HRE PROPERTIES
321 RAILROAD AVENUE
GREENWICH, CONNECTICUT 06830
January 28, 1997
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of HRE
Properties (the "Trust") which will be held at the Doral Arrowwood Conference
Center, Anderson Hill Road, Rye Brook, New York, on Wednesday, March 12, 1997,
at 11:00 a.m.
At the Annual Meeting, shareholders will be asked to approve: (i) a proposed
Plan of Reorganization which provides for the reorganization of the Trust from a
Massachusetts business trust into a Maryland corporation (the "Corporation");
(ii) the election of three Trustees to serve for the ensuing three years as
Trustees of the Trust or, if the Plan of Reorganization is approved and
consummated, as Directors of the Corporation; (iii) a Restricted Stock Award
Plan providing for the grant of restricted stock awards to key management
personnel of the Trust or, if the Plan of Reorganization is approved and
consummated, key management personnel of the Corporation, on the terms and
conditions set forth therein; (iv) the ratification of the appointment of Arthur
Andersen LLP as the independent auditors of the Trust or, if the Plan of
Reorganization is approved and consummated, the Corporation, for the ensuing
fiscal year; and (v) such other matters as may properly come before the meeting
or any adjournments or postponements thereof. Details of the proposals are set
forth in the attached Proxy Statement/Prospectus.
The proposed Plan of Reorganization will be accomplished by means of the
merger (the "Merger") of the Trust with and into the Corporation. Pursuant to
the Merger, the Corporation will be the surviving entity in the Merger, the
separate existence of the Trust will terminate and each issued and outstanding
common share of the Trust (the "Trust Common Shares") will be converted into one
share of common stock of the Corporation (the "Corporation Common Stock"). This
Merger will modernize the Trust's governance procedures and provide the Trust
with a greater degree of certainty and flexibility in planning and implementing
corporate action by adopting the form of organization used by many established
real estate investment trusts. The Plan of Reorganization is conditioned upon,
among other things, the listing of the Corporation Common Stock on the New York
Stock Exchange, Inc. (the "NYSE") and it is expected that, upon approval of the
Plan of Reorganization and the consummation of the Merger, the Corporation
Common Stock will trade on the NYSE in the same manner as the Trust Common
Shares currently trade on the NYSE. The proposed Plan of Reorganization has been
approved by the Board of Trustees as being in the best interests of the Trust
and its shareholders and the Board recommends a vote "FOR" approval of the
proposal at the Annual Meeting.
The Restricted Stock Award Plan provides for the grant of awards of up to an
aggregate of 250,000 Trust Common Shares to key management personnel of the
Trust on the terms and conditions set forth therein. The Restricted Stock Award
Plan is designed to promote the long-term growth of the Trust by attracting,
retaining and motivating key management personnel and to identify further the
interests of the participants in the plan with those of the shareholders of the
Trust. If the Restricted Stock Award Plan is approved and the Plan of
Reorganization is approved and the Merger is consummated, the Trust and the
Corporation will take such action as may be necessary to provide that all rights
under the Restricted Stock Award Plan to receive grants of Trust Common Shares
will become substantially identical rights to receive grants of Corporation
Common Stock on substantially identical terms and conditions as set forth in the
Trust's Restricted Stock Award Plan. The Board of Trustees recommends a vote
"FOR" approval of the proposal at the Annual Meeting.
The Plan of Reorganization requires the affirmative vote of a majority of the
Trust Common Shares outstanding as of the close of business on January 27, 1997,
the record date for the Annual Meeting. The election of Trustees, the Restricted
Stock Award Plan and the ratification of auditors each requires the affirmative
vote of the holders of a majority of the Trust Common Shares present, in person
or by properly executed proxy, at the Annual Meeting. Each proposal is being
presented to the Trust's shareholders as a separate and independent proposal and
no proposal is conditioned upon the adoption or approval of any other proposal.
The Corporation has filed a registration statement with the Securities and
Exchange Commission covering the 5,346,081 shares of Corporation Common Stock
into which the Trust Common Shares will be converted upon consummation of the
Merger. The accompanying Proxy Statement/Prospectus also constitutes the
prospectus of the Corporation filed as part of the registration statement.
Whether or not you are personally able to attend the Annual Meeting, please
complete, sign, date and return the enclosed proxy card as soon as possible.
This action will not limit your right to vote in person if you wish to attend
the Annual Meeting and vote personally.
Very truly yours,
[sig cut]
Charles J. Urstadt
Chairman and Chief Executive Officer
- --------------------------------------------------------------------------------
IMPORTANT
If your Trust Common Shares are registered in the name of a broker or bank,
only your broker or bank can submit the proxy card on your behalf and only after
receiving your specific instructions. Please contact the person responsible for
your account and direct him or her to submit the enclosed proxy card on your
behalf. If you have any questions about how to vote your shares, please call our
proxy solicitor:
D.F. King & Company
77 Water Street
New York, New York 10005
(800) 549-6650
- --------------------------------------------------------------------------------
HRE PROPERTIES
321 RAILROAD AVENUE
GREENWICH, CONNECTICUT 06830
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual Meeting of Shareholders of HRE
Properties (the "Trust") will be held at the Doral Arrowwood Conference Center,
Anderson Hill Road, Rye Brook, New York, on Wednesday, March 12, 1997, at 11:00
a.m. for the following purposes:
1. To consider and vote upon a proposal to approve a Plan of Reorganization,
which provides for the reorganization of the Trust from a Massachusetts business
trust into a Maryland corporation by means of the merger (the "Merger") of the
Trust with and into HRE Properties, Inc., a newly organized Maryland corporation
which is wholly-owned by the Trust (the "Corporation"), pursuant to which the
Corporation will be the surviving entity in the Merger, the separate existence
of the Trust will terminate and each issued and outstanding common share of the
Trust will be converted into one share of common stock of the Corporation;
2. To elect three Trustees to serve for the ensuing three years as Trustees
of the Trust or, if the Plan of Reorganization is approved and the Merger is
consummated, as Directors of the Corporation;
3. To approve a Restricted Stock Award Plan providing for the grant of
restricted stock awards to key management personnel of the Trust or, if the Plan
of Reorganization is approved and the Merger is consummated, key management
personnel of the Corporation;
4. To ratify the appointment of Arthur Andersen LLP as the independent
auditors of the Trust or, if the Plan of Reorganization is approved and the
Merger is consummated, the Corporation, for the ensuing fiscal year; and
5. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
Shareholders of record as of the close of business on January 27, 1997, are
entitled to notice of and to vote at the Annual Meeting or any adjournments or
postponements thereof.
By Order of the Trustees
JAMES R. MOORE
Secretary
January 28, 1997
HRE PROPERTIES
PROXY STATEMENT
HRE PROPERTIES, INC.
PROSPECTUS
This Proxy Statement/Prospectus is being furnished to the shareholders of HRE
Properties, a Massachusetts business trust (the "Trust"), in connection with the
solicitation of proxies by the Board of Trustees of the Trust (the "Board of
Trustees") for use at the Annual Meeting of Shareholders to be held at the Doral
Arrowwood Conference Center, Anderson Hill Road, Rye Brook, New York, on
Wednesday, March 12, 1997, at 11:00 a.m. (the "Annual Meeting"), and all
adjournments and postponements thereof. The Annual Meeting is being held for the
purpose of voting upon (i) a proposal to approve and adopt a Plan of
Reorganization dated as of December 30, 1996 (the "Plan of Reorganization")
between the Trust and HRE Properties, Inc., a newly-formed Maryland corporation
which is wholly owned by the Trust (the "Corporation"), a copy of which Plan of
Reorganization is attached as Exhibit A to this Proxy Statement/Prospectus
("Proposal 1"), (ii) the election of three Trustees to serve for the ensuing
three years as Trustees of the Trust or, if the Plan of Reorganization is
approved and consummated, as Directors of the Corporation ("Proposal 2"), (iii)
the approval of a Restricted Stock Award Plan providing for the grant of
restricted stock awards to key management personnel of the Trust or, if the Plan
of Reorganization is approved and consummated, key management personnel of the
Corporation (the "Restricted Stock Plan"), a copy of which is attached as
Exhibit B to this Proxy Statement/Prospectus ("Proposal 3"), and (iv) the
ratification of the appointment of Arthur Andersen LLP as the independent
financial auditors of the Trust or, if the Plan of Reorganization is approved
and consummated, the Corporation, for the ensuing fiscal year ("Proposal 4").
The Plan of Reorganization provides for the reorganization of the Trust from
a Massachusetts business trust into a Maryland corporation by means of the
merger (the "Merger") of the Trust with and into the Corporation, pursuant to
which the Corporation shall be the surviving entity in the Merger, the separate
existence of the Trust shall terminate and each issued and outstanding share of
beneficial interest of the Trust (the "Trust Common Shares") shall be converted
into one share of common stock, par value $.01 per share, of the Corporation
(the "Corporation Common Stock"). The Plan of Reorganization is conditioned
upon, among other things, the listing of the Corporation Common Stock on the New
York Stock Exchange, Inc. (the "NYSE") and it is expected that, upon approval of
the Plan of Reorganization and the consummation of the Merger, the Corporation
Common Stock will trade on the NYSE in the same manner as the Trust Common
Shares currently trade on the NYSE. See "THE PLAN OF REORGANIZATION". This Proxy
Statement/Prospectus also constitutes the Prospectus of the Corporation filed as
part of a Registration Statement on Form S-4 (the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), with the
Securities and Exchange Commission (the "SEC"). The Registration Statement and
the Prospectus relate to 5,346,081 shares of the Corporation Common Stock into
which the Trust Common Shares may be converted pursuant to the Plan of
Reorganization.
The Restricted Stock Plan provides for the grant of awards up to an aggregate
of 250,000 Trust Common Shares to key management personnel of the Trust on the
terms and conditions set forth therein. The Restricted Stock Plan is designed to
promote the long-term growth of the Trust by attracting, retaining and
motivating key management personnel and to identify further the interests of the
participants in the Restricted Stock Plan with those of the shareholders of the
Trust. If the Restricted Stock Plan is approved and the Plan of Reorganization
is approved and the Merger is consummated, the Trust and the Corporation will
take such action as may be necessary to provide that all rights under the
Restricted Stock Plan to receive grants of Trust Common Shares will become
substantially identical rights to receive grants of Corporation Common Stock on
substantially indentical terms and conditions as set forth in the Trust's
Restricted Stock Plan. See "THE RESTRICTED STOCK PLAN."
THE BOARD OF TRUSTEES HAS APPROVED THE PLAN OF REORGANIZATION AND THE
RESTRICTED STOCK PLAN, SUBJECT TO SHAREHOLDER APPROVAL, AND BELIEVES THAT THE
PLAN OF REORGANIZATION AND THE RESTRICTED STOCK PLAN ARE IN THE BEST INTERESTS
OF THE TRUST AND ITS SHAREHOLDERS. THE BOARD RECOMMENDS THAT YOU VOTE IN FAVOR
OF THE PLAN OF REORGANIZATION, THE RESTRICTED STOCK PLAN, THE ELECTION OF THE
TRUST'S THREE NOMINEES AS TRUSTEES AND THE RATIFICATION OF THE APPOINTMENT OF
THE TRUST'S AUDITORS.
-------------------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS JANAUARY 28, 1997.
-------------------------
Only holders of record of Trust Common Shares as of the close of business on
January 27, 1997 (the "Record Date") shall be entitled to notice of and to vote
at the Annual Meeting and any adjournments and postponements thereof. Trust
Common Shares represented by proxies in the form enclosed, if such proxies are
properly executed and returned and not revoked, will be voted as specified, but
where no specification is made, such shares will be voted for (i) the approval
of the proposed Plan of Reorganization, (ii) the election of the three Trustees,
(iii) the approval of the Restricted Stock Plan and (iv) the ratification of the
appointment of Arthur Andersen LLP as the Trust's independent auditors for the
ensuing fiscal year, and, in the named proxies' discretion, as to any other
matter which may properly come before the Annual Meeting. To be voted, proxies
must be filed with the Secretary of the Trust prior to voting. Proxies may be
revoked at any time before exercise by filing a notice of such revocation, by
filing a later dated proxy with the Secretary of the Trust or by voting in
person at the Annual Meeting.
The Annual Report to shareholders for the Trust's fiscal year ended October
31, 1996 has been mailed with this Proxy Statement/Prospectus. This Proxy
Statement/Prospectus and the enclosed Proxy were mailed to shareholders on or
about January 30, 1997. The principal executive offices of the Trust and the
Corporation are located at 321 Railroad Avenue, Greenwich, Connecticut 06830
(telephone (203-863-8200)).
------------------------------------
THE SECURITIES OF HRE PROPERTIES, INC. DESCRIBED HEREIN HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------------------------
2
AVAILABLE INFORMATION
The Trust is subject to the informational and reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the SEC. Such reports, proxy statements and other information may be inspected
and copied at the public reference facilities maintained by the SEC at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at the SEC's Regional
Offices at 7 World Trade Center, 13th Floor, New York, New York 10048, and
Northwestern Atrium Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois
60661, and copies may be obtained at the prescribed rates from the Public
Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The address of the SEC's web site is:
http://www.sec.gov. In addition, materials filed by the Trust can be inspected
at the offices of the NYSE, 20 Broad Street, New York, New York 10005.
The Corporation has filed the Registration Statement under the Securities Act
with the SEC with respect to the shares of Corporation Common Stock to be issued
upon consummation of the Plan of Reorganization described herein. This Proxy
Statement/Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the SEC. Reference is made to the Registration
Statement and to the exhibits listed therein, which can be inspected at the
public reference facilities of the SEC and the NYSE noted above, and copies of
which can be obtained from the SEC at the prescribed rates as indicated above.
Statements contained in this Proxy Statement/Prospectus as to the contents of
any contract or other document referred to are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference.
No person is authorized to give any information or make any representation
not contained in this Proxy Statement/Prospectus, and, if given or made, such
information or representation should not be relied upon as having been
authorized. This Proxy Statement/Prospectus does not constitute a solicitation
of a proxy or an offer to sell or a solicitation of an offer to buy the
securities offered by this Proxy Statement/Prospectus in any jurisdiction where,
or to or from any person to whom, it is unlawful to make such proxy solicitation
or offer or solicitation of an offer. Neither the delivery of this Proxy
Statement/Prospectus nor any distribution of the securities offered pursuant to
this Proxy Statement/Prospectus shall create an implication that there has been
no change in the affairs of the Trust or the Corporation since the date of this
Proxy Statement/Prospectus or that the information in this Proxy
Statement/Prospectus or in the documents incorporated herein by reference is
correct as of any time subsequent to the dates hereof or thereof.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Trust with the SEC are hereby
incorporated by reference into this Proxy Statement/Prospectus: Annual Report on
Form 10-K for the fiscal year ended October 31, 1996. The Trust's annual report
to shareholders for the fiscal year ended October 31, 1996, pursuant to Rule
14a-3 promulgated under the Exchange Act, is being mailed to shareholders of the
Trust concurrently with this Proxy Statement/Prospectus. The annual report to
shareholders, however, is not a part of this Proxy Statement/Prospectus.
In addition, all reports and other documents filed by the Trust pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
hereof and prior to the Annual Meeting shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of such reports
and documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated herein by reference shall be deemed to be modified or
superseded for purposes of this Proxy Statement/Prospectus to the extent that a
statement contained herein or in any subsequently filed document that is
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy Statement/Prospectus.
3
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN EXHIBITS
THERETO, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE HEREIN)
ARE AVAILABLE UPON WRITTEN OR ORAL REQUEST DIRECTED TO THE SECRETARY, HRE
PROPERTIES, 321 RAILROAD AVENUE, GREENWICH, CONNECTICUT 06830 (TELEPHONE NUMBER
203-863-8200). IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, SUCH
REQUESTS SHOULD BE RECEIVED NO LATER THAN MARCH 5, 1997.
4
TABLE OF CONTENTS
Page
SUMMARY......................................................................... 7
The Trust and the Corporation.................................................. 7
Date, Time and Place of Annual Meeting......................................... 7
Purpose of the Annual Meeting.................................................. 7
Record Date; Quorum............................................................ 7
Vote Required.................................................................. 8
The Plan of Reorganization..................................................... 8
Principal Reasons for the Plan of Reorganization.............................. 8
Terms of the Plan of Reorganization........................................... 8
Certain Changes in the Rights of Shareholders Resulting from the Plan of
Reorganization............................................................... 9
Limitation of Liability and Indemnification of Trustees and Directors......... 11
Interests of Certain Persons.................................................. 12
Certain Tax Consequences of the Plan of Reorganization........................ 13
Election of Trustees........................................................... 13
Restricted Stock Plan.......................................................... 14
Ratification of Appointment of Arthur Andersen LLP as Independent Auditors..... 14
Vote Required for Proposals; Independent Proposals; Dissenters' Rights......... 14
Recommendation of the Board of Trustees........................................ 14
PROPOSAL 1. THE PLAN OF REORGANIZATION.......................................... 15
Principal Reasons for the Plan of Reorganization............................... 15
Certainty/Flexibility......................................................... 15
Investor Perception........................................................... 15
Limitation of Liability....................................................... 15
Protections Afforded by Maryland Law Against Hostile/Unsolicited Takeovers.... 15
Other Considerations.......................................................... 16
Terms of the Plan of Reorganization............................................ 16
Certain Changes in the Rights of Shareholders Resulting from the Plan of
Reorganization................................................................ 18
General/Authorized Shares..................................................... 18
Dividends..................................................................... 18
Ownership Limitation; Excess Stock............................................ 20
Meetings of Stockholders...................................................... 22
Advance Notice of Stockholder Proposals and Director Nominations.............. 22
Action by Consent of Stockholders............................................. 22
Board of Trustees of the Trust Compared to Board of Directors of the
Corporation.................................................................. 23
Amendment of Constitutional Documents of the Trust and the Corporation........ 23
Consolidation, Merger or Sale of Assets....................................... 24
Dissolution/Termination....................................................... 24
Limitations on Dissenters' Appraisal Rights................................... 24
Limitation of Liability and Indemnification of Trustees and Directors......... 25
Inspection Rights............................................................. 25
Certain Provisions of Massachusetts and Maryland Law........................... 26
Business Combination.......................................................... 26
Control Share Acquisition..................................................... 27
Certain Tax Consequences of the Plan of Reorganization......................... 27
General....................................................................... 27
Federal Income Taxes.......................................................... 28
State Taxes................................................................... 28
Vote Required; No Dissenters' Rights........................................... 28
Interest of Certain Persons.................................................... 29
PROPOSAL 2. ELECTION OF TRUSTEES............................................... 30
PROPOSAL 3. THE RESTRICTED STOCK PLAN.......................................... 40
5
PROPOSAL 4. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS OF THE TRUST... 41
SOLICITATION OF PROXIES AND VOTING PROCEDURES.................................. 41
LEGAL MATTERS.................................................................. 42
OTHER MATTERS.................................................................. 42
Exhibit A...................................................................... A-1
Exhibit B...................................................................... B-1
Exhibit C...................................................................... C-1
Exhibit D...................................................................... D-1
6
SUMMARY
The following is a summary of certain information contained elsewhere in this
Proxy Statement/Prospectus relating to the proposed Plan of Reorganization, the
election of Trustees, the Restricted Stock Plan and the ratification of the
appointment of the Trust's auditors. This summary does not purport to contain
all of the material information relating to such proposals and is qualified in
its entirety by reference to the full text of the Proxy Statement/Prospectus and
the Exhibits hereto. Shareholders are urged to read the Proxy
Statement/Prospectus and the Exhibits in their entirety.
THE TRUST AND THE CORPORATION
The Trust was organized on July 7, 1969 as an unincorporated business trust
under the laws of the Commonwealth of Massachusetts pursuant to a Declaration of
Trust dated July 7, 1969, as amended (the "Declaration of Trust"). The Trust's
principal business is the ownership of real estate investments which consist
principally of equity investments in income-producing properties, with primary
emphasis on properties in the eastern part of the United States. The Trust owns
and manages a portfolio of retail properties, office buildings, and industrial
properties. As at January 28, 1997, the Trust owned or had an equity interest in
18 properties comprised of shopping centers, single tenant retail stores, office
buildings and service and distribution facilities located in twelve states
throughout the United States, containing a total of approximately 2,769,000
square feet of gross leasable space.
The Corporation was organized on December 30, 1996 by the Trust to acquire
and succeed to, and to continue the business of, the Trust upon the consummation
of the Merger of the Trust with and into the Corporation pursuant to the Plan of
Reorganization. The Corporation has had no activities to date other than those
incident to the Plan of Reorganization.
The Trust has qualified and has elected to be taxed as a real estate
investment trust (a "REIT") under Sections 856-860 of the Internal Revenue Code
of 1986, as amended (the "Code"). The consummation of the Merger should not
adversely affect the ability of the Corporation to continue to qualify as a REIT
under Sections 856-860 of the Code. See "THE PLAN OF REORGANIZATION Certain Tax
Consequences of the Plan of Reorganization."
The principal executive offices of both the Trust and the Corporation are
located at 321 Railroad Avenue, Greenwich, Connecticut 06830, and their
telephone number is (203) 863-8200.
DATE, TIME AND PLACE OF ANNUAL MEETING
The Annual Meeting of Shareholders of the Trust will be held on Wednesday,
March 12, 1997, at 11:00 a.m. at the Doral Arrowwood Conference Center, Anderson
Hill Road, Rye Brook, New York.
PURPOSE OF THE ANNUAL MEETING
The Annual Meeting has been called to seek approval of the shareholders of
the Trust of (i) the Plan of Reorganization (Proposal 1), (ii) the election of
three Trustees to serve for the ensuing three-year term as Trustees of the Trust
or, if the Plan of Reorganization is approved and the Merger is consummated, as
Directors of the Corporation (Proposal 2), (iii) the Restricted Stock Plan
(Proposal 3), and (iv) the ratification of the appointment of Arthur Andersen
LLP as the independent auditors of the Trust or, if the Plan of Reorganization
is approved and the Merger is consummated, the Corporation, for the ensuing
fiscal year (Proposal 4).
RECORD DATE; QUORUM
Only holders of record of Trust Common Shares as of the close of business on
the Record Date will be entitled to notice of and to vote at the Annual Meeting
and any adjournments or postponements thereof. Shareholders of record on the
Record Date are entitled to one vote per
7
Trust Common Share on each matter that may properly come before the Annual
Meeting. As of the Record Date, there were 5,346,081 Trust Common Shares
outstanding and entitled to vote. The presence, either in person or by properly
executed proxy, of a majority of the outstanding Trust Common Shares is
necessary to constitute a quorum at the Annual Meeting.
VOTE REQUIRED
The Plan of Reorganization requires the affirmative vote of a majority of the
Trust Common Shares outstanding as of the close of business on the Record Date.
The election of Trustees, the approval of the Restricted Stock Plan and the
ratification of the appointment of the Trust's auditors each requires the
affirmative vote of the holders of a majority of the Trust Common Shares
present, in person or by properly executed proxy, at the Annual Meeting. Each
proposal is being presented to the Trust's shareholders as a separate and
independent proposal and no proposal is conditioned upon adoption or approval of
any other proposal.
THE PLAN OF REORGANIZATION
Principal Reasons For The Plan Of Reorganization
The purpose of the Plan of Reorganization is to reorganize the Trust from a
Massachusetts business trust into a Maryland corporation, to be known as HRE
Properties, Inc. The Board of Trustees believes that the more well-defined
Maryland corporation laws, together with the Corporation's new Articles of
Incorporation and Bylaws, will modernize the Trust's governance procedures and
provide the Trust with a greater degree of certainty and flexibility in planning
and implementing corporate action than is currently available to the Trust as a
business trust organized under the laws of Massachusetts. In addition, certain
provisions of the Maryland General Corporation Law (the "MGCL") are designed to
deter hostile or unsolicited takeover attempts of Maryland corporations and to
increase a Maryland corporation's flexibility in dealing with such takeover
attempts. The Board of Trustees believes that this greater degree of
flexibility, together with the favorable perception of the Maryland corporation
by the experienced REIT investor community, combine to make the Plan of
Reorganization to be in the best interests of the Trust and its shareholders.
See "THE PLAN OF REORGANIZATION - Principal Reasons for the Plan of
Reorganization."
Terms Of The Plan Of Reorganization
The Plan of Reorganization will be effected through the Merger of the Trust
with and into the Corporation, pursuant to which the Corporation will be the
surviving entity in the Merger, the separate existence of the Trust will
terminate and each outstanding Trust Common Share will be converted into one
share of Corporation Common Stock. At the effective time of the Merger, all
properties, assets, liabilities and obligations of the Trust will become
properties, assets, liabilities and obligations of the Corporation. Upon
consummation of the Merger, the Corporation and its shareholders will be
governed by the Corporation's Articles of Incorporation and Bylaws which will
include a number of provisions which are not currently in the Declaration of
Trust. These provisions of the Articles of Incorporation and Bylaws of the
Corporation, together with certain provisions of the MGCL, may have certain
anti-takeover effects.
The Plan of Reorganization has been adopted by the Board of Trustees pursuant
to their authority under the Declaration of Trust to cause a merger of the Trust
with and into a corporation. The Merger will become effective upon the filing of
Articles of Merger with the appropriate state agencies, including, without
limitation, the State Department of Assessments and Taxation of the State of
Maryland. The Trust anticipates that the Merger will become effective as
promptly as practicable following shareholder approval of the Plan of
Reorganization at the Annual Meeting.
8
The Plan of Reorganization provides that the Merger may be abandoned by the
Corporation or by the Trust at any time prior to its effectiveness. The Trust
has no current intention of abandoning or causing the Corporation to abandon the
Merger subsequent to the Annual Meeting if shareholder approval is obtained.
On the effective date of the Merger, each of the persons who are then
Trustees and officers of the Trust will become directors and officers,
respectively, of the Corporation and each of the persons who are then members of
the Board of Consultants of the Trust will become members of the Board of
Consultants of the Corporation.
The Plan of Reorganization is conditioned upon, among other things, the
listing of the Corporation Common Stock on the NYSE, subject to official notice
of issuance. It is expected that the listing of the Corporation Common Stock
will occur at the time of the effectiveness of the Merger and that the listing
of the Trust Common Shares on the NYSE will be simultaneously terminated. The
Corporation Common Stock will thereafter continue to be listed on the NYSE in
accordance with the applicable rules of the NYSE.
If the Restricted Stock Plan is approved and the Plan of Reorganization is
approved and the Merger is consummated, the Trust and the Corporation will take
such action as may be necessary to provide that all rights under the Restricted
Stock Plan to receive grants of Trust Common Shares will become substantially
identical rights to receive grants of Corporation Common Stock on substantially
identical terms and conditions as set forth in the Trust's Restricted Stock
Plan.
If the Plan of Reorganization is approved and the Merger is consummated, the
Trust and the Corporation will take such action as may be necessary to provide
that all rights of participants in the Trust's Stock Option Plan (the "Stock
Option Plan") to receive grants of options and to exercise options and stock
appreciation rights granted thereunder in respect of Trust Common Shares will
become substantially identical rights to receive grants of options and to
exercise options and stock appreciation rights in respect of shares of
Corporation Common Stock on substantially identical terms and conditions as set
forth in the Trust's Stock Option Plan.
If the Plan of Reorganization is approved and the Merger is consummated, the
Trust and the Corporation will take such action as may be necessary to provide
that all rights of shareholders of the Trust under the Trust's Shareholder
Rights Agreement, dated as of November 4, 1988, as amended (the "Shareholder
Rights Agreement"), to acquire capital stock or other securities or properties
of the Trust will become substantially identical rights to acquire capital stock
or other securities or properties of the Corporation on substantially identical
terms and conditions as set forth in the Shareholder Rights Agreement.
See "THE PLAN OF REORGANIZATION - Terms of the Plan of Reorganization."
Certain Changes In The Rights Of Shareholders Resulting From The Plan Of
Reorganization
The rights of shareholders of the Trust are currently governed by the Trust's
Declaration of Trust and Bylaws, Massachusetts law and the rules of the NYSE. If
the Plan of Reorganization is approved by the shareholders of the Trust and the
Merger is consummated, the Corporation will be the surviving entity in the
Merger, the separate existence of the Trust will terminate, each outstanding
Trust Common Share will be converted into one share of Corporation Common Stock
and the rights of stockholders will be governed by the Corporation's Articles of
Incorporation and Bylaws, Maryland law, including the MGCL, and the rules of the
NYSE. While a number of the Trust's current corporate governance provisions will
be included in the Corporation's Articles of Incorporation and Bylaws and,
therefore, will not be affected by the adoption of the Plan of Reorganization
and the consummation of the Merger, certain differences between Massachusetts
law and Maryland law and between the Trust's Declaration of Trust and Bylaws and
the Corporation's Articles of Incorporation and Bylaws will result in certain
material differences between the rights of shareholders of the Trust and the
rights of stockholders of the Corporation. Accordingly,
9
shareholders of the Trust should carefully consider the changes in their rights
that will result from the adoption of the Plan of Reorganization and the
consummation of the Merger. The following table compares certain of the existing
rights of shareholders of the Trust with those of stockholders of the
Corporation, if the Plan of Reorganization is approved and the Merger is
consummated.
TRUST CORPORATION
----------------------------------------------- ------------------------------------------------
Election of Shareholders elect Trustees for staggered Stockholders elect directors for staggered
Trustees/Directors....... three-year terms. three-year terms.
Revomal of Holders of two-thirds of outstanding shares Holders of two-thirds of the outstanding shares
Trustees/Directors....... entitled to vote on the matter may remove entitled to vote on the matter may remove
Trustees, with or without cause. Directors only for cause.
