany
debt based on foreign currency exchange rates in effect as of June 30,
1999.
</FN>
</TABLE>
5. Borrowings:
Lines of Credit
ProLogis has an unsecured credit agreement with Bank of America, N.A.
("Bank of America"), Commerzbank AG and Chase Bank of Texas, National
Association, as agents for a bank group that provides for a $550.0 million
unsecured revolving line of credit (increased from $540.0 million on May 28,
1999). Borrowings bear interest at ProLogis' option, at either (a) the greater
of the federal funds rate plus 0.5% and the prime rate, or (b) LIBOR plus 1.00%
based upon ProLogis' current senior debt ratings. The prime rate was 7.75% and
the 30-day LIBOR rate was 5.2363% as of June 30, 1999. Additionally, the credit
agreement provides for a facility fee of 0.20% per annum. The line of credit
matures on March 29, 2001 and may be extended for an additional year at
ProLogis' option. ProLogis was in compliance with all covenants contained in the
credit agreement as of June 30, 1999. As of June 30, 1999, $242.2 million of
borrowings were outstanding on the line of credit.
The $550.0 million unsecured line of credit replaced ProLogis' previous
$350.0 million unsecured line of credit that was put into place in August 1998.
ProLogis' entered into the new credit agreement to allow for increased borrowing
capacity after the Meridian Merger.
12
<PAGE>
PROLOGIS TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
In addition, ProLogis has a $25.0 million short-term unsecured
discretionary line of credit with Bank of America that matures on October 1,
1999. By agreement between ProLogis and Bank of America, the rate of interest on
and the maturity date of each advance are determined at the time of each
advance. There were $24.4 million of borrowings outstanding on the line of
credit as of June 30, 1999.
Senior Unsecured Notes
ProLogis has issued senior unsecured notes and medium-term unsecured
notes that bear interest at fixed rates, payable semi-annually (the "Notes").
The Notes are summarized as follows (in thousands of dollars:
<TABLE>
<CAPTION>
Principal Principal
Original Coupon Maturity Outstanding at Payment
Date of Issuance Principal Rate Date June 30, 1999 (1) Requirement
---------------- ----------- ------ -------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
May 16, 1995 $ 17,500 7.250% 05/15/00 $ 17,485 (2)
May 16, 1995 17,500 7.300% 05/15/01 17,470 (2)
May 17, 1996 50,000 7.250% 05/15/02 37,481 (3)
October 9, 1998 125,000 7.000% 10/01/03 125,000 (2)
April 26, 1999 250,000 6.700% 04/15/04 249,575 (2)
July 20, 1998 250,000 7.050% 07/15/06 249,527 (2)
November 20, 1997 (4) 135,000 7.250% 11/20/07 133,961 (2)
April 26, 1999 250,000 7.100% 04/15/08 249,929 (2)
May 17, 1996 100,000 7.950% 05/15/08 99,869 (5)
March 2, 1995 150,000 8.720% 03/01/09 150,000 (6)
May 16, 1995 75,000 7.875% 05/15/09 74,740 (7)
November 20, 1997 (4) 25,000 7.300% 11/20/09 24,761 (2)
February 4, 1997 100,000 7.810% 02/01/15 100,000 (8)
March 2, 1995 50,000 9.340% 03/01/15 50,000 (9)
May 17, 1996 50,000 8.650% 05/15/16 49,868 (10)
July 11, 1997 100,000 7.625% 07/01/17 99,783 (2)
----------- -----------
$ 1,745,000 $ 1,729,449
=========== ===========
- ---------------
<FN>
(1) Amounts are net of unamortized original issue discount.
(2) Principal due at maturity.
(3) Annual principal payments of $12.5 million from 5/15/00 to 5/15/02.
(4) Senior unsecured notes assumed by ProLogis in connection with the Meridian
Merger. See Note 2.
(5) Annual principal payments of $25.0 million from 5/15/05 to 5/15/08.
(6) Annual principal payments of $18.75 million from 3/1/02 to 3/1/09.
(7) Annual principal payments of $9.375 million from 5/15/02 to 5/15/09.
(8) Annual principal payments ranging from $10.0 million to $20.0 million from
2/1/10 to 2/1/15.
(9) Annual principal payments ranging from $5.0 million to $12.5 million from
3/1/10 to 3/1/15.
(10) Annual principal payments ranging from $5.0 million to $12.5 million from
5/15/10 to 5/15/16.
</FN>
</TABLE>
The Notes rank equally with all other unsecured and unsubordinated
indebtedness of ProLogis from time to time outstanding. The Notes are redeemable
at any time at the option of ProLogis. Such redemption and other terms are
governed by the provisions of an indenture agreement or, with respect to the
notes assumed in connection with the Meridian Merger, note purchase agreements.
Under the terms of the indenture agreement and note purchase agreements,
ProLogis must meet certain financial covenants and ProLogis was in compliance
with all such covenants as of June 30, 1999.
Other Unsecured Debt
ProLogis has an unsecured term loan in the amount of 200.0 million
French francs ($31.8 million as of June 30, 1999). The loan bears interest at a
variable rate (Euribor plus 1.00%) that has been fixed through maturity at 4.62%
through an interest rate swap agreement. See Note 11. The loan is due in
December 2003.
13
<PAGE>
PROLOGIS TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
Mortgage Notes, Assessment Bonds and Securitized Debt
Mortgage notes, assessment bonds and securitized debt consisted of the
following as of June 30, 1999 (in thousands):
<TABLE>
<CAPTION>
Balloon
Periodic Payment
Interest Maturity Payment Principal Due at
Description Rate (1) Date Date Balance Maturity
----------- ------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Mortgage notes:
Platte Valley Industrial Center #1...... 9.750% 03/01/00 (2) $ 319 $ 256
West One Business Center #1............. 8.250 09/01/00 (2) 4,374 4,252
Tampa West Distribution Center #20...... 9.125 11/30/00 (3) 80 --
Rio Grande Industrial Center #1......... 8.875 09/01/01 (2) 2,968 2,544
Titusville Industrial Center #1......... 10.000 09/01/01 (2) 4,578 4,181
Eigenbrodt Way Distribution Center #1... 8.590 04/01/03 (2) 1,640 1,479
Gateway Corporate Center #10............ 8.590 04/01/03 (2) 1,847 1,361
Hayward Industrial Center I & II........ 8.590 04/01/03 (2) 13,846 12,480
Thornton Business Center #1--#4......... 8.590 04/01/03 (2) 9,081 8,185
Sullivan 75 Distribution Center #1...... 9.960 04/01/04 (2) 1,805 1,663
Oceanie Distribution Center #1 and Epone
Distribution Center #1.................. 5.000 07/26/04 (3) 4,934 --
Platte Valley Industrial Center #8...... 8.750 08/01/04 (2) 1,867 1,488
Riverside Distribution Center #3........ 8.750 08/01/04 (2) 1,467 1,170
Riverside Distribution Center #4........ 8.750 08/01/04 (2) 3,964 3,161
West One Business Center #3............. 9.000 09/01/04 (2) 4,363 3,847
Raines Distribution Center.............. 9.500 01/01/05 (2) 5,407 4,402
Prudential Insurance (4) (5)............ 6.850 03/01/05 (6) 73,160 73,160
Consulate Distribution Center #300 (4).. 6.970 02/01/06 (2) 3,865 3,585
Plano Distribution Center #7 (4)........ 7.020 04/15/06 (2) 3,741 3,015
Mitry-Mory Distribution Center #1, Isle
d'Abeau Distribution Center #1 and 2
and Longjumeau Distribution Center.... (7) 12/29/06 (2) 20,670 7,950
Societe Generale (5).................... (8) 12/29/06 (2) 129,490 86,712
CIGNA (5)............................... 7.080 03/01/07 (2) 149,512 134,431
Vista Del Sol Industrial Center #1...... 9.680 08/01/07 (3) 2,526 --
Vista Del Sol Industrial Center #3...... 9.680 08/01/07 (3) 1,069 --
Senart Distribution Center #5 and Aulany
Distribution Center #24......... 8.600 07/21/08 (3) 11,688 --
State Farm Insurance (4) (5)............ 7.100 11/01/08 (2) 15,593 13,065
TIAA (5)................................ 7.200 03/01/09 (9) 182,000 158,676
Placid Street Dist. Center #1 (4)(5).... 7.180 12/01/09 (2) 7,991 6,529
Earth City Industrial Center #3......... 8.500 07/01/10 (3) 2,222 --
GMAC Commercial Mortgage (5)............ 7.750 10/01/10 (3) 7,971 --
Executive Park Distribution Center #3... 8.190 03/01/11 (3) 1,081 --
Cameron Business Center #1 (4) (5)...... 7.230 07/01/11 (2) 6,341 4,526
Platte Valley Industrial Center #9...... 8.100 04/01/17 (3) 3,290 --
Platte Valley Industrial Center #4...... 10.100 11/01/21 (3) 2,047 --
MGT (5)................................. 7.584 04/01/24 (10) 200,000 127,991
----------
$ 886,797
==========
Assessment bonds:
City of Wilsonville..................... 6.82% 08/19/04 (3) $ 120
City of Kent............................ 5.50 05/01/05 (3) 16
City of Kent............................ 7.85 06/20/05 (3) 84
City of Portland........................ 8.33 11/17/07 (3) 6
City of Kent............................ 7.98 05/20/09 (3) 64
City of Fremont......................... 7.00 03/01/11 (3) 9,628
City of Las Vegas....................... 8.75 10/01/13 (3) 294
City of Las Vegas....................... 8.75 10/01/13 (3) 289
City of Las Vegas....................... 8.75 10/01/13 (3) 162
City of Portland........................ 7.25 11/07/15 (3) 96
City of Portland........................ 7.25 09/15/16 (3) 211
----------
$ 10,970
==========
Securitized debt:
Tranche A............................... 7.74% 02/01/04 (2) $ 23,021
Tranche B............................... 9.94 02/01/04 (2) 8,029
----------
$ 31,050
==========
14
<PAGE>
PROLOGIS TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
- ---------------
<FN>
(1) The weighted average interest rates for mortgage notes, assessment bonds
and securitized debt were 7.14%, 7.13% and 8.31%, respectively as of
June 30, 1999.
(2) Monthly amortization with a balloon payment due at maturity.
(3) Fully amortizing.
(4) Mortgage note was assumed by ProLogis in connection with the Meridian
Merger. See Note 2. Under purchase accounting, the mortgage note was
recorded at its fair value. Accordingly, a premium or discount was
recognized, where applicable.
(5) Secured by a pool of distribution facilities.
(6) Interest only with balloon payment due at maturity.
(7) Variable rate provided by loan agreement (Euribor plus 1.35%) is fixed
through January 2004 at 4.94% through interest rate swap agreement. See
Note 11.
(8) Variable rate provided by loan agreement (Euribor plus 1.35%) is fixed
through January 2004 at 4.95% through interest rate swap agreement related
to $122,430,000 of principal. Remaining principal bears interest at
variable rate (Euribor plus 1.35%), 4.00% as of June 30, 1999. See Note 11.
(9) Monthly interest only payments through March 2002 and monthly principal and
interest payments from April 2002 to March 2009.
(10) Monthly interest only payments through May 2005, monthly principal and
interest payments from June 2005 to April 2024 with a balloon payment due
at maturity.
</FN>
</TABLE>
Mortgage notes are secured by real estate with an aggregate
undepreciated cost of $1.54 billion as of June 30, 1999. Assessment bonds are
secured by real estate with an aggregate undepreciated cost of $226.2 million as
of June 30, 1999. Securitized debt is collateralized by real estate with an
aggregate undepreciated cost of $66.8 million as of June 30, 1999.
Long-term Debt Maturities
Approximate principal payments due on senior unsecured notes, other
unsecured debt, mortgage notes, assessment bonds and securitized debt during
each of the years in the five-year period ending December 31, 2003 and
thereafter are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Remainder of 1999...................................... $ 14,403
2000................................................... 43,895
2001................................................... 47,649
2002................................................... 62,050
2003................................................... 231,278
2004 and thereafter.................................... 2,293,842
-----------
Total principal due........................... 2,693,117
Less: Original issue discount......................... (3,051)
-----------
Total carrying value.......................... $ 2,690,066
===========
</TABLE>
Interest Expense
For the six months ended June 30, 1999 and 1998, interest expense was
$76.3 million and $34.0 million, respectively, which excludes capitalized
interest of $7.7 million and $8.9 million, respectively. Amortization of
deferred loan costs included in interest expense was $2.0 and $0.8 million for
the six months ended June 30, 1999 and 1998, respectively. The total interest
paid in cash on all outstanding debt was $69.9 million and $41.7 million for the
six months ended June 30, 1999 and 1998, respectively.
15
<PAGE>
PROLOGIS TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
6. Minority Interest:
Minority interest represents the limited partners' interests in real
estate partnerships controlled by ProLogis. With respect to each of the
partnerships either ProLogis or a subsidiary of ProLogis is the sole general
partner with all management powers over the business and affairs of the
partnership. The limited partners of each partnership generally do not have the
right to participate in or exercise management control over the business and
affairs of the partnership. With respect to each partnership the general partner
may not, without the written consent of all of the limited partners, take any
action that would prevent such partnership from conducting its business, possess
the property of the partnership, admit an additional partner or subject a
limited partner to the liability of a general partner.
ProLogis sold its 70.0% general partnership interest in Red Mountain
Joint Venture in March 1999 and recognized a gain of $715,000. As of June 30,
1999, ProLogis is the controlling general partner in six partnerships: ProLogis
Limited Partnership-I, ProLogis Limited Partnership-II, ProLogis Limited
Partnership-III, ProLogis Limited Partnership-IV and two partnerships acquired
in the Meridian Merger. A total of 5,538,791 limited partnership units were held
by minority interest limited partners in these partnerships as of June 30, 1999.
In each of these partnerships, the limited partners are entitled to exchange
partnership units for Common Shares (5,055,704 on a one for one basis and
483,087 at a rate of 1.1 Common Share per partnership unit, plus $2.00).
Additionally, the limited partners are entitled to receive preferential
cumulative quarterly distributions per unit equal to the quarterly distributions
in respect of Common Shares. ProLogis acquired two additional partnership
interests in the Meridian Merger. During the second quarter of 1999, ProLogis
purchased the minority partners' interest in one of these partnerships and
disposed of its interest in the other of these partnerships.
For the six months ended June 30, 1999, distributions of $3.4 million
were made to the minority interest limited partners. For financial reporting
purposes, the assets, liabilities, results of operations and cash flows of each
of the six partnerships are included in ProLogis' consolidated financial
statements, and the interests of the limited partners are reflected as minority
interest.
7. Distributions and Dividends:
Common Share Distributions
On February 24, 1999, ProLogis paid a quarterly distribution of $0.3183
per Common Share. On March 18, 1999, the Board set a proposed annual
distribution level of $1.30 per Common Share. Accordingly, on that date the
Board declared a quarterly distribution of $0.3272 per Common Share which was
paid on May 27, 1999 to shareholders of record on May 13, 1999. On July 28,
1999, the Board declared a distribution of $0.3272 per Common Share for the
third quarter of 1999 payable on August 26, 1999 to shareholders of record on
August 12, 1999.
On May 3, 1999, ProLogis paid a common distribution to holders of
Meridian common stock as of March 19, 1999. This distribution, which was
declared by the Meridian Board of Directors prior to the closing of the Meridian
Merger, related to the first quarter of 1999 and aggregated $11.1 million. This
liability was assumed by ProLogis in connection with the Meridian Merger.
Preferred Share Dividends
On March 31 and June 30, 1999, ProLogis paid quarterly dividends of
$0.5875 per cumulative redeemable Series A preferred share, $0.4375 per
cumulative redeemable convertible Series B preferred share, $1.0675 per
cumulative redeemable preferred Series C share and $0.495 per cumulative
redeemable Series D preferred share.
On April 30, 1999, ProLogis paid an aggregate dividend of $1.1 million
on the Series E preferred shares ($0.5469 per share), of which $729,200 related
to Meridian's Series D preferred stock and was accrued by Meridian prior to the
closing of the Meridian Merger. On July 2, 1999, the Board declared a dividend
on the Series E preferred shares of $0.5469 per share, which was paid on July
30, 1999 to shareholders of record on July 15, 1999.
16
<PAGE>
PROLOGIS TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
Pursuant to the terms of its preferred shares, ProLogis is restricted
from declaring or paying any distribution with respect to the Common Shares
unless all cumulative distributions with respect to the Preferred Shares have
been paid and sufficient funds have been set aside for distributions that have
been declared for the then current distribution period with respect to the
Preferred Shares.
8. Shareholders' Equity:
Authorized Shares
At the annual meeting on June 24, 1999, the shareholders of ProLogis
approved an Amended and Restated Declaration of Trust, which, among other
provisions, increased the number of authorized shares of beneficial interest
from 230,000,000 shares to 275,000,000 shares.
Shelf Registration
In June 1999, ProLogis' $500.0 million shelf registration statement was
declared effective by the Securities and Exchange Commission. This shelf
registration supplemented an existing shelf registration with a balance of
$108.0 million. As a result of this filing, ProLogis can issue $608.0 million of
securities in the form of debt securities, preferred shares, Common Shares,
rights to purchase Common Shares and preferred share purchase rights on an
as-needed basis, subject to ProLogis' ability to effect offerings on
satisfactory terms.
9. Earnings Per Common Share:
A reconciliation of the numerator and denominator used to calculate
basic earnings per share to the numerator and denominator used to calculate
diluted earnings per share for the periods indicated (in thousands, except per
share amounts) is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net earnings attributable to Common Shares........ $ 12,766 $ 23,561 $ 13,816 $ 51,397
Add: Minority interest share in earnings......... -- -- -- 2,054
----------- ----------- ----------- -----------
Adjusted net earnings attributable to Common
Shares....................................... $ 12,766 $ 23,561 $ 13,816 $ 53,451
=========== =========== =========== ===========
Weighted average Common Shares outstanding -
basic........................................ 162,004 122,445 142,974 120,236
Weighted average effect of convertible limited
partnership units............................ -- -- -- 5,070
Incremental effect of common stock equivalents.... 205 412 136 416
----------- ----------- ----------- -----------
Adjusted weighted average Common Shares
outstanding - diluted........................ 162,209 122,857 143,110 125,722
=========== =========== =========== ===========
Per share net earnings attributable to Common
Shares:
Basic........................................ $ 0.08 $ 0.19 $ 0.10 $ 0.43
=========== =========== ========== ===========
Diluted...................................... $ 0.08 $ 0.19 $ 0.10 $ 0.43
=========== =========== ========== ===========
</TABLE>
17
<PAGE>
PROLOGIS TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
For the six months ended June 30, 1999, basic and diluted per share net
earnings attributable to Common Shares before cumulative effect of accounting
change was $0.11. The following convertible securities were not included in the
calculation of diluted earnings per share as the effect, on an as-converted
basis, was antidilutive (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Series B preferred shares 9,248 10,174 9,336 10,209
=========== =========== =========== ===========
Limited partnership units 5,599 5,069 5,245 --
=========== =========== =========== ===========
</TABLE>
10. Supplemental Cash Flow Information
Non-cash investing and financing activities for the six months ended
June 30, 1999 and 1998 are as follows:
o In connection with the Meridian Merger discussed in Note 2,
ProLogis issued approximately 37.2 million Common Shares and 2.0
million Series E preferred shares, assumed approximately 1.1
million options and assumed outstanding debt and liabilities of
Meridian for an aggregate purchase price of approximately $1.54
billion in exchange for the assets of Meridian (including cash
balances acquired of $49.0 million).
o Series B convertible redeemable preferred shares aggregating
$9.6 million and $1.9 million were converted into Common Shares in
1999 and 1998, respectively.
o Limited partnership units aggregating $205,000 and $302,000
were converted into Common Shares in 1999 and 1998, respectively.
o Foreign currency translation adjustments of $1,534,000 and $62,000
were recognized in 1999 and 1998, respectively.
o Mortgage notes in the amount of $7.2 million were assumed in
connection with the acquisition of real estate in 1998.
11. Financial Instruments:
Derivative Financial Instruments
ProLogis occasionally uses derivative financial instruments as hedges
to manage well-defined risks associated with interest and foreign currency rate
fluctuations on existing obligations or anticipated transactions. ProLogis does
not use derivative financial instruments for trading purposes.
The primary risks associated with derivative instruments are market
risk and credit risk. Market risk is defined as the potential for loss in the
value of the derivative due to adverse changes in market prices (interest rates
or foreign currency rates). Through hedging, ProLogis can effectively manage the
risk of increases in interest rates and fluctuations in foreign currency
exchange rates.
Credit risk is the risk that one of the parties to a derivative
contract fails to perform or meet their financial obligation under the contract.
ProLogis does not obtain collateral to support financial instruments subject to
credit risk but monitors the credit standing of counterparties. ProLogis does
not anticipate non-performance by any of the counterparties to its derivative
contracts. Should a counterparty fail to perform, however, ProLogis would incur
a financial loss to the extent of the positive fair market value of the
derivative instruments, if any.
18
<PAGE>
PROLOGIS TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following table summarizes the activity in interest rate contracts
for the six months ended June 30, 1999 (in millions):
<TABLE>
<CAPTION>
Interest
Rate Futures Interest
Contracts Rate Swaps
------------ ----------
<S> <C> <C>
Notional amount as of December 31, 1998...... $ 75.0 $ 75.0
New contracts (1)............................ -- 174.9
Terminated contracts (2)..................... (75.0) (75.0)
------- -------
Notional amount as of June 30, 1999.......... $ -- $ 174.9
======= =======
- ---------------
<FN>
(1) ProLogis has interest rate swap agreements related to variable rate
mortgage notes and other unsecured debt in the currency equivalent of
$174.9 million as of June 30, 1999. The swap agreements have a combined
notional amount of 1.1 billion French francs and fix the interest rate
at 4.60% through December 2003 on $31.8 million of other unsecured
debt, at 4.95% through January 2004 on $122.4 million of mortgage notes
and at 4.94% through January 2004 on $20.7 million of mortgage notes.
(2) In October 1997, in anticipation of debt offerings in 1998, ProLogis
entered into two interest rate protection agreements which were renewed
past the original termination dates. These agreements were entered into
by ProLogis to fix the interest rate on anticipated financings.
During the third quarter of 1998, ProLogis determined that the interest
rate protection agreements no longer qualified for hedge accounting
treatment under GAAP based upon the following:
o Due to changing conditions in the public debt markets, it was no
longer considered probable that ProLogis would complete the
anticipated 1998 longer term debt offerings that prompted ProLogis
to enter into these interest rate protection agreements in 1997
(i.e., ProLogis would not be exposed to the interest rate risk
that these instruments were intended to hedge); and
o ProLogis determined, through internal analysis and through
communications with independent third parties, that a high degree
of correlation no longer existed between changes in the market
values of these interest rate protection agreements and the
"market values" of the anticipated debt offerings (i.e., the
interest rate at which the debt could be issued by ProLogis under
existing market conditions).
Accordingly, ProLogis began marking these agreements to market as of
September 30, 1998. For 1998, ProLogis recognized a non-cash expense of
$26.1 million. These agreements were terminated in February 1999 at a
total cost of $27.0 million.
</FN>
</TABLE>
On December 22, 1997, ProLogis entered into two separate contracts to
(i) exchange $373.8 million for 2.9 billion Swedish krona, and (ii) exchange
310.0 million German marks for $175.0 million in anticipation of the January
1998 acquisition and planned European currency denominated financing of
Frigoscandia AB by Frigoscandia S.A., ProLogis' unconsolidated subsidiary. The
contracts were marked to market as of December 31, 1997 and ProLogis recognized
a net loss of $6.0 million in 1997. Both contracts were settled during the first
quarter of 1998 at a net loss of $4.0 million. Accordingly, ProLogis recognized
a net gain of $2.0 million in the first quarter of 1998. These foreign currency
exchange hedges were one-time, non-recurring contracts that fixed the exchange
rate between the U.S. dollar and the Swedish krona and German mark. ProLogis
executed these hedges after the execution of the purchase agreement to acquire
Frigoscandia AB, which required payment in Swedish krona. The contracts were
executed exclusively for the acquisition and financing of Frigoscandia AB and
were not entered into to hedge on-going income in foreign currencies.
19
<PAGE>
PROLOGIS TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
12. Business Segments:
ProLogis has three reportable business segments:
o acquisition and development of industrial distribution facilities for
long-term ownership and leasing in North America (the United States and
Mexico) and Europe (a portion of which is owned through Garonor
Holdings, a subsidiary that was recognized under the equity method of
accounting until June 29, 1999 - See Notes 1 and 4); each operating
facility is considered to be an individual operating segment having
similar economic characteristics which are combined within the
reportable segment based upon geographic location;
o operation of refrigerated distribution facilities through
unconsolidated subsidiaries in North America (ProLogis Logistics and
MRI) and Europe (Frigoscandia S.A.); each subsidiary's operating
facilities are considered to be individual operating segments having
similar economic characteristics which are combined within the
reportable segment based upon geographic location; and
o corporate distribution facilities services business that develops
distribution facilities for future sale or on a fee basis for customers
in North America (the United States and Mexico) and in the United
Kingdom (through an unconsolidated subsidiary, Kingspark S.A.); the
development activities of ProLogis and its unconsolidated subsidiary
are considered to be individual operating segments having similar
economic characteristics which are combined within the reportable
segment based upon geographic location.
Reconciliations of the three reportable segments': (i) income from
external customers to ProLogis' total income; (ii) net operating income from
external customers to ProLogis' earnings from operations (ProLogis' chief
operating decision makers rely primarily on net operating income to make
decisions about allocating resources and assessing segment performance); and
(iii) assets to ProLogis' total assets are as follows (in thousands):
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Income:
Property operations:
North America....................................................... $ 220,058 $ 162,918
Europe (1).......................................................... (4,068) --
------------- -------------
Total property operations segment.......................... 215,990 162,918
------------- -------------
Refrigerated distribution operations:
North America (2)................................................... 4,621 2,522
Europe (3) (4)...................................................... (6,859) 686
------------- -------------
Total refrigerated distribution operations segment......... (2,238) 3,208
------------- -------------
Corporate distribution facilities services business:
North America....................................................... 20,161 7,004
Europe (United Kingdom) (5) (6)..................................... 3,583 --
------------- -------------
Total corporate distribution facilities services
business segment......................................... 23,744 7,004
------------- -------------
Reconciling items:
Interest and other.................................................. 1,879 1,325
------------- -------------
Total income............................................... $ 239,375 $ 174,455
============= =============
</TABLE>
20
<PAGE>
PROLOGIS TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Net operating income:
Property operations:
North America....................................................... $ 204,042 $ 149,618
Europe (1).......................................................... (4,217) --
------------- -------------
Total property operations segment.......................... 199,825 149,618
------------- -------------
Refrigerated distribution operations:
North America (2)................................................... 4,621 2,522
Europe (3) (4)...................................................... (6,859) 686
------------- -------------
Total refrigerated distribution operations segment......... (2,238) 3,208
------------- -------------
Corporate distribution facilities services business:
North America....................................................... 20,161 7,004
Europe (United Kingdom) (5) (6)..................................... 3,583 --
------------- -------------
Total corporate distribution facilities services
business segment........................................ 23,744 7,004
------------- -------------
Reconciling items:
Interest and other income........................................... 1,879 1,325
General and administrative expense.................................. (17,811) (9,913)
Depreciation and amortization....................................... (66,992) (46,734)
Interest expense.................................................... (76,269) (34,007)
Interest rate hedge expense......................................... (945) --
Other expenses...................................................... (3,709) (1,517)
------------- -------------
Total reconciling items.................................... (163,847) (90,846)
------------- -------------
Earnings from operations............................................ $ 57,484 $ 68,984
============= =============
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------- -------------
<S> <C> <C>
Assets:
Property operations:
North America..................................................... $ 4,600,391 $ 3,147,742
Europe (7)........................................................ 490,421 309,639
------------- -------------
Total property operations segment........................ 5,090,812 3,457,381
------------- -------------
Refrigerated distribution operations:
North America (7)................................................. 185,988 151,021
Europe (7)........................................................ 217,619 221,566
------------- -------------
Total refrigerated distribution operations segment....... 403,607 372,587
------------- -------------
Corporate distribution facilities services business:
North America..................................................... 184,860 165,986
Europe (United Kingdom) (7)....................................... 374,599 224,769
------------- -------------
Total corporate distribution facilities services
business segment....................................... 559,459 390,755
------------- -------------
Reconciling items:
Cash ............................................................. 60,432 63,140
Accounts and notes receivable..................................... 15,321 1,313
Other assets...................................................... 92,111 45,553
------------- -------------
Total reconciling items.................................. 167,864 110,006
------------- -------------
Total assets...................................................... $ 6,221,742 $ 4,330,729
============= =============
21
<PAGE>
PROLOGIS TRUST
NOTES TO FINANCIAL STATEMENTS--(Continued)
- ---------------
<FN>
(1) Includes a $13.0 million foreign currency exchange loss from the
remeasurement of intercompany debt based on the foreign currency exchange
rates in effect as of June 30, 1999 recognized under the equity method of
accounting related to ProLogis' investment in Garonor Holdings and a $12.4
million foreign currency exchange loss from the remeasurement of
intercompany debt based on the foreign currency exchange rates in effect as
of June 30, 1999. See Notes 1 and 4.
(2) Represents amount recognized under the equity method of accounting related
to ProLogis' investment in ProLogis Logistics. See Note 4 for summarized
financial information of ProLogis Logistics.
(3) Represents amount recognized under the equity method of accounting related
to ProLogis' investment in Frigoscandia S.A. See Note 4 for summarized
financial information of Frigoscandia S.A.
(4) Includes a net loss of $2.1 million from the remeasurement of intercompany
and other debt based on the foreign currency exchange rates in effect as of
June 30, 1999.
(5) Represents amount recognized under the equity method of accounting related
to ProLogis' investment in Kingspark S.A. See Note 4 for summarized
financial information of Kingspark S.A.
(6) Includes a net loss of $5.5 million from the remeasurement of intercompany
debt based on the foreign currency exchange rates in effect as of June 30,
1999.
(7) Includes investment in unconsolidated subsidiaries accounted for under the
equity method. See Note 4 for summarized financial information.
</FN>
</TABLE>
ProLogis' largest customer accounted for 1.81% of ProLogis' rental
income (on an annualized basis) for the six months ended June 30, 1999, and the
annualized base rent for ProLogis' 20 largest customers accounted for
approximately 13.61% of ProLogis' rental income (on an annualized basis) for the
six months ended June 30, 1999.
