<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(as filed with the Securities and Exchange Commission on April 19, 1999)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AMERICAN REAL ESTATE INVESTMENT CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
NOTES
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
620 WEST GERMANTOWN PIKE, SUITE 200
PLYMOUTH MEETING, PA 19462
(610) 834-7950
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 3, 1999
------------------------
To our Stockholders:
We invite you to attend our 1999 Annual Meeting of Stockholders at 10:00
a.m., local time, on June 3, 1999, at the Park Hyatt Philadelphia at the
Bellevue located at Broad Street and Walnut Street, Philadelphia, Pennsylvania
19102. At the meeting, holders of the Company's Common Stock will vote on the
following proposals, together with any other business that may properly come
before the meeting:
1. To elect two Class II directors to serve until the Annual Meeting of
Stockholders to be held in 2002 or until their respective successors are
duly elected and qualified.
2. To approve the adoption of an Agreement and Plan of Merger to effect a
change of the Company from a Maryland corporation to a Maryland
statutory real estate investment trust.
3. To approve an amendment to our Articles of Incorporation changing the
name of the Company to "Keystone Property Trust Corp." if Proposal 2
above is not approved.
4. To transact other business which properly comes before the annual
meeting or its adjournment.
The Board of Directors has fixed the close of business on April 26, 1999 as
the record date for the 1999 Annual Meeting. Only holders of record of the
Company's Common Stock as of that date are entitled to notice of and to vote at
the meeting and any adjournment or postponement thereof, notwithstanding
transfer of any stock on the books of the Company after such record date. The
stock transfer books will not be closed.
A Proxy Statement, form of Proxy and copy of the Annual Report on the
Company's operations during the fiscal year ended December 31, 1998 accompany
this notice.
All stockholders are cordially invited to attend the meeting in person.
However, whether or not you plan to attend, PLEASE PROMPTLY SIGN, DATE AND MAIL
THE ENCLOSED PROXY CARD IN THE ENCLOSED RETURN ENVELOPE, which requires no
postage if mailed in the United States. Returning your proxy card does not
deprive you of your right to attend the meeting and vote your shares in person.
The proposals and other information relating to the annual meeting are described
in detail in the accompanying Proxy Statement.
By Order of the Board of Directors,
Timothy A. Peterson,
Secretary
April 30, 1999
Plymouth Meeting, PA
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
620 WEST GERMANTOWN PIKE, SUITE 200
PLYMOUTH MEETING, PA 19462
(610) 834-7950
------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 3, 1999
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished to the holders of common stock, par value
$.001 per share (the "Common Stock"), of American Real Estate Investment
Corporation, a Maryland corporation (the "Company"), and the holders of
preferred stock, par value $.001 per share (the "Preferred Stock") of the
Company, in connection with the solicitation by the Company's Board of Directors
(the "Board") of Proxies to be voted at the Annual Meeting of Stockholders of
the Company (the "Meeting") to be held at the Park Hyatt Philadelphia at the
Bellevue located at Broad Street and Walnut Street, Philadelphia, Pennsylvania
19102 on Thursday, June 3, 1999, at 10:00 a.m. local time, or at any adjournment
thereof, for the purposes set forth in the accompanying Notice of Annual Meeting
of Stockholders. References herein to the "Company" include its subsidiaries,
unless the context otherwise requires.
This Proxy Statement and form of Proxy are first being mailed to such
stockholders on or about April 30, 1999. If the enclosed form of Proxy is
executed and returned, it nevertheless may be revoked by the stockholder at any
time prior to its use by filing with the Secretary of the Company a written
revocation or a duly executed Proxy bearing a later date. A stockholder who
attends the meeting in person may revoke his or her Proxy at that time and vote
in person if so desired. Unless revoked or unless contrary instructions are
given, each Proxy duly signed, dated and returned will be voted as specified
therein, but unless otherwise specified, will be deemed to grant authority to
vote, as applicable:
(1) FOR the election of the two director nominees listed under "Proposal
One-Election of Directors Proposal" to serve as Class II directors for a
three-year term (the "Election of Directors Proposal");
(2) FOR the approval and adoption of an Agreement and Plan of Merger to
effect a change of the Company from a Maryland corporation to a Maryland
statutory real estate investment trust, all as more fully described in this
Proxy Statement (the "Business Trust Proposal");
(3) FOR the approval of an amendment to our Articles of Incorporation
(the "Charter") changing the name of the Company to "Keystone Property Trust
Corp." if the Business Trust Proposal is not approved, as more fully
described in this Proxy Statement (the "Name Change Proposal"); and
(4) At the discretion of the persons named in the enclosed form of
Proxy, on any other matter that may properly come before the meeting or any
adjournment thereof.
The enclosed Proxy is solicited by and on behalf of the Board of Directors
of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
ELECTION OF DIRECTORS PROPOSAL, FOR THE BUSINESS TRUST PROPOSAL AND FOR THE NAME
CHANGE PROPOSAL.
<PAGE>
QUORUM AND VOTING
RECORD DATE; QUORUM
The Board has fixed the close of business on April 26, 1999 as the record
date (the "Record Date") for the Meeting. Only holders of shares of common
stock, par value $0.001 per share, of the Company (the "Common Stock") on the
close of business on the Record Date are entitled to notice of and to vote at
the Meeting and any adjournments and postponements thereof. The Common Stock is
the only class of voting stock of the Company currently issued and outstanding
which is entitled to vote at the Meeting. The holders of the Company's Preferred
Stock are entitled to notice of, but not entitled to vote such shares, at the
Meeting. On the Record Date, there were 7,501,747 shares of Common Stock
outstanding and entitled to vote at the Meeting. Each holder of Common Stock on
the Record Date is entitled to cast one vote per share at the Meeting on each
matter properly brought before the meeting, exercisable in person or by properly
executed proxy.
The presence of the holders of a majority of the outstanding shares of
Common Stock entitled to vote at the Meeting, in person or by properly executed
proxy, is necessary to constitute a quorum. A quorum is necessary for any action
to be taken at the Meeting. Shares of Common Stock represented at the Meeting in
person or by properly executed proxy but not voted will be included in the
calculation of the number of shares considered to be present at the Meeting for
purposes of determining the presence of a quorum.
VOTES REQUIRED FOR APPROVAL
With respect to "Proposal One--Election of Directors Proposal", assuming a
quorum is present, the plurality of the votes cast at the Meeting will be
sufficient to elect a director.
With respect to "Proposal Two--Business Trust Proposal", pursuant to the
Charter, the affirmative vote of a majority of all of the shares of Common Stock
entitled to vote at the Meeting is required.
With respect to "Proposal Three--Name Change Proposal", pursuant to the
Charter, the affirmative vote of a majority of all of the shares of Common Stock
entitled to vote at the Meeting is required.
With respect to other matters which properly come before the Meeting,
assuming a quorum is present, unless any statute or the Charter provides
otherwise, the majority of all the votes cast at the Meeting is sufficient to
approve any other matter which properly comes before the Meeting.
PROXIES; ABSTENTIONS; BROKER NON-VOTES
All shares of Common Stock represented by properly executed proxies received
prior to or at the Meeting and not revoked will be voted in accordance with the
instructions indicated in such proxies. If no instructions are given on a
properly returned proxy, your proxy will be voted "FOR" the Election of
Directors Proposal; "FOR" the Business Trust Proposal; "FOR" the Name Change
Proposal; and, to the extent permitted by applicable rules of the Securities and
Exchange Commission, in accordance with the judgment of the persons voting the
proxies upon such other matters as may come before the Meeting and any
adjournment or postponement thereof.
Abstentions and broker non-votes are each included in the determination of
the number of shares present at the Meeting for purposes of determining a
quorum. A broker "non-vote" occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power for that particular item and has not
received instructions from the beneficial owner. Brokers generally have
discretionary authority to vote on routine matters, but will not have
discretionary authority to vote on the Business Trust Proposal. Abstentions are
counted for determining the total number of votes cast with respect to a
proposal and thus, generally will be counted as a vote "AGAINST" that proposal.
Since a plurality of the votes cast is required for the Election of Directors
Proposal, abstentions will not be counted for purposes of the Election of
Directors Proposal. Broker
2
<PAGE>
non-votes are not counted in determining the total number of votes cast with
respect to the Election of Directors Proposal and, therefore, are counted
neither as a vote "FOR" nor "AGAINST" this proposal. The affirmative vote of a
majority of all shares of Common Stock entitled to vote at the Meeting is
required to approve the Business Trust Proposal and the Name Change Proposal.
Therefore, abstentions and broker non-votes will have the same effect as a vote
"AGAINST" such proposals.
Stockholders may revoke their proxies at any time prior to their use by
delivering written notice to the Secretary of the Company at the offices of the
Company set forth above, by presenting a duly executed proxy bearing a later
date or by voting in person at the Meeting, but mere attendance at the Meeting
will not revoke a proxy.
OTHER BUSINESS; ADJOURNMENTS
The Board is not currently aware of any business to be acted upon at the
Meeting other than as described herein. If other matters are properly brought
before the Meeting, or any adjournment or postponement thereof, the persons
appointed as proxies, to the extent permitted by applicable rules of the
Securities and Exchange Commission, will have discretion to vote or act thereon
according to their best judgment. Adjournments may be made for the purpose of,
among other things, soliciting additional proxies. Any adjournment may be made
from time to time by approval of the holders of a majority of the shares present
in person or by proxy at the Meeting (whether or not a quorum exists) without
further notice other than by an announcement made at the Meeting. The Company
does not currently intend to seek an adjournment of the Meeting.
3
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS PROPOSAL
The By-laws of the Company provide for a Board of Directors of no fewer than
three nor more than fifteen members, divided into three classes, with the exact
number of directors to be designated from time to time by resolution of the
Board. Currently, the Board consists of nine members. However, effective as of
the date of the Meeting, the Board will consist of seven members until otherwise
designated by the Board. The three classes have staggered terms of office so
that the terms of office of directors of only one class expires at each Annual
Meeting of Stockholders and the directors of that class are elected for three
year terms and until his or her successor is elected and duly qualified or until
his or her earlier death, resignation or removal. The following table lists the
name, class designation and age for each director:
<TABLE>
<CAPTION>
NAME CLASS AGE
- --------------------------------------------------------------------------------- ----- ---
<S> <C> <C>
Michael J. Falcone............................................................... I 63
Francesco Galesi................................................................. I 67
Jeffrey E. Kelter................................................................ I 44
Robert J. Branson................................................................ II 50
Timothy B. McBride............................................................... II 53
Evan Zucker...................................................................... II 33
David H. Lesser.................................................................. III 33
David F. McBride................................................................. III 52
James R. Mulvihill............................................................... III 34
</TABLE>
The term of office of the Class III directors will expire at the annual
meeting of stockholders to be held in 2000 and the term of office of the Class I
directors will expire at the annual meeting of stockholders to be held in 2001.
The term of office of the three Class II directors (Messrs. Branson, Timothy
McBride and Zucker) expires at the Meeting. The Board has determined that,
effective as of the Meeting, the Board will be reduced to seven members,
consisting of two Class I directors, two Class II directors and three Class III
directors. Set forth below are the nominees for Class II directors. Mr. Kelter
has resigned as a Class I director effective as of the Meeting in order to stand
for election as a Class II director. In the event that such nominees are unable
to serve or for good cause will not serve, the Proxies will be voted at the
Meeting for such other person as the Board may recommend.
NOMINEES FOR CLASS II DIRECTORS
MR. KELTER has been President of the Company since the transactions
consummated in December 1997 which transformed the Company into an industrial
and office real estate investment trust (the "1997 Reorganization"). He was
appointed Chief Executive Officer in December 1998. Mr. Kelter was elected as a
Class II Director in November 1997 as part of the 1997 Reorganization, and was
re-elected as a Class I Director at the 1998 Annual Meeting. He has over 18
years of experience in all phases of commercial real estate including
development, third-party management and construction. Upon graduating from
Trinity College in Hartford, Connecticut in 1976, Mr. Kelter was employed by The
Bankers Trust Corporation where he was an assistant treasurer in the Corporate
Finance division. In 1982, Mr. Kelter was employed by Vector Properties in
Tulsa, Oklahoma, where he was in charge of the development and finance of
several downtown Tulsa office building renovations. In 1982, Mr. Kelter founded
Penn Square Properties, Inc. in Philadelphia and served as chief executive
officer and president. Prior to the 1997 Reorganization, Mr. Kelter also served
on the Board of Directors of the Central Philadelphia Development Corporation
(CPDC), a non-profit urban planning commission.
MR. PLATT, 39, serves as Principal and President of JER International, with
primary responsibility for all J.E. Robert Companies' international investments
and operations. In addition to his international responsibilities, Mr. Platt
serves on the firm's Investment Committee. Prior to joining J.E. Robert
Companies in 1999, Mr. Platt served as a Managing Director of Morgan Stanley.
Mr. Platt was the founder of and had
4
<PAGE>
primary responsibility for managing the global real estate investment business
for Morgan Stanley Asset Management ("MSAM"). MSAM manages over $2 billion in
private real estate and listed real estate securities worldwide for
institutional and individual investors. Mr. Platt is a graduate of Williams
College and received an MBA from Harvard Business School. He is a member of the
advisory boards of the National Multi Housing Council, The Wharton Real Estate
Center and the MIT Center for Real Estate. He is also a member of The Urban Land
Institute, the National Association of Real Estate Investment Trusts, the
Pension Real Estate Association and the Association of Foreign Investors in Real
Estate.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF THE CLASS II DIRECTOR
NOMINEES.
DIRECTORS CONTINUING IN OFFICE
CLASS I DIRECTORS (TERM EXPIRES IN 2001)
MR. FALCONE has been a director of the Company since August 1998 as a result
of the acquisition by the Company of a portfolio of 11 office properties and one
industrial property in northern New York (the "Pioneer Portfolio) in which Mr.
Falcone had a significant interest. He founded the Pioneer Group in 1975, the
predecessor to the Pioneer Development Company, one of the largest developers of
commercial office properties in northern New York. He currently serves as
Chairman of Pioneer Development Company. Prior to the founding of the Pioneer
Group, he co-founded the Pyramid Companies, another real estate development
firm. Mr. Falcone is Chairman of the Board of Directors of First National Bank
of Rochester and serves on the Corporate Advisory counsel for the Syracuse
University School of Management. He is a graduate of Syracuse University.
MR. GALESI has been a director of the Company since May 1998 as a result of
the acquisition by the Company of a portfolio of properties in which Mr. Galesi
had a significant interest. Since 1969, he has been the Chairman and Chief
Executive Officer of the Galesi Group, which includes companies engaged in
distribution, manufacturing, real estate and telecommunications industries. He
is a director of MCI-WorldCom, Inc. Mr. Galesi was a director of ATC
Communications Group until ATC merged with WorldCom in 1992. Mr. Galesi also
serves as a director of Amnex, Inc. and Walden Residential Properties, Inc. Mr.
Galesi is a graduate of Princeton University.
CLASS III DIRECTORS (TERM EXPIRES IN 2000)
MR. LESSER has been a director of the Company since December 1997; he was
elected director as part of the 1997 Reorganization. He formed Hudson Bay
Partners, L.P. in May 1996 and is the President of its general partner. From
April 1995 to May 1996, he was the Senior Vice President for Business
Development of Crescent Real Estate Equities Company in charge of acquisition,
finance and strategic investments. From July 1988 to April 1995, Mr. Lesser
worked for Merrill Lynch & Co. in the Real Estate Investment Banking Division
where he was a Director. Mr. Lesser received a B.S. and M.B.A. from Cornell
University.
MR. DAVID F. MCBRIDE has been a director and the Chairman of the Board of
the Company since December 1997; he was elected director and Chairman of the
Board as part of the 1997 Reorganization. He served as Secretary of the Company
from January 1998 until December 1998. He has served as Chief Executive Officer
of McBride Enterprises, Inc. and affiliated family real estate, construction and
brokerage companies since 1987 and has been a director of McBride Enterprises,
Inc. and such enterprises since 1975. Mr. McBride served as a Director of
Midlantic Corporation, Midlantic National Bank and various subsidiaries for
thirteen years prior to their merger with PNC Bank in 1996. Prior to 1987, he
was a partner in the law firm of Harwood Lloyd from 1981 to 1987, a partner in
the law firm of Murphy, Ellis & McBride from 1977 to 1981, and an associate in
the firm of Robinson, Wayne & Greenberg from 1973 to 1977, all located in New
Jersey. He received B.A. and J.D. degrees from Georgetown University in 1969 and
1973, respectively. He remains Of Counsel to Harwood Lloyd and is a member of
the bars of New Jersey and New York.
5
<PAGE>
MR. MULVIHILL was Chairman of the Board of the Company from December 1993
until December 1997. Since 1990, Mr. Mulvihill has been actively investing in
the Denver real estate market. In 1993, he formalized his activities with the
formation of Black Creek Capital, LLC, a firm specializing in Denver real estate
investment, including residential and commercial land development, tax exempt
housing and golf course construction and ownership. From November 1992 to
November 1993, he was Senior Vice President of Finance and Acquisitions at Jerry
J. Moore Investments, an owner and manager of shopping centers in Texas. From
January 1992 to November 1992, Mr. Mulvihill was a Vice President of Chemical
Bank's Real Estate Investment Banking Group, where he managed the Real Estate
Owned Distribution Group. From 1986 to January 1992, Mr. Mulvihill was an
officer of Manufacturers Hanover Trust Company's Real Estate Banking and
Investment Banking Groups. Mr. Mulvihill graduated from Stanford University in
1986 with a B.A. in Political Science.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board held a total of 15 meetings in 1998. Each director attended at
least 75% of the aggregate of the total number of meetings held by the Board and
the total number of meetings held by all committees of the Board on which he
served other than Mr. Branson, who attended ten of the 15 Board meetings and
both of the meetings of the Audit Committee (as defined below). The Board of
Directors has an Audit Committee (the "Audit Committee"), a Compensation
Committee (the "Compensation Committee") and an Executive Committee (the
"Executive Committee"). The Board of Directors does not have a standing
nominating committee.
AUDIT COMMITTEE. The Audit Committee, currently comprised of Messrs.
Branson and Galesi, makes recommendations to the Board regarding the selection
of independent auditors, reviews the results and scope of the audit and other
services provided by the Company's independent auditors, reviews and evaluates
the Company's internal accounting controls and performs such other functions as
directed by the Board. The Audit Committee met two times during 1998. If Mr.
Platt is elected as a director at the Meeting, the Board intends to elect Mr.
Platt to replace Mr. Branson on the Audit Committee.
COMPENSATION COMMITTEE. The Compensation Committee, currently comprised of
Messrs. Timothy B. McBride and Mulvihill, administers the Company's stock
incentive plans, determines executive officer compensation and performs such
other duties as from time to time are designated by the Board. The Compensation
Committee met three times in 1998. The Board intends to elect David F. McBride
to replace Timothy B. McBride on the Compensation Committee.
EXECUTIVE COMMITTEE. The Executive Committee, currently comprised of
Messrs. Kelter, Lesser and David F. McBride, (i) supervises and maintains the
financial affairs of the Company, (ii) is authorized to enter into acquisitions,
dispositions and development projects not exceeding $25 million per transaction,
and to enter into financing arrangements not exceeding $18.75 million per
transaction and (iii) performs such other duties as from time to time are
designated by the Board. The Executive Committee met eight times in 1998.
DIRECTOR COMPENSATION
Directors who are also employees of the Company receive no compensation for
their service as directors. The Directors who are not also employees of the
Company (the "Outside Directors") received $15,000 for serving as a Director in
1998. Each Outside Director who served as a director for the entire year
received 1,035 shares of Common Stock in April 1999 in lieu of cash
compensation. Messrs. Falcone and Galesi received only 377 and 676 shares of
Common Stock, respectively, which represented prorated compensation for the
period of time each served as a director in 1998. The shares of Common Stock
were issued to the Outside Directors at $14.50 per share of Common Stock (the
closing price of the Common Stock on December 11, 1998, the date the Board
approved the issuance of the Common Stock in lieu of the cash compensation).
6
<PAGE>
The Company reimburses the directors for out of pocket expenses incurred in
connection with their activities on behalf of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, the Compensation Committee consisted of Messrs. Timothy McBride
and Mulvihill. Neither of them is currently an officer of the Company and, other
than as described below, neither of them has any other business relationship or
affiliation with the Company, except his service as a director. Mr. Mulvihill
was Chairman of the Board of the Company from December 1993 until December 1997.
SPIN-OFF. As part of the Company's 1997 Reorganization, the Company
organized and agreed to spin-off at a later date a subsidiary of the Company to
enable Messrs. Mulvihill and Zucker to pursue real estate investment
opportunities other than in the office and industrial sectors. The terms of the
spin-off have not yet been determined.
MANAGEMENT COMPANY. Through the Operating Partnership's 100% ownership of
the preferred stock of American Real Estate Management Inc. (the "Management
Company"), the Operating Partnership is entitled to receive 95% of the amounts
paid as dividends by the Management Company. The remaining amounts paid as
dividends by the Management Company are paid to the holders of common stock of
the Management Company. To date, the Management Company has not declared or paid
any dividends. McBride Hudson Bay, L.P. owns 30% of the common stock of the
Management Company. Mr. Timothy McBride has an interest in McBride Hudson Bay,
L.P. The Operating Partnership, in the normal course of business, advances funds
to the Management Company to fund working capital needs. The Operating
Partnership has a management agreement with the Management Company for property
management and leasing services. Under the terms of this Agreement the
Management Company receives a management fee based upon a percentage of rent for
all properties it manages. In 1998, the Management Company received $1,119,000
in management fees from the Company. In addition, the Management Company is
reimbursed for the salaries of certain employees involved in management and
operations of the Company's properties and earns leasing commissions on leases
brokered by its employees. In 1998, the Management Company received $294,000 in
such reimbursements and $84,000 in leasing commissions. The Company believes
that the management fee paid to the Management Company is based upon competitive
rates.
7
<PAGE>
PROPOSAL TWO
BUSINESS TRUST PROPOSAL
At a meeting of the Board held on April 21, 1999, the Board approved the
reorganization of the Company from a Maryland corporation to a Maryland
statutory real estate investment trust ("Trust"), subject to stockholder
approval. To effect this change to a Trust, the Company will merge with and into
a newly formed Trust, with the Trust as the surviving entity. The terms of the
proposed merger are more fully set forth in the Agreement and Plan of Merger
(the "Agreement and Plan of Merger"), a copy of which is attached as Exhibit A
to this Proxy Statement.
GENERAL
If the stockholders approve the Business Trust Proposal, the Company will
effect a reorganization in which the Company's business form is changed from a
corporation to a statutory real estate investment trust, which is an
organizational form permitted under Maryland law. To effect the change to a
Trust, the Company will merge, in accordance with the Agreement and Plan of
Merger, with and into a newly formed Trust, with the Trust as the surviving
entity. When the merger becomes effective:
(i) the Company will cease to exist;
(ii) the Trust will succeed to all of the business, assets and liabilities
of the Company;
(iii) the name of the surviving entity will be "Keystone Property Trust";
(iv) each outstanding share of Common Stock and Preferred Stock of the
Company automatically will be converted into one share of common stock
or preferred stock of the Trust, as the case may be, representing
beneficial interests in the Trust;
(v) each option or warrant to purchase a share of Common Stock of the
Company automatically will be converted into an option or warrant to
purchase a share of common stock of the Trust; and
(vi) the Company will request that the American Stock Exchange change the
Company's listing symbol from "REA" to "KPR."
Each share of common stock and preferred stock in the Trust will entitle the
holder thereof to the same voting rights to which such stockholder was entitled
immediately prior to the merger, and it will not be necessary for stockholders
of the Company to surrender or exchange their existing stock certificates for
new stock certificates of the Trust.
The Board does not believe that the change to a Trust will result in any
material change in the Company's business or operations, or otherwise have any
adverse affect on the Company's financial statements. The Company will continue
to maintain its executive offices at the same location it currently occupies.
It is anticipated that the change to a Trust will be effected after receipt
of stockholder approval at a time and date designated by the Board in its
discretion. The Agreement and Plan of Merger provides that the merger may be
abandoned by the Board of Directors after approval by the stockholders and prior
to the effective time of the merger. No federal or state regulatory requirements
must be complied with or approvals obtained in connection with the merger, other
than approval by the stockholders.
REASONS FOR THE PROPOSED CHANGE TO A TRUST
- The Board has determined that the change to a Trust would result in
substantial franchise tax savings for the Company in certain jurisdictions
in which the Company owns properties.
8
<PAGE>
- The Board does not believe that the change to a Trust will have any
material adverse effect on the Company's operations or that the change to
a Trust will materially increase the legal exposure of any of the
Company's officers, directors or stockholders.
A comparison of the rights of the Company's stockholders as stockholders of
a "corporate entity" and as stockholders of a statutory "real estate investment
trust" is set forth below.
COMPARISON OF CERTAIN RIGHTS OF STOCKHOLDERS AS STOCKHOLDERS OF A MARYLAND
"CORPORATION" AND AS STOCKHOLDERS OF A MARYLAND STATUTORY "REAL ESTATE
INVESTMENT TRUST"
As a result of the merger, the Company and the rights of its stockholders,
directors and officers will be governed by Maryland statutory law dealing with
Maryland statutory real estate investment trusts, by the Trust's Declaration of
Trust (the "Declaration of Trust") and by the Trust's bylaws (the "Trust
Bylaws") rather than by Maryland law dealing with corporations and the Charter
and Bylaws. A copy of the Declaration of Trust substantially in the form
expected to be filed with the State of Maryland is attached to this Proxy
Statement as Exhibit B. The Board reserves the right to make such further
modifications to the Declaration of Trust as it deems advisable to effect the
intent of the Business Trust Proposal. Copies of Trust Bylaws, the Company's
Charter and Bylaws are available for inspection at the principal executive
offices of the Company and will be sent to stockholders upon request.
The following discussion of the material similarities and differences to the
Company and its stockholders, directors and officers resulting from the change
to a Trust is not intended to be complete and is qualified in its entirety by
reference to Exhibit B to this Proxy Statement and applicable Maryland law as it
applies to corporations and Maryland statutory real estate investment trusts.
Stockholders should be aware that Maryland law (including statutory law and
common law) governing Maryland statutory real estate investment trusts is less
developed than Maryland law governing corporations. As a result, there may be
certain matters as to which the Maryland law governing Maryland statutory real
estate investment trusts is not settled and as to which the specific effects on
the rights and obligations of the stockholders, trustees and officers of the
Trust cannot be definitively determined at this time. Nonetheless, for the
reasons set forth above and in light of the known material similarities and
differences, the Board believes that the merger is in the best interests of the
Company's stockholders and recommends its approval.
RESTRICTIONS ON INVESTMENT. A Maryland statutory real estate investment
trust, unlike a corporate entity, must hold, either directly or through other
entities, at least seventy-five percent (75%) of the value of its assets in real
estate assets, mortgages or mortgage related securities, government securities,
cash and cash equivalent items, including high grade, short-term securities and
receivables. The Company, as it is currently organized, is not subject to such a
restriction, but based upon the current allocations of the Company's assets, the
Board does not believe that this restriction on investment will materially
affect the Company or its operations.