Dividends................ Shareholders entitled to receive dividends as Stockholders entitled to receive dividends as
dividends may be declared even when paid-in and when declared by the Directors. Dividends
dissolution, of stockholders whose may be declared as long as, after giving
preferential capital of the Trust exceeds effect to the payment thereof, the
market/book value rights of the Trust's net Corporation would be able to pay its
assets. indebtedness as such indebtedness becomes due
in the usual course of business and the
Corporation's total assets would not be less
than the sum of the Corporation's total
liabilities plus the amount that would be
needed if the Corporation were to be
dissolved at the time of the payment in and
when declared by the Trustees; such order to
satisfy the preferential rights, upon on
dissolution are superior to those receiving
the dividend payment.
Preferred Stock......... Upon the affirmative vote of at least 75% of The Corporation may issue shares of preferred
the Trustees, the Trustees may issue shares of stock, in one or more series, as authorized by
preferred stock, in one or more series, with the Directors. Such shares may be issued with
such voting powers and other rights as they such voting powers and other rights Directors
consider appropriate. and as is consider appropriate. permissible
under the MGCL.
Voting by Unanimous Any shareholders' action may be effected by a Any stockholders' action may be effected by a
Consent ................. written consent signed by all shareholders written consent signed by all stockholders
entitled to vote thereon. entitled to vote thereon.
Amendment of Any amendment to the Declaration of Trust Any amendment to the Articles of
Constitutional requires approval of a majority of the Incorporation requires approval of a majority
Documents................ Trustees and the affirmative vote of the of the Directors and a majority of the
holders of a majority of the outstanding "Continuing Directors," as defined below. Any
shares entitled to vote on the matter. Bylaws amendment to certain provisions to the
may be amended only by the Trustees. Articles of Incorporation requires the
affirmative vote of the holders of two-thirds
of the outstanding shares entitled to vote on
the matter. Any amendment to any other
provision of the Articles of Incorporation
requires the vote of a majority of the
outstanding shares entitled to vote on the
matter. Bylaws may be amended only by the
Board of Directors.
10
TRUST CORPORATION
----------------------------------------------- ------------------------------------------------
Voting on Other Matters . Any proposed merger, sale of substantially Holders of voting stock may vote on all other
all of the assets of the Trust or termination matters provided for by the MGCL. Any
of the Trust requires approval of a majority proposed merger, share exchange,
of the Trustees and the affirmative vote of consolidation or transfer of substantially
the of the holders of a majority of the all of the assets of Corporation requires
outstanding shares entitled to vote on the approval of a majority the Directors and a
matter. Shareholder vote generally not majority of the "Continuing Directors," and
required on matters other than the foregoing. the affirmative vote of the holders of
two-thirds of the outstanding shares entitled
to vote on the matter.
Shareholders' Rights to Holders of not less than 25% of the out- Holders of not less than a majority of the
Call Special Meeting .... standing shares may call a special meeting. outstanding voting shares may call a special
meeting.
Share Ownership Limit ... "Ownership Limit" of 9.9% of the outstanding "Ownership Limit" of 7.5% of the outstanding
shares by any holder to assure against shares by any holder to assure against
"closely held" REIT disqualification, unless "closely held" REIT disqualification, unless
waived by Trustees. waived by Directors.
Shareholder Rights Plan . Each outstanding Trust Common Share includes Each outstanding share of Corporation Common
and represents one Preferred Share Purchase Stock will include and represent one
Right. The Rights will become exercisable if Preferred Share Purchase Right. The Rights
any person or group acquires 25% or more of will become exercisable if any person or
the Trust Common Shares or announces or group acquires 25% or more of the shares of
commences a tender offer which would result Corporation Common Stock or announces or
in such person or group owning 30% or more of commences a tender offer which would result
the Trust Common Shares. Following any such in such person or group owning 30% or more of
25% acquisition, the Rights will be the shares of Corporation Common Stock.
exercisable by the holder thereof (other than Following any such 25% acquisition, the
the acquiring person or group) to purchase Rights will be exercisable by the holder
Trust Common Shares at one-half of the market thereof (other than the acquiring person or
value of such shares. In addition, if the group) to purchase shares of Corporation
Trust is involved in a merger or other Common Stock at one-half of the market value
business combination at any time after the of such shares. In addition, if the
Rights become exercisable, the Rights will Corporation is involved in a merger or other
entitle the holder thereof to purchase shares business combination at any time after the
of common stock of the acquiring company at Rights become exercisable, the Rights will
one-half of the market value of such shares. entitle the holder thereof to purchase shares
of common stock of the acquiring company at
one-half of the market value of such shares.
See "THE PLAN OF REORGANIZATION - Certain Changes in the Rights of
Shareholders Resulting from the Plan of Reorganization; Certain Provisions of
Massachusetts and Maryland Law."
Limitation Of Liability And Indemnification Of Trustees And Directors
Stockholders and directors of a corporation are generally not responsible for
its debts and obligations. In contrast, title to the property of a Massachusetts
business trust like the Trust is vested in its trustees, and its trustees are
personally responsible for the debts and obligations of the trust, although in
the case of the Trust, the Declaration of Trust provides that (i) the Trustees
shall have no such liability unless they are considered to have acted in bad
faith or with willful malfeasance, reckless disregard of their duties or gross
negligence, or not to have acted in good faith in the reasonable belief that
their actions were in the best interests of the Trust, and (ii) the Trustees
shall be and are entitled to indemnification from the Trust assets to the extent
that they meet such required standards of conduct.
11
By comparison, the Corporation's Articles of Incorporation limit the
liability of the Corporation's directors and officers to the Corporation and its
stockholders to the fullest extent permitted from time to time by the MGCL. The
MGCL presently permits the liability of directors and officers to a corporation
or its stockholders for monetary damages to be limited, except (i) to the extent
that it is proved that the director or officer actually received an improper
benefit or profit, for the amount of the benefit or profit actually received, or
(ii) if a judgment or other final adjudication is entered in a proceeding based
on a finding that the director's or officer's actions or failure to act was the
result of active and deliberate dishonesty and was material to the cause of
action adjudicated in the proceeding. This provision does not limit the ability
of the Corporation or its stockholders to obtain other relief, such as an
injunction or rescission.
The Corporation's Articles of Incorporation and Bylaws require the
Corporation to indemnify its directors, officers and certain other parties to
the fullest extent permitted from time to time by the MGCL. The MGCL permits a
corporation to indemnify its directors, officers and certain other parties
against judgments, penalties, fines, settlements and reasonable expenses
actually incurred by them in connection with any proceeding to which they may be
made a party by reason of their service to or at the request of the Corporation,
unless it is established that the act or omission of the indemnified party was
material to the matter giving rise to the proceeding and (i) the act or omission
was committed in bad faith or was the result of active and deliberate
dishonesty, (ii) the indemnified party actually received an improper personal
benefit, or (iii) in the case of any criminal proceeding, the indemnified party
had reasonable cause to believe that the act or omission was unlawful.
Other than the foregoing, the Board of Trustees believes that there are no
significant substantive differences between the limitations of liability and
indemnification rights of the Trustees of the Trust and the limitations of
liability and indemnification rights of directors of the Corporation. See "THE
PLAN OF REORGANIZATION- Principal Reasons for the Plan of Reorganization;
Certain Changes in the Rights of Shareholders Resulting from the Plan of
Reorganization."
It is the position of the SEC that indemnification of directors and officers
for liabilities arising under the Securities Act is against public policy and is
unenforceable pursuant to Section 14 of the Securities Act.
Interests Of Certain Persons
As noted under "ELECTION OF TRUSTEES," Mr. Charles J. Urstadt, Chairman and
Chief Executive Officer of the Trust, beneficially owns 1,148,925 Trust Common
Shares constituting approximately 20.43% of the outstanding Trust Common Shares.
If the Plan of Reorganization is approved and the Merger is consummated, the
1,148,925 Trust Common Shares beneficially owned by Mr. Urstadt will be
converted into 1,148,925 shares of Corporation Common Stock, constituting
approximately 20.43% of the outstanding shares of Corporation Common Stock
currently anticipated to be outstanding at the effective time of the Merger.
The Corporation's Articles of Incorporation provide that directors of the
Corporation may only be removed for cause and only upon the vote of the holders
of two-thirds of the outstanding shares of Corporation Common Stock and that
amendment of certain provisions of the Corporation's Articles of Incorporation
and any merger, share exchange, consolidation or transfer of all or
substantially all of the assets of the Corporation will require approval of a
majority of the Board of Directors of the Corporation and a majority of those
members who are Continuing Directors and the affirmative vote of the holders of
two-thirds of the outstanding shares of Corporation Common Stock. In view of Mr.
Urstadt's currently anticipated percentage ownership of the Corporation Common
Stock upon consummation of the Merger and, depending upon the number of shares
of Corporation Common Stock that are actually voted in connection with any such
proposal, Mr. Urstadt will control a number of shares of Corporation Common
Stock that may be sufficient to block any such proposal. In addition, under the
MGCL certain business combinations between the
12
Corporation and an Interested Stockholder will require the recommendation of the
Board of Directors of the Corporation and the affirmative vote of at least (i)
80% of the outstanding shares of Corporation Common Stock and (ii) two-thirds of
the outstanding shares of Corporation Common Stock not held by such Interested
Stockholder or its affiliates unless, among other things, certain "fair price"
and other conditions are met. In view of Mr. Urstadt's currently anticipated
percentage ownership of the Corporation Common Stock upon consummation of the
Merger, Mr. Urstadt will control a number of shares of Corporation Common Stock
sufficient to block any proposal respecting a business combination with an
Interested Stockholder unless the "fair price" and other conditions of the MGCL
are met.
Mr. Urstadt and all other Trustees and/or executives of the Trust who in the
aggregate hold 1,293,682 Trust Common Shares constituting approximately 23% of
the issued and outstanding Trust Common Shares have notified the Board of
Trustees of their intention to vote FOR each of Proposals 1 through 4 at the
Annual Meeting.
See "THE PLAN OF REORGANIZATION - Interests of Certain Persons."
Certain Tax Consequences Of The Plan Of Reorganization
The Trust and the Corporation have received the opinion of Coudert Brothers,
counsel to the Trust and the Corporation, to the effect that, on the basis of
the facts, representations and assumptions set forth or referred to in such
opinion, the Plan of Reorganization, if consummated in the manner set forth in
the Plan of Reorganization and this Proxy Statement/Prospectus, will constitute
a tax-free reorganization under Section 368(a) of the Code and that,
accordingly, (i) no gain or loss will be recognized for Federal income tax
purposes by the shareholders of the Trust upon conversion of Trust Common Shares
into Corporation Common Stock and (ii) the basis of a shareholder of the Trust
in his shares of Corporation Common Stock will be the same as his basis in his
Trust Common Shares.
In addition, the Merger should not adversely affect the ability of the
Corporation to continue to qualify as a REIT under Sections 856-860 of the Code.
No ruling has been or will be sought from the Internal Revenue Service.
Shareholders are urged to consult their own tax advisors with respect to the tax
consequences arising under Federal law and the laws of any state, municipality
or other taxing jurisdiction, including tax consequences arising from such
shareholder's own tax characteristics and situation.
See "THE PLAN OF REORGANIZATION- Certain Tax Consequences of the Plan of
Reorganization".
ELECTION OF TRUSTEES
Pursuant to the Declaration of Trust, the Trustees are divided into three
classes serving three-year terms. Three Trustees, comprising Class III, are to
be elected at the Annual Meeting. Messrs. Douglass, Lawrence and Urstadt have
been nominated for election as Trustees to hold office until the year 2000
Annual Meeting and until their successors have been elected and shall qualify.
If the Plan of Reorganization is approved and the Merger is consummated, the
Trustees of the Trust at the time of the consummation of the Merger shall become
the directors of the Corporation serving for the same terms and in the same
classes with the Corporation as such persons are then serving with the Trust.
The affirmative vote of the holders of not less than a majority of the Trust
Common Shares entitled to vote and present, in person or by properly executed
proxy, at the Annual Meeting will be required to elect a Trustee.
See "ELECTION OF TRUSTEES."
13
RESTRICTED STOCK PLAN
The Restricted Stock Plan provides for the grant of restricted stock awards
of up to an aggregate of 250,000 Trust Common Shares to key management personnel
of the Trust on the terms and conditions set forth therein. The Restricted Stock
Plan is designed to promote the long-term growth of the Trust by attracting,
retaining and motivating key management personnel and to identify further the
interests of the participants in the Restricted Stock Plan with those of the
shareholders of the Trust. If the Restricted Stock Plan is approved and the Plan
of Reorganization is approved and the Merger is consummated, the Trust and the
Corporation will take such action as may be necessary to provide that all rights
under the Restricted Stock Plan to receive grants of Trust Common Shares will
become substantially identical rights to receive grants of Corporation Common
Stock on substantially identical terms and conditions as set forth in the
Trust's Restricted Stock Plan.
The affirmative vote of the holders of not less than a majority of the Trust
Common Shares entitled to vote and present, in person or by properly executed
proxy, at the Annual Meeting will be required to approve the Restricted Stock
Plan.
See "THE RESTRICTED STOCK PLAN."
RATIFICATION OF APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS
The Trust is proposing that the shareholders of the Trust ratify the
appointment of Arthur Andersen LLP as the independent auditors of the Trust or,
if the Plan of Reorganization is approved and the Merger is consummated, the
Corporation, for the ensuing fiscal year. The affirmative vote of the holders of
not less than a majority of the Trust Common Shares entitled to vote and
present, in person or by properly executed proxy, at the Annual Meeting will be
required to ratify such appointment.
See "RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS OF THE TRUST."
VOTE REQUIRED FOR PROPOSALS; INDEPENDENT PROPOSALS; DISSENTERS' RIGHTS
As noted above, the Plan of Reorganization requires the affirmative vote of a
majority of the Trust Common Shares outstanding on the Record Date. Abstentions
and broker non-votes will thus be the equivalent of negative votes with respect
to the Plan of Reorganization.
The election of the Trustees, the approval of the Restricted Stock Plan and
the ratification of the appointment of the Trust's auditors each requires the
affirmative vote of a majority of the Trust Common Shares entitled to vote and
present, in person or by properly executed proxy, at the Annual Meeting.
Abstentions will thus be the equivalent of negative votes and broker non-votes
will have no effect with respect to such proposals, as any Trust Common Shares
subject to broker non-votes will not be present and entitled to vote with
respect to any proposal to which the broker non-vote applies.
Each of the Proposals presented to the shareholders of the Trust at the
Annual Meeting is being presented as a separate and independent proposal and no
Proposal is conditioned upon adoption or approval of any other Proposal.
Shareholders of the Trust will not have any dissenters' rights of appraisal in
connection with the vote upon the Plan of Reorganization.
See "SOLICITATION OF PROXIES AND VOTING PROCEDURES."
RECOMMENDATION OF THE BOARD OF TRUSTEES
The Board of Trustees has approved the Plan of Reorganization and the
Restricted Stock Plan, subject to shareholder approval, and believes that each
of the Plan of Reorganization and the Restricted Stock Plan is in the best
interests of the Trust and its shareholders. The Board of Trustees recommends
that shareholders vote in favor of the Plan of Reorganization, the election of
Trustees, the Restricted Stock Plan and the ratification of the appointment of
the independent auditors.
14
PROPOSAL 1. THE PLAN OF REORGANIZATION
PRINCIPAL REASONS FOR THE PLAN OF REORGANIZATION
The Trust was organized in 1969 as a Massachusetts business trust primarily
in order to take advantage of the tax treatment afforded to REITs under the
Code. At that time, only unincorporated trusts and associations taxable as a
corporation (i.e. business trusts) could qualify as REITs, and as such would be
eligible for the tax benefits conferred by such status. However, as a result of
certain subsequently effected amendments to the Code, corporations may now also
qualify as a REIT. In more recent years, an increasing number of REITs have been
incorporated as, or have been reorganized into, corporations (and, in
particular, Maryland corporations) in order to take advantage of the more
well-defined state corporation statutes which provide such REITs with a greater
degree of certainty and flexibility in planning and implementing corporate
action than would otherwise be available as a business trust. The Board of
Trustees believes that this greater degree of flexibility, together with the
favorable perception of the Maryland corporation by the experienced REIT
investor community and the other factors set forth below, combine to make the
Plan of Reorganization desirable and in the best interests of the Trust and its
shareholders.
Certainty/Flexibility: Business trusts under Massachusetts law are entities
created by agreement or under a governing document, such as the Declaration of
Trust, for which there is no prescribed form. Accordingly, the powers, rights
and obligations of trustees and shareholders are to a large extent a matter of
contractual interpretation. In states such as Maryland, there is a modern,
well-defined corporate statute as well as decisional case law interpreting such
statute on which an organization may rely in planning and implementing its
activities. The existence of such a statute and case law allows a corporation to
plan the legal aspects of its future activities with more certainty and
flexibility than do the provisions of the Declaration of Trust and Massachusetts
law currently applicable to the Trust. A modern corporate charter also allows
corporations to determine and change business strategies on an ongoing basis as
circumstances warrant, whereas such flexibility is, at times, unavailable to
business trusts which may be restricted by the more specific provisions of their
governing instruments.
Investor Perception: Corporations are far more numerous than business trusts
and are more familiar to the investor community. Additionally, in the specific
context of REITs, Maryland corporations are often perceived by the experienced
investor community as conferring the most beneficial framework within which
REITs may operate and develop. This familiarity and favorable perception is
considered by the Board of Trustees as likely to enhance the liquidity and
marketability of the Trust, providing potentially greater access to capital and
real estate markets.
Limitation of Liability: Through judicial decision it has been established
that the business trust is not a distinct legal entity, as opposed to a
corporation whose directors and stockholders generally have no personal
liability for corporate debts and obligations. Trustees and shareholders (if
they are deemed to control the actions of the Trustees) of a business trust, on
the other hand, can have personal responsibility for the debts and obligations
of the business trust.
Although the Trustees of the Trust are generally entitled to indemnification
out of the Trust assets for any loss they may suffer in the proper performance
of their services to the Trust, the possibility does, however, remain that in
the event that the Trust assets are insufficient to cover a liability of the
Trust, such persons could be left with an unreimbursed personal obligation. By
contrast, the MGCL offers directors broader protection from personal liability.
The Board of Trustees believes that the extending of this statutory protection
against personal liability should enhance the Corporation's ability to attract
and retain qualified directors.
Protections Afforded by Maryland Law Against Hostile/Unsolicited Takeovers:
As noted below under "Certain Provisions of Massachusetts and Maryland Law,"
certain provisions of the MGCL are designed to deter hostile or unsolicited
takeover attempts of Maryland corporations and to encourage potential acquirors
to negotiate directly with the management of a Maryland corporation.
Massachusetts law does not currently contain any similar provisions applicable
to a Massachusetts business trust in the form and nature of the Trust. The Board
of Trustees believes that the reorganization of the Trust into a Maryland
corporation will
15
allow the Board of Directors of the Corporation to avail itself of these
provisions of the MGCL and to increase the Corporation's flexibility in the face
of any future takeover attempts by encouraging the potential acquiror to
negotiate directly with the Corporation's management.
Unsolicited or hostile takeover attempts are frequently structured in ways
that may not be in the best interests of all shareholders. Although a takeover
attempt may be made at a price substantially above the then current market
prices for a target company's shares, such offers are sometimes made for less
than all of the outstanding shares of the target company. As a result,
shareholders may be presented with the alternative of either partially
liquidating their investment at a time which may be disadvantageous or retaining
their investment as minority shareholders in an enterprise which is controlled
by persons whose objectives may be different from those of the remaining
minority shareholders. A takeover attempt may also take the form of a two-tiered
offer in which cash is offered for a portion of the target company's outstanding
shares and thereafter securities that are or may be worth less than the cash
portion are offered for the remaining shares. Furthermore, hostile takeover
attempts are sometimes timed and designed to foreclose or minimize the
possibility of more favorable competing bids which frequently may result in
shareholders losing the opportunity to receive and consider alternative and
possibly more attractive proposals. On the other hand, transactions approved by
a target company's board of directors can be more carefully planned and
undertaken at an opportune time in order to obtain maximum value for the company
and all of its shareholders.
The Board of Trustees recognizes that takeover attempts which have not been
negotiated with and approved by a target company's board of directors or other
managerial body do not always have the unfavorable consequences or effects
described above. However, the Board of Trustees believes that the potential
disadvantages of unapproved takeover attempts are sufficiently great that the
protections afforded by the MGCL against hostile or unsolicited takeover
attempts are in the best interests of the Trust and its stockholders. As noted
under "Certain Provisions of Massachusetts and Maryland Law," the Corporation's
Articles of Incorporation and Bylaws provide that these provisions of the MGCL
will not apply to Mr. Charles J. Urstadt, the Chairman and Chief Executive
Officer of the Trust who beneficially owns approximately 20.43% of the
outstanding Trust Common Shares and will own approximately 20.43% of the
Corporation Common Stock currently anticipated to be outstanding upon
consummation of the Merger, because the Board of Trustees does not believe that
Mr. Urstadt will pose a threat of a hostile or unsolicited takeover attempt to
the Corporation.
Other Considerations: In addition to the foregoing, there are certain other
factors that have caused the Board of Trustees to view a Maryland corporation as
a desirable organization into which the Trust should be reorganized. In
particular, the MGCL does not limit a corporation's ability to pay dividends to
earned surplus. Such a limitation exists in many other state corporate laws and
is inappropriate for many REITs which make distributions of funds from
operations that exceed earnings. The only requirement in this respect under
Maryland law is that after giving effect to the payment of the dividend, the
Corporation would be able to pay its indebtedness as such indebtedness becomes
due in the usual course of business and the Corporation's total assets would not
be less than the sum of the Corporation's total liabilities plus the amount that
would be needed if the Corporation were to be dissolved at the time of the
payment in order to satisfy the preferential rights, upon dissolution, of
stockholders whose preferential rights on dissolution are superior to those
receiving the dividend payment. Additionally, the effectiveness of the so-called
"Excess Share" provision (intended to preserve REIT status) similar to the
existing provision of the Declaration of Trust, has been specifically upheld in
the context of a REIT organized under Maryland law, and a similar provision will
be contained in the Corporation's Articles of Incorporation. See "Certain
Changes in the Rights of Shareholders Resulting from the Plan of Reorganization
- - Ownership Limitation; Excess Stock." Finally, a further advantage of Maryland
over other possible states of domicile, is that no annual franchise tax is
imposed.
TERMS OF THE PLAN OF REORGANIZATION
The Plan of Reorganization is set forth in its entirety as Exhibit A to this
Proxy Statement. The information set forth below is only a summary of its
principal provisions and is qualified in its entirety by Exhibit A.
16
The Plan of Reorganization will be effected through the Merger of the Trust
with and into the Corporation, pursuant to which the Corporation will be the
surviving entity in the Merger, the separate existence of the Trust will
terminate, each outstanding Trust Common Share will be converted into one share
of Corporation Common Stock and the shares of Corporation Common Stock held by
the Trust will be cancelled and retired and will cease to exist. At the
effective time of the Merger, all properties, assets, liabilities and
obligations of the Trust will become properties, assets, liabilities and
obligations of the Corporation. For federal income tax and financial reporting
purposes, the Corporation will be considered to be the same entity as the Trust.
The Plan of Reorganization has been adopted by the Board of Trustees pursuant
to their authority under the Declaration of Trust to cause a merger of the Trust
with and into a corporation.
The Merger will become effective upon the filing of Articles of Merger with
the appropriate state agencies, including, without limitation, the State
Department of Assessments and Taxation of the State of Maryland. The Trust
anticipates that the Merger will become effective as promptly as practicable
following shareholder approval of the Plan of Reorganization at the Annual
Meeting. The Plan of Reorganization provides that the Merger may be abandoned by
the Corporation or by the Trust at any time prior to its effectiveness. The
Trust has no current intention of abandoning or causing the Corporation to
abandon the Merger subsequent to the Annual Meeting if shareholder approval is
obtained.
Upon consummation of the Merger, the Corporation and its shareholders will be
governed by the Corporation's Articles of Incorporation and Bylaws, which will
include a number of provisions which are not currently in the Declaration of
Trust. These provisions of the Articles of Incorporation and Bylaws of the
Corporation, together with certain provisions of the MGCL, may have certain
anti-takeover effects. See "Certain Provisions of Massachusetts and Maryland
Law." A copy of the proposed Articles of Incorporation and By-laws of the
Corporation are set forth in their entirety as Exhibits C and D, respectively.
On the effective date of the Merger, each of the persons then serving as
Trustees and officers of the Trust will be directors and officers, respectively,
of the Corporation and each of the persons who are members of the Board of
Consultants of the Trust will become members of the Board of Consultants of the
Corporation. The Board of Consultants of the Corporation will be appointed by
the Board of Directors of the Corporation to consider, advise upon and make
recommendations to the Board of Directors with respect to such questions
relating to the conduct of the business of the Corporation as may be submitted
to it by the Board of Directors. The Board of Consultants, however, will have no
binding authority or power over the Board of Directors or the Corporation. For
information concerning the Trustees and officers of the Trust, see "ELECTION OF
TRUSTEES."
If the Restricted Stock Plan is approved and the Plan of Reorganization is
approved and the Merger is consummated, the Trust and the Corporation will take
such action as may be necessary to provide that all rights under the Restricted
Stock Plan to receive grants of Trust Common Shares will become substantially
identical rights to receive grants of Corporation Common Stock on substantially
identical terms and conditions as set forth in the Trust's Restricted Stock
Plan.
If the Plan of Reorganization is approved and the Merger is consummated, the
Trust and the Corporation will take such action as may be necessary to provide
that all rights of participants in the Trust's Stock Option Plan to receive
grants of options and to exercise options and stock appreciation rights granted
thereunder in respect of Trust Common Shares will become substantially identical
rights to receive grants of options and to exercise options and stock
appreciation rights in respect of of Corporation Common Stock on substantially
identical terms and conditions as set forth in the Trust's Stock Option Plan.
If the Plan of Reorganization is approved and the Merger is consummated, the
Trust and the Corporation will take such action as may be necessary to provide
that all rights of shareholders of the Trust under the Trust's Shareholder
Rights Agreement to acquire capital stock or other securities or properties of
the Trust will become substantially identical rights to acquire capital stock or
other securities or properties of the Corporation on substantially identical
terms and conditions as set forth in the Shareholder Rights Agreement. Each
outstanding share of Corporation Common Stock will include and represent one
Right. The Rights will become exercisable if any person or group acquires 25% or
more of the shares of Corporation
17
Common Stock or announces or commences a tender offer which would result in such
person or group owning 30% or more of the shares of Corporation Common Stock.
Following any such 25% acquisition, the Rights will be exercisable by the holder
thereof (other than the acquiring person or group) to purchase shares of
Corporation Common Stock at one-half of the market value of such shares. In
addition, if the Corporation is involved in a merger or other business
combination at any time after the Rights become exercisable, the Rights will
entitle the holder thereof to purchase shares of common stock of the acquiring
company at one-half of the market value of such shares.
The Plan of Reorganization is conditioned upon, among other things, the
listing of the Corporation Common Stock on the NYSE, subject to official notice
of issuance. It is expected that the listing of the Corporation Common Stock
will occur on the effective date of the Merger and that the listing of the Trust
Common Shares on the NYSE will be simultaneously terminated. The Corporation
Common Stock will thereafter continue to be listed on the NYSE in accordance
with the applicable rules of the NYSE.
At the effective date of the Merger, each certificate representing Trust
Common Shares will be deemed for all purposes to evidence the same number of
shares of Corporation Common Stock. Shareholders of the Trust will subsequently
be advised as to procedures respecting the exchange of their certificates
representing their Trust Common Shares for certificates representing the shares
of Corporation Common Stock into which Trust Common Shares will be converted in
the Merger.
The expenses associated with the reorganization of the Trust into the
Corporation pursuant to the Merger (currently estimated to be approximately
$50,000) will be borne by the Trust. The Trust does not consider such expenses
to be material in view of the cost savings anticipated to be realized in the
future as a result of the consummation of the Merger and the Trust believes that
such expenses will be recouped through such cost savings in the near term.
CERTAIN CHANGES IN THE RIGHTS OF SHAREHOLDERS RESULTING FROM THE PLAN OF
REORGANIZATION
The rights of shareholders of the Trust are currently governed by the Trust's
Declaration of Trust and Bylaws, Massachusetts law and the rules of the NYSE. If
the Plan of Reorganization is approved by the shareholders of the Trust and the
Merger is consummated, the Corporation will be the surviving entity in the
Merger, the separate existence of the Trust will terminate, each outstanding
Trust Common Share will be converted into one share of Corporation Common Stock
and the rights of stockholders will be governed by the Corporation's Articles of
Incorporation and Bylaws, Maryland law, including the MGCL, and the rules of the
NYSE. While a number of the Trust's current corporate governance provisions will
be included in the Corporation's Articles of Incorporation and Bylaws and,
therefore, will not be affected by the adoption of the Plan of Reorganization
and the consummation of the Merger, certain differences between Massachusetts
law and Maryland law and between the Trust's Declaration of Trust and Bylaws and
the Corporation's Articles of Incorporation and Bylaws will result in certain
material differences between the rights of shareholders of the Trust and the
rights of stockholders of the Corporation. Accordingly, shareholders of the
Trust should carefully consider the changes in their rights that will result
from the adoption of the Plan of Reorganization and the consummation of the
Merger.
Set forth below are descriptions of the principal material differences in
this respect; the descriptions do not, however, purport to be complete and are
qualified in their entirety by reference to the Declaration of Trust and Bylaws
of the Trust, copies of which are exhibits to the Registration Statement of
which this Proxy Statement/Prospectus forms a part, and the Articles of
Incorporation and the Bylaws of the Corporation, copies of which are attached
hereto as Exhibits C and D, respectively.
