<PAGE>
As filed with the Securities and Exchange Commission on June 5, 1996
Registration No. 33-97794
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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CRESCENT REAL ESTATE EQUITIES, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 52-1862813
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
900 Third Avenue, Suite 1800
New York, New York 10022
Telephone: (212) 836-4216
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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GERALD W. HADDOCK
Crescent Real Estate Equities, Ltd.
777 Main Street, Suite 2100
Fort Worth, Texas 76102
Telephone: (817) 877-0477
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
ROBERT B. ROBBINS, ESQ. DAVID M. DEAN, ESQ.
Shaw, Pittman, Potts & Trowbridge Crescent Real Estate Equities, Ltd.
2300 N Street, N.W. 777 Main Street, Suite 2100
Washington, D.C. 20037 Fort Worth, Texas 75102
Telephone: (202) 663-8000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED
SALE OF THE SECURITIES TO THE PUBLIC:
From time to time after the effective date of the registration statement.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. / /
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434 of the Securities Act of 1933, please check the following box. / /
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<PAGE>
PROSPECTUS
SUBJECT TO COMPLETION, DATED ________, 1996
$500,000,000
[LOGO]
CRESCENT
REAL ESTATE EQUITIES, INC.
PREFERRED STOCK, COMMON STOCK AND COMMON STOCK WARRANTS
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Crescent Real Estate Equities, Inc. may from time to time offer in one
or more series, (i) shares of preferred stock ("Preferred Stock"), (ii)
shares of common stock, par value .01 per share ("Common Stock"), and (iii)
warrants exercisable for Common Stock ("Common Stock Warrants"), with an
aggregate public offering price of up to $500,000,000 in amounts, at prices
and on terms to be determined at the time of offering. The Preferred Stock,
Common Stock and Common Stock Warrants (collectively, the "Securities") may
be offered, separately or together, in separate series in amounts, at prices
and on terms to be described in one or more supplements to this Prospectus
(each, a "Prospectus Supplement").
The specific terms of the Securities in respect of which this Prospectus
is being delivered will be set forth in the applicable Prospectus Supplement
and will include, where applicable: (i) in the case of Preferred Stock, the
specific title and stated value, any dividend, liquidation, redemption,
conversion, voting and other rights, and any initial public offering price;
(ii) in the case of Common Stock, any public offering price; and (iii) in the
case of Common Stock Warrants, the specific title and aggregate number, and
the issue price and the exercise price. In addition, such specific terms may
include limitations on direct or beneficial ownership and restrictions on
transfer of the Securities, in each case as may be appropriate to preserve
the status of the Company as a real estate investment trust for federal
income tax purposes.
The applicable Prospectus Supplement also will contain information as to
all material U.S. federal income tax considerations relevant to an investment
in, and any listing on a securities exchange of, the Securities covered by
such Prospectus Supplement.
The Securities may be offered directly, through agents designated from
time to time, or to or through underwriters or dealers. If any agents or
underwriters are involved in the sale of any of the Securities, their names,
and any applicable purchase price, fee, commission or discount arrangement
with, between or among them, will be set forth, or will be calculable from
the information set forth, in an accompanying Prospectus Supplement. See
"Plan of Distribution." No Securities may be sold without delivery of a
Prospectus Supplement describing the method and terms of the offering of such
class or series of Securities.
SEE "RISK FACTORS" AT PAGE 4 OF THIS PROSPECTUS FOR CERTAIN FACTORS
RELEVANT TO AN INVESTMENT IN THE SECURITIES.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
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The date of this Prospectus is ___________, 1996
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information can be inspected at the Public Reference Section maintained
by the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and the following regional offices of the Commission:
Northwestern Plaza, Suite 1400, 500 West Madison Street, Chicago, Illinois
60661-2511 and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, the Company's
Common Stock is listed on the New York Stock Exchange and such reports, proxy
statements and other information concerning the Company can be inspected at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New
York 10005.
The Company has filed with the Commission a registration statement on
Form S-3 (the "Registration Statement"), of which this Prospectus is a part,
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Securities offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement, certain
portions of which have been omitted as permitted by the rules and regulations
of the Commission. Statements contained in this Prospectus as to the
contents of any contract or other documents are not necessarily complete, and
in each instance, reference is made to the copy of such contract or documents
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference and the exhibits and schedules
thereto. For further information regarding the Company and the Securities,
reference is hereby made to the Registration Statement and such exhibits and
schedules which may be obtained from the Commission at its principal office
in Washington, D.C. upon payment of the fees prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed under the Exchange Act by the
Company (Exchange Act file number 1-13038) with the Commission and are
incorporated herein by reference:
1. The Company's Registration Statement on Form 8-A filed on April 18,
1994 registering the Common Stock under Section 12(b) of the
Exchange Act.
2. The Proxy Statement in connection with the Company's 1996 Annual
Meeting of Stockholders.
3. The Company's Annual Report on Form 10-K for the year ended
December 31, 1995, as amended on April 29, 1996.
4. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996.
5. The Company's Current Report on Form 8-K dated August 2, 1994 and
filed January 9, 1996, as amended on February 2, 1996 and February
15, 1996.
6. The Company's Current Report on Form 8-K dated October 3, 1994
and filed January 9, 1996, as amended on February 2, 1996 and
February 15, 1996.
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7. The Company's Current Report on Form 8-K dated December 19,
1995 and filed January 3, 1996, as amended on February 2, 1996 and
February 15, 1996.
8. The Company's Current Report on Form 8-K dated April 18, 1996
and filed June 5, 1996.
All documents filed subsequent to the date of this Prospectus pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to
termination of the offering of all Securities to which this Prospectus
relates shall be deemed to be incorporated by reference in this Prospectus
and shall be part hereof from the date of filing of such document.
Any statement contained herein or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained in this Prospectus (in the case of a statement in a previously
filed document incorporated or deemed to be incorporated by reference
herein), in any accompanying Prospectus Supplement relating to a specific
offering of Securities or in any other subsequently filed document that is
also incorporated or deemed to be incorporated by reference herein, modifies
or supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a
part of this Prospectus or any accompanying Prospectus Supplement. Subject
to the foregoing, all information appearing in this Prospectus and each
accompanying Prospectus Supplement is qualified in its entirety by the
information appearing in the documents incorporated by reference.
The Company undertakes to provide without charge to each person to whom
a copy of this Prospectus has been delivered, upon the written or oral
request of any such person, a copy of any or all of the documents
incorporated by reference in this Prospectus (other than exhibits and
schedules thereto, unless such exhibits or schedules are specifically
incorporated by reference into the information that this Prospectus
incorporates). Written or telephonic requests for copies should be directed
to Crescent Real Estate Equities, Inc., 900 Third Avenue, Suite 1800, New
York, New York 10022, Attention: Corporate Secretary (telephone number: (212)
836-4216).
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THE COMPANY
Crescent Real Estate Equities, Inc. (collectively with its subsidiaries, the
"Company") is a fully integrated real estate company operating as a real
estate investment trust (a "REIT"), which succeeded to the real estate
investment and operating businesses affiliated with Mr. Richard E. Rainwater,
Chairman of the Board of Directors of the Company. As of May 31, 1996, the
Company owned a real estate portfolio located primarily in 17 metropolitan
submarkets in Texas, Colorado, Arizona and New Mexico including 32 office
properties (the "Office Properties") with an aggregate of approximately 9.2
million net rentable square feet, three hotels (the "Hotel Properties") with
a total of 1,303 rooms, two retail properties (the "Retail Properties") with
an aggregate of approximately .2 million net rentable square feet and real
estate mortgages and non-voting common stock in three residential development
corporations (the "Residential Development Corporations") that own all or a
portion of six single-family residential land developments and three
prospective condominium/townhome developments (the "Residential Development
Properties"). In addition, the Company owns one mortgage note secured by a
Class A office property. The Office Properties, the Hotel Properties, the
Retail Properties and the Residential Development Properties are hereafter
collectively referred to as the "Properties."
The Company, as a fully integrated real estate company, provides
management, leasing and development services with respect to certain of its
Properties. The Company conducts all of its business directly or indirectly
through Crescent Real Estate Equities Limited Partnership (the "Operating
Partnership") and its other subsidiaries and indirectly through the
Residential Development Corporations. As of May 31, 1996, the Company had
approximately 200 employees and its eight officers had over 100 years of
combined experience in the real estate industry.
RISK FACTORS
Prospective investors should carefully consider the following summary
information in conjunction with the other information contained in this
Prospectus and the more detailed information on risks of investment contained
in the applicable Prospectus Supplement relating thereto before purchasing
Securities.
CONCENTRATION OF ASSETS
A significant portion of the Company's assets and revenues are derived
from Properties located in the Dallas-Fort Worth and Denver metropolitan
areas. Due to this geographic concentration, any deterioration in economic
conditions in the Dallas-Fort Worth and Denver metropolitan areas or other
geographic markets in which the Company in the future may acquire substantial
assets could have a substantial effect on the financial condition and results
of operations of the Company.
RISKS ASSOCIATED WITH THE ACQUISITION OF SUBSTANTIAL NEW ASSETS
From the closing of the Company's second public offering in April 1995
through the date of this Prospectus, the Company has experienced rapid
growth, increasing its portfolio of Office Properties, on the basis of
rentable square feet, by more than 75 percent. There can be no assurance
either that the Company will be able to manage its growth effectively or that
the Company will be able to maintain its current rate of growth in the
future.
PURCHASES FROM FINANCIALLY DISTRESSED SELLERS
Implementation of the Company's strategy of investing in real estate
assets in distressed circumstances has resulted in the acquisition of certain
Properties from owners that were in poor financial condition, and such
strategy is expected to result in the purchase of additional properties under
similar circumstances in the future. In addition to general real estate
risks, properties acquired in distress situations present risks related to
inadequate
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maintenance, negative market perception and continuation of circumstances
which precipitated the distress originally.
RELIANCE ON KEY PERSONNEL
The Company is dependent on the efforts of Mr. Richard E. Rainwater, Chairman
of the Board of Directors, and other senior management personnel. While the
Company believes that it could find replacements for these key executives,
the loss of their services could have an adverse effect on the operations of
the Company. Mr. Rainwater has no employment agreement with the Company and,
therefore, is not obligated to remain with the Company for any specified
term. John C. Goff, Chief Executive Officer and Director, and Gerald W.
