CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
The following discussion includes a description of our related person transactions since January 1, 2013
and our approval policy for related person transactions. Certain of these related person transactions, and their approvals, occurred prior to the election of our current trustees at the Special
Meeting and the appointment of our current executive officers at the Special Meeting. The disclosure below under "Former Policy for Review, Approval or Ratification of Transactions with
Related Persons" and "Related Person Transactions Prior to the Special Meeting" describes our related person transactions and approvals that occurred before the Special Meeting and has
been copied from the Amended Form 10-K, except for certain immaterial changes.
Review and Approval or Ratification of Transactions with Related Persons
Following the election of our current trustees at the Special Meeting the Board amended and restated certain of our policies, including
our Code of Business Conduct and Ethics and the Related Party Transaction Policy. Our Code of Business Conduct and Ethics prohibits trustees and executive officers from engaging in transactions that
may result in a conflict of interest with us. However, the Code of Business Conduct and Ethics allows exceptions to this prohibition, but only if a majority of the disinterested trustees approve the
transaction or the transaction has otherwise been approved pursuant to our Related Party Transaction Policy. According to our Related Party Transaction Policy and our Audit Committee's charter, our
Audit Committee must review any transaction involving a trustee, officer or 5% shareholder that may create a conflict of interest. The Audit Committee must either approve or reject the transaction or
refer the transaction to the full Board, excluding any interested trustees.
Our
Corporate Governance Guidelines and Code of Business Conduct and Ethics are available on our website, www.cwhreit.com.
Related Person Transactions following the Special Meeting
Equity Group
Effective June 1, 2014, we entered into a one-year license agreement with Equity Group to use office space on the sixth floor at
Two North Riverside Plaza in Chicago, Illinois. The license fee is $185,631 for the year. The license fee includes the non-exclusive use of additional areas on the sixth floor (such as conference
rooms and common areas), certain administrative services (such as mail room services and reception desk staffing), office equipment, office furniture, supplies, licensee's share of building operating
expenses and real estate taxes and access to one parking space. The license expires on May 31, 2015, unless terminated earlier in accordance with the terms of the license. Mr. Zell, our
Chairman, is the Chairman and Chief Executive Officer of Equity Group, and Mr. Helfand, our President, Chief Executive Officer, interim Chief Financial Officer and interim Treasurer, is the
Co-President of Equity Group.
Effective
June 1, 2014, we entered into a one-year lease with one 3-month renewal option with Two North Riverside Plaza Joint Venture Limited Partnership, an entity associated
with Mr. Zell, our Chairman, to occupy office space on the fourteenth floor at Two North Riverside Plaza in Chicago, Illinois. The initial term of the lease expires on May 31, 2015. The
lease payment is $155,036 for the initial term.
Related and Corvex
On June 10, 2014, our Audit Committee and Board recommended to shareholders the reimbursement of $33.5 million of
expenses incurred by Related and Corvex since February 2013 in connection with their consent solicitations to remove our prior trustees from the Board and elect a new
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of nominees and to engage in related litigation, subject to the terms described in "Proposal 4: Reimbursement of Expenses to Related and Corvex." Related and Corvex each currently own
approximately 4.4%, or approximately 8.8% in the aggregate, of our common shares as of June 19, 2014. As more fully described above in "Proposal 4: Reimbursement for Expenses to Related and
Corvex," Related and Corvex have stated that they have incurred approximately $33.5 million in expenses from, among other things, engaging in litigation, preparing and making various SEC
filings and investor presentations, engaging third parties, such as proxy solicitors, interfacing with proxy advisory firms and other related actions. Payment of the reimbursement of these expenses is
subject to shareholder approval, which is being sought in Proposal 4 at the Annual Meeting, and the other terms described in Proposal 4.
Former Policy for Review, Approval or Ratification of Transactions with Related Persons
Prior to the election of our current trustees and adoption of our current governance policies, our Board had
approved certain policies for the review, approval or ratification of transactions with related persons. These prior policies are described in the disclosure below, which has been copied from the
Amended Form 10-K, except for certain immaterial changes. Following the Special Meeting
our current trustees adopted the related party approval policy described above, which supersedes the policy described below.
A
"related person transaction" is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which (i) we were, are or
will be a participant, (ii) the amount involved exceeds $120,000 and (iii) any related person had, has or will have a direct or indirect material interest.
A
"related person" means any person who is, or at any time during the applicable period was:
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our trustee, or a nominee for trustee or our executive officer of the Company;
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known to us to be the beneficial owner of more than 5% of the outstanding common shares;
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an immediate family member of any of the persons referenced in the preceding two bullets, which means any child,
stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of the trustee, nominee for trustee, executive officer or
more than 5% beneficial owner of common shares, and any person (other than a tenant or employee) sharing the household of such trustee, nominee for trustee, executive officer or more than 5%
beneficial owner of common shares; and
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a firm, corporation or other entity in which any of the foregoing persons is a partner or principal or in a similar
position or in which such person has a 10% or greater beneficial ownership interest.
The
Board previously adopted written Governance Guidelines that address the consideration and approval of any related person transactions. Under the Governance Guidelines that were in
effect through June 5, 2014, we could not enter into any transaction in which any trustee or executive officer, any member of the immediate family of any trustee or executive officer or any
other related person, had or would have a direct or indirect material interest unless that transaction had been disclosed or made known to the Board and the Board reviewed and approved or ratified the
transaction by the
affirmative vote of a majority of the disinterested trustees, even if the disinterested trustees constituted less than a quorum. If there were no disinterested trustees, the transaction had to be
reviewed and approved or ratified by both (i) the affirmative vote of a majority of the Board and (ii) the affirmative vote of a majority of the Independent Trustees. In determining
whether to approve or ratify a transaction, the Board, or disinterested trustees or Independent Trustees, as the case may be, had to also act in accordance with any applicable provisions of our
Charter and applicable Maryland law. All related person transactions described below were reviewed and approved or ratified by a majority of the disinterested trustees at the time or otherwise in
accordance with our policies and Charter. In the
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of transactions with the Company by RMR employees (other than trustees and executive officers) subject to our Code of Business Conduct and Ethics, the employee was required to seek approval from
an executive officer of the Company who had no interest in the matter for which approval is being requested.
Related Person Transactions prior to the Special Meeting
The transactions described below were approved prior to the Special Meeting by our former trustees in
accordance with our former policies, as described above. The disclosure below has been copied from the Amended Form 10-K, except for certain immaterial changes.
RMR
As of December 31, 2013, we had no employees. Personnel and various services we require to operate our business are provided to
us by RMR. We have two agreements with RMR to provide management and administrative services to us: (1) a business management agreement, which relates to our business generally, and
(2) a property management agreement, which relates to our property level operations.
One
of our former Managing Trustees, Mr. Barry Portnoy, is Chairman, majority owner and an employee of RMR. Our other former Managing Trustee and former President, Mr. Adam
Portnoy, is the son of Mr. Barry Portnoy, and an owner, President, Chief Executive Officer and a director of RMR.
Each of our other former executive officers, Messrs. Popeo and Lepore, is also an officer of RMR. GOV's and SIR's executive officers are officers of RMR. Two of the former five Independent
Trustees also serve as independent trustees of other public companies to which RMR provides management services. Messrs. Barry and Adam Portnoy serve as managing trustees of those companies. In
addition, officers of RMR serve as officers of those companies.
The
Board historically gave the Compensation Committee authority to act on our behalf with respect to our management agreements with RMR. The charter of the Compensation Committee
required the committee to annually review the terms of these agreements, evaluate RMR's performance under the agreements and determine whether to renew, amend or terminate the management agreements.
The current charter of the Compensation Committee does not give the Compensation Committee the same authority.
In
2013, the Compensation Committee retained FTI Consulting, Inc., a nationally recognized compensation consultant experienced in REIT compensation programs ("FTI"), to assist the
committee in developing the terms of the incentive fee payable to RMR under our business management agreement with RMR beginning in 2014. In connection with retaining this consultant, the Compensation
Committee determined that the consultant did not have any conflicts of interest which would prevent the consultant from advising the Compensation Committee.
On
December 19, 2013, we and RMR entered into an amended and restated business management agreement, effective with respect to services performed on and after January 1,
2014. Under the terms of this amended and restated business management agreement:
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The amount of the base management fee to be paid to RMR by the Company for each applicable period will be equal to the
lesser of:
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the sum of (a) 0.7% of the average historical cost of our real estate investments during such period up to
$250.0 million, plus (b) 1.0% of the average historical cost of our real estate investments located outside the United States, Puerto Rico and Canada during such period, plus
(c) 0.5% of the average historical cost of our real estate investments during such period exceeding $250.0 million and the average historical cost of our real estate investments located
outside the United States, Puerto Rico and Canada combined; and
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the sum of (a) 0.7% of the average closing price per common share on the NYSE, during such period, multiplied by
the average number of common shares outstanding during such period, plus the daily weighted average of the aggregate liquidation preference of each class of our preferred shares outstanding during
such period, plus the daily weighted average of the aggregate principal amount of our consolidated indebtedness during such period, or, together, the Average Market Capitalization, up to
$250.0 million, plus (b) 1.0% of the average historical cost of our real estate investments located outside the United States, Puerto Rico and Canada during such period, plus
(c) 0.5% of the Average Market Capitalization exceeding $250.0 million and the average historical cost of our real estate investments located outside the United States, Puerto Rico and
Canada during such period combined.
The
average historical cost of our real estate investments will include our consolidated assets invested, directly or indirectly, in equity interests in or loans secured by real estate and personal
property owned in connection with such real estate (including acquisition related costs and costs which may be allocated to intangibles or are unallocated), all before reserves for depreciation,
amortization, impairment charges or bad debts or other similar noncash reserves.
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The base management fee will be paid monthly to RMR, ninety percent (90%) in cash and ten percent (10%) in common shares,
which shall be fully-vested when issued. The number of common shares to be issued in payment of the base management fee for each month will be equal to the value of 10% of the total base management
fee for that month divided by the average daily closing price of the common shares during that month.
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The incentive management fee which may be earned by RMR for an annual period will be an amount, subject to certain
limitations and adjustments, equal to 12% of the product of (a) our equity market capitalization and (b) the amount (expressed as a percentage) by which the total returns realized by the
holders of the common shares (i.e., share price appreciation plus dividends) exceeds the total shareholder return of the SNL Office REIT Index, for the relevant measurement period.
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The incentive management fee is payable in common shares, with one-third of the common shares issued in payment of an
incentive management fee vested on the date of issuance, and the remaining two-thirds vesting thereafter in two equal annual installments.
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RMR and certain eligible transferees of common shares issued in payment of the base management fee or incentive management
fee are entitled to demand registration rights, exercisable not more frequently than twice per year, and to "piggy-back" registration rights, with certain expenses to be paid by the Company. We and
applicable selling shareholders also have agreed to indemnify each other (and their officers, trustees, directors and controlling persons) against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"), in connection with any such registration.
The
terms of the amended and restated business management agreement described above were approved by our former Compensation Committee and the terms of the incentive fee were developed
by the former Compensation Committee in consultation with FTI.
For
2013, our business management agreement provided for the base business management fee to be paid to RMR at an annual rate equal to the sum of (a) 0.7% of the historical cost
of our real estate investments, as described in the business management agreement, located in the United States, Puerto Rico or Canada, for the first $250.0 million of such investments, and
0.5% thereafter, plus (b) 1.0% of the historical cost of our real estate investments located outside the United States, Puerto Rico and Canada. In addition, for 2013, our business management
agreement provided for RMR to be paid an incentive fee equal to 15% of the product of (i) the weighted average of the common shares
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on a fully diluted basis during a fiscal year and (ii) the excess, if any, of the FFO Per Share, as defined in the business management agreement, for such fiscal year over the FFO
Per Share for the preceding fiscal year. Our investments in GOV and SIR, which are described below, were not counted for purposes of determining the business management fees payable by the Company to
RMR, however we reported the business management fees payable to RMR by SIR in its consolidated 2013 results until we deconsolidated our investment in SIR on July 2, 2013. We and SIR (while SIR
was our consolidated subsidiary) recognized on a consolidated basis business management fees of $43.3 million for 2013. No incentive fee was paid by us to RMR for 2013.
Our
property management agreement with RMR provides for management fees equal to 3.0% of gross collected rents and construction supervision fees equal to 5.0% of construction costs. The
aggregate
property management and construction supervision fees the Company and SIR (while SIR was our consolidated subsidiary) recognized on a consolidated basis were $32.5 million for 2013.
MacarthurCook
Fund Management Limited ("MacarthurCook"), previously provided us with business and property management services related to our Australian properties. Our contract with
MacarthurCook terminated on January 31, 2013, and on that date we entered into a business and property management agreement (the "Australia Management Agreement"), with RMR Australia Asset
Management Pty Limited ("RMR Australia"), for the benefit of CWH Australia Trust (formerly the MacarthurCook Industrial Property Fund), our subsidiary ("CWHAT"). The terms of the Australia Management
Agreement are substantially similar to the terms of the management agreement we have had with MacarthurCook. RMR Australia is owned by our former Managing Trustees and it has been granted an
Australian financial services license by the Australian Securities & Investments Commission. The Australia Management Agreement provides for compensation to RMR Australia for business
management and real estate investment services at an annual rate equal to 0.5% of the average historical cost of CWHAT's real estate investments, as described in the Australia Management Agreement.
The Australia Management Agreement also provides for additional compensation to RMR Australia (i) for property management services at an annual rate equal to 50% of the difference between 3.0%
of collected gross rents and the aggregate of all amounts paid or payable by or on behalf of CWHAT to third party property managers, and (ii) for construction supervision services at an annual
rate equal to 50% of the difference between 5.0% of constructions costs and any amounts paid to third parties for construction management and/or supervision. Similar our prior arrangement with respect
to fees we paid to MacarthurCook, RMR has agreed to waive half of the fees payable by us under our property management agreement with RMR and half of the business management fees otherwise payable by
us under our business management agreement with RMR related to real estate investments that are subject to the Australia Management Agreement for so long as the Australia Management Agreement is in
effect and we or any of our subsidiaries are paying the fees under that agreement. The Australia Management Agreement was approved by the Compensation Committee, which was at the time comprised solely
of Independent Trustees. The estimated aggregate business and property management fees we recognized pursuant to the Australia Management Agreement during 2013 were $1.6 million, which amount
is equal to fees under the business and property management agreements waived by RMR and excluded from the amounts that were payable to RMR during 2013.
For
January 2013, with respect to our investments in Australia, RMR agreed to waive half of the fees payable by us under our property management agreement and half of the business
management fees related to real estate investments located outside of the United States, Puerto Rico and Canada, so long as our business and property management agreement with MacarthurCook with
respect to those investments was in effect and we or any of our subsidiaries were paying fees under that agreement. MacarthurCook earned approximately $0.2 million in January 2013 with respect
to our Australian properties, which amount is equal to the fees waived by RMR and excluded from the amounts that were payable to RMR during that period.
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RMR
also provides internal audit services to us in return for our share of the total internal audit costs incurred by RMR for us and other publicly owned companies managed by RMR and its
affiliates, which amounts are subject to approval by the Compensation Committee. The Audit Committee was responsible for appointing our Director of Internal Audit. The Company's and SIR's (while SIR
was our consolidated subsidiary) share of RMR's costs of providing this internal audit function was, on a consolidated basis, approximately $0.3 million for 2013. These allocated costs are in
addition to the business and property management fees we and SIR paid to RMR.
We
are generally responsible for all of our operating expenses, including certain expenses incurred by RMR on its behalf. We are generally not responsible for payment of RMR's
employment, office or administration expenses incurred to provide management services to us, except for the employment and related expenses of RMR employees who provide on-site property management
services and our share of the staff employed by RMR who perform our internal audit function. Pursuant to our amended and restated business management agreement, RMR may from time to time negotiate on
our behalf with certain third party vendors and suppliers for the procurement of services to us. As part of this arrangement, we may enter agreements with RMR and other companies to which RMR provides
management services for the purpose of obtaining more favorable terms from such vendors and suppliers.
The
current terms of both our amended and restated business management agreement with RMR and our property management agreement with RMR end on December 31, 2014 and automatically
renew for successive one year terms unless we or RMR give notice of non-renewal before the end of an applicable term. We or RMR may terminate either agreement upon 60 days' prior written
notice, and RMR may also terminate the property management agreement upon five business days' notice if we undergo a change of control, as defined in the property management agreement. As of the date
hereof, no notices of termination have been given or received under the RMR agreements.
Under
our amended and restated business management agreement with RMR, we acknowledge that RMR may engage in other activities or businesses and act as the manager to any other person or
entity (including other REITs) even though such person or entity has investment policies and objectives similar to those of the Company and that we are not entitled to preferential treatment in
receiving information, recommendations and other services from RMR. When the business management agreement was amended and restated on December 19, 2013, a right of first offer provision was
eliminated that had provided that, with certain exceptions, if we determined to offer for sale or other disposition any real property that, at such time, is of a type within the investment focus of
another REIT to which RMR provides management services, we would first offer that property for purchase or disposition to that REIT and negotiate in good faith for such purchase or disposition.
RMR
also leases from us office space for eleven of its regional offices. We earned approximately $0.8 million in rental income from RMR in 2013 with respect to approximately
32,500 square feet of office space, which we believe represents commercially reasonable rent for this office space, not all of which was leased to RMR for the entire period. These leases are
terminable by RMR if our management agreements with RMR are terminated.
Under
our share award plan, we granted restricted shares to certain employees of RMR, some of whom were our officers. We granted a total of 73,450 restricted shares with an aggregate
value of $1.7 million to such persons in 2013, based upon the closing price of the common shares on the NYSE on the date of grant. All unvested restricted share grants vested upon the removal
of all of the trustees comprising our Board. These share grants to RMR employees were in addition to the fees we paid to RMR. On occasion, we entered into arrangements with former employees of RMR in
connection with the termination of their employment with RMR, providing for the acceleration of vesting of restricted shares previously granted to them under our share award plan. Additionally, each
of our former President, Treasurer and Chief Financial Officer and Senior Vice President and Chief Operating Officer
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grants of restricted shares of other companies to which RMR provides management services, including GOV and SIR, in their capacities as officers of RMR.
GOV
GOV was formerly our 100% owned subsidiary. Our former Managing Trustees are also managing trustees of GOV. RMR provides management
services to both the Company and GOV.
In
2009, GOV completed an initial public offering pursuant to which GOV ceased to be our majority owned subsidiary. In connection with this offering, we and GOV entered into a
transaction agreement that governs our separation from and relationship with GOV. Pursuant to this transaction agreement, among other things, we and GOV agreed that, so long as we own in excess of 10%
of GOV's outstanding common shares, we and GOV engage the same manager or we and GOV have any common managing trustees: (i) we will not acquire ownership of properties that are majority leased
to government tenants, unless a majority of GOV's independent trustees who are not also our trustees have determined GOV not make the acquisition; (ii) GOV will not acquire ownership of office
or industrial properties that are not majority leased to government tenants, unless a majority of our Independent Trustees who are not also GOV's trustees have determined we not make the acquisition;
and (iii) GOV will have a right of first refusal to acquire any property owned by us that we determine to divest if the property is then majority leased to a government tenant, which right of
first refusal will also apply in the event of an indirect sale of any such properties as a result of a change of control of the Company. The provisions described in (i) and (ii) do not
prevent GOV from continuing to own and lease its current properties or properties otherwise acquired by GOV that cease to be majority leased to government tenants following the termination of
government tenancies; and, similarly, the provisions described in (i) and (ii) also do not prohibit us from leasing our current or future properties to government tenants. The Company
and GOV also agreed that disputes arising under the transaction agreement may be resolved by binding arbitration.
On
March 15, 2013, we sold all of our 9,950,000 common shares of GOV in a public offering for net proceeds (after deducting underwriters' discounts and commissions and expenses)
of $239.6 million and we realized a gain of $66.3 million. In connection with this public offering, on March 11, 2013, we entered into a registration agreement with GOV under
which we agreed to pay all expenses incurred by GOV relating to the registration and sale of its GOV common shares. We incurred $0.3 million of reimbursements payable to GOV pursuant to this
agreement. In addition, under the registration agreement, GOV agreed to indemnify us and our officers, trustees and controlling persons, and we agreed to indemnify GOV and its officers, trustees and
controlling persons, against certain liabilities related to the public offering, including liabilities under the Securities Act; and we and GOV agreed to reimburse payments that the other may make in
respect of those liabilities.
SIR
SIR was formerly our 100% owned subsidiary. We are SIR's largest shareholder and, until July 2, 2013, SIR was one of our
consolidated subsidiaries. As of April 30, 2014, we owned 22,000,000 common shares of SIR, which represented approximately 44.1% of SIR's then-outstanding common shares. Our former Managing
Trustees are also managing trustees of SIR and our former Treasurer and Chief Financial Officer also serves as the treasurer and chief financial officer of SIR. In addition, one of our former
Independent Trustees is an independent trustee of SIR. RMR provides management services to both the Company and SIR.
On
March 12, 2012, SIR completed an initial public offering (the "SIR IPO"). In connection with the SIR IPO, we and SIR entered into a transaction agreement that governs our
separation from and relationship with SIR. The transaction agreement provides that, among other things, (i) the current assets and liabilities of the 79 properties that we transferred to SIR,
as of the time of closing of the
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SIR
IPO, were settled between the Company and SIR so that we will retain all pre-closing current assets and liabilities and SIR will assume all post-closing current assets and liabilities and
(ii) SIR will indemnify us with respect to any liability relating to any property transferred by us to SIR, including any liability which relates to periods prior to SIR's formation, other than
the pre-closing current assets and current liabilities that we retained with respect to the 79 transferred properties.
On
March 25, 2013, we entered into a registration agreement with SIR, pursuant to which SIR agreed to, among other things, file a registration statement with respect to an
offering of up to all of the
22,000,000 common shares of SIR that we own, and we agreed to pay all expenses incurred by SIR relating to the registration and sale of the shares in an offering. SIR's obligation to register the
shares for resale in an offering is subject to certain conditions and may be terminated in certain circumstances, in each case, as described in the registration agreement. We incurred
$0.6 million of reimbursements payable to SIR pursuant to this agreement. SIR agreed to indemnify us and our officers, trustees and controlling persons, and we agreed to indemnify SIR and its
officers, trustees and controlling persons, against certain liabilities in connection with an offering, including liabilities under the Securities Act; and the Company and SIR agreed to reimburse
payments that the other may make in respect of those liabilities. SIR has an effective registration statement on Form S-3, which permits resales of SIR's shares by selling shareholders,
pursuant to which, and subject to the terms of the registration agreement, we may be able to sell our SIR common shares in a registered offering. The registration agreement may be terminated by SIR,
at its option, upon our change of control. A change of control of the Company, as defined in the registration agreement, occurred upon the removal of all of our then-trustees on March 25, 2014.
On March 31, 2014, SIR gave notice to us of termination of the registration agreement.
AIC
The Company, RMR, GOV, SIR and four other companies to which RMR provides management services each currently own 12.5% of Affiliates
Insurance Company ("AIC"), an Indiana insurance company. A majority of our former trustees, and most of the trustees and directors of the other AIC shareholders currently serve on the board of
directors of AIC. RMR provides management and administrative services to AIC pursuant to a management and administrative services agreement with AIC. Our former Governance Guidelines provide that any
material transaction between the Company and AIC shall be reviewed, authorized and approved or ratified by the affirmative votes of both a majority of the Board and a majority of our Independent
Trustees. The shareholders agreement among us, the other shareholders of AIC and AIC includes arbitration provisions for the resolution of disputes.
As
of December 31, 2013, we had invested approximately $5.2 million in AIC since AIC's formation in 2008. SIR, our former consolidated subsidiary, became a shareholder of
AIC during 2012. We and SIR (while SIR was our consolidated subsidiary) recognized income on a consolidated basis of approximately $0.5 million related to our and SIR's investment in AIC for
2013. In June 2013, we and the other shareholders of AIC purchased a one-year property insurance policy providing $500.0 million of coverage pursuant to an insurance program arranged by AIC and
with respect to which AIC is a reinsurer of certain coverage amounts. We paid AIC a premium, including taxes and fees, of approximately $6.0 million in connection with that policy, which amount
may be adjusted from time to time as we acquire or dispose of properties that are included in the policy. In the past, we have periodically considered the possibilities for expanding our insurance
relationships with AIC to include other types of insurance. By participating in this insurance business with RMR and the other companies to which RMR provides management services, we expect that we
may benefit financially by possibly reducing our insurance expenses or by realizing our pro rata share of any profits of this insurance business.
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On
March 25, 2014, as a result of the removal, without cause, of all of our former trustees, we underwent a change in control, as defined in the shareholders agreement among us,
the other shareholders of AIC and AIC. In April 2014, as a result of this change in control and in accordance with the terms of the shareholders agreement, the other shareholders of AIC provided
notice of exercise of their right to purchase the 20,000 shares of AIC we then owned. On May 9, 2014, as a result of the change in control and in accordance with the terms of the shareholders
agreement, the other shareholders of AIC purchased pro rata all the shares we owned for an aggregate purchase price of approximately $5.78 million. The repurchase of our AIC shares has not
affected our current participation in the AIC property insurance program, which is scheduled to expire in June 2014, unless renewed.
Indemnification and Directors' and Officers' Liability Insurance
In July 2013, we, RMR, GOV, SIR and three other companies to which RMR provides management services purchased a combined directors' and
officers' liability insurance policy for non-indemnifiable claims providing $10.0 million in aggregate primary non-indemnifiable coverage and $5.0 million in aggregate excess coverage.
We paid a premium of approximately $0.1 million in connection with this policy.
Pursuant
to the Charter and separate indemnification agreements, we have advanced amounts incurred for legal fees and costs on behalf of certain of our current and former trustees and
officers with respect to the legal proceedings we previously disclosed in our Form 10-K for the year ended December 31, 2013. Pursuant to indemnification provisions in our business and
property management agreements with RMR, we have also advanced amounts incurred for legal fees and costs on behalf of RMR for claims brought against RMR in its capacity as our business and property
manager with respect to certain legal proceedings we previously disclosed in the Form 10-K for the year ended December 31, 2013. We incurred approximately $30.4 million in such
legal fees and costs in 2013, including our costs.
The
foregoing descriptions of our agreements with RMR, GOV, SIR and AIC are summaries and are qualified in their entirety by the terms of the agreements. A further description of the
terms of certain of those agreements is included in the Amended Form 10-K. In addition, copies of certain of the agreements evidencing these relationships are filed with the SEC and may be
obtained from the SEC's website at www.sec.gov.
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MISCELLANEOUS
Other Matters to Come Before the Annual Meeting
No other matters are to be presented for action at the Annual Meeting other than as set forth in this Proxy Statement. If other matters
properly come before the meeting, however, the persons named in the proxy card will vote all proxies solicited by this Proxy Statement as recommended by the Board, or, if no such recommendation is
given, in their own discretion.
Shareholder Proposals and Nominations for the 2015 Annual Meeting of Shareholders
Shareholder proposals intended to be presented pursuant to Rule 14a-8 under the Exchange Act at our 2015 annual meeting of
shareholders must be received at our principal executive offices on or before February 22, 2015, in order to be considered for inclusion in our proxy statement for our 2015 annual meeting of
shareholders, provided that if we hold our 2015 annual meeting on a date that is more than 30 days before or after June 30, 2015, shareholders must submit proposals for inclusion in our
2015 proxy statement within a reasonable time before we begin to print our proxy materials. Under Rule 14a-8, we are not required to include shareholder proposals in our proxy materials unless
conditions specified in the rule are met.
In
addition, any shareholder who wishes to propose a nominee to the Board or propose any other business to be considered by the shareholders (other than a shareholder proposal included
in our proxy materials pursuant to Rule 14a-8 of the rules promulgated under the Exchange Act) must comply with the advance notice provisions and other requirements of Article II,
Section 12 of our Bylaws, which are on file with the SEC and may be obtained from Investor Relations upon request. These notice provisions require that nominations of persons for election to
the Board and the proposal of business to be considered by the shareholders for the 2015 annual meeting must be received no earlier than January 24, 2015 and no later than 5:00 p.m.,
Central Time, on February 23, 2015. However, in the event that the 2015 annual meeting is advanced or delayed by more than 30 days from the first anniversary of the date of the Annual
Meeting, notice by the shareholder to be timely must be received no earlier than the 150th day prior to the date of the meeting and not later than 5:00 p.m., Central Time, on the later
of the 120th day prior to the date of the meeting or the tenth day following the date of the first public announcement of the meeting.
Householding of Annual Meeting Materials
Some banks, brokers and other record holders of our common shares may participate in the practice of "householding" proxy statements,
annual reports and Notices of Internet Availability of those documents. This means that, unless shareholders give contrary instructions, only one copy of our proxy statement, annual report or Notice
of Internet Availability may be sent to multiple shareholders in each household. We will promptly deliver a separate copy of any of those documents to you if you write to us at Investor Relations,
CommonWealth REIT, Two North Riverside Plaza, Suite 600, Chicago, Illinois 60606, or call us at (312) 646-2801. If you want to receive separate copies of our proxy statement, annual
report or Notice of Internet Availability in the future, or if you are receiving multiple copies and would like to receive only one copy per household, you should contact your bank, broker or other
record holder, or you may contact us at the above address or telephone number.
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Table of Contents
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE STOCKHOLDER MEETING TO BE HELD ON JUNE 30, 2014
This Proxy Statement and our 2013 Annual Report are available on our website at www.cwhreit.com. In addition, our shareholders may
access this information, as well as transmit their voting instructions, at www.proxyvote.com by having their proxy card and related instructions in hand.
Additional
copies of this Proxy Statement and our Annual Report will be furnished to our shareholders upon written request to the Corporate Secretary at the mailing address for our
executive offices set forth on the first page of this Proxy Statement. If requested by eligible shareholders, we will provide copies of exhibits to our Annual Report on Form 10-K for the year
ended December 31, 2013, as amended, for a reasonable fee.