CAPITAL STOCK. Both the Charter and the Declaration of Trust authorize the
same number of shares of capital stock and designate the same number of shares
as common stock, excess stock and preferred stock, except that in the case of a
"trust" the terms "common stock," "excess stock" and "preferred stock" refer to
specified beneficial interests in the trust. Both the Charter and the
Declaration of Trust permit the Board to issue shares of preferred stock from
time to time and in one or more classes or series, to specify the number of
shares of such series and to determine the applicable designations, preferences,
conversion and other rights, voting powers, restrictions, rights and limitations
as to dividends, qualifications or terms and conditions of redemption, within
the limits established by law from time to time. Also, under each of the Charter
and the Declaration of Trust, the Board may reclassify any unissued shares of
capital stock as either common stock, excess stock or preferred stock without
further action by the stockholders.
INDEMNIFICATION OF DIRECTORS/TRUSTEES, OFFICERS, EMPLOYEES AND
AGENTS. Under Maryland law, a Maryland statutory real estate investment trust
has the power to indemnify or advance expenses to trustees,
9
<PAGE>
officers, employees and agents of the Maryland statutory real estate investment
trusts to the same extent as is permitted under the Maryland General Corporation
Law (the "MGCL") with respect to a corporation.
LIABILITIES OF DIRECTORS/TRUSTEES AND STOCKHOLDERS. Under the MGCL, a
director of a corporation is generally immune from liability to the Company for
such director's actions so long as the director acts in good faith, with care
and in a manner the director believes to be in the best interests of such
corporation. Stockholders of the Company generally are not obligated to the
Company or its creditors under the MGCL with respect to stock owned by the
stockholders, except to the extent that the subscription price of such stock has
not been paid or liability is imposed under other provisions of the MGCL. In a
Maryland statutory real estate investment trust, the stockholders and trustees
are not personally liable for the obligations of the Maryland statutory real
estate investment trust except in the case of bad faith, willful misfeasance,
gross negligence or, in the case of a trustee, reckless disregard of the
trustee's duties. The declaration of trust of a Maryland statutory real estate
investment trust may include any provision expanding or limiting the liability
of its trustees and officers to the trust or its stockholders for money damages.
In addition, the declaration of trust may include provisions limiting the
liability of its trustees, officers, employees and agents so that no person
shall be liable to the Maryland statutory real estate investment trust or to any
stockholder for money damages except for the liability of a trustee or officer
resulting from (i) acts or omissions involving active or deliberate dishonesty
established by final judgment or (ii) an improper benefit or profit in money,
property or services. The Declaration of Trust includes such a provision
limiting the liability of the Trust's trustees, officers, employees and agents.
FEDERAL TAX CONSEQUENCES
The following material is based on discussions with counsel. No opinion of
counsel has been obtained. Stockholders are advised to consult with their own
tax advisors for more detailed information relating to their individual tax
circumstances.
The merger will constitute a reorganization under Section 368(a)(1)(F) of
the Internal Revenue Code. For Federal income tax purposes, no gain or loss will
be recognized by the stockholders of the Company on the automatic conversion of
their shares of the Company into shares of the Trust as a result of the merger.
Each stockholder will have a basis in shares of the Trust equal to the basis in
the stockholder's shares of the Company immediately prior to the effective date
of the merger and the stockholder's holding period of shares of the Trust will
include the period during which the stockholder held the corresponding shares of
the Company, provided that such shares were held by the stockholder as a capital
asset on the effective date of the merger. No gain or loss will be recognized by
the Company or by the Trust as a result of the merger.
Each stockholder is advised to consult with his or her attorney or tax
advisor as to the Federal, state or local tax consequences of the proposed
merger in view of his or her individual circumstances.
RIGHTS OF DISSENTING STOCKHOLDERS
Section 3-202 of the MGCL provides that stockholders of a Maryland
corporation do not have appraisal rights when the stock of the corporation is
listed on a national securities exchange on the record date for determining
stockholders entitled to vote on the transaction to which the stockholder
objects.
VOTE REQUIRED
The affirmative vote of a majority of the outstanding shares of the shares
of Common Stock entitled to be voted at the Meeting will be required to approve
this proposal.
THE BOARD RECOMMENDS A VOTE FOR THE BUSINESS TRUST PROPOSAL.
10
<PAGE>
PROPOSAL THREE
NAME CHANGE PROPOSAL
The Board has approved, and deems it advisable that the Company's
stockholders approve and adopt, an amendment to the Charter to change the
Company's name from "American Real Estate Investment Corporation" to "Keystone
Property Trust Corp." if the Business Trust Proposal is not approved. If the
Business Trust Proposal is approved, the Company's name automatically will be
changed to "Keystone Property Trust". Under the Maryland General Corporation
Law, a change in corporate name requires an amendment to a corporation's
articles of incorporation. Pursuant to the Charter, an amendment to the Charter
must be approved by the affirmative vote of a majority of all the shares of
Common Stock entitled to vote at the Meeting.
The Board believes that changing the name of the Company is an important
step in the Company's transition from a multi-family residential real estate
investment trust into an industrial and office real estate investment trust.
The Board believes that the adoption of the proposed amendment to the
Charter is advisable and in the best interests of the Company and its
shareholders if the Restructuring Proposal is not approved. Accordingly, the
Board is proposing that Article 1 of the Charter be amended to change the name
of the Company to "Keystone Property Trust Corp. if the Restructuring Proposal
is not approved.
The full text of Article 1 of the Charter, is proposed to be amended as
follows:
"The name of the corporation is: Keystone Property Trust Corp."
If approved, the Amendment would become effective upon filing with the
Secretary of State of the State of Maryland, which would take place as soon as
practicable following the Meeting if the Restructuring Proposal is not approved.
Upon approval and implementation of the change in the Company's name from
"American Real Estate Investment Corporation" to "Keystone Property Trust Corp."
the Company will request that the American Stock Exchange change the Company's
listing symbol from "REA" to "KPR."
THE BOARD RECOMMENDS A VOTE FOR THE NAME CHANGE PROPOSAL.
11
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information regarding named executive
officers and other executives of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- ----------------------------------------------
<S> <C> <C>
David F. McBride(1) (2)................ 52 Chairman
Jeffrey E. Kelter(1) (2)............... 44 President and Chief Executive Officer
Timothy A. Peterson(2)................. 33 Executive Vice President; Chief Financial
Officer; Secretary
Stephen J. Butte(2).................... 39 Senior Vice President; Chief Investment
Officer
John B. Begier......................... 33 Senior Vice President--Acquisitions
Charles C. Lee......................... 35 Senior Vice President--Marketing and Leasing
Francis K. Ryan........................ 39 Senior Vice President--Property Operations
Timothy E. McKenna(2).................. 35 Vice President--Finance; Treasurer
Jennifer A. Pancoast................... 35 Vice President--Leasing
Jeffrey D. Anderson.................... 46 Vice President--Operations
</TABLE>
- ------------------------
(1) Denotes a member of the Board of Directors. See "Election of Directors
Proposal" for additional information.
(2) Denotes a named executive officer of the Company.
MR. PETERSON has served as Chief Financial Officer of the Company since
August 1998 and as Secretary since December 1998. Prior to joining the Company
in 1998, Mr. Peterson held a variety of positions with Post Properties, Inc.
including, most recently, Executive Vice President, Finance. While at Post
Properties, Inc., which he joined in 1989, Mr. Peterson managed all capital
markets activities, maintained all rating agency relationships and oversaw
accounting, budgeting and financial reporting functions. Mr. Peterson is a
Certified Public Accountant, is a member of the National Association of Real
Estate Investment Trusts and currently serves as Co-Chairman of its Accounting
Committee and Adjunct member of the Best Financial Practices Task Force. He is a
member of the Tax Policy Advisory Board of the National Realty Committee and the
University of Florida Real Estate Advisory Board.
MR. BUTTE has served as Senior Vice President and Chief Investment Officer
of the Company with primary responsibility for acquisition due diligence and
financing since December 1997. From 1988 to December 1997, Mr. Butte worked at
Penn Square Properties, Inc. Prior to joining Penn Square Properties, Inc., he
spent five years in public accounting as a manager in the audit department of
Asher & Company, specializing in providing financial and accounting services to
companies in the real estate industry. Mr. Butte is a Certified Public
Accountant.
MR. BEGIER has served as Senior Vice President of the Company since December
1997 with primary responsibility for the Company's acquisition activities. Mr.
Begier joined Penn Square Properties, Inc. in 1995 and worked there until
December 1997. Prior to working for Penn Square Properties, Inc., he worked for
eight years as a real estate broker with the Pennsylvania office of Cushman &
Wakefield where he was responsible for leasing, sales and acquisition of
commercial and industrial properties.
MR. LEE has served as Senior Vice President of the Company since March 1998
with primary responsibility for the Company's leasing and marketing activities.
From September 1997 until March 1998, he was the regional leasing director for
the Philadelphia region of Equity Office Properties. Mr. Lee was with Penn
Square Properties, Inc. from 1987 to September 1997 where he was responsible for
leasing and marketing activities for various commercial properties. Prior to
working for Penn Square Properties, Inc. he was an
12
<PAGE>
Assistant Portfolio Manager in the Private Banking Division of the Boston Safe
Deposit and Trust Company.
MR. RYAN has served as Senior Vice President of the Company since December
1997 with primary responsibility for the Company's property operations and
management activities. Mr. Ryan worked at Penn Square Properties, Inc. from 1991
to December 1997 where he was responsible for the management of various
commercial offices and industrial properties. Prior to working for Penn Square
Properties, Inc. Mr. Ryan worked for four years as a senior property manager for
Cushman & Wakefield's Pennsylvania office and as a project manager for American
Building Maintenance from 1984 through 1986. Mr. Ryan is certified as a Real
Property Administrator by the Building Owners and Managers Association.
MR. MCKENNA has served as Vice President and Treasurer of the Company since
January 1998. Mr. McKenna was previously employed as a Senior Manager in the
Real Estate Services Group of Arthur Andersen LLP's Philadelphia office. He has
over 12 years experience providing consulting and accounting services to
publicly and privately-owned real estate companies; over 11 years of his
experience was obtained as an employee of Arthur Andersen LLP. Mr. McKenna is a
Certified Public Accountant.
MS. PANCOAST has served as Vice President of the Company since December 1997
with responsibility for the Company's leasing activities related to office
properties. Prior to rejoining Penn Square Properties, Inc. in October 1995, she
spent two years with Bell Atlantic Properties, the real estate subsidiary of
Bell Atlantic, where she was director of property management for over 600,000
square feet of properties located in the Philadelphia region. From September
1990 until September 1993 she was responsible for leasing over 600,000 square
feet of office properties located in Philadelphia for Penn Square Properties,
Inc. From September 1986 until September 1990, she worked as a real estate
broker for The Flynn Company, a manager and developer of office and industrial
properties in the Philadelphia region.
MR. ANDERSON has served as Vice President of the Company since August 1998
with primary responsibility for the operations and management of the properties
located in New York State. Mr. Anderson was previously employed by Pioneer
Management Services Company, an affiliate of Pioneer Development, LLC since
March 1996 as director of property management where he managed over five million
square feet of office and retail properties located in the northeastern region
of the United States. From March 1993 until March 1996, he was vice president of
property management for United Properties, Inc. a developer and manager of
commercial properties located in Minneapolis, Minnesota. Prior to March 1993, he
was director of property management for the Trammell Crow Company's Milwaukee,
Wisconsin office for three years and managed over six million square feet of
office and industrial properties. He has over twenty years of property
management experience.
13
<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth, for the three years ended December 31, 1998,
the compensation earned by or paid to each of the Company's chief executive
officers who served in such capacity during such fiscal year, as well as the
four (4) most highly compensated executive officers of the Company serving as an
executive officer of the Company on December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ----------------------
------------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION(1) YEAR SALARY BONUS COMPENSATION AWARDS(2) OPTIONS(#) COMPENSATION
- ----------------------------------- ---- -------- ------- ------------ --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jeffrey E. Kelter.................. 1998 $200,000 $ -- $ 9,600(3) 7,586 -- $ --
President and Chief 1997 $ 7,692 $ -- $ -- -- -- $ --
Executive Officer(1) 1996 $ -- $ -- $ -- -- -- $ --
David F. McBride................... 1998 $200,000 $ -- $ 9,600(3) 3,793 -- $ --
Chairman(1) 1997 $ 7,692 $ -- $ -- -- -- $ --
1996 $ -- $ -- $ -- -- -- $ --
John B. Begier..................... 1998 $125,000 $ -- $205,257(4) 7,112 102,500 $ --
Senior Vice President(5) 1997 $ 1,538 $ -- $ -- -- -- $ --
1996 $ -- $ -- $ -- -- -- $ --
Charles C. Lee..................... 1998 $125,000 $ -- $126,486(6) 3,793 87,500 $ --
Senior Vice President 1997 $ -- $ -- $ -- -- -- $ --
1996 $ -- $ -- $ -- -- -- $ --
Stephen J. Butte................... 1998 $125,000 $ -- $ 5,000(7) 3,793 87,500 $ --
Senior Vice President(5) 1997 $ 4,038 $ -- $ -- -- -- $ --
1996 $ -- $ -- $ -- -- -- $ --
</TABLE>
- ------------------------------
(1) Mr. Kelter and Mr. McBride became executive officers of the Company on
December 12, 1997 as part of the 1997 Reorganization. Mr. Kelter was named
as Chief Executive Officer in December 1998.
(2) Restricted stock awards were granted on December 11, 1998 at $14.50 per
share. These awards vest over a two-year period from the grant date.
(3) Consists of automobile allowance paid to these executives in 1998.
(4) Comprised of (i) $200,257 paid for leasing and property brokerage services
provided by Mr. Begier to the Management Company, and (ii) $5,000 automobile
allowance. Does not include $567,900 paid by the Management Company to Mr.
Begier in 1998 for commissions earned by Mr. Begier as an employee of Penn
Square Properties, Inc. prior to becoming an executive officer of the
Company as part of the 1997 Reorganization.
(5) Mr. Begier and Mr. Butte became executive officers of the Company on
December 12, 1997 as part of the 1997 Reorganization.
(6) Comprised of (i) $121,486 paid for leasing and brokerage services provided
by Mr. Lee to the Management Company and (ii) $5,000 automobile allowance.
(7) Mr. Butte received a $5,000 automobile allowance. Does not include $86,930
paid by the Management Company to Mr. Butte in 1998 for commissions earned
by Mr. Butte as an employee of Penn Square Properties, Inc. prior to
becoming an executive officer of the Company as part of the 1997
Reorganization.
14
<PAGE>
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1998
The following table provides information with respect to the above named
executive officers regarding options or stock appreciation rights ("SARs")
granted to such persons during the Company's year ended December 31, 1998. No
SARs were granted in 1998. Options granted in 1998 vest over either a two, three
or five year period and have an exercise price equal to the market price on the
date of the grant.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUES AT
ASSUMED ANNUAL RATE
NUMBER OF PERCENT OF TOTAL OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR VESTING FOR OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE PERIOD IN EXPIRATION --------------------
NAME GRANTED FISCAL YEAR PER SHARE YEARS DATE 5% 10%
- ----------------------------------- ------------ ---------------- ----------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
David F. McBride................... -- -- -- -- -- -- --
Jeffrey E. Kelter.................. -- -- -- -- -- -- --
John B. Begier..................... 37,500 6.2% $16.50 5(1) 1/9/08 $389,129 $ 986,128
65,000 10.8% $14.50 3(2) 12/11/08 $592,733 $1,502,102
Charles C. Lee..................... 37,500 6.2% $16.50 5(1) 1/9/08 $389,129 $ 989,128
50,000 8.3% $14.50 3(2) 12/11/08 $455,949 $1,155,463
Stephen J. Butte................... 37,500 6.2% $16.50 5(1) 1/9/08 $389,129 $ 986,128
50,000 8.3% $14.50 3(2) 12/11/08 $455,949 $1,155,463
</TABLE>
- ------------------------
(1) These options vest on the following schedule:
<TABLE>
<S> <C>
Year 1 through Year 2 0%
Year 3 20%
Year 4 40%
Year 5 40%
</TABLE>
(2) These options vest one-third each year over a three-year period.
During the year ended December 31, 1998, none of the executive officers
exercised any stock options or SARs.
EMPLOYMENT AGREEMENTS
On December 12, 1997, the Company entered into employment agreements with
each of David F. McBride and Jeffrey E. Kelter to serve as the Chairman and
President of the Company, respectively. The initial term of each such agreement
is for three years with successive one-year renewal terms thereafter until
terminated. Each agreement provides for an annual base salary of $200,000
together with such additional compensation as may be awarded from time to time
by the Board and further provides that each of Messrs. McBride and Kelter shall
devote substantially all of their working time to the Company's business
activities. In February 1999, the Compensation Committee approved an increase in
Mr. Kelter's annual compensation to $250,000. In the event of the death,
disability or termination of the employment without cause or the involuntary
termination of such executive's employment, the executive is entitled to receive
a lump sum payment equal to the executive's base salary plus the prior year's
bonus times the longer of one year or the remainder of the term of the
employment agreement. Each agreement also
15
<PAGE>
restricts such executive from engaging in activities in competition with the
Company in the ownership, development, construction, management or operation of
office or industrial properties (except that David F. McBride may continue to be
a director of certain McBride-family real estate related companies) during his
term of employment and during the period during which he serves as a director of
the Company and ending one year after the later of the termination of his
employment and the date he ceases to be a director of the Company.
On August 15, 1998, the Company entered into an employment agreement with
Timothy A. Peterson to serve as the Senior Vice President and Chief Financial
Officer of the Company for an initial term of two years with successive one-year
renewal terms thereafter until terminated. The agreement provides for an annual
base salary of $200,000 together with such additional compensation as may be
awarded from time to time by the Board, including a minimum bonus of $100,000 in
the second year of the term, and further provides that Mr. Peterson receive
stock options with respect to 50,000 shares of Common Stock. Under the
agreement, the Company has loaned $392,600 to Mr. Peterson on an interest-free,
recourse basis to enable him to purchase 25,000 shares of Common Stock of which,
$33,333.33 will be forgiven on each of the first three anniversaries of his
employment, if he is employed by the Company on such date. The Company has also
agreed to reimburse Mr. Peterson for certain costs he incurred in connection
with his relocation. In the event of the death or disability of Mr. Peterson,
the stock options initially granted to him under the employment agreement would
become immediately vested. In the event of a termination of Mr. Peterson's
employment without cause or for good reason or an involuntary termination of
such employment, Mr. Peterson is entitled to receive a lump sum payment equal to
his base salary plus the prior year's bonus, or, if greater, $100,000. In
addition, upon such a termination, the stock options initially granted under the
agreement become immediately vested and $300,000 of the loan made, to Mr.
Peterson by the Company to permit his purchase of Company stock will be
forgiven. The agreement provides that, in the event that Mr. Peterson's
employment with the Company terminates for any reason other than death,
disability or cause within the one-year period to follow a change in control (as
defined in the agreement) of the Company, Mr. Peterson is entitled to receive a
lump sum equal to two times the sum of his base salary and the prior year's
bonus, all outstanding unvested options held by Mr. Peterson will become vested
and exercisable, and the loan described above will be forgiven. The agreement
also restricts Mr. Peterson from engaging in activities in competition with the
Company in the ownership, development, construction, management or operation of
office or industrial properties during his term of employment and during the
period during which he serves as a director of the Company and ending one year
after the later of the termination of his employment and the date he ceases to
be a director of the Company.
16
<PAGE>
BOARD OF DIRECTORS COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED, INCLUDING PREVIOUS FILINGS THAT MIGHT INCORPORATE
FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THIS REPORT
AND THE PERFORMANCE GRAPH FOLLOWING IT SHALL NOT BE INCORPORATED BY REFERENCE
INTO ANY SUCH FILINGS.
THE COMPENSATION COMMITTEE
The Compensation Committee of the Board was formed in January 1998 and is
composed of two of the Company's independent outside directors, Messrs. Timothy
McBride and Mulvihill. The Compensation Committee is responsible for
administering the policies which govern the Company's executive compensation.
OBJECTIVES OF EXECUTIVE COMPENSATION
The Compensation Committee strives to provide the proper incentives to
management to maximize the Company's performance in order to serve the best
interests of its stockholders. As a result, the Compensation Committee focuses
on incentive awards, such as stock option grants, restricted stock awards and
deferred income awards (as described below), as opposed to large salary
increases, to emphasize performance related incentive compensation. In
establishing compensation for executive officers, the Compensation Committee
considers industry data, the recommendations of third-party consultants and the
Company's financial performance and industry position.
INCENTIVE REWARDS
The Compensation Committee currently grants stock option and other incentive
awards to the executive officers under the Company's Amended and Restated 1993
Omnibus Incentive Plan (the "Omnibus Plan"). In addition, the Company has
granted certain interest-free loans to certain executive officers of the
Company, and has agreed to guarantee loans obtained by certain executive
officers of the Company, in order for these executive officers to acquire the
Company's Common Stock. Such loans and guarantees are granted to provide
incentive to improve stockholder value over the long-term and to encourage and
facilitate executive stock ownership. Stock options are granted at the market
price of the Common Stock at the date of grant to ensure that executive officers
can only be rewarded for appreciation in the price of the Common Stock when the
Company's stockholders are similarly benefited. The Compensation Committee
determines those executive officers who will receive incentive award grants and
the size of such awards.
CHAIRMAN AND CEO COMPENSATION
The salary paid to David F. McBride (Chairman) and Jeffrey E. Kelter
(President and Chief Executive Officer) in 1998 was set by their respective
employment agreements. The incentive awards, which consisted of grants of
restricted stock, awarded for 1998 performance to Messrs. David McBride and
Kelter were based on a number of factors, including: (i) the significant growth
in the Company's funds from operations per share, property portfolio, and market
capitalization during 1998; (ii) compensation levels of chief executive officers
of other office and industrial real estate investment trusts, based in part on a
peer group survey prepared by Arthur Andersen LLP; and (iii) the impact of the
compensation arrangements on the Company's earnings and funds from operations.
The Compensation Committee did not separately rank the importance of each of
those factors and did not follow a formula in arriving at the compensation
arrangements that were approved.
17
<PAGE>
EXECUTIVE OFFICER COMPENSATION
In determining the salary and incentive awards granted to the other
executive officers, the Compensation Committee considered the same factors that
it considered in awarding compensation and incentive awards to Messrs. David F.
McBride and Kelter, and also considered the recommendations of Messrs. David F.
McBride and Kelter.
ANNUAL REVIEW
The Compensation Committee annually evaluates the performance of the
President and Chief Executive Officer and the other executive officers of the
Company, as well as the Company's performance. In setting the salary levels for
compensation, the Compensation Committee compares the total annual compensation
of the President and the other executive officers to the executive compensation
of executive officers of other publicly-held REITs. Personal performance can
include such qualitative factors as organizational and management development
exhibited from year to year. Generally the Compensation Committee will meet
prior to the beginning of each fiscal year to establish base salary and
performance targets for the upcoming year and will meet again at the beginning
of each year to review performance and approve incentive awards for the
preceding fiscal year.
$1 MILLION LIMIT ON DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits the
deductibility on the Company's tax return of compensation over $1 million to any
of the named executive officers of the Company unless, in general, the
compensation meets certain "performance-based" requirements. The Company does
not expect any compensation in excess of the Section 162(m) limitations to be
paid in the foreseeable future, and has generally not endeavoured to structure
compensation to be eligible for an exception under Section 162(m). However,
option grants under the Omnibus Plan have generally been structured with the
intent that such grants be qualified for an exemption from Section 162(m).
The Compensation Committee believes that it has designed and implemented a
compensation structure which provides appropriate awards and incentives for the
Company's executive officers as they work to sustain and improve the Company's
overall performance.
Submitted by the Compensation Committee:
Timothy B. McBride
James R. Mulvihill
18
<PAGE>
SHARE PRICE PERFORMANCE GRAPH
The Company's Common Stock first commenced public trading on November 10,
1993 in connection with the Company's underwritten initial public offering of
common stock. The graph set forth below compares, for the period of November 10,
1993 through December 31, 1998, the cumulative total return to holders of Common
Stock with the cumulative total return of the Standard & Poor's 500 Stock Index
("S&P 500") and the NAREIT Equity REIT Total Return Index ("NAREIT Index").
Total return values for the S&P 500, the NAREIT Index and the Common Stock were
calculated based on cumulative total return assuming the investment of $100 on
November 10, 1993, and assuming reinvestment of dividends. The stockholder
return shown on the graph below is not necessarily indicative of future
performance.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
AMERICAN REAL ESTATE INVESTMENT CORPORATION COMMON STOCK,
S&P 500 AND THE NAREIT INDEX*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AMERICAN REAL ESTATE S&P 500 NAREIT
<S> <C> <C> <C>
Investment Corporation Index Equity (IN %)
Dec-93 100.00 100.00 100.00
Jan-94 109.55 103.35 102.91
Feb-94 102.82 100.56 107.38
Mar-94 96.18 96.19 103.40
Apr-94 97.84 97.44 105.16
May-94 92.23 99.02 107.50
Jun-94 88.82 96.58 105.31
Jul-94 99.07 99.77 104.79
Aug-94 103.56 103.84 105.11
Sep-94 100.05 101.33 103.15
Oct-94 107.96 103.65 99.58
Nov-94 102.93 99.85 96.15
Dec-94 99.32 101.31 103.17
Jan-95 99.32 103.94 100.92
Feb-95 104.10 107.97 103.41
Mar-95 105.96 111.17 103.00
Apr-95 105.96 114.41 102.97
May-95 105.96 118.92 107.35
Jun-95 117.41 121.72 109.05
Jul-95 127.90 125.77 110.93
Aug-95 122.17 126.11 112.26
Sep-95 125.99 131.40 114.19
Oct-95 129.81 130.94 111.74
Nov-95 121.23 136.70 112.76
Dec-95 123.47 139.23 118.92
Jan-96 129.35 143.97 120.88
Feb-96 135.23 145.30 122.29
Mar-96 134.62 146.70 121.63
Apr-96 138.64 148.86 122.24
May-96 138.64 152.70 125.40
Jun-96 140.05 153.28 127.04
Jul-96 133.87 146.51 128.00
Aug-96 135.93 149.60 133.03
Sep-96 131.22 158.02 135.35
Oct-96 134.40 162.38 139.37
Nov-96 137.57 174.65 145.72
Dec-96 151.79 171.19 160.86
Jan-97 160.46 181.89 162.66
Feb-97 164.80 183.31 162.33
Mar-97 164.21 175.78 161.98
Apr-97 166.43 186.28 157.52
May-97 161.99 197.62 162.16
Jun-97 174.72 206.47 170.04
Jul-97 178.13 222.90 175.29
Aug-97 218.98 210.42 174.87
Sep-97 292.15 221.94 190.13
Oct-97 266.85 214.53 184.99
Nov-97 277.21 224.46 188.99
Dec-97 358.31 228.32 193.45
Jan-98 317.61 230.84 192.43
Feb-98 328.07 247.49 189.16
Mar-98 376.37 260.16 192.55
Apr-98 374.02 262.80 186.28
May-98 369.90 258.28 184.97
Jun-98 328.75 268.77 183.72
Jul-98 328.75 265.91 171.79
Aug-98 285.89 227.46 155.58
Sep-98 279.02 242.03 164.39
Oct-98 286.28 261.71 161.35
Nov-98 259.88 277.57 163.72
Dec-98 314.33 293.57 159.59
</TABLE>
- ------------------------
* The NAREIT Index (consisting of 210 REITs with a total market capitalization
of approximately $138.3 billion at December 31, 1998) is maintained by the
National Association of Real Estate Investment Trusts, Inc., is published
monthly, and is based on the last closing prices of the preceding month.