Haddock, President, Chief Operating Officer and Director, have entered into
employment agreements with the Company, and Messrs. Rainwater, Goff and
Haddock each has entered into a noncompetition agreement with the Company.
The Company has not obtained key-man insurance for any of its senior
management personnel.
RISKS RELATING TO QUALIFICATION AND OPERATION AS A REIT
The Company intends to continue to operate in a manner so as to qualify as
a REIT under the Internal Revenue Code of 1986, as amended (the "Code"). A
qualified REIT generally is not taxed at the corporate level on income it
currently distributes to its stockholders, so long as it distributes at least
95 percent of its taxable income currently and satisfies certain other highly
technical and complex requirements. Unlike many REITs, which tend to make
only one or two types of real estate investment, the Company invests in a
broad range of real estate products, and certain of its investments are more
complicated than those of other REITs. As a result, the Company is likely to
encounter a greater number of interpretative issues under the REIT qualification
rules, and more such issues which lack clear guidance, than are other REITs.
The Company, as a matter of policy, regularly consults with outside tax counsel
in structuring its new investments. The Company has received an opinion from
Shaw, Pittman, Potts and Trowbridge ("Tax Counsel") that the Company qualified
as a REIT under the Code for its taxable years ending on or before December 31,
1995, is organized in conformity with the requirements for qualification as a
REIT under the Code and its proposed manner of operation will enable it to
continue to meet the requirements for qualification as a REIT. However, this
opinion is based upon certain representations made by the Company and the
Operating Partnership and upon existing law, which is subject to change, both
retroactively and prospectively, and to possibly different interpretations.
Furthermore, Tax Counsel's opinion is not binding upon either the Internal
Revenue Service or the courts. Because the Company's qualification as a REIT
in its current and future taxable years depends upon its meeting the
requirements of the Code in future periods, no assurance can be given that
the Company will continue to qualify as a REIT in the future. If, in any
taxable year, the Company were to fail to qualify as a REIT for federal
income tax purposes, it would not be allowed a deduction for distributions to
stockholders in computing taxable income and would be subject to federal
income tax (including any applicable alternative minimum tax) on its taxable
income at regular corporate rates. In addition, unless entitled to relief
under certain statutory provisions, the Company would be disqualified from
treatment as a REIT for federal income tax purposes for the four taxable
years following the year during which qualification were lost. The
additional tax liability resulting from the failure to so qualify would
significantly reduce the amount of funds available for distribution to
stockholders. The applicable Prospectus Supplement will contain information,
where applicable, as to all material U.S. federal income tax considerations
relevant to an investment in, and any listing on a securities exchange of,
the Securities covered by such Prospectus Supplement.
RISKS RELATING TO DEBT
The Company's organizational documents do not limit the level or amount of
debt that it may incur. It is the Company's current policy to pursue a
strategy of conservative use of leverage, generally with a ratio of debt to
total market capitalization of 50 percent or less, although this policy is
subject to reevaluation and modification by the Company and could be
increased above 50 percent. The Company has based its debt policy on the
relationship between its debt and its total market capitalization, rather
than the book value of its assets or other historical measures that typically
have been employed by publicly traded REITs, because management believes
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that market capitalization more accurately reflects the Company's ability to
borrow money and meet its debt service requirements. Market capitalization
is, however, more variable than book value of assets or other historical
measures. There can be no assurance that the ratio of indebtedness to market
capitalization (or any other measure of asset value) or the incurrence of
debt at any particular level would not adversely affect the financial
condition and results of operations of the Company.
RISKS RELATING TO CONTROL OF THE COMPANY
ABILITY TO CHANGE POLICIES AND ACQUIRE ASSETS WITHOUT STOCKHOLDER APPROVAL.
The Company's operating and financial policies, including its policies with
respect to acquisitions, growth, operations, indebtedness, capitalization and
distributions, will be determined by the Operating Partnership. The Company
generally may revise these policies, from time to time, without stockholder
approval. Changes in the Company's policies could adversely affect the
Company's financial condition and results of operations. In addition, the
Company has the right and intends to acquire additional real estate assets
pursuant to and consistent with its investment strategies and policies without
stockholder approval.
HOTEL RISKS. The Company has leased the Hotel Properties and the lessee
of the Hotel Properties, rather than the Company, are entitled to exercise
all rights of the owner of the respective hotel. The Company will receive
both base rent and a percentage of gross sales above a certain minimum level
pursuant to the leases, which expire in 2004 or 2005. As a result, the
Company will participate in the economic operations of the Hotel only through
its indirect participation in gross sales. To the extent that operations of
the Hotel Properties may affect the ability of the lessee of the Hotel
Properties to pay rent, the Company also may indirectly bear the risks
associated with any increases in expenses. Each of the Hotel Properties is
managed pursuant to a management agreement with either Hyatt Corporation or
Marriott International. The Company, therefore, will be dependent upon the
lessee and managers of the Hotel Properties to manage the operations of the
Hotel Properties successfully. As a result, the amount of rent payable to
the Company under the leases with respect to the Hotel Properties will depend
on the ability of the lessee and managers of the Hotel Properties to maintain
and increase revenues from the Hotel Properties. Accordingly, the Company's
results of operations will be affected by such factors as changes in general
economic conditions, the level of demand for rooms and related services at
the Hotel Properties, the ability of the lessee and managers of the Hotel
Properties to maintain and increase gross revenues at the Hotel Properties,
competition in the hotel industry and other factors relating to the operation
of the Hotel Properties.
LACK OF CONTROL OF RESIDENTIAL DEVELOPMENT CORPORATIONS. The Company is
not able to elect the boards of directors of the Residential Development
Corporations, and does not have the authority to control the management and
operation of the Residential Development Corporations. As a result, the
Company does not have the right to control the timing or amount of dividends
paid by the Residential Development Corporations and, therefore, does not
have the authority to require that funds be distributed to it by any of these
entities.
POSSIBLE ADVERSE CONSEQUENCES OF OWNERSHIP LIMIT. The limitation on
ownership of shares of Common Stock set forth in the Company's Articles of
Incorporation, as well as the provisions of the MGCL, could have the effect
of discouraging offers to acquire the Company and of inhibiting or impeding a
change in control and, therefore, could adversely affect the stockholders'
ability to realize a premium over the then-prevailing market price for the
Common Stock in connection with such a transaction. See "Description of
Common Stock - Ownership Limits and Restrictions on Transfer."
GENERAL REAL ESTATE RISKS
UNCONTROLLABLE FACTORS AFFECTING PERFORMANCE AND VALUE. The economic
performance and value of the Company's real estate assets will be subject to
all of the risks incident to the ownership and operation of real estate.
These include the risks normally associated with changes in general national,
regional and local economic and market conditions. Such local real estate
market conditions may include excess supply and competition for tenants,
including competition based on rental rates, attractiveness and location of
the property and quality of maintenance, insurance and management services.
In addition, other factors may affect the performance and
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value of a property adversely, including changes in laws and governmental
regulations (including those governing usage, zoning and taxes), changes in
interest rates (including the risk that increased interest rates may result
in decreased sales of lots in the Residential Development Properties) and the
availability of financing. The success of the Hotel Properties, for example,
will be highly dependent upon their ability to compete in such features as
access, location, quality of accommodations, room rate structure and, to a
lesser extent, the quality and scope of other amenities such as food and
beverage facilities.
ILLIQUIDITY OF REAL ESTATE INVESTMENTS. Because real estate investments
are relatively illiquid, the Company's ability to vary its portfolio promptly
in response to economic or other conditions will be limited. In addition,
certain significant expenditures, such as debt service (if any), real estate
taxes, and operating and maintenance costs, generally are not reduced in
circumstances resulting in a reduction in income from the investment. The
foregoing and any other factor or event that would impede the ability of the
Company to respond to adverse changes in the performance of its investments
could have an adverse effect on the Company's financial condition and results
of operations.
ENVIRONMENTAL MATTERS. Under various federal, state and local laws,
ordinances and regulations, an owner or operator of real property may become
liable for the costs of removal or remediation of certain hazardous or toxic
substances released on or in its property, as well as certain other costs
relating to hazardous or toxic substances. Such liability may be imposed
without regard to whether the owner or operator knew of, or was responsible
for, the release of such substances. The presence of, or the failure to
remediate properly, such substances, when released, may adversely affect the
owner's ability to sell the affected real estate or to borrow using such real
estate as collateral. Such costs or liabilities could exceed the value of
the affected real estate. The Company has not been notified by any governmental
authority of any non-compliance, liability or other claim in connection with
any of the Properties and the Company is not aware of any other environmental
condition with respect to any of the Properties that management believes would
have a material adverse effect on the Company's business, assets or results
of operations. Prior to the Company's acquisition of its Properties, independent
environmental consultants conducted or updated Phase I environmental assessments
(which generally do not involve invasive techniques such as soil or ground water
sampling) on the Properties. None of these Phase I assessments or updates
revealed any materially adverse environmental condition not known to the Company
or the independent consultants preparing the assessments. There can be no
assurance, however, that environmental liabilities have not developed since
such environmental assessments were prepared, or that future uses or conditions
(including, without limitation, changes in applicable environmental laws and
regulations) will not result in imposition of environmental liability.
REAL ESTATE RISKS SPECIFIC TO THE COMPANY'S BUSINESS
ACQUISITION, LEASE AND DEVELOPMENT RISKS. There can be no assurance
that the Company will be able to implement its investment strategies
successfully or that its Property portfolio will expand at all, or at any
specified rate or to any specified size. For example, the Company is subject
to the risks that, upon expiration, leases for space in the Office Properties
and Retail Properties may not be renewed, the space may not be re-leased, or
the terms of renewal or re-lease (including the cost of required renovations
or concessions to tenants) may be less favorable than current lease terms.
In addition, the Company intends to continue to pursue development activities
with respect to the Residential Development Properties and, in the future,
may elect to engage in other development activities.
RISKS OF JOINT OWNERSHIP OF ASSETS. The Company has the right to invest
in properties and assets jointly with other persons or entities. Joint
ownership of properties, under certain circumstances, may involve risks not
otherwise present, including the possibility that the Company's partners or
co-investors might become bankrupt, that such partners or co-investors might
at any time have economic or other business interests or goals which are
inconsistent with the business interests or goals of the Company, and that
such partners or co-investors may be in a position to take action contrary to
the instructions or the requests of the Company or contrary to the Company's
policies or objectives, including the Company's policy with respect to
maintaining its qualification as a REIT.