General/Authorized Shares: The Trust was organized on July 7, 1969 as an
unincorporated business trust under the laws of The Commonwealth of
Massachusetts pursuant to the Declaration of Trust. The Corporation was
organized on December 30, 1996 by the Trust to acquire and succeed to, and to
continue the business of, the Trust upon the consummation of the Merger of the
Trust with and into the Corporation pursuant to the Plan of Reorganization and
has had no activities to date other than those incident to the Plan of
Reorganization.
Title to the property of the Trust is vested in the Trustees, and the
beneficial interest in such Trust property is owned by the shareholders of the
Trust. The interests of the shareholders in the Trust property is divided into
two classes of shares of beneficial interest: (i) the Trust Common Shares and
(ii)
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undesignated preferred shares (the "Trust Preferred Shares"). Under the
Declaration of Trust, the Trust is authorized to issue an unlimited number of
Trust Common Shares and up to 2,000,000 Trust Preferred Shares in one or more
series, with such voting powers and with such designations, preferences and
relative, participating, optional or other special rights and qualifications,
limitations or restrictions as the Trustees consider appropriate. As of January
27, 1997, there were 5,346,081 Trust Common Shares issued and outstanding and
150,000 shares of Series A Participating Preferred Shares reserved for issuance
pursuant to the Trust's Shareholder Rights Plan.
Under its Articles of Incorporation, the Corporation has authority to issue
up to 100,000,000 shares of capital stock, consisting of 70,000,000 shares of
Corporation Common Stock, 20,000,000 shares of undesignated preferred stock (the
"Corporation Preferred Stock") and 10,000,000 shares of "Excess Stock" (as
described below). Subject to the provisions of the Articles of Incorporation
regarding "Excess Stock", all shares of Corporation Common Stock will have equal
dividend, distribution, liquidation and other rights, and will have no
preference or exchange rights. Holders of Corporation Common Stock have no
conversion, sinking fund or redemption rights, or preemptive rights to subscribe
for any securities of the Corporation. The Board of Directors of the Corporation
generally will have the power to issue such shares of Corporation Common Stock
without stockholder approval. Other than the 1,000 shares of Corporation Common
Stock owned by the Trust which will be cancelled in the Merger, there are
currently no shares of any class of capital stock of the Corporation issued or
outstanding. The Corporation may issue shares of Corporation Preferred Stock
from time to time, in one or more series, as authorized by the Board of
Directors. The Articles of Incorporation authorize the Board of Directors to
classify any unissued shares of Corporation Preferred Stock and to reclassify
any previously classified but unissued shares of any series of Corporation
Preferred Stock, Corporation Common Stock or other capital stock from time to
time, in one or more series of preferred stock or capital stock issued from time
to time, as authorized by the Board of Directors. Prior to the issuance of
shares of each series, the Board of Directors is required by the MGCL and the
Articles of Incorporation to set for each series, subject to the provisions of
the Articles of Incorporation regarding "Excess Stock", the terms, preferences,
conversions or other rights, voting powers, restrictions, limitations as to
dividends or other distributions, qualifications and terms or conditions of
redemption, as permitted by Maryland law. Such rights, powers, restrictions and
limitations could include the right to receive specified dividend payments and
payments on liquidation prior to any such payments being made to the holders of
the shares of Corporation Common Stock. The Board of Directors could authorize
the issuance of shares of Corporation Preferred Stock with terms and conditions
that could have the effect of delaying, deferring or preventing a transaction or
a change of control of the Corporation that might involve a premium price for
holders of shares of Corporation Common Stock over the then market price of such
shares or otherwise be in the best interests of such stockholders.
Since the MGCL requires that the Articles of Incorporation fix the maximum
number of shares that are authorized for issuance by the Board of Directors
without further amendment by the stockholders of the Corporation, the authorized
capital of the Corporation authorizes a significantly greater number of shares
than will be issued upon the Merger in order to anticipate current and future
needs for acquisitions, financings, employee benefit plans, stock dividends and
splits and for other corporate purposes. In the event of an unsolicited tender
offer or takeover proposal, the increased number of authorized shares could give
the Board of Directors of the Corporation a greater ability to issue shares in
one or more transactions which might impede or deter such offer or proposal.
Similarly, shares of Corporation Preferred Stock could also be issued in a
manner or with such terms, provisions and rights including, but not limited to,
extraordinary voting, dividend, redemption or conversion rights which could make
more difficult, and therefore less likely, a takeover of the Corporation.
The transfer agent and registrar for the Corporation Common Stock will be The
Bank of New York, the Trust's current transfer agent.
Dividends: Subject to the provisions of any series of outstanding Trust
Preferred Shares, the holders of the Trust Common Shares are entitled to receive
dividends as and when declared by the Trustees. Such distributions are to be
made out of the net profits, surplus (including paid-in-surplus), and capital or
assets held by the Trustees. Such distributions may be made even if the paid-in
capital of the Trust, at the time of the dividend, exceeds the net assets of the
Trust based either on their market or book value.
19
Subject to the preferential rights of any other class or series of stock and
to the provisions of the Articles of Incorporation regarding "Excess Stock",
holders of shares of Corporation Common Stock are entitled to receive dividends
as and when authorized and declared by the Board of Directors out of assets
legally available therefor, and to share ratably in the assets of the
Corporation legally available for distribution to its stockholders in the event
of its liquidation, dissolution or winding-up after payment of, or adequate
provision for, all existing debts and liabilities of the Corporation. The only
requirement respecting the payment of dividends under Maryland law is that after
giving effect to the payment of the dividend, the Corporation would be able to
pay its indebtedness as such indebtedness becomes due in the usual course of
business and the Corporation's total assets would not be less than the sum of
the Corporation's total liabilities plus the amount that would be needed if the
Corporation were to be dissolved at the time of the payment in order to satisfy
the preferential rights, upon dissolution, of stockholders whose preferential
rights on dissolution are superior to those receiving the dividend payment.
Ownership Limitation; Excess Stock: For an entity to qualify as a REIT under
the Code, among other things, not more than 50% in value of its outstanding
capital shares may be owned, directly or indirectly, by five or fewer
individuals (defined in the Code to include certain entities) during the last
half of a taxable year (other than the first year) (the "Five or Fewer
Requirement"), and such shares must be beneficially owned by 100 or more persons
during at least 335 days of a taxable year of 12 months (other than the first
year) or during a proportionate part of a shorter taxable year. Pursuant to the
Code, stock held by most entities, such as, generally, tax-exempt pension trusts
qualifying under Section 401(a) of the Code (subject to certain limited
exceptions), United States investment companies registered under the Investment
Company Act of 1940, partnerships, trusts and corporations, will be attributed
to the beneficial owners (or, as the case may be, beneficiaries) of such
entities for purposes of the Five or Fewer Requirement (i.e., the beneficial
owners, or beneficiaries, of such entities will be deemed to own their
respective proportionate interests, as specifically determined, in the stock of
the REIT). See "Certain Tax Consequences of the Plan of Reorganization."
In order to protect the Trust against the risk of losing its REIT status due
to a concentration of ownership among its shareholders, the Declaration of Trust
contains an "Excess Shares" provision, which provides that no person shall
acquire ownership of Trust Common Shares exceeding 9.9% of the total outstanding
Trust Common Shares (the "Shares Ownership Limit"). Trust Common Shares owned by
a person in excess of the Shares Ownership Limit shall be deemed "Excess
Shares." The Trustees, by notice to the holder thereof, may redeem any or all
shares that are Excess Shares (including Trust Common Shares that remain or
become Excess Shares because of a decrease in the outstanding Trust Common
Shares resulting from such redemption), and from and after the date of such
notice of redemption (the "Redemption Date"), the holder of the Trust Common
Shares called for redemption shall cease to be entitled to dividends, voting
rights and other benefits with respect to such Trust Common Shares, except for
the right to receive payment by the Trust of the redemption price for such
shares (the "Redemption Price"). The Redemption Price for each Excess Share
called for redemption shall be equal to the fair market value of such share as
reflected in the latest bid quotation for the Trust Common Shares (if then
traded over-the-counter) or the closing sale price (if listed on a national
securities exchange) of Trust Common Shares as of the business day preceding the
day on which the notice of redemption is sent or, if no quotations or closing
sales price for Trust Common Shares are available, at a price determined in good
faith by the Trustees. The right of redemption does not apply to Excess Shares
or additional Excess Shares acquired as a result of an offer made for all
outstanding Trust Common Shares.
The Board of Trustees has determined that the current beneficial ownership by
Mr. Charles J. Urstadt, Chairman and Chief Executive Officer, of Trust Common
Shares does not present a risk of the Trust losing its REIT status and,
therefore, has determined not to redeem such shares.
The ownership restrictions contained in the Declaration of Trust may have the
effect of precluding acquisitions of control of the Trust unless the Trustees
determine that maintenance of REIT status is no longer in the best interests of
the Trust.
A similar "Excess Shares" provision is included in the Articles of
Incorporation of the Corporation. Subject to certain exceptions, the Articles of
Incorporation provide that no holder may acquire, directly or indirectly, or be
deemed to acquire by virtue of the attribution provisions of the Code, any class
or
20
series of capital stock of the Corporation with an aggregate value in excess of
7.5% of the aggregate value of all outstanding stock of the Corporation (the
"Ownership Limit"). Any transfer of shares of capital stock or any security
convertible into shares of capital stock that would create a direct or indirect
ownership of shares of capital stock in excess of the Ownership Limit or that
would result in the disqualification of the Corporation as a REIT shall be null
and void, and the intended transferee will acquire no rights to the shares of
capital stock. The foregoing restrictions on transferability and ownership will
not apply if the Board of Directors determines that it is no longer in the best
interests of the Corporation to attempt to qualify, or to continue to qualify,
as a REIT. The Board of Directors may, in its sole discretion, waive the
Ownership Limit if evidence satisfactory to the Board of Directors and the
Corporation's tax counsel is presented that the changes in ownership will not
then or in the future jeopardize the Corporation's REIT status and the Board of
Directors otherwise decides that such action is in the best interests of the
Corporation.
Shares of capital stock owned, or deemed to be owned, or transferred to a
stockholder in excess of the Ownership Limit will automatically be converted
into shares of "Excess Stock" that will be transferred, by operation of law, to
the Corporation as trustee of a trust for the exclusive benefit of the
transferees to whom such shares of capital stock may be ultimately transferred
without violating the Ownership Limit. While the Excess Stock is held in trust,
it will not be entitled to vote, it will not be considered for purposes of any
stockholder vote or the determination of a quorum for such vote, and except upon
liquidation it will not be entitled to participate in dividends or other
distributions. Any distribution paid to a proposed transferee of Excess Stock
prior to the discovery by the Corporation that capital stock has been
transferred in violation of the provision of the Corporation's Articles of
Incorporation shall be repaid to the Corporation upon demand. The Excess Stock
is not treasury stock, but rather constitutes a separate class of issued and
outstanding stock of the Corporation. The original transferee- stockholder may,
at any time the Excess Stock is held by the Corporation in trust, transfer the
interest in the trust representing the Excess Stock to any person whose
ownership of shares of Corporation Common Stock exchanged for such Excess Stock
would be permitted under the Ownership Limit, at a price not in excess of (i)
the price paid by the original transferee-stockholder for the shares of
Corporation Common Stock that were exchanged into Excess Stock, or (ii) if the
original transferee-stockholder did not give value for such shares (e.g., the
shares were received through a gift, devise or other transaction), the average
closing price for the class of stock from which such shares of Excess Stock were
converted for the ten days immediately preceding such sale, gift or other
transaction. Immediately upon the transfer to the permitted transferee, the
Excess Stock will automatically be converted back into shares of Corporation
Common Stock from which it was converted. If the foregoing transfer restrictions
are determined to be void or invalid by virtue of any legal decision, statute,
rule or regulation, then the intended transferee of any shares of Excess Stock
may be deemed, at the option of the Corporation, to have acted as an agent on
behalf of the Corporation in acquiring the Excess Stock and to hold the Excess
Stock on behalf of the Corporation.
In addition, the Corporation will have the right, for a period of 90 days
during the time any shares of Excess Stock are held by the Corporation in trust,
to purchase all or any portion of the Excess Stock from the original
transferee-stockholder at the lesser of (i) the price initially paid for such
shares by the original transferee- stockholder, or if the original
transferee-stockholder did not give value for such shares (e.g., the shares were
received through a gift, devise or other transaction), the average closing price
for the class of stock from which such shares of Excess Stock were converted for
the ten days immediately preceding such sale, gift or other transaction , and
(ii) the average closing price for the class of stock from which such shares of
Excess Stock were converted for the ten trading days immediately preceding the
date the Corporation elects to purchase such shares. The 90-day period begins on
the date notice is received of the violative transfer if the original
transferee-stockholder gives notice to the Corporation of the transfer or, if no
such notice is given, the date the Board of Directors determines that a
violative transfer has been made.
These restrictions will not preclude the settlement of any transaction
entered into through the facilities of the NYSE or of any other stock exchange
on which shares of stock of the Corporation may be listed. The fact that the
settlement of any transaction is permitted shall not negate the effect of any
other aspect of the Excess Shares provision, and any transferee in such a
transaction and the shares so transferred shall be subject to all of the other
provisions and limitations contained in the Excess Shares provision. Each stock-
21
holder shall upon demand be required to disclose to the Corporation in writing
any information with respect to the direct, indirect and constructive ownership
of capital stock as the Board of Directors deems necessary to comply with the
provisions of the Code applicable to REITs, to comply with the requirements of
any taxing authority or governmental agency or to determine any such compliance.
As in the case of the Trust, the Board of Directors of the Corporation has
determined on the basis of evidence and satisfactory assurances provided by him
that the beneficial ownership by Mr. Charles J. Urstadt, Chairman and Chief
Executive Officer of the Trust, of the shares of Corporation Common Stock to be
issued in the Merger does not jeopardize the qualification of the Corporation as
a REIT and, therefore, has determined that the Ownership Limit should not apply
to the shares of Corporation Common Stock owned by him. However, the Board of
Directors will retain the authority under the Articles of Incorporation to
revoke such exemption if it determines that such revocation is necessary to
preserve the qualification of the Corporation as a REIT or otherwise in its sole
discretion.
The ownership restrictions contained in the Articles of Incorporation may
have the effect of precluding acquisitions of control of the Corporation unless
the Board of Directors determines that maintenance of REIT status is no longer
in the best interests of the Corporation.
Meetings of Stockholders: The Declaration of Trust provides for an annual
meeting of shareholders to be held each year at such time and at such place as
the Trustees or the Bylaws may determine. Special meetings of shareholders may
be called by the President or by two Trustees, or, subject to the provisions of
any series of Trust Preferred Shares then outstanding, upon the written request
of the holders of 25% of the Trust Common Shares then outstanding and entitled
to vote at such meeting.
The Bylaws of the Corporation provide for annual meetings of stockholders to
be held on such day in each year as may be established from time to time by the
Board of Directors. Special meetings of stockholders may be called by (i) the
Chairman of the Board or the President, (ii) a majority of the Board of
Directors or (iii) stockholders entitled to cast at least a majority of the
votes entitled to be cast at the meeting.
Advance Notice of Stockholder Proposals and Director Nominations: Under the
Bylaws of the Trust, any shareholder may propose business to be considered at
the Annual Meeting of shareholders provided notice thereof is delivered to the
principal executive offices of the Trust not less than 40 days prior to the date
of the Annual Meeting. Shareholders may also nominate individuals for election
as Trustees provided notice thereof (together with relevant personal details of
the individual(s) concerned) are submitted in writing to the Secretary of the
Trust not less than 60 days prior to the meeting at which the election of
Trustees is to be held.
Under the Corporation's Bylaws, in order to have a stockholder proposal or
director nomination considered at an annual meeting of stockholders,
stockholders are generally required to deliver certain information concerning
themselves and their stockholder proposal or director nomination not less than
75 days nor more than 120 days prior to the anniversary date of the immediately
preceding annual meeting (the "Anniversary Date"); provided, however, that in
the event the annual meeting is scheduled to be held on a date more than 30 days
before or more than 60 days after the Anniversary Date, notice must be so
delivered not later than the close of business on the later of (i) the 75th day
prior to the scheduled date of such annual meeting or (ii) the 15th day after
public disclosure of the date of such meeting. Failure to comply with such
timing and informational requirements will result in such proposal or director
nomination not being considered at the annual meeting. The purpose of requiring
stockholders to give the Corporation advance notice of nominations and other
business, and certain information relating thereto, is to ensure that the
Corporation and its stockholders have sufficient time and information to
consider any matters that are proposed to be voted on at an annual meeting, thus
promoting orderly and informed stockholder voting. Such Bylaw provisions could
have the effect of precluding a contest for the election of directors or the
stockholder proposals if the proper procedures are not followed, and of delaying
or deferring a third party from conducting a solicitation of proxies to elect
its own slate of directors or to have its own proposals approved.
Action by Consent of Stockholders: The Declaration of Trust provides that any
action required or permitted to be taken by shareholders of the Trust may be
effected by a consent in writing signed by the holders of all of the outstanding
Trust Common Shares entitled to vote on the matter. Similarly, the
22
MGCL and the Company's Articles of Incorporation provide that any action
required or permitted to be taken by stockholders of a corporation may be
effected by a consent in writing signed by the holders of all of the outstanding
shares of Corporation Common Stock entitled to vote on the matter.
Board of Trustees of the Trust Compared to Board of Directors of the
Corporation: The Declaration of Trust provides that the number of Trustees shall
generally be established by the Trustees, provided that there shall be no less
than three and no more than fifteen Trustees. Pursuant to the Declaration of
Trust, but subject to any contrary provisions of any series of Trust Preferred
Shares, a Trustee may be removed, with or without cause, by the vote of the
holders of two-thirds of the Trust Common Shares then outstanding and entitled
to vote in the election of Trustees. Vacancies in the office of a Trustee may be
filled by a written appointment signed by a majority of the Trustees. Trustees
are elected for staggered three-year terms.
The Corporation's Articles of Incorporation provide that the number of
Directors of the Corporation initially shall be seven, which number may
thereafter be increased or decreased from time to time by the Directors pursuant
to the Corporation's Articles of Incorporation or Bylaws; provided, however,
that the total number of Directors shall not be fewer than three nor greater
than fifteen. The Directors of the Corporation will be divided into three
classes to serve staggered three-year terms.
The Articles of Incorporation of the Corporation also provide that, subject
to the rights, if any, of any series of Corporation Preferred Stock to elect
directors and to remove any director whom the holders of any such stock have the
right to elect, any director may be removed from office (i) only with cause and
(ii) only by the affirmative vote of the holders of at least two-thirds of the
outstanding Corporation Common Stock then entitled to vote in the election of
directors. The Articles of Incorporation additionally provide that any vacancy
occurring on the Board of Directors (other than as a result of the removal of a
director) shall be filled solely by a majority of remaining directors, except
that a vacancy resulting from an increase in the number of directors shall be
filled by a majority of the entire Board of Directors. A vacancy resulting from
the removal of a director may be filled by the affirmative vote of a majority of
all the votes cast at a meeting of the stockholders called for that purpose.
The provisions of the Articles of Incorporation relating to the removal of
directors and the filling of vacancies on the Board could preclude a third party
from removing incumbent directors without cause and simultaneously gaining
control of the Board by filling, with its own nominees, the vacancies created by
such removal. These provisions also limit the power of stockholders generally,
even those with a majority interest in the Corporation, to remove incumbent
directors and to fill vacancies on the Board without the support of the
incumbent directors.
The Declaration of Trust additionally provides that the Trustees may, by a
majority vote, appoint a Board of Consultants to provide the Trustees with such
advice as the Trustees may request with respect to the performance of their
duties as Trustees. The Board of Consultants, however, has no binding authority
or power over the Board of Trustees or the Trust. Similar to the Declaration of
Trust, the Bylaws of the Corporation also provide for the establishment of a
Board of Consultants to provide such advice with respect to the business and
affairs of the Corporation as the Directors may request. The Board of
Consultants, however, will have no binding authority or power over the Board of
Directors or the Corporation.
Amendment of Constitutional Documents of the Trust and the Corporation: The
Declaration of Trust may generally be amended by the affirmative vote of the
holders of not less than a majority of the aggregate number of Trust Common
Shares then outstanding and entitled to vote thereon, or by an instrument in
writing signed by a majority of the Trustees and the holders of a majority of
such Trust Common Shares. The Bylaws of the Trust may be amended or repealed at
any meeting of the Trustees by an affirmative vote of a majority of the
Trustees.
Under the Corporation's Articles of Incorporation, the affirmative vote of a
majority of the Board of Directors and a majority of those members of the Board
of Directors who are "Continuing Directors," as defined below, is required to
amend any provision of the Articles of Incorporation. In addition to such vote
of the Board of Directors, the affirmative vote of the holders of at least
two-thirds of the shares of Corporation Common Stock outstanding and entitled to
vote thereon will be required to
23
amend any of the provisions of Article VI (Board of Directors), Article IX
(Limitations on Transfer and Ownership), Article XII (Indemnification), Article
XIII (Limitation of Liability), Article XIV (Stockholder Vote Required for
Certain Transactions), Article XVI (Amendment of Bylaws by Directors) and
Article XVII (Amendment of Articles). In all other cases, the vote of a majority
of the shares of Corporation Common Stock outstanding and entitled to vote
thereon is necessary to amend the Corporation's Articles of Incorporation. A
"Continuing Director" is defined in the Corporation's Articles of Incorporation
as (i) any member of the Board of Directors who was a duly appointed Director
immediately prior to the effective time of the Merger or (ii) another member of
the Board of Directors whose nomination for election to the Board of Directors
was recommended or approved by vote of a majority of the Directors then in
office who are Directors referred to in clause (i) above or this clause (ii).
The Board of Directors may without a vote of the stockholders, amend the
Corporation's Bylaws and the stockholders of the Corporation will not have the
power to amend the Corporation's Bylaws.
These provisions could make it more difficult for stockholders of the
Corporation to amend the Corporation's Articles of Incorporation and Bylaws.
Consolidation, Merger or Sale of Assets: The Declaration of Trust generally
does not require shareholder approval of any sale, exchange or other disposition
of the assets of the Trust. Any reorganization of the Trust whether through
merger or otherwise, whereby the assets of the Trusts are conveyed to any
corporation, trust, association or organization in exchange for shares,
securities or a beneficial interest therein and pursuant to which the Trust is
terminated, does however require the approval of the holders of a majority of
the aggregate number of outstanding Trust Common Shares entitled to vote
thereon.
The MGCL generally provides that the Board of Directors of a Maryland
corporation must approve a consolidation, merger, share exchange or transfer of
all or substantially all of the Corporation's assets not in the ordinary course
of business and that the stockholders thereafter must approve such
consolidation, merger, share exchange or transfer of assets by a vote of
two-thirds of all the votes entitled to be cast on the matter at a meeting of
the stockholders, except that the articles of incorporation may provide for a
greater or lesser percentage vote, but not less than a majority of all the votes
entitled to be cast on the matter. The Corporation's Articles of Incorporation
provide that any consolidation, merger, share exchange or transfer of all or
substantially all of the assets shall first be approved by the affirmative vote
of a majority of the Board of Directors of the Corporation (including a majority
of the Continuing Directors) and thereafter shall be approved by a vote of
two-thirds of all the votes entitled to be cast on such matter at a meeting of
the stockholders.
These provisions could make it more difficult for the Corporation to enter
into any consolidation, merger or sale of assets as described above.
Dissolution/Termination: The Trust's Declaration of Trust provides that the
Trust may be terminated by the affirmative vote of the holders of a majority of
the aggregate number of outstanding Trust Common Shares entitled to vote
thereon, or by an instrument in writing signed by a majority of the Trustees and
the holders of a majority of such Trust Common Shares.
By comparison, the MGCL generally permits the dissolution of a corporation if
approved (i) first by the affirmative vote of a majority of the entire Board of
Directors declaring such dissolution to be advisable and directing that the
proposed dissolution be submitted for consideration at an annual or special
meeting of stockholders, and (ii) upon proper notice being given as to the
purpose of the meeting, then by the stockholders of the corporation by the
affirmative vote of two-thirds of all the votes entitled to be cast on the
matter.
Limitations on Dissenters' Appraisal Rights: Neither the Declaration of Trust
nor any Massachusetts statute contains provisions entitling a shareholder of the
Trust who dissents from any action taken with the authorization of a majority or
any other vote of the shareholders to receive an appraisal and payment of the
fair value for such dissenting shareholder's Trust Common Shares. Massachusetts
counsel to the Trust has additionally advised the Board of Trustees that the
Trust's shareholders will not be entitled to dissenters' appraisal rights in
connection with the Merger whether through Massachusetts statute, common law or
otherwise.
24
Generally, so long as the shares of the Corporation Common Stock are listed
on a national stock exchange, holders of such shares who dissent from certain
corporate transactions have no right under the MGCL to an appraisal and payment
of the fair value of their shares, except to the limited extent set forth below
under "Certain Provisions of Massachusetts and Maryland Law." Absent such
listing, as a general matter, the MGCL provides that a dissenting stockholder of
a Maryland corporation has the right to demand and receive the fair value of
such holder's stock, subject to complying with specified procedures, if the
corporation consolidates or merges with, or exchanges its shares for shares of,
another corporation, or sells substantially all of its assets, or amends its
charter in a way that alters the contract rights expressly set forth in the
charter of any outstanding stock and substantially adversely affects the
stockholder's rights (unless the corporation reserves the right to make such an
amendment in its Articles of Incorporation, in which event stockholders will not
be entitled to exercise dissenters' rights in connection with any such
amendment). Because the Corporation has reserved the right to amend its Articles
of Incorporation in a way which alters the contract rights of holders of any
outstanding capital stock, stockholders will not be entitled to exercise
dissenter's rights in connection with any such amendment.
Limitation of Liability and Indemnification of Trustees and Directors:
Stockholders and directors of a corporation are generally not responsible for
its debts and obligations. In contrast, title to the property of a Massachusetts
business trust like the Trust is vested in the trustees, and the trustees are
personally responsible for the debts and obligations of the trust, although in
the specific context of the Trust, the Declaration of Trust provides that (i)
the Trustees shall have no such liability unless they are considered to have
acted in bad faith or with willful malfeasance, reckless disregard of their
duties or gross negligence, or not to have acted in good faith in the reasonable
belief that their actions were in the best interests of the Trust, and (ii) the
Trustees shall be and are entitled to indemnification from the Trust assets to
the extent that they meet such required standards of conduct.
By comparison, the directors of a Maryland corporation are not generally
personally responsible for the debts and obligations of the corporation. In
addition, the Corporation's Articles of Incorporation limit the liability for
monetary damages of the Corporation's directors and officers to the Corporation
and its stockholders to the fullest extent permitted from time to time by the
MGCL. The MGCL presently permits the liability of directors and officers to a
corporation or its stockholders for monetary damages to be limited, except (i)
to the extent that it is proved that the director or officer actually received
an improper benefit or profit, for the amount of the benefit or profit actually
received, or (ii) if a judgment or other final adjudication is entered in a
proceeding based on a finding that the director's or officer's actions or
failure to act was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated in the proceeding. This provision
does not limit the ability of the Corporation or its stockholders to obtain
other relief, such as an injunction or rescission.
The Corporation's Bylaws require the Corporation to indemnify its directors,
officers and certain other parties to the fullest extent permitted from time to
time by the MGCL. The MGCL permits a corporation to indemnify its directors,
officers and certain other parties against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection with
any proceeding to which they may be made a party by reason of their service to
or at the request of the Corporation, unless it is established that the act or
omission of the indemnified party was material to the matter giving rise to the
proceeding and (i) the act or omission was committed in bad faith or was the
result of active and deliberate dishonesty, (ii) the indemnified party actually
received an improper personal benefit, or (iii) in the case of any criminal
proceeding, the indemnified party had reasonable cause to believe that the act
or omission was unlawful.
It is the position of the SEC that indemnification of directors and officers
for liabilities arising under the Securities Act is against public policy and is
unenforceable pursuant to Section 14 of the Securities Act.
Inspection Rights: The Declaration of Trust provides that shareholders of
record shall have the same right to inspect the records of the Trust as a
stockholder of a Massachusetts business corporation has with respect to the
records of a corporation. Under Massachusetts law, a corporation's stockholders
have the right to inspect a corporation's articles of organization, bylaws,
records of all meetings of incorporators and stockholders, and stock and
transfer records, including the stockholders list.
25
Under the MGCL, a corporation's stockholders have the right to inspect and
copy during usual business hours the bylaws, minutes of the proceedings of
stockholders, annual statements of affairs and voting trust agreements on file
at the corporation's principal offices. In addition, any stockholder may request
in writing a statement of all stock and securities issued by the corporation
during a specified period of not more than twelve months before the date of such
request. The MGCL also provides additional inspection rights for stockholders
who individually or together are and for at least six months have been
stockholders of record of at least 5% of the outstanding stock of any class of
the corporation. These rights include (i) the right upon written request to
inspect and copy during usual business hours the corporation's books of account
and its stock ledger, (ii) the right to require the corporation to produce a
statement of affairs verified under oath by an officer that sets forth in
reasonable detail the corporation's assets and liabilities of a reasonably
current date, and (iii) if the corporation does not maintain the original or
duplicate stock ledger at its principal office, the right to obtain from the
corporation a list of stockholders setting forth the name and address of each
stockholder and the number of shares of each class that the stockholder holds,
verified under oath by an officer of the corporation or its transfer agent or
registrar.
CERTAIN PROVISIONS OF MASSACHUSETTS AND MARYLAND LAW
The following summary of certain provisions of Massachusetts and Maryland law
does not purport to be complete and is qualified in its entirety by reference to
Massachusetts and Maryland law.
