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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 29, 1997
REGISTRATION NO. 333-38071
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CRESCENT REAL ESTATE EQUITIES COMPANY
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<C> <C>
TEXAS 52-1862813
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
</TABLE>
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:
<TABLE>
<C> <C>
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
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this 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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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 THESE
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.
SUBJECT TO COMPLETION, DATED OCTOBER 29, 1997
PROSPECTUS
- -----------------
$1,500,000,000
[CRESCENT LOGO]
REAL ESTATE EQUITIES COMPANY
PREFERRED SHARES, COMMON SHARES AND COMMON SHARE WARRANTS
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Crescent Real Estate Equities Company (the "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 $1,500,000,000 in amounts, at prices and on terms
to be determined at the time of offering. 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 described in one or more supplements to this Prospectus (each, a
"Prospectus Supplement").
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and
will include, where applicable: (i) in the case of Preferred Shares, the
specific title and stated value, any dividend, liquidation, redemption,
conversion, voting and other rights, and the offering price; (ii) in the case of
Common Shares, any public offering price; and (iii) in the case of Common Share
Warrants, the specific title and aggregate number, and the issue price and the
exercise price. In addition, such specific terms may include limitations on
direct or beneficial ownership and restrictions on transfer of the Securities,
in each case as may be appropriate to preserve the status of the Company as a
real estate investment trust for federal income tax purposes.
The applicable Prospectus Supplement also will contain information as to
all material U.S. federal income tax considerations relevant to an investment
in, and any listing on a securities exchange of, the Securities covered by such
Prospectus Supplement.
The Securities may be offered directly, through agents designated from time
to time, or to or through underwriters or dealers. If any agents or underwriters
are involved in the sale of any of the Securities, their names, and any
applicable purchase price, fee, commission or discount arrangement with, between
or among them, will be set forth, or will be calculable from the information set
forth, in an accompanying Prospectus Supplement. See "Plan of Distribution." No
Securities may be sold without delivery of a Prospectus Supplement describing
the method and terms of the offering of such class or series of Securities.
SEE "RISK FACTORS" AT PAGE 2 OF THIS PROSPECTUS FOR CERTAIN FACTORS RELEVANT TO
AN INVESTMENT IN THE SECURITIES.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS OCTOBER , 1997.
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THE COMPANY
Crescent Real Estate Equities Company, a Texas real estate investment trust
("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"). The term "Company" includes, as the context
requires, Crescent Real Estate Equities, Inc., formerly a Maryland corporation
and the predecessor of Crescent Equities (the "Predecessor Corporation"),
Crescent Real Estate Equities Limited Partnership, a Delaware limited
partnership (the "Operating Partnership"), and the other subsidiaries of the
Crescent Equities.
As of October 24, 1997, the Company directly or indirectly owned a
portfolio of real estate assets (the "Properties") located primarily in 21
metropolitan submarkets in Texas and Colorado. The Properties include 78 office
properties (the "Office Properties") with an aggregate of approximately 26.6
million net rentable square feet, approximately 90 behavioral healthcare
facilities (the "Behavioral Healthcare Facilities"), five full-service hotels
with a total of 1,900 rooms and two destination health and fitness resorts that
can accommodate up to 442 guests daily (collectively, the "Hotel Properties"),
real estate mortgages relating to, and non-voting common stock in, five
residential development corporations (the "Residential Development
Corporations"), which in turn, through joint ventures or partnership
arrangements, own interests in 14 residential development properties (the
"Residential Development Properties"), and seven retail properties (the "Retail
Properties") with an aggregate of approximately 771,000 net rentable square
feet.
The Company, as a fully integrated real estate company, provides
management, leasing and development services with respect to certain of its
Properties. As of September 30, 1997, the Company had approximately 345
employees and its executive officers had more than 175 years of combined
experience in the real estate industry.
The Company owns its assets and carries on its operations and other
activities through the Operating Partnership and its other subsidiaries. The
Company also has an economic interest in the development activities of the
Residential Development Corporations. Crescent Real Estate Equities, Ltd., the
sole 1% 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 September 30, 1997, the
Company owned an approximately 88% 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 summary
information in conjunction with the other information contained in this
Prospectus and the more detailed information on risks of investment contained in
the applicable Prospectus Supplement relating thereto before purchasing
Securities.
CONCENTRATION OF ASSETS
A significant portion of the Company's assets are, and revenues are derived
from, Properties located in the metropolitan areas of Dallas-Fort Worth and
Houston, Texas. Due to this geographic concentration, any deterioration in
economic conditions in the Dallas-Fort Worth or Houston 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 September 30, 1997, the Company has experienced rapid growth, increasing
its total assets by approximately 940 percent. There can be no assurance that
the Company will be able to manage its growth effectively and the failure to do
so may have a material adverse effect on the financial condition and results of
operations of the Company.
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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.
CHANGE IN POLICIES
The Board of Trust Managers provides guidance to the senior management of
the Operating Partnership regarding the Company's operating and financial
policies and strategies, including its policies and strategies with respect to
acquisitions, growth, operations, indebtedness, capitalization and
distributions. These policies and strategies may be revised, from time to time,
without shareholder approval. Changes in the Company's policies and strategies
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.
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."
RELIANCE ON KEY PERSONNEL
The Company is dependent on the efforts of Mr. Richard E. Rainwater,
Chairman of the Board of Trust Managers, and other senior management personnel.
