SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 21, 1997
LIBERTY PROPERTY TRUST
LIBERTY PROPERTY LIMITED PARTNERSHIP
------------------------------------
(Exact name of registrant as specified in their governing documents)
MARYLAND 1-13130 23-7768996
PENNSYLVANIA 1-13132 23-2766549
- --------------------------- ------------- -------------------
State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
65 VALLEY STREAM PARKWAY, SUITE 100
MALVERN, PENNSYLVANIA 19355
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 648-1700
<PAGE>
ITEM 5: OTHER EVENTS
- ---------------------
A. PORTFOLIO ACQUISITION
Liberty Property Limited Partnership, is a Pennsylvania limited
partnership (the "Operating Partnership"). Liberty Property Trust, a
Maryland real estate investment trust (the "Trust") owns an approximate
91.54% interest in the Operating Partnership (as of March 31, 1997) (the
Trust and the Operating Partnership are collectively referred to as the
"Company"):
On June 23, 1997, the Company acquired title to 7 office properties,
comprising approximately 915,000 leaseable square feet, located in
suburban Detroit, Michigan. Specifically, these 7 properties consist of
a 634,359 square foot office building in the City of Southfield,
Michigan (the "Southfield Property") and 6 office buildings aggregating
280,746 square feet located in the City of Troy, Michigan (the "Troy
Properties"). The Southfield Property and the Troy Properties were
acquired pursuant to a Purchase Agreement dated May 23, 1997 (the
"Purchase Agreement"). In accordance with the terms of the Purchase
Agreement, the Company has also agreed to purchase six flex properties
in the City of Farmington Hills, Michigan (the "Farmington Hills
Properties"). The Farmington Hills Properties represent an aggregate of
224,110 leaseable square feet. The purchase of the Farmington Hills
Properties, which is scheduled to occur on July 7, 1997, is subject to
various contingencies, including among others, completion of due
diligence and other customary conditions. Accordingly, there can be no
assurance that the Company will acquire the Farmington Hills Properties.
Collectively, the Southfield Property, the Troy Properties and the
Farmington Hills Properties are referred to as the "Detroit Properties".
The Detroit Properties aggregate approximately 1.1 million leaseable
square feet. In accordance with the Purchase Agreement, total
consideration for the Detroit Properties is $127.5 million. To the
extent closed, the total consideration was paid in cash provided through
the Company's financing sources. The portion of the purchase
consideration relating to the scheduled closing on July 7, 1997, will
also be provided by the Company's financing sources. It is estimated
that the Company's total investment in the Detroit Properties will be
$130.6 million. The total investment for a property is defined as the
property's purchase price plus closing costs and management's estimate,
as determined at the time of acquisition, of the cost of necessary
building improvements ("Total Investment").
B. AMENDMENT TO DECLARATION OF TRUST
At the Trust's 1997 Annual Meeting of Shareholders, held on May 21,
1997, the shareholders approved amendments to the Trust's Amended and
Restated Declaration of Trust (as amended, the "Declaration of Trust")
which became effective on May 29, 1997. The amendments reduced the
ownership limitation applicable to the Trust's shares of beneficial
interest, which include the Trust's common shares as well as any
preferred shares of beneficial interest that may be issued in the future
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<PAGE>
(the "Ownership Limitation"), from 7.5% to 5% and conformed the legend
required to appear on certificates evidencing the Trust's shares of
beneficial interest to reflect the aforementioned reduction in the
Ownership Limitation. The amendments also gave the Trust's Board of
Trustees the authority to grant exemptions from the Ownership Limitation
without the necessity of obtaining the approval of the Trust's
shareholders except in those instances where the aggregate ownership
limitations in the Declaration of Trust designed to protect the Trust's
tax status as a real estate investment trust would be breached, in which
case an exemption from the Ownership Limitation would continue to
require approval by the affirmative vote of not less than two-thirds of
the Trust's shares of beneficial interest then outstanding and entitled
to vote on the matter. Prior to the effective date of the amendments,
any exemption from the Ownership Limitation required the aforementioned
approval of the Trust's shareholders.
C. AMENDMENT TO SHARE INCENTIVE PLAN
At the meeting, the Trust's shareholders also approved an amendment to
the Trust's Amended and Restated Share Incentive Plan (the "Plan") which
increased the number of the Trust's shares of beneficial interest
available for awards pursuant to the Plan from 2,100,000 to 4,033,535.
Statements contained in this report, contain forward-looking statements
with respect to estimates of total investment, future acquisitions, and
pro forma financial information and their underlying assumptions. As
such, these statements involve risks and uncertainties that could affect
future results, and accordingly, such results may differ from those
expressed herein. These risks and uncertainties include, but are not
limited to, uncertainties affecting real estate businesses generally,
risks relating to acquisition activities and risks relating to leasing
and releasing activities and rates.
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<PAGE>
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
- ------------------------------------------
PAGE
-----
(a) Statement of Operating Revenues and Certain
Operating Expenses for the Detroit Properties
Report of Independent Auditors........................ 6
Statement of Operating Revenues and Certain
Operating Expenses for the Detroit Properties
for the three months ended March 31, 1997
(unaudited) and for the year ended December 31,
1996............................................... 7
Notes to the Statement of Operating Revenues and
Certain Operating Expenses for the Detroit
Properties for the three months ended
March 31, 1997 (unaudited) and for the year
ended December 31, 1996............................ 8
(b) Pro Forma Financial Information (unaudited)
Liberty Property Trust....................................... 11
Pro Forma Condensed Consolidated Balance Sheet as of
March 31, 1997..................................... 12
Pro Forma Consolidated Statement of Operations for
the three months ended March 31, 1997.............. 13
Notes to Pro Forma Condensed Consolidated Financial
Statements as of and for the three months ended
March 31, 1997..................................... 14
Pro Forma Consolidated Statement of Operations for
the year ended December 31, 1996................... 15
Notes to Pro Forma Consolidated Statement of
Operations for the year ended December 31, 1996.... 16
Liberty Property Limited Partnership......................... 17
Pro Forma Condensed Consolidated Balance Sheet as of
March 31, 1997..................................... 18
Pro Forma Consolidated Statement of Operations for
the three months ended March 31, 1997.............. 19
Notes to Pro Forma Condensed Consolidated Financial
Statements as of and for the three months ended
March 31, 1997..................................... 20
Pro Forma Consolidated Statement of Operations for
the year ended December 31, 1996................... 21
Notes to Pro Forma Consolidated Statement of
Operations for the year ended December 31, 1996.... 22
(c) Signatures................................................... 23
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<PAGE>
(d) Exhibits
3.1.1 Amended and Restated Declaration of Trust
10.1 Amended and Restated Share Incentive Plan*
23.1 Consent of Independent Auditors
- ------------------
*Constitutes a management compensation plan or arrangement.
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<PAGE>
REPORT OF INDEPENDENT AUDITORS
To The Board of Trustees and Shareholders
Liberty Property Trust
We have audited the accompanying Statement of Operating Revenues and
Certain Operating Expenses of the Detroit Properties, as defined in Note
1, for the year ended December 31, 1996. This financial statement is
the responsibility of the management of the Detroit Properties. Our
responsibility is to express an opinion on this financial statement
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles
used and significant estimates made by management as well as evaluating
the overall presentation of the financial statement. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying Statement of Operating Revenues and Certain Operating
Expenses was prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission (for inclusion in
the Current Report on Form 8-K of Liberty Property Trust and Liberty
Property Limited Partnership) and, as described in Note 1, is not
intended to be a complete presentation of the Detroit Properties'
revenues and expenses.
In our opinion, the Statement of Operating Revenues and Certain
Operating Expenses referred to above presents fairly, in all material
respects, the Operating Revenues and Certain Operating Expenses
described in Note 1 for the year ended December 31, 1996, in conformity
with generally accepted accounting principles.
/s/ FEGLEY & ASSOCIATES
Plymouth Meeting, Pennsylvania FEGLEY & ASSOCIATES
June 5, 1997
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<PAGE>
STATEMENT OF OPERATING REVENUES AND CERTAIN OPERATING EXPENSES
FOR THE DETROIT PROPERTIES FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED) AND THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
THREE
MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1997 1996
------------- ------------
Operating revenues:
Rental $ 2,670 $ 9,030
Operating expense
reimbursement 1,684 6,007
------------- ------------
Total operating
revenues 4,354 15,037
------------- ------------
Certain operating
expenses:
Rental property
expenses 941 3,666
Real estate taxes 382 1,510
------------- ------------
Total certain
operating expenses 1,323 5,176
------------- ------------
Operating revenues in
excess of certain
operating expenses $3,031 $ 9,861
============= ============
The accompanying notes are an integral part of this statement.
-7-
<PAGE>
NOTES TO THE STATEMENT OF OPERATING REVENUES AND
CERTAIN OPERATING EXPENSES FOR THE DETROIT PROPERTIES
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED) AND THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
1. Summary of Significant Accounting Policies
- ----------------------------------------------
The Statement of Operating Revenues and Certain Operating Expenses (see
"Basis of Presentation" below) includes the operations of the Detroit
Properties, which include the properties acquired by Liberty Property
Limited Partnership (the "Operating Partnership") on June 23, 1997 and
anticipated to be acquired July 7, 1997, as described below. Liberty
Property Trust (the "Company") owns an approximate 91.54% partners'
interest in the Operating Partnership (as of March 31, 1997) (the Trust
and the Operating Partnership are collectively referred to as the
"Company").
PROPERTY NAME LOCATION DESCRIPTION
- -------------------------- -------------------- --------------------
26911-26957 Northwestern Southfield, MI One, multi-level
office building
634,359 square feet
27260 Haggerty Farmington Hills, MI Single story flex
building
50,391 square feet
27200 Haggerty Farmington Hills, MI Single story flex
building
42,156 square feet
27280 Haggerty Farmington Hills, MI Single story flex
building
49,944 square feet
27220 Haggerty Farmington Hills, MI Single story flex
building
22,175 square feet
27240 Haggerty Farmington Hills, MI Single story flex
building
18,665 square feet
27300 Haggerty Farmington Hills, MI Single story flex
building
40,779 square feet
1650 Research Drive Troy, MI Three story office
building
70,562 square feet
-8-
<PAGE>
1775 Research Drive Troy, MI Single story office
building
30,450 square feet
1875 Research Drive Troy, MI Single story office
building
30,305 square feet
1850 Research Drive Troy, MI Three story office
building
72,229 square feet
1965 Research Drive Troy, MI Single story office
building
38,600 square feet
1960 Research Drive Troy, MI Single story office
building
38,600 square feet
USE OF ESTIMATES
- ----------------
Generally accepted accounting principles required management to make
estimates and assumptions in preparing financial statements. Those
estimates and assumptions affect the reported revenues and expenses.
BASIS OF PRESENTATION
- ---------------------
The Statement of Operating Revenues and Certain Operating Expenses is
presented in conformity with Rule 3-14 of the Securities and Exchange
Commission. Accordingly, depreciation, interest and income taxes are
not presented. The Company is not aware of any factors relating to the
Detroit Properties that would cause the reported financial information
not to be indicative of future operating results. General company
overhead has not been allocated to the Detroit Properties.
The financial information presented for the three months ended March 31,
1997 is unaudited. In the opinion of management, the unaudited
financial information contains all adjustments, consisting of normal
recurring accruals, necessary for a fair presentation of the Statements
of Revenues and Certain Operating Expenses for the Detroit Properties.
The properties consist of multi-tenant commercial office space and flex
space leased to tenants under leases with varying terms. Tenant renewal
options are available.
REVENUE RECOGNITION
- -------------------
Base rental income attributable to leases is recorded on a straight-line
basis over the applicable lease term. The leases also typically provide
for tenant reimbursement of common area maintenance and other operating
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<PAGE>
expenses which are included in the accompanying Statement of Operating
Revenue and Certain Operating Expenses as operating expense
reimbursements.
2. MINIMUM FUTURE RENTALS
- ---------------------------
Future minimum rental payments due from tenants of the Detroit
Properties under non-cancellable operating leases as of December 31,
1996 are as follows (in thousands):
1997 $10,834
1998 9,788
1999 8,738
2000 7,025
2001 6,182
Thereafter 33,620
-------
Total $76,187
=======
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<PAGE>
LIBERTY PROPERTY TRUST
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The unaudited, pro forma condensed consolidated balance sheet as of
March 31, 1997 reflects the incremental effect of the Detroit Properties
described in Item 5 as if the acquisitions had occurred on March 31,
1997. The accompanying unaudited, pro forma consolidated statement of
operations for the three months ended March 31, 1997 and the year ended
December 31, 1996 reflect the incremental effect of the Detroit
Properties, as if such acquisitions had occurred on January 1, 1996.
These statements should be read in conjunction with respective
consolidated financial statements and notes thereto included in the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997 and its Annual Report on Form 10-K for the year ended December 31,
1996. In the opinion of management, the unaudited, pro forma
consolidated financial information provides for all adjustments
necessary to reflect the effects of the Detroit Properties.
These pro forma statements may not necessarily be indicative of the
results that would have actually occurred if the acquisition of the
Detroit Properties had been in effect on the date indicated, nor does it
purport to represent the financial position, results of operations or
cash flows for future periods.
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<PAGE>
LIBERTY PROPERTY TRUST
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997
(UNAUDITED, IN THOUSANDS)
LIBERTY
PROPERTY
HISTORICAL DETROIT TRUST
<F1> PROPERTIES CONSOLIDATED
---------- ----------- ------------
ASSETS:
Investment in real estate,
net $1,194,911 $ 130,612 <F2> $1,325,523
Cash and cash equivalents 20,146 - 20,146
Deferred financing and
leasing costs, net 26,172 - 26,172
Other assets 50,483 - 50,483
---------- ----------- -----------
Total assets $1,291,712 $ 130,612 $1,422,324
========== =========== ===========
LIABILITIES:
Mortgage loans $ 313,662 $ 313,662
Subordinated debentures 150,244 150,244
Lines of credit 152,754 $ 130,612 <F3> 283,366
Other liabilities 64,130 - 64,130
---------- ----------- -----------
Total liabilities 680,790 130,612 811,402
---------- ----------- -----------
MINORITY INTEREST 51,655 - 51,655
---------- ----------- -----------
SHAREHOLDERS' EQUITY:
Common shares 40 - 40
Additional paid-in capital 560,281 - 560,281
Unearned compensation (1,303) - (1,303)
Retained earnings 249 - 249
---------- ----------- -----------
Total shareholders'
equity 559,267 - 559,267
---------- ----------- -----------
Total liabilities and
shareholders' equity $1,291,712 $ 130,612 $ 1,422,324
========== =========== ===========
The accompanying notes are an integral part of this unaudited, pro forma
condensed consolidated financial statement.
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<PAGE>
<TABLE>
LIBERTY PROPERTY TRUST
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<CAPTION>
LIBERTY
DETROIT PRO PROPERTY
HISTORICAL PROPERTIES FORMA TRUST
<F1> <F4> ADJUSTMENTS CONSOLIDATED
---------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUE
Rental $ 34,641 $ 2,670 $ 37,311
Operating expense reim-
bursement 10,849 1,684 12,533
Management fees 153 - 153
Interest and other 839 - 839
---------- ----------- ------------
Total revenue 46,482 4,354 50,836
---------- ----------- ------------
OPERATING EXPENSES
Rental property expenses 8,639 941 9,580
Real estate taxes 3,280 382 3,662
General and administrative 2,487 - $ 125 <F5> 2,612
Depreciation and amorti-
zation 7,970 - 694 <F6> 8,664
---------- ----------- ------------ ------------
Total operating expenses 22,376 1,323 819 24,518
---------- ----------- ------------ ------------
Operating income 24,106 3,031 (819) 26,318
Interest expense 12,582 - 2,596 <F7> 15,178
---------- ----------- ------------ ------------
Income (loss) before
minority interest 11,524 3,031 (3,415) 11,140
Minority interest 975 256 (289) <F8> 942
---------- ----------- ------------ ------------
Net income (loss) $ 10,549 $ 2,775 $ (3,126) $ 10,198 <F9>
========== =========== ============ ============
Net income per common
share - primary $ .31
============
Weighted average number
of common shares out-
standing 32,781
============
</TABLE>
The accompanying notes are an integral part of this unaudited, proforma
consolidated financial statement.
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<PAGE>
LIBERTY PROPERTY TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
(Unaudited, dollars in thousands)
<F1> Reflects historical financial information of the Company as of
March 31, 1997 and for the three months ended March 31, 1997.
<F2> Reflects the Total Investment in the Detroit Properties.
<F3> Reflects the use of $130,612 from the line of credit to finance
the Total Investment in the Detroit Properties.
<F4> Reflects incremental addition of revenues and certain expenses of
the Detroit Properties in order to reflect a full three months of
operations for these acquisitions.
<F5> Reflects the adjustment necessary to reflect the estimated
incremental general and administrative expense for the Detroit
Properties.
<F6> Reflects incremental depreciation of the Detroit Properties based
on asset lives of 40 years.
<F7> Reflects an incremental increase in interest expense from the
assumed borrowings of $130,612 million on the line of credit to fund the
purchase of the Detroit Properties.
<F8> Reflects the allocation of the pro forma adjustment to minority
interest based upon pro forma minority interest in the Operating
Partnership of approximately 8.46%.
<F9> The Company's pro forma taxable income for the three month period
ended March 31, 1997 is approximately $10,594 which has been calculated
as pro forma income from operations of approximately $10,198 plus GAAP
depreciation and amortization of $8,664 less tax basis depreciation and
amortization and other tax differences of approximately $8,268.