Business Combination: Under the MGCL, certain "business combinations"
(including a merger, consolidation, share exchange, or, in certain
circumstances, an asset transfer or issuance or reclassification of equity
securities) between a Maryland corporation and any person who beneficially owns
10% or more of the voting power of the corporation's shares or an affiliate of
the corporation who, at any time within the two-year period prior to the date in
question, was the beneficial owner of 10% or more of the voting power of the
then outstanding voting stock of the corporation (an "Interested Stockholder")
or an affiliate thereof are prohibited for five years after the most recent date
on which the Interested Stockholder becomes an Interested Stockholder.
Thereafter, any such business combination must be recommended by the board of
directors of the corporation and approved by the affirmative vote of at least
(i) 80% of the votes entitled to be cast by holders of outstanding voting shares
of the corporation and (ii) two-thirds of the votes entitled to be cast by
holders of outstanding voting shares of the corporation other than shares held
by the Interested Stockholder with whom (or with whose affiliate) the business
combination is to be effected, unless, among other conditions, the corporation's
common stockholders receive a "minimum price" (as defined in the MGCL) for their
shares and the consideration is received in cash or in the same form as
previously paid by the Interested Stockholder for its shares.
These provisions of Maryland law do not apply, however, to business
combinations that are approved or exempted by the board of directors of the
corporation prior to the time that the Interested Stockholder becomes an
Interested Stockholder or if the corporation elects not to be governed in whole
or in part by such provisions by so providing in its original Articles of
Incorporation. The Articles of Incorporation of the Corporation provide that
these provisions of Maryland law will not apply to (i) the Trust or (ii) any
person who as of December 31, 1996, was the beneficial owner of in excess of 20%
of the outstanding shares of the Trust or any such person's affiliates or
associates. By virtue of this provision of the Articles of Incorporation, the
business combination provisions of the MGCL will not apply to combinations of
the Corporation with Mr. Charles J. Urstadt, Chairman and Chief Executive
Officer of the Trust, or to any of his affiliates or associates. Additionally,
the stockholders of a corporation may exempt existing or future Interested
Stockholders from the provisions of Maryland law discussed above by adopting an
amendment to the Articles of Incorporation by a vote of at least 80% of the
votes entitled to be cast by outstanding shares of voting stock of the
corporation voting together as a single class, and 66-2/3% of the votes entitled
to be cast by persons (if any) who are not Interested Stockholders. Such an
amendment may not be effective until 18 months after the vote of stockholders
and may not apply to any business combination of the corporation with an
Interested Stockholder (or any affiliate of the Interested Stockholder) who
became an Interested Stockholder on or before the date of the vote.
Chapter 110F of the Massachusetts General Law limits the ability of a
Massachusetts corporation to engage in business combinations with "interested
stockholders" (defined as any beneficial owner of 5%
26
or more of the outstanding voting stock of the corporation) unless, among other
things, the corporation's board of directors has given its prior approval to
either the business combination or the transaction that resulted in the
stockholder becoming an "interested stockholder." The Massachusetts statute does
not, however, apply to a Massachusetts business trust in the form and nature of
the Trust.
Control Share Acquisition: The MGCL provides that "control shares" of a
Maryland corporation acquired in a "control share acquisition" have no voting
rights except to the extent approved by a vote of two-thirds of the votes
entitled to be cast on the matter, excluding shares of stock owned by the
acquiror or by officers or directors who are employees of the corporation.
"Control shares" are voting shares of stock that, if aggregated with all other
shares of stock previously acquired by that person, or in respect of which the
acquiror is able to exercise or direct the exercise of voting power (except
solely by virtue of a revocable proxy), would entitle the acquiror to exercise
voting power in electing directors within one of the following ranges of voting
power; (i) one-fifth or more but less than one-third, (ii) one-third or more but
less than a majority, or (iii) a majority of all voting power. Control shares do
not include shares the acquiring person is then entitled to vote as a result of
having previously obtained stockholder approval. A "control share acquisition"
means the acquisition of control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the board of directors to call a special meeting of stockholders to
be held within 50 days of demand to consider the voting rights of the shares. If
no request for a meeting is made, the corporation may itself present the
question at any meeting of stockholders.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute, then,
subject to certain conditions and limitations, the corporation may redeem any or
all of the control shares (except those for which voting rights have previously
been approved) for fair value determined, without regard to voting rights, as of
the date of the last control share acquisition or of any meeting of stockholders
at which the voting rights of such shares are considered and not approved. If
voting rights for control shares are approved at a stockholders meeting and the
acquiror becomes entitled to vote a majority of the shares entitled to vote, all
other stockholders may exercise appraisal rights. The fair value of the shares
as determined for purposes of the appraisal rights may not be less than the
highest price per share paid in the control share acquisition, and certain
limitations and restrictions otherwise applicable to the exercise of dissenters'
rights do not apply in the context of a control share acquisition.
The control share acquisition statute does not apply to shares acquired in a
merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or exempted by a corporation's articles
of incorporation or by-laws. The Bylaws of the Corporation provide that the
control share statute of the MGCL will not apply to any acquisition of stock of
the Corporation by any person who, as of December 31, 1996, owned in excess of
20% of the outstanding Trust Common Shares and, by virtue of the Merger, will
own the same percentage of Corporation Common Stock. As of December 31, 1996,
only Mr. Charles J. Urstadt, Chairman and Chief Executive Officer of the Trust,
beneficially owned in excess of 20% of the outstanding Trust Common Shares.
Chapter 110D of the Massachusetts General Laws also regulates "control share
acquisitions," defined as the acquisition of stock in certain "issuing public
corporations" organized in Massachusetts that increases the voting power of the
acquiror above certain specified levels (i.e. 20%, 33-1/3% and 50%). Again,
however, the applicable restrictions do not apply to a Massachusetts business
trust in the form and nature of the Trust.
CERTAIN TAX CONSEQUENCES OF THE PLAN OF REORGANIZATION
General: The Trust believes it has operated, and the Trust (and, subsequent
to the Merger, the Corporation) intends to continue to operate, in such a manner
as to qualify as a REIT under the Code, but no assurance can be given that it
will at all times so qualify.
27
The provisions of the Code pertaining to REITs are highly technical and
complex. The following is a brief and general summary of certain provisions that
currently govern the federal income tax treatment of the Trust and its
shareholders and that will equally be applicable to the Corporation and its
stockholders. For the particular provisions that govern the federal income tax
treatment of a REIT and its shareholders, reference is made to Section 856
through 860 of the Code and the regulations thereunder. The following summary is
qualified in its entirety by such reference.
Under the Code, if certain requirements are met in a taxable year, a REIT
generally will not be subject to federal income tax with respect to income that
it distributes to its shareholders. If the Trust (or the Corporation) fails to
qualify during any taxable year as a REIT, unless certain relief provisions are
available, it will be subject to tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates, which could have
a material adverse effect upon its shareholders.
In any year in which the Corporation qualifies to be taxed as a REIT,
distributions made to its stockholders out of current or accumulated earnings
and profits will be taxed to stockholders as ordinary income except that
distributions of net capital gains designated by the Corporation as capital gain
dividends will be taxed as long-term capital gain income to the stockholders. To
the extent that distributions exceed current or accumulated earnings and
profits, they will constitute a return of capital, rather than dividend or
capital gain income, and will reduce the basis for the stockholder's securities
with respect to which the distribution is paid or, to the extent that they
exceed such basis, will be taxed in the same manner as gain from the sale of
those securities.
Federal Income Taxes: The Board of Trustees intends the Merger to qualify as
a "reorganization" within the meaning of the Code, which will result in no
recognition of gain or loss to the Trust or to the Corporation or to the
shareholders of the Trust. The basis of each shareholder of the Trust in his
shares of Corporation Common Stock received in exchange for his Trust Common
Shares, and the holding period for such shares of Corporation Common Stock, will
be the same as such shareholder's basis in, and holding period for, his Trust
Common Shares. The basis and holding period for the properties of the Trust
acquired by the Corporation upon the consummation of the Merger will be the same
in the hands of the Corporation as they were in the hands of the Trust. The
Merger should not adversely affect the ability of the Corporation to continue to
qualify as a REIT under the Code.
As a condition to the consummation of the Merger, Coudert Brothers, as tax
counsel to the Trust and to the Corporation, will render an opinion to the Trust
and to the Corporation to the effect that the Merger will qualify as a
"reorganization" within the meaning of the Code and that for federal income tax
purposes the Corporation will be deemed to be the same taxpayer as the Trust.
Such opinion will be based on certain factual assumptions and representations of
officers of the Trust and the Corporation regarding the Trust, the Corporation
and their respective operations. In the event that any of such assumptions or
representations are incorrect, the treatment of the Merger as a "reorganization"
under the Code may be adversely affected.
State Taxes: Each shareholder is encouraged to consult with his or her own
tax advisor to determine whether the tax consequences of the Merger to such
shareholder are the same under applicable income tax laws of the state in which
such shareholder resides as the tax consequences to such shareholder under the
Code.
The Trust has been advised that certain states exempt business trusts from
state franchise or income taxes which are or may be imposed upon corporate
entities, such as the Corporation, that own properties in such states. Based
upon the current level of activities involving the current properties of the
Trust, the Board of Trustees does not expect the Trust to incur a material
increase in state franchise or income taxes.
Shareholders are urged to consult their own tax advisors with respect
generally to the tax consequences arising under Federal law and the laws of any
state, municipality or other taxing jurisdiction, including tax consequences
resulting from such shareholder's own tax characteristics and situation.
VOTE REQUIRED; DISSENTERS' RIGHTS
In accordance with the Declaration of Trust, the Plan of Reorganization
provides that it is a condition of the Merger that the Plan of Reorganization be
approved by the affirmative vote of the holders of not less than a majority of
the aggregate number of Trust Common Shares outstanding and entitled to
28
vote at the Annual Meeting. The Trust's shareholders will not be entitled to
dissenters' rights of appraisal in connection with the Merger. See "Certain
Changes in the Rights of Shareholders resulting from the Plan of
Reorganization."
INTEREST OF CERTAIN PERSONS
As noted under "ELECTION OF TRUSTEES," Mr. Charles J. Urstadt, Chairman and
Chief Executive Officer of the Trust, beneficially owns 1,148,925 Trust Common
Shares constituting approximately 20.43% of the outstanding Trust Common Shares.
If the Plan of Reorganization is approved and the Merger is consummated, the
1,148,925 Trust Common Shares beneficially owned by Mr. Urstadt will be
converted into 1,148,925 shares of Corporation Common Stock, constituting
approximately 20.43% of the outstanding shares of Corporation Common Stock
currently anticipated to be outstanding at the effective time of the Merger.
As noted under "Certain Changes in the Rights of Shareholders Resulting from
the Plan of Reorganization-- Board of Trustees of the Trust Compared to Board of
Directors of the Corporation," the Corporation's Articles of Incorporation
provide that directors of the Corporation may only be removed for cause and only
upon the vote of the holders of two-thirds of the outstanding shares of
Corporation Common Stock. In view of Mr. Urstadt's currently anticipated
percentage ownership of the Corporation Common Stock upon consummation of the
Merger and, depending upon the number of shares of Corporation Common Stock that
are actually voted in connection with any proposal to remove directors for
cause, Mr. Urstadt will control a number of shares of Corporation Common Stock
that may be sufficient to block any such proposal.
In addition, as noted under "Certain Changes in the Rights of Shareholders
Resulting from the Plan of Recapitalization--Amendment of Constitutional
Documents of the Trust and the Corporation; Consolidation, Merger or Sale of
Assets," the Corporation's Articles of Incorporation provide that any amendment
of certain provisions of the Corporation's Articles of Incorporation and any
merger, consolidation or sale of all or substantially all of the assets of the
Corporation will require approval of a majority of the Board of Directors of the
Corporation (including a majority of those members who are Continuing Directors)
and the affirmative vote of the holders of two-thirds of the outstanding shares
of Corporation Common Stock. In view of Mr. Urstadt's currently anticipated
percentage ownership of the Corporation Common Stock upon consummation of the
Merger and, depending upon the number of shares of Corporation Common Stock that
are actually voted in connection with any proposal to amend certain provisions
of the Corporation's Articles of Incorporation or to merge, consolidate or sell
all or substantially all of the Corporation's assets, Mr. Urstadt will control a
number of shares of Corporation Common Stock that may be sufficient to block any
such proposal.
Further, as noted under "Certain Provisions of Massachusetts and Maryland
Law," under the MGCL certain business combinations between the Corporation and
an Interested Stockholder will require the recommendation of the Board of
Directors of the Corporation and the affirmative vote of at least (i) 80% of the
outstanding shares of Corporation Common Stock and (ii) two-thirds of the
outstanding shares of Corporation Common Stock not held by such Interested
Stockholder or its affiliates unless, among other conditions, certain "fair
price" and other conditions are met. In view of Mr. Urstadt's currently
anticipated percentage ownership of the Corporation Common Stock upon
consummation of the Merger, Mr. Urstadt will control a number of shares of
Corporation Common Stock sufficient to block any proposal respecting a business
combination with an Interested Stockholder unless the "fair price" and other
conditions of the MGCL are met.
Mr. Urstadt and all other Trustees and/or executives of the Trust who in the
aggregate hold 1,293,682 Trust Common Shares constituting approximately 23% of
the issued and outstanding Trust Common Shares have notified the Board of
Trustees of their intention to vote FOR each of Proposals 1 through 4 at the
Annual Meeting.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
PLAN OF REORGANIZATION
29
PROPOSAL 2. ELECTION OF TRUSTEES
Pursuant to Section 2.2 of the Declaration of Trust, the Trustees are divided
into three classes serving three-year terms. Three Trustees, comprising Class
III, are to be elected at the 1997 Annual Meeting. Messrs. Robert R. Douglass,
George H.C. Lawrence and Charles J. Urstadt have been nominated for election as
Trustees to hold office until the year 2000 Annual Meeting and until their
successors have been elected and shall qualify. As noted above under "THE PLAN
OF REORGANIZATION", if the Plan of Reorganization is approved and the Merger is
consummated, the Trustees of the Trust will become the directors of the
Corporation serving the same terms and in the same classes with the Corporation
as such persons are then serving with the Trust.
PRINCIPAL OCCUPATION TRUSTEE TERM
FOR THE PAST FIVE YEARS CONTINUOUS TO
AND CURRENT DIRECTORSHIP AGE SINCE EXPIRE
CLASS III
(To be nominated for election by
holders of Common Shares to
serve for three years)
Robert R.
Douglass(C)........... Of Counsel, Milbank, Tweed, Hadley and McCloy; Chairman 65 1991 2000
and Director, Cedel; Retired Vice Chairman and Director,
The Chase Manhattan Corporation (1985 to 1993);
Executive Vice President, General Counsel and Secretary,
The Chase Manhattan Corporation (1976 to 1985); Trustee,
Dartmouth College (1983 to 1993); Chairman, Downtown
Lower Manhattan Association; Chairman of Alliance for
Downtown New York; Member, Board of Managers, The New
York Botanical Garden; Director, Business Council for
the United Nations; Member,
Council on Foreign Relations; Director, Gryphone Holdings,
Inc.; Trustee, Managed Accounts Services Portfolio Trust.
George H.C. Lawrence(C) Chairman, Chief Executive Officer and President, Lawrence 59 1988 2000
Investing Company, Inc. (since 1970); Director, Urstadt
Property Company, Inc.; Trustee, Sarah Lawrence College;
Director, Westchester County Association; Senior Vice
President and Director, Kensico Cemetery; Director, CLX
Energy.
Charles J. Urstadt(E). Chairman of the Board of Trustees and Chief Executive 68 1975 2000
Officer of the Trust (since September 1989); Chairman,
President and Director, Urstadt Property Company, Inc. (a
real estate investment corporation); Trustee Emeritus,
Pace University; Advisory Director, Putnam Trust Company;
Trustee, Teacher's Insurance and Annuity Association.
Terms of office of the four Trustees named below will continue until the
Annual Meeting in the years indicated.
30
PRINCIPAL OCCUPATION TRUSTEE TERM
FOR THE PAST FIVE YEARS CONTINUOUS TO
AND CURRENT DIRECTORSHIP AGE SINCE EXPIRE
CLASS I
(Term of Office expires in 1998)
E. Virgil Conway(C)(E) Chairman, Metropolitan Transportation Authority (since 67 1989 1998
1995); Former Chairman, Financial Accounting Standards
Advisory Council (1992-1995); Financial Consultant and
Corporate Director (since January 1989); Chairman and
Director, The Seamen's Bank for Savings, FSB (1969-1989),
Trustee, Consolidated Edison Company of New York, Inc.;
Director, Union Pacific Corporation; Trustee, Phoenix
Home Life Mutual Funds; Trustee, Atlantic Mutual
Insurance Company; Director, Centennial Insurance
Company; Director, Trism, Inc.; Director, AccuHealth,
Inc.; Chairman, New York Housing Partnership Development
Corporation; Vice Chairman, Academy of Political Science;
Trustee, Pace University.
CLASS II
(Term of Office expires in 1999)
Peter Herrick(A)(E) . Retired Vice Chairman (1990-1992) and Director, The Bank 69 1990 1999
of New York; President and Chief Operating Officer, The
Bank of New York (February 1982 to June 1990); President
and Director, The Bank of New York Company, Inc.
(February 1984 to March 1992); Member, New York State
Banking Board (June 1990 to April 1993); Director, BNY
Hamilton Funds.
Paul D. Paganucci(A). Chairman, Ledyard National Bank (since April 1991); 65 1984 1999
Chairman of the Executive Committee of W.R. Grace & Co.
(July 1989 to March 1991); Vice Chairman, W.R. Grace &
Co. (November 1986 to July 1989); Executive Vice
President, W.R. Grace & Co. (January 1986 to November
1986); formerly Vice President and Treasurer of Dartmouth
College (July 1977 to December 1985); Director, Filene's
Basement, Inc.; Director, Allmerica Securities Trust,
Inc.; Director, IGI, Inc.; Trustee, Colby College;
Director, The Grace Institute.
James O. York(A) .... Real Estate Counselor (since 1988); Retired in 1987 as 68 1979 1999
President of R. H. Macy Properties Division and as Senior
Vice President and Director of R.H. Macy Co., Inc.;
Trustee, The International Council of Shopping Centers
Education and Research Foundation; Trustee, Corporate
Property Investors.
- ----------
(A) Member of Audit Committee
(C) Member of Compensation Committee
(E) Member of Executive Committee
31
During the fiscal year ended October 31, 1996, the Trustees held 4 meetings.
The Trustees have three standing committees: an Audit Committee, an Executive
Committee and a Compensation Committee. Each Trustee attended at least 75% of
the aggregate total number of meetings held during the fiscal year by the
Trustees and by all committees of which such Trustee is a member.
The Audit Committee held 2 meetings during the fiscal year ended October 31,
1996. The Audit Committee recommends to the Trustees the independent public
accountants to be engaged by the Trust, reviews with the Trust's independent
public accountants and management of the Trust's internal accounting procedures
and controls, and reviews with the Trust's independent public accountants the
scope and results of the auditing engagement. Messrs. Paul D. Paganucci, Peter
Herrick and James O. York are the current members of the Audit Committee.
The Executive Committee held no meetings during the fiscal year ended October
31, 1996. In general, the Executive Committee may exercise such powers of the
Trustees between meetings of the Trustees as may be delegated to it by the
Trustees (except for certain powers of the Trustees which may not be delegated).
Messrs. E. Virgil Conway, Peter Herrick and Charles J. Urstadt are the current
members of the Executive Committee.
The Compensation Committee, which makes recommendations to the Trustees
concerning compensation and administers the Trust's Stock Option Plan and, if
approved by shareholders, the Restricted Stock Plan (see Proposal 3), held 2
meetings during the fiscal year ended October 31, 1996. Messrs. E. Virgil
Conway, George H.C. Lawrence and Robert R. Douglass are the current members of
the Compensation Committee.
The Trustees do not have a nominating committee but act as a group on such
matters.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of the
Securities Exchange Act of 1934, as amended, requires the Trustees and officers,
and persons who own more than 10% of a registered class of the Trust's equity
securities, to file initial reports of ownership and reports of changes in
ownership of such equity securities with the SEC. Such persons are also required
by SEC regulations to furnish the Trust with copies of all Section 16(a) forms
they file. Based solely on a review of the copies of such forms furnished to the
Trust, or written representations that no Forms 5 were required, the Trust
believes that, with respect to the period from November 1, 1995 through October
31, 1996, its Trustees, officers and greater than 10% beneficial owners complied
with all Section 16(a) filing requirements.
At the Annual Meeting, the shareholders of the Trust will be requested to
elect three Trustees, comprising Class III. The affirmative vote of the holders
of not less than a majority of the Trust Common Shares entitled to vote and be
present, in person or by properly executed proxy, at the Annual Meeting will be
required to elect a Trustee.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
NOMINEES FOR ELECTION AS TRUSTEES.
SECURITY OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT
The following tables set forth certain information as of January 27, 1997
available to the Trust with respect to the shares of the Trust (i) held by those
persons known to the Trust to be the beneficial owners (as determined under the
rules of the SEC) of more than 5% of the Trust's Common Shares then outstanding
and (ii) held by each of the Trustees, each of the executive officers named in
the Summary Compensation Table below, and by all of the Trustees and executive
officers as a group:
32
5% BENEFICIAL OWNERS
COMMON SHARES
NAME AND ADDRESS BENEFICIALLY PERCENT OF
OF BENEFICIAL OWNER OWNED OF CLASS
- ----------------------------------------- ------------------ ------------
Charles J. Urstadt(1).................... 1,148,925 20.43%
HRE Properties
321 Railroad Avenue
Greenwich, Connecticut 06830
Countryside Square Limited
Partnership(2)........................... 600,000 10.67%
c/o HRE Properties
321 Railroad Avenue
Greenwich, Connecticut 06830
Grace & White, Inc. (3).................. 291,400 5.18%
515 Madison Avenue
Suite 1700
New York, New York 10022
- ----------
(1) Of these shares, 15,000 are owned by Urstadt Property Company, Inc., a
company of which Mr. Urstadt is the president, a director and a principal
stockholder, 900,000 shares are owned by two irrevocable trusts established for
Mr. Urstadt's children and 40,000 shares are owned by Elinor Urstadt, Mr.
Urstadt's wife. The figure excludes 98,750 shares issuable upon exercise of
options which are not currently exercisable and will not become exercisable
within 60 days, and includes 145,000 shares issuable upon exercise of options
exercisable within 60 days. See "Compensation and Transactions with Management
and Others" below. Also excludes 25,000 cash appreciation rights, all of which
are exercisable within 60 days.
(2) Pursuant to the terms of a Limited Partnership Agreement of Countryside
Square Limited Partnership (the "Partnership") dated as of November 22, 1996
(the "Partnership Agreement") by and among the Trust, as general partner, and
the limited partners signatory thereto, the limited partners contributed to the
capital of the Partnership the 600,000 Trust Common Shares previously held by
such limited partners. As the general partner of the Partnership, the Trust may
be deemed to beneficially own the 600,000 Trust Common Shares held by the
Partnership.
(3) Based upon information contained in a Schedule 13G filed with the SEC on
February 14, 1996.
33
TRUSTEES AND OFFICERS
COMMON SHARES
BENEFICIALLY PERCENT
NAME OWNED OF CLASS
Charles J. Urstadt..................................... 1,148,925 (1) 20.43%
Willing L. Biddle...................................... 18,200 (7) *
E. Virgil Conway....................................... 11,500 (2)(3) *
Robert R. Douglass .................................... 7,600 (3)(8) *
Peter Herrick.......................................... 17,000 (2)(3) *
George H.C. Lawrence................................... 24,400 (3)(10) *
Paul D. Paganucci...................................... 7,000 (2)(3) *
James O. York.......................................... 6,100 (2)(3) *
James R. Moore......................................... 34,041 (4)(6) *
Raymond P. Argila...................................... 19,916 (4)(5) *
Trustees and executive officers as a group
(10 persons)........................................... 1,293,682 (9) 23.0%
- ----------
* Less than 1%
(1) Includes 15,000 shares owned by Urstadt Property Company, Inc., 900,000
Common Shares owned by two irrevocable trusts established for Mr. Urstadt's
adult children, 40,000 Common Shares owned by Elinor Urstadt, Mr. Urstadt's
wife. Excludes 101,375 Common Shares issuable upon exercise of options
which are not currently exercisable and will not become exercisable within
60 days, and includes 193,125 Common Shares issuable upon exercise of
options exercisable within 60 days. Also excludes 25,000 cash appreciation
rights all of which are exercisable within 60 days. See "Compensation and
Transactions with Management and Others" below.
(2) Includes 5,000 Common Shares issuable upon exercise of options which are
currently exercisable or which will become exercisable within 60 days. See
"Compensation and Transactions with Management and Others" below.
(3) Excludes 1,000 shares issuable upon exercise of options which are not
currently exercisable and will not become exercisable within 60 days.
(4) Represents Common Shares issuable upon exercise of options which are
currently exercisable or which will become exercisable within 60 days. See
"Compensation and Transactions with Management and Others" below.
(5) Excludes 11,750 Common Shares issuable upon exercise of options which are
not currently exercisable and will not become exercisable within 60 days.
(6) Excludes 15,125 Common Shares issuable upon exercise of options which are
not currently exercisable and will not become exercisable within 60 days.
(7) Includes 5,500 Common Shares issuable upon exercise of options which are
currently exercisable or which will become exercisable within 60 days.
Excludes 13,500 Common Shares issuable upon exercise of options which are
not currently exercisable and will not become exercisable within 60 days.
Mr. Biddle is the son-in-law of Mr. Urstadt.
(8) Includes 4,000 Common Shares issuable upon exercise of options which are
currently exercisable or will become exercisable within 60 days. See
"Compensation and Transactions with Management and Others" below.
(9) Excludes 147,750 Common Shares issuable upon exercise of options which are
not currently exercisable and will not become exercisable within 60 days,
but includes 277,582 Common Shares issuable upon exercise of options which
are exercisable within 60 days. Also excludes 25,000 cash appreciation
rights all of which are exercisable within 60 days.
(10) Includes 1,000 Common Shares issuable upon exercise of options which are
currently exercisable or which will become exercisable within 60 days.
34
COMPENSATION AND TRANSACTIONS WITH MANAGEMENT AND OTHERS
EXECUTIVE OFFICER COMPENSATION
There is set forth below information concerning the annual and long-term
compensation paid by the Trust during each of the three years ended October 31,
1996 to those persons who were, at October 31, 1996 (i) the chief executive
officer and (ii) the three other most highly compensated executive officers of
the Trust constituting the only persons who were serving as executive officers
at such date.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS/PAYOUTS
- ----------------------------------------------------------------------- --------------------------------------
# ALL
NAME AND PRINCIAPL OPTIONS/ OTHER
POSITION YEAR SALARY BONUS TOTAL SARS COMPENSATION* TOTAL
- --------------------------- ------- ----------- ---------- ----------- ---------- --------------- -----------
Charles J. Urstadt,........ 1996 $240,000 $50,000 $290,000 52,000 $7,500 $297,500
Chief Executive Officer 1995 $225,000 $40,000 $265,000 50,000 $7,500 $272,500
1994 $215,000 $20,000 $235,000 50,000 $7,500 $242,500
Willing L. Biddle,......... 1996 $146,250 $15,000 $161,250 9,500 $7,500 $168,750
President 1995 $100,813 $10,000 $110,813 5,000 $5,541 $116,354
1994 $ 80,732 $ 3,500 $ 84,232 3,250 $4,213 $ 88,445
James R. Moore,............ 1996 $147,292 $15,000 $162,292 8,500 $7,500 $169,792
Executive Vice President 1995 $138,813 $10,000 $148,813 7,000 $7,440 $156,253
1994 $132,415 $ 6,500 $138,915 6,500 $6,946 $145,861
Raymond P. Argila, ........ 1996 $131,167 $10,000 $141,167 6,000 $7,058 $148,225
Senior Vice President 1995 $126,073 $ 5,000 $131,073 6,000 $6,554 $137,627
1994 $121,115 $ 4,500 $125,615 5,500 $6,280 $131,895
- ----------
* Discretionary contribution by the Trust to the Trust's Profit Sharing and
Savings Plan (the "401(k) Plan") allocated to an account of the named executive
officer.
35
TRUSTEE COMPENSATION
Other than Mr. Urstadt, each Trustee is entitled to an annual retainer of
$15,000 and compensation of $1,000 for each Trustee meeting and each committee
meeting attended. Trustees may elect to defer payment of any Trustee fees until
they leave office. The Trust paid annual interest of 7.5% on deferred Trustee
fees during the fiscal year ended October 31, 1996 and currently accrues 7.5%
annual interest on deferred Trustee fees.
EXCESS BENEFIT AND DEFERRED COMPENSATION PLAN
Effective November 1, 1996, the Trustees adopted the HRE Properties Excess
Benefit and Deferred Compensation Plan, a non-qualified deferred compensation
plan. The Plan is intended to provide eligible employees with benefits in excess
of the amounts which may be provided under the Trust's tax-qualified Profit
Sharing and Savings Plan, a 401(K) plan, and to provide such employees with the
opportunity to defer receipt of a portion of their compensation. Participation
is limited to those employees who earn above the limit on compensation under the
Trust's Profit Sharing and Savings Plan, currently $160,000.
Under the Plan, a participant is credited with an amount equal to the
contributions which would have been credited to the participant if the $160,000
compensation limitation under the Profit Sharing and Savings Plan did not apply.
Amounts credited under the Plan vest under the same rules as under the Profit
Sharing and Savings Plan. In addition, each Participant may elect to defer the
receipt of a portion of his or her compensation until a later date. Amounts
credited under the Plan are increased with interest at a rate set from time to
time by the Compensation Committee. In the event of a change of control (as
defined in the Plan), the Compensation Committee may in its discretion
accelerate the vesting of benefits under the Plan.
