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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 24, 1997
REGISTRATION NO. 333-21905
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. ONE
TO
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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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 MARCH 24, 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 the applicable 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 DATE OF THIS PROSPECTUS IS MARCH , 1997
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THE COMPANY
Crescent Real Estate Equities Company ("Crescent Equities"), together with
its subsidiaries, is a fully integrated real estate company operating as a real
estate investment trust for federal income tax purposes (a "REIT"). Crescent
Equities is organized as a Texas real estate investment trust and became the
successor to Crescent Real Estate Equities, Inc., a Maryland corporation (the
"Predecessor Corporation"), on December 31, 1996, through the merger of the
Predecessor Corporation and CRE Limited Partner, Inc., a subsidiary of the
Predecessor Corporation, into Crescent Equities. The term "Company" includes,
unless the context otherwise requires, Crescent Equities, the Predecessor
Corporation, Crescent Real Estate Equities Limited Partnership, a Delaware
limited partnership (the "Operating Partnership"), and the other subsidiaries of
Crescent Equities.
As of March 1, 1997, 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 58 office properties
(the "Office Properties") with an aggregate of approximately 18.0 million net
rentable square feet, four full-service hotels with a total of 1,471 rooms and
two destination health and fitness resorts (collectively, 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").
The Company provides management, leasing and development services with
respect to certain of its Properties. As of March 1, 1997, the Company had
approximately 240 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
interests in the Residential Development Corporations. Crescent Real Estate
Equities, Ltd., a Delaware corporation, which is the sole general partner of the
Operating Partnership (the "General Partner"), controls the Operating
Partnership, and Crescent Equities is the sole stockholder of the General
Partner. In addition, as of March 1, 1997, Crescent Equities owned an
approximately 83.4% limited partner interest in the Operating Partnership.
The Company's executive offices are located at 777 Main Street, Suite 2100,
Fort Worth, Texas 76102, and its telephone number is (817) 877-0477.
RISK FACTORS
Prospective investors should carefully consider the following information
in conjunction with the other information contained in this Prospectus and the
more detailed information contained in the applicable Prospectus Supplement
relating thereto before purchasing Securities.
CONCENTRATION OF ASSETS
A significant portion of the Company's assets are, 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.
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
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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, 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 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
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.
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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 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 price for the Common Shares in connection with
such a transaction. See "Description of Common Shares -- Ownership Limits and
Restrictions on Transfer."
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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 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 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, 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,
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 90
acute care psychiatric hospitals and similar facilities which it intends to
acquire and lease to a single tenant, including the effect of any failure of the
tenant under the lease to make the required lease
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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 year ended December 31, 1996 was 2.01. 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 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
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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.
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
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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 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
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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.
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
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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.
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.
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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, redemption, conversion or
preemptive rights. Matters submitted for shareholder approval generally require
a majority vote of the shares present and voting thereon.
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OWNERSHIP LIMITS AND RESTRICTIONS ON TRANSFER
For the Company to qualify as a REIT under the Code (i) not more than 50%
in value of outstanding equity securities of all classes ("Equity Shares") 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 Shares 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 Shares, 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 Shares 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 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, 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 Shares (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 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
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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 are 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 Shares 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 Shares (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 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
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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 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 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
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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 or
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 Equity 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. These factors 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.
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
15
<PAGE> 17
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 proposals 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 Company Equity Shares
of the Company or other securities of the Company or successor in interest of
the Company, 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.
16
<PAGE> 18
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 or reclassification of
securities) between the Company and any person who beneficially owns, directly
or indirectly, 10% or more of the voting power of the Company's voting shares
(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 Equity Shares receive a minimum price (as defined in the Declaration
of Trust) for their shares and the consideration is received in cash or, in
general, 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 the
holders of Equity Shares, excluding shares as to which the acquiror, officers of
the Company and employees of the Company who are also trust managers have the
right to vote or direct the vote. "Control shares" are Equity Shares which, if
aggregated with all other Equity 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 voting shares of the Company. Control shares do not
include Equity 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 such Equity
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 Equity 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 Equity Shares for purposes of such appraisal rights
may not be less than the highest price per share paid by the 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 Equity 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 exempted by a provision
of the Declaration of Trust or Bylaws of the Company adopted prior to the
control share acquisition.
17
<PAGE> 19
OWNERSHIP LIMIT
The limitation on ownership of shares of Common Shares set forth in the
Company's Declaration of Trust, as well as 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, adopted a final regulation (the "DOL
Regulation") setting out the standards that 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
18
<PAGE> 20
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 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.
