Pre-Effective Amendment to Registration Statement for Securities of a Real Estate Company — Form S-11 Filing Table of Contents
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1: S-11/A Pre-Effective Amendment to Registration Statement HTML 1.99M
for Securities of a Real Estate Company
2: EX-3.2 Articles of Incorporation/Organization or By-Laws HTML 154K
3: EX-3.3 Articles of Incorporation/Organization or By-Laws HTML 69K
4: EX-3.4 Articles of Incorporation/Organization or By-Laws HTML 8K
5: EX-5.1 Opinion re: Legality HTML 16K
6: EX-8.1 Opinion re: Tax Matters HTML 17K
7: EX-23.1 Consent of Experts or Counsel HTML 7K
EX-3.2 — Articles of Incorporation/Organization or By-Laws
FORM OF FIRST ARTICLES OF AMENDMENT AND RESTATEMENT
FIRST: NorthEnd Income Property Trust Inc., a Maryland corporation, desires to amend
and restate its charter as currently in effect and as hereinafter amended.
SECOND: The following provisions are all the provisions of the charter currently in
effect and as hereinafter amended:
ARTICLE I
NAME
The name of the corporation (the “Corporation”) is: NorthEnd Income Property Trust Inc.
ARTICLE II
PURPOSES AND POWERS
The purposes for which the Corporation is formed are to engage in any lawful act or activity
(including, without limitation or obligation, engaging in business as a real estate investment
trust under the Internal Revenue Code of 1986, as amended, or any successor statute (the “Code”))
for which corporations may be organized under the general laws of the State of Maryland as now or
hereafter in force.
ARTICLE III
PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT
The address of the principal office of the Corporation in the State of Maryland is c/o The
Corporation Trust Incorporated, 300 East Lombard Street, Baltimore, Maryland21202. The name and
address of the resident agent of the Corporation is The Corporation Trust Incorporated, 300 East
Lombard Street, Baltimore, Maryland21202. The resident agent is a Maryland corporation.
ARTICLE IV
DEFINITIONS
As used in the Charter, the following terms shall have the following meanings unless the
context otherwise requires:
Acquisition Expenses. The term “Acquisition Expenses” shall mean any and all expenses
incurred by the Corporation, the Advisor, or any Affiliate of either in connection with the
selection, acquisition or development of any Asset, whether or not acquired, including, without
limitation, legal fees and expenses, travel and communications expenses, costs of appraisals,
nonrefundable option payments on property not acquired, accounting fees and expenses and title
insurance premiums.
Acquisition Fee. The term “Acquisition Fee” shall mean any and all fees and
commissions, exclusive of Acquisition Expenses, paid by any Person to any other Person (including
any fees or
commissions paid by or to any Affiliate of the Corporation or the Advisor) in connection with
making or investing in Real Estate Related Assets or the purchase, development or construction of a
Property, including real estate commissions, selection fees, nonrecurring management fees, loan
fees, points or any other fees of a similar nature. Excluded shall be development fees and
construction fees paid to any Person not affiliated with the Sponsor in connection with the actual
development and construction of a project.
Advisor or Advisors. The term “Advisor” or “Advisors” shall mean the Person or
Persons, if any, appointed, employed or contracted with by the Corporation pursuant to Section 8.1
hereof and responsible for directing or performing the day-to-day business affairs of the
Corporation, including any Person to whom such Advisor subcontracts all or substantially all of
such functions.
Advisory Agreement. The term “Advisory Agreement” shall mean the agreement between
the Corporation, the Advisor and the other parties named therein pursuant to which the Advisor will
direct or perform the day-to-day business affairs of the Corporation.
Affiliate or Affiliated. The term “Affiliate” or “Affiliated” shall mean, with
respect to any Person, (i) any Person directly or indirectly owning, controlling or holding, with
the power to vote, ten percent or more of the outstanding voting securities of such other Person;
(ii) any Person ten percent or more of whose outstanding voting securities are directly or
indirectly owned, controlled or held, with the power to vote, by such other Person; (iii) any
Person directly or indirectly controlling, controlled by or under common control with such other
Person; (iv) any executive officer, director, trustee or general partner of such other Person; and
(v) any legal entity for which such Person acts as an executive officer, director, trustee or
general partner.
Aggregate Share Ownership Limit. The term “Aggregate Share Ownership Limit” shall
mean not more than 9.8% in value of the aggregate of the outstanding Shares.
Asset. The term “Asset” shall mean any Property, Real Estate Related Asset or other
investment (other than investments in bank accounts, money market funds, marketable securities or
other current assets) owned by the Corporation, directly or indirectly through one or more of its
Affiliates, and any other investment made by the Corporation, directly or indirectly through one or
more of its Affiliates.
Average Invested Assets. The term “Average Invested Assets” shall mean, for a
specified period, the average of the aggregate book value of the assets of the Corporation
invested, directly or indirectly, in Real Estate and Real Estate Related Assets, before deducting
depreciation, bad debts or other non-cash reserves, computed by taking the average of such values
at the end of each month during such period.
Beneficial Ownership. The term “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 interests that would be treated as owned through the application of
Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The terms “Beneficial
Owner,”“Beneficially Owns” and “Beneficially Owned” shall have the correlative meanings.
Board or Board of Directors. The term “Board” or “Board of Directors” shall mean the
board of directors of the Corporation.
Business Day. The term “Business Day” shall mean any day on which the NYSE is open
for trading.
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Bylaws. The term “Bylaws” shall mean the bylaws of the Corporation, as amended from
time to time.
Charitable Beneficiary. The term “Charitable Beneficiary” shall mean one or more
beneficiaries of the Charitable Trust as determined pursuant to Section 6.2.6, provided that each
such organization must be described in Section 501(c)(3) of the Code and contributions to each such
organization must be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of
the Code.
Charitable Trust. The term “Charitable Trust” shall mean any trust provided for in
Section 6.2.1.
Charitable Trustee. The term “Charitable Trustee” shall mean the Person unaffiliated
with the Corporation and a Prohibited Owner that is appointed by the Corporation to serve as
trustee of the Charitable Trust.
Charter. The term “Charter” shall mean the charter of the Corporation.
Code. The term “Code” shall have the meaning as provided in Article II herein.
Commencement of the Initial Public Offering. The term “Commencement of the Initial
Public Offering” shall mean the date that the Securities and Exchange Commission declares effective
the registration statement filed under the Securities Act for the Initial Public Offering.
Common Share Ownership Limit. The term “Common Share Ownership Limit” shall mean not
more than 9.8% (in value or in number of Shares, whichever is more restrictive) of the aggregate of
the outstanding Common Shares.
Common Shares. The term “Common Shares” shall have the meaning as provided in Section
5.1 herein.
Competitive Real Estate Commission. The term “Competitive Real Estate Commission”
shall mean a real estate or brokerage commission paid for the purchase or sale of a Property that
is reasonable, customary and competitive in light of the size, type and location of the Property.
Constructive Ownership. The term “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 interests that would be treated as owned through the application of
Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code. The terms “Constructive
Owner,”“Constructively Owns,”“Constructively Owned” and “Constructively” (as the context
requires) shall have the correlative meanings.
Contract Purchase Price. The term “Contract Purchase Price” shall mean the amount
actually paid or allocated in respect of the purchase, development, construction or improvement of
a Property or the amount of funds advanced with respect to a Mortgage, or the amount actually paid
or allocated in respect of the purchase of other Assets, in each case exclusive of Acquisition
Expenses.
Corporation. The term “Corporation” shall have the meaning as provided in Article I
herein.
Director. The term “Director” shall have the meaning as provided in Section 7.1
herein.
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Distributions. The term “Distributions” shall mean any distributions of money or
other property, pursuant to Section 5.5 hereof, by the Corporation to owners of Shares, including
distributions that may constitute a return of capital for federal income tax purposes.
Distributor. The term “Distributor” shall mean Merrill Lynch, Pierce, Fenner & Smith
Incorporated, a Delaware corporation, or such other Person selected by the Board to act as the
distributor for an Offering.
Excepted Holder. The term “Excepted Holder” shall mean a Stockholder for whom an
Excepted Holder Limit is created by Article VI or by the Board of Directors pursuant to Section
6.1.7.
Excepted Holder Limit. The term “Excepted Holder Limit” shall mean with respect to
any Stockholder, the percentage limit established by the Board of Directors pursuant to Section
6.1.7 for such Stockholder, subject to adjustment pursuant to Section 6.1.8.
Excess Amount. The term “Excess Amount” shall have the meaning as provided in Section
8.10 herein.
Gross Proceeds. The term “Gross Proceeds” shall mean the aggregate purchase price of
all Shares sold for the account of the Corporation through an Offering, without deduction for
Selling Commissions, volume discounts, any marketing support and due diligence expense
reimbursement or Organization and Offering Expenses. For the purpose of computing Gross Proceeds,
the purchase price of any Share for which reduced Selling Commissions are paid to the Distributor
or a Soliciting Dealer (where net proceeds to the Corporation are not reduced) shall be deemed to
be the full amount of the offering price per Share pursuant to the Prospectus for such Offering
without reduction.
Indemnitee. The term “Indemnitee” shall have the meaning as provided in Section
12.2(b) herein.
