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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 15, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
KEYSTONE PROPERTY TRUST
(Exact name of registrant as specified in its Declaration of Trust)
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MARYLAND 84-1246585*
(State or other jurisdiction of (I.R.S. EMPLOYER
incorporation or organization) IDENTIFICATION NO.)
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200 FOUR FALLS CORPORATE CENTER, SUITE 208
WEST CONSHOHOCKEN, PA 19428
(484) 530-1800
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------------
JEFFREY E. KELTER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
KEYSTONE PROPERTY TRUST
200 FOUR FALLS CORPORATE CENTER, SUITE 208
WEST CONSHOHOCKEN, PA 19428
(484) 530-1800
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
COPIES TO:
BONNIE A. BARSAMIAN, ESQ.
ROBERT E. KING, JR., ESQ.
ROGERS & WELLS LLP
200 PARK AVENUE
NEW YORK, NEW YORK 10166
(212) 878-8000
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* I.R.S. Employer Identification Number of American Real Estate Investment
Corporation, the predecessor to the registrant prior to the conversion
described herein.
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to
time or at one time after the effective date of the Registration Statement as
determined by market conditions. If the only securities being registered on this
Form are being offered pursuant to dividend or interest reinvestment plans,
please check the following box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. / /
If this Form is a post-effective. amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
BEING REGISTERED REGISTERED SHARE PRICE REGISTRATION FEE
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Common Shares, par value $.001 per share.... 3,964,767 shares $15.66(1) $62,088,251.22 $17,261
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) of the rules and regulations under the
Securities Act of 1933, as amended, and based on the average of the high and
low sale prices of the Common Shares reported on the American Stock Exchange
on October 12, 1999.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 15, 1999
PROSPECTUS
3,964,767 SHARES
KEYSTONE PROPERTY TRUST
COMMON SHARES
------------------
This Prospectus relates to the offer and sale by the entities and persons
described in the section "Selling Security Holders" in this Prospectus of our
Common Shares. The Selling Security Holders may offer and sell our Common Shares
from time to time on the American Stock Exchange where our Common Shares are
listed for trading under the symbol "KTR," in other markets where our Common
Shares may be traded or in negotiated transactions. The Selling Security Holders
may offer our Common Shares at whatever prices are current when particular sales
take place or at other prices to which they agree. On October 12, 1999, the
closing price of our Common Shares reported on the American Stock Exchange was
$15.56. The Selling Security Holders will pay any brokerage fees or commissions
relating to sales by them. See the section "Method of Sale" in this Prospectus.
The Selling Security Holders received the Common Shares to which this Prospectus
relates from us in privately negotiated sales pursuant to an exemption from
registration under the Securities Act of 1933, as amended. We are registering
the offer and sale by the Selling Security Holders of Common Shares in order to
permit secondary trading of such Common Shares that are held by the Selling
Security Holders. The Selling Security Holders may offer their shares for resale
from time to time. The registration of their shares does not necessarily mean
that the Selling Security Holders will sell their shares.
We will not receive any of the proceeds of sales by the Selling Security
Holders. We are paying the costs of preparing and filing the Registration
Statement of which this Prospectus is a part.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS YOU SHOULD CONSIDER BEFORE YOU INVEST IN OUR COMMON SHARES.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these Securities and they have not
determined if this Prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1999.
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE HAVE FILED A REGISTRATION STATEMENT RELATING TO THESE SECURITIES WITH THE
SECURITIES AND EXCHANGE COMMISSION. THE SELLING SECURITY HOLDERS MAY NOT SELL
THESE SECURITIES PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE SUCH OFFER OR
SALE IS NOT PERMITTED.
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS. NEITHER KEYSTONE PROPERTY TRUST NOR THE SELLING
SECURITY HOLDERS HAVE AUTHORIZED ANY OTHER PERSON TO PROVIDE YOU WITH DIFFERENT
INFORMATION.
THE SELLING SECURITY HOLDERS ARE NOT MAKING AN OFFER OF COMMON SHARES IN ANY
LOCATION WHERE THE OFFER IS NOT PERMITTED.
TABLE OF CONTENTS
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PAGE
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WHERE YOU CAN FIND MORE INFORMATION........................................................................ 1
INCORPORATION OF DOCUMENTS BY REFERENCE.................................................................... 1
CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING INFORMATION............................................... 2
RISK FACTORS............................................................................................... 3
THE COMPANY................................................................................................ 10
USE OF PROCEEDS............................................................................................ 11
SELLING SECURITY HOLDERS................................................................................... 11
METHOD OF SALE............................................................................................. 13
FEDERAL INCOME TAX CONSIDERATIONS.......................................................................... 15
LEGAL MATTERS.............................................................................................. 24
EXPERTS.................................................................................................... 24
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WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, as a result, file reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). You may read and copy those reports, proxy
statements and other information which we file with the Commission at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Regional Offices of
the Commission located at 7 World Trade Center, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
You may also obtain copies of that information from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Please call the Commission at 1-800-SEC-0330 for further
information on the public reference rooms. The Commission maintains a web site
that contains reports, proxy and information statements and other information
regarding registrants, including Keystone Property Trust, that file
electronically with the Commission. You may access the Commission's web site at
http://www.sec.gov. Our Common Shares are listed on the American Stock Exchange
(the "AMEX"). You may also read our reports, proxy statements and other
information which we file at the offices of the AMEX, 86 Trinity Place, New
York, New York 10006.
We have filed with the Commission a Registration Statement on Form S-3
(together with any amendments or supplements, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"). This
Prospectus is a part of the Registration Statement. This Prospectus does not
contain all the information contained in the Registration Statement, because we
have omitted certain parts of the Registration Statement in accordance with the
rules and regulations of the Commission. For further information, we refer you
to the Registration Statement, which you may read and copy at, or obtain from,
the Commission or the AMEX in the manner described above.
INCORPORATION OF DOCUMENTS BY REFERENCE
We incorporate by reference into this Prospectus the following documents
which we previously filed with the Commission under the File Number 1-12514:
(a) our Annual Report on Form 10-K for the fiscal year ended December
31, 1998;
(b) our Quarterly Reports on Form 10-Q for the calendar quarters ended
March 31, 1999 and June 30, 1999;
(c) our Current Report on Form 8-K filed January 23, 1998, our Current
Report on Form 8-K/A filed February 24, 1998, our Current Reports on Form
8-K filed April 10, 1998 and May 15, 1998, our Current Report on Form 8-K/A
filed June 10, 1998, our Current Report on Form 8-K filed July 7, 1998, our
Current Report on Form 8-K/A filed July 14, 1998, our Current Report on Form
8-K filed August 13, 1998, our Current Report on Form 8-K filed September 3,
1998, our Current Report on Form 8-K filed November 13, 1998, our Current
Report on Form 8-K filed December 18, 1998, our Current Report on Form 8-K
filed January 8, 1999, our Current Report on Form 8-K/A filed January 13,
1999, our Current Report on Form 8-K filed August 20, 1999, our Current
Report on Form 8-K filed October 12, 1999 and our Current Report on Form 8-K
filed October 13, 1999;
(d) the description of our capital stock and the description of the
limited partnership interests of Keystone Property, L.P., our operating
partnership, contained in our Registration Statement on Form 8-A/A filed on
October 14, 1999 (including any amendments or reports filed for the purpose
of updating such description); and
(e) all other reports we have filed pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act since December 31, 1998.
When we file documents in accordance with Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act between the date of this Prospectus and the time we
file a post-effective amendment to the
<PAGE>
Registration Statement of which this Prospectus is a part saying all the
securities which are the subject of that Registration Statement have been sold
or deregistering any securities which have not been sold, the documents we file
will be incorporated into this Prospectus and will be a part of it beginning on
the date the documents are filed. If any document which we file changes anything
said in this Prospectus or in an earlier document which is incorporated into
this Prospectus, the later document will modify or supersede what is said in
this Prospectus or the earlier document.
We will provide, without charge, at the written or oral request of anyone,
including any beneficial owner, to whom this Prospectus is delivered, copies of
the documents incorporated by reference in this Prospectus, other than exhibits
to those documents which are not specifically incorporated by reference.
Requests should be directed to: Keystone Property Trust, 200 Four Falls
Corporate Center, Suite 208, West Conshohocken, PA 19428, Attention: Investor
Relations (Telephone: (484) 530-1800).
CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING INFORMATION
Certain information both included and incorporated by reference in this
Prospectus may contain forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act, and as such may
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of our company to be materially
different from future results, performance or achievements expressed or implied
by such forward-looking statements. Forward-looking statements, which are based
on certain assumptions and describe our future plans, strategies and
expectations are generally identifiable by use of the words "may," "will,"
"should," "expect," "anticipate," "estimate," "believe," "intend" or "project"
or the negative thereof or other variations thereon or comparable terminology.
Factors which could have a material adverse effect on the operations and future
prospects of our company include, but are not limited to, changes in: economic
conditions generally and the real estate market specifically,
legislative/regulatory changes (including changes to laws governing the taxation
of real estate investment trusts (each, a "REIT")), availability of capital,
interest rates, competition, supply and demand for properties in our current and
proposed market areas and general accounting principles, policies and guidelines
applicable to REITs. These risks and uncertainties should be considered in
evaluating any forward-looking statements contained or incorporated by reference
herein.
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RISK FACTORS
BEFORE YOU INVEST IN OUR COMMON SHARES, YOU SHOULD BE AWARE THAT THERE ARE
VARIOUS RISKS, INCLUDING THOSE DESCRIBED BELOW. YOU SHOULD CONSIDER CAREFULLY
THESE RISK FACTORS TOGETHER WITH ALL OF THE OTHER INFORMATION INCLUDED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS BEFORE YOU DECIDE TO PURCHASE OUR
COMMON SHARES. THIS SECTION INCLUDES OR REFERS TO CERTAIN FORWARD- LOOKING
STATEMENTS; YOU SHOULD REFER TO THE EXPLANATION OF THE QUALIFICATIONS AND
LIMITATIONS ON SUCH FORWARD-LOOKING STATEMENTS DISCUSSED ON PAGE 2 OF THIS
PROSPECTUS.
THERE ARE RISKS ASSOCIATED WITH THE ACQUISITION OF NEW PROPERTIES, WHICH MAY
ADVERSELY AFFECT THE VALUE OF OUR COMMON SHARES AND OUR ABILITY TO PAY DIVIDENDS
TO OUR SHAREHOLDERS.
We have recently experienced, and may continue to experience, rapid growth
through the acquisition of additional office and industrial properties. Our
ability to manage our growth effectively requires us to integrate successfully
our new acquisitions into our existing management structure. Properties which we
acquire typically have no operating history under our management and such
properties may have characteristics or deficiencies unknown to us which affect
their valuation or revenue potential. The operating performance of these
properties may decline under our management. A decline in the operating
performance of these properties will adversely affect our operating results and
funds from operations, which could adversely impact the price of our Common
Shares and the amount of dividends we will be able to pay.
We currently plan to continue acquiring properties to the extent we consider
appropriate. Our success in this area depends on many factors, including the
ability to successfully (i) identify properties which meet our acquisition
criteria, (ii) negotiate acceptable price and terms with the seller and (iii)
close the transactions for such properties. Also, we plan to finance our future
acquisitions through debt offerings, equity offerings, other debt financing or
any combination thereof. By using existing credit facilities or other short-term
debt for such activities, we may not be able to secure financing in the future
or financing on equally favorable terms. By using other debt to finance such
activities, we will be subject to risks normally associated with debt financing.
See the risk factor captioned "Our Financial Performance and Value are Subject
to Risks Associated with the Real Estate Industry That Could Adversely Affect
Our Financial Condition--Debt financing may have an adverse effect on our cash
flow and our ability to pay dividends" below. By using equity to finance such
activities, we may dilute your current interest in our company. Accordingly, our
acquisition activities may have an adverse effect on our financial performance
and ability to pay dividends to our shareholders.
THERE ARE RISKS ASSOCIATED WITH OUR ENTRY INTO NEW MARKETS
We currently intend to continue to seek expansion of our operations into
additional new markets other than Northern New Jersey, Central Pennsylvania,
Upstate New York, Indianapolis, Indiana, Ohio and Greenville, South Carolina. In
determining whether to enter a new market, we consider, among other factors,
demographics, job growth, employment, real estate fundamentals, competition and
other related matters. We cannot assure you that we will be successful in our
efforts to identify new markets, or that once we identify new markets, that we
will be able to successfully acquire properties in those markets and achieve
favorable operating results from properties acquired in those markets.
WE DEPEND ON THE PERFORMANCE OF OUR PRIMARY MARKETS, AND CHANGES IN SUCH MARKETS
MAY ADVERSELY AFFECT OUR FINANCIAL CONDITION.
Most of our properties are currently located in Northern New Jersey, Central
Pennsylvania, Indianapolis, Indiana, Upstate New York and Greenville, South
Carolina. Like other real estate markets, these commercial real estate markets
have experienced economic downturns in the past, and future declines in any of
these economies or real estate markets could adversely affect our operations
3
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or cash available for dividends. Our financial performance and our ability to
pay dividends to our shareholders will be particularly sensitive to the economic
conditions in those markets. Our revenues and the value of our properties may be
adversely affected by a number of factors, including the local economic climate
(which may be adversely impacted by business layoffs, industry slowdowns,
changing demographics and other factors) and local real estate conditions (such
as oversupply of or reduced demand for office and industrial properties). These
factors, when and if they occur in the area in which our properties are located,
would adversely affect our ability to pay dividends to our shareholders.
OUR SHAREHOLDERS' ABILITY TO EFFECT A CHANGE IN CONTROL OF OUR COMPANY IS
LIMITED, WHICH MAY NOT BE IN OUR SHAREHOLDERS' BEST INTEREST.
OUR OWNERSHIP LIMIT MAY NOT BE IN OUR SHAREHOLDERS' BEST INTEREST. For us
to maintain our qualification as a REIT for federal income tax purposes, not
more than 50% of the value of our outstanding capital shares may be owned,
directly or indirectly, by five or fewer individuals (as defined for federal
income tax purposes to include certain entities) during the last half of each
taxable year after 1993. Our Declaration of Trust (the "Declaration of Trust")
includes certain restrictions regarding transfers of our capital shares and
ownership limits that are intended to assist us in satisfying such limitations.
Such restrictions and limits may not be adequate in all cases, however, to
prevent the transfer of our capital shares in violation of the ownership
limitations. The ownership limit discussed above may have the effect of
delaying, deferring or preventing someone from taking control of our company,
even though such a change of control could involve a premium price for your
Common Shares or otherwise be in our shareholders' best interest.
OUR STAGGERED BOARD MAY NOT BE IN OUR SHAREHOLDERS' BEST INTEREST. Our
Board of Trustees is divided into three classes, with the members of each class
serving a three-year term. The staggered terms for trustees may reduce the
possibility of a tender offer or an attempt to effect a change in control of our
company, even if such a tender offer or change of control would be in our
shareholders' best interest.
ISSUANCES OF PREFERRED SHARES AND PREEMPTIVE RIGHTS MAY PREVENT A CHANGE OF
CONTROL THAT WOULD BE IN OUR SHAREHOLDERS' BEST INTEREST. Our Board of Trustees
is authorized by our Declaration of Trust to establish and issue one or more
series of preferred shares without shareholder approval. We currently have three
series of preferred shares outstanding. The establishment of these series or a
future series of preferred shares could make more difficult a change of control
of our company that would be in your best interest. The holders of our Series A
Convertible Preferred Stock have preemptive rights with respect to future
issuances of our Common Shares. Additionally, we have contractually granted
similar rights to certain holders of our Common Shares. These rights could make
more difficult a change of control of our company that would be in your best
interest.
THE CONCENTRATION OF OWNERSHIP OF OUR CAPITAL SHARES MAY NOT BE IN OUR
SHAREHOLDERS' BEST INTEREST.
Our officers and trustees as a group currently beneficially own 22.04% of
our company (assuming the conversion to Common Shares of all outstanding shares
of our Series A Convertible Preferred Stock, Series B Convertible Preferred
Stock, Series C Convertible Preferred Stock, common and convertible preferred
units of limited partnership interest in our operating partnership and the
conversion of outstanding warrants to purchase units of limited partnership
interest in our operating partnership and our Common Shares). In addition,
certain other investors currently own a significant amount of our Common Shares.
Although we feel this ownership is beneficial in aligning the interest of
officers and trustees with that of the other shareholders, this may enable the
officers and trustees to exercise substantial influence over the management of
our company and on the outcome of any matters submitted to a vote of our
shareholders. The concentration of beneficial ownership of our company may have
the effect of delaying, deferring or preventing a change in control of our
company, may
4
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discourage bids for our capital shares at a premium over the market price of our
capital shares and may adversely affect the market price of our capital shares.
CERTAIN TRUSTEES AND OFFICERS WHO OWN UNITS OF LIMITED PARTNERSHIP INTEREST IN
OUR OPERATING PARTNERSHIP MAY BE AFFECTED DIFFERENTLY THAN OUR SHAREHOLDERS AS A
RESULT OF THE SALE OF, OR REDUCTION OF MORTGAGE DEBT ON, CERTAIN OF THE
PROPERTIES.
Certain of our trustees and officers own units of limited partnership
interest in our operating partnership and, as a result, may face different and
more adverse tax consequences than you will if we sell or reduce our mortgage
indebtedness on certain of our properties. Those individuals may, therefore,
have different objectives than you regarding the appropriate pricing and timing
of any sale of such properties or reduction of mortgage debt. Accordingly, there
may be instances in which we may not sell a property or pay down the debt on a
property even though doing so would be advantageous to you.
RISKS ASSOCIATED WITH FUTURE ISSUANCES OF OUR COMMON SHARES
FUTURE ISSUANCES OF COMMON SHARES OR SECURITIES CONVERTIBLE INTO COMMON
SHARES MAY DILUTE YOUR INTEREST IN OUR COMPANY. Our Declaration of Trust
authorizes our Board of Trustees to issue additional Common Shares or securities
convertible into our Common Shares without shareholder approval. Additionally,
each of our three classes of preferred shares and all limited partnership
interests in our Operating Partnership may be converted into our Common Shares
pursuant to their terms. Such issuances of our Common Shares or conversion of
convertible securities into our Common Shares would have the effect of diluting
your existing interest in our company.
FUTURE SALES OF OUR COMMON SHARES MAY ADVERSELY AFFECT THE PRICE OF OUR
COMMON SHARES. Future sales of a substantial number of our Common Shares may
occur as a result of option holders exercising their rights to purchase our
shares or by resale availability from registration rights (including with
respect to our preferred shares and preferred and common units of limited
partnership interest in our operating partnership, Keystone Property, L.P. (the
"Operating Partnership") converted into our Common Shares) or exemptions from
registration. The Selling Security Holders are not the only shareholders that
have registration rights with respect to our Common Shares and we are not
prevented from granting registration rights to shareholders in the future.
Future sales of a substantial number of our Common Shares could adversely affect
the prevailing market price for our Common Shares.
WE HAVE AGREED NOT TO SELL CERTAIN OF OUR PROPERTIES
We have agreed with the sellers of certain of our properties not to sell
certain properties for a period of time ranging from one to ten years in any
transaction that would trigger taxable income, subject to certain exceptions.
Some of these agreements are with current officers and trustees of our company.
In addition, we may enter into similar agreements with future sellers of
properties. These agreements generally provide that we may dispose of these
properties in transactions that qualify as tax-free exchanges under Section 1031
of the Internal Revenue Code of 1986, as amended (the "Code"). Therefore, we may
be precluded from selling certain properties other than in transactions that
would qualify as tax-free exchanges for federal income tax purposes, even if it
would be in your best interest to do so.
OUR FINANCIAL PERFORMANCE AND VALUE ARE SUBJECT TO RISKS ASSOCIATED WITH THE
REAL ESTATE INDUSTRY THAT COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION
GENERAL. Real property investments are subject to varying degrees of risk.
The yields available from equity investments in real estate depend upon the
amount of income generated and expenses incurred. If properties do not generate
income sufficient to meet operating expenses, including debt
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service and capital expenditures, the owner's income and ability to pay
dividends will be adversely affected. An owner's income from properties may be
adversely affected by a variety of factors, including the general economic
climate, local conditions, such as oversupply of the particular category of real
estate owned or controlled by the owner, or reduction in demand for any such
properties, competition from properties owned by others, or the ability of the
owner to provide adequate facilities maintenance, services and amenities. With
respect to office and industrial properties, maintaining income at desired
levels can be effected by a number of factors, including the ability to locate
desirable replacements for key tenants at attractive rent levels following
expiration of leases, and the costs of reletting and providing tenant
improvements required to attract and maintain attractive tenants at desirable
rentals.
Often, increased operating costs, including real estate taxes, insurance and
maintenance costs, do not decline when circumstances cause a reduction in income
from a property. If a property is mortgaged to secure payment of indebtedness,
and the owner is unable to meet its mortgage payments, a loss could be sustained
as a result of foreclosure on the property. In addition, income from properties
and real estate values are also affected by such factors as applicable laws,
including tax laws, interest rate levels and the availability of financing.
WE DEPEND ON OUR MAJOR TENANTS. Substantially all of our income is, and
will continue to be, derived from rental income on our properties and,
consequently, our distributable cash flow and ability to pay expected dividends
to shareholders would be adversely affected if a significant number of our
tenants failed to meet their lease obligations. At September 30, 1999, our ten
largest tenants represented approximately 24.5% of our industrial and office
properties' annualized rental income. At any time, a tenant at any of our
properties may seek the protection of the bankruptcy laws, which could result in
delays in rental payments or in the rejection and termination of such tenant's
lease and thereby cause a reduction in our cash flow and the amounts available
for dividends to our shareholders. We cannot assure you that tenants will not
file for bankruptcy protection in the future or, if any tenants file, that they
will affirm their leases and continue to make rental payments in a timely
manner. In addition, a tenant from time to time may experience a downturn in its
business which may weaken its financial condition and result in the failure to
make rental payments when due. If tenant leases are not affirmed following
bankruptcy or if a tenant's financial condition weakens, our cash flow and the
amounts available for dividends to you may be adversely effected.
WE COMPETE WITH OTHER OWNERS AND OPERATORS OF PROPERTIES. All of our
properties are located in well-developed market areas. There are numerous other
office and industrial properties and real estate companies (including other
REITs) within the market area of each of our properties which will compete with
us for tenants and for development and acquisition opportunities. The number of
competitive properties and real estate companies in such areas could have a
material effect on our operations, our ability to rent our properties and the
rents which we charge, and our development and acquisition opportunities. We
compete for tenants and acquisitions with others who may have greater resources
than us. We will continue to experience strong competition in pursuing
development and acquisition opportunities.
DEBT FINANCING MAY HAVE AN ADVERSE EFFECT ON OUR CASH FLOW AND OUR ABILITY
TO PAY DIVIDENDS. Our Declaration of Trust, By-laws or investment policies do
not contain any limitation on the amount of aggregate indebtedness which we may
incur and no shareholder approval is required for us to incur additional
indebtedness. Accordingly, our management or Board of Trustees will have
discretion to incur such amounts of aggregate indebtedness as they determine. We
may seek additional debt financing to fund future acquisitions. We are subject
to risks normally associated with debt financing, including the risk that our
cash flow will be insufficient to pay dividends at expected levels and meet
required payments of principal and interest, the risk that indebtedness on our
properties (which will not have been fully amortized at maturity in all cases)
will not be able to be refinanced or that the terms of such refinancing will not
be as favorable as the terms of existing indebtedness. Our properties are or
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may be mortgaged to secure payments on our indebtedness. Certain properties are
secured by debt which is cross-collateralized and cross-defaulted. As of October
1, 1999, our mortgage debt totaled approximately $487.7 million (or 95.9% of our
total indebtedness), $140.2 million or approximately 28.8% of which constituted
borrowings under our $150 million secured credit facility (the "Credit
Facility"). Based on the market price for our Common Shares at the close of
business on October 11, 1999, our indebtedness was equal to approximately 57.1%
of our total market capitalization on that date (assuming the conversion to
Common Shares of all of our outstanding preferred shares, preferred or common
units of limited partnership interest in the Operating Partnership, other than
those shares or units which we own).
In the future, we may increase our borrowings under the Credit Facility for
new acquisitions, capital improvements, new development projects and for general
working capital purposes. Such variable rate debt creates higher debt service
requirements if market interest rates increase, which could adversely affect our
cash flow and the amounts of cash available for dividends to you.
If we fail to make required payments of principal and interest on any
mortgage debt, our lenders could foreclose on the properties securing such debt
which would result in a loss of income and asset value to us. If principal
payments due at maturity cannot be paid or refinanced, we expect that our cash
flow would not be sufficient in all years to pay dividends at expected levels
and to repay all maturing debt. Furthermore, any substantial increase in
interest expense relating to any such refinanced indebtedness also would
adversely affect our cash flow and the amounts available for dividends to you.
THERE ARE RISKS ASSOCIATED WITH OUR ACQUISITION, REDEVELOPMENT, DEVELOPMENT
AND CONSTRUCTION ACTIVITIES. We intend to acquire office and industrial
properties to the extent that they can be acquired on terms that meet our
investment criteria. Acquisitions of office and industrial properties entail
risks that investments will fail to perform in accordance with expectations.
Estimates of the costs of improvements to bring an acquired property up to
standards established for the market position intended for that property may
prove inaccurate. In addition, there are general investment risks associated
with any new real estate investment.