CHANGE OF CONTROL AGREEMENTS
The Trust has agreements with each of its officers, including Messrs.
Urstadt, Biddle, Moore and Argila under which, in certain circumstances
following a Change of Control of the Trust (as defined in such agreements), the
Trust would pay severance benefits to such persons. If, within 18 months
following the Change of Control, the Trust terminates the executive's employment
other than for cause, or if the executive elects to terminate his employment
with the Trust for reasons specified in the agreement, the Trust will make a
severance payment equal to a portion of such person's base salary, together with
medical and other benefits during such period. The severance payments range from
6 months' to 12 months' salary, plus benefits. Messrs. Urstadt, Biddle, Moore
and Argila would each receive a severance payment equal to their respective
twelve month salaries plus benefits. The salaries of Messrs. Urstadt, Biddle,
Moore and Argila are currently $250,000, $185,000, $160,000 and $137,000
respectively. Each of such agreements has an indefinite term.
STOCK OPTIONS
Under the Trust's Stock Option Plan ("Plan"), 453,665 shares of the Trust's
authorized but unissued Common Shares are reserved for issuance upon the
exercise of options or stock appreciation rights which have been or may be
granted under the Plan. The persons eligible to participate in the Plan are such
key employees of the Trust as may be selected from time to time by the
Compensation Committee in its discretion, as well as non-employee Trustees. The
Plan provides that each Trustee who is not a full-time employee or former
full-time employee of the Trust will automatically be awarded options covering
1,000 shares on April 1 of each year. The Plan is administered by the
Compensation Committee.
The following table sets forth, for the executive officers named in the
Summary Compensation Table, information regarding individual grants of stock
options and stock appreciation rights ("SARs") made under the Plan in the fiscal
year ended October 31, 1996.
36
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS GRANT DATE VALUE
---------------------------------------------------- ------------------
% OF TOTAL
OPTIONS/
SARS
OPTIONS/ GRANTED TO
SARS EMPLOYEES EXERCISE OR GRANT DATE
GRANTED IN FISCAL BASE PRICE EXPIRATION PRESENT VALUE
NAME (#)* YEAR ($/SH) DATE ($)**
- ------------------ ------------ ------------ ------------- ------------ ------------------
Charles J.
Urstadt........... 25,000 30.40% $13.75 11/08/05 $43,750
27,000 32.83% $15.38 06/12/06 $59,670
Willing L.
Biddle............ 3,500 4.26% $13.75 11/08/05 $ 6,125
6,000 7.29% $15.38 06/12/06 $13,260
James R. Moore ... 3,500 4.26% $13.75 11/08/05 $ 6,125
5,000 6.08% $15.38 06/12/06 $11,050
Raymond P.
Argila............ 3,000 3.65% $13.75 11/08/05 $ 5,250
3,000 3.65% $15.38 06/12/06 $ 6,630
* All options granted during the past fiscal year vest over four years. No
options granted during the past fiscal year were granted with related stock
appreciation rights.
** Based on the Black-Scholes option pricing model adapted for use in valuing
executive stock options. The actual value, if any, an executive may realize will
depend on the excess of the stock price over the exercise price on the date the
option is exercised, so that there is no assurance the value realized by an
executive will be at or near the value estimated by the Black-Scholes model. The
estimated values under that model are based on arbitrary assumptions as to
variables such as interest rates, stock price volatility and future dividend
yield.
The Compensation Committee has authorized loans to finance the exercise of
incentive stock options granted to executive officers. The loans have a
five-year term, subject to extension at the discretion of the Compensation
Committee, bear interest at the Base Rate of The First National Bank of Boston
and are secured by a pledge of the related shares. The loans become due on
termination of employment by the Trust, but are automatically extended for seven
months following termination of employment other than for cause, and for 13
months following termination of employment occurring after a Change of Control
of the Trust.
The following table sets forth, for the executive officers named in the
Summary Compensation Table, information concerning the fiscal year-end value of
unexercised options and SARs. No Common Shares of the Trust were acquired by
such executive officers through the exercise of options in fiscal 1996.
AGGREGATE NUMBER OF OPTIONS/SARS EXERCISED IN LAST FISCAL YEAR AND FY-END
OPTION/SARS VALUES
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END (#) AT FY-END ($)
--------------- ----------------
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
- ------------------ --------------- ----------------
Charles J. Urstadt. 193,125/101,375 $449,922/$42,266
Willing L. Biddle.. 5,500/13,500 $ 4,804/$8,602
James R. Moore ... 34,041/15,125 $ 51,513/$10,547
Raymond P. Argila 19,916/11,750 $ 50,794/$9,141
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Board of Trustees Compensation Committee, which is composed of three
independent outside Trustees, is responsible for making recommendations to the
Board concerning compensation and for
37
administering the Trust's Stock Option Plan. The Compensation Committee
considered a variety of factors and criteria in arriving at its recommendations
for compensation of the Trust's executive officers for fiscal 1996.
The Committee believes that compensation should be structured so as to
provide incentives to the Trust's officers to enhance the long-term
profitability of the Trust. Thus, in making its recommendations regarding
compensation, the Committee attempts to align the financial interests of the
Trust's executive officers with those of its shareholders.
Options to purchase the Trust's Common Shares are a key element in the
Trust's compensation program. Since the Trust's Stock Option Plan provides for a
one-year waiting period before options may be exercised and an exercise price of
the Trust's Common Shares at fair market value as of the date of grant,
executive officers benefit from options only when the share price increases. As
a result, options help to motivate executives by providing incentives tied to
shareholder goals. The Committee determined that it was advisable to consider
the grant of options twice a year, so as to provide a more immediate incentive
to loyal employees and align more closely the award of options to job
performance.
In evaluating the potential long-term profitability of the Trust and making
its fiscal 1996 compensation recommendations, the Committee considered stock
price, projected and actual cash flow, leasing activities, new acquisitions and
other factors in arriving at its conclusions. The Committee decided to grant
options pursuant to the Trust's Stock Option Plan to purchase the Trust's Common
Shares to certain executive officers which the Committee believed would provide
such officers with a direct incentive to improve the Trust's profitability and,
consequently, shareholder value.
The Committee believes that the continued focus by the Chief Executive
Officer on financing, acquisitions and sales, leasing and cost containment, in
the face of a highly competitive market, warrants special recognition and that
such focus will position the Trust for potential long-term profitability as this
strategy matures. In light of the leadership by Mr. Urstadt during 1996 in all
areas of management including particularly increasing leasing and undertaking
acquisitions, and sales which has resulted in a 12% improvement in cash flow in
fiscal 1996, the Committee decided to award Mr. Urstadt options to purchase
52,000 of the Trust's Common Shares. The Committee believes that the Chief
Executive Officer should be able to profit directly from future increases in the
value of the Trust's Common Shares which enures to the benefit of all
shareholders.
The Committee compared the annual compensation of Mr. Urstadt with that of
Chief Executive Officers of other REITs in the comparable size category of the
Trust and determined that Mr. Urstadt's current salary was lower than the mean
annual salary of such other Chief Executive Officers. Therefore, the Committee
decided that an increase in Mr. Urstadt's annual salary to $250,000 was
advisable and awarded him a bonus of $50,000 in view of the Trust's continued
improved operating performance.
Compensation Committee
E. Virgil Conway, Chairman
George H.C. Lawrence
Robert R. Douglass
38
OTHER INFORMATION
PERFORMANCE GRAPH
The following graph compares, for the five-year period ended October 31,
1996, the Trust's cumulative total return to its shareholders with the returns
for the NAREIT All REIT Total Return Index published by the National Association
of Real Estate Investment Trusts (NAREIT) and for the S&P 500 Index for the same
period.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG HRE PROPERTIES, THE S&P 500 INDEX AND THE NAREIT ALL-REIT INDEX
CHART
* $100 INVESTED ON 10/31/91 IN STOCK OR INDEX-INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING OCTOBER 31.
39
PROPOSAL 3. THE RESTRICTED STOCK PLAN
The Compensation Committee of the Board of Trustees (the "Compensation
Committee") has proposed the adoption of the Restricted Stock Plan by which
certain key management personnel of the Trust, as selected by the Compensation
Committee, will be granted restricted stock awards, generally on such terms and
conditions as the Compensation Committee may determine. If the Restricted Stock
Plan is approved and the Plan of Reorganization is approved and the Merger is
consummated, the Trust and the Corporation will take such action as may be
necessary to provide that all rights under the Restricted Stock Plan to receive
grants of Trust Common Shares will become substantially identical rights to
receive grants of Corporation Common Stock on substantially identical terms and
conditions as set forth in the Trust's Restricted Stock Plan.
PRINCIPAL PURPOSE OF THE RESTRICTED STOCK PLAN
The principal purpose of the Restricted Stock Plan is to promote the
long-term growth of the Trust by attracting, retaining and motivating key
management personnel possessing outstanding ability and to further the identity
of the interests of such personnel with those of the Trust's shareholders
through stock ownership opportunities.
SUMMARY OF THE RESTRICTED STOCK PLAN
The Restricted Stock Plan is set forth in its entirety as Exhibit B to this
Proxy Statement/Prospectus. The information set forth below is only a summary of
its principal provisions and is qualified in its entirety by Exhibit B.
Grant of Restricted Stock Awards. The Compensation Committee will be
authorized to grant restricted stock awards up to an aggregate of 250,000 Trust
Common Shares. The participants eligible to receive the restricted stock awards
will be selected by the Compensation Committee, in its discretion, from
management personnel who are considered to have significant responsibility for
the growth and profitability of the Trust.
Principal Terms and Conditions of Restricted Stock Awards. Each restricted
stock award will be evidenced by a written agreement, executed by both the
relevant participant and the Trust, setting forth all the terms and conditions
applicable to such award as determined by the Compensation Committee. Such terms
and conditions shall include (i) the length of the restricted period of the
award, (ii) the restrictions applicable to the award, including (without
limitation) the employment status rules governing forfeiture, and the
prohibition against the sale, assignment, transfer, pledge or other encumbrance
of the restricted stock during the restricted period, and (iii) the eligibility
to share in dividends and other distributions paid to the Trust's shareholders
during the restricted period.
Lapse of Restrictions. If the employment of a participant shall be terminated
prior to the lapse of the restricted period by reason of death or disability,
the restrictions shall lapse on such date. If the employment of a participant
shall be terminated prior to the lapse of the restricted period by reason of
retirement, the restricted period will continue as if that participant had
remained in the employment of the Trust.
The Compensation Committee will have the authority to accelerate the time at
which the restrictions may lapse whenever it considers that such action is in
the best interests of the Trust and of its shareholders, whether by reason of
changes in tax laws or otherwise. Restrictions will lapse immediately upon a
"change in control" (as defined in the Restricted Stock Plan) of the Trust.
Tax Consequences. The Trust will be required to withhold taxes to comply with
Federal and state laws applicable to the value of restricted shares when they
are released from risk of forfeiture.
Upon the lapse of the applicable restrictions, the value of the restricted
stock will be taxable to the relevant participant as ordinary income and
deductible by the Trust. At the Compensation Committee's discretion, an
arrangement may be made by the Trust to assist the relevant participant in
meeting withholding taxes imposed by Federal and state authorities.
40
Compliance with SEC Requirements. No certificates for Trust Common Shares
shall be executed and delivered to participants under the Restricted Stock Plan
until the Trust shall have taken all such action as may be required in
connection therewith to comply with the provisions of the Securities Act, the
Securities Exchange Act and applicable SEC requirements.
The affirmative vote of the holders of not less than a majority of the Trust
Common Shares entitled to vote and present, in person or by properly executed
proxy, at the Annual Meeting will be required to approve the Restricted Stock
Plan.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
RESTRICTED STOCK PLAN.
PROPOSAL 4. RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS OF THE TRUST
Arthur Andersen LLP, independent auditors, provided auditing services to the
Trust during the fiscal year ended October 31, 1996. The Trustees have, subject
to ratification by the shareholders of the Trust, appointed Arthur Andersen to
audit the financial statements of the Trust for the ensuing fiscal year and
recommend to the shareholders that such appointment be ratified. Representatives
of Arthur Andersen LLP will be present at the Annual Meeting, with the
opportunity to make a statement if they so desire. Such representatives will
also be available to respond to appropriate questions.
The affirmative vote of the holders of not less than a majority of the Trust
Common Shares present, in person or by properly executed proxy, at the Annual
Meeting will be required to ratify the appointment of Arthur Andersen LLP as
independent auditors of the Trust. If the Plan of Reorganization is approved and
the Merger is consummated, the appointment of Arthur Andersen LLP as independent
auditors of the Trust will constitute the appointment of such firm as the
independent auditors of the Corporation for the ensuing fiscal year.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS OF THE TRUST.
SOLICITATION OF PROXIES AND VOTING PROCEDURES
The cost of soliciting proxies will be borne by the Trust. In addition to
solicitation by mail, solicitations may also be made by personal interview,
facsimile transmission or telephone. Trustees and officers of the Trust may
participate in such solicitation and will not receive additional compensation
for such services. Arrangements will also be made with custodians, nominees and
fiduciaries for forwarding of proxy solicitation material to beneficial owners
of Trust Common Shares and the Trust will reimburse such custodians, nominees
and fiduciaries for reasonable expenses incurred in connection therewith. To
assure the presence in person or by proxy of the largest number of shareholders
possible, D.F. King & Company has been engaged to solicit proxies on behalf of
the Trust. It is anticipated that D.F. King & Company will be paid a fee of
$7,500 for its services.
The presence, either in person or by properly executed proxy, of a majority
of the outstanding Trust Common Shares is necessary to constitute a quorum at
the Annual Meeting. Each of the Trust Common Shares outstanding on the Record
Date is entitled to one vote. An automated system administered by the Trust's
transfer agent tabulates the votes.
The Plan of Reorganization requires the affirmative vote of a majority of the
Trust Common Shares outstanding on the Record Date. Abstentions and broker
non-votes will thus be the equivalent of negative votes with respect to the Plan
of Reorganization.
The election of the Trustees, the approval of the Restricted Stock Plan and
the ratification of the appointment of the Trust's auditors each requires the
affirmative vote of a majority of the Trust Common Shares entitled to vote and
present, in person or by properly executed proxy, at the Annual
41
Meeting. Abstentions will thus be the equivalent of negative votes and broker
non-votes will have no effect with respect to such proposals, as any Trust
Common Shares subject to broker non-votes will not be present and entitled to
vote with respect to any proposal to which the broker non-vote applies.
Each of the Proposals presented to the shareholders of the Trust at the
Annual Meeting is being presented as a separate and independent proposal and no
Proposal is conditioned upon adoption or approval of any other Proposal.
Shareholders of the Trust will not have any dissenters' rights of appraisal in
connection with the vote upon the Plan of Reorganization.
LEGAL MATTERS
The validity of the Common Stock to be issued by the Corporation under
Maryland law, and certain related matters, will be passed upon for the Trust by
Miles & Stockbridge, a professional corporation.
OTHER MATTERS
The Trustees know of no other business to be presented at the Annual Meeting.
If other matters properly come before the meeting in accordance with the
Declaration of Trust, the persons named as proxies will vote on them in
accordance with their best judgment.
Proposals of shareholders intended to be presented to the Trust's Annual
Meeting of Shareholders to be held in 1998 must be received by the Trust by
September 22, 1997. Such proposal must also comply with the requirements as to
form and substance established by the SEC for such proposals to be included in
the proxy statement.
The Declaration of Trust provides that the name "HRE Properties" refers to
the trustees under the Declaration collectively as trustees, but not as
individuals or personally; and no trustee, shareholder, officer or agent of HRE
Properties shall be held to any personal liability; nor shall resort be had to
their private property for the satisfaction of any obligation or claim or
otherwise in connection with the affairs of said HRE Properties, but the trust
estate only shall be liable.
You are urged to complete, date, sign and return your Proxy Card promptly to
make certain your Shares will be voted at the Annual Meeting, even if you plan
to attend the meeting in person. If you desire to vote your Shares in person at
the meeting, your proxy may be revoked. For you convenience in returning the
Proxy Card, a pre-addressed and postage paid envelope has been enclosed.
YOUR PROXY IS IMPORTANT
WHETHER YOU OWN FEW OR MANY SHARES.
PLEASE DATE, SIGN AND MAIL THE ENCLOSED PROXY CARD TODAY.
42
EXHIBIT A
PLAN OF REORGANIZATION
THIS PLAN OF REORGANIZATION is made as of the 30th day of December 1996,
between HRE PROPERTIES, INC., a Maryland corporation (the "Corporation"), and
HRE PROPERTIES, a Massachusetts business trust (the "Trust").
WITNESSETH:
WHEREAS, the Corporation is a corporation organized and existing under the
laws of the State of Maryland, with an authorized capital consisting of
70,000,000 shares of common stock, par value $.01 per share (the "Common
Stock"), 20,000,000 shares of undesignated preferred stock, par value $.01 per
share, and 10,000,000 shares of "Excess Stock" (as defined in the Articles of
Incorporation of the Corporation), of which 1,000 shares of Common Stock,
constituting all of the issued and outstanding shares of capital stock of the
Corporation, are owned by the Trust;
WHEREAS, the Trust is a business trust organized and existing under the laws
of the Commonwealth of Massachusetts, and has authorized an unlimited number of
common shares of beneficial interest, without par value (the "Shares"), of which
5,346,081 Shares are issued and outstanding;
WHEREAS, Section 10.4 of the Trust's Declaration of Trust, as amended (the
"Declaration of Trust"), provides that the Board of Trustees of the Trust (the
"Board of Trustees") may direct the organization of a corporation or other
business organization into which the Trust, if permitted by law, may merge or
which shall take over the Trust Property (as defined in the Declaration of
Trust) and carry on the affairs of the Trust, and that, after receiving an
affirmative vote of the holders of not less than a majority of the aggregate
number of the Shares then outstanding and entitled to vote thereon at a meeting
of shareholders called for the purpose, and subject to receipt of an opinion of
counsel the substance of which is set forth in Section 10.4, the Trustees may
thereupon effect such merger or may sell, convey and transfer the property of
the Trust to such corporation or other business organization in exchange for
shares or securities of such transferee and the assumption by such transferee of
the liabilities of the Trust and thereupon terminate the Trust and deliver such
shares or other securities to shareholders of the Trust in accordance with the
terms of the merger or other agreement governing the transaction;
WHEREAS, the Trustees have been advised by counsel that a merger of a
Massachusetts business trust such as the Trust into a Maryland corporation is
specifically permitted by Section 3-102(a)(2) of the Maryland General
Corporation Law ("MGCL") and that there is no provision of Massachusetts law
that prohibits such a merger, and have accordingly determined that such a merger
is permitted by law and is consistent with the aforesaid provisions of Section
10.4 of the Declaration of Trust; and
WHEREAS, the Board of Trustees and the Board of Directors of the Corporation
(the "Directors") have each determined that the Trust and the Corporation be
merged into a single corporation, with the Corporation being the surviving
entity, on the terms and conditions set forth herein, but subject to the prior
authorization of both the holders of a majority of the outstanding Shares and of
the sole stockholder of the Corporation, all under and pursuant to the
Declaration of Trust and the MGCL.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements herein contained, for the purpose of prescribing the terms and
conditions of the merger, the parties hereto agree as follows:
I. TERMS AND CONDITIONS
1.1 Merger. At the Effective Date (as defined in Section 2), the Trust shall
be merged with and into the Corporation (the "Merger"), the Corporation shall be
the surviving entity, and the Trust shall terminate.
A-1
1.2 Successor. At and from the Effective Date, the Corporation shall succeed
to all of the rights, powers and property of the Trust and shall be liable for
all the liabilities, debts and obligations of the Trust, in the manner of and as
more fully set forth in Section 3-114 of the MGCL. The Articles of Merger
evidencing the Merger shall also constitute and evidence the sale, conveyance,
transfer and assignment of all Trust Property (as defined in the Declaration of
Trust) to the Corporation and the Corporation's assumption of all of the
liabilities, debts and obligations of the Trust, including without implied
limitation, obligations to indemnify persons who are or may be entitled to
indemnification under Article 5 of the Declaration of Trust to the extent that
such persons are entitled to indemnification under such Article.
1.3 Conversion of Shares of the Trust. At the Effective Date, by virtue of
the Merger and without any action on the part of the holder thereof, each Share
outstanding immediately prior thereto shall be converted into one fully paid and
non-assessable share of the Common Stock of the Corporation and, until further
action by the Directors of the Corporation, each certificate representing Shares
shall continue to represent the same number of shares of Common Stock of the
Corporation.
1.4 Common Stock of the Corporation. At the Effective Date, by virtue of the
Merger and without any action on the part of the Trust (being the holder
thereof), the 1,000 shares of Common Stock of the Corporation issued and
outstanding immediately prior thereto, shall be cancelled and returned to the
status of authorized but unissued shares.
II. EFFECTIVE DATE
2. Effective Date. The Merger shall become effective on the day and at the
time (the "Effective Date") at which the last of the following actions shall
have been completed: (i) this Plan of Reorganization shall have been authorized
by the affirmative vote of the holders of at least a majority of the aggregate
number of Shares of the Trust then outstanding and entitled to vote thereon in
accordance with the requirements of the Declaration of Trust, and shall have
been authorized by the Trust as the sole stockholder of the Corporation in
accordance with the requirements of the laws of the State of Maryland; (ii) the
shares of the Common Stock of the Corporation issuable to the shareholders of
the Trust pursuant to this Agreement shall have been authorized for listing on
the New York Stock Exchange, upon official notice of issuance; (iii) the Trust
shall have received all consents and/or approvals (if any) required for the
Merger including, without limitation, an opinion of counsel conforming to the
opinion described in Section 10.4 of the Declaration of Trust; and (iv) Articles
of Merger reflecting the Merger shall have been executed and filed in accordance
with Section 3-107 of the MGCL. The filing of a copy of such Articles of Merger
with the Secretary of State of the Commonwealth of Massachusetts will
conclusively evidence the termination of the Trust.
III. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
3.1 Articles of Incorporation and Bylaws. The Articles of Incorporation of
the Corporation and the Bylaws of the Corporation in effect on the Effective
Date (a copy of each of which is attached hereto), shall continue to be,
respectively, the Articles of Incorporation and Bylaws of the Corporation.
3.2 Directors. Immediately upon the consummation of the Merger, those persons
who were as at the Effective Date the Trustees of the Trust shall be appointed
to serve (if not already so appointed) as Directors of the Corporation and
shall, subject to any contrary provision in the Articles of Incorporation and
Bylaws of the Corporation, take up such office upon and subject to the same
terms and conditions subject to which they were appointed as Trustees.
3.3 Officers. The officers of the Corporation as at the Effective Date shall
continue to be the officers of the Corporation, holding such offices in the
Corporation until their successors are elected or appointed and qualified in
accordance with the Articles of Incorporation and Bylaws of the Corporation.
3.4 Restricted Stock Award Plan and Stock Option Plan. As at and from the
Effective Date, the Corporation and the Trust shall take such action, if any, as
may be necessary to provide that all obligations of the Trust under the HRE
Restricted Stock Award Plan (the "Restricted Stock Plan") shall, if
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the same is in effect as at the Effective Date, be assumed by the Corporation
and all rights under the Restricted Stock Plan to receive grants of Shares on
the terms and conditions set forth in the Restricted Stock Plan shall thereupon
be converted into substantially identical rights to receive grants of shares of
Common Stock of the Corporation on substantially identical terms and conditions
as set forth in the Restricted Stock Plan. As at and from the Effective Date,
the Corporation and the Trust shall take such action, if any, as may be
necessary to provide that all obligations of the Trust under the HRE Stock
Option Plan (the "Stock Option Plan") shall be assumed by the Corporation and
all rights of the participants under the Stock Option Plan to receive grants of
options and to exercise the options and the stock appreciation rights granted
thereunder shall thereupon be converted into substantially identical rights to
receive grants of options and to exercise options and stock appreciation rights
in respect of shares of Common Stock of the Corporation on substantially
identical terms and conditions as set forth in the Stock Option Plan.
3.5 Shareholder Rights Plan. As at the Effective Date, the Corporation and
the Trust shall take such action, if any, as may be necessary to provide that
all rights of shareholders of the Trust under that certain Rights Agreement
dated as of November 4, 1988, as amended (the "Rights Agreement"), shall become
rights in respect of the capital stock or other securities or property of the
Corporation on substantially identical terms and conditions as set forth in the
Rights Agreement.
IV. MISCELLANEOUS
4.1 Further Assurances. From time to time to the extent possible, as and when
required by the Corporation or by its successors and assigns, there shall be
executed and delivered on behalf of the Trust such deeds and other instruments,
and there shall be taken or caused to be taken by it such further and other
action as shall be appropriate or necessary in order to vest or perfect, or to
conform of record or otherwise, in the Corporation the title to and possession
of all the property, interests, assets, rights, privileges, immunities, powers,
franchises, and authority of the Trust, and otherwise to carry out the purposes
of this Plan of Reorganization, and the officers and directors of the
Corporation are fully authorized in the name of and on behalf of the Trust or
otherwise to take any and all such action and to execute and deliver any and all
such deeds and other instruments.
4.2 Abandonment. At any time before the Effective Date, this Plan of
Reorganization may be terminated and the Merger may be abandoned by the Board of
Trustees and/or the Directors.
4.3 Counterparts. This Plan of Reorganization may be executed in any number
of counterparts, each of which shall be deemed to be an original.
4.4 Governing Law. This Plan of Reorganization shall be governed by and
construed in accordance with the laws of the State of Maryland.
IN WITNESS WHEREOF, this Plan of Reorganization, is hereby executed on behalf
of each of the parties hereto and attested by their respective officers
thereunto duly authorized.
HRE PROPERTIES, INC.
a Maryland Corporation
By: /s/ Charles J. Urstadt Attest:
------------------------ /s/ James R. Moore
Charles J. Urstadt ----------------------------
Chairman of the Board James R. Moore
and Chief Executive Officer Secretary
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HRE PROPERTIES
a Massachusetts Business Trust
By: /s/ Charles J. Urstadt Attest:
--------------------------- /s/ James R. Moore
Charles J. Urstadt ----------------------------
Chairman of the Board James R. Moore
and Chief Executive Officer Secretary
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EXHIBIT B
RESTRICTED STOCK AWARD PLAN
December 31, 1996
HRE PROPERTIES
RESTRICTED STOCK AWARD PLAN
1. PURPOSES
The purposes of the HRE Properties Restricted Stock Award Plan (the "Plan")
are to promote the long-term growth of HRE Properties by attracting, retaining
and motivating executive management possessing outstanding ability and to
further the identity of Participants' interest with those of the shareholders
through stock ownership opportunities.
2. DEFINITIONS
The following terms shall have the following meanings:
[ ] "Award" means an award of Restricted Stock granted under the provisions
of the Plan.
[ ] "Board" means the Board of Trustees of HRE Properties.
[ ] "Committee" means the Compensation Committee of the Board of Trustees
appointed to administer the Plan.
[ ] "Company" means HRE Properties.
[ ] "Disability" means total and permanent disability.
[ ] "Participant" means an employee of the Company who is selected by the
Committee to participate in the Plan.
[ ] "Restricted Period" means the period of time during which an Award to
Participant(s) remains subject to the restrictions imposed on the shares as
determined by the Committee.
[ ] "Restrictions" mean the restrictions and conditions imposed on an Award
as determined by the Committee, which must be satisfied in order for the Award
to vest to the Participant.
[ ] "Restricted Stock" means an award of shares on which are imposed a
restriction period which subjects them to a "substantial risk of forfeiture" as
defined in Section 83 of the Internal Revenue Code of 1986, as amended.
[ ] "Restricted Stock Award Date" means the date on which the Committee
awarded Restricted Stock to a Participant.
[ ] "Retirement" means termination from active employment with the Company
pursuant to the terms of the retirement plan(s) applicable to the Participant.
[ ] "Stock" or "Share" means a common share of HRE Properties.
3. EFFECTIVE DATE OF THE PLAN
The effective date of the Plan is __________, upon approval by the
shareholders of HRE Properties.
4. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Compensation Committee of the Board,
comprised of persons who are "disinterested persons" as defined in Rule 16b-3 of
the Securities and Exchange Commission.
The Committee shall have complete authority to (a) select Participants, (b)
determine the Award to be granted to a selected Participant, (c) determine the
time or times when Awards will be granted, (d) determine the time or times and
the conditions subject to which Awards may become vested or Restrictions will
lapse, (e) interpret and construe the Plan for purposes of the administration of
the Plan and make determinations, subject to the provisions of the Plan, in the
best interests of the Company and its stockholders.
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The Committee may delegate nondiscretionary administrative duties under the
Plan to one or more agents (e.g., attorneys, consultants, etc.) as it deems
necessary and advisable at the expense of the Company.
Any power which may be exercised by the Committee may also be exercised by
the Board. No member of the Committee or the Board shall be personally liable
for any action taken or determination made in good faith with respect to the
Plan or its administration. All decisions made by the Committee as
administrators of the Plan shall be conclusive and binding upon all persons and
the Company.
5. SHARES SUBJECT TO PLAN
The maximum number of shares of Restricted Stock which may be issued or
transferred under the Plan is 250,000 shares. Any shares of Restricted Stock
which have been awarded, but are later forfeited to the Company, will again be
made subject to Awards under the Plan.
The Stock which may be issued or transferred under the Plan may be authorized
but unissued Shares or Shares acquired by the Company and held in its Treasury
as determined by the Committee.
6. GRANT OF RESTRICTED STOCK AWARDS
The Committee shall from time to time, in its discretion, select Participants
from management personnel who have significant responsibility for the growth and
profitability of the Company, determine the number of shares to be granted by
each Award and establish the applicable terms of each such Award.