19
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of April 26, 1999, information with
respect to each person (including any "group" as that term is used in Section
13(d)(3) of the Exchange Act of 1934, as amended) who is known to the Company to
be the beneficial owner of more than 5% of the Company's Common Stock as well as
shares of Common Stock beneficially owned by all directors and executive
officers of the Company and all directors and executive officers of the Company
as a group. The table also includes the number of OP Units owned, as of April
26, 1999, by such persons. Any owner of OP Units may convert its OP Units into
shares of Common Stock or, at the election of the Company, the cash equivalent
thereof (the "Conversion Right"). As of April 26, 1999, the Company had
7,501,747 shares of Common Stock outstanding, not including 6,988,542 shares
reserved for issuance upon conversion of OP Units, 300,000 shares reserved for
issuance upon conversion of Convertible Preferred Units, 800,000 shares reserved
for issuance upon conversion of Series A Convertible Preferred Stock, par value
$.001 per share (the "Preferred Stock") and 1,314,250 shares reserved for
issuance upon conversion of OP Unit and Common Stock warrants, and other
outstanding options.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL BENEFICIAL PERCENT OF
HOLDER OR IDENTITY OF GROUP OWNER(1) CLASS OWNERSHIP OF OP UNITS
- -------------------------------------------- ------------------ --------------- ---------------------
<S> <C> <C> <C>
Jeffrey E. Kelter........................... 721,222 6.31% 613,636(2)
c/o American Real Estate
Investment Corporation
620 W. Germantown Pike, Suite 200
Plymouth Meeting, PA 19462
Robert J. Branson........................... 78,307(3) * 22,727(3)
Linden & Branson
1133 Connecticut Avenue NW
Suite 902
Washington, DC 20036
James R. Mulvihill.......................... 363,612(4) 3.18% 216,402(4)
5700 Piedmont
Cherry Hills Village, CO 80111
David H. Lesser............................. 1,948,087(5) 17.05% 181,818(5)
c/o Hudson Bay Partners II, L.P.
237 Park Avenue, Suite 900
New York, NY 10017
David F. McBride............................ 435,189(6) 3.81% 299,442(6)
c/o American Real Estate
Investment Corporation
620 W. Germantown Pike, Suite 200
Plymouth Meeting, PA 19462
Francesco Galesi............................ 830,471(7) 7.27% 829,795(7)
c/o Galesi Management Corporation
100 State Street
Albany, NY 12207-1800
Michael J. Falcone.......................... 377 * 122,948(8)
c/o Pioneer Development Company
250 South Clinton Street
Syracuse, NY 13202-1258
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL BENEFICIAL PERCENT OF
HOLDER OR IDENTITY OF GROUP OWNER(1) CLASS OWNERSHIP OF OP UNITS
- -------------------------------------------- ------------------ --------------- ---------------------
<S> <C> <C> <C>
Timothy B. McBride.......................... 398,556 3.49% 221,137(9)
4939 Quebec Street Northwest
Washington, DC 20016
Evan Zucker................................. 127,636(10) 1.12% 29,391(10)
1670 Broadway--Suite 3350
Denver, CO 80202
Timothy A. Peterson......................... 28,793 * 0
c/o American Real Estate
Investment Corporation
620 W. Germantown Pike, Suite 200
Plymouth Meeting, PA 19462
Stephen J. Butte............................ 15,293 * 0
c/o American Real Estate
Investment Corporation
620 W. Germantown Pike, Suite 200
Plymouth Meeting, PA 19462
Timothy E. McKenna.......................... 6,138 * 0
c/o American Real Estate
Investment Corporation
620 W. Germantown Pike, Suite 200
Plymouth Meeting, PA 19462
Hudson Bay Partners II, L.P. ............... 1,936,363(5) 16.95% 181,818(5)
237 Park Avenue, Suite 900
New York, NY 10017
CRA Real Estate Securities, L.P. ........... 703,296(11) 6.15% 0
259 Radnor-Chester Road
--Suite 200
Radnor, PA 19087
New York State Common Retirement Fund....... 720,743 6.31% 0
633 Third Avenue, 31st Floor
New York, NY 10017
AEW Targeted Securities Fund, L.P. ......... 1,212,120(12) 10.61% 0
225 Franklin Street
Boston, MA 02109
Attn: AEW TSF, L.L.C.
All Officers and Directors as a group....... 4,953,681 43.35% 2,537,296
</TABLE>
- ------------------------
* Less than 1%.
(1) Includes shares issuable on exercise of the Conversion Right if such right
is exercisable within 60 days of April 26, 1999.
(2) Includes 613,636 shares of Common Stock issuable on exercise of the
Conversion Right; which number includes a warrant to purchase 250,000 OP
Units held by Mr. Kelter.
21
<PAGE>
(3) Includes 34,545 shares of Common Stock held by a limited liability company
in which Mr. Branson is a principal owner, 10,909 shares of common stock
held through a limited partnership interest in McBride Branson Associates
and 22,727 shares of Common Stock issuable on exercise of the Conversion
Right with respect to OP Units beneficially owned through a limited
partnership interest in McBride Hudson Bay, L.P.
(4) Includes 76,389 OP Units and 190 shares held by Mr. Mulvihill's wife, as to
which Mr. Mulvihill disclaims any beneficial interest. Includes 128,456 and
2,194 OP Units held by Mr. Mulvihill's parents and siblings, respectively,
and 57,359 shares directly and indirectly owned by Mr. Mulvihill's parents,
as to which Mr. Mulvihill disclaims any beneficial interest.
(5) Includes 300,000 shares of Common Stock issuable to Hudson Bay Partners II,
L.P. upon exercise of a stock purchase warrant at an exercise price of
$11.00 per share, which expires on December 12, 2004. Mr. Lesser is
President, sole director and sole shareholder of Hudson Bay Partners, Inc.,
the general partner of Hudson Bay Partners II, L.P., and, as a result of
such affiliation, may be deemed to have shared voting and dispositive power
over the 1,754,545 shares of Common Stock owned by Hudson Bay Partners II,
L.P.; however, Mr. Lesser expressly disclaims beneficial ownership of any
Common Stock not directly owned by him. Also includes 181,818 shares of
Common Stock issuable on exercise of the Conversion Right with respect to OP
Units beneficially owned by Hudson Bay through a limited partnership
interest in McBride Hudson Bay, L.P.
(6) Includes 1,031 shares of Common Stock owned by a limited liability
corporation in which Mr. McBride has an ownership interest and 101 shares of
Common Stock owned by a trust, in the name of Mr. McBride's deceased father,
for which Mr. McBride is a trustee. Also includes a warrant to purchase
125,000 OP Units held by Mr. McBride. Also includes 299,442 shares of Common
Stock issuable on exercise of the Conversion Right with respect to 294,572
OP Units beneficially owned through a limited partnership interest in
McBride Hudson Bay, L.P. and 4,870 OP Units owned by a trust, in the name of
Mr. McBride's deceased father, for which Mr. McBride is the sole trustee.
(7) Includes 829,795 shares of Common Stock issuable upon exercise of the
Conversion Right on such OP Units. All of Mr. Galesi's ownership is held
through various corporations in which Mr. Galesi owns a controlling
ownership interest.
(8) The OP Units are subject to a lock-up agreement contained in the Pioneer
Contribution Agreement prohibiting exercise of the Conversion Right on such
OP Units until after August 19, 1999. Includes 5,391 OP Units beneficially
owned through a limited partnership interest in Pioneer Partners I, L.P.
(9) Includes 11,364 shares of Common Stock held jointly by Mr. McBride and his
wife and 1,290 shares of Common Stock owned by a limited liability
corporation in which Mr. McBride has an ownership interest and 202 shares of
Common Stock owned by a trust, in the name of Mr. McBride's mother, for
which Mr. McBride is the sole trustee. Also includes 221,137 shares of
Common Stock issuable on exercise of the Conversion Right with respect to
211,977 OP Units beneficially owned through a limited partnership interest
in McBride Hudson Bay, L.P. and 9,160 OP Units owned by a trust, in the name
of Mr. McBride's mother, for which Mr. McBride is the sole trustee.
(10) Includes 29,391 shares of Common Stock issuable on exercise of the
Conversion Right; which number includes 1,027 of such OP Units held by Mr.
Zucker's parents and siblings, as to which Mr. Zucker disclaims beneficial
ownership.
(11) These shares of Common Stock are beneficially owned by accounts managed by
CRA Real Estate Securities, L.P. and CRA Real Estate Securities, L.P.
expressly disclaims beneficial ownership of any shares of Common Stock not
directly owned by it.
(12) Includes 1,212,120 shares of Common Stock issuable upon conversion of
800,000 shares of Preferred Stock which are beneficially owned by accounts
managed by AEW Targeted Securities Fund, L.P. AEW Targeted Securities Fund,
L.P. expressly disclaims beneficial ownership of any shares of Common Stock
or Preferred Stock not directly owned by it. These shares of Series A
Convertible Preferred Stock are convertible at $16.50 per share.
22
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ISSUANCE OF STOCK AND LOAN TO MR. KELTER. On April 21, 1999, the Company
issued 100,000 shares of Common Stock to Mr. Kelter in return for a promissory
note in the amount of $1.3 million. The purchase price of $13 per share
represented the market price of the Common Stock on the date of the grant by the
Compensation Committee. The note is an interest-free demand note which is
forgivable by the Company over a seven-year period. In addition, the loan will
be forgiven if Mr. Kelter is no longer employed by the Company after a change of
control of the Company. If Mr. Kelter's employment is terminated for any reason
other than a change of control, Mr. Kelter must repay the loan or surrender
shares of Common Stock to the Company (at a value of $13 per share) sufficient
to repay the outstanding principal balance of the Note. The Company granted
certain registration rights to Mr. Kelter.
EMPLOYMENT AGREEMENT. In connection with his employment as Chief Financial
Officer of the Company in August 1998, Mr. Peterson entered into an employment
agreement with the Company. As part of the conditions of his employment
agreement, the Company has loaned $392,600 to Mr. Peterson in order for him to
acquire 25,000 shares of the Company's common stock on an interest-free,
recourse basis and the Company has agreed to reimburse him for certain costs he
incurs in connection with his relocation.
EMPLOYEE LOAN GUARANTEES BY COMPANY. The Company has agreed to guarantee
loans obtained by certain executive officers of the Company in order for these
executive officers to acquire the Company's Common Stock. As of April 26, 1999,
the Company has guaranteed approximately $687,000 of such loans.
OP UNITS. On April 30, 1998, the Company, through the Operating
Partnership, issued 1,362,940 OP Units to the Galesi Group and its affiliates,
which includes Francesco Galesi, a director of the Company, as part of the
Company's acquisition of a ten building portfolio of office and industrial
facilities in Albany, New York (collectively, the "Galesi Portfolio"). The
purchase price of the Galesi Portfolio of approximately $58 million was funded
through the assumption of approximately $18.0 million in debt, $18.5 million
from our senior secured revolving credit facility and the issuance of the OP
Units. The sellers of the Galesi Portfolio were not affiliated with the Company
or the Operating Partnership prior to the transaction. The Company based its
determination of the purchase price of the Galesi Portfolio on the expected cash
flow, physical condition, location, competitive advantages, existing tenancies
and opportunities to retain and attract additional tenants. The purchase price
was determined through arm's length negotiation between the Company and the
sellers. Francesco Galesi became a director of the Company on May 5, 1998, as
part of the acquisition of the Galesi Portfolio.
On August 19, 1998, the Company, through the Operating Partnership, issued
1,170,893 OP Units to various entities affiliated with Pioneer Development
Company, LLC and Michael J. Falcone, a director of the Company, as part of the
Company's acquisition of the Pioneer Portfolio located in northern New York
State. The purchase price of the Pioneer Portfolio, including closing costs, was
approximately $87.6 million and was funded through the assumption of
approximately $5.5 million in debt, $51.0 million from the Company's senior
secured revolving credit facility, the issuance of the OP Units and the issuance
of 720,743 shares of Common Stock for an aggregate purchase price of $11.4
million to the New York State Common Retirement Fund as a partial repayment of
certain indebtedness encumbering certain properties in the Pioneer Portfolio. As
part of this transaction, the Company and the Operating Partnership also agreed
to acquire three additional office properties and were given an option to
acquire two additional properties. The sellers of the Pioneer Portfolio were not
affiliated with the Company or the Operating Partnership prior to acquisition of
the Pioneer Portfolio. The Company based its determination of the purchase price
of the Pioneer Portfolio on the expected cash flow, physical condition,
location, competitive advantages, existing tenancies and opportunities to retain
and attract additional tenants. The purchase price was determined by arm's
length negotiation between the Company and the sellers. Michael J. Falcone
became a director of the Company on August 19, 1998, as part of the acquisition
of the Pioneer Portfolio.
COMMON STOCK. On July 9, 1998, the Company sold in a private placement
1,092,051 shares of Common Stock for an aggregate purchase price of $18,018,841
($16.50 per share) to several institutional purchasers including 102,051 shares
of Common Stock which were sold to certain accounts managed by CRA Real Estate
Securities, L.P. (a beneficial owner of more than 5% of the Common Stock (a "5%
Holder")). The purchase price was determined through arm's length negotiation
between the Company
23
<PAGE>
and the purchasers. The purchase price will be adjusted on the earlier of the
first business day after the first anniversary of the closing or the first
business day after a the occurrence of certain events if the average price of
the Company's Common Stock for a 30-day period preceding such date is greater
than $19.50 or less than $15.50 per share of Common Stock. The Company granted
certain registration rights to the purchasers.
SPIN-OFF. As part of the 1997 Reorganization, the Company organized and
agreed to spin-off at a later date a subsidiary of the Company to enable Messrs.
Mulvihill and Zucker, each directors of the Company, to pursue real estate
investment opportunities other than in the office and industrial sectors. The
terms of the spin-off have not yet been determined.
LEASES. The Company has leases with companies in which David F. McBride is
an officer, and for certain of these companies, a shareholder. As of April 26,
1999, the annual aggregate base rental revenue under these leases was
approximately $235,000. The Company has a lease for approximately 17,575 square
feet with a company in which Michael Falcone serves as Chairman. As of April 26,
1999, the annual aggregate base rental revenue for this lease is approximately
$354,000. The Company has a lease for approximately 73,000 square feet with a
company in which Francesco Galesi is an executive officer and a beneficial owner
of common stock. As of April 26, 1999, the annual aggregate base rental revenue
for this lease is approximately $481,000.
PAYMENTS FOR SERVICES TO AFFILIATES OF DIRECTORS. The Company incurred
costs during 1998 related to capital and tenant improvements of $397,000,
leasing commissions of $92,000, repair and maintenance costs and other costs of
$55,000 which were earned by companies in which the Company's Chairman and one
of its directors are officers and shareholders.
MANAGEMENT COMPANY. Through the Operating Partnership's 100% ownership of
the preferred stock of the Management Company, the Operating Partnership is
entitled to receive 95% of the amounts paid as dividends by the Management
Company. The remaining amounts paid as dividends by the Management Company are
paid to the holders of common stock of the Management Company. To date, the
Management Company has not declared or paid any dividends. Mr. Kelter, Hudson
Bay Partners, L.P. and McBride Hudson Bay, L.P., own 40%, 30% and 30%,
respectively, of the common stock of the Management Company. Mr. Lesser is the
president, sole director and sole shareholder of the general partner of Hudson
Bay Partners, L.P., and Hudson Bay. Hudson Bay (a 5% Holder) is an affiliate of
Hudson Bay Partners, L.P. Messrs. Timothy B. McBride and David F. McBride and
Hudson Bay have an interest in McBride Hudson Bay, L.P. The Operating
Partnership, in the normal course of business, advances funds to the Management
Company to fund working capital needs. The Operating Partnership has a
management agreement with the Management Company for property management and
leasing services. Under the terms of this Agreement the Management Company
receives a management fee based upon a percentage of rent for all properties it
manages. In 1998, the Management Company received $1,119,000 in management fees
from the Company. In addition, the Management Company is reimbursed for the
salaries of certain employees involved in management and operations of the
Company's properties and earns leasing commissions on leases brokered by its
employees. In 1998, the Management Company received $294,000 in such
reimbursements and $84,000 in leasing commissions. The Company believes that the
management fee paid to the Management Company is based upon competitive rates.
The Management Company manages two properties which are owned by entities in
which Mr. Kelter has a general partnership interest. In addition, certain other
executives of the Company have limited partnership interests in one of these
entities.
PAYMENT OF COMMISSIONS EARNED BY EMPLOYEES OF PENN SQUARE PROPERTIES,
INC. The Management Company paid Mr. Begier (an executive officer of the
Company) $567,900 in 1998 for commissions earned by him as an employee of Penn
Square Properties, Inc. prior to becoming an executive officer of the Company as
part of the 1997 Reorganization. The Management Company also paid Mr. Butte (an
executive officer of the Company) $86,930 in 1998 for commissions earned by him
as an employee of Penn Square Properties, Inc. prior to becoming an executive
officer of the Company as part of the 1997 Reorganization.
24
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
directors and officers of the Company and persons, or "groups" of persons, who
own more than 10% of a registered class of the Company's equity securities
(collectively, "Covered Persons") to file with the Securities and Exchange
Commission and the American Stock Exchange, within specified time periods,
initial reports of beneficial ownership, and subsequent reports of changes in
ownership, of certain equity securities of the Company. Based solely on its
review of copies of such reports furnished to it and upon written
representations of Covered Persons that no other reports were required, other
than as described below, the Company believes that all such filing requirements
applicable to Covered Persons with respect to all periods up to and including
1998 have been complied with on a timely basis other than the following:
<TABLE>
<CAPTION>
REPORT FILED
NAME NUMBER OF LATE REPORTS LATE TRANSACTION(S)
- ----------------------------------- ----------------------------- --------------- -----------------------------------
<S> <C> <C> <C>
Francesco Galesi................... 1 Form 3 --
Michael J. Falcone................. 1 Form 3 --
Timothy E. McKenna................. 1 Form 3 --
Stephen J. Butte................... 1 Form 3 --
James R. Mulvihill................. 1 Form 4 Sale of 3050 shares of common stock
in January 1998
David H. Lesser.................... 4 Form 4 (1)
</TABLE>
- ------------------------
(1) Transactions related to the purchase of shares in the following amounts and
dates:
123 shares on March 17, 1998
122 shares on June 15, 1998
209 shares on September 11, 1998
204 shares on November 24, 1998.
INDEPENDENT AUDITORS
It is not the Company's practice to submit to stockholders a proposal for
the selection or ratification of the Company's independent certified public
accountants, and no such proposal is submitted hereby. The Board has selected
Arthur Andersen LLP as the Company's independent auditors for 1999. The Company
expects representatives of that firm to be present at the Meeting. They will be
given an opportunity to make a statement if they wish to do so, and are expected
to be available to respond to appropriate questions.
SOLICITATION OF PROXIES
The cost of soliciting the proxies will be paid by the Company. Directors,
officers and employees of the Company may solicit proxies in person, or by mail,
telephone, electronic mail or otherwise, but no such person will be compensated
for such services. The Company will request banks, brokers and other nominees
and fiduciaries to forward proxy materials to beneficial owners of Common Stock
held of record by them and will, upon request, reimburse them for their
reasonable out-of-pocket expenses in so doing.
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's proxy material for
the 2000 Annual Meeting of stockholders, stockholders' proposals to take action
at such meeting must comply with applicable Securities and Exchange Commission
rules and regulations and must be received by the Secretary of the Company at
its principal executive offices set forth above no later than January 1, 2000.
In addition, any stockholder who wishes to propose a nominee to the Board or
submit any other matter to a vote at a meeting of stockholders (other than a
stockholder proposal included in the Company's proxy materials
25
<PAGE>
pursuant to Rule 14a-8 of the rules promulgated under the Securities and
Exchange Act or 1934, as amended), must comply with the advance notice
provisions and other requirements of Section 2.8 of the Company's By-laws, which
are on file with the Securities and Exchange Commission and may be obtained from
the Secretary of the Company upon request.
ANNUAL REPORT ON FORM 10-K
UPON REQUEST, THE COMPANY WILL FURNISH FREE OF CHARGE TO RECORD AND
BENEFICIAL OWNERS OF ITS COMMON STOCK A COPY OF ITS 1998 ANNUAL REPORT ON FORM
10-K (INCLUDING FINANCIAL STATEMENTS AND SCHEDULES BUT WITHOUT EXHIBITS). COPIES
OF EXHIBITS TO THE FORM 10-K ALSO WILL BE FURNISHED UPON REQUEST AND THE PAYMENT
OF A REASONABLE CHARGE. ALL REQUESTS SHOULD BE DIRECTED TO THE SECRETARY OF THE
COMPANY AT THE ADDRESS AND TELEPHONE NUMBER OF THE COMPANY'S PRINCIPAL EXECUTIVE
OFFICES SET FORTH ABOVE.
OTHER MATTERS
A copy of the Company's 1998 Annual Report to Stockholders is enclosed but
is not to be regarded as proxy solicitation material.
At the date of this Proxy Statement, management was not aware that any
matters not referred to in this Proxy Statement would be presented for action at
the meeting. If any other matters should come before the meeting, the persons
named in the accompanying form of Proxy will have discretionary authority to
vote all Proxies in accordance with their best judgment, unless otherwise
restricted by law.
By Order of the Board of Directors
Timothy A. Peterson, Secretary
Dated: April 30, 1999
26
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of ,
1999 is entered into by and between American Real Estate Investment Corporation,
a Maryland corporation (the "Company"), and Keystone Property Trust, a Maryland
statutory real estate investment trust (the "Trust").
WHEREAS, the respective Boards of Directors of the Company and the Trust
have each determined that it is advisable and in the best interests of their
respective stockholders to consummate, and have approved upon the terms and
subject to the conditions set forth in this Agreement, the merger of the Company
with and into the Trust (the "Merger") with the Trust being the surviving entity
in the Merger.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Trust agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. SURVIVING ENTITY. In accordance with the provisions of this
Agreement and Section 3-114 of Maryland General Corporation Law, at the
Effective Time (as defined below), the Company shall be merged with and into the
Trust, and the Trust shall be the surviving entity in the Merger (the "Surviving
Entity"). At the Effective Time, the separate existence of the Company shall
cease.
SECTION 1.02. DECLARATION OF TRUST. The Declaration of Trust of the Trust
as in effect immediately prior to the Effective Time shall be the Declaration of
Trust of the Surviving Entity from and after the Effective Time, until
thereafter amended as provided by law or in such Declaration of Trust.
SECTION 1.03. BY-LAWS. The By-laws of the Trust as in effect immediately
prior to the Effective Time shall be the By-laws of the Surviving Entity from
and after the Effective Time, until thereafter amended or repealed as provided
by law.
SECTION 1.04. THE TRUSTEES. The directors of the Company immediately prior
to the Effective Time shall be the Trustees of the Surviving Entity from and
after the Effective Time and shall hold office until their respective successors
are duly elected or appointed and qualified in the manner provided in the
Declaration of Trust and By-laws of the Surviving Entity, or as otherwise
provided by law.
SECTION 1.05. OFFICERS. The officers of the Company immediately prior to
the Effective Time shall be the officers of the Surviving Entity from and after
the Effective Time and shall hold office until their respective successors are
duly elected or appointed and qualified in the manner provided in the
Declaration of Trust and By-laws of the Surviving Entity, or as otherwise
provided by law.
SECTION 1.06. EFFECTIVE TIME. Articles of Merger containing the provisions
required in Section 3-109 of the Maryland General Corporation Law shall be duly
prepared and executed by the Company and the Trust, and thereafter delivered to
the State Department of Assessments and Taxation of the State of Maryland (the
"Secretary of State") for filing, as provided in Sections 3-107 and 8-501.1 of
the Maryland General Corporation Law. The Merger shall become effective at the
time of acceptance for record of the Articles of Merger with the Secretary of
State in accordance with the provisions of Sections 3-107 and 8-501.1 of the
Maryland General Corporation Law (the "Effective Time").
SECTION 1.07. ADDITIONAL ACTIONS. If, at any time after the Effective Time,
the Surviving Entity determines that any deeds, bills of sale, assignments,
assurances or any other acts or things are necessary or desirable (a) to vest,
perfect or confirm, of record or otherwise, in the Surviving Entity, its right,
title or interest in, to or under any of the rights, properties or assets of the
Company acquired or to be acquired by reason of, or as a result of, the Merger,
or (b) otherwise to carry out the purposes of this Agreement, the Surviving
Entity and its proper officers and directors shall be authorized to execute and
deliver, in the name and on behalf of the Company, all such deeds, bills of
sale, assignments and assurances and to do, in the name and on behalf of the
Company, all such other acts and things necessary or desirable to vest,
<PAGE>
perfect or confirm any and all right, title or interest in, to or under such
rights, properties or assets in the Surviving Entity or otherwise to carry out
the purposes of this Agreement.
ARTICLE II
CONVERSION OF SHARES
SECTION 2.01 COMPANY COMMON STOCK AND PREFERRED STOCK. Each share of common
stock, par value $0.001 per share of the Company (the "Company Common Stock"),
and each share of Series A Convertible Preferred Stock, par value $0.001 per
share of the Company (the "Company Preferred Stock"), actually issued and
outstanding at the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, (A) in the case of Company Common
Stock, be converted into one validly issued, fully paid and non-assessable share
of the common stock, par value $0.001 per share, of the Trust (the "Trust Common
Stock") and (B) in the case of Company Preferred Stock, be converted into one
validly issued, fully paid and non-assessable share of Series A Convertible
Preferred Stock, par value $0.001 per share, of the Trust (the "Trust Preferred
Stock"). Certificates representing shares of Company Common Stock and Company
Preferred Stock before the Merger will represent the Trust Common Stock and the
Trust Preferred Stock, respectively, after the Merger and it will not be
necessary for stockholders of the Company to surrender or exchange their
existing stock certificates for new stock certificates.
SECTION 2.02 CANCELLATION OF TREASURY STOCK AND COMPANY COMMON STOCK OWNED
BY THE COMPANY. All shares of Company Common Stock that are owned by the Company
as treasury stock and any shares of Company Common Stock owned by any
wholly-owned Subsidiary (as defined below) of the Company shall be cancelled and
retired and shall cease to exist and no stock of the Trust or other
consideration shall be delivered in exchange therefor. As used in this
Agreement, "Subsidiary" means, with respect to any party, any corporation or
other organization, whether incorporated or unincorporated, of which more than
fifty percent (50%) of either the equity interests in, or the voting control of,
such corporation or other organization is, directly or indirectly through
Subsidiaries or otherwise, beneficially owned by such party.
