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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 14, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CRESCENT REAL ESTATE EQUITIES COMPANY
(FORMERLY KNOWN AS CRESCENT REAL ESTATE EQUITIES, INC.)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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TEXAS 52-1862813
(STATE OR OTHER JURISDICTION OF ORGANIZATION) (IRS EMPLOYER IDENTIFICATION NO.)
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777 MAIN STREET, SUITE 2100
FORT WORTH, TEXAS 76102
TELEPHONE: (817) 877-0477
(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 COMPANY
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:
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ROBERT B. ROBBINS, ESQ. DAVID M. DEAN, ESQ.
SYLVIA M. MAHAFFEY, ESQ. CRESCENT REAL ESTATE EQUITIES COMPANY
SHAW, PITTMAN, POTTS & TROWBRIDGE 777 MAIN STREET, SUITE 2100
2300 N STREET, N.W. FORT WORTH, TEXAS 76102
WASHINGTON, D.C. 20037
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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.
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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CALCULATION OF REGISTRATION FEE
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TYPE OF EACH AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
CLASS OF SECURITIES BEING OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED (1) REGISTERED PER UNIT (2) OFFERING PRICE (2) FEE
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Preferred Shares...............................
Common Shares (3).............................. $1,200,000,000 (4) $1,200,000,000 $363,637(5)
Common Share Warrants..........................
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(1) Securities registered hereunder may be sold separately, together or as units
with other Securities registered hereunder.
(2) Estimated solely for purposes of calculating the registration fee. The
aggregate maximum public offering price of all Securities issued pursuant to
this Registration Statement will not exceed $1,200,000,000.
(3) Including such indeterminate number of Common Shares as may from time to
time be issued at indeterminate prices or issuable upon exercise of the
Common Share Warrants to purchase Common Shares registered hereunder, as the
case may be.
(4) Omitted pursuant to General Instruction II.D of Form S-3 under the
Securities Act of 1933, as amended.
(5) Calculated pursuant to Rule 457(o) of the rules and regulations under the
Securities Act of 1933, as amended.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION,
DATED FEBRUARY 14, 1997
$1,200,000,000
[LOGO]
CRESCENT
REAL ESTATE EQUITIES COMPANY
PREFERRED SHARES, COMMON SHARES AND COMMON SHARE WARRANTS
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Crescent Real Estate Equities Company may from time to time offer, in one
or more series, (i) preferred shares of beneficial interest, par value $0.01 per
share ("Preferred Shares"), (ii) common shares of beneficial interest, par value
$0.01 per share ("Common Shares") and (iii) warrants exercisable for Common
Shares ("Common Share Warrants"), with an aggregate public offering price of up
to $1,200,000,000. The Preferred Shares, Common Shares and Common Share Warrants
(collectively, the "Securities") may be offered, separately or together, in
separate series, in amounts, at prices and on terms to be determined at the time
of the offering and 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 Shares, the
specific title and stated value, any dividend, liquidation, redemption,
conversion, voting and other rights, and the offering price; (ii) in the case of
Common Shares, any public offering price; and (iii) in the case of Common Share
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 2 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 , 1997
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THE COMPANY
Crescent Real Estate Equities Company (collectively with its subsidiaries,
the "Company") is a fully integrated real estate company operating as a real
estate investment trust for federal income tax purposes (a "REIT"). Crescent
Real Estate Equities Company is a Texas real estate investment trust which
became the successor to Crescent Real Estate Equities, Inc., a Maryland
corporation (the "Predecessor Corporation"), on December 31, 1996, through the
merger (the "Merger") of the Predecessor Corporation and CRE Limited Partner,
Inc., a Delaware corporation, into the Company. The term "Company" includes,
unless the context otherwise requires, the Predecessor Corporation, Crescent
Real Estate Equities Limited Partnership, a Delaware limited partnership (the
"Operating Partnership"), and the other subsidiaries of the Company.
As of December 31, 1996, the Company directly or indirectly owned a
portfolio of real estate assets (the "Properties") located primarily in 17
metropolitan submarkets in Texas and Colorado. The Properties include 53 office
properties (the "Office Properties") with an aggregate of approximately 16.3
million net rentable square feet, four full-service hotels with a total of 1,471
rooms and two destination health and fitness resorts (the "Hotel Properties"),
six retail properties (the "Retail Properties") with an aggregate of
approximately .6 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 condominium/townhome
developments (the "Residential Development Properties"). In addition, the
Company owns one mortgage note secured by a Class A office property.
The Company provides management, leasing and development services with
respect to certain of its Properties. As of December 31, 1996, the Company had
approximately 200 employees and its executive officers had over 100 years of
combined experience in the real estate industry.
The Company conducts all of its business through the Operating Partnership
and its other subsidiaries and indirectly through the Operating Partnership's
interest in the Residential Development Corporations. Crescent Real Estate
Equities, Ltd., the sole general partner of the Operating Partnership (the
"General Partner") controls the Operating Partnership, and the Company is the
sole stockholder of the General Partner. In addition, as of December 31, 1996,
the Company owned an approximately 83.4% limited partner interest in the
Operating Partnership.
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 metropolitan areas of Dallas-Fort Worth, Texas,
Houston, Texas and Denver, Colorado. Due to this geographic concentration, any
deterioration in economic conditions in the Dallas-Fort Worth, Houston or 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.
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RISKS ASSOCIATED WITH THE ACQUISITION OF SUBSTANTIAL NEW ASSETS
From the closing of the Company's initial public offering in May 1994
through December 31, 1996, the Company has experienced rapid growth, increasing
its total assets by more than 318 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
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 Trust Managers, 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, Trust Manager and Vice Chairman of the Board of
Trust Managers, and Gerald W. Haddock, President, Chief Executive Officer and
Trust Manager, 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 shareholders, 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, 1996,
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 shareholders 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 was lost. The additional tax liability resulting from the
failure to so qualify would significantly reduce the amount of funds available
for
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distribution to shareholders. The applicable Prospectus Supplement will contain
information, where applicable, as to all material U.S. federal income tax
considerations relevant to an investment in 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 targeted at approximately 40 percent, although this policy is
subject to reevaluation and modification by the Company and could be increased
above 40 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 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 Shareholder
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 Board of Trust
Managers. The Board of Trust Managers generally may revise these policies, from
time to time, without shareholder 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 shareholder approval.
Hotel Risks. The Company has leased the Hotel Properties, and the lessee
of each Hotel Property, rather than the Company, is 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 between the years 2004 and 2006. As a result, the
Company will participate in the economic operations of the Hotel Properties only
through its indirect participation in gross sales. To the extent that operations
of the Hotel Properties may affect the ability of the lessees 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. The Company, therefore, will be
dependent upon the lessees 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 lessees 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 lessees 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 Shares set forth in the Company's Restated
Declaration of Trust (the "Declaration of Trust") 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 shareholders'
ability to realize a premium over the then-prevailing market
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price for the Common Shares in connection with such a transaction. See
"Description of Common Shares -- 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 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.
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
Investment Risks. In implementing its investment strategies, the Company
has invested in a broad range of real estate assets and in the future intends to
invest in additional types of real estate assets not currently included in its
portfolio. There can be no assurance, however, that the Company will be able to
implement its investment strategies successfully in the future. As a result of
its real estate investments, the Company will be subject to risks, in addition
to general real estate risks, relating to the specific assets and asset types in
which it invests. 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. Similarly, the Company is
subject to the risk that the success of the Hotel Properties will be highly
dependent upon their ability to compete in such features as access, location,
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quality of accommodations, room rate structure and, to a lesser extent, the
quality and scope of other amenities such as food and beverage facilities. In
addition, the Company will be subject to risks relating to the approximately 85
hospital properties which it will own and lease to a single tenant, including
the effect of any failure of the tenant under the lease to make the required
lease payments (which are expected to equal more than 10% of the Company's
current base rental revenues); the effects of factors such as regulation of the
healthcare industry and limitations on government reimbursement programs on the
ability of the tenant to make the required lease payments; and the limited
number of replacement tenants in the event of a default under, or non-renewal
of, the lease.
Risks of Joint Ownership of Assets. The Company has the right to invest,
and in certain cases has invested, 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.
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 FIXED CHARGES AND PREFERRED SHARES 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 nine months ended September 30, 1996 was 1.77. There were no preferred
shares outstanding for any of the periods shown above. Accordingly, the ratio of
earnings to combined fixed charges and preferred shares 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 SHARES
GENERAL
The Declaration of Trust of the Company authorizes the Board of Trust
Managers to issue up to 100,000,000 preferred shares of beneficial interest, par
value $0.01 per share (the "Preferred Shares"). See "Certain Provisions of the
Declaration of Trust, Bylaws and Texas Law -- Preferred Shares." The Declaration
of Trust also authorizes the issuance of up to an aggregate of 100,000,000
Excess Shares issuable in exchange
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for Preferred Shares as described below at "Description of Common
Shares -- Ownership Limits and Restrictions on Transfer."
Under the Company's Declaration of Trust, the Board of Trust Managers may
from time to time establish and issue one or more series of Preferred Shares
without shareholder approval. The Board of Trust Managers may classify or
reclassify any unissued Preferred Shares 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 Trust Managers has
the power to establish the preferences and rights of each series of Preferred
Shares, it may afford the holders of any series of Preferred Shares preferences,
powers and rights, voting or otherwise, senior to the rights of holders of
Common Shares. Preferred Shares will, when issued, be fully paid and
nonassessable.
The following description of Preferred Shares sets forth certain general
terms and provisions of Preferred Shares to which any Prospectus Supplement may
relate. The statements below describing Preferred Shares are in all respects
subject to and qualified in their entirety by reference to the applicable
provisions of the Company's Declaration of Trust and the Company's Amended and
Restated Bylaws (the "Bylaws").
The Prospectus Supplement relating to any Preferred Shares offered thereby
will contain the specific terms thereof, including, without limitation: (i) the
title and stated value of such Preferred Shares; (ii) the number of such
Preferred Shares offered, the liquidation preference per share and the offering
price of such Preferred Shares; (iii) the dividend rate(s), period(s) and/or
payment date(s) or method(s) of calculation thereof applicable to such Preferred
Shares; (iv) the date from which dividends on such Preferred Shares shall
accumulate, if applicable; (v) the procedures for any auction and remarketing,
if any, for such Preferred Shares; (vi) the provision for a sinking fund, if
any, for such Preferred Shares; (vii) the provision for redemption, if
applicable, of such Preferred Shares; (viii) any listing of such Preferred
Shares on any securities exchange; (ix) the terms and conditions, if applicable,
upon which such Preferred Shares will be convertible into Common Shares 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 Shares; (xi) a discussion of federal income tax considerations
applicable to such Preferred Shares; (xii) the relative ranking and preferences
of such Preferred Shares 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 Shares ranking senior to or on a parity
with such series of Preferred Shares 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, Preferred Shares
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
Shares of the Company, and to all equity securities ranking junior to such
Preferred Shares, (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 Shares; 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 Shares. The term "equity securities" does
not include convertible debt securities.
DIVIDENDS
Holders of Preferred Shares of each series will be entitled to receive,
when, as and if declared by the Board of Trust Managers, 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 Trust Managers of the
Company.
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Dividends on any series of Preferred Shares 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 Trust Managers fails to
declare a dividend payable on a dividend payment date on any series of Preferred
Shares for which dividends are noncumulative, then the holders of such series of
Preferred Shares 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 Preferred
Shares 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
Shares of such series for any period unless (i) if such series of Preferred
Shares 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 Shares of such
series for all past dividend periods and the then current dividend period or
(ii) if such series of Preferred Shares does not have a cumulative dividend,
full dividends for the then current dividend period 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 Shares 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 Shares of any series and the shares
of any other series of Preferred Shares ranking on a parity as to dividends with
the Preferred Shares of such series, all dividends declared upon Preferred
Shares of such series and any other series of Preferred Shares ranking on a
parity as to dividends with such Preferred Shares shall be declared pro rata so
that the amount of dividends declared per Preferred Share of such series and
such other series of Preferred Shares shall in all cases bear to each other the
same ratio that accrued dividends per share on the Preferred Shares of such
series (which shall not include any accumulation in respect of unpaid dividends
for prior dividend periods if such Preferred Shares do not have a cumulative
dividend) and such other series of Preferred Shares 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 Shares of such series which may be
in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Shares has a cumulative dividend, full cumulative
dividends on the Preferred Shares 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 Shares does not have a
cumulative dividend, full dividends on the Preferred Shares 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 Shares or other capital shares
ranking junior to the Preferred Shares 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 Shares, or any other capital shares of the Company
ranking junior to or on a parity with the Preferred Shares of such series as to
dividends or upon liquidation, nor shall any Common Shares, or any other capital
shares of the Company ranking junior to or on a parity with the Preferred Shares
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 Shares of such series as to dividends
and upon liquidation).
REDEMPTION
If so provided in the applicable Prospectus Supplement, any series of
Preferred Shares 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 Shares that is
subject to mandatory redemption will specify the number of such Preferred Shares
that shall be redeemed by the Company in each
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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 Preferred Shares 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 Preferred Shares of any series is payable only from
the net proceeds of the issuance of capital shares of the Company, the terms of
such Preferred Shares 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 Shares
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
Shares has a cumulative dividend, full cumulative dividends on all Preferred
Shares 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 Shares does not have a cumulative dividend, full dividends
of the Preferred Shares 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 Preferred Shares of
any series shall be redeemed unless all outstanding Preferred Shares of such
series are simultaneously redeemed; provided, however, that the foregoing shall
not prevent the purchase or acquisition of Preferred Shares 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 Shares of
such series. In addition, unless (i) if such series of Preferred Shares has a
cumulative dividend, full cumulative dividends on all outstanding Preferred
Shares 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
all past dividends periods and the then current dividend period, and (ii) if
such series of Preferred Shares does not have a cumulative dividend, full
dividends on the Preferred Shares 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 Shares of
such series (except by conversion into or exchange for capital shares of the
Company ranking junior to the Preferred Shares of such series as to dividends
and upon liquidation); provided, however, that the foregoing shall not prevent
the purchase or acquisition of Preferred Shares 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 Shares of such series.
If fewer than all of the outstanding Preferred Shares 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 Shares 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 Shares 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 Preferred Shares of any
series are to be redeemed, the notice mailed to each such holder thereof shall
also specify the number of Preferred Shares to be redeemed from each such
holder. If notice of redemption of any Preferred Shares 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 Preferred Shares so called for
redemption, then from and after the redemption date dividends will cease to
accrue on such Preferred Shares, and all rights of the holders of such shares
will terminate, except the right to receive the redemption price.
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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 Shares or any other class or series of capital
shares of the Company ranking junior to the Preferred Shares in the distribution
of assets upon any liquidation, dissolution or winding up of the Company, the
holders of each series of Preferred Shares 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
Shares 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 Shares 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 Shares 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 Shares in the distribution of assets, then the holders of the
Preferred Shares 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.
If liquidating distributions shall have been made in full to all holders of
Preferred Shares, 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 Shares 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 Preferred Shares 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.
Unless provided otherwise for any series of Preferred Shares, so long as
any Preferred Shares 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 Shares 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 Shares
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
Declaration of Trust or the designating amendment for such series of Preferred
Shares, 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 Shares 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 Preferred Shares 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 Shares and provided further
that (x) any increase in the amount of the authorized Preferred Shares or the
creation or issuance of any other series of Preferred Shares, or (y) any
increase in the amount of authorized shares of such series or any other series
of Preferred Shares, in each case ranking on a parity with or junior to the
Preferred Shares 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.
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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 Preferred Shares of such series shall have been
redeemed or called for redemption and sufficient funds shall have been deposited
in trust to effect such redemption.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Shares
is convertible into Common Shares will be set forth in the applicable Prospectus
Supplement relating thereto. Such terms will include the number of Common Shares
into which the Preferred Shares 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 Shares 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 Shares.
SHAREHOLDER LIABILITY
Under Texas law, no shareholder, including holders of Preferred Shares,
shall be personally liable for any contractual obligation of the Company on the
basis (i) that the person is or was the alter ego of the Company, or (ii) of
actual or constructive fraud, a sham to perpetrate a fraud, or similar theory,
unless the obligee demonstrates that the shareholder caused the Company to be
used for the purpose of perpetrating and did perpetrate an actual fraud on the
obligee primarily for the direct personal benefit of the shareholder.
RESTRICTIONS ON OWNERSHIP
As discussed below under "Description of Common Shares -- 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 Shares of the Company. Therefore, the designating amendment for each
series of Preferred Shares may contain provisions restricting the ownership and
transfer of Preferred Shares.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Preferred Shares will be set forth
in the applicable Prospectus Supplement.
DESCRIPTION OF COMMON SHARES
GENERAL
The Declaration of Trust of the Company authorizes the Board of Trust
Managers to issue up to 250,000,000 common shares of beneficial interest, par
value $0.01 per share (the "Common Shares"), as well as 250,000,000 Excess
Shares, par value $0.01 per share, issuable in exchange for Common Shares as
described below at "-- Ownership Limits and Restrictions on Transfer." The
Common Shares are listed on the New York Stock Exchange under the symbol "CEI."
Subject to such preferential rights as may be granted by the Board of Trust
Managers in connection with the future issuance of Preferred Shares, holders of
Common Shares 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 Shares by the Board of Trust Managers in its discretion
from funds legally available therefor. In the event of the liquidation,
dissolution or winding up of the Company, holders of Common Shares 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 Shares.
Holders of Common Shares have no subscription,
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redemption, conversion or preemptive rights. Matters submitted for shareholder
approval generally require a majority vote of the shares present and voting
thereon.
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 Declaration of Trust
provides 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 Common Shares (the "Common Shares Ownership Limit") or more than
9.9% of the issued and outstanding shares of any series of Preferred Shares (the
"Preferred Shares Ownership Limit"), except that Mr. Rainwater, the Chairman of
the Board of Trust Managers, and certain related persons together may own, or be
deemed to own, by virtue of certain attribution provisions of the Code, up to
9.5% (the "Rainwater Ownership Limit") of the issued and outstanding Common
Shares (collectively, the "Ownership Limit"). The Board of Trust Managers, upon
receipt of a ruling from the IRS, an opinion of counsel, or other evidence
satisfactory to the Board of Trust Managers, 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 Trust
Managers 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 for federal income tax purposes.
In addition, the Board of Trust Managers, from time to time, may increase
the Common Shares Ownership Limit, except that (i) the Common Shares 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 and (ii) the Common Shares Ownership Limit
may not be increased to a percentage that is greater than 9.9%. Under the
Declaration of Trust, neither the Preferred Shares Ownership Limit nor the
Rainwater Ownership Limit may be increased. The Board of Trust Managers also may
reduce the Rainwater Ownership Limit, with the written consent of Mr. Rainwater,
after any transfer permitted by the Declaration of Trust. Prior to any
modification of the Ownership Limit or the Rainwater Ownership Limit with
respect to any person, the Board of Trust Managers will have the right to
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.
Under the Declaration of Trust, 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.
The Declaration of Trust of the Company also provides that if an issuance,
transfer or acquisition of Equity Securities (i) would result in a holder
exceeding the Ownership Limit, (ii) would cause the Company to be beneficially
owned by less than 100 persons, (iii) would result in the Company being "closely
held" within the meaning of Section 856(h) of the Code or (iv) would otherwise
result in the failure of the Company 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. Pursuant to the Declaration of Trust, 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 Excess Shares. A holder
of Excess Shares is not
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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 Shares pursuant to the Company's
Declaration of Trust will be required to be repaid to the Company upon demand.
Excess Shares will be subject to repurchase by the Company at its election. The
purchase price of any Excess Shares will be equal to the lesser of (i) the price
in such proposed transaction or (ii) either (a) 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 Company or its designee determines
to exercise its repurchase right; or (b) if the shares are not then so listed,
such price for the shares on the principal exchange (including the Nasdaq
National Market) on which the shares are listed; or (c) if the shares are not
then listed on a national securities exchange, the latest quoted price for the
shares; or (d) 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 (e) if such system is no longer in use, the principal automated
quotation system then in use; or (f) 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 (g) if there is no
such market maker or such closing prices otherwise are unavailable, the fair
market value, as determined by the Board of Trust Managers in good faith, on the
last trading day immediately preceding the day on which notice of such proposed
purchase is sent by the Company. The Declaration of Trust also establishes
certain restrictions relating to transfers of any Exchange Shares that may be
issued. If such transfer restrictions are determined to be void or invalid by
virtue of any legal decision, statute, rule or regulation, then the Company will
have the option to deem the intended transferee of any Excess Shares to have
acted as an agent on behalf of the Company in acquiring such Excess Shares and
to hold such Excess Shares on behalf of the Company.
Under the Declaration of Trust, the Company has the authority at any time
to waive the requirement that Excess Shares be issued or be deemed outstanding
in accordance with the provisions of the Declaration of Trust if the issuance of
such Excess Shares or the fact that such Excess Shares 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 issued by the Company representing Equity Securities will
bear a legend referring to the restrictions described above.
The Declaration of Trust of the Company also provides 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 Trust Managers), must file an affidavit with the Company
containing information specified in the Declaration of Trust no later than
January 31 of each year. In addition, each shareholder, upon demand, shall be
required to disclose to the Company in writing such information with respect to
the direct, indirect and constructive ownership of shares as the trust managers
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 inhibiting
or impeding acquisitions of control of the Company by a third party. See
"Certain Provisions of the Declaration of Trust, Bylaws and Texas Law."
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Common Shares is The First
National Bank of Boston.
DESCRIPTION OF COMMON SHARE WARRANTS
The Company may issue Common Share Warrants for the purchase of Common
Shares. Common Share 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 Share
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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 Share
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 Share
Warrants. The following sets forth certain general terms and provisions of the
Common Share Warrants offered hereby. Further terms of the Common Share Warrants
and the applicable Warrant Agreements will be set forth in the applicable
Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of the Common
Share Warrants in respect of which this Prospectus is being delivered,
including, where applicable, the following: (i) the title of such Common Share
Warrants; (ii) the aggregate number of such Common Share Warrants; (iii) the
price or prices at which such Common Share Warrants will be issued; (iv) the
number of shares of Common Shares purchasable upon exercise of such Common Share
Warrants; (v) the designation and terms of any other Securities offered thereby
with which such Common Share Warrants are to be issued and the number of such
Common Share Warrants issued with each such Security offered thereby; (vi) the
date, if any, on and after which such Common Share Warrants and the related
Common Shares will be separately transferable; (vii) the price at which the
Common Shares purchasable upon exercise of such Common Share Warrants may be
purchased; (viii) the date on which the right to exercise such Common Share
Warrants shall commence and the date on which such right shall expire; (ix) the
minimum or maximum number of such Common Share 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 Share
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 Share Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such Common
Share Warrants.
Reference is made to the section captioned "Description of Common Shares"
for a general description of the Common Shares to be acquired upon the exercise
of the Common Share Warrants, including a description of certain restrictions on
the ownership of Common Shares.
CERTAIN PROVISIONS OF THE DECLARATION OF TRUST,
BYLAWS AND TEXAS LAW
The Declaration of Trust 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 Trust
Managers. 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 only a summary of the terms of the
Declaration of Trust and Bylaws (copies of which have been filed as exhibits to
the Registration Statement of which this Prospectus forms a part). See
"Description of Common Shares -- Ownership Limits and Restrictions on Transfer."
STAGGERED BOARD OF TRUST MANAGERS
The Declaration of Trust and the Bylaws provide that the Board of Trust
Managers will be divided into three classes of trust managers, each class
constituting approximately one-third of the total number of trust managers, with
the classes serving staggered three-year terms. The classification of the Board
of Trust Managers will have the effect of making it more difficult for
shareholders to change the composition of the Board of Trust Managers, because
only a minority of the trust managers are up for election, and may be replaced
by vote of the shareholders, at any one time. The Company believes, however,
that the longer terms
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associated with the classified Board of Trust Managers 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 capital shares 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 shareholders.
Accordingly, under certain circumstances shareholders could be deprived of
opportunities to sell their Common Shares at a higher price than might otherwise
be available.
NUMBER OF TRUST MANAGERS; REMOVAL; FILLING VACANCIES
Subject to any rights of holders of Preferred Shares to elect additional
trust managers under specified circumstances ("Preferred Holders' Rights"), the
Declaration of Trust provides that the number of trust managers will be fixed
by, or in the manner provided in, the Bylaws, but must not be more than 25 nor
less than one. See "Description of Preferred Shares -- Voting Rights" below. In
addition, the Bylaws provide that, subject to any Preferred Holders' Rights, the
number of trust managers will be fixed by the Board of Trust Managers, but must
not be more than 25 or less than three. In addition, the Bylaws provide that,
subject to any Preferred Holders' Rights, and unless the Board of Trust Managers
otherwise determines, any vacancies (other than vacancies created by an increase
in the total number of trust managers) will be filled by the affirmative vote of
a majority of the remaining trust managers, although less than a quorum, and any
vacancies created by an increase in the total number of trust managers may be
filled by a majority of the entire Board of Trust Managers. Accordingly, the
Board of Trust Managers could temporarily prevent any shareholder from enlarging
the Board of Trust Managers and then filling the new trust manager position with
such shareholder's own nominees.
The Declaration of Trust and the Bylaws provide that, subject to any
Preferred Holders' Rights, trust managers 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 entitled to vote generally in the election of trust
managers, voting together as a single class.
RELEVANT FACTORS TO BE CONSIDERED BY THE BOARD OF TRUST MANAGERS
The Declaration of Trust provides that, in determining what is in the best
interest of the Company in evaluating a "business combination," "change in
control" or other transaction, a trust manager 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 shareholders, including
shareholders, 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 Trust Managers 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 shareholders.