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By Order of the Board of Trustees
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Orrin S. Shifrin
Executive Vice President,
General Counsel and Secretary
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Chicago,
Illinois
June 23, 2014
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EXHIBIT A-I: PROPOSED AMENDED AND RESTATED CHARTER
A-I
EXHIBIT A-I
COMMONWEALTH REIT
Fourth
Amendment and Restatement of Declaration of Trust
As Amended and Restated on July 31, 2014
TABLE OF CONTENTS
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Page
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7.1
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Limitation of Liability of Shareholders, Trustees, Officers, Employees and Agents for Obligations of the Trust
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A-I-18
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7.2
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Express Exculpatory Clauses and Instruments
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A-I-18
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7.3
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Limitation of Liability of Trustees, Officers, Employees and Agents to the Trust and to Shareholders for Acts and
Omissions
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7.4
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Indemnification and Reimbursement of Expenses
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A-I-19
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7.5
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Right of Trustees, Officers, Employees and Agents to Own Shares or Other Property and to Engage in Other Business
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7.6
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Transactions Between Trustees, Officers, Employees or Agents and the Trust
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7.7
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Persons Dealing with Trustees, Officers, Employees or Agents
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7.8
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Reliance
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ARTICLE VIII DURATION, AMENDMENT AND TERMINATION OF TRUST
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8.1
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Duration of Trust
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8.2
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Termination of Trust
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8.3
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Amendment Procedure
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8.4
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Amendments Effective
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8.5
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Transfer to Successor
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ARTICLE IX MISCELLANEOUS
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A-I-21
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9.1
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Applicable Law
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9.2
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Index and Headings for Reference Only
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9.3
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Successors in Interest
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9.4
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Inspection of Records
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9.5
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Counterparts
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9.6
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Provisions of the Trust in Conflict with Law or Regulations: Severability
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9.7
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Certifications
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A-I-22
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A-I-ii
FOURTH AMENDMENT AND RESTATEMENT OF DECLARATION OF TRUST OF
COMMONWEALTH REIT
As Amended and Restated on July 31, 2014
CommonWealth REIT, a Maryland real estate investment trust (the "Trust") desires to amend and restate its Declaration of Trust (as so
amended and restated, the "Declaration"). The amendment and restatement of the Declaration as herein set forth has been declared advisable by the Board of Trustees and approved by the Shareholders of
the Trust as required by law and by this Declaration.
WITNESSETH:
WHEREAS,
the Trustees desire to create a trust for the principal purpose of investing in real property and interests therein; and
WHEREAS,
the Trustees desire that such trust qualify as a "real estate investment trust" under the REIT Provisions of the Internal Revenue Code, and under Title 8 of the Corporations and
Associations Article of the Annotated Code of Maryland; and
WHEREAS,
in furtherance of such purpose the Trust intends to acquire certain real property and interests therein and to hold, manage and dispose of all such property in the manner
hereinafter stated and as determined from time to time by the Trustees; and
WHEREAS,
it is proposed that the beneficial interest in the Trust be divided into transferable Shares of Beneficial Interest, evidenced by certificates therefore, as hereinafter
provided;
NOW,
THEREFORE, it is hereby declared that the following provisions are all the provisions of the Declaration as hereby amended and restated.
ARTICLE I
THE TRUST; DEFINITIONS
1.1
Name.
The name of the Trust created by this Declaration of Trust shall be "CommonWealth REIT" and so far
as may be practicable the Trustees shall conduct the Trust's
activities, execute all documents and sue or be sued under that name. The Trustees may, at any time, without any action by the Shareholders, amend the Declaration of Trust to change the name of the
Trust.
1.2
Places of Business.
The Trust shall maintain an office in Maryland at CT Corporation or such
other place in Maryland as the Trustees may determine from time to time. The Resident
Agent of the Trust at such office shall be The Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland, 21202. The Trust may change such Resident Agent from time to time as the Trustees
shall determine. The Trust may have such other offices or places of business within or without the State of Maryland as the Trustees may from time to time determine.
1.3
Nature of Trust.
The Trust shall be a real estate investment trust within the meaning of
Title 8 of the Corporations and Associations Article of the Annotated Code of
Maryland. It is also intended that the Trust shall carry on a business as a "real estate investment trust" as described in the REIT Provisions of the Internal Revenue Code. The Trust is not intended
to be, shall not be deemed to be, and shall not be treated as a general partnership, limited partnership, joint venture, corporation or joint stock company (but nothing herein shall preclude the Trust
from being treated for tax purposes as an association under the Internal Revenue Code) nor shall the Trustees or Shareholders or any of them for any purpose be, nor be deemed to be, nor be treated in
any way whatsoever to be, liable or responsible hereunder as partners or joint venturers. The relationship of the Shareholders to the Trust shall be solely that of beneficiaries of the Trust in
accordance with the rights conferred upon them by this Declaration.
A-I-1
1.4
Legal Ownership of Trust Estate.
Legal title of the Trust Estate shall be vested in the Trust, but
it may cause legal title to the Trust Estate to be held by or in the name of any or all of the
Trustees or any other Person as nominee, in which case any right, title or interest of the Trustees in and to the Trust Estate shall automatically vest in successor and additional Trustees upon their
qualification and acceptance of election or appointment as Trustees, and they shall thereupon have all the rights and obligations of Trustees, whether or not conveyancing documents have been executed
and delivered pursuant to Section 2.3 or otherwise. Written evidence of the qualification and acceptance of election or appointment of successor and additional Trustees may be filed with the
records of the Trust and in such other offices, agencies or places as the Trust or Trustees may deem necessary or desirable.
1.5
Definitions.
The terms defined in this Section 1.5., wherever used in this Declaration,
shall, unless the context otherwise requires, have the respective meanings
hereinafter specified. Whenever the singular number is used in this Declaration and when permitted by the context, the same shall include the plural, and the masculine gender shall include the
feminine and neuter genders, and vice versa. Where applicable, calculations to be made pursuant to any such definition shall be made in accordance with generally accepted accounting principles as in
effect from time to time except as otherwise provided in such definition.
(a)
Affiliate.
"Affiliate" shall mean, as to any Person, (i) any other Person directly or indirectly
controlling, controlled by or under common control with such Person, (ii) any other Person that owns beneficially, directly or indirectly, five percent (5%) or more of the outstanding capital
stock, shares or equity interests of such Person, or (iii) any officer, director, employee, general partner or trustee of such
Person or of any Person controlling, controlled by or under common control with such Person (excluding trustees who are not otherwise an Affiliate of such Person).
(b)
Bylaws.
"Bylaws" shall have the meaning set forth in Section 3.3.
(c)
Declaration.
"Declaration" or "this Declaration" shall mean this Declaration of Trust, as amended, restated
or modified from time to time. References in this Declaration to "herein" and "hereunder" shall be deemed to refer to this Declaration and shall not be limited to the particular text, article or
section in which such words appear.
(d)
Exchange Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
(e)
Internal Revenue Code.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as now enacted
or hereafter amended, or successor statutes and applicable rules and regulations thereunder.
(f)
Maryland REIT Law:
"Maryland REIT Law" shall mean Title 8 of the Corporations and Associations Article of
the Annotated Code of Maryland, as in effect from time to time, or any successor thereto.
(g)
Mortgage Loans.
"Mortgage Loans" shall mean notes, debentures, bonds and other evidences of indebtedness or
obligations, whether negotiable or non-negotiable, and which are secured or collateralized by Mortgages.
(h)
Mortgages.
"Mortgages" shall mean mortgages, deeds of trust or other security interests in Real Property.
(i)
Person.
"Person" shall mean and include individuals, corporations, limited partnerships, general
partnerships, joint stock companies or associations, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts and other entities and governments and
agencies and political subdivisions thereof.
A-I-2
(j)
Real Property.
"Real Property" shall mean and include land leasehold interests (including but not limited to
interests of a lessor or lessee therein), rights and interests in land, and in any buildings, structures, improvements, furnishings and fixtures located on or used in connection with land or interests
therein, but does not include investments in Mortgages, Mortgage Loans or interests therein.
(k)
REIT.
"REIT" shall mean a real estate investment trust as defined in the REIT Provisions of the Internal
Revenue Code.
(l)
REIT Provisions of the Internal Revenue Code.
"REIT Provisions of the Internal Revenue Code" shall mean
Parts II and III of Subchapter M of Chapter 1 of Subtitle A of the Internal Revenue Code or any successor provision.
(m)
Securities.
"Securities" shall mean any stock, shares, voting trust certificates, bonds, debentures, notes
or other evidences of indebtedness or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in, temporary or interim certificates for,
receipts for, guarantees of, or warrants, options or rights to subscribe to, purchase or acquire any of the foregoing.
(n)
Shareholders.
"Shareholders" shall mean as of any particular time all holders of record of outstanding
Shares at such time.
(o)
Shares.
"Shares" or, as the context may require, "shares" shall mean the shares of beneficial interest of
the Trust as described in Section 5.1 hereof.
(p)
Trust.
"Trust" shall mean the Trust created by this Declaration.
(q)
Trustees.
"Trustees" shall mean, as of any particular time, the individuals who have been duly elected and
qualify as Trustees as of the date hereof as long as they hold office hereunder and additional and successor Trustees who have been duly elected and qualify hereunder, and shall not include the
officers, employees or agents of the Trust or the Shareholders. Nothing herein shall be deemed to preclude the Trustees from also serving as officers, employees or agents of the Trust or owning
Shares.
(r)
Trust Estate.
"Trust Estate" shall mean as of any particular time any and all property, real, personal or
otherwise, tangible or intangible, which is transferred, conveyed or paid to or purchased by the Trust or Trustees and all rents, income, profits and gains therefrom and which at such time is owned or
held by or for the Trust or the Trustees.
ARTICLE II
TRUSTEES
2.1
Number, Term of Office and Qualifications of Trustees.
The number of Trustees initially shall be eleven
(11), which number may thereafter be increased or decreased by the Trustees then in office from time to time;
however, the total number of Trustees shall be not less than three (3) and not more than thirteen (13). No reduction in the number of Trustees shall have the effect of removing any Trustee from
office prior to the expiration of his or her term. At each annual meeting of Shareholders beginning at the annual meeting of Shareholders in 2014, all Trustees shall be elected to hold office for a
term of one year. The Trust may not elect to be subject to the provisions of Section 3-803 of the Maryland General Corporation Law, or otherwise provide for the Trustees of the Trust to be
divided into classes pursuant to Title 3, Subtitle 8 of the MGCL, unless such election is first approved by the affirmative vote of not less than a majority of the Shares then outstanding and entitled
to vote thereon. Trustees may be re-elected any number of times. Each Trustee shall hold office until the election and qualification of his or her successor. There shall be no cumulative voting in the
election of Trustees. A Trustee shall be an individual at least twenty-one (21) years of age who is not under legal disability.
A-I-3
Unless
otherwise required by law, no Trustee shall be required to give bond, surety or security in any jurisdiction for the performance of any duties or obligations hereunder. The Trustees in their
capacity as Trustees shall not be required to devote their entire time to the business and affairs of the Trust.
The
names of the current Trustees who will serve until their successors are elected and qualify are as follows: James Corl (Group I), Edward Glickman (Group I), Peter Linneman (Group
II), James Lozier (Group II), Kenneth Shea (Group II), Sam Zell (Group III) and David Helfand (Group III). The four vacancies on the Board of Trustees as of the time this Fourth Amendment and
Restatement of Declaration of Trust is filed shall be filled by the Shareholders at the 2014 annual meeting of Shareholders in accordance with Sections 5.8 and 5.10.
2.2
Compensation and Other Remuneration.
The Trustees shall be entitled to receive such reasonable
compensation for their services as Trustees as the Trustees may determine from time to time. The
Trustees and Trust officers shall be entitled to receive remuneration for services rendered to the Trust in any other capacity.
2.3
Resignation, Removal and Death of Trustees.
A Trustee may resign at any time by giving written
notice to the remaining Trustees at the principal office of the Trust. Such resignation shall take effect on
the date specified in such notice, without need for prior accounting. A Trustee may be removed at any time with or without cause by vote or consent of holders of Shares representing two-thirds of the
total votes authorized to be cast by Shares then outstanding and entitled to vote thereon. A Trustee judged incompetent or bankrupt, or for whom a guardian or conservator has been appointed, shall be
deemed to have resigned as of the date of such adjudication or appointment. Upon the resignation or removal of any Trustee, or his otherwise ceasing to be a Trustee, he shall execute and deliver such
documents as the remaining Trustees shall require for the conveyance of any Trust property held in his name, shall account to the remaining Trustees as they require for all property which he holds as
Trustee and shall thereupon be discharged as Trustee. Upon the incapacity or death of any Trustee, his legal representative shall perform the acts set forth in the preceding sentence and the discharge
mentioned therein shall run to such legal representative and to the incapacitated Trustee or the estate of the deceased Trustee, as the case may be.
2.4
Vacancies.
If any or all the Trustees cease to be Trustees hereunder, whether by reason of
resignation, removal, incapacity, death or otherwise, such event shall not
terminate the Trust or affect its continuity. Until vacancies are filled, the remaining Trustee or Trustees (even though fewer than three (3)) may exercise the powers of the Trustees hereunder.
Vacancies (including vacancies created by increases in number) may be filled by the remaining Trustee or by a majority of the remaining Trustees or by the Shareholders in accordance with
Sections 5.8 and 5.10. If at any time there shall be no Trustees in office, successor Trustees shall be elected by the Shareholders as provided in Sections 5.8 and 5.10. Any Trustee
elected to fill a vacancy created by the resignation, removal or death of a former Trustee shall hold office for the unexpired term of such former Trustee.
2.5
Successor and Additional Trustees.
The right, title and interest, if any, of the Trustees in and
to the Trust Estate shall also vest in successor and additional Trustees upon their qualification,
and they shall thereupon have all the rights and obligations of Trustees hereunder. Such right, title and interest, if any, shall vest in the Trustees whether or not conveyancing documents have been
executed and delivered pursuant to Section 2.3 or otherwise. Appropriate written evidence of the election and qualification of successor and additional Trustees shall be filed with the records
of the Trust and in such other offices or places as the Trustees may deem necessary, appropriate or desirable.
2.6
Actions by Trustees.
The Trustees may act with or without a meeting. A quorum for all meetings of
the Trustees shall be a majority of the Trustees. Unless specifically provided
otherwise in this Declaration, any action of the Trustees may be taken at a meeting by vote of a majority of the Trustees present (a quorum being present) or without a meeting by written consents of
all Trustees, which consents shall be filed with the records of meetings of the Trustees. Any action or actions
A-I-4
permitted
to be taken by the Trustees in connection with the business of the Trust may be taken pursuant to authority granted by a meeting of the Trustees conducted by a telephone conference call, and
the transaction of Trust business represented thereby shall be of the same authority and validity as if transacted at a meeting of the Trustees held in person or by written consent. The minutes of any
Trustees' meeting held by telephone shall be prepared in the same manner as a meeting of the Trustees held in person. Any agreement, deed, mortgage, lease or other instrument or writing executed by
one or more of the Trustees or by any authorized Person shall be valid and binding upon the Trustees and upon the Trust when authorized or ratified by action of the Trustees or as provided in the
Bylaws.
With
respect to the actions of the Trustees, Trustees who have, or are Affiliates of Persons who have, any direct or indirect interest in or connection with any matter being acted upon
may be counted for all quorum purposes under this Section 2.6 and, subject to the provisions of Section 7.6, may vote on the matter as to which they or their Affiliates have such
interest or connection.
2.7
Committees.
The Trustees may appoint an audit committee and such other standing committees as the
Trustees determine. Each standing committee shall consist of one or more
members. The Trustees may appoint a standing committee consisting of at least one Trustee and one or more non-Trustee members. Each committee shall have such powers, duties and obligations as the
Board of Trustees may delegate thereto as it deems necessary or appropriate. The standing committees shall report their activities periodically to the Trustees.
ARTICLE III
TRUSTEES' POWERS
3.1
Power and Authority of Trustees.
The Trustees, subject only to the specific limitations contained in
this Declaration, shall have, without further or other authorization, and free from any power
or control on the part of the Shareholders, full, absolute and exclusive power, control and authority over the Trust Estate and over the business and affairs of the Trust to the same extent as if the
Trustees were the sole owners thereof in their own right, and may do all such acts and things as in their sole judgment and discretion are necessary for or incidental to or desirable for the carrying
out of or conducting the business of the Trust. Any construction of this Declaration or any determination made in good faith by the Trustees as to the purposes of the Trust or the existence of any
power or authority hereunder shall be conclusive. In construing the provisions of this Declaration, the presumption shall be in favor of the grant of powers and authority to the Trustees. The
enumeration of any specific power or authority herein shall not be construed as limiting the aforesaid powers or the general powers or authority or any other specified power or authority conferred
herein upon the Trustees.
3.2
Bylaws.
The Trustees may make or adopt and from time to time amend or repeal Bylaws (the
"Bylaws") not inconsistent with law or with this Declaration, containing
provisions relating to the business of the Trust and the conduct of its affairs and in such Bylaws may define the duties of the officers, employees and agents of the Trust.
ARTICLE IV
INVESTMENT POLICY AND POLICIES WITH RESPECT TO CERTAIN
DISTRIBUTIONS TO SHAREHOLDERS
The fundamental investment policy of the Trust is to make investments in such a manner as to comply with the REIT Provisions of the
Internal Revenue Code and with the requirements of Title 8 of the Corporations and Associations Article of the Annotated Code of Maryland with respect to the composition of the Trust's investments and
the derivation of its income. The Trustees shall use their reasonable best efforts to carry out this fundamental investment policy and to conduct the affairs of the Trust in such a manner as to
continue to qualify the Trust for the tax treatment provided in the REIT
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Provisions
of the Internal Revenue Code;
provided, however
, that no Trustee, officer, employee or agent of the Trust shall be liable for any act or
omission resulting in the loss of tax benefits under the Internal Revenue Code. The Board of Trustees may change from time to time, by resolution or in the
Bylaws of the Trust, such investment policies as it determines to be in the best interest of the Trust, including prohibitions or restrictions upon certain types of investments.
ARTICLE V
THE SHARES AND SHAREHOLDERS
5.1
Description of Shares.
The interest of the Shareholders shall be divided into
400,000,000 shares of beneficial interest which shall be known collectively as "Shares," all of which shall be validly issued, fully paid and non-assessable by the Trust upon receipt of full
consideration for which they have been issued or without additional consideration if issued by way of share dividend or share split. There shall be two classes of Shares: 50,000,000 shares of one such
class shall be known as "Preferred Shares" and 350,000,000 shares of the other such class shall be known as "Common Shares," each such class having $0.01 par value per share. Each holder of Shares
shall as a result thereof be deemed to have agreed to and be bound by the terms of this Declaration. The Shares may be issued for such consideration as the Trustees shall deem advisable. The Trustees
are hereby expressly authorized at any time, and from time to time, to provide for issuance of Shares upon such terms and conditions and pursuant to such agreements as the Trustees may determine. The
Trustees are hereby expressly authorized at any time, and from time to time, without Shareholder approval, to amend this Declaration to increase or decrease the aggregate number of Shares or the
number of Shares of any class that the Trust has authority to issue.
The
Trustees are hereby expressly authorized at any time, and from time to time, without Shareholder approval, to set (or change if such class has previously been established) the par
value, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms, or conditions of redemption, of any unissued Preferred Shares, and
such Preferred Shares may further be divided by the Trustees into classes or series.
Except
as otherwise determined by the Trustees with respect to any class or series of Preferred Shares, the holders of Shares shall be entitled to the rights and powers hereinafter set
forth in this Section 5.1: The holders of Shares shall be entitled to receive, when and as declared from time to time by the Trustees out of any funds legally available for the purpose, such
dividends or distributions as may be declared from time to time by the Trustees. In the event of the termination of the Trust pursuant to Section 8.1 or otherwise, or upon the distribution of
its assets, the assets of the Trust available for payment and distribution to Shareholders shall be distributed ratably among the holders of Shares at the time outstanding in accordance with
Section 8.2. All Shares shall have equal non-cumulative voting rights at the rate of one vote per Share, and equal dividend, distribution, liquidation and other rights, and shall have no
preference, conversion, exchange, sinking fund or redemption rights. Absent a contrary written agreement of the Trust authorized by the Trustees, and notwithstanding any other determination by the
Trustees with respect to any class or series of Preferred Shares, no holder of Shares or Preferred Shares shall be entitled as a matter of right to subscribe for or purchase any part of any new or
additional issue of Shares of any class whatsoever of the Trust, or of securities
convertible into any shares of any class whatsoever of the Trust, whether now or hereafter authorized and whether issued for cash or other consideration or by way of dividend.
Notwithstanding
any other provision of this Declaration, the Board of Trustees may cause the outstanding Common Shares to be reverse split in order to meet listing requirements of the
principal securities exchange on which the Common Shares are listed for trading or for any other purpose the Board of Trustees by unanimous vote determines to be in the best interest of the Trust. A
reverse split may be accomplished by any lawful means, including by any means available to a Maryland business corporation or by redeeming Shares pro rata or issuing new Shares in exchange for
outstanding Shares
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in
a manner so that the par value of the Common Shares are adjusted pro rata;
e.g.
, if two outstanding Common Shares are exchanged for one new Common
Share, then the par value of the new Shares shall be two times the current par value.
5.2
Certificates.
At the election of the Trust, ownership of Shares may be
evidenced by certificates in such form as the Trustees shall from time to time approve, specifying the number of Shares of the applicable class held by such Shareholder. Subject to Section 5.5
hereof, such certificates shall be treated as negotiable and title thereto and to the Shares represented thereby shall be transferred by delivery thereof to the same extent in all respects as a stock
certificate, and the Shares represented thereby, of a Maryland business corporation. Unless otherwise determined by the Trustees, such certificates shall be signed by an authorized officer of the
Trust and shall be countersigned by a transfer agent, and registered by a registrar if any, and such signatures may be facsimile signatures in accordance with Section 3.2(d) hereof. There shall
be filed with each transfer agent a copy of the form of certificate so approved by the Trustees, certified by the Chairman, President, or Secretary, and such form shall continue to be used unless and
until the Trustees approve some other form.
In
furtherance of the provisions of Section 5.1 hereof, each certificate evidencing Shares shall contain a legend imprinted thereon to substantially the following effect or such
other legend as the Trustees may from time to time adopt:
REFERENCE
IS MADE TO THE DECLARATION OF TRUST OF THE TRUST FOR A STATEMENT OF ALL THE DESIGNATIONS, PREFERENCES, LIMITATIONS, AND RELATIVE RIGHTS OF EACH CLASS OR SERIES OF SHARES THAT THE TRUST IS
AUTHORIZED TO ISSUE, THE VARIATIONS IN THE RELATIVE RIGHTS AND PREFERENCES OF ANY PREFERRED OR SPECIAL CLASS OF SHARES IN SERIES, TO THE EXTENT THEY HAVE BEEN FIXED AND DETERMINED, AND THE AUTHORITY
OF THE TRUSTEES TO FIX AND DETERMINE THE RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT
SERIES. ANY SUCH STATEMENT SHALL BE FURNISHED WITHOUT CHARGE ON REQUEST TO THE TRUST AT ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE. IF NECESSARY TO EFFECT COMPLIANCE BY THE TRUST WITH
REQUIREMENTS OF THE INTERNAL REVENUE CODE RELATING TO REAL ESTATE INVESTMENT TRUSTS, THE SHARES EVIDENCED BY THIS CERTIFICATE MAY BE REDEEMED BY THE TRUST AND/OR THE TRANSFER THEREOF MAY BE PROHIBITED
ALL UPON THE TERMS AND CONDITIONS SET FORTH IN THE DECLARATION OF TRUST. THE TRUST WILL FURNISH A COPY OF SUCH TERMS AND CONDITIONS TO THE REGISTERED HOLDER OF THIS CERTIFICATE UPON REQUEST AND
WITHOUT CHARGE.
5.3
Fractional Shares.
In connection with any issuance of Shares, the Trustees may
issue fractional Shares or may adopt provisions for the issuance of scrip including without limitation, the time within which any such scrip must be surrendered for exchange into full Shares and the
rights, if any, of holders of scrip upon the expiration of the time so fixed, the rights, if any, to receive proportional distributions, and the rights, if any, to redeem scrip for cash, or the
Trustees may in their discretion, or if they see fit at the option of, each holder, provide in lieu of scrip for the adjustment of the fractions in cash. The provisions of Section 5.2 hereof
relative to certificates for Shares shall apply so far as applicable to such scrip, except that such scrip may in the discretion of the Trustees be signed by a transfer agent alone.
5.4
Shares Deemed Personal Property.
The Shares shall be personal property and
shall confer upon the holders thereof only the interest and rights specifically set forth or provided for in this Declaration. The death, insolvency or incapacity of a Shareholder shall not dissolve
or terminate the Trust or affect its continuity nor give his legal representative any rights whatsoever, whether against or
A-I-7
in
respect of other Shareholders, the Trustees or the Trust Estate or otherwise, except the sole right to demand and, subject to the provisions of this Declaration, the Bylaws and any requirements of
law, to receive a new certificate for Shares registered in the name of such legal representative, in exchange for the certificate held by such Shareholder.
5.5
Share Record; Issuance and Transferability of Shares.
Records shall be kept by
or on behalf of and under the direction of the Trustees, which shall contain the names and addresses of the Shareholders, the number of Shares held by them respectively, and the numbers of the
certificates representing the Shares, and in which there shall be recorded all transfers of Shares. The Trust, the Trustees and the officers, employees and agents of the Trust shall be entitled to
deem the Persons in whose names certificates are registered on the records of the Trust to be the absolute owners of the Shares represented thereby for all purposes of the Trust; but nothing herein
shall be deemed to preclude the Trustees or officers, employees or agents of the Trust from inquiring as to the
actual ownership of Shares. Until a transfer is duly effected on the records of the Trust, the Trustees shall not be affected by any notice of such transfer, either actual or constructive.
Shares
shall be transferable on the records of the Trust only by the record holder thereof or by his agent thereunto duly authorized in writing upon delivery to the Trustees or a
transfer agent of the certificate or certificates therefor, properly endorsed or accompanied by duly executed instruments of transfer and accompanied by all necessary documentary stamps together with
such evidence of the genuineness of each such endorsement, execution or authorization and of other matters as may reasonably be required by the Trustees or such transfer agent. Upon such delivery, the
transfer shall be recorded in the records of the Trust and a new certificate for the Shares so transferred shall be issued to the transferee and in case of a transfer of only a part of the Shares
represented by any certificate, a new certificate for the balance shall be issued to the transferor. Any Person becoming entitled to any Shares in consequence of the death of a Shareholder or
otherwise by operation of law shall be recorded as the holder of such Shares and shall receive a new certificate therefor but only upon delivery to the Trustees or a transfer agent of instruments and
other evidence required by the Trustees or the transfer agent to demonstrate such entitlement, the existing certificate for such Shares and such releases from applicable governmental authorities as
may be required by the Trustees or transfer agent. In case of the loss, mutilation or destruction of any certificate for shares, the Trustees may issue or cause to be issued a replacement certificate
on such terms and subject to such rules and regulations as the Trustees may from time to time prescribe. Nothing in this Declaration shall impose upon the Trustees or a transfer agent a duty, or limit
their rights, to inquire into adverse claims.
5.6
Dividends or Distributions to Shareholders.
The Trustees may from time to time
declare and pay to Shareholders such dividends or distributions in cash, property or assets of the Trust or Securities issued by the Trust, out of current or accumulated income, capital, capital
gains, principal, interest, surplus, proceeds from the increase or financing or refinancing of Trust obligations, or from the sale of portions of the Trust Estate or from any other source as the
Trustees in their discretion shall determine. Shareholders shall have no right to any dividend or distribution unless and until declared by the Trustees. The Trustees shall furnish the Shareholders
with a statement in writing advising as to the source of the funds so distributed not later than ninety (90) days after the close of the fiscal year in which the distribution was made.
5.7
Transfer Agent, Dividend Disbursing Agent and Registrar.
The Trustees shall
have power to employ one or more transfer agents, dividend disbursing agents and registrars and to authorize them on behalf of the Trust to keep records to hold and to disburse any dividends or
distributions and to have and perform, in respect of all original issues and transfers of Shares, dividends and distributions and reports and communications to Shareholders, the powers and duties
usually had and performed by transfer agents, dividend disbursing agents and registrars of a Maryland business corporation.
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5.8
Shareholders' Meetings.
There shall be an annual meeting of the Shareholders,
at such time and place as shall be determined by or in the manner prescribed in the Bylaws, at which the Trustees shall be elected and any other proper business may be conducted. Special meetings of
Shareholders may be called by the chief executive officer of the Trust or by a majority of the Trustees and shall be called by the chief executive officer of the Trust upon the written request of
Shareholders holding in the aggregate not less than ten percent (10%) of the total votes authorized to be cast by the outstanding Shares of the Trust entitled to vote at such meeting in the manner
provided in the Bylaws. If there shall be no Trustees, the officers of the Trust shall promptly call a special meeting of the Shareholders entitled to vote for the election of successor Trustees.
Notice of any special meeting shall state the purposes of the meeting. Any meeting may be adjourned and reconvened as the Trustees determine or as provided in the Bylaws. At any reconvened session of
the meeting at which there shall be a quorum, any business may be transacted at the meeting as originally noticed.
5.9
Quorum.
The holders of Shares entitled to vote at the meeting representing a
majority of the total number of votes authorized to be cast by Shares then outstanding and entitled to vote on any question present in person or by proxy shall constitute a quorum at any such meeting
for action on such question.
5.10
Voting Rights of Shareholders.
(a) Subject
to the provisions of any class or series of Shares then outstanding or as otherwise required by law, the Shareholders shall be entitled to vote only on the
following matters: (i) election of Trustees as provided in Section 5.10(c) and the removal of Trustees as provided in Section 2.3; (ii) amendment of this Declaration as
provided in Section 8.3; (iii) termination of the Trust as provided in Section 8.1 or 8.5; (iv) the merger or consolidation of the Trust or a share exchange;
provided
that the
Shareholders shall not be entitled to vote on a merger of the Trust that may be approved pursuant to the provisions of the Maryland
REIT Law by a majority of the entire Board of Trustees without a vote of the Shareholders and,
provided further
that, if a shareholder vote is required
pursuant to the provisions of the Maryland REIT Law, such merger, consolidation or share exchange shall be approved by the affirmative vote of the holders of not less than a majority of all the Shares
then outstanding and entitled to vote thereon (notwithstanding the higher vote required by Maryland REIT Law), (v) the transfer (as such term is defined in the Maryland General Corporation Law)
of all or substantially all of the Trust Estate;
provided
that such transfer shall be approved by the affirmative vote of the holders of not less than a
majority of all the Shares then outstanding and entitled to vote thereon; and
provided further
that the Trust shall be permitted to transfer or
otherwise dispose of all or substantially all of the Trust Estate without the approval of the Shareholders by means of a distribution to Shareholders or in a disposition, immediately following which
the Trust continues to own, directly or indirectly, substantially all of the ownership interests in the transferees of all or substantially all of the Trust Estate, (vi) consolidation of the
Trust with one or more other entities into a new entity,
provided
that such consolidation shall be approved by the affirmative vote of the holders of
not less than a majority of all the Shares then outstanding and entitled to vote thereon, (vii) such other matters with respect to which the Board of Trustees has adopted a resolution declaring
advisable or recommending a proposal and directing that the matter be submitted to the Shareholders for consideration and (viii) such other matters as may be properly brought before a meeting
by a Shareholder pursuant to the Bylaws.