SECTION 2.03 OPTIONS AND WARRANTS. Each option or warrant to purchase a
share of Company Common Stock (a "Company Stock Option") which is outstanding
immediately prior to the Effective Time shall be converted into an option or
warrant to purchase a share of Trust Common Stock (a "Trust Stock Option"). Each
Trust Stock Option and the obligation to issue shares of Trust Common Stock upon
exercise of such Trust Stock Option shall be assumed by the Trust effective as
of the Effective Time. Fractional shares shall not be issued upon the exercise
of Trust Stock Options. Each Trust Stock Option shall otherwise be exercisable
upon the same terms and conditions as set forth in the option agreement
respecting the Company Stock Option converted into such Trust Stock Option.
ARTICLE III
MISCELLANEOUS
SECTION 3.01. TERMINATION. This Agreement may be terminated and abandoned
by action of the Board of Directors of each of American and the Trust at any
time prior to the Effective Time, whether before or after approval by the
stockholders of American and the Trust.
SECTION 3.02. APPROVAL OF STOCKHOLDERS. The respective obligation of each
party to effect the Merger is subject to adoption by the requisite vote of the
stockholders of each of the Company and the Trust pursuant of Section 3-105 and
8-501.1 of the Maryland General Corporation Law.
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<PAGE>
IN WITNESS WHEREOF, each of American and the Trust has executed this
Agreement, or has caused this Agreement to be executed on its behalf by a
representative duly authorized, all as of the day and year first above written.
<TABLE>
<S> <C> <C>
AMERICAN REAL ESTATE
INVESTMENT CORPORATION
By:
-----------------------------------------
Name:
Title:
KEYSTONE PROPERTY TRUST
By:
-----------------------------------------
Name:
Title:
</TABLE>
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EXHIBIT B
DECLARATION OF TRUST
OF
KEYSTONE PROPERTY TRUST
, 1999
DECLARATION OF TRUST made as of the date set forth above by the undersigned
Trustee.
WITNESSETH:
WHEREAS, the Trustees desire to create a trust for the principal purpose of
investing in real property and interests therein; and
WHEREAS, the Trustees desire that such trust qualify as a "real estate
investment trust" under the Code, and as a "real estate investment trust" under
Title 8 of the Corporations and Associations Article of the Annotated Code of
Maryland; and
WHEREAS, in furtherance of such purpose the Trustees intend to acquire
certain real property and interests therein and to hold, manage and dispose of
all such property as Trustees in the manner hereinafter stated; and
WHEREAS, it is proposed that the beneficial interest in the Trust be divided
into transferable shares of beneficial interest as hereinafter provided;
NOW, THEREFORE, it is hereby agreed and declared that the Trustees will hold
any and all property of every type and description which they are acquiring or
may hereafter acquire as Trustees, together with the proceeds thereof, in trust,
to manage and dispose of the same for the benefit of the holders from time to
time of the shares of beneficial interest being issued and to be, issued
hereunder in the manner and subject to the stipulations contained herein.
ARTICLE I
THE TRUST
1.1. NAME. The name of the Trust created by this Declaration of Trust shall
be "Keystone Property Trust" and so far as may be practicable the Trustees shall
conduct the Trust's activities, execute all documents and sue or be sued under
that name, which name (and the word "TRUST" wherever used in this Declaration of
Trust, except where the context otherwise requires) shall refer to the Trustees
collectively but not individually or personally and not to the officers, agents,
employees or Shareholders of the Trust or of such Trustees. If the Trustees
determine that the use of such name is not practicable or if the Trustees are
contractually bound to change that name, they may use another designation or
they may adopt another name under which the Trust may hold property or conduct
its activities.
1.2. PLACES OF BUSINESS. The Trust shall maintain an office in Maryland at
c/o The Prentice-Hall Company System, Maryland, 11 East Chase Street, Baltimore,
Maryland 21202 or such other place in Maryland as the Trustees may determine
from time to time. The Resident Agent of the Trust at such office shall be The
Prentice-Hall Company System, Maryland, 11 East Chase Street, Baltimore,
Maryland 21202. The resident agent is a Maryland corporation. The Trust may
change such Resident Agent from time to time as the Trustees shall determine.
The Trust may have such other offices or places of business within or without
the State of Maryland as the Trustees may from time to time determine.
1.3. NATURE OF TRUST. The Trust shall be a real estate investment trust
within the meaning of Title 8 of the Corporations and Associations Article of
the Annotated Code of Maryland. It is also intended that the Trust shall qualify
and carry on business as a "real estate investment trust" as described in the
Code. The Trust is not intended to be, shall not be deemed to be, and shall not
be treated as a general partnership, limited partnership, joint venture,
corporation or joint stock company (but nothing herein shall preclude the Trust
from being treated for tax purposes as an association under the Code); nor shall
the Trustees or
<PAGE>
Shareholders or any of them for any purpose be, nor be deemed to be, nor be
treated in any way whatsoever as, liable or responsible hereunder as partners or
joint venturers. The relationship of the Shareholders to the Trustees shall be
solely that of beneficiaries of the Trust in accordance with the rights
conferred upon them by this Declaration of Trust.
ARTICLE II
TRUSTEES
2.1. NUMBER, TERM OF OFFICE AND QUALIFICATIONS OF TRUSTEES.
(a) The number of Trustees shall initially be seven. The number of
Trustees may be increased or decreased pursuant to the Bylaws of the Trust
(which action may not affect the tenure of office of any Trustee), but shall
never be more than fifteen nor less than the minimum number permitted by the
laws of the State of Maryland now or hereafter in force.
(b) The Trustees (other than any Trustee elected solely by holders of
one or more classes or series of Preferred Shares) shall be divided into
three classes, as nearly equal in number as possible. The Class of Trustees
designated as Class I Trustees shall hold office initially for a term
expiring at the annual meeting of Shareholders to be held in 2001. The Class
of Trustees designated as Class II Trustees shall hold office initially for
a term expiring at the annual meeting of Shareholders to be held in 2002.
The Class of Trustees designated as Class III Trustees shall hold office
initially for a term expiring at the annual meeting of Shareholders to be
held in 2000. Trustees elected to succeed those Trustees whose terms have
thereupon expired shall be elected for a term of office of three years and
until the election and qualification of their successors. If the number of
Trustees is changed, any increase or decrease shall be apportioned among the
classes so as to maintain or attain, if possible, the equality of the number
of Trustees in each class, but in no case will a decrease in the number of
Trustees shorten the term of any incumbent Trustee. If such equality is not
possible, the increase or decrease shall be apportioned among the classes in
such a way that the difference in the number of Trustees in any two classes
shall not exceed one. Shareholder votes to elect Trustees shall be conducted
in the manner provided in the Bylaws. There shall be no cumulative voting in
the election of Trustees. A Trustee shall be an individual at least 21 years
of age who is not under legal disability. Unless otherwise required by law,
no Trustee shall be required to give bond, surety or security in any
jurisdiction for the performance of any duties or obligations hereunder. The
Trustees in their capacity as Trustees shall not be required to be
Shareholders or to devote their entire time to the business and affairs of
the Trust.
(c) The name and class of the Trustees who shall serve as the initial
Trustees after the Closing Date and until their successors are duly elected
and qualified is:
<TABLE>
<CAPTION>
NAME CLASS
- --------------------------------------------------------------------------------- -----------
<S> <C>
Michael J. Falcone............................................................... Class I
Francesco Galesi................................................................. Class I
Jeffrey E. Kelter................................................................ Class II
Russell C. Platt................................................................. Class II
David H. Lesser.................................................................. Class III
David F. McBride................................................................. Class III
James R. Mulvihill............................................................... Class III
</TABLE>
2.2. COMPENSATION AND OTHER REMUNERATION. The Trustees shall be entitled to
receive such reasonable compensation for their services as Trustees as the
Trustees may determine from time to time. The Trustees and officers of the Trust
shall be entitled to receive remuneration for services rendered to the Trust in
any
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<PAGE>
other capacity. Subject to Sections 5.6 and 5.7 hereof, such services may
include, without limitation, services as an officer of the Trust, legal,
accounting or other professional services, or services as a broker, transfer
agent or underwriter, whether performed by a Trustee or any Person affiliated
with a Trustee.
2.3. RESIGNATION, REMOVAL AND DEATH OF TRUSTEES. A Trustee may resign at any
time by giving written notice to the remaining Trustees at the principal office
of the Trust. Such resignation shall take effect on the date specified in such
notice, without need for prior accounting. Subject to the rights of holders of
one or more classes or series of Preferred Stock to elect one or more Trustees,
a Trustee may be removed at any time with cause by the affirmative vote of the
holders of Shares representing a majority of the total votes authorized to be
cast by Shares then outstanding and entitled to vote thereon, voting as a single
class. A Trustee judged incompetent or for whom a guardian or conservator has
been appointed shall be deemed to have resigned as of the date of such
adjudication or appointment. Upon the resignation or removal of any Trustee, or
his otherwise ceasing to be a Trustee, he shall execute and deliver such
documents as the remaining Trustees shall require for the conveyance of any
Trust property held in his name, shall account to the remaining Trustees as they
require for all property which he holds as Trustee and shall thereupon be
discharged as Trustee. Upon the incapacity or death of any Trustee, his legal
representative shall perform the acts set forth in the preceding sentence and
the discharge mentioned therein shall run to such legal representative and to
the incapacitated Trustee or the estate of the deceased Trustee, as the case may
be.
2.4. VACANCIES.
(a) If any or all the Trustees cease to be Trustees hereunder, whether
by reason of resignation, removal, incapacity, death or otherwise, such
event shall not terminate the Trust or affect its continuity. Until
vacancies are filled, the remaining Trustee or Trustees (even though fewer
than three) may exercise the powers of the Trustees hereunder.
(b) Subject to the rights of the holders of any class of stock
separately entitled to elect one or more Trustees, the stockholders may
elect a successor to fill a vacancy on the Board which results from the
removal of a Trustee. A Trustee elected by the stockholders to fill a
vacancy which results from the removal of a Trustee serves for the balance
of the term of the removed Trustee. Subject to the rights of the holders of
any class of stock separately entitled to elect one more Trustees, a
majority of the remaining Trustees, whether or not sufficient to constitute
a quorum, may fill a vacancy on the Board which results from any cause
except an increase in the number of Trustees, and a majority of the entire
Board may fill a vacancy which results from an increase in the number of
Trustees. A Trustee elected by the Board to fill a vacancy serves until the
next annual meeting of stockholders and until his or her successor is
elected and qualified. If at any time there shall be no Trustees in office,
successor Trustees shall be elected by the Shareholders as provided in
Section 4.9 hereof. Any Trustee elected to fill a vacancy created by the
resignation, removal or death of a former Trustee shall hold office for the
unexpired term of such former Trustee.
2.5. SUCCESSOR AND ADDITIONAL TRUSTEES. The right, title and interest of the
Trustees in and to the Trust Estate shall also vest in successor and additional
Trustees upon their qualification, and they shall thereupon have all the rights
and obligations of Trustees hereunder. Such right, title and interest shall vest
in the Trustees whether or not conveyancing documents have been executed and
delivered pursuant to Section 2.3 hereof or otherwise. Appropriate written
evidence of the election and qualification of successor and additional Trustees
shall be filed with the records of the Trust and in such other offices or places
as the Trustees may deem necessary, appropriate or desirable.
2.6. ACTIONS BY TRUSTEES.
(a) The Trustees may act with or without a meeting. A quorum for all
meetings of the Trustees shall be a majority of the Trustees; PROVIDED,
HOWEVER, that, whenever pursuant to Section 5.7 hereof or otherwise the vote
of a majority of a particular group of Trustees is required at a meeting, a
quorum for such meeting shall be a majority of the Trustees which shall
include a majority of such group.
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<PAGE>
Unless specifically provided otherwise in this Declaration of Trust, any
action of the Trustees may be taken at a meeting at which a quorum is
present by vote of a majority of the Trustees present or without a meeting
by written consents of a majority of the Trustees, which consents shall be
filed with the records of meetings of the Trustees. Any action or actions
permitted to be taken by the Trustees in connection with the business of the
Trust may be taken pursuant to authority granted by a meeting of the
Trustees conducted by a telephone conference call, and the transaction of
Trust business represented thereby shall be of the same authority and
validity as if transacted at a meeting of the Trustees held in person or by
written consent. The minutes of any Trustees' meeting held by telephone
shall be prepared in the same manner as a meeting of the Trustees held in
person. The acquisition or disposition of any investment shall require the
approval of a majority of Trustees, except as otherwise provided in Section
5.7 hereof. Any agreement, deed, mortgage, lease or other instrument or
writing executed by one or more of the Trustees or by any authorized Person
shall be valid and binding upon the Trustees and upon the Trust when
authorized or ratified by action of the Trustees or as provided in the
Bylaws.
(b) With respect to the actions of the Trustees, Trustees who have, or
are Affiliates of Persons who have, any direct or indirect interest in or
connection with any matter being acted upon may be counted for all quorum
purposes under this Section 2.6 hereof and, subject to the provisions of
Section 5.7 hereof, may vote on the matter as to which they or their
Affiliates have such interest or connection.
2.7. COMMITTEES. The Trustees may appoint an audit committee and such other
standing committees as the Trustees determine. Each standing committee shall
consist of one or more members. Each committee shall have such powers, duties
and obligations as the Trustees may deem necessary or appropriate. The standing
committees shall report their activities periodically to the Trustees.
2.8. INDEPENDENT TRUSTEES. Notwithstanding anything herein to the contrary,
at all times (except during a period not to exceed sixty (60) days following the
death, resignation, incapacity or removal from office of a Trustee prior to the
expiration of the Trustee's term of office), two of the Trustees shall be
"Independent Trustees." Independent Trustees shall mean Trustees who are not (i)
officers of the Trust, (ii) related to officers of the Trust or (iii) holders,
or officers or directors of such holders, of more than 5% of the issued and
outstanding Shares of capital stock of the Trust on a fully diluted basis.
ARTICLE III
TRUSTEES' POWERS
3.1. POWER AND AUTHORITY OF TRUSTEES. The Trustees, subject only to the
specific limitations contained in this Declaration of Trust, shall have, without
further or other authorization, and free from any power or control on the part
of the Shareholders, full, absolute and exclusive power, control and authority
over the Trust Estate and over the business and affairs of the Trust to the same
extent as if the Trustees were the sole owners thereof in their own right, and
may do all such acts and things as in their sole judgment and discretion are
necessary for or incidental to or desirable for carrying out or conducting the
business of the Trust. Any construction of this Declaration of Trust or any
determination made in good faith by the Trustees as to the purposes of the Trust
or the existence of any power or authority hereunder shall be conclusive. In
construing the provisions of this Declaration of Trust, the presumption shall be
in favor of the grant of powers and authority to the Trustees. The enumeration
of any specific power or authority herein shall not be construed as limiting the
aforesaid powers or the general powers or authority or any other specified power
or authority conferred herein upon the Trustees.
3.2. SPECIFIC POWERS AND AUTHORITY. Subject only to the express limitations
contained in this Declaration of Trust and in addition to any powers and
authority conferred by this Declaration of Trust or which the Trustees may have
by virtue of any present or future statute or rule of law, the Trustees without
any action or consent by the Shareholders shall have and may exercise at any
time and from time to time the following
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<PAGE>
powers and authorities which may or may not be exercised by them in their sole
judgment and discretion and in such manner and upon such terms and conditions as
they may from time to time deem proper:
(a) to retain, invest and reinvest the capital or other funds of the
Trust in, and to acquire, purchase, or own, real or personal property of any
kind, whether tangible or intangible, wherever located in the world, and
make commitments for such investments, all without regard to whether any
such property is authorized by law for the investment of trust funds or
produces or may produce income; to possess and exercise all the rights,
powers and privileges appertaining to the ownership of the Trust Estate; and
to increase the capital of the Trust at any time by the issuance of any
additional authorized Shares or other Securities of the Trust for such
consideration as they deem advisable;
(b) without limitation of the powers set forth in Section 3.2(a) hereof,
to invest in, purchase or otherwise acquire for such consideration as they
deem proper, in cash or other property or through the issuance of shares or
through the issuance of notes, debentures, bonds or other obligations of the
Trust, and to hold for investment, the entire or any participating interests
in any Mortgage Loans or interest in Real Property, including ownership of,
or participation in the ownership of, or rights to acquire, equity interests
in Real Property or in Persons owning, developing, improving, operating or
managing Real Property, which interests may be acquired independently of or
in connection with other investment activities of the Trust and in the
latter case, may include rights to receive additional payments based on
gross income or rental or other income from the Real Property or
improvements thereon; and to invest in loans secured by the pledge or
transfer of Mortgage Loans;
(c) to sell, rent, lease, hire, exchange, release, partition, assign,
mortgage, pledge, hypothecate, grant security interests in, encumber,
negotiate, convey, transfer or otherwise dispose of any and all the Trust
Estate by deeds (including deeds in lieu of foreclosure), trust deeds,
assignments, bills of sale, transfers, leases, mortgages, financing
statements, security agreements and other instruments for any of such
purposes executed and delivered for and on behalf of the Trust or the
Trustees by one or more of the Trustees or by a duly authorized officer,
employee, agent or nominee of the Trust;
(d) to issue Shares, bonds, debentures, notes or other evidences of
indebtedness, which may be secured or unsecured and may be subordinated to
any indebtedness of the Trust, to such Persons for such cash, property or
other consideration (including Securities issued or created by, or interests
in, any Person) at such time or times and on such terms as the Trustees may
deem advisable and to list any of the foregoing securities issued by the
Trust on any securities exchange and to purchase or otherwise acquire, hold,
cancel, reissue, sell and transfer any of such Securities, and to cause the
instruments evidencing such Securities to bear an actual or facsimile
imprint of the seal of the Trust (if the Trustees shall have adopted such a
seal) and to be signed by manual or facsimile signature or signatures (and
to issue such Securities, whether or not any Person whose manual or
facsimile signature shall be imprinted thereon shall have ceased to occupy
the office with respect to which such signature was authorized), PROVIDED
THAT, where only facsimile signatures for the Trust are used, the instrument
shall be countersigned manually by a transfer agent, registrar or other
authentication agent; and to issue any of such Securities of different types
in combinations or units with such restrictions on the separate
transferability thereof as the Trustees shall determine;
(e) to enter into leases of real and personal property as lessor or
lessee and to enter into contracts, obligations and other agreements for a
term, and to invest in obligations having a term, extending beyond the term
of office of the Trustees and beyond the possible termination of the Trust,
or having a lesser term;
(f) to borrow money and give negotiable or nonnegotiable instruments
therefor; or guarantee, indemnify or act as surety with respect to payment
or performance of obligations of third parties; to enter into other
obligations on behalf of the Trust; and to assign, convey, transfer,
mortgage, subordinate, pledge, grant security interest in, encumber or
hypothecate the Trust Estate to secure any indebtedness of the Trust or any
other of the foregoing obligations of the Trust;
5
<PAGE>
(g) to lend money, whether secured or unsecured;
(h) to create reserve funds for any purpose;
(i) to incur and pay out of the Trust Estate any charges or expenses,
and to disburse any funds of the Trust, which charges, expenses or
disbursements are, in the opinion of the Trustees, necessary or incidental
to or desirable for the carrying out of any of the purposes of the Trust or
conducting the business of the Trust, including without limitation taxes and
other governmental levies, charges and assessments, of whatever kind or
nature, imposed upon or against the Trustees in connection with the Trust or
the Trust Estate or upon or against the Trust Estate or any part thereof,
and for any of the purposes herein;
(j) to deposit funds of the Trust in banks, trust companies, savings and
loan associations and other depositaries, whether or not such deposits will
draw interest, the same to be subject to withdrawal on such terms and in
such manner and by such Person or Persons (including any one or more
Trustees or officers, employees or agents, of the Trust) as the Trustees may
determine;
(k) to possess and exercise all the rights, powers and privileges
pertaining to the ownership of all or any Mortgages or Securities issued or
created by, or interests in, any Person, forming part of the Trust Estate,
to the same extent that an individual might do so, and, without limiting the
generality of the foregoing, to vote or give any consent, request or notice,
or waive any notice, either in person or by proxy or power of attorney, with
or without power of substitution, to one or more Persons, which proxies and
powers of attorney may be for meetings or action generally or for any
particular meeting or action, and may include the exercise of discretionary
powers;
(l) to cause to be organized or assist in organizing any Person under
the laws of any jurisdiction to acquire the Trust Estate or any part or
parts thereof or to carry on any business in which the Trust shall directly
or indirectly have any interest, and to sell, rent, lease, hire, convey,
negotiate, assign, exchange or transfer the Trust Estate or any part or
parts thereof to or with any such Person or any existing Person in exchange
for the Securities thereof or otherwise, and to merge or consolidate the
Trust with or into any Person or merge or consolidate any Person into the
Trust, and to lend money to, subscribe for the Securities of, and enter into
any contracts with, any Person in which the Trust holds or is about to
acquire Securities or any other interest;
(m) to enter into joint ventures, general or limited partnerships,
limited liability companies, participation or agency arrangements and any
other lawful combinations or associations, and to act as a general or
limited partner or a member thereof;
(n) to elect, appoint, engage or employ such officers for the Trust as
the Trustees may determine, who may be removed or discharged at the
discretion of the Trustees, such officers to have such powers and duties,
and to serve such terms, as may be prescribed by the Trustees or by the
Bylaws; to engage or employ any Persons (including, subject to the
provisions of Sections 5.6 and 5.7 hereof, any Trustee or officer, agent or
employee of the Trust and any Person in which any Trustee, officer or agent
is directly or indirectly interested or with which he is directly or
indirectly connected) as agents, representatives, employees, or independent
contractors (including without limitation real estate advisors, investment
advisors, transfer agents, registrars, underwriters, accountants, attorneys
at law, real estate agents, managers, appraisers, brokers, architects,
engineers, construction managers, general contractors or otherwise) in one
or more capacities, and to pay compensation from the Trust for services in
as many capacities as such Person may be so engaged or employed; and to
delegate any of the powers and duties of the Trustees to any one or more
Trustees, agents, representatives, officers, employees, independent
contractors or other Persons;
(o) to determine or cause to be determined from time to time the value
of all or any part of the Trust Estate and of any services, Securities,
property or other consideration to be furnished to or acquired by the Trust,
and from time to time to revalue or cause to be revalued all or any part of
the
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<PAGE>
Trust Estate in accordance with such appraisals or other information as are,
in the Trustees' sole judgment, necessary and/or satisfactory;
(p) to collect, sue for and receive all sums of money coming due to the
Trust, and to engage in, intervene in, prosecute, join, defend, compromise,
abandon or adjust, by arbitration or otherwise, any actions, suits,
proceedings, disputes, claims, controversies, demands or other litigation
relating to the Trust, the Trust Estate or the Trust's affairs, to enter
into agreements therefor, whether or not any suit is commenced or claim
accrued or asserted and, in advance of any controversy, to enter into
agreements regarding arbitration, adjudication or settlement thereof;
(q) to renew, modify, release, compromise, extend, consolidate or
cancel, in whole or in part, any obligation to or of the Trust or
participate in any reorganization of obligors to the Trust;
(r) to self-insure or to purchase and pay for out of the Trust Estate
insurance contracts and policies, including contracts of indemnity, insuring
the Trust Estate against any and all risks and insuring the Trust and/or all
or any of the Trustees, the Shareholders, or the officers, employees or
agents of the Trust or Persons who may directly or indirectly control the
Trust against any and all claims and liabilities of every nature asserted by
any Person arising by reason of any action alleged to have been taken or
omitted by the Trust or by the Trustees, Shareholders, officers, employees
agents or controlling Persons whether or not the Trust would have the power
to indemnify such Person or Persons against any such claim or liability;
(s) to cause legal title to any of the Trust Estate to be held by and/or
in the name of the Trustees, or, except as prohibited by law, by and/or in
the name of the Trust or one or more of the Trustees or any other Person, on
such terms, in such manner and with such powers in such Person as the
Trustees may determine, and with or without disclosure that the Trust or
Trustees are interested therein;
(t) to adopt a fiscal year for the Trust, and from time to time to
change such fiscal year;
(u) to adopt and use a seal (but the use of a seal shall not be required
for the execution of instruments or obligations of the Trust);
(v) to the extent permitted by law, to indemnify or enter into
agreements with respect to indemnification with any Person with which the
Trust has dealings, including without limitation any broker/dealer,
investment bank, investment advisor or independent contractor, to such
extent as the Trustees shall determine;
(w) to confess judgment against the Trust;
(x) to discontinue the operations of the Trust;
(y) to repurchase or redeem Shares and other Securities issued by the
Trust;
(z) to declare and pay dividends or distributions, consisting of cash,
property or Securities, to the holders of Shares of the Trust out of any
funds legally available therefor;
(aa) to determine from time to time in accordance with sound accounting
practice or other reasonable valuation methods what constitutes annual or
other net profits, earnings, surplus or net assets in excess of capital;
(ab) to fix and vary from time to time the amount to be reserved as
working capital, or determine that retained earnings or surplus shall remain
in the hands of the Trust;
(ac) to determine whether and to what extent and at what times and
places and under what conditions and regulations the books, accounts and
documents of the Trust, or any of them, shall be open to the inspection of
stockholders, except as otherwise provided by statute or by the Bylaws, and,
except as so provided, no stockholder shall have any right to inspect any
book, account or document of the Trust unless authorized so to do by
resolution of the Board; and
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<PAGE>
(ad) 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 and to carry out the provisions of this
Declaration of Trust.
3.3. BYLAWS. The Trustees may make or adopt and from time to time amend or
repeal Bylaws (the "BYLAWS") not inconsistent with law or with this Declaration
of Trust, containing provisions relating to the business of the Trust and the
conduct of its affairs and in such Bylaws may define the duties of the officers,
employees and agents of the Trust.
ARTICLE IV
THE SHARES AND SHAREHOLDERS
4.1. DESCRIPTION OF SHARES.
(a) The interest of the Shareholders shall be divided into sixty five
million shares of beneficial interest, $.001 par value per share, which
shall be known collectively as "SHARES", all of which shall be validly
issued, fully paid and non-assessable by the Trust upon receipt of full
consideration for which they have been issued or without additional
consideration if issued by way of share dividend or share split. All of the
Shares shall be classified initially as "COMMON SHARES." Each holder of
Shares shall as a result thereof be deemed to have agreed to and be bound by
the terms of this Declaration of Trust. The Shares may be issued for such
consideration as the Trustees shall deem advisable. The Trustees are hereby
expressly authorized at any time, and from time to time, to provide for
issuance of Shares upon such terms and conditions and pursuant to such
arrangements as the Trustees may determine. Notwithstanding any other
provisions in the Declaration of Trust, no determination shall be made by
the Board nor shall any transaction be entered into by the Trust which would
cause any Shares or other equity interest in the Trust not to constitute
"transferable shares" or "transferable certificates of beneficial interest"
under Section 856(a)(2) of the Code or which would cause any distribution to
constitute a preferential dividend as described in Section 562(c) of the
Code.