19
<PAGE> 21
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.
20
<PAGE> 22
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed under the Exchange Act by the
Company (Exchange Act file number 1-13038) with the Commission and are
incorporated herein by reference:
1. The Company's Registration Statement on Form 8-B filed on March 24,
1997 registering the Common Shares of the Company under Section
12(b) of the Exchange Act.
2. The Company's Annual Report on Form 10-K for the year ended December
31, 1996.
3. The Company's Current Report on Form 8-K dated February 28, 1997 and
filed March 17, 1997, as amended on March 21, 1997.
4. The Company's Current Report on Form 8-K dated January 29, 1997 and
filed March 24, 1997.
All documents filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to termination
of the offering of all Securities to which this Prospectus relates shall be
deemed to be incorporated by reference in this Prospectus and shall be part
hereof from the date of filing of such document.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained in this
Prospectus (in the case of a statement in a previously filed document
incorporated or deemed to be incorporated by reference herein), in any
accompanying Prospectus Supplement relating to a specific offering of Securities
or in any other subsequently filed document that is also incorporated or deemed
to be incorporated by reference herein, modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus or any
accompanying Prospectus Supplement. Subject to the foregoing, all information
appearing in this Prospectus and each accompanying Prospectus Supplement is
qualified in its entirety by the information appearing in the documents
incorporated by reference.
The Company undertakes to provide without charge to each person to whom a
copy of this Prospectus has been delivered, upon the written or oral request of
any such person, a copy of any or all of the documents incorporated by reference
in this Prospectus (other than exhibits and schedules to such documents, unless
such exhibits or schedules are specifically incorporated by reference into such
documents). 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 Company's Annual Report on Form 10-K for the year ended
December 31, 1996 have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in giving said
reports.
The financial statements incorporated in this Prospectus by reference to
the Current Reports on Form 8-K (i) dated February 28, 1997 and filed on March
17, 1997, as amended on March 21, 1997 and (ii) dated January 29, 1997 and filed
on March 24, 1997, respectively 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.
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.
21
<PAGE> 23
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..................... $ 800,000
Accounting Fees and Expenses................................ $ 150,000
Legal Fees and Expenses..................................... $2,700,000
Miscellaneous............................................... $ 100,863
----------
Total....................................................... $4,145,000
==========
</TABLE>
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 (previously filed).
4.02 -- Amended and Restated Bylaws of Crescent Real Estate Equities
Company (filed herewith).
4.03 -- Form of Common Share Certificate (previously filed).
4.04 -- First Amended and Restated Agreement of Limited Partnership
of Crescent Real Estate Equities Limited Partnership dated
May 5, 1994 (filed as Exhibit 10.01 to the Registrant's
Registration Statement on Form S-11 (File No. 33-78188) and
incorporated herein by reference).
5.01 -- Opinion of Shaw, Pittman, Potts & Trowbridge as to the
legality of the securities being registered by Crescent Real
Estate Equities Company (filed herewith).
8.01 -- Opinion of Shaw, Pittman, Potts & Trowbridge regarding
certain material tax issues relating to Crescent Real Estate
Equities Company (filed herewith).
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 March 24, 1997 (filed herewith).
23.02 -- Consent of Shaw, Pittman, Potts & Trowbridge (included in
its opinions filed as Exhibits 5.01 and 8.01 to this
Registration Statement and incorporated herein by
reference).
24.01 -- Powers of Attorney (previously filed).
</TABLE>
- ------------------
* To be filed by amendment or incorporated by reference.
II-1
<PAGE> 24
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 24th day of March,
1997.
CRESCENT REAL ESTATE EQUITIES COMPANY
By: /s/ GERALD W. HADDOCK
-------------------------------------
GERALD W. HADDOCK
PRESIDENT AND CHIEF EXECUTIVE OFFICER
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 March 24, 1997
- ------------------------------------------------ Board
RICHARD E. RAINWATER
/s/ JOHN C. GOFF* Trust Manager and Vice Chairman of March 24, 1997
- ------------------------------------------------ the Board
JOHN C. GOFF
/s/ GERALD W. HADDOCK Trust Manager, President and Chief March 24, 1997
- ------------------------------------------------ Executive Officer (Principal
GERALD W. HADDOCK Executive Officer)
/s/ DALLAS E. LUCAS Senior Vice President and Chief March 24, 1997
- ------------------------------------------------ Financial Officer (Principal
DALLAS E. LUCAS Financial and Accounting Officer)
/s/ ANTHONY M. FRANK* Trust Manager March 24, 1997
- ------------------------------------------------
ANTHONY M. FRANK
/s/ MORTON H. MEYERSON* Trust Manager March 24, 1997
- ------------------------------------------------
MORTON H. MEYERSON
/s/ WILLIAM F. QUINN* Trust Manager March 24, 1997
- ------------------------------------------------
WILLIAM F. QUINN
/s/ PAUL E. ROWSEY* Trust Manager March 24, 1997
- ------------------------------------------------
PAUL E. ROWSEY, III
/s/ MELVIN ZUCKERMAN* Trust Manager March 24, 1997
- ------------------------------------------------
MELVIN ZUCKERMAN
</TABLE>
*By: /s/ GERALD W.