(b) Any
matters for which the proportion of votes is not specified in Section 5.10(a) or 5.10(e) hereof shall be authorized by the affirmative vote of the holders of
Shares representing a majority of the total number of votes cast by Shares then outstanding and entitled to vote thereon, unless a different vote is required by law, this Declaration, or the Bylaws of
the Trust.
A-I-9
(c) Subject
to the provisions of any class or series of Shares then outstanding or as otherwise required by law, each outstanding Share entitled to vote, regardless of
class, shall be entitled to one vote on each matter presented to Shareholders.
(d) With
the exception of the election and removal of Trustees in accordance with this Declaration and the Bylaws of the Trust and any matter as may be properly brought
before a meeting by a Shareholder pursuant to the Bylaws and applicable laws, no action that would bind the Trust and the Trustees may be taken without the prior recommendation of the Trustees. Except
with respect to the foregoing matters, no action taken by the Shareholders at any meeting shall in any way bind the Board of Trustees.
(e) At
all elections of Trustees, voting by Shareholders shall be conducted under the non-cumulative method and the election of Trustees shall be by the affirmative vote of
the holders of Shares representing a majority of the total number of votes cast by shares then outstanding and entitled to vote thereon; provided, however, the election of a Trustee in a contested
election, which is an election in which the number of nominees for election is greater than the number to be elected at the meeting, shall be by the affirmative vote of Shares representing a plurality
of the total number of share votes cast by Shares then outstanding and entitled to vote thereon.
5.11
Written Consent of Shareholders.
Whenever Shareholders are required or
permitted to take any action (unless a vote at a meeting is specifically required as in Section 8.1), such action may be taken without a meeting by written consents setting forth the action so
taken, signed by the holders, as of any record date established for such action in accordance with the Bylaws, of a majority (or such higher percentage as may be specified by applicable law or in this
Declaration) of the total number of votes authorized to be cast by shares then outstanding and entitled to vote thereon deliver a consent setting forth such action in writing or by electronic
transmission in accordance with any procedures set forth in the Bylaws.
5.12
Proxies.
Whenever the vote or consent of a Shareholder entitled to vote is
required or permitted under this Declaration, such vote or consent may be given either directly by such Shareholder or by a proxy in the form prescribed in, and subject to the provisions of, the
Bylaws. The Trustees may solicit such proxies from the Shareholders or any of them entitled to vote in any matter requiring or permitting the Shareholders' vote or consent.
5.13
Fixing Record Date.
The Bylaws may provide for fixing or, in the absence of
such provision, the Trustees may fix, in advance, a date as the record date for determining the Shareholders entitled to notice of or to vote at any meeting of Shareholders or to express consent to
any proposal without a meeting or for the purpose of determining Shareholders entitled to receive payment of any dividend or distribution (whether before or after termination of the Trust), or for any
other purpose.
5.14
Notice to Shareholders.
Any notice of meeting or other notice, communication
or report to any Shareholder shall be deemed duly delivered to such Shareholder when such notice, communication or report is deposited, with postage thereon prepaid, in the United States mail,
addressed to such Shareholder at his address as it appears on the records of the Trust or is delivered in person to such Shareholder.
ARTICLE VI
RESTRICTIONS ON TRANSFER AND OWNERSHIP OF SHARES
6.1
Definitions.
For the purpose of this Article VI, the following terms
shall have the following meanings:
"Beneficial
Ownership" shall mean ownership of Shares by a Person, whether the interest in Shares is held directly or indirectly (including by a nominee), and shall include, but not be
limited to, interests that would be treated as owned through the application of Section 544 of the Internal
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Revenue
Code, as modified by Sections 856(h)(1)(B) and 856(h)(3) of the Internal Revenue Code. The terms "Beneficial Owner", "Beneficially Owns" and "Beneficially Owned" shall have the
correlative meanings.
"Charitable
Beneficiary" shall mean one or more beneficiaries of the Charitable Trust as determined pursuant to Section 6.3(g), provided that each such organization shall be
described in Sections 501(c)(3), 170(b)(1)(A) (other than clause (vii) or (viii) thereof) and 170(c)(2) of the Internal Revenue Code and contributions to each such organization
shall be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Internal Revenue Code.
"Charitable
Trust" shall mean any trust provided for in Sections 6.2(a)(ii) and 6.3(a).
"Charitable
Trustee" shall mean each Person, unaffiliated with the Trust and a Prohibited Owner, that is appointed by the Trust from time to time to serve as a trustee of a Charitable
Trust as provided by Section 6.3(a).
"Common
Shares" shall mean the common shares of beneficial interest designated as such in the Declaration.
"Constructive
Ownership" shall mean ownership of Shares by a Person, whether the interest in Shares is held directly or indirectly (including by a nominee), and shall include any
interests that would be treated as owned through the application of Section 318(a) of the Internal Revenue Code, as modified by Section 856(d)(5) of the Internal Revenue Code. The terms
"Constructive Owner", "Constructively Owns" and "Constructively Owned" shall have the correlative meanings.
"Excepted
Holder" shall mean a shareholder of the Trust for whom an Excepted Holder Limit is created by the Board of Trustees pursuant to Section 6.2(e).
"Excepted
Holder Limit" shall mean, provided that and only so long as the affected Excepted Holder complies with all of the requirements established by the Board of Trustees pursuant to
Section 6.2(e), the percentage limit established by the Board of Trustees.
"Internal
Revenue Code" shall mean the Internal Revenue Code of 1986, as amended.
"Market
Price" with respect to Shares on any date shall mean the last sale price for such Shares, regular way, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, for such Shares, in either case as reported on the principal consolidated transaction reporting system with respect to such Shares, or if such Shares are not
listed or admitted to trading on any National Securities Exchange, the last sale price in the over the counter market, or if no trading price is available for such Shares, the fair market value of
such Shares as determined in good faith by the Board of Trustees.
"National
Securities Exchange" means an exchange registered with the SEC under Section 6(a) of the Exchange Act, as amended, supplemented or restated from time to time, and any
successor to such statute.
"Ownership
Limit" shall mean (a) with respect to Common Shares, 9.8% (in value or number of shares, whichever is more restrictive) of the Common Shares outstanding at the time of
determination and (b) with respect to any other class or series of Shares, 9.8% (in value or number of shares, whichever is more restrictive) of the Shares of such class or series outstanding
at the time of determination.
"Person"
shall mean and include individuals, corporations, limited partnerships, general partnerships, joint stock companies or associations, joint ventures, associations, companies,
trusts, banks, trust companies, land trusts, business trusts and other entities and governments and agencies and political subdivisions thereof and also includes a group as that term is used for
purposes of Section 13(d)(3) of the Exchange Act.
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"Preferred
Shares" shall mean any class or series of preferred shares of beneficial interest designated as such in the Declaration.
"Prohibited
Owner" shall mean any Person who, but for the provisions of Section 6.2(a), would Beneficially Own or Constructively Own Shares in excess of the Ownership Limit, and
if appropriate in the context, shall also mean any Person who would have been the holder of record in the books of the Trust or the Trust's transfer agent of Shares that the Prohibited Owner would
have so owned.
"REIT"
shall mean a "real estate investment trust" within the meaning of Section 856 of the Internal Revenue Code.
"Shares"
shall mean the shares of beneficial interest of the Trust.
"Transfer"
shall mean any issuance, sale, transfer, gift, assignment, devise or other disposition, as well as any other event (or any agreement to take any such actions or cause any such
events) that causes any Person to acquire Beneficial Ownership or Constructive Ownership of Shares or the right to vote or receive distributions on Shares, including, without limitation,
(a) any change in the capital structure of the Trust which has the effect of increasing the total equity interest of any Person in the Trust, (b) a change in the relationship between two
or more Persons which causes a change in ownership of Shares by application of Section 544 of the Internal Revenue Code, as modified by Section 856(h) of the Internal Revenue Code, or by
application of Section 318(a) of the Internal Revenue Code, as modified by Section 856(d)(5) of the Internal Revenue Code, (c) the grant or exercise of any option or warrant (or
any disposition of any option or warrant, or any event that causes any option or warrant not theretofore exercisable to become exercisable), pledge, security interest or similar right to acquire
Shares, (d) any disposition of any securities or rights convertible into or exchangeable for Shares or any interest in Shares or any exercise of any such conversion or exchange right, and
(e) transfers of interests in other entities that result in changes in Beneficial Ownership or Constructive Ownership of Shares, in each case, whether voluntary or involuntary, whether owned of
record or Beneficially Owned or Constructively Owned, and whether by operation of law or otherwise. The terms "Transferring" and "Transferred" shall have the correlative meanings.
6.2
Restrictions on Ownership.
(a)
Ownership Limitations.
(i)
Basic Restrictions.
(A) No Person, other than an Excepted Holder, shall Beneficially Own or Constructively
Own Shares in excess of the Ownership Limit, (B) no Excepted Holder shall Beneficially Own or Constructively Own Shares in excess of the Excepted Holder Limit for such Excepted Holder,
(C) no Person shall Beneficially Own or Constructively Own Shares to the extent that (i) such Beneficial Ownership or Constructive Ownership of Shares would result in the Trust being
"closely held" within the meaning of Section 856(h) of the Internal Revenue Code (without regard to whether the ownership interest is held during the last half of a taxable year), or
(ii) such Beneficial or Constructive Ownership of Shares would result in the Trust otherwise failing to qualify as a REIT (including, without limitation, Beneficial Ownership or Constructive
Ownership that would result in the Trust owning (actually or Constructively) an interest in a tenant that is described in Section 856(d)(2)(B) of the Internal Revenue Code if the income derived
by the Trust from such tenant would cause the Trust to fail to satisfy any of the gross income requirements of Section 856(c) of the Internal Revenue Code), or (D) subject to
Section 6.5, notwithstanding any other provisions contained herein, any Transfer of Shares (whether or not such Transfer is the result of a transaction entered into through the facilities of a
National Securities Exchange or automated inter-dealer quotation system) that, if effective, would result in Shares being beneficially owned by less than
A-I-12
one-hundred
(100) Persons (determined under the principles of Section 856(a)(5) of the Internal Revenue Code) shall be void ab initio, and the intended transferee shall acquire no rights
in such Shares.
(ii)
Transfer in Trust or Voided Transfer.
If any Transfer of Shares occurs (whether or not such Transfer is the
result of a transaction entered into through the facilities of a National Securities Exchange or automated inter-dealer quotation system) which, if effective, would result in any Person Beneficially
Owning or Constructively Owning Shares in violation of Sections 6.2(a)(i)(A), 6.2(a)(i)(B) or 6.2(a)(i)(C), as applicable, then the Board of Trustees shall be authorized and empowered to deem
(and if so deemed, such action and result shall be deemed to occur and the officers of the Trust shall be authorized to take such actions in the name and on behalf of the Trust authorized by the Board
of Trustees to effectuate the same): (A) that number of Shares the Beneficial Ownership or Constructive Ownership of which otherwise would cause such Person to violate
Sections 6.2(a)(i)(A), 6.2(a)(i)(B) or 6.2(a)(i)(C) (rounded upward to the nearest whole share, and such excess shares, including as so rounded, the "Excess Shares") to be automatically
transferred to a Charitable Trust or Charitable Trusts for the benefit of a Charitable Beneficiary, as described in Section 6.3, effective as of the close of business on the Business Day prior
to the date of such determination of such Transfer or at such other time determined by the Board of Trustees, and such Person shall acquire no rights in the Excess Shares; or (B) to the fullest
extent permitted by law, the Transfer of Excess Shares to be void ab initio, in which case, the intended transferee shall acquire no rights in the Excess Shares.
(iii)
Cooperation.
The shareholder that would otherwise qualify as a Prohibited Owner absent the application of
the provisions of Section 6.2(a)(ii) shall use best efforts and take all actions necessary or requested by the Trust to cooperate with effecting the actions taken by the Board of Trustees
pursuant to Section 6.2(a)(ii), including, without limitation, informing the Trust where any Excess Shares may be held and instructing its agents to cooperate in the prompt implementation and
effectuation of the actions so taken by the Board of Trustees.
(b)
Remedies for Breach.
If the Board of Trustees or any duly authorized committee thereof shall at any time
determine that a Transfer or other event has taken place that results in a violation of Section 6.2(a)(i) or that a Person intends to acquire or has attempted to acquire Beneficial Ownership or
Constructive Ownership of any Shares in violation of Section 6.2(a)(i) (whether or not such violation is intended), the Board of Trustees or a committee thereof may take such action as it deems
advisable to refuse to give effect to or to prevent such Transfer or other event, including, without limitation, causing the Trust to redeem Shares, refusing to give effect to such Transfer on the
books of the Trust
or the Trust's transfer agent or instituting proceedings to enjoin such Transfer or other event. This Section 6.2(b) shall not in any way limit the provisions of Section 6.2(a)(ii).
(c)
Notice of Restricted Transfer.
Any Person who acquires or attempts or intends to acquire Beneficial
Ownership or Constructive Ownership of Shares that will or may violate Section 6.2(a)(i), or any Person who would have owned Excess Shares, shall immediately give written notice to the Trust of
such event, or in the case of such a proposed or attempted transaction, give at least fifteen (15) days prior written notice, and shall provide to the Trust such other information as the Trust
may request.
(d)
Owners Required to Provide Information.
Every shareholder of five percent (5%) or more of the Shares of any
series or class outstanding at the time of determination, within thirty (30) days after the end of each taxable year and also within three (3) Business Days after a request from the
Trust, shall give written notice to the Trust stating the name and address of such owner, the number of Shares Beneficially Owned, and a description of the manner in which such Shares
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are
held; provided that a shareholder who holds Shares as nominee for another Person, which other Person is required to include in gross income the distributions received on such Shares (an "Actual
Owner"), shall give written notice to the Trust stating the name and address of such Actual Owner and the number of Shares of such Actual Owner with respect to which the shareholder is nominee. Each
such shareholder and each Actual Owner shall provide to the Trust such additional information as the Trust may request in order to determine the Trust's status as a REIT, to determine the Trust's
compliance with other applicable laws or requirements of any governmental authority or to ensure compliance with the Ownership Limit. Each Person who is a Beneficial Owner or Constructive Owner of
Shares and each Person (including the shareholder) who is holding Shares for a Beneficial Owner or Constructive Owner shall provide to the Trust such information as the Trust may request, in good
faith, in order to determine the Trust's status as a REIT, to determine the Trust's compliance with other applicable laws or requirements of any governmental authority and to comply with requirements
of any taxing authority or other governmental authority or to determine such compliance.
(e)
Exceptions.
(i) The
Board of Trustees, in its sole discretion, may grant to any Person who makes a request therefor an exception to the Ownership Limit (or one or more elements
thereof) with respect to the ownership of any series or class of Shares, subject to the following conditions and limitations: (A) the Board of
Trustees shall have determined, in its discretion, that: (1) assuming such Person would Beneficially or Constructively Own the maximum amount of Common Shares and Preferred Shares permitted as
a result of the exception to be granted and (2) assuming that all other Persons who would be treated as "individuals" for purposes of Section 542(a)(2) of the Internal Revenue Code
(determined taking into account Section 856(h)(3)(A) of the Internal Revenue Code) would Beneficially or Constructively Own the maximum amount of Common Shares and Preferred Shares permitted
under this Article VI (taking into account any exception, waiver, or exemption granted under this Section 6.2(e) to (or with respect to) such Persons), the Trust would not be "closely
held" within the meaning of Section 856(h) of the Internal Revenue Code (assuming that the ownership of Shares is determined during the second half of a taxable year) and would not otherwise
fail to qualify as a REIT (including, without limitation, Beneficial Ownership or Constructive Ownership that would result in the Trust owning (actually or Constructively) an interest in a tenant that
is described in Section 856(d)(2)(B) of the Internal Revenue Code if the income derived by the Trust from such tenant would cause the Trust to fail to satisfy any of the gross income
requirements of Section 856(c) of the Internal Revenue Code); and (B) such Person provides to the Board of Trustees, for the benefit of the Trust, such representations and undertakings,
if any, as the Board of Trustees may, in its discretion, determine to be necessary in order for it to make the determination that the conditions set forth in Section 6.2(e)(i)(A) of this
Article have been and/or will continue to be satisfied (including, without limitation, an agreement as to a reduced Ownership Limit or Excepted Holder Limit for such Person with respect to the
Beneficial or Constructive Ownership of one or more other classes or series of Shares not subject to the exception), and such Person agrees that any violation of such representations and undertakings
or any attempted violation thereof will give rise to the application of the remedies set forth in Sections 6.2(a)(ii) and 6.2(b) of this Article with respect to Shares held in excess of the
Ownership Limit or the Excepted Holder Limit (as may be applicable) with respect to such Person (determined without regard to the exception granted such Person under this Section 6.2(e)(i)). If
a member of the Board of Trustees requests that the Board of Trustees grant an exception pursuant to this Section 6.2(e) with respect to such member, or with respect to any other Person if such
member of the Board of Trustees would be considered to be the Beneficial Owner or Constructive Owner of Shares owned by such other Person, such member of the Board of
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Trustees
shall not participate in the decision of the Board of Trustees as to whether to grant any such exception.
(ii) Prior
to granting any exception or exemption pursuant to Section 6.2(e), the Board of Trustees may require a ruling from the IRS or an opinion of counsel, in
either case in form and substance satisfactory to the Board of Trustees, in its sole and absolute discretion as it may deem necessary or advisable in order to determine or ensure the Trust's status as
a REIT; provided, however, that the Board of Trustees shall not be obligated to require obtaining a favorable ruling or opinion in order to grant an exception hereunder.
(iii) Subject
to Section 6.2(a)(i)(C), an underwriter or initial purchaser that participates in a public offering or a private placement of Shares (or securities
convertible into or exchangeable for Shares) may Beneficially Own or Constructively Own Shares (or securities convertible into or exchangeable for Shares) in excess of the Ownership Limit, but only to
the extent necessary to facilitate such public offering or private placement as determined by the Board of Trustees.
6.3
Transfer of Shares.
(a)
Ownership in Trust.
Upon any purported Transfer or other event described in Section 6.2(a)(ii) that
results in a transfer of Shares to a Charitable Trust, such Shares shall be deemed to have been transferred to the Charitable Trustee as trustee or trustees, as applicable, of a Charitable Trust for
the exclusive benefit of one or more Charitable Beneficiaries (except to the extent otherwise provided in Section 6.3(e)). Such transfer to the Charitable Trustee shall be deemed to be
effective as of the time provided in Section 6.2(a)(ii). Any Charitable Trustee shall be appointed by the Trust and shall be a Person unaffiliated with the Trust and any Prohibited Owner. Each
Charitable Beneficiary shall be designated by the Trust as provided in Section 6.3(g) of this Article.
(b)
Status of Shares Held by a Charitable Trustee.
Shares held by a Charitable Trustee shall be issued and
outstanding Shares of the Trust. The Prohibited Owner shall:
(i) have
no rights in the Shares held by the Charitable Trustee;
(ii) not
benefit economically from ownership of any Shares held in trust by the Charitable Trustee (except to the extent otherwise provided in Section 6.3(e) of this
Article);
(iii) have
no rights to dividends or other distributions;
(iv) not
possess any rights to vote or other rights attributable to the Shares held in the Charitable Trust; and
(v) have
no claim, cause of action or other recourse whatsoever against the purported transferor of such Shares.
(c)
Dividend and Voting Rights.
The Charitable Trustee shall have all voting rights and rights to dividends or
other distributions with respect to Shares held in the Charitable Trust, which rights shall be exercised
for the exclusive benefit of the Charitable Beneficiary (except to the extent otherwise provided in Section 6.3(e)). Any dividend or other distribution paid with respect to any Shares which
constituted Excess Shares at such time and prior to Shares having been transferred to the Charitable Trustee shall be paid to the Charitable Trustee by the Prohibited Owner upon demand and any
dividend or other distribution authorized but unpaid with respect to such Shares shall be paid when due to the Charitable Trustee. Any dividends or distributions so paid to the Charitable Trustee
shall be held in trust for the Charitable Beneficiary. The Prohibited Owner shall have no voting rights with respect to Shares held in the Charitable Trust and, effective as of the date that Shares
have been transferred to the Charitable Trustee, the Charitable Trustee shall have
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the
authority (at the Charitable Trustee's discretion) (i) to rescind as void any vote cast by a Prohibited Owner with respect to such Shares at any time such Shares constituted Excess Shares
with respect to such Prohibited Owner and (ii) to recast such vote in accordance with the desires of the Charitable Trustee acting for the benefit of the Charitable Beneficiary; provided,
however, that if the Trust has already taken irreversible action, then the Charitable Trustee shall not have the power to rescind and recast such vote. Notwithstanding the provisions of this
Article VI, until the Shares have been transferred into a Charitable Trust, the Trust shall be entitled to rely on its stock transfer and other shareholder records for purposes of preparing
lists of shareholders entitled to vote at meetings, determining the validity and authority of proxies, and otherwise conducting votes of shareholders.
(d)
Rights upon Liquidation.
Upon any voluntary or involuntary liquidation, dissolution or winding up of or any
distribution of the assets of the Trust, the Charitable Trustee shall be entitled to receive, ratably with each other holder of Shares of the class or series of Shares that is held in the Charitable
Trust, that portion of the assets of the Trust available for distribution to the holders of such class or series (determined based upon the ratio that the number of Shares of such class or series of
Shares held by the Charitable Trustee bears to the total number of Shares of such class or series of Shares then outstanding). The Charitable Trustee shall distribute any such assets received in
respect of the Shares held in the Charitable Trust in any liquidation, dissolution or winding up or distribution of the assets of the Trust, in accordance with Section 6.3(e).
(e)
Sale of Shares by Charitable Trustee.
Unless otherwise directed by the Board of Trustees, within twenty
(20) days of receiving notice from the Trust that Shares have been transferred to the Charitable Trust, or soon thereafter as practicable, the Charitable Trustee shall sell the Shares held in
the Charitable Trust (together with the right to receive dividends or other distributions with respect to such Shares as to any Shares transferred to the Charitable Trustee as a result of the
operation of Section 6.2(a)(ii)) to a Person, designated by the Charitable Trustee, whose ownership of the Shares will not violate the ownership limitations set forth in
Section 6.2(a)(i). Upon such sale, the interest of the Charitable Beneficiary in the Shares sold shall terminate and the Charitable Trustee shall distribute the net
proceeds of the sale to the Prohibited Owner and to the Charitable Beneficiary as provided in this Section 6.3(e).
A
Prohibited Owner shall receive the lesser of (A) the net price paid by the Prohibited Owner for the Shares or, if the Prohibited Owner did not give value for the Shares in
connection with the event causing the Shares to be held in the Charitable Trust (for example, in the case of a gift, devise or other such transaction), the Market Price of the Shares on the day of the
event causing the Shares to be held in the Charitable Trust, less the costs, expenses and compensation of the Charitable Trustee and the Trust as provided in Section 6.4 and (B) the net
sales proceeds received by the Charitable Trustee from the sale or other disposition of the Shares held in the Charitable Trust. Any net sales proceeds in excess of the amount payable to the
Prohibited Owner shall be paid to the Charitable Beneficiary, less the costs, expenses and compensation of the Charitable Trustee and the Trust as provided in Section 6.4. If such Shares are
sold by a Prohibited Owner, then (A) such Shares shall be deemed to have been sold on behalf of the Charitable Trust and (B) to the extent that the Prohibited Owner received an amount
for such Shares that exceeds the amount that such Prohibited Owner was entitled to receive pursuant to this Section 6.3(e) of this Article, such excess shall be paid promptly to the Charitable
Trustee upon demand.
(f)
Trust's Purchase Right in Excess Shares.
Notwithstanding any transfer of Excess Shares to a Charitable Trust
pursuant to this Article VI, Excess Shares shall be deemed to have been offered for sale to the Trust, or its designee, at a price per Share equal to the lesser of (i) the price per
Share in the transaction that resulted in such Shares becoming Excess Shares (or, if the Prohibited Owner did not give value for such Shares, such as in the case of a devise, gift or other such
transaction, the Market Price per such Share on the day of the event causing the Shares to become
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Excess
Shares) and (ii) the Market Price per such Share on the date the Trust, or its designee, accepts such offer, in each case of clauses (i) and (ii) of this sentence, less the
costs, expenses and compensation of the Charitable Trustee, if any, and the Trust as provided in Section 6.4. The Trust shall have the right to accept such offer until the Charitable Trustee,
if any, has sold the Shares held in the Charitable Trust, if any, pursuant to Section 6.3(e). Upon such a sale to the Trust, if a Charitable Trust has been established pursuant to this
Article VI, the interest of the Charitable Beneficiary in the Shares sold shall terminate and the Charitable Trustee shall distribute the net proceeds of the sale to the Prohibited Owner and
the Charitable Beneficiary as provided in Section 6.3(e).
(g)
Designation of Charitable Beneficiaries.
By written notice to the Charitable Trustee, the Trust shall
designate from time to time one or more nonprofit organizations to be the Charitable Beneficiary of
the interest in the Charitable Trust such that (i) Shares held in the Charitable Trust would not violate the restrictions set forth in Section 6.2(a)(i) in the hands of such Charitable
Beneficiary and (ii) contributions to each such organization shall be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Internal Revenue Code. The
Charitable Beneficiary shall not obtain any enforceable right to the Charitable Trust or any of its trust corpus until so designated and thereafter any such rights remain subject to the provisions of
this Article VI, including, without limitation, Section 6.3(h).
(h)
Retroactive Changes.
Notwithstanding any other provisions of this Article VI, the Board of Trustees
is authorized and empowered to retroactively amend, alter or repeal any rights which the Charitable Trust, the Charitable Trustee or the Charitable Beneficiary may have under this Article VI,
including, without limitation, granting retroactive Excepted Holder status to any otherwise Prohibited Owner, with the effect of any transfer of Excess Shares to a Charitable Trust being fully and
retroactively revoked; provided, however, that the Board of Trustees shall not have the authority or power to retroactively amend, alter or repeal any obligations to pay amounts incurred prior to such
time and owed or payable to the Charitable Trustee pursuant to Section 6.4 of this Article.
6.4
Costs, Expenses and Compensation of Charitable Trustee and the Trust.
(a) The
Charitable Trustee shall be indemnified by the Trust or from the proceeds from the sale of Shares held in the Charitable Trust, as further provided in this
Article VI, for its costs and expenses reasonably incurred in connection with conducting its duties and satisfying its obligations pursuant to this Article VI.
(b) The
Charitable Trustee shall be entitled to receive reasonable compensation for services provided by the Charitable Trustee in connection with serving as a Charitable
Trustee, the amount and form of which shall be determined by agreement of the Board of Trustees and the Charitable Trustee.
(c) Costs,
expenses and compensation payable to the Charitable Trustee pursuant to Sections 6.4(a) and 6.4(b) may be funded from the Charitable Trust or by the Trust.
The Trust shall be entitled to reimbursement on a first priority basis (after payment in full of amounts payable to the Charitable Trustee pursuant to Sections 6.4(a) and 6.4(b)) from the
Charitable Trust for any such amounts funded by the Trust.
(d) Costs
and expenses incurred by the Trust in the process of enforcing the ownership limitation set forth in Section 6.2(a)(i), in addition to reimbursement of
costs, expenses and compensation of the Charitable Trustee which have been funded by the Trust, may be collected from the Charitable Trust.
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6.5
Transactions on a National Securities Exchange.
Nothing in this
Article VI shall preclude the settlement of any transaction entered into through the facilities of a National Securities Exchange or any automated inter-dealer quotation system. The fact that
the settlement of any transaction takes place shall not negate the effect of any other provision of this Article VI and any transferee in such a transaction shall be subject to all of the
provisions and limitations set forth in this Article VI.
6.6
Enforcement.
The Trust is authorized specifically to seek equitable relief,
including injunctive relief, to enforce the provisions of this Article VI.
6.7
Non-Waiver.
No delay or failure on the part of the Trust or the Board of
Trustees in exercising any right hereunder shall operate as a waiver of any right of the Trust or the Board of Trustees, as the case may be, except to the extent specifically waived in writing.
6.8
Enforceability.
If any of the restrictions on transfer of Shares contained in
this Article VI are determined to be void, invalid or unenforceable by any court of competent jurisdiction, then, to the fullest extent permitted by law, the Prohibited Owner may be deemed, at
the option of the Trust, to have acted as an agent of the Trust in acquiring such Shares and to hold such Shares on behalf of the Trust.
ARTICLE VII
LIABILITY OF TRUSTEES, SHAREHOLDERS, OFFICERS,
EMPLOYEES AND AGENTS, AND OTHER MATTERS
7.1
Limitation of Liability of Shareholders, Trustees, Officers, Employees and Agents for Obligations of the
Trust.
The Trustees and the officers, employees and agents of the Trust, in incurring any debts, liabilities or obligations or in taking or omitting any other
actions for or in connection with the Trust, are, and shall be deemed to be, acting as trustees, officers, employees or agents of the Trust and not in their own individual capacities. Except as
otherwise provided in Section 7.3 hereof with respect to liability of Trustees or officers, agents or employees of the Trust to the Trust or to Shareholders, no Shareholder, Trustee or officer,
employee or agent of the Trust shall be liable for any debt, claim, demand, judgment decree, liability or obligation of any kind (in tort, contract or otherwise) of, against or with respect to the
Trust or arising out of any action taken or omitted for or on behalf of the Trust, and the Trust shall be solely liable therefor and resort shall be had solely to the Trust Estate for the payment or
performance thereof, and no Shareholder, Trustee or officer, employee or agent of the Trust shall be subject to any personal liability whatsoever, in tort, contract or otherwise, to any other Person
or Persons in connection with the Trust Estate or the affairs of the Trust (or any actions taken or omitted for or on behalf of the Trust), and all such other Persons shall look solely to the Trust
Estate for satisfaction of claims of any nature arising in connection with the Trust Estate or the affairs of the Trust (or any action taken or omitted for or on behalf of the Trust).
7.2
Express Exculpatory Clauses and Instruments.