Independent Appraiser. The term “Independent Appraiser” shall mean a Person with no
material current or prior business or personal relationship with the Advisor or the Directors
(other than having contemporaneously or previously provided appraisal services with respect to any
Properties or Assets of the Corporation), and who is engaged to a substantial extent in the
business of rendering opinions regarding the value of Real Property and/or other Assets of the type
held by the Corporation. Membership in a nationally recognized appraisal society such as the
American Institute of Real Estate Appraisers or the Society of Real Estate Appraisers shall be
conclusive evidence of being engaged to a substantial extent in the business of rendering opinions
regarding the value of Real Property.
Independent Director. The term “Independent Director” shall mean a Director who is
not on the date of determination, and within the last two years from the date of determination has
not been, directly or indirectly associated with the Sponsor or the Advisor by virtue of (i)
ownership of an interest in the Sponsor, the Advisor or any of their Affiliates, other than the
Corporation (other than ownership of less than one percent of any such entity that is a publicly
traded company), (ii) employment by the Sponsor, the Advisor or any of their Affiliates, (iii)
service as an officer or director of the Sponsor, the Advisor or any of their Affiliates, other
than as a Director of the Corporation, (iv) performance of services, other than as a Director, for
the Corporation, (v) service as a director or trustee of more than three real estate investment
trusts organized by the Sponsor or advised by the Advisor, or (vi) maintenance of a material
business or professional relationship with the Sponsor, the Advisor or any of their Affiliates. A
business or professional relationship is considered “material” if the aggregate gross revenue
derived by the Director from the Sponsor, the Advisor and their Affiliates exceeds five percent of
either the Director’s annual gross revenue during either of the last two years or the Director’s
net worth on a fair market value
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basis. An indirect association with the Sponsor or the Advisor shall include circumstances in
which a Director’s spouse, parent, child, sibling, mother- or father-in-law, son- or
daughter-in-law or brother- or sister-in-law is or has been associated with the Sponsor, the
Advisor, any of their Affiliates or the Corporation.
Initial Date. The term “Initial Date” shall mean the date on which Shares are first
issued in the Initial Public Offering.
Initial Investment. The term “Initial Investment” shall mean that portion of the
equity interests in the Corporation (or a consolidated subsidiary thereof) issued to the Sponsor or
its Affiliate in exchange for $200,000 of the initial capitalization of the Corporation (or a
consolidated subsidiary thereof) pursuant to Section II.A. of the NASAA REIT Guidelines.
Initial Public Offering. The term “Initial Public Offering” shall mean the first
Offering pursuant to an effective registration statement filed under the Securities Act.
Invested Capital. The term “Invested Capital” shall mean the amount calculated by
multiplying the total number of Shares purchased by Stockholders by the issue price at the time of
such purchase, reduced by the portion of any Distribution that is attributable to Net Sales
Proceeds and by any amounts paid by the Corporation to repurchase Shares pursuant to the
Corporation’s plan for the repurchase of Shares.
Joint Ventures. The term “Joint Ventures” shall mean those joint venture or
partnership arrangements (excluding the Corporations’ general partnership interest in the Operating
Partnership) in which the Corporation or any of its subsidiaries is a co-venturer or general
partner established to acquire or hold Assets.
Leverage. The term “Leverage” shall mean the aggregate amount of indebtedness of the
Corporation for money borrowed (including purchase money mortgage loans) outstanding at any time,
both secured and unsecured.
Listing. The term “Listing” shall mean the listing of the Common Shares on a national
securities exchange, but shall not include the listing of the Common Shares on the NASDAQ Capital Market, over-the-counter market or on the Pink OTC Markets Inc. Upon such Listing, the Common Shares shall be deemed Listed.
Market Price. The term “Market Price” on any date shall mean, with respect to any
class or series of outstanding Shares, the Closing Price for such Shares on such date. The
“Closing Price” 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 in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on the NYSE or, if such
Shares are not listed or admitted to trading on the NYSE, as reported on the principal consolidated
transaction reporting system with respect to securities listed on the principal national securities
exchange on which such Shares are listed or admitted to trading or, if such Shares are not listed
or admitted to trading on any national securities exchange, the last quoted price, or, if not so
quoted, the average of the high bid and low asked prices in the principal automated quotation
system that may then be in use or, if such Shares are not quoted by any such system, the average of
the closing bid and asked prices as furnished by a professional market maker making a market in
such Shares selected by the Board of Directors or, in the event that no trading price is available
for such Shares, the fair market value of Shares, as determined in good faith by the Board of
Directors.
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MGCL. The term “MGCL” shall mean the Maryland General Corporation Law, as amended
from time to time.
Mortgages. The term “Mortgages” shall mean, in connection with mortgage financing
provided, invested in, participated in or purchased by the Corporation, all of the notes, deeds of
trust, security interests or other evidences of indebtedness or obligations, which are secured or
collateralized by Real Property owned by the borrowers under such notes, deeds of trust, security
interests or other evidences of indebtedness or obligations.
NASAA REIT Guidelines. The term “NASAA REIT Guidelines” shall mean the Statement of
Policy Regarding Real Estate Investment Trusts published by the North American Securities
Administrators Association on May 7, 2007 and in effect on the Initial Date.
Net Assets. The term “Net Assets” shall mean the total Assets of the Corporation
(other than intangibles) at cost, before deducting depreciation, reserves for bad debts or other
non-cash reserves, less total liabilities, calculated quarterly by the Corporation on a basis
consistently applied.
Net Asset Value. The term “Net Asset Value” shall mean the value as of the end of
each Business Day determined by subtracting the Corporation’s liabilities, including any fees
payable to the Advisor or the Distributor, Organization and Offering Expenses and other expenses
attributable to the Corporation’s operations, from the Assets.
Net Asset Value Per Share. The term “Net Asset Value Per Share” shall mean the value
per Share as of the end of each Business Day determined by dividing the Net Asset Value by the
number of Common Shares outstanding as of the end of business on such day prior to giving effect to
any Share purchases or redemptions to be effected on such day.
Net Income. The term “Net Income” shall mean for any period, the Corporation’s total
revenues applicable to such period, less the total expenses applicable to such period other than
additions to reserves for depreciation, bad debts or other similar non-cash reserves.
Net Sales Proceeds. The term “Net Sales Proceeds” shall mean in the case of a
transaction described in clause (i)(A) of the definition of Sale, the proceeds of any such
transaction less the amount of selling expenses incurred by or on behalf of the Corporation,
including all real estate commissions, closing costs and legal fees and expenses. In the case of a
transaction described in clause (i)(B) of such definition, Net Sales Proceeds means the proceeds of
any such transaction less the amount of selling expenses incurred by or on behalf of the
Corporation, including any legal fees and expenses and other selling expenses incurred in
connection with such transaction. In the case of a transaction described in clause (i)(C) of such
definition, Net Sales Proceeds means the proceeds of any such transaction actually distributed to
the Corporation or the Operating Partnership from the Joint Venture less the amount of any selling
expenses, including legal fees and expenses incurred by or on behalf of the Corporation (other than
those paid by the Joint Venture). In the case of a transaction or series of transactions described
in clause (i)(D) of the definition of Sale, Net Sales Proceeds means the proceeds of any such
transaction (including the aggregate of all payments under a Mortgage on or in satisfaction thereof
other than regularly scheduled interest payments) less the amount of selling expenses incurred by
or on behalf of the Corporation, including all commissions, closing costs and legal fees and
expenses. In the case of a transaction described in clause (i)(E) of such definition, Net Sales
Proceeds means the proceeds of any such transaction less the amount of selling expenses incurred by
or on behalf of the Corporation, including any legal fees and expenses and other selling expenses
incurred in connection with such transaction. In the case of a transaction described in clause
(ii) of the definition of Sale, Net Sales Proceeds means the proceeds of such transaction or series
of transactions less all amounts generated
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thereby which are reinvested in one or more Assets within 180 days thereafter and less the amount
of any real estate commissions, closing costs, and legal fees and expenses and other selling
expenses incurred by or allocated to the Corporation or the Operating Partnership in connection
with such transaction or series of transactions. Net Sales Proceeds shall also include any amounts
that the Corporation determines, in its discretion, to be economically equivalent to proceeds of a
Sale. Net Sales Proceeds shall not include any reserves established by the Corporation in its sole
discretion.
NYSE. The term “NYSE” shall mean the New York Stock Exchange.
Offering. The term “Offering” shall mean any offering and sale of Shares.
Operating Partnership. The term “Operating Partnership” shall mean NorthEnd Operating
Partnership LP, a Delaware limited partnership, through which the Corporation may own Assets.
Organization and Offering Expenses. The term “Organization and Offering Expenses”
shall mean any and all costs and expenses incurred by and to be paid from the Assets of the
Corporation in connection with the formation, qualification and registration of the Corporation,
and the marketing and distribution of Shares, including, without limitation, total underwriting and
brokerage discounts and commissions (including fees of the underwriters’ attorneys), expenses for
printing, engraving, amending, supplementing, mailing and distributing costs, salaries of employees
while engaged in sales activity, telephone and other telecommunications costs, all advertising and
marketing expenses (including the costs related to investor and broker-dealer sales meetings),
charges of transfer agents, registrars, trustees, escrow holders, depositories, experts, fees,
expenses and taxes related to the filing, registration and qualification of the sale of the Shares
under federal and state laws, including taxes and fees and accountants’ and attorneys’ fees.