We intend to consider future investments in the redevelopment, development
and construction of office and industrial buildings in accordance with our
growth policies. Risks associated with our redevelopment, development and
construction activities may include: abandonment of redevelopment or development
opportunities; construction costs of a property exceeding original estimates,
possibly making the property unprofitable; occupancy rates and rents at a newly
renovated or completed property may not be sufficient to make the property
profitable; financing may not be available on favorable terms for redevelopment
or development of a property; and permanent financing may not be available on
favorable terms to replace a short-term construction loan and construction and
lease-up may not be completed on schedule, resulting in increased debt service
expense and construction costs. In addition, new redevelopment or development
activities, regardless of whether they are ultimately successful, typically
require a substantial portion of management's time and attention. Redevelopment
or development activities are also subject to risks relating to the inability to
obtain, or delays in obtaining, all necessary zoning, land-use, building,
occupancy and other required governmental permits and authorizations.
WE MAY NOT BE ABLE TO RENEW LEASES OR TO RELET SPACE. We are, and will
continue to be, subject to the risk that upon expiration of leases for space
located in our properties, such leases may not be renewed, the space may not be
relet or the terms of renewal or reletting (including the cost of required
renovations) may be less favorable than current lease terms. If we are unable to
relet promptly or renew the leases for all or a substantial portion of any
vacant space, if the rental rates upon such renewal or reletting were
significantly lower than expected or if our cash available proves inadequate,
then our cash flow and ability to pay expected dividends to you may be adversely
affected.
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LIABILITY FOR ENVIRONMENTAL MATTERS COULD ADVERSELY AFFECT OUR FINANCIAL
CONDITION. Under various federal, state, and local environmental laws,
ordinances and regulations, a current or previous owner or operator of real
property may be liable for the costs of removal or remediation of hazardous or
toxic substances on, under or in such property. Such laws often impose liability
whether or not the owner or operator knew of, or was responsible for, the
presence of such hazardous or toxic substances. In addition, the presence of
hazardous or toxic substances, or the failure to remediate such property
properly, may adversely affect the owner's ability to borrow using such real
property as collateral and to lease the property. Persons who arrange for the
disposal or treatment of hazardous or toxic substances may also be liable for
the costs of removal or remediation of hazardous substances at the disposal or
treatment facility, whether or not such facility is or ever was owned or
operated by such person. Certain environmental laws and common law principles
could be used to impose liability for release of, and exposure to, hazardous
substances, including asbestos-containing materials ("ACMs") into the air, and
third parties may seek recovery from owners or operators of real properties for
personal injury or property damage associated with exposure to released
hazardous substances, including ACMs. As the owner of our properties, we may be
potentially liable for any such costs. Phase I environmental site assessments
("ESAs") have been obtained on all of our properties. The purpose of Phase I
ESAs is to identify potential sources of contamination for which we may be
responsible and to assess the status of environmental regulatory compliance. For
a number of the properties, the Phase I ESAs referenced prior Phase II ESAs
obtained on such properties. Phase II ESAs generally involve more invasive
procedures than Phase I ESAs, such as soil sampling and testing or the
installation and monitoring of groundwater wells. The ESAs have not revealed any
environmental condition, liability or compliance concern that we believe would
have a material adverse effect on our business, assets or results of operations,
nor are we aware of any such condition, liability or concern. It is possible
that the ESAs relating to any of the properties do not reveal all environmental
conditions, liabilities or compliance concerns or that there are material
environmental conditions, liabilities or compliance concerns that arose at a
property after the related ESA report was completed of which we are otherwise
unaware. In addition, we cannot assure you that properties which we acquire in
the future will not have any material environmental conditions.
FAILURE TO QUALIFY AS A REIT WOULD CAUSE OUR COMPANY TO BE TAXED AS A
CORPORATION
WE WILL BE TAXED AS A CORPORATION IF WE FAIL TO QUALIFY AS A REIT. We
believe that, commencing with our taxable year ended December 31, 1993, we have
been organized and operated in a manner that has enabled us to meet the
requirements for qualification as a REIT for federal income tax purposes and we
intend to continue to operate in such a manner. We have not requested, and we do
not plan to request, a ruling from the Internal Revenue Service ("IRS") that we
qualify as a REIT. However, we have received an opinion from the law firm of
Rogers & Wells LLP that, based on certain assumptions and representations, we
have been organized in a manner so as to qualify as a REIT under the Code and
that our proposed method of operation will enable us to continue to so qualify.
You should be aware that opinions of counsel are not binding on the IRS or
any court. Furthermore, the conclusions stated in the opinion are conditioned
on, and our continued qualification as a REIT will depend on, our meeting
various requirements imposed by the Code. Such requirements are discussed in
more detail in the section "Federal Income Tax Considerations--Taxation of the
Company" in this Prospectus.
If we fail to qualify as a REIT, we would not be allowed a deduction for
dividends paid to shareholders in computing our taxable income and would be
subject to federal income tax at regular corporate rates. We also could be
subject to the federal alternative minimum tax. Unless we are entitled to relief
under specific statutory provisions, we could not elect to be taxed as a REIT
for the four taxable years following the year during which we were disqualified.
Therefore, if we lost our REIT
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<PAGE>
status, the funds available for dividends to you would be substantially reduced
for each of the years involved. In addition, we would no longer be required to
pay dividends to you.
FAILURE TO MEET MINIMUM DISTRIBUTION REQUIREMENTS MAY ADVERSELY AFFECT
US. To qualify as a REIT, we generally must distribute to our shareholders 95%
of our net taxable income. Such annual distribution requirements limit the
amount of cash we have available for other business purposes, including amounts
to fund our growth and make payments on our debt. If we fail to meet these
distribution requirements, we may be disqualified as a REIT and subject to
certain income and excise taxes. In addition, we will be subject to a 4%
nondeductible excise tax on the amount, if any, by which certain distributions
we make with respect to any calendar year are less than the sum of (i) 85% of
our REIT ordinary income for that year, (ii) 95% of our REIT capital gain net
income for that year and (iii) any undistributed taxable income from prior
years. We intend to make distributions to our shareholders to comply with the
95% distribution requirement and to avoid the nondeductible excise tax.
Differences in timing between (i) the actual receipt of income and actual
payment of deductible expenses and (ii) the inclusion of such income and
deduction of such expenses in arriving at our taxable income could require us,
directly or indirectly through the Operating Partnership, to borrow funds on a
short-term or long-term basis to meet the 95% distribution requirement and to
avoid the nondeductible excise tax. See the section "Federal Income Tax
Considerations--Taxation of the Company--Annual Distribution Requirements" in
this Prospectus.
POTENTIAL LEGISLATIVE ACTION REGARDING REITS MAY ADVERSELY US. During 1999,
the Clinton Administration released a summary of its proposed budget plan and
various legislation was introduced in Congress which contained several proposals
affecting REITs. One such proposal, if enacted in its present form, would
prohibit a REIT from holding securities representing more than 10% of the value
of all classes of stock of a corporation, other than a qualified REIT subsidiary
or another REIT. If enacted in its present form, the proposal may limit the
future activities and growth of Keystone Realty Services, Inc. (the "Management
Company"). No prediction can be made as to whether such proposal or any other
proposal affecting REITs will be enacted into legislation and the impact of any
such legislation on our operations. See the section "Federal Income Tax
Considerations--Other Tax Considerations" in this Prospectus.
WE MAY BE SUBJECT TO OTHER TAX LIABILITIES. Even if we qualify as a REIT,
we may be subject to certain federal, state and local taxes on our income and
property that could reduce operating cash flow. See the section "Federal Income
Tax Considerations--Other Tax Considerations" in this Prospectus.
WE DEPEND ON KEY PERSONNEL, THE LOSS OF WHOM MIGHT ADVERSELY AFFECT OUR
PERFORMANCE
We depend on the efforts of our key personnel, particularly Jeffrey E.
Kelter, our President and Chief Executive Officer, as well as certain other
senior management. While we believe that, if necessary, we could find
replacements for these key personnel, the loss of their services could have a
material adverse effect on our operations.
9
<PAGE>
THE COMPANY
We used to be a Maryland corporation named American Real Estate Investment
Corporation. Effective October 13, 1999, we converted our corporate form from a
Maryland corporation to a Maryland real estate investment trust and changed our
name to "Keystone Property Trust." This was effected through a merger of
American Real Estate Investment Corporation with and into Keystone Property
Trust, a wholly-owned real estate investment trust formed solely for the
purposes of the conversion. We are the surviving entity of the merger and have
succeeded to all of the rights, powers and property of our predecessor and
assumed all of the liabilities, debts and obligations of our predecessor.
We are a self-administered, self-managed REIT engaged in the ownership,
acquisition and development of industrial and office properties. As of October
11, 1999, we owned a portfolio of 130 properties comprised of 95 industrial
properties and 34 office properties containing an aggregate of approximately
17.2 million square feet and an investment in a direct financing lease (the
"Properties"). The Properties are located principally in the mid-Atlantic and
Northeastern United States and are approximately 98.9% leased to 322 tenants.
We conduct substantially all of our activities through, and substantially
all of the Properties are held directly or indirectly by, the Operating
Partnership. We are the sole general partner of the Operating Partnership and,
at September 30, 1999, owned approximately 53.9% of the outstanding units of
limited partnership interest in the Operating Partnership. The remaining units
of limited partnership interest are owned by limited partners of the Operating
Partnership. Our officers and trustees owned approximately 24.2% of the
outstanding units of limited partnership interest in the Operating Partnership
as of September 30, 1999. Each common unit of limited partnership interest of
the Operating Partnership (an "OP Unit") may be converted by the holder into one
common share (subject to certain anti-dilution provisions), or, at our option,
the cash value of one Common Share. Each Series B Convertible Preferred Unit of
limited partnership interest in the Operating Partnership may be converted by
the holder into the number of our Common Shares obtained by dividing the
liquidation preference (which is $25.00 per unit) by the conversion price (which
is $16.50 per unit) (subject to certain anti-dilution provisions). Each Series C
Convertible Preferred Unit of limited partnership interest in the Operating
Partnership may be converted by the holder into (a) at the election of the
holder, (1) the number of our Common Shares obtained by dividing the liquidation
preference (which is $25.00 per unit) by the conversion price (which is $16.00
per unit) or (2) the number of shares of our Series B Convertible Preferred
Stock identical to the number of Series C Preferred OP Units being converted (in
each case subject to certain anti-dilution provisions); or if the Operating
Partnership elects to give cash instead of our Common Shares or Series B
Convertible Preferred Stock, (b) the amount of cash obtained by multiplying the
current market price per share of our Common Shares by a fraction, the numerator
of which is the liquidation preference and the denominator of which is the
conversion price. Each Series D Convertible Preferred Unit of limited
partnership interest in the Operating Partnership may be converted by the holder
into (a) at the election of the holder, the number of our Common Shares or OP
Units obtained by dividing the liquidation preference (which is $25.00 per unit)
by the conversion price (which is $16.00 per unit) (in each case subject to
certain anit-dilution provisions); or if the Operating Partnership elects to
give cash instead of our Common Shares or OP Units, (b) the amount of cash
obtained by multiplying the current market price per share of our Common Shares
by a fraction, the numerator of which is the liquidation preference and the
denominator of which is the conversion price. With each such exchange, our
percentage interest in the Operating Partnership will increase.
Our Common Shares are listed on the AMEX under the symbol "KTR."
Our principal executive offices are located at 200 Four Falls Corporate
Center, Suite 208, West Conshohocken, PA 19428 and our telephone number is (484)
530-1800. We also maintain offices in
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Franklin Lakes, New Jersey, New York and Syracuse, New York, Allentown,
Pennsylvania and Greenville, South Carolina. Unless the context otherwise
requires, all references to "we," "us" or "our company" refers to Keystone
Property Trust and its subsidiaries, including the Operating Partnership.
USE OF PROCEEDS
We will not receive any of the proceeds of sales of Common Shares by the
Selling Security Holders.
SELLING SECURITY HOLDERS
Sales of our Common Shares registered hereby must (i) be accompanied by a
copy of this Prospectus, together with the applicable prospectus supplement or
(ii) be effected through an exemption from registration, such as pursuant to
Rule 144 under the Securities Act.
The following table lists (i) the Selling Security Holders who may offer our
Common Shares from time to time pursuant to this Prospectus, (ii) the number and
percentage of Common Shares owned by each Selling Security Holder, (iii) the
number of Common Shares of each Selling Security Holder, the offer and sale of
which is to be registered on behalf of each Selling Security Holder pursuant to
this Prospectus (the "Registered Shares") and (iv) the amount of Common Shares
that, to the knowledge of the Company, will be held by Selling Security Holders
after completion of this offering. We are registering the Registered Shares in
order to permit secondary trading of the Registered Shares, and the Selling
Security Holders may offer Registered Shares for resale from time to time. See
the section "Method of Sale" in this Prospectus.
<TABLE>
<CAPTION>
SHARES
SHARES OWNED OWNED AFTER
BEFORE OFFERING(1)(2) OFFERING(1)(2)
----------------------- REGISTERED ------------------------
NAME NUMBER PERCENTAGE SHARES NUMBER PERCENTAGE
- --------------------------------------------------- ---------- ----------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
Hudson Bay Partners II, L.P........................ 1,766,536(3) 22.12% 1,454,545 311,991(3) 3.91%
Francis V. McBride, Jr. Revocable Trust,
UID 4/22/96...................................... 163,528 2.05% 163,528 0 0
Joan H. McBride.................................... 163,528 2.05% 163,528 0 0
Mary V. DeKorte.................................... 163,528 2.05% 163,528 0 0
Timothy B. McBride................................. 163,528 2.05% 163,528 0 0
Kathryn Kruckel.................................... 130,823 1.64% 130,823 0 0
Moira Murphy....................................... 130,822 1.64% 130,823 0 0
J. Nevins McBride, Jr.............................. 130,822 1.64% 130,822 0 0
W. Peter McBride................................... 130,822 1.64% 130,822 0 0
David F. McBride................................... 130,822 1.64% 130,822 0 0
Terence A. McBride................................. 163,528 2.05% 163,528 0 0
Sheila James....................................... 163,528 2.05% 163,528 0 0
Michael X. McBride................................. 174,892 2.19% 174,892 0 0
Mark J. McBride.................................... 163,528 2.05% 163,528 0 0
Urban Holdings, L.L.C.............................. 15,462 * 15,462 0 0
Margaret Mary McBride Revocable Trust A, UID
3/10/88.......................................... 202 * 202 0 0
John Nevins McBride Article Third, Testamentary
Trust "B", UWD 3/26/93........................... 101 * 101 0 0
Mary K. McBride.................................... 101 * 101 0 0
Joseph A. McBride.................................. 203 * 203 0 0
Timothy B. McBride and Marcia McBride.............. 12,399 * 11,364 0 *
Robert Branson..................................... 27,308 * 27,273 1,035 *
The Branson Family LLC............................. 27,272 * 27,272 0 0
CRA Real Estate Securities, L.P.................... 692,296(4) 8.67% 454,545 237,751 2.98%
</TABLE>
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- ------------------------
(1) This does not assume conversion to Common Shares of all of our outstanding
preferred shares, preferred OP Units and OP Units and does not include
Common Shares issuable upon conversion of OP Units held by any Selling
Security Holder. All of the Common Shares held by the Selling Security
Holders are subject to a "lock-up" period for a period of two years from the
date of issuance of such Common Shares. Further, only 25% of the Common
Shares held by each Selling Security Holder may be sold in each three month
period following the expiration of the applicable lock-up period, with the
result that a Selling Security Holder may only sell all of its Common Shares
nine months after the expiration of the applicable lock-up period. In
connection with an agreement between Hudson Bay Partners II, L.P. ("Hudson
Bay") and us, pursuant to which Hudson Bay will purchase additional Common
Shares, we have agreed to remove this lock-up restriction from Hudson Bay's
Common Shares.
(2) The Registered Shares may be offered from time to time in one or more
offerings. This assumes that all of the Common Shares being offered under
this Prospectus are sold, and that the Selling Security Holders acquire no
additional Common Shares before the completion of this offering.
(3) Includes 300,000 Common Shares issuable to Hudson Bay 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, 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 Shares
owned by Hudson Bay; however, Mr. Lesser expressly disclaims beneficial
ownership of any Common Shares not directly owned by him. In connection with
an agreement between Hudson Bay and us, pursuant to which Hudson Bay will
purchase additional Common Shares, the Operating Partnership has agreed to
exchange the stock purchase warrant for 125,103 OP Units.
(4) These Common Shares 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 Common Shares not directly owned by
it.
* Less than 1%
David F. McBride is currently our Chairman and a member of our Board of
Trustees. Messrs. Timothy McBride and Robert Branson were members of the Board
of Directors of our predecessor, American Real Estate Investment Corporation,
for a one year term which expired at our last annual meeting of shareholders.
Each of the Selling Security Holders purchased their Common Shares as part of
the series of transactions pursuant to which we were transformed from a
multi-family residential REIT into an office and industrial REIT (the
"Reorganization"). Under a Registration Rights Agreement, dated as of December
12, 1997, with the Selling Security Holders we agreed to register the Common
Shares which they purchased in the Reorganization. Pursuant to Agreements, dated
as of December 12, 1997, the Selling Security Holders agreed not to sell such
shares for a period of two years from the date of such Agreements.
The period during which the Selling Security Holders have agreed not to sell
Common Shares is referred to as a "Lock-Up Period." Each of the Selling Security
Holders has agreed not to sell more than 25% of its Common Shares during the
three month period following the expiration of the Lock-Up Period and not to
sell more than an additional 25% of its Common Shares during each three month
period thereafter. As a result, each Selling Security Holder may only sell all
of its Common Shares nine months after the expiration of the Lock-Up Period. In
connection with an agreement between Hudson Bay and us, pursuant to which Hudson
Bay will purchase additional Common Shares, we have agreed to remove this
lock-up restriction from Hudson Bay's Common Shares.
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We have agreed to indemnify the Selling Security Holders against certain
liabilities. See "Method of Sale" below.
METHOD OF SALE
This Prospectus relates to the possible offer and sale from time to time by
the Selling Security Holders (or by pledgees, donees, transferees or other
successors in interest of such Selling Security Holders) of their Registered
Shares. We have registered the Registered Shares for resale to provide them with
freely tradeable securities. However, registration of the Registered Shares does
not necessarily mean that they will offer or sell any of their Registered
Shares. We will not receive any proceeds from the offering or sale of their
Registered Shares.
The Selling Security Holders (or pledgees, donees, transferees or other
successors in interest) in one or more transactions (which may involve block
crosses or transactions) may sell the Registered Shares to which this Prospectus
relates from time to time (i) on the AMEX, where our Common Shares are listed
for trading, (ii) in other markets where our Common Shares are traded, (iii) in
negotiated transactions, (iv) through short sales or put and call option
transactions through underwriters, brokers or dealers (who may act as agent or
principal), (v) through the distribution of the Registered Shares by any Selling
Security Holder to its partners, members or shareholders, (vi) directly to one
or more purchasers, (vii) through agents or (viii) in a combination of such
methods of sale. They may sell the Registered Shares at prices which are current
when the sales take place or at other prices to which they agree.
Any underwriters, brokers, dealers or agents may receive compensation in the
form of discounts, concessions or commissions from the Selling Security Holders
or such other persons who may be effecting sales hereunder (which discounts,
concessions or commissions as to particular underwriters, brokers, dealers or
agents may be in excess of those customary in the types of transactions
involved). Underwriters may sell Registered Shares to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents. The Selling Security Holders or other persons
effecting sales hereunder, and any such underwriters, brokers, dealers and
agents may be deemed to be "underwriters" within the meaning of the Securities
Act, and any discounts or commissions they receive and any profit on the sale of
the Registered Shares they realize may be deemed to be underwriting discounts
and commissions under the Securities Act. Some sales may involve shares in which
the Selling Security Holders have granted security interests and which are being
sold because of foreclosure of those security interests. We have agreed to
indemnify each Selling Security Holder against certain liabilities, including
liabilities arising under the Securities Act. The Selling Security Holders or
other persons effecting sales hereunder may agree to indemnify any such
underwriters, dealers and agents against certain liabilities, including
liabilities under the Securities Act.
The Selling Security Holders may enter into hedging transactions with
broker-dealers or other financial institutions. In connection with such
transactions, broker-dealers or other financial institutions may engage in short
sales of our Common Shares in the course of hedging the positions they assume
with Selling Security Holders. The Selling Security Holders may also enter into
options or other transactions with broker-dealers or other financial
institutions which require the delivery to such broker-dealer or other financial
institution of our Common Shares offered hereby, which Common Shares such
broker-dealer or other financial institution may resell pursuant to this
Prospectus (as supplemented or amended to reflect such transaction).
Under the securities laws of certain states, the Registered Shares may be
sold in such states only through registered or licensed brokers or dealers. In
addition, in certain states the Registered Shares may not be sold unless the
Registered Shares have been registered or qualified for sale in such state or an
exemption from registration or qualification is available and is complied with.
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<PAGE>
The Selling Security Holders also may resell all or a portion of their
Registered Shares in open market transactions in reliance upon Rule 144 under
the Securities Act, provided they meet the criteria and conform to the
requirements of such rule.
Upon notification by a Selling Security Holder that any material arrangement
has been entered into with a broker-dealer for the sale of Shares through a
block trade, special offering, exchange distribution or secondary distribution
or a purchase by a broker or dealer, we will file a supplement to this
Prospectus, if required, pursuant to Rule 424(b) under the Securities Act,
disclosing (i) the name of each such Selling Security Holder and of the
participating broker-dealer(s), (ii) the number of Registered Shares involved,
(iii) the price at which such Registered Shares were sold, (iv) the commissions
paid or discounts or concessions allowed to such broker-dealer(s), where
applicable, (v) that such broker-dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in this prospectus
and (vi) other facts material to the transaction.
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FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following discussion summarizes the material federal income tax
considerations that may be relevant to a U.S. person who holds Common Shares, is
based on current law, and is not intended and should not be construed as tax
advice. The following discussion, which is not exhaustive of all possible tax
considerations, does not include a detailed discussion of any state, local or
foreign tax considerations. In addition, this discussion is intended to address
only those federal income tax considerations that are generally applicable to
all prospective U.S. shareholders and does not discuss all of the aspects of
federal income taxation that may be relevant to a prospective U.S. shareholder
in light of his or her particular circumstances or to certain types of
shareholders (including insurance companies, tax-exempt entities, financial
institutions or broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States) who are subject to special treatment
under the federal income tax laws.
The statements and opinions in this discussion are based on current
provisions of the Code, existing, temporary and currently proposed Treasury
Regulations under the Code, the legislative history of the Code, existing
administrative rulings and practices of the IRS and judicial decisions. No
assurance can be given that legislative, judicial or administrative changes will
not affect the accuracy of any statements in this Prospectus with respect to
transactions entered into or contemplated prior to the effective date of such
changes. In addition, we have not requested and do not plan to request any
rulings from the IRS concerning our tax treatment or the tax treatment of the
Operating Partnership. Accordingly, no assurance can be given that the
statements set forth herein (which do not bind the IRS or the courts) will not
be challenged by the IRS or sustained by the courts if so challenged.
THIS DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING. WE
ADVISE EACH PROSPECTIVE PURCHASER OF COMMON SHARES TO CONSULT WITH HIS OR HER
OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE
PURCHASE, OWNERSHIP AND SALE OF COMMON SHARES IN AN ENTITY ELECTING TO BE TAXED
AS A REIT, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION, AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.
TAXATION OF THE COMPANY
GENERAL. We have elected to be taxed as a REIT under Sections 856 through
860 of the Code, commencing with our taxable year ended December 31, 1993. We
believe that we have been organized and operated in a manner so as to qualify
for taxation as a REIT under the Code, and we intend to continue to operate in
such a manner. No assurance, however, can be given that we have operated in a
manner so as to qualify as a REIT or will continue to operate in a manner so as
to remain qualified as a REIT. Qualification and taxation as a REIT depends upon
our ability to meet, on a continuing basis, through periodic operating results,
distribution levels, diversity of share ownership and other qualification tests
imposed under the Code on REITs, some of which are summarized below. While we
intend to operate so as to qualify as a REIT, given the highly complex nature of
the rules governing REITs, the ongoing importance of factual determinations and
the possibility of future changes in our circumstances, no assurance can be
given that we will so qualify for any particular year. See the section "Failure
to Qualify" in this Prospectus.
In the opinion of Rogers & Wells LLP, our counsel ("Counsel"), commencing
with our taxable year ended December 31, 1993, we have been organized and
operated in conformity with the requirements for qualification as a REIT under
the Code and our proposed method of operation and that of the Operating
Partnership will enable us to continue to meet the requirements for
qualification as a REIT. Counsel's opinion is based on various assumptions and
is conditioned upon certain of our
15
<PAGE>
representations and the representations of the Operating Partnership as to
factual matters. In addition, Counsel's opinion is based upon our factual
representations concerning our business and properties, and the business and
properties of the Operating Partnership. Unlike a tax ruling, an opinion of
counsel is not binding upon the IRS and no assurance can be given that the IRS
will not challenge our status. Moreover, such qualification and taxation as a
REIT depends upon our ability to meet, through actual annual operating results,
distribution levels, diversity of stock ownership and various other
qualification tests imposed under the Code. Counsel will not review our
compliance with the various REIT qualification tests on a periodic or continuing
basis. Accordingly, no assurance can be given that the actual results of our
operation for any one taxable year will satisfy such requirements. See the
section "Failure to Qualify" in this Prospectus.
The following is a general summary of the Code provisions that govern the
federal income tax treatment of a REIT and its shareholders. These provisions of
the Code are highly technical and complex. This summary is qualified in its
entirety by the applicable Code provisions, Treasury Regulations and
administrative and judicial interpretations thereof, all of which are subject to
change, possibly with retroactive effect.