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ADVANCE NOTICE PROVISIONS FOR SHAREHOLDER NOMINATIONS AND SHAREHOLDER PROPOSALS
The Bylaws provide for an advance notice procedure for shareholders to make
nominations of candidates for trust manager or bring other business before an
annual meeting of shareholders of the Company (the "Shareholder Notice
Procedure").
Pursuant to the Shareholder Notice Procedure (i) only persons who are
nominated by, or at the direction of, the Board of Trust Managers, or by a
shareholder who has given timely written notice containing specified information
to the Secretary of the Company prior to the meeting at which trust managers are
to be elected, will be eligible for election as trust managers 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 Trust Managers or by a shareholder who has given timely written notice to the
Secretary of the Company of such shareholder's intention to bring such business
before such meeting. In general, for notice of shareholder nominations or
proposed business to be conducted at an annual meeting to be timely, such notice
must be received 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 shareholders to give the Company advance notice of
nominations and other business is to afford the Board of Trust Managers 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 Trust Managers, to inform shareholders
and make recommendations about such nominees or business, as well as to ensure
an orderly procedure for conducting meetings of shareholders. Although the
Bylaws do not give the Board of Trust Managers power to block shareholder
nominations for the election of trust managers or proposal for action, they may
have the effect of discouraging a shareholder from proposing nominees or
business, precluding a contest for the election of trust managers or the
consideration of shareholder proposals if procedural requirements are not met,
and deterring third parties from soliciting proxies for a non-management
proposal or slate of trust managers, without regard to the merits of such
proposal or slate.
PREFERRED SHARES
The Declaration of Trust authorizes the Board of Trust Managers to
establish one or more series of Preferred Shares and to determine, with respect
to any series of Preferred Shares, the preferences, rights and other terms of
such series. See "Description of Preferred Shares." The Company believes that
the ability of the Board of Trust Managers to issue one or more series of
Preferred Shares will provide the Company with increased flexibility in
structuring possible future financings and acquisitions, and in meeting other
corporate needs. The authorized Preferred Shares are available for issuance
without further action by the Company's shareholders, 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 Trust Managers has no present intention to do so, it
could, in the future, issue a series of Preferred Shares which, due to its
terms, could impede a merger, tender offer or other transaction that some, or a
majority, of the Company's shareholders might believe to be in their best
interests or in which shareholders might receive a premium over then prevailing
market prices for their Common Shares.
AMENDMENT OF DECLARATION OF TRUST
The Declaration of Trust provides that it may be amended only by the
affirmative vote of the holders of not less than two-thirds of the votes
entitled to be cast, except that the provisions of the Declaration of Trust
relating to "business combinations" or "control shares" (as described below
under "-- Business Combinations" and "-- Control Share Acquisitions") may be
amended only with the affirmative vote of 80% of the votes entitled to be cast,
voting together as a single class.
RIGHTS TO PURCHASE SECURITIES AND OTHER PROPERTY
The Declaration of Trust authorizes the Board of Trust Managers, subject to
any rights of holders of any series of Preferred Shares, to create and issue
rights entitling the holders thereof to purchase from the
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Company shares of beneficial interest 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 Trust Managers. This provision is intended to confirm
the authority of the Board of Trust Managers 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 Declaration of Trust 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 the Company and any person who beneficially owns,
directly or indirectly, 10% or more of the voting power of the Company's shares
is (an "Interested Shareholder"), subject to certain exemptions. In general, the
Declaration of Trust provides that an Interested Shareholder or any affiliate
thereof may not engage in a "business combination" with the Company for a period
of five years following the date he becomes an Interested Shareholder.
Thereafter, pursuant to the Declaration of Trust, such transactions must be (i)
approved by the Board of Trust Managers of the Company and (ii) approved by the
affirmative vote of at least 80% of the votes entitled to be cast by holders of
voting shares other than voting shares held by the Interested Shareholder with
whom the business combination is to be effected, unless, among other things, the
holders of Common Shares receive a minimum price (as defined in the Declaration
of Trust) for their shares and the consideration is received in cash or in the
same form as previously paid by the Interested Shareholder for his shares. These
provisions of the Declaration of Trust do not apply, however, to business
combinations that are approved or exempted by the Board of Trust Managers of the
Company prior to the time that the Interested Shareholder becomes an Interested
Shareholder.
CONTROL SHARE ACQUISITIONS
The Declaration of Trust provides that "control shares" of the Company
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
shareholders, excluding shares owned by the acquiror, officers of the Company
and employees of the Company who are also trust managers. Accordingly, "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 shareholder approval. A "control share acquisition" is defined as the
acquisition of control shares, subject to certain exemptions enumerated in the
Declaration of Trust.
The Declaration of Trust provides that 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
Trust Managers of the Company to call a special meeting of shareholders 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 Declaration of Trust permits the Company
itself to present the question at any shareholders' meeting.
Pursuant to the Declaration of Trust, if voting rights are not approved at
a shareholders' meeting or if the acquiring person does not deliver an acquiring
person statement as required by the Declaration of Trust, then, subject to
certain conditions and limitations set forth in the Declaration of Trust, the
Company will have the right to 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 the absence of voting rights of the control
shares, as of the date of the last control share acquisition or of any meeting
of shareholders at which the voting rights of such shares are considered and not
approved. Under the Declaration of Trust, if voting rights for control shares
are approved at a shareholders' meeting and, as a result, the acquiror would be
entitled to vote a majority of the shares entitled to vote, all other
shareholders will have the rights of dissenting shareholders under the Texas
Real Estate Investment Trust Act (the "TRA"). The Declaration of Trust provides
that the fair value of the shares for purposes of such appraisal rights may not
be less than the highest price per share paid by the
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acquiror in the control share acquisition, and that certain limitations and
restrictions of the TRA otherwise applicable to the exercise of dissenters'
rights do not apply.
These provisions of the Declaration of Trust do not apply to shares
acquired in a merger, consolidation or share exchange if the Company is a party
to the transaction, or if the acquisition is approved or excepted by the
Declaration of Trust or Bylaws of the Company prior to a control share
acquisition.
OWNERSHIP LIMIT
The limitation on ownership of shares of Common Shares set forth in the
Company's Declaration of Trust, as well as the provisions of the TRA, 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
Shares -- 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 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,
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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 Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or sold pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(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(b) 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.
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 Declaration of Trust 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 Shares -- Ownership Limits and Restrictions on
Transfer." 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
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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 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.
AVAILABLE INFORMATION
The Company is subject to the information requirements of 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: Citicorp Center, Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661-2511 and Seven World Trade Center, Suite 1300, 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. The Commission also maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. In addition, the Company's Common Shares are 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, of
which this Prospectus is a part, under 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.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed under the Exchange Act by the
Company or the Predecessor Corporation (Exchange Act file number 1-13038) with
the Commission and are incorporated herein by reference:
1. The Predecessor Corporation's Registration Statement on Form 8-A
filed on April 18, 1994 registering the common stock, par value
$0.01 per share, of the Predecessor Corporation under Section 12(b)
of the Exchange Act.
2. The Proxy Statement in connection with the Predecessor Corporation's
1996 Annual Meeting of Stockholders.
3. The Predecessor Corporation's Annual Report on Form 10-K for the
year ended December 31, 1995, as amended on April 29, 1996.
4. The Predecessor Corporation's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996.
5. The Predecessor Corporation's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996.
6. The Predecessor Corporation's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996, as amended on February 13, 1997.
7. The Predecessor Corporation'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.
8. The Predecessor Corporation'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.
9. The Predecessor Corporation'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.
10. The Predecessor Corporation's Current Report on Form 8-K dated April
18, 1996 and filed June 5, 1996.
11. The Predecessor Corporation's Current Report on Form 8-K dated June
17, 1996 and filed September 11, 1996.
12. The Predecessor Corporation's Current Report on Form 8-K dated
August 15, 1996 and filed September 11, 1996, as amended on
September 27, 1996 and November 12, 1996.
13. The Predecessor Corporation's Current Report on Form 8-K dated
September 27, 1996 and filed September 27, 1996.
14. The Predecessor Corporation's Current Report on Form 8-K dated
October 4, 1996 and filed October 4, 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
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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 Company, 777 Main
Street, Suite 2100, Fort Worth, Texas 76102, Attention: Company Secretary
(telephone number: (817) 877-0477).
EXPERTS
The financial statements and schedule incorporated in this Prospectus by
reference to the Predecessor Corporation'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 giving said reports. 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 Predecessor Corporation'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, (iii) dated April 18, 1996 and filed on
June 5, 1996, and (iv) dated August 15, 1996 and filed on September 11, 1996, as
amended on September 27, 1996 and November 12, 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, 301 Congress and
Greenway Plaza 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, except that certain
financial statements incorporated herein by reference to the Predecessor
Corporation's Current Report on Form 8-K, dated August 15, 1996 and filed on
September 11, 1996, as amended on September 27, 1996 and November 12, 1996,
relating to Greenway Plaza have been audited by Grant Thornton LLP, independent
certified public accountants, as indicated in their report with respect thereto,
and are included herein in reliance upon the authority of Grant Thornton LLP as
experts in accounting and auditing in giving said reports. The financial
statements incorporated in this Prospectus by reference to the Predecessor
Corporation'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, P.C., 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, Washington, D.C. 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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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses to be incurred in connection with the issuance and
distribution of the Securities covered by this Registration Statement, all of
which will be paid by the Company, are as follows:
<TABLE>
<S> <C>
Registration Fee.......................................................... $363,637
NASD Filing Fee........................................................... $ 30,500
Printing, Engraving and Filing Expenses................................... $ *
Accounting Fees and Expenses.............................................. $ *
Legal Fees and Expenses................................................... $ *
Blue Sky Fees and Expenses................................................ $ *
Miscellaneous............................................................. $ *
--------
Total..................................................................... $ *
========
</TABLE>
- ------------------
* To be supplied by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Declaration of Trust provides that the liability of each
trust manager for monetary damages shall be eliminated to the fullest extent
permitted by applicable law. In general, under current Texas law, a trust
manager is liable to the trust only for liabilities arising from such trust
manager's own willful misfeasance or willful malfeasance or gross negligence.
The Declaration of Trust also provides that no amendment thereto may limit or
eliminate this limitation of liability with respect to events occurring prior to
the effective date of such amendment.
The Company's Declaration of Trust provides that the trust managers and
officers shall be indemnified to the maximum extent permitted by Texas law.
Under current Texas law, the trust will indemnify a person who was, is, or is
threatened to be made a named defendant or respondent in a proceeding because
the person is or was a trust manager or officer if it is determined that the
person (i) conducted himself in good faith; (ii) reasonably believed: (a) in the
case of conduct in his official capacity as a trust manager or officer of the
real estate investment trust, that his conduct was in the real estate investment
trust's best interests; and (b) in all other cases, that his conduct was at
least not opposed to the real estate investment trust's best interests; and
(iii) in the case of any criminal proceeding, had no reasonable cause to believe
that his conduct was unlawful. Except to the extent provided in the following
sentence, a trust manager or officer may not be indemnified (i) in respect of a
proceeding in which the person is found liable on the basis that personal
benefit was improperly received by him, whether or not the benefit resulted from
an action taken in the person's official capacity; or (ii) in which the person
is found liable to the real estate investment trust. Notwithstanding the
foregoing, a person may be indemnified against judgments, penalties (including
excise and similar taxes), fines, settlements, and reasonable expenses actually
incurred by the person in connection with the proceeding; provided that if the
person is found liable to the real estate investment trust or is found liable on
the basis that personal benefit was improperly received by the person, the
indemnification (i) is limited to reasonable expenses actually incurred by the
person in connection with the proceeding, and (ii) shall not be made in respect
of any proceeding in which the person shall have been found liable for willful
or intentional misconduct in the performance of his duty to the real estate
investment trust. In addition, the Company's Declaration of Trust and Bylaws
require it to pay or reimburse, in advance of the final disposition of a
proceeding, reasonable expenses incurred by a present or former trust manager or
officer made a party to a proceeding by reason of his status as a trust manager
or officer, provided that the Company shall have received (i) a written
affirmation by the trust manager or officer of his good faith belief that he has
met the standard of conduct necessary for indemnification by the Company as
authorized by the Bylaws and (ii) a written undertaking by or on his behalf to
repay the amount paid or reimbursed by the Company if it shall ultimately be
determined that the standard of conduct was not met. The Company's Declaration
of Trust and Bylaws also permit the Company
II-1
<PAGE> 25
to provide indemnification, payment or reimbursement of expenses to any employee
or agent of the Company in such capacity. Any indemnification, payment or
reimbursement of the expenses permitted by the Declaration of Trust and Bylaws
shall be furnished in accordance with the procedures provided for
indemnification and payment or reimbursement of expenses under Texas Real Estate
Investment Trust Act for trust managers.
The Operating Partnership Agreement contains indemnification provisions
comparable to those contained in the Declaration of Trust.
The Company carries insurance that purports to insure officers and trust
managers of the Company against certain liabilities incurred by them in the
discharge of their official functions.
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
- ----------- ---------------------------------------------------------------------------------
<C> <C> <S>
*1.01 -- Form of Underwriting Agreement(s).
4.01 -- Restated Declaration of Trust of Crescent Real Estate Equities Company.
4.02 -- Amended and Restated Bylaws of Crescent Real Estate Equities Company.
4.03 -- Form of Common Share Certificate (filed herewith).
*4.04 -- Second Amended and Restated Agreement of Limited Partnership of Crescent Real
Estate Equities Limited Partnership dated , 1997.
*5.01 -- Opinion of Shaw, Pittman, Potts & Trowbridge as to the legality of the securities
being registered by Crescent Real Estate Equities Company.
*8.01 -- Opinion of Shaw, Pittman, Potts & Trowbridge regarding certain material tax
issues relating to Crescent Real Estate Equities Company.
*8.02 -- Opinion of Locke Purnell Rain Harrell (a Professional Corporation) regarding
Texas franchise tax matters relating to Crescent Real Estate Equities Company.
12.01 -- Statement Regarding Computation of Ratios of Earnings to Fixed Charges and
Preferred Shares Dividends (filed herewith).
23.01 -- Consent of Arthur Andersen LLP, Certified Public Accountants, dated February 7,
1997 (filed herewith).
*23.02 -- Consent of Shaw, Pittman, Potts & Trowbridge (to be included in its opinion to be
filed as Exhibit 5.01 to this Registration Statement).
23.03 -- Consent of KPMG Peat Marwick LLP, Certified Public Accountants, dated February 7,
1997 (filed herewith).
23.04 -- Consent of Huselton & Morgan, P.C., Certified Public Accountants, dated February
10, 1997 (filed herewith).
23.05 -- Consent of Grant Thornton LLP, Certified Public Accountants, dated February 7,
1997 (filed herewith).
24.01 -- Powers of Attorney (incorporated by reference from the signature page).
</TABLE>
- ------------------
* To be filed by amendment or incorporated by reference.
II-2
<PAGE> 26
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement,
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 27
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 14th day of
February, 1997.
CRESCENT REAL ESTATE EQUITIES COMPANY
By: /s/ GERALD W. HADDOCK
-------------------------------------
GERALD W. HADDOCK
PRESIDENT AND CHIEF EXECUTIVE OFFICER
II-4
<PAGE> 28
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned hereby
constitutes and appoints each of John C. Goff, Gerald W. Haddock and David M.
Dean, and each of them, as his true and lawful attorney-in-fact and agent, each
with full powers of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, with full power to act alone, to
sign any or all documents (including both pre- and post-effective amendments to
this Registration Statement) and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as
each said attorney-in-fact and agent might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or any substitute or substitutes for any of them, may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------------------------------------- --------------------------------- ------------------
<C> <S> <C>
/s/ RICHARD E. RAINWATER Trust Manager and Chairman of the February 14, 1997
- ---------------------------------------- Board
RICHARD E. RAINWATER
/s/ JOHN C. GOFF Trust Manager and Vice Chairman February 14, 1997
- ---------------------------------------- of the Board
JOHN C. GOFF
/s/ GERALD W. HADDOCK Trust Manager, President and February 14, 1997
- ---------------------------------------- Chief Executive Officer
GERALD W. HADDOCK (Principal Executive Officer)
/s/ DALLAS E. LUCAS Senior Vice President and Chief February 14, 1997
- ---------------------------------------- Financial Officer (Principal
DALLAS E. LUCAS Financial and Accounting
Officer)
/s/ ANTHONY M. FRANK Trust Manager February 14, 1997
- ----------------------------------------
ANTHONY M. FRANK
/s/ MORTON H. MEYERSON Trust Manager February 14, 1997
- ----------------------------------------
MORTON H. MEYERSON
/s/ WILLIAM F. QUINN Trust Manager February 14, 1997
- ----------------------------------------
WILLIAM F. QUINN
/s/ PAUL E. ROWSEY Trust Manager February 14, 1997
- ----------------------------------------
PAUL E. ROWSEY, III
/s/ MELVIN ZUCKERMAN Trust Manager February 14, 1997
- ----------------------------------------
MELVIN ZUCKERMAN
</TABLE>
II-5
<PAGE> 29
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE
- ----------- ---------------------------------------------------------------------- ------------
<C> <S> <C> <C>
*1.01 -- Form of Underwriting Agreement(s).
4.01 -- Restated Declaration of Trust of Crescent Real Estate Equities
Company.
4.02 -- Amended and Restated Bylaws of Crescent Real Estate Equities Company.
4.03 -- Form of Common Share Certificate (filed herewith).
*4.04 -- Second Amended and Restated Agreement of Limited Partnership of
Crescent Real Estate Equities Limited Partnership dated ,
1997.
*5.01 -- Opinion of Shaw, Pittman, Potts & Trowbridge as to the legality of the
securities being registered by Crescent Real Estate Equities Company.
*8.01 -- Opinion of Shaw, Pittman, Potts & Trowbridge regarding certain
material tax issues relating to Crescent Real Estate Equities Company.
*8.02 -- Opinion of Locke Purnell Rain Harrell (a Professional Corporation)
regarding Texas franchise tax matters relating to Crescent Real Estate
Equities Company.
12.01 -- Statement Regarding Computation of Ratios of Earnings to Fixed Charges
and Preferred Shares Dividends (filed herewith).
23.01 -- Consent of Arthur Andersen LLP, Certified Public Accountants, dated
February 7, 1997 (filed herewith).
*23.02 -- Consent of Shaw, Pittman, Potts & Trowbridge (to be included in its
opinion to be filed as Exhibit 5.01 to this Registration Statement).
23.03 -- Consent of KPMG Peat Marwick LLP, Certified Public Accountants, dated
February 7, 1997 (filed herewith).
23.04 -- Consent of Huselton & Morgan, P.C., Certified Public Accountants,
dated February 10, 1997 (filed herewith).
23.05 -- Consent of Grant Thornton LLP, Certified Public Accountants, dated
February 7, 1997 (filed herewith).
24.01 -- Powers of Attorney (incorporated by reference from the signature
page).
</TABLE>
- ------------------
* To be filed by amendment or incorporated by reference.
<PAGE> 1
EXHIBIT 4.01
RESTATED DECLARATION OF TRUST
OF
CRESCENT REAL ESTATE EQUITIES COMPANY
In accordance with Section 22.70 of the Texas Real Estate Investment
Trust Act, as amended (the "Texas REIT Act"), the undersigned being the
President of Crescent Real Estate Equities Company, a real estate investment
trust under the Texas REIT Act, and being hereunto duly authorized, hereby
executes the following Restated Declaration of Trust, hereby declaring that
this instrument accurately copies the Declaration of Trust of Crescent Real
Estate Equities Company and all amendments, supplements, modifications and
corrections thereto in effect on the date hereof (the "Crescent Declaration of
Trust") and contains no change in any provision of the Crescent Declaration of
Trust:
ARTICLE I
NAME
The name of the trust (the "Trust") is Crescent Real Estate Equities
Company. An assumed name certificate setting forth such name has been filed in
the manner prescribed by law.
ARTICLE II
DURATION
The duration of the Trust is perpetual.
ARTICLE III
PURPOSES AND POWERS
The Trust is formed pursuant to the Texas REIT Act and has the
following as its purposes:
To purchase, hold, lease, manage, sell, exchange, develop, subdivide
and improve real property and interests in real property, and in
general, to carry on any other business and do any other acts in
connection with the foregoing and to have and exercise all powers
conferred by the laws of the State of Texas now or hereafter in force
upon real estate investment trusts formed under the Texas REIT Act, or
any successor statute, in each case as the same may be amended,
modified or supplemented from time to time, and to do any or all of
the things hereinafter set forth or set forth in the Texas REIT Act,
or any successor statute, in each case as the same may be amended,
modified or supplemented from time to time, to the same extent as
natural persons might or could do. The term "real property" and the
term "interests in real property" for the purposes stated herein shall
not include severed mineral, oil or gas royalty interests.
Without in any manner limiting the generality of the foregoing, and in
addition to all the powers conferred by the laws of the State of Texas now or
hereafter in force upon real estate investment trusts formed under the Texas
REIT Act, or any successor statute, in each case as the same may be amended,
modified or supplemented from time to time, the Trust shall have the power (i)
to acquire, hold, own, develop, construct, improve, maintain, operate, sell,
lease, transfer, encumber, convey, exchange and otherwise dispose of or deal
with real and personal property directly or through one or more subsidiaries or
affiliates; (ii) to enter into any partnership, joint venture or other similar
arrangement to engage in any of the foregoing; and (iii) in general, to possess
and exercise all the purposes, powers, rights and privileges granted to, or
conferred upon real estate investment trusts by the laws of the State of Texas
now or hereafter in force, and to exercise any powers suitable, convenient or
proper for the accomplishment of any of the
-1-
<PAGE> 2
purposes herein enumerated, implied or incidental to the powers or purposes
herein specified, or which at any time may appear conducive to or expedient for
the accomplishment of any such purposes.
The foregoing shall, except where otherwise expressed, in no way be
limited or restricted by reference to or inference from the terms of any other
clause of this or any other provision of this Declaration of Trust, or of any
amendment hereto or restatement hereof, and shall each be regarded as
independent, and shall each be construed as powers as well as purposes.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The address of the initial principal office and place of business of
the Trust is 777 Main Street, Suite 2100, Fort Worth, Texas. The address of
the Trust's registered office is 777 Main Street, Suite 2100, Fort Worth,
Texas, and the name of its registered agent at that address is David M. Dean.
ARTICLE V
BOARD OF TRUST MANAGERS
SECTION 5.1 Trust Managers.
The name and business address of the Trust Manager is as follows:
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
Gerald W. Haddock 777 Main Street, Suite 2100
Fort Worth, TX 76102
</TABLE>
SECTION 5.2 Number of Trust Managers.
The initial number of Trust Managers of the Trust shall be one (1).
From and after the date hereof, the number of Trust Managers of the Trust shall
be fixed by, or in the manner provided in, the Bylaws of the Trust, and may be
increased or decreased from time to time in such a manner as may be prescribed
by the Bylaws, but in no event shall there be less than one (1) or more than
twenty-five (25) Trust Managers.
SECTION 5.3 Classification of Board of Trust Managers.
At such time as the Board of Trust Managers shall consist of three (3)
or more Trust Managers, the Trust Managers, other than those who may be elected
by the holders of any series of Preferred Shares, shall be divided into three
classes, as nearly equal in number as possible. One class of Trust Managers
initially shall have a term expiring at the first annual meeting of
shareholders held after such division into classes, another class initially
shall have a term expiring at the second annual meeting of shareholders held
after such division into classes, and another class initially shall have a term
expiring at the third annual meeting of shareholders held after such division
into classes. Members of each class shall hold office until their respective
successors are elected and qualified. At each succeeding annual meeting of the
shareholders of the Trust, the successors of the class of Trust Managers whose
term expires at that meeting shall be elected by a majority vote of all votes
cast at such meeting, to hold office for a term expiring at the annual meeting
of shareholders held in the third year following the year of their election.
-2-
<PAGE> 3
ARTICLE VI
AUTHORIZED SHARES
SECTION 6.1 Total Capitalization.
The aggregate number of shares of beneficial interest of all classes
of shares of beneficial interest that the Trust shall have authority to issue
is Seven Hundred Million (700,000,000) shares, consisting of (i) One Hundred
Million (100,000,000) preferred shares, par value $0.01 per share (the
"Preferred Shares"); (ii) Two Hundred Fifty Million (250,000,000) common
shares, par value $0.01 per share (the "Common Shares"); and (iii) Three
Hundred Fifty Million (350,000,000) excess shares, par value $0.01 per share
(the "Excess Shares"). The Preferred Shares and the Common Shares are
sometimes referred to collectively herein as the "Equity Shares."
SECTION 6.2 Preferred Shares.
The Preferred Shares may be issued from time to time in one or more
series as authorized by the Board of Trust Managers. Prior to the issuance of
shares of each such series, the Board of Trust Managers, by resolution, shall
fix the number of shares to be included in each series, and the terms, rights,
restrictions and qualifications of the shares of each series. The authority of
the Board of Trust Managers with respect to each series shall include, but not
be limited to, determination of the following:
(i) The designation of the series, which may be by distinguishing
number, letter or title.
(ii) The dividend rate on the shares of the series, if any, whether
any dividends shall be cumulative and, if so, from which date
or dates, and the relative rights of priority, if any, of
payment of dividends on shares of the series.
(iii) The redemption rights, including conditions and the price or
prices, if any, for shares of the series.
(iv) The terms and amounts of any sinking fund for the purchase or
redemption of shares of the series.
(v) The rights of the shares of the series in the event of any
voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the Trust, and the relative rights of
priority, if any, of payment of shares of the series.