22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees and Shareholders
of ProLogis Trust:
We have reviewed the accompanying consolidated balance sheet of
ProLogis Trust and subsidiaries as of June 30, 1999, and the related
consolidated statements of earnings and comprehensive income for the three and
six months ended June 30, 1999 and 1998, and the consolidated statements of cash
flows for the six months ended June 30, 1999 and 1998.These financial statements
are the responsibility of the Trust's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of ProLogis Trust and
subsidiaries as of December 31, 1998, and in our report dated March 5, 1999, we
expressed an unqualified opinion on that statement. In our opinion, the
information set forth in the accompanying consolidated balance sheet as of
December 31, 1998, is fairly stated in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
ARTHUR ANDERSEN LLP
Chicago, Illinois
August 11, 1999
23
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with ProLogis'
consolidated financial statements and the notes thereto included in Item 1 of
this report. See ProLogis' 1998 Annual Report on Form 10-K for a discussion of
various risk factors associated with forward-looking statements made in this
document.
Overview
General
ProLogis' operating results depend primarily on the operating results
of its industrial distribution facilities, which are substantially influenced by
(i) the demand for and supply of industrial distribution facilities in ProLogis'
North American and European target market cities; (ii) the pace and economic
returns at which ProLogis can acquire and develop additional industrial
distribution facilities; (iii) the extent to which ProLogis can sustain improved
market performance as measured by lease rates and occupancy levels; and (iv) the
demand for the corporate distribution facilities services that are provided by
ProLogis, ProLogis Development Services and ProLogis Kingspark. In addition, the
operating performance of ProLogis' unconsolidated subsidiaries that are engaged
in the refrigerated distribution business affect ProLogis' operating results.
ProLogis' target markets and submarkets have benefited substantially in
recent periods from demographic trends (including population and job growth)
which influence the demand for distribution facilities. ProLogis believes its
ability to compete is significantly enhanced relative to other companies due to
its depth of management and ability to serve customers through the ProLogis
Operating System(TM), which includes acquisition, development, property
management personnel and presence in local markets.
On December 29, 1998, ProLogis invested in Garonor Holdings by
acquiring 100% of its preferred stock. Garonor Holdings, a Luxembourg company,
owns ProLogis Garonor, a real estate operating company in France. Security
Capital, ProLogis' largest shareholder, owned 100% of the common stock of
Garonor Holdings. ProLogis accounted for its investment in Garonor Holdings and
ProLogis Garonor under the equity method of accounting. On June 29, 1999,
ProLogis acquired the voting stock of Garonor Holdings from Security Capital.
Accordingly, as of that date the accounts of Garonor Holdings and ProLogis
Garonor are consolidated in ProLogis' financial statements along with ProLogis'
other majority owned and controlled subsidiaries and partnerships. The results
of operations of Garonor Holdings for the period from January 1, 1999 through
June 29, 1999 are reflected by ProLogis under the equity method of accounting.
As of June 30, 1999, Garonor Holdings' real estate assets, at cost, were $282.3
million and Garonor Holdings had third party debt of $173.0 million ($31.8
million of unsecured debt and $141.2 million of mortgage notes).
As of June 30, 1999, ProLogis' real estate investments included 146.5
million square feet of operating facilities with a total expected investment of
$5.27 billion. During the six months ended June 30, 1999, ProLogis disposed of
facilities from its operating portfolio aggregating 2.2 million square feet with
aggregate net sales proceeds of $101.4 million. For the six months ended June
30, 1999, ProLogis recognized $20.2 million of other real estate income related
to the activities of its corporate distribution facilities services business,
primarily from the disposition of undepreciated facilities.
ProLogis had 7.0 million square feet of facilities under development as
of June 30, 1999 with a total expected investment at completion of $318.2
million. Development starts during the six months ended June 30, 1999 aggregated
5.1 million square feet at a total expected investment of $209.6 million.
Development completions during the six months ended June 30, 1999 aggregated 6.5
million square feet at a total expected investment of $237.6 million. As of June
30, 1999, ProLogis had 1,925 acres of land in inventory for the future
development of approximately 33.4 million square feet of distribution
facilities. Additionally, ProLogis had 1,234 acres of land under control for the
future development of 20.2 million square feet of distribution facilities.
Through ProLogis' investment in ProLogis Kingspark, ProLogis had an
additional 483,000 square feet of operating facilities, 1,847,000 square feet of
facilities under development and 337,000 square feet of facilities being
developed under construction management agreements in the United Kingdom as of
June 30, 1999. Additionally, as of June 30, 1999, ProLogis Kingspark owned 387
acres and controlled 1,416 acres of land for the future development of 26.3
million square feet of distribution facilities.
24
<PAGE>
In 1997, ProLogis began expanding its distribution facilities
operations into Europe and Mexico. This expansion was necessary to meet the
needs of its targeted national and international customers as they expand and
reconfigure their distribution facility requirements globally. With over 21
target markets identified in Europe and four target markets identified in
Mexico, ProLogis believes significant growth opportunities exist
internationally. As of June 30, 1999 (excluding its investment in Kingspark
S.A.), ProLogis owned 8.3 million square feet of operating facilities with a
total expected investment of $478.9 million in Europe and 2.1 million square
feet of operating facilities with a total expected investment of $81.4 million
in Mexico. Additionally, as of June 30, 1999, ProLogis had 1.4 million square
feet of facilities under development in Europe with a total expected investment
of $95.9 million and 178,000 square feet of facilities under development in
Mexico with a total expected investment of $5.6 million.
ProLogis has invested in refrigerated distribution businesses through
investments in the preferred stock of two companies. As of June 30, 1999,
ProLogis' had approximately 327.8 million cubic feet of refrigerated
distribution facilities in operation. Of the total, 188.4 million cubic feet are
located in Europe.
On March 30, 1999, Meridian Industrial Trust Inc., a publicly traded
REIT that owned approximately 32.2 million square feet of industrial operating
facilities in the United States, was merged with and into ProLogis. In
accordance with the terms of the Merger Agreement, the approximately 33.8
million outstanding shares of Meridian common stock were exchanged (on a 1.10
for one basis) into approximately 37.2 million ProLogis Common Shares. In
addition, the holders of Meridian common stock received $2.00 in cash per
outstanding share, approximately $67.6 million in total. The holders of
Meridian's Series D cumulative redeemable preferred stock received Series E
preferred shares on a one for one basis. The Series E preferred shares have a
8.75% annual dividend rate ($2.1875 per share) and an aggregate liquidation
value of $50.0 million. The total purchase price of Meridian was approximately
$1.54 billion, which included the assumption of the outstanding debt and
liabilities of Meridian as of March 30, 1999 and the issuance of approximately
1.1 million options each to acquire 1.10 ProLogis Common Shares and $2.00 in
cash. The assets acquired from Meridian include approximately $1.44 billion of
real estate assets, an investment in a refrigerated distribution business of
$28.8 million and cash and other assets aggregating $72.3 million. The
transaction was structured as a tax-free merger and was accounted for under the
purchase method.
No assurance can be given that the current cost of funds available to
ProLogis will be available in the future or that ProLogis will continue to be
able to obtain unsecured debt or equity financing in the public markets on
favorable terms or to continue to generate capital for redeployment through
sales of existing assets. During 1998 and the first six months of 1999, the real
estate industry experienced a general tightening of the equity and credit
markets. Additionally, no assurance can be given that the expected trends in
leasing rates and economic returns on acquired and developed facilities will be
realized. There are risks associated with ProLogis' development and acquisition
activities which include factors such as development and acquisition
opportunities explored by ProLogis may be abandoned; construction costs of a
project may exceed original estimates due to increased materials, labor or other
expenses; and construction and lease-up may not be completed on schedule,
resulting in increased debt service expense and construction costs. Acquisition
activities entail risks that investments will fail to perform in accordance with
expectations and that analysis with respect to the cost of improvement to bring
an acquired project up to standards will prove inaccurate, as well as general
investment risks associated with any new real estate investment. Although
ProLogis undertakes a thorough evaluation of the physical condition of each
proposed investment before it is acquired, certain defects or necessary repairs
may not be detected until after it is acquired, which could increase ProLogis'
total acquisition cost. There are also risks associated with the hedging
strategies used to manage interest rate fluctuations on anticipated
transactions. If these anticipated transactions do not occur as planned,
ProLogis could incur costs. To the extent ProLogis' business activities outside
the United States conducted are in a currency other than the U.S. dollar,
ProLogis is exposed to foreign currency exchange rate fluctuations. However, all
of ProLogis' business activities in Mexico and Poland are U.S. dollar
denominated. The occurrence of any of the events described above could adversely
affect ProLogis' ability to achieve its projected returns on acquisitions and
projects under development and could hinder ProLogis' ability to make expected
distributions to equity holders.
Results of Operations
Six Months Ended June 30, 1999
Net earnings attributable to Common Shares decreased by $37.6 million
to $13.8 million for the six months ended June 30, 1999 from $51.4 million for
the same period in 1998. The decrease in net earnings attributable to Common
Shares in 1999 from 1998 was primarily the result of:
25
<PAGE>
o a net decrease in income generated by ProLogis' unconsolidated
subsidiaries in 1999 from 1998, primarily due to the recognition
of net foreign currency exchange losses in 1999;
o net foreign currency exchange losses recognized by ProLogis in
1999;
o the write-off of previously capitalized start-up and organization
costs due to the adoption of a new accounting principle in 1999;
and
o increases in 1999 in general and administrative expenses and other
expenses, primarily pursuit costs written-off and franchise and
income taxes.
These decreases in net earnings attributable to Common Shares were
partially offset by:
o an increase in net operating income from property operations
(after deductions for depreciation), primarily the result of the
increased number of distribution facilities in operation in 1999
as compared to 1998 and
o an increase in other real estate income, primarily gains on
disposition of undepreciated facilities and fees generated by
ProLogis' corporate distribution facilities services business.
Interest expense, preferred share dividends and weighted average Common
Shares outstanding all increased in 1999 as compared to 1998. These increases
are the result of additional debt and equity used by ProLogis to finance its
acquisition and development activities in each period.
Property Operations
As of June 30, 1999 ProLogis had 1,424 operating facilities totaling
146.5 million square feet. ProLogis had 1,053 operating facilities totaling 97.3
million square feet as of June 30, 1998. This increase in operating facilities
(primarily due to the Meridian Merger) resulted in an increase in property-level
net operating income of $62.6 million from 1998 to 1999 as follows (in
thousands):
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Rental income.............................. $ 228,412 $ 162,918
Rental expenses, net of recoveries......... 16,165 13,300
---------- ----------
Net operating income.................. $ 212,247 $ 149,618
========== ==========
</TABLE>
Rental income increased by $65.5 million in 1999 as compared to 1998.
This increase is comprised from the following components:
o facilities acquired or developed during 1999 contributed $30.9
million (primarily due to the Meridian Merger) and $4.8 million of
additional rental income, respectively;
o facilities acquired or developed during 1998 contributed $11.1
million and $16.0 million of additional rental income,
respectively;
o facilities owned and operated as of January 1, 1998 contributed
$6.7 million of additional rental income; and
o facilities that were in operation during 1998 but have
subsequently been disposed of reduced rental income in 1999 by
$4.0 million.
Rental expenses, net of recoveries from tenants, increased by $2.9
million in 1999 over 1998. Rental expenses, before the deduction of amounts
recovered from tenants, were 23.7% of rental income for 1999 and 25.5% of rental
income for 1998.
ProLogis frequently acquires facilities that are underleased and
develops facilities that are not fully leased at the start of construction,
which reduces ProLogis' overall occupancy rate below its stabilized level but
provides opportunities to increase revenues. The term "stabilized" means that
capital improvements, repositioning, new management and new marketing programs
(or development and marketing, in the case of newly developed facilities) have
been completed and in effect for a sufficient period of time (but in no case
longer than 12 months for facilities acquired by ProLogis and 12 months after
shell completion for facilities developed by ProLogis) to achieve stabilized
occupancy (typically 93%). ProLogis has been successful in increasing
occupancies on acquired and developed facilities during their initial months of
operation resulting in an occupancy rate of 94.9% and a leased rate of 96.0% for
stabilized facilities owned as of June 30, 1999. The average increase in rental
rates for new and renewed leases on previously leased space (11.1 million square
feet) during 1999 was 15.7%. As leases are renewed or new leases are acquired,
ProLogis expects most rental rates on renewals or new leases to increase during
1999.
26
<PAGE>
Other Real Estate Income
Other real estate income consists primarily of gains on the disposition
of undepreciated facilities and fees and other income received from customers
for whom ProLogis develops corporate distribution facilities. Other real estate
income is generated primarily by ProLogis Development Services. Through its
preferred stock ownership of ProLogis Development Services, ProLogis realizes
substantially all economic benefits of these activities. ProLogis advances
mortgage loans to ProLogis Development Services to fund its acquisition,
development and construction activities. The activities of ProLogis Development
Services are consolidated with ProLogis' activities and all intercompany
balances are eliminated. Due to the timing of the completion of these
development projects and the related dispositions, other real estate income
recognized by ProLogis will vary on a annual basis.
Income (Loss) from Unconsolidated Subsidiaries
Income (loss) from unconsolidated subsidiaries relates primarily to
ProLogis' investments in 100% of the preferred stock of two companies, whose
primary source of income is their respective investments in refrigerated
distribution businesses, in Kingspark S.A., which owns an industrial real estate
development company and in Garonor Holdings S.A. which owns an industrial
distribution facilities company. These investments, discussed in Note 4 to the
consolidated financial statements in Item 1, generated income as follows (in
thousands):
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Insight (1)............................................................ $ (60) $ --
----------- -----------
ProLogis Logistics:
Equity in loss.................................................... (540) (2,628)
Management fee from CSI (2)....................................... -- 712
Interest income on note receivable................................ 5,161 4,438
----------- -----------
4,621 2,522
----------- -----------
Frigoscandia S.A. (3):
Equity in loss (4)................................................ (12,029) (9,990)
Interest income on mortgage notes and
notes receivable.............................................. 5,169 10,676
----------- -----------
(6,860) 686
----------- -----------
Kingspark S.A. (5):
Equity in loss (6)................................................ (3,575) --
Interest income on mortgage notes and
notes receivable.............................................. 7,158 --
----------- -----------
3,583 --
----------- -----------
Garonor Holdings (7):
Equity in loss (8)................................................ (15,409) --
Interest income on note receivable................................ 2,988 --
----------- -----------
(12,421) --
----------- -----------
Total..................................................... $ (11,137) $ 3,208
=========== ===========
- -----------------
<FN>
(1) Represents ProLogis' investment in a privately owned logistics optimization
consulting company that, prior to July 1, 1998, was accounted for under the
cost method.
(2) ProLogis received a management fee from CSI during the first six months of
1998.
(3) Frigoscandia S.A. was acquired on January 16, 1998.
(4) Includes a net loss of $2.1 million from the remeasurement from
intercompany and other debt based on the foreign currency exchange rates in
effect as of June 30, 1999.
(5) Kingspark S.A. was acquired on August 14, 1998.
(6) Includes a net loss of $5.5 million from the remeasurement of intercompany
debt based on the foreign currency exchange rates in effect as of June 30,
1999.
(7) Garonor Holdings was acquired on December 29, 1998 and was accounted for
under the equity method of accounting from that date to June 29, 1999.
After June 29, 1999, Garonor Holdings is consolidated with the accounts of
ProLogis.
See Note 1 to the consolidated financial statements in Item 1.
(8) Includes a net loss of $13.0 million from the remeasurement of intercompany
debt based on the foreign currency exchange rates in effect as of June 30
1999.
</FN>
</TABLE>
27
<PAGE>
Depreciation and Amortization
The increase in depreciation and amortization expense of $20.3 million
for the six months ended June 30, 1999 as compared to the same period in 1998
results primarily from the increase in operating facilities in 1999 over 1998.
See "--Property Operations".
Interest Rate Hedge Expense
See "--Liquidity and Capital Resources--Derivative Financial
Instruments" for a discussion of this expense.
Interest Expense
Interest expense is summarized as follows (in thousands):
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Lines of credit and short-term borrowings.................... $ 10,233 $ 7,593
Senior unsecured notes....................................... 50,220 30,036
Mortgage notes............................................... 20,987 2,690
Assessment bonds............................................. 1,140 1,167
Securitized debt............................................. 1,400 1,449
Capitalized interest......................................... (7,711) (8,928)
------------- -------------
$ 76,269 $ 34,007
============= =============
</TABLE>
Interest expense on lines of credit and short-term borrowings increased
$2.6 million in 1999 over 1998 due primarily to a higher average outstanding
balance ($334.6 million in 1999 and $219.1 million in 1998) partially offset by
a lower weighted average daily interest rate (5.92% in 1999 and 6.60% in 1998).
See " -- Liquidity and Capital Resources -- Investing and Financing Activities".
Senior unsecured notes interest expense increased by $20.2 million in
1999 as compared to 1998 due to interest on new senior unsecured debt issuances:
$250.0 million issued in July 1998, $125.0 million issued in October 1998 and
$500.0 million issued in April 1999.
Interest expense on mortgage notes increased by $18.3 million in 1999
over 1998 due to the higher weighted average balance of mortgage notes
outstanding in 1999 over 1998, primarily three secured financing transactions
aggregating $532.0 million that were completed between December 1998 and April
1999. See "Liquidity and Capital Resources--Other Financing Sources."
Interest expense recognized on borrowings is offset by interest
capitalized with respect to ProLogis' development activities. Capitalized
interest decreased by $1.2 million in 1999 over 1998. Capitalized interest
levels are reflective of ProLogis' cost of funds and the level of development
activity. The decrease in capitalized interest is due to decreased development
activity in 1999 and to ProLogis' lower weighted average cost of funds in 1999.
Other Expenses
Other expenses, which increased by $2.2 million for the six months
ended June 30, 1999 over the same period in 1998, consist of land holding costs,
the write-off of previously capitalized pursuit costs and franchise and income
tax expenses related to ProLogis' taxable subsidiaries. Land holding costs were
$1,297,000 in 1999 and $1,147,000 in 1998. Pursuit cost write-offs were
$1,452,000 million in 1999 and $370,000 in 1998. Tax expense was $960,000 in
1999.
28
<PAGE>
Foreign Currency Exchange Gains (Losses)
ProLogis makes intercompany loans to its consolidated foreign
subsidiaries primarily in U.S. dollars. Because the consolidated foreign
subsidiaries' functional currencies are not the U.S. dollar, these intercompany
loans have been marked to market by the foreign subsidiaries based upon the
applicable exchange rate in effect at the end of the period. For the six months
ended June 30, 1999 and 1998, ProLogis incurred a remeasurment loss of $12.4
million and a remeasurement gain of $9,000, respectively. These gains (losses)
resulted primarily from fluctuations of the U.S. dollar against the euro, French
franc, Dutch guilder and British pound, the primary currencies of the foreign
subsidiaries to which ProLogis makes intercompany loans.
For the six months ended June 30, 1998, ProLogis recognized foreign
currency hedge income of $2,054,000 related to two separate contracts entered
into on December 22, 1997 to (i) exchange $373.8 million for 2.9 billion Swedish
krona, and (ii) exchange 310.0 million German marks for $175.0 million in
anticipation of the January 1998 acquisition and planned European currency
denominated financing of Frigoscandia AB by Frigoscandia S.A., ProLogis'
unconsolidated subsidiary. The contracts were marked to market as of December
31, 1997. ProLogis recognized a net loss of $6.0 million in 1997. Both contracts
were settled during the first quarter of 1998 and ProLogis recognized a net gain
of $2,054,000 upon settlement. These foreign currency exchange hedges were
one-time, non-recurring contracts that fixed the exchange rate between the U.S.
dollar and the Swedish krona and German mark. ProLogis executed these hedges
after the execution of the purchase agreement to acquire Frigoscandia AB, which
required payment in Swedish krona. The contracts were executed exclusively for
the acquisition and financing of Frigoscandia AB and were not entered into to
hedge on-going income in foreign currencies.
Cumulative Effect of Accounting Change
Through 1998, ProLogis capitalized costs associated with start-up
activities and organization costs and amortized such costs over an appropriate
period, generally five years. SOP 98-5, "Reporting on the Costs of Start-Up
Activities", which requires that costs associated with organization,
pre-opening, and start-up activities be expensed as incurred, was adopted by
ProLogis on January 1, 1999. Accordingly, ProLogis expensed $1.4 million of
unamortized organization and start-up costs as a cumulative effect of accounting
change in the first quarter of 1999.
Preferred Share Dividends
The increase in preferred share dividends of $6.1 million for the six
months ended June 30, 1999 over the same period in 1998 is primarily
attributable to the issuance of Series D preferred shares in April 1998 and the
issuance of Series E preferred shares in March 1999. See "--Liquidity and
Capital Resources--Investing and Financing Activities".
Environmental Matters
ProLogis did not experience any environmental condition on its
facilities which materially adversely affected its results of operations or
financial position.
Liquidity and Capital Resources
Overview
ProLogis considers its liquidity and ability to generate cash from
operations and financing to be adequate and expects it to continue to be
adequate to meet its anticipated development, acquisition, operating and debt
service needs as well as its shareholder distribution requirements.
ProLogis expects to finance future activities with proceeds from the
disposition of selected facilities in addition to borrowings on its unsecured
lines of credit, issuance of limited partnership units, the assumption of
existing mortgage debt, when applicable, issuances of secured and unsecured debt
and sales of Common Shares and preferred shares. The unsecured lines of credit
provide ProLogis with the ability to efficiently respond to market opportunities
while minimizing the amount of cash invested in short-term investments at lower
yields which would result if debt or equity issuances were made in anticipation
of future investment needs. As of June 30, 1999, ProLogis had $308.4 million
available for borrowing under its unsecured lines of credit ($290.9 million
available as of August 10, 1999). See "--Credit Facilities". Another source of
future liquidity and financial flexibility is ProLogis' shelf-registered
securities which can be issued in the form of debt securities, preferred shares,
Common Shares, rights to purchase Common Shares and preferred share purchase
rights on an as-needed basis, subject to ProLogis' ability to effect an offering
on satisfactory terms. ProLogis currently has $608.0 million of shelf-registered
securities available for issuance.
29
<PAGE>
Operating Activities
Cash provided by operating activities increased by $0.3 million for the
six months ended June 30, 1999 as compared to the same period in 1998 ($104.4
million in 1999 and $104.1 million in 1998). See "--Results of Operations".
Investing and Financing Activities
ProLogis funds its current investment needs primarily with lines of
credit and short-term borrowings, which are subsequently repaid with proceeds
from sales of debt and equity securities. ProLogis' investment activities used
approximately $205.1 million and $530.8 million of cash in the six months ended
June 30, 1999 and 1998, respectively. ProLogis' financing activities provided
net cash flow of $98.0 million and $465.0 million in 1999 and 1998,
respectively. Cash distributions paid on Common Shares were $103.3 million and
$72.6 million for 1999 and 1998, respectively, which have been substantially
funded by cash generated from operating activities.
Investments in real estate, used cash of $216.6 million during the six
months ended June 30, 1999 and $292.2 million during the same period in 1998.
ProLogis' cash investment in its unconsolidated subsidiaries was $139.9 million
and $290.5 million during the six months ended June 30, 1999 and 1998,
respectively. ProLogis generated cash proceeds from dispositions of $102.4
million in 1999 as compared to $51.9 million in 1998.
During the six months ended June 30, 1999, ProLogis' primary financing
activities were entering into secured financing agreements which generated
$466.0 million of proceeds and the issuance of $500.0 million of senior
unsecured notes. The proceeds from these transactions were primarily used to
repay borrowings on the unsecured lines of credit. In connection with the
Meridian Merger, ProLogis assumed Meridian's $328.4 million line of credit which
was repaid on March 30, 1999 with proceeds from borrowings on ProLogis'
unsecured lines of credit. During the six months ended June 30, 1999, ProLogis
had net repayments on its unsecured lines of credit of $227.7 million.
The Meridian Merger, which was completed in March 1999 was principally
a non-cash transaction. However, the Meridian Merger did result in an increase
in cash of $49.0 million, representing Meridian's cash balance on March 30,
1999. A $67.6 million cash payment to Meridian's stockholders was made in April
1999.
ProLogis' primary financing activities in the first six months of 1998
were the sale of equity securities (Series D preferred shares generating net
proceeds of $241.5 million and Common Shares, including sale of Common Shares
under the employee share purchase and dividend reinvestment plans, generating
net proceeds of $130.8 million). ProLogis also had net borrowings on its lines
of credit of $216.6 million and generated proceeds from a short-term bridge loan
from NationsBank of $200.0 million (used primarily to finance the acquisition of
Frigoscandia AB), which was repaid on March 31, 1998 after Frigoscandia Holding
AB obtained third-party financing.
Credit Facilities
ProLogis has an unsecured credit agreement with Bank of America,
Commerzbank AG and Chase Bank of Texas, National Association, as agents for a
bank group that provides for a $550.0 million unsecured revolving line of credit
(increased from $540.0 million in May 28, 1999). Borrowings bear interest at
ProLogis' option, at either (a) the greater of the federal funds rate plus 0.5%
and the prime rate, or (b) LIBOR plus 1.00% based upon ProLogis' current senior
debt ratings. The prime rate was 7.75% and the 30-day LIBOR rate was 5.2363% as
of June 30, 1999. Additionally, the credit agreement provides for a facility fee
of 0.20% per annum. The line of credit matures on March 29, 2001 and may be
extended for an additional year at ProLogis' option. ProLogis was in compliance
with all covenants contained in the credit agreement as of June 30, 1999. As of
June 30, 1999, $242.2 million of borrowings were outstanding on the line of
credit.
In addition, ProLogis has a $25.0 million short-term unsecured
discretionary line of credit with Bank of America that matures on October 1,
1999. By agreement between ProLogis and Bank of America, the rate of interest on
and the maturity date of each advance are determined at the time of each
advance. There were $24.4 million of borrowings outstanding on the line of
credit as of June 30, 1999.
30
<PAGE>
Other Financing Sources
On December 23, 1998, ProLogis entered into a $150.0 million secured
financing agreement with Connecticut General Life Insurance Company. On that
date, $66.0 million was funded under the agreement and the remaining $84.0
million was funded on January 22, 1999. Under the terms of the agreement,
ProLogis pledged distribution facilities ($208.7 million undepreciated cost as
of June 30, 1999) as collateral for the term loan. The loan bears interest at
7.08% per annum and provides for monthly principal and interest payments through
March 2007, at which time the remaining principal outstanding of $134.4 million
will be due.
On February 22, 1999, ProLogis entered into a $182.0 million secured
financing agreement with Teachers Insurance and Annuity Association. Of the
total borrowings, $119.3 million was funded on February 22, 1999, $35.7 million
was funded on March 5, 1999 and the remaining $27.0 million was funded on April
30, 1999. The loan bears interest at 7.20% and provides for monthly interest
payments through March 2002 and monthly principal and interest payments from
April 2002 to March 2009, at which time the remaining principal outstanding of
$158.7 million will be due. ProLogis pledged distribution facilities with an
undepreciated cost of $258.5 million at June 30, 1999 as collateral under the
agreement.
On March 29, 1999, ProLogis entered into a $200.0 million secured
financing agreement with Morgan Guaranty Trust Company of New York. The loan is
secured by distribution facilities with an undepreciated cost of $333.9 million
as of June 30, 1999. The loan provides for interest only payments through May
2005 and principal and interest payments thereafter with the remaining balance
of $127.2 million due on March 2024. The loan bears interest at 7.584% per
annum.
On April 26, 1999, ProLogis completed a $500.0 million offering of
senior unsecured notes. The notes were issued in two tranches of $250.0 million
due April 15, 2004 and April 15, 2008. The Notes have a coupon rate of 6.70% and
7.10%, respectively. Both the Notes were issued at a discount and are governed
by the terms and provisions of the same indenture agreement applicable to
ProLogis' other senior unsecured notes. Net proceeds from the offering were
approximately $495.9 million, net of underwriters' commissions and other costs,
which were used to repay borrowings on ProLogis' unsecured lines of credit and
unsecured term loan.
Derivative Financial Instruments
ProLogis occasionally uses derivative financial instruments as hedges
to manage well-defined risks associated with interest and foreign currency rate
fluctuations on existing obligations or anticipated transactions. ProLogis does
not use derivative financial instruments for trading purposes.
The primary risks associated with derivative instruments are market
risk and credit risk. Market risk is defined as the potential for loss in the
value of the derivative due to adverse changes in market prices (interest rates
or foreign currency rates). Through hedging, ProLogis can effectively manage the
risk of increases in interest rates and fluctuations in foreign currency
exchange rates.
Credit risk is the risk that one of the parties to a derivative
contract fails to perform or meet their financial obligation under the contract.
ProLogis does not obtain collateral to support financial instruments subject to
credit risk but monitors the credit standing of counterparties. ProLogis does
not anticipate non-performance by any of the counterparties to its derivative
contracts. Should a counterparty fail to perform, however, ProLogis would incur
a financial loss to the extent of the positive fair market value of the
derivative instruments, if any.
31
<PAGE>
The following table summarizes the activity in interest rate contracts
for the six months ended June 30, 1999 (in millions):
<TABLE>
<CAPTION>
Interest
Rate Futures Interest
Contracts Rate Swaps
------------ ----------
<S> <C> <C>
Notional amount as of December 31, 1998........ $ 75.0 $ 75.0
New contracts (1).............................. -- 174.9
Terminated contracts (2)....................... (75.0) (75.0)
--------- --------
Notional amount as of June 30, 1999............ $ -- $ 174.9
========= ========
- --------------
<FN>
(1) ProLogis has interest rate swap agreements related to variable rate
mortgage notes and other unsecured debt in the currency equivalent of
$174.9 million as of June 30, 1999. The swap agreements have a combined
notional amount of 1.1 billion French francs and fix the interest rate
at 4.60% through December 2003 on $31.8 million of other unsecured
debt, at 4.95% through January 2004 on $122.4 million of mortgage notes
and at 4.94% through 2004 on $20.7 million of mortgage notes.
(2) In October 1997, in anticipation of debt offerings in 1998, ProLogis
entered into two interest rate protection agreements which were renewed
past the original termination dates. These agreements were entered into
by ProLogis to fix the interest rate on anticipated financings.