(b) The Trustees are hereby expressly authorized to classify and
reclassify any unissued Shares at any time, and from time to time, without
Shareholder approval, by setting (or changing if such class has previously
been established) 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 and in
connection therewith to file articles supplementary with the MSDAT.
(c) Except as otherwise determined by the Trustees with respect to any
class or series of Shares, the holders of Shares shall be entitled to the
rights and powers hereinafter set forth in this Section 4.1. The holders of
Shares shall be entitled to receive, when and as declared from time to time
by the Trustees out of any funds legally available for the purpose, such
dividends or distributions as may be declared from time to time by the
Trustees. In the event of the termination of the Trust pursuant to Section
6.1 hereof or otherwise, or upon the distribution of its assets, the assets
of the Trust available for payment and distribution to Shareholders shall be
distributed ratably among the holders of Shares at the time outstanding in
accordance with Section 6.2 hereof. All Common Shares shall have equal
non-cumulative voting rights at the rate of one vote per Common Share, and
equal dividend, distribution, liquidation and other rights, and (except as
provided in Section 4.14 hereof) shall have no preference, conversion,
exchange, sinking fund or redemption rights. Absent a contrary written
agreement of the Trust authorized by the Trustees, and notwithstanding any
other determination by the Trustees with respect to any class or series of
Shares, no holder of Shares shall be entitled as a matter of right to
subscribe for or purchase any part of any new or additional issue of Shares
of any class whatsoever of the Trust, or of securities convertible into any
Shares of any class whatsoever of the Trust, whether now or hereafter
authorized and whether issued for cash or other consideration or by way of
dividend.
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4.2. CERTIFICATES.
(a) Ownership of Shares shall be evidenced by certificates. Every
Shareholder shall be entitled to receive a certificate, in such form as the
Trustees shall from time to time approve, specifying the number of Shares of
the applicable class held by such Shareholder. Subject to Sections 4.6 and
4.14 hereof, such certificates shall be treated as negotiable and title
thereto and to the Shares represented thereby shall be transferred by
delivery thereof to the same extent in all respects as a stock certificate,
and the Shares represented thereby, of a Maryland business corporation.
Unless otherwise determined by the Trustees, such certificates shall be
signed by the President and shall be countersigned by the Secretary or a
transfer agent, and registered by a registrar, if any, and such signatures
may be facsimile signatures in accordance with Section 3.2(d) hereof. There
shall be filed with each transfer agent, if any, a copy of the form of
certificate so approved by the Trustees, certified by the President or
Secretary, and such form shall continue to be used unless and until the
Trustees approve some other form.
(b) Each certificate evidencing Shares shall contain a legend imprinted
thereon to substantially the following effect or such other legend as the
Trustees may from time to time adopt:
THE TRUST WILL FURNISH TO ANY SHAREHOLDER ON REQUEST AND WITHOUT
CHARGE A FULL STATEMENT OF THE DESIGNATIONS AND ANY PREFERENCES,
CONVERSION AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS,
LIMITATIONS AS TO DIVIDENDS OR DISTRIBUTIONS, QUALIFICATIONS, AND
TERMS AND CONDITIONS OF REDEMPTION OF THE SHARES OF EACH CLASS
WHICH THE TRUST IS AUTHORIZED TO ISSUE, OF THE DIFFERENCES IN THE
RELATIVE RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH SERIES
OF A PREFERRED OR SPECIAL CLASS IN SERIES WHICH THE TRUST IS
AUTHORIZED TO ISSUE, TO THE EXTENT THEY HAVE BEEN SET, AND OF THE
AUTHORITY OF THE BOARD OF TRUSTEES TO SET THE RELATIVE RIGHTS AND
PREFERENCES OF SUBSEQUENT SERIES OF A PREFERRED OR SPECIAL CLASS
OF SHARES. SUCH REQUEST MAY BE MADE TO THE SECRETARY OF THE TRUST
OR TO ITS TRANSFER AGENT.
(c) Notwithstanding Section 4.2(a) hereof, the Trustees of the Trust may
authorize the issuance of some or all Shares of any or all classes or series
without certificates. The authorization does not affect Shares already
represented by certificates until they are surrendered to the Trust. At the
time of issuance or transfer of Shares without certificates, the Trust shall
send the Shareholder a written statement of the information required by
Section 4.2(b) hereof.
4.3. FRACTIONAL SHARES. In connection with any issuance of Shares, the
Trustees may issue fractional Shares or may adopt provisions for the issuance of
scrip including, without limitation, the time within which any such scrip must
be surrendered for exchange into full Shares and the rights, if any, of holders
of scrip upon the expiration of the time so fixed, the rights, if any, to
receive proportional distributions, and the rights, if any, to redeem scrip for
cash, or the Trustees may in their discretion, or if they see fit at the option
of, each holder, provide in lieu of scrip for the adjustment of the fractions in
cash. The provisions of Section 4.2 hereof relative to certificates for Shares
shall apply so far as applicable to such scrip, except that such scrip may in
the discretion of the Trustees be signed by a transfer agent alone.
4.4. LEGAL OWNERSHIP OF TRUST ESTATE. The legal ownership of the Trust
Estate and the right to conduct the business of the Trust are vested exclusively
in the Trustees (subject to Section 3.2(s) hereof), and the Shareholders shall
have no interest therein (other than beneficial interest in the Trust conferred
by their Shares issued hereunder) and they shall have no right to compel any
partition, division, dividend or distribution of the Trust or any of the Trust
Estate.
4.5. SHARES DEEMED PERSONAL PROPERTY. The Shares shall be personal property
and shall confer upon the holders thereof only the interest and rights
specifically set forth or provided for in this Declaration of Trust. The death,
insolvency or incapacity of a Shareholder shall not dissolve or terminate the
Trust or
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affect its continuity nor give his legal representative any rights whatsoever,
whether against or in respect of other Shareholders, the Trustees or the Trust
Estate or otherwise, except the sole right to demand and, subject to the
provisions of this Declaration of Trust (including, without limitation, Section
4.2(c) hereof), the Bylaws and any requirements of law, to receive a new
certificate for Shares registered in the name of such legal representative, in
exchange for the certificate held by such Shareholder.
4.6. SHARE RECORD; ISSUANCE AND TRANSFERABILITY OF SHARES.
(a) Records shall be kept by or on behalf of and under the direction of
the Trustees, which shall contain the names and addresses of the
Shareholders, the number of Shares held by them respectively, and, when
represented by certificates, the numbers of the certificates representing
the Shares, and in which there shall be recorded all transfers of Shares.
The Trust, the Trustees and the officers, employees and agents of the Trust,
when Shares are represented by certificates, shall be entitled to deem the
Persons in whose names certificates are registered on the records of the
Trust to be the absolute owners of the Shares represented thereby for all
purposes of the Trust, and, when Shares are not represented by certificates,
shall be entitled to deem the Persons in whose names the Shares are
registered on the records of the Trust to be the absolute owners of the
Shares represented thereby for all purposes of the Trust; but nothing herein
shall be deemed to preclude the Trustees or officers, employees or agents of
the Trust from inquiring as to the actual ownership of Shares. Until a
transfer is duly effected on the records of the Trust, the Trustees shall
not be affected by any notice of such transfer, either actual or
constructive.
(b) Shares shall be transferable on the records of the Trust only by the
record holder thereof, or by his agent duly authorized in writing, upon
delivery to the Trustees or a transfer agent of the certificate or
certificates therefor, properly endorsed or accompanied by duly executed
instruments of transfer (or for shares issued without certificates by duly
executed instruments of transfer) and accompanied by all necessary
documentary stamps together with such evidence of the genuineness of each
such endorsement, execution or authorization and of other matters as may
reasonably be required by the Trustees or such transfer agent. Upon such
delivery, the transfer shall be recorded in the records of the Trust and,
when the Shares are represented by certificates, a new certificate for the
Shares so transferred shall be issued to the transferee and in case of a
transfer of only a part of the Shares represented by any certificate, a new
certificate for the balance shall be issued to the transferor. Any Person
becoming entitled to any Shares in consequence of the death of a Shareholder
or otherwise by operation of law shall be recorded as the holder of such
Shares and, when the Shares are represented by certificates, shall receive a
new certificate therefor but only upon delivery to the Trustees or a
transfer agent of instruments and other evidence required by the Trustees or
the transfer agent to demonstrate such entitlement, the existing certificate
for such Shares and such releases from applicable governmental authorities
as may be required by the Trustees or transfer agent. In case of the loss,
mutilation or destruction of any certificate for shares, the Trustees may
issue or cause to be issued a replacement certificate on such terms and
subject to such rules and regulations as the Trustees may from time to time
prescribe. Nothing in this Declaration of Trust shall impose upon the
Trustees or a transfer agent a duty, or limit their rights, to inquire into
adverse claims.
4.7. DIVIDENDS OR DISTRIBUTIONS TO SHAREHOLDERS. Subject to Section 4.1
hereof, the Trustees may from time to time declare and pay to Shareholders such
dividends or distributions in cash, property or assets of the Trust or
Securities issued by the Trust, out of current or accumulated income, capital,
capital gains, principal, interest, surplus, proceeds from the increase or
financing or refinancing of Trust obligations, or from the sale of portions of
the Trust Estate or from any other source as the Trustees in their discretion
shall determine. Shareholders shall have no right to any dividend or
distribution unless and until declared by the Trustees. The Trustees shall
furnish the Shareholders with a statement in writing advising as to the source
of the funds so distributed not later than 120 days after the close of the
fiscal year in which the distribution was made.
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4.8. TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR. The Trustees
shall have power to employ one or more transfer agents, dividend disbursing
agents and registrars and to authorize them on behalf of the Trust to keep
records, to hold and to disburse any dividends or distributions and to have and
perform, in respect of all original issues and transfers of Shares, dividends
and distributions and reports and communications to Shareholders, the powers and
duties usually had and performed by transfer agents, dividend disbursing agents
and registrars of a Maryland business corporation.
4.9. SHAREHOLDERS' MEETINGS.
(a) There shall be an annual meeting of the Shareholders, at such time
and place as shall be determined by or in the manner prescribed in the
Bylaws, at which the Trustees shall be elected and any other proper business
may be conducted. Subject to the rights of the holders of any series of
Preferred Stock, special meetings of Shareholders may only be called by the
President or a majority of the Trustees. If there shall be no Trustees, the
officers of the Trust shall promptly call a special meeting of the
Shareholders entitled to vote for the election of successor Trustees.
(b) No business shall be transacted by the Shareholders at a special
meeting other than business that is either (1) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the
Trustees (or any duly authorized committee thereof) or (2) otherwise
properly brought before the Shareholders by or at the direction of the
Trustees.
(c) The holders of Shares entitled to vote at the meeting representing a
majority of the total number of votes authorized to be cast by Shares then
outstanding and entitled to vote on any question present in person or by
proxy shall constitute a quorum at any such meeting for action on such
question. Any meeting may be adjourned from time to time by a majority of
the votes properly cast upon the question, without regard to class, whether
or not a quorum is present, and, except as otherwise provided in the Bylaws,
the meeting may be reconvened without further notice. At any reconvened
session of the meeting at which there shall be a quorum, any business may be
transacted at the meeting as originally noticed.
(d) Notwithstanding any provision of law requiring the authorization of
any action by a greater proportion than a majority of the total number of
shares then outstanding and entitled to vote thereon, except as otherwise
clearly indicated in this Declaration of Trust or the Bylaws, whenever any
action is to be taken by the Shareholders, it shall be authorized by the
affirmative vote of the holders of Shares representing a majority of the
total number of votes authorized to be cast by shares then outstanding and
entitled to vote thereon. At all elections of Trustees, voting by
Shareholders shall be conducted under the non-cumulative method and the
election of Trustees shall be by the affirmative vote of the holders of
Shares representing a majority of the total number of votes authorized to be
cast by shares then outstanding and entitled to vote thereon.
(e) Whenever Shareholders are required or permitted to take any action
by a vote at a meeting of Shareholders, such action may be taken by
executing written consents in lieu thereof.
(f) For any shareholder proposal to be presented in connection with an
annual meeting of Shareholders, including any proposal relating to the
nomination of a Trustee to be elected to the Board, the Shareholders must
have given timely written notice thereof in writing to the Secretary of the
Trust in the manner and containing the information required by the Bylaws.
Shareholder proposals to be presented in connection with a special meeting
of Shareholders will be presented by the Trust only to the extent required
by Section 2-502 of the MGCL and the Bylaws.
4.10. PROXIES. Whenever the vote or consent of a Shareholder entitled to
vote is required or permitted under this Declaration of Trust, such vote or
consent may be given either directly by such Shareholder or by a proxy in the
form prescribed in, and subject to the provisions of, the Bylaws. The Trustees
may solicit such proxies from the Shareholders or any of them entitled to vote
in any matter requiring or permitting the Shareholders' vote or consent.
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4.11. REPORTS TO SHAREHOLDERS. Each year the Trust shall prepare an annual
report (the "ANNUAL REPORT") of its operations, which Annual Report shall
constitute the accounting of the Trustees for such fiscal year. Subject to
Section 8-401 of the Corporations and Associations Article of the Annotated Code
of Maryland, the Annual Report shall be in such form and have such content as
the Trustees deem proper. The Annual Report shall include a balance sheet, an
income statement and a surplus statement, each prepared in accordance with
generally accepted accounting principles. Such financial statements shall be
certified by an independent certified public accountant based on a full
examination of the books and records of the Trust conducted in accordance with
generally accepted auditing procedure. The Annual Report shall be submitted to
the Shareholders at or before the annual meeting of Shareholders and, within the
earlier of 20 days after the annual meeting of Shareholders or 120 days after
the fiscal year of the Trust, shall be placed on file at the principal office of
the Trust.
4.12. FIXING RECORD DATE. The Bylaws may provide for fixing or, in the
absence of such provision, the Trustees may fix, in advance, a date as the
record date for determining the Shareholders entitled to notice of or to vote at
any meeting of Shareholders or to express consent to any proposal without a
meeting or for the purpose of determining Shareholders entitled to receive
payment of any dividend or distribution (whether before or after termination of
the Trust) or any Annual Report or other communication from the Trustees, or for
any other purpose. The record date so fixed shall be not less than 10 days nor
more than 90 days prior to the date of the meeting or event for the purposes of
which it is fixed.
4.13. NOTICE TO SHAREHOLDERS. Timely notice of all meetings of Shareholders
shall be given as provided in the Bylaws and in any event delivered not less
than 10 days before the meeting. Any notice of meeting or other notice,
communication or report to any Shareholder shall be deemed duly delivered to
such Shareholder when such notice, communication or report is deposited, with
postage thereon prepaid, in the United States mail, addressed to such
Shareholder at his address as it appears on the records of the Trust or is
delivered in person to such Shareholder.
4.14. SHAREHOLDERS' DISCLOSURE; RESTRICTIONS ON SHARE TRANSFER; LIMITATION
ON HOLDINGS.
(a)(1) Subject to Section 4.14(a)(10) hereof, during the period commencing
on the Initial Date and prior to the Restriction Termination Date:
(A) (i) No Person, other than an Excepted Holder, shall Beneficially Own
or Constructively Own Shares in excess of the Ownership Limit; no Excepted
Holder shall Beneficially Own or Constructively Own Shares in excess of the
Excepted Holder Limit for such Excepted Holder; the McBride Family shall not
Beneficially Own or Constructively Own Shares in excess of the McBride
Family Excepted Holder Limit; and Hudson Bay shall not Beneficially Own or
Constructively Own Shares in excess of the Hudson Bay Excepted Holder Limit.
(ii) No Person shall Beneficially or Constructively Own Shares to the
extent that such Beneficial or Constructive Ownership of Shares would
result in the Trust (a) being "closely held" within the meaning of
Section 856(h) of the Code (without regard to whether the ownership
interest is held during the last half of a taxable year), or (b)
otherwise failing to qualify as a REIT (including, but not limited to,
Beneficial or Constructive Ownership that would result in the Trust
owning (actually or Constructively) an interest in a tenant that is
described in Section 856(d)(2)(B) of the Code if the income derived by
the Trust from such tenant would cause the Trust to fail to satisfy any
of the gross income requirements of Section 856(c) of the Code).
(iii) Notwithstanding any other provisions contained herein, any
Transfer of Shares (whether or not such Transfer is the result of a
transaction entered into through the facilities of the AMEX or any other
national securities exchange or automated inter-dealer quotation system),
that, if effective, would result in the Shares being Beneficially Owned
by less than 100 Persons (determined under the principles of Section
856(a)(5) of the Code) shall be void AB INITIO, and the intended
transferee shall acquire no rights in such Shares.
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(iv) Any Transfer of Shares that, if effective, would result in
Shares being beneficially owned by a Disqualified Person shall be void AB
INITIO as to the Transfer of that number of shares which would be
otherwise beneficially owned by the intended transferee, and the intended
transferee shall acquire no rights in such Shares.
(B) If any Transfer of Shares or change in capital structure or other
event occurs which, if effective, would result in any Person Beneficially
Owning or Constructively Owning Shares in violation of Section
4.14(a)(1)(A)(i), (ii) or (iv) hereof,
(i) then that number of the Shares the Beneficial or Constructive
Ownership of which otherwise would cause such Person to violate Section
4.14(a)(1)(A)(i), (ii) or (iv) hereof (rounded to the nearest whole
shares) shall be automatically transferred to a Charitable Trust for the
benefit of a Charitable Beneficiary, as described in Section 4.14(b)
hereof, effective on the close of business on the Business Day prior to
the date of such Transfer, and such Person shall acquire no rights in
such shares; or
(ii) if the transfer to the Charitable Trust describe in clause (i)
of this sentence would not be effective for any reason to prevent the
violation of Section 4.14(a)(1)(A)(i), (ii) or (iv) hereof, then the
Transfer of that number of Shares that otherwise would cause any Person
to violate Section 4.14(a)(1)(A)(i), (ii) or (iv) hereof shall be void AB
INITIO, and the intended transferee shall acquire no rights in such
Shares.
(2) If the Board of Trustees of the Trustees of the Trust or any duly
authorized committee thereof shall at any time determine in good faith that a
Transfer or other event has taken place that results in a violation of Section
4.14(a)(1) hereof or that a Person intends to acquire or has attempted to
acquire Beneficial or Constructive Ownership of any Shares in violation of
Section 4.14(a)(1) hereof (whether or not such violation is intended), the Board
of Trustees or a committee thereof shall take such action as it deems advisable
to refuse to give effect to or to prevent such Transfer or other event,
including without limitation, causing the Trust to redeem shares, refusing to
give effect to such Transfer on the books of the Trust or instituting
proceedings to enjoin such Transfer or other event; PROVIDED, HOWEVER, that any
Transfers or attempted Transfers or other events in violation of Section
4.14(a)(1) hereof shall automatically result in the transfer to the Charitable
Trust described above, and, where applicable, such Transfer (or other event)
shall be void AB INITIO as provided above irrespective of any action (or
non-action) by the Board of Trustees of committee thereof.
(3) Any Person who acquires or attempts or intends to acquire Beneficial
Ownership or Constructive Ownership of Shares that will or may violate Section
4.14(a)(1)(A) hereof, or any Person who would have owned Shares that resulted in
a transfer to the Charitable Trust pursuant to the provisions of Section
4.14(a)(1)(B) hereof shall immediately give written notice to the Trust of such
event, or in the case of such proposed or attempted transaction, give at least
15 days prior written notice, and shall provide to the Trust such other
information as the Trust may request in order to determine the effect, if any,
of such Transfer on the Trust's status as a REIT.
(4) From the Initial Date and prior to the Restriction Termination Date:
(A) every owner of more than 1% (or such other percentage as required by
the Code or the Treasury Regulations promulgated thereunder) of the
outstanding Shares, within 30 days after the end of each taxable year, shall
give written notice to the Trust stating the name and address of such owner,
the number of Shares Beneficially Owned or Constructively Owned, and a
description of the manner in which such shares are held. Each such owner
shall provide to the Trust such additional information as the Trust may
request in order to determine the effect, if any, of such Beneficial or
Constructive Ownership on the Trust's status as a REIT and ensure compliance
with the Ownership Limit.
(B) each Person who is a Beneficial or Constructive Owner of Shares and
each Person (including the shareholder of record) who is holding Shares for
a Beneficial or Constructive Owner shall provide
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to the Trust a written statement or affidavit stating such information as
the Trust may request, in good faith, in order to determine the Trust's
status as a REIT and to comply with requirements of any taxing authority or
governmental authority or to determine such compliance.
(5) Nothing contained in this Section 4.14(a) shall limit the authority of
the Board of Trustees of the Trust to take such other action as it deems
necessary or advisable to protect the Trust and the interests of its
shareholders in preserving the Trust's status as a REIT.
(6) In the case of an ambiguity in the application of any of the provisions
of this Section 4.14 or any definition contained in Section 8.1 hereof, the
Board of Trustees of the Trust shall have the power to determine the application
of the provisions of this Section 4.14 with respect to any situation based on
the facts known to it. In the event this Section 4.14 requires and action by the
Board of Trustees and this Declaration of Trust fails to provide specific
guidance with respect to such action, the Board of Trustees shall have the power
to determine the action to be taken so long as such action is not contrary to
the provisions of this Section 4.14.
(7) (A) Subject to Section 4.14(a)(1)(A)(ii) hereof, the Board of Trustees
of the Trust, in its sole discretion, may exempt a Person from the Ownership
Limit, and may establish or increase an Excepted Holder Ownership Limit for such
Person, if:
(i) the Board of Trustees obtains such representations and
undertakings from such Person as are reasonably necessary to ascertain
that no individual's Beneficial or Constructive Ownership of such Shares
will violate Section 4.14(a)(1)(A)(ii) hereof;
(ii) such Person does not and represents that it will not own,
actually or Constructively, an interest in a tenant of the Trust (or a
tenant of any entity owned or controlled by the Trust) that would cause
the Trust to own, actually or Constructively, more than a 9.8% interest
(as set forth in Section 856(d)(2)(B) of the Code) in such tenant and the
Board of Trustees obtains such representations and undertakings from such
Person as are reasonably necessary to ascertain this fact (for this
purpose, a tenant shall not be treated as a tenant of the Trust if the
Trust (or an entity owned or controlled by the Trust) derives (and is
expected to continue to derive) a sufficiently small amount of revenue
from the tenant such that, in the opinion of the Board of Trustees of the
Trust, the Trust's ability to qualify as a REIT is not impaired); and
(iii) such Person agrees that any violation or attempted violation of
such representations or undertakings (or other action which is contrary
to the restrictions contained in Sections 4.14(a)(1) through 4.14(a)(6)
hereof) will result in such Shares being automatically transferred to a
Charitable Trust in accordance with Section 4.14(a)(1)(B) and Section
4.14(b) hereof.
(B) Prior to granting any exception pursuant to Section 4.14(a)(7)(A)
hereof, the Board of Trustees of the Trust may (but is not obligated to)
require a ruling from the Internal Revenue Service, or an opinion of
counsel, in either case in form and substance satisfactory to the Board of
Trustees in its sole discretion, as it may deem necessary or advisable in
order to determine or ensure the Trust's status as a REIT. Notwithstanding
the receipt of any ruling or opinion, the Board of Trustees may impose such
conditions or restrictions as it deems appropriate in connection with
granting such exception.
(C) Subject to Section 4.14(a)(1)(A)(ii) hereof, an underwriter which
participates in a public offering or a private placement of Shares (or
securities convertible into or exchangeable for Shares) may Beneficially Own
or Constructively Own Shares (or securities convertible into or exchangeable
for Shares) in excess of the Ownership Limit, but only to the extent
necessary to facilitate such public offering or private placement (and, in
any event, not more than 90 days following the purchase by the underwriter
of such Shares (or such securities convertible into or exchangeable for
Shares)).
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(D) The Board of Trustees may only reduce the Excepted Holder Ownership
Limit for an Excepted Holder: (i) with the written consent of such Excepted
Holder at any time, or (ii) pursuant to the terms and conditions of the
agreements and understandings entered into with such Excepted Holder in
connection with the establishment of the Excepted Holder Ownership Limit for
that Excepted Holder. No Excepted Holder Ownership Limit shall be reduced to
a percentage that is less than the Ownership Limit.
(E) The Board of Trustees may only reduce the McBride Family Excepted
Holder Limit below 39.9%: (i) with the written consent of the McBride
Family, or (ii) pursuant to the terms and conditions of Section 8.1(v).
(F) The Board of Trustees may only reduce the Hudson Bay Excepted Holder
Limit below 40% with the written consent of Hudson Bay.
(8) The Board of Trustees may from time to time increase or decrease the
Ownership Limit; PROVIDED, HOWEVER, that:
(A) Any decrease may be made only prospectively as to subsequent holders
(other than a decrease as a result of a retroactive change in existing law,
in which case such decrease shall be effective immediately);
(B) The Ownership Limit may not be increased if, after giving effect to
such increase, five Persons could Beneficially Own or Constructively Own, in
the aggregate, more than 49.5% in value of the Shares then outstanding; and
(C) Prior to the modification of either of the ownership limitations,
the Board of Trustees of the Trust 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 REIT.
(9) In addition to the legend provided in Section 4.2(b) hereof, each
certificate evidencing Shares shall contain a legend imprinted thereon (or each
statement delivered to Shareholders under Section 4.2(c) hereof shall contain a
legend therein) to substantially the following effect or such other legend as
the Trustees may from time to time adopt:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR
THE PURPOSE OF THE TRUST'S MAINTENANCE OF ITS STATUS AS A REAL ESTATE
INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS
EXPRESSLY PROVIDED IN THE TRUST'S DECLARATION OF TRUST, (I) NO PERSON
MAY BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON SHARES OF THE TRUST IN
EXCESS OF 4.9% (IN VALUE OR NUMBER OF SHARES) OF THE OUTSTANDING
COMMON SHARES OF THE TRUST UNLESS SUCH PERSON IS AN EXCEPTED HOLDER
(IN WHICH CASE THE EXCEPTED HOLDER OWNERSHIP LIMIT SHALL BE
APPLICABLE); (II) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN
SHARES OF THE TRUST IN EXCESS OF 9.9% OF THE VALUE OF THE TOTAL
OUTSTANDING SHARES OF THE TRUST, UNLESS SUCH PERSON IS AN EXCEPTED
HOLDER (IN WHICH CASE THE EXCEPTED HOLDER OWNERSHIP LIMIT SHALL BE
APPLICABLE); (III) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN
SHARES THAT WOULD RESULT IN THE TRUST BEING "CLOSELY HELD" UNDER
SECTION 856(H) OF THE CODE OR OTHERWISE CAUSE THE TRUST TO FAIL TO
QUALIFY AS A REIT; (IV) NO PERSON MAY TRANSFER SHARES IF SUCH TRANSFER
WOULD RESULT IN THE SHARES OF THE TRUST BEING OWNED BY FEWER THAN 100
PERSONS; (V) NO PERSON MAY TRANSFER SHARES IF SUCH TRANSFER WOULD
RESULT IN SHARES OF THE TRUST BEING OWNED BY A DISQUALIFIED PERSON; AND
(VI) NO PLANS AND CERTAIN OTHER PERSONS DESCRIBED IN OR SUBJECT TO THE
PLAN ASSET REGULATIONS MAY OWN MORE THAN 24.9% OF THE VALUE OF ANY CLASS
OF SHARES OF THE TRUST. ANY PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY
OWNS OR ATTEMPTS TO BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES
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WHICH CAUSES OR WILL CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY
OWN SHARES IN EXCESS OR IN VIOLATION OF THE ABOVE LIMITATIONS MUST
IMMEDIATELY NOTIFY THE TRUST. IF ANY OF THE RESTRICTIONS ON TRANSFER OR
OWNERSHIP ARE VIOLATED, THE SHARES REPRESENTED HEREBY MAY BE
AUTOMATICALLY TRANSFERRED TO A CHARITABLE TRUSTEE OF A CHARITABLE TRUST
FOR THE BENEFIT OR ONE OR MORE CHARITABLE BENEFICIARIES. IN ADDITION,
UPON THE OCCURRENCE OF CERTAIN EVENTS, ATTEMPTED TRANSFERS IN
VIOLATION OF THE RESTRICTIONS DESCRIBED ABOVE MAY BE VOID AB INITIO.