-14-
<PAGE>
<TABLE>
LIBERTY PROPERTY TRUST
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<CAPTION>
LIBERTY
DETROIT PRO PROPERTY
HISTORICAL PROPERTIES FORMA TRUST
<F1> <F2> ADJUSTMENTS CONSOLIDATED
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUE
Rental $ 112,841 $ 9,030 $121,871
Operating expense reim-
bursement 35,886 6,007 41,893
Management fees 1,340 - 1,340
Interest and other 4,198 - 4,198
---------- -------- ---------
Total revenue 154,265 15,037 169,302
---------- -------- ---------
OPERATING EXPENSES
Rental property expenses 29,624 3,666 33,290
Real estate taxes 11,229 1,510 12,739
General and administrative 8,023 - $ 500 <F3> 8,523
Depreciation and amorti-
zation 28,203 - 2,776 <F4> 30,979
---------- -------- --------- ---------
Total operating expenses 77,079 5,176 3,276 85,531
---------- -------- --------- ---------
Operating income 77,186 9,861 (3,276) 83,771
Premium on debenture con-
version 1,027 - - 1,027
Interest expense 38,528 - 10,384 <F5> 48,912
---------- -------- --------- ---------
Income (loss) before
minority interest 37,631 9,861 $(13,660) 33,832
Minority interest 3,891 1,020 (1,412) <F6> 3,499
---------- -------- --------- ----------
Net income (loss) $ 33,740 $ 8,841 $(12,248) $ 30,333 <F7>
========== ======== ========= ==========
Net income per common
share - primary $ 1.02
==========
Weighted average number
of common shares out-
standing 29,678
==========
</TABLE>
The accompanying notes are an integral part of this unaudited, proforma
consolidated financial statement.
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<PAGE>
LIBERTY PROPERTY TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(Unaudited, dollars in thousands)
<F1> Reflects historical operations of the company for the year ended
December 31, 1996.
<F2> Reflects the incremental addition of revenues and certain expenses
of the Detroit Properties in order to reflect a full twelve months of
operations for these acquisitions.
<F3> Reflects the adjustment necessary to reflect the estimated
incremental general and administrative expense for the Detroit
Properties.
<F4> Reflects incremental depreciation of the Detroit Properties based
on asset lives of 40 years.
<F5> Reflects an incremental increase in interest expense from the
assumed borrowings of $130,612 on the line of credit to fund the
purchase of the Detroit Properties.
<F6> Reflects the allocation of the pro forma adjustment to minority
interest based upon pro forma minority interest in the Operating
Partnership of approximately 10.34%.
<F7> The Company's pro forma taxable income for the year ended December
31, 1996 is approximately $29,175 which has been calculated as pro forma
income from operations of approximately $30,333 plus GAAP depreciation
and amortization of $30,979 less tax basis depreciation and amortization
and other tax differences of approximately $32,137.
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<PAGE>
LIBERTY PROPERTY LIMITED PARTNERSHIP
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The unaudited, pro forma condensed consolidated balance sheet as of
March 31, 1997 reflects the incremental effect of the Detroit Properties
described in Item 5 as if the acquisitions had occurred on March 31,
1997. The accompanying unaudited, pro forma consolidated statement of
operations for the three months ended March 31, 1997 and the year ended
December 31, 1996 reflects the incremental effect of the Detroit
Properties, as if such acquisitions had occurred on January 1, 1996.
These statements should be read in conjunction with respective
consolidated financial statements and notes thereto included in the
Company's Quarterly Report on Form 10-Q for the quarter March 31, 1997
and its Annual Report on Form 10-K for the year ended December 31, 1996.
In the opinion of management, the unaudited, pro forma consolidated
financial information provides for all adjustments necessary to reflect
the effects of the Detroit Properties.
These pro forma statements may not necessarily be indicative of the
results that would have actually occurred if the acquisition of the
Detroit Properties had been in effect on the date indicated, nor does it
purport to represent the financial position, results of operations or
cash flows for future periods.
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<PAGE>
LIBERTY PROPERTY LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997
(UNAUDITED, IN THOUSANDS)
LIBERTY
PROPERTY
LIMITED
HISTORICAL DETROIT PARTNERSHIP
<F1> PROPERTIES CONSOLIDATED
---------- ----------- ------------
ASSETS:
Investment in real estate,
net $1,194,911 $ 130,612 <F2> $1,325,523
Cash and cash equivalents 20,146 - 20,146
Deferred financing and
leasing costs, net 26,172 - 26,172
Other assets 50,483 - 50,483
---------- ----------- -----------
Total assets $1,291,712 $ 130,612 $1,422,324
========== =========== ===========
LIABILITIES:
Mortgage loans $ 313,662 $ 313,662
Subordinated debentures 150,244 150,244
Lines of credit 152,754 $ 130,612 <F3> 283,366
Other liabilities 64,130 64,130
---------- ----------- -----------
Total liabilities 680,790 130,612 811,402
---------- ----------- -----------
OWNERS' EQUITY
General partner's equity 559,267 - 559,267
Limited partners' equity 51,655 - 51,655
---------- ----------- -----------
Total owners' equity
equity 610,922 - 610,922
---------- ----------- -----------
Total liabilities and
owners' equity $1,291,712 $ 130,612 $1,422,324
========== =========== ===========
The accompanying notes are an integral part of this unaudited, pro forma
condensed consolidated financial statement.
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<PAGE>
<TABLE>
LIBERTY PROPERTY LIMITED PARTNERSHIP
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED AND IN THOUSANDS)
<CAPTION>
LIBERTY
PROPERTY
DETROIT PRO LIMITED
HISTORICAL PROPERTIES FORMA PARTNERSHIP
<F1> <F4> ADJUSTMENTS CONSOLIDATED
---------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUE
Rental $ 34,641 $ 2,670 $ 37,311
Operating expense reim-
bursement 10,849 1,684 12,533
Management fees 153 - 153
Interest and other 839 - 839
---------- ----------- ------------
Total revenue 46,482 4,354 50,836
---------- ----------- ------------
OPERATING EXPENSES
Rental property expenses 8,639 941 9,580
Real estate taxes 3,280 382 3,662
General and administrative 2,487 - $ 125 <F5> 2,612
Depreciation and amorti-
zation 7,970 - 694 <F6> 8,664
---------- ----------- ------------ ------------
Total operating expenses 22,376 1,323 819 24,518
---------- ----------- ------------ ------------
Operating income 24,106 3,031 (819) 26,318
Interest expense 12,582 - 2,596 <F7> 15,178
---------- ----------- ------------ ------------
Net income (loss) $ 11,524 $ 3,031 $ (3,415) $ 11,140
========== =========== ============ ============
Net income (loss)
allocated to general
partner $ 10,549 $ 2,775 $ (3,126) $ 10,198
========== =========== ============ ============
Net income (loss)
allocated to limited
partners 975 256 (289) <F8> 942
========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of this unaudited, proforma
consolidated financial statement.
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<PAGE>
LIBERTY PROPERTY LIMITED PARTNERSHIP
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
(Unaudited, dollars in thousands)
<F1> Reflects historical financial information of the Company as of
March 31, 1997 and for the three months ended March 31, 1997.
<F2> Reflects the Total Investment in the Detroit Properties.
<F3> Reflects the use of $130,612 from the line of credit to finance
the Total Investment in the Detroit Properties.
<F4> Reflects the incremental addition of revenues and certain expenses
of the Detroit Properties in order to reflect a full three months of
operations for these acquisitions.
<F5> Reflects the adjustment necessary to reflect the estimated
incremental general and administrative expense for the Detroit
Properties.
<F6> Reflects incremental depreciation of the Detroit Properties based
on asset lives of 40 years.
<F7> Reflects an incremental increase in interest expense from the
assumed borrowings of $130,612 million on the line of credit to fund the
purchase of the Detroit Properties.
<F8> Reflects the allocation of the pro forma adjustment to the net
income allocated to the limited partners based upon pro forma ownership
in the Operating Partnership of approximately 8.46%.
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<PAGE>
<TABLE>
LIBERTY PROPERTY LIMITED PARTNERSHIP
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED AND IN THOUSANDS)
<CAPTION>
LIBERTY
PROPERTY
DETROIT PRO LIMITED
HISTORICAL PROPERTIES FORMA PARTNERSHIP
<F1> <F2> ADJUSTMENTS CONSOLIDATED
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUE
Rental $ 112,841 $ 9,030 $121,871
Operating expense reim-
bursement 35,886 6,007 41,893
Management fees 1,340 - 1,340
Interest and other 4,198 - 4,198
---------- ----------- ---------
Total revenue 154,265 15,037 169,302
---------- ----------- ---------
OPERATING EXPENSES
Rental property expenses 29,624 3,666 33,290
Real estate taxes 11,229 1,510 12,739
General and administrative 8,023 - $ 500 <F3> 8,523
Depreciation and amorti-
zation 28,203 - 2,776 <F4> 30,979
---------- ----------- ------------ ---------
Total operating expenses 77,079 5,176 3,276 85,531
---------- ----------- ------------ ---------
Operating income 77,186 9,861 (3,276) 83,771
Premium on debenture con-
version 1,027 - - 1,027
Interest expense 38,528 - 10,384 <F5> 48,912
---------- ----------- ------------ ---------
Net income (loss) $ 37,631 $ 9,861 $ (13,660) $ 33,832
========== =========== ============ =========
Net income (loss)
allocated to general
partner $ 33,740 $ 8,841 $ (12,248) $ 30,333
Net income (loss)
allocated to limited
partners 3,891 1,020 (1,412) <F6> 3,499
========== =========== ============ =========
</TABLE>
The accompanying notes are an integral part of this unaudited, proforma
consolidated financial statement.
-21-
<PAGE>
LIBERTY PROPERTY LIMITED PARTNERSHIP
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(Unaudited, dollars in thousands)
<F1> Reflects historical financial information of the Company for the
year ended December 31, 1996.
<F2> Reflects the incremental addition of revenue and certain expenses
of the Detroit Properties in order to reflect a full twelve months of
operations for these acquisitions.
<F3> Reflects the adjustment necessary to reflect the estimated
incremental general and administrative expense for the Detroit
Properties.
<F4> Reflects incremental depreciation of the Detroit Properties based
on asset lives of 40 years.
<F5> Reflects an incremental increase in interest expense from the
assumed borrowings of $130,612 million on the line of credit to fund the
purchase of the Detroit Properties.
<F6> Reflects the allocation of the pro forma adjustment to the net
income allocated to the limited partners based upon pro forma ownership
in the Operating Partnership of approximately 10.34%.
-22-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
each Registrant has duly caused this Report to be signed on its behalf
by the undersigned hereunto duly authorized.
LIBERTY PROPERTY TRUST
Dated: June 24, 1997 BY: /s/ JOSEPH P. DENNY
----------------------------------------
NAME: Joseph P. Denny
TITLE: President
LIBERTY PROPERTY LIMITED PARTNERSHIP
BY: LIBERTY PROPERTY TRUST,
SOLE GENERAL PARTNER
Dated: June 24, 1997 BY: /s/ JOSEPH P. DENNY
----------------------------------------
NAME: Joseph P. Denny
TITLE: President
-23-
<PAGE>
EXHIBIT 3.1.1
LIBERTY PROPERTY TRUST
AMENDED AND RESTATED DECLARATION OF TRUST
Dated May 29, 1997
This AMENDED AND RESTATED DECLARATION OF TRUST (the "Declaration
of Trust") is made as of the date set forth above and hereby amends and
restates the Trust's Amended and Restated Declaration of Trust, dated
June 22, 1994.
WHEREAS, the Trustees desire to create hereby a real estate
investment trust under the laws of the State of Maryland; and
WHEREAS, the Trustees desire that this trust qualify as a "real
estate investment trust" under the Internal Revenue Code of 1986, as
amended (the "Code"), and under Title 8 of the Corporations and
Associations Article of the Annotated Code of Maryland, as amended
("Title 8"), so long as such qualification, in the opinion of the
Trustees, is advantageous to the holders of beneficial interest in the
Trust; and
WHEREAS, the beneficial interest in the Trust shall be divided
into transferable shares of one or more classes evidenced by
certificates;
NOW, THEREFORE, the Trustees hereby declare that they will hold in
trust all Property which they have or may hereafter acquire as such
Trustees, together with the proceeds thereof, in trust, and manage the
Trust Property for the benefit of the holders of beneficial interest in
the Trust as provided by this Declaration of Trust.
ARTICLE I
THE TRUST; DEFINITIONS
SECTION 1.1 The name of the trust (hereinafter called the "Trust") is:
LIBERTY PROPERTY TRUST
So far as may be practicable, the business of the Trust shall be
conducted and transacted under that name, which name (and the word
"Trust" wherever used in this Declaration of Trust, except where the
context otherwise requires) shall refer to the Trustees collectively but
not individually or personally and shall not refer to the Shareholders
of the Trust, or to any officers, employees or agents of the Trust or of
such Trustees.
Under circumstances in which the Trustees determine that the use of the
name "Liberty Property Trust" is not practicable or desirable, they may
use any other designation or name for the Trust.
SECTION 1.2 Resident Agent. The name and address of the resident agent
of the Trust in the State of Maryland is Robert A. Snyder, Jr., c/o
Weinberg and Green, 100 South Charles Street, Baltimore, Maryland 21201.
The Trust may have such offices or places of business within or without
the State of Maryland as the Trustees may from time to time determine.
SECTION 1.3 Nature of Trust. The Trust is a real estate investment
trust within the meaning of Title 8. The Trust shall not be deemed to
be a general partnership, limited partnership, joint venture, joint
stock company or, except as provided in Section 12.4, a corporation (but
nothing herein shall preclude the Trust from being treated for tax
purposes as an association under the Code).
SECTION 1.4 Powers. The Trust shall have all of the powers granted to
real estate investment trusts generally by Title 8 or any successor
statute and shall have any other and further powers as are not
inconsistent with and are appropriate to promote and attain the purposes
set forth in this Declaration of Trust.
SECTION 1.5 Definitions. As used in this Declaration of Trust, the
following terms shall have the following meanings unless the context
otherwise requires:
"Adviser" means the Person, if any, appointed, employed or contracted
with by the Trust pursuant to Section 4.1.
"Affiliate" or "Affiliated" means, as to any individual, corporation,
partnership, trust or other association (other than the Trust), any
Person (i) who is an officer, director, partner or trustee of such
corporation, partnership, trust or other association or of any Person
which controls, is controlled by, or is under common control with, such
individual, corporation, partnership, trust or other association or (ii)
which controls, is controlled by, or is under common control with, such
individual, corporation, partnership, trust or other association.
"Bylaws" means the Bylaws of the Trust as the same may be amended from
time to time.
"Excluded Assets" shall have the meaning ascribed to the term "Non-REIT
Assets" in the Company's Registration Statement on Form S-11 relating to
the Company's Initial Public Offering (as such term is defined in
Section 7.1).
"Mortgages" means mortgages, deeds of trust or other security interests
in or applicable to Real Property.
"Operating Partnership" means Liberty Property Limited Partnership, a
Delaware limited partnership.
"Person" means an individual, corporation, partnership, estate, trust
(including a trust qualified under Section 401(a) or 501(c)(17) of the
Code), a portion of a trust permanently set aside for or to be used
exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 509(a) of
the Code, joint stock company or other entity, or any government and
agency or political subdivision thereof, and also includes a group as
that term is used for purposes of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended.
"Real Property" or "Real Estate" means land, rights in land (including
leasehold interests), and any buildings, structures, improvements,
furnishings, fixtures and equipment located on or used in connection
with land and rights or interests in land.
"REIT Provisions of the Code" means Sections 856 through 858 of the Code
and any successor or other provisions of the Code relating to real
estate investment trusts (including provisions as to the attribution of
ownership of beneficial interests therein) and the regulations
promulgated thereunder.
"Rouse Affiliates" means the Rouse Senior Executives and their
respective Affiliates and associates, present or future, including,
without limitation, any other Person acting in concert or as a group
with any of the foregoing Persons.
"Rouse Group" means Rouse & Associates and the partnerships,
corporations and other entities in which Rouse & Associates and/or its
Affiliates have a controlling interest, which the Trust acquires on or
prior to the Closing Date of the Initial Public Offering.
"Rouse Senior Executives" means Willard G. Rouse III, George F. Congdon
and Joseph P. Denny, together with David C. Hammers, Leslie Reid Price,
Robert E. Fenza, Claiborn M. Carr, John A. Castorina, Jill R. Felix,
Larry Gildea and Robert Goldschmidt.
"Securities" means Shares, any stock, shares or other evidences of
equity or beneficial or other interests, voting trust certificates,
bonds, debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities" or any certificates of
interest, shares or participations in, temporary or interim certificates
for, receipts for, guarantees of, or warrants, options or rights to
subscribe to, purchase or acquire, any of the foregoing.
"Securities of the Trust" means any Securities issued by the Trust.
"Shareholders" means holders of record of outstanding Shares.
"Shares" means transferable shares of beneficial interest of the Trust
of any class or series.
"Trustees" means, collectively, the individuals named in Section 2.2 of
this Declaration so long as they continue in office and all other
individuals who have been duly elected and qualified as trustees of the
Trust hereunder.
"Trust Property" means any and all property, real, personal or
otherwise, tangible or intangible, which is transferred or conveyed to
the Trust or the Trustees (including all rents, income, profits and
gains therefrom), which is owned or held by, or for the account of, the
Trust or the Trustees.