While the Company believes that it could find replacements for these key
executives, the loss of their services could have an adverse effect on the
operations of the Company. Mr. Rainwater has no employment agreement with the
Company and, therefore, is not obligated to remain with the Company for any
specified term. John C. Goff, Trust Manager and Vice Chairman of the Board of
Trust Managers, and Gerald W. Haddock, President, Chief Executive Officer and
Trust Manager, have entered into employment agreements with the Company, and
Messrs. Rainwater, Goff and Haddock each has entered into a noncompetition
agreement with the Company. The Company has not obtained key-man insurance for
any of its senior management personnel.
RISKS RELATING TO QUALIFICATION AND OPERATION AS A REIT
The Company intends to continue to operate in a manner so as to qualify as
a REIT under the Internal Revenue Code of 1986, as amended (the "Code"). A
qualified REIT generally is not taxed at the corporate level on income it
currently distributes to its shareholders, so long as it distributes at least 95
percent of its taxable income currently and satisfies certain other highly
technical and complex requirements. Unlike many REITs, which tend to make only
one or two types of real estate investment, the Company invests in a broad range
of real estate products, and certain of its investments are more complicated
than those of other REITs. As a result, the Company is likely to encounter a
greater number of interpretative issues under the REIT qualification rules, and
more such issues which lack clear guidance, than are other REITs. The Company,
as a matter of policy, regularly consults with outside tax counsel in
structuring its new investments. The Company has received an opinion from Shaw,
Pittman, Potts and Trowbridge ("Tax Counsel") that the Company qualified as a
REIT under the Code for its taxable years ending on or before December 31, 1996,
is organized in conformity with the requirements for qualification as a REIT
under the Code and its proposed manner of operation will enable it to continue
to meet the requirements for qualification as a REIT. However, this opinion is
based upon certain representations made by the Company and the Operating
Partnership and upon
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existing law, which is subject to change, both retroactively and prospectively,
and to possibly different interpretations. Furthermore, Tax Counsel's opinion is
not binding upon either the Internal Revenue Service or the courts. Because the
Company's qualification as a REIT in its current and future taxable years
depends upon its meeting the requirements of the Code in future periods, no
assurance can be given that the Company will continue to qualify as a REIT in
the future. If, in any taxable year, the Company were to fail to qualify as a
REIT for federal income tax purposes, it would not be allowed a deduction for
distributions to shareholders in computing taxable income and would be subject
to federal income tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates. In addition, unless entitled to
relief under certain statutory provisions, the Company would be disqualified
from treatment as a REIT for federal income tax purposes for the four taxable
years following the year during which qualification was lost. The additional tax
liability resulting from the failure to so qualify would significantly reduce
the amount of funds available for distribution to shareholders. The applicable
Prospectus Supplement will contain information, where applicable, as to all
material U.S. federal income tax considerations relevant to an investment in the
Securities covered by such Prospectus Supplement.
RISKS RELATING TO DEBT
The Company's organizational documents do not limit the level or amount of
debt that it may incur. It is the Company's current policy to pursue a strategy
of conservative use of leverage, generally with a ratio of debt to total market
capitalization targeted at approximately 40 percent, although this policy is
subject to reevaluation and modification by the Company and could be increased
above 40 percent. The Company has based its debt policy on the relationship
between its debt and its total market capitalization, rather than the book value
of its assets or other historical measures that typically have been employed by
publicly traded REITs, because management believes that market capitalization
more accurately reflects the Company's ability to borrow money and meet its debt
service requirements. Market capitalization is, however, more variable than book
value of assets or other historical measures. There can be no assurance that the
ratio of indebtedness to market capitalization (or any other measure of asset
value) or the incurrence of debt at any particular level would not adversely
affect the financial condition and results of operations of the Company.
RISKS RELATING TO CONTROL OF CERTAIN PROPERTIES
Hotel Risks. The Company has leased the Hotel Properties to subsidiaries of
Crescent Operating, Inc., and such subsidiaries, rather than the Company, are
entitled to exercise all rights of the owner of the respective hotel. The
Company will receive both base rent and a percentage of gross sales above a
certain minimum level pursuant to the leases, which expire between 2004 and
2007. 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
such subsidiaries 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 amount of rent payable to the
Company under the leases with respect to the Hotel Properties will depend on the
ability of such subsidiaries and the 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 subsidiaries and the 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. In addition, the Company, expects, in
accordance with the terms of an intercompany agreement between the Company and
Crescent Operating, Inc. (the "Intercompany Agreement"), to lease any hotel
properties that it may acquire in the future to Crescent Operating, Inc. (or a
subsidiary or subsidiaries) which, as lessees of any such hotel properties, will
be entitled to exercise all rights of the owner. See "-- Real Estate Risks
Specific to the Company's Business -- Potential Conflicts of Interest."
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
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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.
GENERAL REAL ESTATE RISKS
Uncontrollable Factors Affecting Performance and Value. The economic
performance and value of the Company's real estate assets will be subject to all
of the risks incident to the ownership and operation of real estate. These
include the risks normally associated with changes in general national, regional
and local economic and market conditions. Such local real estate market
conditions may include excess supply and competition for tenants, including
competition based on rental rates, attractiveness and location of the property
and quality of maintenance, insurance and management services. In addition,
other factors may affect the performance and value of a property adversely,
including changes in laws and governmental regulations (including those
governing usage, zoning and taxes), changes in interest rates (including the
risk that increased interest rates may result in decreased sales of lots in the
Residential Development Properties) and the availability of financing.