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USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the
Company intends to invest, contribute or otherwise transfer the net proceeds
of any sale of Securities to the Operating Partnership, which would use such
net proceeds for general business purposes, including the acquisition and
development of additional properties and other acquisition transactions, the
payment of certain outstanding debt and improvements to certain properties in
the Company's portfolio.
RATIOS OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The Company's ratio of earnings to fixed charges for the year ended
December 31, 1994 was 3.85, for the year ended December 31, 1995 was 2.60 and
for the three months ended March 31, 1996 was 1.82. There was no preferred
stock outstanding for any of the periods shown above. Accordingly, the ratio
of earnings to fixed charges and preferred stock dividends is identical to
the ratio of earnings to fixed charges.
Prior to completion of the Company's initial public offering in May
1994, the Company's predecessors, which consisted of a group of affiliated
entities owned and controlled by Mr. Rainwater, utilized traditional single
asset mortgage loans and construction loans as their principal source of
outside capital. In connection with completion of the initial public
offering, the Company reorganized the predecessor entities into a single
consolidated entity and substantially deleveraged their asset base. As a
result of these factors, the Company does not consider information relating
to the ratio of earnings to fixed charges for the periods prior to the
completion of the initial public offering to be meaningful.
For the purposes of computing these ratios, earnings have been
calculated by adding fixed charges (excluding capitalized interest) to income
(loss) before taxes and extraordinary items. Fixed charges consist of
interest costs, whether expensed or capitalized, and amortization of debt
expense and discount or premium relating to any indebtedness, whether
expensed or capitalized.
DESCRIPTION OF PREFERRED STOCK
GENERAL
The Articles of Incorporation of the Company authorize the Board of
Directors to issue up to 100,000,000 shares of Preferred Stock, no par value
(the "Preferred Stock"). See "Certain Provisions of the Articles of
Incorporation, Bylaws and Maryland Law - Preferred Stock." The Articles of
Incorporation also authorize the issuance of up to an aggregate of
100,000,000 shares of Excess Stock issuable in exchange for Preferred Stock
as described below at "Description of Common Stock - Ownership Limits and
Restrictions on Transfer."
Under the Company's Articles of Incorporation, the Board of Directors
may from time to time establish and issue one or more series of Preferred
Stock without stockholder approval. The Board of Directors may classify or
reclassify any unissued Preferred Stock by setting or changing the number,
designation, preference, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption of such series. Because the Board of Directors has
the power to establish the preferences and rights of each series of Preferred
Stock, it may afford the holders of any series of Preferred Stock
preferences, powers and rights, voting or otherwise, senior to the rights of
holders of Common Stock. Shares of Preferred Stock will, when issued, be
fully paid and nonassessable.
The following description of Preferred Stock sets forth certain general
terms and provisions of Preferred Stock to which any Prospectus Supplement
may relate. The statements below describing Preferred Stock are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of the Company's Articles of Incorporation and the
Company's amended and restated bylaws (the "Bylaws").
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The Prospectus Supplement relating to any Preferred Stock offered
thereby will contain the specific terms thereof, including, without
limitation: (i) the title and stated value of such Preferred Stock; (ii) the
number of shares of such Preferred Stock offered, the liquidation preference
per share and the offering price of such Preferred Stock; (iii) the dividend
rate(s), period(s) and/or payment date(s) or method(s) of calculation thereof
applicable to such Preferred Stock; (iv) the date from which dividends on
such Preferred Stock shall accumulate, if applicable; (v) the procedures for
any auction and remarketing, if any, for such Preferred Stock; (vi) the
provision for a sinking fund, if any, for such Preferred Stock; (vii) the
provision for redemption, if applicable, of such Preferred Stock; (viii) any
listing of such Preferred Stock on any securities exchange; (ix) the terms
and conditions, if applicable, upon which such Preferred Stock will be
convertible into Common Stock of the Company, including the conversion price
(or manner of calculation thereof); (x) any other specific terms,
preferences, rights, limitations or restrictions of such Preferred Stock;
(xi) a discussion of federal income tax considerations applicable to such
Preferred Stock; (xii) the relative ranking and preferences of such Preferred
Stock as to dividend rights and rights upon liquidation, dissolution or
winding up of the affairs of the Company; (xiii) any limitations on issuance
of any series of Preferred Stock ranking senior to or on a parity with such
series of Preferred Stock as to dividend rights and rights upon liquidation,
dissolution or winding up of the affairs of the Company; and (xiv) any
limitations on direct or beneficial ownership and restrictions on transfer,
in each case as may be appropriate to preserve the status of the Company as a
REIT.
RANK
Unless otherwise specified in the Prospectus Supplement, shares of
Preferred Stock will, with respect to dividend rights and rights upon
liquidation, dissolution or winding up of the Company, rank (i) senior to all
classes or series of Common Stock of the Company, and to all equity
securities ranking junior to such Preferred Stock, (ii) on a parity with all
equity securities issued by the Company the terms of which specifically
provide that such equity securities rank on a parity with Preferred Stock;
and (iii) junior to all equity securities issued by the Company the terms of
which specifically provide that such equity securities rank senior to
Preferred Stock. The term "equity securities" does not include convertible
debt securities.
DIVIDENDS
Holders of shares of Preferred Stock of each series will be entitled to
receive, when, as and if declared by the Board of Directors of the Company,
out of assets of the Company legally available for payment, cash dividends
(or dividends in kind or in other property if expressly permitted and
described in the applicable Prospectus Supplement) at such rates and on such
dates as will be set forth in the applicable Prospectus Supplement. Each
such dividend shall be payable to holders of record as they appear on the
share transfer books of the Company on such record dates as shall be fixed by
the Board of Directors of the Company.
Dividends on any series of Preferred Stock may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement.
Dividends, if cumulative, will be cumulative from and after the date set
forth in the applicable Prospectus Supplement. If the Board of Directors of
the Company fails to declare a dividend payable on a dividend payment date on
any series of Preferred Stock for which dividends are non-cumulative, then
the holders of such series of Preferred Stock will have no right to receive a
dividend in respect of the dividend period ending on such dividend payment
date, and the Company will have no obligation to pay the dividend accrued for
such period, whether or not dividends on such series are declared payable on
any future dividend payment date.
Unless otherwise specified in the Prospectus Supplement, if any shares
of Preferred Stock of any series are outstanding, no full dividends shall be
declared or paid or set apart for payment on any capital shares of the
Company of any other series ranking, as to dividends, on a parity with or
junior to the Preferred Stock of such series for any period unless (i) if
such series of Preferred Stock has a cumulative dividend, full cumulative
dividends have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for such payment on
the Preferred Stock of such series for all past dividend periods and the then
current dividend period or (ii) if such series of Preferred Stock does not
have a cumulative dividend, full dividends for the then current dividend
period have been or contemporaneously are declared and paid or declared
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and a sum sufficient for the payment thereof set apart for such payment on
the Preferred Stock of such series. When dividends are not paid in full (or
a sum sufficient for such full payment is not so set apart) upon Preferred
Stock of any series and the shares of any other series of Preferred Stock
ranking on a parity as to dividends with the Preferred Stock of such series,
all dividends declared upon Preferred Stock of such series and any other
series of Preferred Stock ranking on a parity as to dividends with such
Preferred Stock shall be declared pro rata so that the amount of dividends
declared per share of Preferred Stock of such series and such other series of
Preferred Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the Preferred Stock of such series (which
shall not include any accumulation in respect of unpaid dividends for prior
dividend periods if such Preferred Stock does not have a cumulative dividend)
and such other series of Preferred Stock bear to each other. No interest, or
sum of money in lieu of interest, shall be payable in respect of any dividend
payment or payments on Preferred Stock of such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Stock has a cumulative dividend, full cumulative
dividends on the Preferred Stock of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for all past dividend periods and
the then current dividend period, and (ii) if such series of Preferred Stock
does not have a cumulative dividend, full dividends on the Preferred Stock of
such series have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for payment for the
then current dividend period, no dividends (other than in Common Stock or
other capital shares ranking junior to the Preferred Stock of such series as
to dividends and upon liquidation) shall be declared or paid or set aside for
payment or other distribution upon the Common Stock, or any other capital
shares of the Company ranking junior to or on a parity with the Preferred
Stock of such series as to dividends or upon liquidation, nor shall any
Common Stock, or any other capital shares of the Company ranking junior to or
on a parity with the Preferred Stock of such series as to dividends or upon
liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund
for the redemption of any such shares) by the Company (except by conversion
into or exchange for other capital shares of the Company ranking junior to
the Preferred Stock of such series as to dividends and upon liquidation).
REDEMPTION
If so provided in the applicable Prospectus Supplement, any series of
Preferred Stock will be subject to mandatory redemption or redemption at the
option of the Company, in whole or in part, in each case upon the terms, at
the times and at the redemption prices set forth in such Prospectus
Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that
is subject to mandatory redemption will specify the number of such shares of
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be
specified, together with an amount equal to all accrued and unpaid dividends
thereon (which shall not, if such shares of Preferred Stock do not have a
cumulative dividend, include any accumulation in respect of unpaid dividends
for prior dividend periods) to the date of redemption. The redemption price
may be payable in cash or other property, as specified in the applicable
Prospectus Supplement. If the redemption price for shares of Preferred Stock
of any series is payable only from the net proceeds of the issuance of
capital shares of the Company, the terms of such Preferred Stock may provide
that, if no such capital shares shall have been issued or to the extent the
net proceeds from any issuance are insufficient to pay in full the aggregate
redemption price then due, such Preferred Stock shall automatically and
mandatorily be converted into the applicable capital shares of the Company
pursuant to conversion provisions specified in the applicable Prospectus
Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred
Stock has a cumulative dividend, full cumulative dividends on all Preferred
Stock of any series shall have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past dividend periods and the current dividend period and
(ii) if such series of Preferred Stock does not have a cumulative dividend,
full dividends of the Preferred Stock of any series have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for the then current dividend
period, no shares of Preferred Stock of any series shall be redeemed unless
all outstanding shares of Preferred Stock of such series
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are simultaneously redeemed; provided, however, that the foregoing shall not
prevent the purchase or acquisition of Preferred Stock of such series to
preserve the REIT status of the Company or pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding shares of
Preferred Stock of such series. In addition, unless (i) if such series of
Preferred Stock has a cumulative dividend, full cumulative dividends on all
outstanding shares of any series of Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for all past dividends periods and
the then current dividend period, and (ii) if such series of Preferred Stock
does not have a cumulative dividend, full dividends on the Preferred Stock of
any series have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for payment for the
then current dividend period, the Company shall not purchase or otherwise
acquire directly or indirectly any Preferred Stock of such series (except by
conversion into or exchange for capital shares of the Company ranking junior
to the Preferred Stock of such series as to dividends and upon liquidation);
provided, however, that the foregoing shall not prevent the purchase or
acquisition of Preferred Stock of such series to preserve the REIT status of
the Company or pursuant to a purchase or exchange offer made on the same
terms to holders of all outstanding Preferred Stock of such series.