Any written instrument creating an
obligation of the Trust may include a reference to this Declaration and provide that neither the Shareholders nor the Trustees nor any officers, employees or agents of the Trust shall be liable
thereunder and that all Persons shall look solely to the Trust Estate for the payment of any claim thereunder or for the performance thereof; however, the omission of such provision from any such
instrument shall not render the Shareholders, any Trustee, or any officer, employee or agent of the Trust liable nor shall the Shareholders, any Trustee or any officer, employee or agent of the Trust
be liable to any one for such omission.
7.3
Limitation of Liability of Trustees, Officers, Employees and Agents to the Trust and to Shareholders for Acts and
Omissions.
No Trustee or officer, employee or agent of the Trust shall have any greater duties than those established by this Declaration of Trust or, in cases as
to which such duties are not so established, than those of the directors, officers, employees and agents of a Maryland business corporation in effect from time to time. No Trustee, officer, employee
or agent of the Trust
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shall
be liable to the Trust, Shareholders or to any other Person for any act or omission except for his own willful misfeasance, bad faith, gross negligence or reckless disregard of duty.
7.4
Indemnification and Reimbursement of Expenses.
The Trust shall have the power,
to the maximum extent permitted by Maryland statutory or decisional law in effect from time to time, to obligate itself to indemnify, and to pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to, (a) any individual who is a present or former Shareholder, Trustee or officer of the Trust or (b) any individual who, while a Shareholder, Trustee or
officer of the Trust and at the express request of the Trust, serves or has served another corporation, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director,
officer, Shareholder, partner or trustee of such corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, from and against all claims and liabilities to which such
person may become subject by reason of his being or having been a Shareholder, Trustee or officer. The Trust shall have the power, with the approval of its Board of Trustees, to provide such
indemnification and advancement of expenses to a person who served a predecessor of the Trust in any of the capacities described in (a) or (b) above and to any employee or agent of the
Trust or a predecessor of the Trust.
7.5
Right of Trustees, Officers, Employees and Agents to Own Shares or Other Property and to Engage in Other
Business.
Any Trustee or officer, employee or agent of the Trust may acquire, own, hold and dispose of Shares in the Trust, for his individual account, and may
exercise all rights of a Shareholder to the same extent and in the same manner as if he were not a Trustee or officer, employee or agent of the Trust.
7.6
Transactions Between Trustees, Officers, Employees or Agents and the
Trust.
Subject to any express restrictions in this Declaration or adopted by the Trustees in the Bylaws or by resolution, the Trust may enter into any contract or
transaction of any kind with any Person, including any Trustee, officer, employee or agent of the Trust or any person affiliated with a Trustee, officer, employee or agent of the Trust, whether or not
any of them has a financial interest in such transaction, provided, however, that in the case of any contract or transaction in which any Trustee, officer, employee or agent of the Trust (or any
Person affiliated with such Person) has a material financial interest in such transaction, then: (a) the fact of the interest shall be disclosed or known to: (i) the Board of Trustees or
the Audit Committee, and the Board of Trustees or the Audit Committee shall approve or ratify the contract or transaction by the affirmative vote of a majority of disinterested Trustees of the Board
or the Audit Committee, even if the disinterested Trustees of the Board or the Audit Committee constitute less than a quorum, or (ii) the shareholders entitled to vote, and the contract or
transaction shall be authorized, approved or ratified by a majority of the votes cast by the shareholders entitled to vote other than the votes of shares owned of record or beneficially by the
interested part; or (b) the contract or transaction is fair and reasonable to the Trust.
7.7
Persons Dealing with Trustees, Officers, Employees or Agents.
Any act of the
Trustees or of the officers, employees or agents of the Trust purporting to be done in
their capacity as such, shall, as to any Persons dealing with such Trustees, officers, employees or agents, be conclusively deemed to be within the purposes of this Trust and within the powers of such
Trustees or officers, employees or agents. No Person dealing with the Trustees or any of them or with the officers, employees or agents of the Trust shall be bound to see to the application of any
funds or property passing into their hands or control. The receipt of the Trustees or any of them, or of authorized officers, employees or agents of the Trust, for moneys or other consideration, shall
be binding upon the Trust.
7.8
Reliance.
The Trustees and the officers, employees and agents of the Trust may
consult with counsel (which may be a firm in which one or more of the Trustees or the officers, employees or agents of the Trust is or are members) and the advice or opinion of such counsel shall be
full and complete personal protection to all the Trustees and the officers, employees and agents of the Trust in respect of any action taken or suffered by them in good faith and in reliance on or in
accordance with such advice
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or
opinion. In discharging their duties, Trustees or officers, employees or agents of the Trust, when acting in good faith, may rely upon financial statements of the Trust represented to them to
fairly present the financial position or results of operations of the Trust by the chief financial officer of the Trust or the officer of the Trust having charge of its books of account, or stated in
a written report by an independent certified public accountant fairly to present the financial position or results of operations of the Trust. The Trustees and the officers, employees and agents of
the Trust may rely, and shall be personally protected in acting, upon any instrument or other document believed by them to be genuine.
ARTICLE VIII
DURATION, AMENDMENT AND TERMINATION OF TRUST
8.1
Duration of Trust.
The duration of the Trust shall be perpetual; provided,
however, the Trust may be voluntarily dissolved or its existence terminated at any time by the affirmative vote at a meeting of Shareholders of the holders of Shares representing two-thirds of the
total number of Shares then outstanding and entitled to vote thereon.
8.2
Termination of Trust.
(a) Upon
the termination of the Trust:
(i) the
Trust shall carry on no business except for the purpose of winding up its affairs;
(ii) the
Trustees shall proceed to wind up the affairs of the Trust and all the powers of the Trustees under this Declaration shall continue until the affairs of the Trust
shall have been wound up, including the power to fulfill or discharge the contracts of the Trust, collect its assets, sell, convey, assign, exchange, transfer or otherwise dispose of all or any part
of the remaining Trust Estate to one or more persons at public or private sale (for consideration which may consist in whole or in part of cash, Securities or other property of any kind), discharge or
pay its liabilities, and do all other acts appropriate to liquidate its business; and
(iii) after
paying or adequately providing for the payment of all liabilities, and upon receipt of such releases, indemnities and refunding agreements, as they deem
necessary for their protection, the Trustees may distribute the remaining Trust Estate (in cash or in kind or partly each) among the Shareholders according to their respective rights.
(b) After
termination of the Trust and distribution of the Trust Estate to the Shareholders as herein provided, the Trustees shall execute and lodge among the records of the
Trust an instrument in writing setting forth the fact of such termination and such distribution, a copy of which instrument shall be filed with the Maryland Department of Assessments and Taxation, and
the Trustees shall thereupon be discharged from all further liabilities and duties hereunder and the rights and interests of all Shareholders shall thereupon cease.
8.3
Amendment Procedure.
This Declaration may be amended only if such amendment is
declared advisable by the Board of Trustees and approved by holders of Shares representing a majority of the total number of votes authorized to be cast in respect of Shares then outstanding and
entitled to vote thereon (notwithstanding the higher vote required by Maryland REIT Law). Two-thirds (2/3) of the Trustees may, after written notice to the Shareholders, also amend this Declaration
without the vote or consent of Shareholders if in good faith they deem it necessary to conform this Declaration to the requirements of the REIT Provisions of the Internal Revenue Code, but the
Trustees shall not be liable for failing to do so. Actions by the Trustees pursuant to Section 1.1, Section 5.1, or Section 9.6(a) that result in an amendment to this Declaration
shall be effected without the vote or consent of Shareholders.
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8.4
Amendments Effective.
Any amendment pursuant to any Section of this Declaration
shall not become effective until it is duly filed with and accepted for record by the Maryland Department of Assessments and Taxation.
8.5
Transfer to Successor.
The Trustees, with the approval of a majority of the
Trustees and the affirmative vote, at a meeting approving a plan for this purpose, of the holders of Shares representing a majority of all votes authorized to be cast at a meeting at which a quorum is
present, may (a) cause the organization of a limited partnership, partnership, corporation, association, trust or other organization to take over the Trust Estate and carry on the affairs of
the Trust, (b) merge the Trust into, or sell, convey and transfer the Trust Estate to, any such limited partnership, partnership, corporation, association, trust or organization in exchange for
Securities thereof, or beneficial interests therein, and the assumption by such transferee of the liabilities of the Trust and (c) thereupon terminate this Declaration and deliver such shares,
Securities or beneficial interests among the Shareholders in accordance with such plan.
ARTICLE IX
MISCELLANEOUS
9.1
Applicable Law.
This Declaration is executed and acknowledged by the Trustees
with reference to the statutes and laws of the State of Maryland, and the rights of all parties and the construction and effect of every provision hereof shall be subject to and construed according to
the statutes and laws of such State.
9.2
Index and Headings for Reference Only.
The index and headings preceding the
text, articles and sections hereof have been inserted for convenience and reference only and shall not be construed to affect the meaning, construction or effect of this Declaration.
9.3
Successors in Interest.
This Declaration and the Bylaws shall be binding upon
and inure to the benefit of the undersigned Trustees and their successors, assigns, heirs, distributees and legal representatives, and every Shareholder and his successors, assigns, heirs,
distributees and legal representatives.
9.4
Inspection of Records.
Trust records shall be available for inspection by
Shareholders at the same time and in the same manner and to the extent that comparable records of a Maryland business corporation would be available for inspection by shareholders under the laws of
the State of Maryland. Except as specifically provided for in this
Declaration or in Title 8 of the Corporations and Associations Article of the Annotated Code of Maryland, Shareholders shall have no greater right than shareholders of a Maryland business corporation
to require financial or other information from the Trust, Trustees or officers of the Trust. Any Federal or state securities administrator or the Maryland Department of Assessments and Taxation shall
have the right, at reasonable times during business hours and for proper purposes, to inspect the books and records of the Trust.
9.5
Counterparts.
This Declaration may be simultaneously executed in several
counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute one and the same instrument, which shall be sufficiently evidenced by
any such original counterpart.
9.6
Provisions of the Trust in Conflict with Law or Regulations: Severability.
(a) The
provisions of this Declaration are severable, and if the Trustees shall determine, with the advice of counsel, that any one or more of such provisions (the
"Conflicting Provisions") are in conflict with the REIT Provisions of the Internal Revenue Code, the Conflicting Provisions shall be deemed never to have constituted a part of the Declaration;
provided, however, that such determination by the Trustees shall not affect or impair any of the remaining provisions of this Declaration or render invalid or improper any action taken or omitted
(including but not limited
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to
the election of Trustees) prior to such determination. An amendment in recordable form signed by a majority of the Trustees setting forth any such determination and reciting that it was duly
adopted by the Trustees, or a copy of this Declaration, with the Conflicting Provisions removed pursuant to such a determination, in recordable form, signed by a majority of the Trustees, shall be
conclusive evidence of such determination when filed with the Maryland Department of Assessments and Taxation. The Trustees shall not be liable for failure to make any determination under this
Section 9.6(a). Nothing in this Section 9.6(a) shall in any way limit or affect the right of the Trustees to amend this Declaration as provided in Section 8.3.
(b) If
any provision of this Declaration shall be held invalid or unenforceable, such invalidity or unenforceability shall attach only to such provision and shall not in any
manner affect or render invalid
or unenforceable any other provision of this Declaration, and this Declaration shall be carried out as if any such invalid or unenforceable provision were not contained herein.
9.7
Certifications.
The following certifications shall be final and conclusive as
to any Persons dealing with the Trust:
(a) a
certification of a vacancy among the Trustees by reason of resignation, removal, increase in the number of Trustees, incapacity, death or otherwise, when made in
writing by a majority of the remaining Trustees;
(b) a
certification as to the individuals holding office as Trustees or officers at any particular time, when made in writing by the secretary of the Trust;
(c) a
certification that a copy of this Declaration or of the Bylaws is a true and correct copy thereof as then in force, when made in writing by the secretary of the Trust;
and
(d) a
certification as to any actions by Trustees, other than the above, when made in writing by the secretary of the Trust or by any Trustee.
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IN
WITNESS WHEREOF, this Fourth Amendment and Restatement of Declaration of Trust has been signed and acknowledged by each of the undersigned Trustees of the Trust on this
31st day of July, 2014.
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Sam Zell
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James Corl
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Edward Glickman
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David Helfand
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Peter Linneman
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James Lozier
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Kenneth Shea
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Table of Contents
EXHIBIT A-II: MARKED AMENDED AND RESTATED CHARTER
A-II
EXHIBIT A-II
COMMONWEALTH REIT
(formerly
known as HRPT Properties Trust, which was formerly known as Health and Retirement
Properties Trust)
Third
Fourth
Amendment and Restatement of Declaration of Trust
October 9,
1986
As Amended and Restated on July
1
31
,
1994
2014
and Amended July 9, 1996
and Amended March 3, 1997
and Amended May 26, 1998
and Amended July 1, 1998
and Amended June 16, 2003
and Amended January 2, 2004
and Amended March 16, 2005
and Amended September 12, 2005
and Amended May 24, 2006
and Amended December 29, 2006
and Amended May 15, 2007
and Amended October 16, 2007
and Amended May 14, 2009
and Amended April 15, 2010
and Amended May 14, 2010
and Amended June 30, 2010
TABLE OF CONTENTS
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Page
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6.11
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[Reserved]
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21
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6.12
5.13
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Fixing Record Date
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17
21
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6.13
5.14
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Notice to Shareholders
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A-II-
18
22
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6.14
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Shareholders' Disclosure: Trustees' Right to Refuse to Transfer Shares; Limitation on Holdings; Redemption of
Shares
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18
22
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6.15
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Special Voting Requirements for Certain Business Combinations
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19
25
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ARTICLE VI RESTRICTIONS ON TRANSFER AND OWNERSHIP OF SHARES
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22
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6.1
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Definitions
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22
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6.2
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Restrictions on Ownership
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25
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6.3
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Transfer of Shares
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29
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6.4
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Costs, Expenses and Compensation of Charitable Trustee and the Trust
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31
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6.5
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Transactions on a National Securities Exchange
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32
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6.6
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Enforcement
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32
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6.7
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Non-Waiver
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32
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6.8
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Enforceability
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32
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ARTICLE VII LIABILITY OF TRUSTEES, SHAREHOLDERS, OFFICERS, EMPLOYEES AND AGENTS, AND OTHER MATTERS
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32
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7.1
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Limitation of Liability of Shareholders, Trustees, Officers, Employees and Agents for Obligations of the Trust
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20
32
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7.2
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Express Exculpatory Clauses and Instruments
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20
32
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7.3
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Limitation of Liability of Trustees
,
Officers
,
Employees and Agents to the Trust and to Shareholders for Acts and
Omissions
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33
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7.4
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Indemnification and Reimbursement of
Trustees, Officers, Employees and Agents
Expenses
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33
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7.5
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Certain Definitions
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34
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7.6
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Indemnification and Reimbursement of Shareholders
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34
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7.7
7.5
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Right of Trustees, Officers, Employees and Agents to Own Shares or Other Property and to Engage in Other Business
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35
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7.8
7.6
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Transactions Between Trustees, Officers, Employees or Agents and the Trust
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35
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7.9
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Independent Counsel
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36
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7.10
7.7
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Persons Dealing with Trustees, Officers, Employees or Agents
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36
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7.11
7.8
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Reliance
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37
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7.12
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Indemnification of the Trust
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37
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ARTICLE VIII DURATION, AMENDMENT AND TERMINATION OF TRUST
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37
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8.1
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Duration of Trust
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37
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8.2
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Termination of Trust
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37
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8.3
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Amendment Procedure
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38
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8.4
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Amendments Effective
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38
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8.5
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Transfer to Successor
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ARTICLE IX MISCELLANEOUS
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9.1
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Applicable Law
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9.2
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Index and Headings for Reference Only
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9.3
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Successors in Interest
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9.4
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Inspection of Records
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9.5
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Counterparts
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9.6
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Provisions of the Trust in Conflict with Law or Regulations: Severability
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9.7
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Certifications
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A-II-ii
THIRD
FOURTH
AMENDMENT AND RESTATEMENT OF DECLARATION OF TRUST OF
COMMONWEALTH REIT
(formerly
known as HRPT Properties Trust, which was formerly known as Health and Retirement
Properties Trust)
Dated
October 9, 1986
As Amended and Restated on July
1
31
,
1994
2014
and as Amended July 9, 1996
and Amended March 3, 1997
and Amended May 26, 1998
and Amended July 1, 1998
and Amended June 16, 2003
and Amended January 2, 2004
and Amended March 16, 2005
and Amended September 12, 2005
and Amended May 24, 2006
and Amended on December 29, 2006
and Amended May 15, 2007
and Amended October 16, 2007
and Amended May 14, 2009
and Amended April 15, 2010
and Amended May 14, 2010
and Amended June 30, 2010
CommonWealth
REIT, a Maryland real estate investment trust (the "Trust") desires to amend and restate its Declaration of Trust (as so amended and restated, the
"Declaration"). The amendment and restatement of the Declaration as herein set forth has been declared advisable by the Board of Trustees and approved by the Shareholders of the Trust as required by
law and by this Declaration.
The
Declaration of Health and Rehabilitation Properties Trust (the "Trust"), as filed with the Maryland Department of Assessments and Taxation on October 9,
1986 and as amended on September 27, 1987, July 23, 1992, and July 30, 1993 (the "Declaration"), is hereby amended and restated as follows:
DECLARATION
OF TRUST made as of the date set forth above by the undersigned Trustees.
WITNESSETH:
WHEREAS, the Trustees desire to create a trust for the principal purpose of investing in real property and interests therein; and
WHEREAS,
the Trustees desire that such trust qualify as a "real estate investment trust" under the REIT Provisions of the Internal Revenue Code, and under Title 8 of the Corporations and
Associations Article of the Annotated Code of Maryland; and
WHEREAS,
in furtherance of such purpose the
Trustees intend
Trust intends
to acquire certain real property and
interests therein and to hold, manage and dispose of all such property
as Trustees
in the manner hereinafter stated
and as determined from time to
time by the Trustees
; and
WHEREAS,
it is proposed that the beneficial interest in the Trust be divided into transferable Shares of Beneficial Interest, evidenced by certificates therefore, as hereinafter
provided;
NOW,
THEREFORE, it is hereby
agreed and
declared that the
Trustees will hold any and all property of every type and description
which they are acquiring or may hereafter acquire as Trustees,
A-II-1
together
with the proceeds thereof, in trust, to manage and dispose of the same for the benefit of the holders from time to time of the Shares of Beneficial Interest being issued
and to be issued hereunder in the manner and subject to the stipulations contained herein.
following provisions are all the provisions of the Declaration as hereby
amended and restated.
ARTICLE I
THE TRUST; DEFINITIONS
1.1
Name.
The name of the Trust created by this Declaration of Trust shall be
"CommonWealth REIT" and so far as may be practicable the Trustees shall conduct the Trust's activities, execute all documents and sue or be sued under that name
, which name (and the
word "Trust" wherever used in this Declaration of Trust, except where the context otherwise requires) shall refer to the Trustees collectively but not individually or personally nor to the officers,
agents, employees or Shareholders of the Trust or of such Trustees
. The Trustees may, at any time, without any action by the Shareholders, amend the Declaration of Trust to change
the name of the Trust.
1.2
Places of Business.
The Trust shall maintain an office in Maryland at CT
Corporation or such other place in Maryland as the Trustees may determine from time to time. The Resident Agent of the Trust at such office shall be The Corporation Trust Incorporated, 32 South
Street, Baltimore, Maryland, 21202. The Trust may change such Resident Agent from time to time as the Trustees shall determine. The Trust may have such other offices or places of business within or
without the State of Maryland as the Trustees may from time to time determine.
1.3
Nature of Trust.
The Trust shall be a real estate investment trust within the
meaning of Title 8 of the Corporations and Associations Article of the Annotated Code of Maryland. It is also intended that the Trust shall carry on a business as a "real estate investment
trust" as described in the REIT Provisions of the Internal Revenue Code. The Trust is not intended to be, shall not be deemed to be, and shall not be treated as a general partnership, limited
partnership, joint venture, corporation or joint stock company (but nothing herein shall preclude the Trust from being treated for tax purposes as an association under the Internal Revenue Code) nor
shall the Trustees or Shareholders or any of them for any purpose be, nor be deemed to be, nor be treated in
any way whatsoever to be, liable or responsible hereunder as partners or joint venturers. The relationship of the Shareholders to the
Trustees
Trust
shall be solely that of beneficiaries of the Trust in accordance with the rights conferred upon them by this
Declaration.
1.4
Legal Ownership of Trust
Estate.
Legal title of the Trust Estate shall be vested in the Trust, but it may cause legal title to the Trust Estate to be held by
or in the name of any or all of the Trustees or any other Person as nominee, in which case any right, title or interest of the Trustees in and to the Trust Estate shall automatically vest in successor
and additional Trustees upon their qualification and acceptance of election or appointment as Trustees, and they shall thereupon have all the rights and obligations of Trustees, whether or not
conveyancing documents have been executed and delivered pursuant to Section 2.3 or otherwise. Written evidence of the qualification and acceptance of election or appointment of successor and
additional Trustees may be filed with the records of the Trust and in such other offices, agencies or places as the Trust or Trustees may deem necessary or desirable.
1.5
1.4
Definitions.
The terms defined in this Section
1.4
1.5
., wherever used in this Declaration, shall, unless the context otherwise requires, have the respective meanings hereinafter
specified. Whenever the singular number is used in this Declaration and when permitted by the context, the same shall include the plural, and the masculine gender shall include the feminine and neuter
genders, and vice versa. Where applicable, calculations to be made pursuant to any such definition shall be made in accordance with generally accepted accounting principles as in effect from time to
time except as otherwise provided in such definition.
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(a)
Advisor.
"Advisor"
shall mean the Person employed by the Trustees in accordance with the provisions of Article IV.
(a)
(b)
Affiliate
. "Affiliate" shall mean, as
to any Person, (i) any other Person directly or indirectly controlling, controlled by or under common control with such Person, (ii) any other Person that owns beneficially, directly or
indirectly, five percent (5%) or more of the outstanding capital stock, shares or equity interests of such Person, or (iii) any officer, director, employee, general partner or trustee of such
Person or of any Person controlling, controlled by or under common control with such Person (excluding trustees who are not otherwise an Affiliate of such Person).
(c)
Affiliated
Trustee.
"Affiliated Trustee" shall mean a Trustee who is not an Independent Trustee.
(d)
Annual Meeting of
Shareholders
. "Annual Meeting of Shareholders" shall mean the meeting described in the first sentence of
Section 6.9.
(e)
Annual
Report
. "Annual Report" shall have the meaning set forth in Section 6.11(a).
(f)
Average Invested Real Estate
Assets
. "Average Invested Real Estate Assets" for any period shall mean the average of the aggregate book value of the
consolidated assets of the Company invested, directly or indirectly, in equity interests in, and loans secured by, real estate and personal property associated with such real estate, before reserves
for depreciation or bad debt or other similar non-cash reserves, calculated by taking the average of such values at the end of each month during such period.
(g)
Book
Value
. "Book Value" of an asset or assets shall mean the value of such asset or assets of the Trust on the books of the
Trust, without deduction for depreciation or other asset valuation reserves and without deduction for mortgages or other security interests to which such asset or assets are subject, except that no
asset shall be valued at more than its fair market value as determined by or under procedures adopted by the Trustees, and the underlying assets of a partnership, joint venture or other form of
indirect ownership, to the extent of the Trust's interest therein, shall be valued as if owned directly by the Trust.
(b)
(h)
Bylaws
. "Bylaws" shall have the
meaning set forth in Section 3.3.
(c)
(i)
Declaration
. "Declaration" or "this
Declaration" shall mean this Declaration of Trust, as amended, restated or modified from time to time. References in this Declaration to "herein" and "hereunder" shall be deemed to refer to this
Declaration and shall not be limited to the particular text, article or section in which such words appear.
(d)
Exchange Act.
"Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
(j) [
Intentionally left
blank
].
(k)
Independent
Trustee
. "Independent Trustee" shall mean a Trustee who, in his individual capacity, (i) is neither an Affiliate of,
nor has any material business or professional relationship with, the Advisor or any other Person whom the Trustees may pursuant to Section 6.14(c) hereof permit to purchase in excess of 9.8% of
the Trust's Shares (provided, however, that any Trustee affiliated with an underwriter shall not cease to be an Independent Trustee solely on the basis of such underwriter's purchase of Shares in
connection with any public offering of the Trust's Shares), and (ii) does not perform any services for the Trust except as Trustee.
(e)
(l)
Internal Revenue Code
. "Internal
Revenue Code" shall mean the Internal Revenue Code of
1954
1986
, as now enacted or hereafter amended, or successor statutes and
applicable rules and regulations thereunder.
A-II-3
(m)
Invested
Assets
. "Invested Assets" shall mean the Book Value of all the Real Estate Investments of the Trust.
(f)
Maryland REIT Law:
"Maryland REIT Law" shall mean Title 8 of the
Corporations and Associations Article of the Annotated Code of Maryland, as in effect from time to time, or any successor thereto.
(g)
(n)
Mortgage Loans
. "Mortgage Loans"
shall mean notes, debentures, bonds and other evidences of indebtedness or obligations, whether negotiable or non-negotiable, and which are secured or collateralized by Mortgages.
(h)
(o)
Mortgages
. "Mortgages" shall mean
mortgages, deeds of trust or other security interests in Real Property.
(p)
Net
Assets
. "Net Assets" shall mean the total assets (other than intangibles) at cost before deducting depreciation or other
non-cash reserves less total liabilities, calculated at least quarterly on a basis consistently applied.
(q)
Net
Income
. "Net Income" for any period shall be calculated on the basis of the Trust's audited financial statements and shall
mean total revenues applicable to such period, less the expenses applicable to such period, other than additions to reserves for depreciation or bad debts or other similar non-cash
reserves.
(i)
(r)
Person
. "Person" shall mean and
include individuals, corporations, limited partnerships, general partnerships, joint stock companies or associations, joint ventures, associations, companies, trusts, banks, trust companies, land
trusts, business trusts and other entities and governments and agencies and political subdivisions thereof.
(s)
Real Estate
Investment
. "Real Estate Investment" shall mean any direct or indirect investment in any interest in Real Property or in any
Mortgage Loan, or in any Person whose principal purpose is to make any such investment.
(j)
(t)
Real Property
. "Real Property" shall
mean and include land leasehold interests (including but not limited to interests of a lessor or lessee therein), rights and interests in land, and in any buildings, structures, improvements,
furnishings and fixtures located on or used in connection with land or interests therein, but does not include investments in Mortgages, Mortgage Loans or interests therein.
(k)
(u)
REIT
. "REIT" shall mean a real estate
investment trust as defined in the REIT Provisions of the Internal Revenue Code.
(l)
(v)
REIT Provisions of the Internal Revenue
Code
. "REIT Provisions of the Internal Revenue Code" shall mean Parts II and III of Subchapter M of Chapter 1 of Subtitle A of the Internal
Revenue Code or any successor provision.
(m)
(w)
Securities
. "Securities" shall mean
any stock, shares, voting trust certificates, bonds, debentures, notes or other evidences of indebtedness or in general any instruments commonly known as "securities" or any certificates of interest,
shares or participations in, temporary or interim certificates for, receipts for, guarantees of, or warrants, options or rights to subscribe to, purchase or acquire any of the foregoing.
(n)
(x)
Shareholders
. "Shareholders" shall
mean as of any particular time all holders of record of outstanding Shares at such time.
(o)
(y)
Shares
. "Shares" or, as the context
may require, "shares" shall mean the shares of beneficial interest of the Trust as described in Section
6.1
5.1
hereof.
A-II-4
(z)
Total
Assets
.
"Total Assets" shall mean the Book Value of all the assets of the Trust, as
such Book Value appears on the most recent quarterly balance sheet of the Trust.
(aa)
Total Operating
Expenses
.
"Total Operating Expenses" shall be calculated on the basis of the Trust's
annual audited financial statements and shall mean the aggregate annual expenses regarded as ordinary operating expenses (including any compensation payable to the Advisor), exclusive of the
following:
(i)
interest
payments and any other cost of borrowed money;
(ii)
taxes
on income and taxes and assessments on real property, if any, and all other taxes applicable to the
Trust;
(iii)
legal,
auditing, accounting, underwriting, brokerage, listing, reporting, registration and other fees, and
printing, engraving and other expenses and taxes incurred in connection with the issuance, distribution, transfer, trading, registration and stock exchange listing of the Trust's securities, including
transfer agent's, registrar's and indenture trustee's fees and charges;
(A)
expenses
of organizing, restructuring, reorganizing or terminating the Trust, or of revising, amending,
converting or modifying the Trust's organizational documents;
(B)
expenses
directly connected with the acquisition, disposition and ownership of real estate interests or other
property (including the costs of foreclosure, insurance premiums, legal services, brokerage and sales commissions, maintenance, repair, improvement and local management of property), other than
expenses with respect thereto of employees of the Advisor, to the extent that such expenses are to be borne by the Advisor pursuant to the terms of the advisory contract;
(iv)
non-cash
provisions for depreciation, depletion and amortization;
(v)
losses
on the disposition of assets and provisions for such losses; and
(vi)
other
extraordinary charges including, without limitation, litigation costs.
(p)
(bb)
Trust
. "Trust" shall mean the Trust
created by this Declaration.
(q)
(cc)
Trustees
. "Trustees" shall mean, as
of any particular time, the
original signatories hereto
individuals who have been duly elected and qualify as Trustees as of the date
hereof
as long as they hold office hereunder and additional and successor Trustees
who have been duly elected and qualify hereunder
, and shall not include
the officers, employees or agents of the Trust or the Shareholders. Nothing herein shall be deemed to preclude the Trustees from also serving as officers, employees or agents of the Trust or owning
Shares.
(r)
(dd)
Trust Estate
. "Trust Estate" shall
mean as of any particular time any and all property, real, personal or otherwise, tangible or intangible, which is transferred, conveyed or paid to or purchased by the Trust or Trustees and all rents,
income, profits and gains therefrom and which at such time is owned or held by or for the Trust or the Trustees.
ARTICLE II
TRUSTEES
2.1
Number, Term of Office and
Qualifications of Trustees
.