ARTICLE II
TRUSTEES
SECTION 2.1 Number. Prior to the Closing Date of the Initial Public
Offering (as such term is defined in Section 7.1) the number of Trustees
initially shall be seven (7) which number may thereafter be increased or
decreased only by the unanimous vote of the Trustees then in office from
time to time; however, the total number of Trustees shall be not fewer
than three (3) and not more than fifteen (15). No reduction in the
number of Trustees shall cause the removal of any Trustee from office
prior to the expiration of his term.
SECTION 2.2 Initial Board; Term. The Trustees shall be classified,
with respect to the time for which they severally hold office, into
three classes (individually, a "Class" and collectively, "Classes"),
Class I, Class II and Class III, with approximately one-third of the
total number of Trustees in each class as determined by the Trustees.
There shall initially be seven (7) Trustees in the three classes, with
two (2) in each of Class II and Class III and three (3) in Class I. The
names and addresses of the Class I Trustees, who shall serve initially
for a term expiring at the annual meeting of Shareholders to be held in
1995 and until their successors are duly elected and qualified are:
Willard G. Rouse III
c/o 65 Valley Stream Parkway, Suite 100
Malvern, PA 19355
M. Leanne Lachman
c/o 65 Valley Stream Parkway, Suite 100
Malvern, PA 19355
J. Anthony Hayden
c/o 65 Valley Stream Parkway, Suite 100
Malvern, PA 19355
The names and addresses of the Class II Trustees, who shall serve
initially for a term expiring at the annual meeting of Shareholders to
be held in 1996 and until their successors are duly elected and
qualified are:
George F. Congdon
c/o 65 Valley Stream Parkway, Suite 100
Malvern, PA 19355
Frederick F. Buchholz
c/o 65 Valley Stream Parkway, Suite 100
Malvern, PA 19355
The name and address of the Class III Trustee, who shall serve initially
for a term expiring at the annual meeting of Shareholders to be held in
1997 and until their successors are duly elected and qualified are:
Joseph P. Denny
c/o 65 Valley Stream Parkway, Suite 100
Malvern, PA 19355
George A. Butler
c/o 65 Valley Stream Parkway, Suite 100
Malvern, PA 19355
At the first annual meeting of Shareholders and at each annual meeting
of the Shareholders thereafter, the successors to the Class of Trustees
whose term expires at such meeting shall be elected to hold office for a
term expiring at the annual meeting of Shareholders held in the third
year following the year of their election and until their successors are
duly elected and qualified.
At all times following the Initial Public Offering, at least a majority
of the members of the Board of Trustees shall be independent. A trustee
shall be considered "independent" hereunder if such individual is not an
officer or an employee of the Trust or any Affiliate of the Trust when
serving as a Trustee; provided, however, that if less than a majority of
trustees are independent (through resignation or otherwise), such
circumstance shall not cause the Trust to terminate or affect the powers
of the remaining trustees to fill vacancies pursuant to the By-laws.
SECTION 2.3 Resignation; Removal or Death. Any Trustee may resign by
written notice to the remaining Trustees, effective upon execution and
delivery to the Trust of such written notice or upon any future date
specified in the notice. A Trustee may be removed from office only at a
meeting of shareholders called for that purpose by the affirmative vote
of the holders of not less than two-thirds of the Shares then
outstanding and entitled to vote in the election of Trustees. Upon the
resignation or removal of any Trustee, or his otherwise ceasing to be a
Trustee, he shall automatically cease to have any right, title or
interest in and to the Trust Property and shall execute and deliver such
documents as the remaining Trustees require for the conveyance of any
Trust Property held in his name, and shall account to the remaining
Trustees as they require for all Property which he holds as Trustee.
Upon the incapacity or death of any Trustee, his legal representative
shall perform those acts.
SECTION 2.4 Legal Title. Legal title to all Trust Property shall be
vested in the Trustees, but they may cause legal title to any Trust
Property to be held by or in the name of any Trustee, or the Trust, or
any other Person as nominee. The right, title and interest of the
Trustees in and to the Trust Property shall automatically vest in
successor and additional Trustees upon their qualification and
acceptance of election or appointment as Trustees, and they shall
thereupon have all the rights and obligations of Trustees, whether or
not conveyancing documents have been executed and delivered pursuant to
Section 2.3 or otherwise. Written evidence of the qualification and
acceptance of election or appointment of successor and additional
Trustees may be filed with the records of the Trust and in such other
offices, agencies or places as the Trustees may deem necessary or
desirable.
ARTICLE III
POWERS OF TRUSTEES
SECTION 3.1 General. Subject to the express limitations herein or in
the Bylaws, (i) the business and affairs of the Trust shall be managed
under the direction of the Board of Trustees and (2) the Trustees shall
have full, exclusive and absolute power, control and authority over the
Trust Property and over the business of the Trust as if they, in their
own right, were the sole owners thereof. The Trustees may take any
actions as in their sole judgment and discretion are necessary or
desirable to conduct the business of the Trust. This Declaration of
Trust shall be construed with a presumption in favor of the grant of
power and authority to the Trustees. Any construction of this
Declaration of Trust or determination made in good faith by the Trustees
concerning their powers and authority hereunder shall be conclusive.
The enumeration and definition of particular powers of the Trustees
included in this Article III shall in no way be limited or restricted by
reference to or inference from the terms of this or any other provision
of this Declaration of Trust or construed or deemed by inference or
otherwise in any manner to exclude or limit the powers conferred upon
the Trustees under the general laws of the State of Maryland as now or
hereafter in force.
SECTION 3.2 Specific Powers and Authority. Subject only to the express
limitations herein (including, but not limited to, those set forth in
Section 9.5), and in addition to all other powers and authority
conferred by this Declaration of Trust or by law, the Trustees, without
any vote, action or consent by the Shareholders, shall have and may
exercise, at any time or times, in the name of the Trust or on its
behalf the following powers and authorities:
(a) Investments. Subject to Article IX, to invest in, purchase
or otherwise acquire and to hold real, personal or mixed, tangible or
intangible, property of any kind (including, without limitation,
Securities and Mortgages) wherever located, or rights or interests
therein or in connection therewith, all without regard to whether such
property, interests or rights are authorized by law for the investment
of funds held by trustees or other fiduciaries, or whether obligations
the Trust acquires have a term greater or lesser than the term of office
of the Trustees or the possible termination of the Trust, for such
consideration as the Trustees may deem proper (including cash, property
of any kind or Securities of the Trust); provided, however, that the
Trustees shall take such actions as they deem necessary and desirable to
comply with any requirements of Title 8 relating to the types of assets
held by the Trust.
(b) Sale, Disposition and Use of Property. Subject to Article V,
Article IX and Section 10.3, to sell, rent, lease, hire, exchange,
release, partition, assign, mortgage, grant security interests in,
encumber, negotiate, dedicate, grant easements in and options with
respect to, convey, transfer (including transfers to entities wholly or
partially owned by the Trust or the Trustees) or otherwise dispose of
any or all of the Trust Property by deeds (including deeds in lieu of
foreclosure with or without consideration), trust deeds, assignments,
bills of sale, transfers, leases, mortgages, financing statements,
security agreements and other instruments for any of such purposes
executed and delivered for and on behalf of the Trust or the Trustees by
one or more of the Trustees or by a duly authorized officer, employee,
agent or nominee of the Trust, on such terms as they deem appropriate;
to give consents and make contracts relating to the Trust Property and
its use or other property or matters; to develop, improve, manage, use,
alter and otherwise deal with the Trust Property; and to rent, lease or
hire from others property of any kind; provided, however, that the Trust
may not use or apply land for any purposes not permitted by applicable
law.
(c) Financings. To borrow or in any other manner raise money for
the purposes and on the terms they determine, and to evidence the same
by issuance of Securities of the Trust, which may have such provisions
as the Trustees determine; to reacquire such Securities of the Trust; to
enter into other contracts or obligations on behalf of the Trust; to
guarantee, indemnify or act as surety with respect to payment or
performance of obligations of any Person; to mortgage, pledge, assign,
grant security interests in or otherwise encumber the Trust Property to
secure any such Securities of the Trust, contracts or obligations
(including guarantees, indemnifications and suretyships); and to renew,
modify, release, compromise, extend, consolidate or cancel, in whole or
in part, any obligation to or of the Trust or participate in any
reorganization of obligors to the Trust.
(d) Loans. Subject to Article IX, to lend money or other Trust
Property on such terms, for such purposes and to such persons as they
may determine.
(e) Issuances of Securities. Subject to Article IX, to create
and authorize the issuance, in shares, units or amounts of one or more
types, series or classes, of Securities of the Trust, which may have
such voting rights, dividend or interest rates, preferences,
subordinations, conversion or redemption prices or rights, maturity
dates, distribution, exchange or liquidation rights or other rights as
the Trustees may determine, without vote of or other action by the
Shareholders; to issue any type of Securities of the Trust, and any
options, warrants or rights to subscribe therefor, all without vote of
or other action by the Shareholders, to such Persons for such
consideration, at such time or times and in such manner and on such
terms as the Trustees determine; to list any of the Securities of the
Trust on any securities exchange; and to purchase or otherwise acquire,
hold, cancel, reissue, sell and transfer any Securities of the Trust.
(f) Expenses and Taxes. To pay any charges, expenses or
liabilities necessary or desirable, in the sole discretion of the
Trustees, for carrying out the purposes of this Declaration of Trust and
conducting the business of the Trust, including compensation or fees to
Trustees, officers, employees and agents of the Trust, and to Persons
contracting with the Trust, and any taxes, levies, charges and
assessments of any kind imposed upon or chargeable against the Trust,
the Trust Property, or the Trustees in connection therewith; and to
prepare and file any tax returns, reports or other documents and take
any other appropriate action relating to the payment of any such
charges, expenses or liabilities.
(g) Collection and Enforcement. To collect, sue for and receive
money or other property due to the Trust; to consent to extensions of
the time for payment, or to the renewal, of any Securities or
obligations; to engage or intervene in, prosecute, defend, compound,
enforce, compromise, release, abandon or adjust any actions, suits,
proceedings, disputes, claims, demands, security interests, or things
relating to the Trust, the Trust Property, or the Trust's affairs; to
exercise any rights and enter into any agreements, and take any other
action necessary or desirable in connection with the foregoing.
(h) Deposits. To deposit funds or Securities constituting part
of the Trust Property in banks, trust companies, savings and loan
associations, financial institutions and other depositories, whether or
not such deposits will draw interest, subject to withdrawal on such
terms and in such manner as the Trustees determine.
(i) Allocation; Accounts. To determine whether moneys, profits
or other assets of the Trust shall be charged or credited to, or
allocated between, income and capital, including whether to amortize any
premium or discount and to determine in what manner any expenses or
disbursements are to be borne as between income and capital (regardless
of how such items would normally or otherwise be charged to or allocated
between income and capital without such determination); to treat any
dividend or other distribution on any investment as, or apportion it
between, income and capital; in their discretion to provide reserves for
depreciation, amortization, obsolescence or other purposes in respect of
any Trust Property in such amounts and by such methods as they
determine; to determine what constitutes net earnings, profits or
surplus; to determine the method or form in which the accounts and
records of the Trust shall be maintained; and to allocate to the
Shareholders equity account less than all of the consideration paid for
Shares and to allocate the balance to paid-in capital or capital
surplus.
(j) Valuation of Property. To determine the value of all or any
part of the Trust Property and of any services, Securities, property or
other consideration to be furnished to or acquired by the Trust, and to
revalue all or any part of the Trust Property, all in accordance with
such information as is reasonable, in their sole judgment.
(k) Ownership and Voting Powers. To exercise all of the rights,
powers, options and privileges pertaining to the ownership of any
Mortgages, Securities, Real Estate and other Trust Property to the same
extent that an individual owner might, including, without limitation, to
vote or give any consent, request, or notice or waive any notice, either
in person or by proxy or power of attorney, which proxies and powers of
attorney may be for any general or special meetings or action, and may
include the exercise of discretionary powers; provided, however, that
after the Initial Five Year Period (as defined in Section 7.1) the
Trustees shall not, without the prior affirmative vote of not less than
two-thirds of the Shares then outstanding and entitled to vote, effect
(i) the merger or consolidation of the Operating Partnership in a
transaction in which the Operating Partnership is not the surviving
entity, (ii) a voluntary sale or other transfer of all or substantially
all of the assets owned by the Operating Partnership, (iii) the
dissolution of the Operating Partnership, (iv) the institution of any
proceedings for bankruptcy on behalf of the Operating Partnership, (v)
the making of a general assignment for the benefit of creditors or
acquiescence to the filing of an involuntary bankruptcy petition against
the Operating Partnership or (vi) the appointment of a custodian,
receiver or trustee for all or any part of the assets of the Operating
Partnership.
(l) Officers, Etc.; Delegation of Powers. To elect, appoint or
employ such officers for the Trust and such committees of the Board of
Trustees with such powers and duties as the Trustees may determine or
the Trust's Bylaws provide; to engage, employ or contract with and pay
compensation to any Person (including, subject to Section 9.5, any
Trustee and any Person who is an Affiliate of any Trustee) as agent,
representative, Adviser, members of an advisory board, employee or
independent contractor (including advisers, consultants, transfer
agents, registrars, underwriters, accountants, attorneys, real estate
agents, property and other managers, appraisers, brokers, architects,
engineers, construction managers, general contractors or others) in one
or more capacities, to perform such services on such terms as the
Trustees may determine; to delegate to one or more Trustees, officers or
other Persons engaged or employed as aforesaid or to committees of
Trustees or to the Adviser, the performance of acts or other things
(including granting of consents), the making of decisions and the
execution of such deeds, contracts or other instruments, either in the
names of the Trust, the Trustees or as their attorneys or otherwise, as
the Trustees may determine; and to establish such committees as they
deem appropriate.
(m) Associations. Subject to Section 9.5, to cause the Trust to
enter into joint ventures, general or limited partnerships,
participation or agency arrangements or any other lawful combinations,
relationships or associations of any kind through which the Trustees may
exercise any and all powers accorded them by this Declaration of Trust.
(n) Reorganizations; Etc. Subject to Sections 10.2 and 10.3, to
cause to be organized or assist in organizing any Person under the laws
of any jurisdiction to acquire all or any part of the Trust Property or
carry on any business in which the Trust shall have an interest; to
merge or consolidate the Trust with any Person; to sell, rent, lease,
hire, convey, negotiate, assign, exchange or transfer all or any part of
the Trust Property to or with any Person in exchange for Securities of
such Person or otherwise; and to lend money to, subscribe for and
purchase the Securities of, and enter into any contracts with, any
Person in which the Trust holds, or is about to acquire, Securities or
any other interests.
(o) Insurance. To purchase and pay for out of Trust Property
insurance policies insuring the Trust and the Trust Property against any
and all risks, and insuring the Shareholders, Trustees, officers,
employees and agents of the Trust individually against all claims and
liabilities of every nature arising by reason of holding or having held
any such status, office or position or by reason of any action alleged
to have been taken or omitted (including those alleged to constitute
misconduct, gross negligence, reckless disregard of duty or bad faith)
by any such Person in such capacity, whether or not the Trust would have
the power to indemnify such person against such claim or liability.
(p) Executive Compensation; Pension and Other Plans. To adopt
and implement executive compensation, pension,
profit sharing, stock option, stock bonus, stock purchase, stock
appreciation rights, savings, thrift, retirement, incentive or benefit
plans, trusts or provisions, applicable to any or all Trustees,
officers, employees or agents of the Trust, or to other Persons who have
benefited the Trust, all on such terms and for such purposes as the
Trustees may determine.
(q) Distributions. To declare and pay dividends or other
distributions to Shareholders, subject to Article VII with respect to
Excess Shares.
(r) Indemnification. In addition to the indemnification provided
for in Section 9.4, to indemnify any Person, including any Adviser or
independent contractor, with whom the Trust has dealings.
(s) Charitable Contributions. To make donations for the public
welfare or for community, charitable, religious, educational,
scientific, civic or similar purposes, regardless of any direct benefit
to the Trust.
(t) Discontinue Operations; Bankruptcy. To discontinue the
operations of the Trust (subject to Section 11.2); to petition or apply
for relief under any provision of federal or state bankruptcy,
insolvency or reorganization laws or similar laws for the relief of
debtors; to permit any Trust Property to be foreclosed upon without
raising any legal or equitable defenses that may be available to the
Trust or the Trustees or otherwise defending or responding to such
foreclosure; to confess judgment against the Trust; or to take such
other action with respect to indebtedness or other obligations of the
Trustees, in such capacity, the Trust Property or the Trust as the
Trustees in their discretion may determine.
(u) Termination of Status. To terminate the status of the Trust
as a real estate investment trust under the REIT Provisions of the Code.
(v) Fiscal Year. Subject to the Code, to adopt, and from time to
time change, a fiscal year for the Trust.
(w) Seal. To adopt and use a seal, but the use of a seal shall
not be required for the execution of instruments or obligations of the
Trust.
(x) Bylaws. To adopt, implement and from time to time amend
Bylaws of the Trust relating to the business and organization of the
Trust which are not inconsistent with the provisions of this Declaration
of Trust.
(y) Voting Trust. To participate in, and accept Securities
issued under or subject to, any voting trust.
(z) Proxies. To solicit proxies of the Shareholders at the
expense of the Trust.