During the third quarter of 1998, ProLogis determined that the interest
rate protection agreements no longer qualified for hedge accounting
treatment under GAAP based upon the following:
o Due to changing conditions in the public debt markets, it was no
longer considered probable that ProLogis would complete the
anticipated 1998 longer term debt offerings that prompted ProLogis
to enter into these interest rate protection agreements in 1997
(i.e., ProLogis would not be exposed to the interest rate risk
that these instruments were intended to hedge); and
o ProLogis determined, through internal analysis and through
communications with independent third parties, that a high degree
of correlation no longer existed between changes in the market
values of these interest rate protection agreements and the
"market values" of the anticipated debt offerings (i.e., the
interest rate at which the debt could be issued by ProLogis under
existing market conditions).
Accordingly, ProLogis began marking these agreements to market as of
September 30, 1998. For 1998, ProLogis recognized a non-cash expense of
$26.1 million. These agreements, which were terminated in February 1999
at a total cost of $27.0 million, were used to set the interest rate
associated with a secured financing transaction that was completed in
March 1999. ProLogis intends to amortize this expense as a component of
interest expense over the 25-year term of debt issued in the first
quarter of 1999 for purposes of calculating funds from operations. See
"--Funds From Operations".
</FN>
</TABLE>
Commitments
As of June 30, 1999, ProLogis had letters of intent or contingent
contracts, subject to ProLogis' final due diligence, for the acquisition of
347,000 square feet of distribution facilities in Europe and Mexico with an
aggregate acquisition cost of $9.9 million. The foregoing transactions are
subject to a number of conditions, and ProLogis cannot predict with certainty
that any of them will be consummated. In addition, as of June 30, 1999, ProLogis
had $304.2 million of budgeted development cost for developments in process, of
which $143.5 million was unfunded.
Frigoscandia AB has a multi-currency, three-year revolving credit
agreement through a consortium of 11 European banks in the currency equivalent
of approximately $190.2 million as of June 30, 1999. The loan bears interest at
each currency's respective LIBOR or Euribor rate plus 0.65%. ProLogis has
entered into a guaranty agreement for 25% of the loan balance.
ProLogis Kingspark has a line of credit agreement with a bank in the
United Kingdom. The credit agreement, which provides for borrowings of up to
approximately $16.0 million, has been guaranteed by ProLogis. As of June 30,
1999, there were no borrowings outstanding on the line of credit. Additionally,
ProLogis has an agreement whereby it has guaranteed the performance and
obligations of ProLogis Kingspark with respect to an infrastructure agreement
entered into by ProLogis Kingspark related to the development of a land parcel.
As of June 30, 1999, ProLogis had an unfunded commitment on this guarantee
agreement of $10.6 million.
32
<PAGE>
Distribution and Dividend Requirements
ProLogis' current distribution policy is to pay quarterly distributions
to shareholders based upon what it considers to be a reasonable percentage of
cash flow and at the level that will allow ProLogis to continue to qualify as a
REIT for tax purposes. Because depreciation is a non-cash expense, cash flow
typically will be greater than earnings from operations and net earnings.
Therefore, annual distributions are expected to be consistently higher than
annual earnings.
On February 24, 1999, ProLogis paid a quarterly distribution of $0.3183
per Common Share. On March 18, 1999, the Board set a proposed annual
distribution level of $1.30 per Common Share. Accordingly, on that date the
Board declared a quarterly distribution of $0.3272 per Common Share which was
paid on May 27, 1999 to shareholders of record on May 13, 1999. On July 28,
1999, the Board declared a distribution of $0.3272 per Common Share for the
third quarter of 1999 payable on August 26, 1999 to shareholders of record on
August 12, 1999.
On May 3, 1999, ProLogis paid a common distribution to holders of
Meridian common stock as of March 19, 1999. This distribution was declared by
the Meridian Board of Directors prior to the closing of the Meridian Merger.
This distribution related to the first quarter of 1999 and aggregated $11.1
million. This liability was assumed by ProLogis in connection with the Meridian
Merger.
On March 31 and June 30, 1999, ProLogis paid quarterly dividends of
$0.5875 per cumulative redeemable Series A preferred share, $0.4375 per
cumulative redeemable convertible Series B preferred share, $1.0675 per
cumulative redeemable preferred Series C share and $0.495 per cumulative
redeemable Series D preferred share.
On April 30, 1999, ProLogis paid an aggregate dividend of $1.1 million
on the Series E preferred shares ($0.5469 per share) of which $729,200 related
to Meridian's Series D preferred stock and was accrued by Meridian prior to the
closing of the Meridian Merger. On July 2, 1999, the Board declared a dividend
on the Series E preferred shares of $0.5469 per share, which was paid on July
30, 1999 to shareholders of record on July 15, 1999.
Pursuant to the terms of its preferred shares, ProLogis is restricted
from declaring or paying any distribution with respect to the Common Shares
unless all cumulative distributions with respect to the Preferred Shares have
been paid and sufficient funds have been set aside for distributions that have
been declared for the then current distribution period with respect to the
Preferred Shares.
Conversion to the Euro
Effective January 1, 1999, eleven of the fifteen member countries of
the European Monetary Union launched the new monetary unit, the euro, as the
single currency for the member countries of the European Monetary Union. During
the period from January 1, 1999 to January 1, 2002, a transition period will be
in effect during which time the euro will be available for non-cash
transactions. However, transactions can continue to be denominated in the old
national currencies. After January 1, 2002, all transactions must be denominated
in the euro. The targeted exchange rates of the old national currencies to the
euro were determined in May 1998. Conversion to the euro has not had, nor is
management aware of any future effects of the conversion to the euro that will
have, a material impact on its business operations or results of operations.
Funds from Operations
Funds from operations attributable to Common Shares increased $34.4
million to $143.4 million for the six months ended June 30, 1999 from $109.0
million for the same period in 1998.
Funds from operations represent ProLogis' net earnings (computed in
accordance with GAAP) before gains or losses from debt restructuring, before
gains or losses on disposition of depreciated real estate, before gains or
losses from mark to market adjustments resulting from the remeasurement (based
on current foreign currency exchange rates) of intercompany and other debt of
ProLogis' foreign subsidiaries, before deferred tax benefits and deferred tax
expenses of ProLogis' taxable subsidiaries, before significant non-recurring
items that materially distort the comparative measurement of company performance
over time, plus real estate depreciation and amortization (exclusive of
amortization of loan costs), and after adjustments for unconsolidated
subsidiaries calculated to compute their funds from operations on the same basis
as ProLogis. ProLogis believes that funds from operations is helpful to a reader
as a measure of the performance of an equity REIT because, along with cash flow
from operating activities, investing activities and financing activities, it
33
<PAGE>
provides a reader with an indication of the ability of ProLogis to incur and
service debt, to make capital expenditures and to fund other cash needs. The
funds from operations measure presented by ProLogis, while comparable to the
National Association of Real Estate Investment Trusts' definition, will not be
comparable to similarly titled measures of other REITs that do not compute funds
from operations in a manner consistent with ProLogis. Funds from operations is
not intended to represent cash made available to shareholders. Funds from
operations should not be considered as an alternative to net earnings or any
other GAAP measurement of performance as an indicator of ProLogis' operating
performance, or as an alternative to cash flows from operating, investing or
financing activities as a measure of liquidity. Funds from operations is as
follows (in thousands):
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
Net earnings attributable to Common Shares................................................ $ 13,816 $ 51,397
Add (Deduct):
Real estate depreciation and amortization........................................ 66,241 46,214
Gain on disposition of depreciated real estate................................... (715) (4,278)
Foreign currency exchange (gains) losses (1)..................................... 12,402 (2,063)
Interest rate hedge expense, net (2)............................................. 667 --
Cumulative effect of accounting change (3)....................................... 1,440 --
Deferred tax expense............................................................. 363 --
ProLogis' share of reconciling items of unconsolidated subsidiaries:
Real estate depreciation and amortization................................... 24,869 16,919
Net foreign currency exchange loss on remeasurement of
intercompany and other debt............................................. 20,543 2,452
Deferred tax expense (benefit).............................................. 884 (1,596)
Other, net.................................................................. 2,922 --
----------- -----------
Funds from operations attributable to Common Shares....................................... $ 143,432 $ 109,045
=========== ===========
- ---------------
<FN>
(1) See "--Results of Operations - Foreign Currency Exchange Gains (Losses)".
(2) Net of $278,000 of additional interest expense resulting from the
amortization of the interest rate hedge expense. See "--Liquidity and
Capital Resources - Derivative Financial Instruments".
(3) See "--Results of Operations - Cumulative Effect of Accounting Change".
</FN>
</TABLE>
Year 2000
Overview
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Certain
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar business activities.
ProLogis has undertaken a review of all of its computer systems and
applications to determine if these programs are Year 2000 compliant and if not,
the efforts that will be necessary to bring the programs into compliance.
ProLogis has not identified any computer system or applications that, upon
failure to be Year 2000 compliant, would have a material adverse impact on its
business or results of operations.
Information Technology Systems
ProLogis' information technology ("IT") environment is primarily a
Microsoft Windows-based personal computer network (NT or Novell) utilizing
desktop applications, primarily data base and spreadsheet applications. ProLogis
recently installed a new, enterprise-wide, third-party developed property
management and core accounting system. ProLogis' critical computer hardware,
operating systems and key general accounting, property management and financial
reporting applications are Year 2000 compliant, as verified by the appropriate
vendors.
34
<PAGE>
ProLogis Garonor, a wholly-owned subsidiary of ProLogis that operates
in France, has completed testing on all IT and embedded operating systems. In
1999, ProLogis Garonor installed a new Year 2000 compliant version of its
current financial accounting software. ProLogis Garonor's payroll and fixed
asset software are not Year 2000 compliant. ProLogis Garonor is in the process
of replacing these software applications and expects the new software will be in
place prior to the end of 1999. Costs to bring these applications into
compliance are expected to be less than $100,000. Should the new software
applications not be successfully implemented, ProLogis Garonor would perform
these functions manually. Accordingly, ProLogis Garonor could experience delays
in processing its payroll and in reporting financial results. These delays could
result in additional costs to ProLogis Garonor.
Non-IT Systems
Many of ProLogis' operating facilities have microchips embedded in the
building operating systems. ProLogis, as owner and lessor of these buildings,
has assessed its exposure with respect to Year 2000 related failures in these
operating systems. These building operating systems include programmable
thermostats, security systems, communications systems, utility monitoring
systems and timed locks.
Under the terms of substantially all of ProLogis' building leases, the
tenant has responsibility for the operating systems within their leased space,
including the responsibility for addressing the Year 2000 compliance of those
systems. However, ProLogis is responsible for the operating systems that control
the common exterior areas of the buildings, including parking lot lighting and
sprinkler systems. Generally, these systems are programmed on daily or weekly
cycles (as opposed to calendar-based programming). Consequently, the risk of a
Year 2000 related malfunction is extremely low and any such malfunction would
not have a material impact on ProLogis' operations. ProLogis is also responsible
for the fire and life safety monitoring systems in its buildings. ProLogis
contracts with a third party to monitor these systems. These systems are not
calendar-based, because reportable events are identified as they occur.
Consequently, the risk of a Year 2000 related failure is low.
ProLogis has conducted a review of all operating systems that fall
within its responsibility. Results have indicated that ProLogis' primary vendor
for monitoring of fire and life safety systems has verified that their system is
Year 2000 compliant. ProLogis has reviewed and performed testing and
verification as deemed appropriate. ProLogis has not identified any major
operating systems within its responsibility that are not Year 2000 compliant or
that would create a significant adverse effect on its customers or business
undertakings. Should the systems that ProLogis is responsible for fail,
ProLogis' tenants may experience inconveniences with respect to the maintenance
and operations of the facilities (i.e., parking lot lighting and sprinkler
systems). Should the fire and life safety systems fail, there could be a delay
in identifying a reportable event or a reportable event could occur without
being identified. In such a situation, ProLogis could be exposed to the extent
the failure resulted in a loss not covered by existing insurance policies.
ProLogis Garonor's responsibility for the operating systems that
control the interior equipment, common exterior areas and the fire and life
safety systems of its buildings is similar to that of ProLogis. ProLogis Garonor
has tested these systems and determined that they are Year 2000 compliant. In
addition, ProLogis Garonor has received an indemnification from the vendors who
supplied these systems' with respect to any Year 2000 failures.
Third Parties
Management believes that its planning efforts are adequate to address
the Year 2000 issue and that its risk factors are primarily those that it cannot
directly control, including the readiness of financial institutions and utility
providers. Failure on the part of these entities to become Year 2000 compliant
could result in disruptions in the business operations of ProLogis.
Costs
ProLogis' activities with respect to its assessment of Year 2000
compliance and its remediation efforts are being performed primarily by existing
personnel. ProLogis' historical costs for addressing the Year 2000 issue are not
material and management does not anticipate that its future costs associated
with the Year 2000 issue will be material. Third-party costs and interim
software solutions for Year 2000 issues have been less than $100,000 and are not
expected to exceed $250,000. ProLogis does not separately track the internal
costs incurred for Year 2000 compliance issues. Such costs are principally the
related payroll costs of its IT group. Although the cost of replacing ProLogis'
key property management and core accounting systems is substantial, the
replacements were made to improve operational efficiency and were not
accelerated due to the Year 2000 issue. ProLogis has not delayed any material
projects as a result of the Year 2000 issue. Funds expended to address Year 2000
issues have been made from operating cash flow.
35
<PAGE>
Unconsolidated Subsidiaries
As part of its compliance program, management of ProLogis has received
ongoing reports from CSI, Frigoscandia AB and ProLogis Kingspark on the impact
of the Year 2000 problems on their operations and financial results.
CSI has completed testing on all IT and embedded operating systems. No
critical IT or embedded operating systems have been identified that have not
already been remediated or are not Year 2000 compliant. CSI is currently
verifying and testing customer and supplier electronic data interface
programming standards. CSI retained an outside consulting firm to review their
Year 2000 testing methodologies and no significant issues were found. CSI
estimates that the total cost incurred to date and estimated total cost to be
incurred for Year 2000 remediation is less than $250,000. CSI is currently
preparing detailed contingency plans in the event of unexpected Year 2000
disruptions.
Frigoscandia AB has substantially completed testing of its IT and
embedded operating systems. No critical IT or embedded operating systems have
been identified that have not been remediated, with the exception of certain
components of its inventory management systems. Modifications to the components
of its inventory management systems are currently being performed and all
modifications are expected to be completed by the third quarter of 1999.
Frigoscandia AB is currently conducting a coordinated program whereby
testing with key customers and critical suppliers is performed. Additionally,
Frigoscandia AB is preparing detailed contingency plans in the event of
unexpected Year 2000 disruptions. Frigoscandia AB estimates that the total cost
incurred to date and the estimated total costs to be incurred for Year 2000
remediation is between $2 million and $4 million.
ProLogis Kingspark has recently installed a Year 2000 compliant version
of non-customized financial forecasting and accounting software. ProLogis
Kingspark has virtually no risk associated with embedded operating systems
because substantially all of ProLogis Kingspark activities are related to
development of facilities for third parties and not for its own long-term
ownership. ProLogis Kingspark estimates that the total cost incurred to date and
the estimated total cost to be incurred for the Year 2000 remediation is less
than $100,000.
There can be no assurances that Year 2000 remediation efforts by
ProLogis, its unconsolidated subsidiaries or third parties will be properly and
timely completed, and failure to do so could have a material adverse effect on
ProLogis, its business and its financial condition. ProLogis cannot predict the
actual effects to it of the Year 2000 problem, which depends on numerous
uncertainties such as: (i) whether significant third parties properly and timely
address the Year 2000 issue; and (ii) whether broad-based or systemic economic
failures may occur. Due to the general uncertainty inherent in the Year 2000,
ProLogis is unable to determine at this time whether the consequences of Year
2000 failures will have a material impact on its operations. ProLogis' Year 2000
compliance program is expected to significantly reduce the level of uncertainty
about the Year 2000 impact in areas that are within its direct control and
management of ProLogis believes that the possibility of significant
interruptions of normal operations will be reduced.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
As of June 30, 1999, no change had occurred in ProLogis' interest rate
risk or foreign currency risk as discussed in ProLogis' 1998 Annual Report on
Form 10-K.
36
<PAGE>
PART II
Item 4. Submission of Matters to Vote of Securities Holders
At a meeting on June 24, 1999, the shareholders of ProLogis elected the
following Trustees to office (of the total 161,241,850 shares outstanding on the
record date of May 14, 1999, 139,546,465 shares were voted at the meeting):
o 134,649,359 shares were voted for the election of Mr. John S.
Moody as a Class II Trustee to serve until the annual meeting of
shareholders in the year 2001, 4,897,106 shares were withheld;
o 134,657,434 shares were voted for the election of Mr. J. Andre
Teixeria as a Class II Trustee to serve until the annual meeting
of shareholders in the year 2001, 4,889,031 shares were withheld;
o 134,638,689 shares were voted for the election of Mr. K. Dane
Brooksher as a Class III Trustee to serve until the annual meeting
of shareholders in the year 2002, 4,907,776 shares were withheld;
o 134,648,835 shares were voted for the election of Mr. Kenneth N.
Stensby as a Class III Trustee to serve until the annual meeting
of shareholders in the year 2002, 4,897,630 shares were withheld;
and
o 134,661,822 shares were voted for the election of Mr. Thomas G.
Wattles as a Class III Trustee to serve until the annual meeting
of shareholders in the year 2002, 4,884,643 shares were withheld.
In addition, ProLogis' shareholders approved and adopted an Amended and
Restated Declaration of Trust which, among other provisions, amended provisions
relating to the removal of Trustees, approval of extraordinary transactions
(including mergers), the calling of special meetings and increased the
authorized shares of beneficial interest from 230,000,000 to 275,000,000. There
were 97,622,769 shares in favor, 35,800,235 shares against, 88,763 shares
abstaining and 6,034,698 shares not voted on this proposal.
Item 5. Other Information
In June 1999, ProLogis' shelf registration statement was declared
effective by the Securities and Exchange Commission regarding the offering from
time to time of $500.0 million in one or more series of its debt securities,
preferred shares, Common Shares, rights to purchase Common Shares and preferred
share purchase rights. As of August 10, 1999, ProLogis has approximately $608.0
million in securities available to be issued under its shelf registration
statement.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Articles of Amendment and Restatement of ProLogis Trust
3.2 ProLogis Trust Amended and Restated Bylaws
12.1 Computation of Ratio of Earnings to Fixed Charges
12.2 Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Share Dividends
15.1 Letter from Arthur Andersen LLP regarding unaudited financial
information dated August 11, 1999
27 Financial Data Schedule
(b) Reports on Form 8-K:
<TABLE>
Items Financial
Date Reported Statements
-------------- -------- ----------
<S> <C> <C>
April 13, 1999 5, 7 Yes
April 15, 1999 5, 7 Yes
April 15, 1999 5, 7 Yes
April 16, 1999 5, 7 No
April 22, 1999 (8-K/A) 5, 7 Yes
</TABLE>
37
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PROLOGIS TRUST
BY:/S/ WALTER C. RAKOWICH
-------------------------------
Walter C. Rakowich
Managing Director and
Chief Financial Officer
(Principal Financial Officer)
BY:/S/ EDWARD F. LONG
-------------------------------
Edward F. Long
Senior Vice President
and Controller
BY:/S/ SHARI J. JONES
-------------------------------
Shari J. Jones
Vice President
(Principal Accounting Officer)
Date: August 12, 1999
38
EXHIBIT 3.1
ARTICLES OF AMENDMENT AND RESTATEMENT
OF PROLOGIS TRUST
<PAGE>
TABLE OF CONTENTS
ARTICLE I. THE TRUST 1
Section 1. Name 1
Section 2. Resident Agent 1
Section 3. Nature of Trust 2
Section 4. Powers and Purposes 2
Section 5. Conflicts of Interest 2
ARTICLE II. SHARES 2
Section 1. Shares of Beneficial Interest 2
Section 2. Series A Preferred Shares 3
Section 3. Series B Preferred Shares 3
Section 4. Series C Preferred Shares 4
Section 5. Series D Preferred Shares 4
Section 6. Series A Junior Participating Preferred Shares 4
Section 7. Series E Preferred Shares 4
Section 8. Sale of Shares 4
Section 9. General Nature 4
Section 10. Acquisition of Shares 4
Section 11. Transferability; Transfer Restrictions and
Ownership Limitations 4
(a) Definitions 5-6
(b) Ownership Limitation 7
(c) Excess Shares 8-9
(d) Prevention of Transfer 10
(e) Notice to Trust 10
(f) Information for Trust 11
(g) Other Action by Board 11
(h) Ambiguities 11
(i) Modification of Existing Holder Limits 11
(j) Increase or Decrease in Ownership Limit 11
(k) Limitations on Changes in Existing Holder and
Ownership Limits 11
(l) Waivers by the Board 12
(m) Legend 12
(n) Severability 12
(o) Transfer of Excess Shares 12
(p) Distributions on Excess Shares 12
(q) Voting of Excess Shares 12
(r) Non-Transferability of Excess Shares 13
(s) Acting as Agent 13
(t) Call by Trust on Excess Shares 13
(u) Underwritten Offerings 13
Section 12. Exemptions from Certain Provisions of
Maryland Law 13
ARTICLE III. SHAREHOLDERS 14
Section 1. Meetings 14
Section 2. Voting 14
Section 3. Distributions 14
Section 4. Annual Report 14
Section 5. Inspection Rights 14
Section 6. Nonliability and Indemnification 14
Section 7. Notice of Nonliability 15
ARTICLE IV. THE TRUSTEES 15
Section 1. Number, Qualification, Compensation and Term 15
Section 2. Resignation, Removal and Death 16
Section 3. Vacancies 16
Section 4. Successor Trustees 16
Section 5. Meetings and Action Without a Meeting 16
Section 6. Authority 16
Section 7. Powers 16-17
Section 8. Right to Own Shares 18
Section 9. Transactions with Trust 18
Section 10. Limitation of Liability 18
Section 11. Indemnification 18
Section 12. Persons Dealing with Trustees 18
Section 13. Election of Officers 19
Section 14. Committees and Delegation of Powers and Duties 19
ARTICLE V. TERMINATION AND DURATION 19
Section 1. Termination 19
Section 2. Merger, Consolidation or Sale of Trust Property 19
Section 3. Duration 19
ARTICLE VI. AMENDMENTS 19
Section 1. Amendment by Shareholders 19
Section 2. Amendment by Trustees 20
Section 3. Requirements of Maryland Law 20
<PAGE>
ARTICLE VII. MISCELLANEOUS 20
Section 1. Construction 20
Section 2. Headings for Reference Only 20
Section 3. Filing and Recording 20
Section 4. Applicable Law 20
Section 5. Certifications 20
Section 6. Severability 20
Section 7. Bylaws 21
Section 8. Recording 21
ARTICLE VIII. LIMITATION OF LIABILITY AND INDEMNIFICATION 21
Section 1. Limitation of Liability of Officers and
Employees 21
Section 2. Indemnification of Officers and Employees 21
Section 3. Insurance 21
ANNEX A - SERIES A CUMULATIVE REDEEMABLE PREFERRED SHARES OF BENEFICIAL INTEREST
ANNEX B - SERIES B CUMULATIVE CONVERTIBLE REDEEMABLE PREFERRED SHARES OF
BENEFICIAL INTEREST
ANNEX C - SERIES C CUMULATIVE REDEEMABLE PREFERRED SHARES OF BENEFICIAL INTEREST
ANNEX D - SERIES D CUMULATIVE REDEEMABLE PREFERRED SHARES OF BENEFICIAL INTEREST
ANNEX E - SERIES A JUNIOR PARTICIPATING PREFERRED SHARES
ANNEX F - SERIES E CUMULATIVE REDEEMABLE PREFERRED SHARES OF BENEFICIAL INTEREST
<PAGE>
PROLOGIS TRUST
ARTICLES OF AMENDMENT AND RESTATEMENT
These Articles of Amendment and Restatement of the Amended and Restated
Declaration of Trust of ProLogis Trust are made as of June 24, 1999.
RECITALS
1. ProLogis Trust, a Maryland real estate investment trust (the
"Trust"), desires to amend and restate its declaration of trust as currently in
effect and as hereinafter amended.
2. The amendment to and restatement of the declaration of trust of the
Trust as hereinafter set forth was duly advised by the Board of Trustees (the
"Board") of the Trust and approved by the shareholders (the "Shareholders") of
the Trust as required by law.
3. The Trustees desire that the Trust continue to qualify as a "real
estate investment trust" under the provisions of the Internal Revenue Code of
1986, as 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.
4. The beneficial interests in the Trust are divided into transferable
Shares of one or more classes of shares of beneficial interest evidenced by
certificates or, if the class or series of Shares are uncertificated, by the
share records of the Trust.
DECLARATION
NOW, THEREFORE, the Trustees hereby declare that they hold 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, which are all of the provisions
of the Trust's declaration of trust as currently in effect and as hereinafter
amended.
ARTICLE I. THE TRUST
Section 1. Name.
(a) The Trust governed by these Articles of Amendment and Restatement
(as amended, supplemented or restated from time to time, this "Declaration of
Trust") is herein referred to as the "Trust" and shall be known by the name
"ProLogis Trust." So far as may be practicable, legal and convenient, the
affairs of the Trust shall be conducted and transacted under such 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.
(b) Under circumstances in which the Board determines that the use of
the name "ProLogis Trust" is not practicable, legal or convenient, it may as
appropriate use the Trustees' names with suitable reference to their Trustee
status, or some other suitable designation, or it 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 Board, refer to beneficiaries or Shareholders
of the Trust. Legal title to all of the properties subject from time to time to
this Declaration of Trust shall be transferred to, vested in and held by the
Trust in its own name or by the Trustees as joint tenants with right of
survivorship as Trustees of the Trust, except that the Board shall have the
power to cause legal title to any property of the 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 Board may determine, provided
that the interest of the Trust therein is, in the judgment of the Board,
appropriately protected.
(c) The Trust shall have the authority to operate under an assumed name
or names in such state or states or any political subdivision thereof where it
would not be legal, practical or convenient to operate in the name of the Trust.
The Trust shall have the authority to file such assumed name certificates or
other instruments in such places as may be required by applicable law to operate
under such assumed name or names.
(d) The Board may amend this Declaration of Trust, without Shareholder
approval, to change the name or other designation of the Trust.
Section 2. Resident Agent. The name and address of the resident
agent of the Trust in the State of Maryland is CSC-Lawyers Incorporating Service
Company, 11 East Chase St., Baltimore, Maryland 21202. The Trust may have such
other offices or places of business within or without the State of Maryland as
the Board may from time to time determine.
1
<PAGE>
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 a corporation. The Shareholders shall be
beneficiaries in such capacity in accordance with the rights conferred on them
hereunder.
Section 4. Powers and Purposes. The Trust is formed pursuant to the
provisions of, and shall have all of the powers provided in, Title 8, as it may
be amended from time to time, and shall have such additional powers as are not
inconsistent with, and are appropriate with respect to, the purpose of the Trust
as set forth in this Declaration of Trust. The purpose of the Trust is to invest
in notes, bonds and other obligations secured by mortgages on real property and
to purchase, hold, lease, manage, sell, exchange, develop, subdivide and improve
real property and interests in real property, and in general, to do all other
things in connection with the foregoing and to have and exercise all powers
conferred by Maryland law on real estate investment trusts formed under Maryland
law, and to do any or all of the things set forth herein to the same extent as
natural persons might or could do. In addition, it is intended that the business
of the Trust shall be conducted so that the Trust will qualify (so long as such
qualification, in the opinion of the Board, is advantageous to the Shareholders)
as a "real estate investment trust" as defined in the Code.
Section 5. Conflicts of Interest. Any transactions between the Trust
and any Trustee or any affiliates thereof shall be approved by a majority of the
Trustees not otherwise interested in such transactions.
ARTICLE I. SHARES
Section 1. Shares of Beneficial Interest.
(a) The units into which the beneficial interests in the Trust shall be
divided shall be designated as shares of beneficial interest ("Shares"), with a
par value of $0.01 per Share; provided, that the Board may amend this
Declaration of Trust, without shareholder approval, to change the par value of
any class or series of Shares of the Trust and the aggregate par value of the
Shares of the Trust. Ownership of Shares shall be evidenced by certificates in
such form as shall be determined by the Board from time to time in accordance
with Maryland law; provided, however, that the Board may provide that some or
all of any or all classes or series of Shares shall be uncertificated. The
owners of the 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 Shares shall consist of common
shares of beneficial interest, par value $0.01 per Share (the "Common Shares"),
and such other types or classes of Shares as the Board may create and authorize
from time to time and designate as representing a beneficial interest in the
Trust. The consideration paid for the issuance of Shares shall be determined by
the Board and shall consist of money paid, tangible or intangible property or
labor or services actually performed. Shares shall not be issued until the full
amount of the consideration has been received by the Trust. The Board may
authorize Share dividends or Share splits. All Shares issued hereunder shall be,
when issued, fully paid, and no assessment shall ever be made on the
Shareholders.
(b) Immediately before the filing of this Declaration of Trust, the
total number of Shares of all classes which the Trust had authority to issue was
230,000,000, consisting of 198,450,000 Common Shares, 5,400,000 Series A
Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $0.01
per Share (the "Series A Preferred Shares"), 8,050,000 Series B Cumulative
Convertible Redeemable Preferred Shares of Beneficial Interest, par value $0.01
per Share (the "Series B Preferred Shares"), 2,300,000 Series C Cumulative
Redeemable Preferred Shares of Beneficial Interest, par value $0.01 per share
(the "Series C Preferred Shares"), 11,500,000 Series D Cumulative Redeemable
Preferred Shares of Beneficial Interest, par value $0.01 per Share (the "Series
D Preferred Shares"), 2,300,000 Series A Junior Participating Preferred Shares,
par value $0.01 per Share (the "Junior Participating Preferred Shares") and
2,000,000 Series E Cumulative Redeemable Preferred Shares of Beneficial
Interest, par value $0.01 per Share (the "Series E Preferred Shares"),
representing an aggregate par value of $2,300,000. Immediately after the filing
of this Declaration of Trust, the total number of Shares of all classes which
the Trust has authority to issue is 275,000,000, consisting of 243,000,000
Common Shares, 5,400,000 Series A Preferred Shares, 8,050,000 Series B Preferred
Shares, 2,300,000 Series C Preferred Shares, 11,500,000 Series D Preferred
Shares, 2,750,000 Junior Participating Preferred Shares and 2,000,000 Series E
Preferred Shares, representing an aggregate par value of $2,750,000. If Shares
of one class are classified or reclassified into Shares of another class of
Shares pursuant to this Article II (including an exchange of Shares into Excess
Shares (defined below) pursuant to Section 11(c)), the number of authorized
Shares of the former class shall be automatically decreased and the number of
Shares of the latter class shall be automatically increased, in each case by the
number of Shares so classified or reclassified, so that the aggregate number of
Shares of all classes that the Trust has authority to issue shall not be more
than the aggregate number of Shares of all classes that the Trust has authority
to issue set forth in the second sentence of this paragraph. The Board, without
any action by the shareholders of the Trust, may amend the Declaration of Trust
from time to time to increase or decrease the aggregate number of Shares or the
number of Shares of any class or series that the Trust has authority to issue.