Person. The term “Person” shall mean an individual, corporation, partnership, estate,
trust (including a trust qualified under Sections 401(a) or 501(c)(17) of the Code), a portion of a
trust permanently set aside for or to be used exclusively for the purposes described in Section
642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the
Code, joint stock company or other entity and also includes a group as that term is used for
purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, and a group to
which an Excepted Holder Limit applies.
Preferred Shares. The term “Preferred Shares” shall have the meaning as provided in
Section 5.1 herein.
Prohibited Owner. The term “Prohibited Owner” shall mean, with respect to any
purported Transfer, any Person who, but for the provisions of Section 6.1.1, would Beneficially Own
or Constructively Own Shares, and if appropriate in the context, shall also mean any Person who
would have been the record owner of Shares that the Prohibited Owner would have so owned.
Property or Properties. The term “Property” or “Properties” shall mean, as the
context requires, any, or all, respectively, of the Real Property acquired by the Corporation,
directly or indirectly through joint venture arrangements or other partnership or investment
interests.
Prospectus. The term “Prospectus” shall mean the same as that term is defined in
Section 2(10) of the Securities Act, including a preliminary prospectus, an offering circular as
described in Rule 256 of the General Rules and Regulations under the Securities Act, or, in the
case of an intrastate offering, any document by whatever name known, utilized for the purpose of
offering and selling Securities to the public.
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Real Estate Related Asset. The term “Real Estate Related Asset” shall mean any
investments by the Corporation or the Operating Partnership in (a) mortgage, mezzanine, bridge and
other loans on Real Property, (b) equity securities such as common stocks, preferred stocks and
convertible securities of public or private real estate companies, and (c) debt securities such as
collateralized mortgage backed securities, commercial mortgages and other debt securities.
Real Property or Real Estate. The term “Real Property” or “Real Estate” shall mean
land, rights in land (including leasehold interests), and any buildings, structures, improvements,
furnishings, fixtures and equipment located on or used in connection with land and rights or
interests in land.
Reinvestment Plan. The term “Reinvestment Plan” shall have the meaning as provided in
Section 5.10 herein.
REIT. The term “REIT” shall mean a real estate investment trust within the meaning of
the REIT Provisions of the Code.
REIT Provisions of the Code. The term “REIT Provisions of the Code” shall mean
Sections 856 through 860 of the Code and any successor or other provisions of the Code relating to
real estate investment trusts (including provisions as to the attribution of ownership of
beneficial interests therein) and the regulations promulgated thereunder.
Restriction Termination Date. The term “Restriction Termination Date” shall mean the
first day after the Initial Date on which the Board of Directors determines that it is no longer in
the best interests of the Corporation to attempt to, or continue to, qualify as a REIT or that
compliance with the restrictions and limitations on Beneficial Ownership, Constructive Ownership
and Transfers of Shares set forth herein is no longer required in order for the Corporation to
qualify as a REIT.
Roll-Up Entity. The term “Roll-Up Entity” shall mean a partnership, real estate
investment trust, corporation, trust or similar entity that would be created or would survive after
the successful completion of a proposed Roll-Up Transaction.
Roll-Up Transaction. The term “Roll-Up Transaction” shall mean a transaction
involving the acquisition, merger, conversion or consolidation either directly or indirectly of the
Corporation and the issuance of securities of a Roll-Up Entity to the Stockholders. Such term does
not include:
(a) a transaction involving Securities of the Corporation that have been for at least twelve
months listed on a national securities exchange or traded through Nasdaq’s National Market System;
or
(b) a transaction involving the conversion to corporate, trust or association form of only the
Corporation, if, as a consequence of the transaction, there will be no significant adverse change
in any of the following:
(i) Stockholders’ voting rights;
(ii) the term of existence of the Corporation;
(iii) Sponsor or Advisor compensation; or
(iv) the Corporation’s investment objectives.
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Sale or Sales. The term “Sale” or “Sales” shall mean (i) any transaction or series of
transactions whereby: (A) the Corporation or the Operating Partnership directly or indirectly
(except as described in other subsections of this definition) sells, grants, transfers, conveys, or
relinquishes its ownership of any Property or portion thereof, including the lease of any Property
consisting of a building only, and including any event with respect to any Property which gives
rise to a significant amount of insurance proceeds or condemnation awards; (B) the Corporation or
the Operating Partnership directly or indirectly (except as described in other subsections of this
definition) sells, grants, transfers, conveys, or relinquishes its ownership of all or
substantially all of the interest of the Corporation or the Operating Partnership in any Joint
Venture in which it is a co-venturer or partner; (C) any Joint Venture directly or indirectly
(except as described in other subsections of this definition) in which the Corporation or the
Operating Partnership as a co-venturer or partner sells, grants, transfers, conveys, or
relinquishes its ownership of any Property or portion thereof, including any event with respect to
any Property which gives rise to insurance claims or condemnation awards; (D) the Corporation or
the Operating Partnership directly or indirectly (except as described in other subsections of this
definition) sells, grants, conveys or relinquishes its interest in any Real Estate Related Asset or
portion thereof (including with respect to any Mortgage, all payments thereunder or in satisfaction
thereof other than regularly scheduled interest payments) of amounts owed pursuant to such Mortgage
and any event which gives rise to a significant amount of insurance proceeds or similar awards; or
(E) the Corporation or the Operating Partnership directly or indirectly (except as described in
other subsections of this definition) sells, grants, transfers, conveys, or relinquishes its
ownership of any other Asset not previously described in this definition or any portion thereof,
but (ii) not including any transaction or series of transactions specified in clause (i) (A)
through (E) above in which the proceeds of such transaction or series of transactions are
reinvested by the Corporation in one or more Assets within 180 days thereafter.
SDAT. The term “SDAT” shall have the meaning as provided in Section 5.4 herein.
Securities. The term “Securities” shall mean any of the following issued by the
Corporation, as the text requires: Shares, any other stock, shares or other evidences of equity or
beneficial or other interests, voting trust certificates, bonds, debentures, notes or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in
general any instruments commonly known as “securities” or any certificates of interest, shares or
participations in, temporary or interim certificates for, receipts for, guarantees of, or warrants,
options or rights to subscribe to, purchase or acquire, any of the foregoing.
Securities Act. The term “Securities Act” shall mean the Securities Act of 1933, as
amended from time to time, or any successor statute thereto. Reference to any provision of the
Securities Act shall mean such provision as in effect from time to time, as the same may be
amended, and any successor provision thereto, as interpreted by any applicable regulations as in
effect from time to time.
Selling Commissions. The term “Selling Commissions” shall mean any and all
commissions payable to underwriters, dealer managers or other broker-dealers in connection with the
sale of Shares, including, without limitation, commissions payable to the Distributor.
Shares. The term “Shares” shall mean shares of stock of the Corporation of any class
or series, including Common Shares or Preferred Shares.
Soliciting Dealers. The term “Soliciting Dealers” shall mean those broker-dealers
that are members of the Financial Industry Regulatory Authority, Inc., or that are exempt from
broker-dealer registration, and that, in either case, enter into participating broker or other
agreements with the Distributor to sell Shares.
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Sponsor. The term “Sponsor” shall mean any Person which (a) is directly or indirectly
instrumental in organizing, wholly or in part, the Corporation, (b) will control, manage or
participate in the management of the Corporation, and any Affiliate of any such Person, (c) takes
the initiative, directly or indirectly, in founding or organizing the Corporation, either alone or
in conjunction with one or more other Persons, (d) receives a material participation in the
Corporation in connection with the founding or organizing of the business of the Corporation, in
consideration of services or property, or both services and property, (e) has a substantial number
of relationships and contacts with the Corporation, (f) possesses significant rights to control
Properties, (g) receives fees for providing services to the Corporation which are paid on a basis
that is not customary in the industry or (h) provides goods or services to the Corporation on a
basis which was not negotiated at arm’s-length with the Corporation. “Sponsor” does not include
any Person whose only relationship with the Corporation is that of an independent property manager
and whose only compensation is as such, or wholly independent third parties such as attorneys,
accountants and underwriters whose only compensation is for professional services.
Stockholder List. The term “Stockholder List” shall have the meaning as provided in
Section 11.5 herein.
Stockholders. The term “Stockholders” shall mean the holders of record of the Shares
as maintained in the books and records of the Corporation or its transfer agent.
Termination Date. The term “Termination Date” shall mean the date of termination of
the Advisory Agreement.
Total Operating Expenses. The term “Total Operating Expenses” shall mean all costs
and expenses paid or incurred by the Corporation, as determined under generally accepted accounting
principles, that are in any way related to the operation of the Corporation or to corporate
business, including advisory fees, but excluding (a) the expenses of raising capital such as
Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing,
registration, and other fees, printing and other such expenses and tax incurred in connection with
the issuance, distribution, Transfer, registration and Listing of the Shares, (b) interest
payments, (c) taxes, (d) non-cash expenditures such as depreciation, amortization and bad debt
reserves, (e) incentive fees paid in compliance with the NASAA REIT Guidelines; (f) Acquisition
Fees and Acquisition Expenses, (g) real estate commissions on the Sale of Property, and (h) other
fees and expenses connected with the management and ownership of real estate interests, mortgage
loans or other property (including the costs of foreclosure, insurance premiums, legal services,
maintenance, repair, and improvement of property).