So long as we qualify for taxation as a REIT, we generally will not be
subject to federal corporate income tax on our net income that we distribute
currently to our shareholders. This treatment substantially eliminates the
"double taxation" (taxation at both the entity and shareholder levels) that
generally results from an investment in an entity taxable as a corporation. If
we do not qualify as a REIT, we would be taxed at rates applicable to
corporations on all of our income, whether or not distributed to our
shareholders. Even if we qualify as a REIT, we will be subject to federal income
or excise tax as follows: (i) we will be taxed at regular corporate rates on any
undistributed REIT taxable income and undistributed net capital gains other than
retained capital gains as discussed below; (ii) under certain circumstances, we
may be subject to the "alternative minimum tax" on our items of tax preference,
if any; (iii) if we have (1) net income from the sale or other disposition of
"foreclosure property" (generally, property acquired by reason of a foreclosure
or otherwise on default of a loan secured by the property) that is held
primarily for sale to customers in the ordinary course of business or (2) other
nonqualifying net income from foreclosure property, we will be subject to tax at
the highest corporate rate on such income; (iv) if we have net income from
prohibited transactions (which are, in general, certain sales or other
dispositions of property (other than dispositions of foreclosure property and
dispositions of property that occur due to involuntary conversion) held
primarily for sale to customers in the ordinary course of business), such income
will be subject to a 100% tax; (v) if we should fail to satisfy the 75% gross
income test or the 95% gross income test (as discussed below), and nonetheless
maintain our qualification as a REIT because certain other requirements are met,
we will be subject to a 100% tax on the net income attributable to the greater
of the amount by which we fail the 75% or 95% test, multiplied by a fraction
intended to reflect our profitability; (vi) if we should fail to distribute with
respect to each calendar year at least the sum of (1) 85% of our REIT ordinary
income for such year, (2) 95% of our REIT capital gain net income for such year,
and (3) any undistributed taxable income from prior years, we would be subject
to a 4% excise tax on the excess of such required distribution over the amounts
actually distributed; (vii) if we acquire any asset from a C corporation (I.E.,
generally a corporation subject to full corporate-level tax) in a transaction in
which the basis of the asset in our hands is determined by reference to the
basis of the asset (or any other property) in the hands of the C corporation and
we subsequently recognize gain on the disposition of such asset in a taxable
transaction during the 10-year period (the "Recognition Period") beginning on
the date on which we acquired the asset (or we first qualified as a REIT), then
pursuant to guidelines issued by the IRS, the excess of (1) the fair market
value of the asset as of the beginning of the applicable Recognition Period,
over (2) our adjusted basis in such asset as of the beginning of such
Recognition Period will be subject to tax at the highest regular corporate rate.
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REQUIREMENTS FOR QUALIFICATION. The Code defines a REIT as a corporation,
trust or association (i) that is managed by one or more trustees or directors;
(ii) the beneficial ownership of which is evidenced by transferable shares, or
by transferable certificates of beneficial interest; (iii) that would be taxable
as a domestic corporation but for Sections 856 through 859 of the Code; (iv)
that is neither a financial institution nor an insurance company subject to
certain provisions of the Code; (v) that has the calendar year as its taxable
year; (vi) the beneficial ownership of which is held by 100 or more persons;
(vii) during the last half of each taxable year not more than 50% in value of
the outstanding stock of which is owned, directly or indirectly, by five or
fewer individuals (as defined in the Code to include certain entities); and
(viii) that meets certain other tests, described below, regarding the nature of
its income and assets. The Code provides that conditions (i) through (v),
inclusive, must be met during the entire taxable year and that condition (vi)
must be met during at least 335 days of a taxable year of 12 months, or during a
proportionate part of a taxable year of less than 12 months. Conditions (vi) and
(vii), however, will not apply until after the first taxable year for which an
election is made to be taxed as a REIT.
We believe that we currently satisfy all of the conditions listed in the
preceding paragraph. In addition, our Declaration of Trust includes restrictions
regarding the transfer of our Common Shares that are intended to assist us in
continuing to satisfy the share ownership requirements described in (vi) and
(vii) above. In rendering its opinion that we are organized in conformity with
the requirements for qualification as a REIT, Counsel is relying on our
representation that ownership of our stock satisfies condition (vii) and Counsel
expresses no opinion as to whether the ownership restrictions contained in the
Declaration of Trust preclude us from failing to satisfy condition (vii) above.
In addition, we intend to continue to comply with the Treasury Regulations
requiring us to ascertain and maintain records which disclose the actual
ownership of our shares. Although a failure to ascertain the actual ownership of
our shares will not cause our disqualification as a REIT beginning with our
taxable year ending December 31, 1998, a monetary fine may result.
We currently have several "qualified REIT subsidiaries." A corporation that
is a qualified REIT subsidiary is not treated as a separate corporation for
federal income tax purposes, and all assets, liabilities and items of income,
deduction and credit of a qualified REIT subsidiary are treated as assets,
liabilities and items of the REIT. In applying the requirements described
herein, our qualified REIT subsidiaries will be ignored, and all assets,
liabilities and items of income, deduction and credit of such subsidiaries will
be treated as our assets, liabilities and items of income, deduction and credit.
Any qualified REIT subsidiary of ours will therefore not be subject to federal
corporate income taxation, although such qualified REIT subsidiary may be
subject to state or local taxation.
In the case of a REIT that is a partner in a partnership, the REIT is deemed
to own its proportionate share of the assets of the partnership and is deemed to
receive the income of the partnership attributable to such share. In addition,
the character of the assets and gross income of the partnership shall retain the
same character in the hands of the REIT. Accordingly, our proportionate share of
the assets, liabilities and items of income of the Operating Partnership are
treated as assets, liabilities and items of income of ours for purposes of
applying the requirements described herein, provided that the Operating
Partnership is treated as a partnership for federal income tax purposes. See the
section "Other Tax Considerations--Effect of Tax Status of the Operating
Partnership on REIT Qualification" in this Prospectus.
INCOME TESTS. In order to qualify as a REIT, a company must generally
satisfy two gross income requirements on an annual basis. First, at least 75% of
its gross income (excluding gross income from prohibited transactions) for each
taxable year must be derived directly or indirectly from investments relating to
real property or mortgages on real property (including "rents from real
property" and, in certain circumstances, interest) or from certain types of
temporary investments. Second, at least 95% of its gross income (excluding gross
income from prohibited transactions) for each taxable year must be derived from
the same items which qualify under the 75% gross income test, and from
dividends,
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interest and gain from the sale or disposition of stock or securities, or from
any combination of the foregoing. In addition, short-term gain from the sale or
other disposition of stock or securities, gain from prohibited transactions and
gain on the sale or other disposition of real property held for less than four
years (apart from involuntary conversions and sales of foreclosure property)
must represent less than 30% of its gross income (including gross income from
prohibited transactions) for each taxable year beginning on or prior to August
5, 1997. The Taxpayer Relief Act of 1997 (the "Taxpayer Relief Act") repealed
the 30% gross income test for taxable years beginning after its enactment on
August 5, 1997. Accordingly, the 30% gross income test no longer applies
beginning with our taxable year ending December 31, 1998.
Rents received by a REIT will qualify as "rents from real property" in
satisfying the gross income requirements described above only if several
conditions are met. First, the amount of rent must not be based in whole or in
part on the income or profits of any person. However, an amount received or
accrued generally will not be excluded from the term "rents from real property"
solely by reason of being based on a fixed percentage or percentages of gross
receipts or sales. Second, rents received from a tenant will not qualify as
"rents from real property" in satisfying the gross income tests if the REIT, or
a direct or indirect owner of 10% or more of the REIT, directly or
constructively, owns 10% or more of such tenant (a "Related Party Tenant").
Third, if rent attributable to personal property, leased in connection with a
lease of real property, is greater than 15% of the total rent received under the
lease, then the portion of rent attributable to such personal property will not
qualify as "rents from real property." Finally, in order for rents received with
respect to a property to qualify as "rents from real property," the REIT
generally must not operate or manage the property or furnish or render services
to tenants, except through an "independent contractor" who is adequately
compensated and from whom the REIT derives no income. The "independent
contractor" requirement, however, does not apply to the extent the services
provided by the REIT are "usually or customarily rendered" in connection with
the rental of space for occupancy only and are not otherwise considered
"rendered to the occupant." The Taxpayer Relief Act provides a DE MINIMIS rule
for non-customary services beginning with our taxable year ending December 31,
1998. Specifically, if the value of the non-customary service income with
respect to a property (valued at no less than 150% of the direct costs of
performing such services) is 1% or less of the total income derived from the
property, then all rental income except the non-customary service income will
qualify as "rents from real property."
We do not anticipate charging rent that is based in whole or in part on the
income or profits of any person (except by reason of being based on a fixed
percentage or percentages of gross receipts or sales consistent with the rules
described above). We do not anticipate receiving more than a DE MINIMIS amount
of rents from any Related Party Tenant or rents attributable to personal
property leased in connection with real property that will exceed 15% of the
total rents received with respect to such property.
We will provide certain services with respect to our Properties through the
Operating Partnership, which is not an "independent contractor." However, we
believe (and have represented to Counsel) that all of such services will be
considered "usually or customarily rendered" in connection with the rental of
space for occupancy only so that the provision of such services will not
jeopardize the qualification of rent from the Properties as "rents from real
property." In rendering its opinion on our ability to qualify as a REIT, Counsel
is relying on such representations. In the case of any services that are not
"usual and customary" under the foregoing rules, we will employ an "independent
contractor" to provide such services.
The Operating Partnership may receive certain types of income that will not
qualify under the 75% or 95% gross income tests. In particular, dividends
received from the Management Company will not qualify under the 75% test. We
believe, and have represented to Counsel, however, that the aggregate amount of
such items and other non-qualifying income in any taxable year will not cause us
to exceed the limits on non-qualifying income under the 75% and 95% gross income
tests.
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If we fail to satisfy one or both of the 75% or the 95% gross income tests
for any taxable year, we may nevertheless qualify as a REIT for such year if we
are entitled to relief under certain provisions of the Code. These relief
provisions generally will be available if our failure to meet any such tests was
due to reasonable cause and not due to willful neglect, we attach a schedule of
the sources and nature of our income to our federal income tax return and any
incorrect information on the schedule was not due to fraud with the intent to
evade tax. It is not possible, however, to state whether in all circumstances we
would be entitled to the benefit of these relief provisions. As discussed above,
even if these relief provisions were to apply, a tax would be imposed on certain
excess net income.
ASSET TESTS. At the close of each quarter of its taxable year, a REIT must
also satisfy three tests relating to the nature of its assets: (i) at least 75%
of the value of its total assets must be represented by real estate assets
(including (1) its allocable share of real estate assets held by partnerships in
which it has an interest and (2) stock or debt instruments purchased with the
proceeds of a stock offering or long-term (at least five years) debt offering of
the REIT and held for not more than one year following the receipt of such
proceeds), cash, cash items and government securities; (ii) not more than 25% of
its total assets may be represented by securities other than those in the 75%
asset class; and (iii) of the investments included in the 25% asset class, the
value of any one issuer's securities (other than an interest in a partnership or
a "qualified REIT subsidiary" or another REIT) owned by a REIT may not exceed 5%
of the value of its total assets, and it may not own more than 10% of any one
issuer's outstanding voting securities (other than an interest in a partnership
or securities of a "qualified REIT subsidiary" or another REIT).
After initially meeting the asset tests at the close of any quarter, we will
not lose our status as a REIT for failure to satisfy the asset tests at the end
of a later quarter solely by reason of changes in asset values. If a failure to
satisfy the asset tests results from an acquisition of securities or other
property during a quarter (including, for example, as a result of increasing our
interest in the Operating Partnership as a result of a merger, the exercise of
redemption rights or an additional capital contribution of proceeds of an
offering of capital shares), such failure may be cured by a disposition of
sufficient nonqualifying assets within 30 days following the close of that
quarter. We intend to maintain adequate records of the value of our assets to
ensure compliance with the asset tests and plan to take such other action within
30 days following the close of any quarter as may be required to cure any
noncompliance. However, there can be no assurance that such action will always
be successful.
ANNUAL DISTRIBUTION REQUIREMENTS. In order to qualify as a REIT, a company
is generally required to distribute to its shareholders at least 95% of its
taxable income each year. In addition, it will be subject to regular capital
gains and ordinary corporate tax rates on undistributed income, and also may be
subject to a 4% excise tax on undistributed income in certain events. We believe
that we have made, and intend to continue to make, timely distributions
sufficient to satisfy the annual distribution requirements. However, it is
possible that, from time to time, we may not have sufficient cash or other
liquid assets to meet the distribution requirements. In such circumstances, we
may cause the Operating Partnership to arrange for short-term, or possibly
long-term, borrowings to permit the payment of required dividends.
Under certain circumstances, we may be able to rectify a failure to meet the
distribution requirement for a taxable year by paying "deficiency dividends" to
shareholders in a later year that may be included in our deduction for dividends
paid for the earlier year. Thus, we may be able to avoid being taxed on amounts
distributed as deficiency dividends. However, we would be required to pay to the
IRS interest based upon the amount of any deduction taken for deficiency
dividends.
FAILURE TO QUALIFY. If we fail to qualify for taxation as a REIT in any
taxable year and special relief provisions do not apply, we will be subject to
tax (including any applicable alternative minimum tax) on our taxable income at
regular corporate rates. Distributions to shareholders in any year in which we
fail to qualify as a REIT will not be deductible, nor will they be required to
be made. In such
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event, to the extent of current and accumulated earnings and profits, all
distributions to our shareholders will be taxable as ordinary income and,
subject to certain limitations in the Code, corporate distributees may be
eligible for the "dividends received deduction." In addition, our failure to
qualify as a REIT would also substantially reduce the cash available for
distributions to shareholders. Unless entitled to relief under specific
statutory provisions, we also would be disqualified from taxation as a REIT for
the four taxable years following the year during which qualification was lost.
It is not possible to state whether in all circumstances we would be entitled to
such statutory relief.
TAXATION OF SHAREHOLDERS
TAXATION OF TAXABLE DOMESTIC SHAREHOLDERS. As long as we qualify as a REIT,
distributions made to our taxable domestic shareholders out of current or
accumulated earnings and profits (and not designated as capital gain dividends)
will constitute dividends taxable as ordinary income, and corporate shareholders
will not be eligible for the dividends received deduction as to such amounts.
Distributions that are designated as capital gain dividends will be taxed as
gains from the sale or exchange of a capital asset (to the extent they do not
exceed our actual net capital gain for the taxable year) without regard to the
period for which the shareholder has held its shares. If we designate any
portion of a dividend as a capital gain dividend, a shareholder's share of such
capital gain dividend would be an amount which bears the same ratio to the total
amount of dividends paid to such shareholder for the taxable year as the total
amount of capital gain dividends bears to the total amount of all dividends paid
on all classes of shares for the taxable year. However, corporate shareholders
may be required to treat up to 20% of certain capital gain dividends as ordinary
income. We may elect to retain and pay income tax on any net long-term capital
gain, in which case our domestic shareholders would include in their income as
long-term capital gain their proportionate share of such undistributed net
long-term capital gain. A domestic shareholder would also receive a refundable
tax credit for such shareholder's proportionate share of the tax paid by us on
such retained capital gains and an increase in its basis in our shares in an
amount equal to the difference between the undistributed long-term capital gains
and the amount of tax paid by us. See "Capital Gains and Losses" below.
Distributions in excess of current and accumulated earnings and profits will
not be taxable to a shareholder to the extent that they do not exceed the
adjusted basis of the shareholder's Common Shares, but rather will reduce the
adjusted basis of such Common Shares. To the extent that such distributions
exceed the adjusted basis of a shareholder's Common Shares, they will be
included in income as short-term or long-term capital gain (depending on the
length of time the shares have been held), assuming the Common Shares are a
capital asset in the hands of the shareholder. In addition, any dividend
declared by us in October, November or December of any year and payable to a
shareholder of record on a specific date in any such month shall be treated as
both paid by us and received by the shareholder on December 31 of such year,
provided that the dividend is actually paid by us during January of the
following calendar year. Shareholders may not include in their individual income
tax returns any of our net operating losses or capital losses.
In general, a domestic shareholder will realize capital gain or loss on the
disposition of Common Shares equal to the difference between (i) the amount of
cash and the fair market value of any property received on such disposition, and
(ii) the shareholder's adjusted basis of such Common Shares. Such gain or loss
generally will constitute short-term capital gain or loss if the shareholder has
not held such shares for more than one year and long-term capital gain or loss
if the shareholder has held such shares for more than one year. See "Capital
Gains and Losses" below. Loss upon a sale or exchange of Common Shares by a
shareholder who has held such Common Shares for six months or less (after
applying certain holding period rules) will be treated as a long-term capital
loss to the extent of distributions from us required to be treated by such
shareholder as long-term capital gain.
CAPITAL GAINS AND LOSSES. The maximum marginal individual federal income
tax rate is 39.6%. The maximum tax rate on net capital gains applicable to
individuals, trusts and estates from the sale or
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exchange of capital assets held for more than one year is 20%, and the maximum
rate is reduced to 18% for assets acquired after December 31, 2000 and held for
more than five years. For individuals, trusts and estates who would be subject
to a maximum tax rate of 15%, the rate on net capital gains is reduced to 10%,
and, effective for taxable years commencing after December 31, 2000, the rate is
reduced to 8% for assets held for more than five years. The maximum rate for net
capital gains attributable to the sale of depreciable real property held for
more than one year is 25% to the extent of the deductions for depreciation
(other than certain depreciation recapture taxable as ordinary income) with
respect to such property. Accordingly, the tax rate differential between capital
gain and ordinary income for noncorporate taxpayers may be significant. In
addition, the characterization of income as capital or ordinary may affect the
deductibility of capital losses. Capital losses not offset by capital gains may
be deducted against a noncorporate taxpayer's ordinary income only up to a
maximum annual amount of $3,000. Unused capital losses may be carried forward.
All net capital gain of a corporate taxpayer is subject to tax at ordinary
corporate rates. A corporate taxpayer can deduct capital losses only to the
extent of capital gains, with unused losses being carried back three years and
forward five years.
IRS Notice 97-64 provides temporary guidance with respect to the taxation of
distributions by REITs that are designated as capital gain dividends. Pursuant
to Notice 97-64, forthcoming Treasury Regulations will provide that capital
gains allocated to a shareholder by us may be designated as a 20% rate gain
distribution, a 25% rate gain distribution, or a 28% rate gain distribution. In
determining the amounts which may be designated as each class of capital gains
dividends, a REIT must calculate its net capital gains as if it were an
individual subject to a marginal tax rate on ordinary income of 28%. Unless
specifically designated otherwise by us, a distribution designated as a capital
gain distribution is presumed to be a 28% rate gain distribution. If we elect to
retain any net long-term capital gain, as discussed above, the undistributed
long-term capital gains are considered to be designated as capital gain
dividends for purposes of Notice 97-64. Furthermore, Notice 97-64 provides that
designations of capital gain dividends made by us will only be effective to the
extent that the distributions with respect to our different classes of shares
are composed proportionately of ordinary and capital gain dividends. However,
Notice 97-64 was issued prior to the IRS Restructuring and Reform Act of 1998
(the "1998 Reform Act") which significantly changed the taxation of capital
gains of certain non-corporate taxpayers. We expect the IRS to issue clarifying
guidance regarding the impact of Notice 97-64 in light of the 1998 Reform Act.
BACKUP WITHHOLDING. We will report to our domestic shareholders and the IRS
the amount of dividends paid during each calendar year and the amount of tax
withheld, if any, with respect thereto. Under the backup withholding rules, a
shareholder may be subject to backup withholding at the rate of 31% with respect
to dividends paid unless such holder (i) is a corporation or comes within
certain other exempt categories and, when required, demonstrates this fact or
(ii) provides a taxpayer identification number, certifies as to no loss of
exemption and otherwise complies with the applicable requirements of the backup
withholdings rules. Any amount paid as backup withholding will be creditable
against the shareholder's income tax liability. The United States Treasury has
issued final regulations on October 6, 1997 (the "Final Regulations") regarding
the withholding and information reporting rules discussed above. In general, the
Final Regulations do not alter the substantive withholding and information
reporting requirements but unify current certification procedures and forms and
clarify and modify reliance standards. The Final Regulations are generally
effective for payments made after December 31, 2000, subject to certain
transition rules. Prospective investors should consult their own tax advisors
concerning the adoption of the Final Regulations and the potential effect on
their ownership of Common Shares.
In addition, we may be required to withhold a portion of capital gain
dividends made to any shareholders which fail to certify their non-foreign
status to us. See "Taxation of Foreign Shareholders" below.
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TAXATION OF TAX-EXEMPT SHAREHOLDERS. Distributions that we make to a
shareholder that is a tax-exempt entity will not constitute "unrelated business
taxable income" ("UBTI"), provided that the tax-exempt entity has not financed
the acquisition of Common Shares with "acquisition indebtedness" within the
meaning of the Code and the Common Shares are not otherwise used in an unrelated
trade or business of the tax-exempt entity. In addition, under certain
circumstances, qualified trusts that own more than 10% (by value) of our shares
may be required to treat a certain percentage of dividends as UBTI. This
requirement will only apply if we are a "pension-held REIT." The restrictions on
ownership in our Declaration of Trust should prevent us from being classified as
a pension-held REIT.
TAXATION OF FOREIGN SHAREHOLDERS. The rules governing the United States
federal income taxation of the ownership and disposition of Common Shares by
persons that are, for purposes of such taxation, nonresident alien individuals,
foreign corporations, foreign partnerships and other foreign shareholders
(collectively, "Non-U.S. Shareholders") are complex and no attempt will be made
herein to provide more than a very limited summary of such rules. PROSPECTIVE
NON-U.S. SHAREHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS TO DETERMINE
THE IMPACT OF FEDERAL, STATE, AND LOCAL INCOME TAX LAWS WITH REGARD TO AN
INVESTMENT IN SHARES, INCLUDING ANY REPORTING REQUIREMENTS, AS WELL AS THE TAX
TREATMENT OF SUCH AN INVESTMENT UNDER THEIR HOME COUNTRY LAWS.
Distributions that are not attributable to gain from sales or exchanges of
U.S. real property interests and not designated by us as capital gain dividends
will be treated as dividends and taxed as ordinary income to the extent that
they are made out of our current or accumulated earnings and profits. Such
distributions are, generally, subject to a withholding tax equal to 30% of the
gross amount of the distribution, unless an applicable tax treaty reduces that
tax. Distributions in excess of our current and accumulated earnings and profits
will not be taxable to a Non-U.S. Shareholder to the extent that they do not
exceed the adjusted basis of the Non-U.S. Shareholder's Common Shares, but
rather will reduce the adjusted basis of such Common Shares. To the extent that
such distributions exceed the adjusted basis of a Non-U.S. Shareholder's Common
Shares, they will give rise to tax liability if the Non-U.S. Shareholder
otherwise would be subject to tax on any gain from the sale or disposition of
his Common Shares as described below (in which case they also may be subject to
a 30% branch profits tax if the shareholder is a foreign corporation).
For withholding tax purposes, we are currently required to treat all
distributions as if made out of our current or accumulated earnings and profits
and thus intend to withhold at the rate of 30% (or a reduced treaty rate if
applicable) on the amount of any distribution (other than distributions
designated as capital gain dividends) made to a Non-U.S. Shareholder. Under the
Final Regulations, generally effective for distributions after December 31,
2000, we would not be required to withhold at the 30% rate on distributions we
reasonably estimate to be in excess of our current and accumulated earnings and
profits. If it cannot be determined at the time a distribution is made whether
such distribution will be in excess of current and accumulated earnings and
profits, the distribution will be subject to withholding at the rate applicable
to ordinary dividends. However, a Non-U.S. Shareholder may seek a refund of such
amounts from the IRS if it is subsequently determined that such distribution
was, in fact, in excess of our current or accumulated earnings and profits, and
the amount withheld exceeded the Non-U.S. Shareholder's United States tax
liability, if any, with respect to the distribution.
For any year in which we qualify as a REIT, distributions that are
attributable to gain from sales or exchanges of U.S. real property interests
will be taxed to a Non-U.S. Shareholder under the provisions of the Foreign
Investment in Real Property Tax Act of 1980 ("FIRPTA") at the normal capital
gain rates applicable to U.S. shareholders (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals). Also, distributions subject to FIRPTA may be subject to a
30% branch profits tax in the hands of a corporate Non-U.S. Shareholder not
entitled to treaty relief or exemption. We are required by the Code to withhold
35% of any
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distribution that could be designated by us as a capital gain dividend. This
amount is creditable against the Non-U.S. Shareholder's FIRPTA tax liability.
Gain recognized by a Non-U.S. Shareholder upon a sale of Common Shares will
generally not be taxed under FIRPTA if we are a "domestically controlled REIT,"
defined generally as a REIT in which, at all times during a specified testing
period, less than 50% in value of the shares was held directly or indirectly by
foreign persons. We believe that we are a "domestically controlled REIT" and,
therefore, the sale of Common Shares will not be subject to taxation under
FIRPTA. However, because the Common Shares are publicly traded, no assurance can
be given that we will continue to qualify as a "domestically controlled REIT."
If the gain on the sale of Common Shares were to be subject to tax under FIRPTA,
the Non-U.S. Shareholder would be subject to the same treatment as U.S.
shareholders with respect to such gain (subject to applicable alternative
minimum tax, possible withholding tax and a special alternative minimum tax in
the case of nonresident alien individuals), and the purchaser of the Common
Shares would be required to withhold and remit to the IRS 10% of the purchase
price. In addition, if we are not a "domestically controlled REIT,"
distributions in excess of our current and accumulated earnings and profits
would be subject to withholding at a rate of 10%.