7. AWARD AGREEMENT
Each Restricted Stock Award shall be evidenced by a written agreement,
executed by the Participant and the Company, which shall contain the terms and
conditions established by the Committee.
8. TERMS OF RESTRICTED STOCK AWARDS
Subject to the provisions of the Plan, the Committee shall determine:
[ ] The terms and conditions of the Award Agreement; and,
[ ] The Restricted Period of the Award; and,
[ ] The Restrictions applicable to an Award, including, but not limited to
employment status rules governing forfeitures, and that Restricted Stock may not
be sold, assigned, transferred, pledged or otherwise encumbered, during the
Restricted Period; and,
[ ]The issuance of stock certificates to the named Participants representing
the Restricted Stock Award to be held in custody by the Company until the
Restrictions lapse; and,
[ ]That the Participant shall receive any dividends, taxable at that time as
ordinary income, and other distributions paid with respect to any Award(s) as
declared and paid to shareholders during the Restricted Periods; and,
[ ]Upon the lapse of Restrictions, the value of the Restricted Stock will be
taxable as ordinary income. At the Committee's discretion, an arrangement may be
made by the Company to assist the Participant in meeting the withholding taxes
required by Federal, State and Local authorities.
9. TERMINATIONS OF EMPLOYMENT DURING RESTRICTIVE PERIOD
In the event that during the term of the Restricted Period a Participant:
[ ] Terminates employment with the Company for any reason other than death,
Disability or Retirement, such Participant shall forfeit any and all Restricted
Stock Awards whose Restrictions have not lapsed; or,
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[ ] Terminates employment by reason of death or Disability, the Restrictions
on any and all Awards shall lapse on the date of such termination; or,
[ ] Terminates employment by reason of Retirement, all Awards continue to
vest as if Retirement had not occurred until such time as the Restrictions
lapse. If the Participant, prior to the completion of any or all Restricted
Periods, accepts employment or provides services to any organization that is
competitive in nature with the Company, the Participant will forfeit any and all
Restricted Stock Awards whose Restrictions have not lapsed.
10. CHANGE-OF-CONTROL
The Committee shall have the authority to accelerate the time at which the
Restrictions will lapse or to remove any such restriction upon the occurrence of
a "change-of-control" as defined by any one of the following events:
(a) any Person who becomes the owner of 20% or more of the Trust's Common
Shares and, thereafter, individuals who were not Trustees of the Trust prior to
the date such Person became a 20% owner are elected as Trustees pursuant to an
arrangement or understanding with, or upon the request of or nomination by, such
Person and constitute at least two of the Trustees; or
(b) there occurs a change-of-control of the Trust of a nature that would be
required to be reported in response to Items 1a of Form 8-K pursuant to Section
13 or 15 under the Securities Exchange Act of 1934 ("Exchange Act"), or in any
other filing by the Trust with the Securities and Exchange Commission (the
"Commission"); or
(c) there occurs any solicitation of proxies by or on behalf of any Person
other than the Trustees of the Trust and thereafter individuals who were not
Trustees prior to the commencement of such solicitation are elected as Trustees
pursuant to an arrangement or understanding with, or upon the request of or
nomination by, such Person and constitute at least two of the Trustees.
(d) the Trust executes an agreement of acquisition, merger or consolidation
which contemplates that:
(i) after the effective date provided for in the agreement, all or
substantially all of the business and/or assets of the Trust shall be owned,
leased or otherwise controlled by another corporation or other entity; and
(ii) individuals who are Trustees of the Trust when such agreement is
executed shall not constitute a majority of the Trustees or board of directors
of the survivor or successor entity immediately after the effective date
provided for in such agreement; provided, however, for purposes of this
paragraph (d), that if such agreement requires as a condition precedent approval
by the Trust's shareholders of the agreement or transaction, a Change-of-Control
shall not be deemed to have taken place unless and until such approval is
secured.
11. COMPLIANCE WITH SECURITIES AND EXCHANGE COMMISSION REQUIREMENTS
No certificate for Shares of stock distributed under the terms of the Plan
shall be executed and delivered to the Participant until the Company shall have
taken any action then required to comply with the provisions of the Securities
Act of 1933, the Exchange Act or any other applicable laws and requirements.
12. AMENDMENT AND TERMINATION
The Committee and/or Board may, at any time or from time to time, modify or
amend the Plan in any respect, except that without shareholder approval, the
Committee and/or Board may not increase the maximum number of shares of
Restricted Stock which may be Awarded under this Plan. Any modification,
amendment or termination of the Plan shall not, without the consent of a
Participant, affect his/her rights under an Award previously granted to a
Participant.
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EXHIBIT C
ARTICLES OF INCORPORATION
OF
HRE PROPERTIES, INC.
AMENDED ARTICLES OF INCORPORATION
OF
HRE PROPERTIES, INC.
ARTICLE I
INCORPORATION
The undersigned, J. W. Thompson Webb, whose post office address is 10 Light
Street, Baltimore, Maryland 21202, being at least eighteen (18) years of age,
does hereby form a corporation under the Maryland General Corporation Law (the
"MGCL").
ARTICLE II
NAME
The name of the corporation (the "Corporation") is:
HRE PROPERTIES, INC.
ARTICLE III
PURPOSES
3.1 Purpose and Powers. The Corporation is being formed to acquire and
succeed to, and continue the business of, HRE Properties ("HRE Properties"), a
common law business trust organized under the laws of the Commonwealth of
Massachusetts that has operated so as to qualify as a real estate investment
trust ("REIT"), as that phrase is defined in Section 856 of the Internal Revenue
Code of 1986, as amended (the "Code"), through a merger of HRE Properties with
and into the Corporation and to engage in the business of acquiring, managing,
financing, disposing of and otherwise dealing in interests in real property and
to engage in any other lawful act or activity for which corporations may be
organized under the MGCL. The foregoing purposes shall be in no way limited or
restricted by reference to, or inference from, the terms of any other clause of
the Articles of Incorporation, as amended or supplemented from time to time (the
"Articles"), and each shall be regarded as independent. The foregoing purposes
are also to be construed as powers of the Corporation, and shall be in addition
to and not in limitation of the general powers of corporations under the laws of
the State of Maryland.
3.2 Real Estate Investment Trust. Without limiting the generality of the
foregoing purposes, business and objects, until such time as the Board of
Directors of the Corporation determines that it is no longer in the interest of
the Corporation and its stockholders that the Corporation engage in the business
of, and conduct its business and affairs so as to qualify as, a REIT, the
purpose of the Corporation shall include engaging in the business of a REIT.
This reference to such purpose shall not make unlawful or unauthorized any
otherwise lawful act or activity that the Corporation may take that is
inconsistent with such purpose.
ARTICLE IV
PRINCIPAL PLACE OF BUSINESS
The address of the principal office of the Corporation is c/o The Corporation
Trust Incorporated, 32 South Street, Baltimore, Maryland 21202.
ARTICLE V
THE RESIDENT AGENT
The Resident Agent of the Corporation is The Corporation Trust Incorporated,
whose address is 32 South Street, Baltimore, Maryland 21202.
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ARTICLE VI
BOARD OF DIRECTORS
6.1 Number. The number of Directors of the Corporation initially shall be
seven, which number may thereafter be increased or decreased from time to time
in accordance with the Bylaws of the Corporation; provided, however, that the
total number of Directors shall be not fewer than the greater of two or the
minimum number permitted by the MGCL. No reduction in the number of Directors
shall cause the removal of any Director from office prior to the expiration of
his or her term.
6.2 Directors; Classification; Term. The initial Directors of the Corporation
shall be E. Virgil Conway, Peter Herrick, Paul D. Paganucci, James O. York,
Robert R. Douglass, George H.C. Lawrence and Charles J. Urstadt. At the first
annual meeting of stockholders, the Directors shall be divided into three
classes designated as Class I, Class II and Class III, with the term of three
years each, and the term of one class shall expire each year. Class I directors
shall initially consist of one director who shall hold office initially for a
term expiring at the annual meeting of stockholders in 1998. Class II Directors
shall initially consist of three directors who shall hold office initially for a
term expiring at the annual meeting of stockholders in 1999. Class III Directors
shall initially consist of three directors who shall hold office initially for a
term expiring at the annual meeting of stockholders in 2000. Beginning with the
annual meeting of stockholders in 1998 and at each succeeding annual meeting of
stockholders, the class of Directors whose term expires at such meeting will
stand for election to hold office for a term expiring at the third succeeding
annual meeting. Each director will hold office for the term for which he or she
is elected and until his or her successor is duly elected and qualified. If the
number of Directors is changed, any increase or decrease in directorships shall
be apportioned among the classes so as to maintain the proportional number of
Directors in each class as nearly equal as set forth above or as may otherwise
be determined by a majority of the Board of Directors then in office, and any
additional Directors of any class elected to fill a vacancy resulting from an
increase in such class shall hold office only until the next election of
Directors by the stockholders, but in no case will a decrease in the number of
Directors shorten the term of any incumbent Director.
Notwithstanding the foregoing, whenever, pursuant to the provisions of
Article VII of the Articles, the holders of any one or more series of Preferred
Stock shall have the right, voting separately as a series or together with
holders of other such series, to elect Directors at an annual or special meeting
of stockholders, the election, term of office, filling of vacancies and other
features of such directorships shall be governed by the terms of the Articles
and any Articles Supplementary applicable thereto, and such Directors so elected
shall not be divided into classes pursuant to this Section 6.2.
During any period when the holders of any series of Preferred Stock have the
right to elect additional Directors as provided for or fixed pursuant to the
provisions of Article VII hereof, then upon commencement and for the duration of
the period during which such right continues: (i) the then otherwise total
authorized number of Directors shall be increased, and the holders of such
Preferred Stock shall be entitled to elect the additional Directors so provided
for or fixed pursuant to said provisions, and (ii) each such additional Director
shall serve until such Director's successor shall have been duly elected and
qualified, or until such Director's right to hold such office terminates
pursuant to said provisions, whichever occurs earlier, subject to such
Director's earlier death, disqualification, resignation or removal. Except as
otherwise provided by the Board in the resolution or resolutions establishing
such series, whenever the holders of any series of Preferred Stock having such
right to elect additional Directors are divested of such right pursuant to the
provisions of such stock, the terms of office of all such additional Directors
elected by the holders of such stock, or elected to fill any vacancies resulting
from the death, resignation, disqualification or removal of such additional
Directors, shall terminate as quickly as is permissible under the MGCL and the
total and authorized number of Directors of the Corporation shall be reduced
accordingly.
6.3 Vacancies. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, newly created directorships resulting from any
increase in the authorized number of Directors shall be filled solely by the
affirmative vote of a majority of the entire Board of Directors and any
vacancies on the Board of Directors resulting from death, resignation,
retirement, disqualification or other cause
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(other than removal from office) shall be filled solely by the affirmative vote
of a majority of the remaining Directors then in office, even if less than a
quorum. Subject to the rights of the holders of any series of Preferred Stock
then outstanding, vacancies on the Board of Directors resulting from the removal
of a Director from office may be filled by the affirmative vote of a majority of
all the votes cast at a meeting of stockholders called for that purpose. A
Director elected by the Board of Directors to fill any vacancy shall serve until
the next annual meeting of stockholders and until his successor is elected and
qualifies.
6.4 Resignation; Removal. Any Director may resign from the Board of Directors
or any committee thereof at any time by written notice to the Board of
Directors, effective upon execution and delivery to the Corporation of such
notice or upon any future date specified in the notice. A Director may be
removed from office, but only for cause and only by the affirmative vote of the
holders of not less than two-thirds of the Stock then outstanding and entitled
to vote generally for the election of Directors; provided, however, that in the
case of any Directors elected solely by holders of one or more series of
Preferred Stock, such Directors may be removed only for cause and only by the
affirmative vote of two-thirds of the Stock of such series then outstanding and
entitled to vote in the election of Directors, voting together as a single
class. At least 30 days prior to any meeting of stockholders at which it is
proposed that any Director be removed from office, written notice of such
proposed removal shall be sent to the Director whose removal will be considered
at the meeting. For purposes of the Articles, "cause," with respect to the
removal of any Director, shall mean only (i) conviction of a felony, (ii)
declaration of unsound mind by order of court, (iii) gross dereliction of duty,
(iv) commission of any action involving moral turpitude, or (v) commission of an
action which constitutes intentional misconduct or a knowing violation of law,
and in the case of clause (iv) or (v), above, such action results both in an
improper substantial personal benefit and a material injury to the Corporation.
6.5 Powers. Subject to the express limitations herein or in the Bylaws, the
business and affairs of the Corporation shall be managed under the direction of
the Board of Directors. The Articles shall be construed with a presumption in
favor of the grant of power and authority to the Directors.
ARTICLE VII
STOCK
7.1 Authorized Capital Stock. The total number of shares of stock which the
Corporation has authority to issue (the "Stock") is One Hundred Million
(100,000,000) shares, initially consisting of (i) Seventy Million (70,000,000)
shares of common stock, par value $.01 per share (the "Common Stock"); (ii)
Twenty Million (20,000,000) shares of preferred stock, par value $.01 per share
(the "Preferred Stock"); and (iii) Ten Million (10,000,000) shares of excess
stock, par value $.01 per share (the "Excess Stock"). The aggregate par value of
all the shares of all classes of stock is $1,000,000.
7.2 Preferred Stock. The Board of Directors may issue the Preferred Stock in
one or more series consisting of such numbers of shares and having such
preferences, conversion and other rights, voting powers, restrictions and
limitations as to dividends, qualifications and terms and conditions of
redemption of stock as the Board of Directors may from time to time determine
when designating such series.
7.3 Common Stock.
7.3.1 Dividend Rights. Subject to the preferential dividend rights of
Preferred Stock, if any, as may be determined by the Board of Directors, the
holders of shares of Common Stock shall be entitled to receive such dividends as
may be declared by the Board of Directors out of funds legally available
therefor.
7.3.2 Voting Rights. The holders of shares of Common Stock shall be entitled
to vote on all matters submitted to the holders of Common Stock for a vote at
all meetings of the stockholders, and each holder of shares of Common Stock
shall be entitled to one vote for each share of Common Stock held by such
stockholder.
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7.4 Classification of Stock. The Board of Directors may classify or
reclassify any unissued shares of Stock from time to time by setting or changing
the preferences, conversion and other rights, voting powers, restrictions and
limitations as to dividends, qualifications, and terms and conditions of
redemption of those shares of Stock, including, but not limited to, the
reclassification of unissued shares of Common Stock to shares of Preferred Stock
or shares of Excess Stock, or unissued shares of Preferred Stock to shares of
Common Stock or shares of Excess Stock, or unissued shares of Excess Stock to
shares of Common Stock or shares of Preferred Stock or the issuance of any
rights plan or similar plan.
7.5 Issuance of Stock. The Board of Directors may authorize the issuance from
time to time of shares of Stock of any class, whether now or hereafter
authorized, or securities or rights convertible into shares of Stock, for such
consideration as the Board of Directors may deem advisable (or without
consideration in the case of a share split or dividend), subject to such
restrictions or limitations, if any, as may be lawfully set forth in the Bylaws
of the Corporation.
7.6 Dividends or Distributions. The Directors may from time to time declare
and pay to stockholders such dividends or distributions in cash, property or
other assets of the Corporation or in securities of the Corporation or from any
other source as the Directors in their discretion shall determine.
ARTICLE VIII
LIMITATION ON PREEMPTIVE RIGHTS
No holder of any Stock or any other securities of the Corporation, whether
now or hereafter authorized, shall have any preferential or preemptive rights to
subscribe for or purchase any Stock or any other securities of the Corporation
other than such rights, if any, as the Board of Directors, in its sole
discretion may fix; and any Stock or other securities which the Board of
Directors may determine to offer for subscription may, within the Board of
Directors' sole discretion, be offered to the holders of any class, series or
type of Stock or other securities at the time outstanding to the exclusion of
holders of any or all other classes, series or types of Stock or other
securities at the time outstanding.
ARTICLE IX
LIMITATIONS ON TRANSFER AND OWNERSHIP
9.1 Limitations on Transfer. Stock (other than Excess Stock) shall be freely
transferable by the record owner thereof, subject to the provisions of this
Article IX, and provided that any purported acquisition or transfer of Stock
that would result in the disqualification of the Corporation as a REIT shall be
void ab initio, except to the extent necessary to give effect to Section 9.10
hereof. Any purported transfer of Stock that, if effective, would result in a
violation of Section 9.2 (unless excepted from the application of Section 9.2
pursuant to Section 9.6) shall be void ab initio as to the transfer of that
number of shares of Stock that would otherwise be beneficially owned by a
stockholder in violation of Section 9.2, the intended transferee of such shares
shall acquire no rights therein and the transfer of such shares will not be
reflected on the Corporation's stock record books. For purposes of this Article
IX, a "transfer" of shares of Stock shall mean any sale, transfer, gift,
hypothecation, pledge, assignment, or other disposition, whether voluntary or
involuntary, by operation of law or otherwise.
9.2 Limitations on Ownership. Except as provided by Section 9.6, no person
except as described below shall at any time directly or indirectly acquire or
hold beneficial ownership of shares of any class or series of Stock with an
aggregate value in excess of 7.5% of the aggregate value of all outstanding
Stock of the Corporation (the "Ownership Limit"). Any entity, the ownership of
whose Stock is attributed to the owners of such entity under Sections 544 and
856(h) of the Code, will be "looked-through" for purposes of the Ownership
Limit. Notwithstanding the foregoing, the Board of Directors may, in its sole
discretion, waive the Ownership Limit with respect to any transaction if it is
satisfied, based on the advice of tax counsel, that ownership in excess of this
limit will not jeopardize the Corporation's status as a REIT and it otherwise
decides that such action is in the best interests of the Corporation.
For purposes of this Article IX, (a) the value of any share of Stock shall be
determined in the manner established by the Board of Directors, and (b) a person
(which includes natural persons, corporations, trusts, partnerships, and other
entities) shall be deemed to be the beneficial owner of the Stock
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that such person (i) actually owns, (ii) constructively owns after applying the
rules of Section 544 of the Code as modified in the case of a REIT by Section
856(h) of the Code, and (iii) has the right to acquire upon exercise of
outstanding rights, options and warrants, and upon conversion of any securities
convertible into Stock, if any.
9.3 Stockholder Information. Each stockholder shall, upon demand of the
Corporation, disclose to the Corporation in writing such information with
respect to his or its direct and indirect beneficial ownership of the Stock as
the Board of Directors in its discretion deems necessary or appropriate in order
that the Corporation may fully comply with all provisions of the Code relating
to REITs and all regulations, rulings and cases promulgated or decided
thereunder (the "REIT Provisions") and to comply with the requirements of any
taxing authority or governmental agency.
9.4 Transferee Information. Whenever the Board of Directors deems it
reasonably necessary to protect the tax status of the Corporation as a REIT
under the REIT Provisions, the Board of Directors may require a statement or
affidavit from each stockholder or proposed transferee of Stock setting forth
the number of shares of Stock already beneficially owned by such proposed
transferee and any related person specified by the Board of Directors. If the
Board of Directors determines in good faith that any proposed transfer may
jeopardize the qualification of the Corporation as a REIT, the Board of
Directors shall have the right, but not the duty, to refuse to permit the
transfer of such Stock to the proposed transferee. All contracts for the sale or
other transfer of Stock shall be subject to this Section 9.4.
9.5 Excess Stock.
9.5.1 Exchange for Excess Stock. If, notwithstanding the other provisions
contained in this Article IX, at any time there is a purported transfer of Stock
or a change in the capital structure of the Corporation (including any
redemption of Excess Stock pursuant to Subsection 9.5.7) as a result of which
any person would beneficially own Stock in excess of the Ownership Limit, then,
except as otherwise provided in Section 9.6, such shares of Stock in excess of
the Ownership Limit (rounded up to the nearest whole share) shall automatically
and without further action be exchanged for an equal number of shares of Excess
Stock. Such exchange shall be effective as of the close of business on the
business day prior to the date of the purported transfer of Stock or the change
in capital structure. The shares of Common Stock which were exchanged for shares
of Excess Stock shall revert to the Corporation, subject to the provisions of
Subsection 9.5.6.
9.5.2 Ownership in Trust. Upon any purported transfer of Stock that results
in an exchange for Excess Stock pursuant to Subsection 9.5.1, such shares of
Excess Stock shall be deemed to have been transferred to the Corporation, as
trustee of a separate trust for the exclusive benefit of the person or persons
to whom such Excess Stock can ultimately be transferred without violating the
Ownership Limit. Shares of Excess Stock so held in trust shall be issued and
outstanding Stock of the Corporation. The purported transferee of Excess Stock
shall have no rights in such Excess Stock, except the right to designate a
transferee of its interest in the trust created under this Subsection 9.5.2 upon
the terms specified in Subsection 9.5.6. If any of the restrictions on transfer
set forth in this Article IX are determined to be void, invalid or unenforceable
by virtue of any legal decision, statute, rule or regulation, then the intended
transferee of any Excess Stock may be deemed, at the option of the Corporation,
to have acted as an agent on behalf of the Corporation in acquiring the Excess
Stock and to hold the Excess Stock on behalf of the Corporation.
9.5.3 Dividend Rights. Excess Stock shall not be entitled to any dividends.
Any dividend or distribution paid prior to the discovery by the Corporation that
shares of Stock have been exchanged for Excess Stock shall be repaid to the
Corporation upon demand, and any dividend or distribution declared but unpaid
shall be rescinded as void ab initio with respect to such shares of Excess
Stock.
9.5.4 Rights Upon Liquidation. Subject to the preferential rights of
Preferred Stock, if any, as may be determined by the Board of Directors and the
preferential rights of Excess Preferred Stock (as defined below), if any, in the
event of any voluntary or involuntary liquidation, dissolution or winding up of,
or any distribution of the assets of, the Corporation, the trustee holding any
shares of
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Excess Common Stock shall be entitled to receive, ratably with each other holder
of shares of Common Stock or Excess Common Stock, that portion of the assets of
the Corporation available for distribution to the holders of Common Stock and
Excess Common Stock as the number of shares of Excess Common Stock held by such
holder bears to the total number of shares of Common Stock and Excess Common
Stock then outstanding. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of, or any distribution of the assets of,
the Corporation, the trustee holding any shares of Excess Stock issued upon the
exchange of Preferred Stock (the "Excess Preferred Stock") shall be entitled to
receive the pro rata share of the assets of the Corporation available for
distribution to the holders of Preferred Stock of the series for which such
Excess Stock was exchanged which such holder of Excess Preferred Stock would be
entitled to receive if such shares of Excess Preferred Stock were shares of
Preferred Stock of the series from which such Excess Preferred Stock was
exchanged. The Corporation, as the holder of all Excess Stock in one or more
trusts, or, if the Corporation shall have been dissolved, any trustee appointed
by the Corporation prior to its dissolution, shall distribute to each transferee
of an interest in such a trust pursuant to Subsection 9.5.6 hereof, when
determined, any assets received in any liquidation, dissolution or winding up
of, or any distribution of the assets of, the Corporation in respect of the
Excess Stock held in such trust and represented by the trust interest
transferred to such transferee.
9.5.5 Voting Rights. No stockholder may vote any shares of Excess Stock. The
shares of Excess Stock will not be considered to be issued or outstanding for
purposes of any Stockholder vote or for purposes of determining a quorum for
such a vote.
9.5.6 Restrictions on Transfer. Excess Stock shall not be transferable except
pursuant to Section 9.5.2 and Section 9.5.7. The purported transferee of any
shares of Stock that are exchanged for Excess Stock pursuant to Section 9.5.1
may freely designate a transferee of the interest in the trust that represents
such shares of Excess Stock, if (a) the shares of Excess Stock held in the trust
and represented by the trust interest to be transferred would not be Excess
Stock in the hands of the transferee of the trust interest and (b) the
transferor of the trust interest does not receive a price for the trust interest
in excess of (i) the price such transferor paid for the Stock in the purported
transfer of Stock that resulted in the Excess Stock represented by the trust
interest, or (ii) if such transferor did not give value for such Stock (e.g.,
the shares were received through a gift, devise or other transaction), a price
equal to the aggregate Market Price (as defined in Subsection 9.5.7) for all
shares of the Stock that were exchanged for Excess Stock on the date of the
purported transfer that resulted in the Excess Stock. No interest in a trust may
be transferred unless the transferor of such interest has given advance notice
to the Corporation of the intended transferee and the Corporation has agreed in
writing to waive its redemption rights under Subsection 9.5.7. Upon the transfer
of an interest in a trust in compliance with this Subsection 9.5.6, the
corresponding shares of Excess Stock that are represented by the transferred
interest in the trust shall be automatically exchanged for an equal number of
shares of Stock of the same class and series from which they were originally
exchanged and such shares of Stock shall be transferred of record to the
transferee of the interest in the trust. Upon any exchange of Excess Stock for
Stock of another class, the interest in the trust representing such Excess Stock
shall automatically terminate.
9.5.7 Corporation's Redemption Right. All shares of Excess Stock shall be
deemed to have been offered for sale to the Corporation, or its designee, at a
price per share equal to the lesser of (a) the price per share of Stock in the
transaction that created such Excess Stock (or, in the case of devise or gift,
the Market Price per share of such Stock at the time of such devise or gift) or
(b) the Market Price per share of Stock of the class of Stock for which such
Excess Stock was exchanged on the date the Corporation, or its designee, accepts
such offer. The Corporation shall have the right to accept such offer at any
time until the date ninety (90) days after the date on which the purported owner
or transferee gives written notice to the Corporation of any event (including,
without limitation, redemptions or repurchases of Stock by the Corporation) or
any purported transfer that results in the exchange of Stock for such Excess
Stock and the nature and amount of all ownership interests, direct or indirect,
of record or beneficial, of such purported owner or transferee, or, if no such
notice is given, the date on which the Board of Directors determines that a
purported transfer resulting in the exchange of Stock for such Excess Stock has
been made. For purposes of this
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Article IX, "Market Price" means for any share of Stock, the average daily per
share closing sales price of a share of such Stock if shares of such Stock are
listed on a national securities exchange or quoted on the National Association
of Securities Dealers Automated Quotation National Market (the "NASDAQ NM"), and
if such shares are not so listed or quoted, the Market Price shall be the mean
between the average per share closing bid prices and the average per share
closing asked prices, in each case during the 30-day period ending on the
business day prior to the redemption date, or if there have been no sales on a
national securities exchange or on the NASDAQ NM and no published bid and asked
quotations with respect to shares of such Stock during the 30-day period, the
Market Price shall be the price determined by the Board of Directors in good
faith. Unless the Board of Directors determines that it is in the interest of
Corporation to make earlier payment of all of the amount determined as the
redemption payment for Stock redeemed in accordance with this Section 9.5.7, the
redemption payment shall be paid to the transferee of the trust interest
representing the redeemed Excess Stock only upon the liquidation of the
Corporation and shall not exceed an amount equal to the lesser of the price
determined pursuant to the first sentence of this Subsection 9.5.7 or the
product of (x) the number of Excess Shares redeemed, multiplied by (y) the sum
of the per share distributions designated as liquidating distributions and
return of capital distribution declared subsequent to the redemption date with
respect to unredeemed shares of Stock of the class for which the redeemed Excess
Stock was exchanged. No interest shall accrue on any redemption payment with
respect to the period subsequent to the redemption date to the date of the
redemption payment.
9.6 Exceptions to Certain Ownership and Transfer Limitations. The Ownership
Limit set forth in Section 9.2 shall not apply to the following shares of Stock
and such shares shall not be deemed to be Excess Stock at the times and subject
to the terms and conditions set forth in this Section 9.6:
9.6.1 Subject to the provisions of Section 9.7, shares of Stock which the
Board of Directors in its sole discretion may exempt from the Ownership Limit
while owned by a person who has provided the Corporation with evidence and
assurances acceptable to the Board of Directors that the qualification of the
Corporation as a REIT would not be jeopardized thereby.
9.6.2 Subject to the provisions of Section 9.7, shares of Stock acquired and
held by an underwriter in a public offering of Stock, or in any transaction
involving the issuance of Stock by the Corporation in which the Board of
Directors determines that the underwriter or other person or party initially
acquiring such Stock will make a timely distribution of such Stock to or among
other holders such that, following such distribution, the Corporation will
continue to be in compliance with the REIT Provisions.
9.6.3 Shares of Stock acquired pursuant to an all cash tender offer made for
all outstanding shares of Stock of the Corporation in conformity with applicable
federal and state securities laws where not less than eighty percent (80%) of
the outstanding Stock (not including Stock or securities convertible into Stock
held by the tender offeror and/or any "affiliates" or "associates" thereof
within the meaning of the Securities Exchange Act of 1934, as amended) are duly
tendered and accepted pursuant to the cash tender offer and where the tender
offeror commits in such tender offer, if the tender offer is so accepted by the
holders of such eighty percent (80%) of the outstanding Stock, as promptly as
practicable thereafter to give any holders who did not accept such tender offer
a reasonable opportunity to put their Stock to the tender offeror at a price not
less than the price per share paid for Stock tendered pursuant to the tender
offer.
9.7 Authority to Revoke Exceptions to Limitations. The Board of Directors, in
its sole discretion, may at any time revoke any exception pursuant to
Subsections 9.6.1, 9.6.2 or 9.6.3 in the case of any stockholder, and upon such
revocation, the provisions of Sections 9.2 and 9.5 shall immediately become
applicable to such stockholder and all Stock of which such stockholder may be
the beneficial owner. A decision to exempt or refuse to exempt from the
Ownership Limit the ownership of certain designated shares of Stock, or to
revoke an exemption previously granted, shall be made by the Board of Directors
in its sole discretion, based on any reason whatsoever, including, but not
limited to, the preservation of the Corporation's qualification as a REIT.