Transfer. The term “Transfer” shall mean any issuance, sale, transfer, gift,
assignment, devise or other disposition, as well as any other event that causes any Person to
acquire Beneficial Ownership or Constructive Ownership, or any agreement to take any such actions
or cause any such events, of Shares or the right to vote or receive Distributions, including (a)
the granting or exercise of any option (or any disposition of any option), (b) 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 (c) 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, Constructively Owned or
Beneficially Owned and whether by operation of law or otherwise. The terms “Transferring” and
“Transferred” shall have the correlative meanings.
2%/25% Guidelines. The term “2%/25% Guidelines” shall have the meaning as provided in
Section 8.10 herein.
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Unimproved Real Property. The term “Unimproved Real Property” shall mean Property in
which the Corporation has an equity interest that was not acquired for the purpose of producing
rental or other operating income that has no development or construction in process and for which
no development or construction is planned, in good faith, to commence within one year.
ARTICLE V
STOCK
Section 5.1 Authorized Shares. The Corporation has authority to issue 1,000,000,000
shares of common stock, $0.01 par value per share (“Common Shares”), and 50,000,000 shares of
preferred stock, $0.01 par value per share (“Preferred Shares”). The aggregate par value of all
authorized Shares having par value is $10,500,000. All Shares shall be fully paid and
nonassessable when issued. If Shares of one class are classified or reclassified into Shares of
another class pursuant to this Article V, the number of authorized Shares of the former class shall
be automatically decreased and the number of Shares of the latter class shall be automatically
increased, in each case by the number of Shares so classified or reclassified, so that the
aggregate number of Shares of all classes that the Corporation has authority to issue shall not be
more than the total number of Shares set forth in the first sentence of this paragraph. The Board
of Directors, with the approval of a majority of the entire Board and without any action by the
Stockholders, may amend the Charter from time to time to increase or decrease the aggregate number
of Shares or the number of Shares of any class or series that the Corporation has authority to
issue.
Section 5.2 Common Shares.
Section 5.2.1 Common Shares Subject to Terms of Preferred Shares. The Common Shares
shall be subject to the express terms of any series of Preferred Shares.
Section 5.2.2 Description. Subject to the provisions of Article VI and except as may
otherwise be specified in the terms of any class or series of Common Shares, each Common Share
shall entitle the holder thereof to one vote per share on all matters upon which Stockholders are
entitled to vote pursuant to Section 11.2 hereof. The Board may classify or reclassify any
unissued Common Shares from time to time in one or more classes or series of Shares; provided,
however, that the voting rights per Share (other than any publicly held Share) sold in a private
offering shall not exceed the voting rights which bear the same relationship to the voting rights
of a publicly held Share as the consideration paid to the Corporation for each privately offered
Share bears to the book value of each outstanding publicly held Share.
Section 5.2.3 Rights Upon Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up, or any Distribution of the Assets of the Corporation, the
aggregate Assets available for Distribution to holders of the Common Shares shall be determined in
accordance with applicable law. Each holder of Common Shares of a particular class shall be
entitled to receive, ratably with each other holder of Common Shares of such class, that portion of
such aggregate Assets available for Distribution as the number of outstanding Common Shares of such
class held by such holder bears to the total number of outstanding Common Shares of such class then
outstanding.
Section 5.2.4 Voting Rights. Except as may be provided otherwise in the Charter, and
subject to the express terms of any series of Preferred Shares, the holders of the Common Shares
shall have the exclusive right to vote on all matters (as to which a common stockholder shall be
entitled to vote pursuant to applicable law) at all meetings of the Stockholders.
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Section 5.3 Preferred Shares. The Board may classify any unissued Preferred Shares
and reclassify any previously classified but unissued Preferred Shares of any series from time to
time, in one or more classes or series of Shares; provided, however, that the voting rights per
Share (other than any publicly held Share) sold in a private offering shall not exceed the voting
rights which bear the same relationship to the voting rights of a publicly held Share as the
consideration paid to the Corporation for each privately offered Share bears to the book value of
each outstanding publicly held Share.
Section 5.4 Classified or Reclassified Shares. Prior to issuance of classified or
reclassified Shares of any class or series, the Board by resolution shall: (a) designate that
class or series to distinguish it from all other classes and series of Shares; (b) specify the
number of Shares to be included in the class or series; (c) set or change, subject to the
provisions of Article VI and subject to the express terms of any class or series of Shares
outstanding at the time, the preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other Distributions, qualifications and terms and conditions of
redemption for each class or series; and (d) cause the Corporation to file articles supplementary
with the State Department of Assessments and Taxation of Maryland (“SDAT”). Any of the terms of
any class or series of Shares set or changed pursuant to clause (c) of this Section 5.4 may be made
dependent upon facts or events ascertainable outside the Charter (including determinations by the
Board or other facts or events within the control of the Corporation) and may vary among holders
thereof, provided that the manner in which such facts, events or variations shall operate upon the
terms of such class or series of Shares is clearly and expressly set forth in the articles
supplementary or other charter document.
Section 5.5 Dividends and Distributions. The Board of Directors may from time to time
authorize the Corporation to declare and pay to Stockholders such dividends or Distributions, in
cash or other Assets of the Corporation or in Securities of the Corporation or from any other
source as the Board of Directors in its discretion shall determine. The Board of Directors shall
endeavor to authorize the Corporation to declare and pay such dividends and Distributions as shall
be necessary for the Corporation to qualify as a REIT under the Code; however, Stockholders shall
have no right to any dividend or Distribution unless and until authorized by the Board and declared
by the Corporation. The exercise of the powers and rights of the Board of Directors pursuant to
this Section 5.5 shall be subject to the provisions of any class or series of Shares at the time
outstanding. The receipt by any Person in whose name any Shares are registered on the records of
the Corporation or by his or her duly authorized agent shall be a sufficient discharge for all
dividends or Distributions payable or deliverable in respect of such Shares and from all liability
to see to the application thereof. Distributions in kind shall not be permitted, except for
Distributions of readily marketable securities, Distributions of beneficial interests in a
liquidating trust established for the dissolution of the Corporation and the liquidation of its
Assets in accordance with the terms of the Charter or Distributions in which (a) the Board advises
each Stockholder of the risks associated with direct ownership of the property, (b) the Board
offers each Stockholder the election of receiving such in-kind Distributions, and (c) in-kind
Distributions are made only to those Stockholders that accept such offer.
Section 5.6 Charter and Bylaws. The rights of all Stockholders and the terms of all
Shares are subject to the provisions of the Charter and the Bylaws.
Section 5.7 No Issuance of Share Certificates. Unless otherwise provided by the Board
of Directors, the Corporation shall not issue stock certificates. A Stockholder’s investment shall
be recorded on the books of the Corporation. To Transfer his or her Shares, a Stockholder shall
submit an executed form to the Corporation, which form shall be provided by the Corporation upon
request. Such Transfer will also be recorded on the books of the Corporation. Upon issuance or
Transfer of Shares, the Corporation will provide the Stockholder with information concerning his or
her rights with regard to such Shares, as required by the Bylaws and the MGCL or other applicable
law.
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Section 5.8 Suitability of Stockholders. Until Listing, the following provisions
shall apply:
Section 5.8.1 Investor Suitability Standards. To become a Stockholder in the
Corporation, if such prospective Stockholder is an individual (including an individual beneficiary
of a purchasing individual retirement account), or if the prospective Stockholder is a fiduciary
(such as a trustee of a trust or corporate pension or profit sharing plan, or other tax-exempt
organization, or a custodian under a Uniform Gifts to Minors Act), such individual or fiduciary, as
the case may be, must represent to the Corporation, among other requirements as the Corporation may
require from time to time, that such individual (or, in the case of a fiduciary, that the fiduciary
account, the donor who directly or indirectly supplies the funds to purchase the Shares or the
beneficiary of the fiduciary account) meets the minimum annual gross income level or the net worth
(excluding home, home furnishings and automobiles) level contained in any Prospectus of the
Corporation. The income and net worth standards above do not apply to participant-directed
purchases under a 401(k) or other defined contribution plan where the authorized plan fiduciary has
approved Common Shares or Preferred Shares as an available investment under such plan.
Section 5.8.2
Determination of Suitability of Sale. The sponsor and each Person selling Shares on
behalf of the Corporation shall make every reasonable effort to determine that the purchase of
Shares by Stockholders is a suitable and appropriate investment for such Stockholder. In making
this determination, each Person selling Shares on behalf of the Corporation shall ascertain that
the prospective Stockholder: (a) meets the minimum income and net worth standards established for
the Corporation; (b) can reasonably benefit from the Corporation based on the prospective
Stockholder’s overall investment objectives and portfolio structure; (c) is able to bear the
economic risk of the investment based on the prospective Stockholder’s overall financial situation;
and (d) has apparent understanding of (1) the fundamental risks of the investment; (2) the risk
that the Stockholder may lose the entire investment; (3) the potential lack of liquidity of the
Shares; (4) the restrictions on transferability of the Shares; and (5) the tax consequences of the
investment. Each Person selling Shares on behalf of the Corporation shall make this determination
on the basis of information it has obtained from a prospective Stockholder. Relevant information
for this purpose will include at least the age, investment objectives, investment experiences,
income, net worth, financial situation, and other investments of the prospective Stockholder, as
well as any other pertinent factors. Each Person selling Shares on behalf of the Corporation shall
maintain records of the information used to determine that an investment in Shares is suitable and
appropriate for a Stockholder. Each Person selling Shares on behalf of the Corporation shall
maintain these records for at least six years.