Illiquidity of Real Estate Investments. Because real estate investments are
relatively illiquid, the Company's ability to vary its portfolio promptly in
response to economic or other conditions will be limited. In addition, certain
significant expenditures, such as debt service (if any), real estate taxes, and
operating and maintenance costs, generally are not reduced in circumstances
resulting in a reduction in income from the investment. The foregoing and any
other factor or event that would impede the ability of the Company to respond to
adverse changes in the performance of its investments could have an adverse
effect on the Company's financial condition and results of operations.
Environmental Matters. Under various federal, state and local laws,
ordinances and regulations, an owner or operator of real property may become
liable for the costs of removal or remediation of certain hazardous or toxic
substances released on or in its property, as well as certain other costs
relating to hazardous or toxic substances. Such liability may be imposed without
regard to whether the owner or operator knew of, or was responsible for, the
release of such substances. The presence of, or the failure to remediate
properly, such substances, when released, may adversely affect the owner's
ability to sell the affected real estate or to borrow using such real estate as
collateral. Such costs or liabilities could exceed the value of the affected
real estate. The Company has not been notified by any governmental authority of
any non-compliance, liability or other claim in connection with any of the
Properties and the Company is not aware of any other environmental condition
with respect to any of the Properties that management believes would have a
material adverse effect on the Company's business, assets or results of
operations. Prior to the Company's acquisition of its Properties, independent
environmental consultants conducted or updated Phase I environmental assessments
(which generally do not involve invasive techniques such as soil or ground water
sampling) on the Properties. None of these Phase I assessments or updates
revealed any materially adverse environmental condition not known to the Company
or the independent consultants preparing the assessments. There can be no
assurance, however, that environmental liabilities have not developed since such
environmental assessments were prepared, or that future uses or conditions
(including, without limitation, changes in applicable environmental laws and
regulations) will not result in imposition of environmental liability.
REAL ESTATE RISKS SPECIFIC TO THE COMPANY'S BUSINESS
Investment Risks. In implementing its investment strategies, the Company
has invested in a broad range of real estate assets, and in the future, may
invest in additional types of real estate assets not currently included in its
portfolio. There can be no assurance, however, that the Operating Partnership
will be able to implement its investment strategies successfully in the future.
As a result of its real estate investments, the Operating Partnership 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 Operating
Partnership is subject to risks that, upon expiration, leases for space in the
Office Properties and Retail Properties may not be renewed, the space may not be
re-leased, or the terms of renewal or re-lease (including the cost of required
renovations or concessions to tenants) may be less favorable than current lease
terms. In addition, the Company is subject to risks relating to the Behavioral
Healthcare Facilities, including the effect of any failure of the tenant to make
required lease
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payments (which 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 disbursement programs, on the ability of the
tenant to make the required lease payments, and the limited number of
replacement tenants in the event of default under, or non-renewal of, the lease.
Similarly, the Company is subject to the risk that the success of its investment
in the Hotel Properties will be highly dependent upon the ability of the Hotel
Properties 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.
Risks of Joint Ownership of Assets. The Company has the right to invest in
properties and assets jointly with other persons or entities. Joint ownership of
properties, under certain circumstances, may involve risks not otherwise
present, including the possibility that the Company's partners or co-investors
might become bankrupt, that such partners or co-investors might at any time have
economic or other business interests or goals which are inconsistent with the
business interests or goals of the Company, and that such partners or co-
investors may be in a position to take action contrary to the instructions or
the requests of the Company or contrary to the Company's policies or objectives,
including the Company's policy with respect to maintaining its qualification as
a REIT.
Potential Conflicts of Interest. The Company has entered into the
Intercompany Agreement with Crescent Operating, Inc., pursuant to which each has
agreed to provide the other with rights to participate in certain transactions.
The certificate of incorporation of Crescent Operating, Inc., as amended and
restated, generally prohibits Crescent Operating, Inc., for so long as the
Intercompany Agreement remains in effect, from engaging in activities or making
investments that a REIT could make, unless the Operating Partnership was first
given the opportunity but elected not to pursue such activities or investments.
In addition, subsidiaries of Crescent Operating, Inc. are the lessees of each of
the Hotel Properties, and Crescent Operating, Inc. owns a 50% interest in the
entity which is the lessee of the Behavioral Healthcare Facilities and the
Company's largest tenant in terms of current base rental. Richard E. Rainwater
and John C. Goff are, respectively, the Chairman of the Board and the Vice
Chairman of the Board of both the Company and Crescent Operating, Inc., and
Gerald W. Haddock also serves as President, Chief Executive Officer and a
director of Crescent Operating, Inc., and serves as President, Chief Executive
Officer and a trust manager of the Company. As of September 30, 1997, senior
management and the trust managers of the Company beneficially owned
approximately 17.2% of the Company's common equity (consisting of Common Shares
and units of ownership interest in the Operating Partnership ("Units"),
including vested options to purchase Common Shares and Units) and approximately
the same percentage of the outstanding common stock of Crescent Operating, Inc.
The common management and ownership among these entities may lead to conflicts
of interest in connection with transactions between the Operating Partnership
and Crescent Operating, Inc.
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 six months ended
June 30, 1997, for the years ended December 31, 1996 and 1995, and for the
period from May 4, 1994 to December 31, 1994 were 2.45, 2.01, 2.60 and 3.85.
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.
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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 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
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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 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
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
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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 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
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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 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.
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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.
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.
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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, 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 distributions 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.