OTHER TAX CONSIDERATIONS
EFFECT OF TAX STATUS OF THE OPERATING PARTNERSHIP ON REIT
QUALIFICATION. All of our investments are through the Operating Partnership. We
believe that the Operating Partnership is properly treated as a partnership for
tax purposes (and not as an association taxable as a corporation). If, however,
the Operating Partnership were to be treated as an association taxable as a
corporation, we would cease to qualify as a REIT. Furthermore, in such a
situation, the Operating Partnership would be subject to corporate income taxes
and we would not be able to deduct our share of any losses generated by the
Operating Partnership in computing our taxable income.
TAX ALLOCATIONS WITH RESPECT TO THE PROPERTIES. The Operating Partnership
was formed by way of contributions of appreciated property (including certain of
the Properties). When property is contributed to a partnership in exchange for
an interest in the partnership, the partnership generally takes a carryover
basis in that property for tax purposes equal to the adjusted basis of the
contributing partner in the property, rather than a basis equal to the fair
market value of the property at the time of contribution (this difference is
referred to as a "Book-Tax Difference"). The partnership agreement of the
Operating Partnership requires allocations of income, gain, loss and deduction
with respect to contributed Property to be made in a manner consistent with the
special rules in Section 704(c) of the Code, and the regulations thereunder,
which tend to eliminate the Book-Tax Differences with respect to the contributed
Properties over the depreciable lives of the contributed Properties. However,
because of certain technical limitations, the special allocation rules of
Section 704(c) may not always entirely eliminate the Book-Tax Difference on an
annual basis or with respect to a specific taxable transaction such as a sale.
Thus, the carryover basis of the contributed Properties in the hands of the
Operating Partnership could cause us to be allocated lower amounts of
depreciation and other deductions for tax purposes than would be allocated to us
if all Properties were to have a tax basis equal to their fair market value at
the time of acquisition. The foregoing principles also apply in determining our
earnings and profits for purposes of determining the portion of distributions
taxable as dividend income. The application of these rules over time may result
in a higher portion of distributions being taxed as dividends than would have
occurred had we purchased our interests in the Properties at their agreed value.
Treasury Regulations under Section 704(c) of the Code allow partnerships to
use any reasonable method of accounting for Book-Tax Differences so that the
contributing partner receives the tax benefits and burdens of any built-in gain
or loss associated with the property. The Operating Partnership has determined
to use the "traditional method"(which is specifically approved in the
23
<PAGE>
Treasury Regulations) for accounting for Book-Tax Differences with respect to
the contributed Properties.
STATE AND LOCAL TAXES. We and our shareholders may be subject to state or
local taxation in various state or local jurisdictions, including those in which
we or they transact business or reside. The state and local tax treatment of us
and our shareholders may not conform to the federal income tax consequences
discussed above. Consequently, prospective shareholders should consult with
their own tax advisors regarding the effect of state, local and other tax laws
of any investment in our Common Shares.
POTENTIAL LEGISLATIVE ACTION REGARDING REITS. During 1999, the Clinton
Administration released a summary of its proposed budget plan and various
legislation was introduced in Congress which contained several proposals
affecting REITs. One such proposal, if enacted in its present form, would
prohibit a REIT from holding securities representing more than 10% of the value
of all classes of stock of a corporation, other than a qualified REIT subsidiary
or another REIT. However, REITs would be allowed to hold two types of "taxable
REIT subsidiaries" which would be subject to full corporate level taxation.
Under the proposal, we would be allowed to combine or convert our existing stock
interest in the Management Company into a "taxable REIT subsidiary," subject to
certain transition rules. If enacted in its present form, the proposal may limit
the future activities and growth of the Management Company. No prediction can be
made as to whether such proposal or any other proposal affecting REITs will be
enacted into legislation and the impact of any such legislation on our
operations.
LEGAL MATTERS
Piper & Marbury L.L.P., Baltimore, Maryland will pass upon the validity of
the Common Shares offered by this Prospectus. Rogers & Wells LLP, New York, New
York will pass upon certain legal matters described under "Federal Income Tax
Considerations."
EXPERTS
The consolidated financial statements and the related financial statement
schedule of Keystone Property Trust and subsidiaries incorporated by reference
in this Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, to the extent and for the periods indicated in their reports and
are incorporated by reference herein and have been so incorporated in reliance
upon the authority of said firm as experts in giving said reports.
24
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection with the
issuance and distribution of the securities being registered, other than
underwriting discounts and commissions:
<TABLE>
<S> <C>
Registration fee--Securities and Exchange Commission.............. 17,261
Accounting fees and expenses...................................... 1,500(a)
Legal fees and expenses........................................... 25,000(a)
Printing and engraving expenses................................... 5,000(a)
Miscellaneous..................................................... 15,000(a)
---------
Total....................................................... 63,761(a)
---------
---------
</TABLE>
- ------------------------
(a) Does not include expenses of preparing prospectus supplements and other
expenses relating to offerings of particular securities.
ITEM 15. INDEMNIFICATION OF TRUSTEES AND OFFICERS
As permitted by Title 8 of the Corporations and Associations Articles of the
Annotated Code of Maryland ("Title 8"), our Declaration of Trust provides that
we shall indemnify (i) our trustees and officers to the fullest extent required
or permitted by Maryland law, including the advance of expenses under the
procedures and to the full extent permitted by law and (ii) other employees and
agents to such extent as shall be authorized by our Board of Trustees or our
Bylaws and be permitted by law. Title 8 requires a real estate investment trust
(a "Trust") to indemnify its present and former trustees and officers, among
others, against expenses incurred by them in connection with a proceedings where
the trustee or officer has been successful, on the merits or otherwise, in the
defense of any such proceedings. In addition, Title 8 permits a Trust to
indemnify its present and former trustees and officers, among others, against
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by them in connection with any proceeding to which they may be made a
party by reason of their service in those or other capacities, unless it is
established that (a) the act or omission of the trustee or officer was material
to the matter giving rise to the proceeding and (i) was committed in bad faith,
or (ii) was the result of active and deliberate dishonesty, (b) the trustee or
officer actually received an improper personal benefit in money, property or
services or (c) in the case of any criminal proceeding, the trustee or officer
had reasonable cause to believe that the act or omission was unlawful.
As permitted by Title 8, our Declaration of Trust provides that no trustee,
officer, employee or agent shall be personally liable to the Trust or its
shareholders to the fullest extent permitted by Maryland law. Title 8 permits a
Trust to limit the liability of its trustees and officers to the Trust and its
shareholders for money damages, except to the extent that (1) it is provided
that the person actually received an improper benefit or profit in money,
property or services or (2) a judgment or other final adjudication is entered in
a proceeding based on a finding that the person's action, or failure to act, was
the result of active and deliberate dishonesty and was material to the cause of
action adjudicated in the proceeding.
We have a trustee and officer liability insurance policy with a $5,000,000
limit of liability and a company retention of $75,000 in the aggregate for each
claim.
II-1
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
2.1 Articles of Merger (incorporated by reference to Exhibit 2.1 of our Form 8-K, filed
with the Commission on October 13, 1999 (File 001-12514)).
2.2 Agreement and Plan of Merger.
3.1 Declaration of Trust of the Registrant.
3.2 Articles Supplementary of the Registrant relating to our Series A Convertible
Preferred Stock.
3.3 Articles Supplementary of the Registrant relating to the Series B Convertible
Preferred Stock.
3.4 Articles Supplementary of the Registrant relating to our Series C Convertible
Preferred Stock.
3.5 By-Laws of the Registrant.
3.6 Specimen of Certificate of Common Shares.
5.1 Opinion of Piper & Marbury L.L.P. (Counsel).
8 Opinion of Rogers & Wells LLP regarding tax matters.
23.1 Consent of Rogers & Wells LLP (included in Exhibit 8).
23.2 Consent of Piper & Marbury L.L.P. (included in Exhibit 5.1).
23.3 Consent of Arthur Andersen LLP.
24 Powers of Attorney (included on signature pages hereto).
</TABLE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
this Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in the Registration Statement;
PROVIDED, HOWEVER, that the undertakings set forth in paragraphs (i) and (ii)
above shall not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange
Act that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment will be deemed to be a
new registration statement relating to the
II-2
<PAGE>
securities offered therein, and the offering of such securities at that time
will be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Exchange Act that is incorporated by reference in
this Registration Statement will be deemed to be a new registration
statement relating to the securities offered herein, and the offering of
such securities at that time will be deemed to be the initial bona fide
offering thereof.
(5) That, (i) for purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective and (ii) for
the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to trustees, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of counsel for the
Registrant the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York and State of New York on October 15, 1999.
<TABLE>
<S> <C> <C>
KEYSTONE PROPERTY TRUST
By: /s/ JEFFREY E. KELTER
-----------------------------------------
Jeffrey E. Kelter
PRESIDENT
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Jeffrey E. Kelter, Timothy A. Peterson and
Timothy E. McKenna, and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all
amendments, including any post-effective amendments, to this Registration
Statement on Form S-3 and any registration statement for the same offering that
is to be effective upon filing pursuant to Rule 462(b) under the Securities Act
of 1933, as amended, and any and all applications and other documents in
connection therewith, with the Securities and Exchange Commission and any state
or other securities authority, granting unto said attorneys-in-fact and agents,
and each of them full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact or agents, or any of them, or his
substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ DAVID F. MCBRIDE
- ------------------------------ Chairman And Trustee October 15, 1999
David F. McBride
President and Chief
/s/ JEFFREY E. KELTER Executive Officer And
- ------------------------------ Trustee (Principal October 15, 1999
Jeffrey E. Kelter Executive Officer)
/s/ TIMOTHY E. PETERSON Chief Financial Officer
- ------------------------------ And Secretary (Principal October 15, 1999
Timothy E. Peterson Financial Officer)
Senior Vice President,
/s/ TIMOTHY E. MCKENNA Finance and Treasurer
- ------------------------------ (Principal Accounting October 15, 1999
Timothy E. McKenna Officer)
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ RUSSELL PLATT
- ------------------------------ Trustee October 15, 1999
Russell Platt
/s/ FRANCESCO GALESI
- ------------------------------ Trustee October 15, 1999
Francesco Galesi
- ------------------------------ Trustee October 15, 1999
Michael Falcone
/s/ DAVID LESSER
- ------------------------------ Trustee October 15, 1999
David Lesser
- ------------------------------ Trustee October 15, 1999
James Mulvihill
/s/ SCOTT RECHLER
- ------------------------------ Trustee October 15, 1999
Scott Rechler
/s/ JOSEPH D. MORRIS
- ------------------------------ Trustee October 15, 1999
Joseph D. Morris
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS PAGE
- ----------- -----
<C> <S> <C>
2.1 Articles of Merger (incorporated by reference to Exhibit 2.1 of our Form 8-K, filed with the
Commission on October 13, 1999 (File 001-12514)).
2.2 Agreement and Plan of Merger.
3.1 Declaration of Trust of the Registrant.
3.2 Articles Supplementary of the Registrant relating to our Series A Convertible
Preferred Stock.
3.3 Articles Supplementary of the Registrant relating to the Series B Convertible
Preferred Stock.
3.4 Articles Supplementary of the Registrant relating to our Series C Convertible
Preferred Stock.
3.5 By-Laws of the Registrant.
3.6 Specimen of Certificate of Common Shares.
5.1 Opinion of Piper & Marbury L.L.P. (Counsel).
8 Opinion of Rogers & Wells LLP regarding tax matters.
23.1 Consent of Rogers & Wells LLP (included in Exhibit 8).
23.2 Consent of Piper & Marbury L.L.P. (included in Exhibit 5.1).
23.3 Consent of Arthur Andersen LLP.
24 Powers of Attorney (included on signature pages hereto).
</TABLE>
<PAGE>
Exhibit 2.2
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of April 30,
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, 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.
<PAGE>
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.
2
<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.
AMERICAN REAL ESTATE
INVESTMENT CORPORATION
By: /s/ TIMOTHY A. PETERSON
-----------------------------------------
Name: Timothy A. Peterson
Title: Senior Vice President
KEYSTONE PROPERTY TRUST
By: /s/ TIMOTHY A. PETERSON
-----------------------------------------
Name: Timothy A. Peterson
Title: Executive Vice President
3
<PAGE>
Exhibit 3.1
DECLARATION OF TRUST
OF
KEYSTONE PROPERTY TRUST
APRIL 30, 1999
DECLARATION OF TRUST made as of the date set forth above by the
undersigned Trustees.
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
<PAGE>
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 CSC Lawyers Incorporating Service Company, 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 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
2
<PAGE>
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:
NAME CLASS
---------------------------------------------------------- ---------
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
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 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
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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, but only for cause, and 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.
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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. 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.
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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 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
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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;
(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
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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
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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 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);
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(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
(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.
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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. Any
such Shares reclassified as Preferred Shares shall be called "PREFERRED
STOCK".
(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
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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.
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
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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 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
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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.
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.
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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
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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 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.
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:
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(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.
(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
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(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 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
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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 an
action by the Board of Trustees and this Declaration of Trust fails to provide
specific guidance with respect to such action, the Board of Trustees shall have
the power to determine the action to be taken so long as such action is not
contrary to the provisions of this 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.
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(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)).
(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(w).
(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
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(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% (IN VALUE
OR NUMBER OF SHARES) OF THE OUTSTANDING SHARES OF ANY CLASS OR
SERIES OF PREFERRED STOCK 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 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
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TRANSFER OR OWNERSHIP ARE VIOLATED, THE SHARES REPRESENTED HEREBY
MAY BE AUTOMATICALLY TRANSFERRED TO A CHARITABLE TRUSTEE OF A
CHARITABLE TRUST FOR THE BENEFIT OF ONE OR MORE CHARITABLE
BENEFICIARIES. IN ADDITION, UPON THE OCCURRENCE OF CERTAIN EVENTS,
ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS DESCRIBED ABOVE
MAY BE VOID AB INITIO. 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 qualify 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
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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 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.
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(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 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
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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).
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
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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
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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 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.
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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.
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.
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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.
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
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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.
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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.
(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
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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.
(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.
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(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.
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(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."
(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(w), 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.
35
<PAGE>
(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 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.
36
<PAGE>
(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.
37
<PAGE>
(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.
38
<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.
/s/ MICHAEL J. FALCONE
--------------------------------------
Michael J. Falcone
c/o Pioneer Development Company
250 South Clinton Street
Syracuse, New York 13202-1258
ACKNOWLEDGMENTS
State of New York April 28, 1999
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/ MARY CERIO
--------------------------------------
Notary Public
My Commission Expires: 5/26/00
/s/ FRANCESCO GALESI
--------------------------------------
Francesco Galesi
c/o Galesi Management Corporation
100 State Street
Albany, New York 12207-1800
39
<PAGE>
ACKNOWLEDGMENTS
State of New York April 28, 1999
ss.
County of Albany
There personally appeared the above-named Francesco Galesi and
acknowledged the foregoing instrument to be his free act and deed.
Before me,
/s/ NOREEN PRIEST
--------------------------------------
Notary Public
My Commission Expires: 1/31/2000
/s/ JEFFREY E. KELTER
--------------------------------------
Jeffrey E. Kelter
c/o American Real Estate Investment
Corporation
620 West Germantown Pike, Suite 200
Plymouth Meeting, Pennsylvania 19462
40
<PAGE>
ACKNOWLEDGMENTS
State of Pennsylvania April 28, 1999
ss.
Montgomery County
There personally appeared the above-named Jeffrey E. Kelter and acknowledged
the foregoing instrument to be his free act and deed.
Before me,
/s/ KRISTINE M. FISHER
--------------------------------------
Notary Public
My Commission Expires: Sept. 9, 2002
/s/ DAVID H. LESSER
--------------------------------------
David H. Lesser
c/o Hudson Bay Partners II, L.P.
237 Park Avenue, Suite 900
New York, New York 10017
41
<PAGE>
ACKNOWLEDGMENTS
State of New York April 27, 1999
ss.
New York County
There personally appeared the above-named David Lesser and acknowledged
the foregoing instrument to be his free act and deed.
Before me,
/s/ LAURA LAST
--------------------------------------
Notary Public
My Commission Expires: 11/30/00
/s/ DAVID F. MCBRIDE
--------------------------------------
David F. McBride
c/o American Real Estate Investment
Corporation
620 West Germantown Pike, Suite 200
Plymouth Meeting, Pennsylvania 19462
42
<PAGE>
ACKNOWLEDGMENTS
State of New Jersey April 27, 1999
ss.
County of Bergen
There personally appeared the above-named David F. McBride and
acknowledged the foregoing instrument to be his free act and deed.
Before me,
/s/ ANNE S. MCKEGNEY
--------------------------------------
Notary Public
My Commission Expires: Aug. 4, 2001
/s/ JAMES R. MULVIHILL
--------------------------------------
James R. Mulvihill
2 Sunset Drive
Cherry Hills Village, Co 80110
43
<PAGE>
ACKNOWLEDGMENTS
State of Pennsylvania April 28, 1999
ss.
County of Montgomery
There personally appeared the above-named James R. Mulvihill and
acknowledged the foregoing instrument to be his free act and deed.
Before me,
/s/ KRISTINE M. FISHER
--------------------------------------
Notary Public
My Commission Expires: Sept. 9, 2002
/s/ RUSSEL C. PLATT
--------------------------------------
Russell C. Platt
c/o JER International
630 Fifth Avenue, 23rd Floor
New York, New York 10111
44
<PAGE>
ACKNOWLEDGMENTS
State of New York April 28, 1999
ss.
County of New York
There personally appeared the above-named Russell C. Platt and acknowledged
the foregoing instrument to be his free act and deed.
Before me,
/s/ JOSEPH CHO
--------------------------------------
Notary Public
My Commission Expires: Feb. 22, 2001
45
<PAGE>
Exhibit 3.2
KEYSTONE PROPERTY TRUST
Articles Supplementary Reclassifying
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 (the "Department") that:
Pursuant to authority expressly vested in the Board of Trustees by Article
IV of the Declaration of Trust, the Board of Trustees adopted resolutions
reclassifying 800,000 Common Shares, par value $.001 per share, into a series of
Preferred Shares to be known as Series A Convertible Preferred Stock, par value
$.001 per share, and determined 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 A Convertible Preferred Stock.
Pursuant to such authority, Articles Supplementary were filed with the
Department on April 30, 1999. The within Articles Supplementary are being filed
before the issuance of any shares of Series A Convertible Preferred Stock so as
to modify 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 A
Convertible Preferred Stock.
Immediately before the reclassification, there are 800,000 shares
classified as Series A Convertible Preferred Stock, and immediately after the
reclassification, there are 800,000 shares classified as Series A Convertible
Preferred Stock (with the preferences and rights of such series modified as set
forth herein).
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 A Convertible
Preferred Stock, as so modified and determined are as follows:
SECTION 1. NUMBER OF SHARES AND DESIGNATION. This series of Preferred
Shares shall be designated as Series A Convertible Preferred Stock (the "Series
A Preferred Shares"), and the number of Preferred Shares 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:
<PAGE>
"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 shareholders 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 shares.
"Common Shares" shall mean the common shares, 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).
"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).
2
<PAGE>
"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 beneficial interest of the Trust constituting junior shares 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.
3
<PAGE>
"Parity Shares" shall have the meaning set forth in paragraph (b) of
Section 9 hereof.
"Person" shall mean any individual, firm, partnership, corporation, trust,
limited liability company or other entity, and shall include any successor (by
merger or otherwise) of such entity.
"Preferred Shares" shall mean the preferred shares, 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 beneficial
interest of the Trust; provided, however, that if any funds for any class or
series of Junior Shares or any class or series of 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.
4
<PAGE>
"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.
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 share 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.
5
<PAGE>
(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 shares, 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.
(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) 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
6
<PAGE>
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 share dividend, share 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 class or series of Parity Shares, then such assets, or the
proceeds thereof, shall be distributed among the holders of such Series A
Preferred Shares and such other Parity Shares ratably in accordance with the
amounts that would be payable on such Series A Preferred Shares and such other
Parity Shares 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 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
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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:
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%
(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 Series A Preferred Shares.
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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 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.
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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 share
transfer books of the Trust shall be closed on that date, in which event such
person or persons shall be deemed to have become such holder or holders of
record at the close of business on the next succeeding day on which such share
transfer books are open, but such conversion shall be at the Conversion Price in
effect on the date on which such 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 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 beneficial interest in Common Shares,
(B) subdivide its outstanding Common Shares into a greater number of shares, (C)
combine its outstanding Common Shares into a smaller number of shares or (D)
issue any shares of beneficial interest by reclassification of its Common
Shares, the Conversion Price in effect at the opening of business on the day
following the date fixed for the determination of shareholders entitled to
receive such dividend or distribution or at the opening of business on the 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
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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 shareholders 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 beneficial interest 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 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
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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 beneficial interest 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 shareholders entitled to receive such
distribution. For the purposes of this subparagraph (iii), the distribution of a
Security, which is distributed not only to the holders of the Common Shares on
the date fixed for the determination of shareholders entitled to such
distribution of such Security, but also is 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 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
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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 share dividends, subdivision of shares,
reclassification or combination of shares, distribution of rights, options or
warrants to purchase shares 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 shares, 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 shares, securities or
other property in connection with such Transaction shall thereafter be
convertible into the kind and amount of shares, securities and other property
(including cash or any combination thereof) receivable upon the consummation of
such Transaction by a holder of that number of Common Shares into which one
Series 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 shares,
securities and other property (including cash) receivable upon such Transaction
(provided that if the kind or amount of shares, securities and other property
(including cash) receivable upon such Transaction is not the same for each
Common Share 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 shares, securities
and other property (including cash) receivable upon such Transaction by each
Non-Electing Share shall be deemed to be the kind and amount so receivable per
share by a plurality of the Non-Electing Shares). The Trust shall not be a party
to any Transaction unless the terms of such Transaction are consistent with the
provisions of this paragraph (e), and it shall not consent or agree to the
occurrence of any Transaction until the Trust has entered into an agreement with
the successor or purchasing entity, as the case may be, for the benefit of the
holders of the Series 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.
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(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 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 share 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
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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
share 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 beneficial interest 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.
(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 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.
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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
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 beneficial interest of any class or
series whose preferential rights upon dissolution are superior or prior to those
receiving the distribution shall not be added to the Trust's total liabilities.
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SECTION 9. RANKING. Any class or series of shares of beneficial interest
of the Trust shall be deemed to rank:
(a) prior to the Series A Preferred Shares, as to the payment of
dividends and as to distribution of assets upon liquidation, dissolution or
winding up, if the holders of such class or series shall be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution
or winding up, as the case may be, in preference or priority to the holders of
Series A Preferred Shares;
(b) on a parity with the Series A Preferred Shares, as to the
payment of dividends and as to 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 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 class 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 such class or series, and
such class 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
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time after such voting power shall have been so vested in the holders of Series
A Preferred Shares, the Secretary of the Trust may, and upon the written request
of any holder of Series A Preferred Shares (addressed to the Secretary at the
principal office of the Trust) shall, call a special meeting of the holders of
the Series A Preferred Shares 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 share 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
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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 Shares, and Preferred Shares constitutes Shares of
the Trust. Therefore, the Series A Preferred Shares, being Shares, are governed
by and issued subject to all the limitations, terms and conditions of the
Declaration applicable to Shares generally, including but not limited to the
terms and conditions (including exceptions and exemptions) of Article IV of the
Declaration applicable to Shares. 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.
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IN WITNESS WHEREOF, KEYSTONE PROPERTY TRUST has caused these presents to
be signed in its name and on its behalf by its Vice President and witnessed to
by its Secretary as of October 7, 1999.
WITNESS: KEYSTONE PROPERTY TRUST
/s/ Timothy A. Peterson By: /s/ Stephen J. Butte
Timothy A. Peterson, Stephen J. Butte,
Secretary Vice President
The UNDERSIGNED, Vice President 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.
/s/ Stephen J. Butte
Stephen J. Butte,
Vice President
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Exhibit 3.3
KEYSTONE PROPERTY TRUST
Articles Supplementary Classifying and Designating a
Series of Preferred Shares as
Series B Convertible Preferred Stock
and Fixing Distribution and
Other Preferences and Rights of Such Series
KEYSTONE PROPERTY TRUST, a Maryland statutory real estate investment
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 (the "Department") that:
Pursuant to authority expressly vested in the Board of Trustees by Article
IV of the Declaration of Trust, the Board of Trustees adopted resolutions
reclassifying 4,200,000 Common Shares, par value $.001 per share, into 4,200,000
shares of Series B Convertible Preferred Stock, par value $.001 per share, and
determined 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, terms and conditions of redemption,
number of shares and dividend rate of the Series B Convertible Preferred Stock
are as follows:
SECTION 1. NUMBER OF SHARES AND DESIGNATION. This series of Preferred
Shares shall be designated as Series B Convertible Preferred Stock, par value
$.001 per share (the "Series B Preferred Shares"), and the number of Preferred
Shares which shall constitute such series shall be 4,200,000 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 B Preferred Shares, the
following terms shall have the meanings indicated:
"Act" shall mean the Securities Act of 1933, as amended.
"Annual Dividend Rate" shall have the meaning set forth in Section 3(a).
"Available Income I" means the amount of consolidated net income (or loss)
of the Trust and its subsidiaries for such period determined on a consolidated
basis in accordance with generally accepted accounting principles (i) plus
amounts which have been deducted for (a) interest on indebtedness of the Trust
and its subsidiaries, (b) provision for taxes of the Trust and its subsidiaries
based on income, (c) amortization of debt discount, (d) depreciation and
amortization, (e) the effect of any noncash charge resulting from a change in
accounting principles in determining consolidated net income for such period,
(f) amortization of deferred
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charges and (g) provisions for or realized losses on properties, (ii) less
amounts which have been included for gains on properties and (iii) adjusted to
eliminate the effect of the "straight lining" of rents.