If fewer than all of the outstanding shares of Preferred Stock of any
series are to be redeemed, the number of shares to be redeemed will be
determined by the Company and such shares may be redeemed pro rata from the
holders of record of such shares in proportion to the number of such shares
held or for which redemption is requested by such holder (with adjustments to
avoid redemption of fractional shares) or by lot in a manner determined by
the Company.
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of record of Preferred
Stock of any series to be redeemed at the address shown on the share transfer
books of the Company. Each notice shall state: (i) the redemption date; (ii)
the number of shares and the series of Preferred Stock to be redeemed; (iii)
the redemption to be surrendered for payment of the redemption price; (iv)
that dividends on the shares to be redeemed will cease to accrue on such
redemption date; and (v) the date upon which the holder's conversion rights,
if any, as to such shares shall terminate. If fewer than all of the shares
of Preferred Stock of any series are to be redeemed, the notice mailed to
each such holder thereof shall also specify the number of shares of Preferred
Stock to be redeemed from each such holder. If notice of redemption of any
shares of Preferred Stock has been given and if the funds necessary for such
redemption have been set aside by the Company in trust for the benefit of the
holders of any shares of Preferred Stock so called for redemption, then from
and after the redemption date dividends will cease to accrue on such shares
of Preferred Stock, and all rights of the holders of such shares will
terminate, except the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the Company, then, before any distribution or payment shall
be made to the holders of any Common Stock or any other class or series of
capital shares of the Company ranking junior to the Preferred Stock in the
distribution of assets upon any liquidation, dissolution or winding up of the
Company, the holders of each series of Preferred Stock shall be entitled to
receive out of assets of the Company legally available for distribution to
shareholders liquidating distributions in the amount of the liquidation
preference per share (set forth in the applicable Prospectus Supplement),
plus an amount equal to all dividends accrued and unpaid thereon (which shall
not include any accumulation in respect of unpaid dividends for prior
dividend periods if such Preferred Stock do not have a cumulative dividend).
After payment of the full amount of the liquidating distributions to which
they are entitled, the holders of Preferred Stock will have no right or claim
to any of the remaining assets of the Company. In the event that, upon any
such voluntary or involuntary liquidation, dissolution or winding up, the
available assets of the Company are insufficient to pay the amount of the
liquidating distributions on all outstanding Preferred Stock and the
corresponding amounts payable on all shares of other classes or series of
capital shares of the Company ranking on a parity with the Preferred Stock in
the distribution of assets, then the holders of the Preferred Stock and all
other such classes or series of capital shares shall share ratably in any
such distribution of assets in proportion to the full liquidating
distributions to which they would otherwise be respectively entitled.
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If liquidating distributions shall have been made in full to all holders
of Preferred Stock, the remaining assets of the Company shall be distributed
among the holders of any other classes or series of capital shares ranking
junior to the Preferred Stock upon liquidation, dissolution or winding up,
according to their respective rights and preferences and in each case according
to their respective number of shares. For such purposes, the consolidation or
merger of the Company with or into any other corporation, trust or entity, or
the sale, lease or conveyance of all or substantially all of the property or
business of the Company, shall not be deemed to constitute a liquidation,
dissolution or winding up of the Company.
VOTING RIGHTS
Holders of shares of Preferred Stock will not have any voting rights,
except as set forth below or as otherwise from time to time required by law
or as indicated in the applicable Prospectus Supplement.
Whenever dividends on any series of Preferred Stock shall be in arrears
for six or more consecutive quarterly periods, the holders of shares of such
series of Preferred Stock (voting separately as a class with all other series
of Preferred Stock upon which like voting rights have been conferred and are
exercisable) will be entitled to vote for the election of two additional
Directors of the Company at a special meeting called by the holders of record
of at least ten percent (10%) of any series of Preferred Stock so in arrears
(unless such request is received less than 90 days before the date fixed for
the next annual or special meeting of the shareholders) or at the next annual
meeting of shareholders, and at each subsequent annual meeting until (i) if
such series of Preferred Stock has a cumulative dividend, all dividends
accumulated on such series of Preferred Stock for the past dividend periods
and the then current dividend period shall have been fully paid or declared
and a sum sufficient for the payment thereof set aside for payment or (ii) if
such series of Preferred Stock does not have a cumulative dividend, four
consecutive quarterly dividends shall have been fully paid or declared and a
sum sufficient for the payment thereof set aside for payment. In such case,
the entire Board of Directors of the Company will be increased by two
Directors.
Unless provided otherwise for any series of Preferred Stock, so long as
any shares of Preferred Stock remain outstanding, the Company will not,
without the affirmative vote or consent of the holders of at least two-thirds
of each series of Preferred Stock outstanding at the time, given in person or
by proxy, either in writing or at a meeting (such series voting separately as
a class), (i) authorize or create, or increase the authorized or issued
amount of, any class or series of capital shares ranking senior to such
series of Preferred Stock with respect to the payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up or
reclassify any authorized capital shares of the Company into such shares, or
create, authorize or issue any obligation or security convertible into or
evidencing the right to purchase any such shares; or (ii) amend, alter or
repeal the provisions of the Company's Articles of Incorporation or the
designating amendment for such series of Preferred Stock, whether by merger,
consolidation or otherwise (an "Event"), so as to materially and adversely
affect any right, preference, privilege or voting power of such series of
Preferred Stock or the holders thereof, provided, however, with respect to
the occurrence of any of the Events set forth in (ii) above, so long as the
shares of Preferred Stock remain outstanding with the terms thereof
materially unchanged, taking into account that upon the occurrence of an
Event, the Company may not be the surviving entity, the occurrence of any
such Event shall not be deemed to materially and adversely affect such
rights, preferences, privileges or voting power of holders of Preferred Stock
and provided further that (x) any increase in the amount of the authorized
Preferred Stock or the creation or issuance of any other series of Preferred
Stock, or (y) any increase in the amount of authorized shares of such series
or any other series of Preferred Stock, in each case ranking on a parity with
or junior to the Preferred Stock of such series with respect to payment of
dividends or the distribution of assets upon liquidation, dissolution or
winding up, shall not be deemed to materially and adversely affect such
rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of Preferred Stock of such series
shall have been redeemed or called for redemption and sufficient funds shall
have been deposited in trust to effect such redemption.
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CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred
Stock is convertible into Common Stock will be set forth in the applicable
Prospectus Supplement relating thereto. Such terms will include the number
of shares of Common Stock into which the shares of Preferred Stock are
convertible, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option
of the holders of Preferred Stock or the Company, the events requiring an
adjustment of the conversion price and provisions affecting conversion in the
event of the redemption of such series of Preferred Stock.
STOCKHOLDER LIABILITY
Applicable Maryland law provides that no stockholder, including holders
of shares of Preferred Stock, shall be personally liable for the acts and
obligations of the Company and that the funds and property of the Company
shall be the only recourse for such acts or obligations.
RESTRICTIONS ON OWNERSHIP
As discussed below under "Description of Common Stock - Ownership Limits
and Restrictions on Transfer," for the Company to qualify as a REIT under the
Code, not more than 50% in value of its outstanding equity securities of all
classes may be owned, directly or indirectly, by five or fewer individuals
(as defined in the Code to include certain entities) during the last half of
a taxable year. To assist the Company in meeting this requirement, the
Company may take certain actions to limit the beneficial ownership, directly
or indirectly, by a single person of the Company's outstanding equity
securities, including any Preferred Stock of the Company. Therefore, the
designating amendment for each series of Preferred Stock may contain
provisions restricting the ownership and transfer of Preferred Stock.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Preferred Stock will be set
forth in the applicable Prospectus Supplement.
DESCRIPTION OF COMMON STOCK
GENERAL
The Articles of Incorporation of the Company authorize the Board of
Directors to issue up to 250,000,000 shares of Common Stock, par value .01 per
share, as well as 250,000,000 shares of Excess Stock, par value .01 per share,
issuable in exchange for Common Stock as described below at "- Ownership Limits
and Restrictions on Transfer." The Common Stock is listed on the New York Stock
Exchange under the symbol "CEI."
Subject to such preferential rights as may be granted by the Board of
Directors in connection with the future issuance of Preferred Stock, holders
of Common Stock are entitled to one vote per share on all matters to be voted
on by shareholders and are entitled to receive ratably such dividends as may
be declared on the Common Stock by the Board of Directors in its discretion
from funds legally available therefor. In the event of the liquidation,
dissolution or winding up of the Company, holders of Common Stock are
entitled to share ratably in all assets remaining after payment of all debts
and other liabilities and any liquidation preference of the holders of
Preferred Stock. Holders of Common Stock have no subscription, redemption,
conversion or preemptive rights. Matters submitted for stockholder approval
generally require a majority vote of the shares present and voting thereon.
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OWNERSHIP LIMITS AND RESTRICTIONS ON TRANSFER
For the Company to qualify as a REIT under the Code (i) not more than
50% in value of outstanding equity securities of all classes ("Equity
Securities") may be owned, directly or indirectly, by five or fewer
individuals (as defined in the Code to include certain entities) during the
last half of a taxable year; (ii) the Equity Securities must be beneficially
owned by 100 or more persons during at least 335 days of a taxable year of 12
months or during a proportionate part of a shorter taxable year; and (iii)
certain percentages of the Company's gross income must come from certain
activities.