(aa) Further Powers. To do all other acts and things and execute
and deliver all instruments incident to the foregoing powers, and to
exercise all powers which they deem necessary, useful or desirable to
carry on the business of the Trust or to carry out the provisions of
this Declaration of Trust, even if such powers are not specifically
provided hereby.
ARTICLE IV
ADVISER
SECTION 4.1 Appointment. The Trustees are responsible for setting the
general policies of the Trust and for the general supervision of its
business conducted by officers, agents, employees, advisers or
independent contractors of the Trust. The Trustees are not required,
however, to conduct personally the business of the Trust, and they may
(but need not) appoint, employ or contract with any Person (including a
Person Affiliated with any Trustee) as an Adviser and may grant or
delegate such authority to the Adviser as the Trustees may, in their
sole discretion, deem necessary or desirable. The Trustees may
determine the terms of retention and the compensation of the Adviser and
may exercise broad discretion in allowing the Adviser to administer and
regulate the operations of the Trust, to act as agent for the Trust, to
execute documents on behalf of the Trust and to make executive decisions
which conform to general policies and principles established by the
Trustees.
SECTION 4.2 Affiliation and Functions. The Trustees, by resolution or
in the Bylaws, may provide guidelines, provisions or requirements
concerning the affiliation and functions of the Adviser.
ARTICLE V
INVESTMENT POLICY
The fundamental investment policy of the Trust is to make investments in
such a manner as to comply with the REIT Provisions of the Code and with
the requirements of Title 8, with respect to the composition of the
Trust's investments and the derivation of its income. Subject to
Section 3.2(u), the Trustees will use their best efforts to carry out
this fundamental investment policy and to conduct the affairs of the
Trust in such a manner as to continue to qualify the Trust for tax
treatment provided in the REIT Provisions of the Code; provided,
however, no Trustee, officer, employee or agent of the Trust shall be
liable for any act or omission resulting in the loss of tax benefits
under the Code, except to the extent provided in Section 9.2. The
Trustees may change from time to time by resolution or in the Bylaws of
the Trust, such investment policies as they determine to be in the best
interests of the Trust, including prohibitions or restrictions upon
certain types of investments.
ARTICLE VI
SHARES
SECTION 6.1 Shares. The beneficial interest in the Trust shall be
divided into Shares. The total number of Shares which the Trust has
authority to issue is two hundred million (200,000,000), and shall
consist of Shares, which may comprise one or more series or classes, and
such other types, series or classes of Securities of the Trust as the
Trustees may create and authorize from time to time and designate as
representing a beneficial interest in the Trust. Shares may be issued
for such consideration as the Trustees determine or, if issued as a
result of a Share dividend or Share split, without any consideration, in
which case all Shares so issued shall be full paid and nonassessable by
the Trust.
SECTION 6.2 Common Shares. Common Shares ("Common Shares") shall have
a par value of $.001 per share and, subject to the provisions of Article
VII with respect to Excess Shares (as defined in Article VII), shall
entitle the holders to one vote per Common Share on a non-cumulative
basis on all matters upon which Shareholders are entitled to vote
pursuant to Section 8.2, and shares of a particular class of issued
Common Shares shall have equal dividend, distribution, liquidation and
other rights, and shall have no preference, preemptive, appraisal,
conversion or exchange rights. Subject to the express terms of any
class of Common Shares outstanding at the time, and notwithstanding any
other provision of the Declaration of Trust, the Board of Trustees may
increase or decrease the number of, alter the designation of or classify
or reclassify any unissued Shares by setting or changing, in any one or
more respects, from time to time before issuing the Shares, and, subject
to the provisions of Article VII regarding Excess Shares, the terms,
preferences, conversion and other rights, including, but not limited to,
voting powers, restrictions, limitations as to dividends or other
distributions, qualifications or terms or conditions of redemption of
any class of Shares, and in such event, the Trust shall file for record
with the State Department of Assessments and Taxation of Maryland
articles supplementary in substance and form as prescribed by Maryland
law.
SECTION 6.3 Preferred Shares. The Trustees are hereby expressly
granted the authority to authorize from time to time the issuance of one
or more series of preferred Shares ("Preferred Shares") and, with
respect to any such series, to fix the numbers, designations,
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications and other terms or
conditions of redemption of such series. Subject to the express terms
of any series of Preferred Shares at the time, and notwithstanding any
other provision of the Declaration of Trust, the Board of Trustees may
increase or decrease the number of, alter the designation of or classify
or reclassify any unissued Preferred Shares by setting or changing, in
any one or more respects, from time to time before issuing the Preferred
Shares, and, subject to the provisions of Article VII regarding Excess
Shares, the terms, preferences, conversion and other rights, including,
but not limited to, voting powers, restrictions, limitations as to
dividends or other distributions, qualifications or terms or conditions
of redemption, of any series of Preferred Shares, and in such event, the
Trust shall file for record with the State Department of Assessments and
Taxation of Maryland articles supplementary in substance and form as
prescribed by Maryland law.
SECTION 6.4 Dividends or Distributions. The Trustees may from time to
time declare and pay to Shareholders such dividends or distributions in
cash, property or other assets of the Trust or in Securities of the
Trust or from any other source as the Trustees in their discretion shall
determine. The Trustees shall endeavor to declare and pay such
dividends and distributions as shall be necessary for the Trust to
qualify as a real estate investment trust under the REIT Provisions of
the Code; however, Shareholders shall have no right to any dividend or
distribution unless and until declared by the Trustees. The exercise of
the powers and rights of the Trustees pursuant to this Section shall be
subject to the provisions of any class or series of Shares at the time
outstanding. The receipt by any Person in whose name any Shares are
registered on the records of the Trust or by his duly authorized agent
shall be a sufficient discharge for all dividends or distributions
payable or deliverable in respect of such Shares and from all liability
to see to the application thereof.
SECTION 6.5 General Nature of Shares. All Shares shall be personal
property entitling the Shareholders only to those rights provided in
this Declaration or in the resolution creating any class or series of
Shares. The legal ownership of the Trust Property and the right to
conduct the business of the Trust are vested exclusively in the
Trustees; the Shareholders shall have no interest therein other than
beneficial interest in the Trust conferred by their Shares and shall
have no right to compel any partition, division, dividend or
distribution of the Trust or any of the Trust Property. The death of a
Shareholder shall not terminate the Trust or give his legal
representative any rights against other Shareholders, the Trustees or
the Trust Property, except the right, exercised in accordance with
applicable provisions of the Bylaws, to receive a new certificate for
Shares in exchange for the certificate held by the deceased Shareholder.
ARTICLE VII
RESTRICTION ON TRANSFER,
ACQUISITION AND REDEMPTION OF EQUITY SHARES;
EXCHANGE FOR EXCESS SHARES
SECTION 7.1 Definitions. For the purposes of this Article VII, the
following terms shall have the following meanings:
"Beneficial Ownership" shall mean ownership of Equity Shares by a Person
who would be treated as an owner of such Equity Shares under Section
542(a)(2) of the Code either directly or constructively through the
application of Section 544 of the Code, as modified by Section
856(h)(1)(B) of the Code. The terms "Beneficial Owner," "Beneficially
Owns," "Beneficially Own" and "Beneficially Owned" shall have the
correlative meanings.
"Charitable Beneficiary" shall mean one or more organizations described
in Sections 170(b)(1)(A ) or 170(c) of the Code which shall be the
beneficiaries of the Charitable Trust.
"Charitable Trust" shall mean the trust established for the benefit of
the Charitable Beneficiary pursuant to Section 7.15 for which the Trust
is the trustee, interests in which shall be allocated in accordance with
the provisions of Section 7.19.
"Closing Date of the Initial Public Offering" shall mean the time and
date of payment for and delivery of Common Shares issued pursuant to the
Initial Public Offering, excluding the Common Shares issuable upon
exercise of the over-allotment option granted in connection with the
Initial Public Offering.
"Equity Shares" shall mean either Common Shares or Preferred Shares.
"Excess Shares" shall have the meaning ascribed to it in Section 7.3.
"Existing Holder" shall mean (a) any Person (other than any of the Rouse
Principals) who is or would be, upon the exchange of OP Units, the
Beneficial Owner of Common Shares and/or Preferred Shares in excess of
the Ownership Limit both upon and immediately after the Closing Date of
the Initial Public Offering, so long as, but only so long as, such
Person Beneficially Owns or would, upon the exchange of OP Units,
Beneficially Own Common Shares and/or Preferred Shares in excess of the
Ownership Limit and (b) any Person (other than any of the Rouse
Principals) to whom an Existing Holder transfers, subject to the
limitations provided in this Article VII, Beneficial Ownership of Common
Shares and/or Preferred Shares causing such transferee to Beneficially
Own Common Shares and/or Preferred Shares in excess of the Ownership
Limit.
"Existing Holder Limit" (a) for any Existing Holder who is an Existing
Holder by virtue of clause (a) of the definition thereof, shall mean,
initially, the percentage of the outstanding Equity Shares Beneficially
Owned, or which would be Beneficially Owned upon the exchange of OP
Units, by such Existing Holder upon and immediately after the Closing
Date of the Initial Public Offering and, after any adjustment pursuant
to Section 7.9, shall mean such percentage of the outstanding Equity
Shares as so adjusted; and (b) for any Existing Holder who becomes an
Existing Holder by virtue of clause (b) of the definition thereof, shall
mean, initially, the percentage of the outstanding Equity Shares
Beneficially Owned by such Existing Holder at the time that such
Existing Holder becomes an Existing Holder, but in no event shall such
percentage be greater than the Existing Holder Limit for the Existing
Holder who transfers Beneficial Ownership of Common Shares and/or
Preferred Shares to such transferee Existing Holder or, in the case of
more than one transferor, in no event shall such percentage be greater
than the smallest Existing Holder Limit of any transferring Existing
Holder, and, after any adjustment pursuant to Section 7.9, shall mean
such percentage of the outstanding Equity Shares as so adjusted. From
the Closing Date of the Initial Public Offering and prior to the
Restriction Termination Date, the Secretary of the Trust shall maintain
and, upon request, make available to each Existing Holder a schedule
which sets forth the then current Existing Holder Limit for each
Existing Holder.
"Initial Public Offering" means the sale of Common Shares pursuant to
the Trust's first effective registration statement for such Common
Shares filed under the Securities Act of 1933, as amended.
"Market Price" shall mean the last reported sales price reported on the
New York Stock Exchange, Inc. (the "Exchange") of Common Shares or
Preferred Shares, as the case may be, on the trading date immediately
preceding the relevant date, or if not then traded on the Exchange, the
last reported sales price of, or the average of the closing bid and
asked prices for, Common Shares or Preferred Shares, as the case may be,
on the trading day immediately preceding the relevant date as reported
on any exchange or quotation system over which Common Shares or
Preferred Shares, as the case may be, may be traded, or if not then
traded over any exchange or quotation system, then the fair market value
of Common Shares or Preferred Shares, as the case may be, on the
relevant date as determined in good faith by the Board of Trustees.
"OP Units" shall mean units of limited partnership of the Operating
Partnership.
"Ownership Limit" shall mean that number of Shares which equals the
lesser of (a) 5.0% of the number of outstanding Equity Shares and (b)
5.0% of the value of outstanding Equity Shares, and after any adjustment
as set forth in Section 7.10, shall mean such greater percentage of the
outstanding Equity Shares as so adjusted. The number and value of
outstanding Equity Shares shall be determined by the Board of Trustees
in good faith, which determination shall be conclusive for all purposes
hereof.
"Person" shall mean a Person as defined in Article I but solely for
purposes of this Article VII shall not include an underwriter that
participated in a public offering of the Common Shares and/or Preferred
Shares for a period of 25 days following the purchase by such
underwriter of the Common Shares and/or Preferred Shares in connection
with such public offering.
"Purported Beneficial Transferee" shall mean, with respect to any
purported Transfer which results in Excess Shares, the purported
beneficial transferee for whom the Purported Record Transferee would
have acquired Equity Shares, if such Transfer had been valid under
Section 7.2.
"Purported Record Transferee" shall mean, with respect to any purported
Transfer which results in Excess Shares, the record holder of the Equity
Shares, if such Transfer had been valid under Section 7.2.
"Restriction Termination Date" shall mean the first day after the
Closing Date of the Initial Public Offering on which the Board of
Trustees determines that it is no longer in the best interests of the
Trust to attempt to, or to continue to, qualify as a REIT.
"Rouse Principals Limit" shall initially mean that number of Shares
which equals the lesser of (a) 19.9% of the number of outstanding Equity
Shares and (b) 19.9% of the value of outstanding Equity Shares, and
after any adjustment as set forth in Section 7.10, shall mean such
greater percentage of the outstanding Equity Shares as so adjusted. The
number and value of outstanding Equity Shares shall be determined by the
Board of Trustees in good faith, which determination shall be conclusive
for all purposes hereof.
"Rouse Principals" shall mean Willard G. Rouse III, George F. Congdon,
Joseph Denny and David C. Hammers.
"Special Trustee" shall mean the Trust as trustee for the Charitable
Trust, and any successor trustee appointed by the Trust.
"Transfer" shall mean any sale, transfer, gift, assignment, devise or
other disposition of Equity Shares (including (a) the granting of any
option or entering into any agreement for the sale, transfer or other
disposition of Equity Shares or (b) the sale, transfer, assignment or
other disposition of any securities or rights convertible into or
exchangeable for Shares, whether voluntary or involuntary, whether of
record or beneficially and whether by operation of law or otherwise.
The terms "Transfers" and "Transferred" shall have the correlative
meanings.
SECTION 7.2 Ownership Limitation.
(a) Except as provided in Section 7.12, from and after the
Closing Date of the Initial Public Offering and prior to the Restriction
Termination Date, no Person (other than an Existing Holder or any of the
Rouse Principals) shall Beneficially Own Common Shares and/or Preferred
Shares in excess of the Ownership Limit, no Existing Holder shall
Beneficially Own Common Shares and/or Preferred Shares in excess of the
Existing Holder Limit for such Existing Holder, the Rouse Principals, in
the aggregate, shall not Beneficially Own Common Shares and/or Preferred
Shares in excess of the Rouse Principals' Limit, and no Person (other
than any of the Rouse Principals) shall acquire Common Shares in excess
of the Ownership Limit in the Initial Public Offering.
(b) Except as provided in Section 7.12, from and after the
Closing Date of the Initial Public Offering and prior to the Restriction
Termination Date, any Transfer that, if effective, would result in any
Person (other than an Existing Holder or any of the Rouse Principals)
Beneficially Owning Common Shares and/or Preferred Shares in excess of
the Ownership Limit shall be void ab initio as to the Transfer of such
Common Shares and/or Preferred Shares which would be otherwise
Beneficially Owned by such Person in excess of the Ownership Limit; and
the intended transferee shall acquire no rights in such Common Shares
and/or Preferred Shares.
(c) Except as provided in Section 7.9 and 7.12, from and after
the Closing Date of the Initial Public Offering and prior to the
Restriction Termination Date, any Transfer that, if effective, would
result in an Existing Holder or the Rouse Principals, in the aggregate,
Beneficially Owning Common Shares and/or Preferred Shares in excess of
the applicable Existing Holder Limit, or the Rouse Principals' Limit, as
the case may be, shall be void ab initio as to the Transfer of such
Common Shares and/or Preferred Shares which would be otherwise
Beneficially Owned by such Existing Holder or Rouse Senior Executive in
excess of the applicable Existing Holder Limit or Rouse Principals'
Limit; and such Existing Holder or Rouse Senior Executive shall acquire
no rights in such Common Shares and/or Preferred Shares.
(d) Except as provided in Section 7.12, from and after the
Closing Date of the Initial Public Offering and prior to the Restriction
Termination Date, any Transfer that, if effective, would result in
Common Shares and/or Preferred Shares being owned by fewer than 100
Shareholders (determined without reference to any rules of attribution)
shall be void ab initio as to the Transfer of such Common Shares and/or
Preferred Shares which would be otherwise owned by the transferee; and
the intended transferee shall acquire no rights in such Common Shares
and/or Preferred Shares.
(e) From and after the Closing Date of the Initial Public
Offering and prior to the Restriction Termination Date, any Transfer
that, if effective, would result in the Trust being "closely held"
within the meaning of Section 856(h) of the Code shall be void ab initio
as to the Transfer of the Common Shares and/or Preferred Shares which
would cause the Trust to be "closely held" within the meaning of Section
856(h) of the Code; and the intended transferee shall acquire no rights
in such Common Shares and/or Preferred Shares.
SECTION 7.3 Excess Shares.
(a) If, not withstanding the other provisions contained in this
Article VII, at any time from and after the Closing Date of the Initial
Public Offering and prior to the Restriction Termination Date, there is
a purported Transfer or change in the capital structure of the Trust
(except for a change resulting from the exchange of OP Units for Equity
Shares) such that any Person would Beneficially Own Common Shares and/or
Preferred Shares in excess of the applicable Ownership Limit, Existing
Holder Limit, or Rouse Principals' Limit, then, except as otherwise
provided in Sections 7.9 and 7.12, such Common Shares and/or Preferred
Shares in excess of such Ownership Limit, Existing Holder Limit, or
Rouse Principals' Limit (rounded up to the nearest whole share) shall
constitute "Excess Shares" and be treated as provided in this Article
VII. Such designation and treatment shall be effective as of the close
of business on the business day prior to the date of the purported
Transfer or change in capital structure (except for a change resulting
from the exchange of OP Units for Equity Shares).