"Available Income II" means the amount of consolidated net income (or
loss) of the Trust and its subsidiaries for such period determined on a
consolidated basis in accordance with generally accepted accounting principles
(i) plus amounts which have been incurred for (a) interest on indebtedness of
the Trust and its subsidiaries, (b) provision for taxes of the Trust and its
subsidiaries based on income, (c) amortization of debt discount, (d)
depreciation and amortization, (e) the effect of any noncash charge resulting
from a change in accounting principles in determining consolidated net income
for such period, (f) amortization of deferred charges and (g) provisions for or
realized losses on properties, (ii) less amounts which have been included for
gains on properties and (iii) adjusted to eliminate the effect of the "straight
lining" of rents.
"Board of Trustees" shall mean the Board of Trustees of the Trust or any
committee authorized by such Board of Trustees to perform any of its
responsibilities with respect to the Series B Preferred Shares.
"Business Day" shall mean any day other than a Saturday, Sunday or a day
on which state or federally chartered banking institutions in New York, New York
are not required to be open.
"Change in Control" shall mean (i) 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 shareholders 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 shares; (ii) any sale, exchange
or other transfer (in one transaction or a series of transactions contemplated
or arranged by any party as a single plan) of all or substantially all of the
assets of the Trust; (iii) any Person together with all "affiliates" and
"associates" (as such terms are defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of such Person, becoming
the "beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Trust representing 50% or
more of either (A) the combined voting power of the Trust's then outstanding
securities having the right to vote in an election of the Board of Trustees or
(B) the then outstanding shares of all classes of shares of the Trust (in each
such case other than as a result of the acquisition of securities directly from
the Trust), provided, however, that a Change in Control shall not be deemed to
have occurred if such Person is a Qualified Entity; and (iv) individuals who, as
of the initial Issue Date constitute the members of the Board of Trustees (the
"Incumbent Trustees") cease for any reason, including, without limitation, as a
result of a tender offer, proxy contest, merger or similar transaction, to
constitute at least a majority of the members of the Board of Trustees, provided
that any person becoming a Trustee of the Trust whose election or nomination for
election was approved by a vote of at least a majority of the Incumbent Trustees
shall, for purposes hereof be considered an Incumbent Trustee.
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"Change in Control Put Notice" shall have the meaning set forth in Section
5(b).
"Change in Control Redemption Date" shall have the meaning set forth in
Section 5(b).
"Common Base Amount" shall have the meaning set forth in Section 3(a)
hereof.
"Common Shares" shall mean the Common Shares, par value $.001 per share,
of the Trust.
"Conversion Price" shall mean the conversion price per Common Share for
which each Series B Preferred Share is convertible. The initial conversion price
shall be $16.00 (equivalent to a conversion rate of 1.5625 Common Shares for
each Series B Preferred Share).
"Conversion Price Adjustment" shall have the meaning set forth in Section
3(a) hereof.
"Conversion Ratio" shall mean the quotient of (A) $25.00 divided by (B)
the Conversion Price then in effect.
"Coverage Ratio I" means the ratio, for the year comprising the four most
recently completed calendar quarters for which financial statements are
available, of the Trust's Available Income I in such period to the Fixed Charges
I in such period.
"Coverage Ratio II" means the ratio, for the year comprising the four most
recently completed calendar quarters for which financial statements are
available, of the Trust's Available Income II in such period to the Fixed
Charges II in such period.
"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 30 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 October 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 October 31, 1999).
"Fixed Charges I" means the amount which is expensed in the applicable
period for interest on indebtedness and required distributions payable on
Preferred Units.
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"Fixed Charges II" means the amount which is incurred in the applicable
period for interest on indebtedness and required distributions payable on
Preferred Units.
"IRR" shall mean the annual discount rate which when applied to each
distribution on a Series B Preferred Share and the Redemption Price would result
in the net present value as of the respective Issue Date of all such payments
being equal to the Purchase Price.
"Issue Date" shall mean the date on which any Series B Preferred Shares
are issued and sold.
"Junior Shares" shall mean the Common Shares and any other class or series
of shares of beneficial interest of the Trust constituting junior shares within
the meaning set forth in Section 9(a)(iii) 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(a)
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 5% of the Liquidation Preference or (ii)
any other Liquidation, an amount equal to 10% of the Liquidation Preference, or
(Y) after December 15, 2003, in connection with any Liquidation, an amount equal
to the difference between the Redemption Price set forth in Section 5 and the
Liquidation Preference.
"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 the Board of Trustees determines to be
the value of a Common Share.
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"Merger Liquidation" shall mean 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.
"OP Units" shall mean units of limited partnership interest in the
Partnership that are not Preferred Units.
"Parity Shares" shall have the meaning set forth in Section 9(a)(ii)
hereof.
"Partnership" shall mean Keystone Operating Partnership, L.P., a Delaware
limited partnership.
"Person" shall mean any individual, firm, partnership, corporation, trust,
limited liability company or other entity, and shall include any successor (by
merger or otherwise) of such entity.
"Preferred Shares" shall mean the preferred shares, par value $.001 per
share, of the Trust.
"Preferred Units" shall mean any units issued by the Partnership that may
be issued in one or more series or classes, having such rights, powers, duties
and preferences as may be determined by the Trust as general partner in its sole
and absolute discretion.
"Purchase Price" shall mean Twenty-Five Dollars ($25.00) per Series B
Preferred Share issued hereunder.
"Qualified Entity" shall mean any Person that 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.
"Ratcheted Amount" shall have the meaning set forth in Section 3 hereof.
"Redemption Date" shall have the meaning set forth in Section 5(a) hereof.
"Redemption Notice" shall have the meaning set forth in Section 5(a)
hereof.
"Redemption Price" shall have the meaning set forth in Section 5(a)
hereof.
"Series B 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 beneficial
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interest 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 B
Preferred Shares shall mean placing such funds in a separate account or
delivering such funds to a disbursing, paying or other similar agent.
"Trading Day" shall mean any day on which the securities in question are
traded on the AMEX, or if such securities are not listed or admitted for trading
on the AMEX, 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.
SECTION 3. DIVIDENDS.
(a) The holders of Series B 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 (i) $2.4375 per Series B Preferred Share ("Annual Dividend
Rate") plus (ii) an amount (the "Ratcheted Amount") equal to the product of (x)
the amount by which cash dividends with respect to each Common Share exceeds
$1.56 (the "Common Base Amount") and (y) the Conversion Ratio in effect
immediately after any adjustment to the Conversion Price pursuant to (i) a
payment of a dividend or a distribution on its shares of beneficial interest in
Common Shares, (ii) a subdivision of its outstanding Common Shares into a
greater number of shares, (iii) a combination of its outstanding Common Shares
into a smaller number of shares or (iv) an issuance of any shares of beneficial
interest by reclassification of its outstanding Common Shares (a "Conversion
Price Adjustment"); provided, that, at the time of a Conversion Price
Adjustment, the Common Base Amount shall be adjusted to an amount equal to the
product of (I) the Common Base Amount in effect immediately prior to the
Conversion Price Adjustment and (II) a fraction, the numerator of which shall be
the Conversion Ratio in effect immediately prior to the applicable Conversion
Price Adjustment and the denominator of which shall be the Conversion Ratio in
effect immediately after the applicable Conversion Price Adjustment. 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, and shall compound at a rate per annum equal
to 9.75% 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 B Preferred Shares,
as they appear on the share records of the Trust at the close of business on
each record date which shall not be less than ten nor 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 (including any Ratcheted Amount if applicable) on any
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Series B 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 B 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 B Preferred Shares shall be computed on the basis of twelve 30-day
months and a 360-day year.
(c) So long as any Series B 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 B 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 B
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 B Preferred Shares and such Parity Shares.
(d) So long as any Series B Preferred Shares are outstanding, no
dividends (other than dividends or distributions paid solely in shares of, or
options, warrants or rights to subscribe for or purchase shares of, 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 such shares) by
the Trust, directly or indirectly (except by conversion into or exchange for
Junior Shares), unless in each case (i) all accumulated and unpaid dividends on
all outstanding Series B 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 B 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 B Preferred Shares and any Parity Shares.
(e) If the Trust shall after the Issue Date make any issuance or
distribution to holders of its Common Shares other than the regular quarterly
dividend thereon (or any special distribution in lieu thereof in an amount not
exceeding the regular quarterly dividend), the holders of the Series B Preferred
Shares shall be entitled to receive such issuance or distribution in an amount
per Series B Preferred Share equal to the amount the holder of such share would
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have received if such Series B Preferred Share had been converted into Common
Shares immediately prior to such issuance or distribution.
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 B
Preferred Shares shall be entitled to receive the greater of (i) an amount equal
to (A) Twenty-Five Dollars ($25.00) per Series B 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 B Preferred Share equal to the
amount which would have been payable had each Series B 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 share dividend, share split, combination, reorganization,
recapitalization, reclassification or other similar event involving a change in
the capital structure of the Trust. Until the holders of the Series B 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 B Preferred Shares shall be insufficient to pay in full
the preferential amount aforesaid and liquidating payments then payable on any
other shares of any class or series of Parity Shares, then such assets, or the
proceeds thereof, shall be distributed among the holders of such Series B
Preferred Shares and such other Parity Shares ratably in accordance with the
amounts that would be payable on such Series B Preferred Shares in accordance
with the first sentence of this Section 4(a) and on all other Parity Shares if
all amounts then payable thereon were paid in full.
In connection with a Merger Liquidation, the holders of Series B 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 B 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 B
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 B Preferred Shares at any time prior to the Merger
Liquidation, to redeem any or all of the outstanding Series B Preferred Shares
for an amount per Series B Preferred Share equal to the Liquidation Preference
plus a premium equal to 10% of the Liquidation Preference.
(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 B Preferred Shares and any Parity 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 B Preferred
Shares and any Parity Shares shall not be entitled to share therein.
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SECTION 5. REDEMPTION.
(a) At any time on or after the Issue Date, upon the written
election of the Trust given to each record holder of Series B 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 or part of the outstanding Series B Preferred Shares at a price per Series B
Preferred Share equal to the following amounts or percentages of the Liquidation
Preference during the following periods (the "Redemption Price"):
From the Issue Date through and including the
fifth anniversary of the Issue Date the amount necessary
to produce a 17% IRR
From the fifth anniversary of the Issue Date
through and including the sixth anniversary of
the Issue Date 104.825%
From the sixth anniversary of the Issue Date
through and including the seventh anniversary
of the Issue Date 103.62%
From the seventh anniversary of the Issue Date
through and including the eighth anniversary
of the Issue Date 102.41%
From the eighth anniversary of the Issue Date
through and including the ninth anniversary of
the Issue Date 101.21%
The ninth anniversary of the Issue Date and
thereafter 100%
provided, however, that if Redemption Date would occur subsequent to the Change
in Control Redemption Date (as defined below), and a holder of Series B
Preferred Shares, whose shares are subject to a Redemption Notice, delivers a
Change in Control Put Notice (as defined below), the Redemption Notice shall be
deemed void and have no effect and the Trust shall redeem the holder's Series B
Preferred Shares in accordance with Section 5(b).
If less than all the Series B Preferred Shares are called for redemption by the
Trust, the number of Series B Preferred Shares to be redeemed by the holders of
the Series B Preferred Shares shall be redeemed pro rata among such holders on
the basis of the number of Series B Preferred Shares owned by such holders.
(b) Notwithstanding the provisions of Section 4(a), in connection
with a Change in Control where the surviving entity is not a Qualified Entity,
the Trust shall provide notice of a proposed Change in Control to the holders of
Series B Preferred Shares at least 20 days prior to such Change in Control
becoming effective and each holder of Series B Preferred Shares shall have the
right to elect by delivering written notice (the "Change in Control Put Notice")
to the Trust not less than five Business Days prior to the Change in Control to
require the Trust to redeem all, but not less than all, of the outstanding
Series B Preferred Shares owned by such holder for an amount per Series B
Preferred Share equal to the Liquidation Preference
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plus a premium equal to 10% of the Liquidation Preference. Upon receipt of such
notice, the Trust shall redeem such shares on the date on which the Change of
Control becomes effective (the "Change of Control Redemption Date"), if such
shares were not redeemed previously in accordance with Section 5(a).
(c) From and after the Redemption Date or the Change of Control
Redemption Date, as the case may be, (i) except as otherwise provided herein,
dividends on the Series B 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 B 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 or the Change of
Control Redemption Date, as the case may be, the Trust shall deposit with a bank
or trust company 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 B Preferred Shares so
called for redemption, provided, however, if the Trust elects to make such a
deposit it will notify the holders of Series B Preferred Shares subject to
redemption in advance of such deposit of (i) the date of such deposit, (ii) the
office of such bank or trust company as the place of payment for the redemption
and (iii) instructing such holders to surrender their certificates for payment
at such office on or about the Redemption Date or the Change in Control
Redemption Date. No interest shall accrue for the benefit of the holder of
Series B Preferred Shares to be redeemed on any cash so set aside by the Trust.
(d) Notwithstanding the provisions of Section 5(c), if (i) at any
time during the one year period following the initial Issue Date, the Trust
redeems Series B Preferred Shares pursuant to Section 5(a) and (ii) within 90
days of the Redemption Date with respect thereto a Change in Control occurs
wherein the surviving entity is not a Qualified Entity, the Trust shall promptly
pay to each holder of Series B Preferred Shares that were redeemed on such
Redemption Date an additional amount with respect to each Series B Preferred
Share of such holder that was so redeemed equal to the difference between (x)
the amount that would have been payable to such holder with respect to such
Series B Preferred Share had such holder continued to hold such share beyond
such Redemption Date and exercised the rights of such holder under Section 5(b)
upon such Change in Control and (y) the amount the holder received on the
Redemption Date for such Series B Preferred Share pursuant to Section 5(a).
SECTION 6. REACQUIRED SHARES. All Series B Preferred Shares which shall
have been issued and converted, redeemed or reacquired in any manner by the
Trust shall be restored to the status of authorized but unissued Series B
Preferred Shares.
SECTION 7. CONVERSION. Holders of Series B Preferred Shares shall have the
right to convert all or a portion of such shares into Common Shares, as follows:
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(a) Subject to and upon compliance with the provisions of this
Section 7, a holder of Series B 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 nonassessable Common Shares obtained by dividing the
aggregate Liquidation Preference of such Series B 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 B
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 convert Series B 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 B Preferred Share to be converted shall surrender the certificate
representing such Series B 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 B Preferred Shares. Unless the
Common Shares issuable on conversion are to be issued in the same name as the
name in which such Series B 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 B 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 (and of any accrued and unpaid
dividends to the date of conversion), notwithstanding the conversion thereof,
following such Dividend Payment Record Date and prior to such Dividend Payment
Date; provided, however, that no holder Series B Preferred Shares surrendered
for conversion shall be entitled to receive a dividend for such Dividend Period
with respect to such Series B Preferred Shares if such holder is entitled to
receive a distribution for the identical quarterly period with respect to Common
Shares for which such Series B Preferred Shares have been exchanged.
As promptly as practicable after the surrender of certificates for Series B
Preferred Shares as aforesaid, the Trust shall issue and shall deliver at such
office to such holder, or 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 B 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 B 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
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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
shares 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 shares
transfer books are open, but such conversion shall be at the Conversion Price in
effect on the date on which such Series B 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 B Preferred Shares. Instead
of any fractional interest in a Common Share that would otherwise be deliverable
upon the conversion of a Series B Preferred Share, the Trust shall pay to the
holder of such Series B 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 than one Series B 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 B Preferred Shares so surrendered.
(d) The Conversion Price shall be adjusted from time to time as
follows:
(i) If the Trust shall after the Issue Date (A) subdivide its
outstanding Common Shares into a greater number of shares or (B) combine its
outstanding Common Shares into a smaller number of 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 or combination becomes effective, as the case may be, shall be
adjusted so that the holder of any Series B Preferred Share thereafter
surrendered for conversion shall be entitled to receive the number of Common
Shares that such holder would have owned or have been entitled to receive after
the happening of any of the events described above, had such Series B 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) 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 (ii) 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 (ii)) not later than
such time as may be required in order to preserve the tax-free nature of a
distribution to the holders of Common Shares. Notwithstanding any other
provisions of this Section 7, the Trust shall not be required to
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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 share dividends, subdivision of shares, reclassification or
combination of shares, distribution of rights, options or warrants to purchase
shares 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 shares, securities or other property
(including cash or any combination thereof), each Series B Preferred Share that
is not redeemed or converted into the right to receive shares, securities or
other property in connection with such Transaction shall thereafter be
convertible into the kind and amount of shares, securities and other property
(including cash or any combination thereof) receivable upon the consummation of
such Transaction by a holder of that number of Common Shares into which one
Series B Preferred Share was convertible immediately prior to such Transaction,
assuming such holder of Common Shares (i) is not a Person with which the Trust
consolidated or into which the Trust merged or which merged into the Trust or to
which such sale or transfer was made, as the case may be (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 shares,
securities and other property (including cash) receivable upon such Transaction
(provided that if the kind or amount of shares, securities and other property
(including cash) receivable upon such Transaction is not the same for each
Common Share 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 shares, securities
and other property (including cash) receivable upon such Transaction by each
Non-Electing Share shall be deemed to be the kind and amount so receivable per
share by a plurality of the Non-Electing Shares). The Trust shall not be a party
to any Transaction unless the terms of such Transaction are consistent with the
provisions of this paragraph (e), and it shall not consent or agree to the
occurrence of any Transaction until the Trust has entered into an agreement with
the successor or purchasing entity, as the case may be, for the benefit of the
holders of the Series B Preferred Shares that will contain provisions enabling
the holders of the Series B Preferred Shares that remain outstanding after such
Transaction to convert their Series B Preferred Shares into the consideration
received by holders
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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 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; 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 B Preferred Shares at their addresses as shown on the share 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 B
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.
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The Trust shall mail such notice and such certificate to the holders of each
Series B Preferred Share at such holder's last address as shown on the share
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 B Preferred Share converted after such
record date and before the occurrence of such event the additional Common Shares
issuable upon such conversion by reason of the adjustment required by such event
over and above the Common Shares issuable upon such conversion before giving
effect to such adjustment and (B) paying to such holder any amount of cash in
lieu of any fraction pursuant to paragraph (c) of this Section 7.
(i) There shall be no adjustment of the Conversion Price in case of
the issuance of any shares of beneficial interest of the Trust in a
reorganization, acquisition or other similar transaction except as specifically
set forth in this Section 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.
(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 B Preferred Shares, the Conversion Price for the Series B
Preferred Shares may be adjusted, to the extent permitted by law, in such
manner, if any, and at such time, as the Board of Trustees, in its sole
discretion, may determine to be equitable in the circumstances.
(k) The Trust will at all times reserve and keep available, free
from preemptive rights, out of the aggregate of its authorized but unissued
Common Shares, for the purpose of effecting conversion of the Series B Preferred
Shares, the full number of Common Shares deliverable upon the conversion of all
outstanding Series B Preferred Shares not theretofore converted. For purposes of
this paragraph (i), the number of Common Shares that shall be deliverable upon
the conversion of all outstanding Series B Preferred Shares shall be computed as
if at the time of computation all such outstanding shares were held by a single
holder.
The Trust covenants that any Common Shares issued upon conversion of the Series
B Preferred Shares shall be validly issued, fully paid and nonassessable. Before
taking any action that would cause an adjustment reducing the Conversion Price
below the then-par value of the Common Shares deliverable upon conversion of the
Series B Preferred Shares, the Trust 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 nonassessable Common Shares at such adjusted
Conversion Price.
(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 B Preferred
Shares pursuant hereto; provided, however, that
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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 B
Preferred Shares to be converted, and no such issue or delivery shall be made
unless and until the person requesting such issue or delivery has paid to the
Trust the amount of any such tax or established, to the reasonable satisfaction
of the Trust, that such tax has been paid.
(m) Except as permitted in Section 33 of the Contribution and
Exchange Agreement, dated as of August 6, 1999, by and among Reckson Morris
Industrial Trust, Reckson Morris Interim GP, LLC, Reckson Operating Partnership,
L.P., Robert Morris, Joseph D. Morris, Ronald Schram, Mark M. Bava, The Drew
Morris Trust, The Justin Morris Trust, The Keith Morris Trust, Joseph D. Morris
Family Limited Partnership, Robert Morris Family Limited Partnership (the
"Contribution Agreement"), holders of Series B Preferred Shares will not have
the conversion rights set forth in Section 7 hereof and the Series B Preferred
Shares may not be converted into Common Shares, until and unless Shareholders'
Approval (as such term is defined in the Contribution Agreement) are obtained.
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 beneficial interest of any class or
series 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.
(a) Any class or series of shares of beneficial interest of the
Trust shall be deemed to rank:
(i) prior to the Series B Preferred Shares, as to the payment
of dividends and as to distribution of assets upon liquidation, dissolution or
winding up, if the holders of such class or series shall be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution
or winding up, as the case may be, in preference or priority to the holders of
Series B Preferred Shares;
(ii) on a parity with the Series B 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 B Preferred Shares, if the holders of such class or series
and the Series B Preferred Shares shall be entitled to the receipt of dividends
and of amounts distributable upon liquidation, dissolution or winding up in
proportion to their respective amounts of accrued and unpaid dividends per share
or liquidation preferences, without preference or priority one over the other
("Parity Shares"); and
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(iii) junior to the Series B Preferred Shares, as to the
payment of dividends or as to the distribution of assets upon liquidation,
dissolution or winding up, if such class or series shall be Common Shares or if
the holders of Series B 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 class or series, and such class or series shall not in either case rank
prior to the Series B Preferred Shares.
(b) The Series B Preferred Shares shall be deemed to rank on a
parity with the Series A Preferred Shares of the Trust, par value $.001 per
share.
SECTION 10. VOTING. Except as otherwise set forth herein, the Series B
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 B 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 B 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 B 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 B 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 B Preferred Shares
shall forthwith terminate and the number of Trustees constituting the Board of
Trustees shall be reduced accordingly.
(b) The Trust covenants to the holders of the Series B Preferred
Shares that while any Series B Preferred Shares are outstanding:
(i) the Trust will not (x) incur any indebtedness for borrowed
money or (y) issue additional Parity Shares if, after giving effect to such
incurrence or issuance, the Trust's Coverage Ratio I would be less than 1.5:1 or
the Trust's Coverage Ratio II would be less than 1.2:1.
(ii) the Trust will not declare or pay any dividends which
result in the aggregate dividends declared or paid from the Issue Date paid on
Preferred Shares or Common Shares to exceed the sum of (x) the cumulative Funds
from Operations (FFO) (as defined by NAREIT and reported by the Trust) from the
Issue Date (with the amount for the quarter in which the Series B Preferred
Shares are issued being based upon the number of days such shares are
outstanding during such quarter divided by 90 and multiplied by the FFO for such
quarter) plus (y) any capital gains not included in (x) (net of any capital
gains tax paid by the Trust) from the Issue Date; and
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(iii) the Trust will extend to the holders of the Series B
Preferred Shares the benefit of any covenant granted to holder of a future
series of Preferred Shares that restricts the total amount of the Trust's
combined indebtedness and Preferred Shares to a specified percentage of the
value of either assets or real estate held by the Trust.
If and whenever the Trust breaches any of the covenants set forth in this
Section 10(b), the number of Trustees then constituting the Board of Trustees
shall be increased by one and the holders of Series B 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 the Trust cures
any breach of any of such covenants or is no longer in violation thereof, then
the rights of the holders of the Series B Preferred Shares to elect such
additional Trustee shall cease, and the term of office of the person elected as
a Trustee by the holders of the Series B Preferred Shares shall forthwith
terminate and the number of Trustees constituting the Board of Trustees shall be
reduced accordingly.
(c) At any time after voting power shall have been vested in the
holders of Series B Preferred Shares pursuant to (a) or (b) above, the Secretary
of the Trust may, and upon the written request of any holder of Series B
Preferred Shares (addressed to the Secretary at the principal office of the
Trust) shall, call a special meeting of the holders of the Series B Preferred
Shares 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 B Preferred Shares may call such meeting, upon the
notice above provided, and for that purpose shall have access to the shares
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 provided
in (a) or (b) above. If the Trustee elected by the holders of the Series B
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 B
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.
(d) So long as any Series B Preferred Shares are outstanding, in
addition to any other vote or consent of shareholders required by the
Declaration, the affirmative vote of at least two-thirds (2/3) of the votes cast
by the holders of Series B 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 B 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 Parity Shares shall not be deemed to
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materially adversely affect the voting powers, rights or preferences of the
holders of Series B Preferred Shares and (B) any filing with the Department by
the Trust in connection with a merger, consolidation or sale of all or
substantially all of the assets of the Trust which does not include an amendment
to the Declaration or these Articles Supplementary shall not be deemed to be an
amendment, alteration or repeal of any of the provisions of the Declaration or
these Articles Supplementary provided that (i) the Trust is the surviving entity
and the Series B Preferred shares remain outstanding with the terms thereof
unchanged or (ii) the resulting, surviving or transferee entity is a Trust,
business trust or other like entity organized under the laws of any state and
substitutes for the Series B Preferred Shares, other preferred shares having
substantially the same terms and the same rights as the Series B Preferred
Shares including, with respect to distributions, voting rights, conversion
rights and rights upon liquidation, distribution or winding up; 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 B
Preferred Shares in the distribution of assets on any liquidation, dissolution
or winding up of the Trust or in the payment of dividends;
provided, however, that no such vote of the holders of Series B Preferred Shares
under this Section 10(d) 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 is to occur, as the case may be, provision is made for the
redemption of all Series B Preferred Shares, as the case may be, at the time
outstanding in accordance with Section 5 hereof.
