<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 1997
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
_____________________
Commission file number 1-12630
CENTERPOINT PROPERTIES CORPORATION
Maryland 36-3910279
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
401 North Michigan Ave., Chicago, Illinois 60611
(312) 346-5600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
______ _______
Number of shares of Common Stock outstanding as of July 31, 1997;
19,022,483
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CENTERPOINT PROPERTIES CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
(UNAUDITED)
ASSETS
JUNE 30, DECEMBER 31,
1997 1996
----------- -------------
Assets:
Investment in real estate:
Land and leasehold $86,407 $72,004
Buildings 321,846 284,626
Building improvements 50,029 43,583
Furniture, fixtures, and equipment 11,284 10,429
Construction in progress 19,812 18,392
-------- --------
489,378 429,034
-------- --------
Less accumulated depreciation
and amortization 36,404 30,206
Net investment in real estate 452,974 398,828
Cash and cash equivalents 2,006 1,070
Restricted cash and cash equivalents 866 977
Tenant accounts receivable, net 13,153 10,193
Mortgage notes receivable 20,225 22,665
Investment in and advances to affiliate 15,120 9,673
Prepaid expenses and other assets 3,412 3,630
Deferred expenses, net 4,481 4,170
-------- --------
$512,237 $451,206
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $111,892 $114,451
Line of credit 42,550 46,100
Convertible subordinated debentures payable 12,055 14,380
Notes payable 2,045 2,418
Accounts payable 5,163 4,130
Accrued expenses 19,621 17,914
Rents received in advance and
security deposits 3,483 3,699
--------- --------
196,809 203,092
--------- --------
Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value, 47,727,273 million
shares authorized; 16,735,236 and 14,333,231
issued and outstanding, respectively 17 14
Class B common stock, $.001 par value, 2,272,727
million shares authorized; 2,272,727 issued
and outstanding 2 2
Additional paid-in-capital 345,906 276,142
Retained earnings (deficit) (29,964) (27,726)
Unearned compensation - restricted stock (533) (318)
--------- --------
Total stockholders' equity 315,428 248,114
--------- --------
$512,237 $451,206
========= ========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CENTERPOINT PROPERTIES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR PER SHARE INFORMATION)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenue:
Operating and investment revenue
Minimum rents $13,540 $ 9,821 $26,311 $19,317
Straight-line rents 633 383 1,287 769
Expense reimbursements 4,480 2,934 9,375 5,630
Mortgage interest income 524 247 1,179 500
------ ------ ------ ------
Total operating and investment revenue 19,177 13,385 38,152 26,216
------ ------ ------ ------
Other Revenue:
Real estate fee income 813 399 1,615 1,532
Equity in net income of affiliate 140 670 92 632
------ ------ ------ ------
Total other revenue 953 1,069 1,707 2,164
------ ------ ------ ------
Total revenue 20,130 14,454 39,859 28,380
Expenses:
Real estate taxes 4,097 2,796 8,367 5,287
Property operating and leasing 2,424 1,878 5,447 3,714
General and administrative 739 532 1,442 1,235
Depreciation and amortization 3,379 2,505 6,589 4,912
Interest expense:
Interest incurred, net 2,246 2,654 4,872 5,187
Amortization of deferred financing costs 203 296 395 599
------ ------ ------ ------
Total expenses 13,088 10,661 27,112 20,934
------ ------ ------ ------
Operating income 7,042 3,793 12,747 7,446
Other income(expense) 101 (180) 67 (205)
------ ------ ------ ------
Income before extraordinary item 7,143 3,613 12,814 7,241
Extraordinary item, early extinguishment of debt (1,430) (1,430)
------ ------ ------ ------
Net income $ 7,143 $ 2,183 $ 12,814 $ 5,811
======== ======== ======== ========
Income before extraordinary item per share $0.37 $0.28 $0.69 $0.56
Extraordinary item per share (0.11) (0.11)
------ ------ ------ ------
Net income per share $0.37 $0.17 $0.69 $0.45
======== ======== ======== ========
Distributions per share $0.420 $0.405 $0.840 $0.810
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CENTERPOINT PROPERTIES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
1997 1996
------ ------
Cash flows from operating activities:
Net income $12,814 $ 5,811
Adjustments to reconcile net income to net cash
provided by operating activities:
Extraordinary item-early extinguishment of debt 1,430
Depreciation 6,152 4,757
Amortization of deferred financing costs 395 599
Other amortization 437 155
Incentive stock awards 178 55
Interest on converted debentures 11 61
Equity in net income of affiliate (92) (632)
Gain on disposal of real estate (140)
Net changes in:
Tenant accounts receivable (3,109) (1,211)
Prepaid expenses and other assets (1,104) (1,079)
Rents received in advance and security deposits (232) 198
Accounts payable and accrued expenses (377) 1,094
------- ------
Net cash provided by operating activities 14,933 11,238
------- ------
Cash flows from investing activities:
Change in restricted cash and cash equivalents 111 (4,607)
Acquisition of real estate (36,346) (35,377)
Additions to construction in progress (5,308)
Improvements and additions to properties (16,180) (10,417)
Disposition of real estate 1,615 13,807
Change in deposits on acquisitions 706 (2,346)
Issuance of mortgage notes receivable (2,352) (658)
Repayment of mortgage notes receivable 4,792
Investment in and advances to affiliate (5,356) 5,225
Receivable from affiliates and employees 43 (141)
Addition to deferred expenses (1,246) (879)
------- ------
Net cash used in investing activities (59,521) (35,393)
------- ------
Cash flows from financing activities:
Proceeds from sale of common stock 71,070 148
Offering costs paid (4,009)
Proceeds from issuance of mortgage notes payable 53,370
Proceeds from issuance of line of credit 62,650
Repayments of mortgage notes payable (2,559) (23,370)
Repayments of line of credit (66,200)
Repayments of notes payable (373) (57)
Distributions (15,054) (10,235)
Conversion of convertible subordinated
debentures payable (1)
------- ------
Net cash provided by financing activities 45,524 19,856
------- ------
Net change in cash and cash equivalents 936 (4,299)
Cash and cash equivalents, beginning of the year 1,070 2,878
------- ------
Cash and cash equivalents, end of period $ 2,006 $ (1,421)
======= ========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CENTERPOINT PROPERTIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION:
These unaudited Consolidated Financial Statements of CenterPoint Properties
Corporation, a Maryland Corporation (the "Company"), have been prepared
pursuant to the Securities and Exchange Commission ("SEC") rules and
regulations and should be read in conjunction with the December 31, 1996,
Financial Statements and Notes thereto included in the Company's Form 10-K.
The following Notes to Consolidated Financial Statements highlight significant
changes to the Notes included in the December 31, 1996, Audited Financial
Statements and present interim disclosures as required by the SEC. The
accompanying Consolidated Financial Statements reflect, in the opinion of
management, all adjustments necessary for a fair presentation of the interim
financial statements. All such adjustments are of a normal and recurring
nature. The consolidated balance sheet as of December 31, 1996, has been
derived from the Company's audited Financial Statements.
The consolidated statements of operations and statements of cash flows for
prior periods have been reclassified to conform with current classifications
with no effect on results of operations or cash flows.
1. PREFERRED STOCK, COMMON STOCK AND RELATED TRANSACTIONS
Under the terms of the Company's 1995 Restricted Stock Incentive Plan,
adopted in 1995, certain key employees were granted 12,444 restricted
shares of the Company's common stock in March, 1997. Shares were awarded
in the name of each of the participants, who have all the rights of other
common stockholders, subject to certain restrictions and forfeiture
provisions. Restrictions on the shares expire no more than eight years
after the date of award, or earlier if certain performance targets are
met.
Unearned compensation was recorded at the date of award based on the
market value of the shares. Unearned compensation, which is shown as a
separate component of stockholders' equity, is being amortized to expense
over the eight year vesting period.
Under the terms of the Company's 1995 Director Stock Plan, adopted in
1995, certain directors were granted 1,921 unrestricted shares of the
Company's common stock in May, 1997. Shares were awarded in the name of
each of the participants, who have all the rights of other common
stockholders.
Under the terms of Company's 1993 Stock Option Plan, options for 226,769
shares of common stock were granted to officers and employees in March,
1997 at $31.50 per share and 15,000 shares of common stock were granted to
directors in May, 1997 at $30.625 per share. During the first quarter of
1997, 8,624 options were exercised. During the second quarter, an
additional 1,635 options were exercised.
On March 6, 1997, the Company completed a public offering of 2,250,000
shares of common stock at $31.50 per share under a shelf registration
statement declared
<PAGE>
effective by the Securities and Exchange Commission in January, 1997.
Net proceeds from the offering after the underwriting discounts were
approximately $66.9 million. The proceeds of the offering were used
to refund approximately $58.2 million then outstanding under the
Company's line of credit with the balance of $8.7 million to fund the
acquisition of additional properties.
Income per share amounts are based on the weighted average of common and
common equivalent (stock options) shares outstanding of 19,271,375 and
13,151,237 for the three months ended June 30, 1997 and 1996,
respectively, and 18,456,493 and 13,033,295 for the six months ended June
30, 1997 and 1996, respectively. The assumed conversion of convertible
subordinated debentures into common shares for purposes of computing fully
diluted earnings per share would be anti-dilutive.
In February, 1997, the Financial Accounting Standards Board issued
Statement of Financial Standards No. 128 (FAS 128), "Earnings per Share",
effective for financial statements issued after December 15, 1997. The
Company intends to adopt FAS 128 in fiscal year 1997. The Company has
determined the financial impact to be immaterial for each of the three
month periods ended and the six month period ended June 30, 1997 and 1996.
Statement of Financial Accounting Standards (SFAS) No. 129, "Disclosure of
Information about Capital Structure," was also issued in February 1997 and
is effective for periods ending after December 15, 1997. This statement
establishes standards for disclosing information about an entity's capital
structure by superseding and consolidating previously issued accounting
standards. The financial standards of the Company are prepared in
accordance with the requirements of SFAS No. 129.
In June, 1997, the FASB issued SFAS Statement No. 130, "Reporting
Comprehensive Income." This statement, effective for fiscal years
beginning after December 15, 1997, would require the Company to report
components of comprehensive income in a financial statement that is
displayed with the same prominence as other financial statements.
comprehensive income is defined by Concepts Statement No. 6, "Elements of
Financial Statements" as the change in equity of a business enterprise
during a period from transactions and other events and circumstances from
nonowner sources. It includes all changes in equity distributions to
owners. The Company has not yet determined its comprehensive income.
In June, 1997, the FASB issued SFAS Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information." This statement,
effective for financial statements for periods beginning after December
15, 1997, requires that a public business enterprise report financial and
descriptive information about its reportable operating segments.
Generally, financial information is required to be reported on the basis
that it is used internally for evaluating segment performance and deciding
how to allocate resources to segments. This Company has not yet
determined the impact of this statement on it's financial statements.
<PAGE>
2. ACQUISITION AND DISPOSITION OF REAL ESTATE
In January, 1997, the Company acquired a 300,000 square foot industrial
property located in Waukegan, Illinois for approximately $6.4 million,
which was funded with an advance from the Company's line of credit of $5.1
million and the balance from working capital.
In April, 1997, the Company acquired a 243,000 square foot industrial
property located in West Allis, Wisconsin for approximately $4.7 million,
which was funded entirely with an advance from the Company's line of
credit.
The company acquired an aggregate of 1,664,500 square feet of industrial
property during May, 1997. Four buildings totaling 635,300 square feet
located in Bedford Park, Illinois were acquired for approximately $13.8
million, a 21,000 square foot property located in Downers Grove, Illinois
was acquired for approximately $1.4 million, and a 1,008,000 square foot
property located in Montgomery, Illinois was acquired for approximately
$12.3 million. The transactions were funded with advances from the
Company's line of credit totaling of $12.3 million and the balance from
working capital.
A property, located in Wood Dale, Illinois was sold in June, 1997 for
approximately $1.7 million upon the execution of a tenant purchase option.
3. MORTGAGE NOTES RECEIVABLE
In March, 1997, the Company assigned its $4.8 million mortgage note
receivable, collateralized by a property in Bedford Park, Illinois, for a
net fee of $176,000.
4. INVESTMENT IN AND ADVANCES TO AFFILIATE
The Company holds approximately 99% of the economic interest in
CenterPoint Realty Services Corporation ("CRS"). To maintain compliance
with limitations on income from business activities received by REITs and
their qualified REIT subsidiaries, the Company holds its interest in CRS
in the form of non-voting equity ownership which qualifies CRS as an
unconsolidated taxable subsidiary.
As of June 30, 1997, the Company had advanced to CRS approximately $13.8
million under a demand loan with an interest rate of 8.125%. The proceeds
of the loan were applied towards development projects currently under
construction and the purchase of land held for future development.
Principal and interest are due upon demand.
The Company typically purchases development projects upon completion of
construction on a turn-key basis or develops the property under guaranteed
maximum price contracts, substantially eliminating any construction risk.
<PAGE>
5. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS (IN THOUSANDS)
Supplemental disclosures of cash flow information for six months ended June 30,
1997 and 1996:
1997 1996
------- -------
Interest paid $ 5,120 $ 5,552
Interest capitalized 208 82
In conjunction with the acquisition of real estate, the Company acquired
the following asset and assumed the following liability amounts:
1997 1996
------- -------
Purchase of real estate $ 37,498 $ 50,793
Accounts receivable 614
Prepaid expenses and other assets 68
Mortgage notes payable (13,308)
Accrued expenses (1,152) (2,790)
------- -------
Acquisition of real estate $ 36,346 $ 35,377
======= =======
In conjunction with the disposition of real estate, the Company disposed
of the following asset and liability amounts:
1997 1996
------- -------
Disposal of real estate $ 1,510 $ 17,421
Tenant accounts receivable 18
Prepaid expenses and other assets 2
Mortgage notes receivable (935)
Mortgage notes payable (2,070)
Accounts payable and accrued
expenses (55) (609)
Gain on disposal of assets 140
------- -------
Disposition of real estate $ 1,615 $ 13,807
======= =======
Conversion of convertible subordinated debentures payable:
1997 1996
------- -------
Convertible subordinated
debentures converted $ 2,325 $ 6,544
127,381 and 358,563 shares
of common stock issued at
$18.25 per share, respectively 2,324 6,544
------- -------
Cash disbursed for fractional
shares $ 1 $ 0
======== ==========
6. COMMITMENTS AND CONTINGENCIES
In the normal course of business, from time to time, the Company is
involved in legal actions relating to the ownership and operations of its
properties. In management's opinion, the liabilities, if any, that may
ultimately result from such legal actions are not expected to have a
materially adverse effect on the consolidated financial position, results
of operations and liquidity of the Company.
The Company has entered into other contracts for the acquisition of
properties. Each acquisition is subject to satisfactory completion of due
diligence and, in the case of development projects, completion and
occupancy of the project.
At June 30, 1997, nine of the properties owned are subject to purchase
options held
<PAGE>
by certain tenants. The purchase options are exercisable at various
intervals through 2006, each for an amount greater than the net book
value of the asset. The option to purchase 655 Wheat Lane, Wood Dale,
IL, was exercised by the tenant, who purchased the property in June, 1997
for a purchase price of $1.7 million. Management is not currently aware
of planned exercises of other such options and believes that any potential
exercises would not materially affect the results or prospects of the
Company.
7. SUBSEQUENT EVENTS
In July, 1997, a 161,000 square foot industrial property in Oakbrook,
Illinois was purchased for approximately $5.8 million. The acquisition was
funded with an advance on the Company's line of credit. This property will
be redeveloped for the eventual location of the Company's corporate
offices.