HADDOCK
-------------------------------
GERALD W.
HADDOCK
ATTORNEY-IN-FACT
II-2
<PAGE> 25
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
------- ---------------------- ------------
<C> <S> <C>
*1.01 -- Form of Underwriting Agreement(s).
4.01 -- Restated Declaration of Trust of Crescent Real Estate
Equities Company (previously filed).
4.02 -- Amended and Restated Bylaws of Crescent Real Estate
Equities Company (filed herewith).
4.03 -- Form of Common Share Certificate (previously filed).
4.04 -- First Amended and Restated Agreement of Limited
Partnership of Crescent Real Estate Equities Limited
Partnership dated May 5, 1994 (filed as Exhibit 10.01 to
the Registrant's Registration Statement on Form S-11
(File No. 33-78188) and incorporated herein by
reference).
5.01 -- Opinion of Shaw, Pittman, Potts & Trowbridge as to the
legality of the securities being registered by Crescent
Real Estate Equities Company (filed herewith).
8.01 -- Opinion of Shaw, Pittman, Potts & Trowbridge regarding
certain material tax issues relating to Crescent Real
Estate Equities Company (filed herewith).
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 March 24, 1997 (filed herewith).
23.02 -- Consent of Shaw, Pittman, Potts & Trowbridge (included in
its opinions filed as Exhibits 5.01 and 8.01 to this
Registration Statement and incorporated herein by
reference).
24.01 -- Powers of Attorney (previously filed).
</TABLE>
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* To be filed by amendment or incorporated by reference.
<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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<PAGE> 3
<TABLE>
<S> <C>
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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<PAGE> 4
<TABLE>
<S> <C>
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>
-iii-
<PAGE> 5
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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<PAGE> 7
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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<PAGE> 8
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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<PAGE> 9
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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<PAGE> 10
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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<PAGE> 11
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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<PAGE> 12
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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<PAGE> 13
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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<PAGE> 14
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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<PAGE> 15
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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<PAGE> 16
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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<PAGE> 17
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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<PAGE> 18
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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<PAGE> 19
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
set forth in these Bylaws or as from time to time may be established by the
Board of Trust Managers. The Vice Chairman of the Board may, in the absence of
or because of the inability to act of the Chairman of the Board, and if so
authorized by the Board of Trust Managers, perform all duties of the Chairman
of the Board. Except where by law the signature of the Chief Executive Officer
or the President is required, the Vice 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.
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 Vice 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 Vice 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 Vice 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 Vice 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 Vice 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 Vice
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 Vice
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, the Vice Chairman of the Board or
any Vice President of this Company, and in the event none of the Chairman of
the Board, the Chief Executive Officer, the President, the Vice Chairman of the
Board 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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<PAGE> 37
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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<PAGE> 38
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,
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<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
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<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
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<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.
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<PAGE> 1
EXHIBIT 5.01
[Letterhead of Shaw, Pittman, Potts & Trowbridge]
March 24, 1997
Crescent Real Estate Equities Company,
777 Main Street, Suite 2100
Fort Worth, Texas 76102
RE: CRESCENT REAL ESTATE EQUITIES COMPANY
Ladies and Gentleman:
We have acted as counsel to Crescent Real Estate Equities Company, a
Texas real estate investment trust (the "Company"), in connection with the
Registration Statement on Form S-3 filed by the Company on February 14, 1997,
with the Securities and Exchange Commission under the Securities Act of 1933,
as amended to date (the "Registration Statement"), and any subsequent
amendments thereto, relating to the offering by the Company from time to time
of (i) preferred shares of beneficial interest, par value $.01 per share (the
"Preferred Shares"), (ii) common shares of beneficial interest, par value $.01
per share (the "Common Shares") and (iii) warrants to purchase Common Shares
(the "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
are collectively referred to herein as the "Offered Securities."