Section 5.8.3 Minimum Investment. Subject to certain individual state requirements and the issuance
of Shares under the Reinvestment Plan, no initial sale of Shares will be permitted of less than $10,000.
Section 5.9 Repurchase of Shares. The Board may establish, from time to time, a
program or programs by which the Corporation voluntarily repurchases Shares from its Stockholders;
provided, however, that such repurchase does not impair the capital or operations of the
Corporation. The Sponsor, Advisor, members of the Board or any Affiliates thereof may not receive
any fees arising out of the repurchase of Shares by the Corporation.
Section 5.10 Distribution Reinvestment Plans. The Board may establish, from time to
time, a Distribution reinvestment plan or plans (each, a “Reinvestment Plan”). Under any such
Reinvestment Plan, (a) all material information regarding Distributions to the Stockholders and the
effect of reinvesting such Distributions, including the tax consequences thereof, shall be provided
to the Stockholders not less often than annually, and (b) each Stockholder participating in such
Reinvestment Plan shall have a reasonable opportunity to withdraw from the Reinvestment Plan not
less often than annually after receipt of the information required in clause (a) above.
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ARTICLE VI
RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES
Section 6.1 Shares.
Section 6.1.1 Ownership Limitations. During the period commencing on the Initial Date
and prior to the Restriction Termination Date, but subject to Section 6.3:
(a) Basic Restrictions.
(i) (1) No Person, other than an Excepted Holder, shall Beneficially Own or Constructively Own
Shares in excess of the Aggregate Share Ownership Limit, (2) no Person, other than an Excepted
Holder, shall Beneficially Own or Constructively Own Common Shares in excess of the Common Share
Ownership Limit and (3) no Excepted Holder shall Beneficially Own or Constructively Own Shares in
excess of the Excepted Holder Limit for such Excepted Holder.
(ii) No Person shall Beneficially Own or Constructively Own Shares to the extent that such
Beneficial Ownership or Constructive Ownership of Shares would result in (A) the ownership of the
Corporation’s Shares causing the Corporation to satisfy the stock ownership requirement for being a
personal holding company under Section 542(a)(2) of the Code (without regard to whether the
ownership interest is held during the last half of a taxable year), (B) the Corporation being
“closely held” within the meaning of Section 856(h) of the Code (without regard to whether the
ownership interest is held during the last half of a taxable year), or otherwise failing to qualify
as a REIT (including, but not limited to, Beneficial Ownership or Constructive Ownership that would
result in the Corporation owning (actually or Constructively) an interest in a tenant that is
described in Section 856(d)(2)(B) of the Code if the income derived by the Corporation from such
tenant would cause the Corporation to fail to satisfy any of the gross income requirements of
Section 856(c) of the Code).
(iii) No Person shall Beneficially Own or Constructively Own shares of capital stock to the
extent that such ownership would cause any income of the Corporation that would otherwise qualify
as “rents from real property” for purposes of Section 856(d) of the Code to fail to qualify as such
(including, but not limited to, as a result of any “eligible independent contractor” that operates
a “qualified lodging facility” on behalf of a “taxable REIT subsidiary” of the Corporation (as such
terms are defined in Section 856(d)(9)(A), Section 856(d)(9)(D) and Section 856(l) of the Code,
respectively) failing to qualify as such).
(iv) Any Transfer of Shares that, if effective, would result in Shares being Beneficially
Owned by less than 100 Persons (determined under the principles of Section 856(a)(5) of the Code)
shall be void abinitio, and the intended transferee shall acquire no rights in
such Shares.
(b) Transfer in Trust. If any Transfer of Shares occurs which, if effective, would
result in any Person Beneficially Owning or Constructively Owning Shares in violation of Section
6.1.1(a)(i) (ii) or (iii);
(i) then that number of Shares the Beneficial Ownership or Constructive Ownership of which
otherwise would cause such Person to violate Section 6.1.1(a)(i) (ii) or (iii) (rounded up to the
nearest whole share) shall be automatically transferred to a Charitable Trust for the benefit of a
Charitable Beneficiary, as described in Section 6.2, effective as of the close of business on the
Business Day prior to the date of such Transfer, and such Person shall acquire no rights in such
Shares; or
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(ii) if the Transfer to the Charitable Trust described in clause (i) of this sentence would
not be effective for any reason to prevent the violation of Section 6.1.1(a)(i) (ii) or (iii), then
the Transfer of that number of Shares that otherwise would cause any Person to violate Section
6.1.1(a)(i), (ii), or (iii) shall be void abinitio, and the intended transferee
shall acquire no rights in such Shares.
Section 6.1.2 Remedies for Breach. If the Board of Directors or its designee
(including any duly authorized committee of the Board) shall at any time determine in good faith
that a Transfer or other event has taken place that results in a violation of Section 6.1.1 or that
a Person intends to acquire or has attempted to acquire Beneficial Ownership or Constructive
Ownership of any Shares in violation of Section 6.1.1 (whether or not such violation is intended),
the Board of Directors or its designee shall 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 Corporation to redeem Shares, refusing to give effect to such Transfer on the books of the
Corporation or instituting proceedings to enjoin such Transfer or other event; provided, however,
that any Transfers or attempted Transfers or other events in violation of Section 6.1.1 shall
automatically result in the Transfer to the Charitable Trust described above, and, where
applicable, such Transfer (or other event) shall be void abinitio as provided
above irrespective of any action (or non-action) by the Board of Directors or its designee;
provided further, however, that this Section 6.1.2 shall not require the Board of Directors to
refuse to redeem Shares or to void any prior redemptions of Shares.
Section 6.1.3 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 6.1.1(a), or any Person who would have owned Shares that resulted in a Transfer to
the Charitable Trust pursuant to the provisions of Section 6.1.1(b), shall immediately give written
notice to the Corporation of such event, or in the case of such a proposed or attempted
transaction, give at least 15 days prior written notice, and shall provide to the Corporation such
other information as the Corporation may request in order to determine the effect, if any, of such
Transfer on the Corporation’s status as a REIT.
Section 6.1.4 Owners Required To Provide Information. From the Initial Date and prior
to the Restriction Termination Date:
(a) every owner of more than five percent (or such lower percentage as required by the Code or
the Treasury Regulations promulgated thereunder) of the outstanding Shares, within 30 days after
the end of each taxable year, shall give written notice to the Corporation stating the name and
address of such owner, the number of Shares and other Shares Beneficially Owned and a description
of the manner in which such Shares are held. Each such owner shall provide to the Corporation such
additional information as the Corporation may request in order to determine the effect, if any, of
such Beneficial Ownership on the Corporation’s status as a REIT and to ensure compliance with the
Aggregate Share Ownership Limit, the Common Share Ownership Limit and the other restrictions set
forth herein.
(b) each Person who is a Beneficial Owner or Constructive Owner of Shares and each Person
(including the Stockholder of record) who is holding Shares for a Beneficial Owner or Constructive
Owner shall provide to the Corporation such information as the Corporation may request, in good
faith, in order to determine the Corporation’s status as a REIT and to comply with requirements of
any taxing authority or governmental authority or to determine such compliance.
Section 6.1.5 Remedies Not Limited. Subject to Section 7.10 of the Charter, nothing
contained in this Section 6.1 shall limit the authority of the Board of Directors to take such
other action as
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it deems necessary or advisable to protect the Corporation and the interests of its Stockholders in
preserving the Corporation’s status as a REIT.
Section 6.1.6 Ambiguity. In the case of an ambiguity in the application of any of the
provisions of this Section 6.1, Section 6.2 or any definition contained in Article IV, the Board of
Directors shall have the power to determine the application of the provisions of this Section 6.1
or Section 6.2 with respect to any situation based on the facts known to it. In the event Section
6.1 or 6.2 requires an action by the Board of Directors and the Charter fails to provide specific
guidance with respect to such action, the Board of Directors shall have the power to determine the
action to be taken so long as such action is not contrary to the provisions of Article IV or
Sections 6.1 or 6.2. Absent a decision to the contrary by the Board of Directors (which the Board
may make in its sole and absolute discretion), if a Person would have (but for the remedies set
forth in Section 6.1.2) acquired Beneficial Ownership or Constructive Ownership of Shares in
violation of Section 6.1.1, such remedies (as applicable) shall apply first to the Shares which,
but for such remedies, would have been Beneficially Owned or Constructively Owned (but not actually
owned) by such Person, pro rata among the Persons who actually own such Shares based upon the
relative number of the Shares held by each such Person.
Section 6.1.7 Exceptions.