2
<PAGE>
(c) The Board 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 or distributions,
qualifications or terms or conditions of redemption of the Shares by filing
articles supplementary pursuant to Maryland law. The Board 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 with respect to each
unissued series shall include, but not be limited to, determination of the
following:
(1)The number of Shares constituting such series and the distinctive designation
of such series;
(2) The rate of dividend, if any, payable on Shares of such series and whether
(and, if so, on what terms and conditions) such 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 series of Shares;
(3) Whether Shares of such 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;
(4) Whether Shares of such series 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);
(5) Whether Shares of such series may be redeemed and, if so, the terms and
conditions on which they may be redeemed (including, without limitation, the
dates on 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);
(6) The amount, if any, payable on Shares of such series upon the voluntary
liquidation, dissolution or winding up of the Trust in preference to Shares of
any other class or series and whether Shares of such series shall be entitled to
participate generally in distributions on the Common Shares under such
circumstances;
(7) The amount, if any, payable on Shares of such series upon the involuntary
liquidation, dissolution or winding up of the Trust in preference to Shares of
any other class or series and whether Shares of such series shall be entitled to
participate generally in distributions on the Common Shares under such
circumstances;
(8) Sinking fund provisions, if any, for the redemption or purchase of Shares of
such series (including any similar fund, however designated); and
(9) Any other relative rights, preferences, limitations and powers of Shares of
such series.
Any terms of any class or series of Shares set pursuant to this Section
1 may be made dependent upon facts ascertainable outside of this Declaration of
Trust (including the occurrence of any event, including a determination or
action by the Trust or any other entity, person or body and the contents of any
agreements to which the Trust is a party or any other document) and may vary
among holders thereof.
Section 2. Series A Preferred Shares. The Board has classified
5,400,000 Shares of the Trust as Series A Preferred Shares. 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, is set forth in
Annex A hereto, which is hereby incorporated by reference as if it were set
forth in this Section 2 in its entirety.
Section 3. Series B Preferred Shares. The Board has classified
8,050,000 Shares of the Trust as Series B Preferred Shares. 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, is set forth in
Annex B hereto, which is hereby incorporated by reference as if it were set
forth in this Section 3 in its entirety.
3
<PAGE>
Section 4. Series C Preferred Shares. The Board has classified
2,300,000 Shares of the Trust as Series C Preferred Shares. A description of the
Series C Preferred Shares, including the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption thereof, is set forth in
Annex C hereto, which is hereby incorporated by reference as if it were set
forth in this Section 4 in its entirety.
Section 5. Series D Preferred Shares. The Board has classified
11,500,000 Shares of the Trust as Series D Preferred Shares. A description of
the Series D Preferred Shares, including the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption thereof, is set forth in
Annex D hereto, which is hereby incorporated by reference as if it were set
forth in this Section 5 in its entirety.
Section 6. Series A Junior Participating Preferred Shares. The Board
has classified 2,750,000 Shares of the Trust as Series A Junior Participating
Preferred Shares. A description of the Junior Participating Preferred Shares,
including the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption thereof, is set forth in Annex E hereto, which is
hereby incorporated by reference as if it were set forth in this Section 6 in
its entirety.
Section 7. Series E Preferred Shares. The Board has classified
2,000,000 Shares of the Trust as Series E Preferred Shares. A description of the
Series E Preferred Shares, including the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption thereof, is set forth in
Annex F hereto, which is hereby incorporated by reference as if it were set
forth in this Section 7 in its entirety.
Section 8. Sale of Shares. The Board, in its discretion, may authorize
the issuance of Shares of any class or series, whether now or hereafter
authorized, or securities or rights convertible into Shares of any class or
series, whether now or hereafter authorized and for such consideration, as
allowed by Maryland law, at such time or times, and on such terms as the Board
may deem appropriate. In connection with any issuance of Shares, the Board, in
its discretion, may eliminate a fraction of a Share by rounding up or down to a
full Share, arrange for the disposition of a fraction of a Share by the person
entitled to it, or pay cash for the fair value of a fraction of a Share. Except
as may be provided in any agreement between the Trust and any of its
Shareholders, the Shareholders shall have no preemptive rights of any kind
whatsoever (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).
Section 9. General Nature. All Shares shall be personal property
entitling the Shareholders only to those rights provided in this Declaration of
Trust or in the resolution creating any class or series of Shares. The legal
ownership of the property of the Trust and the right to conduct the business of
the Trust are vested exclusively in the Trustees; the Shareholders shall have no
interest therein other than beneficial interest in the Trust conferred by their
Shares and shall have no right to compel any partition, division, dividend or
distribution of the Trust or any of its property. The death of a Shareholder
shall not terminate the Trust or give his or her legal representative any rights
against other Shareholders, the Trustees or the Trust property, except the
right, exercised in accordance with applicable provisions of the Trust's Bylaws
(the "Bylaws"), to receive a new certificate for Shares in exchange for the
certificate held by the deceased Shareholder.
Section 10. Acquisition of Shares. The Trust may repurchase or
otherwise acquire its own Shares at such price or prices as may be determined by
the Board, and for such 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
Board, be disposed of by the Board at such time or times, to such party or
parties, and for such consideration, as the Board may deem appropriate or may be
returned to the status of authorized but unissued Shares of the Trust.
Section 11. Transferability; Transfer Restrictions and Ownership
Limitations. Shares in the Trust shall be transferable (subject to the further
provisions of this Section 11) in accordance with the procedure prescribed from
time to time in the 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 Board 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 REIT, shall be null and void ab initio.
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a. Definitions. For purposes of this Section 11, the following terms shall have
the following meanings:
"Adoption Date" shall mean the date of the adoption of the
ownership restrictions contained in this Section 11 by resolution of
the Board, which shall be deemed to occur upon the Board's adoption of
this Declaration of Trust.
"Beneficial Ownership" shall mean, except as provided below in
the following sentence, ownership of Shares by a Person (whether or not
treated as an individual for purposes of Section 544 of the Code) who
is or would be treated as an owner of such Shares either directly or
constructively through the application of Section 544 of the Code, as
modified by Section 856(h)(1)(B) of the Code. However, Section 544
shall be modified so that no corporate shareholder of an Excluded
Holder owning directly or indirectly less than 10% of the stock of such
Excluded Holder shall be treated as owning any of the Shares of the
Trust owned by such Excluded Holder so long as no individual directly
or indirectly owns 50 percent or more in value of the stock of such
corporate shareholder. "Beneficial Ownership" shall also mean
beneficial ownership as defined under Rule 13(d) under the Securities
Exchange Act of 1934, as amended, and, with respect to such meaning,
Beneficial Ownership by any Person shall include Beneficial Ownership
by other Persons who are part of the same group as the original Person
for purposes of such Rule 13(d). The terms "Beneficial Owner,"
"Beneficially Owns," "Beneficially Own" and "Beneficially Owned" shall
have correlative meanings.
"Charitable Beneficiary" shall mean an organization or
organizations described in Sections 170(b)(1)(A) and 170(c) of the Code
and identified by the Board as the beneficiary or beneficiaries of the
Excess Share Trust.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Constructive Ownership" shall mean ownership of Shares by a
Person who would be treated as an owner of such Shares, either directly
or constructively, through the application of Section 318 of the Code,
as modified by Section 856(d)(5) of the Code. The terms "Constructive
Owner", "Constructively Owns", "Constructively Owning" and
"Constructively Owned" shall have correlative meanings.
"Excess Shares" shall mean Shares resulting from an exchange
described in subsection (c) of this Section 11.
"Excess Share Trust" shall mean the trust created pursuant to
subsections (c) and (o) of this Section 11.
"Excess Share Trustee" shall mean a person, who shall be
unaffiliated with the Trust, any Purported Beneficial Transferee and
any Purported Record Transferee, identified by the Board as the trustee
of the Excess Share Trust.
"Excluded Holder" shall mean Security Capital Group and its
affiliates, successors or assignees. However, an affiliate, successor
or assignee of Security Capital Group shall be treated as an Excluded
Holder only if the Board determines, based on such evidence as it deems
appropriate, that any ownership of Shares by such affiliate, successor
or assignee will not jeopardize the status of the Trust as a REIT.
"Existing Holder" shall mean any Person (other than an
Excluded Holder) who is, or would be upon the exchange of Units, debt
or any security of the Trust, the Beneficial Owner of Shares in excess
of the Ownership Limit both on and immediately after the Adoption Date,
so long as, but only so long as, such Person Beneficially Owns or
would, upon exchange of Units, debt or any security of the Trust,
Beneficially Own Shares in excess of the Ownership Limit.
"Existing Holder Limit" for any Existing Holder shall mean the
percentage of the outstanding Shares Beneficially Owned, or which would
be Beneficially Owned upon the exchange of Units, debt or any security
of the Trust, by such Existing Holder on and immediately after the
Adoption Date, and, after any adjustment pursuant to subsection (i) of
this Section 11, shall mean such percentage of the outstanding Shares
as so adjusted. Any Existing Holder Limit shall not be modified except
as provided in subsection (i) of this Section 11. From the Adoption
Date until the Restriction Termination Date, the Trust shall maintain
and, upon request, make available to each Existing Holder, a schedule
which sets forth the then current Existing Holder Limit for each
Existing Holder.
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"Market Price" shall mean the last reported sales price
reported on the NYSE for Shares on the trading day immediately
preceding the relevant date, or if not then traded on the NYSE, the
last reported sales price for Shares on the trading day immediately
preceding the relevant date as reported on any exchange or quotation
system over or through which such Shares may be traded, or if not then
traded over or through any exchange or quotation system, then the
market price of such Shares on the relevant date as determined in good
faith by the Board.
"Non-U.S. Person" shall mean a Person other than a U.S.Person.
"Ownership Limit" shall initially mean 9.8%, in number of
Shares or value, of the outstanding Shares, and, after any adjustment
as set forth in subsection (j) of this Section 11, shall mean such
lesser or greater percentage of the outstanding Shares as so adjusted.
The number and value of the outstanding Shares of the Trust shall be
determined by the Board in good faith, which determination shall be
conclusive for all purposes hereof.
"Person" shall mean an individual, corporation, partnership,
estate, trust (including a trust qualified under Section 401(a) or
501(c)(17) of the Code), portion of a trust permanently set aside for
or to be used exclusively for the purposes described in Section 642(c)
of the Code, association, private foundation within the meaning of
Section 509(a) of the Code, joint stock company or other entity.
"Purported Beneficial Transferee" shall mean, with respect to
any purported Transfer which results in Excess Shares, as defined in
subsection (c) of this Section 11, the beneficial holder of such
Shares, if such Transfer had been valid under subsection (b) of this
Section 11.
"Purported Record Transferee" shall mean, with respect to any
purported Transfer which results in Excess Shares, as defined in
subsection (c) of this Section 11, the record holder of such Shares, if
such Transfer had been valid under subsection (b) of this Section 11.
"REIT" shall mean a real estate investment trust under Section
856 of the Code.
"REIT Provisions of the Code" means Sections 856 through 860
of the Code and any successor or other provisions of the Code relating
to REITs (including provisions as to the attribution of ownership of
beneficial interests therein) and the regulations promulgated
thereunder.
"Related Tenant Limit" shall mean 9.9% by value of the
outstanding Shares of the Trust.
"Related Tenant Owner" shall mean any Constructive Owner who
also owns, directly or indirectly, an interest in a Tenant, which
interest is equal to or greater than (i) 9.9% of the combined voting
power of all classes of stock of such Tenant, (ii) 9.9% of the total
number of shares of all classes of stock of such Tenant or (iii) if
such Tenant is not a corporation, 9.9% of the assets or net profits of
such Tenant, in each case only if such ownership would cause the Trust
to fail the 95% gross income test set forth in Section 856(c)(2) of the
Code or the 75% gross income test set forth in Section 856(c)(3) of the
Code.
"Restriction Termination Date" shall mean the first day after
the Adoption Date on which the Board determines that it is no longer in
the best interests of the Trust to continue to qualify as a REIT.
"Security Capital Group" shall mean Security Capital Group
Incorporated, a Maryland corporation.
"Shares" shall mean the shares of beneficial interest of the
Trust as may be authorized and issued from time to time pursuant to
this Article II.
"Tenant" shall mean any tenant (including a subtenant) of (i)
the Trust, (ii) a subsidiary of the Trust which is deemed to be a
"qualified REIT subsidiary" under Section 856(i)(2) of the Code or
(iii) a partnership or limited liability company in which the Trust or
one or more of its qualified REIT subsidiaries is a partner or a
member.
"Transfer" shall mean any sale, transfer, gift, assignment,
devise or other disposition of Shares (including (i) the granting of
any option or entering into any agreement for the sale, transfer or
other disposition of Shares, (ii) the sale, transfer, assignment or
other disposition of any securities or rights convertible into or
exchangeable for Shares, but excluding the exchange of Units, debt or
any security of the Trust for Shares and (iii) any transfer or other
disposition of any interest in Shares as a result of a change in the
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marital status of the holder thereof), whether voluntary or
involuntary, whether of record, constructively or beneficially and
whether by operation of law or otherwise. The terms "Transfers" and
"Transferred" shall have correlative meanings.
"Units" shall mean units of any partnership which are
convertible into or exchangeable for Shares or in respect of which any
Shares may be issued in satisfaction of a unit holder's redemption
right.
"U.S. Person" shall mean a person defined as a "United States
Person" in Section 7701(a)(30) of the Code.
b. Ownership Limitation.
(1) Except as provided in subsections (l) and (u) of this Section 11 and subject
to subsection (b)(ix) of this Section 11, from the Adoption Date until the
Restriction Termination Date, no Person or Persons acting as a group (other than
an Excluded Holder or an Existing Holder) shall Beneficially Own Shares in
excess of the Ownership Limit.
(2) Except as provided in subsections (l) and (u) of this Section 11 and subject
to subsection (b)(ix) of this Section 11, from the Adoption Date until the
Restriction Termination Date, any Transfer which, if effective, would result in
any Person (other than an Excluded Holder or an Existing Holder) Beneficially
Owning Shares in excess of the Ownership Limit shall be void ab initio as to the
Transfer of the Shares which would be otherwise Beneficially Owned by such
Person in excess of the Ownership Limit; and the intended transferee shall
acquire no rights in such Shares.
(3) Except as provided in subsections (l) and (u) of this Section 11 and subject
to subsection (b)(ix) of this Section 11, from the Adoption Date until the
Restriction Termination Date, any Transfer which, if effective, would result in
any Existing Holder Beneficially Owning Shares in excess of the applicable
Existing Holder Limit shall be void ab initio as to the Transfer of the Shares
which would be otherwise Beneficially Owned by such Existing Holder in excess of
the applicable Existing Holder Limit; and such Existing Holder shall acquire no
rights in such Shares.
(4) Except as provided in subsections (l) and (u) of this Section 11 and subject
to subsection (b)(ix) of this Section 11, from the Adoption Date until the
Restriction Termination Date, any Transfer which, if effective, would result in
the Shares being beneficially owned (as provided in Section 856(a) of the Code)
by fewer than 100 Persons (determined without reference to any rules of
attribution) shall be void ab initio as to the Transfer of the Shares which
would be otherwise beneficially owned (as provided in Section 856(a) of the
Code) by the transferee; and the intended transferee shall acquire no rights in
such Shares.
(5) Except as provided in subsection (l) of this Section 11 and subject to
subsection (b)(ix) of this Section 11, from the Adoption Date until the
Restriction Termination Date, any Transfer which, if effective, would result in
the Trust being "closely held" within the meaning of Section 856(h) of the Code
shall be void ab initio as to the Transfer of the Shares which would cause the
Trust to be "closely held" within the meaning of Section 856(h) of the Code; and
the intended transferee shall acquire no rights in such Shares.
(6) Subject to subsection (b)(ix) of this Section 11, from the Adoption Date
until the Restriction Termination Date, any Transfer of Shares to a Non-U.S.
Person (other than an Excluded Holder) shall be void ab initio as to the
Transfer of such Shares if, as a result of such Transfer, the fair market value
of Shares owned directly or indirectly by Non-U.S. Persons would comprise 50% or
more of the fair market value of the issued and outstanding Shares of the Trust;
and such Non-U.S. Person shall acquire no rights in such Shares.
(7) Subject to subsection (b)(ix) of this Section 11, from the Adoption Date
until the Restriction Termination Date, any Transfer of Shares which, if
effective, would result in any Related Tenant Owner Constructively Owning Shares
in excess of the Related Tenant Limit shall be void ab initio as to the Transfer
of such Shares which would be otherwise Constructively Owned by such Related
Tenant Owner in excess of the Related Tenant Limit; and the intended transferee
shall acquire no rights in such Shares.
(8) Subject to subsection (b)(ix) of this Section 11, from the Adoption Date
until the Restriction Termination Date, any Transfer which, if effective, would
result in the disqualification of the Trust as a REIT by virtue of actual,
Beneficial or Constructive Ownership of Shares shall be void ab initio as to
such portion of the Transfer resulting in the disqualification; and the intended
transferee shall acquire no rights in such Shares.
(9) Nothing contained in this Section 11 shall preclude the settlement of any
transaction entered into through the facilities of the New York Stock Exchange
(the "NYSE"). The fact that the settlement of any transaction is permitted shall
not negate the effect of any other provision of this Section 11 and any
transferee in such a transaction shall be subject to all of the provisions and
limitations set forth in this Section 11.
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c. Excess Shares.
(1) If, notwithstanding the other provisions contained in this Section 11, at
any time after the Adoption Date until the Restriction Termination Date, there
is a purported Transfer which is not void ab initio pursuant to subsection (b)
of this Section 11 such that (i) any Person (other than an Excluded Holder or an
Existing Holder) would Beneficially Own Shares in excess of the applicable
Ownership Limit or (ii) any Existing Holder would Beneficially Own Shares in
excess of the applicable Existing Holder Limit, then, except as otherwise
provided in subsection (l) of this Section 11, Shares directly owned by such
Person or Existing Holder, as the case may be, shall be automatically exchanged
for an equal number of Excess Shares until such Person or Existing Holder, as
the case may be, does not Beneficially Own Shares in excess of the applicable
Ownership Limit or Existing Holder Limit. Such exchange shall be effective as of
the close of business on the business day prior to the date of the purported
Transfer. If, after exchanging all of the Shares owned directly by a Person or
Existing Holder, such Person or Existing Holder still Beneficially Owns Shares
in excess of the applicable Ownership Limit or Existing Holder Limit, Shares
owned by such Person or Existing Holder constructively through the application
of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code,
shall be exchanged for an equal number of Excess Shares until such Person or
Existing Holder, as the case may be, does not Beneficially Own Shares in excess
of the applicable Ownership Limit or Existing Holder Limit. If such Person or
Existing Holder owns Shares constructively through one or more Persons and the
Shares held by such other Persons must be exchanged for an equal number of
Excess Shares, the exchange of Shares by such other Persons shall be pro rata.
However, if such Person or Existing Holder owns Shares constructively through an
Excluded Holder, the Excluded Holder shall not have to exchange its Shares for
Excess Shares and the exchange shall be pro rata among the other Persons.
(2) If, notwithstanding the other provisions contained in this Section 11, at
any time after the Adoption Date until the Restriction Termination Date, there
is a purported Transfer of Shares or any sale, transfer, gift, assignment,
devise or other disposition of shares or other interests of a direct or indirect
Shareholder of the Trust which is not void ab initio pursuant to subsection (b)
of this Section 11 and which, if effective, would cause the Trust to become
"closely held" within the meaning of Section 856(h) of the Code, then any Shares
being Transferred which would cause the Trust to be "closely held" within the
meaning of Section 856(h) of the Code (rounded up to the nearest whole Share)
shall be automatically exchanged for an equal number of Excess Shares and be
treated as provided in this Section 11. Such designation and treatment shall be
effective as of the close of business on the business day prior to the date of
the purported Transfer. If, after the exchange of any such Shares, the Trust is
still "closely held" within the meaning of Section 856(h) of the Code, any
individual whose Beneficial Ownership of Shares in the Trust increased as a
result of the sale, transfer, gift, assignment, devise or other disposition of
shares or other interests of a direct or indirect Shareholder of the Trust or
any other event and is one of the five individuals who caused the Trust to be
"closely held" within the meaning of Section 856(h) of the Code, shall exchange
Shares owned directly for an equal number of Excess Shares until the Trust is
not "closely held" within the meaning of Section 856(h) of the Code. If
similarly situated individuals exist, the exchange shall be pro rata. If, after
applying the foregoing provisions, the Trust is still "closely held" within the
meaning of Section 856(h) of the Code, then any Shares constructively owned by
such individuals shall be exchanged for Excess Shares (other than Shares held by
an Excluded Holder), on a pro rata basis among similarly situated individuals,
until the Trust is not "closely held" within the meaning of Section 856(h) of
the Code.
(3) If, at any time after the Adoption Date until the Restriction Termination
Date, an event other than a purported Transfer (an "Event") occurs which would
(i) cause any Person (other than an Excluded Holder or an Existing Holder) to
Beneficially Own Shares in excess of the Ownership Limit or (ii) cause an
Existing Holder to Beneficially Own Shares in excess of the Existing Holder
Limit, then, except as otherwise provided in subsection (l) of this Section 11,
Shares Beneficially Owned by such Person or Existing Holder, as the case may be,
shall be automatically exchanged for an equal number of Excess Shares to the
extent necessary to eliminate such excess ownership. Such exchange shall be
effective as of the close of business on the business day prior to the date of
the Event. In determining which Shares are exchanged, Shares Beneficially Owned
by any Person who caused the Event to occur shall be exchanged before any Shares
not so held are exchanged. If similarly situated Persons exist, the exchange
shall be pro rata. If any Person is required to exchange Shares pursuant to this
subsection (c)(iii), such Person shall first exchange Shares directly held by
such Person before exchanging Shares owned constructively through the
application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of
the Code. If such Person or Existing Holder owns Shares constructively through
one or more Persons and the Shares held by such other Persons must be exchanged
for an equal number of Excess Shares, the exchange of Shares by such other
Persons shall be pro rata. However, if such Person or Existing Holder owns
Shares constructively through an Excluded Holder, the Excluded Holder shall not
have to exchange its Shares for Excess Shares and the exchange shall be pro rata
among the other Persons.
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(4) If, at any time after the Adoption Date until the Restriction Termination
Date, an Event occurs which would cause the Trust to become "closely held"
within the meaning of Section 856(h) of the Code, then Shares Beneficially Owned
by any Person or Existing Holder (other than an Excluded Holder), as the case
may be, shall be automatically exchanged for an equal number of Excess Shares to
the extent necessary to eliminate such excess ownership. Such exchange shall be
effective as of the close of business on the business day prior to the date of
the Event. In determining which Shares are exchanged, Shares Beneficially Owned
by any Person (other than an Excluded Holder) who caused the Event to occur
shall be exchanged before any Shares not so held are exchanged. If similarly
situated Persons exist, the exchange shall be pro rata. If any Person is
required to exchange Shares pursuant to this subsection (c)(iv), such Person
shall first exchange Shares directly held by such Person before exchanging
Shares owned constructively through the application of Section 544 of the Code,
as modified by Section 856(h)(1)(B) of the Code. If any Person (other than an
Excluded Holder) owns Shares constructively through one or more Persons and the
Shares held by such other Persons must be exchanged for an equal number of
Excess Shares, the exchange of Shares by such other Persons shall be pro rata.
However, if such Person or Existing Holder owns Shares constructively through an
Excluded Holder, the Excluded Holder shall not have to exchange its Shares for
Excess Shares and the exchange shall be pro rata among the other Persons.
(5) If, notwithstanding the other provisions contained in this Article II, there
is a purported Transfer of Shares which is not void ab initio pursuant to
subsection (b) of this Section 11 to (i) a Non-U.S. Person (other than an
Excluded Holder) or (ii) a U.S. Person whose Shares would be treated as owned
indirectly by a Non-U.S. Person (other than an Excluded Holder), then any Shares
being Transferred which would result in the fair market value of Shares owned
directly or indirectly by Non-U.S. Persons comprising 50% or more of the fair
market value of the issued and outstanding Shares of the Trust shall be
automatically exchanged for an equal number of Excess Shares and be treated as
provided in this Section 11. Such designation and treatment shall be effective
as of the close of business on the business day prior to the date of the
purported Transfer.
(6) If, notwithstanding the other provisions contained in this Article II, there
is an event other than those described in subsection (c)(v) of this Section 11
(a "Non-U.S. Event") which would result in the fair market value of Shares owned
directly or indirectly by Non-U.S. Persons comprising 50% or more of the fair
market value of the issued and outstanding Shares of the Trust, then Shares
owned directly or indirectly by Non-U.S. Persons (other than by an Excluded
Holder) shall be automatically exchanged for an equal number of Excess Shares to
the extent necessary to eliminate such excess ownership. Such exchange shall be
effective as of the close of business on the business day prior to the date of
the Non-U.S. Event. In determining which Shares are exchanged, Shares owned
directly or indirectly by any Non-U.S. Person who caused the Non-U.S. Event to
occur shall be exchanged before any Shares not so held are exchanged. If
similarly situated Persons exist, the exchange shall be pro rata. If the
Non-U.S. Event was not caused by a Non-U.S. Person, Shares owned directly or
indirectly by Non-U.S. Persons (other than Shares owned directly or indirectly
by an Excluded Holder) shall be chosen by random lot and exchanged for Excess
Shares until Non-U.S. Persons do not own directly or indirectly 50% or more of
the issued and outstanding Shares.
(7) If, notwithstanding the other provisions contained in this Section 11, at
any time after the Adoption Date until the Restriction Termination Date, there
is a purported Transfer of Shares or any sale, transfer, gift, assignment,
devise or other disposition of shares or other interests of a direct or indirect
Shareholder of the Trust which, if effective, would cause any Related Tenant
Owner to Constructively Own Shares in excess of the Related Tenant Limit, then
any Shares purportedly owned by such Related Tenant Owner which would cause such
Related Tenant to Constructively Own Shares in excess of the Related Tenant
Limit shall be automatically exchanged for an equal number of Excess Shares and
be treated as provided in this Section 11. Such designation and treatment shall
be effective as of the close of business on the business day prior to the date
of the purported Transfer or event described in the preceding sentence. In
determining which Shares are exchanged, Shares owned directly or indirectly by
any Person (other than an Excluded Holder) who caused the Related Tenant Event
to occur shall be exchanged before any Shares not so held are exchanged. If
similarly situated Persons exist, the exchange shall be pro rata. If the Related
Tenant Limit is still exceeded and the Related Tenant Event was not caused by
the Related Tenant Owner in question, Shares owned directly or indirectly by
such Related Tenant Owner (other than Shares owned directly or indirectly by an
Excluded Holder) shall be exchanged for Excess Shares until the Related Tenant
Owner does not own Shares in excess of the Related Tenant Limit. If, after the
exchanges described above in this subsection (c)(vii), the Related Tenant Owner
still owns Shares in excess of the Related Tenant Limit, Shares owned directly
or indirectly by the Excluded Holders shall be exchanged pro rata for Excess
Shares until the Related Tenant Owner does not own Shares in excess of the
Related Tenant Limit.
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(8) If, at any time after the Adoption Date until the Restriction Termination
Date, there is an event (a "Related Tenant Event") which would cause any Related
Tenant Owner to Constructively Own Shares in excess of the Related Tenant Limit,
then Shares which would cause the Related Tenant Limit to be exceeded shall be
automatically exchanged for an equal number of Excess Shares to the extent
necessary to eliminate such excess ownership. Such exchange shall be effective
as of the close of business on the business day prior to the date of the Related
Tenant Event. In determining which Shares are exchanged, Shares owned directly
or indirectly by any Person (other than an Excluded Holder) who caused the
Related Tenant Event to occur shall be exchanged before any Shares not so held
are exchanged. If similarly situated Persons exist, the exchange shall be pro
rata. If the Related Tenant Limit is still exceeded and the Related Tenant Event
was not caused by the Related Tenant Owner in question, Shares owned directly or
indirectly by such Related Tenant Owner (other than Shares owned directly or
indirectly by an Excluded Holder) shall be exchanged for Excess Shares until the
Related Tenant Owner does not own Shares in excess of the Related Tenant Limit.
If, after the exchanges described above in this subsection (c)(viii), the
Related Tenant Owner still owns Shares in excess of the Related Tenant Limit,
Shares owned directly or indirectly by the Excluded Holders shall be exchanged
pro rata for Excess Shares until the Related Tenant Owner does not own Shares in
excess of the Related Tenant Limit.
(9) If, notwithstanding the other provisions contained in this Section 11, at
any time after the Adoption Date until the Restriction Termination Date, there
is a purported Transfer of Shares or any sale, transfer, gift, assignment,
devise or other disposition of shares or other interests of a direct or indirect
Shareholder of the Trust which, if effective, would result in the
disqualification of the Trust as a REIT by virtue of actual, Beneficial or
Constructive Ownership of Shares, then any Shares being Transferred which would
result in such disqualification shall be automatically exchanged for an equal
number of Excess Shares and shall be treated as provided in this Section 11.
Such designation and treatment shall be effective as of the close of business on
the business day prior to the date of the purported Transfer.
(10) If, at any time after the Adoption Date until the Restriction Termination
Date, notwithstanding the other provisions contained in this Section 11, there
is an event (a "Prohibited Owner Event") which would result in the
disqualification of the Trust as a REIT by virtue of actual, Beneficial or
Constructive Ownership of Shares, then Shares which would result in the
disqualification of the Trust shall be automatically exchanged for an equal
number of Excess Shares to the extent necessary to avoid such disqualification.