ALL CAPITALIZED TERMS IN THIS LEGEND HAVE THE MEANINGS DEFINED IN THE
DECLARATION OF TRUST, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A
COPY OF WHICH, INCLUDING THE RESTRICTIONS ON TRANSFER AND OWNERSHIP,
WILL BE FURNISHED TO EACH HOLDER OF SHARES OF THE TRUST ON REQUEST AND
WITHOUT CHARGE.
(10) Nothing contained in this Section 4.14 hereof or in any provision
hereof shall preclude the settlement of any transaction entered into through the
facilities of the AMEX or any other national securities exchange or automated
inter-dealer quotation system. Although settlement of any transaction is
permitted, any transferee in such transaction shall be subject to all the
provisions and limitations set forth in this Section 4.14 hereof.
(11) Subject to Section 4.14(a)(10) hereof,
(A) Prior to the date that either
(i) the Common Shares of the Trust qualifies as a class of
"publicly-offered securities" (within the meaning of Section
2510.3-101(b)(2) of the Plan Asset Regulations) or
(ii) the Trust qualifies for another exception to the Plan Asset
Regulations (other than the exception found in Section
2510.3-101(a)(2)(ii) of the Plan Asset Regulations),
the ownership of Shares of the Trust by a "benefit plan investor" (within
the meaning of Section 2510.3-101(f)(2) of the Plan Asset Regulations) or
persons acting on behalf thereof may not exceed 24.9% of the value of any
class of Shares of the Trust calculated in accordance with the Plan Asset
Regulations. The Trustees may impose such requirements and restrictions on
purchasers and other transferees of Shares (including without limitation,
requirements under which such purchasers and other transferees must make
representations and agreements as to whether they are benefit plan
investors), and related rules and regulations, as they may deem necessary or
appropriate to monitor and enforce compliance with this Section
4.14(a)(11)(A).
(B) Without limiting the last sentence of Section 4.14(a)(11)(A), any
Transfer of Shares that, if effective, would result in Shares being
beneficially owned in a violation of Section 4.14(a)(11)(A) hereof shall be
void AB INITIO as to the Transfer of that number of shares which would be
otherwise beneficially owned by the intended transferee, and the intended
transferee shall acquire no rights in such Shares.
(C) Without limiting the last sentence of Section 4.14(a)(11)(A), if any
Transfer of Shares or change in capital structure or other event occurs
which, if effective, would result in a violation of Section 4.14(a)(11)(A)
hereof, the provisions of Section 4.14(a)(1)(B) hereof shall apply to such
shares in violation as if there had been a violation of Section
4.14(a)(1)(A)(i), (ii) or (iv) hereof.
(b) (1) Upon any purported Transfer or other event described in Section
4.14(a)(1)(B) hereof that would result in a transfer of Shares to a Charitable
Trust, such Shares shall be deemed to have been transferred to the Charitable
Trustee as Charitable Trustee of a Charitable Trust for the exclusive benefit of
one or more Charitable Beneficiaries. Such transfer to the Charitable Trustee
shall be deemed to be effective as of the close of business on the Business Day
prior to the purported Transfer or other event that results in the transfer to
the Charitable Trust pursuant to Section 4.14(a)(1)(B) hereof. The Charitable
Trustee shall be appointed by the Trust and shall be a Person unaffiliated with
the Trust and any Prohibited
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Owner. Each Charitable Beneficiary shall be designated by the Trust as provided
in Section 4.14(b)(6) hereof.
(2) Shares held by the Charitable Trustee shall be issued and outstanding
Shares of the Trust. The Prohibited Owner shall have no rights in the shares
held by the Charitable Trustee. The Prohibited Owner shall not benefit
economically from ownership of any shares held in trust by the Charitable
Trustee, shall have no rights to dividends and shall not possess any rights to
vote or other rights attributable to the shares held in the Charitable Trust.
(3) The Charitable Trustee shall have all voting rights and rights to
dividends or other distributions with respect to Shares held in the Charitable
Trust, which rights shall be exercised for the exclusive benefit of the
Charitable Beneficiary. Any dividend or other distribution paid prior to the
discovery by the Trust that the Shares have been transferred to the Charitable
Trustee shall be paid with respect to such Shares to the Charitable Trustee upon
demand and any dividend or other distribution authorized but unpaid shall be
paid when due to the Charitable Trustee. Any dividends or distributions so paid
over to the Charitable Trustee shall be held in trust for the Charitable
Beneficiary. The Prohibited Owner shall have no voting rights with respect to
shares held in the Charitable Trust and, subject to Maryland law, effective as
of the date that the Shares have been transferred to the Charitable Trustee, the
Charitable Trustee shall have the authority (at the Charitable Trustee's sole
discretion) (A) to rescind as void any vote cast by a Prohibited Owner prior to
the discovery by the Trust that the Shares have been transferred to the
Charitable Trustee and (B) to recast such vote in accordance with the desires of
the Charitable Trustee acting for the benefit of the Charitable Beneficiary.
Notwithstanding the provisions of this Section 4.14, until the Trust has
received notification that Shares have been transferred into a Charitable Trust,
the Trust shall be entitled to rely on its share transfer and other shareholder
records for purposes of preparing lists of shareholders entitled to vote at
meetings, determining the validity and authority of proxies and otherwise
conducting votes of shareholders.
(4) Within 20 days of receiving notice from the Trust that Shares have been
transferred to the Charitable Trust, the Charitable Trustee of the Charitable
Trust shall sell the shares held in the Charitable Trust to a Person, designated
by the Charitable Trustee, whose ownership of the shares will not violate the
ownership limitations set forth in Section 4.14(a)(1)(A) hereof. Upon such sale,
the interest of the Charitable Beneficiary in the Shares sold shall terminate,
and the Charitable Trustee shall distribute the net proceeds of the sale to the
Prohibited Owner and to the Charitable Beneficiary as provided in this Section
4.14(b)(4). The Prohibited Owner shall receive the lesser of (A) the price paid
by the Prohibited Owner for the shares or, if the Prohibited Owner did not give
value for the shares in connection with the event causing the shares to be held
in the Charitable Trust (E.G., in the case of a gift, devise or other such
transaction), the Market Price of the shares on the day of the event causing the
shares to be held in the Charitable Trust and (B) the price per share received
by the Charitable Trustee from the sale or other disposition of the shares held
in the Charitable Trust. Any net sales proceeds in excess of the amount payable
to the Prohibited Owner shall be immediately paid to the Charitable Beneficiary.
Each Prohibited Owner and Charitable Beneficiary waive any and all claims that
they may have against the Charitable Trustee and the Charitable Trust arising
out of the disposition of any Shares transferred to the Charitable Trust, except
for claims arising out of the gross negligence or willful misconduct of, or any
failure to make payments in accordance with this Section 4.14(b)(4) by, the
Charitable Trustee or the Trust. If, prior to the discovery by the Trust that
Shares have been transferred to the Charitable Trustee, such shares are sold by
a Prohibited Owner, then (C) such shares shall be deemed to have been sold on
behalf of the Charitable Trust and (D) to the extent that the Prohibited Owner
received an amount for such shares that exceeds the amount that such Prohibited
Owner was entitled to receive pursuant to this Section 4.14(b)(4), such excess
shall be paid to the Charitable Trustee upon demand.
(5) Shares transferred to the Charitable Trustee shall be deemed to have
been offered for sale to the Trust, or its designee, at a price per share equal
to the lesser of (A) the price per share in the transaction that resulted in
such transfer to the Charitable Trust (or, in the case of a devise or gift, the
Market Price at
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the time of such devise or gift) and (B) the Market Price on the date the Trust,
or its designee, accepts such offer. The Trust shall have the right to accept
such offer until the Charitable Trustee has sold the shares held in the
Charitable Trust pursuant to Section 4.14(b)(4) hereof. Upon such sale to the
Trust, the interest of the Charitable Beneficiary in the shares sold shall
terminate and the Charitable Trustee shall distribute the net proceeds of the
sale to the Prohibited Owner.
(6) By written notice to the Charitable Trustee, the Trust shall designate
one or more nonprofit organizations to be the Charitable Beneficiary of the
interest in the Charitable Trust such that (A) the Shares held in the Charitable
Trust would not violate the restrictions set forth in Section 4.14(a)(1)(A)
hereof in the hands of such Charitable Beneficiary and (B) each such
organization must be described in Section 501(c)(3) of the Code and
contributions to each such organization must be eligible for deduction under
each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.
(7) No delay or failure on the part of the Trust or the Board of Trustees in
exercising any right under this Declaration of Trust shall operate as a waiver
of any right of the Trust or the Board of Trustees, as the case may be, except
to the extent specifically waived in writing.
4.15. SPECIAL VOTING PROVISIONS RELATING TO CERTAIN BUSINESS COMBINATIONS
AND CONTROL SHARES. The Trust elects not to be governed by the provisions of
Subtitles 6 and 7 of Title 3 of the MGCL with respect to any transactions.
ARTICLE V
LIABILITY OF TRUSTEES, SHAREHOLDERS,
OFFICERS, EMPLOYEES AND AGENTS, AND OTHER MATTERS
5.1. LIMITATION OF LIABILITY OF SHAREHOLDERS, TRUSTEES, OFFICERS, EMPLOYEES
AND AGENTS FOR OBLIGATIONS OF THE TRUST. The Trustees and the officers,
employees and agents of the Trust, in incurring any debts, liabilities or
obligations or in taking or omitting any other actions for or in connection with
the Trust, are, and shall be deemed to be, acting as trustees, officers,
employees or agents of the Trust and not in their own individual capacities.
Except as otherwise provided in Section 6.3 hereof with respect to liability of
Trustees or officers, agents or employees of the Trust to the Trust, or to
Shareholders, no Shareholder, Trustee or officer, employee or agent of the Trust
shall be liable for any debt, claim, demand, judgment decree, liability or
obligation of any kind (in tort, contract or otherwise) of, against or with
respect to the Trust or arising out of any action taken or omitted for or on
behalf of the Trust, and the Trust shall be solely liable therefor and resort
shall be had solely to the Trust Estate for the payment or performance thereof,
and no Shareholder, Trustee or officer, employee or agent of the Trust shall be
subject to any personal liability whatsoever, in tort, contract or otherwise, to
any other Person or Persons in connection with the Trust Estate or the affairs
of the Trust (or any actions taken or omitted for or on behalf of the Trust),
and all such other Persons shall look solely to the Trust Estate for
satisfaction of claims of any nature arising in connection with the Trust Estate
or the affairs of the Trust (or any action taken or omitted for or on behalf of
the Trust).
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5.2. EXPRESS EXCULPATORY CLAUSES AND INSTRUMENTS. Any written instrument
creating an obligation of the Trust shall, to the extent practicable, include a
reference to this Declaration of Trust and provide that neither the Shareholders
nor the Trustees nor any officers, employees or agents of the Trust shall be
liable thereunder and that all Persons shall look solely to the Trust Estate for
the payment of any claim thereunder or for the performance thereof; however, the
omission of such provision from any such instrument shall not render the
Shareholders, any Trustee, or any officer, employee or agent of the Trust liable
nor shall the Shareholders, any Trustee or any officer, employee or agent of the
Trust be liable to any one for such omission.
5.3. LIMITATION OF LIABILITY OF TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS TO
THE TRUST AND TO SHAREHOLDERS FOR ACTS AND OMISSIONS. To the fullest extent
permitted by Maryland statutory and decisional law, as amended or interpreted,
no Trustee, officer, employee or agent of the Trust (a) shall be personally
liable to the Trust or its Shareholders and (b) shall have any greater duties
than those established by this Declaration of Trust or, in cases as to which
such duties are not so established, than those to which the directors, officers,
employees and agents of a Maryland business corporation are subject from time to
time. No amendment of this Declaration of Trust or repeal of any of its
provisions shall limit or eliminate the limitation on liability provided to
Trustees, officers, employees and agents of the Trust hereunder with respect to
any act or omission occurring prior to such amendment or repeal.
5.4. INDEMNIFICATION AND REIMBURSEMENT OF TRUSTEES, OFFICERS, EMPLOYEES,
AGENTS AND CERTAIN OTHER PERSONS.
(a) The Trust shall indemnify (1) its Trustees and officers, whether
serving the Trust or at its request any other entity, to the full extent
required or permitted by the General Laws of the State of Maryland now or
hereafter in force, including the advance of expenses under the procedures
and to the full extent permitted by law and (2) other employees and agents
to such extent as shall be authorized by the Trustees of the Trust or the
Bylaws and be permitted by law. The foregoing rights of indemnification
shall not be exclusive of any other rights to which those seeking
indemnification may be entitled. The Trustees may take such action as is
necessary to carry out these indemnification provisions and is expressly
empowered to adopt, approve and amend from time to time such Bylaws,
resolutions or contracts implementing such provisions or such further
indemnification arrangements as may be permitted by law. No amendment of
this Declaration of Trust or repeal of any of its provisions shall limit or
eliminate the right to indemnification provided hereunder with respect to
acts or omissions occurring prior to such amendment or repeal.
(b) Notwithstanding anything herein to the contrary, and to the fullest
extent permitted by Maryland statutory or decisional law, as amended or
interpreted, no Trustee or officer of the Trust shall be personally liable
to the Trust or its Shareholders for money damages. No amendment of this
Declaration of Trust or repeal of any of its provisions shall limit or
eliminate the limitation on liability provided to Trustees and officers
hereunder with respect to any act or omission occurring prior to such
amendment or repeal.
5.5. INDEMNIFICATION AND REIMBURSEMENT OF SHAREHOLDERS. Any Shareholder made
a party to any action, suit or proceeding or against him a claim or liabilities
are asserted by reason of the fact that he, his testate or intestate estate was
or is a Shareholder shall be indemnified and held harmless by the Trust against
judgments, fines, amounts paid on account thereof (whether in settlement or
otherwise) and reasonable expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense of such action, suit,
proceeding, claim or alleged liability or in connection with any appeal therein,
whether or not the same proceeds to judgment or is settled or otherwise brought
to a conclusion; PROVIDED, HOWEVER, that such Shareholder gives prompt notice
thereof, executes such documents and takes such action as will permit the Trust
to conduct the defense or settlement thereof and cooperates therein. In the
event that the assets of the Trust Estate are insufficient to satisfy the
Trust's indemnity obligations hereunder, each Shareholder shall be entitled to
such indemnification pro rata from the Trust Estate.
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5.6. RIGHT OF TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS TO OWN SHARES OR
OTHER PROPERTY AND TO ENGAGE IN OTHER BUSINESS. Any Trustee or officer, employee
or agent of the Trust may acquire, own, hold and dispose of Shares in the Trust,
for his individual account, and may exercise all rights of a Shareholder to the
same extent and in the same manner as if he were not a Trustee or officer,
employee or agent of the Trust. Any Trustee or officer, employee or agent of the
Trust may, in his personal capacity or in the capacity of trustee, officer,
director, stockholder, partner, member, advisor or employee of any Person or
otherwise, have business interests and engage in business activities similar to
or in addition to those relating to the Trust, which interests and activities
may be similar to and competitive with those of the Trust and may include the
acquisition, syndication, holding, management, development, operation or
disposition, for his own account, or for the account of such Person or others,
of interests in Mortgages, interests in Real Property, or interests in Persons
engaged in the real estate business. Each Trustee, officer, employee and agent
of the Trust shall be free of any obligation to present to the Trust any
investment opportunity which comes to him in any capacity other than solely as
Trustee, officer, employee or agent of the Trust even if such opportunity is of
a character which, if presented to the Trust, could be taken by the Trust.
Subject to the provisions of Section 6.8 hereof, any Trustee or officer,
employee or agent of the Trust may be interested as trustee, officer, director,
stockholder, partner, member, advisor or employee of, or otherwise have a direct
or indirect interest in, any Person who may be engaged to render advice or
services to the Trust, and may receive compensation from such Person as well as
compensation as Trustee, officer, employee or agent or otherwise hereunder. None
of these activities shall be deemed to conflict with his duties and powers as
Trustee or officer, employee or agent of the Trust.
5.7. TRANSACTIONS BETWEEN TRUSTEES, OFFICERS, EMPLOYEES OR AGENTS AND THE
TRUST.
(a) Except as otherwise provided by this Declaration of Trust, and in
the absence of fraud, a contract, act or other transaction between the Trust
and any other Person in which the Trust is interested, shall be valid, and
no Trustee or officer, employee or agent of the Trust shall have any
liability as a result of entering into any such contract, act or
transaction, even though (1) one or more of the Trustees or officers,
employees or agents of the Trust are directly or indirectly interested in or
connected with or are trustees, partners, directors, employees, officers or
agents of such other Person, or (2) one or more of the Trustees or officers,
employees or agents of the Trust individually or jointly with others, is a
party or are parties to, or are directly or indirectly interested in or
connected with, such contract, act or transaction; PROVIDED THAT in each
such case (A) such interest or connection is disclosed or known to the
Trustees and thereafter the Trustees authorize or ratify such contract, act
or other transaction by affirmative vote of a majority of the Trustees who
are not so interested or (B) such interest or connection is disclosed or
known to the Shareholders, and thereafter such contract, act or transaction
is approved by Shareholders holding a majority of the Shares then
outstanding and entitled to vote thereon.
(b) Notwithstanding any other provision of this Declaration of Trust,
the Trust may engage in a transaction with (1) any Trustee, officer,
employee or agent of the Trust (acting in his individual capacity), (2) any
director, trustee, partner, officer, employee or agent (acting in his
individual capacity) of any investment advisor of the Trust, (3) any
investment advisor of the Trust or (4) an Affiliate of any of the foregoing,
PROVIDED THAT such transaction has, after disclosure of such affiliation,
been approved or ratified by the affirmative vote of a majority of the
Trustees not having any interest in such transaction and not Affiliates of
any party to the transaction after a determination by them that such
transaction is fair and reasonable to the Trust and the Shareholders.
(c) This Section 5.7 shall not prevent any sale of Shares issued by the
Trust for the public offering thereof in accordance with a registration
statement filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended. The Trustees are not restricted by this
Section 5.7 from forming a corporation, partnership, trust or other business
association owned by any Trustee, officer, employee or agent or by their
nominees for the purpose of holding title to property of the
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Trust or managing property of the Trust, PROVIDED THAT the Trustees make a
determination that the creation of such entity for such purpose is in the
best interest of the Trust.
5.8. PERSONS DEALING WITH TRUSTEES, OFFICERS, EMPLOYEES OR AGENTS. Any act
of the Trustees or of the officers, employees or agents of the Trust purporting
to be done in their capacity as such, shall, as to any Persons dealing with such
Trustees, officers, employees or agents, be conclusively deemed to be within the
purposes of this Trust and within the powers of such Trustees or officers,
employees or agents. No Person dealing with the Trustees or any of them or with
the officers, employees or agents of the Trust shall be bound to see to the
application of any funds or property passing into their hands or control. The
receipt of the Trustees or any of them, or of authorized officers, employees or
agents of the Trust, for moneys or other consideration, shall be binding upon
the Trust.
5.9. RELIANCE. The Trustees and the officers, employees and agents of the
Trust may consult with counsel (which may be a firm in which one or more of the
Trustees or the officers, employees or agents of the Trust is or are members)
and the advice or opinion of such counsel shall be full and complete personal
protection to all the Trustees and the officers, employees and agents of the
Trust in respect of any action taken or suffered by them in good faith and in
reliance on or in accordance with such advice or opinion. In discharging their
duties, Trustees or officers, employees or agents of the Trust, when acting in
good faith, may rely upon financial statements of the Trust represented to them
to fairly present the financial position or results of operations of the Trust
by the chief financial officer of the Trust or the officer of the Trust having
charge of its books of account, or stated in a written report by an independent
certified public accountant fairly to present the financial position or results
of operations of the Trust. The Trustees and the officers, employees and agents
of the Trust may rely, and shall be personally protected in acting, upon any
instrument or other document believed by them to be genuine.
ARTICLE VI
DURATION, AMENDMENT AND TERMINATION OF TRUST
6.1. DURATION OF TRUST. The duration of the Trust shall be perpetual;
PROVIDED, HOWEVER, the Trust may be terminated at any time at a meeting of
Shareholders by the affirmative vote of the holders of Shares representing
two-thirds of the total number of Shares then outstanding and entitled to vote
thereon.
6.2. TERMINATION OF TRUST.
(a) Upon the termination of the Trust: (1) the Trust shall carry on no
business except for the purpose of winding up its affairs; (2) the Trustees
shall proceed to wind up the affairs of the Trust and all the powers of the
Trustees under this Declaration of Trust shall continue until the affairs of
the Trust shall have been wound up, including the power to fulfill or
discharge the contracts of the Trust, collect its assets, sell, convey,
assign, exchange, transfer or otherwise dispose of all or any part of the
remaining Trust Estate to one or more Persons at public or private sale (for
consideration which may consist in whole or in part of cash, Securities or
other property of any kind), discharge or pay its liabilities, and do all
other acts appropriate to liquidate its business; and (3) after paying or
adequately providing for the payment of all liabilities, and upon receipt of
such releases, indemnities and refunding agreements, as they deem necessary
for their protection, the Trustees may distribute the remaining Trust Estate
(in cash or in kind or partly each) among the Shareholders according to
their respective rights.
(b) After termination of the Trust and distribution of the Trust Estate
to the Shareholders as herein provided, the Trustees shall execute and lodge
among the records of the Trust an instrument in writing setting forth the
fact of such termination and such distribution, a copy of which instrument
shall be filed with the MSDAT, and the trustees shall thereupon be
discharged from all further liabilities and duties hereunder and the rights
and interests of all Shareholders shall thereupon cease.
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6.3. AMENDMENT PROCEDURE. This Declaration of Trust may be amended (except
that the provisions governing the personal liability of the Shareholders,
Trustees and of the officers, employees and agents of the Trust and the
prohibition of assessments upon Shareholders may not be amended in any respect
that could increase the personal liability of such Shareholders, Trustees or
officers, employees and agents of the Trust) at a meeting of Shareholders by
holders of Shares representing a majority of the total number of votes
authorized to be cast in respect of Shares then outstanding and entitled to vote
thereon. The approval of a majority of the Trustees shall also be required for
any such amendment. A majority of the Trustees may, after 15 days' written
notice to the Shareholders, also amend this Declaration of Trust without the
vote or consent of Shareholders if in good faith they deem it necessary to
conform this Declaration of Trust to the requirements of the Code relating to a
REIT, but the Trustees shall not be liable for failing to do so. Actions by the
Trustees pursuant to Sections 4.1, 4.14(a)(6) or 7.6(a) hereof that result in an
amendment to this Declaration of Trust shall be effected without the vote or
consent of Shareholders.
6.4. AMENDMENTS EFFECTIVE. Any amendment pursuant to any Section of this
Declaration of Trust shall not become effective until it is duly filed with the
MSDAT.
6.5. TRANSFER TO SUCCESSOR. The Trustees, with the affirmative vote, at a
meeting approving a plan for this purpose, of the holders of Shares representing
a majority of all votes cast at a meeting at which a quorum is present, may (a)
cause the organization of a limited partnership, partnership, corporation,
association, trust or other organization to take over the Trust Estate and carry
on the affairs of the Trust, (b) merge the Trust into, or sell, convey and
transfer the Trust Estate to, any such limited partnership, partnership,
corporation, association, trust or organization in exchange for Securities
thereof, or beneficial interests therein, and the assumption by such transferee
of the liabilities of the Trust and (c) thereupon terminate this Declaration of
Trust and deliver such shares, Securities or beneficial interests to the
Shareholders in accordance with such plan.
ARTICLE VII
MISCELLANEOUS
7.1. APPLICABLE LAW. This Declaration of Trust is executed and acknowledged
by the Trustees with reference to the statutes and laws of the State of
Maryland, and the rights of all parties and the construction and effect of every
provision hereof shall be subject to and construed according to the statutes and
laws of such State. To the extent not otherwise provided in this Declaration of
Trust, the provisions of MGCL shall be deemed to apply to the Trust.
7.2. INDEX AND HEADINGS FOR REFERENCE ONLY. The index and headings preceding
the text, articles and sections hereof have been inserted for convenience and
reference only and shall not be construed to affect the meaning, construction or
effect of this Declaration of Trust.
7.3. SUCCESSORS IN INTEREST. This Declaration of Trust and the Bylaws shall
be binding upon and inure to the benefit of the undersigned Trustees and their
successors, assigns, heirs, distributees and legal representatives, and every
Shareholder and his successors, assigns, heirs, distributees and legal
representatives.
7.4. INSPECTION OF RECORDS. Trust records shall be available for inspection
by Shareholders at the same time and in the same manner and to the extent that
comparable records of a Maryland business corporation would be available for
inspection by stockholders under the laws of the State of Maryland. Except as
specifically provided for in this Declaration of Trust or in Title 8 of the
Corporations and Associations Article of the Annotated Code of Maryland,
Shareholders shall have no greater right than stockholders of a Maryland
business corporation to require financial or other information from the Trust,
the Trustees or officers of the Trust. Any Federal or state securities
administrator or the MSDAT shall have the right, at reasonable times during
business hours and for proper purposes, to inspect the books and records of the
Trust.
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7.5. COUNTERPARTS. This Declaration of Trust may be simultaneously executed
in several counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts together shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
7.6. PROVISIONS OF THE TRUST IN CONFLICT WITH LAW OR REGULATIONS;
SEVERABILITY.
(a) The provisions of this Declaration of Trust are severable, and if
the Trustees shall determine, with the advice of counsel, that any one or
more of such provisions (the "CONFLICTING PROVISIONS") are in conflict with
the provisions of Code relating to a REIT, the Conflicting Provisions shall
be deemed never to have constituted a part of this Declaration of Trust;
PROVIDED, HOWEVER, that such determination by the Trustees shall not affect
or impair any of the remaining provisions of this Declaration of Trust or
render invalid or improper any action taken or omitted (including but not
limited to the election of Trustees) prior to such determination. An
amendment in recordable form signed by a majority of the Trustees setting
forth any such determination and reciting that it was duly adopted by the
Trustees, or a copy of this Declaration of Trust, with the Conflicting
Provisions removed pursuant to such a determination, in recordable form,
signed by a majority of the Trustees, shall be conclusive evidence of such
determination when filed with the MSDAT. The Trustees shall not be liable
for failure to make any determination under this Section 7.6(a). Nothing in
this Section 7.6(a) shall in any way limit or affect the right of the
Trustees to amend this Declaration of Trust as provided in Section 6.3
hereof.