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 Share 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
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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 Company failing to qualify as a REIT for federal income tax purposes,
such issuance, transfer or acquisition shall be null and void to the intended
transferee or holder, and the intended transferee or holder will acquire no
rights to the shares. Pursuant to the Declaration of Trust, Equity Shares 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
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 such shares are listed; or (c) if the shares
are not then listed on a national securities exchange, the latest quoted price
for the shares; or (d) if not quoted, the average of the high bid and low asked
prices if the shares are then traded over-the-counter, as reported by the Nasdaq
Stock Market; or (e) if such system is no longer in use, the principal automated
quotation system then in use; or (f) if the shares are not quoted on such
system, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the shares; or (g) if there is no
such market maker or such closing prices otherwise are unavailable, the fair
market value, as determined by the Board of Trust Managers in good faith, on the
last trading day immediately preceding the day on which notice of such proposed
purchase is sent by the Company. The Declaration of Trust also establishes
certain restrictions relating to transfers of any Exchange Shares that may be
issued. If such transfer restrictions are determined to be void or invalid by
virtue of any legal decision, statute, rule or regulation, then the Company will
have the option to deem the intended transferee of any Excess Shares to have
acted as an agent on behalf of the Company in acquiring such Excess Shares and
to hold such Excess Shares on behalf of the Company.
Under the Declaration of Trust, the Company has the authority at any time
to waive the requirement that Excess Shares be issued or be deemed outstanding
in accordance with the provisions of the Declaration of Trust if the issuance of
such Excess Shares or the fact that such Excess Shares is deemed to be
outstanding would, in the opinion of nationally recognized tax counsel,
jeopardize the status of the Company as a REIT for federal income tax purposes.
All certificates issued by the Company representing Equity 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
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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 precluding
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 BankBoston, N.A.
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 Common Share Warrants of such
series and will not assume any obligation or relationship of agency or trust for
or with any holders or beneficial owners of Common Share Warrants. The following
sets forth certain general terms and provisions of the Common Share Warrants
offered hereby. Further terms of the Common Share Warrants and the applicable
Warrant Agreements will be set forth in the applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of the Common
Share Warrants in respect of which this Prospectus is being delivered,
including, where applicable, the following: (i) the title of such Common Share
Warrants; (ii) the aggregate number of such Common Share Warrants; (iii) the
price or prices at which such Common Share Warrants will be issued; (iv) the
number of shares of Common Shares purchasable upon exercise of such Common Share
Warrants; (v) the designation and terms of any other Securities offered thereby
with which such Common Share Warrants are to be issued and the number of such
Common Share Warrants issued with each such Security offered thereby; (vi) the
date, if any, on and after which such Common Share Warrants and the related
Common Shares will be separately transferable; (vii) the price at which the
Common Shares purchasable upon exercise of such Common Share Warrants may be
purchased; (viii) the date on which the right to exercise such Common Share
Warrants shall commence and the date on which such right shall expire; (ix) the
minimum or maximum number of such Common Share Warrants which may be exercised
at any one time; (x) information with respect to book entry procedures, if any;
(xi) any limitations on the acquisition or ownership of such Common Share
Warrants which may be required in order to maintain the status of the Company as
a REIT; (xii) a discussion of certain federal income tax considerations; and
(xiii) any other terms of such Common Share Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such Common
Share Warrants.
Reference is made to the section captioned "Description of Common Shares"
for a general description of the Common Shares to be acquired upon the exercise
of the Common Share Warrants, including a description of certain restrictions on
the ownership of Common Shares.
CERTAIN PROVISIONS OF THE DECLARATION OF TRUST, BYLAWS AND TEXAS LAW
The Declaration of Trust and the Bylaws of the Company contain certain
provisions that may inhibit or impede acquisition or attempted acquisition of
control of the Company by means of a tender offer, a proxy contest or otherwise.
These provisions are expected to discourage certain types of coercive takeover
practices and inadequate takeover bids and to encourage persons seeking to
acquire control of the Company to negotiate
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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 incorporated by reference 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 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 shares of Common Shares at a higher price than might
otherwise be available.
NUMBER OF TRUST MANAGERS; REMOVAL; FILLING VACANCIES
Subject to any rights of holders of Preferred Shares to elect additional
trust managers under specified circumstances ("Preferred Holders' Rights"), the
Declaration of Trust provides that the number of trust managers will be fixed
by, or in the manner provided in, the Bylaws, but must not be more than 25 nor
less than one. See "Description of Preferred Shares -- Voting Rights" below. In
addition, the Bylaws provide that, subject to any Preferred Holders' Rights, the
number of trust managers will be fixed by the Board of Trust Managers, but must
not be more than 25 or less than three. In addition, the Bylaws provide that,
subject to any Preferred Holders' Rights, and unless the Board of Trust Managers
otherwise determines, any vacancies (other than vacancies created by an increase
in the total number of trust managers) will be filled by the affirmative vote of
a majority of the remaining trust managers, although less than a quorum, and any
vacancies created by an increase in the total number of trust managers may be
filled by a majority of the entire Board of Trust Managers. Accordingly, the
Board of Trust Managers could temporarily prevent any shareholder from enlarging
the Board of Trust Managers and then filling the new trust manager position with
such shareholder's own nominees.
The Declaration of Trust and the Bylaws provide that, subject to any
Preferred Holders' Rights, trust managers may be removed only for cause upon the
affirmative vote of holders of at least 80% of the entire voting power of all
the then-outstanding shares entitled to vote generally in the election of trust
managers, voting together as a single class.