(b) If, notwithstanding the other provisions contained in this
Article VII, at any time from and after the Closing Date of the Initial
Public Offering and prior to the Restriction Termination Date, there is
a purported Transfer or change in the capital structure of the Trust
(except for a change resulting from the exchange of OP Units for Equity
Shares) which, if effective, would cause the Trust to become "closely
held" within the meaning of Section 856(h) of the Code, then the Common
Shares and/or Preferred Shares being Transferred which would cause the
Trust to be "closely held" within the meaning of Section 856(h) of the
Code (rounded up to the nearest whole share) shall constitute Excess
Shares and be treated as provided in this Article VII. Such designation
and treatment shall be effective as of the close of business on the
business day prior to the date of the purported Transfer or change in
capital structure (except for a change resulting from the exchange of OP
Units for Equity Shares).
SECTION 7.4 Prevention of Transfer. If the Board of Trustees or its
designee shall at any time determine in good faith that a Transfer has
taken place in violation of Section 7.2 or that a Person intends to
acquire or has attempted to acquire beneficial ownership (determined
without reference to any rules of attribution) or Beneficial Ownership
of any Shares in violation of Section 7.2, the Board of Trustees or its
designee shall take such action as it deems advisable to refuse to give
effect to or to prevent such Transfer, including, but not limited to,
refusing to give effect to such Transfer on the books of the Trust or
instituting proceedings to enjoin such Transfer; provided, however, that
any Transfers or attempted Transfers in violation of Sections 7.2(b),
(c), (d) and (e) shall automatically result in the designation and
treatment described in Section 7.3, irrespective of any action (or
non-action) by the Board of Trustees.
SECTION 7.5 Notice to Trust. Any Person who acquires or attempts to
acquire Shares in violation of Section 7.2, or any Person who is a
transferee such that Excess Shares result under Section 7.3, shall
immediately give written notice or, in the event of a proposed or
attempted Transfer, give at least 15 days prior written notice to the
Trust of such event and shall provide to the Trust such other
information as the Trust may request in order to determine the effect,
if any, of such Transfer or attempted Transfer on the Trust's status as
a REIT.
SECTION 7.6 Information for Trust. From and after the Closing Date of
the Initial Public Offering and prior to the Restriction Termination
Date:
(a) Every Beneficial Owner of more than 5.0% (or such other
percentage, between 0.5% and 5%, as provided in the income tax
regulations promulgated under the Code) of the number or value of
outstanding Equity Shares shall, within 30 days after January 1 of each
year, give written notice to the Trust stating the name and address of
such Beneficial Owner, the number of Shares Beneficially Owned, and a
description of how such Shares are held. Each such Beneficial Owner
shall provide to the Trust such additional information as the Trust may
reasonably request in order to determine the effect, if any, of such
Beneficial Ownership on the Trust's status as a REIT.
(b) Each Person who is a Beneficial Owner of Common Shares
and/or Preferred Shares and each Person (including the Shareholder of
record) who is holding Common Shares and/or Preferred Shares for a
Beneficial Owner shall provide to the Trust such information as the
Trust may reasonably request in order to determine the Trust's status as
a REIT, to comply with the requirements of any taxing authority or
governmental agency or to determine any such compliance.
SECTION 7.7 Other Action by Board. Nothing contained in this Article
VII shall limit the authority of the Board of Trustees to take such
other action as it deems necessary or advisable to protect the Trust and
the interests of the Shareholders by preservation of the Trust's status
as a REIT.
SECTION 7.8 Ambiguities. In the case of an ambiguity in the
application of any of the provisions of this Article VII, including any
definition contained in Section 7.1, the Board of Trustees shall have
the power to determine the application of the provisions of this Article
VII with respect to any situation based on the facts known to it.
SECTION 7.9 Modification of Existing Holder and Rouse Principals'
Limits. The Existing Holder and Rouse Principals' Limits may be
modified as follows:
(a) Subject to the limitations provided in Section 7.11, the
Board of Trustees may grant share options which result in Beneficial
Ownership of Common Shares and/or Preferred Shares by an Existing
Holder or Rouse Senior Executive pursuant to a share option plan
approved by the Board of Trustees and/or the Shareholders. Any such
grant shall increase the Existing Holder or Rouse Principals' Limit for
the affected Existing Holder or Rouse Senior Executive to the maximum
extent possible under Section 7.11 to permit the Beneficial Ownership of
the Common Shares and/or Preferred Shares issuable upon the exercise of
such share option.
(b) Subject to the limitations provided in Section 7.11, an
Existing Holder or Rouse Senior Executive may elect to participate in a
dividend reinvestment plan approved by the Board of Trustees which
results in Beneficial Ownership of Common Shares and/or Preferred Shares
by such participating Existing Holder or Rouse Senior Executive and any
comparable reinvestment plan of the Operating Partnership, wherein those
Existing Holders or Rouse Principals holding OP Units are entitled to
purchase additional OP Units. Any such participation shall increase the
Existing Holder and Rouse Senior Executive Limits for the affected
Existing Holder and Rouse Principals to the maximum extent possible
under Section 7.11 to permit Beneficial Ownership of the Common Shares
and/or Preferred Shares acquired or which can be acquired as a result of
such participation.
(c) The Board of Trustees will reduce the Existing Holder Limit
for any Existing Holder after any Transfer permitted in this Article VII
by such Existing Holder by the percentage of the total outstanding
Equity Shares so Transferred or after the lapse (without exercise) of a
stock option described in Section 7.9(a) by the percentage of the total
outstanding Equity Shares that the share option, if exercised, would
have represented, but in either case no Existing Holder Limit shall be
reduced to a percentage which is less than the Ownership Limit.
SECTION 7.10 Increase in Ownership Limit. Subject to the limitations
provided in Section 7.11, the Board of Trustees may from time to time
increase the Ownership Limit or Rouse Principals' Limit; provided,
however, that no increase in the Ownership Limit or Rouse Principals'
Limit shall be effective without the prior affirmative vote of not less
than two-thirds of the Shares then outstanding and entitled to vote.
SECTION 7.11 Limitations on Changes in Existing Holder and Ownership
Limits.
(a) Except as may occur in connection with action taken by the
Trustees under Section 3.2(u), neither the Ownership Limit, any Existing
Holder Limit, nor the Rouse Principals' Limit may be increased (nor may
any additional Existing Holder Limit be created) if, after giving effect
to such increase (or creation), five Beneficial Owners of Common Shares
(including all of the then Existing Holders) could Beneficially Own, in
the aggregate, more than 49.0% in number or value (determined as
provided in the definition of "Ownership Limit" in Section 7.1) of the
outstanding Equity Shares.
(b) Prior to the modification of any Existing Holder Limit,
Ownership Limit, or Rouse Principals' Limit pursuant to Sections 7.9 or
7.10, the Board of Trustees may require such opinions of counsel,
affidavits, undertakings or agreements as it may deem necessary or
advisable in order to determine or ensure the Trust's status as a REIT.
(c) No Existing Holder Limit shall be reduced to a percentage
which is less than the Ownership Limit.
SECTION 7.12 Exemptions by Board. The Board of Trustees, upon receipt
of a ruling from the Internal Revenue Service or an opinion of counsel
or other evidence satisfactory to the Board of Trustees, and upon at
least 15 days written notice from a Transferee prior to the proposed
Transfer which, if consummated, would result in the intended Transferee
owning Shares in excess of the Ownership Limit or Existing Holder Limit,
as the case may be, and upon such other conditions as the Board of
Trustees may direct, may exempt a Person from the Ownership Limit or the
Existing Holder Limit, as the case may be; provided, however, that no
exemption from the Ownership Limit or the Existing Holder Limit shall be
effective without the prior affirmative vote of not less than two-thirds
of the Shares then outstanding and entitled to vote if, after giving
effect to such exemption, five Beneficial Owners of Common Shares
(assuming each such Beneficial Owner Beneficially Owns the greater of
(i) the Ownership Limit or (ii) the greatest number or percentage of
Shares such Beneficial Owner is permitted to own pursuant to this
Section 7.12 or any other provision hereof) would Beneficially Own, in
the aggregate, more than 49% in number or value (determined as provided
in the definition of "Ownership Limit" in Section 7.1) of the
outstanding Equity Shares.
SECTION 7.13 Legend. Each certificate for Shares shall bear
substantially the following legend:
The securities represented by this certificate are subject to
restrictions on transfer for the purpose of the Trust's maintenance of
its status as a real estate investment trust under the Internal Revenue
Code of 1986, as amended. Except as otherwise provided pursuant to the
Declaration of Trust, no Person (unless such Person is an Existing
Holder) may Beneficially Own Shares in excess of that number of Shares
which equals the lesser of 5.0% (or such greater percentage as may be
determined by the Board of Trustees) of (a) the number of outstanding
Equity Shares of the Trust and (b) the value of outstanding Equity
Shares of the Trust. Any Person who attempts or proposes to
beneficially own Shares in excess of the above limitations must notify
the Trust in writing at least 15 days prior to such proposed or
attempted Transfer. All capitalized terms in this legend have the
meanings defined in the Declaration of Trust of the Trust, a copy of
which will be sent without charge to each Shareholder who so requests.
If the restrictions on transfer are violated, the securities represented
hereby will be designated and treated as Excess Shares which will be
held in the Charitable Trust by the Trust.
SECTION 7.14 Severability. If any provision of this Article VII or any
application of any such provision is determined to be void, invalid or
unenforceable by any court of competent jurisdiction, the validity and
enforceability of the remaining provisions shall not be affected and
other applications of such provision shall be affected only to the
extent necessary to comply with the determination of such court.
SECTION 7.15 Charitable Trust for Excess Shares. Upon any purported
Transfer that results in Excess Shares pursuant to Section 7.3, such
Excess Shares shall be deemed to have been transferred to the Trust, as
Special Trustee of the Charitable Trust for the exclusive benefit of the
Charitable Beneficiary or Beneficiaries. Excess Shares so held in trust
shall be issued and outstanding Shares. Neither the Purported Record
Transferee or the Purported Beneficial Transferee shall have any rights
in such Excess Shares.
SECTION 7.16 Dividends on Excess Shares. Excess Shares shall be
entitled to dividends or other distributions which shall be paid to the
Trust as trustee of the Charitable Trust for the exclusive benefit of
the Charitable Beneficiary. Any dividend or other distribution paid
prior to the discovery by the Trust that the Common Shares and/or
Preferred Shares have been Transferred so as to be deemed Excess Shares
shall be repaid to the Trust as trustee for the Charitable Trust and
held for the exclusive benefit of the Charitable Beneficiary. Any
dividend declared and unpaid shall be void ab initio as to the Purported
Record Transferee or the Purported Beneficial Transferee and shall be
repaid to the Trust as trustee of the Charitable Trust and held for the
exclusive benefit of the Charitable Beneficiary.
SECTION 7.17 Liquidation Distributions for Excess Shares. Subject to
the preferential rights of the Preferred Shares, if any, as may be
determined by the Board of Trustees, in the event of any voluntary or
involuntary liquidation, dissolution or winding up of, or any other
distribution of all or substantially all of the assets of, the Trust, as
trustee, or any successor trustee appointed by the Trust, as holder of
Excess Shares shall be entitled to receive, in the case of Excess Shares
constituting Preferred Shares, ratably with each other holder of
Preferred Shares of the same series and Excess Shares constituting
Preferred Shares of the same series and in the case of Excess Shares
constituting Common Shares, ratably with each other holder of Common
Shares of the same class and Excess Shares constituting Common Shares of
the same class, that portion of the assets of the Trust available for
distribution to the Shareholders as the number of Excess Shares held by
such holder bears to the total number of (a) Preferred Shares and Excess
Shares then outstanding in the case of Excess Shares constituting
Preferred Shares of the same series and (b) Common Shares and Excess
Shares then outstanding in the case of Excess Shares constituting Common
Shares of the same class. The Trust, to the extent it holds Excess
Shares as trustee of the Charitable Trust, or if the Trust shall have
been dissolved, any trustee appointed by the Trust prior to its
dissolution and holding Excess Shares as trustee of the Charitable
Trust, shall distribute any such assets received in respect of the
Excess Shares in any liquidation, dissolution or winding up of, or any
distribution of the assets of, the Trust in accordance with the
priorities and limitations set forth in Section 7.19, and as if such
assets were the proceeds from the disposition of the Excess Shares with
respect to which the distribution is received.
SECTION 7.18 Voting Rights for Excess Shares. The holder of Excess
Shares shall not be entitled to vote on any matter. In lieu thereof,
the Trust as trustee of the Charitable Trust shall be deemed to have
been given an irrevocable proxy by such holder of Excess Shares to vote
the shares for the benefit of the Charitable Beneficiary. To the extent
that any vote has been taken by a Purported Record Transferee or
Purported Beneficial Transferee, as the case may be, such vote shall be
rescinded as void ab initio.
SECTION 7.19 Non-Transferability of Excess Shares. Excess Shares shall
not be transferable. Subject to Section 7.20, the Trust as trustee of
the Charitable Trust may freely designate a Transferee of an interest in
the Charitable Trust (representing the number of Excess Shares held in
the Charitable Trust attributable to a transaction that resulted in the
Excess Shares) if Excess Shares held in the Charitable Trust would not
be Excess Shares in the hands of such Transferee. If such a transfer is
made by the Trust, the proceeds of such a sale shall be payable in
accordance with the terms of the Charitable Trust as follows. The
Purported Beneficial Transferee would receive the lesser of (i) the
price per share received by the Trust from the transfer of the Excess
Shares or (ii) the price per Share such Purported Beneficial Transferee
paid for the Common Shares and/or Preferred Shares, as the case may be,
in the purported Transfer that resulted in the Excess Shares, or, if the
Purported Beneficial Transferee did not give value for such Excess
Shares (i.e., such Shares were purported to be Transferred through a
gift, devise or other transaction not involving any payment), a price
per Share equal to the Market Price for the Excess Shares on the date of
the purported Transfer that resulted in the Excess Shares. Any proceeds
in excess of the amount payable to the Purported Beneficial Transferee
shall be payable to the Charitable Beneficiary. Upon such transfer of
an interest in the Charitable Trust, the corresponding Excess Shares in
the Charitable Trust shall be automatically exchanged for an equal
number of Common Shares and/or Preferred Shares, as applicable, and such
Common Shares and/or Preferred Shares, as applicable, shall be
transferred of record to the transferee of the interest in the Trust if
such Common Shares and/or Preferred Shares, as applicable, would not be
Excess Shares in the hands of such transferee.
SECTION 7.20 Call by Trust on Excess Shares. Excess Shares shall be
deemed to have been offered for sale to the Trust, or its designee, on
the date of the transaction resulting in such Excess Shares at a price
per Share equal to the lesser of (a) the price per Share in the
transaction that created such Excess Shares (or, in the case of a gift,
devise or other purported Transfer not involving any payment, the Market
Price at the time of such gift, devise or other purported Transfer not
involving any payment) and (b) the Market Price of Common Shares or
Preferred Shares to which such Excess Shares relate on the date the
Trust, or its designee, accepts such offer. The Trust shall have the
right to accept such offer for a period of 90 days after the later of
(a) the date of the transaction that resulted in such Excess Shares and
(b) the date the Board of Trustees determines in good faith that a
transaction resulting in Excess Shares has occurred, if the Trust does
not receive a notice of such Transfer pursuant to Section 7.5, but in no
event later than a permitted Transfer pursuant to and in compliance with
the terms of Section 7.19.
SECTION 7.21 Trust as Agent. If any of the foregoing provisions of
this Article VII are determined to be void, invalid or unenforceable by
any court of competent jurisdiction, then the Purported Record
Transferee may be deemed, at the option of the Trust, and to comply with
the determination of such court, to have acted as an agent of the Trust
in acquiring such Excess Shares and to hold such Excess Shares on behalf
of the Trust and subject to its direction.
SECTION 7.22 Amendment to Article VII. Notwithstanding any other
provision in this Declaration of Trust or Bylaws, no Section of this
Article VII may be amended or repealed without the affirmative vote of
the holders of two-thirds of the Shares then outstanding and entitled to
vote.
SECTION 7.23 Priority of New York Stock Exchange, Inc. Transactions.
Notwithstanding anything in this Article VII to the contrary, nothing
herein shall preclude the settlement of a transaction entered into
through the facilities of the New York Stock Exchange, Inc.
ARTICLE VIII
SHAREHOLDERS
SECTION 8.1 Meetings of Shareholders. There shall be an annual meeting
of the Shareholders, to be held at such time and place as shall be
determined by or in the manner prescribed in the Bylaws at which the
Trustees shall be elected and any other proper business may be
conducted. Except as otherwise provided in this Declaration of Trust,
special meetings of Shareholders may be called in the manner provided in
the Bylaws. If there are no Trustees, the officers of the Trust shall
promptly call a special meeting of the Shareholders entitled to vote for
the election of successor Trustees. Any meeting may be adjourned and
reconvened as the Trustees determine or as provided in the Bylaws.
SECTION 8.2 Voting Rights of Shareholders. Subject to the provisions
of any class or series of Shares then outstanding, the Shareholders
shall be entitled to vote only on the following matters: (a) election or
removal of Trustees as provided in Sections 8.1 and 2.3; (b) amendment
of any provision of this Declaration of Trust as provided in Section
10.1; (c) termination of the Trust as provided in Section 11.2; (d)
reorganization of the Trust as provided in Section 10.2; (e) merger,
consolidation or Share exchange of the Trust, or the sale or disposition
of substantially all of the Trust Property (except for a merger of any
entity into the Trust in which the Trust owns 90% or more of the entire
equity interests in such entity) as provided in Section 10.3; (f) any
matter regarding the Operating Partnership requiring the affirmative
vote of Shares pursuant to Section 3.2(k); and (g) any matter for which
a vote of Shareholders is required by a national securities exchange on
which the Shares are traded. Except with respect to the foregoing
matters, no action taken by the Shareholders at any meeting shall in any
way bind the Trustees.