To ensure that five or fewer individuals do not own more than 50% in
value of the outstanding Equity Securities, the Company's Articles of
Incorporation provide generally that no holder may own, or be deemed to own
by virtue of certain attribution provisions of the Code, more than 8.0% of
the issued and outstanding shares of Common Stock or more than 9.9% of the
issued and outstanding shares of any series of Preferred Stock, except that
Mr. Rainwater and certain related persons together may own, or be deemed to
own, by virtue of certain attribution provisions of the Code, up to 17.9%
(the "Rainwater Ownership Limit") of the issued and outstanding shares of
Common Stock and up to 9.9% of the issued and outstanding shares of any
series of Preferred Stock (collectively, the "Ownership Limit"). The Board
of Directors, upon receipt of a ruling from the IRS, an opinion of counsel,
or other evidence satisfactory to the Board of Directors, in its sole
discretion, may waive or change, in whole or in part, the application of the
Ownership Limit with respect to any person that is not an individual (as
defined in Section 542(a)(2) of the Code). In connection with any such
waiver or change, the Board of Directors may require such representations and
undertakings from such person or affiliates and may impose such other
conditions, as the Board deems necessary, advisable or prudent, in its sole
discretion, to determine the effect, if any, of the proposed transaction or
ownership of Equity Securities on the Company's status as a REIT. The Board
of Directors may reduce the Rainwater Ownership Limit, with the written
consent of Mr. Rainwater, after any transfer permitted by the Articles of
Incorporation. The Board of Directors may from time to time increase the
Common Stock Ownership Limit, except that (i) the Ownership Limit may not be
increased and no additional limitations may be created if, after giving
effect thereto, the Company would be "closely held" within the meaning of
Section 856(h) of the Code, (ii) neither the Common Stock Ownership Limit nor
the Preferred Stock Ownership Limit may be increased to a percentage that is
greater than 9.9%, (iii) the Rainwater Ownership Limit may not be increased,
and (iv) prior to any modification of the Ownership Limit or the Rainwater
Ownership Limit with respect to any person, the Board of Directors may
require such opinions of counsel, affidavits, undertakings or agreements as
it may deem necessary, advisable or prudent, in its sole discretion, in order
to determine or ensure the Company's status as a REIT.
The Ownership Limit will not be automatically removed even if the REIT
provisions of the Code are changed so as to no longer contain any ownership
concentration limitation or if the ownership concentration limit is increased.
In addition to preserving the Company's status as a REIT for federal income
tax purposes, the Ownership Limit may prevent any person or small group of
persons from acquiring control of the Company.
If an issuance, transfer or acquisition of Equity Securities would
result in a holder exceeding the Ownership Limit, would cause the Company to
be beneficially owned by less than 100 persons, would result in the Company
being "closely held" within the meaning of Section 856(h) of the Code or
would otherwise result in the Company failing to qualify as a REIT for
federal income tax purposes, such issuance, transfer or acquisition shall be
null and void to the intended transferee or holder, and the intended
transferee or holder will acquire no rights to the shares. Equity Securities
owned, transferred or proposed to be transferred in excess of the Ownership
Limit or which would otherwise jeopardize the Company's status as a REIT
under the Code will automatically be converted to shares of Excess Stock. A
holder of Excess Stock is not entitled to distributions, voting rights and
other benefits with respect to such shares except the right to payment of the
purchase price for the shares and the right to certain distributions upon
liquidation. Any dividend or distribution paid to a proposed transferee on
Excess Stock pursuant to the Company's Articles of Incorporation shall be
repaid to the Company upon demand. Excess Stock will be subject to
repurchase by the Company at its election. The purchase price of any Excess
Stock will be equal to the lesser of (a) the price in such proposed
transaction or (b) either (i) if the shares are then listed on the New York
Stock Exchange, the fair market value of such shares reflected in the average
closing sales prices for the shares on the 10 trading days immediately
preceding the date on which the
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Company or its designee determines to exercise its repurchase right; or (ii)
if the shares are not then so listed, such price for the shares on the
principal exchange (including the National Market System of the Nasdaq Stock
Market on which the shares are listed; or (iii) if the shares are not then
listed on a national securities exchange, the latest quoted price for the
shares; or (iv) if not quoted, the average of the high bid and low asked
prices if the shares are then traded over-the-counter, as reported by the
Nasdaq Stock Market; or (v) if such system is no longer in use, the principal
automated quotation system then in use; or (vi) if the shares are not quoted
on such system, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the shares; or (vii) if
there is no such market maker or such closing prices otherwise are
unavailable, the fair market value, as determined by the Board of Directors
in good faith, on the last trading day immediately preceding the day on which
notice of such proposed purchase is sent by the Company. If the foregoing
transfer restrictions are determined to be void or invalid by virtue of any
legal decision, statute, rule or regulation, then the intended transferee of
any Excess Stock may be deemed, at the option of the Company, to have acted
as an agent on behalf of the Company in acquiring such Excess Stock and to
hold such Excess Stock on behalf of the Company.
The Company has the authority at any time to waive the requirement that
Excess Stock be issued or be deemed outstanding in accordance with the
provisions of the Articles of Incorporation if the issuance of such Excess
Stock or the fact that such Excess Stock is deemed to be outstanding would,
in the opinion of nationally recognized tax counsel, jeopardize the status of
the Company as a REIT for federal income tax purposes.
All certificates representing Equity Securities will bear a legend
referring to the restrictions described above.
The Articles of Incorporation of the Company provide that all persons
who own, directly or by virtue of the attribution provisions of the Code,
more than 5.0% of the outstanding Equity Securities (or such lower percentage
as may be set by the Board of Directors), must file an affidavit with the
Company containing information specified in the Articles of Incorporation no
later than January 31 of each year. In addition, each stockholder shall,
upon demand, be required to disclose to the Company in writing such
information with respect to the direct, indirect and constructive ownership
of shares as the directors deem necessary to comply with the provisions of
the Code, as applicable to a REIT, or to comply with the requirements of an
authority or governmental agency.
The ownership limitations described above may have the effect of
precluding acquisitions of control of the Company by a third party. See
"Certain Provisions of the Articles of Incorporation, Bylaws and Maryland
Law."
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Common Stock is The First National
Bank of Boston.
DESCRIPTION OF COMMON STOCK WARRANTS
The Company may issue Common Stock Warrants for the purchase of Common
Stock. Common Stock Warrants may be issued independently or together with
any other Securities offered by any Prospectus Supplement and may be attached
to or separate from such Securities. Each series of Common Stock Warrants
will be issued under a separate warrant agreement (each, a "Warrant
Agreement") to be entered into between the Company and a warrant agent
specified in the applicable Prospectus Supplement (the "Warrant Agent"). The
Warrant Agent will act solely as an agent of the Company in connection with
the Common Stock Warrants of such series and will not assume any obligation
or relationship of agency or trust for or with any holders or beneficial
owners of Common Stock Warrants. The following sets forth certain general
terms and provisions of the Common Stock Warrants offered hereby. Further
terms of the Common Stock Warrants and the applicable Warrant Agreements will
be set forth in the applicable Prospectus Supplement.
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The applicable Prospectus Supplement will describe the terms of the
Common Stock Warrants in respect of which this Prospectus is being delivered,
including, where applicable, the following: (i) the title of such Common
Stock Warrants; (ii) the aggregate number of such Common Stock Warrants;
(iii) the price or prices at which such Common Stock Warrants will be issued;
(iv) the number of shares of Common Stock purchasable upon exercise of such
Common Stock Warrants; (v) the designation and terms of any other Securities
offered thereby with which such Common Stock Warrants are to be issued and
the number of such Common Stock Warrants issued with each such Security
offered thereby; (vi) the date, if any, on and after which such Common Stock
Warrants and the related Common Stock will be separately transferable; (vii)
the price at which the shares of Common Stock purchasable upon exercise of
such Common Stock Warrants may be purchased; (viii) the date on which the
right to exercise such Common Stock Warrants shall commence and the date on
which such right shall expire; (ix) the minimum or maximum number of such
Common Stock Warrants which may be exercised at any one time; (x) information
with respect to book entry procedures, if any; (xi) any limitations on the
acquisition or ownership of such Common Stock Warrants which may be required
in order to maintain the status of the Company as a REIT; (xii) a discussion
of certain federal income tax considerations; and (xiii) any other terms of
such Common Stock Warrants, including terms, procedures and limitations
relating to the exchange and exercise of such Common Stock Warrants.
Reference is made to the section captioned "Description of Common Stock"
for a general description of the Common Stock to be acquired upon the
exercise of the Common Stock Warrants, including a description of certain
restrictions on the ownership of Common Stock.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION,
BYLAWS AND MARYLAND LAW
The Articles of Incorporation and the Bylaws of the Company contain
certain provisions that may inhibit or impede acquisition or attempted
acquisition of control of the Company by means of a tender offer, a proxy
contest or otherwise. These provisions are expected to discourage certain
types of coercive takeover practices and inadequate takeover bids and to
encourage persons seeking to acquire control of the Company to negotiate
first with the Board of Directors. The Company believes that these
provisions increase the likelihood that proposals initially will be on more
attractive terms than would be the case in their absence and increase the
likelihood of negotiations, which might outweigh the potential disadvantages
of discouraging such proposals because, among other things, negotiation of
such proposals might result in improvement of terms. The description set
forth below is a summary only, and is qualified in its entirety by reference
to the Articles of Incorporation and the Bylaws which have been filed as
exhibits to the Registration Statement of which this Prospectus is a part.
See "Description of Common Stock - Ownership Limits and Restrictions on
Transfer."
STAGGERED BOARD OF DIRECTORS
The Articles of Incorporation and the Bylaws provide that the Board of
Directors will be divided into three classes of directors, each class
constituting approximately one-third of the total number of directors, with
the classes serving staggered three-year terms. The classification of the
Board of Directors will have the effect of making it more difficult for
stockholders to change the composition of the Board of Directors, because
only a minority of the directors are up for election, and may be replaced by
vote of the stockholders, at any one time. The Company believes however,
that the longer terms associated with the classified Board of Directors will
help to ensure continuity and stability of the Company's management and
policies.