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9.8 Controlling Provision. Except as provided in Article XV, to the extent
this Article IX may be inconsistent with any other provision of the Articles,
this Article IX shall be controlling.
9.9 Authority of the Board of Directors. Subject to Section 9.10 hereof,
nothing else contained in this Article IX or in any other provision of the
Articles shall limit the authority of the Board of Directors to take such action
as it deems necessary or advisable to protect the Corporation and the interests
of the Stockholders by preservation of the Corporation's qualification as a REIT
under the REIT Provisions. In applying the provisions of this Article IX, the
Board of Directors may take into account the lack of certainty in the REIT
Provisions relating to the ownership of stock that may prevent a corporation
from qualifying as a REIT and may make interpretations concerning the Ownership
Limit, Excess Stock, beneficial ownership and related matters on as conservative
a basis as the Board of Directors deems advisable to minimize or eliminate
uncertainty as to the Corporation's continued qualification as a REIT.
Notwithstanding any other provision of the Articles, if the Board of Directors
determines that it is no longer in the best interests of the Corporation and the
Stockholders to continue to have the Corporation qualify as a REIT, the Board of
Directors may revoke or otherwise terminate the Corporation's REIT election
pursuant to Section 856(g) of the Code.
9.10 New York Stock Exchange. Nothing in the Articles shall preclude the
settlement of any transaction entered into through the facilities of the New
York Stock Exchange or of any other stock exchange on which shares of stock of
the Corporation may be listed and which have conditioned such listing on the
inclusion in the Articles of a provision such as this Section 9.10. The fact
that the settlement of any transaction is permitted shall not negate the effect
of any other provision of this Article IX, and any transferee in such a
transaction and the shares so transferred shall be subject to all of the other
provisions and limitations of this Article IX.
ARTICLE X
RIGHTS AND POWERS OF CORPORATION
BOARD OF DIRECTORS AND OFFICERS
In carrying on its business, or for the purpose of attaining or furthering
any of its objectives, the Corporation shall have all of the rights, powers and
privileges granted to corporations by the laws of the State of Maryland, as well
as the power to do any and all acts and things that a natural person or
partnership could do as now or hereafter authorized by law, either alone or in
partnership or conjunction with others. Except as otherwise provided in the
Articles or the Bylaws of the Corporation, as amended from time to time, the
business of the Corporation shall be managed by its Board of Directors. The
Board of Directors shall have and may exercise all the rights, powers and
privileges of the Corporation except those that are by law, the Articles or the
Bylaws of the Corporation, conferred upon or reserved to the stockholders.
ARTICLE XI
STOCKHOLDER ACTION
11.1 Quorum. At any meeting of stockholders, the presence in person or by
proxy of stockholders entitled to cast a majority of all the votes entitled to
be cast at the meeting shall constitute a quorum.
11.2 Vote Required. A majority of the votes cast at a meeting of Stockholders
at which a quorum is present shall be sufficient to take or authorize action
upon any matter which may properly come before the meeting, unless more than a
majority of the votes cast is specifically required by law or the Articles.
Unless otherwise provided by law or the Articles, each outstanding share of
Stock, regardless of class, shall be entitled to one vote upon each matter
submitted to a vote at a meeting of stockholders. Shares of Stock directly or
indirectly owned by the Corporation shall not be voted in any meeting and shall
not be counted in determining the total number of outstanding shares of Stock
entitled to vote at any given time, but Stock held by it in a fiduciary capacity
(other than "Excess Stock" held by it in accordance with Article 9.5.2) may be
voted and shall be counted in determining the total number of outstanding shares
of Stock at any given time.
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11.3 Informal Action. Any action required or permitted to be taken by the
Stockholders at any annual or special meeting of stockholders may be taken
without a meeting if (i) a unanimous written consent which sets forth the action
taken and which is signed by each stockholder entitled to vote on the matter and
(ii) a written waiver of any right to dissent signed by each Stockholder
entitled to notice of such meeting but not entitled to vote at such meeting, are
filed with the records of stockholders meetings. Such consents and waivers may
be signed by different stockholders on separate counterparts.
ARTICLE XII
INDEMNIFICATION
The Board of Directors shall have the power to adopt Bylaws or resolutions
for the indemnification of the Corporation's directors, officers, employees and
agents, provided that any such Bylaws or resolutions shall be consistent with
applicable law.
ARTICLE XIII
LIMITATION OF LIABILITY
To the fullest extent permitted under the MGCL as in effect on the date of
filing the Articles or as the MGCL is thereafter amended from time to time, no
Director or officer shall be liable to the Corporation or its Stockholders for
money damages. Neither the amendment or the repeal of this Article XIII, nor the
adoption of any other provision in the Articles inconsistent with this Article
XIII, shall eliminate or reduce the protection afforded by this Article XIII to
a Director or officer of the Corporation with respect to any matter which
occurred, or any cause of action, suit or claim which but for this Article XIII
would have accrued or arisen, prior to such amendment, repeal or adoption.
ARTICLE XIV
STOCKHOLDER VOTE REQUIRED FOR CERTAIN TRANSACTIONS
No (i) sale, lease or exchange of all or substantially all of the property or
assets, including goodwill, of the Corporation or (ii) share exchange or merger
or consolidation of the Corporation with or into any other corporation, shall be
effected unless the same is first approved by the Board of Directors pursuant to
a resolution adopted by the Board of Directors in accordance with Section
3-105(b) of the MGCL and by a majority of the "Continuing Directors" (as defined
below), and, except as otherwise provided by law, thereafter approved by the
Stockholders. Whenever any vote of the holders of voting stock is required, and
in addition to any other vote of holders of voting stock that is required by the
Articles or by law, the affirmative vote of at least two-thirds of all the votes
cast on such sale, lease or exchange, share exchange, merger or consolidation,
by holders of voting stock, voting together as a single class, at any annual
meeting of Stockholders or special meeting of Stockholders called for such
purpose, shall be required to approve such sale, lease or exchange, share
exchange, merger or consolidation.
For the purpose of the Articles, the term "Continuing Directors" shall mean
(i) each of the initial members of the Board of Directors of the Corporation or
(ii) any of the Directors whose nomination for election to the Board of
Directors was recommended or approved by a vote of the majority of the Directors
then in office who are the Directors referred to in clause (i) of this sentence
or this clause (ii).
ARTICLE XV
PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS
15.1 The provisions of the Articles are severable, and if the Directors shall
determine that any one or more of such provisions are in conflict with the REIT
Provisions, or other applicable federal or state laws, the conflicting
provisions shall be deemed never to have constituted a part of the Articles,
even without any amendment of the Articles pursuant to Article XVII hereof;
provided, however, that such determination by the Directors shall not affect or
impair any of the remaining provisions of the Articles or render invalid or
improper any action taken or omitted prior to such determination. No Director
shall be liable for making or failing to make such a determination.
C-9
15.2 If any provision of the Articles or any application of such provision
shall be held invalid or unenforceable by any federal or state court having
jurisdiction, such holding shall not in any manner affect or render invalid or
unenforceable such provision in any other jurisdiction, and the validity of the
remaining provisions of the Articles shall not be affected. Other applications
of such provision shall be affected only to the extent necessary to comply with
the determination of such court.
ARTICLE XVI
AMENDMENT OF BYLAWS BY DIRECTORS
The Board of Directors shall have the power, at any regular or special
meeting of the Board of Directors, to make and adopt, or to amend, rescind,
alter or repeal, any Bylaws of the Corporation. The Bylaws may contain any
provision for the regulation and management of the affairs of the Corporation
not inconsistent with law or the provisions of the Articles of Incorporation.
ARTICLE XVII
AMENDMENT OF ARTICLES
The Corporation reserves the right to repeal, alter, amend or rescind any
provision contained in the Articles of Incorporation, including without
limitation any amendment to change the terms or contract rights, as expressly
set forth in the Articles, of any of its outstanding stock by classification,
reclassification or otherwise, in the manner now or hereafter prescribed by
statute, and all rights conferred on stockholders herein are granted subject to
this reservation. The affirmative vote of a majority of the Directors and a
majority of the Continuing Directors, shall be required to amend, repeal or
modify any provision of the Articles. Notwithstanding the foregoing, any
amendment, repeal or other modification of the provisions of Article VI, Article
IX, Article XII, Article XIII, Article XIV, Article XVI and this Article XVII
hereof shall require, in addition to the other applicable requirements of the
Articles of Incorporation and of law, the affirmative vote of holders of at
least two-thirds of the Stock then outstanding and entitled to vote generally in
the election of directors. All other amendments to the Articles shall require
the affirmative vote of a majority of the vote entitled to be cast on the
matter.
The provision of Section 3-602 of the MGCL, as the same may be amended or
re-enacted, or any successor provisions thereto, shall not apply to any business
combination (as defined in Section 3-601 of the MGCL) involving (i) the
Corporation and HRE Properties, a Massachusetts business trust ("HRE
Properties") or (ii) the Corporation and any person, who, as of December 31,
1996, is the "beneficial owner" (as such term is defined in Section 3-601 of the
MGCL) of in excess of 20% of the outstanding shares of beneficial interests in
HRE Properties, and who, by virtue of the merger of HRE Properties with and into
the Corporation, will own a similar percentage of the Corporation Common Stock
or any of such person's affiliates or associates (as such terms are defined in
Section 3-601 of the MGCL).
IN WITNESS WHEREOF, the undersigned incorporator of HRE Properties, Inc.
confirms that the organization meeting of the Board of Directors of the
Corporation has not been held and hereby executes the foregoing Amended Articles
of Incorporation and acknowledges the same to be his act and further
acknowledges that, to the best of his knowledge, the matters and facts set forth
therein are true in all material respects under the penalties of perjury as of
the 30th day of December, 1996.
/s/ J. W. Thompson Webb
-------------------------------
Name: J. W. Thompson Webb
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EXHIBIT D
BY-LAWS
OF
HRE PROPERTIES, INC.
BYLAWS
OF
HRE PROPERTIES, INC.
TABLE OF CONTENTS
PAGE
---------
ARTICLE I MEETINGS OF STOCKHOLDERS ................................. D-4
1.01 PLACE .................................................... D-4
1.02 ANNUAL MEETING ........................................... D-4
1.03 MATTERS TO BE CONSIDERED AT ANNUAL MEETING ............... D-4
1.04 SPECIAL MEETINGS ......................................... D-5
1.05 NOTICE ................................................... D-5
1.06 SCOPE OF NOTICE .......................................... D-5
1.07 ADJOURNMENT .............................................. D-5
1.08 PROXIES .................................................. D-6
1.09 CONDUCT OF MEETINGS ...................................... D-6
1.10 TABULATION OF VOTES ...................................... D-6
1.11 VOTING BY BALLOT ......................................... D-6
1.12 CONTROL SHARE STATUTE .................................... D-6
ARTICLE II DIRECTORS ................................................ D-6
2.01 GENERAL POWERS ........................................... D-6
2.02 OUTSIDE ACTIVITIES ....................................... D-6
2.03 NUMBER, TENURE AND QUALIFICATION ......................... D-7
2.04 NOMINATION OF DIRECTORS .................................. D-7
2.05 ANNUAL AND REGULAR MEETINGS .............................. D-8
2.06 SPECIAL MEETINGS ......................................... D-8
2.07 NOTICE ................................................... D-8
2.08 QUORUM ................................................... D-9
2.09 VOTING ................................................... D-9
2.10 CONDUCT OF MEETINGS ...................................... D-9
2.11 RESIGNATIONS ............................................. D-9
2.12 REMOVAL OF DIRECTORS ..................................... D-9
2.13 VACANCIES ................................................ D-9
2.14 INFORMAL ACTION BY DIRECTORS ............................. D-9
2.15 COMPENSATION ............................................. D-9
ARTICLE III COMMITTEES ............................................... D-10
3.01 NUMBER, TENURE AND QUALIFICATION ......................... D-10
3.02 DELEGATION OF POWER .......................................D-10
3.03 QUORUM AND VOTING ........................................ D-10
3.04 CONDUCT OF MEETINGS ...................................... D-10
D-1
PAGE
---------
3.05 INFORMAL ACTION BY COMMITTEES ............................ D-10
ARTICLE IV BOARD OF CONSULTANTS ..................................... D-10
4.01 APPOINTMENT .............................................. D-10
4.02 MEMBERS .................................................. D-10
4.03 MEETINGS ................................................. D-10
4.04 AUTHORITY ................................................ D-11
ARTICLE V OFFICERS ................................................. D-11
5.01 TITLES AND ELECTION ...................................... D-11
5.02 REMOVAL .................................................. D-11
5.03 VACANCIES ................................................ D-11
5.04 CHAIRMAN OF THE BOARD .................................... D-11
5.05 PRESIDENT ................................................ D-11
5.06 VICE PRESIDENTS .......................................... D-11
5.07 SECRETARY ................................................ D-12
5.08 TREASURER ................................................ D-12
5.09 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS ........... D-12
5.10 SUBORDINATE OFFICERS ..................................... D-12
5.11 COMPENSATION ............................................. D-12
ARTICLE VI SHARES OF STOCK .......................................... D-12
6.01 CERTIFICATES FOR STOCK ................................... D-12
6.02 STOCK LEDGER ............................................. D-13
6.03 RECORDING TRANSFER OF STOCK .............................. D-13
6.04 LOST CERTIFICATE ......................................... D-13
6.05 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE ....... D-13
ARTICLE VII DIVIDENDS AND DISTRIBUTIONS .............................. D-14
7.01 DECLARATIONS ............................................. D-14
7.02 CONTINGENCIES ............................................ D-14
ARTICLE VIII INDEMNIFICATION .......................................... D-14
8.01 INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES ..... D-14
8.02 STANDARD ................................................. D-14
8.03 ADVANCE PAYMENT OF EXPENSES .............................. D-15
8.04 GENERAL .................................................. D-15
ARTICLE IX NOTICES .................................................. D-15
9.01 NOTICES .................................................. D-15
9.02 SECRETARY TO GIVE NOTICE ................................. D-15
9.03 WAIVER OF NOTICE ......................................... D-15
D-2
PAGE
---------
ARTICLE X MISCELLANEOUS ........................................ D-16
10.01 BOOKS AND RECORDS .................................... D-16
10.03 CONTRACTS ............................................ D-16
10.04 CHECKS, DRAFTS, ETC. ................................. D-16
10.05 LOANS ................................................ D-16
10.06 FISCAL YEAR .......................................... D-16
10.07 ANNUAL REPORT ........................................ D-16
10.08 INTERIM REPORTS ...................................... D-16
10.09 OTHER REPORTS ........................................ D-16
10.10 BYLAWS SEVERABLE D-17
ARTICLE XI AMENDMENT OF BYLAWS .................................. D-17
ARTICLE XII EXEMPTIONS TO SECTIONS 3-701 THROUGH 3-709 OF THE
MGCL ................................................ D-17
D-3
ARTICLE I
MEETINGS OF STOCKHOLDERS
1.01 Place. All meetings of the holders of the issued and outstanding common
stock and preferred stock of the Corporation (the "Stockholders") shall be held
at the principal executive office of the Corporation or such other place within
the United States as shall be stated in the notice of the meetings.
1.02 Annual Meeting. An annual meeting of the Stockholders for the election
of Directors and the transaction of such other business as properly may be
brought before the meeting shall be held in March of each year or at such other
date and time as may be fixed by the Board of Directors. If the date fixed for
the annual meeting shall be a legal holiday, such meeting shall be held on the
next succeeding business day. Failure to hold an annual meeting shall not
invalidate the Corporation's existence or affect any otherwise valid acts of the
Corporation.
1.03 Matters to be Considered at Annual Meeting. At any annual meeting of
Stockholders or any special meeting in lieu of the annual meeting of
Stockholders (the "Annual Meeting"), only such business shall be conducted, and
only such proposals shall be acted upon, as shall have been properly brought
before each Annual Meeting. To be considered as properly brought before an
Annual Meeting, business must be: (a) specified in the notice of meeting, (b)
otherwise properly brought before the meeting by, or at the direction of, the
Board of Directors, or (c) otherwise properly brought before the meeting by any
holder of record (both as of the time notice of such proposal is given by the
Stockholder as set forth below and as of the record date for the Annual Meeting
in question) of any shares of capital stock of the Corporation entitled to vote
at such Annual Meeting who complies with the requirements set forth in this
Section 1.03.
In addition to any other applicable requirements, for business to be properly
brought before an Annual Meeting by a Stockholder of record of any shares of
capital stock entitled to vote at such Annual Meeting, such Stockholder shall:
(i) give timely notice as required by this Section 1.03 to the Secretary of the
Corporation and (ii) be present at such meeting, either in person or by a
representative. For the first Annual Meeting of the Corporation, a Stockholder's
notice shall be timely delivered to, or mailed to and received by, the
Corporation, at its principal executive office not later than the close of
business on the later of (A) the 75th day prior to the scheduled date of such
Annual Meeting or (B) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made by the
Corporation. For all subsequent Annual Meetings, a Stockholder's notice shall be
timely if delivered to, or mailed to and received by, the Corporation at its
principal executive office not less than 75 days nor more than 120 days prior to
the anniversary date of the immediately preceding Annual Meeting (the
"Anniversary Date"); provided, however, that in the event the Annual Meeting is
scheduled to be held on a date more than 30 days before the Anniversary Date or
more than 60 days after the Anniversary Date, a Stockholder's notice shall be
timely if delivered to, or mailed to and received by, the Corporation at its
principal executive office not later than the close of business on the later of
(A) the 75th day prior to the scheduled date of such Annual Meeting or (B) the
15th day following the day on which public announcement of the date of such
Annual Meeting is first made by the Corporation.
For purposes of these Bylaws, "public announcement" shall mean: (i)
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service, (ii) a report or other document filed
publicly with the Securities and Exchange Commission (including, without
limitation, a Form 8-K), or (iii) a letter or report sent to Stockholders of
record of the Corporation at the time of the mailing of such letter or report.
A Stockholder's notice to the Secretary shall set forth as to each matter
proposed to be brought before an Annual Meeting: (i) a brief description of the
business the Stockholder desires to bring before such Annual Meeting and the
reasons for conducting such business at such Annual Meeting, (ii) the name and
address, as they appear on the Corporation's stock transfer books, of the
Stockholder proposing such business, (iii) the class and number of shares of the
Corporation's capital stock beneficially owned by the Stockholder proposing such
business, (iv) the names and addresses of the beneficial owners, of any capital
stock of the Corporation registered in such Stockholder's name on such books,
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and the class and number of shares of the Corporation's capital stock
beneficially owned by such beneficial owners, (v) the names and addresses of
other Stockholders known by the Stockholder proposing such business to support
such proposal, and the class and number of shares of the Corporation's capital
stock beneficially owned by such other Stockholders; and (vi) any material
interest of the Stockholder proposing to bring such business before such meeting
(or any other Stockholders known to be supporting such proposal) in such
proposal.
If the Board of Directors or a designated committee thereof determines that
any Stockholder proposal was not made in a timely fashion in accordance with the
provisions of this Section 1.03 or that the information provided in a
Stockholder's notice does not satisfy the information requirements of this
Section 1.03 in any material respect, such proposal shall not be presented for
action at the Annual Meeting in question. If neither the Board of Directors nor
such committee makes a determination as to the validity of any Stockholder
proposal in the manner set forth above, the presiding officer of the Annual
Meeting shall determine whether the Stockholder proposal was made in accordance
with the terms of this Section 1.03. If the presiding officer determines that
any Stockholder proposal was not made in a timely fashion in accordance with the
provisions of this Section 1.03 or that the information provided in a
Stockholder's notice does not satisfy the information requirements of this
Section 1.03 in any material respect, such proposal shall not be presented for
action at the Annual Meeting in question. If the Board of Directors, a
designated committee thereof or the presiding officer determines that a
Stockholder proposal was made in accordance with the requirements of this
Section 1.03, the presiding officer shall so declare at the Annual Meeting and
ballots shall be provided for use at the meeting with respect to such proposal.
Notwithstanding the foregoing provisions of this Bylaw, a Stockholder shall
also comply with all applicable requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations thereunder
with respect to the matters set forth in this Bylaw, and nothing in this Bylaw
shall be deemed to affect any rights of Stockholders to request inclusion of
proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the
Exchange Act.
1.04 Special Meetings. The Chairman of the Board, the President or a majority
of the Board of Directors may call special meetings of the Stockholders. In
addition, the Secretary of the Corporation shall call a special meeting of the
Stockholders on the written request of Stockholders entitled to cast at least a
majority of all the votes entitled to be cast at the meeting.
1.05 Notice. Not fewer than ten (10) nor more than ninety (90) days before
the date of every meeting of Stockholders, written or printed notice of such
meeting shall be given in accordance with Article 9, to each Stockholder
entitled to vote or entitled to notice by statute, stating the time and place of
the meeting and, in the case of a special meeting or as otherwise may be
required by statute, the purpose or purposes for which the meeting is called.
1.06 Scope of Notice. No business shall be transacted at a special meeting of
Stockholders except that specifically designated in the notice of the meeting.
Any business of the Corporation may be transacted at the Annual Meeting without
being specifically designated in the notice, except such business as is required
by statute to be stated in such notice.
1.07 Adjournment. When any meeting is convened, the presiding officer may
adjourn the meeting if (a) no quorum is present for the transaction of business,
(b) the Board of Directors determines that adjournment is necessary or
appropriate to enable the Stockholders to consider full information which the
Board of Directors determines has not been made sufficiently or timely available
to Stockholders, or (c) the Board of Directors determines that adjournment is
otherwise in the best interests of the Corporation. When any Annual Meeting or
special meeting of Stockholders is adjourned to another hour, date or place,
notice need not be given of the adjourned meeting other than an announcement at
the meeting at which the adjournment is taken of the hour, date and place to
which the meeting is adjourned; provided, however, that if the adjournment is
for more than 120 days after the original record date, notice of the adjourned
meeting shall be given to each Stockholder of record entitled to vote thereat
and each Stockholder who by law or under the Articles or these Bylaws is
entitled to such notice.
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At any adjourned meeting at which a quorum is present, any business may be
transacted that might have been transacted at the meeting as originally
notified. The Stockholders present at a meeting which has been duly called and
convened and at which a quorum is present at the time counted may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
Stockholders to leave less than a quorum.
1.08 Proxies. A Stockholder may vote the Shares owned of record by him or
her, either in person or by proxy executed in writing by the Stockholder or by
his or her duly authorized attorney in fact. Such proxy shall be filed with the
Secretary of the Corporation before or at the time of the meeting. No proxy
shall be valid after eleven (11) months from the date of its execution, unless
otherwise provided in the proxy.
1.09 Conduct of Meetings. The Chairman of the Board or, in the absence of the
Chairman, the President or any Vice President, or, in the absence of the
Chairman, President or any Vice Presidents, a presiding officer elected at the
meeting, shall preside over meetings of Stockholders. The Secretary of the
Corporation, or, in the absence of the Secretary and Assistant Secretaries, the
person appointed by the presiding officer of the meeting shall act as secretary
of such meeting.
1.10 Tabulation of Votes. At any Annual Meeting of Stockholders, the
presiding officer shall be authorized to appoint one or more persons as tellers
for such meeting (the "Teller" or "Tellers"). The Teller may, but need not, be
an officer or employee of the Corporation. The Teller shall be responsible for
tabulating or causing to be tabulated the shares voted at the meeting and
reviewing or causing to be reviewed all proxies. In tabulating votes, the Teller
shall be entitled to rely in whole or in part on tabulations and analyses made
by personnel of the Corporation, its counsel, its transfer agent, its registrar
or such other organizations that are customarily employed to provide such
services. The Teller may be authorized by the presiding officer to determine on
a preliminary basis the legality and sufficiency of all votes cast and proxies
delivered under the Articles, Bylaws and applicable law. The presiding officer
may review all preliminary determinations made by the Teller hereunder, and in
doing so, the presiding officer shall be entitled to exercise his or her sole
judgment and discretion and he or she shall not be bound by any preliminary
determinations made by the Teller. Each report of the Teller shall be in writing
and signed by him or her or by a majority of them if there is more than one. The
report of the majority shall be the report of the Tellers.
1.11 Voting by Ballot. Voting on any question or in any election may be viva
voce unless the presiding officer shall order or any Stockholder shall demand
that voting be by ballot.
1.12 Control Share Statute. Notwithstanding any other provision of the
charter of the Corporation or these Bylaws, Title 3, Subtitle 7 of the
Corporations and Associations Article of the Annotated Code of Maryland (or any
successor statute) shall not apply to any acquisition of the stock of the
Corporation by any person who, as of December 31, 1996, owned in excess of 20%
of the outstanding common shares of HRE Properties, a Massachusetts business
trust (the "Trust"), and who by virtue of the merger of the Trust with and into
the Corporation will own that percentage of the stock of the Corporation.
ARTICLE II
DIRECTORS
2.01 General Powers. The business and affairs of the Corporation shall be
managed by its Board of Directors. All powers of the Corporation may be
exercised by or under the authority of the Board of Directors, except as
conferred on or reserved to the Stockholders by statute, the Articles or these
Bylaws.
2.02 Outside Activities. The Board of Directors and its members are required
to spend only such time managing the business and affairs of the Corporation as
is necessary to carry out their duties in accordance with Section 2-405.1 of the
Maryland General Corporation Law (the "MGCL"). The Board of Directors, each
Director, and the agents, officers and employees of the Corporation or of the
Board of Directors or of any Director may engage with or for others in business
activities of the types conducted by the Corporation. Except as set forth in the
Articles or by separate agreement, none of such
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individuals has an obligation to notify or present to the Corporation or each
other any investment opportunity that may come to such person's attention even
though such investment might be within the scope of the Corporation's purposes
or various investment objectives. Any interest (including any interest as
defined in Section 2-419(a) of the MGCL) that a Director has in any investment
opportunity presented to the Corporation must be disclosed by such Director to
the Board of Directors (and, if voting thereon, to the Stockholders or to any
committee of the Board of Directors) within ten (10) days after the later of the
date upon which such Director becomes aware of such interest or the date upon
which such Director becomes aware that the Corporation is considering such
investment opportunity. If such interest comes to the interested Director's
attention after a vote to take such investment opportunity, the voting body
shall be notified of such interest and shall reconsider such investment
opportunity if not already consummated or implemented.
2.03 Number, Tenure and Qualification. The number of Directors of the
Corporation shall initially be seven. The number of directors may be changed
from time to time by a majority of the entire Board of Directors, provided, that
there shall not be fewer than 3 directors or greater than 15 directors. No
reduction in the number of Directors shall cause the removal of any Director
from office prior to the expiration of his or her term. Each Director shall
serve for the term set forth in the Articles and until his or her successor is
elected and qualified.
2.04 Nomination of Directors. Nomination of candidates for election as
Directors of the Corporation at any Annual Meeting may be made only (a) by, or
at the direction of, a majority of the Board of Directors or (b) by any holder
of record (both as of the time notice of such nomination is given by the
Stockholder as set forth below and as of the record date for the Annual Meeting
in question) of any shares of the capital stock of the Corporation entitled to
vote at such Annual Meeting who complies with the timing, informational and
other requirements set forth in this Section 2.04. Any Stockholder who has
complied with the timing, informational and other requirements set forth in this
Section 2.04 and who seeks to make such a nomination, or his, her or its
representative, must be present in person at the Annual Meeting. Only persons
nominated in accordance with the procedures set forth in this Section 2.04 shall
be eligible for election as directors at an Annual Meeting.
Nominations, other than those made by, or at the direction of, the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation as set forth in this Section 2.04. For the first Annual
Meeting of the Corporation, a stockholder's notice shall be timely if delivered
to, or mailed to and received by, the Corporation at its principal executive
office not later than the close of business on the later of (A) the 75th day
prior to the scheduled date of such Annual Meeting or (B) the 15th day following
the day on which public announcement of the date of such Annual Meeting is first
made by the Corporation. For all subsequent Annual Meetings, a stockholder's
notice shall be timely if delivered to, or mailed to and received by, the
Corporation at its principal executive office not less than 75 days nor more
than 120 days prior to the Anniversary Date; provided, however, that in the
event the Annual Meeting is scheduled to be held on a date more than 30 days
before the Anniversary Date or more than 60 days after the Anniversary Date, a
Stockholder's notice shall be timely if delivered to, or mailed and received by,
the Corporation at its principal executive office not later than the close of
business on the later of (i) the 75th day prior to the scheduled date of such
Annual Meeting or (ii) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made by the
Corporation.
A Stockholder's notice to the Secretary shall set forth as to each person
whom the Stockholder proposes to nominate for election or re-election as a
Director: (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of the Corporation's capital stock which are
beneficially owned by such person on the date of such Stockholder notice, and
(iv) the consent of each nominee to serve as a Director if elected. A
Stockholder's notice to the Secretary shall further set forth as to the
Stockholder giving such notice: (i) the name and address, as they appear on the
Corporation's stock transfer books, of such Stockholder and of the beneficial
owners (if any) of the Corporation's capital stock registered in such
Stockholder's name and the name and address of other Stockholders known by such
Stockholder to be supporting such nominee(s), (ii) the class and number of
shares of the Corporation's capital stock
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which are held of record, beneficially owned or represented by proxy by such
Stockholder and by any other Stockholders known by such Stockholder to be
supporting such nominee(s) on the record date for the Annual Meeting in question
(if such date shall then have been made publicly available) and on the date of
such Stockholder's notice, and (iii) a description of all arrangements or
understandings between such Stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by such Stockholder.