Such exchange shall be effective as of the close of business on the business day
prior to the date of the Prohibited Owner Event. In determining which Shares are
exchanged, Shares owned directly or indirectly by any Person (other than the
Excluded Holder) who caused the Prohibited Owner Event to occur shall be
exchanged before any Shares not so held are exchanged. If similarly situated
Persons exist, the exchange shall be pro rata. If the Trust is still
disqualified, Shares owned directly or indirectly by Persons who did not cause
the Prohibited Owner Event to occur (other than Shares owned directly or
indirectly by an Excluded Holder) shall be chosen by random lot and exchanged
for Excess Shares until the Trust is no longer disqualified as a REIT. If, after
the exchanges described above in this subsection (c)(x), the Trust is still
disqualified as a REIT, Shares owned directly or indirectly by the Excluded
Holders shall be exchanged pro rata for Excess Shares until the Trust is no
longer disqualified as a REIT.
d. Prevention of Transfer. If the Board or its designee shall at any time
determine in good faith that a Transfer has taken place in violation of
subsection (b) of this Section 11 or that a Person intends to acquire or has
attempted to acquire Beneficial Ownership (determined without reference to any
rules of attribution) of any Shares in violation of subsection (b) of this
Section 11, the Board or its designee shall take such action as it deems
advisable to refuse to give effect to or to prevent such Transfer, including,
but not limited to, refusing to give effect to such Transfer on the books of the
Trust or instituting proceedings to enjoin such Transfer; provided, however,
that any Transfers or attempted Transfers in violation of subsection (b) of this
Section 11 shall automatically result in the designation and treatment described
in subsection (c) of this Section 11, irrespective of any action (or non-action)
by the Board.
e. Notice to Trust. Any Person who acquires or attempts to acquire Shares in
violation of subsection (b) of this Section 11, or any Person who is a
transferee such that Excess Shares result under subsection (c) of this Section
11, shall immediately give written notice or, with respect to a proposed or
attempted Transfer, give at least 30 days' prior written notice to the Trust of
such event and shall provide to the Trust such other information as the Trust
may request in order to determine the effect, if any, of such Transfer or
attempted Transfer on the Trust's status as a REIT.
f. Information for Trust. From the Adoption Date until the Restriction
Termination Date:
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(1) Every Beneficial Owner of more than 5% (or such other percentage, between
0.5% and 5%, as provided in the income tax regulations promulgated under the
Code) of the number or value of outstanding Shares of the Trust shall, within 30
days after January 1 of each year, give written notice to the Trust stating the
name and address of such Beneficial Owner, the number of Shares Beneficially
Owned and a description of how such Shares are held; and each such Beneficial
Owner shall provide to the Trust such additional information as the Trust may
reasonably request in order to determine the effect, if any, of such Beneficial
Ownership on the Trust's status as a REIT; and
(2) Each Person who is a Beneficial Owner of Shares and each Person (including
the Shareholder of record) who is holding Shares for a Beneficial Owner shall
provide to the Trust in writing such information with respect to direct,
indirect and constructive ownership of Shares as the Board deems reasonably
necessary to comply with the provisions of the Code applicable to a REIT, to
determine the Trust's status as a REIT, to comply with the requirements of any
taxing authority or governmental agency or to determine any such compliance.
g. Other Action by Board. Subject to subsection (b) of this Section 11, nothing
contained in this Section 11 shall limit the authority of the Board to take such
other action as it deems necessary or advisable to protect the Trust and the
interests of its Shareholders by preservation of the Trust's status as a REIT;
provided, however, that no provision of this Section 11 shall preclude the
settlement of any transaction entered into through the facilities of the NYSE.
h. Ambiguities. In the case of an ambiguity in the application of any of the
provisions of this Section 11, including any definition contained in subsection
(a) of this Section 11, the Board shall have the power to determine the
application of the provisions of this Section 11 with respect to any situation
based on the facts known to it.
i. Modification of Existing Holder Limits. The Existing Holder Limits may be
modified as follows:
(1) Subject to the limitations provided in subsection (k) of this Section 11,
the Board may grant options which result in Beneficial Ownership of Shares by an
Existing Holder pursuant to an option plan approved by the Board and/or the
Shareholders. Any such grant shall increase the Existing Holder Limit for the
affected Existing Holder to the maximum extent possible under subsection (k) of
this Section 11 to permit the Beneficial Ownership of Shares issuable upon the
exercise of such option.
(2) Subject to the limitations provided in subsection (k) of this Section 11, an
Existing Holder may elect to participate in a dividend reinvestment plan
approved by the Board which results in Beneficial Ownership of Shares by such
participating Existing Holder and any comparable reinvestment plan of any
partnership, wherein those Existing Holders holding Units are entitled to
purchase additional Units. Any such participation shall increase the Existing
Holder Limit for the affected Existing Holder to the maximum extent possible
under subsection (k) of this Section 11 to permit Beneficial Ownership of the
Shares acquired as a result of such participation.
(3) The Board shall reduce the Existing Holder Limit for any Existing Holder
after any Transfer permitted in this Section 11 by such Existing Holder by the
percentage of the outstanding Shares so Transferred or after the lapse (without
exercise) of an option described in subsection (i)(i) of this Section 11 by the
percentage of the Shares which the option, if exercised, would have represented,
but in either case no Existing Holder Limit shall be reduced to a percentage
which is less than the Ownership Limit.
j. Increase or Decrease in Ownership Limit. Subject to the limitations provided
in subsection (k) of this Section 11, the Board may from time to time increase
or decrease the Ownership Limit; provided, however, that any decrease may only
be made prospectively as to subsequent holders (other than a decrease as a
result of a retroactive change in existing law which would require a decrease to
retain REIT status, in which case such decrease shall be effective immediately).
k. Limitations on Changes in Existing Holder and Ownership Limits.
(1) Neither the Ownership Limit nor any Existing Holder Limit may be increased
(nor may any additional Existing Holder Limit be created) if, after giving
effect to such increase (or creation), five individual Beneficial Owners of
Shares (including all of the then Existing Holders) could Beneficially Own, in
the aggregate, more than 49.9% in number or value of the outstanding Shares.
(2) Prior to the modification of any Existing Holder Limit or Ownership Limit
pursuant to subsection (i) or (j) of this Section 11, the Board may require such
opinions of counsel, affidavits, undertakings or agreements as it may deem
necessary or advisable in order to determine or ensure the Trust's status as a
REIT.
(3) No Ownership Limit may be increased to a percentage which is greater than
9.9%.
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l. Waivers by the Board. The Board, upon receipt of a ruling from the Internal
Revenue Service, an opinion of counsel to the effect that such exemption will
not result in the Trust being "closely held" within the meaning of Section
856(h) of the Code or such other evidence as the Board deems necessary in its
sole discretion, may exempt, on such conditions and terms as the Board deems
necessary in its sole discretion, a Person from the Ownership Limit or the
Existing Holder Limit, as the case may be, if the Board obtains such
representations and undertakings from such Person as the Board may deem
appropriate and such Person agrees that any violation or attempted violation
shall result in, to the extent necessary, the exchange of Shares held by such
Person for Excess Shares in accordance with subsection (c) of this Section 11.
m. Legend. Each certificate for Shares shall bear substantially the following
legend:
The securities represented by this certificate are subject to
restrictions on ownership and transfer for purposes, among others, of
the Trust's maintenance of its status as a real estate investment trust
under the Internal Revenue Code of 1986, as amended. Except as
otherwise provided pursuant to the Amended and Restated Declaration of
Trust of the Trust, no Person may Beneficially Own Shares in excess of
9.8% (or such greater percentage as may be determined by the Board of
Trustees of the Trust) of the number or value of the outstanding Shares
of the Trust (unless such Person is an Existing Holder or an Excluded
Holder). Any Person who attempts or proposes to Beneficially Own Shares
in excess of the above limitations must notify the Trust in writing at
least 30 days prior to such proposed or attempted Transfer. In
addition, Share ownership by and transfers of Shares to non-U.S.
persons and certain tenants of the Trust are subject to certain
restrictions. If the restrictions on transfer are violated, the
securities represented hereby shall be designated and treated as Excess
Shares which shall be held in trust by the Excess Share Trustee for the
benefit of the Charitable Beneficiary. All capitalized terms in this
legend have the meanings defined in the Amended and Restated
Declaration of Trust of the Trust, a copy of which, including the
restrictions on transfer, shall be furnished to each Shareholder on
request and without charge.
Instead of the foregoing legend, the certificate may state that the
Trust will furnish a full statement about certain restrictions on
transferability to a Shareholder on request and without charge.
n. Severability. If any provision of this Section 11 or any application of any
such provision is determined to be void, invalid or unenforceable by any court
having jurisdiction over the issue, the validity and enforceability of the
remaining provisions shall be affected only to the extent necessary to comply
with the determination of such court.
o. Transfer of Excess Shares. Upon any purported Transfer which results in
Excess Shares pursuant to subsection (c) of this Section 11, such Excess Shares
shall be deemed to have been transferred to the Excess Share Trustee, as trustee
of a special trust for the exclusive benefit of the Charitable Beneficiary or
Charitable Beneficiaries to whom an interest in such Excess Shares may later be
transferred pursuant to subsection (c) of this Section 11. Excess Shares so held
in trust shall be issued and outstanding Shares of the Trust. The Purported
Record Transferee or Purported Record Holder shall have no rights in such Excess
Shares except as provided in subsection (r) of this Section 11.
p. Distributions on Excess Shares. Any dividends (whether taxable as a dividend,
return of capital or otherwise) on Excess Shares shall be paid to the Excess
Share Trust for the benefit of the Charitable Beneficiary. Upon liquidation,
dissolution or winding up, the Purported Record Transferee shall receive the
lesser of (i) the amount of any distribution made upon liquidation, dissolution
or winding up or (ii) the price paid by the Purported Record Transferee for the
Shares, or if the Purported Record Transferee did not give value for the Shares,
the Market Price of the Shares on the day of the event causing the Shares to be
held in trust. Any such dividend paid or distribution paid to the Purported
Record Transferee in excess of the amount provided in the preceding sentence
prior to the discovery by the Trust that the Shares with respect to which the
dividend or distribution was made had been exchanged for Excess Shares shall be
repaid to the Excess Share Trust for the benefit of the Charitable Beneficiary.
q. Voting of Excess Shares. The Excess Share Trustee shall be entitled to vote
the Excess Shares for the benefit of the Charitable Beneficiary on any matter.
Any vote taken by a Purported Record Transferee prior to the discovery by the
Trust that the Excess Shares were held in trust shall, subject to applicable
law, be rescinded ab initio, provided, however, that if the Trust has taken
irreversible action, a vote need not be rescinded. The owner of the Excess
Shares shall be deemed to have given an irrevocable proxy to the Excess Share
Trustee to vote the Excess Shares for the benefit of the Charitable Beneficiary.
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r. Non-Transferability of Excess Shares. Excess Shares shall be transferable
only as provided in this subsection (r). At the direction of the Trust, the
Excess Share Trustee shall transfer the Shares held in the Excess Share Trust to
a Person whose ownership of the Shares will not violate the Ownership Limit or
Existing Holder Limit. If Shares were transferred to the Excess Share Trustee
pursuant to subsection (c)(i), (c)(ii), (c)(iii) or (c)(iv) of this Section 11,
at the direction of the Trust, the Excess Share Trustee shall transfer the
Shares held by the Excess Share Trustee to a Person who makes the highest offer
for the Excess Shares and pays the purchase price and whose ownership of the
Shares will not violate the Ownership Limit. If Shares were transferred to the
Excess Shares Trustee pursuant to subsection (c)(v) or (c)(vi) of this Section
11, at the direction of the Trust, the Excess Share Trustee shall transfer the
Shares held by the Excess Share Trustee to the U.S. Person who makes the highest
offer for the Excess Shares and pays the purchase price. If such a transfer is
made to a Person, the interest of the Charitable Beneficiary shall terminate and
proceeds of the sale shall be payable to the Purported Record Transferee and to
the Charitable Beneficiary. The Purported Record Transferee shall receive (i)
the lesser of (A) the price paid by the Purported Record Transferee for the
Shares or, if the Purported Record Transferee did not give value for the Shares,
the Market Price of the Shares on the day of the event causing the Shares to be
held in trust, and (B) the price received by the Excess Share Trust from the
sale or other disposition of the Shares minus (ii) any dividend paid or
distribution paid to the Purported Record Transferee which the Purported Record
Transferee was under an obligation to repay to the Excess Share Trustee but has
not repaid to the Excess Share Trustee at the time of the distribution of the
proceeds. Any proceeds in excess of the amount payable to the Purported Record
Transferee shall be paid to the Charitable Beneficiary. Prior to any transfer of
any Excess Shares by the Excess Share Trustee, the Trust must have waived in
writing its purchase rights under subsection (t) of this Section 11. It is
expressly understood that the Purported Record Transferee may enforce the
provisions of this Section 11 against the Charitable Beneficiary.
s. Acting as Agent. If any of the foregoing restrictions on transfer of Excess
Shares is determined to be void, invalid or unenforceable by any court of
competent jurisdiction, then the Purported Record Transferee may be deemed, at
the option of the Trust, to have acted as an agent of the Trust in acquiring
such Excess Shares and to hold such Excess Shares on behalf of the Trust.
t. Call by Trust on Excess Shares. Excess Shares shall be deemed to have been
offered for sale to the Trust, or its designee, at a price per Share equal to
the lesser of (i) the price per Share in the transaction which created such
Excess Shares (or, in the case of a devise, gift or other transaction in which
no value was given for such Excess Shares, the Market Price at the time of such
devise, gift or other transaction) and (ii) the Market Price of the Shares to
which such Excess Shares relate on the date the Trust, or its designee, accepts
such offer (the "Redemption Price"). The Trust shall have the right to accept
such offer for a period of 90 days after the later of (A) the date of the
Transfer which resulted in such Excess Shares and (B) the date the Board
determines in good faith that a Transfer resulting in Excess Shares has
occurred, if the Trust does not receive a notice of such Transfer pursuant to
subsection (e) of this Section 11, but in no event later than a permitted
Transfer pursuant to and in compliance with the terms of subsection (r) of this
Section 11. Unless the Board determines that it is in the interests of the Trust
to make earlier payments 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 Board at any time up to but not later than five
years after the date the Trust accepts the offer to purchase the Excess Shares.
In no event shall the Trust have an obligation to pay interest to the Purported
Record Transferee.
u. Underwritten Offerings. The Ownership Limit 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, provided that
the underwriter makes a timely distribution of such Shares or rights, options or
warrants for, or securities convertible into, Shares.
Section 12. Exemptions from Certain Provisions of Maryland Law. The
provisions of Title 3, Subtitle 6 of the Corporations and Associations Article
of the Annotated Code of Maryland entitled "Special Voting Requirements"
(Section 3-601 through and including Section 3-604), or any successor statute,
shall not apply to any business combination with Security Capital Group and its
affiliates and successors. The provisions of Title 3, Subtitle 7 of the
Corporations and Associations Article of the Annotated Code of Maryland entitled
"Voting Rights of Certain Control Shares" (Section 3-701 through and including
Section 3-709), or any successor statute, shall not apply to any Shares owned or
acquired by Security Capital Group and its affiliates and successors.
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ARTICLE III. SHAREHOLDERS
Section 1. Meetings.
(a) There shall be an annual meeting of Shareholders at such time and
place, either within or without the State of Maryland, as the Board shall
prescribe, at which Trustees shall be elected or re-elected and any other proper
business may be conducted. The annual meeting of Shareholders shall be held upon
reasonable notice at a convenient location and within a reasonable period
following delivery of the annual report. Special meetings of Shareholders may be
called by a majority of the Trustees or by the Chairman (or any Co-Chairman) of
the Trust, and shall be called upon the written request of Shareholders holding
in the aggregate not less than a majority 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. Unless otherwise provided
in the Declaration of Trust, notice of the Shareholders' meeting shall be given
as provided in the Bylaws. No other business than that which is stated in the
call for a special meeting shall be considered at such meeting.
(b) A majority of the holders of outstanding Shares entitled to vote at
any meeting represented in person or by proxy shall constitute a quorum at such
meeting. Except as specifically provided in Section 2 of Article IV (relating to
removal of Trustees), notwithstanding any provision of law permitting or
requiring any action to be taken or authorized by the affirmative vote of the
holders of Shares entitled to cast a greater number of votes, any such action
shall be effective and valid if taken or approved by the affirmative vote of
holders of Shares entitled to cast a majority of all the votes entitled to be
cast on the matter. The submission of any action to the Shareholders for their
consideration shall first be approved by the Board.
Section 2. Voting. At each meeting of Shareholders, each Shareholder
entitled to vote shall have the right to vote, in person or by proxy in any
manner permitted under Maryland law, the number of Shares of the Trust owned by
him or her on each matter on which the vote of the Shareholders is taken. In any
election of Trustees in which more than one vacancy is to be filled, each
Shareholder may vote the number of Shares of the Trust owned by him or her for
each vacancy to be filled. There shall be no right of cumulative voting. Each
outstanding Share, regardless of class, shall be entitled to one vote on each
matter submitted to a vote at a meeting of Shareholders, except 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.
Section 3. Distributions. The Trust may pay any dividend or make
any other distribution to the Shareholders as authorized in the Declaration of
Trust or by the Board if, after giving effect to the dividend or distribution,
the Trust would be able to pay its debts as they become due in the usual course
of its business. The Board may from time to time 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 Board in its discretion
shall determine. The Board shall endeavor to authorize the Trust to pay such
dividends and distributions as shall be necessary for the Trust to qualify as a
REIT under the REIT Provisions of the Code (so long as such qualification, in
the opinion of the Board, is in the best interests of the Shareholders);
however, Shareholders shall have no right to any dividend or distribution unless
and until authorized by the Board. The exercise of the powers and rights of the
Board pursuant to this Section 3 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 or her duly
authorized agent shall be a sufficient discharge for all dividends or
distributions payable or deliverable in respect of such Shares and from all
liability with respect to the application thereof.
Section 4. Annual Report. The Trust shall prepare an annual report
concerning its operations for the preceding fiscal year in the manner and within
the time prescribed by Title 8.
Section 5. Inspection Rights. The books and records of the Trust shall
be open to inspection to Shareholders to the extent required under Maryland law.
Section 6. Nonliability and Indemnification. 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 Board and shall be
under no obligation to the Trust or its creditors with respect to their 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 Board 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 or her being or having been a
Shareholder, and shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him or her in connection with any such claim or
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liability; provided, however, 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 contained herein
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 this Declaration of Trust increasing or enlarging the
liability of the Shareholders shall be made without the unanimous vote or
written consent of all of the Shareholders.
Section 7. Notice of Nonliability. The Board shall use 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 Board 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 or such agreement,
undertaking or obligation unenforceable.
ARTICLE IV. THE TRUSTEES
Section 1. Number, Qualification, Compensation and Term.
(a) The Board shall be comprised of not less than three nor more than
15 Trustees. The current number of Trustees is 10, which may be changed from
time to time by resolution of the Board within the limits provided in the
preceding sentence. Trustees may succeed themselves in office. Trustees shall be
individuals who are at least 21 years old and not under any legal disability. No
Trustee shall be required to give bond, surety or securities to secure the
performance of his or her duties or obligations hereunder. No reduction in the
number of Trustees shall have the effect of removing any Trustee from office
prior to the expiration of his or her term. Whenever a vacancy among the
Trustees shall occur, until such vacancy is filled as provided in Section 3, the
Trustee or Trustees continuing in office, regardless of their number, shall have
all of the powers granted to the Board and shall discharge all of the duties
imposed on the Board by this Declaration of Trust. The Trustees shall receive
such fees for their services and expenses as they shall deem reasonable and
proper. A majority of the Trustees shall not be officers or employees of the
Trust.
(b) The Board shall be divided into three classes of Trustees,
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. The term of office of each Trustee shall be three years and
until his or her successor is elected and qualifies, subject to prior death,
resignation or removal. At the 2000 annual meeting of Shareholders, Class I
Trustees shall be elected; at the 2001 annual meeting of Shareholders, Class II
Trustees shall be elected; and at the 2002 annual meeting of Shareholders, Class
III Trustees shall be elected. At each succeeding annual meeting of
Shareholders, beginning in 2003, successors to the class of Trustees whose term
expires at such annual meeting shall be elected. If the authorized number of
Trustees constituting the Board 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 shall hold
office until the next annual meeting of shareholders, but in no case shall a
decrease in the number of Trustees constituting the Board shorten the term of
any incumbent Trustee. The names, classes and addresses of the current Trustees
are as follows:
Name Class Address
K. Dane Brooksher III 14100 East 35th Place, Aurora, Colorado 80011
Stephen L. Feinberg II 14100 East 35th Place, Aurora, Colorado 80011
Donald P. Jacobs II 14100 East 35th Place, Aurora, Colorado 80011
Irving F. Lyons, III I 14100 East 35th Place, Aurora, Colorado 80011
John S. Moody II 14100 East 35th Place, Aurora, Colorado 80011
William G. Myers I 14100 East 35th Place, Aurora, Colorado 80011
John E. Robson I 14100 East 35th Place, Aurora, Colorado 80011
Kenneth N. Stensby III 14100 East 35th Place, Aurora, Colorado 80011
J. Andre Teixeira II 14100 East 35th Place, Aurora, Colorado 80011
Thomas G. Wattles III 14100 East 35th Place, Aurora, Colorado 80011
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The records of the Trust shall be revised to reflect the names, classes and
addresses of the current Trustees, at such times as any change has occurred. The
Board may, but is not required to, amend this Declaration of Trust, without
Shareholder consent, at such times as the names, classes and addresses of the
Trustees have changed.
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 only for
cause by the shareholders by the affirmative vote of two-thirds of all of the
votes entitled to be cast in the election of Trustees or by the Trustees then in
office by a two-thirds vote (which action shall be taken only by vote at a
meeting and not by authorization without a meeting, notwithstanding anything in
Section 5 of this Article IV to the contrary). Upon the resignation or removal
of any Trustee, he or she shall execute and deliver such documents and render
such accounting as the remaining Trustee or Trustees shall require and shall
thereupon be discharged as Trustee. Upon the incapacity or death of any Trustee,
his or her status as a Trustee shall immediately terminate, and his or her legal
representatives shall perform the acts set forth in the preceding sentence. This
Section 2 may only be amended or repealed with the affirmative vote of holders
of two-thirds of all of the votes entitled to be cast generally in the election
of Trustees.
Section 3. Vacancies. The resignation, removal, incompetency 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 (including vacancies resulting from an increase in the number
of Trustees), such vacancy or vacancies shall be filled (i) at a special meeting
of Shareholders called for such purpose, (ii) by the Trustee or Trustees then in
office or (iii) at the next annual meeting of Shareholders. Trustees elected at
special meetings of Shareholders to fill vacancies or appointed by the remaining
Trustee or Trustees to fill vacancies shall hold office until the next annual
meeting of Shareholders.
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 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 Board may deem necessary, appropriate
or desirable. Upon the resignation, removal or death of a Trustee, he or she
(and upon his or her death, his or her 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 of such Trustee in and to the Trust property shall vest
automatically in the remaining Trustee or Trustees without any further act.
Section 5. Meetings and Action Without a Meeting. The Board 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 Board shall be
conclusive and binding as an action of the Board. A quorum for meetings of the
Board shall be a majority of all of the Trustees in office. Action may be taken
without a meeting in any manner and by any means permitted by Maryland law 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. Any
action taken by the Board in accordance with the provisions of this Section 5
shall be conclusive and binding on the Trust, the Trustees and the Shareholders,
as an action of all of 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 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 on the Trustees, the Trust and the Shareholders.
Section 6. Authority. The Trustees may 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. The Board shall have all of the powers necessary,
convenient or appropriate to effectuate the purposes of the Trust and may take
any action which it deems necessary or desirable and proper to carry out such
purposes. Any determination of the purposes of the Trust made by the Board in
good faith shall be conclusive. In construing the provisions of this Declaration
of Trust, the presumption shall be in favor of the grant of powers to the Board.
Without limiting the generality of the foregoing, the Board's powers on behalf
of the Trust shall include the following:
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a. 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, 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.
b. 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.
c. 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.
d. 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.
e. 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 property of the Trust to secure such notes,
debentures, bonds, instruments or other obligations.
f. To lend money on behalf of the Trust and to invest the funds of the Trust.
g. To create reserve funds for such purposes as it deems advisable.
h. To deposit funds of the Trust in banks and other depositories without regard
to whether such accounts will draw interest.
i. To pay taxes and assessments imposed on or chargeable against the Trust or
the Trustees by virtue of or arising out of the existence, property, business or
activities of the Trust.
j. To purchase, issue, sell or exchange Shares of the Trust as provided in
Article II.
k. 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.
l. 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.
m. To engage or employ agents, representatives and employees of any nature, or
independent contractors, including, but not limited to, 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 Board deems appropriate.
n. 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.
o. 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.
p. To compromise or settle claims, questions, disputes and controversies by,
against or affecting the Trust.
q. To solicit proxies of the Shareholders.
r. To adopt a fiscal year for the Trust and to change such fiscal year in
accordance with the REIT Provisions of the Code.
s. To adopt and use a seal.
t. To merge the Trust with or into any other trust, corporation or other entity
in accordance with Maryland law.
u. To deal with the Trust property in every way, including joint ventures,
partnerships and any other combinations or associations, which it would be
lawful for an individual to deal with the same, whether similar to or different
from the ways herein specified.
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v. To determine whether or not, at any time or from time to time, to attempt to
cause the Trust to qualify for taxation, or to terminate the status of the
Trust, as a REIT.
w. 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.
x. To do all other such acts 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. Right to Own Shares. A Trustee may acquire, hold and
dispose of Shares in the Trust for his or her individual account and may
exercise all rights of a Shareholder to the same extent and in the same manner
as if he or she were not a Trustee.
Section 9. Transactions with Trust. Subject to the provisions of
Section 5 of Article I, and to any restrictions in this Declaration of Trust or
adopted by the Board in the Bylaws or by resolution, the Trust may enter into
any contract or transaction of any kind (including, but not limited to, for the
purchase or sale of property or for any type of services, including those in
connection with underwriting or the offer or sale of securities of the Trust)
with any person, including any Trustee, officer, employee or agent of the Trust
or any person affiliated with a Trustee, officer, employee or agent of the
Trust, whether or not any of them has a financial interest in such transaction.
Section 10. Limitation of Liability. To the maximum extent that
Maryland law in effect from time to time permits limitation of the liability of
trustees of a real estate investment trust, no Trustee of the Trust shall be
liable to the Trust or to any Shareholder for money damages. Neither the
amendment nor repeal of this Section 10, nor the adoption or amendment of any
other provision of this Declaration of Trust inconsistent with this Section 10,
shall apply to or affect in any respect the applicability of the preceding
sentence with respect to any act or failure to act which occurred prior to such
amendment, repeal or adoption. In the absence of any Maryland statute limiting
the liability of trustees of a Maryland real estate investment trust for money
damages in a suit by or on behalf of the Trust or by any Shareholder, no Trustee
of the Trust shall be liable to the Trust or to any Shareholder for money
damages except to the extent that (i) the Trustee actually received an improper
benefit or profit in money, property or services, for the amount of the benefit
or profit in money, property or services actually received; or (ii) a judgment
or other final adjudication adverse to the Trustee is entered in a proceeding
based on a finding in the proceeding that the Trustee's action or failure to act
was the result of active and deliberate dishonesty and was material to the cause
of action adjudicated in the proceeding.
Section 11. Indemnification. The Trust shall indemnify each Trustee,
to the fullest extent permitted by Maryland law, as amended from time to time,
in connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he or she was a Trustee of the Trust or is or was serving at
the request of the Trust as a director, trustee, officer, partner, manager,
member, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, limited liability company, other enterprise
or employee benefit plan, from all claims and liabilities to which such person
may become subject by reason of service in such capacity and shall pay or
reimburse reasonable expenses, as such expenses are incurred, of each Trustee in
connection with any such proceedings.
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, 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 obligation.
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Section 13. Election of Officers. The Board shall annually elect a
Chairman of the Board (or two or more Co-Chairmen of the Board) and a Secretary
of the Trust. The Board may also annually elect a Chief Executive Officer, a
President, one or more Managing Directors, a Chief Operating Officer, a Chief
Financial Officer, a Chief Investment Officer, Vice Presidents, Assistant
Secretaries, a Treasurer, Assistant Treasurers and such other officers as the
Board 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 Board not inconsistent
with the Bylaws. Any officer or agent elected or appointed by the Board may be
removed by the Board whenever in its 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 Board shall
fix the compensation of all officers.
Section 14. Committees and Delegation of Powers and Duties. The Board
may, in its discretion, by resolution passed by a majority of the Trustees,
designate from among its members one or more committees which shall consist of
one or more Trustees. The Board may designate one or more Trustees as alternate
members of any such committee, who may replace any absent or disqualified 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 (including, but not limited to, the determination of the type and amount of
consideration at which Shares are to be issued). A majority of any such
committee may determine its action and fix the time and place of its meetings,
unless the Board shall otherwise provide. The Board, by resolution passed by a
majority of the Trustees, may at any time change the membership of any such
committee, fill vacancies on 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 Board, and to discharge
any and all duties imposed on the Board, 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 or her own
judgment in so doing.
ARTICLE V. TERMINATION AND DURATION
Section 1. Termination. Subject to the provisions of any class or
series of Shares at the time outstanding, after approval by a majority of the
entire Board of Trustees the Trust may be terminated at any meeting of
Shareholders called for such purpose, by the affirmative vote of the holders of
not less than a majority of the outstanding Shares entitled to be cast on the
matter. In connection with any termination of the Trust, the Board, upon receipt
of such releases or indemnity as they deem necessary for their protection, may
a. Sell and convert into cash the property of the Trust and distribute the net
proceeds among the Shareholders ratably; or
b. 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 Board, in cash or in kind, or
partly in cash and partly in kind.
Upon termination of the Trust and distribution to the Shareholders as herein
provided, a majority of the Trustees shall execute and place 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.
Section 2. Merger, Consolidation or Sale of Trust Property. Subject
to the provisions of any class or series of Shares at the time outstanding, the
Trust may (i) merge with or into another entity, (ii) consolidate the Trust with
one or more other entities into a new entity or (iii) sell, lease, exchange or
otherwise transfer all or substantially all of the Trust property; provided that
such action shall have been approved by the Board of Trustees and by the
Shareholders, at a meeting called for such purpose, by the affirmative vote of
the holders of not less than a majority of the votes entitled to be cast on the
matter.