The classification provisions also could have the effect of discouraging
a third party from accumulating a large block of the Company's stock or
attempting to obtain control of the Company, even though such an attempt
might be beneficial to the Company and some, or a majority, of its
stockholders. Accordingly, under certain circumstances stockholders could be
deprived of opportunities to sell their shares of Common Stock at a higher
price than might otherwise be available.
-16-
<PAGE>
NUMBER OF DIRECTORS; REMOVAL; FILLING VACANCIES
The Articles of Incorporation provide that, subject to any rights of
holders of Preferred Stock to elect additional directors under specified
circumstances ("Preferred Holders' Rights"), the number of directors will be
fixed by the Bylaws. See "Description of Preferred Stock - Voting Rights."
The Bylaws provide that, subject to any Preferred Holders' Rights, the number
of directors will be fixed by the Board of Directors, but must not be more
than 25 nor less than three. In addition, the Bylaws provide that, subject
to any Preferred Holders' Rights, and unless the Board of Directors otherwise
determines, any vacancies (other than vacancies created by an increase in the
total number of directors) will be filled by the affirmative vote of a
majority of the remaining directors, though less than a quorum, and any
vacancies created by an increase in the total number of directors may be
filled by a majority of the entire Board of Directors. Accordingly, the
Board of Directors could temporarily prevent any stockholder from enlarging
the Board of Directors and then filling the new directorship with such
stockholder's own nominees.
The Articles of Incorporation and the Bylaws provide that, subject to
any Preferred Holders' Rights, directors may be removed only for cause upon
the affirmative vote of holders of at least 80% of the entire voting power of
all the then-outstanding shares of stock entitled to vote generally in the
election of directors, voting together as a single class.
RELEVANT FACTORS TO BE CONSIDERED BY THE BOARD OF DIRECTORS
The Articles of Incorporation provide that, in determining what is in
the best interest of the Company in evaluating a "business combination,"
"change in control" or other transaction, a director of the Company shall
consider all of the relevant factors, which may include (i) the immediate and
long-term effects of the transaction on the Company's stockholders, including
stockholders, if any, who do not participate in the transaction; (ii) the
social and economic effects of the transaction on the Company's employees,
suppliers, creditors and customers and others dealing with the Company and on
the communities in which the Company operates and is located; (iii) whether
the transaction is acceptable, based on the historical and current operating
results and financial condition of the Company; (iv) whether a more favorable
price would be obtained for the Company's stock or other securities in the
future; (v) the reputation and business practices of the other party or
parties to the proposed transaction, including its or their management and
affiliates, as they would affect employees of the Company; (vi) the future
value of the Company's securities; (vii) any legal or regulatory issues
raised by the transaction; and (viii) the business and financial condition
and earnings prospects of the other party or parties to the proposed
transaction including, without limitation, debt service and other existing
financial obligations, financial obligations to be incurred in connection
with the transaction, and other foreseeable financial obligations of such
other party or parties. Pursuant to this provision, the Board of Directors
may consider subjective factors affecting a proposal, including certain
nonfinancial matters, and, on the basis of these considerations, may oppose a
business combination or other transaction which, evaluated only in terms of
its financial merits, might be attractive to some, or a majority, of the
Company's stockholders.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND STOCKHOLDER PROPOSALS
The Bylaws establish an advance notice procedure for stockholders to
make nominations of candidates for directors or bring other business before
an annual meeting of stockholders of the Company (the "Stockholder Notice
Procedure").
The Stockholder Notice Procedure provides that (i) only persons who are
nominated by, or at the direction of, the Board of Directors, or by a
stockholder who has given timely written notice containing specified
information to the Secretary of the Company prior to the meeting at which
directors are to be elected, will be eligible for election as directors of
the Company and (ii) at an annual meeting, only such business may be
conducted as has been brought before the meeting by, or at the direction of
the Chairman or the Board of Directors or by a stockholder who has given
timely written notice to the Secretary of the Company of such stockholder's
intention to bring such business before such meeting. In general, for notice
of stockholder nominations or proposed business to be conducted at an annual
meeting to be timely, such notice must be received
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<PAGE>
by the Company not less than 70 days nor more than 90 days prior to the first
anniversary of the previous year's annual meeting.
The purpose of requiring stockholders to give the Company advance notice
of nominations and other business is to afford the Board of Directors a
meaningful opportunity to consider the qualifications of the proposed
nominees or the advisability of the other proposed business and, to the
extent deemed necessary or desirable by the Board of Directors, to inform
stockholders and make recommendations about such nominees or business, as
well as to ensure an orderly procedure for conducting meetings of
stockholders. Although the Bylaws do not give the Board of Directors power
to block stockholder nominations for the election of directors or proposal
for action, they may have the effect of discouraging a stockholder from
proposing nominees or business, precluding a contest for the election of
directors or the consideration of stockholder proposals if procedural
requirements are not met, and deterring third parties from soliciting proxies
for a non-management slate of directors or proposal, without regard to the
merits of such slate or proposal.
PREFERRED STOCK
The Articles of Incorporation authorize the Board of Directors to
establish one or more series of Preferred Stock and to determine, with
respect to any series of Preferred Stock, the preferences, rights and other
terms of such series. See "Description of Preferred Stock." The Company
believes that the ability of the Board of Directors to issue one or more
series of Preferred Stock will provide the Company with increased flexibility
in structuring possible future financings and acquisitions, and in meeting
other corporate needs. The authorized shares of Preferred Stock, as well as
shares of Common Stock, will be available for issuance without further action
by the Company's stockholders, unless such action is required by applicable
law or the rules of any stock exchange or automated quotation system on which
the Company's securities may be listed or traded. Although the Board of
Directors has no present intention to do so, it could, in the future, issue a
series of Preferred Stock which, due to its terms, could impede a merger,
tender offer or other transaction that some, or a majority, of the Company's
stockholders might believe to be in their best interests or in which
stockholders might receive a premium over then prevailing market prices for
their shares of Common Stock.
AMENDMENT OF ARTICLES OF INCORPORATION
The Articles of Incorporation may be amended only by the affirmative
vote of the holders of not less than that percentage (currently two-thirds)
of the votes entitled to be cast as would be required to amend the Articles
of Incorporation pursuant to the Maryland General Corporation Law, as amended
(the "MGCL").
RIGHTS TO PURCHASE SECURITIES AND OTHER PROPERTY
The Articles of Incorporation authorize the Board of Directors to create
and issue rights entitling the holders thereof to purchase from the Company
shares of capital stock or other securities or property. The times at which
and terms upon which such rights are to be issued are within the discretion
of the Board of Directors. This provision is intended to confirm the Board
of Director's authority to issue share purchase rights which could have terms
that would impede a merger, tender offer or other takeover attempt, or other
rights to purchase securities of the Company or any other entity.
BUSINESS COMBINATIONS
The MGCL establishes special requirements with respect to "business
combinations" (including a merger, consolidation, share exchange, or, in
certain circumstances, an asset transfer or issuance of reclassification of
equity securities) between a Maryland corporation and any person who
beneficially owns, directly or indirectly, 10% or more of the voting power of
the corporation's shares is (an "Interested Stockholder"), subject to certain
exemptions. In general, an Interested Stockholder or any affiliate thereof
may not engage in a "business combination" with the corporation for a period
of five years following the date he becomes an Interested Stockholder.
Thereafter, such transactions must be (i) approved by the Board of Directors
of such corporation and (ii) approved by the affirmative vote of at least 80%
of the votes entitled to be cast by holders of voting shares
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<PAGE>
other than voting shares held by the Interested Stockholder with whom the
business combination is to be effected, unless, among other things, the
corporation's common stockholders receive a minimum price (as defined in the
statute) for their shares and the consideration is received in cash or in the
same form as previously paid by the Interested Stockholder for his shares.
These provisions of the MGCL do not apply, however, to business combinations
that are approved or exempted by the board of directors of such corporation
prior to the time that the Interested Stockholder becomes an Interested
Stockholder.
CONTROL SHARE ACQUISITIONS
The MGCL provides that "control shares" of a Maryland corporation
acquired in a control share acquisition have no voting rights except to the
extent approved by a vote of two-thirds of the votes entitled to be cast by
stockholders, excluding shares owned by the acquiror and officers and
directors who are employees of the corporation. "Control shares" are shares
which, if aggregated with all other shares previously acquired which the
person is entitled to vote, would entitle the acquiror to vote (i) 20% or
more but less than one-third; (ii) one-third or more but less than a
majority; or (iii) a majority of the outstanding shares. Control shares do
not include shares that the acquiring person is entitled to vote on the basis
of prior stockholder approval. A "control share acquisition" means the
acquisition of control shares subject to certain exemptions.
A person who has made or proposed to make a control share acquisition
and who has obtained a definitive financing agreement with a responsible
financial institution providing for any amount of financing not to be
provided by the acquiring person may compel the Board of Directors of the
corporation to call a special meeting of stockholders to be held within 50
days of demand to consider the voting rights of the shares. If no request
for a meeting is made, the corporation may itself present the question at any
stockholders' meeting.
If voting rights are not approved at a stockholders' meeting or if the
acquiring person does not deliver an acquiring person statement as required
by statute, then, subject to certain conditions and limitations, the
corporation may redeem any or all of the control shares, except those for
which voting rights have previously been approved, for fair value determined,
without regard to voting rights, as of the date of the last control share
acquisition or of any meeting of stockholders at which the voting rights of
such shares are considered and not approved. If voting rights for control
shares are approved at a stockholders' meeting and the acquiror is entitled
to vote a majority of the shares entitled to vote, all other stockholders may
exercise appraisal rights. The fair value of the shares for purposes of such
appraisal rights may not be less than the highest price per share in the
control share acquisition, and certain limitations and restrictions otherwise
applicable to the exercise of dissenters' rights do not apply.
The control share acquisition statute does not apply to shares acquired
in a merger, consolidation or share exchange if the corporation is a party to
the transaction, or if the acquisition is approved or excepted by the
Articles of Incorporation or Bylaws of the corporation prior to a control
share acquisition.
OWNERSHIP LIMIT
The limitation on ownership of shares of Common Stock set forth in the
Company's Articles of Incorporation, as well as the provisions of the MGCL,
could have the effect of discouraging offers to acquire the Company and of
increasing the difficulty of consummating any such offer. See "Description
of Common Stock - Ownership Limits and Restrictions on Transfer."