(vi) Whether the shares of the series shall be convertible into
shares of any other class or series, or any other security, of
the Trust or any other entity, and, if so, the specification
of such other class or series of such other security, the
conversion price or prices or rate or rates, any adjustments
thereof, the date or dates on which such shares shall be
convertible and all other terms and conditions upon which such
conversion may be made.
(vii) Restrictions on the issuance of shares of the same series or
of any other class or series.
(viii) The voting rights, if any, of the holders of shares of the
series.
(ix) Any other relative rights, preferences and limitations on that
series.
Subject to the express provisions of any other series of Preferred
Shares then outstanding, and notwithstanding any other provision of this
Declaration of Trust, the Board of Trust Managers may increase or decrease (but
not below the number of shares of such series then outstanding) the number of
shares, or alter the designation or classify or reclassify any unissued shares
of a particular series of Preferred Shares, by fixing or
-3-
<PAGE> 4
altering, in one or more respects, from time to time before issuing the shares,
the terms, rights, restrictions and qualifications of the shares of any such
series of Preferred Shares.
SECTION 6.3 Common Shares.
(A) Common Shares Subject to Terms of Preferred Shares. The Common
Shares shall be subject to the express terms of any series of Preferred Shares.
(B) Dividend Rights. The holders of Common Shares shall be entitled
to receive such dividends as may be declared by the Board of Trust Managers out
of funds legally available therefor.
(C) Rights Upon Liquidation. In the event of any voluntary or
involuntary liquidation, dissolution or winding up, or any distribution of the
assets, of the Trust, the aggregate assets available for distribution to
holders of Common Shares (including holders of Excess Shares resulting from the
exchange of Common Shares pursuant to paragraph C of Section 6.4 hereof) shall
be determined in accordance with applicable law. Except as provided below as a
consequence of the limitations on distributions to holders of Excess Shares,
each holder of Common Shares shall be entitled to receive, ratably with (i)
each other holder of Common Shares and (ii) each holder of Excess Shares
resulting from the exchange of Common Shares, that portion of such aggregate
assets available for distribution as the number of outstanding Common Shares
held by such holder bears to the total number of outstanding Common Shares and
Excess Shares resulting from the exchange of Common Shares then outstanding.
Anything herein to the contrary notwithstanding, in no event shall the amount
payable to a holder of Excess Shares exceed (i) the price per share such holder
paid for the Common Shares in the purported Transfer or Acquisition (as those
terms are defined in paragraph A of Section 6.4) or change in capital structure
or other transaction or event that resulted in the Excess Shares or (ii) if the
holder did not give full value for such Excess Shares (as through a gift, a
devise or other event or transaction) a price per share equal to the Market
Price (as that term is defined in paragraph A of Section 6.4) for the Common
Shares on the date of the purported Transfer, Acquisition, change in capital
structure, or other transaction or event that resulted in such Excess Shares.
Any amount available for distribution in excess of the foregoing limitations
shall be paid ratably to the holders of Common Shares and other holders of
Excess Shares resulting from the exchange of Common Shares to the extent
permitted by the foregoing limitations.
(D) Voting Rights. Except as may be provided in this Declaration of
Trust, and subject to the express terms of any series of Preferred Shares, the
holders of Common Shares shall have the exclusive right to vote on all matters
(as to which a common shareholder shall be entitled to vote pursuant to
applicable law) at all meetings of the shareholders of the Trust, and shall be
entitled to one (1) vote for each Common Share entitled to vote at such
meeting.
SECTION 6.4 Restrictions on Ownership, Transfer, Acquisition
and Redemption of Shares.
(A) Definitions. For purposes of Sections 6.4 and 6.5, the following
terms shall have the following meanings:
"Acquire" shall mean the acquisition of Beneficial or
Constructive Ownership of Equity Shares by any means, including, without
limitation, the exercise of any rights under any option, warrant, convertible
security, pledge or other security interest or similar right to acquire shares,
but shall not include the acquisition of any such rights unless, as a result,
the acquiror would be considered a Beneficial Owner or Constructive Owner. The
terms "Acquires" and "Acquisition" shall have correlative meanings.
"Beneficial Ownership" shall mean ownership of Equity Shares
by an individual who would be treated as an owner of such shares under Section
542(a)(2) of the Code, either directly or constructively through the
application of Section 544, as modified by Section 856(h)(1)(B). For purposes
of this definition, the term "individual" also shall include any organization,
trust or other entity that is treated as an individual for purposes of
-4-
<PAGE> 5
Section 542(a)(2) of the Code. The terms "Beneficial Owner," "Beneficially
Own," "Beneficially Owns" and "Beneficially Owned" shall have correlative
meanings.
"Beneficiary" shall mean a beneficiary of the Excess Shares
Trust as determined pursuant to paragraph A of Section 6.5.
"Board of Trust Managers" shall mean the Board of Trust
Managers of the Trust.
"Bylaws" shall mean the Bylaws of the Trust, as the same are
in effect from time to time.
"Closing Price" on any day shall mean the last sale price,
regular way on such day, or, if no such sale takes place on that day, the
average of the closing bid and asked prices, regular way, in either case as
reported on the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange, or if the affected class or series of Equity Shares is not so listed
or admitted to trading, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange (including the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotation System) on which
the affected class or series of Equity Shares is listed or admitted to trading
or, if the affected class or series of Equity Shares is not so listed or
admitted to trading, the last quoted price or, if not quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported
by the National Association of Securities Dealers, Inc. Automated Quotation
System or, if such system is no longer in use, the principal automated
quotation system then in use or, if the affected class or series of Equity
Shares is not so quoted by any such system, the average of the closing bid and
asked prices as furnished by a professional market maker selected by the Board
of Trust Managers making a market in the affected class or series of Equity
Shares, or, if there is no such market maker or such closing prices otherwise
are not available, the fair market value of the affected class or series of
Equity Shares as of such day, as determined by the Board of Trust Managers in
its discretion.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute thereto. Reference to any
provision of the Code shall mean such provision as in effect from time to time,
as the same may be amended, and any successor provision thereto, as interpreted
by any applicable regulations as in effect from time to time.
"Common Shares Ownership Limit" shall mean 8.0 percent of the
outstanding Common Shares of the Trust, or, from and after the date hereof,
such greater percentage of the outstanding Common Shares of the Trust as the
Board of Trust Managers may establish pursuant to the authority expressly
vested in the Board of Trust Managers in paragraph K of this Section 6.4 (but
in no event to more than 9.9 percent of the outstanding Common Shares of the
Trust, as so adjusted), subject to the limitations contained in paragraph L of
this Section 6.4.
"Constructive Ownership" shall mean ownership of Equity Shares
by a Person who would be treated as an owner of such shares, either actually or
constructively, directly or indirectly, through the application of Section 318
of the Code, as modified by Section 856(d)(5) thereof. The terms "Constructive
Owner," "Constructively Own," "Constructively Owns" and "Constructively Owned"
shall have correlative meanings.
"Equity Shares" shall mean collectively shares of the Trust
that are either Common Shares or Preferred Shares.
"Excess Shares Trust" shall mean the trust created pursuant
to paragraph A of Section 6.5.
"Excess Shares Trustee" shall mean the Trust as trustee for
the Excess Shares Trust, and any successor trustee appointed by the Trust.
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"Existing Holder" shall mean collectively Richard E. Rainwater
and any sibling (whether by the whole or half blood), spouse, ancestor or
lineal descendant thereof (provided that in the event the definition of
"Family" pursuant to Section 544(a)(2) of the Code shall be amended, the
foregoing definition shall be deemed to be similarly amended).
"Existing Holder Limit" shall mean initially 9.5 percent of
the outstanding Common Shares of the Trust, or, from and after the date hereof,
such lesser percentage of the outstanding Common Shares of the Trust as the
Board of Trust Managers may establish from time to time pursuant to the
authority expressly vested in the Board of Trust Managers in paragraph J of
this Section 6.4, subject to the limitations contained in paragraph L of this
Section 6.4. For purposes of the application of the Existing Holder Limit, the
Existing Holder shall be deemed to own the sum of (a) the Common Shares
Beneficially or Constructively Owned by the Existing Holder and (b) the Common
Shares the Existing Holder would Beneficially or Constructively Own upon
exercise of any conversion right, option or other right (without regard to any
temporal restrictions on the exercise thereof) to directly or indirectly
Acquire Beneficial or Constructive Ownership of Common Shares. For purposes of
determining the Existing Holder Limit, the Common Shares outstanding shall be
deemed to include the maximum number of shares that the Existing Holder may
Beneficially and Constructively Own pursuant to any conversion right, option or
other right (without regard to any temporal restrictions on the exercise
thereof). From and after the date hereof and prior to the Restriction
Termination Date, the Secretary of the Trust, or such other person as shall be
designated by the Board of Trust Managers, shall maintain and, upon request,
make available to the Existing Holder or the Board of Trust Managers, a
schedule which sets forth the then-current Existing Holder Limit.
"Market Price" on any day shall mean the average of the
Closing Prices for the ten (10) consecutive Trading Days immediately preceding
such day (or those days during such 10-day period for which Closing Prices are
available).
"Ownership Limit" shall mean the Common Shares Ownership Limit
or the Preferred Shares Ownership Limit, or both, as the context may require.
"Person" shall mean an individual, corporation, partnership,
estate, trust (including a trust qualified under Section 401(a) or 501(c)(17)
of the Code), a portion of a trust permanently set aside for or to be used
exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 509(a) of the
Code, joint stock company or other entity, or a group as that term is used for
purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended; but does not include an underwriter which participated in a public
offering of Equity Shares for a period of sixty (60) days following the
purchase by such underwriter of such Equity Shares therein, provided that the
foregoing exclusion shall apply only if the ownership of such Equity Shares by
an underwriter or underwriters participating in a public offering would not
cause the Trust to fail to qualify as a REIT by reason of being "closely held"
within the meaning of Section 856(a) of the Code or otherwise cause the Trust
to fail to qualify as a REIT.
"Preferred Shares Ownership Limit" shall mean 9.9 percent of
the outstanding shares of a particular series of Preferred Shares of the Trust.
"Purported Beneficial Holder" shall mean, with respect to any
event or transaction other than a purported Transfer or Acquisition which
results in Excess Shares, the Person for whom the applicable Purported Record
Holder held the Equity Shares that were, pursuant to paragraph C of this
Section 6.4, automatically exchanged for Excess Shares upon the occurrence of
such event or transaction. The Purported Beneficial Holder and the Purported
Record Holder may be the same Person.
"Purported Beneficial Transferee" shall mean, with respect to
any purported Transfer or Acquisition which results in Excess Shares, the
purported beneficial transferee for whom the Purported Record Transferee would
have acquired Equity Shares if such Transfer or Acquisition had been valid
under paragraph B of this Section 6.4. The Purported Beneficial Transferee and
the Purported Record Transferee may be the same Person.
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"Purported Record Holder" shall mean, with respect to any
event or transaction other than a purported Transfer or Acquisition which
results in Excess Shares, the record holder of the Equity Shares that were,
pursuant to paragraph C of this Section 6.4, automatically exchanged for Excess
Shares upon the occurrence of such an event or transaction. The Purported
Record Holder and the Purported Beneficial Holder may be the same Person.
"Purported Record Transferee" shall mean, with respect to any
purported Transfer or Acquisition which results in Excess Shares, the record
holder of the Equity Shares if such Transfer had been valid under paragraph B
of this Section 6.4. The Purported Record Transferee and the Purported
Beneficial Transferee may be the same Person.
"REIT" shall mean a real estate investment trust under
Sections 856 through 860 of the Code.
"Restriction Termination Date" shall mean the first day after
the date hereof on which the Board of Trust Managers and the shareholders of
the Trust determine that it is no longer in the best interests of the Trust to
attempt, or continue, to qualify as a REIT.
"Trading Day" shall mean a day on which the principal national
securities exchange on which the affected class or series of Equity Shares is
listed or admitted to trading is open for the transaction of business or, if
the affected class or series of Equity Shares is not listed or admitted to
trading, shall mean any day other than a Saturday, Sunday or other day on which
banking institutions in the State of New York are authorized or obligated by
law or executive order to close.
"Transfer" shall mean any sale, transfer, gift, hypothecation,
assignment, devise or other disposition of a direct or indirect interest in
Equity Shares or the right to vote or receive dividends on Equity Shares
(including (i) the granting of any option (including any option to acquire an
option or any series of such options) or entering into any agreement for the
sale, transfer or other disposition of Equity Shares or the right to vote or
receive dividends on Equity Shares or (ii) the sale, transfer, assignment or
other disposition of any securities or rights convertible into or exchangeable
for Equity Shares (including the Exchange Rights, granted under the First
Amended and Restated Agreement of Limited Partnership of Crescent Real Estate
Equities Limited Partnership, as the same may be amended or restated from time
to time, to the limited partners thereunder, to acquire Common Shares), whether
voluntary or involuntary, of record, constructively or beneficially, and
whether by operation of law or otherwise. The terms "Transfers," "Transferred"
and "Transferable" shall have correlative meanings.
(B) Ownership and Transfer Limitations.
(1) Notwithstanding any other provision of this Declaration
of Trust, except as provided in paragraph I of this Section 6.4 and Section
6.6, from and after the effective time of the merger of Crescent Real Estate
Equities, Inc. and CRE Limited Partner, Inc. with and into the Trust and prior
to the Restriction Termination Date, (i) no Person (other than the Existing
Holder) shall Beneficially or Constructively Own Common Shares in excess of the
Common Shares Ownership Limit; (ii) the Existing Holder shall not Beneficially
or Constructively Own Common Shares in excess of the Existing Holder Limit; and
(iii) no Person shall Beneficially or Constructively Own shares of any series
of Preferred Shares in excess of the Preferred Shares Ownership Limit.
(2) Notwithstanding any other provision of this Declaration
of Trust, except as provided in paragraph I of this Section 6.4 and Section
6.6, from and after the date hereof and prior to the Restriction Termination
Date, any Transfer, Acquisition, change in the capital structure of the Trust,
or other purported change in Beneficial or Constructive Ownership of Equity
Shares or other event or transaction that, if effective, would result in any
Person (other than the Existing Holder) Beneficially or Constructively Owning
Equity Shares in excess of the applicable Ownership Limit shall be void ab
initio as to the Transfer, Acquisition, change in the capital structure of the
Trust, or other purported change in Beneficial or Constructive Ownership or
other event or transaction with respect to that number of Equity Shares which
would otherwise be Beneficially or Constructively Owned by such Person in
excess of the applicable Ownership Limit, and none of the Purported Beneficial
Transferee, the Purported
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<PAGE> 8
Record Transferee, the Purported Beneficial Holder or the Purported Record
Holder, as applicable, shall acquire any rights in that number of Equity
Shares.
(3) Notwithstanding any other provision of this Declaration
of Trust, except as provided in Paragraph I of this Section 6.4 and in Section
6.6, from and after the date hereof and prior to the Restriction Termination
Date, any Transfer, Acquisition, change in the capital structure of the Trust,
or other purported change in Beneficial or Constructive Ownership of Common
Shares and/or Preferred Shares or other event or transaction that, if
effective, would result in the Existing Holder Beneficially or Constructively
Owning (i) Common Shares in excess of the Existing Holder Limit or (ii)
Preferred Shares in excess of the Preferred Shares Ownership Limit shall be
void ab initio as to the Transfer, Acquisition, change in the capital structure
of the Trust, or other purported change in the Beneficial or Constructive
Ownership or other event or transaction with respect to that number of Common
Shares which otherwise would be Beneficially or Constructively Owned by the
Existing Holder in excess of the Existing Holder Limit and/or that number of
Preferred Shares which otherwise would be Beneficially or Constructively Owned
by the Existing Holder in excess of the Preferred Shares Ownership Limit, as
the case may be, and the Existing Holder shall acquire no rights in that number
of Common Shares and/or Preferred Shares.
(4) Notwithstanding any other provision of this Declaration
of Trust, except as provided in Section 6.6, from and after the date hereof and
prior to the Restriction Termination Date, any Transfer, Acquisition, change in
the capital structure of the Trust, or other purported change in Beneficial or
Constructive Ownership (including actual ownership) of Equity Shares or other
event or transaction that, if effective, would result in the Equity Shares
being actually owned by fewer than one hundred (100) Persons (determined
without reference to any rules of attribution) shall be void ab initio as to
the Transfer, Acquisition, change in the capital structure of the Trust, or
other purported change in Beneficial or Constructive Ownership (including
actual ownership) or other event or transaction with respect to that number of
Equity Shares which otherwise would be owned by the transferee, and the
intended transferee or subsequent owner (including a Beneficial or Constructive
Owner) shall acquire no rights in that number of Equity Shares.
(5) Notwithstanding any other provision of this Declaration
of Trust, except as provided in Section 6.6, from and after the date hereof and
prior to the Restriction Termination Date, any Transfer, Acquisition, change in
the capital structure of the Trust, or other purported change in Beneficial or
Constructive Ownership of Equity Shares or other event or transaction that, if
effective, would cause the Trust to fail to qualify as a REIT by reason of
being "closely held" within the meaning of Section 856(h) of the Code or
otherwise, directly or indirectly, would cause the Trust to fail to qualify as
a REIT shall be void ab initio as to the Transfer, Acquisition, change in the
capital structure of the Trust, or other purported change in Beneficial or
Constructive Ownership or other event or transaction with respect to that
number of Equity Shares which would cause the Trust to be "closely held" within
the meaning of Section 856(h) of the Code or otherwise, directly or indirectly,
would cause the Trust to fail to qualify as a REIT, and none of the Purported
Beneficial Transferee, the Purported Record Transferee, the Purported
Beneficial Holder or the Purported Record Holder shall acquire any rights in
that number of Equity Shares.
(6) Notwithstanding any other provision of this Declaration
of Trust, except as provided in Section 6.6, from and after the date hereof and
prior to the Restriction Termination Date, any Transfer, Acquisition, change in
capital structure of the Trust, or other purported change in Beneficial or
Constructive Ownership of Equity Shares or other event or transaction that, if
effective, would (i) cause the Trust to own (directly or Constructively) an
interest in a tenant that is described in Section 856(d)(2)(B) of the Code and
(ii) cause the Trust to fail to satisfy any of the gross income requirements of
Section 856(c) of the Code, shall be void ab initio as to the Transfer,
Acquisition, change in capital structure of the Trust, or other purported
change in Beneficial or Constructive Ownership or other event or transaction
with respect to that number of Equity Shares which would cause the Trust to own
an interest (directly or Constructively) in a tenant that is described in
Section 856(d)(2)(B) of the Code, and none of the Purported Beneficial
Transferee, the Purported Record Transferee, the Purported Beneficial Holder or
the Purported Record Holder shall acquire any rights in that number of Equity
Shares.
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<PAGE> 9
(7) It is expressly intended that the restrictions on
ownership and transfer described in this Section 6.4(B) shall apply to the
exchange rights provided in Section 8.6 of the First Amended and Restated
Agreement of Limited Partnership of Crescent Real Estate Equities Limited
Partnership, as the same has been and may from time to time hereafter be
amended, modified or supplemented (the "Crescent Partnership Agreement"), of
Crescent Real Estate Equities Limited Partnership, a Delaware limited
partnership ("Crescent Partnership"). Notwithstanding any of the provisions of
the Crescent Partnership Agreement to the contrary, a partner of Crescent
Partnership shall not be entitled to effect an exchange of an interest in
Crescent Partnership into Common Shares if the Beneficial or Constructive
Ownership of such Common Shares would be prohibited under the provisions of
this Section 6.4(B).
(C) Exchange for Excess Shares.
(1) If, notwithstanding the other provisions contained in
this Article VI, at any time from and after the date hereof and prior to the
Restriction Termination Date, there is a purported Transfer, Acquisition,
change in the capital structure of the Trust, or other purported change in the
Beneficial or Constructive Ownership of Equity Shares or other event or
transaction such that (i) any Person (other than the Existing Holder) would
Beneficially or Constructively Own Equity Shares in excess of the applicable
Ownership Limit or (ii) the Existing Holder would Beneficially or
Constructively Own Common Shares in excess of the Existing Holder Limit or any
series of Preferred Shares in excess of the Preferred Shares Ownership Limit,
then, except as otherwise provided in paragraph I of this Section 6.4, such
number of Equity Shares (rounded up to the next whole number of shares) in
excess of the applicable Ownership Limit or the Existing Holder Limit, as the
case may be, automatically shall be exchanged for an equal number of Excess
Shares having terms, rights, restrictions and qualifications identical thereto,
except to the extent that this Article VI requires different terms. Such
exchange shall be effective as of the close of business on the business day
next preceding the date of the purported Transfer, Acquisition, change in
capital structure, or other purported change in Beneficial or Constructive
Ownership of Equity Shares or other event or transaction.
(2) If, notwithstanding the other provisions contained in
this Article VI, at any time from and after the date hereof and prior to the
Restriction Termination Date, there is a purported Transfer, Acquisition,
change in the capital structure of the Trust, or other purported change in
Beneficial or Constructive Ownership of Equity Shares or other event or
transaction which, if effective, would result in a violation of any of the
restrictions described in subparagraphs (2), (3), (4), (5) and (6) of paragraph
B of this Section 6.4 or, directly or indirectly, would for any reason cause
the Trust to fail to qualify as a REIT, then the number of Equity Shares
(rounded up to the next whole number of shares) being Transferred or Acquired
or which are otherwise affected by the change in capital structure or other
purported change in Beneficial or Constructive Ownership or other event or
transaction and which would result in a violation of any of the restrictions
described in subparagraphs (2), (3), (4), (5) and (6) of paragraph B of this
Section 6.4 or, directly or indirectly, would for any reason cause the Trust to
fail to qualify as a REIT, automatically shall be exchanged for an equal number
of Excess Shares having terms, rights, restrictions and qualifications
identical thereto, except to the extent that this Article VI requires different
terms. Such exchange shall be effective as of the close of business on the
business day prior to the date of the purported Transfer, Acquisition, change
in capital structure, or other purported change in Beneficial or Constructive
Ownership or other event or transaction.
(3) The Board of Trust Managers recognizes that Section
6.4(C)(1) or Section 6.4(C)(2) may become operative because of the purported
ownership of Equity Shares by two or more (i) partners of a partnership, (ii)
shareholders of a corporation or (iii) members of any other Person. In such
event, the Board of Trust Managers shall have the authority in its sole,
complete and absolute discretion to determine the number of Equity Shares and
the identity of the Equity Shares of each partner, shareholder or member that
automatically shall be exchanged for an equal number of Excess Shares.
(D) Remedies For Breach. If the Board of Trust Managers or its
designee shall at any time determine in good faith that a Transfer,
Acquisition, or change in the capital structure of the Trust or other purported
change in Beneficial or Constructive Ownership or other event or transaction
has taken place in violation of paragraph B of this Section 6.4 or that a
Person intends to Acquire or has attempted to Acquire Beneficial or
Constructive Ownership
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of any Equity Shares in violation of paragraph B of this Section 6.4, the Board
of Trust Managers or its designee shall take such action as it deems advisable
to refuse to give effect to or to prevent such Transfer, Acquisition, or change
in the capital structure of the Trust, or other attempt to Acquire Beneficial
or Constructive Ownership of any Equity Shares or other event or transaction,
including, but not limited to, refusing to give effect thereto on the books of
the Trust or instituting injunctive proceedings with respect thereto; provided,
however, that any Transfer, Acquisition, change in the capital structure of the
Trust, attempted Transfer, or other attempt to Acquire Beneficial or
Constructive Ownership of any Equity Shares or event or transaction in
violation of subparagraphs (2), (3), (4), (5) or (6) of paragraph B of this
Section 6.4 (as applicable) shall be void ab initio and, where applicable,
automatically shall result in the exchange described in paragraph C of this
Section 6.4, irrespective of any action (or inaction) by the Board of Trust
Managers or its designee.
(E) Notice of Restricted Transfer. Any Person who Acquires or
attempts to Acquire Beneficial or Constructive Ownership of Equity Shares in
violation of paragraph B of this Section 6.4 and any Person who Beneficially or
Constructively Owns Excess Shares as a transferee of Equity Shares resulting in
an exchange for Excess Shares, pursuant to paragraph C of this Section 6.4, or
otherwise, immediately shall give written notice to the Trust, or, in the event
of a proposed or attempted Transfer or Acquisition or purported change in
Beneficial or Constructive Ownership, shall give at least fifteen (15) days
prior written notice to the Trust, of such event and shall promptly provide to
the Trust such other information as the Trust, in its sole discretion, may
request in order to determine the effect, if any, of such Transfer, attempted
Transfer, Acquisition, attempted Acquisition or other purported change in
Beneficial or Constructive Ownership on the Trust's status as a REIT.
(F) Owners Required To Provide Information. From and after the date
hereof and prior to the Restriction Termination Date:
(1) Every Beneficial or Constructive Owner of more than 5
percent, or such lower percentage or percentages as determined pursuant to
regulations under the Code or as may be requested by the Board of Trust
Managers in its sole discretion, of the outstanding shares of any class or
series of Equity Shares of the Trust annually shall, no later than January 31
of each calendar year, give written notice to the Trust stating (i) the name
and address of such Beneficial or Constructive Owner; (ii) the number of shares
of each class or series of Equity Shares Beneficially or Constructively Owned;
and (iii) a description of how such shares are held. Each such Beneficial or
Constructive Owner promptly shall provide to the Trust such additional
information as the Trust, in its sole discretion, may request in order to
determine the effect, if any, of such Beneficial or Constructive Ownership on
the Trust's status as a REIT and to ensure compliance with the applicable
Ownership Limit or the Existing Holder Limit and other restrictions set forth
herein.