Section 3. Duration. Subject to possible earlier termination in
accordance with the provisions of this Article V, 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 VI. AMENDMENTS
Section 1. Amendment by Shareholders. Except as provided herein,
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 then outstanding and
entitled to vote thereon.
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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 enable
the Trust to qualify as a real estate investment trust under the REIT Provisions
of the Code or under Title 8.
Section 3. Requirements of Maryland Law. Except as otherwise
specifically provided herein, this Declaration of Trust may only be amended in
accordance with Section 8-501 of Title 8.
ARTICLE VII. MISCELLANEOUS
Section 1. Construction. In this Declaration of Trust, unless the
context otherwise requires, words used in the singular or in the plural include
both the plural and singular and words denoting any gender include all genders.
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 shall 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 of
the Trust, reference may be made, to the extent appropriate and not inconsistent
with the Code, Title 8 and this Declaration of Trust, to Titles 1 through 3 of
the Corporations and Associations Article of the Annotated Code of Maryland.
Section 2. Headings for Reference Only. Headings preceding the text of
articles, sections and subsections 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 shall be
filed in the manner prescribed for real estate investment trusts under Maryland
law and may be filed for record in any county where real property is owned by
the Trust.
Section 4. Applicable Law. This Declaration of Trust has been
executed with reference to, and its construction and interpretation shall be
governed by, Maryland law, and the rights of all parties and the construction
and effect of every provision hereof shall be subject to and construed according
to Maryland law.
Section 5. 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 or supplements thereto, or any restated declaration of trust and
any amendments or supplements thereto, or that there are no amendments to this
Declaration of Trust or any restated declaration of trust; a copy of the Bylaws
or any amendment thereto; the due authorization of the execution of any
instrument or writing; the vote at any meeting of the Board 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 this
Declaration of Trust; a copy of any Bylaw adopted by the Shareholders or the
identity of any officer elected by the Board; or the existence or nonexistence
of any fact or facts which in any manner relate to the affairs of the Trust. If
this Declaration of Trust or 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 on 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 Board may sign any certificate of the kind
described in this Section 5, 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 6. Severability. If any provision of this 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 this Declaration of Trust and
this Declaration of Trust shall be carried out, if possible, as if such invalid
or unenforceable provision were not contained herein.
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Section 7. Bylaws. The Bylaws of the Trust may be altered, amended or
repealed, and new Bylaws may be adopted, at any meeting of the Board by vote of
a majority of the Trustees, subject to repeal or change by action of the
Shareholders of the Trust entitled to vote thereon.
Section 8. Recording. This Declaration of Trust shall be filed in
the manner prescribed for real estate investment trusts under Maryland law and
may also be filed or recorded in such other places as the Board deems
appropriate, but failure to file for record this Declaration of Trust or any
amendment hereto in any office other than in the State Department of Assessments
and Taxation of Maryland shall not affect or impair the validity or
effectiveness of this Declaration of Trust or any amendment or supplement
hereto.
ARTICLE VIII. LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 1. Limitation of Liability of Officers. To the maximum
extent that Maryland law in effect from time to time permits limitation of the
liability of officers of a real estate investment trust, no officer of the Trust
shall be liable to the Trust or to any Shareholder for money damages. Neither
the amendment nor repeal of this Section 1, nor the adoption or amendment of any
other provision of this Declaration of Trust inconsistent with this Section 1,
shall apply to or affect in any respect the applicability of the preceding
sentence with respect to any act or failure to act which occurred prior to such
amendment, repeal or adoption. In the absence of any Maryland statute limiting
the liability of officers of a Maryland real estate investment trust for money
damages in a suit by or on behalf of the Trust or by any Shareholder, no officer
of the Trust shall be liable to the Trust or to any Shareholder for money
damages except to the extent that (i) the officer actually received an improper
benefit or profit in money, property or services, for the amount of the benefit
or profit in money, property or services actually received; or (ii) a judgment
or other final adjudication adverse to the officer is entered in a proceeding
based on a finding in the proceeding that the officer's action or failure to act
was the result of active and deliberate dishonesty and was material to the cause
of action adjudicated in the proceeding.
Section 2. Indemnification of Officers and Employees. The Trust shall
have the power to indemnify each officer, employee and agent, to the fullest
extent permitted by Maryland law, as amended from time to time, in connection
with any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
or she was an officer, employee or agent of the Trust or is or was serving at
the request of the Trust as a director, trustee, officer, partner, manager,
member, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, limited liability company, other enterprise
or employee benefit plan, from all claims and liabilities to which such person
may become subject by reason of service in such capacity and shall pay or
reimburse reasonable expenses, as such expenses are incurred, of each officer,
employee or agent in connection with any such proceedings.
Section 3. Insurance. Notwithstanding any other provisions of this
Declaration of Trust, the Trust, for purposes of providing indemnification for
its Trustees, officers, employees and agents, shall have the authority, without
specific Shareholder approval, to enter into insurance or other arrangements,
with persons or entities which are regularly engaged in the business of
providing insurance coverage, to indemnify all Trustees, officers, employees and
agents of the Trust against any and all liabilities and expenses incurred by
them by reason of their being Trustees, officers, employees or agents 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 Trust 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 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 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 in and approving such
insurance or other arrangement shall be beneficiaries thereof.
* * * * *
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IN WITNESS WHEREOF, the Trust has caused this Declaration of Trust to
be signed in its name and on its behalf as of the date first written above, by
the undersigned Chairman who acknowledges to the best of his knowledge,
information and belief, the matters and facts set forth herein are true in all
material respects and that this statement is made under the penalties for
perjury.
/s/ K. Dane Brooksher
--------------------------
Chairman
ATTEST:
/s/ Edward S. Nekritz
- -------------------------
Secretary
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ANNEX A
SERIES A CUMULATIVE REDEEMABLE
PREFERRED SHARES OF BENEFICIAL INTEREST
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").
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.
"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.
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"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.
"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 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
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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.
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
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.
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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 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 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.
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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 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 % 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 % 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 % 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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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
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.
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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 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.
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ANNEX B
SERIES B CUMULATIVE CONVERTIBLE REDEEMABLE
PREFERRED SHARES OF BENEFICIAL INTEREST
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").
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.
"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.
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"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 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).
"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.
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"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 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 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
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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.
(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.
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(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 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:
(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
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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.
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:
1. 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 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
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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.
2. 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.
3. 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 distribution" and "the record date" within the meaning of the two preceding
sentences).
4. 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
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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.
1. No adjustment in the Conversion Price shall be required unless such
5djustment 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 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 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
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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 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.
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(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 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 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.
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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 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 % 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
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 %
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 % 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
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(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
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
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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.
(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.
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ANNEX C
SERIES C CUMULATIVE REDEEMABLE
PREFERRED SHARES OF BENEFICIAL INTEREST
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").
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.
"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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"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 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
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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
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 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.
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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:
(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 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
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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 % 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 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 %
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 % 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.
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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 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 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
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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.
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ANNEX D
SERIES D CUMULATIVE REDEEMABLE
PREFERRED SHARES OF BENEFICIAL INTEREST
The Board of Trustees has classified 11,500,000 unissued shares of
beneficial interest of the Trust as Series D Cumulative Redeemable Preferred
Shares of Beneficial Interest (the "Series D Preferred Shares").
The following is a description of the Series D 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 D Cumulative
Redeemable Preferred Shares of Beneficial Interest (the "Series D Preferred
Shares") and the number of shares which shall constitute such series shall not
be more than 11,500,000 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 D 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 D Preferred
Shares.
"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 June
30, 1998; 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 June 30,
1998, and other than the Dividend Period during which any Series D
Preferred Shares shall be redeemed pursuant to Section 5, which shall
end on and include the Call Date with respect to the Series D 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 D 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 April 13, 1998
"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 D 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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"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 D 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 D 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 D 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 Boston Equiserve, Canton,
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 D
Preferred Shares.
"Voting Preferred Shares" shall have the meaning set forth in
Section 8.
Section 3. Dividends.
(a) The holders of Series D 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
7.92% of the liquidation preference per annum (equivalent to $1.98 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 June 30, 1998. Each
such dividend shall be payable in arrears to the holders of record of
Series D 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 D Preferred
Shares shall first be credited against the earliest accrued but unpaid
dividend due with respect to Series D Preferred Shares which remains
payable.
(b) The holders of Series D 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 June 30, 1998. The amount of dividends payable for such period,
or any other period shorter than a full Dividend Period, on the Series
D Preferred Shares shall be computed on the basis of a 360-day year of
twelve 30-day months. Holders of Series D 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 D
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 D Preferred Shares which may be in arrears.
(c) So long as any Series D 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 D 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
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sufficient for such payment is not set apart, as aforesaid, all
dividends declared upon Series D 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 D Preferred Shares and accumulated
and unpaid on such Parity Shares.
(d) So long as any Series D 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 D 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 D 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 D Preferred Shares and the
current dividend period with respect to such Parity Shares.
(e) No distributions on Series D 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 D Preferred Shares shall be entitled to receive
Twenty-Five Dollars ($25.00) per Series D 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 D 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 D Preferred Shares and any such other Parity Shares ratably
in accordance with the respective amounts that would be payable on such
Series D 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 D 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 D 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 D
Preferred Shares shall not be entitled to share therein.
Section 5. Redemption at the Option of the Trust.
(a) Subject to Section 9, the Series D Preferred Shares shall
not be redeemable by the Trust prior to the 5th anniversary of the
Issue Date. On and after the 5th anniversary of the Issue Date, the
Trust, at its option, may redeem the Series D 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
D Preferred Share, plus the amounts indicated in Section 5(b).
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(b) Upon any redemption of Series D 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 D
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 D Preferred Shares
called for redemption.
(c) If full cumulative dividends on the Series D 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 D Preferred Shares may not be redeemed under this Section 5 in
part and the Trust may not purchase or acquire Series D Preferred
Shares, otherwise than pursuant to a purchase or exchange offer made on
the same terms to all holders of Series D Preferred Shares or pursuant
to Section 9.
(d) The redemption price to be paid upon any redemption of the
Series D 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 D Preferred Shares
under this Section 5 shall be mailed by first-class mail to each holder
of record of Series D 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 D 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; 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 D 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 D
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 D Preferred Shares so called for redemption.
No interest shall accrue for the benefit of the holders of Series D
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 D
Preferred Shares are to be redeemed, shares to be redeemed shall be
selected by the Trust from outstanding Series D 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 D Preferred Shares
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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 D 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 D 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 D Preferred Shares;
(b) on a parity with the Series D 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 D Preferred Shares, if the
holders of such class or series and the Series D 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 D 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 D 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 D 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 D
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 D Preferred Shares and the Voting Preferred Shares called as
hereinafter provided. Whenever all arrears in dividends on the Series D
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 D 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 D 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 D Preferred Shares and
the Voting Preferred Shares, the Secretary of the Trust may, and upon the
written request of any holder of Series D Preferred Shares (addressed to the
Secretary at the principal office of the Trust) shall, call a special meeting of
the holders of the Series D 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 D 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 D
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 D 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 D Preferred Shares and
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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 D 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 D 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 % of the votes entitled to be cast by the
holders of the Series D 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 D
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 D Preferred
Shares, or any shares of any class ranking on a parity with the Series
D 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 D 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
D 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 %
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 % of the votes entitled to be cast by the holders
of the Series D Preferred Shares and the Voting Preferred Shares
otherwise entitled to vote in accordance herewith; or
(b) A share exchange that affects the Series D 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 D 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 D Preferred Share (except for changes that do not
materially and adversely affect the holders of the Series D 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 D 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 D 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 D Preferred Shares at the time outstanding.
For purposes of the foregoing provisions of this Section 8, each Series
D 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 D
Preferred Shares as a single class on any matter, then the Series D 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 D 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.
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Section 9. Limitation on Ownership.
(a) Limitation. Notwithstanding any other provision of the
terms of the Series D 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 D 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 D Preferred Shares, provided that
thereafter any additional Series D 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 D 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 D 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 D Preferred
Share closing sales price, if the Series D Preferred Shares are listed
on a national securities exchange or, if not, are reported on the
NASDAQ National Market System, and if the Series D Preferred Shares are
not so listed or reported, shall be the mean between the average per
Series D Preferred Share closing bid prices and the average per Series
D 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 D 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 D 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 D Preferred Share distributions designated as
liquidating distributions and return of capital distributions declared
with respect to unredeemed Series D 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 D Preferred
Shares by an underwriter in a public offering of Series D Preferred
Shares and shall not apply to the ownership of Series D Preferred
Shares by a managing underwriter in the initial public offering of
Series D 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 D 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 D 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 D Preferred Shares shall not
be entitled to the benefits of any retirement or sinking fund.
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ANNEX E
SERIES A JUNIOR
PARTICIPATING PREFERRED SHARES
The Board of Trustees has classified 2,300,000 unissued shares of the
Trust as Series A Junior Participating Preferred Shares of Beneficial Interest
(the "Preferred Shares").
The following is a description of the 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. Designation and Amount. There shall be a series of preferred
shares of the Trust, $0.01 par value per share, which shall be designated
"Series A Junior Participating Preferred Shares," $0.01 par value per share
(hereinafter called "Series A Preferred Shares"), and the number of shares
constituting that series shall be 2,300,000. Such number of shares may be
increased or decreased by resolution of the Board of Trustees and by the filing
of articles supplementary in accordance with the provisions of Title 8 of the
Corporations and Associations Article of the Code of Maryland stating that such
increase or reduction has been so authorized; provided, however, that no
decrease shall reduce the number of shares of Series A Preferred Shares to a
number less than the number of shares of the series then outstanding plus the
number of shares of Series A Preferred Shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Trust.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any
shares of any class or series of preferred shares of the Trust ranking prior and
superior to the shares of Series A Preferred Shares with respect to dividends,
the holders of shares 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 the purpose, quarterly dividends payable in cash to holders of record on the
last business day of January, April, July and October in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
(commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Preferred Shares) in an
amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00
or (b) subject to the provision for adjustment hereinafter set forth, 100 times
the aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Shares
(hereinafter defined) or a subdivision of the outstanding shares of Common
Shares (by a reclassification or otherwise), declared on the Shares of
Beneficial Interest, par value $0.01 per share, of the Trust (the "Common
Shares") since the immediately preceding Quarterly Dividend Payment Date, or,
with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Preferred Shares. In
the event the Trust shall at any time following December 31, 1993 (i) declare
any dividend on Common Shares payable in shares of Common Shares, (ii) subdivide
the outstanding Common Shares or (iii) combine the outstanding Common Shares
into a smaller number of shares, then in each such case the amount to which
holders of Series A Preferred Shares were entitled immediately prior to such
event under clause (b) of the preceding sentence shall be adjusted by
multiplying each such amount by a fraction the numerator of which is the number
of Common Shares outstanding immediately after such event and the denominator of
which is the number of Common Shares that were outstanding immediately prior to
such event.
(B) The Trust shall declare a dividend or distribution on the Series A
Preferred Shares as provided in paragraph (A) above at the time it declares a
dividend or distribution on the Common Shares (other than a dividend payable in
shares of Common Shares).
(C) No dividend or distribution (other than a dividend or distribution
payable in Common Shares) shall be paid or payable to the holders of Common
Shares unless, prior thereto, all accrued but unpaid dividends to the date of
that dividend or distribution shall have been paid to the holders of Series A
Preferred Shares.
(D) Dividends shall begin to accrue and be cumulative on outstanding
Series A Preferred Shares from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Shares, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
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begin to accrue and be cumulative from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series A Preferred
Shares entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the Series A
Preferred Shares in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Trustees may fix a record date for the determination of holders of shares of
Series A Preferred Shares entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than 30 days
prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of Series A Preferred Shares
shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
one one-hundredth of a share of Series A Preferred Shares shall entitle the
holder thereof to one vote on all matters submitted to a vote of the
shareholders of the Trust. In the event the Trust shall at any time following
December 31, 1993 (i) declare any dividend on Common Shares payable in shares of
Common Shares, (ii) subdivide the outstanding shares of Common Shares or (iii)
combine the outstanding Common Shares into a smaller number of shares, then in
each such case the number of votes per share to which holders of shares of
Series A Preferred Shares were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction the numerator of which is the
number of shares of Common Shares outstanding immediately after such event and
the denominator of which is the number of shares of Common Shares that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein or required by law, the holders
of Series A Preferred Shares and the holders of Common Shares and any other
capital shares of the Trust having general voting rights shall vote together as
one class on all matters submitted to a vote of shareholders of the Trust.
(C) (i) Whenever, at any time or times, dividends payable on any share
or shares of Series A Preferred Shares shall be in arrears in an amount equal to
at least six full quarterly dividends (whether or not declared and whether or
not consecutive), the holders of record of the outstanding Preferred Shares
shall have the exclusive right, voting separately as a single class, to elect
two trustees of the Trust at a special meeting of shareholders of the Trust or
at the Trust's next annual meeting of shareholders, and at each subsequent
annual meeting of shareholders, as provided below. At elections for such
trustees, the holders of shares of Series A Preferred Shares shall be entitled
to cast one vote for each one one-hundredth of a share of Series A Preferred
Shares held.
(ii) Upon the vesting of such right of the holders of the
Preferred Shares, the maximum authorized number of members of the Board
of Trustees shall automatically be increased by two and the two
vacancies so created shall be filled by vote of the holders of the
outstanding Preferred Shares as hereinafter set forth. A special
meeting of the shareholders of the Trust then entitled to vote shall be
called by the Chairman or the President or the Secretary of the Trust,
if requested in writing by the holders of record of not less than 10%
of the Preferred Shares then outstanding. At such special meeting, or,
if no such special meeting shall have been called, then at the next
annual meeting of shareholders of the Trust, the holders of the shares
of the Preferred Shares shall elect, voting as above provided, two
trustees of the Trust to fill the aforesaid vacancies created by the
automatic increase in the number of members of the Board of Trustees.
At any and all such meetings for such election, the holders of a
majority of the outstanding shares of the Preferred Shares shall be
necessary to constitute a quorum for such election, whether present in
person or by proxy, and such two trustees shall be elected by the vote
of at least a plurality of shares held by such shareholders present or
represented at the meeting. Any trustee elected by holders of shares of
the Preferred Shares pursuant to this Section may be removed at any
annual or special meeting, by vote of a majority of the shareholders
voting as a class who elected such trustee, with or without cause. In
case any vacancy shall occur among the trustees elected by the holders
of the Preferred Shares pursuant to this Section, such vacancy may be
filled by the remaining trustee so elected, or his successor then in
office, and the trustee so elected to fill such vacancy shall serve
until the next meeting of shareholders for the election of trustees.
After the holders of the Preferred Shares shall have exercised their
right to elect trustees in any default period and during the
continuance of such period, the number of trustees shall not be further
increased or decreased except by vote of the holders of Preferred
Shares as herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series A Preferred
Shares.
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(iii) The right of the holders of the Preferred Shares, voting
separately as a class, to elect two members of the Board of Trustees of
the Trust as aforesaid shall continue until, and only until, such time
as all arrears in dividends (whether or not declared) on the Preferred
Shares shall have been paid or declared and set apart for payment, at
which time such right shall terminate, except as herein or by law
expressly provided, subject to revesting in the event of each and every
subsequent default of the character above-mentioned. Upon any
termination of the right of the holders of the shares of the Preferred
Shares as a class to vote for trustees as herein provided, the term of
office of all trustees then in office elected by the holders of
Preferred Shares pursuant to this Section shall terminate immediately.
Whenever the term of office of the trustees elected by the holders of
the Preferred Shares pursuant to this Section shall terminate and the
special voting powers vested in the holders of the Preferred Shares
pursuant to this Section shall have expired, the maximum number of
members of the Board of Trustees of the Trust shall be such number as
may be provided for in the Bylaws of the Trust irrespective of any
increase made pursuant to the provisions of this Section.
(D) Except as otherwise provided herein or required by law, holders of
Series A Preferred Shares shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote with
holders of Common Shares as provided herein) for taking any trust action.
Section 4. Certain Restrictions.
(A) Whenever any quarterly dividends or other dividends or
distributions payable on the Series A Preferred Shares as provided in Section 2
are in arrears, then, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred Shares
outstanding shall have been paid in full, the Trust shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
shares ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Shares;
(ii) declare or pay dividends on or make any other
distributions on any shares ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A
Preferred Shares, except dividends paid ratably on the Series A
Preferred Shares and all such parity shares on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A
Preferred Shares, provided that the Trust may at any time redeem,
purchase or otherwise acquire any such parity shares in exchange for
shares of the Trust ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred
Shares; or
(iv) purchase or otherwise acquire for consideration any
Series A Preferred Shares, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of
Trustees) to all holders of such shares upon such terms as the Board of
Trustees, after consideration of the respective annual dividend rates
and other relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Trust shall not permit any subsidiary of the Trust to purchase
or otherwise acquire for consideration any shares of the Trust unless the Trust
could, under paragraph (A) of this Section, purchase or otherwise acquire such
shares at such time and in such manner.
Section 5. Reacquired Shares. Any Series A Preferred Shares purchased
or otherwise acquired by the Trust in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Shares and
may be reissued as part of a new series of Preferred Shares to be created by
resolution or resolutions of the Board of Trustees, subject to the conditions
and restrictions on issuance set forth herein.
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Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any voluntary liquidation, dissolution or winding up of the
Trust, no distribution shall be made to the holders of shares ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Shares unless, prior thereto, the holders of shares of Series
A Preferred Shares shall have received $1.00 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment (the "Series A Liquidation Preference"). Following
the payment of the full amount of the Series A Liquidation Preference, no
additional distributions shall be made to the holders of shares of Series A
Preferred Shares unless, prior thereto, the holders of shares of Common Shares
shall have received an amount per share (the "Common Adjustment") equal to the
quotient obtained by dividing (i) the Series A Liquidation Preference by (ii)
100 (as appropriately adjusted as set forth in subparagraph C below to reflect
such events as share splits, share dividends and recapitalizations with respect
to the Common Shares) (such number in clause (ii), the "Adjustment Number").
Following the payment of the full amount of the Series A Liquidation Preference
and the Common Adjustment in respect of all outstanding shares of Series A
Preferred Shares and Common Shares, respectively, holders of Series A Preferred
Shares and holders of shares of Common Shares shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio, on a
per share basis, of the Adjustment Number to 1 with respect to such Preferred
Shares and Common Shares, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of Preferred Shares, if any,
which rank on a parity with the Series A Preferred Shares, then such remaining
assets shall be distributed ratably to the holders of such parity shares in
proportion to their respective liquidation preferences.
(C) In the event the Trust shall at any time following December 31,
1993 (i) declare any dividend on Common Shares payable in shares of Common
Shares, (ii) subdivide the outstanding shares of Common Shares or (iii) combine
the outstanding Common Shares into a smaller number of shares, then in each such
case the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Shares outstanding immediately after
such event and the denominator of which is the number of shares of Common Shares
that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Trust shall enter
into any consolidation, merger, combination or other transaction in which the
Common Shares are exchanged for or changed into other shares or securities, cash
and/or any other property, then in any such case, the shares of Series A
Preferred Shares shall at the same time be similarly exchanged or changed in an
amount per share (subject to the provision for adjustment hereinafter set forth)
equal to 100 times the aggregate amount of shares, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each Common Share is exchanged or changed. In the event the Trust shall at any
time (i) declare any dividend on Common Shares payable in shares of Common
Shares, (ii) subdivide the outstanding Common Shares or (iii) combine the
outstanding Common Shares into a smaller number of shares, then in each such
case the amount set forth in the preceding sentence with respect to the exchange
or change of shares of Series A Preferred Shares shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Shares outstanding immediately after such event and the
denominator of which is the number of shares of Common Shares that were
outstanding immediately prior to such event.
Section 8. Redemption. The Series A Preferred Shares shall not be
redeemable by the Trust. The preceding sentence shall not limit the ability of
the Trust to purchase or otherwise deal in such shares to the extent permitted
by law.
Section 9. Ranking. The Series A Preferred Shares shall rank junior to
all other series of the Trust's preferred shares (whether with or without par
value) as to the payment of dividends and the distribution of assets, unless the
terms of any such series shall provide otherwise.
Section 10. Amendment. Neither the Declaration of Trust nor any
Articles Supplementary relating to the Series A Preferred Shares shall be
amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series A Preferred Shares so as to affect
the holders of Series A Preferred Shares adversely without the affirmative vote
of the holders of a majority or more of the outstanding shares of Series A
Preferred Shares, voting separately as a class.
Section 11. Fractional Shares. Series A Preferred Shares may be issued
in fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends and
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Shares.
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ANNEX F
SERIES E CUMULATIVE REDEEMABLE
PREFERRED SHARES OF BENEFICIAL INTEREST
Pursuant to Section 8-203(b) of the Corporations and Associations
Article of the Annotated Code of Maryland and the authority granted to and
vested in the Board of Trustees of the Trust by Article II, Section 1 of the
Amended and Restated Declaration of Trust of the Trust, as amended and
supplemented (the "Charter"), the Board of Trustees at a meeting duly convened
and held on November 16, 1999, in accordance with the Agreement and Plan of
Merger between the Trust and Meridian Industrial Trust, Inc. dated November 16,
1998 (the "Merger Agreement"), adopted resolutions classifying 2,000,000
unissued shares of beneficial interest of the Trust as Series E Cumulative
Redeemable Preferred Shares of Beneficial Interest and setting the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends and other distributions, 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 E Cumulative
Redeemable Preferred Shares of Beneficial Interest, par value $0.01 per share
(the "Series E Preferred Stock"). The number of preferred shares constituting
the Series E Preferred Stock is 2,000,000.
Section 2. Definitions. The following terms shall have the following
meanings herein:
(a) "Beneficial Ownership" shall mean ownership of Equity
Stock by a Person, whether the interest in the shares of Equity Stock is held
directly or indirectly (including by a nominee), and shall include interests
that would be treated as owned through the application of Section 544 of the
Code, as modified by Section 856(h)(1)(B) of the Code. The terms "Beneficial
Owner," "Beneficially Owns" and "Beneficially Owned" shall have correlative
meanings. For example, if a corporation is the actual beneficial owner of Equity
Stock, the shares will be treated as Beneficially Owned by that corporation (due
to its direct ownership of the shares), and the shareholders of that corporation
will Beneficially Own their respective proportionate interests in those shares
(due to their deemed ownership under Code Section 544(a)(1)), and interests in
the same shares may also be treated as Beneficially Owned by others, depending
upon the identity of, and relationships between, the shareholders and those
related to the shareholders.
(b) "Board of Trustees" shall mean the Board of Trustees of
the Trust or any committee authorized by the Board of Trustees to perform any of
its responsibilities with respect to the Series E Preferred Stock.
(c) "Business Day" shall mean any day other than a Saturday,
Sunday or day on which state or federally chartered banking institutions in New
York City, New York are not required to be open.
(d) "Call Date" shall have the meaning set forth in Section
6(b).
(e) "Capital Gains Amount" shall have the meaning set forth in
Section 3(d).
(f) "Charter" means the Amended and Restated Declaration of
Trust, as amended and supplemented, of the Trust, as the same may be amended or
supplemented hereafter from time to time.
(g) "Code" shall have the meaning set forth in Section 12.
(h) "Common Stock" shall mean the common shares of beneficial
interest of the Trust, par value $0.01 per share.
(i) "Constructive Ownership" shall mean ownership of Equity
Stock by a Person, whether the interest in the shares of Equity Stock is held
directly or indirectly (including by a nominee), and shall include interests
that would be treated as owned through the application of Section 318(a) of the
Code, as modified by Section 856(d)(5) of the Code. The terms "Constructive
Owner," "Constructively Owns" and "Constructively Owned" shall have correlative
meanings. For example, if a corporation is the actual beneficial owner of Equity
Stock, the shares will be treated as Constructively Owned by that corporation
(due to its direct ownership of the shares), and the 10% or more shareholders of
that corporation will Constructively Own their respective proportionate
interests in those shares (due to their deemed ownership under Code Section
318(a)(2)(C) as modified by Code Section 856(d)(5)), and interests in the same
shares may also be treated as Constructively Owned by others, depending upon the
identity of, and relationships between, the shareholders and those related to
the shareholders.
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(j) "Dividend Payment Date" shall mean the last calendar day
(or, if such day is not a Business Day, the next Business Day thereafter) of
each January, April, July and October, commencing on April 30, 1999.
(k) "Dividend Periods" shall mean quarterly dividend periods
commencing on February 1, May 1, August 1 and November 1 of each year and ending
on April 30, July 31, October 31 and January 31 of such year, respectively
(other than the Dividend Period during which any shares of Series E Preferred
Stock shall be redeemed pursuant to Section 6, which shall end on and include
the Call Date with respect to the shares of Series E Preferred Stock being
redeemed).
(l) "Equity Stock" shall mean shares of beneficial interest
that are either Preferred Stock or Common Stock.
(m) "Excepted Holder" shall mean a shareholder of the Trust
for whom an exemption from the Ownership Limit is granted by the Board of
Trustees pursuant to Article 2, Section 7(e) of the Charter, and then only to
the extent of such exemption (the "Excepted Holder Limit").
(n) "Excepted Holder Limit" shall have the meaning set forth
in Section 2(m).
(o) "Exempted Person" shall have the meaning set forth in
Section 12.
(p) "Fully Junior Stock" shall mean the Common Stock and any
other class or series of shares of beneficial interest of the Trust now or
hereafter issued and outstanding over which the Series E Preferred Stock has
preference or priority in both the payment of dividends and the distribution
of assets on any liquidation, dissolution or winding up of the Trust.
(q) "Issue Date" shall mean the first date on which the
pertinent shares of the Series E Preferred Stock are issued pursuant to the
Merger Agreement.
(r) "Junior Stock" shall mean the Common Stock and any other
class or series of shares of beneficial interest of the Trust now or hereafter
issued and outstanding over which the Series E Preferred Stock has preference or
priority in the payment of dividends or in the distribution of assets on any
liquidation, dissolution or winding up of the Trust.
(s) "Ownership Limit" shall mean nine and eight tenths percent
(9.8%) of the lesser of the number or value of the outstanding shares of any
class or series of the Equity Stock of the Trust. The number and value of
outstanding shares of any class or series of the Equity Stock of the Trust shall
be determined by the Board of Trustees in good faith, which determination shall
be conclusive.