(a) Subject to Section 6.1.1(a)(ii), the Board of Directors, in its sole discretion, may
exempt (prospectively or retroactively) a Person from the Aggregate Share Ownership Limit and the
Common Share Ownership Limit, as the case may be, and may establish or increase an Excepted Holder
Limit for such Person if:
(i) the Board of Directors obtains such representations and undertakings from such Person as
are reasonably necessary to ascertain that no individual’s Beneficial Ownership or Constructive
Ownership of such Shares will violate Section 6.1.1(a)(ii);
(ii) such Person does not, and represents that it will not, own, actually or Constructively,
an interest in a tenant of the Corporation (or a tenant of any entity owned or controlled by the
Corporation) that would cause the Corporation to own, actually or Constructively, a 9.9% interest
or greater (as set forth in Section 856(d)(2)(B) of the Code) in such tenant and the Board of
Directors obtains such representations and undertakings from such Person as are reasonably
necessary to ascertain this fact (for this purpose, a tenant from whom the Corporation (or an
entity owned or controlled by the Corporation) derives (and is expected to continue to derive) a
sufficiently small amount of revenue such that, in the opinion of the Board of Directors, rent from
such tenant would not adversely affect the Corporation’s ability to qualify as a REIT, shall not be
treated as a tenant of the Corporation); and
(iii) such Person agrees that any violation or attempted violation of such representations or
undertakings (or other action which is contrary to the restrictions contained in Sections 6.1.1
through 6.1.6) will result in such Shares being automatically Transferred to a Charitable Trust in
accordance with Sections 6.1.1(b) and 6.2.
(b) Prior to granting any exception pursuant to Section 6.1.7(a), the Board of Directors may
require a ruling from the Internal Revenue Service, or an opinion of counsel, in either case in
form and substance satisfactory to the Board of Directors in its sole discretion, as it may deem
necessary or advisable in order to determine or ensure the Corporation’s status as a REIT.
Notwithstanding the receipt of any ruling or opinion, the Board of Directors may impose such
conditions or restrictions as it deems appropriate in connection with granting such exception.
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(c) Subject to Section 6.1.1(a)(ii), an underwriter which 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 Aggregate Share Ownership Limit, the Common Share Ownership Limit or both
such limits, but only to the extent necessary to facilitate such public offering or private
placement.
(d) The Board of Directors may only reduce the Excepted Holder Limit for an Excepted Holder:
(1) with the written consent of such Excepted Holder at any time, or (2) pursuant to the terms and
conditions of the agreements and undertakings entered into with such Excepted Holder in connection
with the establishment of the Excepted Holder Limit for that Excepted Holder. No Excepted Holder
Limit shall be reduced to a percentage that is less than the Common Share Ownership Limit.
Section 6.1.8 Increase in Aggregate Share Ownership and Common Share Ownership Limits.
Subject to Section 6.1.1, the Board of Directors may from time to time increase the Common Share
Ownership Limit and the Aggregate Share Ownership Limit for one or more Persons and decrease the
Common Share Ownership Limit and the Aggregate Share Ownership Limit for all other Persons;
provided, however, that the decreased Common Share Ownership Limit and/or Aggregate Share Ownership
Limit will not be effective for any Person whose percentage ownership in Shares is in excess of
such decreased Common Share Ownership Limit and/or Aggregate Share Ownership Limit until such time
as such Person’s percentage of Shares equals or falls below the decreased Common Share Ownership
Limit and/or Aggregate Share Ownership Limit, but any further acquisition of Shares in excess of
such percentage ownership of Shares will be in violation of the Common Share Ownership Limit and/or
Aggregate Share Ownership Limit and, provided further, that the new Common Share Ownership Limit
and/or Aggregate Share Ownership Limit would not allow five or fewer Persons to Beneficially Own
more than 49.9% in value of the outstanding Shares.
Section 6.1.9 Legend. Any certificate representing Shares shall bear substantially
the following legend:
The Shares represented by this certificate are subject to restrictions on Beneficial
Ownership and Constructive Ownership and Transfer for the purpose, among others, of
the Corporation’s maintenance of its status as a REIT under the Code. Subject to
certain further restrictions and except as expressly provided in the Corporation’s
Charter, (i) no Person may Beneficially Own or Constructively Own Common Shares of
the Corporation in excess of 9.8% (in value or number of Shares) of the outstanding
Common Shares of the Corporation unless such Person is an Excepted Holder (in which
case the Excepted Holder Limit shall be applicable); (ii) no Person may Beneficially
Own or Constructively Own Shares of the Corporation in excess of 9.8% of the value
of the total outstanding Shares of the Corporation, unless such Person is an
Excepted Holder (in which case the Excepted Holder Limit shall be applicable); (iii)
no Person may Beneficially Own or Constructively Own Shares that would result in the
ownership of Shares of the Corporation causing the Corporation to satisfy the stock
ownership requirement for being a personal holding company under Section 542(a)(2)
of the Code, the Corporation being “closely held” under Section 856(h) of the Code
or otherwise cause the Corporation to fail to qualify as a REIT; (iv) no Person may
Beneficially Own or Constructively Own shares of capital stock to the extent that
such ownership would cause any income of the Corporation that would otherwise
qualify as “rents from real property” for purposes of Section 856(d) of the Code to
fail to qualify as such; and (v) no Person may Transfer Shares if such Transfer
would result in Shares of the Corporation being owned by fewer than 100 Persons.
Any Person who Beneficially Own or Constructively Owns or
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attempts to Beneficially Own or Constructively Own Shares which cause or will cause
a Person to Beneficially Own or Constructively Own Shares in excess or in violation
of the above limitations must immediately notify the Corporation. If any of the
restrictions on Transfer or ownership are violated, the Shares represented hereby
will be automatically Transferred to a Charitable Trust for the benefit of one or
more Charitable Beneficiaries. In addition, the Corporation may redeem Shares upon
the terms and conditions specified by the Board of Directors in its sole discretion
if the Board of Directors determines that ownership or a Transfer or other event may
violate the restrictions described above. Furthermore, upon the occurrence of
certain events, attempted Transfers in violation of the restrictions described above
may be void abinitio. All capitalized terms in this legend have
the meanings defined in the Corporation’s Charter, as the same may be amended from
time to time, a copy of which, including the restrictions on Transfer and ownership,
will be furnished to each Stockholder on request and without charge. Requests for
such a copy may be directed to the Secretary of the Corporation at its principal
office.
Instead of the foregoing legend, the certificate may state that the Corporation will furnish a
full statement about certain restrictions on transferability to a Stockholder on request and
without charge.
Section 6.2 Transfer of Shares in Trust.
Section 6.2.1 Ownership in Trust. Upon any purported Transfer or other event
described in Section 6.1.1(b) that would result in a Transfer of Shares to a Charitable Trust, such
Shares shall be deemed to have been Transferred to the Charitable Trustee as trustee of a
Charitable Trust for the exclusive benefit of one or more Charitable Beneficiaries. Such Transfer
to the Charitable Trustee shall be deemed to be effective as of the close of business on the
Business Day prior to the purported Transfer or other event that results in the Transfer to the
Charitable Trust pursuant to Section 6.1.1(b). The Charitable Trustee shall be appointed by the
Corporation and shall be a Person unaffiliated with the Corporation and any Prohibited Owner. Each
Charitable Beneficiary shall be designated by the Corporation as provided in Section 6.2.6.
Section 6.2.2 Status of Shares Held by the Charitable Trustee. Shares held by the
Charitable Trustee shall continue to be issued and outstanding Shares of the Corporation. The
Prohibited Owner shall have no rights in the Shares held by the Charitable Trustee. The Prohibited
Owner shall not benefit economically from ownership of any Shares held in trust by the Charitable
Trustee, shall have no rights to dividends or other Distributions and shall not possess any rights
to vote or other rights attributable to the Shares held in the Charitable Trust.
Section 6.2.3 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. Any dividend or other Distribution paid prior to the discovery by the Corporation
that Shares have been Transferred to the Charitable Trustee shall be paid with respect to such
Shares to the Charitable Trustee upon demand and any dividend or other Distribution authorized but
unpaid shall be paid when due to the Charitable Trustee. Any dividends or Distributions so paid
over 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, subject to Maryland law, 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
sole discretion) (a) to rescind as void any vote cast by a Prohibited Owner prior to the discovery
by the Corporation that Shares have been Transferred to the Charitable Trustee and (b) to recast
such vote in accordance with the desires of the Charitable Trustee acting for the benefit of the
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Charitable Beneficiary; provided, however, that if the Corporation has already taken irreversible
corporate action, then the Charitable Trustee shall not have the authority to rescind and recast
such vote. Notwithstanding the provisions of this Article VI, until the Corporation has received
notification that Shares have been Transferred into a Charitable Trust, the Corporation shall be
entitled to rely on its share transfer and other Stockholder records for purposes of preparing
lists of Stockholders entitled to vote at meetings, determining the validity and authority of
proxies and otherwise conducting votes of Stockholders.
Section 6.2.4 Sale of Shares by Charitable Trustee. Within 20 days of receiving
notice from the Corporation that Shares have been Transferred to the Charitable Trust, the
Charitable Trustee shall sell the Shares held in the Charitable Trust to a Person, designated by
the Charitable Trustee, whose ownership of the Shares will not violate the ownership limitations
set forth in Section 6.1.1(a). 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 6.2.4.