If the Board of Directors or a designated committee thereof determines that
any Stockholder nomination was not made in accordance with the terms of this
Section 2.04 or that the information provided in a Stockholder's notice does not
satisfy the informational requirements of this Section 2.04 in any material
respect, then such nomination shall not be considered at the Annual Meeting in
question. If neither the Board of Directors nor such committee makes a
determination as to whether a nomination was made in accordance with the
provisions of this Section 2.04, the presiding officer of the Annual Meeting
shall determine whether a nomination was made in accordance with such
provisions. If the presiding officer determines that any Stockholder nomination
was not made in accordance with the terms of this Section 2.04 or that the
information provided in a Stockholder's notices does not satisfy the
informational requirements of this Section 2.04 in any material respect, then
such nomination shall not be considered at the Annual Meeting in question. If
the Board of Directors, a designated committee thereof or the presiding officer
determines that a nomination was made in accordance with the terms of this
Section 2.04, the presiding officer shall so declare at the Annual Meeting and
ballots shall be provided for use at the meeting with respect to such nominee.
Notwithstanding anything to the contrary in the second sentence of the second
paragraph of this Section 2.04, in the event that the number of Directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement by the Corporation naming all of the nominees for
Director or specifying the size of the increased Board of Directors at least 75
days prior to the Anniversary Date, a Stockholder's notice required by this
Section 2.04 shall also be considered timely, but only with respect to nominees
for any new positions created by such increase, if such notice shall be
delivered to, or mailed to and received by, the Corporation at its principal
executive office not later than the close of business on the 15th day following
the day on which such public announcement is first made by the Corporation.
No person shall be elected by the Stockholders as a Director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section. Election of Directors at the Annual Meeting need not be by written
ballot, unless otherwise provided by the Board of Directors or presiding officer
at such Annual Meeting. If written ballots are to be used, ballots bearing the
names of all the persons who have been nominated for election as Directors at
the Annual Meeting in accordance with the procedures set forth in this Section
shall be provided for use at the Annual Meeting.
2.05 Annual and Regular Meetings. An annual meeting of the Board of Directors
may be held immediately after and at the same place as the Annual Meeting of
Stockholders, or at such other time and place, either within or without the
State of Maryland, as is selected by resolution of the Board of Directors, and
no notice other than this Bylaw or such resolution shall be necessary. The Board
of Directors may provide, by resolution, the time and place, either within or
without the State of Maryland, for the holding of regular meetings of the Board
of Directors without other notice than such resolutions.
2.06 Special Meetings. Special meetings of the Board of Directors may be
called by or at the request of the Chairman of the Board, the President or a
majority of the Directors then in office. The person or persons authorized to
call special meetings of the Board of Directors may fix any place, either within
or without the State of Maryland, as the place for holding any special meeting
of the Board of Directors called by them.
2.07 Notice. Notice of any special meeting to be provided herein shall be
given, in accordance with Section 9, by written notice delivered personally,
telegraphed or telecopied to each Director at his or her business or residence
at least twenty-four (24) hours, or by mail at least five (5) days, prior to the
meeting. Neither the business to be transacted at, nor the purpose of, any
annual, regular or special meeting of the Board of Directors need be specified
in the notice, unless specifically required by statute, the Articles or these
Bylaws.
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2.08 Quorum. A majority of the Board of Directors then in office shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors; provided, however, that a quorum for the transaction of business
with respect to any matter in which any Director (or affiliate of such Director)
who is not an independent Director has any interest shall consist of a majority
of the Directors that includes a majority of the independent Directors then in
office. If less than a majority of the Board of Directors is present at said
meeting, a majority of the Directors present may adjourn the meeting from time
to time without further notice.
2.09 Voting. The act of a majority of the Directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors, unless the
concurrence of a greater proportion is required for such action by applicable
statute, the Articles or these Bylaws; provided, however, that no act relating
to any matter in which a Director (or affiliate of such Director) who is not an
independent Director has any interest shall be the act of the Board of Directors
unless such act has been approved by a majority of the Board of Directors that
includes a majority of the independent Directors.
2.10 Conduct of Meetings. All meetings of the Board of Directors shall be
called to order and presided over by the Chairman of the Board, or in the
absence of the Chairman of the Board, by the President (if a member of the Board
of Directors) or, in the absence of the Chairman of the Board of Directors and
the President, by a member of the Board of Directors selected by the members
present. The Secretary of the Corporation, or in the absence of the Secretary,
any Assistant Secretary, shall act as secretary of all meetings of the Board of
Directors, and in the absence of the Secretary and Assistant Secretaries, the
presiding officer of the meeting shall designate any person to act as secretary
of the meeting. Members of the Board of Directors may participate in meetings of
the Board of Directors by conference telephone or similar communications
equipment by means of which all Directors participating in the meeting can hear
each other at the same time, and participation in a meeting in accordance
herewith shall constitute presence in person at such meeting for all purposes of
these Bylaws.
2.11 Resignations. Any Director may resign from the Board of Directors or any
committee thereof at any time. Such resignation shall be made in writing and
shall take effect at the time specified therein, or if no time be specified, at
the time of the receipt of notice of such resignation by the President or the
Secretary.
2.12 Removal of Directors. Any or all of the Directors may be removed from
office in accordance with the Articles of Incorporation.
2.13 Vacancies. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, newly created directorships resulting from any
increase in the authorized number of Directors shall be filled solely by the
affirmative vote of a majority of the entire Board of Directors and any
vacancies on the Board of Directors resulting from death, resignation,
retirement, disqualification or other cause (other than removal from office)
shall be filled solely by the affirmative vote of a majority of the remaining
Directors then in office, even if less than a quorum. Subject to the rights of
the holders of any series of Preferred Stock then outstanding, vacancies on the
Board of Directors resulting from the removal of a Director from office may be
filled by the affirmative vote of a majority of all the votes cast at a meeting
of Stockholders called for that purpose. A director elected by the Board of
Directors to fill any vacancy shall serve until the next annual meeting of
stockholders and until his successor is elected and qualifies.
2.14 Informal Action by Directors. Any action required or permitted to be
taken at any meeting of the Board of Directors may be taken without a meeting,
if a consent in writing to such action is signed by all of the Directors and
such written consent is filed with the minutes of the Board of Directors.
Consents may be signed by different Directors on separate counterparts.
2.15 Compensation. An annual fee for services and payment for expenses of
attendance at each meeting of the Board of Directors, or of any committee
thereof, may be allowed to any Director by resolution of the Board of Directors.
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ARTICLE III
COMMITTEES
3.01 Number, Tenure and Qualification. The Board of Directors may appoint
from among its members an Executive Committee and other committees of two or
more Directors, to serve at the pleasure of the Board of Directors. If any
committee may take or authorize any act as to any matter in which any Director
(or affiliate of such Director) who is not an independent Director has or may
have any interest, a majority of the members of such committee shall be
independent Directors, except that any such committee consisting of only two
Directors may have one independent Director and one Director who is not an
independent Director.
3.02 Delegation of Power. The Board of Directors may delegate to these
committees in the intervals between meeting of the Board of Directors any of the
powers of the Board of Directors to manage the business and affairs of the
Corporation, except those powers which the Board of Directors is specifically
prohibited from delegating pursuant to Section 2-411 of the MGCL.
3.03 Quorum and Voting. A majority of the members of any committee shall
constitute a quorum for the transaction of business by such committee, and the
act of a majority of the quorum shall constitute the act of the committee,
except that no act relating to any matter in which any Director (or affiliate of
such Director) who is not an independent Director has any interest, shall be the
act of any committee unless a majority of the independent Directors on the
committee vote for such act.
3.04 Conduct of Meetings. Each committee shall designate a presiding officer
of such committee, and if not present at a particular meeting, the committee
shall select a presiding officer for such meeting. Members of any committee may
participate in meetings of such committee by conference telephone or similar
communication equipment by means of which all Directors participating in the
meeting can hear each other at the same time, and participation in a meeting in
accordance herewith shall constitute presence in person at such meeting for all
purposes of these Bylaws. Each committee shall keep minutes of its meetings, and
report the results of any proceedings at the next succeeding annual or regular
meeting of the Board of Directors.
3.05 Informal Action by Committees. Any action required or permitted to be
taken at any meeting of a committee of the Board of Directors may be taken
without a meeting, if a written consent to such action is signed by all members
of the committee and such written consent is filed with the minutes of
proceedings of such committee. Consents may be signed by different members on
separate counterparts.
ARTICLE IV
BOARD OF CONSULTANTS
4.01 Appointment. The Board of Directors may appoint a Board of Consultants
to consider, advise upon and make recommendations to the Board of Directors with
respect to such questions relating to the conduct of the business of the
Corporation as may be submitted to it by the Board of Directors.
4.02 Members. The members of the Board of Consultants, who shall not be
Directors and need not be officers or shareholders, shall serve from the date
appointed until their resignation, death or removal by a vote of the majority of
the Board of Directors, with or without cause.
4.03 Meetings. Meetings of the Board of Consultants shall be called by the
Chairman of the Board or Secretary on order by the Board of Directors at such
time and place as the Board of Directors may from time to time designate. The
Board of Directors shall determine with respect to each meeting which members of
the Board of Consultants should be called; all members need not be called to
every meeting. The Board of Directors may, at their discretion, invite other
participants and/or observers to such meetings. The members of the Board of
Consultants shall be entitled to a fee for attendance at such meetings, which
fee shall be fixed by resolution of the Board of Directors.
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4.04 Authority. The Board of Consultants shall have no authority or power
with respect to the affairs of the Corporation, and members of the Board of
Consultants shall not be empowered by such membership to act as, or to represent
themselves to be, agents or representatives of the Corporation and/or of the
Board of Directors.
ARTICLE V
OFFICERS
5.01 Titles and Election. The Corporation shall have a Chairman of the Board,
a President, a Treasurer and a Secretary, and may have one or more Vice
Presidents, a Chief Financial Officer, a Chief Operating Officer, one or more
Assistant Secretaries, one or more Assistant Treasurers and such other
subordinate officers as the Board of Directors, or any committee or officer
appointed by the Board of Directors for such purpose, may from time to time
elect. The officers of the Corporation shall be elected from time to time by the
Board of Directors at any meeting thereof. Each officer shall hold office until
his successor is duly elected and qualified or until his death, resignation or
removal in the manner hereinafter provided. Any two or more officers, except
President and Vice President, may be held by the same person. Election or
appointment of an officer or agent shall not of itself create contract rights
between the Corporation and such officer or agent.
5.02 Removal. Any officer or agent elected or appointed by the Board of
Directors may be removed, with or without cause, by the Board of Directors
whenever in its judgment the best interests of the Corporation would be served
thereby. The fact that a person is elected to office, whether or not for a
specified term, shall not by itself constitute any undertaking or evidence of
any employment obligation of the Corporation to that person.
5.03 Vacancies. A vacancy in any office may be filled by the Board of
Directors for the unexpired portion of the term.
5.04 Chairman of the Board. Unless the Board of Directors shall otherwise
determine, the Chairman of the Board shall be the Chief Executive Officer and
general manager of the Corporation and shall in general supervise and control
all of the business and affairs of the Corporation. The Chairman of the Board
shall be a Director and shall preside over the meetings of the Stockholders and
the Board of Directors. The Chairman of the Board shall perform such other
duties as may be assigned to him by the Board of Directors. The Chairman of the
Board may sign and execute any deed, mortgage, bond, contract, or other
obligation or instrument on behalf of the Corporation, except in cases where the
execution thereof shall be expressly designated by the Board of Directors or by
the Articles, these Bylaws or otherwise to another officer or agent of the
Corporation.
5.05 President. Unless the Board of Directors shall otherwise determine, the
President shall be the Chief Operating Officer of the Corporation and shall
supervise and control the day-to-day business and affairs of the Corporation. In
the absence of the Chairman of the Board, the President shall preside at all
meetings of the Stockholders and of the Board of Directors (if a member of the
Board of Directors). The President may execute any deed, mortgage, bond,
contract or other obligation or instrument on behalf of the Corporation, except
in cases where the execution thereof shall be expressly delegated by the Board
of Directors or by the Articles, by these Bylaws or otherwise to some other
officer or agent of the Corporation. In general, the President shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors or the Chairman of the Board from time to
time.
5.06 Vice Presidents. The Board of Directors may appoint one or more Vice
Presidents. In the absence of the President or in the event of a vacancy in such
office, the Vice President (or in the event there shall be more than one Vice
President, the Vice Presidents in the order designated at the time of their
election, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President and when so acting shall
have all the powers of and be subject to all of the
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restrictions upon the President. Every Vice President shall perform such other
duties as from time to time may be assigned to him by the President or the Board
of Directors. The Board of Directors may designate one or more Vice Presidents
as Executive Vice Presidents or as Vice Presidents for particular areas of
responsibility.
5.07 Secretary. The Secretary shall (i) keep the minutes of the proceedings
of the Stockholders and Board of Directors in one or more books provided for
that purpose; (ii) see that all notices are duly given in accordance with the
provisions of these Bylaws or as required by law; (iii) be custodian of the
records of the Corporation; (iv) unless a transfer agent is appointed, keep a
register of the post office address of each Stockholder which shall be furnished
to the Secretary by such Stockholder and have general charge of the stock ledger
of the Corporation; (v) when authorized by the Board of Directors or the
President, attest to or witness all documents requiring the same; (vi) perform
all duties as from time to time may be assigned to him by the President or by
the Board of Directors; and (vii) perform all of the duties generally incident
to the office of secretary of a corporation.
5.08 Treasurer. The Treasurer shall have the custody of the Corporation's
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositaries as may be designated by the Board of Directors. The Treasurer
shall disburse funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors, at the regular meetings of the Board
of Directors or whenever they may require it, an account of all his transactions
as Treasurer and of the financial condition of the Corporation. The Board of
Directors may engage a custodian to perform some or all of the duties of the
Treasurer, and if a custodian is so engaged then the Treasurer shall be relieved
of the responsibilities set forth herein to the extent delegated to such
custodian and, unless the Board of Directors otherwise determines, shall have
general supervision over the activities of the custodian. The custodian shall
not be an officer of the Corporation.
5.09 Assistant Secretaries and Assistant Treasurers. The Board of Directors,
or any committee or officer appointed by the Board of Directors for such
purpose, may appoint one or more Assistant Secretaries or Assistant Treasurers.
The Assistant Secretaries and Assistant Treasurers (i) shall have the power to
perform and shall perform all the duties of the Secretary and the Treasurer,
respectively, in such respective officer's absence and (ii) shall perform such
duties as shall be assigned to him by the Secretary or Treasurer, respectively,
or by the President of the Board of Directors, or any such designated committee
or officer.
5.10 Subordinate Officers. The Corporation shall have such subordinate
officers as the Board of Directors, or any committee or officer appointed by the
Board of Directors for such purpose, may from time to time elect. Each such
officer shall hold office for such period and perform such duties as the Board
of Directors, the President or any designated committee or officer may
prescribe.
5.11 Compensation. The salaries and other compensation and remuneration, of
any kind, if any, of the officers shall be fixed from time to time by the Board
of Directors. No officer shall be prevented from receiving such compensation, if
any, by reason of the fact that he is also a Director of the Corporation. The
Board of Directors may authorize any committee or officer, upon whom the power
of appointing assistant and subordinate officers may have been conferred, to fix
the compensation and remuneration of such assistant and subordinate officer.
ARTICLE VI
SHARES OF STOCK
6.01 Certificates for Stock. All shares of the classes or series of Stock
shall be represented by certificates in such form, not inconsistent with the
Articles, as shall be approved by the Board of Directors. All certificates shall
be signed by the Chairman of the Board, the President, or a Vice President and
countersigned by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary. Any signature or countersignature may be either a manual or
facsimile signature. All certificates for each
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class of Stock, shall be consecutively numbered. Each certificate representing
shares of Stock which are restricted as to their transferability or voting
powers, which are preferred or limited as to their allocable portion of the
assets upon liquidation or which are redeemable at the option of the
Corporation, shall have a statement of such restriction, limitation, preference
or redemption provision, or summary thereof, plainly stated on the certificate.
In lieu of such statement or summary, the Corporation may set forth on the face
or back of the certificate a statement that the Corporation will furnish to any
Stockholder, upon request and without charge, a full statement of such
information.
6.02 Stock Ledger. The Corporation shall maintain at its principal executive
office, at the office of its counsel, accountants or transfer agent or at such
other place designated by the Board of Directors an original or duplicate stock
ledger containing the names and addresses of all the Stockholders and the number
of shares of each class held by each Stockholder. The stock ledger shall be
maintained pursuant to a system that the Corporation shall adopt allowing for
the issuance, recordation and transfer of its Stock by electronic or other means
that can be readily converted into written form for visual inspection and not
involving any issuance of certificates. Such system shall include provisions for
notice to acquirors of Stock (whether upon issuance or transfer of Stock) in
accordance with Sections 2-210 and 2-211 of the MGCL, and Section 8-408 of the
Commercial Law Article of the State of Maryland. The Corporation shall be
entitled to treat the holder of record of any Share or Shares as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such Share on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of the State of Maryland. Until a transfer is
duly effected on the stock ledger, the Corporation shall not be affected by any
notice of such transfer, either actual or constructive. Nothing herein shall
impose upon the Corporation, the Board of Directors or officers or their agents
and representatives a duty or limit to their rights to inquire as to the actual
ownership of Shares.
6.03 Recording Transfer of Stock. If transferred in accordance with any
restrictions on transfer contained in the Articles, these Bylaws or otherwise,
Shares shall be recorded as transferred in the Stock Ledger upon provision to
the Corporation or the transfer agent of the Corporation of an executed stock
power duly guaranteed and any other documents reasonably requested by the
Corporation, and the surrender of the certificate or certificates, if any,
representing such Shares. Upon receipt of such documents, the Corporation shall
issue the statements required by Section 2-210 and 2-211 of the MGCL and Section
8-408 of the Commercial Law Article of the State of Maryland, issue as needed a
new certificate or certificates (if the transferred Shares were certificated) to
the persons entitled thereto, cancel any old certificates and record the
transaction upon its books.
6.04 Lost Certificate. The Board of Directors may direct a new certificate to
be issued in the place of any certificate theretofore issued by the Corporation
alleged to have been stolen, lost or destroyed upon the making of an affidavit
of that fact by the person claiming the certificate of Stock to be stolen, lost
or destroyed. When authorizing such issue of a new certificate, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such stolen, lost or destroyed certificate or his
legal representative to advertise the same in such manner as it shall require
and/or to give bond, with sufficient surety, to the Corporation to indemnify it
against any loss or claim which may arise by reason of the issuance of a new
certificate.
6.05 Closing of Transfer Books or Fixing of Record Date.
6.5.1. The Board of Directors may fix, in advance, a date as the record date
for the purpose of determining Stockholders entitled to notice of, or to vote
at, any meeting of Stockholders, or Stockholders entitled to receive payment of
any dividend or other allotment of any rights, or in order to make a
determination of Stockholders for any other proper purpose. Such date, in any
case, shall not be prior to the close of business on the day the record date is
fixed and shall be not more than ninety (90) days, and in the case of a meeting
of Stockholders not less than ten (10) days, prior to the date on which the
meeting or particular action requiring such determination of Stockholders is to
be held or taken.
6.5.2. In lieu of fixing a record date, the stock transfer books may be
closed by the Board of Directors in accordance with Section 2-511 of the MGCL
for the purpose of determining Stockholders entitled to notice of or to vote at
a meeting of Stockholders.
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6.5.3. If no record date is fixed and the stock transfer books are not
closed for the determination of Stockholders, (a) the record date for the
determination of Stockholders entitled to notice of, or to vote at, a meeting of
Stockholders shall be at the close of business on the day on which the notice of
meeting is mailed or the 30th day before the meeting, whichever is the closer
date to the meeting; and (b) the record date for the determination of
Stockholders entitled to receive payment of a dividend or an allotment of any
rights shall be at the close of business on the day on which the resolution of
the Board of Directors, declaring the dividend or allotment of rights, is
adopted, but the payment or allotment may not be made more than sixty (60) days
after the date on which the resolution is adopted.
6.5.4. When a determination of Stockholders entitled to vote at any meeting
of Stockholders has been made as provided in this section, such determination
shall apply to any adjournment thereof, except where the determination has been
made through the closing of the stock transfer books and the stated period of
closing has expired.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
7.01 Declarations. Dividends and other distributions upon the Stock may be
declared by the Board of Directors as set forth in the applicable provisions of
the Articles and any applicable law, at any meeting, limited only to the extent
of Section 2-311 of the MGCL. Dividends and other distributions upon the Stock
may be paid in cash, property or Stock of the Corporation, subject to the
provisions of law and of the Articles.
7.02 Contingencies. Before payment of any dividends or other distributions
upon the Stock, there may be set aside (but there is no duty to set aside) out
of any funds of the Corporation available for dividends or other distributions
such sum or sums as the Board of Directors may from time to time, in its
absolute discretion, think proper as a reserve fund to meet contingencies, for
repairing or maintaining any property of the Corporation or for such other
purpose as the Board of Directors shall determine to be in the best interests of
the Corporation, and the Board of Directors may modify or abolish any such
reserve in the manner in which it was created.
ARTICLE VIII
INDEMNIFICATION
8.01 Indemnification of Directors, Officers and Employees. The Corporation
shall indemnify and hold harmless to the fullest extent permitted by, and under,
applicable law as it presently exists and as is further set forth in Article
8.02 below or as may hereafter be amended, any person who is or was a Director,
officer, employee or agent of the Corporation or who is or was serving at the
request of the Corporation as a Director, officer or employee of another
corporation or entity (including service with employee benefit plans), who by
reason of this status or service in that capacity was, is, or is threatened to
be made a party or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative, or investigative. Such indemnification
shall be against all liability and loss suffered and expenses (including, but
not limited to, attorneys' fees, judgments, fines, penalties, and amounts paid
in settlement) actually and reasonably incurred by the individual in connection
with such proceeding; provided, however, that the Corporation shall not be
required to indemnify a person in connection with an action, suit or proceeding
initiated by such person unless the action, suit or proceeding was authorized by
the Board of Directors of the Corporation.
8.02 Standard. Section 2-418 of the MGCL, on December 31, 1996, provided
generally that a corporation may indemnify any individual made a party to a
proceeding by reason of service on behalf of the corporation unless it is
established that:
(i) the act or omission of the individual was material to the matter giving
rise to the proceeding; and
(1) was committed in bad faith; or
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(2) was the result of active and deliberate dishonesty; or
(ii) the individual actually received an improper personal benefit in money,
property, or services; or
(iii) in the case of any criminal proceeding, the individual had reasonable
cause to believe that the act or omission was unlawful.
8.03 Advance Payment of Expenses. The Corporation shall pay or reimburse
reasonable expenses in advance of a final disposition of the proceeding and
without requiring a preliminary determination of the ultimate entitlement to
indemnification provided that the individual first provides the Corporation
with: (a) a written affirmation of the individual's good faith belief that the
individual meets the standard of conduct necessary for indemnification under the
laws of the State of Maryland; and (b) a written undertaking by or on behalf of
the individual to repay the amount advanced if it shall ultimately be determined
that the applicable standard of conduct has not been met.
8.04 General. The Board of Directors, by resolution, may authorize the
management of the Corporation to act for and on behalf of the Corporation in all
matters relating to indemnification within any such limits as may be specified
from time to time by the Board of Directors, all consistent with applicable law.
The rights conferred on any person by this Article VIII shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Articles of Incorporation of the
Corporation, these Bylaws, agreement, vote of the stockholders or disinterested
directors or otherwise.
Repeal or modification of this Article VIII or the relevant law shall not
affect adversely any rights or obligations then existing with respect to any
facts then or theretofore existing or any action, suit or proceeding theretofore
or thereafter brought or threatened based in whole or in part upon any such
facts.
ARTICLE IX
NOTICES
9.01 Notices. Except as provided in Section 2.07, whenever notice is required
to be given pursuant to these Bylaws, it shall be construed to mean either
written notice personally served against written receipt, or notice in writing
transmitted by mail, by depositing the same in a post office or letter box, in a
post-paid sealed wrapper, addressed, if to the Corporation, to 321 Railroad
Avenue, Greenwich, Connecticut 06830 (or any subsequent address selected by the
Board of Directors), attention President, or if to a Stockholder, Director or
officer, at the address at the general post office situated in the city or
county of his or her residence. Unless otherwise specified, notice sent by mail
shall be deemed to be given at the time mailed.
9.02 Secretary to Give Notice. All notices required by law or these Bylaws to
be given by the Corporation shall be given by the Secretary or any other officer
of the Corporation designated by the President. If the Secretary and Assistant
Secretary are absent or refuse or neglect to act, the notice may be given by any
person directed to do so by the President or, with respect to any meeting called
pursuant to these Bylaws upon the request of any Stockholders or Directors, by
any person directed to do so by the Stockholders or Directors upon whose request
the meeting is called.
9.03 Waiver of Notice. Wherever any notice is required to be given pursuant
to the Articles or these Bylaws or pursuant to applicable law, a wavier thereof
in writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. Neither the business to be transacted at nor the purpose
of any meeting need be set forth in the waiver of notice, unless specifically
required by statute. The attendance of any person at any meeting shall
constitute a wavier of notice of such meeting, except where such person attends
a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
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ARTICLE X
MISCELLANEOUS
10.01 Books and Records. The Corporation shall keep correct and complete
books and records of its accounts and transactions and minutes of the
proceedings of its Stockholders and Board of Directors meetings and of its
executive and other committees when exercising any powers of authority of the
Board of Directors. The books and records of the Corporation may be in written
form or in any other form that be converted within a reasonable time into
written form for visual inspection. Minutes shall be recorded in written form,
but may be maintained in the form of a reproduction.
10.02 Contracts. The Board of Directors may authorize any officer(s) or
agent(s) to enter into any contract or to execute and deliver any instrument in
the name of and on behalf of the Corporation, and such authority may be general
or confined to specific instances.
10.03 Checks, Drafts, Etc. All checks, drafts or other orders for the payment
of money, notes or other evidences of indebtedness issued in the name of the
Corporation shall be signed by such officers or agents of the Corporation and in
such manner as shall from time to time be determined by resolution of the Board
of Directors.
10.04 Loans.
10.4.1 Such officers or agents of the Corporation as from time to time have
been designated by the Board of Directors shall have authority (i) to effect
loans, advances, or other forms of credit at any time or times for the
Corporation, from such banks, trust companies, institutions, corporations,
firms, or persons, in such amounts and subject to such terms and conditions, as
the Board of Directors from time to time has designated; (ii) as security for
the repayment of any loans, advances, or other forms of credit so authorized, to
assign, transfer, endorse, and deliver, either originally or in addition or
substitution, any or all personal property, real property, stocks, bonds,
deposits, accounts, documents, bills, accounts receivable, and other commercial
paper and evidence of debt or other securities, or any rights or interests at
any time held by the Corporation; (iii) in connection with any loans, advances,
or other forms of credit so authorized, to make, execute, and deliver one or
more notes, mortgages, deeds of trust, statements, security agreements,
acceptances, or written obligations of the Corporation, on such terms and with
such provisions as to the security or sale or disposition of them as those
officers or agents deem proper, and (iv) to sell to, or discount or rediscount
with, the banks, trust companies, institutions, corporations, firms or persons
making those loans, advances, or other forms of credit, any and all commercial
paper, bills, accounts receivable, acceptances, and other instruments and
evidences of debt at any time held by the Corporation and, to that end, to
endorse, transfer, and deliver the same.
10.4.2. From time to time the Corporation shall certify to the bank, trust
company, institution, corporation, firm or person so designated, the signatures
of the officers or agents so authorized. Each bank, trust company, institution,
corporation, firm or person so designated is authorized to rely upon such
certification until it has received written notice that the Board of Directors
has revoked the authority of those officers or agents.
10.05 Fiscal Year. The Board of Directors shall have the power, from time to
time, to fix the fiscal year of the Corporation by a duly adopted resolution,
and, in the absence of such resolution, the fiscal year shall be the period
ending October 31.
10.06 Annual Report. Not later than 120 days after the close of each fiscal
year, the Board of Directors of the Corporation shall cause to be sent to the
Stockholders an Annual Report in such form as may be deemed appropriate by the
Board of Directors. The Annual Report shall include audited financial statements
and shall be accompanied by the report thereon of an independent certified
public accountant.
10.07 Interim Reports. The Corporation may send interim reports to the
Stockholders having such form and content as the Board of Directors may deem
proper.
10.08 Other Reports. Any distributions to Stockholders of income or capital
assets shall be accompanied by a written statement disclosing the source of the
funds distributed unless at the time of distri-
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butions they are accompanied by a written explanation of the relevant
circumstances. The statement as to such source shall be sent to the Stockholders
not later than ninety (90) days after the close of the fiscal year in which the
distributions were made.
10.09 Bylaws Severable. The provisions of these Bylaws are severable, and if
any provision shall be held invalid or unenforceable, that invalidity or
unenforceability shall attach only to that provision and shall not in any manner
affect or render invalid or unenforceable any other provision of these Bylaws,
and these Bylaws shall be carried out as if the invalid or unenforceable
provision were not contained herein.
ARTICLE XI
AMENDMENT OF BYLAWS
The Board of Directors shall have the exclusive power, at any regular or
special meeting thereof, to make and adopt new Bylaws, or to amend, alter or
repeal any Bylaws of the Corporation, provided such revisions are not
inconsistent with the Articles of Incorporation or applicable law.
ARTICLE XII
EXEMPTIONS TO SECTIONS 3-701
THROUGH 3-709 OF THE MGCL
The provisions of Sections 3-701 through 3-709 of Title III of the MGCL, as
the same may be amended or re-enacted or any successor provisions thereto, shall
not apply to any Person (as defined in Section 3-701 of Title III of the MGCL)
who, as of December 31, 1996 beneficially owned in excess of 20% of the
outstanding shares of beneficial interest of HRE Properties and who, by virtue
of the merger of HRE Properties with and into the Corporation, will own a
similar percentage of the Corporation Common Stock.
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