RELEVANT FACTORS TO BE CONSIDERED BY THE BOARD OF TRUST MANAGERS
The Declaration of Trust provides that, in determining what is in the best
interest of the Company in evaluating a "business combination," "change in
control" or other transaction, a trust manager of the Company shall consider all
of the relevant factors. These factors may include (i) the immediate and
long-term effects of the transaction on the Company's shareholders, including
shareholders, if any, who do not participate in the transaction; (ii) the social
and economic effects of the transaction on the Company's employees, suppliers,
creditors and customers and others dealing with the Company and on the
communities
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<PAGE> 17
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 information
to the Secretary of the Company prior to the meeting at which trust managers are
to be elected, will be eligible for election as trust managers of the Company
and (ii) at an annual meeting, only such business may be conducted as has been
brought before the meeting by, or at the direction of, the Chairman or the Board
of Trust Managers or by a shareholder who has given timely written notice to the
Secretary of the Company of such shareholder's intention to bring such business
before such meeting. In general, for notice of shareholder nominations or
proposed business to be conducted at an annual meeting to be timely, such notice
must be received by the Company not less than 70 days nor more than 90 days
prior to the first anniversary of the previous year's annual meeting.
The purpose of requiring shareholders to give the Company advance notice of
nominations and other business is to afford the Board of Trust Managers a
meaningful opportunity to consider the qualifications of the proposed nominees
or the advisability of the other proposed business and, to the extent deemed
necessary or desirable by the Board of Trust Managers, to inform shareholders
and make recommendations about such nominees or business, as well as to ensure
an orderly procedure for conducting meetings of shareholders. Although the
Bylaws do not give the Board of Trust Managers power to block shareholder
nominations for the election of trust managers or proposal for action, the
Shareholder Notice Procedure 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 at
the time of issuance or proposed issuance. 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
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<PAGE> 18
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
or other securities or property. The times at which and terms upon which such
rights are to be issued are within the discretion of the Board of Trust
Managers. This provision is intended to confirm the authority of the Board of
Trust Managers to issue share purchase rights which could have terms that would
impede a merger, tender offer or other takeover attempt, or other rights to
purchase securities of the Company or any other entity.
BUSINESS COMBINATIONS
The Declaration of Trust establishes special requirements with respect to
"business combinations" (including a merger, consolidation, share exchange, or,
in certain circumstances, an asset transfer or issuance of reclassification of
equity securities) between the Company and any person who beneficially owns,
directly or indirectly, 10% or more of the voting power of the Company's shares
(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 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
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<PAGE> 19
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 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 excepted by the
Declaration of Trust or Bylaws of the Company prior to a control share
acquisition.
OWNERSHIP LIMIT
The limitation on ownership of shares of Common Shares set forth in the
Company's Declaration of Trust, as well as the provisions of the TRA, could have
the effect of discouraging offers to acquire the Company and of increasing the
difficulty of consummating any such offer. See "Description of Common
Shares -- Ownership Limits and Restrictions on Transfer."
ERISA CONSIDERATIONS
The following is a summary of material considerations arising under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the
prohibited transaction provisions of Section 4975 of the Code that may be
relevant to prospective investors. This discussion does not purport to deal with
all aspects of ERISA or the Code that may be relevant to particular investors in
light of their particular circumstances. A PROSPECTIVE INVESTOR THAT IS AN
EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA, A TAX QUALIFIED RETIREMENT PLAN, AN
INDIVIDUAL RETIREMENT ACCOUNT ("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
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<PAGE> 20
purpose of providing benefits to the ERISA Plan participants and beneficiaries
and defraying reasonable administrative expenses of the ERISA Plan as required
by Section 404(a)(1)(A) of ERISA.
In addition to the imposition of fiduciary standards, ERISA and Section
4975 of the Code prohibit a wide range of transactions between an ERISA Plan, an
IRA or certain other plans (collectively, a "Plan") and persons who have certain
specified relationships to the Plan ("parties in interest" within the meaning of
ERISA and "disqualified persons" within the meaning of the Code). Thus, a Plan
fiduciary or person making an investment decision for a Plan also should
consider whether the acquisition or the continued holding of the Securities
might constitute or give rise to a direct or indirect prohibited transaction.
PLAN ASSETS
The prohibited transactions rules of ERISA and the Code apply to
transactions with a Plan and also to transactions with the "plan assets" of a
Plan. The "plan assets" of a Plan include the Plan's interest in an entity in
which the Plan invests and, in certain circumstances, the assets of the entity
in which the Plan holds such interest. The term "plan assets" is not
specifically defined in ERISA or the Code, nor, as of the date hereof, has it
been interpreted definitively by the courts in litigation. On November 13, 1986,
the United States Department of Labor, the governmental agency primarily
responsible for administering ERISA, adopted a final regulation (the "DOL
Regulation") setting out the standards it will apply in determining whether an
equity investment in an entity will cause the assets of such entity to
constitute "plan assets." The DOL Regulation applies for purposes of both ERISA
and Section 4975 of the Code.
Under the DOL Regulation, if a Plan acquires an equity interest in an
entity, which equity interest is not a "publicly offered security," the Plan's
assets generally would include both the equity interest and an undivided
interest in each of the entity's underlying assets unless certain specified
exceptions apply. The DOL Regulation defines a publicly offered security as a
security that is "widely held," "freely transferable," and either part of a
class of securities registered under Section 12(b) or 12(g) of the Exchange Act,
or sold pursuant to an effective registration statement under the Securities Act
(provided the securities are registered under the Exchange Act within 120 days
after the end of the fiscal year of the issuer during which the offering
occurred). The Securities will be sold in an offering registered under the
Securities Act and registered under Section 12(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.