There shall be no fewer than three (3) nor more
than twelve (12) Trustees. The exact number of Trustees shall be five (5) until changed by a two-thirds (
2
/
3
) vote of the Trustees or by an amendment of this Declaration
duly adopted by the Shareholders. The Board of Trustees shall be classified into three groups, with two (2) Trustees in Group I, two (2) Trustees in Group II, and one (1) Trustee
in Group III. Each Trustee in Group I shall
A-II-5
serve
for a term ending at the annual meeting of Shareholders in 1996; each Trustee in Group II shall serve for a term ending at the annual meeting of Shareholders in 1997; and the
Trustee in Group III shall serve for a term ending at the annual meeting of Shareholders in 1995. After the respective terms of the groups indicated, each such group of Trustees shall be elected for
successive terms ending at the annual meeting of Shareholders held during the third year after election.
The
names and business addresses of the current Trustees who will serve as Trustees until the expiration of their respective terms and until their successors are
elected and qualify are as follows
:
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Name
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Address
|
Group I:
|
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Barry M. Portnoy
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Sullivan & Worcester
|
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One Post Office Square
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Boston, MA 02109
|
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John L. Harrington
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990 Washington Street
|
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Suite 315
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Dedham, MA 02026
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Group II:
|
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Rev. Justinian Manning, C.P.
|
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St. Gabriel's Parish Rectory
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139 Washington Street
|
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Brighton, MA 02135
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Gerard M. Martin
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M & P Partners Limited
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Partnership
|
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400 Centre Street
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Newton, MA 02158
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Group III:
|
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Arthur G. Koumantzelis
|
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Cumberland Farms, Inc.
|
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777 Dedham Street
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Canton, MA 02021-9118
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2.1
The current
Number, Term of Office and Qualifications of Trustees.
The number of
Trustees initially shall be eleven (11), which number may thereafter be
increased or decreased by the Trustees then in office from time to time; however, the total number of
Trustees shall be
the signatories
hereto
not less than three (3) and not more than thirteen (13)
. No reduction in the number of Trustees shall have the effect of removing any
Trustee from office prior to the expiration of
his or her
term.
Subject
At each annual meeting of Shareholders
beginning at the annual meeting of Shareholders in 2014, all Trustees shall be elected to hold office for a term of one year. The Trust may not elect to be subject
to the provisions of
Section
2.3, each
3-803 of the Maryland General Corporation Law, or otherwise provide for the Trustees of the Trust to be divided into classes
pursuant to Title 3, Subtitle 8 of the MGCL, unless such election is first approved by the affirmative vote of not less than a majority of the Shares then outstanding and entitled to vote thereon.
Trustees may be re-elected any number of times. Each
Trustee shall hold office until the election and qualification of his
or her
successor. There shall be
no cumulative voting in the election of Trustees. A Trustee shall be an individual at least twenty-one (21) years of age who is not under legal disability
. A majority of the
Trustees shall at all times be persons who are Independent Trustees; provided, however, that upon a failure to comply with
this requirement because of the
resignation, removal or death of a Trustee who is an Independent Trustee, such requirement shall not be applicable for a period of ninety (90) days. Nominees to serve as Independent Trustees
shall be nominated by the then current Independent Trustees, if any
. Unless otherwise required by law, no Trustee shall be required to give bond, surety or security in any
jurisdiction for the performance of any duties or obligations hereunder. The Trustees in their capacity as Trustees shall not be required to devote their entire time to the business and affairs of the
Trust.
A-II-6
The
names of the current Trustees who will serve until their successors are elected and qualify are as follows: James Corl (Group I), Edward Glickman (Group I), Peter
Linneman (Group II), James Lozier (Group II), Kenneth Shea (Group II), Sam Zell (Group III) and David Helfand (Group III). The four vacancies on the Board of Trustees as of the time this Fourth
Amendment and Restatement of Declaration of Trust is filed shall be filled by the Shareholders at the 2014 annual meeting of Shareholders in accordance with Sections 5.8 and 5.10.
2.2
Compensation and Other Remuneration.
The Trustees shall be entitled to receive
such reasonable compensation for their services as Trustees as the Trustees may determine from time to time. The Trustees and Trust officers shall be entitled to receive remuneration for services
rendered to the Trust in any other capacity.
Subject to Sections 7.7 and 7.8, such services may include, without limitation, services as an officer of the Trust, legal,
accounting or other professional services, or services as a broker, transfer agent or underwriter, whether performed by a Trustee or any person affiliated with a Trustee.
2.3
Resignation, Removal and Death of Trustees.
A Trustee may resign at any time
by giving written notice to the remaining Trustees at the principal office of the Trust. Such resignation shall take effect on the date specified in such notice, without need for prior accounting. A
Trustee may be removed at any time with or without cause by vote or consent of holders of Shares representing two-thirds of the total votes authorized to be cast by Shares then outstanding
and entitled to vote thereon
, or with cause by all remaining Trustees
. A Trustee judged incompetent or bankrupt, or for whom a guardian or conservator has been
appointed, shall be deemed to have resigned as of the date of such adjudication or appointment. Upon the resignation or removal of any Trustee, or his otherwise ceasing to be a Trustee, he shall
execute and deliver such documents as the remaining Trustees shall require for the conveyance of any Trust property held in his name, shall account to the remaining Trustees as they require for all
property which he holds as Trustee and shall thereupon be discharged as Trustee. Upon the incapacity or death of any Trustee, his legal representative shall perform the acts set forth in the preceding
sentence and the discharge mentioned therein shall run to such legal representative and to the incapacitated Trustee or the estate of the deceased Trustee, as the case may be.
2.4
Vacancies.
If any or all the Trustees cease to be Trustees hereunder, whether
by reason of resignation, removal, incapacity, death or otherwise, such event shall not terminate the Trust or affect its continuity. Until vacancies are filled, the remaining Trustee or Trustees
(even though fewer than three (3)) may exercise the powers of the Trustees hereunder. Vacancies (including vacancies created by increases in number) may be filled by the remaining Trustee or by a
majority of the remaining Trustees
(or a majority of the remaining Independent Trustees, if any, if the vacant position was formerly held by an Independent Trustee or is required to
be held by an Independent Trustee) or by vote of holders of Shares representing a majority of the total number of votes authorized to be cast by Shares then outstanding and entitled to vote
thereon
or by the Shareholders in accordance with Sections 5.8 and 5.10
. If at any time there shall be no Trustees in office, successor Trustees
shall be elected by the Shareholders as provided in
Section 6.9
Sections 5.8 and 5.10
. Any Trustee elected to fill a
vacancy created by the resignation, removal or death of a former Trustee shall hold office for the unexpired term of such former Trustee.
2.5
Successor and Additional Trustees.
The right, title and
interest
, if any,
of the Trustees in and to the Trust Estate shall also vest in successor and additional Trustees upon their qualification, and they shall thereupon have
all the rights and obligations of Trustees hereunder. Such right, title and interest
, if any,
shall vest in the Trustees whether or not conveyancing documents have been
executed and delivered pursuant to Section 2.3 or otherwise. Appropriate written evidence of the election and qualification of successor and additional Trustees shall be filed with the records
of the Trust and in such other offices or places as the Trustees may deem necessary, appropriate or desirable.
A-II-7
2.6
Actions by Trustees.
The Trustees may act with or without a meeting. A quorum
for all meetings of the Trustees shall be a majority of the Trustees
; provided, however, that, whenever pursuant to Section 7.8 or otherwise the vote of a majority of a
particular group of Trustees is required at a meeting, a quorum for such meeting shall be a majority of the Trustees which shall include a majority of such group
. Unless
specifically provided otherwise in this Declaration, any action of the Trustees may be taken at a meeting by vote of a majority of the Trustees present (a quorum being present) or without a meeting by
written consents of
a majority of the
all
Trustees, which consents shall be filed with the records of meetings of the Trustees. Any action or actions permitted to be taken by the Trustees in connection with the business of the Trust may be
taken pursuant to authority granted by a meeting of the Trustees conducted by a telephone conference call, and the transaction of Trust business represented thereby shall be of the same authority and
validity as if transacted at a meeting of the Trustees held in person or by written consent. The minutes of any Trustees' meeting held by telephone shall be prepared in the same manner as a meeting of
the Trustees held in person.
The acquisition or disposition of any investment (other than investments in short-term investment Securities described in Section 5.1) shall
require the approval of a majority of Trustees, except as otherwise provided in Section 7.8.
Any agreement, deed, mortgage, lease or other instrument or writing executed by
one or more of the Trustees or by any authorized Person shall be valid and binding upon the Trustees and upon the Trust when authorized or ratified by action of the Trustees or as provided in the
Bylaws.
With
respect to the actions of the Trustees, Trustees who have, or are Affiliates of Persons who have, any direct or indirect interest in or connection with any matter being acted upon
may be counted for all quorum purposes under this Section 2.6 and, subject to the provisions of Section
7.8
7.6
, may vote on
the matter as to which they or their Affiliates have such interest or connection.
2.7
Certification of Changes in
Trustees.
No alteration in the number of Trustees, no removal of a Trustee and no election or appointment of any individual
as Trustee (other than an individual who was serving as a Trustee immediately prior to such election or appointment) shall become effective unless and until there shall be delivered to the secretary
of the Trust an instrument in writing signed by a majority of the Trustees, certifying to such alteration in the number of Trustees and/or to such removal of a Trustee and/or naming the individual so
elected or appointed as Trustee, together with his written acceptance thereof and agreement to be bound thereby.
2.7
2.8
Committees.
The Trustees may appoint an audit committee and such other standing committees as the Trustees determine. Each standing committee shall consist of
three
one
or more members
, provided, however, that the
. The
Trustees may appoint a standing committee consisting of at least one Trustee and
two
one or more
non-
Trustees.
Notwithstanding the foregoing, however, all members of the audit committee shall be Independent Trustees. A majority of the members of each other standing committee comprised solely of Trustees shall
be Independent Trustees; provided, however, that upon a failure to comply with this requirement because of the resignation, removal or death of a Trustee who is an Independent Trustee, such
requirement shall not be applicable for a period of ninety (90) days
Trustee members
. Each committee shall have such powers, duties and
obligations as the
Board of
Trustees may
deem
delegate thereto as it deems
necessary or appropriate. The
standing committees shall report their activities periodically to the Trustees.
ARTICLE III
TRUSTEES' POWERS
3.1
Power and Authority of Trustees.
The Trustees, subject only to the specific
limitations contained in this Declaration, shall have, without further or other authorization, and free from any power or control on the part of the Shareholders, full, absolute and exclusive power,
control and authority over the Trust Estate and over the business and affairs of the Trust to the same extent as if the Trustees were the sole owners thereof in their own right, and may do all such
acts and things as in
A-II-8
their
sole judgment and discretion are necessary for or incidental to or desirable for the carrying out of or conducting the business of the Trust. Any construction of this Declaration or any
determination made in good faith by the Trustees as to the purposes of the Trust or the existence of any power or authority hereunder shall be conclusive. In construing the provisions of this
Declaration, the presumption shall be in favor of the grant of powers and authority to the Trustees. The enumeration of any specific power or authority herein shall not be construed as limiting the
aforesaid powers or the general powers or authority or any other specified power or authority conferred herein upon the Trustees.
3.2
Specific Powers and
Authority.
Subject only to the express limitations contained in this Declaration and in addition to any powers and authority
conferred by this Declaration or which the Trustees may have by virtue of any present or future statute or rule or law, the Trustees without any action or consent by the Shareholders shall have and
may exercise at any time and from time to time the following powers and authorities which may or may not be exercised by them in their sole judgment and discretion and in such manner and upon such
terms and conditions as they may from time to time deem proper:
(a)
to
retain, invest and reinvest the capital or other funds of the Trust in, and to acquire, purchase, or own,
real or personal property of any kind, whether tangible or intangible, wherever located in the world, and make commitments for such investments, all without regard to whether any such property is
authorized by law for the investment of trust funds or produces or may produce income; to possess and exercise all the rights, powers and privileges appertaining to the ownership of the Trust Estate;
and to increase the capital of the Trust at any time by the issuance of any additional authorized Shares (subject to Section 5.2(e)) or other Securities of the Trust for such consideration as
they deem advisable;
(b)
without
limitation of the powers set forth in paragraph (a) above, to invest in, purchase or otherwise
acquire for such consideration as they deem proper, in cash or other property or through the issuance of shares or through the issuance of notes, debentures, bonds or other obligations of the Trust,
and to hold for investment, the entire or any participating interests in any Mortgage Loans or interest in Real Property, including ownership of, or participations in the ownership of, or rights to
acquire, equity interests in Real Property or in Persons owning, developing, improving, operating or managing Real Property, which interests may be acquired independently of or in connection with
other investment
activities of the Trust and, in the latter case, may include rights to receive additional payments based on gross income or rental or other income from the Real Property or improvements thereon; to
invest in loans secured by the pledge or transfer of Mortgage Loans;
(c)
to
sell, rent, lease, hire, exchange, release, partition, assign, mortgage, pledge, hypothecate, grant security
interests in, encumber, negotiate, convey, transfer or otherwise dispose of any and all the Trust Estate by deeds (including deeds in lieu of foreclosure), trust deeds, assignments, bills of sale,
transfers, leases, mortgages, financing statements, security agreements and other instruments for any of such purposes executed and delivered for and on behalf of the Trust or the Trustees by one or
more of the Trustees or by a duly authorized officer, employee,
agent or nominee of the Trust, provided that no disposition of a Real Estate Investment shall be
accomplished without the approval of a majority of the Trustees;
(d)
to
issue Shares, bonds, debentures, notes or other evidences of indebtedness, which may be secured or unsecured
and may be subordinated to any indebtedness of the Trust, to such Persons for such cash, property or other consideration (including Securities issued or created by, or interests in, any Person) at
such time or times and on such terms as the Trustees may deem advisable and to list any of the foregoing Securities issued by the Trust on any securities exchange and to purchase or otherwise acquire,
hold, cancel, reissue, sell and transfer any of such Securities,
A-II-9
and
to cause the instruments evidencing such Securities to bear an actual or facsimile imprint of the seal of the Trust (if the Trustees shall have adopted such a seal) and to be
signed by manual or facsimile signature or signatures (and to issue such Securities, whether or not any Person whose manual or facsimile signature shall be imprinted thereon shall have ceased to
occupy the office with respect to which such signature was authorized), provided that, where only facsimile signatures for the Trust are used, the instrument shall be countersigned manually by a
transfer agent, registrar or other authentication agent; and to issue any of such Securities of different types in combinations or units with such restrictions on the separate transferability thereof
as the Trustees shall determine;
(e)
to
enter into leases of real and personal property as lessor or lessee and to enter into contracts, obligations
and other agreements for a term, and to invest in obligations having a term, extending beyond the term of office of the Trustees and beyond the possible termination of the Trust, or having a lesser
term;
(f)
to
borrow money and give negotiable or non negotiable instruments therefor; or guarantee, indemnify or act as
surety with respect to payment or performance of obligations of third parties; to enter into other obligations on behalf of the Trust; and to assign, convey, transfer, mortgage,
subordinate, pledge, grant security interest in, encumber or hypothecate the Trust Estate to secure any indebtedness of the Trust or any other of the foregoing obligations of the
Trust;
(g)
to
lend money, whether secured or unsecured;
(h)
to
create reserve funds for any purpose;
(i)
to
incur and pay out of the Trust Estate any charges or expenses, and to disburse any funds of the Trust, which
charges, expenses or disbursements are, in the opinion of the Trustees, necessary or incidental to or desirable for the carrying out of any of the purposes of the Trust or conducting the business of
the Trust, including without limitation taxes and other governmental levies, charges and assessments, of whatever kind or nature, imposed upon or against the Trustees in connection with the Trust or
the Trust Estate or upon or against the Trust Estate or any part hereof, and for any of the purposes herein;
(j)
to
deposit funds of the Trust in banks, trust companies, savings and loan associations and other depositories,
whether or not such deposits will draw interest, the same to be subject to withdrawal on such terms and in such manner and by such Person or Persons (including any one or more Trustees or officers,
employees or agents, of the Trust) as the Trustees may determine;
(k)
to
possess and exercise all the rights, powers and privileges pertaining to the ownership of all or any
Mortgages or Securities issued or created by, or interests in, any Person, forming part of the Trust Estate, to the same extent that an individual might do so, and, without limiting the generality of
the foregoing, to vote or give any consent, request or notice, or waive any notice, either in person or by proxy or power of attorney, with or without power of substitution, to one or more Persons,
which proxies and powers of attorney may be for meetings or action generally or for any particular meeting or action, and may include the exercise of discretionary powers;
(l)
to
cause to be organized or assist in organizing any Person under the laws of any jurisdiction to acquire the
Trust Estate or any part or parts thereof or to carry on any business in which the Trust shall directly or indirectly have any interest, and to sell, rent, lease, hire, convey, negotiate, assign,
exchange or transfer the Trust Estate or any part or parts thereof to or with any such Person or any existing Person in exchange for the Securities thereof or otherwise, and to merge or consolidate
the Trust with or into any Person or merge or consolidate any Person into the Trust, and to lend money to, subscribe for the Securities of, and enter into any contracts with, any Person in which the
Trust holds or is about to acquire Securities or any other interest;
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(m)
to
enter into joint ventures, general or limited partnerships, participation or agency arrangements and any
other lawful combinations or associations, and to act as a general or limited partner provided, however, that the Trustees may not enter into any such joint venture or other association as aforesaid
unless it has first received from counsel an opinion to the effect that such joint venture or other association as aforesaid will be treated for tax purposes as a partnership;
(n)
to
elect, appoint, engage or employ such officers for the Trust as the Trustees may determine, who may be
removed or discharged at the discretion of the Trustees, such officers to have such powers and duties, and to serve such terms, as may be prescribed by the Trustees or by the Bylaws; to engage or
employ any Persons (including, subject to the provisions of Sections 7.7 and 7.8, any Trustee or officer, agent or employee of the Trust and any Person in which any Trustee, officer or agent is
directly or indirectly interested or with which he is directly or indirectly connected) as agents, representatives, employees, or independent contractors (including without limitation real estate
advisors, investment advisors, transfer agents, registrars, underwriters, accountants, attorneys at law, real estate agents, managers, appraisers, brokers, architects, engineers, construction
managers, general contractors or otherwise) in one or more capacities, and to pay compensation from the Trust for services in as many capacities as such Person may be so engaged or employed; and to
delegate any of the powers and duties of the Trustees to any one or more Trustees, agents, representatives, officers, employees, independent contractors or other Persons; provided, however, that no
such delegation shall be made to an Affiliate of the Advisor, except with the approval of a majority of the Independent Trustees;
(o)
to
determine or cause to be determined from time to time the value of all or any part of the Trust Estate and
of any services, Securities, property or other consideration to be furnished to or acquired by the Trust, and from time to time to revalue or cause to be revalued all or any part of the Trust Estate
in accordance with such appraisals or other information as are, in the Trustees' sole judgment, necessary and/or satisfactory;
(p)
to
collect, sue for and receive all sums of money coming due to the Trust, and to engage in, intervene in,
prosecute, join, defend, compromise, abandon or adjust, by arbitration or otherwise, any actions, suits, proceedings, disputes, claims, controversies, demands or other litigation relating to the
Trust, the Trust Estate or the Trust's affairs, to enter into agreements therefor, whether or not any suit is commenced or claim accrued or asserted and, in advance of any controversy, to enter into
agreements regarding arbitration, adjudication or settlement thereof;
(q)
to
renew, modify, release, compromise, extend, consolidate or cancel, in whole or in part, any obligation to or
of the Trust or participate in any reorganization of obligors to the Trust;
(r)
to
self-insure or to purchase and pay for out of the Trust Estate insurance contracts and policies, including
contracts of indemnity, insuring the Trust Estate against any and all risks and insuring the Trust and/or all or any of the Trustees, the Shareholders, or the officers, employees or agents of the
Trust against any and all claims and liabilities of every nature asserted by any Person arising by reason of any action alleged to have been taken or omitted by the Trust or by the
Trustees, Shareholders, officers, employees or agents, whether or not the Trust would have the power to indemnify such Person or Persons against any such claim or
liability;
(s)
to
cause legal title to any of the Trust Estate to be held by and/or in the name of the Trustees, or, except as
prohibited by law, by and/or in the name of the Trust or one or more of the Trustees or any other Person, on such terms, in such manner and with such powers in such Person as the Trustees may
determine, and with or without disclosure that the Trust or Trustees are interested therein;
(t)
to
adopt a fiscal year for the Trust, and from time to time to change such fiscal year;
A-II-11
(u)
to
adopt and use a seal (but the use of a seal shall not be required for the execution of instruments or
obligations of the Trust;
(v)
to
the extent permitted by law, to indemnify or enter into agreements with respect to indemnification with any
Person with which the Trust has dealings, including without limitation any broker/dealer, investment bank, investment advisor or independent contractor, to such extent as the Trustees shall
determine;
(w)
to
confess judgment against the Trust;
(x)
to
discontinue the operations of the Trust;
(y)
to
repurchase or redeem Shares and other Securities issued by the Trust;
(z)
to
declare and pay dividends or distributions, consisting of cash, property or Securities, to the holders of
Shares of the Trust out of any funds legally available therefor; and
(aa)
to
do all other such acts and things as are incident to the foregoing, and to exercise all
powers which are necessary or useful to carry on the business of the Trust and to carry out the provisions of this Declaration.
3.2
3.3
Bylaws.
The Trustees may make or
adopt and from time to time amend or repeal Bylaws (the "Bylaws") not inconsistent with law or with this Declaration, containing provisions relating to the business of the Trust and the conduct of its
affairs and in such Bylaws may define the duties of the officers, employees and agents of the Trust.
ARTICLE IV
ADVISOR
4.1
Employment of
Advisor.
The Trustees are responsible for the general policies of the Trust and for the general supervision of the business
of the Trust conducted by all officers, agents, employees, advisors, managers or independent contractors of the Trust. However, the Trustees are not and shall not be required personally to conduct the
business of the Trust, and, consistent with their ultimate responsibility as stated above, the Trustees shall have the power to appoint, employ or contract with any Person (including one or more of
themselves or any corporation, partnership, or trust in which one or more of them may be directors, officers, stockholders, partners or trustees) as the Trustees may deem necessary or proper for the
transaction of the business of the Trust. The Trustees may therefore employ or contract with such Person (herein referred to as the "Advisor") and, consistent with their ultimate responsibility as set
forth in this Section 4.1, the Trustees may grant or delegate such authority to the Advisor as the Trustees may in their sole discretion deem necessary or desirable without regard to whether
such authority is normally granted or delegated by trustees. The Advisor shall be required to use its best efforts to supervise the operation of the Trust in a manner consistent with the investment
policies and objectives of the Trust. Subject to the provisions of Sections 4.2 and 7.8 hereof, the Trustees shall have the power to determine the terms and compensation of the Advisor or any
other Person whom they may employ or with whom they may contract for advisory services. The Trustees may
exercise broad discretion in allowing the Advisor to
administer and regulate the operations of the Trust, to act as agent for the Trust, to execute documents on behalf of the Trustees and to make executive decisions which conform to general policies and
general principles previously established by the Trustees.
4.2
Term
.
The
Trustees shall not enter into any advisory contract with the Advisor unless such contract has an initial term of not more than one year, provides for annual renewal or extension thereafter, provides
for termination thereof by the Trustees without cause at any time upon sixty (60) days' written notice by the Trustees, by affirmative vote or written consent of
a majority of the Independent Trustees, and provides for termination thereof by the Advisor without cause at any time
A-II-12
after
the expiration of a period specified in such contract (which period shall not be shorter than the original term) without penalty upon sixty (60) days' written notice by
the Advisor. In the event of the termination of an advisory contract, the terminated Advisor shall be required to cooperate with the Trust and take all reasonable steps requested to assist the
Trustees in making an orderly transition of the advisory function. It shall be the duty of the Trustees annually to evaluate the performance of the Advisor, and the Independent Trustees have a
fiduciary duty to the Shareholders to supervise the relationship of the Trust with the Advisor.
4.3
Other Activities of
Advisor.
The Advisor shall not be required to administer the Trust as its sole and exclusive function and may have other
business interests and may engage in other activities similar or in addition to those relating to the Trust, including the rendering of advice or services of any kind to other investors or any other
Persons (including other REITs) and the management of other
investments. The Trustees may request the Advisor to engage in certain other activities which
complement the Trust's investments, and the Advisor may receive compensation or commissions therefor from the Trust or other Persons.
Neither
the Advisor nor (subject to any applicable provisions of Section 7.7) any Affiliate of the Advisor shall be obligated to present any particular
investment opportunities to the Trust, even if such opportunities are of a character such that, if presented to the Trust, they could be taken by the Trust, and, subject to the foregoing, each of them
shall be protected in taking for its own account or recommending to others any such particular investment opportunity.
Notwithstanding
the foregoing, the Advisor shall be required to use its best efforts to present the Trust with a continuing and suitable program consistent with the
investment policies and objectives of the Trust and with investments which are representative of, comparable with and on similar terms as investments being made by Affiliates of the Advisor, or by the
Advisor for its own account or for the account of any Person for whom the Advisor is providing advisory services. In addition, the Advisor shall be required to, upon the request of any Trustee,
promptly furnish the Trustees with such information on a confidential basis as to any investments within the investment policies of the Trust made by Affiliates of the Advisor or by the Advisor for
its own account or for the account of any Person for whom the Advisor is providing advisory services.
4.4
Advisor
Compensation.
The Trustees, including a majority of the Independent Trustees, shall at least annually review generally the
performance of the Advisor in
order to determine whether the compensation which the Trust has contracted to pay to the Advisor is reasonable in relation to the nature and quality of services performed and whether the provisions of
the advisory contract with the Advisor are being carried out. Each such determination shall be based on such of the following and other factors as the Trustees (including the Independent Trustees)
deem appropriate and shall be reflected in the minutes of the meetings of the Trustees:
(a)
the
size of the advisory fee in relation to the size, composition and profitability of the portfolio of the
Trust;
(b)
the
success of the Advisor in generating opportunities that meet the investment objectives of the
Trust;
(c)
the
rates charged to other REITs and to investors other than REITs by advisors performing similar
services;
(d)
additional
revenues realized by the Advisor and its Affiliates through their relationship with the Trust,
including loan administration, underwriting or brokerage commissions and servicing, engineering, inspection and other fees, whether paid by the Trust or by others with whom the Trust does
business;
(e)
the
quality and extent of service and advice furnished by the Advisor;
A-II-13
(f)
the
performance of the investment portfolio of the Trust, including income, conservation or appreciation of
capital, frequency of problem investments and competence in dealing with distress situations; and
(g)
the
quality of the portfolio of the Trust in relationship to any investments generated by the Advisor for its
own account.
4.5
Annual Total Operating
Expenses
.
Each advisory contract with an Advisor shall provide that the Total
Operating Expenses of the Trust shall not exceed in any fiscal year the lower of:
(a)
the
greater of (i) two percent (2%) of the Average Invested Real Estate Assets for such fiscal year or
(ii) twenty-five percent (25%) of the Net Income for such fiscal year (calculated before the deduction therefrom of such Total Operating Expenses); or
(b)
the
lowest of any applicable operating expense limitations that may be imposed by law or regulation in a state
in which any securities of the Trust are or will be qualified for sale or by a national securities exchange on which any securities of the Trust are or may be listed, as such limitations may be
altered from time to time.
The
Independent Trustees shall at least annually determine whether the total fees and expenses of the Trust are reasonable in light of the investment experience of the
Trust, its Net Assets, its Net Income and the fees and expenses of comparable REITs. Each such determination shall be reflected in the minutes of meetings of the Trustees.
Within
sixty (60) days after the end of any fiscal quarter of the Trust ending on or after December 31, 1987 for which Total Operating Expenses (for the
twelve months then ended) exceed either of the expense limitations provided in subparagraph (a) of this Section 4.5, the Trust shall send to the Shareholders a written disclosure of such
fact, together with an explanation of the factors, if any, which the Trustees (including a majority of the Independent Trustees) have concluded were sufficiently unanticipated, unusual or nonrecurring
to justify such higher Total Operating Expenses.
Each
advisory contract with the Advisor shall provide that in the event that the Total Operating Expenses exceed any of the limitations provided in this
Section 4.5, then the Advisor shall refund to the Trust the amount by which the aggregate annual Total Operating Expenses paid or incurred by the Trust exceed the limitations herein provided;
provided, however, that with respect to the limitations provided in subparagraph (a) of this Section 4.5, only so much of such excess need be refunded as the Trustees, including a
majority of the Independent Trustees, shall have found to be unjustified as provided above.
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ARTICLE V
INVESTMENT POLICY AND POLICIES WITH RESPECT TO CERTAIN
DISTRIBUTIONS TO SHAREHOLDERS
5.1
Statement of
Policy.
It shall be the general objectives of the Trust (i) to provide current income for distribution to
Shareholders through investments in income-producing rehabilitation, health care and related facilities and other real estate investments, (ii) to provide Shareholders with the opportunity for
additional returns through participation in any increases in the operating revenues of investment properties, (iii) to provide Shareholders with the opportunity to realize income from
investments in income-producing properties to be financed by the issuance of additional Shares or debt, (iv) to provide Shareholders with the opportunity to realize capital growth resulting
from appreciation, if any, in the residual value of investment properties and (v) to preserve and protect Shareholders' capital. These general objectives shall be pursued in a manner consistent
with the investment policies specified in the remainder of this Section 5.1.
While
the Trustees are authorized pursuant to Article III to invest the Trust Estate in a wide variety of investments, it shall be the policy of the Trustees to
invest the initial portion of the Trust Estate primarily in income-producing rehabilitation, health care and related facilities including, without limitation, acute care and rehabilitation hospitals,
skilled nursing and intermediate care facilities, retirement centers, congregate living facilities, medical office buildings, health care related hotels, outpatient rehabilitation centers, community
re-entry/re-training facilities and facilities housing other health care and related products and services.
The
Trust may make secured borrowings to make permitted additional Real Estate Investments and secured or unsecured borrowings for normal working capital needs,
including the repair and
maintenance of properties in which it has invested, tenant improvements and leasing commissions. The Trust may make such borrowings from third parties or, subject to approval by a majority of the
Independent Trustees, from Affiliates of the Advisor. Interest and other financing charges or fees to be paid on loans from such Affiliates will not exceed the interest and other financing charges or
fees which would be charged by third party financing institutions on comparable loans for the same purpose in the same geographic area.
To
the extent that the Trust Estate has assets not otherwise invested in accordance with this Section 5.1, it shall be the policy of the Trustees to invest such
assets in (i) U.S. government Securities; (ii) Securities of U.S. government agencies; (iii) bankers' acceptances; (iv) bank certificates of deposit;
(v) interest-bearing deposits in commercial banks; (vi) participations in pools of mortgages or bonds and notes (such as Federal Home Loan Mortgage Corporation participation sale
certificates, Government National Mortgage Association modified pass-through certificates and Federal National Mortgage Association bonds and notes; (vii) bank repurchase agreements covering
the Securities of the United States or agencies or instrumentalities thereof; and (viii) other short-term investments consistent with the Trust's intention to qualify as a REIT under the
Internal Revenue Code.