(t) "Parity Stock" shall have the meaning set forth in Section
8(b).
(u) "Person" shall mean an individual, corporation,
partnership, limited liability company, estate, trust (including a trust
qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a trust
permanently set aside for or to be used exclusively for the purposes described
in Section 642(c) of the Code, association, private foundation within the
meaning of Section 509(a) of the Code, joint stock company, or other entity and
also includes a group as that term is used for purposes of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended, and any group to which a
particular Excepted Holder Limit may be applicable.
(v) "Preferred Stock" shall mean the preferred shares of
beneficial interest of the Trust, par value $0.01 per share.
(w) "Series E Preferred Stock" shall have the meaning set
forth in Section 1.
(x) "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 an authorization 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 Stock or Fully Junior Stock or any class or series
of shares of beneficial interest ranking on a parity with the Series E Preferred
Stock 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 E Preferred Stock shall mean
placing such funds in such separate account or delivering such funds to a
disbursing, paying or other similar agent.
(y) "Total Dividends" shall have the meaning set forth in
Section 3(d).
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(z) "Transfer Agent" means Bank Boston N.A., Canton,
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 E Preferred Stock.
Section 3. Dividends.
(a) Subject to the provisions of Section 8 hereof, the holders
of Series E Preferred Stock shall be entitled to receive, when, as and if
authorized by the Board of Trustees out of funds legally available for that
purpose, cumulative, preferential dividends payable in cash at the rate of 8.75%
of the liquidation preference per annum per share (equal to $2.1875 per annum
per share). Such dividends shall be deemed to begin to accrue and shall be fully
cumulative from February 1, 1999, 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 authorized by
the Board of Trustees, in arrears on Dividend Payment Dates, commencing on the
first Dividend Payment Date after the Issue Date. Such dividends shall be
payable in arrears to the holders of record of Series E Preferred Stock, as they
appear on the share records of the Trust at the close of business on the record
date, not more than 50 nor less than 10 days preceding the relevant Dividend
Payment Date, as shall be fixed by the Board of Trustees. Accrued and unpaid
dividends for any past Dividend Periods may be authorized and paid on any date
and for such interim periods, without reference to any regular Dividend Payment
Date, to holders of record on such date, not exceeding 50 days preceding the
payment date thereof, as may be fixed by the Board of Trustees. Any dividend
payment made on the Series E Preferred Stock shall first be credited against the
earliest accrued but unpaid dividend due with respect to the Series E Preferred
Stock which remains payable.
(b) The amount of dividends referred to in Section 3(a)
payable for each full Dividend Period for the Series E Preferred Stock shall be
computed by dividing the annual dividend rate by four, except that the amount of
dividends payable for the initial Dividend Period, and for any Dividend Period
shorter than a full Dividend Period, for the Series E Preferred Stock shall be
computed on the basis of the actual number of days in such Dividend Period.
Holders of Series E Preferred Stock shall not be entitled to any dividends,
whether payable in cash, property or shares of beneficial interest, in excess of
cumulative dividends, as herein provided, on the Series E Preferred Stock. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on the Series E Preferred Stock that may be in
arrears.
(c) Dividends on Series E Preferred Stock will accrue whether
or not the Trust has earnings, whether or not there are funds legally available
for the payment of such dividends and whether or not such dividends are
authorized.
(d) If, for any taxable year, the Trust elects to designate as
"capital gain dividends" (as defined in Section 857 of the Code), any portion
(the "Capital Gains Amount") of the total dividends (within the meaning of the
Code) paid or made available for the year to holders of all classes of
beneficial interest (the "Total Dividends"), then the portion of the Capital
Gains Amount that shall be allocable to holders of Series E Preferred Stock
shall be in the same proportion that the dividends paid or made available to the
holders of Series E Preferred Stock for the year bears to the Total Dividends.
(e) So long as any shares of Series E Preferred Stock are
outstanding, no dividends, except as described in the immediately following
sentence, shall be authorized or paid or set apart for payment on any class or
series of Parity Stock for any period unless full cumulative dividends have been
or contemporaneously are authorized and paid or authorized and a sum sufficient
for the payment thereof set apart for such payment on any outstanding shares of
the Series E Preferred Stock for all Dividend Periods terminating on or prior to
the dividend payment date for such class or series of Parity Stock. If dividends
are not paid in full or a sum sufficient for such payment is not set apart upon
the Series E Preferred Stock, as aforesaid, all dividends authorized upon Series
E Preferred Stock and all dividends authorized upon any other class or series of
Parity Stock shall be authorized ratably in proportion to the respective amounts
of dividends accumulated and unpaid on the Series E Preferred Stock and
accumulated and unpaid on such Parity Stock.
(f) So long as any shares of Series E Preferred Stock 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 Stock) shall be authorized or paid or set apart for payment or
other distribution authorized or made upon Junior Stock or Fully Junior Stock,
nor shall any Junior Stock or Fully Junior Stock be redeemed, purchased or
otherwise acquired (other than a redemption, purchase or other acquisition of
shares of Common Stock made for purposes of any employee incentive or benefit
plan of the Trust or any subsidiary) for any consideration (or any moneys be
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paid to or made available for a sinking fund for the redemption of any such
shares) by the Trust, directly or indirectly (except by conversion into or
exchange for shares of Fully Junior Stock), unless in each case the full
cumulative dividends on all outstanding shares of Series E Preferred Stock and
any other Parity Stock of the Trust shall have been or contemporaneously are
authorized and paid or authorized and set apart for payment for all past
Dividend Periods with respect to the Series E Preferred Stock and all past
dividend periods with respect to such Parity Stock and sufficient funds shall
have been or contemporaneously are authorized and paid or authorized and set
apart for the payment of the dividend for the current Dividend Period with
respect to the Series E Preferred Stock and the current dividend period with
respect to such Parity Stock.
(g) No dividends on Series E Preferred Stock shall be
authorized 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
authorization, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such authorization or payment shall be
restricted or prohibited by law.
Section 4. Liquidation Rights.
(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 Stock and subject to the
provisions of Section 8 hereof, the holders of the Series E Preferred Stock
shall be entitled to receive Twenty Five Dollars ($25.00) per share of Series E
Preferred Stock plus an amount equal to all dividends (whether or not earned or
authorized) 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 E
Preferred Stock 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 Stock, then such assets, or the proceeds thereof, shall be distributed
among the holders of the Series E Preferred Stock and any such other Parity
Stock ratably in accordance with the respective amounts that would be payable on
such Series E Preferred Stock and any such other Parity Stock if all amounts
payable thereon were paid in full. For the purposes of this Section 4, a
consolidation or merger of the Trust with one or more corporations, real estate
investment trusts, or other entities, a sale, lease or transfer of all or
substantially all of the Trust's assets, or 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 E Preferred Stock 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 E Preferred
Stock, as provided in this Section 4, any other series or class or classes of
Junior Stock or Fully Junior Stock 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 E Preferred
Stock shall not be entitled to share therein.
(c) No distribution with respect to any series or class or
classes of shares of beneficial interest (other than upon voluntary or
involuntary liquidation) by dividend, redemption or other acquisition of shares
or otherwise, may be made if, after giving effect to such distribution:
(i) The Trust would not be able to pay its indebtedness as
the indebtedness becomes due in the usual course of business; or
(ii) The Trust's total assets would be less than the sum of
its total liabilities plus the amounts that would be needed, if the Trust were
to be dissolved at the time of the distribution, to satisfy the preferential
rights upon dissolution of holders of the Series E Preferred Stock, but only if,
and to the extent that, the addition of such amounts would not prohibit a
distribution necessary, as determined by the Board of Trustees, to maintain the
Trust's status as a "real estate investment trust" under the Code.
Section 5. Conversion. The shares of Series E Preferred Stock are not
convertible or exchangeable for any other property or securities of the Trust.
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Section 6. Redemption at the Option of the Trust.
(a) The Series E Preferred Stock shall not be redeemable by
the Trust prior to June 30, 2003. On and after that date, the Trust, at its
option, may redeem the Series E Preferred Stock, in whole or in part at any time
or from time to time, at a redemption price of Twenty Five Dollars ($25.00) per
share of Series E Preferred Stock, plus the amounts indicated in Section 6(b).
(b) Upon any redemption of the Series E Preferred Stock
pursuant to this Section 6, the Trust shall pay all accrued and unpaid
dividends, if any, thereon ending on or prior to the date of such redemption
(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 E Preferred Stock 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 shares of Series E Preferred Stock called for redemption.
(c) If full cumulative dividends on the Series E Preferred
Stock and any other class or series of Parity Stock of the Trust have not been
authorized and paid or authorized and set apart for payment, the Series E
Preferred Stock or Parity Stock may not be redeemed under this Section 6 in part
and the Trust may not purchase or acquire the Series E Preferred Stock or any
Parity Stock, otherwise than pursuant to a purchase or exchange offer made on
the same terms to all holders of Series E Preferred Stock or Parity Stock, as
the case may be.
(d) Notice of the redemption of any Series E Preferred Stock
under this Section 6 shall be mailed by first-class mail to each holder of
record of Series E Preferred Stock 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
Section 6(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 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 shares of Series E Preferred Stock 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 per share;
(4) the place or places at which certificates for such 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 E Preferred Stock
so called for redemption shall cease to accrue, (ii) shares of such Series E
Preferred Stock shall no longer be deemed to be outstanding, and (iii) all
rights of the holders thereof as holders of Series E Preferred Stock 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, the amount of cash necessary for such redemption, in
trust, with irrevocable instructions that such cash be applied to the redemption
of the Series E Preferred Stock so called for redemption. No interest shall
accrue for the benefit of the holders of Series E Preferred Stock 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
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shares of Series E Preferred Stock are to redeemed, shares to be redeemed shall
be selected by the Trust from outstanding shares of Series E Preferred Stock 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 shares of Series E Preferred Stock represented by any
certificate are redeemed, then new certificates representing the unredeemed
shares shall be issued without cost to the holder thereof.
Section 7. Shares to be Retired. All shares of Series E Preferred Stock
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 E Preferred Stock, 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 E Preferred Stock;
(b) on a parity with the Series E Preferred Stock, 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 be different from
those of the Series E Preferred Stock, if the holders of such class or series of
shares of stock and the Series E Preferred Stock 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, which shall include, without limitation, shares of Preferred
Stock classified by the Trust as Series A Cumulative Redeemable Preferred
Shares, Series B Cumulative Convertible Preferred Shares, Series C Cumulative
Redeemable Preferred Shares and Series D Cumulative Redeemable Preferred Shares
("Parity Stock");
(c) junior to the Series E Preferred Stock, as to the payment
of dividends or as to the distribution of assets upon liquidation, dissolution
or winding up, as the case may be, if such shares of beneficial interest shall
be Junior Stock; and
(d) junior to the Series E Preferred Stock, as to the payment
of dividends and as to the distribution of assets upon liquidation, dissolution
or winding up, if such shares of beneficial interest shall be Fully Junior
Stock.
Section 9. Voting.
(a) On any matter on which the holders of Series E Preferred
Stock are entitled to vote (as expressly provided herein or as may be required
by law), including any action by written consent, each share of Series E
Preferred Stock shall have one vote per share, except that when shares of any
other series of Preferred Stock shall have the right to vote with the Series E
Preferred Stock as a single class on any matter, then the Series E Preferred
Stock and such other series shall have with respect to such matters one vote per
$25.00 of stated liquidation preference. With respect to each matter on which
the holders of Series E Preferred Stock are entitled to vote, the holder of each
share of Series E Preferred Stock may designate a number of proxies equal to the
number of votes to which the share is entitled, with each such proxy having the
right to vote a whole number of votes on behalf of such holder.
(b) If and whenever dividends payable for six or more
quarterly periods on the Series E Preferred Stock or any series or class of
Parity Stock 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 authorized and whether or not such periods are consecutive, the
number of trustees then constituting the Board of Trustees shall be increased by
two, and the holders of Series E Preferred Stock, together with the holders of
shares of every other series of Parity Stock, voting as a single class
regardless of series, shall be entitled to elect the 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 E Preferred Stock and the Parity Stock called as hereinafter provided.
Whenever all arrears in dividends on the Series E Preferred Stock and the Parity
Stock 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 E Preferred Stock and
the Parity Stock to elect such additional two trustees shall immediately 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 so elected as trustees by the holders of the
Series E Preferred Stock and the Parity Stock shall immediately terminate and
the number of the Board of Trustees shall be reduced accordingly. At any time
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after such voting rights shall have been so vested in the holders of Series E
Preferred Stock and the Parity Stock, the secretary of the Trust may, and upon
the written request of any holder of Series E Preferred Stock (addressed to the
secretary at the principal office of the Trust) shall, call a special meeting of
the holders of the Series E Preferred Stock and of the Parity Stock 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 E Preferred Stock 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 holders of the Series E
Preferred Stock and the Parity Stock, 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 E Preferred Stock and the Parity Stock 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.
(c) So long as any shares of Series E Preferred Stock are
outstanding, in addition to any other vote or consent of shareholders required
by law or by the Charter of the Trust, the affirmative vote of the holders of at
least 66-2/3% of the Series E Preferred Stock and the Parity Stock, 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:
(i) Any amendment, alteration or repeal of any of the
provisions of the Charter of the Trust (including these Articles Supplementary)
that materially and adversely affects the voting powers, rights or preferences
of the holders of the Series E Preferred Stock or the Parity Stock; provided,
however, that the amendment of the provisions of the Charter of the Trust so as
to authorize or create or to increase the authorized amount of shares of any
class of any Fully Junior Stock or Junior Stock that are not senior in any
respect to the Series E Preferred Stock, or any shares of any class ranking on a
parity with the Series E Preferred Stock or the Parity Stock, shall not be
deemed to materially adversely affect the voting powers, rights or preferences
of the holders of Series E Preferred Stock; 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 E Preferred Stock or another
series of Parity Stock 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 E Preferred Stock and the Parity Stock otherwise entitled
to vote in accordance herewith;
(ii) A share exchange that affects the Series E Preferred
Stock, 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 share of Series E Preferred Stock (i) shall remain outstanding
without a material and adverse change to its terms and rights or (ii) shall be
converted into or exchanged for 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 share of Series E Preferred Stock
(except for changes that do not materially and adversely affect the holders of
the Series E Preferred Stock); or
(iii) 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 E Preferred Stock 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 E Preferred Stock 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 shares or convertible securities is to be made, as the case
may be, provision is made for the redemption of all shares of Series E Preferred
Stock at the time outstanding.
(d) Except as otherwise required by applicable law or as set
forth herein, the Series E Preferred Stock shall not have any relative,
participating, optional or other special voting rights and powers, and the
consent of the holders thereof shall not be required for the taking of any
corporate action.
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Section 10. Record Holders. The Trust and the Transfer Agent may deem
and treat the record holder of any Series E Preferred Stock 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 E Preferred Stock shall not be
entitled to the benefits of any retirement or sinking fund.
Section 12. Ownership Limitation. Pursuant to the authority granted to
the Board of Trustees under Article 2, Section 7(e) of the Charter, any Person
who is not an individual within the meaning of Section 542(a)(2) of the Internal
Revenue Code of 1986, as amended (the "Code"), as modified by Section 856(h)(3)
of the Code (referred to as an "Exempted Person"), that acquires Beneficial
Ownership of shares of Series E Preferred Stock shall not be subject to the
Ownership Limit with respect to the Series E Preferred Stock, subject to the
condition that no Person who is an individual within the meaning of Section
542(a)(2) of the Code, as modified by Section 856(h)(3) of the Code and who
Beneficially Owns any of the shares of Series E Preferred Stock owned directly
by the Exempted Person at any time Beneficially Owns an amount of Series E
Preferred Stock in excess of the Ownership Limit and that such Person does not
own, actually or Constructively, an interest in a tenant of the Company (or a
tenant of any entity owned or controlled by the Company in whole or in part)
that would cause the Company to own, actually or Constructively, more than a
9.8% interest (as set forth in Section 856(h)(3) of the Code) in such tenant.
Each Exempted Person who acquires shares of Series E Preferred Stock in reliance
upon the conditional exemption set forth in the preceding sentence represents
and warrants to the Trust as a condition of such reliance that each of the
conditions set forth therein is satisfied at the time such Exempted Person
acquired the shares of Series E Preferred Stock and will be satisfied throughout
the period during which such Exempted Person Beneficially Owns the shares of
Series E Preferred Stock. Each Exempted Person who acquires shares of Series E
Preferred Stock in reliance upon the conditional exemption set forth in the
second preceding sentence further agrees that in the event either of the
conditions set forth in the second preceding sentence is at any time not
satisfied, the exemption granted under this Section 12 no longer shall apply to
such Exempted Person and all of the shares of Series E Preferred Stock
Beneficially Owned by such Exempted Person shall be subject to all of the
restrictions and remedies set forth in Article 2, Section 2 of the Charter
(including, without limitation, the remedies set forth in Article 2, Section
7(d) of the Charter).
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EXHIBIT 3.2
PROLOGIS TRUST
AMENDED AND RESTATED BYLAWS
June 24, 1999
ARTICLE I. MEETINGS OF SHAREHOLDERS
Section A. Place. All meetings of shareholders ("Shareholders")
of ProLogis Trust (the "Trust") shall be held at the principal office of the
Trust or at such other place as shall be stated in the notice of the meeting.
Section B. Special Meetings. Requests for special meetings shall state
the purpose of such meeting and the matters proposed to be acted on at such
meeting. The Secretary shall inform the requesting Shareholders of the
reasonably estimated cost of preparing and mailing notice of the meeting and,
upon payment to the Trust by such Shareholders of such costs, the Secretary
shall give notice of the meeting. Unless requested by the Shareholders entitled
to cast a majority of the votes entitled to be cast at such meeting, a special
meeting need not be called to consider any matter which is substantially the
same as a matter voted on at any special meeting of Shareholders held during the
preceding twelve months.
Section C. Notice. Notice stating the place, date and time of the
meeting and, in the case of a special meeting or as otherwise required by
statute, the purpose or purposes for which the meeting is called, shall be given
by the Secretary in the manner required by Maryland law not less than 10 nor
more than 90 days before the day of the meeting. If mailed, notices of meetings
of Shareholders shall be deemed to be given when deposited in the United States
mail addressed to the Shareholder at his or her post office address as it
appears on the records of the Trust, with postage thereon prepaid.
Section D. Scope of Notice. Any business of the Trust may be transacted
at an annual meeting of Shareholders without being specifically designated in
the notice, except such business as is required by any statute to be stated in
such notice.
Section E. Waiver of Notice. Whenever any notice of a meeting of
Shareholders is required to be given pursuant to the Trust's Declaration of
Trust (as amended, supplemented or restated from time to time, the "Declaration
of Trust") or these Bylaws or pursuant to applicable law, a waiver thereof in
writing, signed by the Shareholder or Shareholders entitled to such notice and
filed with the records of Shareholders' meetings, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such notice.
Neither the business to be transacted at nor the purpose of any meeting need be
set forth in the waiver of notice, unless specifically required by statute. The
attendance of any Shareholder at any meeting in person or by proxy shall
constitute a waiver of notice of such meeting, except where such Shareholder
attends a meeting in person or by proxy for the express purpose of objecting to
the transaction of any business on the ground that the meeting is not lawfully
called or convened.
Section F. Organization. At every meeting of Shareholders, the Chairman
of the Board, if there is one (or any Co-Chairman of the Board, if there is more
than one), shall conduct the meeting or, in the case of vacancy in office or
absence of the Chairman of the Board (or all Co-Chairmen of the Board), one of
the following officers present shall conduct the meeting in the order stated:
the Chief Executive Officer, the President, the Managing Directors in their
order of rank and seniority, the Chief Operating Officer, the Chief Financial
Officer, the Chief Investment Officer, the Vice Presidents in their order of
rank and seniority, or a chairman chosen by the Shareholders entitled to cast a
majority of the votes which all Shareholders present in person or by proxy are
entitled to cast, shall act as chairman, and the Secretary, or, in his or her
absence, an Assistant Secretary, or in the absence of both the Secretary and
Assistant Secretaries, a person appointed by the chairman shall act as
secretary. At any Shareholders' meeting, the chairman shall determine the
construction or interpretation of these Bylaws, or any part thereof, and the
ruling of the chairman shall be final.
Section G. Quorum. If a quorum is not present at any meeting of the
Shareholders, the Shareholders entitled to vote at such meeting, present in
person or by proxy, shall have the power to adjourn such meeting from time to
time to a date not more than 120 days after the original record date without
notice other than announcement at such meeting. At any such adjourned meeting at
which a quorum shall be present, any business may be transacted which might have
been transacted at the meeting as originally notified.
Section H. Proxies. A Shareholder may cast the votes entitled to be
cast by the shares ("Shares") of the Trust owned of record by him, either in
person or by proxy in any manner authorized by law by the Shareholder or by the
Shareholder's agent. Such proxy shall be filed with the Secretary before or at
the time of the meeting. No proxy shall be valid after eleven (11) months from
the date of its execution, unless otherwise provided in the proxy.
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Section I. Voting of Shares by Certain Holders.
1. Shares Held by an Entity. Shares registered in the name of a
corporation, partnership, trust or other entity, if entitled to be voted, may be
voted by the president or a vice president, a general partner or trustee
thereof, as the case may be, or a proxy appointed by any of the foregoing
individuals, unless some other person who has been appointed to vote such Shares
pursuant to a bylaw or a resolution of the governing body of such corporation or
other entity or agreement of the partners of a partnership presents a certified
copy of such bylaw, resolution or agreement, in which case such person may vote
such Shares. Any Trustee or other fiduciary may vote Shares registered in his or
her name as such fiduciary, either in person or by proxy.
2. Shares Held by Certain Persons. Shares registered in the name of a
person adjudged incompetent may be voted and all rights incident thereto may be
exercised only by his guardian, in person or by proxy. Shares registered in the
name of a deceased person may be voted and all rights incident thereto may be
exercised only by his executor or administrator, in person or by proxy. Shares
registered in the name of a minor may be voted and all rights incident thereto
may be exercised by his guardian, in person or by proxy, or in the absence of
such representation by his guardian, by the minor, in person or by proxy,
whether or not the Trust has notice, actual or constructive, of the minority or
the appointment of a guardian, and whether or not a guardian has in fact been
appointed.
3. Shares Held by Two or More Persons. Shares registered in the names
of two or more persons shall be voted or represented in accordance with the vote
or consent of the majority of the persons in whose names the Shares stand. If
only one such person is present in person or by proxy, he or she may vote all
the Shares, and all the Shares standing in the names of such persons are
represented for the purpose of determining a quorum. This procedure also applies
to the voting of Shares by two or more administrators, executors, trustees or
other fiduciaries, unless the instrument or order of court appointing them
otherwise directs.
4. Shares Held by the Trust. Shares of the Trust directly or indirectly
owned by it shall not be voted at any meeting and shall not be counted in
determining the total number of outstanding Shares entitled to be voted at any
given time, unless they are held by it in a fiduciary capacity, in which case
they may be voted and shall be counted in determining the total number of
outstanding Shares at any given time.
5. Certifications of Beneficial Ownership. The Board of Trustees (the
"Board") may adopt by resolution a procedure by which a Shareholder may certify
in writing to the Trust that any Shares registered in the name of the
Shareholder are held for the account of a specified person other than the
Shareholder. The resolution shall set forth: the class of Shareholders who may
make the certification; the purpose for which the certification may be made; the
form of certification; the information to be contained in it; if the
certification is with respect to a record date or closing of the Share transfer
books, the time after the record date or closing of the Share transfer books
within which the certification must be received by the Trust; and any other
provisions with respect to the procedure which the Board considers necessary or
desirable. On receipt of such certification, the person specified in the
certification shall be regarded as, for the purposes set forth in the
certification, the Shareholder of record of the specified Shares in place of the
Shareholder who makes the certification.
Section J. Inspectors. At any meeting of Shareholders, the chairman of
the meeting may, or upon the request of any Shareholder shall, appoint one or
more persons as inspectors for such meeting. Such inspectors shall ascertain and
report the number of Shares represented at the meeting based on their
determination of the validity and effect of proxies, count all votes, report the
results and perform such other acts as are proper to conduct the election and
voting with impartiality and fairness to all the Shareholders. Each report of an
inspector shall be in writing and signed by him or by a majority of them if
there is more than one inspector acting at such meeting. If there is more than
one inspector, the report of a majority shall be the report of the inspectors.
The report of the inspector or inspectors on the number of Shares represented at
the meeting and the results of the voting shall be prima facie evidence thereof.
Section K. Action Without Meetings. Any action required or permitted to
be taken at a meeting of Shareholders may be taken without a meeting if there is
filed with the records of Shareholders' meetings a unanimous written consent
which sets forth the action and is signed by each Shareholder entitled to vote
on the matter and a written waiver of any rights to dissent signed by each
Shareholder entitled to notice of the meeting but not entitled to vote at such
meeting.
Section L. Nominations and Proposals by Shareholders.
1. Annual Meetings of Shareholders.
a) Nominations of persons for election to the Board and the
proposal of business to be considered by the Shareholders may be made at an
annual meeting of Shareholders (i) pursuant to the Trust's notice of a meeting,
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(ii) by or at the direction of the Board or (iii) by any Shareholder of the
Trust who was a Shareholder of record at the time of the giving of notice
provided for in this Section 12(a) and at the time of the annual meeting, who is
entitled to vote at the meeting and who complied with the notice procedures set
forth in this Section 12(a).
b) For nominations or other business to be properly brought
before an annual meeting by a Shareholder pursuant to clause (iii) of paragraph
(a)(1) of this Section 12, the Shareholder must have given timely notice thereof
in writing to the Secretary and such nomination or other business must otherwise
be a proper matter for action by Shareholders. To be timely, a Shareholder's
notice shall be delivered to the Secretary at the principal executive offices of
the Trust not less than 90 days nor more than 120 days prior to the first
anniversary of the preceding year's annual meeting; provided, however, that if
the date of the annual meeting is advanced by more than 30 days or delayed by
more than 60 days from such anniversary date, notice by the Shareholder to be
timely must be so delivered (x) not more than 120 days prior to such annual
meeting nor less than 90 days prior to such annual meeting or (y) not later than
the close of business on the tenth day following the day on which public
announcement of the date of such meeting is first made by the Trust. Such
Shareholder's notice shall set forth (i) as to each person whom the Shareholder
proposes to nominate for election or reelection as a Trustee, all information
relating to such person which is required to be disclosed in solicitations of
proxies for election of Trustees, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (including such person's written consent to being named in
the proxy statement as a nominee and to serving as a Trustee if elected); (ii)
as to any other business which the Shareholder proposes to bring before the
meeting, a brief description of the business desired to be brought before the
meeting, the reasons for conducting such business at the meeting and any
material interest in such business of such Shareholder and of the beneficial
owner, if any, on whose behalf the proposal is made; and (iii) as to the
Shareholder giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made, (x) the name and address of such
Shareholder, as they appear on the Trust's books, and of such beneficial owner,
(y) the number of Shares of each class of the Trust which are owned beneficially
and of record by such Shareholder and such beneficial owner and (z) in the case
of a nomination, (A) a description of all arrangements or understandings between
such Shareholder and each proposed nominee and any other person or persons
(including their names) pursuant to which the nomination(s) are to be made by
such Shareholder, (B) a representation that such Shareholder intends to appear
in person or by proxy at the meeting, if there is a meeting, to nominate the
persons named in its notice and (C) any other information relating to such
Shareholder that would be required to be disclosed in a proxy statement or other
filings required to be made in connection with solicitations of proxies for
election of Trustees pursuant to Section 14 of the Exchange Act and the rules
and regulations promulgated thereunder.
c) Notwithstanding anything in the second sentence of
paragraph (a)(2) of this Section 12 to the contrary, if the number of Trustees
to be elected to the Board is increased and there is no public announcement by
the Trust naming all of the nominees for Trustee or specifying the size of the
increased Board at least 100 days prior to the first anniversary of the
preceding year's annual meeting, a Shareholder's notice required by this Section
12(a) shall also be considered timely, but only with respect to nominees for any
new positions created by such increase, if it shall be delivered to the
Secretary at the principal executive offices of the Trust not later than the
close of business on the tenth day following the day on which such public
announcement is first made by the Trust.
2. Special Meetings of Shareholders. Only such business shall be
conducted at a special meeting of Shareholders as shall have been brought before
the meeting pursuant to the Trust's notice of meeting. Nominations of persons
for election to the Board may be made at a special meeting of Shareholders at
which Trustees are to be elected (i) pursuant to the Trust's notice of meeting,
(ii) by or at the direction of the Board or (iii) provided that the Board has
determined that Trustees shall or may be elected at such special meeting, by any
Shareholder of the Trust who was a Shareholder of record both at the time of
giving of notice provided for in this Section 12(b) and at the time of the
special meeting, who is entitled to vote at the meeting and who complied with
the notice procedures set forth in this Section 12(b). If the Trust calls a
special meeting of Shareholders for the purpose of electing one or more Trustees
to the Board, any such Shareholder may nominate a person or persons (as the case
may be) for election to such position as specified in the Trust's notice of
meeting, if the Shareholder's notice containing the information required by
paragraph (a)(2) of this Section 12 shall be delivered to the Secretary at the
principal executive offices of the Trust (A) not more than 120 days prior to
such special meeting nor less than 90 days prior to such special meeting or (B)
not later than the close of business on the tenth day following the day on which
public announcement is first made of the date of the special meeting and of the
nominees proposed by the Board to be elected at such meeting.
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3. General.
a) Only such persons who are nominated in accordance with the
procedures set forth in this Section 12 shall be eligible to serve as Trustees
and only such business shall be conducted at a meeting of Shareholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 12. The chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before the
meeting was made or proposed in accordance with the procedures set forth in this
Section 12 and, if any proposed nomination or business is not in compliance with
this Section 12, to declare that such nomination or proposal shall be
disregarded.
b) For purposes of this Section 12, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable news service or in a document publicly filed by
the Trust with the Securities and Exchange Commission pursuant to Section 13, 14
or 15(d) of the Exchange Act.
c) Notwithstanding the foregoing provisions of this Section
12, a Shareholder shall also comply with all applicable requirements of Maryland
law and of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Section 12. Nothing in this Section 12
shall be deemed to affect any rights of Shareholders to request inclusion of,
nor any rights of the Trust to omit, proposals in the Trust's proxy statement
pursuant to Rule 14a-8 under the Exchange Act.