In our capacity as counsel in connection with such registration, we are
familiar with the proceedings taken and proposed to be taken by the Company in
connection with the authorization and issuance of the Offered Securities, and
for purposes of this opinion have assumed that such proceedings will be timely
completed in the manner presently proposed. In addition, we have made such
legal and factual examinations and inquiries, including an examination of
originals or copies, certified or otherwise identified to our satisfaction, of
such documents, corporate records and instruments as we have deemed necessary
or appropriate for purposes of this opinion.
Each series of Common Share Warrants will be issued under one or more
warrant agreements (each, a "Warrant Agreement"), to be entered into between
the Company and a warrant agent identified in the applicable Prospectus
Supplement as warrant agent (each, a "Warrant Agent").
<PAGE> 2
Crescent Real Estate Equities Company
March 24, 1997
Page 2
Subject to the foregoing and the other matters set forth herein, it is
our opinion, that, as of the date hereof:
1. The Company has the authority, pursuant to its Declaration of Trust,
to issue up to 100,000,000 Preferred Shares. Upon adoption by the Board of
Trust Managers of a resolution in form and content as required by applicable
law, and upon issuance and delivery of and payment for such shares in the
manner contemplated by the Registration Statement and the applicable Prospectus
Supplement and by such resolution, such Preferred Shares will be validly
issued, fully paid and nonassessable.
2. The Company has the authority, pursuant to its Declaration of
Trust, to issue up to 250,000,000 Common Shares. Upon adoption by the Board of
Trust Managers of a resolution in form and content as required by applicable
law, and upon issuance and delivery of and payment for such shares in the
manner contemplated by the Registration Statement and the applicable Prospectus
Supplement and by such resolution, such Common Shares will be validly issued,
fully paid and nonassessable.
3. The Common Share Warrants will constitute legally valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms when (i) the final terms of the Common Share Warrants and applicable
Warrant Agreement have been duly established in accordance with the Declaration
of Trust and applicable law, (ii) the Board of Trust Managers of the Company
has adopted a resolution duly authorizing the issuance and delivery of the
Common Share Warrants and (iii) duly executed and delivered by the Company
against payment therefor and countersigned by the applicable Warrant Agent in
accordance with the applicable Warrant Agreement and delivered to and paid for
by the purchasers of the Common Share Warrants in the manner contemplated by
the Registration Statement and the applicable Prospectus Supplement. We consent
to your filing of this opinion as an exhibit to the Registration Statement and
to the reference to our firm under the caption "Legal Matters" in the
Prospectus included therein.
Very truly yours,
/s/ Shaw, Pittman, Potts & Trowbridge
Shaw, Pittman, Potts & Trowbridge
<PAGE> 1
EXHIBIT 8.01
[SHAW, PITTMAN, POTTS & TROWBRIDGE LETTERHEAD]
March 24, 1997
Crescent Real Estate Equities Company
777 Main Street
Suite 2100
Fort Worth, TX 76102
Ladies and Gentlemen:
On February 14, 1997, Crescent Real Estate Equities Company ("Crescent
Equities")(1) filed a registration statement on Form S-3, No. 333-21905 (the
"Registration Statement"), with the Securities and Exchange Commission. In
connection with the prospectus (the "Prospectus") filed as part of an amendment
to the Registration Statement on or about March 24, 1997, you have asked us to
render an opinion with respect to the qualification of Crescent Equities as a
real estate investment trust ("REIT") under sections 856 through 860 of the
Internal Revenue Code.(2) All capitalized terms used but not otherwise defined
herein shall have the respective meanings given them in the Registration
Statement.
We have acted as tax counsel for Crescent Equities in connection with
the preparation of the Registration Statement. Specifically, for the purpose
of this opinion, we have examined and relied on originals, or copies certified
or otherwise identified to our satisfaction, of the following: (1) the Restated
Declaration of Trust of Crescent Real Estate Equities Company; (2) the First
Amended and Restated Agreement of Limited Partnership of Crescent Real Estate
Equities Limited Partnership, as amended (the "Operating Partnership
Agreement"); (3) the Registration Statement, as amended through the date
hereof; (4) copies of all existing leases (including amendments) entered into
as of the date hereof with respect to property owned by Crescent Real Estate
Equities Limited Partnership (the "Operating Partnership"); and (5) such other
documents or information as we have deemed necessary for the opinions set forth
below. In our
- -----------------------
(1) Unless otherwise noted, all references to Crescent Equities herein refer to
Crescent Equities and its wholly owned subsidiary, Crescent Real Estate
Equities, Ltd. ("CREE").