(e) Each Series B Preferred Share shall have one (1) vote per share.
(f) The Trust agrees that the holders of the Series B Preferred
Shares shall be granted, in addition to the voting rights hereunder, voting
rights equivalent to those granted by the Trust in connection with the issuance
of any future series of Preferred Shares, including but not limited to the
Series C Convertible Preferred Shares. In the event such voting rights are
granted by the Trust, these Articles Supplementary shall be deemed to be amended
to grant such voting rights to the holders of the Series B Preferred Shares.
SECTION 11. RECORD HOLDERS. The Trust may deem and treat the record holder
of any Series B 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 B Preferred
Shares constitute Preferred Shares, and Preferred Shares constitutes Shares of
the Trust. Therefore, the Series B Preferred Shares, being Shares, are governed
by and issued subject to all the limitations, terms and conditions of the
Declaration applicable to Shares generally, including but not limited to the
terms and conditions (including exceptions and exemptions) of Article IV of the
Declaration applicable to Shares. The foregoing sentence shall not be construed
to limit the applicability to the Series B Preferred Shares of any other term or
provision of the Declaration.
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SECTION 13. NOTICES. All notices, requests and demands to be made
hereunder shall be in writing and shall be given by registered or certified,
first-class United States mail, postage prepaid, return receipt requested.
Notices to the Trust shall be sent to its principal office and notices to
holders shall be sent to the registered holders at the address shown of the
records of the Trust.
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IN WITNESS WHEREOF, KEYSTONE PROPERTY TRUST has caused these presents to
be signed in its name and on its behalf by its Vice President and witnessed to
by its Secretary as of October 7, 1999.
WITNESS: KEYSTONE PROPERTY TRUST
/s/ Timothy A. Peterson By: /s/ Stephen J. Butte
Timothy A. Peterson, Stephen J. Butte,
Secretary Vice President
The UNDERSIGNED, Vice President 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.
/s/ Stephen J. Butte
Stephen J. Butte,
Vice President
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Exhibit 3.4
KEYSTONE PROPERTY TRUST
Articles Supplementary Classifying and Designating a
Series of Preferred Shares as
Series C Convertible Preferred Stock
and Fixing Distribution and
Other Preferences and Rights of Such Series
KEYSTONE PROPERTY TRUST, a Maryland statutory real estate investment
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 (the "Department") that:
Pursuant to authority expressly vested in the Board of Trustees by Article
IV of the Declaration of Trust, the Board of Trustees adopted resolutions
reclassifying 800,000 Common Shares, par value $.001 per share, into 800,000
shares of Series C Convertible Preferred Stock, par value $.001 per share, and
determined 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, terms and conditions of redemption,
number of shares and dividend rate of the Series C Convertible Preferred Stock
are as follows:
SECTION 1. NUMBER OF SHARES AND DESIGNATION. This series of Preferred
Shares shall be designated as Series C Convertible Preferred Stock, par value
$.001 per share (the "Series C Preferred Shares"), and the number of Preferred
Shares 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 C Preferred Shares, the
following terms shall have the meanings indicated:
"Act" shall mean the Securities Act of 1933, as amended.
"Annual Dividend Rate" shall have the meaning set forth in Section 3(a)
hereof.
"Board of Trustees" shall mean the Board of Trustees of the Trust or any
committee authorized by such Board of Trustees to perform any of its
responsibilities with respect to the Series C Preferred Shares.
"Business Day" shall mean any day other than a Saturday, Sunday or a day
on which state or federally chartered banking institutions in New York, New York
are not required to be open.
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"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 shareholders 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 shares.
"Common Base Amount" shall have the meaning set forth in Section 3(a)
hereof.
"Common Shares" shall mean the Common Shares, par value $.001 per share,
of the Trust.
"Constituent Person" shall have the meaning set forth in Section 7(e)
hereof.
"Conversion Price" shall mean the conversion price per Common Share for
which each Series C Preferred Share is convertible, as such Conversion Price may
be adjusted pursuant to Section 7 hereof. The initial conversion price shall be
$15.75 (equivalent to a conversion rate of 1.587302 Common Shares for each
Series C Preferred Share).
"Conversion Price Adjustment" shall have the meaning set forth in Section
3(a) hereof.
"Conversion Ratio" shall mean the quotient of (A) $25.00 divided by (B)
the Conversion Price then in effect.
"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.
"Department" shall have the meaning set forth in the introductory
paragraph hereof.
"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 October 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 October 31, 1999).
"EBITDA" shall mean earnings before interest, taxes, depreciation and
amortization, determined in accordance with Generally Accepted Accounting
Principles ("GAAP").
"Fixed Charge Coverage Ratio" shall mean the ratio of EBITDA to the Fixed
Charges of the Trust for a given period. In the event that the Trust incurs,
issues, assumes or retires any
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indebtedness or preferred shares prior to the date on which the event for which
the calculation of the Fixed Charge Coverage Ratio is made, then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect to such
transaction, as if the such transaction had occurred at the beginning of the
given period for which the Fixed Charge Coverage Ratio is calculated.
"Fixed Charges" shall mean the sum of (i) the consolidated interest
expense of the Trust and the Subsidiaries for a given period, determined in
accordance with GAAP, and (ii) all accrued dividend payments on any series of
preferred equity of the Trust and the Subsidiaries. Fixed Charges shall not
include intercompany interest or dividends.
"Issue Date" shall mean the date on which any Series C Preferred Shares
are issued and sold.
"Junior Shares" shall have the meaning set forth in Section 9(a)(iii)
hereof.
"Liquidation" shall mean (i) a dissolution or winding up of the Trust,
whether voluntary or involuntary, (ii) 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 (iii) 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(a)
hereof.
"Liquidation Premium" shall mean (X) on or prior to the fifth anniversary
of the date of these Articles Supplementary, in connection with (i) a Merger
Liquidation in which the surviving entity is a Qualified Entity, an amount equal
to 5% of the Liquidation Preference or (ii) any other Liquidation, an amount
equal to 10% of the Liquidation Preference, or (Y) after the fifth anniversary
of the date of these Articles Supplementary, in connection with any Liquidation,
an amount equal to the difference between the Redemption Price set forth in
Section 5 and the Liquidation Preference.
"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 the Board of Trustees determines to be
the value of a Common Share.
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"Merger Liquidation" shall mean 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.
"Non-Electing Share" shall have the meaning set forth in Section 7(e)
hereof.
"Parity Shares" shall have the meaning set forth in Section 9(a)(ii)
hereof.
"Person" shall mean any individual, firm, partnership, corporation, trust,
limited liability company or other entity, and shall include any successor (by
merger or otherwise) of such entity.
"Preferred Shares" shall mean the preferred shares of beneficial interest,
par value $.001 per share, of the Trust.
"Purchase Price" shall mean Twenty-Five Dollars ($25.00) per Series C
Preferred Share issued hereunder.
"Qualified Entity" shall mean any Person that 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 Investors 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.
"Ratcheted Amount" shall have the meaning set forth in Section 3 hereof.
"Redemption Date" shall have the meaning set forth in Section 5(a) hereof.
"Redemption Notice" shall have the meaning set forth in Section 5(a)
hereof.
"Redemption Price" shall have the meaning set forth in Section 5(a)
hereof.
"Securities" shall have the meaning set forth in Section 7(d)(iii) hereof.
"Series C 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 beneficial
interest of the Trust; provided, however, that if any funds for any class or
series of Junior Shares or any class or series of 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 C
Preferred Shares shall mean placing such funds in a separate account or
delivering such funds to a disbursing, paying or other similar agent.
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"Subsidiaries" means subsidiary corporations, trusts, partnerships,
limited partnerships, joint ventures and limited liability companies which are
directly or indirectly and wholly or majority owned by the Trust, including,
unless the context requires otherwise, Keystone Operating Partnership, L.P.
"Trading Day" shall mean any day on which the securities in question are
traded on the AMEX, or if such securities are not listed or admitted for trading
on the AMEX, 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 Section 7(e) hereof.
"Trust" shall have the meaning set forth in the introductory paragraph
hereof.
SECTION 3. DIVIDENDS.
(a) The holders of Series C 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 (i) $2.4375 per Series C Preferred Share ("Annual Dividend
Rate") plus (ii) an amount (the "Ratcheted Amount") equal to the product of (x)
the amount by which cash dividends with respect to each Common Share exceeds
$1.54 (the "Common Base Amount") and (y) the Conversion Ratio in effect
immediately after any adjustment to the Conversion Price pursuant to Section
7(d) below (a "Conversion Price Adjustment"); provided, that, at the time of a
Conversion Price Adjustment, the Common Base Amount shall be adjusted to an
amount equal to the product of (I) the Common Base Amount in effect immediately
prior to the Conversion Price Adjustment and (II) a fraction, the numerator of
which shall be the Conversion Ratio in effect prior to the applicable Conversion
Price Adjustment and the denominator of which shall be the Conversion Ratio in
effect immediately after the applicable Conversion Price Adjustment. 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, and shall compound at a rate per annum equal
to 9.75% 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 C Preferred Shares,
as they appear on the share records of the Trust at the close of business on
each record date which shall not be less than ten nor 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 (including any Ratcheted Amount if applicable) on any
Series C 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.
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(b) The amount of dividends payable for each full Dividend Period
for the Series C 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 C Preferred Shares shall be computed on the basis of twelve 30-day
months and a 360-day year. Holders of Series C Preferred Shares shall not be
entitled to any dividends, whether payable in cash, property or shares, in
excess of cumulative dividends, as herein provided, on the Series C Preferred
Shares, plus any other amounts provided in these Articles Supplementary.
(c) So long as any Series C 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 C 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 C
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 C Preferred Shares and such Parity Shares.
(d) So long as any Series C Preferred Shares are outstanding, no
dividends (other than dividends or distributions paid solely in shares of, or
options, warrants or rights to subscribe for or purchase shares of, 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 such shares) by
the Trust, directly or indirectly (except by conversion into or exchange for
Junior Shares), unless in each case (i) all accumulated and unpaid dividends on
all outstanding Series C 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 C 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 C 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 C
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 C 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 C
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Preferred Share equal to the amount which would have been payable had each
Series C 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 share dividend, share split, combination,
reorganization, recapitalization, reclassification or other similar event
involving a change in the capital structure of the Trust. Until the holders of
the Series C 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 C Preferred Shares shall be
insufficient to pay in full the preferential amount aforesaid and liquidating
payments on any other shares of any class or series of Parity Shares, then such
assets, or the proceeds thereof, shall be distributed among the holders of such
Series C Preferred Shares and such other Parity Shares ratably in accordance
with the amounts that would be payable on such Series C Preferred Shares and
such other Parity Shares if all amounts payable thereon were paid in full.
In connection with a Merger Liquidation, the holders of Series C Preferred Units
shall have the right (a "Continuation Right") to elect, by delivering written
notice to the Partnership not less than five Business Days prior to the Merger
Liquidation, to require the Partnership to make provision for the Series C
Preferred Units to be assumed by the surviving entity as described in Section
7(e); provided, however, notwithstanding the election by the holders of the
Series C 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 C Preferred Shares at any time prior to
the Merger Liquidation, to redeem any or all of the outstanding Series C
Preferred Shares for an amount per Series C Preferred Share equal to the
Liquidation Preference plus a premium equal to 10% of the Liquidation
Preference.
(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 C Preferred Shares and any Parity 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 C Preferred
Shares and any Parity Shares shall not be entitled to share therein.
SECTION 5. REDEMPTION.
(a) At any time on or after the fifth anniversary of the Issue Date,
upon the written election of the Trust given to each record holder of Series C
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 or part of the outstanding Series C Preferred Shares at a
price per Series C Preferred Share equal to the following amounts or percentages
of the Liquidation Preference during the following periods (the "Redemption
Price"):
Following the fifth anniversary of the Issue Date through and
including the sixth anniversary of the Issue Date .............. 104.75%
Following the sixth anniversary of the Issue Date through and
including the seventh anniversary of the Issue Date ............ 103.5625%
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Following the seventh anniversary of the Issue Date through and
including the eighth anniversary of the Issue Date ............. 102.375%
Following the eighth anniversary of the Issue Date through and
including the ninth anniversary of the Issue Date .............. 101.1875%
Following the ninth anniversary of the Issue Date and
thereafter ..................................................... 100%
(b) If less than all of the outstanding Series C Preferred Shares
are called for redemption by the Trust, the number of Series C Preferred Shares
to be redeemed from the holders of the Series C Preferred Shares shall be
redeemed pro rata among such holders on the basis of the respective number of
Series C Preferred Shares owned by such holders.
(c) From and after the Redemption Date or the date on which the
Change in Control becomes effective, as the case may be, (i) except as otherwise
provided herein, dividends on the Series C 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
C 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 or the date on which the Change in Control becomes effective, as the case
may be, 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 C Preferred Shares so
called for redemption. No interest shall accrue for the benefit of the holder of
Series C Preferred Shares to be redeemed on any cash so set aside by the Trust.
SECTION 6. REACQUIRED SHARES. All Series C Preferred Shares which shall
have been issued and reacquired in any manner by the Trust shall be restored to
the status of authorized but unissued Series C Preferred Shares.
SECTION 7. CONVERSION. Holders of Series C 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 C 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 nonassessable Common Shares obtained by dividing the
aggregate Liquidation Preference of such Series C 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 C
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 convert Series C Preferred Shares called for redemption pursuant to Section 5
hereof shall terminate at the close of business on the Redemption Date
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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 C Preferred Share to be converted shall surrender the certificate
representing such Series C 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 C Preferred Shares. Unless the
Common Shares issuable on conversion are to be issued in the same name as the
name in which such Series C 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 C 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 (and of any accrued and unpaid
dividends to the date of conversion), notwithstanding the conversion thereof,
following such Dividend Payment Record Date and prior to such Dividend Payment
Date; provided, however, that no holder of Series C Preferred Shares surrendered
for conversion shall be entitled to receive a dividend for such Dividend Period
with respect to such Series C Preferred Shares if such holder is entitled to
receive a distribution for the identical quarterly period with respect to Common
Shares for which such Series C Preferred Shares have been exchanged.
As promptly as practicable after the surrender of certificates for Series C
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 C 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.
Such certificates shall be legended, to the extent deemed necessary by the
Trust's counsel, to reflect any restrictions on resale required by applicable
law.
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 C 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 share
transfer books of the Trust shall be closed on that date, in which event such
person or persons shall be deemed to have become such holder or holders of
record at the close of business on the next succeeding day on which such share
transfer books are open, but such conversion shall be at the Conversion Price in
effect on the date on which such Series C Preferred Shares shall have been
surrendered and such notice received by the Trust.
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(c) No fractional shares or scrip representing fractions of Common
Shares shall be issued upon conversion of the Series C Preferred Shares. Instead
of any fractional interest in a Common Share that would otherwise be deliverable
upon the conversion of a Series C Preferred Share, the Trust shall pay to the
holder of such Series C 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 than one Series C 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 C 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 beneficial interest in Common Shares,
(B) subdivide its outstanding Common Shares into a greater number of shares, (C)
combine its outstanding Common Shares into a smaller number of shares or (D)
issue any shares of beneficial interest by reclassification of its Common
Shares, the Conversion Price in effect at the opening of business on the day
following the date fixed for the determination of shareholders entitled to
receive such dividend or distribution or at the opening of business on the 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 C 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 C 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 shareholders 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
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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 beneficial interest 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 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 beneficial interest 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
shareholders entitled to receive such distribution. For the purposes of this
subparagraph (iii), the distribution of a Security, which is distributed not
only to the holders of the Common Shares on the date fixed for the determination
of shareholders entitled to such distribution of such Security, but also is
required to be distributed with each Common Share delivered to a Person
converting a Series C Preferred Share after such determination date, shall not
require an adjustment of the Conversion Price pursuant to this subparagraph
(iii); provided, however, that on the date, if any, on which a person converting
a Series C 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).
(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
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to be made shall be carried forward and taken into account in any subsequent
adjustment until made; 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 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 share dividends, subdivision of shares, reclassification or
combination of shares, distribution of rights, options or warrants to purchase
shares 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 shares, securities or other property
(including cash or any combination thereof), each Series C Preferred Share that
is not redeemed or converted into the right to receive shares, securities or
other property in connection with such Transaction shall thereafter be
convertible into the kind and amount of shares, securities and other property
(including cash or any combination thereof) receivable upon the consummation of
such Transaction by a holder of that number of Common Shares into which one
Series C 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 shares,
securities and other property (including cash) receivable upon such Transaction
(provided that if the kind or amount of shares, securities and other property
(including cash) receivable upon such Transaction is not the same for each
Common Share 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 shares, securities
and other property (including cash) receivable upon such Transaction by each
Non-Electing Share shall be deemed to be the kind and amount so receivable per
share by a plurality of the Non-Electing Shares). The Trust shall not be a party
to any Transaction unless the terms of such Transaction are consistent with the
provisions of this paragraph (e), and it shall not consent or agree to the
occurrence of any Transaction until the Trust has entered into an agreement with
the successor or purchasing entity, as the case may be, for the benefit of the
holders of the Series C Preferred Shares that will contain provisions
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enabling the holders of the Series C Preferred Shares that remain outstanding
after such Transaction to convert their Series C 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 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; 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 C Preferred Shares at their addresses as shown on the share 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 C
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
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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 C Preferred Share at such holder's last address as shown
on the share 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 C 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 beneficial interest 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.
(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 C Preferred Shares, the Conversion Price for the Series C
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 C Preferred
Shares, the full number of Common Shares deliverable upon the conversion of all
outstanding Series C Preferred Shares not theretofore converted. For purposes of
this paragraph (k), the number of Common Shares that shall be deliverable upon
the conversion of all outstanding Series C 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
C Preferred Shares shall be validly issued, fully paid and nonassessable. 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 C 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 nonassessable 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 C 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.
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(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 C 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 C Preferred Shares to be converted,
and no such issue or delivery shall be made unless and until the person
requesting such issue or delivery has paid to the Trust the amount of any such
tax or established, to the reasonable satisfaction of the Trust, that such tax
has been paid.
SECTION 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 beneficial interest of any class or
series 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. (a) Any class or series of shares of beneficial
interest of the Trust shall be deemed to rank:
(i) prior to the Series C Preferred Shares, as to the payment
of dividends and as to distribution of assets upon liquidation, dissolution or
winding up, if the holders of such class or series shall be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution
or winding up, as the case may be, in preference or priority to the holders of
Series C Preferred Shares;
(ii) on a parity with the Series C 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 C Preferred Shares, if the holders of such class or series
or Series C and the Series C Preferred Shares shall be entitled to the receipt
of dividends and of amounts distributable upon liquidation, dissolution or
winding up in proportion to their respective amounts of accrued and unpaid
dividends per share or liquidation preferences, without preference or priority
one over the other ("Parity Shares"); and
(iii) junior to the Series C Preferred Shares, as to the
payment of dividends or as to the distribution of assets upon liquidation,
dissolution or winding up, if such class or series shall be Common Shares or if
the holders of Series C 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 class or series, and such class or series shall not in either case rank
prior to the Series C Preferred Shares ("Junior Shares").
(b) The Series C Preferred Shares shall be deemed to rank on a
parity with the Series A Convertible Preferred Shares, par value $.001 per
share, and the Series B Convertible Preferred Shares, par value $.001 per share,
of the Trust.
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SECTION 10. VOTING. Except as otherwise set forth herein, the Series C
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) So long as any Series C 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 two-thirds (2/3) of
the votes cast by the holders of Series C 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 C 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 C Preferred Shares shall not be deemed to
materially adversely affect the voting powers, rights or preferences of the
holders of Series C Preferred Shares and (B) any filing with the Department 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
these Articles Supplementary; or
(ii) The authorization or creation of, or the increase in the
authorized amount of, any Parity Shares or shares of any class or series or any
security convertible into shares of any class or series ranking prior to the
Series C Preferred Shares in the distribution of assets on any liquidation,
dissolution or winding up of the Trust or in the payment of dividends;
provided, however, that no such vote of the holders of Series C Preferred Shares
shall be required if, at or prior to the time when such amendment, alteration or
repeal is to take effect, or when the issuance of any such prior shares is to
occur, provision is made for the redemption of all outstanding Series C
Preferred Shares in accordance with Section 5 hereof.
(b) None of the Trust or any Subsidiary shall enter into any
capital-raising transaction or financing, including any merger or acquisition,
without the consent of holders of a majority in interest of the Series C
Preferred Shares; provided, however, that such consent shall not be required if,
in each case, (i) such capital raising transaction or financing represents a
replacement, renewal, refinancing or extension of outstanding indebtedness or
any portion thereof of the Trust or of any Subsidiary; provided that any such
replacement, renewal, refinancing or extension shall not exceed the sum of the
principal amount of such indebtedness being replaced, renewed, refinanced or
extended plus the amount of accrued interest thereon and the amount of any
reasonably determined prepayment premium necessary to accomplish such
replacement, renewal refinancing or extension and such reasonable fees and
expenses incurred in connection therewith; or (ii) the Fixed Charge Coverage
Ratio for the Trust's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such capital-raising transaction or financing is entered into would have
been more than 1.5 to 1, determined on a pro forma basis (including a pro forma
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application of the net proceeds therefrom), as if such capital-raising
transaction or financing had been entered into at the beginning of such
four-quarter period.
If and whenever the Trust breaches any of the covenants set forth in this
Section 10(b), the number of Trustees then constituting the Board of Trustees
shall be increased by one and the holders of Series C 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 the Trust cures
any breach of any of such covenants or is no longer in violation thereof, then
the rights of the holders of the Series C Preferred Shares to elect such
additional Trustee shall cease, and the term of office of the person elected as
a Trustee by the holders of the Series C Preferred Shares shall forthwith
terminate and the number of Trustees constituting the Board of Trustees shall be
reduced accordingly.
(c) Each Series C 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 C 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 C Preferred
Shares constitute Preferred Shares, and Preferred Shares constitutes Shares of
the Trust. Therefore, the Series C Preferred Shares, being Shares, are governed
by and issued subject to all the limitations, terms and conditions of the
Declaration applicable to Shares generally, including but not limited to the
terms and conditions (including exceptions and exemptions) of Article IV of the
Declaration applicable to Shares. The foregoing sentence shall not be construed
to limit the applicability to the Series C Preferred Shares of any other term or
provision of the Declaration.
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IN WITNESS WHEREOF, KEYSTONE PROPERTY TRUST has caused these presents to
be signed in its name and on its behalf by its Vice President and witnessed to
by its Secretary as of October 7, 1999.
WITNESS: KEYSTONE PROPERTY TRUST
/s/ Timothy A. Peterson By: /s/ Stephen J. Butte
Timothy A. Peterson, Stephen J. Butte,
Secretary Vice President
The UNDERSIGNED, Vice President 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.
/s/ Stephen J. Butte
Stephen J. Butte,
Vice President
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Exhibit 3.5
KEYSTONE PROPERTY TRUST
BYLAWS
ARTICLE I
OFFICES
Section 1.01. Principal Executive Office. The principal office of Keystone
Property Trust (the "Trust") shall be located at such place or places as the
Trustees may designate.
Section 1.02. Additional Offices. The Trust may have additional offices at
such places as the Trustees may from time to time determine or the business of
the Trust may require.
ARTICLE II
TRUSTEES
Section 2.01. General Powers. The business and affairs of the Trust shall
be managed under the direction of its Trustees, which may exercise all such
powers of the Trust and do all such lawful act and things as are not by statute,
by the Trust's Declaration of Trust, as it may be amended from time to time (the
"Declaration of Trust") or by these Bylaws conferred on or reserved to the
Shareholders.
Section 2.02. Qualifying Shares Not Required. Trustees need not be
Shareholders of the Trust.
Section 2.03. Quorum. A majority of the Trustees shall constitute a quorum
subject to the provisions of Section 2.6 of the Declaration of Trust.
Section 2.04. Number and Term; Election. Subject to the rights of the
holders of any series of Preferred Stock, the number of Trustees shall be fixed
from time to time exclusively pursuant to a resolution adopted by a majority of
the Trustees, but shall consist of not more than fifteen nor less than the
minimum number permitted by the laws of the State of Maryland now or hereafter
in force. The initial Trustees shall be set forth in the Declaration of Trust.
The Trustees, other than any who may be elected by the holders of any series of
Preferred Stock, shall be divided, with respect to the time for which they
severally hold office, into three classes, as nearly equal in number as
possible, with the term of office of the class of Trustees designated as Class I
Trustees to 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 to hold office initially for a term
<PAGE>
expiring at the annual meeting of Shareholders to be held in 2002 and the class
of Trustees designated as Class III Trustees to hold office initially for a term
expiring at the annual meeting of Shareholders to be held in 2000. Each Trustee
shall hold office until his or her successor shall have been duly elected and
qualified. At each annual meeting of Shareholders, commencing with the annual
meeting to be held in 2000, Trustees elected to succeed those Trustees whose
terms then expire shall be elected for a term of office to expire at the third
succeeding annual meeting of Shareholders after their election, with each
Trustee to hold office until his or her successor shall have been duly elected
and qualified.
Section 2.05. Place of Meeting. Meetings of the Trustees shall be held at
the principal office of the Trust or at such place within the United States as
the President shall direct or as is fixed from time to time by resolution of the
Trustees.
Section 2.06. Annual Meeting. Immediately following each annual meeting of
Shareholders, and at the same place as each annual meeting, a regular meeting of
the Trustees shall be held for the purpose of electing officers and transacting
other business. Notice of such meetings need not be given.