Since June 30, 1997, an additional $265,000 of convertible subordinated
debentures have been converted to 14,520 shares of common stock. As of
July 31, 1997, the principal amount of convertible subordinated debentures
outstanding is $11,790,000.
8. PRO FORMA FINANCIAL INFORMATION
Due to the effect of the May, 1996 refinancing of long term bonds, the
July, 1996 public offering, the March, 1997 public offering and subsequent
acquisitions and dispositions of properties, the historical results are
not indicative of the future results of operations. The following
unaudited pro forma information for the six months ended June 30, 1997 and
1996 is presented as if the 1996 acquisitions of properties, the 1997
acquisitions and dispositions of properties, the May, 1996 bond
refinancing, the July, 1996 public offering, the March, 1997 public
offering and the corresponding repayment of certain debt had all occurred
on January 1, 1996 (or on the date the property first commenced operations
with a third-party tenant, if later). The pro forma information is based
upon historical information and does not purport to present what actual
results would have been had the offering and related transactions, in
fact, occurred at January 1, 1996, or to project results for any future
period.
SIX MONTHS ENDED JUNE 30,
1997 1996
------- -------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
Revenues $ 40,712 $ 33,949
---------- --------
Expenses:
Operating expenses 14,180 12,219
General and administrative 1,442 1,235
Depreciation and amortization 6,749 5,742
Interest expense, net 3,493 3,358
Amortization of financing costs 395 599
Other expense (67) 205
---------- --------
Total expenses 26,192 23,358
---------- --------
Net income $ 14,520 $ 10,591
========== ========
Net income per common share $ 0.76 $ 0.57
========== ========
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION.
RESULTS OF OPERATIONS - 1997 COMPARED WITH 1996:
GENERAL BACKGROUND
The following is a discussion of the historical operating results of the
Company. The discussion should be read in conjunction with the Form 10-K
filed for the fiscal year ended December 31, 1996.
RESULTS OF OPERATIONS
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997 TO SIX MONTHS ENDED JUNE 30,
1996
Total revenues in the first six months of 1997 increased by $11.4 million,
or 40.5%, over the same period last year. The revenues of the Company are
derived primarily from base rents and additional rents from expense
reimbursements, pursuant to the terms of tenant leases for occupied space
at the warehouse/industrial properties. These properties represent
approximately 96% of the gross leasable area of the Company's portfolio as
of June 30, 1997.
Operating and investment revenues increased by $11.9 million in 1997.
Full period income from properties acquired in 1996 and eight acquisitions
in 1997 accounted for most of the increase. Also, mortgage interest
income contributed $0.6 million in increased operating and investment
revenue from new mortgages receivable acquired in the second half of 1996.
Equity in net income of affiliate was lower in the first six months of
1997 than for the same period in 1996 due to the lower volume of
transactions in the Company's unconsolidated subsidiary.
Real estate taxes increased $3.0 million, or 58.3%, due to full period
expenses for 1996 acquisitions and expenses related to 1997 acquisitions.
Property operating and leasing expense, which includes insurance,
utilities, repairs and maintenance and property management costs,
increased by $1.7 million, or 46%. The majority of the increase, $1.6
million, resulted from full period expenses for 1996 acquisitions and
expenses related to 1997 acquisitions. The balance, $0.1 million, was
from other operating cost increases throughout the portfolio.
General and administrative expenses increased by $0.2 million, or 16.8%,
due to the growth of the Company, but decreased from 4.4% to 3.6% of
revenue.
Depreciation and other amortization increased by $1.7 million, from $4.9
million in 1996 to $6.6 million in 1997. $1.5 million of the increase is
due to the full period of depreciation on acquisitions completed during
1996 and eight acquisitions in 1997, with the balance attributable to
building improvements in 1996.
Interest incurred decreased by $0.3 million over the same period last year
due to lower average loan balances and reduced borrowing rates.
<PAGE>
Amortization of financing costs decreased by $0.2 million due to the
replacement of secured debt with unsecured debt during the fourth quarter
of 1996.
Other income (expense), generally non-operating items, increased by $0.2
million from the same period last year largely due to a $140,000 gain on
the disposition of a property in the second quarter of 1997.
In 1996, an extraordinary charge of $1.4 million was incurred representing
the unamortized balance of deferred costs associated with the initial
funding of the Company's 1991 and 1993 tax exempt bonds. The bonds were
refunded by issuing new tax exempt and taxable bonds in 1996.
As a result of the factors described above, net income increased 120.5%,
or $7.0 million, from $5.8 million for the first six months of 1996 to
$12.8 million for the first six months of 1997. Earnings before interest,
income taxes, depreciation and amortization for the six months increased
by $4.8 million, from $19.9 million in 1996 to $24.7 million in 1997.
The Company reviews its operating results by comparing Net Revenue Margin
between periods. Net Revenue Margin is calculated by dividing net revenue
(total operating and investment revenue less real estate taxes and
property operating and leasing expense) by adjusted operating and
investment revenue (operating and investment revenue less expense
reimbursements, adjusted for leases containing expense stops). This
margin indicates the percentage of revenue actually retained by the
Company or, alternatively, the amount of operating expenses not recovered
by tenant reimbursements. The margin for the first six months of 1997 was
89.8% compared to 88.8% for the first six month of 1996, an increase of
1.0%.
On a "same-store" basis (comparing the first half year's results of
operations of 1997, on a cash basis, of the properties owned at January 1,
1996, with the results of operations of the same properties at June 30,
1996), the Company recognized a 2.8 % increase in net operating income
primarily due to the lease-up of vacant spaces, rental increases on
renewed leases and contractual increases in minimum rent under leases in
place.
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1997 TO THREE MONTHS ENDED
JUNE 30, 1996
Total revenues for the three months ended June 30, 1997 increased by $5.7
million or 39.3%, over the same period last year. Operating and
investment revenues increased by $5.7 million for the same period in 1997.
Full period income from properties acquired in 1996 and eight acquisitions
in 1997 accounted for most of the increase. In addition, mortgage
interest income contributed $0.2 million in increased operating and
investment revenue from new mortgages acquired in the second half of 1996.
Fee income for the three months ended June 30, 1997 increased by $0.4
million over the same period in 1996 due to an assignment fee for one of
the Company's development projects.
Equity in net income of affiliate was lower in the second quarter of
1997 than for the same period in 1996 due to the lower volume of
transactions in the Company's unconsolidated subsidiary.
<PAGE>
Real estate taxes increased $1.3 million, or 46.5%, due to full period
expenses for 1996 acquisitions and expense related to 1997 acquisitions.
Property operating and leasing expenses, which includes insurance,
utilities, repairs and maintenance and property management costs,
increased by $0.5 million, or 29.1%. The increase resulted from full
period expenses for 1996 acquisitions and expenses related to 1997
acquisitions and other operating cost increases throughout the
portfolio.
General and administrative expenses increased by $0.2 million, or
39.0%, due to the growth of the Company, but decreased from 4.0% to 3.9%
of revenue.
Depreciation and other amortization increased by $0.8 million, from $2.5
million in 1996 to $3.3 million in 1997. $0.7 of the increase is due to
the full period of depreciation on 1996 acquisitions and expense related
to 1997 acquisitions, with the balance attributable to building
improvements in 1996.
Interest incurred decreased by $0.4 million over the same period last
year due to lower average loan balances and reduced borrowing rates.
Amortization of financing costs decreased by $0.1 million due to the
replacement of secured debt with unsecured debt during the fourth
quarter of 1996.
Other income (expense), generally non-operating items, increased by $0.3
million from the same period last year largely due to a $140,000 gain on
disposition of a property in the second quarter of 1997.
In 1996, an extraordinary charge of $1.4 million was incurred
representing the unamortized balance of deferred costs associated with
the initial funding of the Company's 1991 and 1993 tax exempt bonds.
The bonds were refunded by issuing new tax exempt and taxable bonds in
1996.
As a result of the factors described above, net income increased 227.2%,
or $4.9 million, from $2.2 million for the second quarter of 1996 to
$7.1 million for the second quarter of 1997. Earnings before interest,
income taxes, depreciation and amortization for the three months
increased by $4.0 million, from $9.0 million in 1996 to $13.0 million in
1997.
The Company reviews its operating results by comparing Net Revenue
Margin between periods. Net Revenue Margin is calculated by dividing
net revenue (total operating and investment revenue less real estate
taxes and property operating and leasing expense) by adjusted operating
and investment revenue (operating and investment revenue less expense
reimbursements, adjusted for leases containing expense stops). This
margin indicates the percentage of revenue actually retained by the
Company or, alternatively, the amount of operating expenses not
recovered by tenant reimbursements. The margin for the second quarter
of 1997 was 91.3% compared to 88.4% for the second quarter of 1996, an
increase of 2.9%.
On a "same-store" basis (comparing the second quarter results of
operations for 1997, on a cash basis, of the properties owned at April 1,
1996, with the results of operations of the same properties for the
second quarter of 1996), the Company recognized a 5.4% increase in net
operating income primarily due to the lease-up of vacant spaces, rental
increases on renewed leases and contractual increases in minimum rent
under leases in place.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash flow generated from Company operations has historically been
utilized for working capital purposes and making distributions, while
proceeds from financings and capital raises have been used to fund
acquisitions and other capital costs. For the six months ended June 30,
1997, cash flow from operations was $14.9 million. Cash flow during
that period and cash on hand was used to pay $15.1 million of
distributions.
Acquisitions, construction in progress, advances to affiliate, increases
to mortgage notes receivable, and improvements and additions to
properties of approximately $65.5 million for the six months ended June
30,01997 were funded with a net increase in borrowings under the
Company's line of credit totaling $52.1 million, repayment of mortgage
notes receivable of $4.8 million, and the balance with net proceeds of
the public offering of common stock.
An increase on the line of credit of $2.6 million were used to repay a
portion of the Company's mortgage notes payable in March of 1997.
At June 30, 1997, the Company's debt constitutes approximately 22% of
its fully diluted market capitalization. At that date, the Company's
fully diluted equity market capitalization was approximately $615
million, and its fully diluted total market capitalization was
approximately $769 million. The Company's leverage ratios benefited in
the first six months of 1997 from the conversion of approximately $2.3
million of its 8.22% Convertible Subordinated Debentures, due 2004, to
127,381 shares of common stock.
At June 30, 1997, the Company had outstanding borrowings of
approximately $42.6 million under its revolving lines of credit
(approximately 6% of the Company's fully diluted market capitalization),
with current remaining availability of approximately $92.4 million. As
of June 30, 1997, the Company's line of credit consists of a $135
million unsecured credit facility co-led by First Chicago NBD and
Lehman Brothers with participating banks including ABN LaSalle, Bank of
America, Bank of Boston and NationsBank.
On March 6, 1997, the Company completed a public offering of 2,250,000
shares of common stock at $31.50 per share. Net proceeds from the
offering, after the underwriting discounts, were approximately $66.9
million. The proceeds of the offering were used to repay approximately
$58.2 million in borrowings then outstanding under the Company's lines
of credit, with the balance of $8.7 million to fund working capital
requirements. The public offering left the entire amount of the
Company's line of credit available.
As of June 30, 1997, the Company had a cash balance of $2.0 million.
The Company believes that its liquidity is adequate for operations and
that positive cash flow from operations, supplemented by proceeds of
borrowings under its lines of credit and other financings, will be
adequate to fund the Company's acquisition activities and allow
distributions to the Company's stockholders in accordance with the
requirements for qualification as a REIT.
In the first six months of 1997, the Company declared distributions of
$15.1 million, representing an annualized distribution rate of
approximately $1.68 per share. The following factors, among others,
will affect the future availability of funds for distribution: (i)
scheduled increases in base rents under existing leases and (ii)
changes in minimum base rents attributable to replacement of existing
leases with new or replacement leases.
<PAGE>
PART II. OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
The Registrant held its annual meeting of stockholders on May 15, 1997. The
voting results of the annual meeting were as follows:
1. 14,630,806 shares were voted in the election of directors and the
following persons received the number of votes set opposite their
respective names:
FOR DIRECTORS VOTED IN FAVOR VOTE WITHHELD
Nicholas C. Babson 14,627,902 32,742
Martin Barber 14,631,806 28,838
Alan D. Feld 14,630,606 30,038
John S. Gates, Jr. 14,630,606 30,038
John J. Kinsella 14,627,302 33,342
Thomas E. Robinson 14,630,606 30,038
Robert L. Stovall 14,629,280 31,364
2. In addition to the election of directors, the following matters were
approved by the vote of the stockholders at the annual meeting:
- Ratification of the appointment of Coopers & Lybrand as the
Company's independent auditors for the year ending December 31,
1997:
VOTED IN FAVOR VOTED AGAINST ABSTAINED
14,614,527 27,302 18,818
- Approval of charter amendment regarding settlement of transactions
on the NYSE:
VOTED IN FAVOR VOTED AGAINST ABSTAINED NON-VOTE
14,570,667 29,767 34,643 25,567
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Exhibit 3.1 - Amended and Restated Articles of Incorporation
(2) Exhibit 3.2 - Amended and Restated By-Laws
(3) Exhibit 11 - Computation of Earnings per Share
(4) Exhibit 27 - Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CENTERPOINT PROPERTIES CORPORATION
a Maryland corporation
By: /s/ Paul S. Fisher
_________________________
Paul S. Fisher
Executive Vice President and
Chief Financial Officer
August 13, 1997 (Principal Accounting Officer)
<PAGE>
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
CENTERPOINT PROPERTIES CORPORATION
ARTICLE I
INCORPORATOR
The undersigned, Bruce P. Golden, whose address is Three First National
Plaza, Suite 3500, Chicago, Illinois 60602, Chicago, Illinois, being at least 18
years of age, does hereby form a corporation under the general laws of the State
of Maryland.
ARTICLE II
NAME
The name of the Corporation is:
CenterPoint Properties Corporation
ARTICLE III
PURPOSE OF CORPORATION
The purpose for which the Corporation is formed and the business or objects
to be carried on and promoted by it, within the State of Maryland or elsewhere,
is to engage in any lawful act or activity for which corporations may be formed
under the Maryland General Corporation Law, as now or hereafter in force, to do
everything necessary, proper, advisable and convenient to accomplish the
purposes herein set forth, and to do all other things incidental thereto or
connected therewith which are not forbidden by the laws of the State of Maryland
as now or hereafter in force or by these Articles of Incorporation.
Without limiting the generality of the foregoing, the Corporation may
engage in business as a real estate investment trust under the Internal Revenue
Code of 1986, as amended, or any successor statute (the "Code"). For purposes of
these Articles of Incorporation, "REIT" shall mean a real estate investment
trust as described in the Code.
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ARTICLE IV
PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT
The post office address of the principal office of the Corporation in the
State of Maryland is c/o Prentice-Hall, Inc., 11 East Chase St., Baltimore,
Maryland 21201. The name of the resident agent of the Corporation in the State
of Maryland is Prentice-Hall, Inc., 11 East Chase St., Baltimore, Maryland
21202. The resident agent is a corporation in the State of Maryland.
ARTICLE V
CAPITAL STOCK
Section 1. AUTHORIZED SHARES. The total number of shares of
stock which the Corporation has authority to issue is 60,000,000 shares, of
which 47,727,273 are shares of Common Stock, par value $.001 per share
("Common Stock"), 2,272,727 are shares of Class B Common Stock, par value
$.001 per share ("Class B Common Stock") and 10,000,000 are shares of Series
Preferred Stock, par value $.001 per share ("Preferred Stock"). The
aggregate par value of all authorized shares of stock having par value is
$60,000.