(2) Each Person who is a Beneficial or Constructive Owner of
Equity Shares and each Person (including the shareholder of record) who is
holding Equity Shares for a Beneficial or Constructive Owner promptly shall
provide to the Trust such information as the Trust, in its sole discretion, may
request in order to determine the Trust's status as a REIT, to comply with the
requirements of any taxing authority or other governmental agency, to determine
any such compliance or to ensure compliance with the applicable Ownership Limit
or the Existing Holder Limit and other restrictions set forth herein.
(G) Remedies Not Limited. Nothing contained in this Article VI
except Section 6.6 hereof shall limit the scope or application of the
provisions of this Section 6.4, the ability of the Trust to implement or
enforce compliance with the terms thereof or the authority of the Board of
Trust Managers to take any such other action or actions as it may deem
necessary or advisable to protect the Trust and the interests of its
shareholders by preservation of the Trust's status as a REIT and to ensure
compliance with the applicable Ownership Limit or the Existing Holder Limit and
other restrictions set forth herein, including, without limitation, refusal to
give effect to a transaction on the books of the Trust.
(H) Ambiguity. In the case of ambiguity in the application of any of
the provisions of this Section 6.4, including any definition contained in
paragraph A hereof, the Board of Trust Managers shall have the power and
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authority, in its sole discretion, to determine the application of the
provisions of this Section 6.4 with respect to any situation, based on the
facts known to it.
(I) Exceptions. The Board of Trust Managers, upon receipt of a
ruling from the Internal Revenue Service, an opinion of counsel, or other
evidence satisfactory to the Board of Trust Managers, in its sole discretion,
in each case to the effect that the restrictions contained in subparagraphs
(4), (5) and (6) of paragraph B of this Section 6.4 will not be violated, may
waive or change, in whole or in part, the application of the applicable
Ownership Limit with respect to any Person that is not an individual, as such
term is defined in Section 542(a)(2) of the Code. In connection with any such
waiver or change, the Board of Trust Managers 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 Shares on the Trust's status as a REIT.
(J) Reduction of Existing Holder Limit. The Board of Trust Managers
is hereby expressly vested with the full power and authority to reduce the
Existing Holder Limit as in effect from time to time on and after the date
hereof, with the written consent of Richard E. Rainwater or his
successor-in-interest or designee. No such reduction shall constitute or be
deemed to constitute an amendment of this Declaration of Trust, and shall take
effect automatically without any action on the part of any shareholder as of
the date specified by the Board of Trust Managers that is subsequent to the
Board resolution approving and effecting such reduction.
(K) Increase in Common Shares Ownership Limit. Subject to the
limitations contained in paragraph L of this Section 6.4, the Board of Trust
Managers is hereby expressly vested with the full power and authority from
time to time to increase the Common Shares Ownership Limit. No such increase
shall constitute or be deemed to constitute an amendment of this Declaration of
Trust, and shall take effect automatically without any action on the part of
any shareholder as of the date specified by the Board of Trust Managers that is
subsequent to the Board resolution approving and effecting such reduction.
(L) Limitations on Modifications.
(1) The Ownership Limit for a class or series of Equity
Shares may not be increased and no additional ownership limitations may be
created if, after giving effect to such increase or creation the Trust would be
"closely held" within the meaning of Section 856(h) of the Code (assuming
ownership of Equity Shares by all Persons (other than the Existing Holder)
equal to the greatest of (i) the actual ownership, (ii) the Beneficial
Ownership of Equity Shares by each Person, or (iii) the applicable Ownership
Limit with respect to such Person, and assuming the ownership by the Existing
Holder of Common Shares equal to the Existing Holder Limit and shares of any
series of Preferred Shares equal to the Preferred Shares Ownership Limit).
(2) Prior to any modification of the Ownership Limit or the
Existing Holder Limit with respect to any Person, the Board of Trust Managers
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 Trust's status as a REIT.
(3) Neither the Common Shares Ownership Limit nor the
Preferred Shares Ownership Limit may be increased to a percentage that is
greater than 9.9 percent.
(4) The Existing Holder Limit may not be increased.
(M) Legend. Each certificate for Equity Shares shall bear
substantially the following legend:
"The securities represented by this certificate are
subject to the restrictions on transfer and ownership for the
purpose of maintenance of the Trust's status as a real estate
investment trust (a "REIT") under Sections 856
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through 860 of the Internal Revenue Code of 1986, as amended
(the "Code"). Except as otherwise provided pursuant to the
Declaration of Trust of the Trust, no Person may (i)
Beneficially or Constructively Own Common Shares of the Trust
in excess of 8.0 percent (or such greater percent as may be
determined by the Board of Trust Managers of the Trust) of the
outstanding Common Shares (except in such circumstances as the
Existing Holder Limit shall apply); (ii) Beneficially or
Constructively Own shares of any series of Preferred Shares of
the Trust in excess of 9.9 percent of the outstanding shares
of such series of Preferred Shares; or (iii) Beneficially or
Constructively Own Common Shares or Preferred Shares (of any
class or series) which would result in the Trust being
"closely held" under Section 856(h) of the Code or which
otherwise would cause the Trust to fail to qualify as a REIT.
Any Person who has Beneficial or Constructive Ownership, or
who Acquires or attempts to Acquire Beneficial or Constructive
Ownership of Common Shares and/or Preferred Shares in excess
of the above limitations and any Person who Beneficially or
Constructively Owns Excess Shares as a transferee of Common
Shares or Preferred Shares resulting in an exchange for Excess
Shares (as described below) immediately must notify the Trust
in writing or, in the event of a proposed or attempted
Transfer or Acquisition or purported change in the Beneficial
or Constructive Ownership, must give written notice to the
Trust at least fifteen (15) days prior to the proposed or
attempted transfer, transaction or other event. Any Transfer
or Acquisition of Common Shares and/or Preferred Shares or
other event which results in violation of the ownership or
transfer limitations set forth in the Declaration of Trust of
the Trust shall be void ab initio and the Purported Beneficial
and Record Transferee shall not have or acquire any rights in
such Common Shares and/or Preferred Shares. If the transfer
and ownership limitations referred to herein are violated, the
Common Shares or Preferred Shares represented hereby
automatically will be exchanged for Excess Shares to the
extent of violation of such limitations, and such Excess
Shares will be held in trust by the Trust, all as provided by
the Declaration of Trust of the Trust. All defined terms used
in this legend have the meanings identified in the Declaration
of Trust of the Trust, as the same may be amended from time to
time, a copy of which, including the restrictions on transfer,
will be sent without charge to each shareholder who so
requests."
SECTION 6.5 Excess Shares.
(A) Ownership In Trust. Upon any purported Transfer,
Acquisition, change in the capital structure of the Trust, or other purported
change in the Beneficial or Constructive Ownership or event or transaction that
results in Excess Shares pursuant to paragraph C of Section 6.4, such Excess
Shares shall be deemed to have been transferred to the Trust, as Excess Shares
Trustee of an Excess Shares Trust for the benefit of such Beneficiary or
Beneficiaries to whom an interest in such Excess Shares may later be
transferred pursuant to paragraph E of this Section 6.5. Excess Shares so held
in trust shall be issued and outstanding shares of the Trust. The Purported
Record Transferee (or Purported Record Holder) shall have no rights in such
Excess Shares except the right to designate a transferee of such Excess Shares
upon the terms specified in paragraph E of this Section 6.5. The Purported
Beneficial Transferee (or Purported Beneficial Holder) shall have no rights in
such Excess Shares except as provided in paragraphs C and E of this Section
6.5.
(B) Dividend Rights. Excess Shares shall not be entitled to
any dividends or distributions (except as provided in Paragraph C of this
Section 6.5). Any dividend or distribution paid prior to the discovery by the
Trust that the Equity Shares have been exchanged for Excess Shares shall be
repaid to the Trust upon demand, and any
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dividend or distribution declared but unpaid at the time of such discovery
shall be void ab initio with respect to such Excess Shares.
(C) Rights Upon Liquidation.
(1) Except as provided below, in the event of any
voluntary or involuntary liquidation, dissolution or winding up, or any other
distribution of the assets, of the Trust, each holder of Excess Shares
resulting from the exchange of Preferred Shares of any specified series shall
be entitled to receive, ratably with each other holder of Excess Shares
resulting from the exchange of Preferred Shares of such series and each holder
of Preferred Shares of such series, such accrued and unpaid dividends,
liquidation preferences and other preferential payments, if any, as are due to
holders of Preferred Shares of such series. In the event that holders of
shares of any series of Preferred Shares are entitled to participate in the
Trust's distribution of its residual assets, each holder of Excess Shares
resulting from the exchange of Preferred Shares of any such series shall be
entitled to participate, ratably with (i) each other holder of Excess Shares
resulting from the exchange of Preferred Shares of all series entitled to so
participate; (ii) each holder of Preferred Shares of all series entitled to so
participate; and (iii) each holder of Common Shares resulting from the exchange
of Common Shares (to the extent permitted by paragraph C of Section 6.4
hereof), that portion of the aggregate assets available for distribution
(determined in accordance with applicable law) as the number of such Excess
Shares held by such holder bears to the total number of (i) outstanding Excess
Shares resulting from the exchange of Preferred Shares of all series entitled
to so participate; (ii) outstanding Preferred Shares of all series entitled to
so participate; and (iii) outstanding Common Shares and Excess Shares resulting
from the exchange of Common Shares. The Trust, as holder of Excess Shares in
trust, or, if the Trust shall have been dissolved, any trustee appointed by the
Trust prior to its dissolution, shall distribute ratably to the Beneficiaries
of the Excess Shares Trust, when determined, any such assets received in
respect of the Excess Shares in any liquidation, dissolution or winding up, or
any distribution of the assets, of the Trust. Anything to the contrary herein
notwithstanding, in no event shall the amount payable to a holder with respect
to Excess Shares resulting from the exchange of Preferred Shares exceed (i) the
price per share such holder paid for the Preferred Shares in the purported
Transfer, Acquisition, change in capital structure, or other transaction or
event that resulted in the Excess Shares or the price per share such holder
paid for the Preferred Shares that were exchanged for the Excess Shares or (ii)
if the holder did not give full value for such Excess Shares (as through a
gift, devise or other event or transaction), a price per share equal to the
Market Price for the Preferred Shares on the date of the purported Transfer,
Acquisition, change in capital structure or other transaction or event that
resulted in such Excess Shares or the Market Price for the Preferred Shares on
the date they were exchanged for the Excess Shares. Any amount available for
distribution in excess of the foregoing limitations shall be paid ratably to
the holders of Preferred Shares and Excess Shares resulting from the exchange
of Preferred Shares to the extent permitted by the foregoing limitations.
(2) Except as provided below, in the event of any
voluntary or involuntary liquidation, dissolution or winding up, or any other
distribution of the assets, of the Trust, each holder of Excess Shares
resulting from the exchange of Common Shares shall be entitled to receive,
ratably with (i) each other holder of such Excess Shares and (ii) each holder
of Common Shares, that portion of the aggregate assets available for
distribution to holders of Common Shares (including holders of Excess Shares
resulting from the exchange of Common Shares pursuant to paragraph C of Section
6.4 hereof), determined in accordance with applicable law, as the number of
such Excess Shares held by such holder bears to the total number of outstanding
Common Shares and outstanding Excess Shares resulting from the exchange of
Common Shares then outstanding. The Trust, as holder of the Excess Shares in
trust, or, if the Trust shall have been dissolved, any trustee appointed by the
Trust prior to its dissolution, shall distribute ratably to the Beneficiaries
of the Excess Shares Trust, when determined, any such assets received in
respect of the Excess Shares in any liquidation, dissolution or winding up, or
any distribution of the assets, of the Trust. Anything herein to the contrary
notwithstanding, in no event shall the amount payable to a holder with respect
to Excess Shares exceed (i) the price per share such holder paid for the Equity
Shares in the purported Transfer, Acquisition, change in capital structure, or
other transaction or event that resulted in the Excess Shares or the price per
share such holder paid for the Equity Shares that were exchanged for the Excess
Shares or (ii) if the holder did not give full value for such Excess Shares (as
through a gift, devise or other event or transaction), a price per share
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equal to the Market Price for the Equity Shares on the date of the purported
Transfer, Acquisition, change in capital structure or other transaction or
event that resulted in such Excess Shares or the Market Price for the Equity
Shares on the date they were exchanged for the Excess Shares. Any amount
available for distribution in excess of the foregoing limitations shall be paid
ratably to the holders of Common Shares and Excess Shares resulting from the
exchange of Common Shares to the extent permitted by the foregoing limitations.
(D) Voting Rights. The holders of Excess Shares shall not be
entitled to vote on any matters (except as required by the Texas REIT Act).
(E) Restrictions on Transfer; Designation of Beneficiary.
(1) Excess Shares shall not be Transferable. The
Purported Record Transferee (or Purported Record Holder) may freely designate a
Beneficiary of its interest in the Excess Shares Trust (representing the number
of Excess Shares held by the Excess Shares Trust attributable to the purported
Transfer that resulted in the Excess Shares), if (i) the Excess Shares held in
the Excess Shares Trust would not be Excess Shares in the hands of such
Beneficiary and (ii) the Purported Beneficial Transferee (or Purported
Beneficial Holder) does not receive a price for designating such Beneficiary
that reflects a price per share for such Excess Shares that exceeds (x) the
price per share such Purported Beneficial Transferee (or Purported Beneficial
Holder) paid for the Equity Shares in the purported Transfer, Acquisition,
change in capital structure, or other transaction or event that resulted in the
Excess Shares or the price per share paid for the Equity Shares that were
exchanged for the Excess Shares or (y) if the Purported Beneficial Transferee
(or Purported Beneficial Holder) did not give value for such Excess Shares (as
through a gift, devise or other event or transaction), a price per share equal
to the Market Price for the Equity Shares on the date of the purported
Transfer, Acquisition, change in capital structure, or other transaction or
event that resulted in the Excess Shares or the Market Price for the Equity
Shares on the date they were exchanged for the Excess Shares. Upon such
Transfer of an interest in the Excess Shares Trust, the corresponding Excess
Shares in the Excess Shares Trust automatically shall be exchanged for an equal
number of Equity Shares (depending on the type and class of shares that
originally were exchanged for such Excess Shares) and such Equity Shares shall
be transferred of record to the Beneficiary of the interest in the Excess
Shares Trust designated by the Purported Record Transferee (or Purported Record
Holder), as described above, if such Equity Shares would not be Excess Shares
in the hands of such Beneficiary. Prior to any Transfer of any interest in the
Excess Shares Trust, the Purported Record Transferee (or Purported Record
Holder) must give written notice to the Trust of the intended Transfer and the
Trust must have waived in writing its purchase rights under paragraph F of this
Section 6.5.
(2) Notwithstanding the foregoing, if a Purported
Beneficial Transferee (or Purported Beneficial Holder) receives a price for
designating a Beneficiary of an interest in the Excess Shares Trust that
exceeds the amounts allowable under subparagraph (1) of this paragraph E, such
Purported Beneficial Transferee (or Purported Beneficial Holder) shall pay, or
cause the Beneficiary of the interest in the Excess Shares Trust to pay, such
excess in full to the Trust.
(3) If any of the Transfer restrictions set forth in
this paragraph E or any application thereof is determined to be void, invalid
or unenforceable by any court having jurisdiction over the issue, the Purported
Record Transferee (or Purported Record Holder) may be deemed, at the option of
the Trust, to have acted as the agent of the Trust in acquiring the Excess
Shares as to which such restrictions would otherwise, by their terms, apply,
and to hold such Excess Shares on behalf of the Trust.
(F) Purchase Right in Excess Shares. Excess Shares shall be deemed
to have been offered for sale to the Trust or its designee at a price per share
equal to the lesser of (i) the price per share in the transaction that created
such Excess Shares (or, in the case of a devise or gift or event other than a
Transfer or Acquisition which results in the issuance of Excess Shares, the
Market Price at the time of such devise or gift or event other than a Transfer
or Acquisition which results in the issuance of Excess Shares) or (ii) the
Market Price of the Equity Shares exchanged for such Excess Shares on the date
the Trust or its designee accepts such offer. The Trust and its assignees
shall have the right to accept such offer for a period of ninety (90) days
after the later of (i) the date of
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the purported Transfer, Acquisition, change in capital structure of the Trust,
or purported change in Beneficial or Constructive Ownership or other event or
transaction which resulted in such Excess Shares and (ii) the date on which the
Board of Trust Managers determines in good faith that a Transfer, Acquisition,
change in capital structure of the Trust, or purported change in Beneficial or
Constructive Ownership or other event or transaction resulting in Excess Shares
has occurred, if the Trust does not receive a notice pursuant to paragraph E of
Section 6.4, but in no event later than a permitted Transfer pursuant to, and
in compliance with, the terms of paragraph E of this Section 6.5.
(G) Remedies Not Limited. Nothing contained in this Article VI
except Section 6.6 hereof shall limit the scope or application of the
provisions of this Section 6.5, the ability of the Trust to implement or
enforce compliance with the terms hereof or the authority of the Board of Trust
Managers to take any such other action or actions as it may deem necessary or
advisable to protect the Trust and the interests of its shareholders by
preservation of the Trust's status as a REIT and to ensure compliance with the
applicable Ownership Limits and the other restrictions set forth herein,
including, without limitation, refusal to give effect to a transaction on the
books of the Trust.
(H) Authorization. At such time as the Board of Trust Managers
authorizes a series of Preferred Shares pursuant to Section 6.2 of this Article
VI, without any further or separate action of the Board of Trust Managers,
there shall be deemed to be authorized a series of Excess Shares consisting of
the number of shares included in the series of Preferred Shares so authorized
and having terms, rights, restrictions and qualifications identical thereto,
except to the extent that this Article VI requires different terms.
SECTION 6.6 Settlements.
Nothing in Sections 6.4 and 6.5 shall preclude the settlement of any
transaction with respect to the Common Shares entered into through the
facilities of the New York Stock Exchange.
SECTION 6.7 Issuance of Rights to Purchase Securities and Other
Property.
Subject to the rights of the holders of any series of Preferred
Shares, the Board of Trust Managers is hereby authorized to create and to
authorize and direct the issuance (on either a pro rata or non-pro rata basis)
by the Trust of rights, options or warrants for the purchase of Equity Shares
of the Trust as that term is defined in paragraph A of Section 6.4, other
securities of the Trust, or shares or other securities of any successor in
interest of the Trust (a "Successor"), at such times, in such amounts, to such
persons, for such consideration (if any), with such form and content (including
without limitation the consideration for which any Equity Shares of the Trust,
other securities of the Trust, or shares or other securities of any Successor
are to be issued) and upon such terms and conditions as it may, from time to
time, determine, subject only to the restrictions, limitations, conditions and
requirements imposed by the Texas REIT Act, other applicable laws and this
Declaration of Trust. Without limiting the generality of the foregoing, the
authority granted hereby includes the authority to adopt a "rights plan" or
similar plan that treats shareholders in a discriminatory or non pro rata
manner, based upon the number of shares owned thereby or otherwise.
SECTION 6.8 Severability.
If any provision of this Article VI or any application of any such
provision is determined to be void, invalid or unenforceable by any court
having jurisdiction over the issue, the validity and enforceability of the
remainder of this Article VI shall not be affected and other applications of
such provision shall be affected only to the extent necessary to comply with
the determination of such court.
SECTION 6.9 Waiver.
The Trust shall have authority at any time to waive the requirements
that Excess Shares be issued or be deemed outstanding in accordance with the
provisions of this Article VI if the Trust determines, based on an opinion of
nationally recognized tax counsel, that the issuance of such Excess Shares or
the fact that such Excess Shares are
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deemed to be outstanding, would jeopardize the status of the Trust as a REIT
(as that term is defined in paragraph A of Section 6.4).
SECTION 6.10 Management of Money and Property Received for Shares.
The Trust Managers shall manage all money and property received for
the issuance of shares for the benefit of the shareholders of the Trust.
SECTION 6.11 Commencement of Business.
The Trust will not commence business until it has received for the
issuance of shares of beneficial interest consideration of at least $1,000
value, consisting of any tangible or intangible benefit to the Trust, including
cash, promissory notes, services performed, contracts for services to be
performed, or other securities of the Trust.
ARTICLE VII
MATTERS RELATING TO THE POWERS OF THE
TRUST AND ITS TRUST MANAGERS AND SHAREHOLDERS
The following provisions are hereby adopted for the purpose of
defining, limiting and regulating the powers of the Trust and of the trust
managers and shareholders thereof:
SECTION 7.1 Matters Relating to the Board of Trust Managers.
(A) Authority as to Bylaws. Except as provided in
Section 7.2(E) hereof, the Trust Managers of the Trust shall have exclusive
authority to amend or repeal the Bylaws of the Trust, or to adopt new Bylaws.
(B) Authority as to Share Issuances. The Board of Trust
Managers of the Trust may authorize the issuance, from time to time, of its
shares of beneficial interest of any class or series, whether now or hereafter
authorized, or securities convertible into shares now or hereafter authorized,
for such consideration as the Board of Trust Managers may deem advisable,
subject to such restrictions or limitations, if any, as may be set forth in
this Declaration of Trust or the Bylaws of the Trust or in the laws of the
State of Texas. The Board of Trust Managers may classify or reclassify any
unissued shares from time to time by setting or changing the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption of the shares.
(C) Manner of Election. Unless and except to the extent
that the Bylaws of the Trust shall so require, the election of trust managers
of the Trust need not be by written ballot.
(D) Removal of Trust Managers. Subject to the rights of
the holders of any series of Preferred Shares to elect additional trust
managers (or remove such additional trust managers, once elected) under
specified circumstances, any trust manager may be removed from office at any
time, but only for cause and only by the affirmative vote of the holders of 80
percent of the then-outstanding Equity Shares entitled to vote generally in the
election of trust managers (the "Voting Shares"), voting together as a single
class.
(E) Permissible Criteria for Consideration of Best
Interests. In determining what is in the best interest of the Trust, a trust
manager of the Trust shall consider all of the relevant factors, which may
include (i) the immediate and long-term effects of the transaction on the
Trust's shareholders, including shareholders, if any, who do not participate in
the transaction; (ii) the social and economic effects of the transaction on the
Trust's employees, suppliers, creditors and customers and others dealing with
the Trust and on the communities in which the Trust operates and is located;
(iii) whether the transaction is acceptable, based on the historical and
current operating results and financial condition of the Trust; (iv) whether a
more favorable price could be obtained for the
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Trust's shares or other securities in the future; (v) the future value of the
Trust'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 objections of such other party or parties.
(F) Determinations by Board. The determination as to any
of the following matters, made in good faith by or pursuant to the direction of
the Board of Trust Managers consistent with the Declaration of Trust of the
Trust and in the absence of actual receipt of an improper benefit in money,
property or services or active and deliberate dishonesty established by a
court, shall be final and conclusive and shall be binding upon the Trust and
every holder of its shares: (i) the amount of the net income of the Trust for
any period and the amount of assets at any time legally available for the
payment of dividends, redemption of its shares or the payment of other
distributions on its shares; (ii) the amount of paid-in surplus, net assets,
other surplus, annual or other net profit, net assets in excess of capital,
undivided profits or excess of profits over losses on sales of assets; the
amount, purpose, time of creation, increase or decrease, alteration or
cancellation of any reserves or charges and the propriety thereof (whether or
not any obligation or liability for which such reserves shall have been created
shall have been paid or discharged); (iii) the fair value, or any sale, bid or
asked priced to be applied in determining the fair value, of any asset owned or
held by the Trust; and (iv) any matters relating to the acquisition, holding
and disposition of any assets by the Trust.
(G) Reserved Powers of Board. The enumeration and
definition of particular powers of the Board of Trust Managers included in this
Article VII shall in no way be limited or restricted by reference to or
inference from the terms of any other clause of this or any other provision of
the Declaration of Trust of the Trust, or construed or deemed by inference or
otherwise in any manner to exclude or limit the powers conferred upon the Board
of Trust Managers under the laws of the State of Texas as now or hereafter in
force.
(H) Alteration of Authority Granted to the Board of Trust
Managers. The affirmative vote of that proportion of the then-outstanding
Voting Shares necessary to approve an amendment to this Declaration of Trust
pursuant to the Texas REIT Act, voting together as a single class, shall be
required to amend, repeal or adopt any provision inconsistent with Section 7.1
of this Article VII.
(I) REIT Qualification. The Board of Trust Managers
shall use its best efforts to cause the Trust and its shareholders to qualify
for U.S. federal income tax treatment in accordance with the provisions of the
Code applicable to REITs (as those terms are defined in paragraph A of Section
6.4 hereof). In furtherance of the foregoing, the Board of Trust Managers
shall use its best efforts to take such actions as are necessary, and may take
such actions as it deems desirable (in its sole discretion) to preserve the
status of the Trust as a REIT; provided, however, that in the event that the
Board of Trust Managers determines, in its sole discretion, that it no longer
is in the best interests of the Trust to qualify as a REIT, the Board of Trust
Managers shall take such actions as are required by the Code, the Texas REIT
Act and other applicable law, to cause the matter of termination of
qualification as a REIT (as that term is defined in paragraph A of Section 6.4)
to be submitted to a vote of the shareholders of the Trust pursuant to
paragraph A of Section 7.2.
SECTION 7.2 Matters Relating to the Shareholders.