The Prohibited Owner shall receive the lesser of (1) the 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 (e.g., 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 and (2) the price per share received by the Charitable Trustee (net of
any commissions and other expenses of sale) from the sale or other disposition of the Shares held
in the Charitable Trust. The Charitable Trustee may reduce the amount payable to the Prohibited
Owner by the amount of dividends and Distributions which have been paid to the Prohibited Owner and
are owed by the Prohibited Owner to the Charitable Trustee pursuant to Section 6.2.3 of this
Article VI. Any net sales proceeds in excess of the amount payable to the Prohibited Owner shall
be immediately paid to the Charitable Beneficiary. If, prior to the discovery by the Corporation
that Shares have been Transferred to the Charitable Trustee, such Shares are sold by a Prohibited
Owner, then (i) such Shares shall be deemed to have been sold on behalf of the Charitable Trust and
(ii) 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 6.2.4, such
excess shall be paid to the Charitable Trustee upon demand.
Section 6.2.5 Purchase Right in Shares Transferred to the Charitable Trustee. Shares
Transferred to the Charitable Trustee shall be deemed to have been offered for sale to the
Corporation, or its designee, at a price per Share equal to the lesser of (a) the price per Share
in the transaction that resulted in such Transfer to the Charitable Trust (or, in the case of a
devise or gift, the Market Price at the time of such devise or gift) and (b) the Market Price on
the date the Corporation, or its designee, accepts such offer. The Corporation may reduce the
amount payable to the Prohibited Owner by the amount of dividends and Distributions which has been
paid to the Prohibited Owner and are owed by the Prohibited Owner to the Charitable Trustee
pursuant to Section 6.2.3 of this Article VI. The Corporation may pay the amount of such reduction
to the Charitable Trustee for the benefit of the Charitable Beneficiary. The Corporation shall
have the right to accept such offer until the Charitable Trustee has sold the Shares held in the
Charitable Trust pursuant to Section 6.2.4. Upon such a sale to the Corporation, 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.
Section 6.2.6 Designation of Charitable Beneficiaries. By written notice to the
Charitable Trustee, the Corporation shall designate one or more nonprofit organizations to be the
Charitable Beneficiary of the interest in the Charitable Trust such that (a) Shares held in the
Charitable Trust would not violate the restrictions set forth in Section 6.1.1(a) in the hands of
such Charitable Beneficiary and (b) each such organization must be described in Section 501(c)(3)
of the Code and contributions to each such organization must be eligible for deduction under each
of Sections 170(b)(1)(A), 2055 and 2522 of the Code.
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Section 6.3 NYSE Transactions. Nothing in this Article VI shall preclude the
settlement of any transaction entered into through the facilities of the NYSE or any other national
securities exchange or automated inter-dealer quotation system. The fact that the settlement of
any transaction occurs 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.
Section 6.4 Enforcement. The Corporation is authorized specifically to seek equitable
relief, including injunctive relief, to enforce the provisions of this Article VI.
Section 6.5 Non-Waiver. No delay or failure on the part of the Corporation or the
Board of Directors in exercising any right hereunder shall operate as a waiver of any right of the
Corporation or the Board of Directors, as the case may be, except to the extent specifically waived
in writing.
ARTICLE VII
PROVISIONS FOR DEFINING, LIMITING
AND REGULATING CERTAIN POWERS OF THE
CORPORATION AND OF THE STOCKHOLDERS AND DIRECTORS
Section 7.1 Number of Directors. The business and affairs of the Corporation shall be
managed under the direction of the Board of Directors. The number of Directors of the Corporation
(the “Directors”) shall be seven, which number may be increased or decreased from time to time
pursuant to the Bylaws; provided, however, that the total number of Directors shall not be fewer
than three. A majority of the Board will be Independent Directors except for a period of up to 60
days after the death, removal or resignation of an Independent Director pending the election of
such Independent Director’s successor. The names of the Directors who shall serve until the first
annual meeting of Stockholders and until their successors are duly elected and qualify are:
Paul F. Morton
Mark R. Patterson
Douglas W. Sesler
[ ]
[ ]
[ ]
[ ]
These Directors may increase the number of Directors and fill any vacancy, whether resulting from
an increase in the number of Directors or otherwise, on the Board of Directors prior to the first
annual meeting of Stockholders in the manner provided in the Bylaws.
The Corporation elects, at such time as it becomes eligible to make the election provided for
under Section 3-804(c) of the MGCL, that, except as may be provided by the Board of Directors in
setting the terms of any class or series of Shares, any and all vacancies on the Board of Directors
may be filled only by the affirmative vote of a majority of the remaining Directors in office, even
if the remaining Directors do not constitute a quorum, and any Director elected to fill a vacancy
shall serve for the remainder of the full term of the directorship in which such vacancy occurred.
Notwithstanding the foregoing sentence, Independent Directors shall nominate replacements for
vacancies among the Independent Directors’ positions, unless there are no remaining Independent
Directors to so fill a vacancy, in which case a majority vote of the remaining Directors will be
sufficient.
Section 7.2 Experience. Each Director shall have at least three years of relevant
experience demonstrating the knowledge and experience required to successfully acquire and manage
the type of
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assets being acquired by the Corporation. At least one of the Independent Directors shall
have three years of relevant real estate experience.
Section 7.3 Committees. The Board may establish such committees as it deems
appropriate, in its discretion, provided that the majority of the members of each committee are
Independent Directors.
Section 7.4 Term. Except as may otherwise be provided in the terms of any Preferred
Shares issued by the Corporation, each Director shall hold office for one year, until the next
annual meeting of Stockholders and until his or her successor is duly elected and qualifies.
Directors may be elected to an unlimited number of successive terms.
Section 7.5 Fiduciary Obligations. The Directors and the Advisor serve in a fiduciary
capacity to the Corporation and have a fiduciary duty to the Stockholders of the Corporation,
including, with respect to the Directors, a specific fiduciary duty to supervise the relationship
of the Corporation with the Advisor.
Section 7.6 Extraordinary Actions. Notwithstanding any provision of law permitting or
requiring any action to be taken or approved by the affirmative vote of the holders of Shares
entitled to cast a greater number of votes, any such action shall be effective and valid if
declared advisable by the Board of Directors and taken or approved by the affirmative vote of
holders of Shares entitled to cast a majority of all the votes entitled to be cast on the matter.
Section 7.7 Authorization by Board of Stock Issuance. The Board of Directors may
authorize the issuance from time to time of Shares of any class or series, whether now or hereafter
authorized, or securities or rights convertible into Shares of any class or series, whether now or
hereafter authorized, for such consideration as the Board of Directors may deem advisable (or
without consideration in the case of a stock split or stock dividend), subject to such restrictions
or limitations, if any, as may be set forth in the Charter or the Bylaws. The issuance of
Preferred Shares shall also be approved by a majority of Independent Directors not otherwise
interested in the transaction, who shall have access, at the Corporation’s expense, to the
Corporation’s legal counsel or to independent legal counsel.
Section 7.8 Preemptive Rights and Appraisal Rights. Except as may be provided by the
Board of Directors in setting the terms of classified or reclassified Shares pursuant to Section
5.4 or as may otherwise be provided by contract approved by the Board of Directors, no holder of
Shares shall, as such holder, have any preemptive right to purchase or subscribe for any additional
Shares or any other security of the Corporation which it may issue or sell. Holders of Shares
shall not be entitled to exercise any rights of an objecting stockholder provided for under Title
3, Subtitle 2 of the MGCL or any successor statute unless the Board of Directors, upon the
affirmative vote of a majority of the Board of Directors, shall determine that such rights apply,
with respect to all or any classes or series of stock, to one or more transactions occurring after
the date of such determination in connection with which holders of such Shares would otherwise be
entitled to exercise such rights.
Section 7.9 Determinations by Board. The determination as to any of the following
matters, made in good faith by or pursuant to the direction of the Board of Directors consistent
with the Charter, shall be final and conclusive and shall be binding upon the Corporation and every
holder of Shares: the amount of the Net Income of the Corporation for any period and the amount of
Assets at any time legally available for the payment of dividends, redemption of Shares or the
payment of other Distributions on Shares; the amount of paid-in surplus, Net Assets, other surplus,
annual or other cash flow, funds from operations, net profit, Net Assets in excess of capital,
undivided profits or excess of profits over losses on sales of Assets; the amount, purpose, time of
creation, increase or decrease, alteration or cancellation of
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any reserves or charges and the propriety thereof (whether or not any obligation or liability
for which such reserves or charges shall have been created shall have been paid or discharged); any
interpretation of the terms, preferences, conversion or other rights, voting powers or rights,
restrictions, limitations as to dividends or Distributions, qualifications or terms or conditions
of redemption of any class or series of Shares; the fair value, or any sale, bid or asked price to
be applied in determining the fair value, of any Asset owned or held by the Corporation or any
Shares; the number of Shares of any class of the Corporation; any matter relating to the
acquisition, holding and disposition of any Assets by the Corporation; or any other matter relating
to the business and affairs of the Corporation or required or permitted by applicable law, the
Charter or Bylaws or otherwise to be determined by the Board of Directors; provided, however, that
any determination by the Board of Directors as to any of the preceding matters shall not render
invalid or improper any action taken or omitted prior to such determination and no Director shall
be liable for making or failing to make such a determination.