Section 2.07. Regular Meetings. Regular meetings of the Trustees shall be
held at the place determined pursuant to Section 2.05 on the dates, if any,
established at each annual meeting of the Trustees and notice of such regular
meetings of the Trustees is hereby dispensed with.
Section 2.08. Special Meetings. Special meetings of the Trustees may be
called at any time by the President or a majority of the Trustees. Notice of any
special meeting shall be given to each Trustee at his or her business or
residence in writing or by telegram or by telephone communication. If mailed,
such notice shall be deemed adequately delivered when deposited in the United
States mails so addressed, with postage thereon prepaid, at least five days
before such meeting. If by telegram, such notice shall be deemed adequately
delivered when the telegram is delivered to the telegraph company at least
twenty-four hours before such meeting. If by telephone, the notice shall be
given at least twelve hours prior to the time set for the meeting. Neither the
business to be transacted at, nor the purpose of, any special meeting of the
Trustees need be specified in the notice of such meeting, except for amendments
to these Bylaws as provided under Article XI hereof. A meeting may be held at
any time without notice if all the Trustees are present or if those not present
waive notice of the meeting in writing, either before or after such meeting.
Section 2.09. Committees. The Trustees may, by resolution or resolutions
passed by a majority of the Trustees, designate one or more committees composed
of one or more Trustees and delegate to these committees any of the powers of
the Trustees, except the power to authorize dividends on Shares, elect Trustees,
issue Shares other than as provided in the next sentence, recommend to the
Shareholders any action which requires Shareholder approval, amend the Bylaws,
or approve any merger or Share exchange which does not require Shareholder
approval. If the Trustees have given general authorization for the issuance of
Shares providing for or establishing a method or procedure for determining the
maximum number of Shares to be issued, a committee of the
<PAGE>
Trustees, in accordance with that general authorization or any Share option or
other plan or program adopted by the Trustees, may authorize or fix the terms of
Shares subject to classification or reclassification and the terms on which any
Shares may be issued, including all terms and conditions required or permitted
to be established or authorized by the Trustees. Among the committees the
Trustees may appoint are the following:
(a) An Executive Committee, which shall have such authority as shall
be delegated by the Trustees and shall advise the Trustees from time to
time with respect to such matters as the Trustees shall direct.
(b) An Audit Committee, which shall consist solely of Independent
Trustees (as defined below), unless otherwise changed by resolution
adopted by a majority of the Trustees. The Audit Committee shall make
recommendations concerning the engagement of independent public
accountants, review with the independent public accountants the plans and
results of the audit engagement, approve professional services provided by
the independent public accountants, review the independence of the
independent public accountants, consider the range of audit and non-audit
fees and review the adequacy of the Trust's internal accounting controls.
(c) A Compensation Committee, which shall determine compensation for
the Trust's executive officers and shall administer a Share incentive plan
adopted by the Trust.
For purposes of this Section 2.09, "Independent Trustees" shall mean Trustees
who are not (i) officers of the Trust, (ii) related to officers of the Trust or
(iii) holders of more than 5% of the issued and outstanding Shares of the Trust.
The Trustees may designate one or more Trustees as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of such committee. Each committee may fix rules of procedure for its business. A
majority of the members of a committee shall constitute a quorum for the
transaction of business and the act of a majority of those present at a meeting
at which a quorum is present shall be the act of the committee. The members of a
committee present at any meeting, whether or not they constitute a quorum, may
appoint a Trustee to act in the place of an absent member. Any action required
or permitted to be taken at a meeting of a committee may be taken without a
meeting, if a unanimous written consent which sets forth the action is signed by
each member of the committee and filed with the minutes of the committee.
Section 2.10. Action Without Meeting. Unless specifically otherwise
provided in the Declaration of Trust, any action required or permitted to be
taken by the Trustees may be taken without a meeting if a unanimous written
consent which sets forth the action is signed by each Trustee or committee and
such written consent is filed with the minutes of the proceedings of the
Trustees or committee.
Section 2.11. Telephone Meetings. The Trustees or a committee may meet by
means of a telephone conference circuit or similar communications equipment by
means of which all persons
<PAGE>
participating in the meeting shall be able to hear one another and participate
therein. Such meeting shall be deemed to have been held at a place designated by
the Trustees at the meeting. Participation in a telephone conference meeting
shall constitute presence in person at such meeting.
Section 2.12. Committee Rules. Unless the Trustees or a committee
otherwise provide, each committee designated by the Trustees may adopt, amend
and repeal rules for the conduct of such committees business. In the absence of
a provision by the Trustees or a provision in the rules of such committee to the
contrary, a majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of business, the vote of
a majority of the members present at a meeting at the time of such vote if a
quorum is then present shall be the act of such committee, and in other respects
each committee shall conduct its business in the same manner as the Trustees
conduct their business pursuant to Article II of the Declaration of Trust and
this Article II of these Bylaws.
Section 2.13. Resignation. Any Trustee may resign at any time by giving
written notice to the Trustees. Such resignation shall take effect upon the
execution and delivery to Trust of such notice or upon any future date specified
in the notice, and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 2.14. Vacancies. Subject to the rights of the holders of any class
of Shares separately entitled to elect one or more Trustees, the Shareholders
may elect a successor to fill a vacancy among the Trustees which results from
the removal of a Trustee. A Trustee elected by the Shareholders 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 Shares separately entitled to elect one or more Trustees, a majority of
the remaining Trustees, whether or not sufficient to constitute a quorum, may
fill a vacancy among the Trustees which results from any cause except an
increase in the number of Trustees, and a majority of the Trustees may fill a
vacancy which results from an increase in the number of Trustees. A Trustee
elected by the Trustees to fill a vacancy serves until the next annual meeting
of Shareholders and until his or her successor is elected and qualifies.
Section 2.15. Removal. Subject to the rights of the holders of any series
of Preferred Shares, any Trustee, or all the Trustees, may be removed from
office at any time with cause by the affirmative vote of the holders of not less
than a majority of the then outstanding voting Shares.
Section 2.16. Compensation. Trustees shall not receive any stated salary
for their services as Trustees but, by resolution of the Trustees, the Trustees
may receive fixed sums per year and/or per meeting and for any service or
activity they perform or engage in as Trustees. Such fixed sums may be paid
either in cash or in Shares of the Trust. Trustees may be reimbursed for
expenses of attendance, if any, at each annual, regular or special meeting of
the Trustees or of any committee thereof; and for their expenses, if any, in
connection with each property visit and any other service or activity performed
or engaged in as Trustees, but nothing herein contained shall be construed to
preclude any Trustee from serving the Trust in any other capacity and receiving
<PAGE>
compensation therefor.
Section 2.17. Loss of Deposits. No Trustee shall be liable for any loss
which may occur by reason of the failure of the bank, trust company, savings and
loan association, or other institution with whom moneys or shares have been
deposited.
Section 2.18. Surety Bonds. Unless required by law, no Trustee shall be
obligated to give any bond or surety or other security for the performance of
any of his or her duties.
Section 2.19. Reliance. Each Trustee, officer, employee and agent of the
Trust shall, in the performance of his or her duties with respect to the Trust,
be fully justified and protected with regard to any act or failure to act in
reliance in good faith upon the books of account or other records of the Trust,
upon an opinion of counsel or upon reports made to the Trust by any of its
officers or employees or by the adviser, accountants, appraisers or other
experts or consultants selected by the Trustees or officers of the Trust,
regardless of whether such counsel or expert may also be a Trustee.
ARTICLE III
OFFICERS
Section 3.01. Enumeration. The officers of the Trust shall be a Chairman
of the Trustees, a President, a Secretary, a Treasurer. The Trustees may also
designate a Chief Executive Officer, and may appoint one or more
Vice-Presidents, Assistant Secretaries and Assistant Treasurers. Any two or more
offices except President and Vice-President may be held by the same person. The
Chairman of the Trustees shall be a Trustee, and the other officers may be
Trustees. The Trustees may elect or appoint such other officers, agents and
employees as it shall deem necessary who shall have such authority and shall
perform such duties as from time to time shall be prescribed by the Trustees.
Section 3.02. Powers and Duties of the Chairman. The Chairman of the
Trustees shall be an executive position which shall perform such duties and have
such powers as are from time to time assigned by the Trustees.
Section 3.03. Powers and Duties of the President. The President shall have
general powers of supervision and management of the business and affairs of the
Trust subject to the control of the Executive Committee and the Trustees, and
shall see that all orders and resolutions of the Trustees are carried into
effect. He or she may execute, in the name of the Trust, all authorized deeds,
mortgages, bonds, contracts or other instruments, except in cases in which the
signing and execution thereof shall have been expressly delegated to some other
officer or agent of the Trust. In general, he or she shall perform such other
duties customarily performed by a President of a corporation and shall perform
such other duties and have such other powers as are from time to time assigned
to him or her by the Trustees or the Executive Committee of the Trustees.
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Section 3.04. Powers and Duties of Vice President. Each Vice President, if
any, designated by the Trustees shall be an administrative officer of the Trust
and have such duties as are designated by the Trustees.
Section 3.05. Duties of the Secretary. The Secretary or at the request of
the Trustees, the Assistant Secretary, shall attend all meetings of the Trustees
or the Shareholders, keep the minutes thereof in appropriate books, give or
cause to be given notice of all meetings of the Trustees and of the
Shareholders, keep in safe custody the records and seal of the Trust, affix such
seal to any instrument when authorized by the Trustees and perform such other
duties incidental to the office or as may be prescribed by the Trustees.
Section 3.06. Duties of the Treasurer. The Treasurer shall have the
custody of the Trust's funds and securities and shall be responsible for the
keeping of full and accurate accounts of receipts and disbursements in books
belonging to the Trust, the deposit of all moneys and other valuable effects in
the name and to the credit of the Trust and the disbursement of the funds of the
Trust subject to the order of the Trustees. The Treasurer shall render to the
President and Trustees whenever they may so require an account of all his or her
transactions as Treasurer and of the financial condition of the Trust. The
Treasurer shall, if required by the Trustees, give the Trust a bond in such sum
or sums and with such surety or sureties as shall be satisfactory to the
Trustees, conditioned upon the faithful performance of his duties. The Assistant
Treasurer shall perform such duties and have such power as the Trustees may from
time to time prescribe. At the request of the Treasurer or in his or her absence
or disability, the Assistant Treasurer shall in their order of designated rank
or seniority perform all the duties and exercise the powers of Treasurer.
ARTICLE IV
SHAREHOLDERS
Section 4.01. Effect of Quorum. Subject to the provisions of the
Declaration of Trust, the Shareholders present at a duly called or held meeting
at which a quorum is present may continue to do business until adjournment
notwithstanding the withdrawal of enough Shareholders so that the remaining
Shareholders constitute less than a quorum.
Section 4.02. Place of Meeting. Meetings of the Shareholders shall be held
at the principal office of the Trust or at such place within the United States
as shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
Section 4.03. Annual Meeting. The annual meeting of the Shareholders shall
be held on such date and at such time as may be determined by the Trustees. The
first annual meeting of the Shareholders shall be held in the second calendar
quarter of 1999. At each annual meeting, the Shareholders shall elect Trustees
in the manner provided by the Declaration of Trust and these Bylaws, as in
effect from time to time, and shall transact such other business as may properly
come before the meeting.
<PAGE>
Section 4.04. Special Meetings. Subject to the rights of the holders of
any series of preferred Shares of the Trust (the "Preferred Shares"), the
President of the Trust or the Trustees, pursuant to a resolution adopted by a
majority of the total number of Trustees, may call special meetings of the
Shareholders. Special meetings of Shareholders shall also be called by the
Secretary of the Trust upon the written request of the Shareholders holding not
less than 25% of all the Shares entitled to vote at such meeting. Such request
shall state the purpose of such meeting and the matters proposed to be acted on
at such meeting. Within ten (10) days of the receipt of such a request, the
Secretary shall inform said Shareholders of the reasonably estimated cost of
preparing and mailing notice of the meeting (including all proxy materials that
may be required in connection therewith) and, upon payment to the Trust of such
costs, the Secretary shall within thirty (30) days of such payment, or such
longer period as may be necessitated by compliance with any applicable statutory
or regulatory requirements, give notice to each Shareholder entitled to notice
of the meeting. Unless requested by the holders of a majority of the issued and
outstanding Shares entitled to be voted at such meeting, the special meeting
need not be called to consider any matter which is substantially the same as a
matter voted on at any meeting of the Shareholders held during the preceding
twelve (12) months.
Section 4.05. Notice of Annual or Special Meetings.
(a) Written notice of every meeting of Shareholders, stating the
purpose or purposes for which the meeting is called, the date, hour and
place of the meeting, and, unless it is an annual meeting, indicating that
it is being issued by or at the direction of the person or persons calling
the meeting, shall be given, not less than ten (10) nor more than ninety
(90) days before the date of the meeting, to each Shareholder of record
entitled to vote at such meeting. Such notice shall be directed to a
Shareholder at his address as it shall appear on the records of the Trust
or its transfer agent.
(b) Any business of the Trust may be transacted at an annual meeting
of the Shareholders without being specifically designated in the notice,
except such business as is required by statute to be stated in such
notice. Business transacted at all special meetings shall be confined to
that which is related to the purpose or purposes stated in the notice of
the meeting. At every meeting of the Shareholders, the Chairman of the
Trustees, if there is one, shall conduct the meeting or, in the case of
vacancy in office or absence of the Chairman of the Trustees, one of the
following officers present shall conduct the meeting in the order stated:
the Vice Chairman of the Trustees, if there be one, the President, the
Vice-Presidents in their order of rank and seniority.
Section 4.06. Quorum; Adjournment. Whether or not there is a quorum
present, the Shareholders entitled to vote at a meeting, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time
to a date not more than 120 days after the original record date, without notice
other than announcement at the meeting of the time and place to which the
meeting shall be adjourned. At such adjourned meeting at which there shall be a
quorum, any business may be transacted which might have been transacted on the
original date of the meeting.
<PAGE>
Unless any statute or the Declaration of Trust provides otherwise, a majority of
all the votes cast at a meeting at which a quorum is present is sufficient to
approve any matter which properly comes before the meeting, except that a
plurality of all the votes cast at a meeting at which a quorum is present shall
be sufficient to elect a Director.
Section 4.07. Proxies. Unless the Declaration of Trust provides for a
greater or lesser number of votes per Share or limits or denies voting rights,
each outstanding Share, regardless of class, is entitled to one vote on each
matter submitted to a vote at a meeting of Shareholders. In all elections for
Trustees, each Share may be voted for as many individuals as there are Trustees
to be elected and for whose election the Share is entitled to be voted. A
Shareholder may vote the Share the Shareholder owns of record either in person
or by proxy. A Shareholder may sign a writing authorizing another person to act
as proxy. Signing may be accomplished by the Shareholder or the Shareholder's
authorized agent signing the writing or causing the Shareholder's signature to
be affixed to the writing by any reasonable means, including facsimile
signature. A Shareholder may authorize another person to act as proxy by
transmitting, or authorizing the transmission of, a telegram, cablegram,
datagram, or other means of electronic transmission to the person authorized to
act as proxy or to a proxy solicitation firm, proxy support service
organization, or other person authorized by the person who will act as proxy to
receive the transmission. Unless a proxy provides otherwise, it is not valid
more than eleven months after its date. A proxy is revocable by a Shareholder at
any time without condition or qualification unless the proxy states that it is
irrevocable and the proxy is coupled with an interest. A proxy may be made
irrevocable for so long as it is coupled with an interest. The interest with
which a proxy may be coupled includes an interest in the Share to be voted under
the proxy or another general interest in the Trust or its assets or liabilities.
Section 4.08. Nominations and Proposals by Shareholders.
(a) Annual Meetings of Shareholders.
(1) Nominations of persons for election as a Trustee and the
proposal of business to be considered by the Shareholders may be
made at an annual meeting of Shareholders (a) pursuant to the
Trust's notice of meeting delivered pursuant to Article IV, Section
4.08 of these Bylaws, (b) by or at the direction of the President or
(c) by any Shareholder of the Trust who is entitled to vote at the
meeting, who complies with the notice procedures set forth in
clauses (2) and (3) of this paragraph (a) of this Bylaw and who was
a Shareholder of record at the time such notice is delivered to the
Secretary of the Trust.
(2) For nominations or other business to be properly brought
before the annual meeting by a Shareholder pursuant to clause (c) of
Paragraph (a) (1) of this Bylaw the Shareholder must have given
timely notice thereof in writing to the Secretary of the Trust. To
be timely, a Shareholder's notice shall be delivered to the
Secretary at the principal executive offices of the Trust not less
than sixty days nor more than ninety days prior to the first
anniversary of the preceding year's
<PAGE>
annual meeting; provided, however, that in the event that the date
of the annual meeting is advanced by more than thirty days or
delayed by more than sixty days from such anniversary date, notice
by the Shareholder to be timely must be so delivered not earlier
than the ninetieth day prior to such annual meeting and not later
than the close of business on the later of the sixtieth day prior to
such annual meeting or the tenth day following the day on which
public announcement of the date of meeting is first made. Such
Shareholder's notice shall set forth (a) as to each person whom the
Shareholder proposes to nominate for election or reelection as a
Trustee all information relating to such person that is required to
be disclosed in solicitations of proxies for election of Trustees,
or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), including such person's written consent to being named in the
proxy statement as a nominee and to serving as a Trustee if elected;
(b) as to any other business that the Shareholder proposes to bring
before the meeting, a brief description of the business desired to
be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest in such business
of such Shareholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the Shareholder giving
the notice and the beneficial owner, if any, on whose behalf the
nominations or proposal is made (i) the name and address of such
Shareholder, as they appear on the Trust's books, and of such
beneficial owner and (ii) the class and number of Shares of the
Trust which are owned beneficially and of record by such Shareholder
and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (a) (2) of this Bylaw to the contrary, in the event that
the number of Trustees to be elected as Trustees is increased and
there is no public announcement naming all of the nominees for
Trustee or specifying the size of the increased number of Trustees
made by the Trust at least seventy days prior to the first
anniversary of the preceding year's annual meeting, a Shareholder's
notice required by this Bylaw shall also be considered timely, but
only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the Secretary at the principal
executive offices of the Trust not later than the close of business
on the tenth day following the day on which such public announcement
is first made by the Trust.
(b) Special Meetings of Shareholders. Only such business shall be
conducted at a special meeting of Shareholders as shall have been brought before
the meeting pursuant to the Trust's notice of meeting pursuant to Article IV,
Section 4.08 of these Bylaws. Nominations of persons for election as Trustees
may be made at a special meeting of Shareholders at which Trustees are to be
elected pursuant to the Trust's notice of meeting by or at the direction of the
Trustees. Nominations by Shareholders of persons for
<PAGE>
election as Trustees may be made at such a special meeting of Shareholders if
the Shareholder's notice as required by paragraph (a) (2) of this Bylaw shall be
delivered to the Secretary at the principal executive offices of the Trust not
earlier than the ninetieth day prior to such special meeting and not later than
the close of business on the later of the seventieth day prior to such special
meeting or the tenth day following the day on which public announcement is first
made of the date of the special meeting and of the nominees proposed by the
Trustees to be elected at such meeting.
(c) General.
(1) Only persons who are nominated in accordance with the
procedures set forth in this Bylaw shall be eligible to serve as
Trustees. Except as otherwise provided by Maryland law, the
Declaration of Trust or these Bylaws, the Chairman of the meeting
shall have the power and duty to determine whether a nomination or
any business proposed to be brought before the meeting was made in
accordance with the procedures set forth in this Bylaw and, if any
proposed nomination or business is not in compliance with this
Bylaw, to declare that such defective proposal or nomination shall
be disregarded.
(2) For purposes of this Bylaw, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or in
a document publicly filed by the Trust with the Securities and
Exchange Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a
Shareholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Bylaw. Nothing in this
Bylaw shall be deemed to affect any rights of Shareholders to
request inclusion of proposals in the Trust's proxy statement
pursuant to Rule 14a-5 under the Exchange Act.
Section 4.09. Voting Rights. If no date is fixed for the determination of
the Shareholders entitled to vote at any meeting of Shareholders, only Persons
in whose names Shares entitled to vote stand on the Share records of the Trust
at the opening of business on the day of any meeting of Shareholders shall be
entitled to vote at such meeting.
Section 4.10. Conduct of Business and Voting. At all meetings of
Shareholders, unless the voting is conducted by inspectors, the proxies and
ballots shall be received, and all questions touching the qualification of
voters and the validity of proxies, the acceptance or rejection of votes and
procedures for the conduct of business not otherwise specified by these Bylaws,
the Declaration of Trust or law, shall be decided or determined by the Chairman
of the meeting. If demanded by Shareholders, present in person or by proxy,
entitled to cast 10% in number of votes entitled to be cast, or if ordered by
the Chairman, the vote upon any election or question shall be taken by
<PAGE>
ballot and, upon like demand or order, the voting shall be conducted by two
inspectors, in which event the proxies and ballots shall be received, and all
questions touching the qualification of voters and the validity of proxies and
the acceptance or rejection of votes shall be decided, by such inspectors.
Unless so demanded or ordered, no vote need be by ballot and voting need not be
conducted by inspectors. The Shareholders at any meeting may choose an inspector
or inspectors to act at such meeting, and in default of such election the
Chairman of the meeting may appoint an inspector or inspectors. No candidate for
election as a Trustee at a meeting shall serve as an inspector thereat.
Section 4.11. Informal Action by Shareholders. Any action required or
permitted to be taken at a meeting of Shareholders may be taken without a
meeting if there is filed with the records of Shareholder's meetings a unanimous
written consent which sets forth the action and is signed by each Shareholder
entitled to vote on the matter and a written waiver of any right to dissent
signed by each Shareholder entitled to notice of the meeting but not entitled to
vote at it.
ARTICLE V
CONTRACTS AND FINANCE
Section 5.01. Contracts and Agreements. To the extent permitted by
applicable law, and except as otherwise prescribed by the Declaration of Trust
or these Bylaws, the Trustees may authorize any officer, employee or agent of
the Trust to enter into any contract or execute and deliver any instrument in
the name of and on behalf of the Trust. Such authority may be general or
confined to specific instances. A person who holds more than one office in the
Trust may not act in more than one capacity to execute, acknowledge, or verify
an instrument required by law to be executed, acknowledged, or verified by more
than one officer.
Section 5.02. Checks and Drafts. All checks, drafts and orders for the
payment of money, notes and other evidences of indebtedness, issued in the name
of the Trust, shall, unless otherwise provided by resolution of the Trustees, be
signed by the Chairman of the Trustees, the President, a Vice-President or an
Assistant Vice-President and countersigned by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary.
Section 5.03. Deposits. All funds of the Trust not otherwise employed
shall be deposited from time to time to the credit of the Trust in such banks,
trust companies or other depositories as the Trustees may designate.
ARTICLE VI
SHARES
Section 6.01. Certificates for Shares Each Shareholder is entitled to
certificates which represent and certify the transferable unit of beneficial
interest he or she holds in the Trust. Each Share certificate shall include on
its face the name of the Trust, the name of the Shareholder or other
<PAGE>
person to whom it is issued, and the class of Share and number of Shares it
represents. It shall also include on its face or back (a) a statement of any
restrictions on transferability and (b) a statement which provides in substance
that 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,
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 Trustees to set the relative
rights and preferences of subsequent series of a preferred or special class of
Shares and any restrictions on transferability. Such request may be made to the
Secretary or to its transfer agent. It shall be in such form, not inconsistent
with law or with the Declaration of Trust, as shall be approved by the Trustees
or any officer or officers designated for such purpose by resolution of the
Trustees. Each Share certificate shall be signed by the Chairman of the
Trustees, the President, or a Vice-President, and countersigned by the
Secretary, an Assistant Secretary, the Treasurer, or an Assistant Treasurer.
Each certificate may be sealed with the actual trust seal or a facsimile of it
or in any other form and the signatures may be either manual or facsimile
signatures. A certificate is valid and may be issued whether or not an officer
who signed it is still an officer when it is issued. A certificate may not be
issued until the Shares represented by it is fully paid.
Section 6.02. Record Dates or Closing of Transfer Books. The Trustees may
set a record date or direct that the Share transfer books be closed for a stated
period for the purpose of making any proper determination with respect to
Shareholders, including which Shareholders are entitled to notice of a meeting,
vote at a meeting, receive a dividend, or be allotted other rights. The record
date may not be prior to the close of business on the day the record date is
fixed nor more than 90 days before the date on which the action requiring the
determination will be taken; the transfer books may not be closed for a period
longer than 20 days; and, in the case of a meeting of Shareholders, the record
date or the closing of the transfer books shall be at least ten days before the
date of the meeting.
When a determination of Shareholders entitled to vote at any meeting of
Shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, except when (i) the determination has been
made through the closing of the transfer books and the stated period of closing
has expired or (ii) the meeting is adjourned to a date more than 120 days after
the record date fixed for the original meeting, in either of which case a new
record date shall be determined as set forth herein.
Section 6.03. Lost Certificates. The Trustees (or any officer designated
by them) may direct a new certificate to be issued in place of any certificate
theretofore issued by the Trust, alleged to have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate to be lost, stolen or destroyed. When authorizing such issue of a
new certificate, the Trustees may, in their discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate, or his legal representative, to give the Trustee a bond
in such sum and with such surety or sureties as it may direct as indemnity agent
<PAGE>
any claim that may be made against the Trust with respect to the certificate
alleged to have been lost, stolen or destroyed.
Section 6.04. Transfers of Shares. Upon surrender to the Trust or the
transfer agent of the Trust of a certificate for Shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, subject to compliance with all applicable laws and the requirements of
the Trust's transfer agent, it shall be the duty of the Trust or its agents to
issue a new certificate to the person entitled thereto, to cancel the old
certificate and to record the transaction upon its transfer books.