Section 2. VOTING RIGHTS. Subject to the provisions of Article VII
regarding Excess Stock (as such term is deemed therein), each share of Common
Stock shall entitle the holder thereof to one vote.
Section 3. ISSUANCE OF PREFERRED STOCK. The Preferred Stock may be
issued, from time to time, in one or more series as authorized by the Board of
Directors. Prior to issuance of shares of each series of Preferred Stock, the
Board of Directors by resolution shall designate that series to distinguish it
from all other series of Preferred Stock and classes of capital stock of the
Corporation, shall specify the number of shares to be included in that series of
Preferred Stock and, subject to the provisions of Article VII regarding Excess
Stock, shall set the terms, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends or other distributions,
qualifications and terms or conditions of redemption. Subject to the express
terms of any other series of Preferred Stock outstanding at the time and
notwithstanding any other provision of these Articles of Incorporation, the
Board of Directors may increase or decrease the number of shares of any series
of Preferred Stock by setting or changing, in any one or more respects, from
time to time before issuing the shares, and, subject to the provisions of
Article VII regarding Excess Stock, the terms, preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications or terms or conditions of redemption of the shares
of any series of Preferred Stock.
Section 4. ARTICLES OF INCORPORATION AND BYLAWS. All persons who shall
acquire stock in the Corporation at any time and from time to time shall acquire
the same subject to the provisions of these Articles of Incorporation and the
Bylaws of the Corporation.
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<PAGE>
Section 5. CLASS B COMMON STOCK. The Class B Common Stock shall have
the following rights:
(1) Dividend Rights.
(a) The holders of record of outstanding shares of Class B
Common Stock shall be entitled to receive, when and as declared by the
Board of Directors, out of funds legally available therefor, cash dividends
which are payable when, as and if authorized by the Board of Directors,
PARI PASSU with any dividends paid on the Corporation's Common Stock, in an
amount per share equal to the Class B Common Stock Common Dividend Amount,
as in effect from time to time. The initial per share Class B Common Stock
Common Dividend Amount per annum shall be equal to $1.6068. Each calendar
quarter hereafter (or, if the date of original issuance of the Class B
Common Stock (the "Original Issue Date") is not on the first day of a
calendar quarter, the period beginning on the Original Issue Date and
ending on the last day of the calendar quarter of issuance) is referred to
hereinafter as a "Dividend Period." The amount of dividends payable with
respect to each full dividend period for the Class B Common Stock shall be
computed by dividing the Class B Common Stock Common Dividend Amount by
four. The amount of dividends on the Class B Common Stock payable with
respect to the initial Dividend Period, or any other Dividend Period
shorter or longer than a full Dividend Period shall be computed ratably on
the basis of the actual number of days in such Dividend Period. In the
event of any change in the quarterly cash dividend per share applicable to
the Common Stock after the date of these Articles of Amendment, the
quarterly cash dividend per share of the Class B Common Stock shall be
adjusted for the same dividend period by an amount computed by multiplying
the amount of the change in the Common Stock dividend by the Conversion
Ratio (as defined in Section 3.2).
(b) In the event the Corporation shall declare a
distribution payable in (i) securities of other persons, (ii) evidences of
indebtedness issued by the Corporation or other persons, (iii) assets
(excluding cash dividends) or (iv) options or rights to purchase capital
stock or evidences of indebtedness in the Corporation or other persons,
then, in each such case for the purpose of this Section 5(1), the holders
of the Class B Common Stock shall be entitled to a proportionate share of
any such distribution as though they were the holders of the number of
shares of Common Stock of the Corporation into which their shares of Class
B Common Stock are or would be convertible (assuming such shares of Class B
Common Stock were then convertible) as of the record date fixed for
determination of the holders of Common Stock of the Corporation entitled to
receive such distribution.
(2) Liquidation Rights.
(a) Subject to any prior rights of any other class or
series of stock, the holders of Class B Common Stock shall be entitled to
receive the remaining assets of the Corporation available for distribution
pro rata with the other holders of
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shares of capital stock of the Corporation as though they were the
holders of the number of shares of Common Stock of the Corporation into
which their shares of Class B Common Stock are or would be convertible
(assuming such shares of Class B Common Stock were then convertible) as
of the record date applicable to such distribution.
(b) Neither a consolidation or merger of the Corporation
with or into any other corporation, nor a merger of any other corporation
into the Corporation, nor the purchase or redemption of all or part of the
outstanding shares of any class or classes of stock of the Corporation, nor
a sale or transfer of all or any part of its assets, shall be considered a
liquidation, dissolution or winding up of the Corporation within the
meaning of this Section 5(2).
(3) Conversation Rights.
3.1 MANDATORY CONVERSION INTO COMMON STOCK.
(a) Beginning on September 30, 1998, and at the end of
each calendar quarter thereafter, such number of shares of Class B
Common Stock will mandatorily convert into such number of shares of
Common Stock as will result in the holders of the Class B Common Stock
owning, in the aggregate, 4.9% of the then outstanding shares of
Common Stock; and if on any such date the total number of outstanding
shares of Class B Common Stock would not, upon conversion, result in
the holders thereof owning, in the aggregate, 4.9% of the then
outstanding shares of Common Stock, then all such outstanding shares
of Class B Common Stock will mandatorily convert into Common Stock.
The Company will notify the Investor in writing at least five (5)
business days prior to the end of each calendar quarter as to the
number of shares of Class B Common Stock subject to mandatory
conversion, which number will be revised, if necessary, as a result of
intervening events, no later than two (2) business days after the end
of the applicable quarter.
(b) On the tenth anniversary of the Original Issue
Date, each remaining share of Class B Common Stock which has not been
converted to Common Stock shall mandatorily convert to that number of
fully paid and nonassessable shares of Common Stock equal to the
Conversion Ratio, as adjusted, regardless of the 4.9% limitation
described in Section 3.1(a) above.
(c) The Corporation shall make such arrangements as it
deems appropriate for the issuance as soon as practicable of
certificates representing shares of Common Stock issued upon the
mandatory conversion of the Class B Common Stock in exchange for and
contingent upon surrender by the holder of the certificate(s)
representing such holder's shares of Class B Common Stock. From and
after the date of mandatory conversion, certificates representing
shares of Class B Common Stock shall be deemed to represent an equal
number of shares of Common Stock.
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<PAGE>
3.2 RIGHT TO CONVERT.
Beginning on September 21, 1998, the holders of shares
of Class B Common Stock shall have the right, at their option, to
convert each such share, at any time and from time to time, into one
fully paid and nonassessable share of Common Stock (the "Conversion
Ratio," which is subject to adjustment as provided below); PROVIDED,
HOWEVER, that no holder of Class B Common Stock shall be entitled to
convert shares of such Class B Common Stock into Common Stock pursuant
to the foregoing provision, if, as a result of such conversion, such
person would become the Beneficial Owner of more than 4.9% of the
Corporation's outstanding Common Stock. "Beneficial Owner" shall have
the meaning set forth in Rule 13d-3 under the Securities and Exchange
Act of 1934 (or any successor provision thereto). Notwithstanding the
foregoing, the foregoing conversion right may be exercised at any time
after the date of these Articles of Amendment and irrespective of the
4.9% limitation (and no such limit shall apply) if any of the
following circumstances occurs:
(i) For any two consecutive fiscal quarters, the
aggregate amount outstanding as of the end of the quarter under
(1) all mortgage indebtedness of the Corporation and its
consolidated entities and (2) unsecured indebtedness of the
Corporation and its consolidated entities for money borrowed that
has not been made generally subordinate to the other indebtedness
for borrowed money of the Corporation or any consolidated entity
exceeds fifty-five percent (55%) of the Corporation's total
market capitalization, defined as the market value of all of the
Corporation's outstanding capital stock, assuming the conversion
of all outstanding convertible securities, including the Class B
Common Stock plus the amount of the Company's total non-
convertible indebtedness (all as such items of indebtedness and
capitalization are reported in consolidated financial statements
contained in the Corporation's Form 10-Ks and Form 10-Qs as filed
with the Securities and Exchange Commission); or
(ii) Fewer than three of John S. Gates, Jr., Robert M.
Stovall, Michael M. Mullen and Paul S. Fisher are continuing as
Key Managers of the Company. (For purposes of this subparagraph
(ii), a "Key Manager" shall mean a Person who is (a) employed by
the Company and (b) actively participates as a senior executive
officer in the management of the Company); or
(iii) If (A) the Corporation shall be party to, or
shall have announced or entered into an agreement for, any
transaction (including, without limitation, a merger,
consolidation, statutory share exchange or sale of all or
substantially all of its assets (each of the
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<PAGE>
foregoing a "Transaction")), in each case as a result of which
shares of Common Stock shall have been or will be converted
into the right to receive stock, securities or other property
(including cash or any combination thereof) or which has
resulted or will result in the holders of Common Stock
immediately prior to the Transaction owning less than 50% of
the Common Stock after the Transaction, or (b) a "change of
control" as defined in the next sentence occurs with respect
to the Corporation. A change of control shall mean the
acquisition (including by virtue of a merger, share exchange
or other business combination) by one stockholder or a group
of stockholders acting in concert of the power to elect a
majority of the Corporation's board of directors. The
Corporation shall notify the holders of Class B Common Stock
promptly if any of the events listed in this Section 3.2(iii)
shall occur.
3.3 The Corporation shall make such arrangements as it
deems appropriate for the issuance as soon as practicable of
certificates representing shares of Common Stock issued upon the
mandatory conversion of the Class B Common Stock in exchange for and
contingent upon surrender by the holder of the certificate(s)
representing such holder's shares of Class B Common Stock. From and
after the date of mandatory conversion, certificates representing
shares of Class B Common Stock shall be deemed to represent an equal
number of shares of Common Stock.
3.4 PROCEDURE FOR CONVERSION. In order to exercise
its right to convert shares of Class B Common Stock into Common Stock
pursuant to Section 3.2 above, the holder thereof shall surrender the
certificate(s) therefor, duly endorsed if the Corporation shall so
require, or accompanied by appropriate instruments of transfer
satisfactory to the Corporation, at the office of any transfer agent
for the Class B Common Stock, or if there is no such transfer agent,
at the principal offices of the Corporation, or at such other office
as may be designated by the Corporation, together with written notice
that such holder elects to convert such shares. Such notice shall
also state the name(s) and address(es) in which such holder wishes the
certificate(s) for the shares of Common Stock issuable upon conversion
to be issued. As soon as practicable after an optional conversion,
the Corporation shall issue and deliver at said office a certificate
or certificates for the number of whole shares of Common Stock
issuable upon conversion of the shares of Class B Common Stock duly
surrendered for conversion, to the person(s) entitled to receive the
same. Shares of Class B Common Stock shall be deemed to have been
converted immediately prior to the close of business on the date on
which the certificates therefor and notice of election to convert the
same are duly received by the Corporation in accordance with the
foregoing provisions, and the person(s) entitled to receive the Common
Stock issuable upon such conversion shall be deemed for all purposes
as record holder(s) of such Common Stock as of the close of business
on such date.
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<PAGE>
3.5 NO FRACTIONAL SHARES. No fractional shares shall
be issued upon conversion of the Class B Common Stock into Common
Stock, and the number of shares of Common Stock to be issued shall be
rounded to the nearest whole share. Whether or not fractional shares
would be issuable upon such conversion shall be determined on the
basis of the total number of shares of Class B Common Stock the holder
is at the time converting into Common Stock and the number of shares
of Common Stock issuable upon such aggregate conversion. As to any
final fraction of a share which the holder of one or more shares of
Class B Common Stock would be entitled to receive upon exercise of his
conversion right, the Corporation shall pay a cash adjustment in an
amount equal to the same fraction of the last sale price (or bid price
if there were no sales) per share of Common Stock on the American
Stock Exchange on the business day which next precedes the conversion
date or, if such Common Stock is not then listed or admitted to
trading on such Exchange, on any national securities exchange, of the
market price per share (as determined in a manner prescribed by the
Board of Directors of the Corporation) at the close of business on the
business day which next precedes the conversion date.
3.6 ADJUSTMENTS.
(i) The Conversion Ratio shall be subject to
adjustment as follows:
(A) In the event the Corporation shall at
any time (i) pay a dividend or make a distribution to
holders of Common Stock in shares of capital stock, (ii)
subdivide its outstanding shares of Common Stock into a
larger number of shares, (iii) combine its outstanding
shares of Common Stock into a smaller number of shares, or
(iv) issue by reclassification of its shares of Common Stock
any shares of the Corporation, the Conversion Ratio in
effect immediately prior thereto shall be adjusted as
provided below so that the holder of any share of Class B
Common Stock thereafter surrendered for conversion shall be
entitled to receive the number of shares of the Corporation
which such holder would have owned or have been entitled to
receive after the happening of any of the events described
above, had such share of Class B Common Stock been converted
immediately prior to the happening of such event. Any
adjustment made pursuant to this subparagraph (a) shall
become effective retroactively immediately after the record
date in the case of a dividend and shall become effective
immediately after the effective date in the case of a
subdivision, combination or reclassification.
(B) In case the Corporation shall issue
rights or warrants to all holders of its Common Stock
entitling
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<PAGE>
them to subscribe for or purchase shares of Common
Stock at a price per share less than the current market
price (as hereinafter defined) per share of Common Stock at
the record date mentioned below, the number of shares of
Common Stock into which each share of Class B Common Stock
shall thereafter be convertible shall be determined by
multiplying the number of shares of Common Stock into which
such share of Class B Common Stock was therefore convertible
by a fraction, of which the numerator shall be the number of
shares of Common Stock outstanding on the date of issuance
of such rights or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase,
and of which the denominator shall be the number of shares
of Common Stock outstanding on the date of issuance of such
rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so
offered would purchase at such current market price. Such
adjustment shall be made whenever such rights or warrants
are issued, and shall become effective retroactively
immediately after the record date for the determination of
stockholders entitled to receive such rights or warrants.
(C) In case the Corporation shall distribute
to all holders of its Common Stock evidences of its
indebtedness or assets or rights or warrants to subscribe
for or purchase securities issued by the Corporation or
property of the Corporation (excluding those referred to in
subparagraph (b) above), then in each such case the number
of shares of Common Stock into which each share of Class B
Common Stock shall thereafter be convertible shall be
determined by multiplying the number of shares of Common
Stock into which such share of Class B Common Stock was
theretofore convertible by a fraction, of which the
numerator shall be the current market price per share of the
Common Stock, and of which the denominator shall be such
current market price per share of Common Stock, less the
then fair market value (as determined by the Board of
Directors of the Corporation, whose determination shall be
conclusive) of the portion of the assets or evidence of
indebtedness so distributed or of such rights or warrants
applicable to one share of the Common Stock. Such
adjustment shall be made whenever any such distribution is
made, and shall become effective retroactively immediately
after the record date for the determination of stockholders
entitled to receive such distribution.