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<PAGE> 21
PLAN OF DISTRIBUTION
The Company may sell the Securities to one or more underwriters for public
offering and sale by them or may sell the Securities to investors directly or
through agents. Any such underwriter or agent involved in the offer and sale of
the Securities will be named in the applicable Prospectus Supplement.
Underwriters may offer and sell the Securities at a fixed price or prices,
which may be changed, related to the prevailing market prices at the time of
sale, or at negotiated prices. The Company also may, from time to time,
authorize underwriters acting as the Company's agents to offer and sell the
Securities upon the terms and conditions set forth in an applicable Prospectus
Supplement. In connection with the sale of Securities, underwriters may be
deemed to have received compensation from the Company in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of Securities for whom they may act as agent. Underwriters may sell
the Securities to or through dealers, and such dealers may receive compensation
in the form of discounts, concessions from the underwriters or commissions from
the purchasers for whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Securities and any discounts, concessions or
commissions allowed by underwriters to participating dealers will be set forth
in the applicable Prospectus Supplement. Underwriters, dealers and agents
participating in the distribution of the Securities may be deemed to be
underwriters, and any discounts and commissions received by them and any profit
realized by them on resale of the Securities may be deemed to be underwriting
discounts and commissions under the Securities Act. Underwriters, dealers and
agents may be entitled, under agreements entered into with the Company, to
indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Securities from the Company at the public offering
price set forth in such Prospectus Supplement pursuant to delayed delivery
contracts ("Contracts") providing for payment and delivery on the date or dates
stated in such Prospectus Supplement. Each Contract will be for an amount not
less than, and the aggregate principal amount of Securities sold pursuant to
Contracts shall be not less or more than, the respective amounts stated in the
applicable Prospectus Supplement. Institutions with whom Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions, and other institutions, but will in all cases be subject to the
approval of the Company. Contracts will not be subject to any conditions except
(i) the 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
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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.
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 Proxy Statement in connection with the Company's 1997 Annual
Meeting of Stockholders.
3. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996, as amended on April 30, 1997 and May 16, 1997.
4. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997.
5. The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997, as amended on August 28, 1997.
6. The Company's Current Report on Form 8-K dated January 29, 1997
and filed March 24, 1997, as amended on April 9, 1997, April 24,
1997, May 23, 1997 and July 2, 1997.
7. The Company's Current Report on Form 8-K dated February 28, 1997
and filed March 17, 1997, as amended on March 21, 1997.
8. The Company's Current Report on Form 8-K dated April 9, 1997 and
filed April 10, 1997, as amended on April 24, 1997.
9. The Company's Current Report on Form 8-K dated April 22, 1997 and
filed April 24, 1997.
10. The Company's Current Report on Form 8-K dated May 8, 1997 and
filed May 12, 1997.
11. The Company's Current Report on Form 8-K dated June 20, 1997 and
filed September 30, 1997, as amended on October 1, 1997.
12. The Company's Current Report on Form 8-K dated July 22, 1997 and
filed July 23, 1997.
13. The Company's Current Report on Form 8-K dated August 11, 1997 and
filed August 13, 1997.
14. The Company's Current Report on Form 8-K dated September 22, 1997
and filed September 22, 1997.
15. The Company's Current Report on Form 8-K dated September 22, 1997
and filed September 30, 1997, as amended on October 1, 1997.
16. The Company's Current Report on Form 8-K dated September 28, 1997
and filed October 27, 1997.
17. The Company's Current Report on Form 8-K dated September 30, 1997
and filed September 30, 1997, as amended on October 1, 1997.
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<PAGE> 23
18. The Company's Current Report on Form 8-K dated September 30, 1997
and filed October 1, 1997, as amended on October 9, 1997.
19. The Company's Current Report on Form 8-K dated October 8, 1997 and
filed October 14, 1997.
20. The Company's Current Report on Form 8-K dated October 22, 1997
and filed October 28, 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 thereto, unless such
exhibits or schedules are specifically incorporated by reference into the
information that this Prospectus incorporates). Written or telephonic requests
for copies should be directed to Crescent Real Estate Equities Company, 777 Main
Street, Suite 2100, Fort Worth, Texas 76102, Attention: Company Secretary
(telephone number: (817) 877-0477).
EXPERTS
The financial statements and schedule incorporated in this Prospectus by
reference to the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, as amended, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report.
The financial statements incorporated in this Prospectus by reference to
the Company's Current Reports on Form 8-K (i) dated January 29, 1997 and filed
on March 24, 1997, as amended on April 9, 1997, April 24, 1997, May 23, 1997 and
July 2, 1997, (ii) dated February 28, 1997 and filed on March 17, 1997, as
amended on March 21, 1997, (iii) dated June 20, 1997 and filed on September 30,
1997, as amended on October 1, 1997, (iv) dated September 22, 1997 and filed on
September 30, 1997, as amended on October 1, 1997, (v) dated September 30, 1997
and filed on September 30, 1997, as amended on October 1, 1997, and (vi) dated
October 22, 1997 and filed October 28, 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 report.