It
shall be the
The fundamental investment
policy of the
Trustees
Trust is
to make investments in such
a
manner as to comply with the
requirements
REIT Provisions
of the Internal Revenue Code
and with the requirements of Title 8
of the Corporations and Associations Article of the Annotated Code of Maryland
with respect to the composition of the
Trust's
investments and
the derivation of
the
its
income
of a real estate investment trust as defined
.
The Trustees shall use their reasonable best efforts to carry out this fundamental investment policy and to conduct the affairs of the Trust in such a manner as to continue to qualify the Trust for
the tax treatment provided
in the REIT Provisions of the Internal Revenue Code;
provided,
however
, that no Trustee, officer, employee or agent of the Trust shall be liable
for any act or omission resulting in the loss of tax benefits under
the Internal Revenue Code
, except for that arising from his own willful misfeasance, bad faith, gross negligence or reckless disregard of duty.
.
The Board of Trustees may change from time to time, by resolution or in the Bylaws
A-II-15
of
the Trust, such investment policies as it determines to be in the best interest of the Trust, including prohibitions or restrictions upon certain types of investments.
5.2
Prohibited Investments and
Activities
.
The Trustees shall not engage in any of the following investment
practices or activities:
(a)
investing
in any junior mortgage loan unless by appraisal or other method the Independent Trustees determine
that (a) capital invested in any such loan is adequately secured on the basis of the equity of
the borrower in the property underlying such investment and the ability of the borrower to repay the mortgage loan or (b) such loan is a financing device entered into by the Trust to establish
the priority of its capital investment over the capital invested by others investing with the Trust in a real estate project;
(b)
investing
in commodities or commodity futures contracts (other than interest rate futures, when used solely for
hedging purposes);
(c)
investing
more than 1% of the Trust's total assets in real estate contracts of sale unless such contracts of
sale are in recordable form and appropriately recorded in the chain of title;
(d)
[reserved];
(e)
granting
warrants or options to purchase shares of beneficial interest of the Trust unless such warrants or
options (i) are issued at an exercise price greater than or equal to the fair market value of the shares of beneficial interest of the Trust on the date of the grant and for consideration
(including services) that in the judgment of a majority of the Independent Trustees has a market value at least equal to the value of the warrant or option on the date of grant, (ii) are
exercisable within ten years from the date of grant and (iii) when aggregated with all other outstanding options and warrants are less than 10% of the value of the outstanding shares of
beneficial interest of the Trust on the date of grant; provided that the terms of warrants or options that are issued ratably to all holders of shares of beneficial interest or as part of a financing
arrangement need not meet the above restrictions;
(f)
holding
equity investments in unimproved, non-income producing real property, except such properties as are
currently undergoing development or are presently intended to be developed within one year, together with mortgage loans on such property (other than first mortgage development loans), aggregating to
more than 10% of the Trust's assets;
(g)
engaging
in trading (as compared with investment activities), or engaging in the underwriting of or
distributing as agent of the Securities issued by others;
(h)
making
secured and unsecured borrowings which in the aggregate exceed 300% of the Net Assets of the Trust,
unless approved by a majority of the Independent Trustees, and disclosed to shareholders;
(i)
undertaking
any activity that would disqualify the Trust as a real estate investment trust under the provisions
of the Code as long as a real estate investment trust is accorded substantially the same treatment or benefits under the United States tax laws from time to time in effect as under
Sections 856-860 of the Code at the date of adoption of the Trust's Declaration of Trust; and
(j)
using
or applying land for farming, agriculture, horticulture or similar purposes in violation of
Section 8-302(b) of the Corporations and Associations Article of the Annotated Code of Maryland.
5.3
Appraisals.
If
the Trustees shall at any time purchase Real Property, or interests therein, the consideration paid therefor shall generally be based upon the fair market value thereof as
determined
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by
an appraisal by a person who is not an Affiliate of the Trust or the Advisor and who is, in the sole judgment of the Trustees, properly qualified to make such a
determination.
5.4
Change in Investment
Policies.
The investment policies set out in this Article V may be changed by a vote of a majority of the Trustees,
including a majority of the Independent Trustees.
ARTICLE V
ARTICLE VI
THE SHARES AND SHAREHOLDERS
5.1
6.1
Description of
Shares.
The interest of the Shareholders shall be divided into 400,000,000 shares of beneficial interest which shall be known collectively as "Shares," all
of which shall be validly issued, fully paid and non-assessable by the Trust upon receipt of full consideration for which they have been issued or without additional consideration if issued by way of
share dividend or share split. There shall be two classes of Shares: 50,000,000 shares of one such class shall be known as "Preferred Shares" and 350,000,000 shares of the other such class shall be
known as "Common Shares," each such class having $0.01 par value per share. Each holder of Shares shall as a result thereof be deemed to have agreed to and be bound by the terms of this Declaration.
The Shares may be issued for such consideration as the Trustees shall deem advisable. The Trustees are hereby expressly authorized at any time, and from time to time, to provide for issuance of Shares
upon such terms and conditions and pursuant to such agreements as the Trustees may determine. The Trustees are hereby expressly authorized at any time, and from time to time, without Shareholder
approval, to amend this Declaration to increase or decrease the aggregate number of Shares or the number of Shares of any class that the Trust has authority to issue.
The
Trustees are hereby expressly authorized at any time, and from time to time, without Shareholder approval, to set (or change if such class has previously been established) the par
value, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms, or conditions of redemption, of
the
any unissued
Preferred Shares, and such Preferred Shares may further be divided by the Trustees into classes or series.
Except
as otherwise determined by the Trustees with respect to any class or series of Preferred Shares, the holders of Shares shall be entitled to the rights and powers hereinafter set
forth in this Section
6.1
5.1
: The holders of Shares shall be entitled to receive, when and as declared from time to time by the
Trustees out of any funds legally available for the purpose, such dividends or distributions as may be declared from time to time by the Trustees. In the event of the termination of the Trust pursuant
to Section 8.1 or otherwise, or upon the distribution of its assets, the assets of the Trust available for payment and distribution to Shareholders shall be distributed ratably among the
holders of Shares at the time outstanding in accordance with Section 8.2. All Shares shall have equal non-cumulative voting rights at the rate of one vote per Share, and equal dividend,
distribution, liquidation and other rights, and shall have no preference, conversion, exchange, sinking fund or redemption rights. Absent a contrary written agreement of the Trust authorized by the
Trustees, and notwithstanding any other determination by the Trustees with respect to any class or series of Preferred Shares, no holder of Shares or Preferred Shares shall be entitled as a matter of
right to subscribe for or purchase any part of any new or additional issue of Shares of any class whatsoever of the Trust, or of securities convertible into any shares of any class whatsoever of the
Trust, whether now or hereafter authorized and whether issued for cash or other consideration or by way of dividend.
Notwithstanding
any other provision of this Declaration, the Board of Trustees may cause the outstanding Common Shares to be reverse split in order to meet listing requirements of the
principal securities exchange on which the Common Shares are listed for trading or for any other purpose the Board of Trustees by unanimous vote determines to be in the best interest of the Trust. A
reverse split may be accomplished by any lawful means, including by
any means available to a Maryland business corporation or by
redeeming Shares pro rata or issuing new
Shares in exchange for outstanding Shares
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in
a manner so that the par value of the Common Shares are adjusted pro rata;
e.g.
, if two outstanding Common Shares are exchanged for one new Common
Share, then the par value of the new Shares shall be two times the current par value.
5.2
6.2
Certificates.
At
the election of the Trust, ownership of Shares may be evidenced by certificates in such form as the Trustees shall from time to time approve, specifying the number of Shares of the applicable class
held by such Shareholder. Subject to
Sections 6.6 and 6.14(c)
Section 5.5
hereof, such certificates shall be treated as
negotiable and title thereto and to the Shares represented thereby shall be transferred by delivery thereof to the same extent in all respects as
a stock certificate, and the Shares represented thereby, of a Maryland business corporation. Unless otherwise determined by the Trustees, such certificates shall be signed by
the
Chairman, if any, and the President
an authorized officer of the Trust
and shall be countersigned by a transfer agent, and registered by a registrar if
any, and such signatures may be facsimile signatures in accordance with Section 3.2(d) hereof. There shall be filed with each transfer agent a copy of the form of certificate so approved by the
Trustees, certified by the Chairman, President, or Secretary, and such form shall continue to be used unless and until the Trustees approve some other form.
In
furtherance of the provisions of
Sections 6.1 and 6.14(c)
Section 5.1
hereof, each certificate
evidencing Shares shall contain a legend imprinted thereon to substantially the following effect or such other legend as the Trustees may from time to time adopt:
REFERENCE
IS MADE TO THE DECLARATION OF TRUST OF THE TRUST FOR A STATEMENT OF ALL THE DESIGNATIONS, PREFERENCES, LIMITATIONS, AND RELATIVE RIGHTS OF EACH CLASS OR SERIES OF SHARES THAT THE TRUST IS
AUTHORIZED TO ISSUE, THE VARIATIONS IN THE RELATIVE RIGHTS AND PREFERENCES OF ANY PREFERRED OR SPECIAL CLASS OF SHARES IN SERIES, TO THE EXTENT THEY HAVE BEEN FIXED AND DETERMINED, AND THE AUTHORITY
OF THE TRUSTEES TO FIX AND DETERMINE THE RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES. ANY SUCH STATEMENT SHALL BE FURNISHED WITHOUT CHARGE ON REQUEST TO THE TRUST AT ITS PRINCIPAL PLACE OF
BUSINESS OR REGISTERED OFFICE. IF NECESSARY TO EFFECT COMPLIANCE BY THE TRUST WITH REQUIREMENTS OF THE INTERNAL REVENUE CODE RELATING TO REAL ESTATE INVESTMENT TRUSTS, THE SHARES EVIDENCED BY THIS
CERTIFICATE MAY BE REDEEMED BY THE TRUST AND/OR THE TRANSFER THEREOF MAY BE PROHIBITED ALL UPON THE TERMS AND CONDITIONS SET FORTH IN THE DECLARATION OF TRUST. THE TRUST WILL FURNISH A COPY OF SUCH
TERMS AND CONDITIONS TO THE REGISTERED HOLDER OF THIS CERTIFICATE UPON REQUEST AND WITHOUT CHARGE.
5.3
6.3
Fractional
Shares.
In connection with any issuance of Shares, the Trustees may issue fractional Shares or may adopt provisions for the issuance of scrip including without
limitation, the time within which any such scrip must be surrendered for exchange into full Shares and the rights, if any, of holders of scrip upon the expiration of the time so fixed, the rights, if
any, to receive proportional distributions, and the rights, if any, to redeem scrip for cash, or the Trustees may in their discretion, or if they see fit at the option of, each holder, provide in lieu
of scrip for the adjustment of the fractions in cash. The provisions of Section
6.2
5.2
hereof relative to certificates for Shares
shall apply so far as applicable to such scrip, except that such scrip may in the discretion of the Trustees be signed by a transfer agent alone.
6.4
Legal Ownership of Trust
Estate.
The legal ownership of the Trust Estate and the right to conduct the business of the Trust are vested exclusively in
the Trustees (subject to Section 3.2(s)), and the Shareholders shall have no interest therein (other than beneficial interest in the Trust conferred by
A-II-18
their
Shares issued hereunder) and they shall have no right to compel any partition, division, dividend or distribution of the Trust or any of the Trust Estate.
5.4
6.5
Shares Deemed Personal
Property.
The Shares shall be personal property and shall confer upon the holders thereof only the interest and rights specifically set forth or provided for in
this Declaration. The death, insolvency or incapacity of a Shareholder shall not dissolve or terminate the Trust or affect its continuity nor give his legal representative any rights whatsoever,
whether against or in respect of other Shareholders, the Trustees or the Trust Estate or otherwise, except the sole right to demand and, subject to the provisions of this Declaration, the Bylaws and
any requirements of law, to receive a new certificate for Shares registered in the name of such legal representative, in exchange for the certificate held by such Shareholder.
5.5
6.6
Share Record; Issuance and Transferability
of Shares.
Records shall be kept by or on behalf of and under the direction of the Trustees, which shall contain the names and addresses of the Shareholders, the
number of Shares held by them respectively, and the numbers of the certificates representing the Shares, and in which there shall be recorded all transfers of Shares. The Trust, the Trustees and the
officers, employees and agents of the Trust shall be entitled to deem the Persons in whose names certificates are registered on the records of the Trust to be the absolute owners of the Shares
represented thereby for all purposes of the Trust; but nothing herein shall be deemed to preclude the Trustees or officers, employees or agents of the Trust from inquiring as to the actual ownership
of Shares. Until a transfer is duly effected on the records of the Trust, the Trustees shall not be affected by any notice of such transfer, either actual or constructive.
Shares
shall be transferable on the records of the Trust only by the record holder thereof or by his agent thereunto duly authorized in writing upon delivery to the Trustees or a
transfer agent of the certificate or certificates therefor, properly endorsed or accompanied by duly executed instruments of transfer and accompanied by all necessary documentary stamps together with
such evidence of the genuineness of each such endorsement, execution or authorization and of other matters as may reasonably be required by the Trustees or such transfer agent. Upon such delivery, the
transfer shall be recorded in the records of the Trust and a new certificate for the Shares so transferred shall be issued to the transferee and in case of a transfer of only a part of the Shares
represented by any certificate, a new certificate for the balance shall be issued to the transferor. Any Person becoming entitled to any Shares in consequence of the death of a Shareholder or
otherwise by operation of law shall be recorded as the holder of such Shares and shall receive a new certificate therefor but only upon delivery to the Trustees or a transfer agent of instruments and
other evidence required by the Trustees or the transfer agent to demonstrate such entitlement, the existing certificate for such Shares and such releases from applicable governmental authorities as
may be required by the Trustees or transfer agent. In case of the loss, mutilation or destruction of any certificate for shares, the Trustees may issue or cause to be issued a replacement certificate
on such terms and subject to such rules and regulations as
the Trustees may from time to time prescribe. Nothing in this Declaration shall impose upon the Trustees or a transfer agent a duty, or limit their rights, to inquire into adverse claims.
5.6
6.7
Dividends or Distributions to
Shareholders.
Subject to Section 5.1, the
The
Trustees may from time to time declare and
pay to Shareholders such dividends or distributions in cash, property or assets of the Trust or Securities issued by the Trust, out of current or accumulated income, capital, capital gains, principal,
interest, surplus, proceeds from the increase or financing or refinancing of Trust obligations, or from the sale of portions of the Trust Estate or from any other source as the Trustees in their
discretion shall determine. Shareholders shall have no right to any dividend or distribution unless and until declared by the Trustees. The Trustees shall furnish the Shareholders with a statement in
writing advising as to the source of the funds so distributed not later than ninety (90) days after the close of the fiscal year in which the distribution was made.
A-II-19
5.7
6.8
Transfer Agent, Dividend Disbursing Agent
and Registrar.
The Trustees shall have power to employ one or more transfer agents, dividend disbursing agents and registrars
(including the
Advisor or its Affiliates)
and to authorize them on behalf of the Trust to keep records to hold and to disburse any dividends or distributions and to have and perform, in respect
of all original issues and transfers of Shares, dividends and distributions and reports and communications to Shareholders, the powers and duties usually had and performed by transfer agents, dividend
disbursing agents and registrars of a Maryland business corporation.
5.8
6.9
Shareholders'
Meetings.
There shall be an annual meeting of the Shareholders, at such time and place as shall be determined by or in the manner prescribed in the Bylaws, at
which the Trustees shall be elected and any other proper business may be conducted.
The Annual Meeting of Shareholders shall be held no fewer than 30 days after delivery to
the Shareholders of the Annual Report and within six (6) months after the end of each fiscal year, commencing with the fiscal year ending December 31, 1986.
Special
meetings of Shareholders may be called by the chief executive officer of the Trust or by a majority of the
Trustees or of the Independent
Trustees and shall be
called by the chief executive officer of the Trust upon the written request of Shareholders holding in the aggregate not less than ten percent (10%) of the total votes authorized to be cast by the
outstanding Shares of the Trust entitled to vote at such meeting in the manner provided in the Bylaws. If there shall be no Trustees, the officers of the Trust shall promptly call a special meeting of
the Shareholders entitled to vote for the election of successor Trustees. Notice of any special meeting shall state the purposes of the meeting.
Any meeting may be adjourned and
reconvened as the Trustees determine or as
provided in the Bylaws. At any reconvened session of the meeting at which there shall be a quorum, any business may be
transacted at the meeting as originally noticed.
5.9
Quorum.
The holders of Shares entitled to vote at the meeting representing a
majority of the total number of votes authorized to be cast by Shares then outstanding and entitled to vote on any question present in person or by proxy shall constitute a quorum at any such meeting
for action on such question.
Any meeting may be adjourned from time to time by a majority of the votes properly cast upon the question, without regard to class, whether or not a
quorum is present, and, except as otherwise provided in the Bylaws, the meeting may be reconvened without further notice. At any reconvened session of the meeting at which there shall be a quorum, any
business may be transacted at the meeting as originally noticed.
5.10
Voting Rights of Shareholders.
(a)
Subject
to the provisions of any class or series of Shares then outstanding or as otherwise required by law, the Shareholders
shall be entitled to vote only on the following matters: (i) election of Trustees as provided in Section 5.10(c) and the removal of Trustees as provided in Section 2.3;
(ii) amendment of this Declaration as provided in Section 8.3; (iii) termination of the Trust as provided in Section 8.1 or 8.5; (iv) the merger or consolidation of
the Trust or a share exchange; provided that the Shareholders shall not be entitled to vote on a merger of the Trust that may be approved pursuant to the provisions of the Maryland REIT Law by a
majority of the entire Board of Trustees without a vote of the Shareholders and, provided further that, if a shareholder vote is required pursuant to the provisions of the Maryland REIT Law, such
merger, consolidation or share exchange shall be approved by the affirmative vote of the holders of not less than a majority of all the Shares then outstanding and entitled to vote thereon
(notwithstanding the higher vote required by Maryland REIT Law), (v) the transfer (as such term is defined in the Maryland General Corporation Law) of all or substantially all of the Trust
Estate; provided that such transfer shall be approved by the affirmative vote of the holders of not less than a majority of all the Shares then outstanding and entitled to vote thereon; and provided
further that the Trust shall be permitted to transfer or otherwise dispose of all or substantially all of the Trust Estate
A-II-20
without
the approval of the Shareholders by means of a distribution to Shareholders or in a disposition, immediately following which the Trust continues to own, directly or
indirectly,
substantially all of the ownership interests in the transferees of all or substantially all of the Trust Estate, (vi) consolidation of the Trust with
one or more other entities into a new entity, provided that such consolidation shall be approved by the affirmative vote of the holders of not less than a majority of all the Shares then outstanding
and entitled to vote thereon, (vii) such other matters with respect to which the Board of Trustees has adopted a resolution declaring advisable or recommending a proposal and directing that the
matter be submitted to the Shareholders for consideration and (viii) such other matters as may be properly brought before a meeting by a Shareholder pursuant to the Bylaws.
(b)
Except
as otherwise clearly indicated in this Declaration or the Bylaws, whenever any action is to be taken by the
Shareholders, it
Any matters for which the proportion of votes is not specified in
Section 5.10(a) or 5.10(e) hereof
shall be authorized by the affirmative vote of the holders of Shares representing a majority of the total number of votes
authorized to be
cast by
shares
Shares
then outstanding and entitled to vote
thereon
, unless a different vote is required by law, this Declaration, or the Bylaws of the Trust
.
(c)
Subject
to the provisions of any class or series of Shares then outstanding or as otherwise required by law, each outstanding
Share entitled to vote, regardless of class, shall be entitled to one vote on each matter presented to Shareholders.
(d)
With
the exception of the election and removal of Trustees in accordance with this Declaration and the Bylaws of the Trust and
any matter as may be properly brought before a meeting by a Shareholder pursuant to the Bylaws and applicable laws, no action that would bind the Trust and the Trustees may be taken without the prior
recommendation of the Trustees. Except with respect to the foregoing matters, no action taken by the Shareholders at any meeting shall in any way bind the Board of Trustees.
(e)
At
all elections of Trustees, voting by Shareholders shall be conducted under the non-cumulative method and the election of Trustees shall
be by the affirmative vote of the holders of Shares representing a majority of the total number of votes
authorized to be
cast by shares then outstanding and
entitled to vote thereon; provided, however, the election of a
Managing Trustee or an Independent
Trustee in
an
uncontested
a contested
election, which is an election in which the number of nominees for election
equals (or
is
less
greater
than
)
the number to be elected at the meeting, shall be by the affirmative vote
of Shares representing a
majority
plurality
of the total number of
Share
share
votes cast
by Shares then outstanding and entitled to vote thereon
.
5.11
Written Consent of Shareholders.
Whenever Shareholders are required or
permitted to take any action (unless a vote at a meeting is specifically required as in
Sections
Section
8.1
, 8.3
and 8.5
), such action may be taken without a meeting by written consents setting forth the action so taken, signed by the holders
, as of any record date established
for such action in accordance with the Bylaws,
of a majority (or such higher percentage as may be specified
elsewhere
by applicable
law or
in this Declaration) of the total number of votes authorized to be cast by shares then outstanding and entitled to vote thereon
deliver a consent setting forth such
action in writing or by electronic transmission in accordance with any procedures set forth in the Bylaws
.
5.12
6.10
Proxies.
Whenever the vote or consent of a Shareholder entitled to vote is required or permitted under this
Declaration, such vote or consent may be given either directly by such Shareholder or by a proxy in the form prescribed in, and subject to the provisions of, the Bylaws. The Trustees may solicit such
proxies from the Shareholders or any of them entitled to vote in any matter requiring or permitting the Shareholders' vote or consent.
A-II-21
6.11
[Reserved].
5.13
6.12
Fixing Record
Date.
The Bylaws may provide for fixing or, in the absence of such provision, the Trustees may fix, in advance, a date as the record date for determining the
Shareholders entitled to notice of or to vote at any meeting of Shareholders or to express consent to any proposal without a meeting or for the purpose of determining Shareholders entitled to receive
payment of any dividend or distribution (whether before or after termination of the Trust)
or any Annual Report or other communication from the Trustees
, or for
any other purpose.
5.14
6.13
Notice to Shareholders.
Any notice of meeting or other notice, communication or report to any Shareholder shall be
deemed duly delivered to such Shareholder when such notice, communication or report is deposited, with postage thereon prepaid, in the United States mail, addressed to such Shareholder at his address
as it appears on the records of the Trust or is delivered in person to such Shareholder.
ARTICLE VI
RESTRICTIONS ON TRANSFER AND OWNERSHIP OF SHARES
6.1
Definitions.
For
the purpose of this Article VI, the following terms shall have the following meanings:
"Beneficial
Ownership" shall mean ownership of Shares by a Person, whether the interest in Shares is held directly or indirectly (including by a nominee), and shall
include, but not be limited to, interests that would be treated as owned through the application of Section 544 of the Internal Revenue Code, as modified by Sections 856(h)(1)(B) and
856(h)(3) of the Internal Revenue Code. The terms "Beneficial Owner", "Beneficially Owns" and "Beneficially Owned" shall have the correlative meanings.
"Charitable
Beneficiary" shall mean one or more beneficiaries of the Charitable Trust as determined pursuant to Section 6.3(g), provided that each such organization
shall be described in Sections 501(c)(3), 170(b)(1)(A) (other than clause (vii) or (viii) thereof) and 170(c)(2) of the Internal Revenue Code and
contributions to each such organization shall be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Internal Revenue Code.
"Charitable
Trust" shall mean any trust provided for in Sections 6.2(a)(ii) and 6.3(a).
"Charitable
Trustee" shall mean each Person, unaffiliated with the Trust and a Prohibited Owner, that is appointed by the Trust from time to time to serve as a trustee of a
Charitable Trust as provided by Section 6.3(a).
"Common
Shares" shall mean the common
shares of beneficial interest designated as such in the Declaration.
6.14
Shareholders'
Disclosure:
Trustees' Right to Refuse to Transfer Shares; Limitation on Holdings; Redemption of Shares.
(a)
The
Shareholders shall upon demand disclose to the Trustees in writing such information with respect to direct
and indirect ownership of the Shares as the Trustees deem necessary or appropriate to comply with the REIT provisions of the Internal Revenue Code or to comply with the requirements of any taxing
authority or governmental agency.
(b)
Whenever
in good faith the Trustees deem it reasonably necessary to protect the status of the Trust as a REIT
they may require a statement or affidavit from each Shareholder or proposed transferee of Shares setting forth the number of Shares already owned, directly or indirectly, by him and any related Person
specified in the form prescribed by the Trustees for that purpose. If, in the opinion of the Trustees, which shall be binding upon any proposed transferee of Shares, any proposed transfer would
jeopardize the status of the Trust as a REIT, the Trustees shall have the right, but not the duty, to refuse to permit such transfer.
A-II-22
(c)
The
Trustees, by notice to the holder thereof, may purchase any or all Shares that have been transferred
pursuant to a transfer which, in the opinion of the Trustees, would jeopardize the status of the Trust as a REIT. Without limiting the generality of the foregoing, as a condition to the transfer
and/or registration of transfer of any Shares which could result in direct or indirect ownership (as hereafter defined) of Shares representing more than 9.8% in value of the total Shares outstanding
(the "Excess Shares") becoming concentrated in the hands of one owner other than an Excepted Person, such potential owner shall file with the Trust the statement or affidavit described in
subsection (b) of this Section 6.14 no later than the fifteenth day prior to any transfer, registration of transfer or transaction which, if consummated, would result in such ownership.
The Trustees shall have the power
(i)
by
lot or other means deemed equitable by them to call for the purchase from the beneficial owner or the
Shareholder of such Excess Shares, and (ii) to refuse to transfer or issue Shares to any Person whose acquisition of such Shares would, in the opinion of the Trustees, result in the direct or
indirect beneficial ownership of any Excess Shares by a person other than any of the Excepted Persons. The purchase price for any Excess Shares shall be equal to the fair market value of the Shares
reflected in the closing sale price for the Shares, if then listed on a national securities exchange, or such price for the Shares on the principal exchange if then listed on more than one national
securities exchange, or if the Shares are not then listed on a national securities exchange, the latest bid quotation for the Shares if then traded over-the-counter, on the last trading day
immediately preceding the day on which notices of such acquisition are sent, or, if no such closing sales prices or quotations are available, then the purchase price shall be equal to the net asset
value of such Shares as determined by the Trustees in accordance with the provisions of applicable law. Prompt payment of the purchase price shall be made in cash by the Trust in such manner as may be
determined by the Trustees. From and after the date fixed for purchase by the Trustees, and so long as payment of the purchase price for the Shares to be so redeemed shall have been made or duly
provided for, the holder of any Excess Shares so called for purchase shall cease to be entitled to distributions, voting rights and other benefits with respect to such Shares, excepting only the right
to payment of the purchase price fixed as aforesaid. Any transfer of Shares, options, warrants or other securities convertible into Shares that would create a direct or indirect beneficial owner of
Excess Shares other than any of the Excepted Persons shall be deemed void ab initio and the intended transferee shall be deemed never to have an interest therein. If the foregoing provision is
determined to be void or invalid by virtue of any legal decision, statute, rule or regulation, then the transferee of such Shares, options, warrants or other securities convertible into
Shares shall be deemed, at the option of the Trust, to have acted as agent on behalf of the Trust in acquiring such Shares and to hold such Shares on behalf of the Trust.
The
following persons are "Excepted Persons": (i) the Advisor, (ii) persons to whom the Advisor's Share ownership is attributed or whose Share ownership is attributed
to the Advisor, or (iii) other persons approved by the Trustees, at their option and in their sole discretion, provided only that such approval shall not be granted to any person whose
ownership of more than 9.8% in value of the total Shares outstanding would result, directly, indirectly or as a result of attribution of ownership, in termination of the status of the Trust as a
REIT.
(d)
Notwithstanding
any other provision in this Declaration of Trust or the Bylaws, the foregoing provision may not
be amended or repealed without the affirmative vote of 75% of the Shares entitled to vote.
(e)
Notwithstanding
any other provision of this Declaration of Trust to the contrary, any purported acquisition of
Shares of the Trust (whether such purported acquisition results from the direct or indirect acquisition or ownership (as hereafter defined) of Shares) which would result in
A-II-23
the
disqualification of the Trust as a REIT shall be null and void. Any such Shares may be treated by the Trustees in the manner prescribed for Excess Shares in
subsection (c) of this Section 6.14.
(f)
Nothing
contained in this Section 6.14 or in any other provision of this Declaration of Trust shall
limit the authority of the Trustees to take such other action as they deem necessary or advisable to protect the Trust and the interests of the Shareholders by preservation of the Trust's status as a
REIT.
(g)
If
any provision of this Section 6.14 or any application of any such provision is determined to be
invalid by any federal or state court having jurisdiction over the issues, the validity of the remaining provision shall not be affected and other applications of such provision shall be affected only
to the extent necessary to comply with the determination of such court. To the extent this Section 6.14 may be inconsistent with any other provision of this Declaration of Trust, this
Section 6.14 shall be controlling.
(h)
It
shall be the policy of the Trustees to consult with the appropriate officials of any stock exchange on which
the relevant Shares of the Trust are listed as far as reasonably possible in advance of the final
exercise (at any time when the Shares are listed on such exchange) of any powers granted by subsections (b) or (c) of this Section 6.14.
(i)
For
purposes of this Declaration of Trust, Shares not owned directly shall be deemed to be owned indirectly by
a person if that person or a group of which he is a member would be the beneficial owner of such Shares, as defined as of September 1, 1986 in Rule 13d-3 under the Securities Exchange
Act of 1934 and/or would be considered to own such Shares by reason of the attribution rules of Section 544 or
"Constructive Ownership" shall mean ownership of
Shares by a Person, whether the interest in Shares is held directly or indirectly (including by a nominee), and shall include any interests that would be treated as owned through the application of
Section 318(a) of the Internal Revenue Code, as modified by
Section 856(d)(5) of the Internal Revenue Code.
The terms "Constructive Owner", "Constructively
Owns" and "Constructively Owned" shall have the correlative meanings.