ERISA CONSIDERATIONS
The following is a summary of material considerations arising under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
the prohibited transaction provisions of Section 4975 of the Code that may be
relevant to prospective investors. This discussion does not purport to deal
with all aspects of ERISA or the Code that may be relevant to particular
investors in light of their particular circumstances. A PROSPECTIVE INVESTOR
THAT IS AN EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA, A TAX QUALIFIED RETIREMENT
PLAN, AN IRA OR A GOVERNMENTAL, CHURCH OR OTHER PLAN THAT
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<PAGE>
IS EXEMPT FROM ERISA IS ADVISED TO CONSULT ITS OWN LEGAL ADVISOR REGARDING
THE SPECIFIC CONSIDERATIONS ARISING UNDER APPLICABLE PROVISIONS OF ERISA, THE
CODE AND STATE LAW WITH RESPECT TO THE PURCHASE, OWNERSHIP, OR SALE OF THE
SECURITIES BY SUCH PLAN OR IRA.
FIDUCIARY DUTIES AND PROHIBITED TRANSACTIONS
A fiduciary of a pension, profit-sharing, retirement or other employee
benefit plan subject to ERISA (an "ERISA Plan") should consider the fiduciary
standards under ERISA in the context of the ERISA Plan's particular
circumstances before authorizing an investment of any portion of the ERISA
Plan's assets in the Securities. Accordingly, such fiduciary should consider
(i) whether the investment satisfies the diversification requirements of
Section 404(a)(1)(C) of ERISA; (ii) whether the investment is in accordance
with the documents and instruments governing the ERISA Plan as required by
Section 404(a)(1)(D) of ERISA; (iii) whether the investment is prudent under
Section 404(a)(1)(B) of ERISA; and (iv) whether the investment is solely in
the interests of the ERISA Plan participants and beneficiaries and for the
exclusive purpose of providing benefits to the ERISA Plan participants and
beneficiaries and defraying reasonable administrative expenses of the ERISA
Plan as required by Section 404(a)(1)(A) of ERISA.
In addition to the imposition of fiduciary standards, ERISA and Section
4975 of the Code prohibit a wide range of transactions between an ERISA Plan,
an IRA or certain other plans (collectively, a "Plan") and persons who have
certain specified relationships to the Plan ("parties in interest" within the
meaning of ERISA and "disqualified persons" within the meaning of the Code).
Thus, a Plan fiduciary or person making an investment decision for a Plan
also should consider whether the acquisition or the continued holding of the
Securities might constitute or give rise to a direct or indirect prohibited
transaction.
PLAN ASSETS
The prohibited transactions rules of ERISA and the Code apply to
transactions with a Plan and also to transactions with the "plan assets" of a
Plan. The "plan assets" of a Plan include the Plan's interest in an entity
in which the Plan invests and, in certain circumstances, the assets of the
entity in which the Plan holds such interest. The term "plan assets" is not
specifically defined in ERISA or the Code, nor, as of the date hereof, has it
been interpreted definitively by the courts in litigation. On November 13,
1986, the United States Department of Labor, the governmental agency
primarily responsible for administering ERISA, adopted a final regulation
(the "DOL Regulation") setting out the standards it will apply in determining
whether an equity investment in an entity will cause the assets of such
entity to constitute "plan assets." The DOL Regulation applies for purposes
of both ERISA and Section 4975 of the Code.
Under the DOL Regulation, if a Plan acquires an equity interest in an
entity, which equity interest is not a "publicly-offered security," the
Plan's assets generally would include both the equity interest and an
undivided interest in each of the entity's underlying assets unless certain
specified exceptions apply. The DOL Regulation defines a publicly-offered
security as a security that is "widely held," "freely transferable," and
either part of a class of securities registered under Section 12(b) or 12(g)
of the Exchange Act, or sold pursuant to an effective registration statement
under the Securities Act (provided the securities are registered under the
Exchange Act within 120 days after the end of the fiscal year of the issuer
during which the offering occurred). The Securities will be sold in an
offering registered under the Securities Act and registered under Section
12(g) of the Exchange Act.
The DOL Regulation provides that a security is "widely held" only if it
is part of a class of securities that is owned by 100 or more investors
independent of the issuer and of one another. However, a class of securities
will not fail to be "widely held" solely because the number of independent
investors falls below 100 subsequent to the initial public offering as a
result of events beyond the issuer's control. The Company expects the
Securities to be "widely held" upon completion of any offering.
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<PAGE>
The DOL Regulation provides that whether a security is "freely
transferable" is a factual question to be determined on the basis of all the
relevant facts and circumstances. The DOL Regulation further provides that
when a security is part of an offering in which the minimum investment is
$10,000 or less, as will be the case with any offering, certain restrictions
ordinarily will not affect, alone or in combination, the finding that such
securities are freely transferable. The Company believes that the
restrictions imposed under the Articles of Incorporation on the transfer of
the Securities are limited to restrictions on transfer generally permitted
under the DOL Regulation and are not likely to result in the failure of the
Securities to be "freely transferable." See "Common Stock - Ownership Limits
and Restrictions on Transfer." The Company also believes that the
restrictions that apply to the Common Stock to be held by members of the
Rainwater Group and that derive from contractual arrangements requested by
the underwriters in connection with the initial public offering of the
Company are unlikely to result in the failure of the Securities to be "freely
transferable." The DOL Regulation only establishes a presumption in favor of
a finding of free transferability and, therefore, no assurance can be given
that the Department of Labor and the U.S. Treasury Department would not reach
a contrary conclusion with respect to the Securities. Any additional
transfer restrictions imposed on the transfer of the Securities will be
discussed in the applicable Prospectus Supplement.
Assuming that the Securities will be "widely held" and "freely
transferable," the Company believes that the Securities will be
publicly-offered securities for purposes of the DOL Regulation and that the
assets of the Company will not be deemed to be "plan assets" of any plan that
invests in the Securities.
PLAN OF DISTRIBUTION
The Company may sell the Securities to one or more underwriters for
public offering and sale by them or may sell the Securities to investors
directly or through agents. Any such underwriter or agent involved in the
offer and sale of the Securities will be named in the applicable Prospectus
Supplement.
Underwriters may offer and sell the Securities at a fixed price or
prices, which may be changed, related to the prevailing market prices at the
time of sale, or at negotiated prices. The Company also may, from time to
time, authorize underwriters acting as the Company's agents to offer and sell
the Securities upon the terms and conditions set forth in an applicable
Prospectus Supplement. In connection with the sale of Securities,
underwriters may be deemed to have received compensation from the Company in
the form of underwriting discounts or commissions and may also receive
commissions from purchasers of Securities for whom they may act as agent.
Underwriters may sell the Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions from the
underwriters or commissions from the purchasers for whom they may act as
agent.
Any underwriting compensation paid by the Company to underwriters or
agents in connection with the offering of Securities and any discounts,
concessions or commissions allowed by underwriters to participating dealers
will be set forth in the applicable Prospectus Supplement. Underwriters,
dealers and agents participating in the distribution of the Securities may be
deemed to be underwriters, and any discounts and commissions received by them
and any profit realized by them on resale of the Securities may be deemed to
be underwriting discounts and commissions under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements entered
into with the Company, to indemnification against and contribution toward
certain civil liabilities, including liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company
will authorize dealers acting as the Company's agents to solicit offers by
certain institutions to purchase Securities from the Company at the public
offering price set forth in such Prospectus Supplement pursuant to delayed
delivery contracts ("Contracts") providing for payment and delivery on the
date or dates stated in such Prospectus Supplement. Each Contract will be
for an amount not less than, and the aggregate principal amount of Securities
sold pursuant to Contracts shall be not less or more than, the respective
amounts stated in the applicable Prospectus Supplement. Institutions with
whom Contracts, when authorized, may be made include commercial and savings
banks, insurance companies, pension funds, investment companies, educational
and charitable institutions, and other institutions, but will in all cases be
subject to the approval of the Company. Contracts will not be subject to any
conditions except (i) the
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<PAGE>
purchase by an institution of the Securities covered by its Contracts shall
not at the time of delivery be prohibited under the laws of any jurisdiction
in the United States to which such institution is subject and (ii) if the
Securities are being sold to underwriters, the Company shall have sold to
such underwriters the total principal amount of the Securities less the
principal amount thereof covered by Contracts.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for the Company and its
subsidiaries in the ordinary course of business.
Subject to the approval of the stockholders, the Company may also offer
and sell directly to Mr. Richard E. Rainwater, the Chairman of the Board of
Directors of the Company, and entities owned by him (collectively
"Rainwater") up to 19.73% of any Securities offered pursuant to this
Prospectus, at the same price and on the same terms as the Securities are
otherwise offered, in order to permit Rainwater to maintain the same current
percentage ownership level in the Company. The Company also may offer and
sell to Rainwater, in lieu of such Securities, but on equivalent terms, units
of ownership interest in the Operating Partnership ("Units") that are
exchangeable for Common Stock on a one-for-one basis. No underwriting
compensation will be paid by the Company to underwriters or agents in
connection with any offer and sale of Securities or Units to Rainwater. The
offer of Securities or Units to Rainwater in connection with any offering of
Securities will be disclosed in the applicable Prospectus Supplement.
EXPERTS
The financial statements and schedule incorporated in this Prospectus by
reference to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, as amended, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm
as experts in accounting and auditing. The report of Arthur Andersen LLP
with respect to the combined financial statements and schedules of the
Rainwater Property Group (as defined in the financial statements and schedule
incorporated by reference herein) is based in part on the report of KPMG Peat
Marwick LLP, independent public accountants, on the combined statement of
operations, owners' deficit, and cash flows of The Crescent property and in
reliance upon the authority of KPMG Peat Marwick LLP as experts in accounting
and auditing.