(2) All section references herein are to the Internal Revenue Code of 1986, as
amended (the "Code"), unless otherwise noted.
<PAGE> 2
Crescent Real Estate Equities Company
March 24, 1997
Page 2
examination, we have assumed the genuineness of all signatures, the legal
capacity of natural persons, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted
to us as certified or photostatic copies, and the authenticity of the originals
of such copies.
In addition, these opinions are conditioned upon certain
representations made by Crescent Equities and the Operating Partnership as to
factual and other matters as set forth in a letter provided to us. These
opinions are also based on the assumptions that (i) the Operating Partnership
will continue to be operated in accordance with the terms and provisions of the
Operating Partnership Agreement, (ii) Crescent Equities will continue to be
operated in accordance with the terms and provisions of its Restated
Declaration of Trust, and (iii) various elections, procedural steps, and other
actions by Crescent Equities or the Operating Partnership will be completed in
a timely fashion or otherwise carried out as so described.
Unless facts material to the opinions expressed herein are specifically
stated to have been independently established or verified by us, we have relied
as to such facts solely upon the representations made by Crescent Equities and
the Operating Partnership. We are not, however, aware of any facts or
circumstances contrary to or inconsistent with the representations. To the
extent the representations are with respect to matters set forth in the Code or
Treasury Regulations, we have reviewed with the individuals making such
representations the relevant provisions of the Code, the Treasury Regulations
and published administrative interpretations.
Based upon the foregoing, we are of the opinion that Crescent Equities
qualified as a "real estate investment trust" as defined by sections 856
through 860 for its taxable years ending on or before December 31, 1996, is
organized in conformity with the requirements for qualification as a REIT and
its proposed method of operation will enable it to continue to meet the
requirements for qualification and taxation as a REIT for its current and
future taxable years. With respect to its current and future years, however, we
note that Crescent Equities' status as a REIT at any time is dependent, among
other things, upon its meeting the requirements of section 856 throughout the
year as a whole.
The opinions set forth herein are based upon the existing provisions of
the Code, Treasury Regulations, and the reported interpretations thereof by the
Internal Revenue Service ("IRS") and by the courts in effect as of the date
hereof, all of which are subject to change, both retroactively or
prospectively, and to possibly different interpretations. We believe that the
conclusions expressed herein, if challenged by the IRS, would be sustained in
court. Because our opinions are not binding upon the IRS or the courts, however,
there can be no assurance that contrary positions may not be asserted
successfully by the IRS.
<PAGE> 3
Crescent Real Estate Equities Company
March 24, 1997
Page 3
The foregoing opinions are limited to the specific matters covered
thereby and should not be interpreted to imply that the undersigned has offered
its opinion on any other matter. These opinions are furnished to you solely for
use in connection with the Registration Statement. We hereby consent to the
filing of this letter as an exhibit to the Registration Statement and to the
use of our name under the caption "Risk Factors-Risks Relating to
Qualification and Operation as a REIT" in the Prospectus.
Very truly yours,
SHAW, PITTMAN, POTTS & TROWBRIDGE
By:/s/ CHARLES B. TEMKIN, P.C.
---------------------------
Charles B. Temkin, P.C.
<PAGE> 1
EXHIBIT 12.01
Computation of Ratio of Earnings to Fixed Charges
(dollars in thousands)
<TABLE>
<CAPTION>
For the Year For the Year For the Period
Ended Ended May 5, 1994 to
December 31, 1996 December 31, 1995 December 31, 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
Pretax Income from Continuing Operations $ 47,951 $ 36,358 $ 12,595
Interest Expense 42,926 18,781 3,493
Amortization of Deferred Financing Costs 2,812 2,500 923
------------ ------------ ---------
Earnings $ 93,689 $ 57,639 $ 17,011
============ ============ =========
Interest Expense 42,926 18,781 3,493
Capitalized Interest 946 916 --
Amortization of Deferred Financing Costs 2,812 2,500 923
------------ ------------ ---------
Fixed Charges $ 46,684 $ 22,197 $ 4,416
============ ============ =========
Ratio of Earnings to Fixed Charges 2.01 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
January 17, 1997 included in Crescent Real Estate Equities Company's Form 10-K
for the year ended December 31, 1996 and of our reports dated February 14, 1997
on Trammel Crow Center, and March 18, 1997 on Carter-Crowley Real Estate
Portfolio included in Crescent Real Estate Equities Company's Form 8-K and to
all references to our Firm included in this Registration Statement.
Dallas, Texas,
March 24, 1997