(D) If any such rights or warrants referred
to above shall expire without having been exercised, the
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Conversion Ratio as theretofore adjusted because of the
issue of such rights or warrants shall forthwith be
readjusted to the Conversion Ratio which would have been in
effect had an adjustment been made on the basis that only
the rights or warrants so issued or sold were those rights
or warrants actually exercised and that with respect to any
such rights or warrants to subscribe for or purchase
securities issued by the Corporation, other than Common
Stock or property of the Corporation, the fair market value
thereof shall be the fair market value of the rights or
warrants actually exercised. If any such rights or warrants
shall expire without having been exercised, the Conversion
Ratio as theretofore adjusted because of the issue of such
rights or warrants shall forthwith be readjusted to the
Conversion Ratio which would have been in effect had an
adjustment been made on the basis that the only rights or
warrants, so issued or sold, were those rights or warrants
actually exercised and that with respect to any such rights
or warrants to subscribe for or purchase securities issued
by the Corporation, other than Common Stock, or property of
the Corporation the fair market value thereof shall be the
fair market value of the rights or warrants actually
exercised.
For the purpose of any computation under this
paragraph (i) the current market price per share of Common
Stock at any date shall be deemed to be the average of the
daily closing prices for the fifteen (15) consecutive
business days commencing thirty (30) business days before
the day in question. The closing price for each day shall
be the last reported sale price regular way or, in the case
no such reported sale takes place on such day, the average
of the reported closing bid and asked prices regular way, in
either case on the American Stock Exchange, or, if the
Common Stock is not listed or admitted to trading on such
Exchange, on any national securities exchange, designated by
the Board of Directors, on which the Common Stock is listed
or admitted to trading, or if not listed or admitted to
trading on any national securities exchange, the average of
the closing bid and asked prices as furnished by any
American Stock Exchange or New York Stock Exchange firm
selected from time to time by the Corporation for the
purpose.
All calculations under this paragraph (i)
shall be made to the nearest cent or to the nearest 1/100th
of a share as the case may be.
(ii) No adjustment of the Conversion Ratio shall
be made as a result of or in connection with the issuance of
Common
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Stock of the Corporation pursuant to options or stock purchase
agreements now or hereafter granted or entered into with
directors, officers or employees of the Corporation or its
subsidiaries in connection with their employment, whether entered
into at the beginning of the employment or at any time
thereafter.
(iii) In case of:
(A) any capital reorganization of the
Corporation, or
(B) the consolidation or merger of the
Corporation with or into another corporation, or
(C) a statutory share exchange whereby the
Corporation's Common Stock is converted into property
other than cash, or
(D) the sale, transfer or other disposition
of all or substantially all of the property, assets or
business of the Corporation as a result of which sale,
transfer or other disposition property other than cash
shall be payable or distributable to the holders of the
Common Stock, then, in each such case, each share of
Class B Common Stock shall thereafter be convertible
into the number and class of shares or other securities
or property of the Corporation, or of the corporation
resulting from such consolidation or merger or with or
to which such statutory share exchange, sale, transfer
or other disposition shall have been made, to which the
Common Stock otherwise issuable upon conversion of such
share of Class B Common Stock would have been entitled
upon such reorganization, consolidation, merger,
statutory share exchange, or sale, transfer or other
disposition if outstanding at the time thereof; and in
any such case appropriate adjustment, as determined by
the Board of Directors, shall be made in the
application of the provisions set forth in this Section
3.6 with respect to the conversion rights thereafter of
the holders of the Class B Common Stock, to the end
that such provisions shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares
or securities or other property thereafter issuable or
deliverable upon the conversion of Class B Common
Stock. Proper provision shall be made as a part of the
terms of any such reorganization, consolidation,
merger, statutory share exchange or sale,
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transfer or other disposition whereby the conversion
rights of the holders of Class B Common Stock shall
be protected and preserved in accordance with the
provisions of this paragraph (iii). The provisions
of this paragraph (iii) shall similarly apply to
successive capital reorganizations, consolidations,
merger, statutory share exchanges, sales, transfers
or other dispositions of property as aforesaid.
(iv) Upon conversion of any shares of Class B
Common Stock, no payment or adjustment shall be made on account
of dividends accrued, whether or not in arrears, on such shares
or on account of dividends declared and payable to holders of
Common Stock of record on a date prior to the date of conversion.
(v) Whenever the Conversion Ratio shall be
adjusted as herein provided, the Corporation shall cause to be
mailed by first class mail, postage prepaid, as soon as
practicable to each holder of record of shares of Class B Common
Stock a notice stating that the Conversion Ratio has been
adjusted and setting forth the adjusted Conversion Ratio,
together with an explanation of the calculation of the same.
(vi) If the Corporation shall be party to any
Transaction in each case as a result of which shares of Common
Stock shall be converted into the right to receive stock,
securities or other property (including cash or any combination
thereof), the holder of each share of Class B Common Stock shall
have the right after such Transaction to convert such share,
pursuant to the optional conversion provisions hereof, into the
number and kind of shares of stock or other securities and the
amount and kind of property receivable upon such Transaction by a
holder of the number of shares of Common Stock issuable upon
conversion of such share of Class B Common Stock immediately
prior to such Transaction. The Corporation shall not be party to
any Transaction unless the terms of such Transaction are
consistent with the provisions of this Section 3.6(vi), and it
shall not consent to or agree to the occurrence of any
Transaction until the Corporation has entered into an agreement
with the successor or purchasing entity, as the case may be, for
the benefit of the holders of the Class B Common Stock, thereby
enabling the holders of the Class B Common Stock to receive the
benefits of this Section 3.6(vi) and the other provisions of
these Articles of Amendment. Without limiting the generality of
the foregoing, provision shall be made for adjustments in the
Conversion Ratio which shall be as nearly equivalent as may be
practicable to the adjustments provided for in Section 3.6(i).
The provisions of this Section 3.6(vi) shall similarly apply to
successive Transactions.
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(vii) In the event that the Corporation shall
propose to effect any Transaction which would result in an
adjustment under Section 3.6(vi), the Corporation shall cause to
be mailed to the holders of record of Class B Common Stock at
least twenty (20) days prior to the applicable date hereinafter
specified a notice stating the date on which such Transaction is
expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled
to exchange their shares of Common Stock for securities or other
property deliverable upon such Transaction. Failure to give such
notice, or any defect therein, shall not affect the legality or
validity of such Transaction.
3.7 OTHER.
(i) The Corporation shall at all times reserve
and keep available out of its authorized but unissued Common
Stock the maximum number of shares of Common Stock issuable
upon the conversion of all shares of Class B Common Stock
then outstanding, and if at any time the number of
authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding
shares of the Class B Common Stock, in addition to such
other remedies as shall be available to the holder of such
Class B Common Stock, the Corporation shall take such
corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient
for such purposes.
(ii) The Corporation shall pay any taxes that may
be payable in respect of the issuance of shares of Common
Stock upon conversion of shares of Class B Common Stock, but
the Corporation shall not be required to pay any taxes which
may be payable in respect of any transfer of shares of Class
B Common Stock or any transfer involved in the issuance of
shares of Common Stock in a name other than that in which
the shares of Class B Common Stock so converted are
registered, and the Corporation shall not be required to
transfer any such shares of Class B Common Stock or to issue
or deliver any such shares of Common Stock unless and until
the person(s) requesting such transfer or issuance shall
have paid to the Corporation the amount of any such taxes,
or shall have established to the satisfaction of the
Corporation that such taxes have been paid.
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(iii) The Corporation will not, by amendment
of the Articles of Incorporation or through any
reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to
be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in carrying out of
all the provisions of these Articles of Amendment and in the
taking of all such action as may be necessary or appropriate
to protect the conversion rights of the holders of the Class
B Common Stock against impairment.
(iv) Holders of Class B Common Stock shall be
entitled to receive copies of all communications by the
Corporation to its holders of Common Stock, concurrently
with the distribution to such shareholders.
(v) The Corporation warrants that all Common
Stock issued upon conversion of shares of Class B Common
Stock will upon issue be fully paid and nonassessable by the
Corporation and free from original issue taxes.
(4) Voting Rights. The holders of record of Class B Common
Stock shall not be entitled to vote on any matter on which the holders
of record of Common Stock are entitled to vote, except that the
holders of a majority of the Class B Common Stock, voting as a
separate class, shall be required to vote on and approve: (a) any
material adverse change in the rights, preferences or privileges of
the Class B Common Stock, and (b) any creation of a new class of stock
having rights, preferences or privileges senior to or in parity with
the rights, preferences or privileges of the Class B Common Stock.
(5) Reacquired Shares. Shares of Class B Common Stock
converted, redeemed or otherwise purchased or acquired by the
Corporation shall be restored to the status of authorized but unissued
shares of preferred stock without designation as to series.
ARTICLE VI
PROVISIONS FOR DEFINING, LIMITING
AND REGULATING CERTAIN POWERS OF THE
CORPORATION AND OF THE STOCKHOLDERS AND DIRECTORS
Section 1. NUMBER AND CERTIFICATION. The number of directors of the
Corporation initially shall be three, which number may be increased or decreased
pursuant to the Bylaws of the Corporation; provided, however, that (a) if there
is stock outstanding and so long as there are
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three or more stockholders, the number of directors shall never be less than
three and (b) if there is stock outstanding and so long as there are less
than three stockholders, the number of directors may be less than three but
not less than the number of stockholders. The names of the directors who
shall serve effective immediately and until the first annual meeting of
stockholders and until their successors are duly elected and shall qualify
are:
Martin Barber
John S. Gates, Jr.
Robert L. Stovall
At the first annual meeting of stockholders, and at each annual meeting
thereafter, the stockholders shall elect the directors who shall serve until
their successors are duly elected and shall qualify.
Section 2. REMOVAL. A director may be removed, with or without cause,
by the stockholders upon the affirmative vote of a majority of all of the votes
entitled to be cast for the election of directors. A director may be removed,
with or without cause, by the Board of Directors upon the affirmative vote of a
majority of the then acting directors. A special meeting of the stockholders or
the Board of Directors may be called, in accordance with the Bylaws of the
Corporation, for the purpose of removing a director.
Section 3. AUTHORIZATION BY BOARD OF CAPITAL STOCK ISSUANCE. The Board
of Directors of the Corporation may authorize the issuance from time to time of
shares of its stock of any class, whether now or hereafter authorized, or
securities convertible into shares of its stock of any class, whether now or
hereafter authorized, for such consideration as the Board of Directors in its
sole discretion may deem advisable, subject to such restrictions or limitations,
if any, as may be set forth in these Articles of Incorporation or the Bylaws of
the Corporation or in the general laws of the State of Maryland.
Section 4. PREEMPTIVE RIGHTS. Except as may be provided by the Board
of Directors in authorizing the issuance of shares of Preferred Stock pursuant
to Article V, Section 3, no holder of shares of stock of the Corporation shall,
as such holder, have any preemptive right to purchase or subscribe for any
additional shares of the stock of the Corporation or any other security of the
Corporation which it may issue or sell.
Section 5. INDEMNIFICATION. The Corporation shall have the power, to
the maximum extent permitted by Maryland law in effect from time to time, to
obligate itself to indemnify, and to pay or reimburse expenses under the
procedure provided by such Maryland law in advance of final disposition of a
proceeding to, (i) any individual who is a present or former director or officer
of the Corporation or (ii) any individual who, while a director of the
Corporation and at the request of the Corporation, serves or has served another
corporation, partnership, joint venture, trust, employee benefit plan or any
other enterprise as a director, officer, partner or trustee of such corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise.
The Corporation shall have the power, with the approval of its Board of
Directors, to provide such indemnification and advancement of expenses to a
person who served a predecessor
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of the Corporation in any of the capacities described in (i) or (ii) above
and to any employee or agent of the Corporation or a predecessor of the
Corporation.
Section 6. ADVISOR AGREEMENTS. Subject to such approval of
stockholders and other conditions, if any, as may be required by any applicable
statute, rule or regulation, the Board of Directors may authorize the execution
and performance by the Corporation of one or more agreements with any person,
corporation, association, company, trust, partnership (limited or general) or
other organization whereby, subject to the supervision and control of the Board
of Directors, any such other person, corporation, association, company, trust,
partnership (limited or general) or other organization (the "Advisor") shall
render or make available to the Corporation managerial, investment, advisory
and/or related services, office space and other services and facilities
(including, if deemed advisable by the Board of Directors, the management or
supervision of the investments of the Corporation) upon such terms and
conditions as may be provided in such agreement or agreements (including, if
deemed fair and equitable by the Board of Directors, the compensation payable
thereunder by the Corporation).
Section 7. RELATED PARTY TRANSACTIONS. Without limiting any other
procedures available by law or otherwise to the Corporation, the Board of
Directors may authorize any agreement of the character described in Section 6 of
this Article VI or other transaction with any person, corporation, association,
company, trust, partnership (limited or general) or other organization, although
one or more of the directors or officers of the Corporation may be a party to
any such agreement or an officer, director, stockholder or member of such other
party, and no such agreement or transaction shall be invalidated or rendered
void or voidable solely by reason of the existence of any such relationship if
the existence is disclosed or known to the Board of Directors, and the contract
or transaction is approved by the affirmative vote of a majority of the
disinterested directors, even if they constitute less than a quorum of the
Board. Any director of the Corporation who is also a director, officer,
stockholder or member of such other entity may be counted in determining the
existence of a quorum at any meeting of the Board of Directors considering such
matter.
Section 8. DETERMINATION BY BOARD. The determination as to any of the
following matters, made in good faith by or pursuant to the direction of the
Board of Directors consistent with these Articles of Incorporation and in the
absence of actual receipt of an improper benefit in money, property or services
or active and deliberate dishonesty established by a court, shall be final and
conclusive and shall be binding upon the Corporation and every holder of shares
of its stock: the amount of the net income of the Corporation for any period and
the amount of assets at any time legally available for the payment of dividends,
redemption of its stock or the payment of other distributions on its stock; the
amount of paid-in surplus, net assets, other surplus, annual or other net
profit, net assets in excess of capital, undivided profits or excess of profits
over losses on sales of assets; the amount, purpose, time of creation, increase
or decrease, alteration or cancellation of any reserves or charges and the
propriety thereof (whether or not any obligation or liability for which such
reserves or charges shall have been created shall have been paid or discharged);
the fair value, or any sale, bid or asked price to be applied in determining the
fair value, of any asset owned or held by the Corporation, and any matters
relating to the acquisition, holding and disposition of any assets by the
Corporation.
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Section 9. RESERVED POWERS OF BOARD. The enumeration and definition of
particular powers of the Board of Directors included in this Article VI shall in
no way be limited or restricted by reference to or inference from the terms of
any other clause of this or any other provision of these Articles of
Incorporation, or construed or deemed by inference or otherwise in any manner to
exclude or limit the powers conferred upon the Board of Directors under the
general laws of the State of Maryland as now or hereafter in force.
ARTICLE VII
RESTRICTION ON TRANSFER
ACQUISITION AND REDEMPTION OF SHARES
Section 1. DEFINITIONS. For the purpose of this Article VII, the
following terms shall have the following meanings:
"Act" means the Securities Act of 1933, as amended.
"Beneficial Ownership" shall mean ownership of Equity Stock (as
hereinafter defined) by a Person (as hereinafter defined) who would be treated
as an owner of such Equity Stock under Section 542(a)(2) of the Code either
directly or constructively through the application of Section 544 of the Code,
as modified by Section 856(h)(1)(B) of the Code but without regard to Section
856(h)(3) of the Code. The terms "Beneficial Owner, "Beneficially Owns,"
"Beneficially Own" and "Beneficially Owned" shall have the correlative meanings.
"Beneficiary" shall mean the beneficiary of the Trust (as hereinafter
defined) as determined pursuant to Section 19 of this Article VII.
"Debt" shall mean indebtedness of (i) the Corporation or (ii) any
subsidiary thereof.