Section 6.05. Registered Shareholders The Trust shall be entitled to treat
the holder of record of any Share or Shares as the holder in fact thereof and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such Share or Shares on the part of any person whether or not it
shall have express or other notice thereof, except as expressly provided by the
laws of the State of Maryland.
Section 6.06. Share Ledger. The Trust shall maintain at its principal
executive office or at the office of its counsel, accountants or transfer agent,
an original or a duplicate Share ledger containing the name and address of each
Shareholder and the number of Shares of each class held by such Shareholder.
ARTICLE VII
MISCELLANEOUS
Section 7.01. Record Dates and Closing of Transfer Books. Pursuant to the
Declaration of Trust, the Trustees may fix record dates for specified purposes.
If a record date is so fixed, only Shareholders of record on the date so fixed
shall be entitled to the rights to which the record date pertains.
Section 7.02. Books and Records. The Trust shall keep correct and complete
books and records of its accounts and transactions and minutes of the
proceedings of its Shareholders and Trustees and of any executive or other
committee when exercising any of the powers of the Trustees. The books and
records of the Trust may be in written form or in any other form which can be
converted within a reasonable time into written form for visual inspection.
Minutes shall be recorded in written form but may be maintained in the form of a
reproduction. The original or a certified copy of these Bylaws shall be kept at
the principal office of the Trust.
Section 7.03. Trust Seal. The Trustees may provide a suitable seal,
bearing the name of the Trust, which shall be in the charge of the Secretary.
The Trustees may authorize one or more duplicate seals and provide for the
custody thereof. If the Trust is required to place its trust seal to a document,
it is sufficient to meet the requirement of any law, rule, or regulation
relating to a trust seal to place the word "(seal)" adjacent to the signature of
the person authorized to sign the document on behalf of the Trust.
<PAGE>
Section 7.04. Voting Stock in Other Corporations. Stock of other
corporations or associations, registered in the name of the Trust, may be voted
by the President, a Vice President, or a proxy appointed by either of them. The
Trustees, however, may by resolution appoint some other person to vote such
Shares, in which case such person shall be entitled to vote such Shares upon the
production of a certified copy of such resolution, or otherwise direct the
voting of such Shares.
Section 7.05. Annual Statement of Affairs. The President or chief
accounting officer shall prepare annually a full and correct statement of the
affairs of the Trust, to include a balance sheet and a financial statement of
operations for the preceding fiscal year. The statement of affairs shall be
submitted at the annual meeting of the Shareholders and, within 20 days after
the meeting, placed on file at the Trust's principal office.
Section 7.06. Inspection of Bylaws. The Trustees shall keep at the
principal office for the transaction of business of the Trust the original or a
copy of the Bylaws as amended or otherwise altered to date, certified by the
Secretary, which shall be open to inspection by the Shareholders at all
reasonable times during office hours.
ARTICLE VIII
DISTRIBUTIONS
Section 8.01. Distributions. If declared by the Trustees at any meeting
thereof, the Trust may pay dividends or distributions on its Shares in cash,
property, or in Shares, unless such dividend or distribution is contrary to law
or to a restriction contained in the Declaration of Trust.
ARTICLE IX
INDEMNIFICATION OF OFFICERS AND TRUSTEES;
INSURANCE
Section 9.01. Indemnification.
(a) Procedure. Any indemnification, or payment of expenses in
advance of the final disposition of any proceeding, shall be made
promptly, and in any event within 60 days, upon the written request of the
Trustee or officer entitled to seek indemnification (the "Indemnified
Party"). The right to indemnification and advances hereunder shall be
enforceable by the Indemnified Party in any court of competent
jurisdiction, if (i) the Trust denies such request, in whole or in part,
or (ii) no disposition thereof is made within 60 days. The Indemnified
Party's costs and expenses incurred in connection with successfully
establishing his or her right to indemnification, in whole or in part, in
any such action shall also be reimbursed by the Trust. It shall be a
defense to any action for advance for expenses that (a) a determination
has been made that the facts then known to those making the determination
would preclude indemnification or (b) the Trust has not
<PAGE>
received both (i) an undertaking as required by law to repay such advances
in the event it shall ultimately be determined that the standard of
conduct has not been met and (ii) a written affirmation by the Indemnified
Party of such Indemnified Party's good faith belief that the standard of
conduct necessary for indemnification by the Trust has been met.
(b) Exclusivity, Etc. The indemnification and advance of expenses
provided by the Declaration of Trust and these Bylaws shall not be deemed
exclusive of any other rights to which a person seeking indemnification or
advance of expenses may be entitled under any law (common or statutory),
or any agreement, vote of Shareholders or disinterested Trustees or other
provision that is consistent with law, both as to action in his or her
official capacity and as to action in another capacity while holding
office or while employed by or acting as agent for the Trust, shall
continue in respect of all events occurring while a person was a Trustee
or officer after such person has ceased to be a Trustee or officer, and
shall inure to the benefit of the estate, heirs, executors and
administrators of such person. The Trustee shall not be liable for any
payment under this Bylaw in connection with a claim made by a Trustee or
officer to the extent such Trustee or officer has otherwise actually
received payment under insurance policy, agreement, vote or otherwise, of
the amounts otherwise indemnifiable hereunder. All rights to
indemnification and advance of expenses under the Declaration of Trust and
hereunder shall be deemed to be a contract between the Trust and each
Trustee or officer of the Trust who serves or served in such capacity at
any time while this Bylaw is in effect. Nothing herein shall prevent the
amendment of this Bylaw, provided that no such amendment shall diminish
the rights of any person hereunder with respect to events occurring or
claims made before its adoption or as to claims made after its adoption in
respect of events occurring before its adoption. Any repeal or
modification of this Bylaw shall not in any way diminish any rights to
indemnification or advance of expenses of such Trustee or officer or the
obligations of the Trust arising hereunder with respect to events
occurring, or claims made, while this Bylaw or any provision hereof is in
force.
(c) Following any "change in control" of the Trust of the type
required to be reported under Item 1 of Form 8-K promulgated under the
Exchange Act, any determination as to entitlement to indemnification shall
be made by independent legal counsel selected by the claimant, which such
independent legal counsel shall be retained by the Trustees on behalf of
the Trust and whose fees and disbursements shall be paid by the Trust.
Section 9.02. Insurance. The Trust may maintain insurance, at its expense,
to protect itself and any Trustee, officer, employee or agent of the Trust or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Trust would have the
power to indemnify such person against such expense, liability or loss under the
Declaration of Trust.
ARTICLE X
WAIVER OF NOTICE
<PAGE>
Section 10.01. Waiver of Notice. Whenever any notice is required to be
given pursuant to the Declaration of Trust or Bylaws or pursuant to applicable
law, a waiver thereof in writing, signed by the person or persons entitled to
such notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Neither the business to be transacted
at nor the purpose of any meeting need be set forth in the waiver of notice,
unless specifically required by statute. The attendance of any person at any
meeting shall constitute a waiver of notice of such meeting, except where such
person attends a meeting for the express purpose of objecting to the transaction
of any business of the ground that the meeting is not lawfully called or
convened.
ARTICLE XI
AMENDMENTS
Section 11.01. Amendments. These Bylaws may be amended or repealed, or new
Bylaws may be adopted, by the Shareholders at any meeting of the Shareholders or
pursuant to Section 4.11 of these Bylaws, or by the Trustees at any meeting of
the Trustees or pursuant to Section 2.10 of these Bylaws; provided that the
Trustees may not amend or repeal this Article XI or Section 4.11 or any part of
these Bylaws that has been adopted by the Shareholders subject to the express
condition that it may not be amended or repealed except by holders of a majority
of the issued and outstanding Shares.
ARTICLE XII
DEFINITIONS
Section 12.01. Definitions. All terms defined in the Declaration of Trust
shall have the same meaning when used in these Bylaws.
ARTICLE XIII
FISCAL YEAR
Section 13.01. Fiscal Year. The fiscal year of the Trust shall be the
calendar year.
ARTICLE XIV
THE ADVISOR
Section 14.01. Employment of Advisor. The Trustees are not and shall not
be required personally to conduct the business of the Trust, and the Trustees
shall have the power to appoint, employ or contract with any person (including
one or more of themselves or any corporation, partnership, or trust in which one
or more of them may be Trustees, officers, Shareholders, partners or trustees,
as the Trustees may deem necessary or proper for the transaction of the business
of the Trust.
<PAGE>
The Trustees may employ or contract with a person to act as advisor to the Trust
(the "Advisor") and may grant or delegate such authority to the Advisor as the
Trustees may in its sole discretion deem necessary or desirable without regard
to whether such authority is normally granted or delegated by boards of trustees
or boards of directors of business corporations. The Advisor shall be required
to use its best efforts to supervise the operation of the Trust in a manner
consistent with the investment policies and objectives of the Trust. The
Trustees shall have the power to determine the terms and compensation of the
Advisor or any other person whom it may cause the Trust to employ or with whom
it may cause the Trust to contract for advisory services. The Trustees may
exercise broad discretion in allowing the Advisor to administer and regulate the
operations of the Trust, to act as agent for the Trust, to execute documents on
behalf of the Trustees and to make executive decisions which conform to general
policies and general principles previously established by the Trustees.
Section 14.02. Other Activities of Advisor. The Advisor shall not be
required to administer the Trust as its sole and exclusive function and may have
other business interests and may engage in other activities similar or in
addition to those relating to the Trust, including the rendering of advice or
services of any kind to other investors or any other persons (including other
real estate investment trusts) and the management of other investments. The
Trustees may request the Advisor to engage in certain other activities which
complement the Trust's investments, and the Advisor may receive compensation or
commissions therefor from the Trust or other persons. Neither the Advisor nor
any Affiliate of the Advisor shall be obligated to present any particular
investment opportunities to the Trust, even if such opportunities are of a
character such that, if presented to the Trust, they could be taken by the
Trust, and, subject to the foregoing, each of them shall be protected in taking
for, its own account or recommending to others any such particular investment
opportunity. Notwithstanding the foregoing, the Advisor shall be required to use
its best efforts to present the Trust with a continuing and suitable program
consistent with the investment policies and objectives of the Trust and with
investments which are representative of, comparable with and on similar terms as
investments being made by Affiliates of the Advisor, or by the Advisor for its
own account or for the account of any person for whom the Advisor is providing
advisory services. In addition, the Advisor shall be required, upon the request
of any Trustee, to promptly furnish the Trustees with such information on a
confidential basis as to any investments within the investment policies of the
Trust made by Affiliates of the Advisor or by the Advisor for its own account or
for the account of any person for whom the Advisor is providing advisory
services.
Section 14.03. Advisor Compensation. The Trustees shall at least annually
review generally the performance of the Advisor in order to determine whether
the compensation which the Trust has contracted to pay to the Advisor is
reasonable in relation to the nature and quality of services performed and
whether the provisions of the advisory contract with the Advisor are being
carried out.
<PAGE>
Exhibit 3.6
====================================================
AMERICAN BANK NOTE COMPANY
850 BLAIR MILL ROAD
HORSHAM, PA 19044
(215) 837-3480
----------------------------------------------------
SALES: J. NAPOLITANO: 212-583-5700
----------------------------------------------------
new zip 1 KEYSTONE H83705
====================================================
====================================================
PRODUCTION COORDINATOR: MARY TARTAGLIA: 215-830-2154
PROOF OF OCTOBER 8, 1999
KEYSTONE PROPERTY TRUST
H 83705 fc
----------------------------------------------------
OPERATOR: JW/MT/lr
----------------------------------------------------
Rev 3
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================================================================================
[LOGO]
================= ==================
NUMBER S H A R E S
KEYSTONE
K
PROPERTY TRUST
================ ==================
A Real Estate Investment Trust organized under the laws of the State of Maryland
CUSIP 493596 10 0
SEE REVERSE FOR CERTAIN DEFINITIONS AND LEGENDS
- --------------------------------------------------------------------------------
THIS CERTIFIES THAT
is the owner of
- --------------------------------------------------------------------------------
FULLY-PAID AND NONASSESSABLE COMMON SHARES, $.001 PAR VALUE, OF
KEYSTONE PROPERTY TRUST
transferable on the books of the Trust by the holder hereof in person or by duly
authorized attorney, upon surrender of this Certificate properly endorsed. This
Certificate and the shares represented hereby are issued and shall be held
subject to all the provisions of the Declaration of Trust, as amended, and the
By-Laws of the Trust, as amended (copies of which are on file at the office of
the Transfer Agent), to all of which the holder of this Certificate by
acceptance hereof assents. This Certificate is not valid unless countersigned
and registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Trust and the facsimile signatures of
its duly authorized officers.
SHARE CERTIFICATE
Dated:
KEYSTONE PROPERTY TRUST
(SEAL)
1999
Maryland
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
Executive Vice President and Secretary President and Chief Executive Officer
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK, NEW YORK)
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED OFFICER
================================================================================
<PAGE>
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.
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 Real Estate Investment Trust under the
Internal Revenue Code of 1986, as amended (the "Code"). Subject to the 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% (in
value or number of shares) of the outstanding Shares of any class or series of
Preferred Stock 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 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 of one
or more Charitable Beneficiaries. In addition, upon the occurrence of certain
events, attempted Transfers in violation of the restrictions described above may
be void ab initio. 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.
Keep this certificate in a safe place. If it is lost, stolen, or
destroyed, the Trust will require a bond of indemnity as a condition to the
issuance of a replacement certificate.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right
of survivorship and not as
tenants in common
UNIF GIFT MIN ACT- __________Custodian___________
(Cust) (Minor)
under Uniform Gifts to Minors
Act___________________________
(State)
Additional abbreviations may also be used though not in the above list.
For value received,_______________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
| |
| |
|_____________________________________|_________________________________________
________________________________________________________________________________
Please print or typewrite name and address including postal zip code of assignee
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________ Common Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint
________________________________________________________________________________
________________________________________________________________________________
Attorney to transfer the said shares on the books of the within-named Trust with
full power of substitution in the premises.
Dated _______________________________
__________________________________
SIGNATURE
Signature Guaranteed
By:_____________________________________________________________________________
The signature(s) must be guaranteed by an eligible guarantor institution (Banks,
Stockbrokers, Savings and Loan Associations and Credit Unions with membership in
an approved signature guarantee Medallion Program), pursuant to S.E.C. Rule
17Ad-15.
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the Certificate, in every particular, without
alteration or enlargement, or any change whatever.
====================================================
AMERICAN BANK NOTE COMPANY
850 BLAIR MILL ROAD
HORSHAM, PA 19044
(215) 837-3480
----------------------------------------------------
SALES: J. NAPOLITANO: 212-583-5700
----------------------------------------------------
new zip 1 KEYSTONE H83705
====================================================
====================================================
PRODUCTION COORDINATOR: MARY TARTAGLIA: 215-830-2154
PROOF OF OCTOBER 8, 1999
KEYSTONE PROPERTY TRUST
H 83705 back
----------------------------------------------------
OPERATOR: lr/mt
----------------------------------------------------
Rev 1
====================================================
<PAGE>
Exhibit 5.1
[Letterhead]
October 14, 1999
KEYSTONE PROPERTY TRUST
200 Four Falls Corporate Center, Suite 208
West Conshohocken, Pennsylvania 29428
Ladies and Gentlemen:
We have acted as special Maryland counsel to Keystone Property
Trust, a Maryland real estate investment trust (the "Trust"), in connection
with the registration under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement on Form S-3 of the
Trust (the "Registration Statement") to be filed on October 15, 1999 with the
Securities and Exchange Commission (the "Commission"), of up to 3,964,767
Common Shares (the "Shares"), par value $.001 per share, to be offered and
sold from time to time by certain selling stockholders of the Trust listed in
the Registration Statement. This opinion is being furnished to you at your
request in connection with the filing of the Registration Statement.
In rendering the opinion expressed herein, we have reviewed
originals or copies, certified or otherwise identified to our satisfaction,
of the Registration Statement, the Declaration of Trust and Bylaws of the
Trust, the proceedings of the Board of Trustees of the Trust or a committee
thereof relating to the organization of the Trust and to the authorization and
issuance of the Shares, a Certificate of the Secretary of the Trust (the
"Certificate"), and such other statutes, certificates, instruments, and
documents relating to the Trust and matters of law as we have deemed
necessary to the issuance of this opinion.
In our examination of the aforesaid documents, we have assumed,
without independent investigation, the genuineness of all signatures, the legal
capacity of all individuals who have executed any of the aforesaid documents,
the authenticity of all documents submitted to us as originals, the
conformity with originals of all documents submitted to us as copies (and the
authenticity of the originals of such copies), and the accuracy and
completeness of all public records reviewed by us. In making our examination
of documents executed by parties other than the Trust, we have assumed that
<PAGE>
KEYSTONE PROPERTY TRUST
October 14, 1999
Page 2
such parties had the power, corporate or other, to enter into and perform all
obligations thereunder, and we have also assumed the due authorization by
all requisite action, corporate or other, and the valid execution and
delivery by such parties of such documents and the validity, binding effect
and enforceability thereof with respect to such parties. As to any facts
materials to this opinion which we did not independently establish or verify,
we have relied solely upon the Certificate.
Based upon the foregoing, having regard for such legal considerations as
we deem relevant, and limited in all respects to applicable Maryland law, we
are of the opinion and advise you that:
(1) The Trust has been duly formed and is validly existing as a
real estate investment trust in good standing under the laws of the State
of Maryland.
(2) The Shares have been duly authorized and validly issued and are
fully paid and non-assessable.
In addition to the qualifications set forth above, this opinion is
subject to the qualification that we express no opinion as to the laws of any
jurisdiction other than the State of Maryland. We assume that the issuance of
the Shares will not cause any person to violate any of the Ownership Limit
provisions of the Trust's Declaration of Trust (as defined in Article VII
thereof). This opinion concerns only the effect of the laws (exclusive of
the securities or "blue sky" laws and the principles of conflict of laws) of
the State of Maryland as currently in effect. We assume no obligation to
supplement this opinion if any applicable laws change after the date hereof
or if any facts or circumstances come to our attention after the date hereof
that might change this opinion. To the extent that any documents referred to
herein are governed by the law of a jurisdiction other than Maryland, we have
assumed that the laws of such jurisdiction are the same as the laws of the
State of Maryland. This opinion is limited to the matters set forth herein,
and no other opinion should be inferred beyond the matters expressly stated.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the heading
"Legal Matters" in the Prospectus included in the Registration Statement. In
giving our consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act or
the rules and regulations of the Commission thereunder.
Very truly yours,
Piper & Marbury L.L.P.
<PAGE>
Exhibit 8
[LETTERHEAD]
October 14, 1999
Keystone Property Trust
200 Four Falls Corporate Center, Suite 208
West Conshohocken, PA 19428
Re: REIT Status of Keystone Property Trust
Ladies and Gentlemen:
We have acted as counsel to Keystone Property Trust, a Maryland real estate
investment trust (the "Company") and the general partner of Keystone
Property, I.P., a Delaware limited partnership (the "Operating Partnership"),
in connection with the preparation and filing of the Company's Registration
Statement on Form S-3 (as the same may be amended or supplemented from time
to time, the "Registration Statement") with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended
(the "Securities Act"), covering the offer and sale from time to time by the
securityholders listed in the Registration Statement of up to 3,964,767 common
shares, par value $0.001 per share (the "Shares"), of the Company. This
opinion is being provided at your request in connection with the filing of
the Registration Statement.
In rendering the opinion expressed herein, we have examined and relied on the
following items:
1. The Registration Statement;
2. The Company's Declaration of Trust;
3. The Amended and Restated Agreement of Limited Partnership of the
Operating Partnership dated December 12, 1997, as amended to the date
hereof; and
4. Such other documents, records and instruments as we have deemed
necessary in order to enable us to render the opinion referred to in
this letter.
In our examination of the foregoing documents, we have assumed, with your
consent, that (i) all documents reviewed by us are original documents, or
true and accurate copies of original documents, and have not been
subsequently amended, (ii) the signatures of each original document are
genuine, (iii) each party who executed the document had proper authority and
capacity, (iv) all representations and statements set forth in such documents
are true and correct, (v) all obligations imposed by any such documents on
the parties thereto have been or will be performed or satisfied in accordance
with their terms and (vi) the Company and the Operating Partnership at all
times have been and will continue to be organized and operated in accordance
with the terms of such documents. We have
<PAGE>
Keystone Property Trust Page 2
October 14, 1999
further assumed the accuracy of the statements and descriptions of the
Company's and the Operating Partnership's intended activities as described in
the Registration Statement and that the Company and the Operating Partnership
have operated and will continue to operate in accordance with the method of
operation described in the Registration Statement.
For purposes of rendering the opinion stated below, we have also assumed,
with your consent, the accuracy of the representations contained in the
Certificate of Representations, dated October 13, 1999, provided to us by the
Company and the Operating Partnership. These representations generally relate
to the classification and operation of the Company as a REIT and the
organization and operation of the Operating Partnership.
Based upon and subject to the foregoing, we are of the opinion that:
(1) Commencing with its taxable year ended December 31, 1993, the
Company was organized and operated in conformity with the
requirements for qualification as a REIT under the Code and that
the present and proposed method of operation of the Company and
the Operating Partnership, as described in the Registration
Statement and as represented by the Company and the Operating
Partnership, will permit the Company to continue to so qualify; and
(2) The information in the Registration Statement under the heading
"Federal Income Tax Considerations" has been reviewed by us and,
to the extent that it constitutes matters of law or legal
conclusions, is correct in all material respects.
The opinion stated above represents our conclusions as to the application of
the federal income tax laws existing as of the date of this letter to the
transactions contemplated in the Registration Statement and we can give no
assurance that legislative enactments, administrative changes or court
decisions may not be forthcoming that would modify or supersede our opinion.
Moreover, there can be no assurance that positions contrary to our opinion
will not be taken by the Internal Revenue Service, or that a court
considering the issues would not hold contrary to such opinion. Further, the
opinion set forth above represents our conclusions based upon the documents,
facts and representations referred to above. Any material amendments to such
documents, changes in any significant facts or inaccuracy of such
representations could affect the opinion referred to herein. Moreover, the
Company's qualification and taxation as a REIT depend upon the Company's
ability to meet, through actual annual operating results, requirements under
the Code regarding income, assets, distributions and diversity of stock
ownership. Because the Company's satisfaction of these requirements will
depend on future events, no assurance can be given that the actual results of
the Company's operations for any particular taxable year will satisfy the
tests necessary to qualify as or be taxed as a REIT under the Code. Although
we have made such inquiries and performed such investigations as we have
deemed necessary to fulfill our professional responsibilities as counsel, we
have not undertaken an independent investigation of all of the facts referred
to in this letter and the Certificate of Representations.
<PAGE>
Keystone Property Trust Page 3
October 14, 1999
The opinion set forth in this letter: (i) is limited to those matters
expressly covered; no opinion is to be implied in respect of any other
matter; (ii) is as of the date hereof; and (iii) is rendered by us solely for
your benefit and may not be provided to or relied upon by any other person or
entity other than you without our express consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to this firm under the captions
"Legal Matters" and "Federal Income Tax Considerations" in the Registration
Statement. In giving this consent, we do not concede that we are within the
category of persons whose consent is required under the Securities Act or the
rules and regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ Rogers & Wells LLP
<PAGE>
Exhibit 23.3
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference into this Registration Statement on Form S-3 (the "Registration
Statement") of Keystone Property Trust (the "Company") of: our report dated
February 18, 1999, on the consolidated financial statements of the Company,
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998; our report dated February 13, 1998 on the statement of
revenue and certain expenses of 101 Commerce Drive for the year ended
December 31, 1996, included in the Company's Form 8-K/A dated February 24,
1998; our report dated April 1, 1998 on the statement of revenue and certain
expenses of GATX Properties for the year ended December 31, 1997 and our
report dated June 5, 1998 on the statement of revenue and certain expenses of
Double M Development Properties for the year ended December 31, 1997, both
included in the Company's Form 8-K/A detect June 10, 1998; our report dated
April 1, 1998 on the combined statement of revenue and certain expenses of
Galesi Properties for the year ended December 31, 1997 and our report dated
June 15, 1998 on the statement of revenue and certain expenses of Fed One
Portfolio for the year ended December 31, 1997, both included in the
Company's Form 8-K/A dated July 14, 1998; our report dated July 6, 1998 on
the combined statement of revenue and certain expenses of Pioneer Portfolio
for the year ended December 31, 1997, our report dated July 7, 1998 on the
statement of revenue and certain expenses of ASW Portfolio for the year ended
December 31, 1997 and our report dated July 31, 1998 on the combined
statement of revenue and certain expenses of Szeles Portfolio for the year
ended December 31, 1997, all included in the Company's 8-K dated August 13,
1998; our report dated December 5, 1998 on the combined statement of revenue
and certain expenses of Chambersburg Properties for the year ended December
31, 1997, our report dated December 16, 1998 on the combined statement of
revenue and certain expenses of Browning Investment Portfolio for the year
ended December 31, 1997 and our report dated December 23, 1998 on the
combined statement of revenue and certain expenses of Brashier Portfolio for
the year ended December 31, 1997, all included in the Company's 8-K/A dated
January 13, 1999; our report dated August 13, 1999 on the combined statement
of revenue and certain expenses of Reckson Morris Industrial Portfolio, our
report dated October 11, 1999 on the combined statement of revenue and
certain expenses of Poly-Foam Properties and our report dated October 11,
1999 on the statement of revenue and certain expenses of BMG Property and to
all references to our Firm included in the Registration Statement.
Philadelphia, Pennsylvania /s/ Arthur Andersen LLP
October 14, 1999