(b) If any provision of this Declaration of Trust shall be held 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 as if any such invalid or
unenforceable provision were not contained herein.
7.7. CERTIFICATIONS. The following certifications shall be final and
conclusive as to any Persons dealing with the Trust:
(a) a certification of a vacancy among the Trustees by reason of
resignation, removal, increase in the number of Trustees, incapacity, death
or otherwise, when made in writing by a majority of the remaining Trustees;
(b) a certification as to the individuals holding office as Trustees or
officers at any particular time, when made in writing by the secretary of
the Trust;
(c) a certification that a copy of this Declaration of Trust or of the
Bylaws is a true and correct copy thereof as than in force, when made in
writing by the secretary of the Trust;
(d) a certification as to any actions by Trustees, other than the above
when made in writing by the secretary of the Trust or by any Trustee.
ARTICLE VIII
DEFINITIONS
8.1. DEFINITIONS. The terms defined in this Article, wherever used in this
Declaration of Trust, shall, unless the context otherwise requires, have the
respective meanings hereinafter specified. Whenever the singular number is used
in this Declaration of Trust and when permitted by the context, the same shall
include the plural, and the masculine gender shall include the feminine and
neuter genders, and vice versa. Where applicable, calculations to be made
pursuant to any such definition shall be made in accordance with generally
accepted accounting principles as in effect from time to time except as
otherwise provided in such definition.
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(a) AFFILIATE. The term "AFFILIATE" of a Person shall mean (1) any
Person directly or indirectly owning, controlling, or holding, with power to
vote, 10% or more of the outstanding voting securities of such other Person,
(2) any Person 10% or more of whose outstanding voting securities are
directly or indirectly owned, controlled, or held, with power to vote, by
such other Person, (3) any person directly or indirectly controlling,
controlled by, or under common control with such other Person (4) any
executive officer, director, trustee or general partner of such other
Person, and (5) any legal entity for which such Person acts as an executive
officer, director, trustee or general partner.
(b) AMEX. The term "AMEX" shall mean the American Stock Exchange, Inc.
(c) ANNUAL REPORT. The term "ANNUAL REPORT"shall have the meaning set
forth in Section 4.11(a) hereof.
(d) BENEFICIAL OWNERSHIP. The term "BENEFICIAL OWNERSHIP" shall mean
ownership of Shares by a Person, whether the interest in the Shares is held
directly or indirectly (including by a nominee), and shall include interests
that would be treated as owned through the application of Section 544 of the
Code, as modified by Section 856(h)(1)(B) of the Code. The terms "BENEFICIAL
OWNER," "BENEFICIALLY OWNS," and "BENEFICIALLY OWNED" shall have the
correlative meanings.
(e) BUSINESS DAY. The term "BUSINESS DAY"shall mean any day, other than
a Saturday or Sunday, that is neither a legal holiday nor a day on which
banking institutions in New York City are authorized or required by law,
regulation or executive order to close.
(f) BYLAWS. The term "BYLAWS" shall have the meaning set forth in
Section 3.3 hereof.
(g) CHARITABLE BENEFICIARY. The term "CHARITABLE BENEFICIARY" shall mean
one or more beneficiaries of the Charitable Trust as determined pursuant to
Section 4.14(b)(6) hereof, provided that each such organization must be
described in Section 501(c)(3) of the Code and contributions to each such
organization must be eligible for deduction under each Sections
170(b)(1)(A), 2055 and 2522 of the Code.
(h) CHARITABLE TRUST. The term "CHARITABLE TRUST" shall mean any trust
provided for in Section 4.14(b)(1) hereof.
(i) CHARITABLE TRUSTEE. The term "CHARITABLE TRUSTEE" shall mean the
Person unaffiliated with the Trust and a Prohibited Owner, that is appointed
by the Trust to serve as trustee of the Charitable Trust.
(j) CLOSING PRICE. The term "CLOSING PRICE" on any date shall mean the
last sale price for such Shares, regular way, or in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular
way, for such Shares, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed
or admitted to trading on the NYSE or, if such Shares is not listed or
admitted to trading on the NYSE, as reported on the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which such Shares is listed or
admitted to trading or, if such Shares is not listed or admitted to trading
on any national securities exchange, the last quoted price, or, if not so
quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the NASDAQ National Market, or, if
such automated quotation system is no longer in use, the principal other
automated quotation system that may then be in use or, if such Shares is not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in such
Shares selected by the Board of Trustees of the Trust or, in the event that
no trading price is available for such Shares, the fair market value of the
Shares, as determined in good faith by the Board of Trustees of the Trust.
(k) CODE. The term "CODE" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
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(l) COMMON SHARES. The term "COMMON SHARES" shall mean the shares of
beneficial interest of the Trust as described in Section 4.1 hereof as
Common Shares.
(m) CONSTRUCTIVE OWNERSHIP. The term "CONSTRUCTIVE OWNERSHIP" shall mean
ownership of Shares by a Person, whether the interest in the Shares is held
directly or indirectly (including by a nominee), and shall include interests
that would be treated as owned through the application of Section 318(a) of
the Code, as modified by Section 856(d)(5) of the Code. The terms
"CONSTRUCTIVE OWNER," "CONSTRUCTIVELY OWNS," and "CONSTRUCTIVELY OWNED"
shall have the correlative meanings.
(n) DECLARATION OF TRUST. The term "DECLARATION OF TRUST" or "THIS
DECLARATION OF TRUST" shall mean this Declaration of Trust, as amended,
restated, supplemented or modified from time to time. The use in this
Declaration of Trust of "HEREIN" and "HEREUNDER" shall be deemed to refer to
this Declaration of Trust and shall not be limited to the particular text,
article or section in which such words appear.
(o) DISQUALIFIED PERSON. The term "DISQUALIFIED PERSON" shall mean (1)
the United States, any State or political subdivision thereof, any foreign
government, any international organization, or any agency or instrumentality
of any of the foregoing, (2) any organization (other than a cooperative
described in Section 521 of the Code) which is exempt from tax unless such
organization is subject to the tax imposed by Section 511 of the Code, and
(3) any organization described in Section 1381(a)(2)(C) of the Code.
(p) EXCEPTED HOLDER. The term "EXCEPTED HOLDER" shall mean any
shareholder of the Trust for whom an Excepted Holder Ownership Limit is
created by this Declaration of Trust or by the Board of Trustees pursuant to
Section 4.14(a)(7) hereof.
(q) EXCEPTED HOLDER OWNERSHIP LIMIT. The term "EXCEPTED HOLDER OWNERSHIP
LIMIT" shall mean, provided that the affected Excepted Holder agrees to
comply with the requirements established by the Board of Trustees pursuant
to Section 4.14(a)(7) hereof, and subject to adjustment pursuant to Section
4.14(a)(8) hereof, the percentage limit established by the Board of Trustees
pursuant to Section 4.14(a)(7) hereof.
(r) HUDSON BAY EXCEPTED HOLDER LIMIT. The term "Hudson Bay Excepted
Holder Limit" shall mean, subject to adjustment pursuant to Section
4.14(a)(7), 40% of the Common Shares outstanding or treated as outstanding
under Section 544 of the Code; provided that no Person that is a Beneficial
Owner of Hudson Bay may Beneficially Own more than 4.9% of the Common Shares
outstanding or treated as outstanding under Section 544 of the Code. Hudson
Bay shall be subject to the Ownership Limit with respect to any Shares
acquired that are not Common Shares.
(s) HUDSON BAY. The term "Hudson Bay" shall mean Hudson Bay Partners II,
L.P.
(t) INITIAL DATE. The term "Initial Date" shall mean the date upon which
the Declaration of Trust containing Section 4.14 is filed for record with
the MSDAT.
(u) MARKET PRICE. The term "MARKET PRICE" on any date shall mean, with
respect to any class or series of outstanding Shares, the Closing Price for
such Shares on such date.
(v) MCBRIDE FAMILY. The term "McBride Family" shall mean David McBride,
Michael McBride and Timothy McBride, each of their parents, brothers,
sisters, spouses and children, any lineal descendants of any of the
foregoing, any estates of any of the foregoing and any trusts now or
hereafter established for the benefit of any of the foregoing. As referred
to herein, a "branch" of the McBride Family shall mean all Persons referred
to in the preceding sentence whose ownership of Common Shares is
Beneficially Owned by one individual who is part of the McBride Family (as
the term "individual" is defined in Section 542(a)(2) of the Code, as
modified by Section 856(h)(3) of the Code); provided that a Person shall be
treated as part of the "branch" that results in the greatest Beneficial
Ownership by an individual who is part of the McBride Family and such Person
shall not be treated as part of any other "branch."
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(w) MCBRIDE FAMILY EXCEPTED HOLDER LIMIT. The term "McBride Family
Excepted Holder Limit" shall mean, subject to adjustment pursuant to Section
4.14(a)(7) and this Section 8.1(v), 39.9% of the Common Shares outstanding.
The McBride Family Excepted Holder Limit shall be reduced to 35% at such
time as any branch of the McBride Family Beneficially Owns less than 4.9% of
the outstanding Common Shares, provided that if three or more branches of
the McBride Family each Beneficially Own 4.9% or more of the outstanding
Common Shares, the McBride Family Excepted Holder Limit shall not be reduced
pursuant to this sentence. The McBride Family Excepted Holder Limit shall be
further reduced to 30.1% at such time as any two branches of the McBride
Family each Beneficially Owns less than 4.9% of the outstanding Common
Shares, provided that if two or more branches of the McBride Family each
Beneficially Own 4.9% or more of the outstanding Common Shares, the McBride
Family Excepted Holder Limit shall not be reduced pursuant to this sentence.
At such time as any branch of the McBride Family Beneficially Owns 4.9% or
less of the outstanding Common Shares, the Person included in such branch
will be subject to the Ownership Limit and the Common Shares Beneficially
Owned by such Person shall no longer be considered in determining the
McBride Family's Beneficial Ownership for purposes of the McBride Family
Excepted Holder Limit. The McBride Family shall be subject to the Ownership
Limit with respect to any Preferred Stock acquired.
(x) MORTGAGE LOANS. The term "MORTGAGE LOANS" shall mean notes,
debentures, bonds and other evidences of indebtedness or obligations,
whether negotiable or non-negotiable, which are secured or collateralized by
Mortgages.
(y) MORTGAGES. The term "MORTGAGES" shall mean mortgages, deeds of trust
or other security interests in Real Property.
(z) MGCL. The term "MGCL" shall mean the Maryland General Corporation
Law.
(aa) MSDAT. The term "MSDAT" shall mean the State Department of
Assessments and Taxation of Maryland.
(ab) OWNERSHIP LIMIT. The term "Ownership Limit" shall mean (i) with
respect to the Common Shares, 4.9% (in value or number of shares, whichever
is more restrictive) of the outstanding shares of COMMON Shares; and (ii)
with respect to any class or series of Preferred Stock, 9.9% (in value or
number of shares, whichever is more restrictive) of the outstanding shares
of such class or series of Preferred Stock.
(ac) PERSON. The term "PERSON" shall mean an individual, corporation,
partnership, limited liability company, estate, trust (including a trust
qualified under Sections 401(a) or 501(c)(17) of the Code), a portion of a
trust permanently set aside for or to be used exclusively for the purposes
described in Section 642(c) of the Code, association, private foundation
within the meaning of Section 509(a) of the Code, joint stock company or
other entity a group as that term is used for purposes of Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended, and a group to which an
Excepted Holder Limit applies.
(ad) PLAN ASSET REGULATIONS. The term "PLAN ASSET REGULATIONS" shall
mean the regulations of the United States Department of Labor found at Title
29, Section 2510.3-101 of the United States Code issued pursuant to the
Employee Retirement Income Security Act of 1974, as amended.
(ae) PROHIBITED OWNER. The term "PROHIBITED OWNER" shall mean, with
respect to any purported Transfer, any Person who, but for the provisions of
Section 4.14(a)(1) hereof, would Beneficially Own or Constructively Own
Shares, and if appropriate in the context, shall also mean any Person who
would have been the record owner of the shares that the Prohibited Owner
would have so owned.
(af) REAL PROPERTY. The term "REAL PROPERTY" shall mean and include
land, leasehold interests (including but not limited to interests of a
lessor or lessee therein), rights and interests in land, and in any
buildings, structures, improvements, furnishings and fixtures located on or
used in connection with
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land or interests therein, but does not include investments in Mortgages,
Mortgage Loans or interests therein.
(ag) REIT. The term "REIT" shall mean a real estate investment trust
within the meaning of Section 856 of the Code.
(ah) RESTRICTION TERMINATION DATE. The term "RESTRICTION TERMINATION
DATE" shall mean the first day after the Initial Date on which the Board of
Trustees of the Trust determines that it is no longer in the best interests
of the Trust to attempt to, or continue to, qualify as a REIT or that
compliance with the restriction and limitations Beneficial Ownership,
Constructive Ownership and Transfers of Shares set forth herein is no longer
required in order for the Trust to qualify as a REIT.
(ai) SECURITIES. The term "SECURITIES" shall mean any stock, shares,
voting trust certificates, bonds, debentures, notes or other evidences of
indebtedness or in general any instruments commonly known as "securities" or
any certificates of interest, shares or participation in, temporary or
interim certificates for, receipts for, guarantees of, or warrants, options
or rights to subscribe to, purchase or acquire any of the foregoing.
(aj) SHAREHOLDERS. The term "SHAREHOLDERS" shall mean as of any
particular time all holders of record of outstanding Shares at such time.
(ak) SHARES. The term "SHARES" or, as the context may require, "SHARES"
shall mean the shares of beneficial interest of the Trust as described in
Section 4.1 hereof or in any articles supplementary hereto, and shall
include Common Shares.
(al) TRANSFER. The term "TRANSFER" shall mean any issuance, sale,
transfer, gift, assignment, devise or other disposition, as well as any
other event, that causes any Person to acquire Beneficial Ownership or
Constructive Ownership, or any agreement to take any such actions or cause
any such events, of Shares or the right to vote or receive dividends on
Shares, including (1) the granting or exercise of any option or warrant (or
any disposition of any option or warrant), (2) any disposition of any
securities or rights convertible into or exchangeable for Shares or any
interest in Shares or any exercise of any such conversion or exchange right,
and (3) Transfers of interests in other entities that result in changes in
Beneficial or Constructive Ownership of Shares; in each case, whether
voluntary or involuntary, whether owned of record, Constructively Owned or
Beneficially Owned and whether by operation of law or otherwise. The terms
"TRANSFERRING" and "TRANSFERRED" shall have the correlative meanings.
(am) TRUST. The term "TRUST" shall mean the Trust created by this
Declaration of Trust.
(an) TRUSTEES. The term "TRUSTEES" shall mean, as of any particular
time, the original signatories hereto as long as they hold office hereunder
and additional and successor Trustees, and shall not include the officers,
employees or agents of the Trust or the Shareholders. Nothing herein shall
be deemed to preclude the Trustees from also serving as officers, employees
or agents of the Trust or owning shares.
(ao) TRUST ESTATE. The term "TRUST ESTATE" shall mean as of any
particular time any and all property, real, personal or otherwise, tangible
or intangible, which is transferred, conveyed or paid to or purchased by the
Trust or Trustees and all rents, income, profits and gains therefrom and
which at such time is owned or held by or for the Trust or the Trustees.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Declaration of Trust to
be executed as of the day and year first written above. The undersigned
acknowledge, under penalties of perjury, that this document is such Trustee's
free act and deed, and that, to the best of his knowledge, information and
belief, the matters and facts set forth herein are true in all material
respects.
______________________________________
Michael J. Falcone
c/o Pioneer Development Company
250 South Clinton Street
Syracuse, New York 13202-1258
ACKNOWLEDGMENTS
State of New York ____________, 19______
ss.
County of Onondaga
There personally appeared the above-named Michael J. Falcone and
acknowledged the foregoing instrument to be his free act and deed.
Before me,
/s/___________________________________
Notary Public
My Commission Expires:________________
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<PAGE>
______________________________________
Francesco Galesi
c/o Galesi Management Corporation
100 State Street
Albany, New York 12207-1800
ACKNOWLEDGMENTS
State of New York ____________, 19______
ss.
County of Albany
There personally appeared the above-named ____________ and acknowledged the
foregoing instrument to be his free act and deed.
Before me,
/s/___________________________________
Notary Public
My Commission Expires:________________
29
<PAGE>
______________________________________
Jeffrey E. Kelter
c/o American Real Estate Investment
Corporation
620 West Germantown Pike, Suite 200
Plymouth Meeting, Pennsylvania 19462
ACKNOWLEDGMENTS
State of Pennsylvania ____________, 19______
ss.
Montgomery County
There personally appeared the above-named ____________ and acknowledged the
foregoing instrument to be his free act and deed.
Before me,
/s/___________________________________
Notary Public
My Commission Expires:________________
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<PAGE>
______________________________________
David H. Lesser
c/o Hudson Bay Partners II, L.P.
237 Park Avenue, Suite 900
New York, New York 10017
ACKNOWLEDGMENTS
State of New York ____________, 19______
ss.
New York County
There personally appeared the above-named ____________ and acknowledged the
foregoing instrument to be his free act and deed.
Before me,
/s/___________________________________
Notary Public
My Commission Expires:________________
31
<PAGE>
______________________________________
David F. McBride
c/o American Real Estate Investment
Corporation
620 West Germantown Pike, Suite 200
Plymouth Meeting, Pennsylvania 19462
ACKNOWLEDGMENTS
State of Pennsylvania ____________, 19______
ss.
County of Montgomery
There personally appeared the above-named ____________ and acknowledged the
foregoing instrument to be his free act and deed.
Before me,
/s/___________________________________
Notary Public
My Commission Expires:________________
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<PAGE>
______________________________________
James R. Mulvihill
5700 Piedmont
Cherry Hills Village, Colorado 80111
ACKNOWLEDGMENTS
State of Colorado ____________, 19______
ss.
County of Arapahoe
There personally appeared the above-named ____________ and acknowledged the
foregoing instrument to be his free act and deed.
Before me,
/s/___________________________________
Notary Public
My Commission Expires:________________
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<PAGE>
______________________________________
Russell C. Platt
c/o JER International
630 Fifth Avenue, 23rd Floor
New York, New York 10111
ACKNOWLEDGMENTS
State of New York ____________, 19______
ss.
County of New York
There personally appeared the above-named ____________ and acknowledged the
foregoing instrument to be his free act and deed.
Before me,
/s/___________________________________
Notary Public
My Commission Expires:________________
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<PAGE>
ANNEX A
TO THE DECLARATION OF TRUST OF
KEYSTONE PROPERTY TRUST
ARTICLES SUPPLEMENTARY CLASSIFYING AND DESIGNATING A
SERIES OF PREFERRED STOCK AS
SERIES A CONVERTIBLE PREFERRED STOCK
AND FIXING DISTRIBUTION AND
OTHER PREFERENCES AND RIGHTS OF SUCH SERIES
Keystone Property Trust, a Maryland statutory real estate trust, having its
principal office in the state of Maryland in the City of Baltimore (the
"Trust"), hereby certifies to the State Department of Assessments and Taxation
of Maryland that:
Pursuant to authority expressly vested in the Board of Trustees by Article V
of the Declaration of Trust, the Board of Trustees adopted resolutions
authorizing the creation and issuance of Eight Hundred Thousand (800,000)
shares, with a liquidation preference of Twenty-Five Dollars ($25.00) per share,
of Series A Convertible Preferred Stock and adopted resolutions granting the
Executive Committee of the Board of Trustees with full power and authority to
determine the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption, number of shares and dividend rate.
The preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption, number of shares and dividend rate of the Series Convertible
Preferred Stock are as follows:
SECTION 1. NUMBER OF SHARES AND DESIGNATION. This series of Preferred Stock
shall be designated as Series A Convertible Preferred Stock (the "Series A
Preferred Shares"), and the number of shares of Preferred Stock which shall
constitute such series shall be 800,000 shares 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 A Preferred Shares, the
following terms shall have the meanings indicated:
"Act" shall mean the Securities Act of 1933, as amended.
"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, New York
are not required to be open.
"Change in Control" shall mean any merger or consolidation of the Trust in
which one or more entities which are not affiliates of the Trust acquire more
than 50% of the Trust's outstanding voting equity securities or as a result of
which stockholders of the Trust immediately before such merger or consolidation
hold, immediately after such merger or consolidation, less than 50% of the
surviving entity's outstanding common stock.
"Common Shares" shall mean the shares of common stock, par value $.001 per
share, of the Trust.
"Constituent Person" shall have the meaning set forth in paragraph (e) of
Section 7 hereof.
"Continuation Right" shall have the meaning set forth in Section 4.
"Conversion Price" shall mean the conversion price per Common Share for
which each Series A Preferred Share is convertible, as such Conversion Price may
be adjusted pursuant to Section 7 hereof. The initial conversion price shall be
$16.50 (equivalent to a conversion rate of 1.51515 Common Shares for each Series
A Preferred Share).
<PAGE>
"Current Market Price" shall mean, with respect to the Common Shares, on any
date specified herein, the average of the Market Price during the period of the
most recent ten consecutive trading days ending on such date.
"Declaration" shall mean the Trust's Declaration of Trust and any amendments
or supplements thereto.
"Dividend Payment Date" shall mean, with respect to each Dividend Period,
the last calendar day of January, April, July and October, in each year,
commencing on January 31, 1999; 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 first Business Day immediately
following such Dividend Payment Date.
"Dividend Periods" shall mean quarterly dividend periods commencing on
February 1, May 1, August 1 and November 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 January 31, 1999).
"Issue Date" shall mean the first date on which any Series A Preferred
Shares are issued and sold.
"Junior Shares" shall mean the Common Shares and any other class or series
of shares of capital stock of the Trust constituting junior stock within the
meaning set forth in paragraph (c) of Section 9 hereof.
"Liquidation" shall mean (A) a dissolution or winding up of the Trust,
whether voluntary or involuntary, (B) a consolidation or merger of the Trust
with and into one or more entities which are not affiliates of the Trust which
results in a Change in Control, or (C) a sale or transfer of all or
substantially all of the Trust's assets other than to an affiliate of the Trust.
"Liquidation Preference" shall have the meaning set forth in Section 4
hereof.
"Liquidation Premium" shall mean (X) on or prior to December 15, 2003, in
connection with (i) a Merger Liquidation in which the surviving entity is a
Qualified Entity, an amount equal to five percent (5%) of the Liquidation
Preference or (ii) any other Liquidation, an amount equal to ten percent (10%)
of the Liquidation Preference, or (Y) after December 15, 2003, in connection
with any Liquidation, an amount equal to the Redemption Premium set forth in
Section 5.
"Market Price" shall mean, with respect to the Common Shares on any date,
the last reported sales price, regular way on such day, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way on such day, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the American Stock Exchange ("AMEX") or, if the Common
Shares are not listed or admitted for trading on AMEX, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Common Shares
are listed or admitted for trading or, if the Common Shares are not listed or
admitted for trading on any national securities exchange, the last quoted price,
or if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the NASD Automated Quotation System or,
if such system is no longer in use, the principal other automated quotation
system that may then be in use, or if the Common Shares are not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker regularly making a market in the Common Shares
selected for such purpose by the Board of Trustees or, if there is no such
professional market maker, such amount as an independent investment banking firm
selected by the Board of Trustees determines to be the value of a Common Share.
"Merger Liquidation" shall have the meaning set forth in Section 4.
"Non-Electing Share" shall have the meaning set forth in paragraph (e) of
Section 7 hereof.
"Parity Shares" shall have the meaning set forth in paragraph (b) of Section
9 hereof.
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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.
"Preferred Stock" shall mean the preferred stock, par value $.001 per share,
of the Trust.
"Qualified Entity" shall mean any Person that (I) either (i) is or may be
the issuer of senior unsecured debt securities which are rated no lower than
investment grade by either Standard & Poor's Rating Service, Inc., a division of
the McGraw Hill Companies, Inc. ("S&P"), or Moody's Investor Services, Inc.
("Moody's"), which rating may (A) relate to any outstanding issue of such debt
securities or (B) relate to any unissued debt securities registered on an
effective shelf registration statement or (ii) is an issuer of outstanding
preferred equity securities which are rated no lower than Ba1 by Moody's or BB+
by S&P, and (II) is the issuer of common equity securities the average daily
trading volume of which on the principal national securities exchange on which
such common equity securities are traded on the 30 most recent Trading Days has
been equal to or greater than $2,475,000 per day.
"Qualifying Offering" shall mean the sale of Common Shares in an
underwritten public offering (in which no person acquires more than 10% of the
Common Shares to be sold) at a price of at least $16.50 per share which results
in net proceeds to the REIT of at least $150 million.
"Redemption Date" shall have the meaning set forth in paragraph (a) of
Section 5 hereof.
"Redemption Notice" shall have the meaning set forth in paragraph (a) of
Section 5 hereof.
"Redemption Premium" shall have the meaning set forth in paragraph (a) of
Section 5 hereof.
"Securities" shall have the meaning set forth in paragraph (d)(iii) of
Section 7 hereof.
"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 a
dividend or other distribution by the Board of Trustees, the allocation of funds
to be so paid on any series or class of shares of capital stock of the Trust;
provided, however, that if any funds for any class or series of Junior Shares or
any class or series of Parity Shares 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.
"Trading Day" shall mean any day on which the securities in question are
traded on the New York Stock Exchange ("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 Nasdaq National
Market, or if such securities are not quoted on such Nasdaq National Market, in
the applicable securities market in which the securities are traded.
"Transaction" shall have the meaning set forth in paragraph (e) of Section 7
hereof.
"Voting Preferred Shares" shall have the meaning set forth in Section 10
hereof.
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SECTION 3. DIVIDENDS.
(a) The holders of Series A Preferred Shares shall be entitled to
receive, when, as and if authorized and declared by the Board of Trustees
out of funds legally available for that purpose, dividends payable in cash
at the rate per annum equal to the greater of (i) $2.25 per Series A
Preferred Share or (ii) an amount per Series A Preferred Share equal to the
aggregate annual amount of cash dividends paid or payable, if any, with
respect to that number of Common Shares, or portion thereof, into which each
Series A Preferred Share is then convertible, in accordance with the terms
of these Articles Supplementary (such greater amount, the ("Annual Dividend
Rate"). The amount referred in clause (ii) of this subparagraph (a) with
respect to each Dividend Period shall be determined as of the applicable
Dividend Payment Date by multiplying the number of Common Shares, or portion
thereof calculated to the fourth decimal point, into which a Series A
Preferred Share would be convertible at the opening of business on such
Dividend Payment Date (based on the Conversion Price then in effect) by the
quarterly cash dividend payable or paid for such Dividend Period in respect
of a Common Share outstanding as of the record date for the payment of
dividends on the Common Shares with respect to such Dividend Period or, if
different, with respect to the most recent quarterly period for which
dividends with respect to the Common Shares have been declared. Such
dividends shall be 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, shall compound quarterly at a
rate per annum equal to nine percent (9%) and shall be payable quarterly,
when, as and if authorized and 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 the Series A Preferred Shares, as they appear on the
stock records of the Trust at the close of business on each record date
which shall not be more than 30 days preceding the applicable Dividend
Payment Date (the "Dividend Payment Record Date"), as shall be fixed by the
Board of Trustees. Accrued and unpaid dividends for any past Dividend
Periods may be authorized and declared and paid at any time, without
reference to any regular Dividend Payment Date, to holders of record on such
date, which shall not be more than 45 days preceding the payment date
thereof, as may be fixed by the Board of Trustees. The amount of accrued and
unpaid dividends on any Series A Preferred Share at any date shall be the
amount of any dividends thereon calculated and compounded at the applicable
rate to and including such date, whether or not earned or declared, which
have not been paid in cash.