LEGAL MATTERS
The legality of the issuance of the Securities will be passed upon for the
Company by Shaw, Pittman, Potts & Trowbridge, Washington, D.C. Certain legal
matters relating to federal income tax considerations will be passed upon for
the Company by Shaw, Pittman, Potts & Trowbridge, which will rely, as to all
Texas franchise tax matters upon the opinion of Locke Purnell Rain Harrell (A
Professional Corporation), Dallas, Texas.
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses to be incurred in connection with the issuance and
distribution of the Securities covered by this Registration Statement, all of
which will be paid by the Company, are as follows:
<TABLE>
<S> <C>
Registration Fee............................................ $ 454,545
Printing, Engraving and Filing Expenses..................... $1,000,000
Accounting Fees and Expenses................................ $ 200,000
Legal Fees and Expenses..................................... $3,400,000
Miscellaneous............................................... $ 145,455
----------
Total............................................. $5,200,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Declaration of Trust provides that no trust manager shall be
liable to the Company for any act, omission, loss, damage, or expense arising
from the performance of his duties to the Company save only for his own willful
misfeasance or willful malfeasance or gross negligence. In addition to, but in
no respect whatsoever in limitation of the foregoing, the liability of each
trust manager for monetary damages shall be eliminated to the fullest extent
permitted by applicable law. The Declaration of Trust also provides that no
amendment thereto may limit or eliminate this limitation of liability with
respect to events occurring prior to the effective date of such amendment.
The Company's Declaration of Trust provides that the trust managers and
officers shall be indemnified to the maximum extent permitted by Texas law.
Under current Texas law, the trust will indemnify a person who was, is, or is
threatened to be made a named defendant or respondent in a proceeding because
the person is or was a trust manager or officer if it is determined that the
person (i) conducted himself in good faith; (ii) reasonably believed: (a) in the
case of conduct in his official capacity as a trust manager or officer of the
real estate investment trust, that his conduct was in the real estate investment
trust's best interests; and (b) in all other cases, that his conduct was at
least not opposed to the real estate investment trust's best interests; and
(iii) in the case of any criminal proceeding, had no reasonable cause to believe
that his conduct was unlawful. Except to the extent provided in the following
sentence, a trust manager or officer may not be indemnified (i) in respect of a
proceeding in which the person is found liable on the basis that personal
benefit was improperly received by him, whether or not the benefit resulted from
an action taken in the person's official capacity; or (ii) in which the person
is found liable to the real estate investment trust. Notwithstanding the
foregoing, a person may be indemnified against judgments, penalties (including
excise and similar taxes), fines, settlements, and reasonable expenses actually
incurred by the person in connection with the proceeding; provided that if the
person is found liable to the real estate investment trust or is found liable on
the basis that personal benefit was improperly received by the person, the
indemnification (i) is limited to reasonable expenses actually incurred by the
person in connection with the proceeding, and (ii) shall not be made in respect
of any proceeding in which the person shall have been found liable for willful
or intentional misconduct in the performance of his duty to the real estate
investment trust. In addition, the Company's Declaration of Trust and Bylaws
require it to pay or reimburse, in advance of the final disposition of a
proceeding, reasonable expenses incurred by a present or former trust manager or
officer made a party to a proceeding by reason of his status as a trust manager
or officer, provided that the Company shall have received (i) a written
affirmation by the trust manager or officer of his good faith belief that he has
met the standard of conduct necessary for indemnification by the Company as
authorized by the Bylaws and (ii) a written undertaking by or on his behalf to
repay the amount paid or reimbursed by the Company if it shall ultimately be
determined that the standard of conduct was not met. The Company's Declaration
of Trust and Bylaws also permit the Company to provide indemnification, payment
or reimbursement of expenses to any employee or agent of the Company
II-1
<PAGE> 25
in such capacity. The Company's Declaration of Trust and Bylaws also permit the
Company to indemnify a person who was or who agreed to appear as a witness or
other participant in a proceeding at a time when he is not named a defendant or
respondent in the proceeding. Any indemnification, payment or reimbursement of
the expenses permitted by the Declaration of Trust and Bylaws shall be furnished
in accordance with the procedures provided for indemnification and payment or
reimbursement of expenses under Texas Real Estate Investment Trust Act for trust
managers.
The limited partnership agreement of the Operating Partnership contains
indemnification provisions comparable to those contained in the Declaration of
Trust.
The Company carries insurance that purports to insure officers and trust
managers of the Company against certain liabilities incurred by them in the
discharge of their official functions.
ITEM 16. EXHIBITS.
The following is a list of all exhibits filed as a part of this
Registration Statement on Form S-3, including those incorporated herein by
reference.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
*1.01 Form of Underwriting Agreement(s).
4.01 Restated Declaration of Trust of the Registrant (filed as
Exhibit No. 4.01 to the Registrant's Registration Statement
on Form S-3 (File No. 333-21905) (the "1997 Form S-3") and
incorporated herein by reference).
4.02 Amended and Restated Bylaws of the Registrant, as amended
(filed as Exhibit 4.02 to the Registrant's Form 8-K dated
October 8, 1997 and filed October 14, 1997 and incorporated
herein by reference).
4.03 Form of Common Share Certificate (filed as Exhibit 4.03 to
the 1997 Form S-3 and incorporated herein by reference).
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 the
Registrant (filed herewith).
8.01 Opinion of Shaw, Pittman, Potts & Trowbridge regarding
certain material tax issues relating to the Registrant
(filed herewith).
**12.01 Statement Regarding Computation of Ratios of Earnings to
Fixed Charges and Preferred Shares Dividends.