"Equity Stock" shall mean capital stock that is either Common Stock or
Preferred Stock.
"Existing Holder" shall mean Capital and Regional Properties plc, a
United Kingdom corporation.
"Existing Holder Limit" shall initially mean 18.0%, in number of
shares or value, of the outstanding Equity Stock of the corporation, and after
any adjustment as set forth in Section 10 of this Article VII, shall mean such
greater percentage of the outstanding Equity Stock as so adjusted. The number
and value of shares of the outstanding Equity Stock of the Corporation shall be
determined by the Board of Directors in good faith, which determination shall be
conclusive for all purposes hereof.
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"Initial Public Offering Date" shall mean the date of the first sale
of shares of Common Stock pursuant to the Corporation's first effective
registration statement for such shares of Common Stock filed pursuant to the
Act.
"Market Price" shall mean the last reported sales price of Common
Stock or Preferred Stock, as the case may be, reported on any nationally
registered securities exchange on the trading day immediately preceding the
relevant date, or if not then traded on any such exchange, the last reported
sales price of the Common Stock or Preferred Stock, as the case may be, on the
trading day immediately preceding the relevant date as reported on any exchange
or quotation system over which the Common Stock or Preferred Stock, as the case
may be, may be traded, or if not then traded over any exchange or quotation
system, then the market price of the Common Stock or Preferred Stock, as the
case may be, on the relevant date as determined in good faith by the Board of
Directors of the Corporation.
"Ownership Limit" shall initially mean 9.8%, in number of shares or
value, of the outstanding Equity Stock of the corporation, and after any
adjustment as set forth in Section 10 of this Article VII, shall mean such
greater percentage of the outstanding Equity Stock as so adjusted. The number
and value of shares of the outstanding Equity Stock of the Corporation shall be
determined by the Board of Directors in good faith, which determination shall be
conclusive for all purposes hereof.
"Person" shall mean an individual, corporation, partnership, estate,
trust (including a trust qualified under Section 401(a)) or 501(c)(17) of the
Code), 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 or any successor
statute, joint stock company or other entity; but does not include an
underwriter which participated in the initial public offering of the Common
Stock on the Initial Public Offering Date and/or in any subsequent public
offering registered under the Act of any capital stock of the Corporation for a
period of 30 days following the purchase by such underwriter of the Common Stock
and/or capital stock.
"Purported Beneficial Transferee" shall mean, with respect to any
purported Transfer which results in Excess Stock (as defined in Section 3 of
this Article VII), the purported beneficial transferee for whom the Purported
Record Transferee (as hereinafter defined) would have acquired shares of Equity
Stock, if such transfer had been valid under Section 2 of this Article VII.
"Purported Record Transferee" shall mean, with respect to any
purported Transfer which results in Excess Stock, the record Holder of the
Equity Stock if such transfer had been valid under Section 2 of this Article
VII.
"Restriction Termination Date" shall mean the first day on which the
Board of Directors of the Corporation determines that it is no longer in the
best interests of the Corporation to attempt to, or continue to, qualify as a
REIT.
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"Transfer" shall mean any sale, transfer, gift, assignment, devise or
other disposition of Equity Stock (including (i) the granting of any option or
entering into any agreement for the sale, transfer or other disposition of
Equity Stock or (ii) the sale, transfer, assignment or other disposition of any
securities or rights convertible into or exchangeable for Equity Stock, but
excluding the exchange of Debt for Equity Stock), whether by operation of law or
otherwise. The terms "Transfers" and "Transferred" shall have the correlative
meanings.
"Trust" shall mean the trust created pursuant to Section 15 of this
Article VII.
"Trustee" shall mean the Corporation as trustee for the Trust, and any
successor trustee appointed by the Corporation.
Section 2. OWNERSHIP LIMITATION. (i) Except as provided in Section 12
of this Article VII, from the Initial Public Offering Date until the
Restriction Termination Date, no Person (other than an Existing Holder) shall
Beneficially Own shares of Common Stock and/or Preferred Stock in excess of the
Ownership Limit and no Existing Holder shall Beneficially Own shares of Common
Stock and/or Preferred Stock in excess of the Existing Holder Limit for such
Existing Holder.
(ii) Subject to Section 21, notwithstanding any other provisions
of this Article VII and except as provided in Sections 9 and 12 of this Article
VII, from the Initial Public Offering Date until the Restriction Termination
Date, any Transfer that, if effective, would result in any Person (other than an
Existing Holder) Beneficially Owning Common Stock and/or Preferred Stock in
excess of the Ownership Limit shall be void AB INITIO as to the Transfer of such
shares of Common Stock and/or Preferred Stock which would be otherwise
Beneficially Owned by such Person in excess of the Ownership Limit; and the
intended transferee shall acquire no rights in such shares of Common Stock
and/or Preferred Stock.
(iii) Subject to Section 21, notwithstanding any other provisions
of this Article VII and except as provided in Sections 9 and 12 of this Article
VII, from the Initial Public Offering Date until the Restriction Termination
Date, any Transfer that, if effective, would result in any Existing Holder
Beneficially Owning Common Stock and/or Preferred Stock in excess of the
Existing Holder Limit shall be void AB INITIO as to the Transfer of such shares
of Common Stock and/or Preferred Stock which would be otherwise Beneficially
Owned by such Existing Holder in excess of the Existing Holder Limit; and such
Existing Holder shall acquire no rights in such shares of Common Stock and/or
Preferred Stock.
(iv) Subject to Section 21, notwithstanding any other provisions
of this Article VII and except as provided in Section 12 of this Article VII,
from the Initial Public Offering Date until the Restriction Termination Date,
any Transfer that, if effective, would result in the Common Stock and/or
Preferred Stock being Beneficially Owned by less than 100 Persons (determined
without reference to any rules of attribution) shall be void AB INITIO as to the
Transfer of such shares of Common Stock and/or Preferred Stock which would be
otherwise Beneficially Owned by the transferee; and the intended transferee
shall acquire no rights in such shares of Common Stock and/or Preferred Stock.
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(v) From the Initial Public Offering Date until the Restriction
Termination Date, any Transfer that, if effective, would result in the
Corporation being "closely held" within the meaning of Section 856(h) of the
Code shall be void AB INITIO as to the Transfer of the shares of Common Stock
and/or Preferred Stock which would cause the Corporation to be "closely held"
within the meaning of Section 856(h) of the Code or any successor statute; and
the intended transferee shall acquire no rights in such shares of Common Stock
and/or Preferred Stock.
Section 3. EXCESS STOCK. (i) If, notwithstanding the other provisions
contained in this Article VII, at any time from the Initial Public Offering Date
until the Restriction Termination Date, there is a purported Transfer or other
change in the capital structure of the Corporation such that any Person would
Beneficially Own Common Stock and/or Preferred Stock in excess of the Ownership
Limit or that the Existing Holder would Beneficially Own Common Stock and/or
Preferred Stock in excess of the Existing Holder Limit, then, except as
otherwise provided in Sections 9 and 12, such shares of Common Stock and/or
Preferred Stock in excess of such Ownership Limit or Existing Holder Limit
(rounded up to the nearest whole share) shall constitute "Excess Stock" and be
treated as provided in this Article VII. Such designation and treatment shall
be effective as of the close of business on the business day prior to the date
of the purported Transfer or change in capital structure.
(ii) If, notwithstanding the other provisions contained in this
Article VII, at any time from the Initial Public Offering Date until the
Restriction Termination Date, there is a purported Transfer or other change in
the capital structure of the Corporation (except for a change resulting from the
exchange of Debt for Equity Stock) which, if effective, would cause the
corporation to become "closely held" within the meaning of Section 856(h) of the
Code or any successor statute, then the shares of Common Stock and/or Preferred
Stock being Transferred which would cause the Corporation to be "closely held"
within the meaning of Section 856(h) of the Code or any successor statute
(rounded up to the nearest whole share) shall constitute Excess Stock and be
treated as provided in this Article VII. Such designation and treatment shall
be effective as of the close of business on the business day prior to the date
of the purported Transfer or change in capital structure.
(iii) The Ownership Limit shall not apply to the acquisition of
shares of Common Stock or Preferred Stock by an underwriter on the Initial
Public Offering Date or in a public offering of such shares or in any
transaction involving the issuance of shares of capital stock by the Corporation
in which the Board of Directors determines that the underwriter or another
person initially acquiring such shares will timely distribute such shares to
others such that the following such distribution none of such shares will be
Excess Stock.
Section 4. PREVENTION OF TRANSFER. If the Board of Directors or its
designee shall at any time determine in good faith that a Transfer has taken
place in violation of Section 2 of this Article VII or that a Person intends to
acquire or has attempted to acquire Beneficial Ownership of any shares of stock
of the Corporation in violation of Section 2 of this Article VII, the Board of
Directors or its designee shall take such action as it deems advisable to refuse
to give effect to
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or to prevent such Transfer, including, but not limited to, refusing to give
effect to such Transfer on the books of the Corporation, directing the
Corporation's transfer agent and/or registrar to refuse to give effect to
such Transfer on the books of the Corporation or instituting proceedings to
enjoin such Transfer; provided, however, that any Transfers or attempted
Transfers in violation of subparagraphs Section 2(ii), (iii) and (iv) of this
Article VII shall automatically result in the designation and treatment
described in Section 3 irrespective of any action (or non-action) by the
Board of Directors or its designee.
Section 5. NOTICE TO CORPORATION. Any Person who acquires or attempts
to acquire shares in violation of Section 2 of this Article VII, or any Person
who is a transferee such that Excess Stock results under Section 3 of this
Article VII, shall immediately give written notice or, in the event of a
proposed or attempted Transfer, give at least 15 days prior written notice to
the Corporation of such event and shall provide to the Corporation such other
information as the Corporation may request in order to determine the effect, if
any, of such Transfer or attempted Transfer on the Corporation's status as a
REIT.
Section 6. INFORMATION FOR CORPORATION. From the Initial Public
Offering Date until the Restriction Termination Date:
(i) every Beneficial Owner of more than 5.0% (or such other
percentage, between 1/2 of 1% and 5%, as provided in the regulations of the
Internal Revenue Service promulgated under the Code) of the number or value of
outstanding shares of Equity Stock of the Corporation shall, within 30 days
after January 1 of each year, give written notice to the Corporation stating the
name and address of such Beneficial Owner, the number of shares Beneficially
Owned, and a description of how such shares are held. Each such Beneficial
Owner shall provide to the Corporation such additional information as the
Corporation may reasonably request in order to determine the effect, if any, of
such Beneficial Ownership on the Corporation's status as a REIT.
(ii) each Person who is a Beneficial Owner of Common Stock and/or
Preferred Stock and each Person (including the stockholder of record) who is
holding Common Stock and/or Preferred Stock for a Beneficial Owner shall provide
to the Corporation such information as the Corporation may reasonably request in
order to determine the Corporation's status as a REIT, to comply with the
requirements of any taxing authority or governmental agency or to determine any
such compliance.
Section 7. OTHER ACTION BY BOARD. Subject to Section 21,
notwithstanding any other provisions of this Article VII, nothing contained in
this Article VII shall limit the authority of the Board of Directors to take
such other action as it deems necessary or advisable to protect the Corporation
and the interests of its stockholders by preservation of the Corporation's
status as a REIT.
Section 8. AMBIGUITIES. In the case of an ambiguity in the application
of any of the provisions of this Article VII, including any definition contained
in Section 1, the Board of
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Directors shall have the power to determine the application of the provisions
of this Article VII with respect to any situation based on the facts known to
it.
Section 9. MODIFICATION OF EXISTING HOLDER LIMITS. Subject to the
limitations provided in Section 11 of this Article VII, an Existing Holder may
elect to participate in a dividend reinvestment plan approved by the Board of
Directors of the Corporation which results in Beneficial Ownership of Common
Stock and/or Preferred Stock by such participating Existing Holder. Any such
participation shall increase the Existing Holder Limit for the affected Existing
Holder to the maximum extent possible under Section 11 to permit Beneficial
Ownership of the shares of Common Stock and/or Preferred Stock acquired as a
result of such participation.
Section 10. INCREASE IN OWNERSHIP LIMIT. Subject to the limitations
provided in Section 11 of this Article VII, the Board of Directors may from time
to time increase the Ownership Limit.
Section 11. LIMITATIONS ON CHANGES IN OWNERSHIP LIMIT. (i) Neither the
Ownership Limit nor the Existing Holder Limit may be increased (nor may any
additional Existing Holder Limit be created) if, after giving effect to such
increase (or creation), five Beneficial Owners of Equity Stock (including all of
the then Existing Holders) could Beneficially Own, in the aggregate, more than
50% in number or value of the outstanding shares of Equity Stock.
(ii) Prior to the modification of the Ownership Limit or Existing
Holder Limit pursuant to Sections 9 or 10 of this Article VII, the Board of
Directors of the Corporation shall require such opinions of counsel, affidavits,
undertakings or agreements as it may deem necessary to advisable in order to
ensure the Corporation's status as a REIT will not be affected.
(iii) No Existing Holder Limit shall be reduced to a
percentage which is less than the Ownership Limit.
Section 12. EXEMPTIONS BY BOARD. The Board of Directors, upon receipt
of a ruling from the Internal Revenue Service or an opinion of counsel or other
evidence satisfactory to the Board of Directors and upon at least 15 days
written notice from a Transferee prior to a proposed Transfer which, if
consummated, would result in the intended Transferee owning shares in excess of
Ownership Limit or Existing Holder Limit, as the case may be, and upon such
other conditions as the Board of Directors may direct, may exempt a Person from
the Ownership Limit or the Existing Holder Limit, as the case may be.
Section 13. LEGEND. Each certificate for shares of Common Stock and for
shares of Preferred Stock shall bear substantially the following legend:
The securities represented by this certificate are subject
to restrictions on transfer for the purpose of the
Corporation's maintenance of its status as a real estate
investment trust under the Internal Revenue Code of 1986, as
amended. Except as otherwise
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provided pursuant to the Articles of Incorporation of the Corporation,
no Person may Beneficially Own shares of Common Stock and/or Preferred
Stock in excess of 9.8% (or such greater percentage as may be
determined by the Board of Directors of the Corporation) of the
number or value of the outstanding Equity Stock of the Corporation
(unless such Person is an Existing Holder). Any Person who attempts
or proposes to Beneficially Own shares of Common Stock and/or
Preferred Stock in excess of the above limitations must notify the
Corporation in writing at least 15 days prior to such proposed or
attempted Transfer. All capitalized terms in this legend have the
meanings defined in the Articles of Incorporation of the
Corporation, a copy of which, including the restrictions on
transfer, will be sent without charge to each stockholder who so
requests. If the restrictions on transfer are violated, the
securities represented hereby will be designated and treated as
shares of Excess Stock which will be held in trust by the
Corporation.
Section 14. SEVERABILITY. If any provision of this Article VII or any
application of any such provision is determined to be void, invalid or
unenforceable by any court having jurisdiction over the issue, the validity and
enforceability of the remaining provisions shall not be affected and other
applications of such provision shall be affected only to the extent necessary to
comply with the determination of such court.
Section 15. TRUST FOR EXCESS STOCK. Upon any purported Transfer that
results in Excess Stock pursuant to Section 3 of this Article VII, such Excess
Stock shall be deemed to have been transferred to the Corporation, as Trustee of
a Trust for the benefit of such Beneficiary or Beneficiaries to whom an interest
in such Excess Stock may later be transferred pursuant to Section 18 of this
Article VII. Shares of Excess Stock so held in trust shall be issued and
outstanding stock of the Corporation. The Purported Record Transferee shall
have no rights in such Excess Stock except the right to designate a transferee
of such Excess Stock upon the terms specified in Section 18 of this Article VII.