(A) Liability of Shareholders. A holder of Equity Shares, or an
owner of any beneficial interest in Equity Shares, of the Trust is not under
an, and shall not have any, obligation or liability of any nature whatsoever to
the Trust or to its obligees with respect to: (i) the Equity Shares other than
the obligation to pay to the Trust the full amount of the consideration, fixed
in compliance with the Texas REIT Act, for which the Equity Shares were issued;
(ii) any contractual obligation of the Trust on the basis that the holder or
owner is or was the alter ego of the Trust, or on the basis of actual fraud or
constructive fraud, a sham to perpetrate a fraud, or other similar theory; or
(iii) any obligation of the Trust on the basis of the failure of the Trust to
observe any formality, including the failure to (1) comply with any requirement
of the Texas REIT Act or of this Declaration of Trust or of the Bylaws
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of the Trust; or (2) observe any requirement prescribed by the Texas REIT Act
or by this Declaration of Trust or the Bylaws of the Trust for acts taken by
the Trust, its Trust Managers, or its shareholders.
(B) Termination of REIT Status. Anything contained in this
Declaration of Trust to the contrary notwithstanding, the affirmative vote of
the holders of a majority of the then-outstanding Voting Shares, voting as a
single class, and the approval of the Board of Trust Managers, shall be
required to terminate voluntarily the Trust's status as a REIT (as that term is
defined in paragraph A of Section 6.4).
(C) No Cumulative Rights. Except as may be expressly provided
with respect to any class or series of Preferred Shares, shareholders of the
Trust shall not have cumulative voting rights in the election of trust
managers.
(D) No Preemptive Rights. Except as may be expressly provided
with respect to any class or series of Preferred Shares, no holders of shares
of the Trust, of whatever class or series, shall have any preferential right of
subscription for the purchase of any shares of any class or series or for the
purchase of any securities convertible into shares of any class or series of
the Trust other than such rights, if any, as the Board of Trust Managers, in
its sole discretion, may determine, and for such consideration as the Board of
Trust Managers, in its sole discretion, may fix; and except as may be expressly
provided with respect to any class or series of Preferred Shares, any shares of
any class or series of convertible securities which the Board of Trust Managers
may determine to offer for subscription to the holders of shares may, as the
Board of Trust Managers shall determine in its sole discretion, be offered to
holders of any then-existing class, classes or series of shares or other
securities to the exclusion of holders of any or all other then-existing
classes or series of securities.
(E) Authority as to Bylaws. The shareholders of the Trust shall
have no authority to amend or repeal the Bylaws of the Trust, or to adopt new
Bylaws unless (i) specifically authorized to do so by a resolution duly adopted
by the Board of Trust Managers, or (ii) any Bylaw duly adopted as herein
provided expressly vests authority in the shareholders of the Trust to amend or
repeal any such Bylaw, or provides that any such Bylaw may not be amended or
appealed without such approval of the shareholders of the Trust as may be
therein provided.
ARTICLE VIII
LIMITATION OF LIABILITY OF TRUST MANAGERS
No Trust Manager of the Trust shall be liable to the Trust for any
act, omission, loss, damage, or expense arising from the performance of his
duty under the Trust save only for his own willful misfeasance or willful
malfeasance or gross negligence.
In addition to, and in no respect whatsoever in limitation of, the
foregoing, the liability of each Trust Manager of the Trust for monetary
damages shall be eliminated to the fullest extent permitted under the laws of
the State of Texas, as the same exist or may be hereafter amended (but, in the
case of any such amendment, only to the extent that such amendment permits
broader elimination or limitation of liability of a Trust Manager than said law
permitted prior to such amendment), and no Trust Manager of the Trust shall be
liable to the Trust or its shareholders for monetary damages except to the
extent, and only to the extent, such elimination or limitation of liability is
expressly prohibited under the laws of the State of Texas, as the same exist or
may be hereafter amended (but, in the case of any such amendment, only to the
extent that such amendment permits broader elimination or limitation of
liability of a Trust Manager than said law permitted prior to such amendment).
If after the date hereof the laws of the State of Texas are amended to
authorize broader elimination or limitation of liability of a Trust Manager,
upon the effective date of such amendment the liability of a Trust Manager
shall without further act also be eliminated and limited to such broader extent
to the fullest extent not prohibited by the laws of the State of Texas as so
amended. The provisions of this Article VIII shall be deemed to be a contract
with each Trust Manager of the Trust who serves as such at any time while such
provisions are in effect, and each such Trust Manager shall be deemed
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to be serving as such in reliance on the provisions of this Article VIII. No
repeal or amendment of this Declaration of Trust shall adversely affect any
right or any elimination or limitation of liability of a Trust Manager existing
at the time of the repeal or amendment.
ARTICLE IX
INDEMNIFICATION
Each person who is or was or who agrees to become a Trust Manager or
officer of the Trust, or each person who, while a Trust Manager of the Trust,
is or was serving or who agrees to serve, at the request of the Trust, as a
Trust Manager, director, officer, partner, joint venturer, employee or trustee
of another corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise (including the heirs, executor, administrators or
estate of such person), shall be indemnified by the Trust, and shall be
entitled to have paid on his behalf or be reimbursed for reasonable expenses in
advance of final disposition of a proceeding, in accordance with the Bylaws of
the Trust, to the full extent permitted from time to time by the Texas REIT Act
as the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Trust to provide
broader indemnification rights than said law permitted the Trust to provide
prior to such amendment) or any other applicable laws presently or hereafter in
effect. The Trust shall have the power, with the approval of the Board of
Trust Managers, to provide such indemnification and advancement of expenses to
any employee or agent of the Trust, in accordance with the Bylaws of the Trust.
Without limiting the generality or the effect of the foregoing, the Trust may
enter into one or more agreements with any person which provide for
indemnification greater or different than that provided in this Article IX.
Any amendment or repeal of this Article IX shall not adversely affect any right
or protection existing hereunder immediately prior to such amendment or repeal
and shall not adversely affect any right or protection then existing pursuant
to any such indemnification agreement.
ARTICLE X
AMENDMENT
The Trust reserves the right at any time and from time to time to
amend, alter, change or repeal any provision contained in its Declaration of
Trust and any other provisions authorized by the laws of the State of Texas at
the time in force may be added or inserted in the manner now or hereafter
prescribed herein or by applicable law, and all rights, preferences and
privileges of whatsoever nature conferred upon shareholders, trust managers or
any other persons whomsoever by and pursuant to this Declaration of Trust in
its present form or as hereafter amended are granted subject to the rights
reserved in this Article X; provided, however, that any amendment or repeal of
Articles VIII, IX or this Article X of this Declaration of Trust shall not
adversely affect any right or protection existing hereunder immediately prior
to such amendment or repeal; and provided further that Article XI or Article
XII of this Declaration of Trust may be amended only upon the affirmative vote
of 80% of the votes entitled to be cast by outstanding voting shares of the
Trust, voting together as a single class.
ARTICLE XI
SPECIAL VOTING REQUIREMENTS
SECTION 11.1 DEFINITIONS.
(A) In General. In this Article XI, the following words have the
meanings indicated.
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(B) Affiliates. "Affiliate," including the term "affiliated
person," means a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
a specified person.
(C) Associate. "Associate," when used to indicate a relationship
with any person, means:
(1) Any corporation or organization (other than the
corporation or a subsidiary of the corporation) of which such person is an
officer, director, or partner or is, directly or indirectly, the beneficial
owner of 10 percent or more of any class of equity securities;
(2) Any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity; and
(3) Any relative or spouse of such person, or any
relative of such spouse, who has the same home as such person or who is a
director or officer of the corporation or any of its affiliates.
(D) Beneficial Owner. "Beneficial owner," when used with respect
to any voting shares, means a person:
(1) That, individually or with any of its affiliates or
associates, beneficially owns voting shares, directly or indirectly; or
(2) That, individually or with any of its affiliates or
associates, has:
(i) The right to acquire voting shares (whether
such right is exercisable immediately or only after the passage of
time), pursuant to any agreement, arrangement, or understanding or
upon the exercise of conversion rights, exchange rights, warrants or
options, or otherwise; or
(ii) The right to vote voting shares pursuant to
any agreement, arrangement, or understanding; or
(3) That has any agreement, arrangement, or understanding
for the purpose of acquiring, holding, voting, or disposing of voting shares
with any other person that beneficially owns, or whose affiliates or associates
beneficially own, directly or indirectly, such voting shares.
(E) Business Combination. "Business combination" means:
(1) Unless the merger, consolidation, or share exchange
does not alter the contract rights of the shares as expressly set forth in the
Declaration of Trust or change or convert in whole or in part the outstanding
shares of beneficial interest of the Trust, any merger, consolidation, or share
exchange of the Trust or any subsidiary with (i) any interested shareholder or
(ii) any other corporation (whether or not itself an interested shareholder)
which is, or after the merger, consolidation, or share exchange would be, an
affiliate of an interested shareholder that was an interested shareholder prior
to the transaction;
(2) Any sale, lease, transfer, or other disposition,
other than in the ordinary course of business or pursuant to a dividend or any
other method affording substantially proportionate treatment to the holders of
voting shares, in one transaction or a series of transactions in any 12-month
period, to any interested shareholder or any affiliate of any interested
shareholder (other than the Trust or any of its subsidiaries) of any assets of
the Trust or any subsidiary having, measured at the time the transaction or
transactions are approved by the board of Trust Managers of the Trust, an
aggregate book value as of the end of the Trust's most recently ended fiscal
quarter of 10
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percent or more of the total market value of the outstanding shares of the
Trust or of its net worth as of the end of its most recently ended fiscal
quarter;
(3) The issuance or transfer by the Trust, or any
subsidiary, in one transaction or a series of transactions, of any equity
securities of the Trust or any subsidiary which have an aggregate market value
of 5 percent or more of the total market value of the outstanding shares of the
Trust to any interested shareholder or any affiliate of any interested
shareholder (other than the Trust or any subsidiary) except pursuant to the
exercise of warrants or rights to purchase securities offered pro rata to all
holders of the Trust's voting shares or any other method affording
substantially proportionate treatment to the holders of voting shares;
(4) The adoption of any plan or proposal for the
liquidation or dissolution of the Trust in which anything other than cash will
be received by an interested shareholder or any affiliate of any interested
shareholder;
(5) Any reclassification of securities (including any
reverse share split), or recapitalization of the Trust, or any merger,
consolidation, or share exchange of the Trust with any subsidiary which has the
effect, directly or indirectly, in one or a series of transactions, of
increasing by 5 percent or more of the total number of outstanding shares, the
proportionate amount of the outstanding shares of any class of equity
securities of the Trust or any subsidiary which is directly or indirectly owned
by any interested shareholder or any affiliate of any interested shareholder;
or
(6) The receipt by any interested shareholder or any
affiliate of any interested shareholder (other than the Trust or any
subsidiary) of the benefit, directly or indirectly (except proportionately as a
shareholder), of any loan, advance, guarantee, pledge, or other financial
assistance or any tax credit or other tax advantage provided by the Trust or
any of its subsidiaries.
(F) Common Shares. "Common shares" means any shares other than
preferred or preference shares.
(G) Control. "Control", including the terms "controlling",
"controlled by" and "under common control with", means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a person, whether through the ownership of voting securities,
by contract, or otherwise, and the beneficial ownership of 10 percent or more
of the votes entitled to be cast by the Trust's voting shares creates a
presumption of control.
(H) Corporation. "Corporation" includes a real estate investment
trust.
(I) Equity Security. "Equity security" means:
(1) Any stock or similar security, share of beneficial
interest, certificate of interest, or participation in any profit sharing
agreement, voting trust certificate, or certificate of deposit for an equity
security;
(2) Any security convertible, with or without
consideration, into an equity security, or any warrant or other security
carrying any right to subscribe to or purchase any equity security; or
(3) Any put, call, straddle, or other option or privilege
of buying an equity security from or selling an equity security to another
without being bound to do so.
(J) Interested Shareholder. "Interested shareholder" means any
person (other than the Trust or any subsidiary) that:
(1) (i) Is the beneficial owner, directly or
indirectly, of 10 percent or more of the voting power of the
outstanding voting shares of the Trust; or
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(ii) Is an affiliate or associate of the Trust and
at any time within the 2 year period immediately prior to the date in
question was the beneficial owner, directly or indirectly, or 10
percent or more of the voting power of the then outstanding voting
shares of the Trust.
(2) For the purpose of determining whether a person is an
interested shareholder, the number of voting shares deemed to be outstanding
shall include shares deemed owned by the person through application of
subsection (D) of this section but may not include any other voting shares
which may be issuable pursuant to any agreement, arrangement, or understanding,
or upon exercise of conversion rights, warrants or options, or otherwise.
(K) Market Value. "Market value" means:
(1) In the case of shares, the highest closing sale price
during the 30 day period immediately preceding the date in question of such a
share on the composite tape for New York Stock Exchange-listed stocks, or, if
such shares are not quoted on the composite tape, on the New York Stock
Exchange, or, if such shares are not listed on such Exchange, on the principal
United States securities exchange registered under the Securities Exchange Act
of 1934 on which such shares are listed, or, if such shares are not listed on
any such exchange, the highest closing bid quotation with respect to such a
share during the 30 day period preceding the date in question on The Nasdaq
Stock Market, or any other nationally recognized automated quotation system
then in use, or, if no such quotations are available, the fair market value on
the date in question of such a share as determined by the Board of Trust
Managers of the Trust in good faith; and
(2) In the case of property other than cash or shares,
the fair market value of such property on the date in question as determined by
the Board of Trust Managers of the Trust in good faith.
(L) Subsidiary. "Subsidiary" means, unless the context indicates
otherwise, any Corporation of which voting stock having a majority of the votes
entitled to be cast is owned, directly or indirectly, by the Trust.
(M) Voting Shares. "Voting shares" means shares of beneficial
interest of the Trust entitled to vote generally in the election of Trust
Managers.
SECTION 11.2 VOTING REQUIREMENTS.
(A) Unless an exemption under Section 11.3(C) or (D) of this
Article applies, the Trust may not engage in any business combination with any
interested shareholder or any affiliate of the interested shareholder for a
period of 5 years following the most recent date on which the interested
shareholder became an interested shareholder.
(B) Unless an exemption under Section 11.3 of this Article
applies, in addition to any vote otherwise required by law or this Declaration
of Trust, a business combination that is not prohibited by subsection (A) of
this Section 11.2 shall be recommended by the board of Trust Managers and
approved by the affirmative vote of at least:
(1) 80 percent of the votes entitled to be cast by
outstanding voting shares of the Trust, voting together as a single voting
group; and
(2) Two-thirds of the votes entitled to be cast by
holders of voting shares other than voting shares held by the interested
shareholder who will (or whose affiliate will) be a party to the business
combination or by an affiliate or associate of the interested shareholder,
voting together as a single voting group.
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SECTION 11.3 WHEN VOTING REQUIREMENT NOT APPLICABLE
(A) For purposes of this Section 11.3:
(1) "Announcement date" means the first general public
announcement of the proposal or intention to make a proposal of the business
combination or its first communication generally to shareholders of the Trust,
whichever is earlier,
(2) "Determination date" means the most recent date on
which the interested shareholder became an interested shareholder, and
(3) "Valuation date" means:
(i) For a business combination voted upon by
shareholders, the latter of the day prior to the date of the
shareholders' vote or the day 20 days prior to the consummation of the
business combination; and
(ii) For a business combination not voted upon by
shareholders, the date of the consummation of the business
combination.
(B) The vote required by Section 11.2(B) of this Article does not
apply to a business combination as defined in Section 11.1(E)(1) of this
Article if each of the following conditions is met:
(1) The aggregate amount of the cash and the market value
as of the valuation date of consideration other than cash to be received per
share by holders of common shares in such business combination is at least
equal to the highest of the following:
(i) The highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by the interested shareholder for any common shares of the same
class or series acquired by it within the 5-year period immediately
prior to the announcement date of the proposal of the business
combination, plus an amount equal to interest compounded annually from
the earliest date on which the highest per share acquisition price was
paid through the valuation date at the rate for 1-year United States
Treasury obligations from time to time in effect, less the aggregate
amount of any cash dividends paid and the market value of any
dividends paid in other than cash, per common share from the earliest
date through the valuation date, up to the amount of the interest; or
(ii) The highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by the interested shareholder for any common shares of the same
class or series acquired by it on, or within the 5-year period
immediately before, the determination date, plus an amount equal to
interest compounded annually from the earliest date on which the
highest per share acquisition price was paid through the valuation
date at the rate for 1-year United States Treasury obligations from
time to time in effect, less the aggregate amount of any cash
dividends paid and the market value of any dividends paid in other
than cash, per common share from the earliest date through the
valuation date, up to the amount of the interest; or
(iii) The market value per common share of the same
class or series on the announcement date, plus an amount equal to
interest compounded annually from that date through the valuation date
at the rate for 1-year United States Treasury obligations from time to
time in effect, less the aggregate amount of any cash dividends paid
and the market value of any dividends paid in other than cash, per
common share from that date through the valuation date, up to the
amount of the interest; or
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(iv) The market value per common share of the same
class or series on the determination date, plus an amount equal to
interest compounded annually from that date through the valuation date
at the rate for 1-year United States Treasury obligations from time to
time in effect, less the aggregate amount of any cash dividends paid
and the market value of any dividends paid in other than cash, per
common share from that date through the valuation date, up to the
amount of the interest; or
(v) The price per share equal to the market value
per common share of the same class or series on the announcement date
or on the determination date, whichever is higher, multiplied by the
fraction of:
1. The highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the interested shareholder
for any common shares of the same class or series acquired by
it within the 5-year period immediately prior to the
announcement date, over
2. The market value per common share
of the same class or series on the first day in such 5-year
period on which the interested shareholder acquired any common
shares.
(2) The aggregate amount of the cash and the market value
as of the valuation date of consideration other than cash to be received per
share by holders of shares of any class or series of outstanding shares other
than common shares in the business combination is at least equal the highest of
the following (whether or not the interested shareholder has previously
acquired any shares of the particular class or series):
(i) The highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by the interested shareholder for any shares of such class or
series acquired by it within the 5-year period immediately prior to
the announcement date of the proposal of the business combination,
plus an amount equal to interest compounded annually from the earliest
date on which the highest per share acquisition price was paid through
the valuation date at the rate for 1-year United States Treasury
obligations from time to time in effect, less the aggregate amount of
any cash dividends paid and the market value of any dividends paid in
other than cash, per share of the class or series from the earliest
date through the valuation date, up to the amount of the interest; or
(ii) The highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by the interested shareholder for any shares of such class or
series acquired by it on, or within the 5-year period immediately
prior to, the determination date, plus an amount equal to interest
compounded annually from the earliest date on which highest per share
acquisition price was paid through the valuation date at the rate for
1-year United States Treasury obligations from time to time in effect,
less the aggregate amount of any cash dividends paid and the market
value of any dividends paid in other than cash, per share of the class
or series from the earliest date through the valuation date, to the
amount of the interest; or
(iii) The highest preferential amount per share to
which the holders of shares of such class or series are entitled in
the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Trust; or
(iv) The market value per share of such class or
series on the announcement date, plus an amount equal to interest
compounded annually from that date through the valuation date at the
rate for 1-year United States Treasury obligations from time to time
in effect, less the aggregate amount of any cash dividends paid and
the market value of any dividends paid in other than cash, per share
of the class or series from that date through the valuation date, up
to the amount of the interest; or
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(v) The market value per share of such class or
series on the determination date, plus an amount equal to interest
compounded annually from that date through the valuation date at the
rate for 1-year United States Treasury obligations from time to time
in effect, less aggregate amount of any cash dividends paid and the
market value of any dividends paid in other than cash, per share of
the class or series from that date through the valuation date, up to
the amount of the interest; or
(vi) The price per share equal to the market value
per share of such class or series on the announcement date or on the
determination date, whichever is higher, multiplied by the fraction
of:
1. The highest per share price
(including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the interested shareholder
for any shares of any class of voting shares acquired by it
within the 5-year period immediately prior to the announcement
date, over
2. The market value per share of the
same class of voting shares on the first day in such 5-year
period on which the interested shareholder acquired any shares
of the same class of voting shares.
(3) The consideration to be received by holders of any
class or series of outstanding shares is to be in cash or in the same form as
the interested shareholder has previously paid for shares of the same class or
series. If the interested shareholder has paid for shares of any class or
series with varying forms of consideration, the form of consideration for such
class or series shall be either cash or the form used to acquire the largest
number of shares of such class or series previously acquired by it.
(4) (i) After the determination date and prior to the
consummation of such business combination:
1. There shall have been no failure to
declare and pay at the regular date therefor any full periodic
dividends (whether or not cumulative) on any outstanding
preferred shares of the Trust;
2. There shall have been:
A. No reduction in the
annual rate of dividends paid on any class or series
of shares of the Trust that are not preferred shares
(except as necessary to reflect any subdivision of
the shares); and
B. An increase in such
annual rate of dividends as necessary to reflect any
reclassification (including any reverse share split),
recapitalization, reorganization or any similar
transaction which has the effect of reducing the
number of outstanding shares; and
3. The interested shareholder did not
become the beneficial owner of any additional shares of the
Trust except as part of the transaction which resulted in such
interested shareholder becoming an interested shareholder or
by virtue of proportionate share splits or share dividends.
(ii) The provisions of sub-paragraphs 1. and 2. of
subparagraph 4(i) above do not apply if no interested shareholder or
an affiliate or associate of the interested shareholder voted as a
Trust Manager of the Trust in a manner inconsistent with such
sub-subparagraphs and the interested shareholder, within 10 days after
any act or failure to act inconsistent with such sub-subparagraphs,
notifies
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the board of Trust Managers of the Trust in writing that the
interested shareholder disapproves thereof and requests in good faith
that the board of Trust Managers rectify such act or failure to act.
(C) (1) The provisions of Section 11.2 of this Article do not
apply to business combinations that specifically, generally, or generally by
types, as to specifically identified or unidentified existing or future
interested shareholders or their affiliates, which have been approved or
exempted therefrom, in whole or in part, by resolution of the board of Trust
Managers of the Trust if involving transactions with a particular interested
shareholder or its existing or future affiliates, at any time prior to the
determination date.
(2) Unless by its terms a resolution adopted under this
subsection is made irrevocable, it may be altered or repealed by the board of
Trust Managers, but this shall not affect any business combinations that have
been consummated, or are the subject of an existing agreement entered into,
prior to the alteration or repeal.
(D) The provisions of Section 11.2 of this Article do not apply to
any business combination of the Trust with an interested shareholder that
became an interested shareholder inadvertently, if the interested shareholder:
(1) as soon as practicable (but not more than 10 days after the interested
shareholder knew or should have known it had become an interested shareholder)
divests itself of a sufficient amount of the voting shares of the Trust so that
it no longer is the beneficial owner, directly or indirectly, of 10 percent or
more of the outstanding voting shares of the Trust; and (2) would not at any
time within the 5-year period preceding the announcement date with respect to
the business combination have been an interested shareholder except by
inadvertence.
ARTICLE XII
VOTING RIGHTS OF CERTAIN CONTROL SHARES
SECTION 12.1 DEFINITIONS
(A) In this Article XII, the following words have the meanings
indicated.
(B) "Acquiring person" means a person who makes or proposes to
make a control share acquisition.
(C) "Associate," when used to indicate a relationship with any
person, means:
(1) An "associate" as defined in Section 11.1(C) of Article XI; or
(2) A person that:
(i) Directly or indirectly controls, or is
controlled by, or is under common control with, the person specified;
or
(ii) Is acting or intends to act jointly or in
concert with the person specified.
(D) (1) "Control shares" means shares of beneficial interest
that, except for this Article, would, if aggregated with all other shares of
beneficial interest of the Trust (including shares the acquisition of which is
excluded from the definition of "control share acquisition" in subsection
(E)(2) of this section) owned by a person or in respect of which that person is
entitled to exercise or direct the exercise of voting power, except solely by
virtue of a revocable proxy, entitle that person, directly or indirectly, to
exercise or direct the exercise of the voting power of shares of beneficial
interest of the Trust in the election of Trust Managers within any of the
following ranges of voting power:
(i) One-fifth or more, but less than one-third of
all voting power,
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(ii) One-third or more, but less than a majority
of all voting power, or
(iii) A majority or more of all voting power.
(2) "Control shares" includes shares of beneficial
interest of the Trust only to the extent that the acquiring person, following
the acquisition of the shares, is entitled, directly or indirectly, to exercise
or direct the exercise of voting power within any level of voting power set
forth in this section for which approval has not been obtained previously under
Section 12.2 of this Article.
(E) (1) "Control share acquisition" means the acquisition,
directly or indirectly, by any person, of ownership of, or the power to direct
the exercise of voting power with respect to, issued and outstanding control
shares.
(2) "Control share acquisition" does not include the
acquisition of shares:
(i) Under the laws of descent and distribution;
(ii) Under the satisfaction of a pledge or other
security interest charged created in good faith and not for the
purpose of circumventing this Article; or
(iii) Under a merger, consolidation, or share
exchange if the Trust is a party to the merger, consolidation, or
share exchange.
(3) Unless the acquisition entitles any person, directly
or indirectly, to exercise or direct the exercise of voting power in the
election of Trust Managers in excess of the range of voting power previously
authorized or attained under an acquisition that is exempt under paragraph (2)
of this subsection, "control share acquisition" does not include the
acquisition of shares of the Trust in good faith and not for the purpose of
circumventing this Article by or from:
(i) Any person whose voting rights have
previously been authorized by shareholders in compliance with this
Article; or
(ii) Any person whose previous acquisition of
shares of beneficial interest of the Trust would have constituted a
control share acquisition but for paragraph (2) of this subsection.