23.01 Consent of Arthur Andersen LLP, Certified Public
Accountants, dated October 28, 1997 (filed herewith).
23.02 Consent of Arthur Andersen LLP, Certified Public
Accountants, dated October 24, 1997 (filed herewith).
23.03 Consent of Shaw, Pittman, Potts & Trowbridge (included in
its opinion filed as Exhibit 5.01 to this Registration
Statement).
**24.01 Powers of Attorney.
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed.
II-2
<PAGE> 26
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement,
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fort Worth, State of Texas, on the 28th day of
October, 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 October 28, 1997
- ----------------------------------------------------- the Board
Richard E. Rainwater
/s/ JOHN C. GOFF* Trust Manager and Vice October 28, 1997
- ----------------------------------------------------- Chairman of the Board
John C. Goff
/s/ GERALD W. HADDOCK Trust Manager, President and October 28, 1997
- ----------------------------------------------------- Chief Executive Officer
Gerald W. Haddock (Principal Executive
Officer)
/s/ DALLAS E. LUCAS Senior Vice President and October 28, 1997
- ----------------------------------------------------- Chief Financial Officer
Dallas E. Lucas (Principal Financial and
Accounting Officer)
/s/ ANTHONY M. FRANK* Trust Manager October 28, 1997
- -----------------------------------------------------
Anthony M. Frank
/s/ MORTON H. MEYERSON* Trust Manager October 28, 1997
- -----------------------------------------------------
Morton H. Meyerson
/s/ WILLIAM F. QUINN* Trust Manager October 28, 1997
- -----------------------------------------------------
William F. Quinn
/s/ PAUL E. ROWSEY, III* Trust Manager October 28, 1997
- -----------------------------------------------------
Paul E. Rowsey, III
/s/ MELVIN ZUCKERMAN* Trust Manager October 28, 1997
- -----------------------------------------------------
Melvin Zuckerman
</TABLE>
*By: /s/ GERALD W. HADDOCK
----------------------------------
Gerald W. Haddock
Attorney-in-fact
II-4
<PAGE> 28
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
*1.01 Form of Underwriting Agreement(s).
4.01 Restated Declaration of Trust of the Registrant (filed as
Exhibit No. 4.01 to the Registrant's Registration Statement
on Form S-3 (File No. 333-21905) (the "1997 Form S-3") and
incorporated herein by reference).
4.02 Amended and Restated Bylaws of the Registrant, as amended
(filed as Exhibit 4.02 to the Registrant's Form 8-K dated
October 8, 1997 and filed October 14, 1997, and incorporated
herein by reference.
4.03 Form of Common Share Certificate (filed as Exhibit 4.03 to
the 1997 Form S-3 and incorporated herein by reference).
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 the
Registrant (filed herewith).
8.01 Opinion of Shaw, Pittman, Potts & Trowbridge regarding
certain material tax issues relating to the Registrant
(filed herewith).
**12.01 Statement Regarding Computation of Ratios of Earnings to
Fixed Charges and Preferred Shares Dividends.
23.01 Consent of Arthur Andersen LLP, Certified Public
Accountants, dated October 28, 1997 (filed herewith).
23.02 Consent of Arthur Andersen LLP, Certified Public
Accountants, dated October 24, 1997 (filed herewith).
23.03 Consent of Shaw, Pittman, Potts & Trowbridge (included in
its opinion filed as Exhibit 5.01 to this Registration
Statement).
**24.01 Powers of Attorney.
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed.
II-5
<PAGE> 1
EXHIBIT 5.01
[LETTERHEAD OF SHAW, PITTMAN, POTTS & TROWBRIDGE]
October 28, 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 October 16, 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
$1,500,000,000. 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").
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,
filed 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
<PAGE> 2
resolution, in form and content as required by applicable law, establishing the
final terms of the Common Share Warrants and applicable Warrant Agreement and
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, the
applicable Prospectus Supplement and such resolution of the Board of Trust
Managers of the Company.
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
2
<PAGE> 1
EXHIBIT 8.01
[LETTERHEAD OF SHAW, PITTMAN, POTTS & TROWBRIDGE]
October 28, 1997
Crescent Real Estate Equities Company
777 Main Street
Suite 2100
Fort Worth, TX 76102
Ladies and Gentlemen:
On October 16, 1997, Crescent Real Estate Equities Company ("Crescent
Equities")(1) filed a Registration Statement on Form S-3, No. 333-38071 (the
"Registration Statement"), with the Securities and Exchange Commission. In
connection with Amendment No. 1 to the Registration Statement filed on or about
October 28, 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, as amended through the date hereof.
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,
including the prospectus (the "Prospectus") contained therein; (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 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 concern 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.
- ---------------
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
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.
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.
2
<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 Trammell Crow Center, March 18, 1997 on Carter-Crowley Real Estate Portfolio,
July 23, 1997 on Fountain Place, August 21, 1997 on Miami Center, August 22,
1997 on Houston Center, and October 15, 1997 on Bank One Center included in
Crescent Real Estate Equities Company's Form 8-K and to all references to our
Firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Dallas, Texas
October 28, 1997
<PAGE> 1
EXHIBIT 23.02
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we consent to the incorporation by
reference in this Registration Statement on Form S-3 of our report dated
November 7, 1996 on the Provider Segment of Magellan Health Services, Inc.
included in Crescent Real Estate Equities Company's Form 8-K dated January 29,
1997, as amended by Form 8-K/A on July 2, 1997, and to all references to our
Firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
October 24, 1997