The Purported Beneficial Transferee shall have no rights in such Excess Stock
except as provided in Section 18 of this Article VII.
Section 16. NO DIVIDENDS OR DISTRIBUTIONS FOR EXCESS STOCK. Excess
Stock shall not be entitled to any distributions or dividends. Any dividend or
distribution paid prior to the discovery by the Corporation that the shares of
Common Stock and/or Preferred Stock have been Transferred so as to be deemed
Excess Stock shall be repaid to the Corporation upon demand.
Section 17. LIQUIDATION DISTRIBUTIONS FOR EXCESS STOCK. Subject to the
preferential rights of the Preferred Stock, if any, as may be determined by the
Board of Directors of the Corporation, in the event of any voluntary or
involuntary liquidation, dissolution or winding up of, or any other distribution
of all or substantially all of the assets of, the Corporation, each holder of
shares of Excess Stock shall be entitled to receive, in the case of Excess Stock
constituting Preferred Stock, ratably with each other holder of Preferred Stock
and Excess Stock
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constituting Preferred Stock and, in the case of Excess Stock constituting
Common Stock, ratably with each other holder of Common Stock and Excess Stock
constituting Common Stock, that portion of the assets of the Corporation
available for distribution to its stockholders as the number of shares of the
Excess Stock held by such holder bears to the total number of shares of (i)
Preferred Stock and Excess Stock then outstanding in the case of Excess Stock
constituting Preferred Stock and (ii) Common Stock and Excess Stock then
outstanding in the case of Excess Stock constituting Common Stock. The
Corporation, as holder of the Excess Stock in trust, or if the Corporation
shall have been dissolved, any trustee appointed by the Corporation prior to
its dissolution, shall distribute ratably to the Beneficiaries of the Trust,
when determined, any such assets received in respect of the Excess Stock in
any liquidation, dissolution or winding up of, or any distribution of the
assets of the Corporation.
Section 18. VOTING RIGHTS FOR EXCESS STOCK. The holders of shares of
Excess Stock shall not be entitled to vote on any matter.
Section 19. NON-TRANSFERABILITY OF EXCESS STOCK. Excess Stock shall not
be transferable. The Purported Record Transferee may freely designate a
Beneficiary of an interest in the Trust (representing the number of shares of
Excess Stock held by the Trust attributable to a purported Transfer that
resulted in the Excess Stock), if (i) the shares of Excess Stock held in the
Trust would not be Excess Stock in the hands of such Beneficiary and (ii) the
Purported Beneficial Transferee does not receive a price for designating such
Beneficiary that reflects a price per share for such Excess Stock that exceeds
(x) the price per share such Purported Beneficial Transferee paid for the Common
Stock and/or Preferred Stock, as the case may be, in the purported Transfer that
resulted in the Excess Stock, or (y) if the Purported Beneficial Transferee did
not give value for such Excess Stock (through a gift, devise or other
transaction), a price per share equal to the Market Price for the shares of the
Excess Stock on the date of the purported Transfer that resulted in the Excess
Stock. Upon such transfer of an interest in the Trust, the corresponding shares
of Excess Stock in the Trust shall be automatically exchanged for an equal
number of shares of Common Stock and/or Preferred Stock, as applicable, and such
shares of Common Stock and/or Preferred Stock, as applicable, shall be
transferred of record to the transferee of the interest in the Trust if such
shares of Common Stock and/or Preferred Stock, as applicable, would not be
Excess Stock in the hands of such transferee. Prior to any transfer of any
interest in the Trust, the Purported Record Transferee must give advance notice
to the Corporation of the intended transfer and the Corporation must have waived
in writing its purchase rights under Section 20 of this Article VII.
Notwithstanding the foregoing, if a Purported Beneficial Transferee
receives a price for designating a Beneficiary of an interest in the Trust that
exceeds the amounts allowable under this Section 19 of this Article VII, such
Purported Beneficial Transferee shall pay, or cause such Beneficiary to pay such
excess to the Corporation.
If any of the foregoing restrictions on transfer of Excess Stock are
determined to be void, invalid or unenforceable by any court of competent
jurisdiction, then the Purported Record Transferee may be deemed, at the option
of the Company, to have acted as an agent of
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the Company in acquiring such Excess Stock and to hold such Excess Stock on
behalf of the Company.
Section 20. CALL BY CORPORATION ON EXCESS STOCK. Shares of Excess Stock
shall be deemed to have been offered for sale to the Corporation, or its
designee, at a price per share equal to the lesser of (i) the price per share in
the transaction that created such Excess Stock, (or, in the case of a devise or
gift, the Market Price at the time of such devise or gift) and (ii) the Market
Price of the Common Stock or Preferred Stock to which such Excess Stock relates
on the date the Corporation, or its designee, accepts such offer. The
Corporation shall have the right to accept such offer for a period of ninety
days after the later of (i) the date of the Transfer which resulted in such
Excess Stock and (ii) the date the Board of Directors determines in good faith
that a Transfer resulting in Excess Stock has occurred, if the Corporation does
not receive a notice of such Transfer pursuant to Section 5 of this Article VII
but in no event later than a permitted Transfer pursuant to and in compliance
with the terms of Section 19 of this Article VII.
Section 21. SETTLEMENTS ON THE NYSE. Nothing in Article VII shall
preclude the settlement of any transaction entered through the facilities of the
New York Stock Exchange or any other national securities exchange or automated
inter-dealer system. The immediately foregoing sentence shall not limit the
authority of the Board of Directors to take any and all actions it deems
necessary or advisable to protect the Corporation and the interests of the
stockholders in preserving the Corporation's status as a REIT, so long as such
actions do not prohibit settlement of any transactions entered into through the
facilities of the New York Stock Exchange or any other national securities or
automated inter-dealer quotation system.
Section 22. INVALIDITY. If any provision of this Article VII or any
application of such provision is determined to be invalid by any federal or
state court having jurisdiction over the issue, the validity of the remaining
provisions shall not be affected except only to the extent necessary to comply
with the determination of such court.
Section 23. EFFECTIVENESS OF ARTICLE VII. Notwithstanding anything to
the contrary provided for in these Articles of Incorporation, the provisions of
this ARTICLE VII shall not be effective until the Initial Public Offering Date.
ARTICLE VIII
AMENDMENTS
The Corporation reserves the right from time to time to make any
amendment to these Articles of Incorporation, now or hereafter authorized by
law, including any amendment altering the terms or contract rights, as
expressly set forth in these Articles of Incorporation, of any shares of
outstanding stock. Any amendment to these Articles of Incorporation shall be
valid only if such amendment shall have been approved by the affirmative vote
of two-thirds of all the votes entitled to be case on the matter except to
the extent Maryland law requires a higher vote. All rights and powers
conferred by these Articles of Incorporation on stockholders, directors and
officers are granted subject to this reservation.
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ARTICLE IX
LIMITATION OF LIABILITY
To the maximum extent that Maryland law in effect from time to time permits
limitation of the liability of directors and officers, no director or officer of
the Corporation shall be liable to the Corporation or its stockholders for money
damages. Neither the amendment nor repeal of this Article IX, nor the adoption
or amendment of any other provision of these Articles of Incorporation or Bylaws
of the Corporation inconsistent with this Article IX, shall apply to or affect
in any respect the applicability of the preceding sentence with respect to any
act or failure to act which occurred prior to such amendment, repeal or
adoption.
ARTICLE X
NOMINATION AND BUSINESS PROCEDURES
Section 1. GENERAL. At a meeting of the stockholders, no business shall
be conducted which has not been properly brought before the meeting as set forth
in this ARTICLE X. To be property brought before a meeting, business must be
brought before the meeting by or at the direction of the Board of Directors or
brought before the meeting by a stockholder. For business to be properly
brought before a meeting by a stockholder, the Secretary of the Corporation must
have received written notice not less than sixty (60) days nor more than ninety
(90) days prior to the date fixed by the Board of Directors for such meeting;
provided, however, that in the event that less than seventy (70) days' notice or
prior public disclosure is given or made to stockholders of the date of such
meeting, notice by a stockholder to be timely made must be received no later
than the close of business on the tenth (10th) day following the day on which
such notice of the date of the meeting was mailed or the public disclosure was
made.
Section 2. BOARD OF DIRECTOR NOMINATIONS. In the case of stockholder
nominations for election to the Board of Directors, the notice set forth in
Section 1 of this ARTICLE X shall set forth (i) the name, age, business address
and, if known, residence address of each nominee proposed in such notice, (ii)
the principal occupations or employment of each such nominee for the past five
(5) years, (iii), the number of shares of the Corporation which are beneficially
owned by each such nominee, (iv) other directorships held by each such nominee,
(v) the names of business entities of which each such nominee owns a ten percent
(10%) or more beneficial interest, and (vi) all other information with respect
to the nominees required by the Federal proxy rules in effect at the time the
notice is submitted. In addition, such notice shall be accompanied by a
statement, over the signature of each proposed nominee, that he consents to
being a nominee, if elected he intends to serve as a director, and confirming
the information with respect to him set forth in the notice.
Section 3. STOCKHOLDER PROPOSALS. In the case of stockholder proposals or
business other than the election of directors, the notice set forth in Section 1
of this ARTICLE X shall set forth (i) a brief description of the proposal or
business to be brought before the meeting, (ii) the name,
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age, business and residence address of the stockholder submitting the
proposal or business, (iii) the principal occupation or employment of that
stockholder, (iv) the number of shares of the Corporation which are
beneficially owned by that stockholder, and (v) any material interest of that
stockholder in the proposal or business to be brought before the meeting.
Section 4. DETERMINATIONS BY CHAIRMAN. The Chairman of any meeting in
respect of which a stockholder nomination or proposal has been submitted, may,
if the facts as determined by the Chairman in his sole discretion warrant,
determine and declare to the meeting that the stockholder nomination or proposal
was not made in accordance with the procedures set forth in this ARTICLE X, in
which event the defective nomination or proposal shall not be considered at such
meeting and shall be disregarded and no votes cast either for or against such
nomination or proposal shall be counted or, in the event votes have previously
been cast for or against such nomination or proposal, the duly appointed
inspectors for such meeting shall disregard any such votes.
Section 5. EXCLUSIVITY. Notwithstanding anything in these Articles of
Incorporation or the By-Laws of this Corporation to the contrary, no
elections, proposals or other business shall be conducted at any meeting of
the stockholders except in accordance with the procedures set forth in this
ARTICLE X.
ARTICLE XI
QUORUM
At an annual meeting of the stockholders called for the sole purpose of
electing directors and ratifying the selection of the Corporation's independent
public accountants, the holders of one-third of the outstanding shares of the
Corporation entitled to vote, present in person or represented by proxy, shall
constitute a quorum at such annual meeting of stockholders; provided, if less
than one-third of the outstanding shares entitled to vote are represented at
said meeting, a majority of the shares so represented may adjourn the meeting at
any time without further notice. At any other annual meeting or any special
meeting of stockholders, the holders of a majority of the outstanding shares of
the Corporation entitled to vote, present in person or represented by proxy,
shall constitute a quorum at such meeting of stockholders; provided, if less
than a majority of the outstanding shares entitled to vote are represented at
said meeting, a majority of the shares so represented may adjourn the meeting at
any time without further notice. If a quorum is present at any meeting of the
stockholders, the affirmative vote of the majority of the shares entitled to
vote represented at the meeting and entitled to vote on the matter shall be the
act of the stockholders. At any adjourned meeting at which a quorum shall be
present, any business may be transacted which might have been transacted at the
original meeting. Withdrawal of stockholders from any meeting shall not cause
failure of a duly constituted quorum at that meeting.
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AMENDED AND RESTATED BY-LAWS(1)
OF
CENTERPOINT PROPERTIES CORPORATION
ARTICLE I
OFFICES
SECTION 1.1 MARYLAND REGISTERED OFFICE. The corporation shall
continuously maintain in the State of Maryland a registered office and
registered agent whose office is identical with such registered office.
SECTION 1.2 OTHER OFFICES. The corporation may have other offices
within any other state of the United States, including, without limitation, the
State of Illinois.
ARTICLE II
STOCKHOLDERS
SECTION 2.1 ANNUAL MEETING. An annual meeting of the stockholders shall
be held each year for the purpose of electing directors and for the transaction
of such other business as may come before the meeting. Commencing with 1995,
the date of the annual meeting shall be set by the Board of Directors on a date
following the availability of the corporation's audited financial statements of
the preceding year but in no event later than May 31.
SECTION 2.2 SPECIAL MEETINGS. Special meetings of the stockholders may
be called either by the President or the board of directors or by stockholders
holding in the aggregate at least 25% of all the votes entitled to be cast at
the meeting.
SECTION 2.3 PLACE OF MEETING. The board of directors may designate any
place the place of meeting for any annual meeting or for any special meeting
called by the board of directors. If no designation is made, or if a special
meeting be otherwise called, the place of meeting shall be at the main offices
of the corporation in Chicago, Illinois.
SECTION 2.4 INFORMAL ACTION BY STOCKHOLDERS. Any action required to be
taken at a meeting of the stockholders, or any other action which may be taken
at a meeting of the stockholders, may be taken without a meeting whether by
consent of the stockholders or otherwise as provided by the Maryland General
Corporation Law.
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(1) As amended through July 31, 1997
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SECTION 2.5 NOTICE OF MEETINGS. Written notice stating the place, date
and hour of the meeting, and in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than 10
nor more than 90 days before the date of the meeting, or in the case of a
merger, consolidation, share exchange, dissolution or sale, lease or exchange of
assets, not less than twenty nor more than sixty days before the meeting, either
personally or by mail, by or at the direction of the president, or the board of
directors, to each stockholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited with the
United States Postal Service, addressed to the stockholder at his address as it
appears on the records of the corporation, with postage thereon prepaid. When a
meeting is adjourned to another time or place, notice need not be given of the
adjourned meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken.
SECTION 2.6 FIXING OF RECORD DATE. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to receive payment of any dividend, or any rights in
respect of any change, conversion or exchange of shares or for the purpose of
any other lawful action, the board of directors of the corporation may fix in
advance a record date which shall not be more than sixty days and, for a meeting
of stockholders, not less than twenty days, or in the case of a merger,
consolidation, share exchange, dissolution or sale, lease or exchange of assets,
not less than twenty days, immediately preceding the date of such meeting. If
no record date is fixed, the record date for the determination of stockholders
entitled to notice of or to vote at a meeting of stockholders shall be the date
on which notice of the meeting is mailed, and the record date for the
determination of stockholders for any other purpose shall be the date on which
the board of directors adopts the resolution relating thereto. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting.
SECTION 2.7 STOCKHOLDERS' LIST. The officer or agent having charge of
the transfer books for shares of the corporation shall make, within twenty days
after record date or twenty days before each meeting of stockholders, whichever
is earlier, a complete list of the stockholders entitled to vote at such
meeting, arranged in alphabetical order, showing the address of and the number
of shares registered in the name of the stockholder, which list, for a period of
twenty days prior to such meeting, shall be kept on file at the registered
office of the Corporation and shall be open to inspection by any stockholder for
any purpose germane to the meeting, at any time during usual business hours.