The financial statements incorporated in this Prospectus by reference to
the Company's Current Reports on Form 8-K (i) dated August 2, 1994 and filed
on January 9, 1996, as amended on February 2, 1996 and February 15, 1996,
(ii) dated October 3, 1994 and filed on January 9, 1996, as amended on
February 2, 1996 and February 15, 1996, and (iii) dated April 18, 1996 and
filed on June 5, 1996, respectively, relating to the Caltex House, Regency
Plaza One, Two Renaissance Square, Waterside Commons, Stanford Corporate
Centre, MCI Tower, Denver Marriott City Center, Ptarmigan Place, Albuquerque
Facility, the Hyatt Regency Albuquerque and 301 Congress properties and for
East-West Properties, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and
are included herein in reliance upon the authority of said firm as experts in
giving said reports. The financial statements incorporated in this
Prospectus by reference to the Company's Current Report on Form 8-K dated
October 3, 1994 and filed on January 9, 1996, as amended on February 2, 1996
and February 15, 1996, relating to Spectrum Center have been audited by
Huselton & Morgan, independent public accountants, as indicated in its report
with respect thereto, and are included herein in reliance upon their
authority as experts in accounting and auditing.
LEGAL MATTERS
The legality of the issuance of the Securities will be passed upon for
the Company by Shaw, Pittman, Potts & Trowbridge. Certain legal matters
relating to federal income tax considerations will be passed upon for the
Company by Shaw, Pittman, Potts & Trowbridge, which will rely, as to all
Texas franchise tax matters upon the opinion of Locke Purnell Rain Harrell (A
Professional Corporation), Dallas, Texas.
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<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 16. EXHIBITS.
The following is a list of all exhibits filed as a part of this
Registration Statement on Form S-3, including those incorporated herein by
reference.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<S> <C>
*1.01 Form of Underwriting Agreement(s).
4.01 First Amended and Restated Articles of Incorporation of
Crescent Real Estate Equities, Inc. (filed as Exhibit 3.01 to
the Registrant's Registration Statement on Form S-11
(Registration No. 33-75188) (the "1994 Form S-11") and
incorporated by reference herein).
4.02 Amended and Restated Bylaws of Crescent Real Estate Equities,
Inc. (filed as Exhibit 3.02 to the 1994 Form S-11 and
incorporated by reference herein).
4.03 Form of Stock Certificate (filed as Exhibit 4.01 to the 1994
Form S-11 and incorporated by reference herein).
4.04 First Amended and Restated Agreement of Limited Partnership of
Crescent Real Estate Equities Limited Partnership dated May 5,
1994 (filed as Exhibit 10.01 to the 1994 Form S-11 and
incorporated by reference herein).
5.01 Opinion of Shaw, Pittman, Potts & Trowbridge as to the
legality of the securities being registered by Crescent Real
Estate Equities, Inc. (previously filed).
8.01 Opinion of Shaw, Pittman, Potts & Trowbridge regarding certain
material tax issues relating to Crescent Real Estate Equities,
Inc. (previously filed).
12.01 Statement Regarding Computation of Ratios of Earnings to
Combined Fixed Charges and Preferred Stock Dividends (filed
herewith).
23.01 Consent of Arthur Andersen LLP., Certified Public Accountants,
dated June 3, 1996 (filed herewith).
23.02 Consent of Shaw, Pittman, Potts & Trowbridge (included in its
opinion previously filed as Exhibit 5.01 to this Registration
Statement).
23.03 Consent of KPMG Peat Marwick LLP, Certified Public
Accountants, dated June 3, 1996 (filed herewith).
23.04 Consent of Huselton & Morgan, A Professional Corporation,
Certified Public Accountants, dated June 3, 1996 (filed
herewith).
24.01 Powers of Attorney (previously filed).
</TABLE>
______________________________
* To be filed by amendment or incorporated by reference.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Fort Worth, State of Texas, on the
3rd day of June, 1996.
CRESCENT REAL ESTATE EQUITIES, INC.
By: /s/ GERALD W. HADDOCK
----------------------------------------
Gerald W. Haddock
President and Chief Operating Officer
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<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Richard E. Rainwater*
- ----------------------------------- Director and Chairman of the Board June 3, 1996
Richard E. Rainwater
/s/ John C. Goff* Director and Chief Executive June 3, 1996
- ----------------------------------- Officer
John C. Goff (Principal Executive Officer)
/s/ Gerald W. Haddock Director, President and Chief June 3, 1996
- ----------------------------------- Operating Officer
Gerald W. Haddock
/s/ Dallas E. Lucas Senior Vice President and Chief June 3, 1996
- ----------------------------------- Financial Officer (Principal
Dallas E. Lucas Financial and Accounting Officer)
/s/ Anthony M. Frank*
- ----------------------------------- Director June 3, 1996
Anthony M. Frank
/s/ Morton H. Meyerson*
- ----------------------------------- Director June 3, 1996
Morton H. Meyerson
/s/ William F. Quinn*
- ----------------------------------- Director June 3, 1996
William F. Quinn
/s/ Paul E. Rowsey*
- ----------------------------------- Director June 3, 1996
Paul E. Rowsey, III
*By: /s/ Gerald W. Haddock
-----------------------------
Gerald W. Haddock
Attorney-in-Fact
</TABLE>
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<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE NO.
- ------- ---------------------- --------
<S> <C> <C>
*1.01 Form of Underwriting Agreement(s).
4.01 First Amended and Restated Articles of
Incorporation of Crescent Real Estate Equities,
Inc. (filed as Exhibit 3.01 to the Registrant's
Registration Statement on Form S-11 (Registration
No. 33-75188) (the "1994 Form S-11") and
incorporated by reference herein).
4.02 Amended and Restated Bylaws of Crescent Real
Estate Equities, Inc. (filed as Exhibit 3.02 to
the 1994 Form S-11 and incorporated by reference
herein).
4.03 Form of Stock Certificate (filed as Exhibit 4.01
to the 1994 Form S-11 and incorporated by
reference herein).
4.04 First Amended and Restated Agreement of Limited
Partnership of Crescent Real Estate Equities
Limited Partnership dated May 5, 1994 (filed as
Exhibit 10.01 to the 1994 Form S-11 and
incorporated by reference herein).
5.01 Opinion of Shaw, Pittman, Potts & Trowbridge as
to the legality of the securities being
registered by Crescent Real Estate Equities, Inc.
(previously filed).
8.01 Opinion of Shaw, Pittman, Potts & Trowbridge
regarding certain material tax issues relating to
Crescent Real Estate Equities, Inc. (previously
filed).
12.01 Statement Regarding Computation of Ratios of
Earnings to Combined Fixed Charges and Preferred
Stock Dividends (filed herewith).
23.01 Consent of Arthur Andersen LLP, Certified Public
Accountants, dated June 3, 1996 (filed herewith).
23.02 Consent of Shaw, Pittman, Potts & Trowbridge
(included in its opinion previously filed as
Exhibit 5.01 to this Registration Statement).
23.03 Consent of KPMG Peat Marwick LLP, Certified
Public Accountants, dated June 3, 1996 (filed
herewith).
23.04 Consent of Huselton & Morgan, A Professional
Corporation, Certified Public Accountants, dated
June 3, 1996 (filed herewith).
24.01 Powers of Attorney (previously filed).
</TABLE>
____________________
* To be filed by amendment or incorporated by reference.
<PAGE>
EXHIBIT 12.01
STATEMENT REGARDING COMPUTATION
OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
<PAGE>
CRESCENT REAL ESTATE EQUITIES, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
FOR THE THREE FOR THE YEAR FOR THE PERIOD
MONTHS ENDED ENDED MAY 5, 1994 TO
MARCH 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
-------------- ----------------- -----------------
<S> <C> <C> <C>
Pretax Income from Continuing Operations $ 8,563 $36,358 $12,595
Interest Expense 9,159 18,781 3,493
Amortization of Deferred Financing Costs 983 2,500 923
------- ------- -------
Earnings $18,705 $57,639 $17,011
------- ------- -------
------- ------- -------
Interest Expense 9,159 18,781 3,493
Capitalized Interest 147 916 --
Amortization of Deferred Financing Costs 983 2,500 923
------- ------- -------
Fixed Charges $10,289 $22,197 $ 4,416
------- ------- -------
------- ------- -------
Ratio of Earnings to Fixed Charges 1.82 2.60 3.85
------- ------- -------
------- ------- -------
</TABLE>
<PAGE>
EXHIBIT 23.01
CONSENT OF ARTHUR ANDERSEN LLP,
CERTIFIED PUBLIC ACCOUNTANTS,
DATED JUNE 3, 1996
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Registration Statement on Form S-3 of our
report dated February 2, 1996 included in Crescent Real Estate Equities,
Inc.'s Form 10-K for the year ended December 31, 1995, and of our reports
dated March 11, 1994 on Caltex House, June 30, 1994 on Regency Plaza One,
August 16, 1994 on Waterside Commons, September 9, 1994 on Two Renaissance
Square, February 17, 1995 on East West Properties, May 10, 1995 on MCI Tower
and Denver Marriott City Center, July 14, 1995 on Ptarmigan Place, and
November 17, 1995 on Albuquerque Facility and The Hyatt Regency of
Albuquerque, January 5, 1996 on Stanford Corporate Centre and February
15,1996 on 301 Congress included in Crescent Real Estate Equities, Inc.'s
Form 8-K's and to all references to our Firm included in this Registration
Statement.
Arthur Andersen, LLP
Dallas, Texas
June 3, 1996
<PAGE>
EXHIBIT 23.03
CONSENT OF KPMG PEAT MARWICK LLP,
CERTIFIED PUBLIC ACCOUNTANTS,
DATED JUNE 3, 1996
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Owners of The Crescent:
We consent to the use of our report dated February 28, 1994 incorporated
by reference in this Post Effective Amendment No. 1 to the Registration
Statement on Form S-3 (File No. 33-97794) of Crescent Real Estate Equities,
Inc., relating to the combined financial statements of The Crescent, and to
the reference to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Dallas, Texas
June 3, 1996
<PAGE>
EXHIBIT 23.04
CONSENT OF HUSELTON & MORGAN,
CERTIFIED PUBLIC ACCOUNTANTS,
DATED JUNE 3, 1996
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement on Form S-3 of our audit opinion
dated February 13, 1995 and our review report dated December 28, 1995 as they
relate to the statement of excess of revenues over specific operating expenses
for Spectrum Center, Ltd. for the year ended December 31, 1994 and the
nine-month period ending September 30, 1995, respectively, as included in
Crescent Real Estate Equities, Inc.'s Form 8-K dated October 3, 1994, and to
the reference to our firm under the heading "Experts" in the prospectus.
Huselton & Morgan
June 3, 1996