(F) "Interested shares" means shares of beneficial interest of the
Trust in respect of which any of the following persons is entitled to exercise
or direct the exercise of the voting power of shares of beneficial interest of
the Trust in the election of Trust Managers:
(1) An acquiring person;
(2) An officer of the Trust; or
(3) An employee of the Trust who is also a Trust Manager
of the Trust.
(G) "Corporation" includes a real estate investment trust.
(H) "Person" includes an associate of the person.
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SECTION 12.2 VOTING RIGHTS
(A) Approval by Shareholders. Control shares of the Trust
acquired in a control share acquisition have no voting rights except to the
extent approved by the shareholders at a meeting held under Section 12.4 of
this Article by the affirmative vote of two-thirds of all the votes entitled to
be cast on the matter, excluding all interested shares.
(B) Acquisition of Shares; Voting Power. For the purposes of
Section 12.1(D) of this Article:
(1) Shares acquired within 90 days or shares acquired
under a plan to make a control share acquisition are considered to have been
acquired in the same acquisition; and
(2) A person may not be deemed to be entitled to exercise
or direct the exercise of voting power with respect to shares held for
the benefit of others if the person:
(i) Is acting in the ordinary course of business,
in good faith and not for the purpose of circumventing the provisions
of this section; and
(ii) Is not entitled to exercise or to direct the
exercise of the voting power of the shares unless the person first
seeks to obtain the instruction of another person.
SECTION 12.3 ACQUIRING PERSON STATEMENT
Any person who proposes to make or who has made a control share
acquisition may deliver an acquiring person statement to the Trust at the
Trust's principal office. The acquiring person statement shall set forth all
of the following:
(1) The identity of the acquiring person and each other
member of any group of which the person is a part for purposes of determining
control shares;
(2) A statement that the acquiring person statement is
given under this Article;
(3) The number of shares of the Trust owned (directly or
indirectly) by the acquiring person and each other member of any group;
(4) The applicable range of voting power as set forth in
Section 12.1(D) of this Article; and
(5) The control share acquisition has not occurred:
(i) A description in reasonable detail of
the terms of the proposed control share acquisition; and
(ii) Representations of the acquiring person,
together with a statement in reasonable detail of the facts on which
they are based, that:
1. The proposed control share
acquisition, if consummated, will not be contrary to law;
and
2. The acquiring person has the
financial capacity, through financing to be provided by the
acquiring person and any additional specified sources of
financing required under Section 12.5 of this Article, to make
the proposed control share acquisition.
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SECTION 12.4 SPECIAL MEETING
(A) Request by Acquiring Person. Except as provided in Section
12.5 of this Article, if the acquiring person requests, at the time of delivery
of an acquiring person statement, and gives a written undertaking to pay the
Trust's expenses of a special meeting, except the expenses of opposing approval
of the voting rights, within 10 days after the day on which the Trust receives
both the request and undertaking, the Trust Managers of the Trust shall call a
special meeting of shareholders of the Trust for the purpose of considering the
voting rights to be accorded the shares acquired or to be acquired in the
control share acquisition.
(B) Bond. The Trust may require the acquiring person to give
bond, with sufficient surety, to reasonably assure the Trust that this
undertaking will be satisfied.
(C) Time for Meeting. Unless the acquiring person agrees in
writing to another date, the special meeting of shareholders shall be held
within 50 days after the day on which the Trust has received both the request
and the undertaking.
(D) Delay at Request of Acquiring Person. If the acquiring person
makes a request in writing at the time of delivery of the acquiring person
statement, the special meeting may not be held sooner than 30 days after the
day on which the Trust receives the acquiring person statement.
(E) In Absence of Request. (1) If no request is made under
subsection (A) of this Section, the issue of the voting rights to be accorded
the shares acquired in the control shares acquisition may, at the option of the
Trust, be presented for consideration at any meeting of shareholders.
(2) If no request is made under subsection (A) of this
Section and the Trust proposes to present the issue of the voting rights to be
accorded the shares acquired is a control share acquisition for consideration
at any meeting of shareholders, the Trust shall provide the acquiring person
with written notice of the proposal not less than 20 days before the date on
which notice of the meeting is given.
SECTION 12.5 CALLS
A call of a special meeting of shareholders of the Trust is not
required to be made under Section 12.4(A) of this Article unless, at the time
of delivery of an acquiring person statement under Section 12.3 of this
Article, the acquiring person has:
(1) Entered into a definitive financing agreement or
agreements with one or more responsible financial institutions or other
entities that have the necessary financial capacity, providing for any amount
of financing of the control share acquisition not to be provided by the
acquiring person; and
(2) Delivered a copy of the agreements to the Trust.
SECTION 12.6 NOTICE OF MEETING.
(A) In General. If a special meeting of shareholders is
requested, notice of the special meeting shall be given as promptly as
reasonably practicable by the Trust to all shareholders of record as of the
record date set for the meeting, whether or not the shareholder is entitled to
vote at the meeting.
(B) Contents. Notice of the special or annual meeting of
shareholders at which the voting rights are to be considered shall include or
be accompanied by the following:
(1) A copy of the acquiring person statement delivered to
the Trust under Section 12.3 of this Article; and
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(2) A statement by the board of Trust Managers of the
Trust setting forth the position or recommendation of the board, or stating
that the board is taking no position or making no recommendation, with respect
to the issue of voting rights to be accorded the control shares.
SECTION 12.7 REDEMPTION RIGHTS.
(A) Upon delivery of acquiring person statement. If an acquiring
person statement has been delivered on or before the 10th day after the control
share acquisition, the Trust at its option, shall have the right to redeem any
or all control shares, except control shares for which voting have been
previously approved under Section 12.2 of this Article, at any time during a
60-day period commencing on the day of a meeting at which voting rights are
considered under Section 12.4 of this Article and are not approved.
(B) In absence of delivery of acquiring person statement. In
addition to the redemption rights authorized under subsection (A) of this
Section, if an acquiring person statement has not been delivered on or before
the 10th day after the control share acquisition, the Trust, at its option,
shall have the right to redeem any or all control shares, except control shares
for which voting rights have been previously approved under Section 12.2 of
this Article, at any time during a period commencing on the 11th day after the
control share acquisition and ending 60 days after a statement has been
delivered.
(C) Fair value. Any redemption of control shares under this
section shall be at the fair value of the shares. For purposes of this
section, "fair value" shall be determined:
(1) As of the date of the last acquisition of control
shares by the acquiring person in a control share acquisition or, if a meeting
is held under Section 12.4 of this Article, as of the date of the meeting; and
(2) Without regard to the absence of voting rights for
the control shares.
SECTION 12.8 STATUS AS DISSENTING SHAREHOLDERS.
(A) In General. Before a control share acquisition has occurred,
if voting rights for control shares are approved at a meeting held under
Section 12.4 of this Article and the acquiring person is entitled to exercise
or direct the exercise of a majority or more of all voting power, all
shareholders of the Trust (other than the acquiring person) have the rights of
dissenting shareholders as provided in Section 25.10 of the Texas REIT Act.
(B) Trust Deemed Successor. For purposes of applying the
provisions of the Texas REIT Act to shareholders under this Section 12.8, the
Trust shall be deemed to be a successor in a merger and the date of the most
recent approval of voting rights referred to in subsection (A) of this Section
shall be deemed to be the date of filing of articles of merger for record as
therein provided.
(C) Status To Be Contained In Notice. The notice required by
Section 12.6 of this Article shall also state that shareholders (other than the
acquiring person) are entitled to the rights of dissenting shareholders under
the Texas REIT Act and shall include a copy the applicable provisions thereof.
(D) Application of Texas REIT Act. For purposes of applying the
provisions of Sections 25.10 through 25.30 of the Texas REIT Act to this
Section:
(1) "Fair value" may not be less than the highest price
per share paid by the acquiring person in the control share acquisition;
(2) Section 25.10(B) and the first two sentences of
Section 25.20(1)(a) of the Texas REIT Act do not apply; and
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(3) There shall be no requirement that the dissenting
shareholder shall not have voted in favor of the action.
IN WITNESS WHEREOF, the undersigned President does hereby execute
this Restated Declaration of Trust as of the 17th day of January, 1997.
CRESCENT REAL ESTATE EQUITIES COMPANY
By: /s/ GERALD W. HADDOCK
-----------------------------
Name: Gerald W. Haddock
Title: President
STATE OF TEXAS )
)
COUNTY OF TARRANT )
This instrument was ACKNOWLEDGED before me on January 17, 1997, by
GERALD W. HADDOCK, President of Crescent Real Estate Equities Company, a Texas
real estate investment trust, on behalf of said real estate investment trust.
/s/ OSCAR FLORES
-----------------------------------
Notary Public - State of Texas
My Commission Expires:
/s/ OSCAR FLORES
9-28-97 -----------------------------------
- ------------------- Printed Name of Notary Public
[SEAL]
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<PAGE> 1
EXHIBIT 4.02
AMENDED AND RESTATED BYLAWS
OF
CRESCENT REAL ESTATE EQUITIES COMPANY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I - OFFICES AND RECORDS............................................ 1
Section 1.1 - Principal Office ....................................... 1
Section 1.2 - Additional Offices ..................................... 1
Section 1.3 - Books and Records ...................................... 1
ARTICLE II - SHAREHOLDERS ................................................. 1
Section 2.1 - Annual Meeting ......................................... 1
Section 2.2 - Special Meetings ....................................... 2
Section 2.3 - Place of Meeting ....................................... 2
Section 2.4 - Notice of Meeting ...................................... 2
Section 2.5 - Meeting Without Notice; Waiver of Notice ............... 3
Section 2.6 - Quorum ................................................. 3
Section 2.7 - Adjournment ............................................ 4
Section 2.8 - Proxies ................................................ 4
Section 2.9 - Notice of Shareholder Business and Nominations ......... 4
A. Annual Meeting of Shareholders ............................... 4
B. Special Meetings of Shareholders ............................. 7
C. General ...................................................... 7
Section 2.10 - Procedure for Election of Trust Managers .............. 8
Section 2.11 - Vote of Shareholders .................................. 9
Section 2.12 - Opening and Closing the Polls ......................... 10
Section 2.13 - Inspectors ............................................ 10
Section 2.14 - Informal Action ....................................... 10
ARTICLE III - BOARD OF TRUST MANAGERS ..................................... 11
Section 3.1 - General Powers ......................................... 11
Section 3.2 - Number, Tenure and Qualifications ...................... 11
Section 3.3 - Composition of the Board of Trust Managers ............. 12
Section 3.4 - Regular Meetings ....................................... 12
Section 3.5 - Special Meetings ....................................... 13
Section 3.6 - Notice ................................................. 13
Section 3.7 - Quorum ................................................. 14
</TABLE>
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<TABLE>
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Section 3.8 - Participation By Conference Telephone .................. 14
Section 3.9 - Presumption of Assent .................................. 15
Section 3.10 - Adjournments .......................................... 15
Section 3.11 - Informal Action ....................................... 15
Section 3.12 - Vacancies ............................................. 15
Section 3.13 - Removal ............................................... 16
Section 3.14 - Committees ............................................ 16
ARTICLE IV - OFFICERS ..................................................... 19
Section 4.1 - Categories of Officers ................................. 19
Section 4.2 - Election and Term of Office ............................ 19
Section 4.3 - Chairman of the Board .................................. 20
Section 4.4 - Vice Chairman of the Board ............................. 20
Section 4.4 - Chief Executive Officer ................................ 20
Section 4.5 - President .............................................. 21
Section 4.6 - Vice Presidents ........................................ 21
Section 4.7 - Secretary .............................................. 22
Section 4.8 - Treasurer .............................................. 22
Section 4.9 - Removal ................................................ 23
Section 4.10 - Salaries .............................................. 23
Section 4.11 - Vacancies ............................................. 24
Section 4.12 - Resignations .......................................... 24
ARTICLE V - SHARE CERTIFICATES AND TRANSFERS .............................. 24
Section 5.1 - Share Certificates ..................................... 24
Section 5.2 - Record Date and Closing of Transfer Books .............. 25
Section 5.3 - Registered Shareholders ................................ 26
Section 5.4 - Lost Certificates ...................................... 26
ARTICLE VI - MISCELLANEOUS PROVISIONS ..................................... 27
Section 6.1 - Fiscal Year ............................................ 27
Section 6.2 - Dividends .............................................. 27
Section 6.3 - Seal ................................................... 27
Section 6.4 - Execution of Written Instruments ....................... 27
Section 6.5 - Signing of Checks and Notes ............................ 27
Section 6.6 - Voting of Securities Held in Other Entities ............ 27
</TABLE>
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<TABLE>
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Section 6.7 - Indemnification and Insurance .......................... 28
A. Definitions .................................................. 28
B. Indemnification .............................................. 29
C. Successful Defense ........................................... 30
D. Determinations ............................................... 31
E. Advancement of Expenses ...................................... 32
F. Enforcement .................................................. 32
G. Procedure Upon a Change in Control ........................... 33
H. Employee Benefit Plans ....................................... 34
I. Authorization to Purchase Insurance .......................... 34
J. Other Indemnification and Insurance .......................... 34
K. Notice ....................................................... 35
L. Construction ................................................. 35
M. Continuing Offer, Reliance, Etc .............................. 35
N. Indemnification of Shareholders .............................. 36
O. Authority to Further Indemnify ............................... 36
P. Effect of Amendment .......................................... 36
ARTICLE VII - AMENDMENTS .................................................. 37
</TABLE>
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AMENDED AND RESTATED BYLAWS
OF
CRESCENT REAL ESTATE EQUITIES COMPANY
ORGANIZED UNDER THE LAWS OF THE STATE OF TEXAS
ARTICLE I
OFFICES AND RECORDS
SECTION 1.1 PRINCIPAL OFFICE. The initial address of the principal office
of the Company in the State of Texas is 777 Main Street, Suite 2100, Fort Worth,
Texas 76102.
SECTION 1.2 ADDITIONAL OFFICES. The Company may have such other offices,
either within or without the State of Texas, as the Board of Trust Managers from
time to time may designate or as the business of the Company from time to time
may require.
SECTION 1.3 BOOKS AND RECORDS. The books and records of the Company may be
kept, either within or without the State of Texas, at such place or places as
the Board of Trust Managers from time to time may designate.
ARTICLE II
SHAREHOLDERS
SECTION 2.1 ANNUAL MEETING. An annual meeting of the shareholders of the
Company shall be held each year, commencing with 1997, on such date and at such
time as may be fixed by resolution of the Board of Trust Managers.
<PAGE> 6
SECTION 2.2 SPECIAL MEETINGS. Subject to the rights of the holders of any
class or series of preferred shares of the Company ("Preferred Shares") to elect
additional trust managers under specified circumstances, special meetings of the
shareholders may be called only by the Chairman of the Board, the Vice Chairman
of the Board, the Chief Executive Officer, the President, the Board of Trust
Managers pursuant to a resolution adopted by a majority of the total number of
trust managers constituting the whole Board of Trust Managers (the "Whole
Board"), or by written request to the Secretary by the holders of not less than
25 percent of all of the shares then outstanding and entitled to vote at such
meeting (the "Voting Shares"); provided that (i) the Secretary shall inform the
shareholders requesting such meeting of the reasonably estimated cost of
preparing and disseminating notice thereof and shall not be required to give
such notice until the Company has received payment in such amount from such
shareholders and (ii) unless requested by holders of a majority of the Voting
Shares, the Secretary shall not be required to call a special meeting to
consider any matter which is substantially the same as a matter voted on at any
special meeting of the shareholders held during the twelve (12) months preceding
the request to call such new special meeting.
SECTION 2.3 PLACE OF MEETING. Meetings shall be held at the principal
office of the Company or at such other place, within or without the State of
Texas, as the Board of Trust Managers from time to time by resolution may
designate.
SECTION 2.4 NOTICE OF MEETING. Written or printed notice, stating the
place, day and hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be prepared and
delivered by the Company, not less than ten (10) days nor more than sixty (60)
days before the date of the meeting, personally or by mail, to each shareholder
of record entitled to vote at such meeting and to each
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shareholder or other person, if any, entitled to notice of the meeting. If
delivered by mail, such notice shall be deemed to be delivered when deposited in
the United States mail with postage thereon prepaid, addressed to the
shareholder at his or her address as it appears on the share transfer books of
the Company. If delivered personally, such notice shall be deemed given when so
delivered to the shareholder as provided above and if by facsimile, such notice
shall be deemed given upon completion of the facsimile transmission to the
shareholder as provided above. Meetings may be held without notice if all
shareholders entitled to vote are present, or if notice is waived by those not
present in accordance with Section 2.5 of these Bylaws. Any previously scheduled
meeting of the shareholders may be postponed by resolution of the Board of Trust
Managers upon public notice given prior to the date scheduled for such meeting.
SECTION 2.5 MEETING WITHOUT NOTICE; WAIVER OF NOTICE. Either before or
after a shareholders' meeting, a shareholder may waive notice thereof by
executing a waiver of notice to be filed with the Company's records of
shareholder meetings. Any such written notice shall be deemed to be the
equivalent of notice pursuant to Section 2.4 hereof. Attendance at a
shareholders' meeting, either in person or by proxy, by a person entitled to
notice thereof shall constitute a waiver of notice of the meeting unless such
person attends for the sole and express purpose of objecting to the transaction
of business on the ground that the meeting was not lawfully called or convened.
SECTION 2.6 QUORUM. Except as otherwise provided by law or by the
Declaration of Trust of the Company, as the same may be amended or restated from
time to time (the "Declaration of Trust"), the holders of a majority of the
Voting Shares, represented in person or
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by proxy, shall constitute a quorum at a meeting of shareholders, except that
when specified business is to be voted on by a class or series voting as a
class, the holders of a majority of the shares of such class or series shall
constitute a quorum for the transaction of such business.
SECTION 2.7 ADJOURNMENT. A meeting of shareholders convened on the date
for which it was called may be adjourned prior to the completion of business
thereat to a date not more than one hundred twenty (120) days after the record
date of the original meeting. Notice of a subsequent meeting held as a result of
an adjournment, other than by announcement at the meeting at which the
adjournment was taken, shall not be necessary. If a quorum is present or
represented at such subsequent meeting, any business may be transacted thereat
which could have been transacted at the meeting which was adjourned.
SECTION 2.8 PROXIES. At all meetings of shareholders, a shareholder
entitled to vote may vote in person or by proxy executed in writing thereby or
by his duly authorized attorney-in-fact. A proxy shall not be valid after eleven
(11) months from the date of its execution unless a longer period is expressly
stated therein. A proxy shall be revocable unless the proxy form states
conspicuously that the proxy is irrevocable and the proxy is coupled with an
interest. Each proxy must be filed with the Secretary of the Company or his
representative at or before the time of the meeting to which it relates.
SECTION 2.9 NOTICE OF SHAREHOLDER BUSINESS AND NOMINATIONS.
A. ANNUAL MEETING OF SHAREHOLDERS.
(1) Nominations of persons for election to the Board of Trust
Managers of the Company and the proposal of business to be considered by the
shareholders may be made at
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an annual meeting of shareholders (i) pursuant to the Company's notice of
meeting delivered pursuant to Section 2.4 of these Bylaws; (ii) by or at the
direction of the Chairman of the Board of Trust Managers; or (iii) by any
shareholder of the Company who is entitled to vote at the meeting, who has
complied with the notice procedures set forth in clauses (2) and (3) of this
Paragraph A and who was a shareholder of record at the time such notice is
delivered to the Secretary of the Company.
(2) For nominations or other business to be properly brought
before an annual meeting by a shareholder pursuant to clause (iii) of Paragraph
A(1) of this Section 2.9, the shareholder must have given timely notice thereof
in writing to the Secretary of the Company. To be timely, a shareholder's notice
shall be delivered to the Secretary at the principal office of the Company not
less than seventy (70) days nor more than ninety (90) days prior to the
anniversary of the preceding year's annual meeting; provided, however, that,
with respect to the 1997 annual meeting, the date of the 1996 annual meeting
shall be deemed to be June 17, 1996, and further provided that in the event that
the date of an annual meeting is advanced by more than thirty (30) days or
delayed by more than sixty (60) days from such anniversary date, to be timely
notice by the shareholder must be so delivered not earlier than the ninetieth
(90th) day prior to such annual meeting and not later than the close of business
on the later of the seventieth (70th) day prior to such annual meeting or the
tenth (10th) day following the day on which public announcement of the date of
such meeting is first made. Such shareholder's notice shall set forth (i) as to
each person whom the shareholder proposes to nominate for election or reelection
as a trust manager, all information relating to such person that is required to
be disclosed in solicitations of proxies for election of trust managers, or is
otherwise required, pursuant to
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Regulation 14A under the Securities Exchange Act of 1934, as amended, or any
successor statute thereto (the "Exchange Act"), including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
trust manager if elected; (ii) as to any other business that the shareholder
proposes to bring before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest in such business of such
shareholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (iii) as to the shareholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made (a) the name
and address of such shareholder, as they appear on the Company's share transfer
books, and the name and address of such beneficial owner; (b) the class or
series and number of shares of beneficial interest of the Company which are
owned beneficially and of record by such shareholder and such beneficial owner;
and (c) the date or dates upon which the shareholder acquired ownership of such
shares.
(3) Notwithstanding anything in the second sentence of
Paragraph A(2) of this Section 2.9 to the contrary, in the event that the number
of trust managers to be elected to the Board of Trust Managers of the Company is
increased and there is no public announcement naming all of the nominees for
trust manager or specifying the size of the increased Board of Trust Managers
made by the Company at least seventy (70) days prior to the first anniversary of
the preceding year's annual meeting, a shareholder's notice required by
Paragraph A of this Section 2.9 shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if it shall
be delivered to the Secretary at the principal
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executive offices of the Company not later than the close of business on the
tenth (10th) day following the day on which such public announcement is first
made by the Company.
B. SPECIAL MEETINGS OF SHAREHOLDERS. Only such business shall be conducted
at a special meeting of shareholders as shall have been brought before the
meeting pursuant to the Company's notice of meeting pursuant to Section 2.4 of
these Bylaws. Nominations of persons for election to the Board of Trust Managers
may be made at a special meeting of shareholders at which trust managers are to
be elected pursuant to the Company's notice of meeting (i) by or at the
direction of the Board of Trust Managers or (ii) by any shareholder of the
Company who is entitled to vote at the meeting, who complies with the notice
procedures set forth in this Section 2.9 and who is a shareholder of record at
the time such notice is delivered to the Secretary of the Company. Nominations
by shareholders of persons for election to the Board of Trust Managers may be
made at such a special meeting of shareholders if the shareholder's notice as
required by Paragraph A(2) of this Section 2.9 shall be delivered to the
Secretary at the principal office of the Company not earlier than the ninetieth
(90th) day prior to such special meeting and not later than the close of
business on the later of the seventieth (70th) day prior to such special meeting
or the tenth (10th) day following the day on which public announcement is first
made of the date of the special meeting and of the nominees proposed by the
Board of Trust Managers to be elected at such meeting.
C. GENERAL.
(1) Only persons who are nominated in accordance with the
procedures set forth in this Section 2.9 shall be eligible to serve as trust
managers, and only such business shall
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be conducted at a meeting of shareholders as shall have been brought before the
meeting in accordance with the procedures set forth in this Section. Except as
otherwise provided by law, the Declaration of Trust or these Bylaws, the
chairman of the meeting shall have the power and duty to determine whether a
nomination or any business proposed to be brought before the meeting was made or
brought in accordance with the procedures set forth in this Section 2.9 and, if
any proposed nomination or business is determined not to be in compliance
herewith, to declare that such defective nomination or proposal shall be
disregarded.
(2) For purposes of this Section 2.9, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Company with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section
2.9, a shareholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth herein. Nothing in this Bylaw shall be deemed to affect any
rights of shareholders to request inclusion of proposals in the Company's proxy
statement pursuant to Rule l4a-8 under the Exchange Act or to create any
additional rights with respect to any such inclusion.
SECTION 2.10 PROCEDURE FOR ELECTION OF TRUST MANAGERS. Subject to the
rights of the holders of any class or series of Preferred Shares to elect trust
managers under specified circumstances, and to the laws of the State of Texas,
each shareholder having the right to vote for the election of trust managers
shall, unless otherwise provided in the Declaration of Trust or by
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applicable law, have the right to vote, in person or by proxy, the number of
shares owned by such shareholder for as many persons as there are to be elected
and for whose election such shareholder has the right to vote. Unless otherwise
provided by the Declaration of Trust, no shareholder shall have the right or be
permitted to cumulate his or her votes on any basis. Election of trust managers
at all meetings of the shareholders at which trust managers are to be elected
may be viva voce, unless the chairman of the meeting shall order, or any
shareholder shall demand, that voting be by written ballot, and, except as
otherwise expressly provided with respect to the right of the holders of any
series of Preferred Shares to elect additional trust managers under specified
circumstances, a majority of the votes cast thereat shall elect. Voting on any
other question or election may be viva voce, unless the chairman of the meeting
shall order, or any shareholder shall demand, that voting be by written ballot.
SECTION 2.11 VOTE OF SHAREHOLDERS. Subject to the rights of the holders of
any class or series of Preferred Shares to elect trust managers under specified
circumstances, and to the laws of the State of Texas, each shareholder having
the right to vote shall be entitled at every meeting of shareholders to one (1)
vote for every share standing in his or her name on the record date fixed by the
Board of Trust Managers pursuant to Section 5.2 of these Bylaws. Except as
otherwise provided by law, the Declaration of Trust, these Bylaws, any
resolution adopted by the Board of Trust Managers authorizing a series of
Preferred Shares, or any resolution adopted by a majority of the Whole Board,
all matters submitted to the shareholders at any meeting (other than the
election of trust managers) shall be decided by a majority of the votes cast
with respect thereto.