Such list shall also be produced and kept open at the time and place of the
meeting and may be inspected by any stockholder during the whole time of the
meeting. The original share ledger or transfer book, or a duplicate thereof
kept in the State of Illinois, shall be prima facie evidence as to who are the
stockholders entitled to examine such list or share ledger or transfer book or
to vote at any meeting of stockholders.
SECTION 2.8 VOTING OF SHARES. Except as otherwise provided in the
articles of incorporation or these by-laws, each outstanding share, regardless
of class, shall be entitled to one vote upon each matter submitted to vote at a
meeting of stockholders.
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SECTION 2.9 VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the
name of another corporation, domestic or foreign, may be voted by such officer,
agent, or proxy as its by-laws of such corporation may prescribe, or, in the
absence of such provision, as the board of directors of such corporation may
determine and under the law of incorporation of such corporation.
(a) Shares standing in the name of a deceased person, a minor ward or
an incompetent person, may be voted by his administrator, executor, court
appointed guardian, or conservator, either in person or by proxy without a
transfer of such shares in the name of such administrator, executor, court
appointed guardian, or conservator. Shares standing in the name of a
trustee may be voted by him, either in person or by proxy.
(b) Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be
voted by such receiver without the transfer thereof into his name if
authority so to do be contained in an appropriate order of the court by
which such receiver was appointed.
(c) A stockholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee shall be entitled to vote the shares so
transferred.
(d) Any number of stockholders may create a voting trust for the
purpose of conferring upon a trustee or trustees the right to vote or
otherwise represent their share, for a period not to exceed ten years, by
entering into a written voting trust agreement specifying the terms and
conditions of the voting trust, and by transferring their shares to such
trustee or trustees for the purpose of the agreement. Any such trust
agreement shall not become effective until a counterpart of the agreement
is deposited with the corporation at its registered office. The
counterpart of the voting trust agreement so deposited with the corporation
shall be subject to the same right of examination by a stockholder of the
corporation, in person or by agent or attorney, as are the books and
records of the corporation, and shall be subject to examination by any
holder of a beneficial interest in the voting trust, either in person or by
agent or attorney, at any reasonable time for any proper purpose.
(e) Stockholders may provide for the voting of their shares by
signing an agreement for that purpose. A voting agreement under this
subsection is not subject to the provisions of subsection (a) above.
(f) Shares of its own stock belonging to this corporation shall not
be voted, directly or indirectly, at any meeting and shall not be counted
in determining the total number of outstanding shares at any given time,
but shares of its own stock held by it in a fiduciary capacity may be voted
and shall be counted in determining the total number of outstanding shares
at any given time.
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SECTION 2.10 PROXIES. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy by signing an appointment form and delivering it to the person so
appointed, but no such proxy shall be valid after eleven months from the date of
its execution, unless otherwise provided in the proxy.
SECTION 2.11 CUMULATIVE VOTING. Unless otherwise provided in the
articles of incorporation, in elections for directors, no stockholder shall have
the right to cumulate his votes.
SECTION 2.12 QUORUM. At an annual meeting of the stockholders called for
the sole purpose of electing directors and ratifying the selection of the
corporation's independent public accountants, the holders of one-third of the
outstanding shares of the corporation entitled to vote, present in person or
represented by proxy, shall constitute a quorum at such annual meeting of
stockholders; provided that, if less than one-third of the outstanding shares
entitled to vote are represented at said meeting, a majority of the shares so
represented may adjourn the meeting at any time without further notice. At any
other annual meeting or any special meeting of stockholders, the holders of a
majority of the outstanding shares of the corporation entitled to vote, present
in person or represented by proxy, shall constitute a quorum at such meeting of
stockholders; provided that, if less than a majority of the outstanding shares
entitled to vote are represented at said meeting, a majority of the shares so
represented may adjourn the meeting at any time without further notice. If a
quorum is present at any meeting of the stockholders, the affirmative vote of
the majority of the shares entitled to vote represented at the meeting and
entitled to vote on the matter shall be the act of the stockholders. At any
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the original meeting. Withdrawal
of stockholders from any meeting shall not cause failure of a duly constituted
quorum at that meeting.
SECTION 2.13 INSPECTORS. At any meeting of stockholders, the chairman of
the meeting may, or upon request of any stockholder shall, appoint one or more
persons as inspectors for such meeting.
(a) Such inspectors shall ascertain and report the number of shares
represented at the meeting, based upon their determination of the validity
and effect of proxies; count all votes and report the results; and do such
other acts as are proper to conduct the election and voting with
impartiality and fairness to all the stockholders.
(b) Each report of an inspector shall be in writing and signed by him
or by a majority of them if there be more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority
shall be the report of the inspectors. The report of the inspector or
inspectors on the number of shares represented at the meeting and the
results of the voting shall be prima facie evidence thereof.
SECTION 2.14 VOTING BY BALLOT. Voting on any question or in any election
may be by voice unless the presiding officer shall order or any stockholder
shall demand that voting be by ballot.
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ARTICLE III
DIRECTORS
SECTION 3.1 GENERAL POWERS. The business and affairs of the
corporation shall be managed by, or under the direction of, its board of
directors.
SECTION 3.2 NUMBER, TENURE AND QUALIFICATIONS. The number of
directors of the corporation shall be not less than three (3) and not more
than ten (10), as determined from time to time by the then acting board of
directors. Each director shall hold office until the next annual meeting of
stockholders, thereafter, until his successor shall have been elected.
Directors need not be residents of Maryland or Illinois or stockholders of
the corporation. The number of directors may be increased or decreased from
time to time as provided by the Articles of Incorporation by the amendment of
this section; but no decrease shall have the effect of shortening the term of
any incumbent director. A director may resign at any time by giving written
notice to the board of directors, its chairman, or to the president or
secretary of the corporation. A resignation is effective when the notice is
given unless the notice specifies a future date. The pending vacancy may be
filled before the effective date, but the successor shall not take office
until the effective date. A majority of the number of directors of the Board
of Directors shall be independent (non-management) directors of the
corporation.
SECTION 3.3 QUORUM. A majority of the number of directors fixed by
these by-laws shall constitute a quorum for transaction of business at any
meeting of the board of directors, provided that if less than a majority of such
number of directors are present at said meeting, a majority of the directors
present may adjourn the meeting at any time without further notice.
SECTION 3.4 MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless the act of a greater number is required by statute, these
by-laws, or the articles of incorporation.
SECTION 3.5 REGULAR MEETINGS. A regular meeting of the board of
directors shall be held without other notice than this by-law, immediately after
the annual meeting of stockholders. The board of directors may provide, by
resolution, the time and place for holding of additional regular meetings
without other notice than such resolution.
SECTION 3.6 SPECIAL MEETINGS. Special meetings of the board of
directors may be called by or at the request of the president or any one or more
directors. The person or persons authorized to call special meetings of the
board of directors may fix any place as the place for holding any special
meeting of the board of directors called by them.
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SECTION 3.7 NOTICE. Notice of any special meeting shall be given at
least ten days previous thereto by written notice to each director at his
business address. If mailed, such notice shall be deemed to be delivered when
deposited with the United States Postal Service so addressed, with postage
thereon prepaid. If notice be given by telegram, such notice shall be deemed to
be delivered when the telegram is delivered to the telegram company. The
attendance of a director at any meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the board of directors need be
specified in the notice or waiver of notice of such meeting.
SECTION 3.8 VACANCIES. Any vacancy occurring in the board of directors
and any directorship to be filled by reason of an increase in the number of
directors, may be filled by (1) election at an annual meeting or at a special
meeting of stockholders or (2) by the board of directors remaining. A director
elected by the stockholders to fill a vacancy shall hold office for the balance
of the term for which he or she was elected. A director appointed to fill a
vacancy shall serve until the next meeting of stockholders at which directors
are to be elected.
SECTION 3.9 REMOVAL OF DIRECTORS. One or more of the directors may be
removed, with or without cause, at a meeting of stockholders by the affirmative
vote of the holders of a majority of the outstanding shares then entitled to
vote at an election of directors, except as follows:
(a) No director shall be removed at a meeting of stockholders unless
the notice of such meeting shall state that a purpose of the meeting is to
vote upon the removal of one or more directors named in the notice. Only
the named director or directors may be removed at such meeting.
(b) In the case of a corporation having cumulative voting, if less
than the entire board is to be removed, no director may be removed, with or
without cause, if the votes cast against his or her removal would be
sufficient to elect him or her if then cumulatively voted at an election of
the entire board of directors.
(c) If a director is elected by a class or series of shares, he or
she may be removed only by the stockholders of that class or series.
In addition, one or more of the directors may be removed, with or without cause,
by the board of directors upon the affirmative vote of a majority of the then
acting directors.
SECTION 3.10 COMMITTEES OF DIRECTORS. The board of directors may, by
resolution or resolutions adopted by a majority of the number of directors
fixed by the by-laws or otherwise, designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting
of the committee. Any such committee, to the extent provided in the
resolution of the board,
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shall have and may exercise all of the powers and authority of the board of
directors in the management of the business and affairs of the corporation,
and may authorize the seal of the corporation to be affixed to all papers
which may require it; but no such committee shall have the power of authority
in reference to amending the articles of incorporation; adopting an agreement
of merger or consolidation; recommending to the stockholders the sale, lease
or exchange of all or substantially all of the corporation's property and
assets; recommending to the stockholders a dissolution of the corporation or
a revocation of a dissolution; recommending to the stockholders any other
action which requires stockholder approval; amending the by-laws of the
corporation; declaring a dividend or authorizing the issuance of
distributions on stock; or issue stock other than pursuant to a stock option
or similar compensation plan in accordance with Section 2-411 of the Maryland
General Corporation Law. Such committee or committees shall have such name
or names as may be determined by the board of directors. The committees
shall keep regular minutes of their proceedings and report the same to the
full board of directors when required.
SECTION 3.11 ACTION WITHOUT A MEETING. Unless specifically prohibited by
the articles of incorporation or these by-laws, any action required to be taken
at a meeting of the board of directors, or any other action which may be taken
at a meeting of the board of directors, or of any committee thereof may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all the directors entitled to vote with respect to the
subject matter thereof, or by all the members of such committee, as the case may
be. Any such consent signed by all the directors or all the members of the
committee shall have the same effect as a unanimous vote.
SECTION 3.12 COMPENSATION. The board of directors, by the affirmative
vote of a majority of directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the corporation as directors,
officers, or otherwise. By resolution of the board of directors, the directors
may be paid their expenses, if any, of attendance at each meeting of the board.
No such payment previously mentioned in this section shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor. Members of committees of the board may be allowed like compensation
for attending committee meetings.
SECTION 3.13 PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the board of directors at which action on any corporate
matter is taken shall be conclusively presumed to have assented to the action
taken unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as the secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the secretary of the corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to
a director who voted in favor of such action.
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ARTICLE IV
OFFICERS
SECTION 4.1 NUMBER. The officers of the corporation shall be a
chairman, a vice chairman, a president, a secretary, a treasurer, and any number
of vice presidents (who may be designated as executive vice presidents, senior
vice presidents or non-executive vice presidents), treasurers, assistant
treasurers, assistant secretaries or other officers as may be elected by the
board of directors or, in the case of non-executive vice presidents, appointed
by the president. Any two or more offices may be held by the same person except
for the offices of president and vice president.
SECTION 4.2 APPOINTMENT OR ELECTION AND TERM OF OFFICE. Non-executive
vice presidents, if any, shall be appointed by the president and shall serve at
the pleasure of the president. The other officers of the corporation shall be
elected or appointed annually by the board of directors at the first meeting of
the board of directors held after each annual meeting of stockholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as conveniently may be. Vacancies may be filled or new
offices created and filled at any meeting of the board of directors. Each
officer elected or appointed by the Board shall hold office until his successor
shall have been duly elected and shall have qualified or until his death or
until he shall resign or shall have been removed in the manner hereinafter
provided. Election or appointment of an officer shall not of itself create
contract rights.
SECTION 4.3 REMOVAL. Any officer elected or appointed by the board of
directors may be removed by the board of directors whenever in its judgment the
best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
SECTION 4.4 CHAIRMAN. The chairman shall be the chairman of the board
of directors. He shall advise and counsel with the president and shall assume
such other duties as from time to time may be assigned by the board of
directors. He shall preside at all meetings of the board of directors and, in
the absence of the president or at the president's request, shall preside at all
meetings of the stockholders. He may execute for the corporation certificates
for its shares, and any contracts, deeds, mortgages, bonds, or other instruments
which the board of directors has authorized to be executed, and he may
accomplish such execution either under or without the seal of the corporation
and either individually or with the secretary, any assistant secretary, or any
other officer thereunto authorized by the board of directors, according to the
requirements of the form of the instrument.
SECTION 4.5 VICE CHAIRMAN. The vice chairman shall assist the chairman
in the discharge of his duties as the chairman may direct and shall perform such
other duties as from time to time may be assigned to him by the chairman or by
the board of directors. In the absence of the chairman or in the event of his
inability or refusal to act, the vice chairman shall perform the duties of the
chairman, and when so acting, shall have all the powers of and be subject to all
the restrictions upon the chairman. Except in those instances in which the
authority to execute is
8
<PAGE>
expressly delegated to another officer or agent of the corporation or a
different mode of execution is expressly prescribed by the board of directors
or these by-laws, the vice chairman may execute for the corporation
certificates for its shares and any contracts, deeds, mortgages, bonds or
other instruments which the board of directors has authorized to be executed,
and he may accomplish such execution either under or without the seal of the
corporation and either individually or with the secretary, any assistant
secretary, or any other officer thereunto authorized by the board of
directors, according to the requirements of the form of the instrument.
SECTION 4.6 PRESIDENT. The president shall be the chief executive
officer of the corporation. Subject to the direction and control of the board
of directors, he shall be in charge of the business of the corporation; he shall
see that the resolutions and directions of the board of directors are carried
into effect except in those instances in which that responsibility is
specifically assigned to some other person by the board of directors; and, in
general, he shall discharge all duties incident to the office of president and
such other duties as may be prescribed by the board of directors from time to
time. He shall preside at all meetings of the stockholders and, in the absence
of the chairman, shall preside at all meetings of the board of directors.
Except in those instances in which the authority to execute is expressly
delegated to another officer or agent of the corporation or a different mode of
execution is expressly prescribed by the board of directors or these by-laws, he
may execute for the corporation certificates for its shares, and any contracts,
deeds, mortgages, bonds, or other instruments which the board of directors has
authorized to be executed, and he may accomplish such execution either under or
without the seal of the corporation and either individually or with the
secretary, any assistant secretary, or any other officer thereunto authorized by
the board of directors, according to the requirements of the form of the
instrument. He may vote all securities which the corporation is entitled to
vote except as and to the extent such authority shall be vested in a different
officer or agent of the corporation by the board of directors.