(j)
The
Trustees may, in their sole discretion, adopt, amend or repeal Bylaws providing additional alternative
measures to enforce the ownership limitations set forth in paragraphs (b) and (c) above, including, without limitation, alternative powers to those set forth in paragraph (c)(i)
above.
"Excepted
Holder" shall mean a shareholder of the Trust for whom an Excepted Holder Limit is created by the Board of Trustees pursuant to
Section 6.2(e).
"Excepted
Holder Limit" shall mean, provided that and only so long as the affected Excepted Holder complies with all of the requirements established by the Board of
Trustees pursuant to Section 6.2(e), the percentage limit established by the Board of Trustees.
"Internal
Revenue Code" shall mean the Internal Revenue Code of 1986, as amended.
"Market
Price" with respect to Shares on any date shall mean the last sale price for such Shares, regular way, or, in case no such sale takes place on such day, the average
of the closing bid and asked prices, regular way, for such Shares, in either case as reported on the principal consolidated transaction reporting system with respect to such Shares, or if such Shares
are not listed or admitted to trading on any National Securities Exchange, the last sale price in the over the counter market, or if no trading price is available for such Shares, the fair market
value of such Shares as determined in good faith by the Board of Trustees.
"National
Securities Exchange" means an exchange registered with the SEC under Section 6(a) of the Exchange Act, as amended, supplemented or restated from time to
time, and any successor to such statute.
A-II-24
"Ownership
Limit" shall mean (a) with respect to Common Shares, 9.8% (in value or number of shares, whichever is more restrictive) of the Common Shares outstanding
at the time of determination and (b) with respect to any other class or series of Shares, 9.8% (in value or number of shares, whichever is more restrictive) of the Shares of such class or
series outstanding at the time of determination.
"Person"
shall mean and include individuals, corporations, limited partnerships, general partnerships, joint stock companies or associations, joint ventures, associations,
companies, trusts,
banks, trust companies, land trusts, business trusts and other entities and governments and agencies and political subdivisions thereof and also
includes a group as that term is used for purposes of Section 13(d)(3) of the
Exchange Act.
"Preferred
Shares" shall mean any class or series of preferred shares of beneficial interest designated as such in the Declaration.
"Prohibited
Owner" shall mean any Person who, but for the provisions of Section 6.2(a), would Beneficially Own or Constructively Own Shares in excess of the
Ownership Limit, and if appropriate in the context, shall also mean any Person who would have been the holder of record in the books of the Trust or the Trust's transfer agent of Shares that the
Prohibited Owner would have so owned.
"REIT"
shall mean a "real estate investment trust" within the meaning of Section 856 of the Internal Revenue Code.
"Shares"
shall mean
the shares of beneficial interest of the Trust.
"Transfer"
shall mean any issuance, sale, transfer, gift, assignment, devise or other disposition, as well as any other event (or any agreement to take any such actions or
cause any such events) that causes any Person to acquire Beneficial Ownership or Constructive Ownership of Shares or the right to vote or receive distributions on Shares,
including, without limitation, (a) any change in the capital structure of the Trust which has the effect of increasing the total equity interest of any Person in the Trust, (b) a
change in the relationship between two or more Persons which causes a change in ownership of Shares by application of Section 544 of the Internal Revenue Code, as modified by
Section 856(h) of the Internal Revenue Code, or by application of Section 318(a) of the Internal Revenue Code, as modified by Section 856(d)(5) of the Internal Revenue Code,
(c) the grant or exercise of any option or warrant (or any disposition of any option or warrant, or any event that causes any option or warrant not
theretofore exercisable to become exercisable), pledge, security interest or similar right to acquire Shares, (d) any disposition of any securities or rights convertible into or exchangeable
for Shares or any interest in Shares or any exercise of any such conversion or exchange right, and (e) transfers of interests in other entities that result in changes in Beneficial Ownership or
Constructive Ownership of Shares, in each case, whether voluntary or involuntary, whether owned of record or Beneficially Owned or Constructively Owned, and whether by operation of law or otherwise.
The terms "Transferring" and "Transferred" shall have the correlative meanings.
6.2
6.15 Special Voting Requirements for Certain Business
Combinations
Restrictions on Ownership
.
(a)
The
affirmative vote of the holders of not less than 75% of the Shares then outstanding and entitled to vote
thereon shall be required for the approval or authorization of any "Business Combination" (as hereinafter defined) of the Trust with any "Related Person" (as hereinafter defined). However, such 75%
voting requirement shall not be applicable if: (1) the Board of Trustees by unanimous vote or written consent shall have expressly approved in advance the acquisition of the outstanding Shares
of the Trust that caused the Related Person to become a
Related Person or shall have approved the Business Combination prior to the Related Person involved in
the Business Combination having become a Related Person; or (2) the Business Combination is solely between the Trust and another limited partnership, partnership, trust or corporation, 100% of
the voting securities of which is owned directly or indirectly by the Trust.
A-II-25
(a)
Ownership Limitations
.
(i)
Basic Restrictions
.
(A) No
Person, other than an Excepted Holder, shall Beneficially Own or Constructively Own Shares in excess of the Ownership Limit, (B) no Excepted Holder shall Beneficially Own or Constructively Own
Shares in excess of the Excepted Holder Limit for such Excepted Holder, (C) no Person shall Beneficially Own or Constructively Own Shares to the extent that (i) such Beneficial Ownership
or Constructive Ownership of Shares would result in the Trust being "closely held" within the meaning of Section 856(h) of the Internal Revenue Code (without regard to whether the ownership
interest is held during the last half of a taxable year), or (ii) such Beneficial or Constructive Ownership of Shares would result in the Trust otherwise failing to qualify as a REIT
(including, without limitation, Beneficial Ownership or Constructive Ownership that would result in the Trust owning (actually or Constructively) an interest in a tenant that is described in
Section 856(d)(2)(B) of the Internal Revenue Code if the income derived by the Trust from such tenant would cause the Trust to fail to satisfy any of the gross income requirements of
Section 856(c) of the Internal Revenue Code), or (D) subject to Section 6.5, notwithstanding any other provisions contained herein, any Transfer of Shares (whether or not such
Transfer is the result of a transaction entered into through the facilities of a National Securities Exchange or automated inter-dealer quotation system) that, if effective, would result in
Shares being beneficially owned by less than one-hundred (100) Persons (determined under the principles of Section 856(a)(5) of the Internal Revenue Code) shall be void ab initio, and
the intended transferee shall acquire no rights in such Shares.
(ii)
Transfer in Trust or Voided
Transfer
.
If any Transfer of Shares occurs (whether or not such Transfer is the result of a transaction entered into through the
facilities of a National Securities Exchange or automated inter-dealer quotation system) which, if effective, would result in any Person Beneficially Owning or Constructively Owning Shares in
violation of Sections 6.2(a)(i)(A), 6.2(a)(i)(B) or 6.2(a)(i)(C), as applicable, then the Board of Trustees shall be authorized and empowered to deem (and if so deemed, such action and result
shall be deemed to occur and the officers of the Trust shall be authorized to take such actions in the name and on behalf of the Trust authorized by the Board of Trustees to effectuate the same):
(A) that number of Shares the Beneficial Ownership or Constructive Ownership of which otherwise would cause such Person to violate Sections 6.2(a)(i)(A), 6.2(a)(i)(B) or 6.2(a)(i)(C)
(rounded upward to the nearest whole share, and such excess shares, including as so rounded, the "Excess Shares") to be automatically transferred to a Charitable Trust or Charitable Trusts for the
benefit of a Charitable Beneficiary, as described in Section 6.3, effective as of the close of business on the Business Day prior to the date of such determination of such Transfer or at such
other time determined by the Board of Trustees, and such Person shall acquire no rights in the Excess Shares; or (B) to the fullest extent permitted by law, the Transfer of Excess Shares to be
void ab initio, in which case, the intended transferee shall acquire no rights in the Excess Shares.
(iii)
Cooperation
.
The shareholder that
would otherwise qualify as a Prohibited Owner absent the application of the provisions of Section 6.2(a)(ii) shall use best efforts and take all actions necessary or requested by the Trust to
cooperate with effecting the actions taken by the Board of Trustees pursuant to Section 6.2(a)(ii), including, without limitation, informing the Trust where any Excess Shares may be held and
instructing its agents to cooperate in the prompt implementation and effectuation of the actions so taken by the Board of Trustees.
(b)
Remedies for Breach
.
If the Board of
Trustees or any duly authorized committee thereof shall at any time determine that a Transfer or other event has taken place that results in a violation of Section 6.2(a)(i) or that a Person
intends to acquire or has attempted to acquire Beneficial Ownership or Constructive Ownership of any Shares in violation of Section 6.2(a)(i)
A-II-26
(whether
or not such violation is intended), the Board of Trustees or a committee thereof may take such action as it deems advisable to refuse to give effect to or to prevent such
Transfer or other event, including, without limitation, causing the Trust to redeem Shares, refusing to give effect to such Transfer on the books of the Trust or the Trust's transfer agent or
instituting proceedings to enjoin such Transfer or other event. This Section 6.2(b) shall not in any way limit the provisions of Section 6.2(a)(ii).
(c)
Notice of Restricted Transfer
.
Any
Person who acquires or attempts or intends to acquire Beneficial Ownership or Constructive Ownership of Shares that will or may violate Section 6.2(a)(i), or any Person who would have owned
Excess Shares, shall immediately give written notice to the Trust of such event, or in the case of such a proposed or attempted transaction, give at least
fifteen
(15) days prior written notice, and shall provide to the Trust such other information as the Trust may request.
(d)
Owners Required to Provide
Information
.
Every shareholder of five percent (5%) or more of the Shares of any series or class outstanding at the time of
determination, within thirty (30) days after the end of each taxable year and also within three (3) Business Days after a request from the Trust, shall give written notice to the Trust
stating the name and address of such owner, the number of Shares Beneficially Owned, and a description of the manner in which such Shares are held; provided that a shareholder who holds Shares as
nominee for another Person, which other Person is required to include in gross income the distributions received on such Shares (an "Actual Owner"), shall give written notice to the Trust stating the
name and address of such Actual Owner and the number of Shares of such Actual Owner with respect to which the shareholder is nominee. Each such shareholder and each Actual Owner shall provide to the
Trust such additional information as the Trust may request in order to determine
the Trust's status as a REIT, to determine the Trust's compliance with other applicable
laws or requirements of any governmental authority or to ensure compliance with the Ownership Limit. Each Person who is a Beneficial Owner or Constructive Owner of Shares and each Person (including
the shareholder) who is holding Shares for a Beneficial Owner or Constructive Owner shall provide to the Trust such information as the Trust may request, in good faith, in order to determine the
Trust's status as a REIT, to determine the Trust's compliance with other applicable laws or requirements of any governmental authority and to comply with
requirements of
any taxing authority or other governmental authority or to determine such compliance.
(e)
(b)
For purposes of this
Section 6.15:
Exceptions
.
(i)
The
term "Business Combination" shall mean (a) any merger or consolidation of the Trust with or into a
Related Person, (b) any sale, lease, exchange, transfer or other disposition, including without limitation a mortgage or any other security device, of all or any "Substantial Part" (as
hereinafter defined) of the assets of the Trust (including without limitation any voting securities of a subsidiary) to a Related Person, (c) any merger or consolidation of a Related Person
with or into the Trust, (d) any sale, lease, exchange, transfer or other disposition of assets of a Related Person to the Trust having a book value equal to more than 10% of the Invested Assets
of the Trust as of the end of the Trust's most recent fiscal year ending prior to the time the determination is made, (e) the issuance of any Securities (other than by way of pro rata
distribution to all Shareholders) of the Trust to a Related Person, and (f) any agreement, contract or other arrangement providing for any of the transactions described in this definition of
Business Combination.
(ii)
The
term "Related Person" shall mean and include any individual, corporation, partnership, limited partnership
or other person or entity other than the Advisor or any wholly owned subsidiary of the Advisor which, together with its "affiliates" and "associates" (as defined as of September 1, 1986, in
Rule 12b-2 under the Securities Exchange Act of
A-II-27
(iii) "beneficially
owns" (as defined as of September 1, 1986, in Rule 13d-3 under the Securities Exchange Act of 1934) in the aggregate 10% or more of the
outstanding Shares of the Trust.
(iii)
The
term "Substantial Part" shall mean an amount equal to more than 10% of the Invested Assets of the Trust
as of the end of its most recent fiscal year ending prior to the time the determination is being made.
(iv)
Without
limitation, any Shares that any Related Person has the right to acquire pursuant to any agreement, or
upon exercise of conversion rights, warrants or options, or otherwise, shall be deemed beneficially owned by the Related Person.
(c)
The
Trust elects not to be governed by the provisions of Subtitle 6 of Title 3 of the Corporations and
Associations Article of the Annotated Code of Maryland, and the provisions of subparagraphs (a) and (b) of this Section 6.15 shall be in substitution for and to the exclusion of
said Subtitle 6 of Title 3.
(d)
Except
as otherwise provided in this Section 6.15, the Trust may effect any merger or consolidation in
accordance with applicable law.
(i)
The
Board of Trustees, in its sole discretion, may grant to any Person who makes a request therefor an exception to the
Ownership Limit (or one or more elements thereof) with respect to the ownership of any series or class of Shares, subject to the following conditions and limitations: (A) the Board of Trustees
shall have determined, in its discretion, that: (1) assuming such Person would Beneficially or Constructively Own the maximum amount of Common Shares and Preferred Shares permitted as a result
of the exception to be granted and (2) assuming that all other Persons who would be treated as "individuals" for purposes of Section 542(a)(2) of the Internal Revenue Code (determined
taking into account Section 856(h)(3)(A) of the Internal Revenue Code) would Beneficially or Constructively Own the maximum amount of Common Shares and Preferred Shares permitted under this
Article VI (taking into account any exception, waiver, or exemption granted under this Section 6.2(e) to (or with respect to) such Persons), the Trust would not be "closely held" within
the meaning of Section 856(h) of the Internal Revenue Code (assuming that the ownership of Shares is determined during the second half of a taxable year) and would not otherwise fail to qualify
as a REIT (including, without limitation, Beneficial Ownership or Constructive Ownership that would result in the Trust owning (actually or Constructively) an interest in a tenant that is described in
Section 856(d)(2)(B) of the Internal Revenue Code if the income derived by the Trust from such tenant would cause the Trust to fail to satisfy any of the gross income requirements of
Section 856(c) of the Internal Revenue Code); and (B) such Person provides to the Board of Trustees, for the benefit of the Trust, such representations and undertakings, if
any, as the Board of Trustees may, in its discretion, determine to be necessary in order for it to make the determination that the conditions set forth in Section 6.2(e)(i)(A) of this Article
have been and/or will continue to be satisfied (including, without limitation, an agreement as to a reduced Ownership Limit or Excepted Holder Limit for such Person with respect to the Beneficial or
Constructive Ownership of one or more other classes or series of Shares not subject to the exception), and such Person agrees that any violation of such representations and undertakings or any
attempted violation thereof will give rise to the application of the remedies set forth in Sections 6.2(a)(ii) and 6.2(b) of this Article with respect to Shares held in excess of the Ownership
Limit or the Excepted
Holder Limit (as may be applicable) with respect to such Person (determined without regard to the exception granted such Person under this
Section 6.2(e)(i)). If a member of the Board of Trustees requests that the Board of Trustees grant an exception pursuant to this Section 6.2(e) with respect to such member, or with
respect to any other Person if such
A-II-28
member
of the Board of Trustees would be considered to be the Beneficial Owner or Constructive Owner of Shares owned by such other Person, such member of the Board of Trustees shall not
participate in the decision of the Board of Trustees as to whether to grant any such exception.
(ii)
Prior
to granting any exception or exemption pursuant to Section 6.2(e), the Board of Trustees may require a ruling
from the IRS or an opinion of counsel, in either case in form and substance satisfactory to the Board of Trustees, in its sole and absolute discretion as it may deem necessary or advisable in order to
determine or ensure the Trust's status as a REIT; provided, however, that the Board of Trustees shall not be obligated to require obtaining a favorable ruling or opinion in order to grant an exception
hereunder.
(iii)
Subject
to Section 6.2(a)(i)(C), an underwriter or initial purchaser that participates in a public offering or a
private placement of Shares (or securities convertible into or exchangeable for Shares) may Beneficially Own or Constructively Own Shares (or securities convertible into or exchangeable for Shares) in
excess of the Ownership Limit, but
only to the extent necessary to facilitate such public offering or private placement as determined by the Board of
Trustees.
6.3
Transfer of Shares
.
(a)
Ownership in Trust
.
Upon any
purported Transfer or other event
described in Section 6.2(a)(ii) that results in a transfer of Shares to a Charitable Trust, such Shares shall be deemed to have
been transferred to the Charitable Trustee as trustee or trustees, as applicable, of a Charitable Trust for the exclusive benefit of one or more Charitable Beneficiaries (except to the
extent
otherwise provided in Section 6.3(e)). Such transfer to the Charitable Trustee shall be deemed to be effective as of the time
provided in Section 6.2(a)(ii). Any Charitable Trustee shall be appointed by the Trust and shall be a Person unaffiliated with the Trust and any Prohibited Owner. Each Charitable Beneficiary
shall be designated by the Trust as provided in Section 6.3(g) of this Article.
(b)
Status of Shares Held by a Charitable
Trustee
.
Shares held by a Charitable Trustee shall be issued and
outstanding Shares of the Trust. The
Prohibited Owner shall:
(i)
have
no rights in the Shares held by the Charitable Trustee;
(ii)
not
benefit economically from ownership of any Shares held in trust by the Charitable Trustee (except to the extent otherwise
provided in Section 6.3(e) of this Article);
(iii)
have
no rights to dividends or other distributions;
(iv)
not
possess any rights to vote or other rights attributable to the Shares held in the Charitable Trust; and
(v)
have
no claim, cause of action or other recourse whatsoever against the purported transferor of such Shares.
(c)
Dividend and Voting Rights
.
The
Charitable Trustee shall have all voting rights and rights to dividends or other distributions with respect to Shares held in the Charitable Trust, which rights shall be exercised for the exclusive
benefit of the Charitable Beneficiary (except to the extent otherwise provided in Section 6.3(e)). Any dividend or other distribution paid with respect to any Shares which constituted Excess
Shares at such time and prior to Shares having been transferred to the Charitable Trustee shall be paid to the Charitable Trustee by the Prohibited Owner upon demand and any dividend or other
distribution authorized but unpaid with respect to such Shares shall be paid when due to the Charitable Trustee. Any dividends or distributions so paid to the Charitable Trustee shall be held in trust
for the Charitable Beneficiary. The Prohibited Owner shall
A-II-29
have
no voting rights with respect to Shares held in the Charitable Trust and, effective as of the date that Shares have been transferred to the Charitable Trustee, the Charitable
Trustee shall have the authority (at the Charitable Trustee's discretion) (i) to rescind as void any vote cast by a Prohibited Owner with respect to such Shares at any time such Shares
constituted Excess Shares with respect to such Prohibited Owner and (ii) to recast such vote in accordance with the desires of the Charitable Trustee acting for the benefit of the Charitable
Beneficiary; provided, however, that if the Trust has already taken irreversible action, then the Charitable Trustee shall not have the power to rescind and recast such vote. Notwithstanding the
provisions of this Article VI, until the Shares have been transferred into a Charitable Trust, the Trust shall be entitled to rely on its stock transfer and other shareholder records for
purposes of preparing lists of shareholders entitled to vote at meetings, determining the validity and authority of proxies, and otherwise conducting votes of shareholders.
(d)
Rights upon Liquidation
.
Upon any
voluntary or involuntary liquidation, dissolution or winding up of or any distribution of the assets of the Trust, the Charitable Trustee shall be entitled to receive, ratably with each other holder
of Shares of the class or series of Shares that is held in the Charitable Trust, that portion of the assets of the Trust available for distribution to the holders of such class or series (determined
based upon the ratio that the number of Shares of such class or series of Shares held by the Charitable Trustee bears to the total number of Shares of such class or series of Shares then outstanding).
The Charitable Trustee shall distribute any such assets received in respect of the Shares held in the Charitable Trust in any liquidation, dissolution or winding up or distribution of the assets of
the Trust, in accordance with Section 6.3(e).
(e)
Sale of Shares by Charitable
Trustee
.
Unless otherwise directed by the Board of Trustees, within twenty (20) days of receiving notice from the Trust that
Shares have been transferred to the Charitable Trust, or soon thereafter as practicable, the Charitable Trustee shall sell the Shares held in the Charitable Trust (together with the right to receive
dividends or other distributions with respect to such Shares as to any Shares transferred to the Charitable Trustee as a result of the operation of Section 6.2(a)(ii)) to a Person, designated
by the Charitable Trustee, whose ownership of the Shares will not violate the ownership limitations set forth in Section 6.2(a)(i). Upon such sale, the interest of the Charitable Beneficiary in
the Shares sold shall terminate and the Charitable Trustee shall distribute the net proceeds of the sale to the Prohibited Owner and to the Charitable Beneficiary as provided in this
Section 6.3(e).
A
Prohibited Owner shall receive the lesser of (A) the net price paid by the Prohibited Owner for the Shares or, if the Prohibited Owner did not give value for the
Shares in connection with the event causing the Shares to be held in the Charitable Trust (for example, in the case of a gift, devise or other such transaction), the Market Price of the Shares on the
day of the event causing the Shares to be held in the Charitable Trust, less the costs, expenses and compensation of the Charitable Trustee and the Trust as provided in Section 6.4 and
(B) the net sales proceeds received by the Charitable Trustee from the sale or other disposition of the Shares held in the Charitable Trust. Any net sales proceeds in excess of the amount
payable to the Prohibited Owner shall be paid to the Charitable Beneficiary, less the costs, expenses and compensation of the Charitable Trustee and the Trust as provided in Section 6.4. If
such Shares are sold by a Prohibited Owner, then (A) such Shares shall be deemed to have been sold on behalf of the Charitable Trust and (B) to the extent that the Prohibited Owner
received an amount for such Shares that exceeds the amount that such Prohibited Owner was entitled to receive pursuant to this Section 6.3(e) of this Article, such excess shall be paid promptly
to the Charitable Trustee upon demand.
(f)
Trust's Purchase Right in Excess
Shares
.
Notwithstanding any transfer of Excess Shares to a Charitable Trust pursuant to this Article VI, Excess Shares shall be
deemed to have been offered for sale to the Trust, or its designee, at a price per Share equal to the lesser of (i) the price per Share in the transaction that resulted in such Shares becoming
Excess Shares (or, if the Prohibited
A-II-30
Owner
did not give value for such Shares, such as in the case of a devise, gift or other such transaction, the Market Price per such Share on the day of the event causing the Shares to
become Excess Shares) and (ii) the Market Price per such Share on the date the Trust, or its designee, accepts such offer, in each case of clauses (i) and (ii) of this sentence,
less the costs, expenses and compensation of the Charitable Trustee, if any, and the Trust as provided in Section 6.4. The Trust shall have the right to accept such offer until the Charitable
Trustee, if any, has sold the Shares held in the Charitable Trust, if any, pursuant to Section 6.3(e). Upon such a sale to the Trust, if a Charitable Trust has been established pursuant to this
Article VI, the interest of the Charitable Beneficiary in the Shares sold shall terminate and the Charitable Trustee shall distribute the net proceeds of the sale to the Prohibited Owner and
the Charitable Beneficiary as provided in Section 6.3(e).
(g)
Designation of Charitable
Beneficiaries
.
By written notice to the Charitable Trustee, the Trust shall designate from time to time one or more nonprofit
organizations to be the Charitable Beneficiary of the interest in the Charitable Trust such that (i) Shares held in the Charitable Trust would not violate the restrictions set forth in
Section 6.2(a)(i) in the hands of such Charitable Beneficiary and (ii) contributions to each such organization shall be eligible for deduction under each of Sections 170(b)(1)(A),
2055 and 2522 of the Internal Revenue Code. The Charitable Beneficiary shall not obtain any enforceable right to the Charitable Trust or any of its trust corpus until so designated and thereafter any
such rights remain subject to the provisions of this Article VI, including, without limitation, Section 6.3(h).
(h)
Retroactive Changes
.
Notwithstanding
any other provisions of this Article VI, the Board of Trustees is authorized and empowered to retroactively amend, alter or repeal any rights which the Charitable Trust, the Charitable Trustee
or the Charitable Beneficiary may have under this Article VI, including, without limitation, granting retroactive Excepted Holder status to any otherwise Prohibited Owner, with the effect of
any transfer of Excess Shares to a Charitable Trust being fully and retroactively revoked; provided, however, that the Board of Trustees shall not have the authority or power to retroactively amend,
alter or repeal any obligations to pay amounts incurred prior to such time and owed or payable to the Charitable Trustee pursuant to Section 6.4 of this Article.
6.4
Costs, Expenses and Compensation of Charitable Trustee and the
Trust
.
(a)
The
Charitable Trustee shall be indemnified by the Trust or from the proceeds from the sale of Shares held in the Charitable
Trust, as further provided in this Article VI, for its costs and expenses reasonably incurred in connection with conducting its duties and satisfying its obligations pursuant to this
Article VI.
(b)
The
Charitable Trustee shall be entitled to receive reasonable compensation for services provided by the Charitable Trustee in
connection with serving as a Charitable Trustee, the amount and form of which shall be determined by agreement of the Board of Trustees and the Charitable Trustee.
(c)
Costs,
expenses and compensation payable to the Charitable Trustee pursuant to Sections 6.4(a) and 6.4(b) may be funded
from the Charitable Trust or by the Trust. The Trust shall be entitled to reimbursement on a first priority basis (after payment in full of amounts payable to the Charitable Trustee pursuant to
Sections 6.4(a) and 6.4(b)) from the Charitable Trust for any such amounts funded by the Trust.
(d)
Costs
and expenses incurred by the Trust in the process of enforcing the ownership limitation set forth in
Section 6.2(a)(i), in addition to reimbursement of costs, expenses and compensation of the Charitable Trustee which have been funded by the Trust, may be collected from the Charitable
Trust.
A-II-31
6.5
Transactions on a National Securities
Exchange
.
Nothing in this Article VI shall preclude the settlement of any transaction entered into through the facilities of a
National Securities Exchange or any automated inter-dealer quotation system. The fact that the settlement of any transaction takes place shall not negate the effect of any other provision of this
Article VI and any transferee in such a transaction shall be subject to all of the provisions and limitations set forth in this Article VI.
6.6
Enforcement
.
The
Trust is authorized specifically to seek equitable relief, including injunctive relief, to enforce the provisions of this Article VI.
6.7
Non-Waiver
.
No
delay or failure on the part of the Trust or the Board of Trustees in exercising any right hereunder shall operate as a waiver of any right of the Trust or the Board of Trustees, as the case may be,
except to the extent specifically waived in writing.
6.8
Enforceability
.
If
any of the restrictions on
transfer of Shares contained in this Article VI are determined to be void, invalid or unenforceable by any court of competent
jurisdiction, then, to the fullest
extent permitted by law, the Prohibited Owner may
be deemed, at the option of the Trust, to have acted as
an agent
of the Trust in acquiring such Shares and to hold such Shares on behalf of the Trust.
ARTICLE VII
LIABILITY OF TRUSTEES, SHAREHOLDERS, OFFICERS,
EMPLOYEES AND AGENTS, AND OTHER MATTERS
7.1
Limitation of Liability of Shareholders, Trustees, Officers, Employees and Agents for Obligations of the
Trust
. The Trustees and the officers, employees and agents
(including the Advisor)
of the Trust, in incurring any debts,
liabilities or obligations or in taking or omitting any other actions for or in connection with the Trust, are, and shall be deemed to be, acting as trustees, officers, employees or agents of the
Trust and not in their own individual capacities. Except as otherwise provided in
Sections
Section
7.3 hereof with respect to
liability of Trustees or officers, agents or employees of the Trust to the Trust or to Shareholders, no Shareholder, Trustee or officer, employee or agent
(including the Advisor)
of the Trust shall be liable for any debt, claim, demand, judgment decree, liability or obligation of any kind (in tort, contract or otherwise) of, against or with respect to the
Trust or arising out of any action taken or omitted for or on behalf of the Trust, and the Trust shall be solely liable therefor and resort shall be had solely to the Trust Estate for the payment or
performance thereof, and no Shareholder, Trustee or officer, employee or agent
(including the Advisor)
of the Trust shall be subject to any personal liability
whatsoever, in tort, contract or otherwise, to any other Person or Persons in connection with the Trust Estate or the affairs of the Trust (or any actions taken or omitted for or on behalf of the
Trust), and all such other Persons shall look solely to the Trust Estate for satisfaction of claims of any nature arising in connection with the Trust Estate or the affairs of the Trust (or any action
taken or omitted for or on behalf of the Trust).
7.2
Express Exculpatory Clauses and Instruments.
Any written instrument creating
an obligation of the Trust
shall
may
include a reference to this Declaration and provide that neither the Shareholders nor the
Trustees nor any officers, employees or agents
(including the Advisor)
of the Trust shall be liable thereunder and that all Persons shall look solely to the
Trust Estate for the payment of any claim thereunder or for the performance thereof; however, the omission of such provision from any such instrument shall not render the Shareholders, any Trustee, or
any officer, employee or agent
(including the Advisor)
of the Trust liable nor shall the Shareholders, any Trustee or any officer, employee or agent
(including the Advisor)
of the Trust be liable to any one for such omission.
A-II-32
7.3
Limitation of Liability of Trustees
,
Officers
,
Employees
and Agents to the Trust and to Shareholders for Acts and Omissions.
(a)
No
Independent
Trustee or officer, employee or agent of the Trust shall have any greater
duties than those established by this Declaration of Trust or, in cases as to which such duties are not so established, than those of the directors, officers, employees and agents of a Maryland
business corporation in effect from time to time. No
Independent
Trustee, officer, employee or agent of the Trust shall be liable to the Trust, Shareholders or
to any other Person for any act or omission except for his own willful misfeasance, bad faith, gross negligence or reckless disregard of duty.
(b)
No
Affiliated Trustee shall have liability to the Trust, Shareholders or any other Person for any loss suffered
by the Trust which arises out of any action or inaction of such Affiliated Trustee if such Affiliated Trustee in good faith had determined that such course of conduct was in the best interest of the
Trust and if such course of conduct did not constitute negligence or misconduct of such Affiliated Trustee.
7.4
Indemnification and Reimbursement of Trustees, Officers,
Employees and Agents.