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SECTION 2.12 OPENING AND CLOSING THE POLLS. The chairman of the meeting
shall fix, and announce at the meeting, the date and time of the opening and the
closing of the polls for each matter upon which the shareholders are to vote at
the meeting.
SECTION 2.13 INSPECTORS. At any meeting of shareholders, the chairman of
such meeting may, and upon the request of any shareholder shall, appoint one or
more persons as inspectors for such meeting. Such inspector or inspectors shall
ascertain and report the number of shares represented at such meeting in person
or by proxy, based upon the determination of such inspector or inspectors of the
validity and effect of proxies, count all votes, report the results and perform
such other acts as are proper to conduct voting with impartiality and fairness
to all shareholders. Each report of inspectors shall be in writing and signed by
the inspector or, if there is more than one, by a majority of inspectors acting
at such meeting, in which event the report of the majority shall be the report
of the inspectors. The report of the inspector or inspectors on the number of
shares represented at a meeting and the results of voting thereat shall be prima
facie evidence thereof.
SECTION 2.14 INFORMAL ACTION. Any action required or permitted to be taken
at a meeting of shareholders may be taken without a meeting if the following are
filed with the Company's records of shareholder meetings:
(1) a unanimous written consent which sets forth the action
and is signed by each shareholder entitled to vote thereon; and
(2) a written waiver of any right to dissent signed by each
shareholder, if any, entitled to notice of the meeting but not entitled to vote
thereat.
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ARTICLE III
BOARD OF TRUST MANAGERS
SECTION 3.1 GENERAL POWERS. The business and affairs of the Company shall
be managed by, or under the direction of, its Board of Trust Managers. In
addition to the powers and authorities expressly conferred by these Bylaws, the
Board of Trust Managers may exercise all such powers of the Company and do all
such lawful acts and things as are not by law or by the Declaration of Trust or
these Bylaws required to be exercised or done by the shareholders.
SECTION 3.2 NUMBER, TENURE AND QUALIFICATIONS. Subject to the rights of
the holders of any class or series of Preferred Shares to elect trust managers
under specified circumstances, the number of trust managers shall be fixed from
time to time pursuant to a resolution adopted by a majority of the Whole Board,
but shall consist of not more than twenty-five (25) nor less than three (3)
trust managers who need not be residents of the State of Texas and need not hold
shares in the Company; provided that if, at any time, the Company has fewer than
three (3) shareholders, the number of trust managers may be less than three (3),
but not less than the number of shareholders. At all times as the Board of Trust
Managers shall consist of three (3) or more trust managers, the trust managers,
other than those who may be elected by the holders of any class or series of
Preferred Shares, shall be divided, with respect to the time for which they
severally hold office, into three (3) classes, as nearly equal in number as
possible, with the term of office of the first class to expire at the first
annual meeting of shareholders held after such division into classes, the term
of office of the second class to expire at the second annual meeting of
shareholders held after such division into classes and the term of office of the
third class to expire at the third annual meeting of shareholders held after
such division into classes. Each
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trust manager shall hold office until his or her successor shall have been duly
elected and qualified. At each annual meeting of shareholders commencing with
the first annual meeting held after such division into classes, trust managers
elected to succeed those trust managers whose terms then expire shall be elected
for a term of office to expire at the third (3rd) succeeding annual meeting of
shareholders after their election, with each trust manager to hold office until
his or her successor shall have been duly elected and qualified.
SECTION 3.3 COMPOSITION OF THE BOARD OF TRUST MANAGERS. Except during a
period of vacancy or vacancies on the Board of Trust Managers, a majority of the
trust managers at all times shall be persons who are not affiliates (as that
term is defined in the next succeeding sentence) of (i) the Company other than
affiliation solely by reason of service as a trust manager of the Company or
(ii) Rainwater, Inc. or any successor entity thereto (the "Independent Trust
Managers"). For purposes of this Section 3.3, "affiliate" shall mean, with
respect to the Company or Rainwater, Inc., any individual who (i) directly or
indirectly controls, is controlled by or is under common control with, such
entity or (ii) any officer, director, trust manager, general partner or trustee
of such entity (other than a trust manager of the Company who otherwise would be
deemed to be an affiliate of the Company solely by reason of service as a trust
manager).
SECTION 3.4 REGULAR MEETINGS. A regular meeting of the Board of Trust
Managers to elect officers and consider other business shall be held without
notice other than this Section 3.4 immediately after, and at the same place as,
each annual meeting of shareholders. The Board of Trust Managers may, by
resolution, designate the time and place for additional regular meetings without
notice other than such resolution.
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SECTION 3.5 SPECIAL MEETINGS. Special meetings of the Board of Trust
Managers shall be called at the request of the Chairman of the Board, the Vice
Chairman of the Board, the Chief Executive Officer, the President or a majority
of the Board of Trust Managers. The person or persons authorized to call special
meetings of the Board of Trust Managers may fix the place and time of the
meeting.
SECTION 3.6 NOTICE. Notice of any special meeting shall be given to each
trust manager at his business or residence as recorded in the books and records
of the Company or at such other address as such trust manager may designate in
writing to the Secretary of the Company by mail, by telegram or express courier,
charges prepaid, by facsimile or telephonic communication. If mailed, such
notice shall be deemed adequately delivered if deposited in the United States
mails so addressed, with postage thereon prepaid, at least five (5) days before
the day of such meeting. If by telegram, such notice shall be deemed adequately
delivered if the telegram is delivered to the telegraph company at least
twenty-four (24) hours before the time set for such meeting. If by express
courier, the notice shall be deemed adequately given if delivered to the courier
company at least two (2) days before the day of such meeting. If by telephone or
facsimile, the notice shall be deemed adequately delivered if given at least
twelve (12) hours prior to the time set for such meeting. Neither the business
to be transacted at, nor the purpose of, any regular or special meeting of the
Board of Trust Managers need be specified in the notice of such meeting, except
for amendments to these Bylaws as provided under Article VII hereof. A meeting
may be held at any time without notice if all the trust managers are present or
if those not present waive notice of the meeting in writing, either before or
after such meeting. Attendance of a trust manager at a meeting shall constitute
waiver of notice of that meeting unless he or she attends for the sole and
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express purpose of objecting to the transaction of business on the ground that
the meeting was not lawfully called or convened.
SECTION 3.7 QUORUM. A number of trust managers equal to at least a
majority of the trust managers then in office shall constitute a quorum for the
transaction of business; provided, however, that if the Whole Board consists of
two or three trust managers, two trust managers shall constitute a quorum, if
the Whole Board consists of one trust manager, one trust manager shall
constitute a quorum and that in no event may less than one third (1/3) of the
Whole Board constitute a quorum. Anything else herein to the contrary
notwithstanding, if at any meeting of the Board of Trust Managers there shall be
less than a quorum present, a majority of the trust managers present may adjourn
the meeting from time to time without further notice. Except as may otherwise be
provided by the Declaration of Trust, these Bylaws or applicable law, the act of
the majority of the trust managers present at a meeting at which a quorum is
present shall be the act of the Board of Trust Managers. The trust managers
present at a duly organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal or departure of enough trust
managers to leave less than a quorum.
SECTION 3.8 PARTICIPATION BY CONFERENCE TELEPHONE. Members of the Board of
Trust Managers, or any committee thereof, may participate in a meeting of such
Board or committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 3.8 shall
constitute presence in person at such meeting.
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SECTION 3.9 PRESUMPTION OF ASSENT. A trust manager of the Company who is
present at a meeting of the trust managers at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his or her dissent shall be entered in the minutes of the meeting or unless he
or she shall file a written dissent to such action with the person acting as the
secretary of the meeting before the adjournment thereof.
SECTION 3.10 ADJOURNMENTS. Any meeting of the Board of Trust Managers may
be adjourned prior to the completion of business thereat. Notice of the
subsequent meeting held as a result of an adjournment, other than by
announcement at the meeting at which the adjournment is taken, shall not be
necessary. If a quorum is present at such subsequent meeting, any business may
be transacted thereat which could have been transacted at the meeting which was
adjourned.
SECTION 3.11 INFORMAL ACTION. If all of the trust managers consent in
writing to any action required or permitted to be taken at a meeting of the
Board of Trust Managers or a committee thereof and the writing or writings
evidencing such consent is or are filed by the Secretary of the Company with the
minutes of proceedings of the Board of Trust Managers or such committee, the
action shall be as valid as though it had been taken at a meeting of the Board
or committee.
SECTION 3.12 VACANCIES. Except as otherwise provided in this Section 3.12,
subject to the rights of the holders of any class or series of Preferred Shares
to elect additional trust managers under specified circumstances, unless the
Board of Trust Managers otherwise determines, vacancies resulting from death,
resignation, retirement, disqualification, or other cause relating to a
then-existing Board position shall be filled by the affirmative vote of a
majority of the remaining trust managers, though less than a quorum of the Board
of Trust Managers, and newly
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created trust managerships resulting from an increase in the authorized number
of trust managers shall be filled by the affirmative vote of a majority of the
Whole Board and, in either event, trust managers so chosen shall hold office for
a term expiring at the annual meeting of shareholders at which the term of
office of the class to which they have been elected expires and until such trust
manager's successor shall have been duly elected and qualified. No decrease in
the number of authorized trust managers constituting the Whole Board shall
shorten the term of any incumbent trust manager. Vacancies on the Board of Trust
Managers due to the removal of a trust manager may be filled by the shareholders
at an annual or special meeting called for that purpose, and trust managers so
chosen shall hold office for a term expiring at the annual meeting of
shareholders at which the term of office of the class to which they have been
elected expires and until each such trust manager's successor shall have been
duly elected and qualified. The appointment or election of a successor trust
manager shall be considered an amendment to the Declaration of Trust.
SECTION 3.13 REMOVAL. Subject to the rights of the holders of any class or
series of Preferred Shares to elect additional trust managers under specified
circumstances, any trust manager, or the entire Board of Trust Managers, may be
removed from office at any time, but only for cause and only by the affirmative
vote of the holders of at least 80 percent of the then outstanding Voting
Shares, voting together as a single class.
SECTION 3.14 COMMITTEES. The Board of Trust Managers, by resolution or
resolutions passed by a majority of the Whole Board, may designate from among
the members of the trust managers one or more committees which, to the extent
provided in such resolution or resolutions, shall have and may exercise all of
the authority of the Board of Trust Managers in
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the business and affairs of the Company to the extent consistent with the Texas
Real Estate Investment Trust Act, as amended from time to time, or any successor
statute thereto (the "Texas REIT Act"), except the power to amend the
Declaration of Trust, to approve a plan of merger or share exchange, to declare
dividends or distributions on shares, to amend these Bylaws, to issue shares
except in the manner and to the extent prescribed by the Declaration of Trust,
these Bylaws or any resolution designating the committee, to fill vacancies in
the trust managers or in the committee, to elect or remove officers of the
Company or members of the committee, to fix the compensation of any member of
the committee, to recommend to the shareholders any action requiring shareholder
approval, or to approve any merger, consolidation or share exchange which does
not require shareholder approval, each committee to consist of two (2) or more
trust managers of the Company, including, without limitation the following
committees:
(1) An Executive Committee, which shall have such authority as
shall be delegated by the Board of Trust Managers, including,
without limitation, authority to acquire and dispose of real
property and to execute contracts and agreements on behalf of
the full Board of Trust Managers including, without
limitation, those relating to the incurrence of debt by the
Company or subsidiaries thereof, and shall advise the Board of
Trust Managers from time to time with respect to such matters
as the Board of Trust Managers shall direct.
(2) An Audit Committee, which shall consist of Outside Trust
Managers (as defined below). The Audit Committee shall make
recommendations concerning the engagement of independent
public accountants, review with the independent public
accountants the plans and results of each audit engagement,
approve
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professional services provided by the independent public
accountants, review the independence of the independent public
accountants, consider the range of audit and non-audit fees
and review the adequacy of the Company's internal accounting
controls.
(3) An Executive Compensation Committee, which shall determine
compensation for the Company's executive officers and shall
administer any share incentive or other compensation plans
adopted by the Company.
For purposes of this Section 3.14, "Outside Trust Managers" shall mean trust
managers who are not (i) officers or former officers of the Company or any
subsidiary thereof; (ii) employees of the Company or any subsidiary or division
thereof; (iii) relatives of an executive officer; (iv) holders of more than five
(5) percent of the Voting Shares of the Company or any subsidiary thereof; (v)
members of any organization acting as an adviser, consultant, legal counsel or
in a similar capacity with respect to the Company and receiving compensation
therefor on an ongoing basis from the Company, in addition to trust managers
fees; or (vi) with reference to any particular transaction, interested trust
managers within the meaning of Section 4.20 of the Texas REIT Act or any
successor provision thereto. The Board of Trust Managers may designate one or
more trust managers as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of such committee. Unless the Board
of Trust Managers shall provide otherwise, the presence of one-half (1/2) of the
total membership of any committee of the Board of Trust Managers shall
constitute a quorum for the transaction of business at any meeting of such
committee and the act of a majority of those present shall be the act of such
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committee. Each committee shall keep regular minutes of its proceedings and
report the same to the full Board of Trust Managers when so requested.
ARTICLE IV
OFFICERS
SECTION 4.1 CATEGORIES OF OFFICERS. The elected officers of the Company
shall consist of a Chairman of the Board, a Vice Chairman of the Board, a Chief
Executive Officer, a President, one or more Executive Vice Presidents or Vice
Presidents, a Secretary and a Treasurer. Such other officers, assistant
officers, agents and employees as the Board of Trust Managers may from time to
time deem necessary may be elected by the Board of Trust Managers or appointed
by the Chairman of the Board. The Chairman of the Board and the Vice Chairman of
the Board shall be chosen from among the trust managers. Two or more offices may
be held by the same person, except that a person may not concurrently serve as
the President and a Vice President or Executive Vice President. Each officer
chosen or appointed in the manner prescribed by the Board of Trust Managers
shall have such powers and duties as generally pertain to his or her office or
offices, subject to the specific provisions of this Article IV. Such officers
also shall have such powers and duties as from time to time may be conferred by
the Board of Trust Managers or by any committee thereof authorized to do so.
SECTION 4.2 ELECTION AND TERM OF OFFICE. The elected officers of the
Company shall be elected annually by the Board of Trust Managers at the regular
meeting of the Board of Trust Managers held after each annual meeting of the
shareholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as is convenient. Each
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officer shall hold office until his or her successor shall have been duly
elected and shall have qualified, or until his or her death or until he or she
shall resign or be removed from office.
SECTION 4.3 CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside
at all meetings of the shareholders and of the Board of Trust Managers. The
Chairman of the Board shall be responsible for general management of the affairs
of the Company and shall perform all duties incidental to the office which may
be required by law, and all such other duties as may properly be required by the
Board of Trust Managers. Except where by law the signature of the Chief
Executive Officer or the President is required, the Chairman of the Board shall
possess the same power as the Chief Executive Officer and the President to sign
all certificates, contracts, and other instruments of the Company which may be
authorized by the Board of Trust Managers. The Chairman of the Board shall make
such reports to the Board of Trust Managers and the shareholders as are properly
required by the Board of Trust Managers. The Chairman of the Board shall see
that all orders and resolutions of the Board of Trust Managers and of any
committee thereof are carried into effect.
SECTION 4.4 VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board
shall, in the absence of the Chairman, preside at all meetings of the
shareholders and of the Board of Trust Managers. The Vice Chairman of the Board
shall, together with the Chairman of the Board and the Chief Executive Officer,
act in a general executive capacity and shall have such powers and duties as
from time to time may be established by the Board of Trust Managers.
SECTION 4.5 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall act
in a general executive capacity and shall assist the Chairman of the Board in
the administration and operation
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of the Company's business and general supervision of its policies and affairs.
The Chief Executive Officer may, in the absence of or because of the inability
to act of the Chairman of the Board, perform all duties of the Chairman of the
Board and, in the absence of or because of the inability to act of the Chairman
of the Board and the Vice Chairman of the Board, preside at all meetings of
shareholders and of the Board of Trust Managers. The Chief Executive Officer may
sign, alone or with the Secretary or any assistant secretary or any other
officer of the Company properly authorized by the Board of Trust Managers,
certificates, contracts and other instruments of the Company as authorized by
the Board of Trust Managers.
SECTION 4.6 PRESIDENT. The President shall be the chief operating officer
of the Company, shall act in a general executive capacity and shall assist the
Chairman of the Board and the Chief Executive Officer in the administration and
operation of the Company's business and general supervision of its policies and
affairs. The President may, in the absence of or because of the inability to act
of the Chairman of the Board and the Chief Executive Officer, perform all duties
of the Chairman of the Board and, in the absence of or because of the inability
to act of the Chairman of the Board, the Vice Chairman of the Board and the
Chief Executive Officer, preside at all meetings of shareholders and of the
Board of Trust Managers. The President may sign, alone or with the Secretary or
any assistant secretary or any other officer of the Company properly authorized
by the Board of Trust Managers, certificates, contracts and other instruments of
the Company as authorized by the Board of Trust Managers.
SECTION 4.7 VICE PRESIDENTS. The Vice President or Vice Presidents, if
any, including any Executive Vice Presidents, shall perform the duties of the
Chief Executive Officer and the President in the absence or disability of both
the Chief Executive Officer and the President, and
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shall have such powers and perform such other duties as the Board of Trust
Managers or the Chairman of the Board from time to time may prescribe.
SECTION 4.8 SECRETARY. The Secretary shall give, or cause to be given,
notice of all meetings of shareholders and trust managers and all other notices
required by law, by the Declaration of Trust or by these Bylaws, and in case of
his or her absence or refusal or neglect so to do, any such notice may be given
by any person thereunto directed by the Chairman of the Board, the Vice Chairman
of the Board, the Chief Executive Officer, the President or the Board of Trust
Managers, upon whose request the meeting is called, as provided in these Bylaws.
The Secretary shall record all the proceedings of the meetings of the Board of
Trust Managers, any committees thereof and the shareholders of the Company in a
book or books to be kept for that purpose, and shall perform such other duties
as from time to time may be prescribed by the Board of Trust Managers, the
Chairman of the Board, the Chief Executive Officer or the President. The
Secretary shall have custody of the seal, if any, of the Company and shall affix
the same to all instruments requiring it, when authorized by the Board of Trust
Managers, the Chairman of the Board, the Chief Executive Officer or the
President, and shall attest to the same.
SECTION 4.9 TREASURER. The Treasurer shall have custody of all Company
funds and securities and shall keep full and accurate account of receipts and
disbursements in books belonging to the Company. The Treasurer shall deposit all
moneys and other valuable effects in the name and to the credit of the Company
in such depositories as may be designated by the Board of Trust Managers. The
Treasurer shall disburse the funds of the Company in such manner as may be
ordered by the Board of Trust Managers, the Chairman of the Board, the Chief
Executive Officer or the President, taking proper vouchers for such
disbursements. The
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Treasurer shall render to the Chairman of the Board, the Chief Executive
Officer, the President and the Board of Trust Managers, whenever requested, an
account of all his or her transactions as Treasurer and of the financial
condition of the Company. If required by the Board of Trust Managers, the
Treasurer shall give the Company a bond for the faithful discharge of his or her
other duties in such amount and with such surety as the Board of Trust Managers
shall prescribe. The Treasurer also shall perform such duties and have such
powers as the Board of Trust Managers from time to time may prescribe.
SECTION 4.10 REMOVAL. Any officer elected by the Board of Trust Managers
or appointed in the manner prescribed hereby may be removed by a majority of the
members of the Whole Board whenever, in their judgment, the best interests of
the Company would be served thereby. No elected or appointed officer shall have
any contractual rights against the Company for compensation by virtue of such
election or appointment beyond the date of the election or appointment of his or
her successor, his or her death, resignation or removal, whichever event shall
first occur, except as otherwise provided in an employment or similar contract
or under an employee deferred compensation plan.
SECTION 4.11 SALARIES. The Board of Trust Managers shall fix the salaries
of the Chairman of the Board, the Vice Chairman of the Board, the Chief
Executive Officer and the President of the Company, or may delegate the
authority to do so to a duly constituted Executive Compensation Committee. The
salaries of other officers, agents and employees of the Company may be fixed by
the Board of Trust Managers, by a committee of the Board, by the Chairman of the
Board or by another officer or committee to whom that function has been
delegated by the Board of Trust Managers or the Chairman of the Board.
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SECTION 4.12 VACANCIES. Any newly created office or vacancy in any office
because of death, resignation or removal shall be filled by the Board of Trust
Managers or, in the case of an office not specifically provided for in Section
4.1 hereof, by or in the manner prescribed by the Board of Trust Managers. The
officer so selected shall hold office until his or her successor is duly
selected and shall have qualified, unless he or she sooner resigns or is removed
from office in the manner provided in these Bylaws.
SECTION 4.13 RESIGNATIONS. Any trust manager or officer, whether elected
or appointed, may resign at any time by serving written notice of such
resignation on the Chairman of the Board, the Chief Executive Officer, the
President or the Secretary, and such resignation shall be deemed to be effective
as of the close of business on the date said notice is received by the Chairman
of the Board, the Chief Executive Officer, the President or the Secretary. No
action shall be required of the Board of Trust Managers or the shareholders to
make any such resignation effective.
ARTICLE V
SHARE CERTIFICATES AND TRANSFERS
SECTION 5.1 SHARE CERTIFICATES. Each shareholder shall be entitled to a
certificate or certificates, in a form approved by the Board of Trust Managers
and consistent with the Texas REIT Act, which shall represent and certify the
number, kind and class of shares owned by him or her in the Company. Each
certificate shall be signed by the Chairman of the Board, the President or a
Vice President, and by the Secretary or the Treasurer (or an assistant secretary
or assistant treasurer, if any) and, pursuant to resolutions of the Board of
Trust Managers, any such signature may be in facsimile. In case any officer,
transfer agent or registrar who has signed, or
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whose facsimile signature has been placed on, a certificate has ceased to hold
such office before the certificate is issued, it nevertheless may be issued by
the Company with the same effect as if he or she held such office at the date of
issue.
SECTION 5.2 RECORD DATE AND CLOSING OF TRANSFER BOOKS. The Board of Trust
Managers may fix, in advance, a date as the record date for the purpose of
determining shareholders entitled to notice of, or to vote at, any meeting of
shareholders, or shareholders entitled to receive payment of any dividend or
distribution or the allotment of any rights, or the shareholders entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or in order to make a determination of shareholders for any other proper
purpose. The record date may not be prior to the close of business on the day
the record date is fixed. Such record date shall not be prior to the close of
business on the day such date is fixed and not more than sixty (60) days, and in
case of a meeting of shareholders, not less than ten (10) days, prior to the
date on which the particular action requiring such determination of shareholders
is to be taken. The stock transfer books of the Company may not be closed for a
period longer than twenty (20) days.
If no record date is fixed and the Company's stock transfer books are not
closed, the determination of shareholders entitled to notice of, or to vote at,
a meeting of shareholders shall be at the close of the business on the day on
which notice of the meeting is mailed. If no record date is fixed, the record
date for determining shareholders for any purpose other than that specified in
the preceding sentence shall be at the close of business on the day on which the
resolution of the Board of Trust Managers relating thereto is adopted.
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When a determination of shareholders of record entitled to notice of,
or to vote at, any meeting of shareholders has been made as provided in this
Section 5.2, such determination shall apply to any future meeting in respect of
an adjournment thereof, unless the trust managers fix a new record date under
this section for such future meeting.
SECTION 5.3 REGISTERED SHAREHOLDERS. The Company shall be entitled to
treat the holder of record of shares as the holder in fact and, except as
otherwise provided by the laws of the State of Texas, shall not be bound to
recognize any equitable or other claim to or interest in the shares.
Shares of the Company shall be transferred on its books only upon the
surrender to the Company of the share certificates duly endorsed or accompanied
by proper evidence of succession, assignment or authority to transfer, and upon
presentation of adequate evidence of the validity of the transfer under this
Section 5.3 and the laws of the State of Texas. In that event, the surrendered
certificates shall be canceled, new certificates issued to the person entitled
to them and the transaction recorded on the books of the Company.
SECTION 5.4 LOST CERTIFICATES. The Board of Trust Managers may direct a
new certificate to be issued in place of a certificate alleged to have been
destroyed or lost if the owner makes an affidavit that it is destroyed or lost.
The Board, in its discretion, may, as a condition precedent to issuing the new
certificate, require the owner to give the Company a bond as indemnity against
any claim that may be made against the Company on the certificate allegedly
destroyed or lost.
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ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1 FISCAL YEAR. The fiscal year of the Company shall begin on the
first (1st) day of January and end on the thirty-first (31st) day of December of
each year.
SECTION 6.2 DIVIDENDS. The Board of Trust Managers may from time to time
declare, and the Company may pay, dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law and the Declaration of
Trust.
SECTION 6.3 SEAL. The seal of the Company, if any, shall have inscribed
thereon the name of the Company and shall be in such form as may be approved by
the Board of Trust Managers. The seal may be used by causing it or a facsimile
thereof to be impressed, affixed or otherwise reproduced.
SECTION 6.4 EXECUTION OF WRITTEN INSTRUMENTS. Contracts, deeds, documents,
and other instruments shall be executed by the Chairman of the Board, the Chief
Executive Officer, the President or a Vice President and attested by the
Secretary or an assistant secretary, unless the Board of Trust Managers shall
designate other authorized signatories or other procedures for their execution.
SECTION 6.5 SIGNING OF CHECKS AND NOTES. Checks, notes, drafts, and
demands for money shall be signed by such person or persons as may be designated
by the Board of Trust Managers, the Chairman of the Board, the Chief Executive
Officer or the President.