Section 13. Exemptions from Certain Provisions of Maryland Law. Except
as otherwise provided in the Trust's Declaration of Trust, the provisions of
Article 3, Subtitle 7 of the Corporations and Associations Article of the
Annotated Code of Maryland (Section 3-701 through and including Section 3-709),
or any successor statute, shall not apply to any acquisition by any person of
Shares of the Trust. This section may be repealed, in whole or in part, at any
time, whether before or after an acquisition of control shares and, upon such
repeal, may, to the extent provided by any successor bylaw, apply to any prior
or subsequent control share acquisition.
Section 14. Voting by Ballot. Voting on any question or in any election
may be by voice unless the presiding officer shall order or any Shareholder
shall demand that voting be by ballot.
ARTICLE II. TRUSTEES
Section A. Annual And Regular Meetings. An annual meeting of the Board
shall be held immediately after and at the same place as the annual meeting of
Shareholders, no notice other than this bylaw being necessary. The Board may
provide, by resolution, the time and place, either within or without the State
of Maryland, for the holding of regular meetings of the Board without other
notice than such resolution.
Section B. Special Meetings. Special meetings of the Board may be
called by or at the request of the Chairman of the Board (or any Co-Chairman of
the Board, if there is more than one), the Chief Executive Officer, the
President or by a majority of the Trustees then in office. The person or persons
authorized to call special meetings of the Board may fix any place, either
within or without the State of Maryland, as the place for holding any special
meeting of the Board called by them.
Section C. Notice. Notice of any special meeting of the Board shall be
given personally or by telephone, facsimile transmission, United States mail or
courier to each Trustee at his or her business or residence address. Notice by
personal delivery, by telephone or a facsimile transmission shall be given at
least two days prior to the meeting. Notice by mail shall be given at least five
days prior to the meeting and shall be deemed to be given when deposited in the
United States mail properly addressed, with postage thereon prepaid. Telephone
notice shall be deemed to be given when the Trustee is personally given such
notice in a telephone call to which he is a party. Facsimile transmission notice
shall be deemed to be given upon completion of the transmission of the message
to the number given to the Trust by the Trustee and receipt of a completed
confirmation indicating receipt of the transmission. Neither the business to be
transacted at, nor the purpose of, any annual, regular or special meeting of the
Board need be stated in the notice, unless specifically required by statute or
these Bylaws.
Section D. Waiver of Notice. Whenever any notice of a meeting of the
Board or any committee thereof is required to be given pursuant to the
Declaration of Trust or these Bylaws or pursuant to applicable law, a waiver
thereof in writing, signed by the Trustee or Trustees entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice. Neither the business to be transacted at nor the
purpose of any meeting need be set forth in the waiver of notice, unless
specifically required by statute. The attendance of any Trustee at any meeting
shall constitute a waiver of notice of such meeting, except where such Trustee
attends a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
Section E. Organization. A majority of the Board may designate or elect
a Trustee to preside at Board meetings. In the absence of such designation or
election, the Chairman of the Board (or any Co-Chairman of the Board, if there
is more than one), the Chief Executive Officer or the President shall preside at
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Board meetings; in his absence, the Trustees present at each meeting shall elect
one of the Trustees present as chairman. All rules of conduct adopted and used
at Board meetings shall be determined by the chairman, whose ruling on all
procedural matters shall be final.
Section F. Quorum. If less than a quorum of Trustees is present at a
meeting, a majority of the Trustees present may adjourn the meeting from time to
time without further notice, and further provided that if, pursuant to the
Declaration of Trust or these Bylaws, the vote of a majority of a particular
group of Trustees is required for action, a quorum must also include a majority
of such group. The Trustees present at a meeting which has been duly called and
convened may continue to transact business until adjournment, notwithstanding
the withdrawal of enough Trustees to leave less than a quorum.
Section G. Voting at Meetings. Voting at Board meetings may be
conducted orally, by show of hands, or, if requested by any Trustee, by written
ballot. The results of all voting shall be recorded by the Secretary in the
minute book.
Section H. Telephone Meetings. Trustees may participate in a meeting by
means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence in person at
the meeting.
Section I. Compensation and Financial Assistance. Trustees shall not
receive any stated salary for their services as Trustees but, by resolution of
the Board, may receive fixed sums per year and/or per meeting and/or per visit
to real property owned or to be acquired by the Trust and for any service or
activity they performed or engaged in as Trustees. Trustees may be reimbursed
for expenses of attendance, if any, at each annual, regular or special meeting
of the Board or of any committee thereof and for their expenses, if any, in
connection with each property visit and any other service or activity they
performed or engaged in as Trustees; but nothing herein contained shall be
construed to preclude any Trustees from serving the Trust in any other capacity
and receiving compensation therefor. The Trust may lend money to, guarantee an
obligation of or otherwise assist a Trustee or a trustee of its direct or
indirect subsidiary. The loan, guarantee or other assistance may be with or
without interest, unsecured, or secured in any manner that the Board approves,
including a pledge of Shares.
Section J. Distributions. Before payment of any dividends or other
distributions, there may be set aside out of any assets of the Trust available
for dividends or other distributions such sum or sums as the Board may from time
to time, in its absolute discretion, think proper as a reserve fund for
contingencies, for equalizing dividends or other distributions, for repairing or
maintaining any property of the Trust or for such other purpose as the Board
shall determine to be in the best interest of the Trust and the Board may modify
or abolish any such reserve in the manner in which it was created.
Section K. Investment Policy. Subject to the provisions of the
Declaration of Trust, the Board may from time to time adopt, amend, revise or
terminate any policy or policies with respect to investments by the Trust as it
shall deem appropriate in its sole discretion.
Section L. Loss of Deposits. No Trustee shall be liable for any loss
which may occur by reason of the failure of the bank, trust company, savings and
loan association or other institution with whom moneys or shares have been
deposited.
Section M. Surety Bonds. Unless required by law, no Trustee shall be
obligated to give any bond or surety or other security for the performance of
any of his or her duties.
Section N. Reliance. Each Trustee, officer, employee and agent of the
Trust shall, in the performance of his or her duties with respect to the Trust,
be fully justified and protected with regard to any act or failure to act in
reliance in good faith on the books of account or other records of the Trust, on
an opinion of counsel or on reports made to the Trust by any of its officers or
employees or by the adviser, accountants, appraisers or other experts or
consultants selected by the Board or officers of the Trust, regardless of
whether such counsel or expert may also be a Trustee.
Section O. Certain Rights of Trustees, Officers, Employees And Agents.
The Trustees shall have no responsibility to devote their full time to the
affairs of the Trust. Any Trustee or officer, employee or agent of the Trust, in
his or her personal capacity or in a capacity as an affiliate, employee or agent
of any other person, or otherwise, may have business interests and engage in
business activities similar to or in addition to or in competition with those of
or relating to the Trust.
ARTICLE III. COMMITTEES
Section A. Number, Tenure And Qualifications. The Board may appoint
from among its members an Executive Committee, an Audit Committee, a Management
Development and Compensation Committee, an Investment Committee and other
committees, composed of one or more Trustees, to serve at the pleasure of the
Board.
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Section 2. Meetings. Notice of committee meetings shall be given in the
same manner as notice for special meetings of the Board. A majority of the
members of the committee shall constitute a quorum for the transaction of
business at such meeting of the committee. The act of a majority of the
committee members present at a meeting shall be the act of such committee. The
Board may designate a chairman of any committee and such chairman or any two
members of any committee may fix the time and place of its meeting unless the
Board shall otherwise provide. In the absence or disqualification of any member
of any such committee, the members thereof present at any meeting and not
disqualified from voting, whether or not they constitute a quorum, may appoint
another Trustee to act in the place of such absent or disqualified member. Each
committee shall keep minutes of its proceedings and shall report the same to the
Board at the next succeeding meeting, and any action by the committee shall be
subject to revision and alteration by the Board, provided that no rights of
third persons shall be affected by any such revision or alteration.
Section 3. Telephone Meetings. Members of a committee of the Board may
participate in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means shall
constitute presence in person at the meeting.
Section 4. Informal Action by Committees. Any action required or
permitted to be taken at any meeting of a committee of the Board may be taken
without a meeting, if a consent in writing to such action is signed by each
member of the committee and such written consent is filed with the minutes of
proceedings of such committee.
Section 5. Vacancies. Subject to the provisions hereof, the Board shall
have the power at any time to change the membership of any committee, to fill
all vacancies, to designate alternate members to replace any absent or
disqualified member or to dissolve any such committee.
ARTICLE IV. OFFICERS
Section A. General Provisions. The officers of the Trust shall be
elected annually by the Board at the first meeting of the Board held after each
annual meeting of Shareholders, except that the Chairman of the Board (or any
Co-Chairman of the Board, if there is more than one) or the Chief Executive
Officer may appoint a President, a Chief Operating Officer, a Chief Investment
Officer, a Chief Financial Officer, a Treasurer, and one or more Managing
Directors, Vice Presidents, Assistant Secretaries and Assistant Treasurers, or
such other officers as the Board, the Chairman of the Board or the President
shall deem proper. If the election of officers shall not be held at such
meeting, such election shall be held as soon thereafter as may be convenient.
Each officer shall hold office until his or her successor is elected and
qualifies or until his or her death, resignation or removal in the manner
hereinafter provided. Any two or more offices may be held by the same person. In
its discretion, the Board may leave unfilled any office except that of Chairman
of the Board, Chief Executive Officer and Secretary. Any two offices except
President and Vice President may be held concurrently by the same person.
Section B. Resignation. Any officer of the Trust may resign at any time
by giving written notice of his or her resignation to the Board, the Chairman of
the Board (or any Co-Chairman of the Board, if there is more than one), the
Chief Executive Officer or the Secretary. Any resignation shall take effect at
any time subsequent to the time specified therein or, if the time when it shall
become effective is not specified therein, immediately upon its receipt. The
acceptance of a resignation shall not be necessary to make it effective unless
otherwise stated in the resignation. Such resignation shall be without prejudice
to the contract rights, if any, of the Trust.
Section C. Vacancies. A vacancy in any office may be filled by the
Board for the balance of the term.
Section D. Chairman of the Board. The Chairman of the Board (or the
Co-Chairmen of the Board in the order of their election, if there is more than
one) shall also serve as the Chief Executive Officer and, as such, shall have
general supervision, direction and control of the business and affairs of the
Trust, subject to the control of the Board, shall preside at meetings of
Shareholders and shall have such other functions, authority and duties as
customarily appertain to the office of the chief executive of a business
corporation or as may be prescribed by the Board.
Section E. Chief Executive Officer. The Chief Executive Officer shall
have general supervision, direction and control of the business and affairs of
the Trust, subject to the control of the Board, shall preside at meetings of
Shareholders and shall have such other functions, authority and duties as
customarily appertain to the office of the chief executive of a business
corporation or as may be prescribed by the Board or the Chairman of the Board.
Section F. President. The President shall have such functions,
authority and duties as may be prescribed by the Board or the Chairman of the
Board (or any Co-Chairman of the Board, if there is more than one).
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Section 7. Managing Director. The Managing Director (or the Managing
Directors, if there is more than one), shall have such functions, authority and
duties, and have such additional descriptive designations in his or her title
(if any), as may be prescribed by the Board, the Chairman of the Board (or any
Co-Chairman of the Board, if there is more than one), the Chief Executive
Officer or the President.
Section 8. Chief Operating Officer. The Chief Operating Officer shall
have such functions, authority and duties, and have such additional descriptive
designations in his or her title (if any), as may be prescribed by the Board,
the Chairman of the Board (or any Co-Chairman of the Board, if there is more
than one), the Chief Executive Officer or the President.
Section 9. Chief Financial Officer. The Chief Financial Officer shall
have the custody of the funds and securities of the Trust and shall keep full
and accurate accounts of receipts and disbursements in books belonging to the
Trust and shall deposit all moneys and other valuable effects in the name and to
the credit of the Trust in such depositories as may be designated by the Board
and shall perform such other duties as may be prescribed by the Board, the
Chairman of the Board (or any Co-Chairman or the Board, if there is more than
one), the Chief Executive Officer or the President.
Section 10. Chief Investment Officer. The Chief Investment Officer
shall have such functions, authority and duties, and have such additional
descriptive designations in his or her title (if any), as may be prescribed by
the Board, the Chairman of the Board (or any Co-Chairman of the Board, if there
is more than one), the Chief Executive Officer or the President.
Section 11. Vice Presidents. Each Vice President shall have such
functions, authority and duties, and have such additional descriptive
designations in his or her title (if any), as may be prescribed by the Board,
the Chairman of the Board (or any Co-Chairman of the Board, if there is more
than one), the Chief Executive Officer, the President or any Managing Director.
Section 12. Secretary. The Secretary shall keep a record of all
proceedings of the Shareholders of the Trust and of the Board and shall perform
like duties for the standing committees when required. The Secretary shall give,
or cause to be given, notice, if any, of all meetings of the Shareholders and
shall perform such other duties as may be prescribed by the Board, the Chairman
of the Board (or any Co-Chairman of the Board, if there is more than one), the
Chief Executive Officer or the President. The Secretary shall have custody of
the corporate seal of the Trust and the Secretary or, in the absence of the
Secretary, any Assistant Secretary shall have authority to affix the same to any
instrument requiring it and when so affixed it may be attested by the signature
of the Secretary or any Assistant Secretary. The Board may give general
authority to any other officer to affix the seal of the Trust and to attest such
affixing of the seal.
Section 13. Assistant Secretary. The Assistant Secretary, or if there
is more than one, the Assistant Secretaries in the order determined by the Board
(or if there is no such determination, then in the order of their election),
shall, in the absence of the Secretary or if the Secretary is unable or refuses
to act, perform the duties and exercise the powers of the Secretary and shall
perform such other duties as may from time to time be prescribed by the Board,
the Chairman of the Board (or any Co-Chairman of the Board, if there is more
than one), the Chief Executive Officer, the President or the Secretary.
Section 14. Treasurer. The Treasurer shall have such functions,
authority and duties, and have such additional descriptive designations in his
or her title (if any), as may be prescribed by the Board, the Chairman of the
Board (or any Co-Chairman of the Board, if there is more than one), the Chief
Executive Officer or the President.
Section 15. Assistant Treasurer. The Assistant Treasurer, or if there
is more than one, the Assistant Treasurers in the order determined by the Board
(or if there is no such determination, then in the order of their election),
shall, in the absence of the Treasurer or if the Treasurer is unable or refuses
to act, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties as may from time to time be prescribed by the Board,
the Chairman of the Board (or any Co-Chairman of the Board, if there is more
than one), the Chief Executive Officer, the President or the Treasurer.
Section 16. Salaries. The salaries and other compensation of the
officers shall be fixed from time to time by the Board and no officer shall be
prevented from receiving such salary or other compensation by reason of the fact
that he or she is also a Trustee.
Section 17. Execution of Documents. A person who holds more than one
office in the Trust may not act in more than one capacity to execute,
acknowledge or verify an instrument required by law to be executed, acknowledged
or verified by more than one officer.
Section 18. Bonds. The Board may require any officer, agent or employee
of the Trust to give a bond to the Trust, conditioned on the faithful discharge
of his or her duties, with one or more sureties and in such amount as may be
satisfactory to the Board.
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ARTICLE V. INDEMNIFICATION
Section A. Procedure. Any indemnification, or payment of expenses in
advance of the final disposition of any proceeding, shall be made promptly, and
in any event within 60 days, upon the written request of the Trustee or officer
entitled to seek indemnification (the "Indemnified Party"). The right to
indemnification and advances hereunder shall be enforceable by the Indemnified
Party in any court of competent jurisdiction, if (i) the Trust denies such
request, in whole or in part, or (ii) no disposition thereof is made within 60
days. The Indemnified Party's costs and expenses incurred in connection with
successfully establishing his or her right to indemnification, in whole or in
part, in any such action shall also be reimbursed by the Trust. It shall be a
defense to any action for advance of expenses that (a) a determination has been
made that the facts then known to those making the determination would preclude
indemnification or (b) the Trust has not received both (i) an undertaking as
required by law to repay such advances if it shall ultimately be determined that
the standard of conduct has not been met and (ii) a written affirmation by the
Indemnified Party of such Indemnified Party's good faith belief that the
standard of conduct necessary for indemnification by the Trust has been met.
Section B. Exclusivity, Etc. The indemnification and advance of
expenses provided by the Declaration of Trust and these Bylaws shall not be
deemed exclusive of any other rights to which a person seeking indemnification
or advance of expenses may be entitled under any law (common or statutory), or
any agreement, vote of Shareholders or disinterested Trustees or other provision
which is consistent with law, both as to action in his or her official capacity
and as to action in another capacity while holding office or while employed by
or acting as agent for the Trust, shall continue in respect of all events
occurring while a person was a Trustee or officer after such person has ceased
to be a Trustee or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of such person. All rights to indemnification and
advancement of expenses under the Declaration of Trust and these Bylaws shall be
deemed to be a contract between the Trust and each Trustee or officer of the
Trust who serves or served in such capacity at any time while such provisions
are in effect. Nothing herein shall prevent the amendment of these Bylaws,
provided that no such amendment shall diminish the rights of any person
hereunder with respect to events occurring or claims made before its adoption or
as to claims made after its adoption in respect of events occurring before its
adoption. Any repeal or modification of these Bylaws shall not in any way
diminish any rights to indemnification or advancement of expenses of such
Trustee or officer of the obligations of the Trust arising hereunder with
respect to events occurring, or claims made, while these Bylaws or any provision
hereof is in effect.
ARTICLE VI. CONTRACTS AND ACCOUNTING
Section A. Contracts. The Board may authorize any officer or agent to
enter into any contract or to execute and deliver any instrument in the name of
and on behalf of the Trust and such authority may be general or confined to
specific instances. Any agreement, deed, mortgage, lease or other document
executed by one or more of the Trustees or by an authorized person shall be
valid and binding on the Board and on the Trust when authorized or ratified by
action of the Board.
Section B. Checks And Drafts. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Trust shall be signed by such officer or agent of the Trust in such
manner as shall from time to time be determined by the Board.
Section C. Deposits. All funds of the Trust not otherwise employed
shall be deposited from time to time to the credit of the Trust in such banks,
trust companies or other depositories as the Board may designate.
Section D. Books and Records. The Trust shall keep correct and complete
books and records of its accounts and transactions and minutes of the
proceedings of its Shareholders and Board and of any executive or other
committee when exercising any of the powers of the Board. The books and records
of the Trust may be in written form or in any other form which can be converted
within a reasonable time into written form for visual inspection. Minutes shall
be recorded in written form but may be maintained in the form of a reproduction.
The original or a certified copy of the Bylaws shall be kept at the principal
office of the Trust.
Section E. Fiscal Year. The fiscal year of the Trust shall be the
twelve months ending December 31 in each year, unless otherwise provided by the
Board.
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ARTICLE VII. SHARES
Section A. Certificates. Each Shareholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
Shares of each class held by him or her in the Trust; provided, however, that
the Board may provide by resolution or resolutions that some or all of any or
all classes or series of Shares shall be uncertificated. Each certificate shall
be signed by the Chairman of the Board (or any Co-Chairman of the Board, if
there is more than one), the President or a Vice President and countersigned by
the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer and may be sealed with the seal, if any, of the Trust. The signatures
may be either manual or facsimile. Certificates shall be consecutively numbered;
and if the Trust shall, from time to time, issue several classes of Shares, each
class may have its own number series. A certificate is valid and may be issued
whether or not an officer who signed it is still an officer when it is issued.
Each certificate representing Shares which are restricted as to their
transferability or voting powers, which are preferred or limited as to their
dividends or as to their allocable portion of the assets upon liquidation or
which are redeemable at the option of the Trust, shall have a statement of such
restriction, limitation, preference or redemption provision, or a summary
thereof, plainly stated on the certificate. If the Trust has authority to issue
Shares of more than one class, the certificate shall contain on the face or back
a full statement or summary of the designations and any preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends and
other distributions, qualifications and terms and conditions of redemption of
each class of Shares and, if the Trust is authorized to issue any preferred or
special class in series, the differences in the relative rights and preferences
between the Shares of each series to the extent they have been set and the
authority of the Board to set the relative rights and preferences of subsequent
series. In lieu of such statement or summary, the certificate may state that the
Trust will furnish a full statement of such information to any Shareholder upon
request and without charge. If any class of Shares is restricted by the Trust as
to transferability, the certificate shall contain a full statement of the
restriction or state that the Trust will furnish information about the
restrictions to the Shareholder on request and without charge.
Section B. Transfers. Upon surrender to the Trust or the transfer agent
of the Trust of a Share certificate duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, the Trust shall
issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction on its books. Notwithstanding the
foregoing, transfers of Shares of any class will be subject in all respects to
the Declaration of Trust and all of the terms and conditions contained therein.
Section C. Replacement Certificate. Any officer designated by the Board
may direct a new certificate to be issued in place of any certificate previously
issued by the Trust alleged to have been lost, stolen or destroyed upon the
making of an affidavit of that fact by the person claiming the certificate to be
lost, stolen or destroyed. When authorizing the issuance of a new certificate,
an officer designated by the Board may, in his or her discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate or the owner's legal representative to advertise
the same in such manner as he or she shall require and/or to give bond, with
sufficient surety, to the Trust to indemnify it against any loss or claim which
may arise as a result of the issuance of a new certificate.
Section D. Closing of Transfer Books or Fixing of Record Date.
1. Fixing of Record Date. The Board may set, in advance, a record date
for the purpose of determining Shareholders entitled to notice of or to vote at
any meeting of Shareholders or determining Shareholders entitled to receive
payment of any dividend or the allotment of any other rights, or in order to
make a determination of Shareholders for any other proper purpose. Such date, in
any case, shall not be prior to the close of business on the day the record date
is fixed and shall be not more than 90 days, and in the case of a meeting of the
Shareholders, not less than ten (10) days, before the date on which the
particular action requiring such determination of Shareholders of record is to
be held or taken. In lieu of fixing a record date, the Board may provide that
the Share transfer books shall be closed for a stated period but not longer than
20 days. If the Share transfer books are closed for the purpose of determining
Shareholders entitled to notice of or to vote at a meeting of Shareholders, such
books shall be closed for at least ten (10) days before the date of such
meeting.
2. If Record Date Not Fixed. If no record date is fixed and the Share
transfer books are not closed for the determination of Shareholders, (i) the
record date for the determination of Shareholders entitled to receive a payment
of a dividend or an allotment of any other rights shall be the close of business
on the day on which the resolution of the Board, declaring the dividend or
allotment of rights, is adopted; and (ii) the record date for the determination
of Shareholders entitled to notice of or to vote at a meeting of Shareholders
shall be at the close of business on the day on which the notice of meeting is
mailed or the thirtieth day before the meeting, whichever is the closer date to
the meeting.
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3. Record Dates for Adjourned Meetings. When a determination of
Shareholders entitled to vote at any meeting of Shareholders has been made as
provided in the Declaration of Trust, such determination shall apply to any
adjournment thereof, except when (i) the determination has been made through the
closing of the transfer books and the stated period of closing has expired or
(ii) the meeting is adjourned to a date more than 120 days after the record date
fixed for the original meeting, in which case a new record date shall be
determined as set forth in the Declaration of Trust.
4. Share Transfers After Record Date. Except where the Board fixes a
new record date for any adjourned meeting as provided above, any Shareholder who
was a Shareholder on the original record date shall be entitled to receive
notice of and to vote at a meeting of Shareholders or any adjournment thereof
and to receive a dividend or allotment of rights even though he or she has since
such date disposed of his or her Shares, and no Shareholder becoming a
Shareholder after such date shall be entitled to receive notice of or to vote at
such meeting or any adjournment thereof or to receive such dividend or allotment
of rights.
5. Paying of Pro Rata Dividends. Notwithstanding anything in this
Section 4 to the contrary, the Board may declare and pay dividends or an
allotment or any other rights to those who are Shareholders as of a specified
record date or, alternatively, to those who are or were Shareholders at any time
during any quarter, year or other applicable period with respect to which any
such dividend or allotment of rights is paid so that each Shareholder shall
receive, with respect to each Share, the proportion of such dividend or
allotment of rights per Share which the number of days each Share is owned of
record by such Shareholder during such quarter, year or other applicable period
bears to the total number of days in such quarter, year or other applicable
period.
Section E. Share Ledger. The Trust shall maintain at its principal
office or at the office of its counsel, accountants or transfer agent, an
original or duplicate Share ledger containing the name and address of each
Shareholder and the number of Shares of each class held by such Shareholder. The
Trust shall be entitled to treat the holder of record of any Share as the holder
in fact thereof and, accordingly, shall not be bound to recognize any equitable
or other claim to or interest in such Share or on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of the State of Maryland.
Section F. Fractional Shares; Issuance of Units. The Board may issue
fractional Shares or provide for the issuance of scrip, all on such terms and
under such conditions as they may determine. Notwithstanding any other provision
of the Declaration of Trust or these Bylaws to the contrary, the Board may issue
units consisting of different securities of the Trust. Any security issued in a
unit shall have the same characteristics as any identical securities issued by
the Trust, except that the Board may provide that, for a specified period,
securities of the Trust issued in such unit may be transferred on the books of
the Trust only in such unit.
ARTICLE VIII. SEAL
Section A. Seal. The Board may adopt a suitable seal, bearing the name
of the Trust, which shall be in the charge of the Secretary. The Board may
authorize one or more duplicate seals and provide for the custody thereof.
Section B. Affixing Seal. Whenever the Trust is permitted or required
to affix its seal to a document, it shall be sufficient to meet the requirements
of any law, rule or regulation relating to a seal to place the word "(SEAL)"
adjacent to the signature of the person authorized to execute the document on
behalf of the Trust.
10
<TABLE>
EXHIBIT 12.1
PROLOGIS
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollar amounts in thousands)
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
---------------------- --------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Earnings from Operations $ 54,881 $ 66,930 $ 100,483 $ 38,399 $ 79,384 $ 47,660 $ 25,066
Add:
Interest Expense 76,269 34,007 77,650 52,704 38,819 32,005 7,568
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings as Adjusted $ 131,150 $ 100,937 $ 178,133 $ 91,103 $ 118,203 $ 79,665 $ 32,634
========== ========== ========== ========== ========== ========== ==========
Fixed Charges:
Interest Expense $ 76,269 $ 34,007 $ 77,650 $ 52,704 $ 38,819 $ 32,005 $ 7,568
Capitalized Interest 7,711 8,928 19,173 18,365 16,138 8,599 2,208
---------- ---------- ---------- ---------- ---------- --------- ----------
Total Fixed Charges $ 83,980 $ 42,935 $ 96,823 $ 71,069 $ 54,957 $ 40,604 $ 9,776
========== ========== ========== ========== ========== ========= ==========
Ratio of Earnings, as Adjusted to
Fixed Charges 1.6 2.4 1.8 1.3 2.2 2.0 3.3
========== ========== ========== ========== ========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT 12.2
PROLOGIS
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED SHARE DIVIDENDS
(Dollar amounts in thousands)
Six Months Ended
June 30, Year Ended December 31,
---------------------- -------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Earnings from Operations $ 54,881 $ 66,930 $ 100,483 $ 38,399 $ 79,384 $ 47,660 $ 25,066
Add:
Interest Expense 76,269 34,007 77,650 52,704 38,819 32,005 7,568
---------- ---------- ---------- ---------- ---------- --------- ----------
Earnings, as Adjusted $ 131,150 $ 100,937 $ 178,133 $ 91,103 $ 118,203 $ 79,665 $ 32,634
========== ========== ========== ========== ========== ========= ==========
Combined Fixed Charges and Preferred
Share Dividends:
Interest Expense $ 76,269 $ 34,007 $ 77,650 $ 52,704 $ 38,819 $ 32,005 $ 7,568
Capitalized Interest 7,711 8,928 19,173 18,365 16,138 8,599 2,208
---------- ---------- ---------- ---------- ---------- --------- ----------
Total Fixed Charges 83,980 42,935 96,823 71,069 54,957 40,604 9,776
Preferred Share Dividends (a) 27,938 21,874 49,098 35,318 25,895 6,698 --
---------- ---------- ---------- ---------- ---------- --------- ----------
Combined Fixed Charges and Preferred
Share Dividends $ 111,918 $ 64,809 $ 145,921 $ 106,387 $ 80,852 $ 47,302 $ 9,776
========== ========== ========== ========== ========== ========= ==========
Ratio of Earnings, as Adjusted to
Combined Fixed Charges and
Preferred Share Dividends 1.2 1.6 1.2 (b) 1.5 1.7 3.3
========== ========== ========== ========== ========== ========= ==========
<FN>
(a) ProLogis had no preferred shares prior to 1995.
(b) Due to a one-time, non-recurring, non-cash charge of $75.4 million relating
to the costs incurred in acquiring the management companies from a related
party earnings were insufficient to cover combined fixed charges and
preferred share dividends for the year ended December 31, 1997 by $21.3
million.
</FN>
</TABLE>
EXHIBIT 15.1
August 11, 1999
Board of Trustees and Shareholders
of ProLogis Trust:
We are aware that ProLogis Trust has incorporated by reference in its
Registration Statement Nos. 33-91366, 33-92490, 333-4961, 333-31421, 333-39797,
333-38515, 333-52867 and 333-26597 its Form 10-Q for the quarter ended June 30,
1999, which includes our report dated August 11, 1999 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 the
registration statements prepared or certified by our firm or a report prepared
or certified by our firm within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
ARTHUR ANDERSEN LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary fnancial information extracted from the
Form 10-Q for the six months ended June 30, 1999, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 60,432
<SECURITIES> 0
<RECEIVABLES> 812,706
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,476,988
<DEPRECIATION> 315,598
<TOTAL-ASSETS> 6,221,742
<CURRENT-LIABILITIES> 0
<BONDS> 2,690,066
0
713,892
<COMMON> 1,614
<OTHER-SE> 2,291,273
<TOTAL-LIABILITY-AND-EQUITY> 6,221,273
<SALES> 228,412
<TOTAL-REVENUES> 239,375
<CGS> 0
<TOTAL-COSTS> 16,165
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76,269
<INCOME-PRETAX> 15,256
<INCOME-TAX> 0
<INCOME-CONTINUING> 15,256
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 1,440
<NET-INCOME> 13,816
<EPS-BASIC> 0.10
<EPS-DILUTED> 0.10
</TABLE>