(a)
Except
as otherwise provided in paragraph (b) of this Section 7.4, any Person made a party to any
action, suit or proceeding or against whom a claim or liability is asserted by reason of the fact that he, his testator or intestate was or is a Independent Trustee, officer, employee or agent of the
Trust shall be indemnified and held harmless by the Trust against judgments, fines, amounts paid on account thereof (whether in settlement or otherwise) and reasonable expenses, including attorneys'
fees, actually and reasonably incurred by him in connection with the defense of such action, suit, proceeding, claim or alleged liability or in connection with any appeal therein, whether or not the
same proceeds to judgment or is settled or otherwise brought to a conclusion; provided, however, that no such Person
shall be so indemnified or reimbursed for any claim, obligation or liability which shall have been adjudicated to have arisen out of or been based upon his willful misfeasance, bad faith, gross
negligence or reckless disregard of duty; and provided, further, that such Person gives prompt notice thereof, executes such documents and takes such action as will permit the Trust to conduct the
defense or settlement thereof and cooperates therein. In the event of a settlement approved by the Trustees of any such claim, alleged liability, action, suit or proceeding, indemnification and
reimbursement shall be provided except as to such matters covered by the settlement which the Trust is advised by its counsel would, if adjudicated, likely be adjudicated to have arisen out of or been
based upon such Person's willful misfeasance, bad faith, gross negligence or reckless disregard of duty. Such rights of indemnification and reimbursement shall be satisfied only out of the Trust
Estate. The rights accruing to any Person under these provisions shall not exclude any other right to which he may be lawfully entitled, nor shall anything contained herein restrict such Person's
right to contribution as may be available under applicable law. The Trustees may make advance payments in connection with indemnification under this Section 7.4, provided that the indemnified
Person shall have given a written undertaking to reimburse the Trust in the event it is subsequently determined that he is not entitled to such indemnification. Any action taken by or conduct on the
part of an Independent Trustee, officer, employee or agent of the Trust in conformity with or in good faith reliance upon the provisions of this Declaration (including without limitation any provision
in Article VII hereof) shall not constitute willful misfeasance, bad faith, gross negligence or reckless disregard of duty.
(b)
Each
Affiliated Trustee and any Affiliates (as defined in Section 7.5 hereof) of such Affiliated Trustee
shall be indemnified by the Trust against any losses, judgments, liabilities, expenses and amounts paid in settlement of any claims sustained by them in connection with any action or inaction of such
Affiliated Trustee or Affiliate if such Affiliated Trustee or Affiliate, in good faith, determined that such course of conduct was in the best interest of the Trust and if such
A-II-33
conduct
did not constitute negligence or misconduct on the part of such Affiliated Trustee or Affiliate. Notwithstanding the foregoing, Affiliated Trustees and their Affiliates and
any person acting for the Trust as a broker/dealer shall not be indemnified for any losses, liabilities or expenses arising from or out of an alleged violation of federal or state securities laws
unless (i) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular indemnitee, or (ii) such claims have been
dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee or (iii) a court of competent jurisdiction approves a settlement of the claim against
the particular indemnitee. In any claim for indemnification for federal or state securities law violations, the party seeking indemnification shall place before the court the position of the
Securities and Exchange Commission and the Massachusetts Securities Division (and any other state securities commissioner or administrator who may so require) with respect to the issue of
indemnification for securities law violations. The Trust shall not incur the cost of that portion of any insurance, other than public liability insurance, which insures any party against any liability
the indemnification of which is prohibited by this Section 7.4(b). The provision of advances from Trust funds to the Affiliated Trustees and any Affiliates for legal expenses and other costs
incurred as a result of any legal action initiated against the Affiliated Trustees by Shareholders of the Trust is prohibited.
(c)
Notwithstanding
anything herein to the contrary, and to the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, no Trustee or officer of the Trust shall be personally liable to the Trust or its shareholders for money damages. No amendment of this Declaration or repeal
of any of its provisions shall limit or eliminate the limitation on liability provided to Trustees and officers hereunder with respect to any act or omission occurring prior to such amendment or
repeal.
7.5
Certain
Definitions.
For the purposes of Section 7.4(b) hereof, the term "Affiliate," when used in connection with the term
"Affiliated Trustee," shall mean any person performing services on behalf of the Trust who (i) directly or indirectly controls, is controlled by, or is under common control with such Affiliated
Trustee; (ii) owns or controls ten percent (10%) or more of the outstanding voting securities of such Affiliated Trustee; (iii) is an officer, director, partner or trustee of such
Affiliated Trustee; or (iv) is a company for which such Affiliated Trustee acts as an officer, director, partner or trustee. For the purposes of the above definition, the terms "control,"
"controlling," "controlled by," and "under common control with" refer to the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or otherwise.
7.4
7.6
Indemnification and Reimbursement of
Shareholders
Expenses
.
Any Shareholder made a party to any action, suit or
proceeding or
The Trust shall have the power, to the maximum
extent permitted by Maryland statutory or decisional law in effect from time
to time, to obligate itself to indemnify, and to pay or reimburse reasonable expenses in advance of final disposition of a proceeding to, (a) any individual who is a present or former
Shareholder,
Trustee or officer of the Trust or (b) any individual who, while a Shareholder, Trustee or officer of the Trust and at the express request of the
Trust, serves or has served another corporation, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, Shareholder, partner or trustee of such
corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, from and
against
him a claim or
all claims
and
liabilities
asserted
to which such person may become subject
by reason of
the fact that
he,
his
testate
being
or
intestate was or is
having
been
a Shareholder
shall be indemnified and held harmless by the Trust against judgments, fines, amounts paid on account thereof (whether in settlement or otherwise)
and reasonable expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense of such action, suit, proceeding, claim or alleged liability or in connection
with any appeal therein, whether or not the same proceeds to judgment or is settled or otherwise brought to a conclusion; provided however, that such Shareholder gives prompt
A-II-34
notice
thereof, executes such documents and takes such action as will permit the Trust to conduct the defense or settlement thereof and cooperates therein. In the event that the
assets of the Trust Estate are insufficient to satisfy the Trust's indemnity obligations hereunder, each Shareholder shall be entitled to such indemnification pro rata
from
, Trustee or officer. The Trust shall have the power, with the
approval of its Board of Trustees, to provide such indemnification and advancement of expenses to a person who served a predecessor of the Trust in any of the capacities described in (a) or
(b) above and to any employee or agent of
the Trust
Estate
or a predecessor of the Trust
.
7.5
7.7
Right of Trustees, Officers, Employees and Agents to Own Shares or Other
Property and to Engage in Other Business.
Any Trustee or officer, employee or agent of the Trust may acquire, own, hold and dispose of Shares in the Trust, for his
individual account, and may exercise all rights of a Shareholder to the same extent and in the same manner as if he were not a Trustee or officer, employee or agent of the Trust.
Any Trustee or officer, employee or agent of the Trust may, in his personal capacity or in the capacity of trustee, officer, director, stockholder, partner, member, advisor or employee of any Person
or otherwise, have business interests and engage in business activities similar to or in addition to those relating to the Trust, which interests and activities may be similar to and competitive with
those of the Trust and may include the acquisition, syndication, holding, management, development, operation or disposition, for his own account, or for the account of such Person or others, of
interests in Mortgages, interests in Real Property, or interests in Persons engaged in the real estate business. Each Trustee, officer, employee and agent of the Trust shall be free of any obligation
to present to the Trust any investment opportunity which comes to him in any capacity other than solely as Trustee, officer, employee or agent of the Trust even if such opportunity is of a character
which, if presented to the Trust, could be taken by the Trust. Subject to the provisions of Article IV and Section 7.8, any Trustee or officer, employee or agent of the Trust may be
interested as trustee, officer, director, stockholder, partner, member, advisor or employee of, or otherwise have a direct or indirect interest in, any Person who may be engaged to render advice or
services to the Trust, and may receive compensation from such Person as well as compensation as Trustee, officer, employee or agent or otherwise hereunder. None of these activities shall be deemed to
conflict with his duties and powers as Trustee or officer, employee or agent of the Trust.
7.6
7.8
Transactions Between Trustees, Officers, Employees or Agents and the
Trust.
Except as otherwise provided by
Subject to any express restrictions in
this
Declaration
, and in the absence of fraud, a contract, act or other transaction between the Trust and any other Person in which the Trust is interested, shall be valid, and
no
or adopted by the Trustees in the Bylaws or by resolution, the Trust may enter into any contract or transaction of any kind with any Person, including
any
Trustee
or
,
officer, employee or agent of the Trust
shall have any liability as a result of
entering into any such contract, act or transaction, even though (a) one or more of the Trustees or officers, employees or agents of the Trust are directly or indirectly interested in or
connected with or are trustees, partners, directors, employees, officers or agents of such other Person, or (b) one or more of the Trustees or officers, employees or agents of the Trust
individually or jointly with others, is a party or are parties to, or are directly or indirectly interested in or connected with, such contract, act or transaction; provided that in each such case
(i) such
or any person affiliated with a
Trustee, officer, employee or agent of the Trust, whether or not any of them has a
financial interest in such transaction, provided, however, that in the case of any contract or transaction in which any
Trustee, officer, employee or agent of the
Trust
(or any Person affiliated with such Person) has a material financial interest in such transaction, then: (a) the fact of the
interest
or connection is
shall be
disclosed or known to
: (i)
the
Board of
Trustees
and thereafter the
or the Audit Committee, and the Board of
Trustees
authorize
or the Audit Committee shall approve
or ratify
such
the
contract
,
act
or
other
transaction by
the
affirmative vote of a majority of
the
disinterested
Trustees
who are not so interested
of the Board or the Audit
Committee, even if the disinterested Trustees of the Board or the Audit Committee constitute less than a quorum,
or (ii)
such interest or connection is
disclosed or known to the Shareholders, and thereafter such
the shareholders entitled to vote, and the
contract
,
act
or transaction
is
shall be authorized,
approved
or ratified
by
A-II-35
Shareholders
holding
a majority of the
Shares then outstanding and entitled to vote thereon.
votes cast by
the shareholders entitled to vote other than the votes of shares owned of record or beneficially by the interested part; or (b) the contract or
transaction is fair
and reasonable to the Trust.
Notwithstanding
any other provision of this Declaration, the Trust shall not engage in a transaction with (a) any Trustee, officer, employee or agent of the
Trust (acting in his individual capacity), (b) any director, trustee, partner, officer, employee or agent (acting in his individual capacity) of the Advisor or any other investment advisor of
the Trust, (c) the Advisor or any other investment advisor of the Trust or (d) an Affiliate of any of the foregoing, except to the extent that such transaction has, after disclosure of
such affiliation, been approved or ratified by the affirmative vote of a majority of the Trustees including a majority of the Independent Trustees (or, if the transaction is with a Person other than
the Advisor or its Affiliates, a majority of the Trustees not having any interest in such transaction and not Affiliates of any party to the transaction) after a determination by them that to the
extent applicable:
(a)
such
transaction is fair and reasonable to the Trust and the Shareholders;
(b)
based
upon an appraisal by a qualified independent real estate appraiser, such qualification to be determined
in each instance by a majority of the Independent Trustees who shall, in each case, have been approved by a majority of the Independent Trustees (or, if the transaction is with a Person other than the
Advisor its Affiliates, a majority of the Trustees not having any interest in such transaction and not Affiliates of any party to the transaction), the total consideration is not in excess of the
appraised value of the interest in Real Property being acquired, if an acquisition is involved, or not less than the appraised value of the interest in Real Property being disposed of, if a
disposition is involved; and
(c)
if
such transaction involves payment by the Trust for services rendered to the Trust by a Person in a capacity
other than that of Advisor, Trustee or Trust officer, (1) the compensation is not in excess of the compensation, if any, paid to such Person by any other Person who is not an Affiliate of such
Person, for any comparable services in the same geographic area, and (2) the compensation is not greater than the charges for comparable services generally available in the same geographic area
from other Persons who are competent and not affiliated with any of the parties involved.
This
Section 7.8 shall not prevent any sale of Shares issued by the Trust for the public offering thereof in accordance with a registration statement filed with the
Securities and Exchange Commission under the Securities Act of 1933. The Trustees are not restricted by this Section 7.8 from forming a corporation, partnership, trust or other business
association owned by any Trustee, officer, employee or
agent or by their nominees for the purpose of holding title to property of the Trust or managing property of the Trust, provided that the Trustees make a determination that the creation of such entity
for such purpose is in the best interest of the Trust.
7.9
Independent
Counsel.
In the event of a dispute between the Trust and the Advisor or its Affiliates, or should it be necessary for the
Trust to prepare and negotiate contracts and agreements between the Trust and the Advisor or its Affiliates which in the good faith judgment of a majority of the Independent Trustees require the
advice or assistance of separate counsel or accountants from that of the Advisor or its Affiliates, the Trust will retain such separate counsel or accountants for such matters, the choice of which
shall be made by a majority of the Independent Trustees.
7.7
7.10
Persons Dealing with Trustees, Officers, Employees or
Agents.
Any act of the Trustees or of the officers, employees or agents of the Trust purporting to be done in their capacity as such, shall, as to any Persons
dealing with such Trustees, officers, employees or agents, be conclusively deemed to be within the purposes of this Trust and within the powers of such Trustees or officers, employees or agents. No
Person dealing with the Trustees or any of them or with the officers, employees or agents of
A-II-36
the
Trust shall be bound to see to the application of any funds or property passing into their hands or control. The receipt of the Trustees or any of them, or of authorized officers, employees or
agents of the Trust, for moneys or other consideration, shall be binding upon the Trust.
7.8
7.11
Reliance.
The Trustees and the
officers, employees and agents of the Trust may consult with counsel (which may be a firm in which one or more of the Trustees or the officers, employees or agents of the Trust is or are members) and
the advice or opinion of such counsel shall be full and complete personal protection to all the Trustees and the officers, employees and agents of the Trust in respect of any action taken or suffered
by them in good faith and in reliance on or in accordance with such advice or opinion. In discharging their duties, Trustees or officers, employees or agents of the Trust, when acting in good faith,
may rely upon financial statements of the Trust represented to them to fairly present the financial position or results of operations of the Trust by the chief financial officer of the Trust or the
officer of the Trust having charge of its books of account, or stated in a written report by an independent certified public accountant fairly to present the financial position or results of
operations of the Trust. The Trustees and the officers, employees and agents of the Trust may rely, and shall be personally protected in acting, upon any instrument or other document believed by them
to be genuine.
7.12
Indemnification of the
Trust.
Each shareholder will indemnify and hold harmless the Trust from and against all costs, expenses, penalties, fines
and other amounts, including, without limitation, attorneys' and other professional fees, whether third party or internal, arising from such shareholder's violation of any provision of this
Declaration or the Bylaws, including, without limitation, Section 6.14, and shall pay such sums to the Trust upon demand, together with interest on such amounts, which interest will accrue at
the lesser of 15% per annum and the maximum amount permitted by law, from the date such costs or the like are incurred until the receipt of repayment by the Trust. Nothing in this Section shall create
or increase the liability of any shareholders, trustees, officers, employees or agents of the Trust for actions taken on behalf of the Trust.
ARTICLE VIII
DURATION, AMENDMENT AND TERMINATION OF TRUST
8.1
Duration of Trust.
The duration of the Trust shall be perpetual; provided,
however, the Trust may be
voluntarily dissolved or its existence
terminated at any time by the affirmative vote at a meeting of Shareholders of the holders of Shares
representing two-thirds of the total number of Shares then outstanding and entitled to vote thereon.
8.2
Termination of Trust.
(a) Upon
the termination of the Trust:
(i) the
Trust shall carry on no business except for the purpose of winding up its affairs;
(ii) the
Trustees shall proceed to wind up the affairs of the Trust and all the powers of the Trustees under this Declaration shall continue until the affairs of the Trust
shall have been wound up, including the power to fulfill or discharge the contracts of the Trust, collect its assets, sell, convey, assign, exchange, transfer or otherwise dispose of all or any part
of the remaining Trust Estate to one or more persons at public or private sale (for consideration which may consist in whole or in part of cash, Securities or other property of any kind), discharge or
pay its liabilities, and do all other acts appropriate to liquidate its business; and
(iii) after
paying or adequately providing for the payment of all liabilities, and upon receipt of such releases, indemnities and refunding agreements, as they deem
necessary for their protection, the
Trustees may distribute the remaining Trust Estate (in cash or in kind or partly each) among the Shareholders according to their respective rights.
A-II-37
(b) After
termination of the Trust and distribution of the Trust Estate to the Shareholders as herein provided, the Trustees shall execute and lodge among the records of the
Trust an instrument in writing setting forth the fact of such termination and such distribution, a copy of which instrument shall be filed with the Maryland Department of Assessments and Taxation, and
the Trustees shall thereupon be discharged from all further liabilities and duties hereunder and the rights and interests of all Shareholders shall thereupon cease.
8.3
Amendment Procedure.
This Declaration may be amended
(except that the provisions governing the personal liability of the Shareholders, Trustees and of the officers, employees and agents of the Trust and the prohibition of assessments
upon Shareholders may not be amended in any respect that could increase the personal liability of such Shareholders, Trustees or officers, employees and agents of the Trust) at a meeting of
Shareholders
only if such amendment is declared advisable by the Board of Trustees and approved
by holders of Shares representing a majority
(or, with respect to amendments of Article V, amendments to the provisions of Section 8.1, amendments to this Section 8.3 that would reduce the percentage vote
required to approve any amendments to this Declaration, and with respect to amendments inconsistent with Sections 2.1, 6.14 and 6.15, seventy-five percent (75%))
of the
total number of votes authorized to be cast in respect of Shares then outstanding and entitled to vote thereon
. The approval of a majority of the Trustees (including a majority of
the Independent Trustees) shall also be
(notwithstanding the higher vote
required
for any such
amendment
by Maryland REIT Law)
. Two-thirds (2/3) of the Trustees may, after
fifteen (15) days
written
notice to the Shareholders, also amend this Declaration without the vote or consent of Shareholders if in good faith they deem it necessary to conform this Declaration to the requirements of the REIT
Provisions of the Internal Revenue Code, but the Trustees shall not be liable for failing to do so. Actions by the Trustees pursuant to Section 1.1, Section
6.1
5.1
, or Section 9.6(a) that result in an amendment to this Declaration shall be effected without the vote or consent of
Shareholders.
8.4
Amendments Effective.
Any amendment pursuant to any Section of this
Declaration shall not become effective until it is duly filed with
and accepted for record by
the Maryland Department of Assessments and Taxation.
8.5
Transfer to Successor.
The Trustees, with the approval of a majority of the
Trustees
(including a majority of the Independent Trustees)
and the affirmative vote, at a meeting approving a plan for this purpose, of the holders of Shares
representing a majority of all votes
authorized to be
cast at a meeting at which a quorum is present, may (a) cause the organization of a limited partnership,
partnership, corporation, association, trust or other organization to take over the Trust Estate and carry on the affairs of the Trust, (b) merge the Trust into, or sell, convey and
transfer the Trust Estate to, any such limited partnership, partnership, corporation, association, trust or organization in exchange for Securities thereof, or beneficial interests therein, and the
assumption by such transferee of the liabilities of the Trust and (c) thereupon terminate this Declaration and deliver such shares, Securities or beneficial interests among the Shareholders in
accordance with such plan.
ARTICLE IX
MISCELLANEOUS
9.1
Applicable Law.
This Declaration is executed and acknowledged by the Trustees
with reference to the statutes and laws of the State of Maryland, and the rights of all parties and the construction and effect of every provision hereof shall be subject to and construed according to
the statutes and laws of such State.
9.2
Index and Headings for Reference Only.
The index and headings preceding the
text, articles and sections hereof have been inserted for convenience and reference only and shall not be construed to affect the meaning, construction or effect of this Declaration.
A-II-38
9.3
Successors in Interest.
This Declaration and the Bylaws shall be binding upon
and inure to the benefit of the undersigned Trustees and their successors, assigns, heirs, distributees and legal representatives, and every Shareholder and his successors, assigns, heirs,
distributees and legal representatives.
9.4
Inspection of Records.
Trust records shall be available for inspection by
Shareholders at the same time and in the same manner and to the extent that comparable records of a Maryland business corporation would be available for inspection by shareholders under the laws of
the State of Maryland. Except as specifically provided for in this Declaration or in Title 8
of the Corporations and Associations Article
of the Annotated Code of
Maryland, Shareholders shall have no greater right than shareholders of a Maryland business corporation to require financial or other information from the Trust, Trustees or officers of the Trust. Any
Federal or state securities administrator or the Maryland Department of Assessments and Taxation shall have the right, at reasonable times during business hours and for proper purposes, to inspect the
books and records of the Trust.
9.5
Counterparts.
This Declaration may be simultaneously executed in several
counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute one and the same instrument, which shall be sufficiently evidenced by
any such original counterpart.
9.6
Provisions of the Trust in Conflict with Law or Regulations: Severability.
(a) The
provisions of this Declaration are severable, and if the Trustees shall determine, with the advice of counsel, that any one or more of such provisions (the
"Conflicting Provisions") are in conflict with the REIT Provisions of the Internal Revenue Code, the Conflicting Provisions shall be deemed never to have constituted a part of the Declaration;
provided, however, that such determination by the Trustees shall not affect or impair any of the remaining provisions of this Declaration or render invalid or improper any action taken or omitted
(including but not limited to the election of Trustees) prior to such determination. An amendment in recordable form signed by a majority of the Trustees setting forth any such determination and
reciting that it was duly adopted by the Trustees, or a copy of this Declaration, with the Conflicting Provisions removed pursuant to such a determination, in recordable form, signed by a majority of
the Trustees, shall be conclusive evidence of such determination when filed with the Maryland Department of Assessments and Taxation. The Trustees shall not be liable for failure to make any
determination under this Section 9.6(a). Nothing in this Section 9.6(a) shall in any way limit or affect the right of the Trustees to amend this Declaration as provided in
Section 8.3.
(b) If
any provision of this Declaration shall be held invalid or unenforceable, such invalidity or unenforceability shall attach only to such provision and shall not in any
manner affect or render invalid or unenforceable any other provision of this Declaration, and this Declaration shall be carried out as if any such invalid or unenforceable provision were not contained
herein.
9.7
Certifications.
The following certifications shall be final and conclusive as
to any Persons dealing with the Trust:
(a) a
certification of a vacancy among the Trustees by reason of resignation, removal, increase in the number of Trustees, incapacity, death or otherwise, when made in
writing by a majority of the remaining Trustees;
(b) a
certification as to the individuals holding office as Trustees or officers at any particular time, when made in writing by the secretary of the Trust;
(c) a
certification that a copy of this Declaration or of the Bylaws is a true and correct copy thereof as then in force, when made in writing by the secretary of the
Trust;
and
(d)
the
certifications referred to in Sections 2.7, 8.4 and 9.6(a); and
(e)
a
certification as to any actions by Trustees, other than the above, when made in writing by the secretary of the Trust or by any
Trustee.
A-II-39
IN
WITNESS WHEREOF, this Fourth Amendment and Restatement of Declaration of Trust has been signed and acknowledged by each of the undersigned Trustees of the Trust on this
31st day of July, 2014.
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Sam Zell
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James Corl
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Edward Glickman
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David Helfand
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Peter Linneman
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James Lozier
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Kenneth Shea
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01) Sam Zell
07) James L. Lozier, Jr. 02) James S. Corl 08) Mary Jane Robertson 03) Martin
L. Edelmen 09) Kenneth Shea 04) Edward A. Glickman 10) Gerald A. Spector 05)
David Helfand 11) James A. Star 06) Peter Linneman . . . . . . . . . . . . .
. . . . . . . . . . . . . . COMMONWEALTH REIT TWO NORTH RIVERSIDE PLAZA SUITE
600 CHICAGO, IL 60606 AUTHORIZE YOUR PROXY BY INTERNET - www.proxyvote.com
Use the internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 p.m. Eastern Time on July 30, 2014.
Have your proxy card in hand when you access the website and follow the
instructions to obtain your records and to create an electronic voting
instruction form. AUTHORIZE YOUR PROXY BY PHONE - 1-800-690-6903 Use any touch-tone
telephone to transmit your voting instructions up until 11:59 p.m. Eastern
Time on July 30, 2014. Have your proxy card in hand when you call and then
follow the instructions. AUTHORIZE YOUR PROXY BY MAIL Mark, sign and date
your proxy card and return it in the postage-paid envelope we have provided
or return it to CommonWealth REIT, c/o Broadridge, 51 Mercedes Way, Edgewood,
NY 11717. ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS If you
would like to reduce the costs incurred by CommonWealth REIT in mailing proxy
materials, you can consent to receiving all future proxy statements, proxy
cards and annual reports electronically by e-mail or over the internet. To
sign up for electronic delivery, please follow the instructions above to vote
using the internet and, when prompted, indicate that you agree to receive or
access shareholder communications electronically in future years. TO VOTE,
MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: M76516-P54599 KEEP THIS
PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD
IS VALID ONLY WHEN SIGNED AND DATED. COMMONWEALTH REIT Our Board of Trustees
Recommends You Vote FOR the Nominees for Trustee For All Withhold All For
All Except To withhold authority to vote for any individual nominee(s), mark
For All Except and write the in Proposal 1 and FOR Proposals 2, 3, 4 and
5. 1. To elect the nominees named in our proxy statement to our Board of
Trustees . . . number(s) of the nominee(s) on the line below. Our Board
recommends you vote "FOR" Proposal 1. 2. To approve amendments to
our Third Amendment and Restatement of Declaration of Trust (the
"Charter") that require approval of a majority of shares
outstanding: For Against Abstain 3. To approve amendments to our Charter that
require approval of 75% of the shares outstanding: For Against Abstain 2a.
Amendment to adopt plurality voting in contested trustee elections . . . 2b.
Amendment to lower the general shareholder voting standard . . . 2c.
Amendment to require majority vote for a transfer of all or substantially all
assets 2d. Amendment to convert indemnification rights to permissive to the
full extent of Maryland Law 2e. Amendment to eliminate the obligation of
shareholders to indemnify the Company 2f. Amendment to eliminate the external
advisor provisions . . . 2g. Amendment to align related party transaction
requirements with Maryland law 2h. Amendment to increase flexibility in
scheduling annual meetings . . . 2i. Amendment to increase flexibility in
approval of investments . . . 2j. Amendment to increase flexibility in
structuring board committees . . . 2k. Amendment to remove the requirement
that shareholders approve certain restructurings 2l. Amendment to eliminate
the Board's ability to remove a trustee . . . 2m. Amendment to require
unanimity for trustees to act by written consent . . . 2n. Amendments
regarding conforming changes and other immaterial modifications to the
Charter and amendment and restatement of the Charter Our Board recommends you
vote "FOR" Proposals 2a through 2n. 3a. Amendment to declassify the
Board and provide for annual elections . . . 3b. Amendment to provide
majority voting for mergers . . . 3c. Amendment to require a majority vote
for Charter amendments . . . 3d. Amendment to remove voting standard for
combinations with 10% shareholders 3e. Amendment to increase the number of
permitted trustees . . . 3f. Amendment to install revised REIT ownership
limitation provisions . . . 3g. Amendment to broaden investment policy . . .
Our Board recommends you vote "FOR" Proposals 3a through 3g. 4. To
approve the reimbursement to Related Fund Management, LLC and Corvex
Management LP of expenses related to their consent solicitations Our Board
recommends you vote "FOR" Proposal 4. 5. To ratify the appointment
of Ernst & Young LLP as our independent registered public accounting firm
for the fiscal year ending December 31, 2014 Our Board recommends you vote
"FOR" Proposal 5. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED
AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED "FOR" THE
NOMINEES FOR TRUSTEE IN PROPOSAL 1 AND "FOR" PROPOSALS 2, 3, 4 AND
5. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, THE PROXIES, IN THEIR
DISCRETION, ARE AUTHORIZED TO VOTE AND OTHERWISE REPRESENT THE UNDERSIGNED ON
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR AT ANY
POSTPONEMENT OR ADJOURNMENT THEREOF. For address changes, please check this
box and write them on the back where indicated. . (NOTE: Please sign exactly
as your name(s) appear(s) hereon. All holders must sign. When signing as
attorney, executor, administrator or other fiduciary, please give full title
as such. Joint owners should each sign personally. If a corporation, please
sign in full corporate name by authorized officer, indicating title. If a
partnership, please sign in partnership name by authorized person indicating
title.) Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
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COMMONWEALTH
REIT ANNUAL MEETING OF SHAREHOLDERS June 30, 2014, 10:00 a.m., Central Time,
To be adjourned to July 31, 2014, 10:00 a.m., Central Time Two North
Riverside Plaza, 24th Floor Chicago, IL 60606 M76517-P54599 COMMONWEALTH REIT
Two North Riverside Plaza, Suite 600 Chicago, IL 60606 Proxy Important Notice
Regarding Internet Availability of Proxy Materials: The proxy materials for
the CommonWealth REIT annual meeting of shareholders, including our annual
report and proxy statement, are available on the internet. This proxy is
solicited on behalf of the Board of Trustees of CommonWealth REIT. The undersigned
shareholder of CommonWealth REIT, a Maryland real estate investment trust, or
the Company, hereby appoints David Helfand and Orrin S. Shifrin, or any of
them, as proxies for the undersigned, with full power of substitution in each
of them, to attend the annual meeting of shareholders of the Company to be
held at Two North Riverside Plaza, 24th Floor, Chicago, IL 60606 on June 30,
2014, at 10:00 a.m. Central Time, and any postponement or adjournment
thereof, to cast on behalf of the undersigned all the votes that the
undersigned is entitled to cast at the meeting and otherwise to represent the
undersigned at the meeting with all powers possessed by the undersigned if
personally present at the meeting. The undersigned hereby acknowledges
receipt of the notice of annual meeting of shareholders and of the
accompanying proxy statement, each of which is incorporated herein by
reference, and revokes any proxy heretofore given with respect to the
meeting. THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL BE CAST AS
INSTRUCTED ON THE REVERSE SIDE HEREOF. IF THIS PROXY IS EXECUTED, BUT NO
INSTRUCTION IS GIVEN, THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL
BE CAST "FOR" THE NOMINEES FOR TRUSTEE IN PROPOSAL 1 AND FOR
PROPOSALS 2, 3, 4 AND 5. ADDITIONALLY, TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL BE CAST
BY THE PROXIES, IN THEIR DISCRETION, ON ANY OTHER MATTER THAT MAY PROPERLY
COME BEFORE THE MEETING OR ANY POSTPONEMENT OR ADJOURNMENT THEREOF. See
reverse for voting instructions. Address Changes: (If you noted any Address
Changes above, please mark the corresponding box on the reverse side.)
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