SECTION 6.6 VOTING OF SECURITIES HELD IN OTHER ENTITIES. In the absence of
other arrangements by the Board of Trust Managers, securities issued by any
other trust, corporation,
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partnership or other entity and owned or controlled by this Company may be voted
at any securityholders' meeting of such other entity by the Chairman of the
Board of this Company or, if he or she is not present at the meeting, by the
Chief Executive Officer, the President or any Vice President of this Company,
and in the event none of the Chairman of the Board, the Chief Executive Officer,
the President or any Vice President is to be present at a meeting, the
securities may be voted by such person as the Chairman of the Board and the
Secretary of the Company shall, by duly executed proxy, designate to represent
the Company at the meeting.
SECTION 6.7 INDEMNIFICATION AND INSURANCE.
A. DEFINITIONS. In this Section 6.7:
(1) "COMPANY" includes any domestic or foreign predecessor of
the Company in a merger, consolidation, or other transaction in which the
liabilities of the predecessor are transferred to the Company by operation of
law and in any other transaction in which the Company assumes the liabilities of
the predecessor but does not specifically exclude liabilities that are the
subject of this Section 6.7.
(2) "INDEMNITEE" means (i) any present or former Trust
Manager, officer, employee or agent of the Company, (ii) any person who while
serving in any of the capacities referred to in clause (i) hereof served at the
Company's request as a director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another real estate
investment trust or foreign or domestic corporation, partnership, joint venture,
sole proprietorship, trust, employee benefit plan or other enterprise, and (iii)
any person nominated or
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designed by (or pursuant to authority granted by) the Trust Managers or any
committee thereof to serve in any of the capacities referred to in clause (i) or
(ii) hereof.
(3) "OFFICIAL CAPACITY" means (i) when used with respect to a
Trust Manager, the office of Trust Manager of the Company and (ii) when used
with respect to a person other than a Trust Manager, the elective or appointive
office of the Company held by such person or the employment or agency
relationship undertaken by such person on behalf of the Company, but in each
case does not include service for any other real estate investment trust or
foreign or domestic corporation or any partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise.
(4) "PROCEEDING" means any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative, arbitrative
or investigative, any appeal in such an action, suit or proceeding, and any
inquiry or investigation that could lead to such an action, suit or proceeding.
B. INDEMNIFICATION. The Company shall indemnify every Indemnitee against
all judgments, penalties (including excise and similar taxes), fines, amounts
paid in settlement and reasonable expenses actually incurred by the Indemnitee
in connection with any Proceeding in which he was, is or is threatened to be
named defendant or respondent, or in which he was or is a witness without being
named a defendant or respondent, by reason, in whole or in part, of his serving
or having served, or having been nominated or designated to serve, in any of the
capacities referred to in Section 6.7.A(1), if it is determined in accordance
with Section 6.7.D that the Indemnitee (a) conducted himself in good faith, (b)
reasonably believed, in the case of
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conduct in his Official Capacity, that his conduct was in the Company's best
interests and, in all other cases, that his conduct was at least not opposed to
the Company's best interests, and (c) in the case of any criminal proceeding,
had no reasonable cause to believe that his conduct was unlawful; provided,
however, that in the event that an Indemnitee is found liable to the Company or
is found liable on the basis that personal benefit was improperly received by
the Indemnitee the indemnification (i) is limited to reasonable expenses
actually incurred by the Indemnitee in connection with the Proceeding and (ii)
shall not be made in respect of any Proceeding in which the Indemnitee shall
have been found liable for willful or intentional misconduct in the performance
of his duty to the Company. Except as provided in the immediately preceding
proviso to the first sentence of this Section 6.7.B, no indemnification shall be
made under this Section 6.7.B in respect of any Proceeding in which such
Indemnitee shall have been (x) found liable on the basis that personal benefit
was improperly received by him, whether or not the benefit resulted from an
action taken in the Indemnitee's Official Capacity, or (y) found liable to the
Company. The termination of any Proceeding by judgment, order, settlement or
conviction, or on a plea of nolo contendere or its equivalent, is not of itself
determinative that the Indemnitee did not meet the requirements set forth in
clauses (a), (b) or (c) in the first sentence of this Section 6.7.B. An
Indemnitee shall be deemed to have been found liable in respect of any claim,
issue or matter only after the Indemnitee shall have been so adjudged by a court
of competent jurisdiction after exhaustion of all appeals therefrom. Reasonable
expenses shall include, without limitation, all court costs and all fees and
disbursements of attorneys for the Indemnitee.
C. SUCCESSFUL DEFENSE. Without limitation of Section 6.7.B and in addition
to the indemnification provided for in Section 6.7.B, the Company shall
indemnify every
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Indemnitee against reasonable expenses incurred by such person in connection
with any Proceeding in which he is a witness or a named defendant or respondent
because he served in any of the capacities referred to in Section 6.7.A(1), if
such person has been wholly successful, on the merits or otherwise, in defense
of the Proceeding.
D. DETERMINATIONS. Any indemnification under Section 6.7.B
(unless ordered by a court of competent jurisdiction) shall be made by the
Company only upon a determination that indemnification of the Indemnitee is
proper in the circumstances because he has met the applicable standard of
conduct. Such determination shall be made (a) by the Trust Managers by a
majority vote of a quorum consisting of Trust Managers who, at the time of such
vote, are not named defendants or respondents in the Proceeding; (b) if such a
quorum cannot be obtained, then by a majority vote of a committee of the Trust
Managers, duly designated to act in the matter by a majority vote of all Trust
Managers (in which designation Trust Managers who are named defendants or
respondents in the Proceeding may participate), such committee to consist solely
of two (2) or more Trust Managers who, at the time of the committee vote, are
not named defendants or respondents in the Proceeding; (c) by special legal
counsel selected by the Trust Managers or a committee thereof by vote as set
forth in clauses (a) or (b) of this Section 6.7.D or, if the requisite quorum of
all of the Trust Managers cannot be obtained and such committee cannot be
established, by a majority vote of all of the Trust managers (in which Trust
Managers who are named defendants or respondents in the Proceeding may
participate); or (d) by the shareholders in a vote that excludes the shares held
by Trust Managers that are named defendants or respondents in the Proceeding.
Determination as to reasonableness of expenses shall be made in the same manner
as the determination that indemnification is permissible, except that if the
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determination that indemnification is permissible is made by special legal
counsel, determination as to reasonableness of expenses must be made in the
manner specified in clause (c) of the preceding sentence for the selection of
special legal counsel. In the event a determination is made under this Section
6.7.D that the Indemnitee has met the applicable standard of conduct as to some
matters but not as to others, amounts to be indemnified may be reasonably
prorated.
E. ADVANCEMENT OF EXPENSES. Reasonable expenses (including court costs and
attorneys' fees) incurred by an Indemnitee who was or is a witness or was, is or
is threatened to be made a named defendant or respondent in a Proceeding shall
be paid or reimbursed by the Company at reasonable intervals in advance of the
final disposition of such Proceeding, and without making any of the
determinations specified in Section 6.7.D, after receipt by the Company of (a) a
written affirmation by such Indemnitee of his good faith belief that he has met
the standard of conduct necessary for indemnification by the Company under this
Section 6.7 and (b) a written undertaking by or on behalf of such Indemnitee to
repay the amount paid or reimbursed by the Company if it shall ultimately be
determined that he is not entitled to be indemnified by the Company as
authorized in this Section 6.7. Such written undertaking shall be an unlimited
general obligation of the Indemnitee but need not be secured and it may be
accepted without reference to financial ability to make repayment.
Notwithstanding any other provision of this Section 6.7, the Company may pay or
reimburse expenses incurred by an Indemnitee in connection with his appearance
as a witness or other participation in a Proceeding at a time when he is not
named a defendant or respondent in the Proceeding.
F. ENFORCEMENT. If a claim under paragraph B of this Section 6.7 is not
paid in full by the Company within thirty (30) calendar days after a written
claim has been received by
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the Company, the claimant may at any time thereafter (but prior to payment of
the claim) bring suit against the Company to recover the unpaid amount of the
claim and, if successful, in whole or in part, the claimant shall be entitled to
be paid also the expense of prosecuting such claim. It shall be a defense to any
such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any, has been tendered to the Company) that the
claimant has not met the standards of conduct which make it permissible under
the Texas REIT Act for the Company to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Company. Neither
the failure of the Company (including its Board of Trust Managers, independent
legal counsel or stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the Texas REIT Act, nor an actual determination by the Company
(including its Board of Trust Managers, independent legal counsel or
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
G. PROCEDURE UPON A CHANGE IN CONTROL. Following any "change in control"
of the Company of the type required to be reported under Item 1 of Form 8-K
promulgated under the Exchange Act, any determination as to entitlement to
indemnification shall be made by independent legal counsel selected by the
claimant, which such independent legal counsel shall be retained by the Board of
Trust Managers on behalf of the Company.
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H. EMPLOYEE BENEFIT PLANS. For purposes of this Section 6.7, the Company
shall be deemed to have requested an Indemnitee to serve an employee benefit
plan whenever the performance by him of his duties to the Company also imposed
or imposes duties on or otherwise involved or involves services by him to the
plan or participants or beneficiaries of the plan. Excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall be deemed fines. Action taken or omitted by an Indemnitee with respect to
an employee benefit plan in the performance of his duties for a purpose
reasonably believed by him to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the Company.
I. AUTHORIZATION TO PURCHASE INSURANCE. The Company may purchase and
maintain insurance, at its expense, on its own behalf and on behalf of any
person who is or was a trust manager, officer, employee or agent of the Company
or who while a trust manager, officer, employee or agent of the Company is or
was serving at the request of the Company as a trust manager, officer, partner,
trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise, or employee benefit plan,
against any liability asserted against and incurred by such person in any such
capacity or arising out of such person's position, whether or not the Company
would have the power to indemnify such person against such expense or liability
under the Texas REIT Act.
J. OTHER INDEMNIFICATION AND INSURANCE. The indemnification provided by
this Section 6.7 shall (a) not be deemed exclusive of, or to preclude, any other
rights to which those seeking indemnification may at any time be entitled under
the Company's Declaration of Trust, any law, agreement or vote of shareholders
or disinterested Trust Managers, or otherwise,
-34-
<PAGE> 39
or under any policy or policies of insurance purchased and maintained by the
Company on behalf of any Indemnitee, both as to action in his Official Capacity
and as to action in any other capacity, (b) continue as to a person who has
ceased to be in the capacity by reason of which he was an Indemnitee with
respect to matters arising during the period he was in such capacity, and (c)
inure to the benefit of the heirs, executors and administrators of such a
person.
K. NOTICE. Any indemnification of or advance of expenses to an Indemnitee
in accordance with this Section 6.7 shall be reported in writing to the
shareholders of the Company with or before the notice or waiver of notice of the
next shareholders' meeting or with or before the next submission to shareholders
of a consent to action without a meeting and, in any case, within the
twelve-month period immediately following the date of the indemnification or
advance.
L. CONSTRUCTION. The indemnification provided by this Section 6.7 shall be
subject to all valid and applicable laws, including, without limitation, the
Texas REIT Act, and, in the event this Section 6.7 or any of the provisions
hereof or the indemnification contemplated hereby are found to be inconsistent
with or contrary to any such valid laws, the latter shall be deemed to control
and this Section 6.7 shall be regarded as modified accordingly, and, as so
modified, shall continue in full force and effect.
M. CONTINUING OFFER, RELIANCE, ETC. The provisions of this Section 6.7 (a)
are for the benefit of, and may be enforced by, each Indemnitee of the Company,
the same as if set forth in their entirety in a written instrument duly executed
and delivered by the Company and such Indemnitee and (b) constitute a continuing
offer to all present and future Indemnitees. The
-35-
<PAGE> 40
Company, by its adoption of these Bylaws, (x) acknowledges and agrees that each
Indemnitee of the Company has relied upon and will continue to rely upon the
provisions of this Section 6.7 in becoming, and serving in any of the capacities
referred to in Section 6.7.A(1) hereof, (y) waives reliance upon, and all
notices of acceptance of, such provisions by such Indemnitees and (z)
acknowledges and agrees that no present or future Indemnitee shall be prejudiced
in his right to enforce the provisions of this Section 6.7 in accordance with
their terms by any act or failure to act on the part of the Company.
N. INDEMNIFICATION OF SHAREHOLDERS. The Company shall indemnify each
shareholder against any claim or liability to which the shareholder may become
subject by reason of being or having been a shareholder. The Company shall
reimburse each shareholder for all legal and other expenses reasonably incurred
by such shareholder in connection with any such claim or liability.
O. AUTHORITY TO FURTHER INDEMNIFY. The Company may, to the extent
authorized from time to time by the Trust Managers, grant rights of
indemnification and rights to be paid by the Company the expenses incurred in
defending any proceeding in advance of its final disposition to any employee or
agent of the Company to the fullest extent of the provisions of this Section 6.7
with respect to the indemnification and advancement of expenses of Trust
Managers and officers of the Company.
P. EFFECT OF AMENDMENT. No amendment, modification or repeal of this
Section 6.7 or any provision of this Section 6.7 shall in any manner terminate,
reduce or impair the right of any past, present or future Indemnitees to be
indemnified by the Company, nor the
-36-
<PAGE> 41
obligation of the Company to indemnify any such Indemnitees, under and in
accordance with the provisions of this Section 6.7 as in effect immediately
prior to such amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may be
asserted.
ARTICLE VII
AMENDMENTS
These Bylaws may be amended, added to, rescinded or repealed at any
meeting of the Board of Trust Managers or of the shareholders, provided that
notice of the proposed change was given (i) in the case of a meeting of the
shareholders, in the notice of the meeting given pursuant to Section 2.4 of
these Bylaws and (ii) in the case of a meeting of the Board of Trust Managers,
in a notice given pursuant to Section 3.4 or 3.6 hereof, as the case may be;
provided, however, that, in the case of amendments by shareholders, except as
otherwise specifically required by law, notwithstanding any other provisions of
these Bylaws or the Declaration of Trust or any provision of law which might
otherwise permit a lesser vote or no vote, but in addition to any affirmative
vote of the holders of any particular class or series of the Voting Shares
required by law, the Declaration of Trust or these Bylaws with respect to any
class or series of Preferred Shares, the affirmative vote of the holders of that
proportion of the Voting Shares necessary to approve an amendment to the
Company's Declaration of Trust pursuant to such Declaration of Trust and the
Texas REIT Act, voting together as a single class, shall be required to alter,
amend or repeal any provision of these Bylaws.
-37-
<PAGE> 1
EXHIBIT 4.03
<TABLE>
<S> <C>
SHARES OF COMMON STOCK SHARES OF COMMON STOCK
PAR VALUE $.01 PAR VALUE $.01
NUMBER FORMED UNDER THE LAWS THIS CERTIFICATE IS TRANSFERABLE SHARES
OF THE STATE OF MARYLAND IN NEW YORK, NEW YORK
C OR BOSTON, MASS.
</TABLE>
CUSIP 225756 10 5
SEE REVERSE FOR CERTAIN DEFINITIONS
CRESCENT
REAL ESTATE EQUITIES, INC.
A MARYLAND CORPORATION
- --------------------------------------------------------------------------------
THIS CERTIFIES THAT
IS THE OWNER OF
- --------------------------------------------------------------------------------
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK OF
Crescent Real Estate Equities, Inc. (the "Company"), transferable to the
Company by the holder hereof in person, or by duly authorized attorney upon
surrender of this Certificate properly endorsed. This Certificate is not valid
unless countersigned by the Transfer Agent and registered by the Registrar.
NAME CHANGED TO CRESENT REAL ESTATE EQUITIES COMPANY
AND
REORGANIZED AS A TEXAS REAL ESTATE INVESTMENT TRUST.
Witness the facsimile seal of the Company and the facsimile signatures of its
duly authorized representatives.
Dated:
Countersigned and Registered
THE FIRST NATIONAL BANK OF BOSTON
[SIG] [SIG] By Transfer Agent
Secretary President and Registrar
Authorized Signature
[CRESCENT REAL ESTATE EQUITIES, INC. CORPORATE SEAL MARYLAND 1994]
THERE ARE RESTRICTIONS ON THE TRANSFER OF THE SHARES EVIDENCED BY THIS
CERTIFICATE AS MORE FULLY SET FORTH ON THE REVERSE HEREOF.
<PAGE> 2
[CRESCENT REAL ESTATE EQUITIES, INC. LOGO]
THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER ON REQUEST AND WITHOUT CHARGE A
FULL STATEMENT OF THE DESIGNATIONS AND ANY PREFERENCES, CONVERSION AND OTHER
RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO THE DIVIDENDS,
QUALIFICATIONS AND TERMS AND CONDITIONS OF REDEMPTION OF THE STOCK OF EACH
CLASS WHICH THE CORPORATION IS AUTHORIZED TO ISSUE, OR THE DIFFERENCES IN THE
RELATIVE RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH SERIES WHICH THE
CORPORATION IS AUTHORIZED TO ISSUE, TO THE EXTENT THEY HAVE BEEN SET, AND OF
THE AUTHORITY OF THE BOARD OF DIRECTORS TO SET THE RELATIVE RIGHTS AND
PREFERENCES OF SUBSEQUENT SERIES. SUCH REQUEST MAY BE MADE TO THE SECRETARY OF
THE CORPORATION OR TO ITS TRANSFER AGENT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER AND OWNERSHIP FOR THE PURPOSE OF THE MAINTENANCE OF THE CORPORATION'S
STATUS AS A REAL ESTATE INVESTMENT TRUST (A "REIT") UNDER SECTIONS 856 THROUGH
860 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"). EXCEPT AS
OTHERWISE PROVIDED PURSUANT TO THE CHARTER OF THE CORPORATION, NO PERSON MAY
(i) BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF COMMON STOCK OF THE
CORPORATION IN EXCESS OF 8.0 PERCENT (OR SUCH GREATER PERCENT AS MAY BE
DETERMINED BY THE BOARD OF DIRECTORS OF THE CORPORATION) OF THE OUTSTANDING
SHARES OF SUCH COMMON STOCK (EXCEPT IN SUCH CIRCUMSTANCES) AS THE EXISTING
HOLDER LIMIT SHALL APPLY); (ii) BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF
ANY SERIES OF PREFERRED STOCK OF THE CORPORATION IN EXCESS OF 9.9 PERCENT OF
THE OUTSTANDING SHARES OF SUCH SERIES OF PREFERRED STOCK; OR (iii) BENEFICIALLY
OR CONSTRUCTIVELY OWN COMMON STOCK OR PREFERRED STOCK (OF ANY CLASS OR SERIES)
WHICH WOULD RESULT IN THE CORPORATION BEING "CLOSELY HELD" UNDER SECTION 856(b)
OF THE CODE OR WHICH OTHERWISE WOULD CAUSE THE CORPORATION TO FAIL TO QUALIFY
AS A REIT. ANY PERSON WHO HAS BENEFICIAL OF CONSTRUCTIVE OWNERSHIP OR WHO
ACQUIRES OR ATTEMPTS TO ACQUIRE BENEFICIAL OR CONSTRUCTIVE OWNERSHIP OF COMMON
STOCK AND/OR PREFERRED STOCK IN EXCESS OF THE ABOVE LIMITATIONS AND ANY PERSON
WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS EXCESS STOCK AS A TRANSFEREE OF SHARES
OF COMMON OR PREFERRED STOCK RESULTING IN AN EXCHANGE FOR EXCESS STOCK (AS
DESCRIBED BELOW) IMMEDIATELY MUST NOTIFY THE CORPORATION IN WRITING OR IN THE
EVENT OF A PROPOSED OR ATTEMPTED TRANSFER OR ACQUISITION OR PURPORTED CHANGE IN
BENEFICIAL OR CONSTRUCTIVE OWNERSHIP, MUST GIVE WRITTEN NOTICE TO THE
CORPORATION AT LEAST FIFTEEN (15) DAYS PRIOR TO THE PROPOSED OR ATTEMPTED
TRANSFER, TRANSACTION OR OTHER EVENT. ANY TRANSFER OR ACQUISITION OF SHARES OF
COMMON STOCK AND/OR PREFERRED STOCK OR OTHER EVENT WHICH RESULTS IN VIOLATION
OF THE OWNERSHIP OR TRANSFER LIMITATIONS SET FORTH IN THE COMPANY'S CHARTER
SHALL BE VOID AB INITIO AND THE PURPORTED BENEFICIAL AND RECORD TRANSFEREE
SHALL NOT HAVE OR ACQUIRE ANY RIGHTS IN SUCH SHARES OF COMMON STOCK AND/OR
PREFERRED STOCK. IF THE TRANSFER AND OWNERSHIP LIMITATIONS REFERRED TO HEREIN
ARE VIOLATED, THE SHARES OF COMMON OR PREFERRED STOCK REPRESENTED HEREBY
AUTOMATICALLY WILL BE EXCHANGED FOR SHARES OF EXCESS STOCK TO THE EXTENT OF
VIOLATION OF SUCH LIMITATIONS, AND SUCH SHARES OF EXCESS STOCK WILL BE HELD IN
TRUST BY THE CORPORATION, ALL AS PROVIDED BY THE CHARTER OF THE CORPORATION.
ALL DEFINED TERMS USED IN THIS LEGEND HAVE THE MEANINGS IDENTIFIED IN THE
CORPORATION'S CHARTER, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF
WHICH INCLUDING THE RESTRICTIONS ON TRANSFER, WILL BE SENT WITHOUT CHARGE TO
EACH STOCKHOLDER WHO SO REQUESTS.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right
of survivorship and not as tenants in
common
UNIF GIFT MIN ACT- _________ Custodian _________
(Cust) (Minor)
under Uniform Gifts to Minors
Act_____________
(State)
Additional abbreviations may also be used though not in the above list.
For value received, ________________________ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR THE
IDENTIFYING NUMBER OF ASSIGNEE
- -------------------------------------
- -------------------------------------------------------------------------------
Please print or typewrite name and address including postal zip
code of assignee
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
, shares of Common Stock
- -------------------------------------------------------
represented by the within certificate, and do hereby irrevocably constitute and
appoint
- -------------------------------------------------------------------------------
Attorney
- ----------------------------------------------------------------------
to transfer the said shares on the books of the within-named Company with full
power of substitution in the premises.
Dated, X
------------------------- --------------------------------------
NOTICE: (SIGNATURE)
THE SIGNATURE(S) TO THIS
ASSIGNMENT MUST CORRESPOND
WITH THE NAME(S) AS WRITTEN X
UPON THE FACE OF THE --------------------------------------
CERTIFICATE IN EVERY (SIGNATURE)
PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
- -------------------------------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN "ELIGIBLE GUARANTOR INSTITUTION" AS
DEFINED IN RULE 17Ad-15 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
- -------------------------------------------------------------------------------
SIGNATURE(S) GUARANTEED BY:
- -------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 12.01
Computation of Ratio of Earnings to Fixed Charges
(dollars in thousands)
<TABLE>
<CAPTION>
For the Nine For the Year For the Period
Months Ended Ended May 5, 1994 to
September 30, 1996 December 31, 1995 December 31, 1994
------------------ ----------------- -----------------
<S> <C> <C> <C>
Pretax Income from Continuing Operations $ 26,735 $ 36,358 $ 12,595
Interest Expense 30,861 18,781 3,493
Amortization of Deferred Financing Costs 2,065 2,500 923
------------ ------------ ---------
Earnings $ 59,661 $ 57,639 $ 17,011
============ ============ =========
Interest Expense 30,861 18,781 3,493
Capitalized Interest 779 916 --
Amortization of Deferred Financing Costs 2,065 2,500 923
------------ ------------ ---------
Fixed Charges $ 33,705 $ 22,197 $ 4,416
============ ============ =========
Ratio of Earnings to Fixed Charges 1.77 2.60 3.85
============ ============ =========
</TABLE>
<PAGE> 1
EXHIBIT 23.01
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, November 17, 1995 on Albuquerque
Facility and The Hyatt Regency of Albuquerque, January 5, 1996 on Stanford
Corporate Centre, February 15, 1996 on 301 Congress and July 19, 1996 on
Greenway Plaza included in Crescent Real Estate Equities, Inc.'s Form 8-K and
to all references to our Firm included in this Registration Statement.
Arthur Andersen, LLP
Dallas, Texas
February 7, 1997
<PAGE> 1
EXHIBIT 23.03
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Owners of The Crescent:
We consent to the incorporation by reference herein in this
Registration Statement on Form S-3 of Crescent Real Estate Equities Company
(formerly known as Crescent Real Estate Equities, Inc.) of our report dated
February 28, 1994 relating to the combined financial statements of The Crescent
as of and for the year ended December 31, 1993, which financial statements are
included in the Annual Report on Form 10-K of Crescent Real Estate Equities,
Inc. for the year ended December 31, 1995, and the reference to our firm under
the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Dallas, Texas
February 7, 1997
<PAGE> 1
EXHIBIT 23.04
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, P.C.
February 10, 1997
<PAGE> 1
EXHIBIT 23.05
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have issued our report dated February 9, 1996 accompanying the
Combined Statement of Excess of Revenues Over Specific Operating Expenses of
Greenway Plaza, Ltd. and Nine Greenway, Ltd. appearing in the Crescent Real
Estate Equities, Inc. Form 8-K dated August 15, 1996 which is incorporated by
reference in this Registration Statement on Form S-3. We consent to the
incorporation by reference in this Registration Statement of the aforementioned
report and to the use of our name as it appears under the caption "Experts."
Grant Thornton LLP
Houston, Texas
February 7, 1997