ARTICLE IX
LIABILITY OF SHAREHOLDERS, TRUSTEES, OFFICERS,
EMPLOYEES AND AGENTS
AND TRANSACTIONS BETWEEN THEM AND THE TRUST
SECTION 9.1 Limitation of Shareholder Liability. No Shareholder shall
be liable for any debt, claim, demand, judgment or obligation of any
kind of, against or with respect to the Trust by reason of his being a
Shareholder, nor shall any Shareholder be subject to any personal
liability whatsoever, in tort, contract or otherwise, to any Person in
connection with the Trust Property or the affairs of the Trust.
SECTION 9.2 Limitation of Trustee and Officer Liability. To the
maximum extent that Maryland law in effect from time to time permits
limitation of the liability of trustees and officers of a real estate
investment trust, no Trustee or officer of the Trust shall be liable to
the Trust or to any Shareholder for money damages. Neither the
amendment nor repeal of this Section, nor the adoption or amendment of
any other provision of this Declaration of Trust inconsistent with this
Section, shall apply to or affect in any respect the applicability of
the preceding sentence with respect to any act or failure to act which
occurred prior to such amendment, repeal or adoption. In the absence of
any Maryland statute limiting the liability of trustees and officers of
a Maryland real estate investment trust for money damages in a suit by
or on behalf of the Trust or by any Shareholder, no Trustee or officer
of the Trust shall be liable to the Trust or to any Shareholder for
money damages except to the extent that (i) the Trustee or officer
actually received an improper benefit or profit in money, property or
services, in which case the liability shall not exceed the amount of the
benefit or profit in money, property or services actually received; or
(ii) a judgment or other final adjudication adverse to the Trustee or
officer is entered in a proceeding based on a finding in the proceeding
that, the Trustee's or officer's action or failure to act was the result
of active and deliberate dishonesty and was material to the cause of
action adjudicated in the proceeding.
SECTION 9.3 Express Exculpatory Clauses in Instruments. Neither the
Shareholders nor the Trustees, officers, employees or agents of the
Trust shall be liable under any written instrument creating an
obligation of the Trust, and all Persons shall look solely to the Trust
Property for the payment of any claim under or for the performance of
that instrument. The omission of the foregoing exculpatory language
from any instrument shall not affect the validity or enforceability of
such instrument and shall not render any Shareholder, Trustee, officer,
employee or agent liable thereunder to any third party, nor shall the
Trustees or any officer, employee or agent of the Trust be liable to
anyone for such omission.
SECTION 9.4 Indemnification and Advancement for Expenses. The Trust
shall have the power, to the maximum extent permitted by Maryland law in
effect from time to time, to obligate itself to indemnify, and to pay or
reimburse reasonable expenses in advance of final disposition of a
proceeding to (a) any Person who is a present or former Shareholder,
Trustee, officer, employee or agent of the Trust or (b) any Person who,
while a Shareholder, Trustee or officer of the Trust and at the express
request of the Trust, serves or has served another corporation,
partnership, joint venture, trust, employee benefit plan or any other
enterprise as a director, officer, shareholder, partner or trustee of
such corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise, from and against all claims and liabilities to
which such Person may become subject by reason of his being or having
been a Shareholder, Trustee or officer or by reason of having served in
any of the capacities described in (b) above at the request of the Trust
while a Shareholder, Trustee or officer. The Trust shall have the
power, with the approval of its Board of Trustees, to provide such
indemnification and advancement of expenses to a Person who served a
predecessor of the Trust in any of the capacities described in (a) or
(b) above and to any employee or agent of the Trust or a predecessor of
the Trust.
SECTION 9.5 Transactions Between the Trust and its Trustees, Officers,
Employees and Agents.
(a) Subject to any express restrictions in this Declaration of
Trust or adopted by the Trustees in the Bylaws or by resolution, the
Trust may enter into any contract or transaction of any kind (including
without limitation for the purchase or sale of property or for any type
of services, including those in connection with underwriting or the
offer or sale of Securities of the Trust) with any Person, including any
Trustee, officer, employee or agent of the Trust or any Person
Affiliated with a Trustee, officer, employee or agent of the Trust,
whether or not any of them has a financial interest in such transaction.
(b) Without limiting any other procedures available by law or
otherwise to the Trust, the Board of Trustees may authorize any
agreement of the character described in Section 3.2 or other transaction
with any person, corporation, association, company, trust, partnership
(limited or general) or other organization, although one or more of the
Trustees or officers of the Trust may be a party to any such agreement
or an officer, director, stockholder or member of such other party, and
no such agreement or transaction shall be invalidated or rendered void
or voidable solely by reason of the existence of any such relationship
if the existence is disclosed or known to the Board of Trustees, and the
contract or transaction is approved by the Board of Trustees (including
the affirmative vote of a majority of the disinterested Trustees even if
they constitute less than a quorum of the Board). Any Trustee who is
also a director, officer, stockholder or member of such other entity may
be counted in determining the existence of a quorum at any meeting of
the Board of Trustees considering such matter.
(c) Notwithstanding anything in Section 9.5(b) to the contrary,
subsequent to the Closing Date of the Initial Public Offering (as such
term is defined in Article VII), the affirmative vote of a majority of
the votes cast by the independent Trustees (even if they constitute less
than a quorum of the Board) shall be required: (i) to approve the
purchase by the Trust or its subsidiaries (including the Operating
Partnership and its subsidiaries) of any of the Excluded Assets; (ii) to
approve the sale or refinancing of any properties of the Trust or its
subsidiaries (including the Operating Partnership and its subsidiaries)
contributed by the Rouse Group on or prior to the Closing Date of the
Initial Public Offering; and (iii) to approve or adopt, or to waive any
right of the Trust (including the waiver of a right to enforce any
existing right) under, or to amend in a manner so as to reduce, limit or
otherwise eliminate any right of the Trust or any of its subsidiaries
under, any agreement or transaction between the Trust or any of its
subsidiaries and any one or more of the Rouse Group or the Rouse Senior
Executives of their Affiliates, including, but not limited to,
employment agreements and agreements pursuant to which the Rouse Group
or the Rouse Senior Executives contributed their respective interests in
properties to the Operating Partnership.
ARTICLE X
AMENDMENT; REORGANIZATION; MERGER, ETC.
SECTION 10.1 Amendment.
(a) This Declaration of Trust may be amended by the affirmative
vote of the holders of not less than a majority of the Shares then
outstanding and entitled to vote thereon, except that Section 2.3,
Section 3.2(k), Article VII, Section 8.2, Section 9.3, Article X and
Section 11.2 may be amended only by the affirmative vote of not less
than two-thirds of the Shares then outstanding and entitled to vote.
(b) The Trustees, by a two-thirds vote, may amend provisions of
this Declaration of Trust from time to time to enable the Trust to
qualify as a real estate investment trust under the REIT Provisions of
the Code or under Title 8.
(c) An amendment to this Declaration of Trust shall become
effective as provided in Section 12.5.
(d) This Declaration of Trust may not be amended except as
provided in this Section 10.1.
SECTION 10.2 Reorganization. Subject to the provisions of any class or
series of Shares at the time outstanding, the Trustees shall have the
power to (a) cause the organization of a corporation, association, trust
or other organization to take over the Trust Property and carry on the
affairs of the Trust; (b) merge the Trust into, or sell, convey and
transfer the Trust Property to, any such corporation, association, trust
or organization in exchange for Securities thereof or beneficial
interests therein, and the assumption by the transferee of the
liabilities of the Trust; and (c) thereupon terminate the Trust and
deliver such Securities or beneficial interests ratably among the
Shareholders according to the respective rights of the class or series
of Shares held by them; provided that any such action shall have been
approved, at a meeting of the Shareholders called for the purpose, by
the affirmative vote of the holders of not less than two-thirds of the
Shares then outstanding and entitled to vote thereon.
SECTION 10.3 Merger, Consolidation or Sale of Trust Property. Subject
to the provisions of any class or series of Shares at the time
outstanding, the Trustees shall have the power to (a) merge the Trust
into another entity, (b) consolidate the Trust with one or more other
entities into a new entity or (c) sell or otherwise dispose of all or
substantially all of the Trust Property; provided, that such action
shall have been approved, at a meeting of the Shareholders called for
the purpose, by the affirmative vote of the holders of not less than (i)
two-thirds, if the Trust is not the surviving entity in any such merger
or consolidation or in the event of a proposed sale or disposition of
all or substantially all of the Trust Property, or (ii) a majority, in
all other cases, of the Shares then outstanding and entitled to vote
thereon.
ARTICLE XI
DURATION AND TERMINATION OF TRUST
SECTION 11.1 Duration of Trust. The Trust shall continue perpetually
unless terminated pursuant to Section 11.2 or pursuant to any applicable
provision of Title 8.
SECTION 11.2 Termination of Trust.
(a) Subject to the provisions of any class or series of Shares at
the time outstanding, the Trust may be terminated at any meeting of
Shareholders called for that purpose, by the affirmative vote of the
holders of not less than two-thirds of the Shares then outstanding and
entitled to vote thereon. Upon the termination of the Trust:
(i) The Trust shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of
the Trust and all of the powers of the Trustees under this Declaration
of Trust shall continue, including the powers to fulfill or discharge
the Trust's contracts, collect its assets, sell, convey, assign,
exchange, transfer or otherwise dispose of all or any part of the
remaining Trust Property to one or more Persons at public or private
sale for consideration which may consist in whole or in part of cash,
Securities or other Property of any kind, discharge or pay its
liabilities and do all other acts appropriate to liquidate its business.
(iii) After paying or adequately providing for the payment
of all liabilities, and upon receipt of such releases, indemnities and
agreements as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property, in cash or in kind or partly
each, among the Shareholders according to their respective rights, so
that after payment in full or the setting apart for payment of such
preferential amounts, if any, to which the holders of any Shares (other
than Common Shares) at the time outstanding shall be entitled, the
remaining Trust Property available for payment and distribution to
Shareholders shall, subject to any participating or similar rights of
Shares (other than Common Shares) at the time outstanding, be
distributed ratably among the holders of Common Shares at the time
outstanding.
(b) After termination of the Trust, the liquidation of its
business, and the distribution to the Shareholders as herein provided, a
majority of the Trustees shall execute and file with the Trust's records
a document certifying that the Trust has been duly terminated, and
thereupon the Trustees shall be discharged from all liabilities and
duties hereunder, and the rights and interests of all Shareholders shall
cease.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 Governing Law. This Declaration of Trust is executed by
the undersigned Trustees and delivered in the State of Maryland with
reference to the laws thereof, and the rights of all parties and the
validity, construction and effect of every provision hereof shall be
subject to and construed according to the laws of the State of Maryland
without regard to conflicts of laws provisions thereof.
SECTION 12.2 Reliance by Third Parties. Any certificate shall be final
and conclusive as to any Persons dealing with the Trust if executed by
an individual who, according to the records of the Trust or of any
recording office in which this Declaration of Trust may be recorded,
appears to be the Secretary or an Assistant Secretary of the Trust or a
Trustee, and if certifying to: (a) the number or identity of Trustees,
officers of the Trust or Shareholders; (b) the due authorization of the
execution of any document; (c) the action or vote taken, and the
existence of a quorum, at a meeting of Trustees or Shareholders; (d) a
copy of this Declaration of Trust or of the Bylaws as a true and
complete copy as then in force; (e) an amendment to this Declaration of
Trust; (f) the termination of the Trust; or (g) the existence of any
fact which relates to the affairs of the Trust. No purchaser, lender,
transfer agent or other Person shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made on
behalf of the Trust by the Trustees or by any officer, employee or agent
of the Trust.
SECTION 12.3 Provisions in Conflict with Law or Regulations.
(a) The provisions of this Declaration of Trust are severable,
and if the Trustees shall determine, with the advice of counsel, that
any one or more of such provisions (the "Conflicting Provisions") are in
conflict with the REIT Provisions of the Code, Title 8 or other
applicable federal or state laws, the Conflicting Provisions shall be
deemed never to have constituted a part of this Declaration of Trust,
even without any amendment of this Declaration of Trust pursuant to
Section 10.1; provided, however, that such determination by the Trustees
shall not affect or impair any of the remaining provisions of this
Declaration of Trust or render invalid or improper any action taken or
omitted prior to such determination. No Trustee shall be liable for
making or failing to make such a determination.
(b) If any provision of this Declaration of Trust shall be held
invalid or unenforceable in any jurisdiction, such holding shall not in
any manner affect or render invalid or unenforceable such provision in
any other jurisdiction or any other provision of this Declaration of
Trust in any jurisdiction.
SECTION 12.4 Construction. In this Declaration of Trust, unless the
context otherwise requires, words used in the singular or in the plural
include both the plural and singular and words denoting any gender
include all genders. The title and headings of different parts are
inserted for convenience and shall not affect the meaning, construction
or effect of this Declaration of Trust. In defining or interpreting the
powers and duties of the Trust and its Trustees and officers, reference
may be made, to the extent appropriate and not inconsistent with the
Code or Title 8, to Titles 1 through 3 of the Corporations and
Associations Article of the Annotated Code of Maryland. In furtherance
and not in limitation of the foregoing, in accordance with the
provisions of Title 3, Subtitles 6 and 7, of the Corporations and
Associations Article of the Annotated Code of Maryland, the Trust shall
be included within the definition of "corporation" for purposes of such
provisions except to the extent provided in the By-laws.
SECTION 12.5 Approvals. This Amended and Restated Declaration of Trust
has been duly advised by the Board of Trustees and approved by the
shareholders of the Trust as required by law. The principal office,
resident agent, and names and addresses of Trustees currently in
office, are as set forth in the Amended and Restated Declaration of
Trust.
SECTION 12.6 Recordation. This Declaration of Trust and any amendment
hereto shall be filed for record with the State Department of
Assessments and Taxation of Maryland and may also be filed or recorded
in such other places as the Trustees deem appropriate, but failure to
file for record this Declaration of Trust or any amendment hereto in any
office other than in the State of Maryland shall not affect or impair
the validity or effectiveness of this Declaration of Trust or any
amendment hereto. A restated Declaration of Trust shall, upon filing,
be conclusive evidence of all amendments contained therein and may
thereafter be referred to in lieu of the original Declaration of Trust
and the various amendments thereto.
<PAGE>
EXHIBIT 10.1
LIBERTY PROPERTY TRUST
AMENDED AND RESTATED SHARE INCENTIVE PLAN
1. Purpose. Liberty Property Trust (the "Company") hereby amends and
restates the Liberty Property Trust Share Incentive Plan (the "Plan") as
set forth herein. The Plan is intended to recognize the contributions
made to the Company by key employees, consultants and advisors of the
Company or an Affiliate (including employees who are members of the
Board of Trustees) of the Company or any Affiliate, to provide such
persons with additional incentive to devote themselves to the future
success of the Company or an Affiliate, and to improve the ability of
the Company or an Affiliate to attract, retain, and motivate individuals
upon whom the Company's sustained growth and financial success depend,
by providing such persons with an opportunity to acquire or increase
their proprietary interest in the Company through receipt of rights to
acquire common shares of beneficial interest, $.001 par value per share
(the "Shares"), in the Company, and through transfers of Shares subject
to conditions of forfeiture. In addition, the Plan is intended as an
additional incentive to members of the Board of Trustees (the
"Trustees") who are not employees of the Company or an Affiliate to
serve on the Board of Trustees and to devote themselves to the future
success of the Company by providing them with an opportunity to acquire
or increase their proprietary interest in the Company through the
receipt of Options to acquire Shares.
2. Definitions. Unless the context clearly indicates otherwise, the
following terms shall have the following meanings:
(a) "Affiliate" means a corporation which is a parent corporation
or a subsidiary corporation with respect to the Company within the
meaning of Section 424(e) or (f) of the Code. In addition, "Affiliate"
means any other entity in which the Company owns an interest which would
be an Affiliate as defined in the preceding sentence but for the fact
that such entity is not a corporation. Employees of any such non-
corporate affiliate shall not be granted ISOs under the Plan.
(b) "Award" means a grant of Shares subject to conditions of
forfeiture made pursuant to the terms of the Plan.
(c) "Award Agreement" means the agreement between the Company and
a Grantee with respect to an Award made pursuant to the Plan.
(d) "Awardee" means a person to whom an Award has been granted
pursuant to the Plan.
(e) "Board of Trustees" means the Board of Trustees of the
Company.
(f) "Change of Control" has the meaning as set forth in Section 10
of the Plan.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Committee" has the meaning set forth in Section 3 of the
Plan.
(i) "Company" means Liberty Property Trust, a Maryland real estate
investment trust.
(j) "Disability" has the meaning set forth in Section 22(e)(3) of
the Code.
(k) "Fair Market Value" has the meaning set forth in Subsection
8(b) of the Plan.
(l) "Grantee" means a person to whom an Option or an Award has
been granted pursuant to the Plan.
(m) "ISO" means an Option granted under the Plan which is intended
to qualify as an "incentive stock option" within the meaning of Section
422(b) of the Code.