(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 amount of dividends payable for the initial
Dividend Period, or any other period shorter or longer than a full Dividend
Period, on the Series A Preferred Shares shall be computed on the basis of
twelve 30-day months and a 360-day year. 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, plus any other amounts provided in these
Articles Supplementary.
(c) So long as any Series A Preferred Shares are outstanding, no
dividends, except as described in the immediately following sentence, shall
be authorized and declared or paid or set apart for payment on any series or
class or classes of Parity Shares for any period unless full cumulative
dividends have been or contemporaneously are authorized and declared and
paid or authorized and 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 for 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
authorized and declared upon Series A Preferred Shares and all dividends
authorized and declared upon any other series or class or classes of Parity
Shares shall be authorized and declared ratably in proportion to the
respective amounts of dividends accumulated and unpaid on the Series A
Preferred Shares and such Parity Shares.
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<PAGE>
(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,
Junior Shares) shall be authorized and declared or paid or set apart for
payment or other distribution authorized and 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 and in compliance with requirements of an
employee incentive or benefit plan of the Trust or any subsidiary), for any
consideration (or any moneys to be paid to or made available for a sinking
fund for the redemption of any shares of such stock) by the Trust, directly
or indirectly (except by conversion into or exchange for Junior Shares),
unless in each case (i) the full cumulative dividends on all outstanding
Series A Preferred Shares and any other Parity Shares of the Trust shall
have been paid or 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 set apart for the payment of the dividend for the current Dividend Period
with respect to the Series A Preferred Shares and any Parity Shares.
SECTION 4. LIQUIDATION PREFERENCE.
(a) In the event of any Liquidation, 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 Series A
Preferred Shares shall be entitled (subject to the Continuation Right of
such holders described below) to receive an amount equal to the greater of
(i) (A) Twenty-Five Dollars ($25.00) per Series A Preferred Share plus
dividends (whether or not earned or declared) accrued and unpaid thereon to
the date of final distribution to such holder (the "Liquidation Preference")
plus (B) the Liquidation Premium or (ii) an amount per Series A Preferred
Share equal to the amount which would have been payable had each Series A
Preferred Share been converted into Common Shares immediately prior to such
Liquidation. The foregoing amounts shall be subject to equitable adjustment
whenever there shall occur a stock dividend, stock split, combination,
reorganization, recapitalization, reclassification or other similar event
involving a change in the capital structure of the Series A Preferred
Shares. Until the holders of the Series A Preferred Shares have been paid
the Liquidation Preference in full, no payment will be made to any holder of
Junior Shares upon Liquidation. If, upon any such Liquidation, the assets of
the Trust, or proceeds thereof, distributable among the holders of 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 Stock, then such assets, or the proceeds thereof, shall
be distributed among the holders of such Series A Preferred Shares and such
other Parity Stock ratably in accordance with the amounts that would be
payable on such Series A Preferred Shares and such other Parity Stock if all
amounts payable thereon were paid in full.
In connection with a Merger Liquidation, the holders of Series A Preferred
Shares shall have the right (a "Continuation Right") to elect, by delivering
written notice to the Trust not less than five Business Days prior to the Merger
Liquidation, to require the Trust to make provision for the Series A Preferred
Shares to be assumed by the surviving entity as described in Section 7(e);
provided, however, notwithstanding the election by the holders of the Series A
Preferred Shares of the Continuation Right, the Trust shall have the right, in
connection with any Merger Liquidation, to elect, by delivering written notice
to the holders of Series A Preferred Shares at any time prior to the Merger
Liquidation, to redeem any or all of the outstanding Series A Preferred Shares
for an amount per Series A Preferred Share equal to the Liquidation Preference
plus a premium equal to ten percent (10%) of the Liquidation Preference. A
"Merger Liquidation" shall be a Liquidation which constitutes a consolidation or
merger of the Trust with one or more entities that are not affiliates of the
Trust and as a result of which the Trust is not the Surviving Entity.
(b) Subject to the rights of the holders of any Parity Shares, upon any
Liquidation of the Trust, after payment shall have been made in full to the
holders of Series A Preferred Shares and any Parity
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Shares, as provided in this Section 4, any other series or class or classes
of Junior Shares shall, subject to the respective terms thereof, be entitled
to receive any and all assets remaining to be paid or distributed, and the
holders of the Series A Preferred Shares and any Parity Shares shall not be
entitled to share therein.
SECTION 5. REDEMPTION AT THE OPTION OF THE TRUST.
(a) The Series A Preferred Shares shall not be redeemable by the Trust
prior to December 15, 2003. On and after December 15, 2003, the Trust, at
its option, may redeem the Series A Preferred Shares, in whole but not in
part, as set forth herein, subject to the provisions described below.
At any time on or after December 15, 2003, upon the written election of the
Trust given to each record holder of Series A Preferred Shares (the "Redemption
Notice"), the Trust may redeem for cash on the date specified in the Redemption
Notice (which date shall not be less than 20 days nor more than 30 days after
the date of the Redemption Notice) (the "Redemption Date"), all, but not less
than all, of the outstanding Series A Preferred Shares at a price per Series A
Preferred Share equal to the Liquidation Preference plus a premium (the
"Redemption Premium") which shall equal the following percentages of the
Liquidation Preference during in the following periods:
<TABLE>
<S> <C>
From December 15, 2003 through and including December 14, 2004..... 4.5%
From December 15, 2004 through and including December 14, 2005..... 3.375%
From December 15, 2005 through and including December 14, 2006..... 2.25%
From December 15, 2006 through and including December 14, 2007..... 1.125%
December 15, 2007 and thereafter................................... 0%
</TABLE>
(b) From and after the Redemption Date, (i) except as otherwise
provided herein, dividends on the Series A Preferred Shares so called for
redemption shall cease to accrue, (ii) said 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 rights to
receive the 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 Redemption 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, or in Philadelphia, Pennsylvania
and that has, or is an affiliate of a bank or trust company that has, a
capital and surplus of at least $50,000,000, any cash 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 holder of Series
A Preferred Shares to be redeemed on any cash so set aside by the Trust.
SECTION 6. REACQUIRED 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 Preferred Stock,
without designation as to series.
SECTION 7. CONVERSION. Holders of Series A 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
7, a holder of Series A Preferred Shares shall have the right, at his or her
option, at any time and from time to 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 Series A Preferred 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 7) by surrendering
such Series A Preferred Shares to be converted, such surrender to be made in
the manner provided in paragraph (b) of this Section 7; provided, however,
that the right to
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<PAGE>
convert Series A Preferred Shares called for redemption pursuant to Section
5 hereof shall terminate at the close of business on the Redemption Date
fixed for such redemption, unless the Trust shall default in making payment
of any cash payable upon such redemption under Section 5 hereof.
(b) In order to exercise the conversion right, the holder of each
Series A Preferred Share to be converted shall surrender the certificate
representing such Series A Preferred Share, duly endorsed or assigned to the
Trust or in blank, to the Trust, accompanied by written notice to the Trust
that the holder thereof elects to convert such Series A Preferred Shares.
Unless the Common Shares issuable on conversion are to be issued in the same
name as the name in which such Series A Preferred Shares are registered,
each share surrendered for conversion shall be accompanied by instruments of
transfer, in form satisfactory to the Trust, duly executed by the holder or
such holder's duly authorized attorney and an amount sufficient to pay any
transfer or similar tax (or evidence reasonably satisfactory to the Trust
demonstrating that such taxes have been paid).
Holders of Series A Preferred Shares at the close of business on any
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 (and of any accrued and unpaid dividends to the date or
conversion) following such Dividend Payment Record Date and prior to such
Dividend Payment Date. However, Series A 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 a Redemption Notice
with respect to a Redemption Date during such period, such Series A 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 A Preferred Shares on a
Dividend Payment Record Date who (or whose transferee) tenders any such shares
for conversion into Common Shares on such Dividend Payment Date will receive the
dividend payable by the Trust on such Series A Preferred Shares on such date,
and the converting holder need not include payment of the amount of such
dividend upon surrender of Series A Preferred Shares for conversion.
As promptly as practicable after the surrender of certificates for Series A
Preferred Shares as aforesaid, the Trust shall issue and shall deliver at such
office to such holder, or send on his or her written order, a certificate or
certificates for the number of full Common Shares issuable upon the conversion
of such Series A Preferred Shares in accordance with the provisions of this
Section 7, 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 7.
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 A
Preferred Shares shall have been surrendered and such notice received by the
Trust as aforesaid, 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
Common Shares represented thereby at such time on such date, and such conversion
shall be at the Conversion Price in effect at such time and on such date unless
the stock 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 stock transfer books are open, but such conversion shall be at the
Conversion Price in effect on the date on which such Series A Preferred 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 A Preferred Shares.
Instead of any fractional interest in a Common Share that would otherwise be
deliverable upon the conversion of a Series A Preferred Share, the Trust
shall pay to the holder of such Series A Preferred 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
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<PAGE>
than one Series A Preferred 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 A Preferred Shares so surrendered.
(d) The Conversion Price shall be adjusted from time to time as
follows:
(i) If the Trust shall after the Issue Date (A) pay a dividend or
make a distribution on its shares of capital stock 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 capital stock 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 day 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 A 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, had such Series A Preferred Share been converted immediately prior
to the record date in the case of a dividend or distribution or the
effective date in the case of a subdivision, combination or
reclassification. An adjustment made pursuant to this subparagraph (i)
shall become effective immediately upon the opening of business on the
day next following the record date (subject to paragraph (h) below) in
the case of a dividend or distribution and shall become effective
immediately upon the opening of business on the day next following the
effective date in the case of a subdivision, combination or
reclassification.
(ii) If the Trust shall issue after the Issue Date rights, options
or warrants to all holders of Common Shares entitling them (for a period
expiring within 45 days after the record date mentioned below in this
subparagraph (ii)) to subscribe for or purchase Common Shares at a price
per share less than the Current Market Price per Common Share on the
record date for the determination of stockholders entitled to receive
such rights, options or warrants, then the Conversion Price in effect at
the opening of business on the 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 day following the date fixed for such determination by (B) a
fraction, the numerator of which shall be the sum of (I) the number of
Common Shares outstanding on the close of business on the date fixed for
such determination and (II) the number of Common Shares that the
aggregate proceeds to the Trust from the exercise of such rights, options
or warrants for Common Shares would purchase at such Current Market
Price, and the denominator of which shall be the sum of (I) the number of
Common Shares outstanding on the close of business on the date fixed for
such determination and (II) the number of additional Common Shares
offered for subscription or purchase pursuant to such rights, options or
warrants. Such adjustment shall become effective immediately upon the
opening of business on the day next following such record date (subject
to 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 such Current Market Price, 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 the Chief
Executive Officer or the Board of Trustees, whose determination shall be
conclusive.
(iii) If the Trust shall distribute to all holders of its Common
Shares any shares of capital stock of the Trust (other than Common
Shares) or evidence of its indebtedness or assets (excluding cash
dividends or distributions paid out of assets based upon a fair valuation
of the assets, in excess of the sum of the liabilities of the Trust and
the amount of stated capital
A-8
<PAGE>
attributable to Common Shares, determined on the basis of the most recent
annual consolidated cost basis and current value basis and quarterly
consolidated balance sheets of the Trust and its consolidated
subsidiaries available at the time of the declaration of the dividend or
distribution) or rights or warrants to subscribe for or purchase any of
its securities (excluding those rights 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) called the "Securities"), then in
each case the Conversion Price shall be adjusted so that it shall equal
the price determined by multiplying (A) 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
(B) a fraction, the numerator of which shall be the Current Market Price
per Common Share on the record date mentioned below less the then fair
market value (as determined by the Board of Trustees, whose determination
shall be conclusive) of the portion of the shares of capital stock or
assets or evidences of indebtedness so distributed or of such rights or
warrants applicable to one Common Share, and the denominator of which
shall be the Current Market Price per Common Share on the record date
mentioned below. Such adjustment shall become effective immediately upon
the opening of business on the day next following (subject to paragraph
(h) below) the record date for the determination of stockholders 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 required to be distributed with each Common Share delivered to a
Person converting a Series A 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 A 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).
The occurrence of a distribution or the occurrence of any other event as a
result of which holders of Series A Preferred Shares shall not be entitled to
receive rights, including exchange rights (the "Rights"), pursuant to any
shareholders protective rights agreement (the "Agreement") that may be adopted
by the Trust as if such holders had converted such shares into Common Shares
immediately prior to the occurrence of such distribution or event shall not be
deemed a distribution of Securities for the purposes of any Conversion Price
adjustment pursuant to this subparagraph (iii) or otherwise give rise to any
Conversion Price adjustment pursuant to this Section 7; provided, however, that
in lieu of any adjustment to the Conversion Price as a result of any such a
distribution or occurrence, the Trust shall make provision so that Rights, to
the extent issuable at the time of conversion of any Series A Preferred Shares
into Common Shares, shall issue and attach to such Common Shares then issued
upon conversion in the amount and manner and to the extent and as provided in
the Agreement in respect of issuances at the time of Common Shares other than
upon conversion.
(iv) No adjustment in the Conversion Price shall be required unless
such adjustment would require a cumulative increase or decrease of at
least 1% in such price; provided, however, that any adjustments that by
reason of this subparagraph (iv) 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 7 (other than this
subparagraph (iv)) not later than such time as may be required in order
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<PAGE>
to preserve the tax-free nature of a distribution to the holders of
Common Shares. Notwithstanding any other provisions of this Section 7,
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 7
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 stock dividends,
subdivision of shares, reclassification or combination of shares,
distribution of rights, options or warrants to purchase stock or
securities, or a 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 outstanding, sale of all or
substantially all of the Trust's assets or recapitalization of the Common
Shares but excluding any transaction as to which subparagraph (d)(i) of this
Section 7 applies) (each of the foregoing being referred to herein as a
"Transaction"), in each case as a result of which Common Shares shall be
converted into the right to receive stock, securities or other property
(including cash or any combination thereof), each Series A Preferred Share
that is not redeemed or converted into the right to receive stock,
securities or other property in connection with such Transaction shall
thereafter be convertible into the kind and amount of shares of stock,
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 A 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 (a "Constituent Person"), or an
affiliate of a Constituent Person and (ii) failed to exercise his or her
rights of the election, if any, as to the kind or amount of stock,
securities and other property (including cash) receivable upon such
Transaction (provided that if the kind or amount of stock, securities and
other property (including cash) receivable upon such Transaction is not the
same for each Common Share of the Trust 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 stock, 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 A Preferred Shares that will contain provisions
enabling the holders of the Series A Preferred Shares that remain
outstanding after such
Transaction to convert their Series A Preferred Shares 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 in cash out of assets, based on a fair
valuation of assets, in excess of the sum of the liabilities of the Trust
and the amount of stated capital attributable to Common Shares,
determined on the basis of the most recent annual consolidated cost basis
and current value basis and
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<PAGE>
quarterly consolidated balance sheets of the Trust and its consolidated
subsidiaries available at the time of the declaration of the dividend or
distribution); or
(ii) the Trust shall authorize the granting to the holders of the
Common Shares of rights or warrants to subscribe for or purchase any
shares of any class or any other rights or warrants (other than Rights to
which the second paragraph of subparagraph (d)(iii) of this Section 7
applies); or
(iii) there shall be any reclassification of the Common Shares
(other than an event to which subparagraph (d) (i) of this Section 7
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 involving the conversion or exchange of Common
Shares into securities or other property, 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 and for which approval of any shareholders of the
Trust is required; or
(iv) there shall occur the voluntary or involuntary liquidation,
dissolution or winding up of the Trust,
then the Trust shall cause to be prepared and delivered to the holders of the
Series A Preferred Shares at their addresses as shown on the stock records of
the Trust, as promptly as possible, but at least 15 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 rights 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 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
7.
(g) Whenever the Conversion Price is adjusted as herein provided, the
Trust shall promptly prepare and deliver to the holders of the Series A
Preferred Shares a notice of such adjustment of the Conversion Price setting
forth the adjusted Conversion Price and the effective date of such
adjustment and an officer's certificate setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the facts
requiring such adjustment. The Trust shall mail such notice and such
certificate to the holders of each Series A Preferred Share at such holder's
last address as shown on the stock records of the Trust.
(h) In any case in which paragraph (d) of this Section 7 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 A 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 7.
(i) There shall be no adjustment of the Conversion Price in case of the
issuance of any shares of capital stock of the Trust in a reorganization,
acquisition or other similar transaction except as specifically set forth in
this Section 7. If any action or transaction would require adjustment of the
Conversion Price pursuant to more than one paragraph of this Section 7, only
one adjustment shall be made, and such adjustment shall be the amount of
adjustment that has the highest absolute value.
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(j) If the Trust shall take any action affecting the Common Shares,
other than action described in this Section 7, that in the opinion of the
Board of Trustees would materially adversely affect the conversion rights of
the holders of the Series A Preferred Shares, the Conversion Price for the
Series A Preferred Shares may be adjusted, to the extent permitted by law,
in such manner, if any, and at such time, as the Board of Trustees, in its
sole discretion, may determine to be equitable in the circumstances.
(k) The Trust 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 A
Preferred Shares, the full number of Common Shares deliverable upon the
conversion of all outstanding Series A 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 shares of
Series A 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 A 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 A Preferred Shares, the Trust shall 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 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 A 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.
(l) The Trust shall 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 A
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 any Common Shares or other
securities or property in a name other than that of the holder of the Series
A 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.
(m) The Trust shall provide each holder of Series A Preferred Shares
with written notice (an "Issuance Notice") of any proposed issuance for cash
of Common Shares or securities convertible into Common Shares (other than
limited partnership interests) no later than 10 business days prior to the
proposed issuance thereof. Such Issuance Notice shall specify the purchase
price, the proposed issuance date and all other material terms of such
issuance. Upon delivery to the Trust by any such holder no more than 10
business days after such Issuance Notice is given to such holder of a notice
stating that such holder intends to acquire a portion of the Common Shares
or convertible securities to be issued, such holder shall be entitled, on
the terms offered by the Trust to other prospective purchasers of the Common
Shares or convertible securities to be issued, to purchase up to an amount
of the securities such that, upon consummation of the proposed issuance, the
holder would hold the same percentage of the Common Shares as such holder
holds immediately prior to such issuance (in each case on an as-converted
basis). Any such notice from any such holder shall indicate the amount of
Common Shares or convertible securities it intends to purchase and shall
constitute a binding contract to acquire such Common Shares or convertible
securities on the terms set forth in the Issuance Notice delivered to such
holder by the Trust. Notwithstanding anything herein to the contrary, the
Trust shall be entitled not to proceed with the proposed issuance or to
alter the terms thereof; provided that, in the event that any material terms
of the proposed issuance are altered, (i) any notice delivered by a holder
to the Trust pursuant to this paragraph (m) of Section 7 shall be
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<PAGE>
revoked automatically and (ii) such holder shall be entitled to participate
in such proposed issuance on the revised terms in accordance with this
paragraph (m) of Section 7. The provisions of this paragraph (m) of Section
7 shall no longer apply and shall be of no further effect after the Trust
consummates a Qualifying Offering.
SECTION 8. PERMISSIBLE DISTRIBUTIONS. In determining whether a distribution
(other than upon liquidation, dissolution or winding up), whether by dividend,
or upon redemption or other acquisition of shares or otherwise, is permitted
under Maryland law, 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 shares of any class or series of capital stock
whose preferential rights upon dissolution are superior or prior to those
receiving the distribution shall not be added to the Trust's total liabilities.
SECTION 9. RANKING. Any class or series of shares of capital stock 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 the 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 A Preferred Shares, if the holders of
such class of stock 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"); and
(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 stock or series shall be Common Shares or if the
holders of Series A Preferred Shares shall be entitled to 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
shares of such stock or series, and such stock or series shall not in either
case rank prior to the Series A Preferred Shares.
SECTION 10. VOTING. Except as otherwise set forth herein, the Series A
Preferred Shares 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 trust action.
(a) If and whenever six quarterly dividends (whether or not
consecutive) payable on the Series A Preferred 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 one and the holders of Series A Preferred Shares, voting
separately as a single class, shall be entitled to nominate and elect the
additional Trustee to serve on the Board of Trustees. Whenever all arrearage
in dividends on the Series A Preferred Shares then outstanding shall have
been paid and full 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 to elect such
additional Trustee 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 term of office of the person
elected as a Trustee by the holders of the Series A Preferred Shares shall
forthwith terminate and the number Trustees constituting the Board of
Trustees shall be reduced accordingly. At any time after such voting power
shall have been so vested in the holders of shares of Series A Preferred
Shares, the Secretary of the
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<PAGE>
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 for the election of the additional Trustee 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 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 books of the Trust. The Trustee 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 the Trustee elected by
the holders of the Series A Preferred Shares shall leave the Board of
Trustees, a successor shall be elected by the Board of Trustees, upon the
nomination of the holders of the Series A Preferred Shares, 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.
(b) So long as any Series A Preferred Shares are outstanding, in
addition to any other vote or consent of shareholders required by the
Declaration of the Trust, the affirmative vote of at least 66 2/3% of the
votes entitled to be cast by the holders of Series A Preferred Shares, at
the time outstanding, voting as a single class, 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 Declaration or these Articles Supplementary that materially and
adversely affects the voting powers, rights or preferences of the holders
of the Series A Preferred Shares; provided, however, that (A) the
amendment of the provisions of the Declaration so as to authorize or
create or to increase the authorized amount of, any Junior Shares or any
shares of any class or series ranking on a parity with the Series A
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 (B) any filing with the State Department of Assessments and
Taxation of Maryland by the Trust in connection with a merger,
consolidation or sale of all or substantially all of the assets of the
Trust shall not be deemed to be an amendment, alteration or repeal of any
of the provisions of the Declaration; or
(ii) The authorization or creation of, or the increase in the
authorized amount of, any shares of any class or series or any security
convertible into shares of any class or series 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, in the case of each of subparagraphs (a) and (b), 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, as the case may be, at the time outstanding in
accordance with Section 5 hereof.
For purposes of the foregoing provisions of this Section 10, each Series A
Preferred Share shall have one (1) vote per share.
SECTION 11. RECORD HOLDERS. The Trust may deem and treat the record holder
of any Series A Preferred Shares as the true and lawful owner thereof for all
purposes, and the Trust shall not be affected by any notice to the contrary.
SECTION 12. RESTRICTIONS ON OWNERSHIP AND TRANSFER. The Series A Preferred
Shares constitute Preferred Stock, and Preferred Stock constitutes Equity Stock
of the Trust. Therefore, the Series A Preferred Shares, being Equity Stock, are
governed by and issued subject to all the limitations, terms and conditions of
the Articles applicable to Equity Stock generally, including but not limited to
the
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<PAGE>
terms and conditions (including exceptions and exemptions) of Article VI of the
Declaration applicable to Equity Stock. The foregoing sentence shall not be
construed to limit the applicability to the Series A Preferred Shares of any
other term or provision of the Declaration.
IN WITNESS WHEREOF, Keystone Property Trust has caused these presents to be
signed in its name and on its behalf by its and attested to by its
Secretary of this day of , 1999.
KEYSTONE PROPERTY TRUST
By: _________________________________
Name:
Title:
Attest:
Name: Timothy A. Peterson
Title: SECRETARY
The UNDERSIGNED, of Keystone Property Trust, who executed on
behalf of the Trust these Articles Supplementary of which this certificate is
made a part, hereby acknowledges in the name and on behalf of said Trust the
foregoing Articles Supplementary to be the act of said Trust and hereby
certifies that the matters and facts set forth herein with respect to the
authorization and approval thereof are true in all material respects under the
penalties of perjury.
By: _________________________________
Name:
Title:
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<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
620 WEST GERMANTOWN PIKE, SUITE 200
PLYMOUTH MEETING, PA 19462
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 3, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all previous proxies, hereby appoints Jeffrey E.
Kelter, David F. McBride and Timothy A. Peterson, or any of them, as proxies,
each with full power of substitution and all of the powers which the undersigned
would possess if present in person, and hereby authorizes them to represent and
vote, as designated on the reverse side of this proxy, all of the shares of
common stock of American Real Estate Investment Corporation (the "Company")
registered in the name of the undersigned on April 26, 1999 at the Annual
Meeting of Stockholders of the Company to be held on June 3, 1999, and at any
adjournment or postponement thereof.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS DIRECTED BY THIS PROXY. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES FOR
DIRECTOR LISTED UNDER PROPOSAL 1, FOR PROPOSAL 2 AND FOR PROPOSAL 3. IN THEIR
DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING.
Receipt of the Company's Notice of Annual Meeting of Stockholders, Proxy
Statement and the Annual Report to Stockholders is acknowledged.
(IMPORTANT--TO BE MARKED, SIGNED AND DATED ON REVERSE SIDE)
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
1. ELECTION OF DIRECTORS FOR ALL WITHHELD FROM
NOMINEES ALL NOMINEES
/ / / /
NOMINEES: Jeffrey E. Kelter, Russell Platt
FOR, except vote withheld from the following
nominee(s)
- ---------------------------------------
2. To approve the adoption of an FOR AGAINST ABSTAIN
Agreement and Plan of Merger to
effect the reorganization of the
Company from a Maryland corporation
to a Maryland statutory real estate
investment trust
/ / / / / /
3. To approve an amendment to our FOR AGAINST ABSTAIN
Articles of Incorporation changing
the name of the Company to "Keystone
Property Trust Corp." if Proposal 2
is not approved.
/ / / / / /
4. In their discretion, the proxies are
authorized to vote upon such other
business as may properly come before
the meeting
NOTE: Please sign exactly as name appears hereon. When shares are held by joint tenants,
both should sign. Executors, administrators, trustees and other fiduciaries should so
indicate when signing. If a corporation, please sign in full corporate name by president
or other authorized officer. If a partnership, please sign in partnership name by
authorized person. This proxy may be mailed, postage-free, in the enclosed envelope.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
- ---------, 1999 --------------- ---------, 1999 -------------------- PLEASE MARK, SIGN, DATE
Signature Signature (if held AND RETURN THIS PROXY
Title (if required) jointly) CARD PROMPTLY USING
THE ENCLOSED ENVELOPE
</TABLE>