SECTION 4.7 EXECUTIVE VICE PRESIDENTS AND SENIOR VICE PRESIDENTS. The
executive vice-presidents and senior vice presidents, if any, shall assist the
president in the discharge of his duties as the president may direct and shall
perform such other duties as from time to time may be assigned to them by the
president or by the board of directors. In the absence of the president or in
the event of his inability or refusal to act, the executive vice-presidents (or
in the event there be more than one executive vice president, the executive
vice-presidents in the order designated by the board of directors, or by the
president if the board of directors has not made such a designation, or in the
absence of any designation, then in the order of seniority of tenure as
executive vice president) shall perform the duties of the president. In the
absence or inability or refusal to act of the president and any executive vice
presidents, the senior vice presidents in the order designated by the board of
directors, or by the president if the board of directors has not made such a
designation, or in the absence of any designation, then in the order of
seniority of tenure as senior vice president) shall perform the duties of the
president. When so acting, the executive vice presidents or senior vice
presidents, as the case may be, shall have all the powers of and be subject to
all the restrictions upon the president. Except in those instances in which the
authority to execute is expressly delegated to another officer or agent of the
corporation or a different mode of execution is expressly prescribed by the
board of directors or these by-laws, the executive vice presidents and senior
vice presidents may execute for the
9
<PAGE>
corporation certificates for its shares and any contracts, deeds, mortgages,
bonds or other instruments which the board of directors has authorized to be
executed, and they may accomplish such execution either under or without the
seal of the corporation and either individually or with the secretary, any
assistant secretary, or any other officer thereunto authorized by the board
of directors, according to the requirements of the form of the instrument.
SECTION 4.8 NON-EXECUTIVE VICE PRESIDENTS. Non-executive vice
presidents shall assist the president in the discharge of his duties as the
president may direct, but shall not, unless specifically authorized by the board
of directors, have any authority to bind or commit the corporation.
SECTION 4.9 THE TREASURER. The treasurer shall be the chief operating
officer and principal accounting and financial officer of the corporation. He
shall:
(a) have charge of and be responsible for the maintenance of adequate
books of account for the corporation;
(b) have charge and custody of all funds and securities of the
corporation, and be responsible therefore and for the receipt and
disbursement thereof; and
(c) perform all the duties incident to the office of treasurer and
such other duties as from time to time may be assigned to him by the
president or by the board of directors.
If required by the board of directors, the treasurer shall give a bond for
the faithful discharge of his duties in such sum and with such surety or
sureties as the board of directors may determine.
SECTION 4.10 THE SECRETARY. The secretary shall:
(a) record the minutes of the stockholders' and of the board of
directors' meetings in one or more books provided for that purpose;
(b) see that all notices are duly given in accordance with the
provisions of these by-laws or as required by law;
(c) be custodian of the corporate records and of the seal of the
corporation;
(d) keep a register of the post office address of each stockholder
which shall be furnished to the secretary by such stockholder;
(e) sign with the chairman, vice chairman, president, or an executive
vice president or a senior vice president, or any other officer thereunto
authorized by the board of directors, certificates for shares of the
corporation, the issue of which shall have been authorized by the board of
directors, and any contracts, deeds, mortgages, bonds, or other
10
<PAGE>
instruments which the board of directors has authorized to be executed,
according to the requirements of the form of the instrument, except
when a different mode of execution is expressly prescribed by the
board of directors or these by-laws;
(f) otherwise certify that by-laws, resolutions of the stockholders
and board of directors and committees thereof, and other documents of the
corporation as true and correct copies thereof;
(g) have general charge of the stock transfer books of the
corporation; and
(h) perform all duties incident to the office of secretary and such
other duties as from time to time may be assigned to him or her by the
president or by the board of directors.
SECTION 4.11 ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The
assistant treasurers and assistant secretaries shall perform such duties as
shall be assigned to them by the treasurer or the secretary, respectively, or by
the president or the board of directors. The assistant secretaries may sign
with the chairman, vice chairman, president, or an executive vice president or a
senior vice president, or any other officer thereunto authorized by the board of
directors, certificates for shares of the corporation, the issue of which shall
have been authorized by the board of directors, and any contracts, deeds,
mortgages, bonds, or other instruments which the board of directors has
authorized to be executed, according to the requirements of the form of the
instrument, except when a different mode of execution is expressly prescribed by
the board of directors or these by-laws. The assistant treasurers shall
respectively, if required by the board of directors, give bonds for the faithful
discharge of their duties in such sums and with such sureties as the board of
directors shall determine.
SECTION 4.12 SALARIES. The salaries of the officers shall be fixed from
time to time by the board of directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
corporation.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 5.1 CONTRACTS. The board of directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
SECTION 5.2 LOANS. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the board of directors. Such authority may be
general or confined to specific instances.
11
<PAGE>
SECTION 5.3 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation shall be signed by such officer or officers, agent or
agents of the corporation and in such manner as shall from time to time be
determined by resolution of the board of directors.
SECTION 5.4 DEPOSITS. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositories as the board of directors
may select.
ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 6.1 CERTIFICATES FOR SHARES. Certificates representing shares
of the corporation shall be signed by the chairman, vice chairman, president or
an executive vice president or a senior vice president, or by such officer as
shall be designated by resolution of the board of directors and by the secretary
or an assistant secretary, and shall be sealed with the seal or a facsimile of
the seal of the corporation. If both of the signatures of the officers be by
facsimile, the certificate shall be countersigned by the corporation's duly
authorized registrar and transfer agent. Each certificate representing shares
shall be consecutively numbered or otherwise identified, and shall also state
the name of the person to whom issued, the number and class of shares (with
designation of series, if any), the date of issue, that the corporation is
organized under Maryland law, and the par value or a statement that the shares
are without par value. If the corporation is authorized and does issue shares
of more than one class or of series within a class, the certificate shall also
contain such information or statement as may be required by law. The name and
address of each stockholder, the number and class of shares held and the date on
which the certificates for the shares were issued shall be entered on the books
of the corporation. The person in whose name shares stand on the books of the
corporation shall be deemed the owner thereof for all purposes as regard the
corporation.
SECTION 6.2 LOST CERTIFICATES. If a certificate representing shares has
allegedly been lost or destroyed the board of directors may in its discretion,
except as may be required by law, direct that a new certificate be issued upon
such indemnification and other reasonable requirements as it may impose.
SECTION 6.3 TRANSFERS OF SHARES. Transfers of shares of the corporation
shall be recorded on the books of the corporation and, except in the case of a
lost or destroyed certificate, on surrender for cancellation of the certificate
for such shares. A certificate presented for transfer must be duly endorsed and
accompanied by proper guaranty of signature and other appropriate assurances
that the endorsement is effective.
SECTION 6.4 RESTRICTION ON TRANSFER OF SECURITIES. A restriction on the
transfer or registration of transfer of securities of the corporation may be
imposed either under the articles of incorporation or by these by-laws or by
agreement among any number of security holders or among such holders and the
corporation. No restriction so imposed shall be binding
12
<PAGE>
with respect to securities issued prior to the adoption of the restriction
unless the holders of the securities are parties to an agreement or voted in
favor of the restriction.
A restriction on the transfer or registration of transfer of securities of
the corporation is permitted if, without limitation, it:
(i) requires the corporation or the holders of any class of
securities of the corporation to consent to any proposed transfer of the
restricted securities or to approve the proposed transferee of the
restricted securities; or
(ii) prohibits the transfer of the restricted securities to designated
persons or classes of persons with designation is not manifestly
unreasonable; or
(iii) restricts transfer or registration of transfer in any other
lawful manner.
Unless noted conspicuously on the security, a restriction, even though
permitted by this section, is ineffective except against a person with actual
knowledge of the restriction.
ARTICLE VII
FISCAL YEAR
SECTION 7.1 RESOLUTION OF DIRECTORS. The fiscal year of the corporation
shall end on December 31 of each year.
ARTICLE VIII
DIVIDENDS
SECTION 8.1 DECLARED BY DIRECTORS. The board of directors may from time
to time declare, and the corporation may pay, dividends on its outstanding
shares in the manner and upon the terms and conditions provided by law and its
articles of incorporation.
ARTICLE IX
SEAL
SECTION 9.1 SUBSCRIPTION. The corporate seal, if any, shall have
inscribed thereon the name of the corporation and the words "Corporate Seal,
Maryland." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced.
13
<PAGE>
ARTICLE X
WAIVER OF NOTICE
SECTION 10.1 WAIVER IN LIEU OF NOTICE. Whenever any notice is required
to be given under the provisions of these by-laws or under the provisions of the
articles of incorporation or under the provisions of Maryland 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. Attendance at any meeting shall constitute waiver of
notice thereof unless the person at the meeting objects to the holding of the
meeting because notice was not given.
ARTICLE XI
AMENDMENTS
SECTION 11.1 DETERMINED BY DIRECTORS. Unless reserved to the
stockholders by the articles of incorporation or required by law, the by-laws of
the corporation may be made, altered, amended or repealed solely by the board of
directors. Any by-law adopted by the stockholders may be altered, amended or
repealed by the board of directors. The by-laws may contain any provisions for
the regulation and management of the affairs of the corporation not inconsistent
with law or the articles of incorporation.
14
<PAGE>
ARTICLE XII
INDEMNIFICATION OF OFFICERS,
DIRECTORS, EMPLOYEES AND AGENTS
SECTION 12.1 POWER TO HOLD HARMLESS. The corporation shall have the
power to indemnify any person to the full extent specified in Section 2-418 of
the Maryland General Corporation Law. Without limiting the generality of the
foregoing, the corporation shall have the power, unless limited from time to
time by the Maryland General Corporation Law, to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation, or who is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if such person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment or settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
or she reasonably believed to be in or not opposed to the best interest of the
corporation, or with respect to any criminal action or proceeding, that the
person had reasonable cause to believe that his or her conduct was unlawful.
SECTION 12.2 POWER TO INDEMNIFY LITIGANT. The corporation shall have
power to indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the
fact that such person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in a
manner he or she reasonably believed to be in, or not opposed to the best
interests of the corporation, provided that no indemnification shall be made in
respect of any claim, issue or matter as to which such persons shall have been
adjudged to be liable for negligence or misconduct in the performance of his or
her duty to the corporation, unless, and only to the extent that the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses as the court shall deem proper.
15
<PAGE>
SECTION 12.3 REIMBURSEMENT AUTHORIZED. To the extent that a director,
officer, employee, or agent of a corporation has been successful, on the merits
or otherwise, in defense of any action, suit or proceeding referred to Sections
12.1 and 12.2 above, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection therewith to the
extent not inconsistent with the Maryland General Corporation Law.
SECTION 12.4 DETERMINATION IF REIMBURSEMENT IS PROPER. Any
indemnification under Sections 12.1 and 12.2 above (unless ordered by court)
shall be made by the corporation only as authorized in the specific case, upon a
determination that indemnification of a director, officer, employee or agent is
proper in the circumstances because he or she has met the applicable standard of
conduct set forth in Section 12.1 or 12.2 above. Such determination shall be
made:
(a) by the board of directors by a majority of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or
(b) if such a quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel
in a written opinion, or
(c) by the stockholders.
SECTION 12.5 ADVANCE OF EXPENSES. Expenses incurred in defending a civil
or criminal action, suit or proceeding may be paid by the corporation in advance
of the final disposition of such action, suit or proceeding, as authorized by
the board of directors in the specific case, upon receipt of an undertaking by
or on behalf of the director, officer, employee or agent to repay such amount,
unless it shall ultimately be determined that he or she is entitled to be
indemnified by the corporation as authorized in this Article.
SECTION 12.6 NON-EXCLUSIVITY. The indemnification provided by this
article shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any contract, agreement, vote of stockholders
or disinterested directors, or otherwise, both as to action in his or her
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 12.7 RIGHT TO ACQUIRE INSURANCE. The corporation shall have
power to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation, as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him or her against such liability
under the provisions of this Article.
16
<PAGE>
SECTION 12.8 NOTICE OF STOCKHOLDERS. If a corporation has paid indemnity
or has advanced expenses to a director, officer, employee or agent, the
corporation shall report the indemnification or advance in writing to the
stockholders with or before the notice of the next stockholders' meeting.
SECTION 12.9 "CORPORATION;" DEFINITION. For purposes of this Article,
references to "the Corporation" shall include, in addition to the surviving
corporation, any merging corporation (including any corporation having merged
with a merging corporation) absorbed in a merger which, if its separate
existence had continued, would have had the power and authority to indemnify its
directors, officers, and employees or agents, so that any person who was a
director, officer, employee or agent of such merging corporation, or was serving
at the request of such merging corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article with respect to the surviving corporation as such person would have with
respect to such merging corporation if its separate existence had continued.
SECTION 12.10 MISCELLANEOUS DEFINITIONS. For purposes of this Article,
references to "other enterprises" shall include employee benefit plans;
reference to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the request
of the corporation" shall include any services as a director, officer, employee
or agent of the corporation which imposes duties on, or involves services by
such director, officer, employee, or agent with respect to an employee benefit
plan, its participants, or beneficiaries. A person who acted in good faith and
in a manner he or she reasonably believed to be in the best interests of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interest of the corporation" as
referred to in this Article.
ARTICLE XIII
REPAYMENT OF DISALLOWED DEDUCTION
SECTION 13.1 FULL REIMBURSEMENT BY OFFICERS. Any payments made to an
officer of the corporation such as salary, commission, bonus, interest, rent,
medical reimbursement or entertainment expense incurred by him which, for
Federal income tax purposes, shall be disallowed in whole or in part as a
deductible expense by the Internal Revenue Service, shall be reimbursed by such
officer to the corporation to the full extent of such disallowance.
SECTION 13.2 SECURITY FOR REPAYMENT. It shall be the duty of the
directors, as a board, to enforce payment of such amount disallowed. In lieu of
payment by the officer, subject to the determination of the directors,
proportionate amounts may be withheld from his future compensation payments
until the amount owed to the corporation has been recovered.
17
<PAGE>
EXHIBIT 11
CENTERPOINT PROPERTIES CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (A) $7,143 $2,183 $12,814 $5,811
Interest expense-debentures 248 344 514 769
------ ------ ------- ------
Adjusted net income (B) $7,391 $2,527 $13,328 $6,580
======= ====== ======= ======
Weighted average number of shares of common
stock outstanding 19,006 11,929 18,190 11,214
Additional number of common equivalent shares
outstanding:
Stock options - net (1) 265 148 266 146
Convertible preferred stock (2) 1,074 1,673
------ ------ ------- ------
Weighted average common and common
equivalent shares outstanding (C) 19,271 13,151 18,456 13,033
Additional weighted average shares outstanding
assuming debentures converted at issue price 661 917 685 1,026
------ ------ ------- ------
Weighted average shares outstanding for fully-
diluted (D) 19,932 14,068 19,141 14,059
====== ====== ======= ======
Net income per share:
Primary (A/C) $0.37 $0.17 $0.69 $0.45
Fully -diluted (3) (B/D) $0.37 $0.18 $0.70 $0.47
</TABLE>
________________________________________________________
Notes:
(1) Represents stock options using the treasury stock method.
(2) Represents convertible preferred stock as if converted on a share for
share basis; prorated for the days the convertible preferred stock was
outstanding. The convertible preferred stock is considered a common
stock equivalent as it participates in dividends with common stock and
was converted into common stock upon shareholder approval in May 1996.
(3) Conversion of debentures is anti-dilutive.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,872
<SECURITIES> 0
<RECEIVABLES> 33,716
<ALLOWANCES> (338)
<INVENTORY> 0
<CURRENT-ASSETS> 23,163
<PP&E> 489,378
<DEPRECIATION> (36,404)
<TOTAL-ASSETS> 512,237
<CURRENT-LIABILITIES> 28,267
<BONDS> 168,542
0
0
<COMMON> 19
<OTHER-SE> 315,409
<TOTAL-LIABILITY-AND-EQUITY> 512,237
<SALES> 0
<TOTAL-REVENUES> 20,130
<CGS> 0
<TOTAL-COSTS> 10,639
<OTHER-EXPENSES> 101
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,449
<INCOME-PRETAX> 7,143
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,143
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,143
<EPS-PRIMARY> .37
<EPS-DILUTED> .37
</TABLE>