(n) "Non-employee Trustee " means a member of the Board of
Trustees who is not an employee of the Company or an Affiliate and who
qualifies both as a "non-employee director" as that term is used in Rule
16b-3 and as an "outside director" as that term is used in applicable
IRS regulations promulgated under Code Section 162(m).
(o) "Non-qualified Stock Option" means an Option granted under the
Plan which is not intended to qualify, or otherwise does not qualify, as
an "incentive stock option" within the meaning of Section 422(b) of the
Code.
(p) "Option" means either an ISO or a Non-qualified Stock Option
granted under the Plan.
(q) "Optionee" means a person to whom an Option has been granted
under the Plan, which Option has not been exercised and has not expired
or terminated.
(r) "Option Document" means the document described in Section 8 or
Section 9 of the Plan, as applicable, which sets forth the terms and
conditions of each grant of Options.
(s) "Option Price" means the price at which Shares may be
purchased upon exercise of an Option, as calculated pursuant to
Subsection 8(b) or Subsection 9(a) of the Plan.
(t) "Restricted Share" means a Share subject to conditions of
forfeiture and transfer granted to any person pursuant to an Award under
the Plan.
(u) "Retirement" shall mean a termination of an Optionee's
employment or services for the Company or an Affiliate at any time after
such Optionee has reached age 65.
(v) "Rule 16b-3" means Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended, or any successor rule.
(w) "Section 16 Officer" means any person who is an "officer"
within the meaning of Rule 16a-1(f) promulgated under the Securities
Exchange Act of 1934, as amended, or any successor rule.
(x) "Shares" means the shares of beneficial interest, $.01 par
value per share, of the Company.
(y) "Trustee" means a member of the Board of Trustees.
3. Administration of the Plan. The Plan shall be administered by the
Board of Trustees of the Company if all members of the Board of Trustees
are Non-employee Trustees; provided, however, that the Board of Trustees
may designate a committee or committee(s) of the Board of Trustees
composed of two or more of its Trustees to administer the Plan in its
stead. If any member of the Board of Trustees is not a Non-employee
Trustee, the Board of Trustees shall (i) designate a committee composed
of two or more Trustees, each of whom is a Non-employee Trustee (the
"Non-employee Trustee Committee"), to operate and administer the Plan in
its stead, (ii) designate two committees to operate and administer the
Plan in its stead, one of such committees composed of two or more of its
Non-employee Trustees (the "Non-employee Trustee Committee") to operate
and administer the Plan with respect to the Company's Section 16
Officers and the Trustees who are not members of the Non-employee
Trustee Committee, and another committee composed of two or more
Trustees (which may include Trustees who are not Non-employee Trustees)
to operate and administer the Plan with respect to persons other than
Section 16 Officers or Trustees or (iii) designate only one committee
composed of two or more Non-employee Trustees (the "Non-employee Trustee
Committee") to operate and administer the Plan with respect to the
Company's Section 16 Officers and Trustees (other than those Trustees
serving on the Non-employee Trustee Committee) and itself operate and
administer the Plan with respect to persons other than Section 16
Officers or Trustees. Any of such committees designated by the Board of
Trustees, and the Board of Trustees itself in its administrative
capacity with respect to the Plan, is referred to as the "Committee."
With the exception of the timing of grants of Options, the price at
which Shares may be purchased, and the number of Shares covered by
Options granted to each member of the Non-employee Trustee Committee,
all of which shall be as specifically set forth in Section 9, the other
provisions set forth herein, as it pertains to members of the Non-
employee Trustee Committee, shall be administered by the Board of
Trustees.
(a) Meetings. The Committee shall hold meetings at such times
and places as it may determine. Acts approved at a meeting by a
majority of the members of the Committee or acts approved in writing by
the unanimous consent of the members of the Committee shall be the valid
acts of the Committee.
(b) Grants and Awards. Except with respect to Options granted
under Subsection 8(j) and to Non-employee Trustee Committee Members
pursuant to Section 9, the Committee shall from time to time at its
discretion direct the Company to grant Options and Awards pursuant to
the terms of the Plan. The Committee shall have plenary authority to
(i) determine the persons to whom, and the times at which Options and
Awards are to be granted as well as the terms applicable to Options and
Awards, (ii) determine the type of Option to be granted and the number
of Shares subject thereto, (iii) determine the Awardees to whom, and the
times at which, Restricted Shares are granted, the number of Shares
awarded, and the purchase price per Share, if any, and (iv) approve the
form and terms and conditions of the Option Documents and Award
Agreements; all subject, however, to the express provisions of the Plan.
In making such determinations, the Committee may take into account the
nature of the Grantee's services and responsibilities, the Grantee's
present and potential contribution to the Company's success and such
other factors as it may deem relevant. Notwithstanding the foregoing,
grants of Options to Non-employee Trustee Committee Members shall be
made exclusively in accordance with Section 9 and such other provisions
of the Plan that specifically apply to such Options. The interpretation
and construction by the Committee of any provisions of the Plan or of
any Option or Award granted under it shall be final, binding and
conclusive.
(c) Exculpation. No member of the Committee shall be personally
liable for monetary damages as such for any action taken or any failure
to take any action in connection with the administration of the Plan or
the granting of Options or Awards thereunder unless (i) the member of
the Committee has breached or failed to perform the duties of his office
under applicable law and (ii) the breach or failure to perform
constitutes self-dealing, willful misconduct or recklessness; provided,
however, that the provisions of this Subsection 3(c) shall not apply to
the responsibility or liability of a member of the Committee pursuant to
any criminal statute or to the liability of a member of the Committee
for the payment of taxes pursuant to local, state or federal law.
(d) Indemnification. Service on the Committee shall constitute
service as a member of the Board of Trustees. Each member of the
Committee shall be entitled without further act on his part to indemnity
from the Company to the fullest extent provided by applicable law and
the Company's Declaration of Trust and/or By-laws in connection with or
arising out of any action, suit or proceeding with respect to the
administration of the Plan or the granting of Options or Awards
thereunder in which he or she may be involved by reason of his or her
being or having been a member of the Committee, whether or not he or she
continues to be such member of the Committee at the time of the action,
suit or proceeding.
4. Grants and Awards under the Plan. Options under the Plan may be
in the form of a Non-qualified Stock Option, an ISO, or Awards of
Restricted Shares, or any combination thereof, at the discretion of the
Committee.
5. Eligibility. All key employees, consultants and advisors of the
Company or an Affiliate and members of the Board of Trustees shall be
eligible to receive Options and Awards hereunder. The Committee, in its
sole discretion, shall determine whether an individual qualifies as a
key employee. Notwithstanding anything to the contrary contained
herein, consultants and advisors shall only be eligible to receive
Options or Awards provided bona fide services shall be rendered by such
persons, and such services are not in connection with a capital raising
transaction.
6. Shares Subject to Plan. The aggregate maximum number of Shares
for which Options or Awards may be granted pursuant to the Plan
(including Shares for which Options or Awards were granted under the
Plan prior to this restatement) is four million thirty-three thousand
five hundred thirty-five (4,033,535), subject to adjustment as provided
in Section 11 of the Plan. The Shares shall be issued from authorized
and unissued Shares or Shares held in or hereafter acquired for the
treasury of the Company. If an Option terminates or expires without
having been fully exercised for any reason, or if Shares granted
pursuant to an Award have been conveyed back to the Company pursuant to
the terms of an Award Agreement, the Shares for which the Option was not
exercised or the Shares that were conveyed back to the Company may again
be the subject of one or more Options or Awards granted pursuant to the
Plan.
7. Term of the Plan. The amended and restated Plan is effective as
of February 26, 1997, the date of its adoption by the Board of Trustees
(the "Approval Date"), subject to the approval of the amended and
restated Plan within twelve months of the Approval Date by a majority of
the votes cast at a duly called meeting of the shareholders at which a
quorum representing a majority of all outstanding voting interests of
the Company is, either in person or by proxy, present and voting, or by
a method and in a degree that would be treated as adequate under
applicable state law in the case of an action requiring shareholder
approval. No Option or Award may be granted under the Plan ten years
after the Approval Date. If the Plan is not approved by shareholder
vote as described above, all Options and Awards granted under the Plan
as amended and restated that could not have been granted under the Plan
as in effect without regard to this Amended and Restated Plan shall be
null and void.
8. Option Documents and Terms. Each Option granted under the Plan
shall be a Non-qualified Stock Option unless the Option shall be
specifically designated at the time of grant to be an ISO for federal
income tax purposes. To the extent any Option designated an ISO is
determined for any reason not to qualify as an incentive stock option
within the meaning of Section 422 of the Code, such Option shall be
treated as a Non-qualified Stock Option for all purposes under the
provisions of the Plan. Options granted pursuant to the Plan shall be
evidenced by the Option Documents in such form as the Committee shall
from time to time approve, which Option Documents shall comply with and
be subject to the following terms and conditions and such other terms
and conditions as the Committee shall from time to time require which
are not inconsistent with the terms of the Plan. However, the
provisions of this Section 8 shall not be applicable to Options granted
to non-employee members of the Board of Trustees, except as otherwise
provided in Subsection 9(c).
(a) Number of Option Shares. Each Option Document shall state
the number of Shares to which it pertains. An Optionee may receive more
than one Option, which may include Options which are intended to be
ISO's and Options which are not intended to be ISO's, but only on the
terms and subject to the conditions and restrictions of the Plan.
Notwithstanding anything to the contrary contained herein, no employee
shall be granted Options to acquire more than two hundred fifty thousand
(250,000) Shares during any calendar year.
(b) Option Price. Each Option Document shall state the Option
Price which, for a Non-qualified Stock Option, may be less than, equal
to, or greater than the Fair Market Value of the Shares on the date the
Option is granted and, for an ISO, shall be at least 100% of the Fair
Market Value of the Shares on the date the Option is granted as
determined by the Committee in accordance with this Subsection 8(b);
provided, however, that if an ISO is granted to an Optionee who then
owns, directly or by attribution under Section 424(d) of the Code,
interests in the Company or any parent or subsidiary corporation
possessing more than ten percent of the total combined voting power of
all classes of interests of the Company or such parent or subsidiary,
then the Option Price shall be at least 110% of the Fair Market Value of
the Shares on the date the Option is granted. If the Shares are traded
in a public market, then the Fair Market Value per Share shall be, if
the Shares are listed on a national securities exchange or included in
the NASDAQ National Market System, the last reported sale price thereof
on the relevant date, or, if the Shares are not so listed or included
(or if there was no reported sale on the relevant date), the mean
between the last reported "bid" and "asked" prices thereof on the
relevant date, as reported on NASDAQ or by the exchange, as applicable,
or, if not so reported, as reported by the National Daily Quotation
Bureau, Inc. or as reported in a customary financial reporting service,
as applicable, or, in the event such method of determination of fair
market value is determined to be inaccurate or such information as is
needed for such determination as set forth above is not available, as
the Committee determines in good faith.
(c) Exercise. No Option shall be deemed to have been exercised
prior to the receipt by the Company of written notice of such exercise
and of payment in full of the Option Price for the Shares to be
purchased. Each such notice shall specify the number of Shares to be
purchased and shall (unless the Shares are covered by a then current
registration statement or qualified Offering Statement under Regulation
A under the Securities Act of 1933, as amended (the "Act")), contain the
Optionee's acknowledgment in form and substance satisfactory to the
Company that (a) such Shares are being purchased for investment and not
for distribution or resale (other than a distribution or resale which,
in the opinion of counsel satisfactory to the Company, may be made
without violating the registration provisions of the Act), (b) the
Optionee has been advised and understands that (i) the Shares have not
been registered under the Act and are "restricted securities" within the
meaning of Rule 144 under the Act and are subject to restrictions on
transfer and (ii) the Company is under no obligation to register the
Shares under the Act or to take any action which would make available to
the Optionee any exemption from such registration, (c) such Shares may
not be transferred without compliance with all applicable federal and
state securities laws, and (d) an appropriate legend referring to the
foregoing restrictions on transfer and any other restrictions imposed
under the Option Documents may be endorsed on the certificates.
Notwithstanding the foregoing, if the Company determines that issuance
of Shares should be delayed pending (A) registration under federal or
state securities laws, (B) the receipt of an opinion of counsel
satisfactory to the Company that an appropriate exemption from such
registration is available, (C) the listing or inclusion of the Shares on
any securities exchange or an automated quotation system or (D) the
consent or approval of any governmental regulatory body whose consent or
approval is deemed necessary in connection with the issuance of such
Shares, the Company may defer exercise of any Option granted hereunder
until any of the events described in this sentence has occurred.
(d)Medium of Payment. An Optionee shall pay for Shares (i) in cash,
(ii) by certified or cashier's check payable to the order of the
Company, or (iii) by such other mode of payment as the Committee may
approve, including payment through a broker in accordance with
procedures permitted by Regulation T of the Federal Reserve Board.
Furthermore, the Committee may provide in an Option Document that
payment may be made in whole or in part in Shares held by the Optionee.
If payment is made in whole or in part in Shares, then the Optionee
shall deliver to the Company certificates registered in the name of such
Optionee representing the Shares owned by such Optionee, free of all
liens, claims and encumbrances of every kind and having an aggregate
Fair Market Value on the date of delivery that is at least as great as
the Option Price of the Shares (or relevant portion thereof) with
respect to which such Option is to be exercised by the payment in
Shares, endorsed in blank or accompanied by stock powers duly endorsed
in blank by the Optionee. In the event that certificates for Shares
delivered to the Company represent a number of Shares in excess of the
number of Shares required to make payment for the Option Price of the
Shares (or relevant portion thereof) with respect to which such Option
is to be exercised by payment in Shares, the certificate or certificates
issued to the Optionee shall represent (i) the Shares in respect of
which payment is made, and (ii) such excess number of Shares.
Notwithstanding the foregoing, the Committee may impose from time to
time such limitations and prohibitions on the use of Shares to exercise
an Option as it deems appropriate.
(e) Termination of Options.
(i) No Option shall be exercisable after the first to occur
of the following:
(A) Expiration of the Option term specified in the Option
Document, which, in the case of an ISO, shall not occur after (1) ten
years from the date of grant, or (2) five years from the date of grant
of an ISO if the Optionee on the date of grant owns, directly or by
attribution under Section 424(d) of the Code, interests in the Company
or any parent or subsidiary corporation possessing more than ten percent
(10%) of the total combined voting power of all classes of interests of
the Company or such parent or subsidiary;
(B) The third month anniversary of the date of
termination of the Optionee's services or employment with the Company or
an Affiliate for any reason other than death, Disability or Retirement.
(C) A finding by the Committee, after full consideration
of the facts presented on behalf of both the Company and the Optionee,
that the Optionee has breached his or her employment or service contract
with the Company or an Affiliate, or has been engaged in disloyalty to
the Company or an Affiliate, including, without limitation, fraud,
embezzlement, theft, commission of a felony or proven dishonesty in the
course of his or her employment or service, or has disclosed trade
secrets or confidential information of the Company or an Affiliate. In
such event, in addition to immediate termination of the Option, the
Optionee shall automatically forfeit all Shares for which the Company
has not yet delivered the Share certificates upon refund by the Company
of the Option Price. Notwithstanding anything herein to the contrary,
the Company may withhold delivery of Share certificates pending the
resolution of any inquiry that could lead to a finding resulting in a
forfeiture;
(D) The date, if any, set by the Board of Trustees as an
accelerated expiration date in the event of the liquidation or
dissolution of the Company; or
(E) The occurrence of such other event or events as may
be set forth in the Option Document as causing an accelerated expiration
of the Option.
(ii) Notwithstanding the foregoing, the Committee may extend
the period during which all or any portion of an Option may be exercised
to a date no later than the Option term specified in the Option Document
pursuant to Subsection 8(e)(i)(A), provided that any change pursuant to
this Subsection 8(e)(ii) which would cause an ISO to become a
Non-qualified Stock Option may be made only with the consent of the
Optionee.
(iii) The terms of an executive severance agreement or other
agreement between the Company and an Optionee, approved by the
Committee, whether entered into prior or subsequent to the grant of an
Option, which provide for Option exercise dates later than those set
forth in Subsection 8(e)(i) but permitted by this Subsection 8(e)(ii)
shall be deemed to be Option terms approved by the Committee and
consented to by the Optionee.
(iv) Unless otherwise expressly permitted in the Option
Document, no Option granted pursuant to this Section 8 shall be
exercisable following the termination of the Optionee's services as a
member of the Board of Trustees or employment with the Company or any
Affiliate with respect to any Shares in excess of those which could have
been acquired by exercise of the Option on the date of such termination
of services or employment.
(f) Transfers. No Option granted under the Plan may be
transferred, except by will or by the laws of descent and distribution.
During the lifetime of the person to whom an Option is granted, such
Option may be exercised only by such person. Notwithstanding the
foregoing, (1) a Non-qualified Stock Option may be transferred pursuant
to the terms of a "qualified domestic relations order," within the
meaning of Sections 401(a)(13) and 414(p) of the Code or within the
meaning of Title I of the Employee Retirement Income Security Act of
1974, as amended, and (2) the Committee may provide, in an Option
Document, that an Optionee may transfer Options to his or her children,
grandchildren or spouse or to one or more trusts for the benefit of such
family members or to partnerships in which such family members are the
only partners (a "Family Transfer"), provided that the Optionee receives
no consideration for such Family Transfer and the Option Documents
relating to Options transferred in such Family Transfer continue to be
subject to the same terms and conditions that were applicable to such
Options immediately prior to the Family Transfer.
(g) Limitation on ISO Grants. In no event shall the aggregate
Fair Market Value of the Shares with respect to which ISOs issued under
the Plan and incentive stock options issued under any other incentive
stock option plans of the Company or its Affiliates which are
exercisable for the first time by the Optionee during any calendar year
exceed $100,000. Any ISOs issued in excess of this limitation shall be
treated as Non-qualified Stock Options issued under the Plan. For
purposes of this subsection 8(g), the Fair Market Value of Shares shall
be determined as of the date of grant of the ISO or other incentive
stock option.
(h) Other Provisions. Subject to the provisions of the Plan, the
Option Documents shall contain such other provisions including, without
limitation, provisions authorizing the Committee to accelerate the
exercisability of all or any portion of an Option granted pursuant to
the Plan, additional restrictions upon the exercise of the Option or
additional limitations upon the term of the Option, as the Committee
shall deem advisable.
(i) Amendment. Subject to the provisions of the Plan, the
Committee shall have the right to amend Option Documents issued to an
Optionee, subject to the Optionee's consent if such amendment is not
favorable to the Optionee, except that the consent of the Optionee shall
not be required for any amendment made pursuant to Subsection 8(e)(i)(C)
or Section 10 of the Plan, as applicable.
(j) No Options shall be granted under the Plan if, taking into
account the grant of such options, five or fewer individuals would own
more than 50% of the outstanding Shares, as computed for purposes of
Code Section 856(h).
9. Special Provisions Relating to Grants of Options to Non-employee
Members of the Board of Trustees. Options granted pursuant to the Plan
to non-employee members of the Board of Trustees shall be granted,
without any further action by the Committee, in accordance with the
terms and conditions set forth in this Section 9. Options granted
pursuant to this Section 9 shall be evidenced by Option Documents in
such form as the Committee shall from time to time approve, which Option
Documents shall comply with and be subject to the following terms and
conditions and such other terms and conditions as the Committee shall
from time to time require which are not inconsistent with the terms of
the Plan and would not cause a Non-employee Trustee to lose his or her
status as a "non-employee director" (as that term is used for purposes
of Rule 16b-3) due to the grant of Options to such person pursuant to
this Section 9.
(a) Timing of Grants; Number of Shares Subject of Options;
Exercisability of Options; Option Price. Each non-employee member of
the Board of Trustees shall be granted annually, commencing on the date
of the initial public offering of Shares, and on each anniversary of
such date thereafter, an Option to purchase five thousand (5,000) Shares
provided such person is a member of the Board of Trustees on such grant
date. Each such Option shall be a Non-qualified Stock Option
exercisable with respect to twenty percent (20%) of the Shares subject
to such Option after the first anniversary of the date of grant,
exercisable with respect to fifty percent (50%) of the Shares after the
second anniversary of the date of grant, and fully exercisable after the
third anniversary of the date of grant. The Option Price shall be equal
to the Fair Market Value of the Shares on the date the Option is
granted.
(b) Termination of Options Granted Pursuant to Section 9. No
Option granted pursuant to this Section 9 shall be exercisable after the
first to occur of the following:
(i) The tenth anniversary of the date of grant.
(ii) The third month anniversary of the date of termination
of the Optionee's services as a member of the Board of Trustees for any
reason other than death, Disability or Retirement.
Notwithstanding anything to the contrary contained herein, no
Option granted pursuant to this Section 9 shall be exercisable following
the termination of the Optionee's services as a member of the Board of
Trustees with respect to any Shares in excess of those which could have
been acquired by exercise of the Option on the date of such termination
of services.
(c) Applicability of Section 8 to Options Granted Pursuant to
Section 9. The following provisions of Section 8 shall be applicable to
Options granted pursuant to this Section 9: Subsection 8(a) (provided
that all Options granted pursuant to this Section 9 shall be
Non-qualified Stock Options); the last sentence of Subsection 8(b);
Subsection 8(c); Subsection 8(d) (provided that Option Documents
relating to Options granted pursuant to this Section 9 shall provide
that payment may be made in whole or in part in Shares); and Subsection
8(f) (provided that Option Documents relating to Options granted
pursuant to this Section 9 shall not permit Family Transfers).
10. Change of Control. In the event of a Change of Control, the
Committee may take whatever action it deems necessary or desirable with
respect to the Options and Awards outstanding (other than Options
granted pursuant to Subsection 8(j) and Section 9), including, without
limitation, accelerating the expiration or termination date in the
respective Option Documents to a date no earlier than thirty (30) days
after notice of such acceleration is given to the Optionees. In
addition to the foregoing, in the event of a Change of Control, Options
granted pursuant to the Plan and held by Optionees who are employees of
the Company or an Affiliate or members of the Board of Trustees at the
time of a Change of Control shall become immediately exercisable in full
and the restrictions applicable to Restricted Shares awarded to Awardees
who are employees of the Company or an Affiliate or members of the Board
of Trustees at the time of a Change of Control shall immediately lapse.
Any amendment to this Section 10 which diminishes the rights of
Optionees, shall not be effective with respect to Options outstanding at
the time of adoption of such amendment, whether or not such outstanding
Options are then exercisable.
A "Change of Control" shall be deemed to have occurred upon the
earliest to occur of the following events: (i) the date the
shareholders of the Company (or the Board of Trustees, if shareholder
action is not required) approve a plan or other arrangement pursuant to
which the Company will be dissolved or liquidated, or (ii) the date the
shareholders of the Company (or the Board of Trustees, if shareholder
action is not required) approve a definitive agreement to sell or
otherwise dispose of substantially all of the assets of the Company, or
(iii) the date the shareholders of the Company (or the Board of
Trustees, if shareholder action is not required) and the shareholders of
the other constituent corporation or entity (or its board of directors
or trustees if shareholder action is not required) have approved a
definitive agreement to merge or consolidate the Company with or into
such other corporation or other entity, other than, in either case, a
merger or consolidation of the Company in which holders of Shares
immediately prior to the merger or consolidation will have at least a
majority of the ownership of interests of the surviving corporation or
entity (and, if one class of common stock or other equity interest is
not the only class of voting securities entitled to vote on the election
of directors or trustees of the surviving entity, a majority of the
voting power of the surviving entity's voting securities) immediately
after the merger or consolidation, which equity interest (and, if
applicable, voting securities) is to be held in the same proportion as
such holders' ownership of Shares immediately before the merger or
consolidation, or (iv) the first day, after the date this Plan is
effective on which there has occurred a change in the majority of the
positions on the Board of Trustees or if any person (or any group of
associated persons acting in concert) acquires, directly or indirectly,
more than a percentage of the voting stock of the Trust in excess of
that held by the "Senior Executives" (as defined in the Registration
Statement) in the aggregate as of the date of the closing of the initial
public offering of the Common Shares, in either case without the advance
written consent of the current Board of Trustees.
11. Adjustments on Changes in Capitalization.
(a) Corporate Transactions. In the event that the outstanding
Shares are changed by reason of a reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, combination or
exchange of shares and the like (not including the issuance of Shares on
the conversion of other securities of the Company which are outstanding
on the date of grant and which are convertible into Shares) or dividends
payable in Shares, an equitable adjustment shall be made by the
Committee in the aggregate number of Shares available under the Plan and
in the number of Shares and price per Share subject to outstanding
Options. Unless the Committee makes other provisions for the equitable
settlement of outstanding options, if the Company shall be reorganized,
consolidated, or merged with another corporation, or if all or
substantially all of the assets of the Company shall be sold or
exchanged, an Optionee shall at the time of issuance of the Shares under
such corporate event be entitled to receive upon the exercise of his or
her Option the same number and kind of shares or the same amount of
property, cash or securities as he or she would have been entitled to
receive upon the occurrence of any such corporate event as if he or she
had been, immediately prior to such event, the holder of the number of
shares covered by his or her Option.
(b) Proportionate Application. Any adjustment under this Section
11 in the number of Shares subject to Options shall apply
proportionately to only the unexercised portion of any Option granted
hereunder. If fractions of a Share would result from any such
adjustment, the adjustment shall be revised to the next lower whole
number of Shares.
(c) Committee Authority. The Committee shall have authority to
determine the adjustments to be made under this Section, and any such
determination by the Committee shall be final, binding and conclusive.
12. Terms and Conditions of Awards. Awards granted pursuant to the
Plan shall be evidenced by written Award Agreements in such form as the
Committee shall from time to time approve, which Award Agreements shall
comply with and be subject to the following terms and conditions and
such other terms and conditions which the Committee shall from time to
time require which are not inconsistent with the terms of the Plan. The
Committee may, in its sole discretion, shorten or waive any term or
condition with respect to all or any portion of any Award.
Notwithstanding the foregoing, all restrictions shall lapse or terminate
with respect to Restricted Shares upon the death or Disability of the
Awardee.
(a) Number of Shares. Each Award Agreement shall state the
number of Shares to which it pertains.
(b) Purchase Price. Each Award Agreement shall specify the
purchase price, if any, which applies to the Award. If the Board of
Trustees specifies a purchase price, the Awardee shall be required to
make payment on or before the date specified in the Award Agreement. An
Awardee shall pay for such Shares (i) in cash, (ii) by certified check
payable to the order of the Company, or (iii) by such other mode of
payment as the Committee may approve.
(c) Restrictions on Transfer and Forfeitures. A share
certificate representing the Restricted Shares granted to an Awardee
shall be registered in the Awardee's name but shall be held in escrow by
the Company or an appropriate officer of the Company, together with an
undated share transfer power executed by the Awardee with respect to
each share certificate representing Restricted Shares in such Awardee's
name. The Awardee shall generally have the rights and privileges of a
shareholder as to such Restricted Shares including the right to vote
such Restricted Shares and to receive and retain all cash dividends with
respect to such Shares, except that the following restrictions shall
apply: (i) the Awardee shall not be entitled to delivery of the
certificate until the expiration or termination of any period designated
by the Committee ("Restricted Period") and the satisfaction of any other
conditions prescribed by the Committee; and (ii) all distributions with
respect to the Restricted Shares other than cash dividends, such as
share dividends, share splits or distributions of property, and any
distributions (other than cash dividends) subsequently made with respect
to other distributions, shall be delivered to the Company or an
appropriate officer of the Company, together with appropriate share
transfer powers or other instruments of transfer signed and delivered to
the Company or appropriate officer of the Company by the Awardee, to be
held by the Company or appropriate officer of the Company and released
to either the Awardee or the Company, as the case may be, together with
the Shares to which they relate; (iii) the Awardee will have no right to
sell, exchange, transfer, pledge, hypothecate or otherwise dispose of
any of the Restricted Shares or distributions (other than cash
dividends) with respect thereto; and (iv) all of the Restricted Shares
shall be forfeited and all rights of the Awardee with respect to such
Restricted Shares shall terminate without further obligation on the part
of the Company unless the Awardee has remained a regular full-time
employee of the Company or an Affiliate, any of its subsidiaries or any
parent or any combination thereof until the expiration or termination of
the Restricted Period and the satisfaction of any other conditions
prescribed by the Committee applicable to such Restricted Share. Upon
the forfeiture of any Restricted Share, such forfeited shares shall be
transferred to the Company without further action by the Awardee.
(d) Lapse of Restrictions. Upon the expiration or termination of
the Restricted Period and the satisfaction of any other conditions
prescribed by the Committee as provided for in the Plan, the
restrictions applicable to the Restricted Share shall lapse and a stock
certificate for the number of shares of Common Stock with respect to
which the restrictions have lapsed shall be delivered, free of all such
restrictions, except any that may be imposed by law, to the Awardee or
the beneficiary or estate, as the case may be. The Company shall not be
required to deliver any fractional share of Common Stock but will pay,
in lieu thereof, the fair market value (determined as of the date the
restrictions lapse) of such fractional share to the Awardee or the
Awardee's beneficiary or estate, as the case may be. The Award may
provide for the lapse of restrictions on transfer and forfeiture
conditions in installments. Notwithstanding the foregoing, unless the
Shares are covered by a then current registration statement or a
Notification under Regulation A under the Act, the Company may require
as a condition to the transfer of Share certificates to an Awardee under
this Subsection 12(d) that the Awardee provide the Company with an
acknowledgment in form and substance satisfactory to the Company that
(a) such Shares are being purchased for investment and not for
distribution or resale (other than a distribution or resale which, in
the opinion of counsel satisfactory to the Company, may be made without
violating the registration provisions of the Act), (b) the Optionee has
been advised and understands that (i) the Shares have not been
registered under the Act and are "restricted securities" within the
meaning of Rule 144 under the Act and are subject to restrictions on
transfer and (ii) the Company is under no obligation to register the
Shares under the Act or to take any action which would make available to
the Optionee any exemption from such registration, (c) such Shares may
not be transferred without compliance with all applicable federal and
state securities laws, and (d) an appropriate legend referring to the
foregoing restrictions on transfer may be endorsed on the certificates.
Notwithstanding the foregoing, if the Company determines that the
transfer of Share certificates should be delayed pending (A)
registration under federal or state securities laws, (B) the receipt of
an opinion of counsel satisfactory to the Company that an appropriate
exemption from such registration is available, (C) the listing or
inclusion of the Shares on any securities exchange or an automated
quotation system or (D) the consent or approval of any governmental
regulatory body whose consent or approval is necessary in connection
with the issuance of such Shares, the Company may defer transfer of
Share certificates hereunder until any of the events described in this
sentence has occurred.
(e) Section 83(b) Election. An Awardee who files an election
with the Internal Revenue Service to include the fair market value of
any Restricted Share in gross income while they are still subject to
restrictions shall promptly furnish the Company with a copy of such
election together with the amount of any federal, state, local or other
taxes required to be withheld to enable the Company to claim an income
tax deduction with respect to such election.
(f) Rights as Shareholder. Upon payment of the purchase price,
if any, for Shares covered by an Award and compliance with the
acknowledgment requirement of subsection 12(d), the Grantee shall have
all of the rights of a shareholder with respect to the Shares covered
thereby, including the right to vote the Shares and receive all
dividends and other distributions paid or made with respect thereto,
except to the extent otherwise provided by the Committee or in the Award
Agreement.
(g) Amendment. Subject to the provisions of the Plan, the
Committee shall have the right to amend Awards issued to an Awardee,
subject to the Awardee's consent if such amendment is not favorable to
the Awardee, except that the consent of the Awardee shall not be
required for any amendment made pursuant to Section 10 of the Plan.
13. Amendment of the Plan. The Board of Trustees of the Company may
amend the Plan from time to time in such manner as it may deem
advisable. Nevertheless, the Board of Trustees of the Company may not
change the class of individuals eligible to receive an ISO or increase
the maximum number of Shares as to which Options or Awards may be
granted without obtaining approval, within twelve months before or after
such action, by vote of a majority of the votes cast at a duly called
meeting of the shareholders at which a quorum representing a majority of
all outstanding voting interests of the Company is, either in person or
by proxy, present and voting on the matter, or by a method and in a
degree that would be treated as adequate under applicable state law in
the case of an action requiring shareholder approval. No amendment to
the Plan shall adversely affect any outstanding Option or Award,
however, without the consent of the Grantee.
14. No Commitment to Retain. The grant of an Option or an Award
pursuant to the Plan shall not be construed to imply or to constitute
evidence of any agreement, express or implied, on the part of the
Company or any Affiliate to retain the Grantee in the employ of the
Company or an Affiliate and/or as a member of the Company's Board of
Trustees or in any other capacity.
15. Withholding of Taxes. Whenever the Company proposes or is
required to deliver or transfer Shares in connection with an Award or
the exercise of an Option, the Company shall have the right to (a)
require the recipient to remit or otherwise make available to the
Company an amount sufficient to satisfy any federal, state and/or local
withholding tax requirements prior to the delivery or transfer of any
certificate or certificates for such Shares or (b) take whatever other
action it deems necessary to protect its interests with respect to its
tax liabilities. The Company's obligation to make any delivery or
transfer of Shares shall be conditioned on the Grantee's compliance, to
the Company's satisfaction, with any withholding requirement.
16. Interpretation. The Plan is intended to enable transactions under
the Plan with respect to Trustees and officers (within the meaning of
Section 16(a) under the Securities Exchange Act of 1934, as amended) to
satisfy the conditions of Rule 16b-3; to the extent that any provision
of the Plan would cause a conflict with such conditions or would cause
the administration of the Plan as provided in Section 3 to fail to
satisfy the conditions of Rule 16b-3, such provision shall be deemed
null and void to the extent permitted by applicable law. This section
shall not be applicable if no class of the Company's equity securities
is then registered pursuant to Section 12 of the Securities Exchange Act
of 1934, as amended.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-3 No. 33-94782) and related Prospectus of Liberty
Property Trust and Liberty Property Limited Partnership, to the
incorporation by reference in the Registration Statement (Form S-3 No.
333-14139) and related Prospectus of Liberty Property Trust, to the
incorporation by reference in the Registration Statement (Form S-3 No.
333-22211) and related Prospectus of Liberty Property Trust and Liberty
Property Limited Partnership, and to the incorporation by reference in
the Registration Statement (Form S-8 No. 33-94036) and related
Prospectus of Liberty Property Trust, of our report dated June 5, 1997,
with respect to the Statement of Operating Revenues and Certain
Operating Expenses for the Detroit Properties included in the Current
Reports on Form 8-K of Liberty Property Trust and Liberty Property
Limited Partnership dated May 21, 1997 filed with the Securities and
Exchange Commission.
/s/ FEGLEY & ASSOCIATES
Plymouth Meeting, Pennsylvania FEGLEY & ASSOCIATES
June 23, 1997