Section 7.10 REIT Qualification. If the Corporation elects to qualify for federal
income tax treatment as a REIT, the Board of Directors shall use its reasonable best efforts to
take such actions as are necessary or appropriate to preserve the status of the Corporation as a
REIT; however, if the Board of Directors determines that it is no longer in the best interests of
the Corporation to continue to be qualified as a REIT, the Board of Directors may revoke or
otherwise terminate the Corporation’s REIT election pursuant to Section 856(g) of the Code. The
Board of Directors also may determine that compliance with any restriction or limitation on stock
ownership and Transfers set forth in Article VI is no longer required for REIT qualification.
Section 7.11 Removal of Directors. Subject to the rights of holders of one or more
classes or series of Preferred Shares to elect or remove one or more Directors, any Director, or
the entire Board of Directors, may be removed from office at any time, but only by the affirmative
vote of at least a majority of the votes entitled to be cast generally in the election of
Directors.
Section 7.12 Board Action with Respect to Certain Matters. A majority of the
Independent Directors must approve any Board action to which the following sections of the NASAA
REIT Guidelines apply: II.A., II.C., II.F., II.G., IV.A., IV.B., IV.C., IV.D., IV.E., IV.F., IV.G.,
V.E., V.H., V.J., VI.A., VI.B.4, and VI.G.
ARTICLE XIII
ADVISOR
Section 8.1 Appointment and Initial Investment of Advisor. The Board is responsible
for setting the general policies of the Corporation and for the general supervision of its business
conducted by officers, agents, employees, advisors or independent contractors of the Corporation.
However, the Board is not required personally to conduct the business of the Corporation, and it
may (but need not) appoint, employ or contract with any Person (including a Person Affiliated with
any Director) as an Advisor and may grant or delegate such authority to the Advisor as the Board
may, in its sole discretion, deem necessary or desirable. The term of retention of any Advisor
shall not exceed one year, although there is no limit to the number of times that a particular
Advisor may be retained. The Advisor or any Affiliate which holds the Initial Investment may not
sell this Initial Investment while the Advisor or its Affiliate serves as the Advisor, but may
Transfer the Initial Investment to other Affiliates.
Section 8.2 Supervision of Advisor. The Board shall evaluate the performance of the
Advisor before entering into or renewing an Advisory Agreement, and the criteria used in such
evaluation shall be reflected in the minutes of the meetings of the Board. The Board may exercise
broad discretion in allowing the Advisor to administer and regulate the operations of the
Corporation, to act as agent for
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the Corporation, to execute documents on behalf of the Corporation and to make executive
decisions that conform to general policies and principles established by the Board. The Board
shall monitor the Advisor to assure that the administrative procedures, operations and programs of
the Corporation are in the best interests of the Stockholders and are fulfilled. The Independent
Directors are responsible for reviewing the fees and expenses of the Corporation at least annually
or with sufficient frequency to determine that the expenses incurred are reasonable in light of the
investment performance of the Corporation, its Net Assets, its Net Income and the fees and expenses
of other comparable unaffiliated REITs. Each such determination shall be reflected in the minutes
of the meetings of the Board. The Independent Directors also will be responsible for reviewing,
from time to time and at least annually, the performance of the Advisor and determining that
compensation to be paid to the Advisor is reasonable in relation to the nature and quality of
services performed and the investment performance of the Corporation and that the provisions of the
Advisory Agreement are being carried out. Specifically, the Independent Directors will consider
factors such as (a) the amount of the fee paid to the Advisor in relation to the size, composition
and performance of the Assets, (b) the success of the Advisor in generating opportunities that meet
the investment objectives of the Corporation, (c) rates charged to other REITs and to investors
other than REITs by advisors performing the same or similar services, (d) additional revenues
realized by the Advisor and its Affiliates through their relationship with the Corporation,
including loan administration, underwriting or broker commissions, servicing, engineering,
inspection and other fees, whether paid by the Corporation or by others with whom the Corporation
does business, (e) the quality and extent of service and advice furnished by the Advisor, (f) the
performance of the Assets, including income, conservation or appreciation of capital, frequency of
problem investments and competence in dealing with distress situations, and (g) the quality of the
Assets relative to the investments generated by the Advisor for its own account. The Independent
Directors may also consider all other factors that they deem relevant, and the findings of the
Independent Directors on each of the factors considered shall be recorded in the minutes of the
Board. The Board shall determine whether any successor Advisor possesses sufficient qualifications
to perform the advisory function for the Corporation and whether the compensation provided for in
its contract with the Corporation is justified.
Section 8.3 Fiduciary Obligations. The Advisor shall have a fiduciary responsibility
and duty to the Corporation and to the Stockholders.
Section 8.4 Affiliation and Functions. The Board, by resolution or in the Bylaws, may
provide guidelines, provisions or requirements concerning the affiliation and functions of the
Advisor.
Section 8.5 Term and Termination. The Advisory Agreement shall have a term of no more
than one year, subject to an unlimited number of successive one-year renewals upon mutual consent
of the parties. Either a majority of the Independent Directors or the Advisor may terminate the
Advisory Agreement on 60 days’ written notice without cause or penalty, and, in such event, the
Advisor will cooperate with the Corporation and the Board in making an orderly transition of the
advisory function.
Section 8.6 Disposition Fee on Sale of Property. Unless otherwise provided in any
resolution adopted by the Board of Directors, the Corporation may pay the Advisor a disposition fee
upon the Sale of any Property in an amount equal to the lesser of (i) one-half of the Competitive
Real Estate Commission, or (ii) three percent of the sales price of such Property or Properties.
Payment of such fee may be made only if the Advisor provides a substantial amount of services in
connection with the Sale of a Property or Properties, as determined by a majority of the
Independent Directors. In addition, the amount paid when added to all other real estate commissions
paid to unaffiliated parties in connection with such Sale shall not exceed the lesser of the
Competitive Real Estate Commission or an amount equal to six percent of the sales price of such
Property or Properties.
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Section 8.7 Incentive Fees. Unless otherwise provided in any resolution adopted by
the Board of Directors, the Corporation may pay the Advisor an interest in the gain from the Sale
of Assets, for which full consideration is not paid in cash or property of equivalent value,
provided the amount or percentage of such interest is reasonable. Such an interest in gain from the
Sale of Assets shall be considered presumptively reasonable if it does not exceed 15% of the
balance of such net proceeds remaining after payment to Stockholders, in the aggregate, of an
amount equal to 100% of the Invested Capital, plus an amount equal to six percent of the Invested
Capital per annum cumulative. In the case of multiple Advisors, such Advisor and any of their
Affiliates shall be allowed such fees provided such fees are distributed by a proportional method
reasonably designed to reflect the value added to the Corporation’s assets by each respective
Advisor or any Affiliate.
Section 8.8 Organization and Offering Expenses Limitation. Unless otherwise provided
in any resolution adopted by the Board of Directors, the Corporation shall reimburse the Advisor
and its Affiliates for Organization and Offering Expenses incurred by the Advisor or its
Affiliates; provided, however, that the total amount of all Organization and Offering Expenses
shall be reasonable and shall in no event exceed 15% of the Gross Proceeds of each Offering.
Section 8.9 Acquisition Fees and Expenses. Unless otherwise provided in any
resolution adopted by the Board of Directors, the Corporation may pay the Advisor and its
Affiliates fees for the review and evaluation of potential investments in Assets; provided,
however, that the total of all Acquisition Fees and Acquisition Expenses shall be reasonable, and
shall not exceed an amount equal to six percent of the Contract Purchase Price or, in the case of a
Mortgage, six percent of the funds advanced; provided, however, that a majority of the Directors
(including a majority of the Independent Directors) not otherwise interested in the transaction may
approve fees and expenses in excess of this limit if they determine the transaction to be
commercially competitive, fair and reasonable to the Corporation.
Section 8.10 Reimbursement for Total Operating Expenses. Unless otherwise provided in
any resolution adopted by the Board of Directors, the Corporation may reimburse the Advisor, at the
end of each fiscal quarter, for Total Operating Expenses incurred by the Advisor; provided, however
that the Corporation shall not reimburse the Advisor at the end of any fiscal quarter for Total
Operating Expenses that, in the four consecutive fiscal quarters then ended, exceed the greater of
two percent of Average Invested Assets or 25% of Net Income (the “2%/25% Guidelines”) for such 12
month period. The Independent Directors shall have the responsibility of limiting Total Operating
Expenses to amounts that do not exceed the 2%/25% Guidelines unless they have made a finding that,
based on such unusual and non-recurring factors that they deem sufficient, a higher level of
expenses (an “Excess Amount”) is justified. Within 60 days after the end of any fiscal quarter of
the Corporation for which there is an Excess Amount which the Independent Directors conclude was
justified and reimbursable to the Advisor, there shall be sent to the Stockholders a written
disclosure of such fact, together with an explanation of the factors the Independent Directors
considered in determining that such Excess Amount was justified. Any such finding and the reasons
in support thereof shall be reflected in the minutes of the meetings of the Board. In the event
that the Independent Directors do not determine that excess expenses are justified, the Advisor
shall reimburse the Corporation the amount by which the expenses exceeded the 2%/25% Guidelines.
Section 8.11 Reimbursement Limitation. The Corporation shall not reimburse the
Advisor or its Affiliates for services for which the Advisor or its Affiliates are entitled to
compensation in the form of a separate fee.
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ARTICLE IX
INVESTMENT OBJECTIVES AND LIMITATIONS
Section 9.1 Investment Objectives. The Corporation’s primary investment objectives
are: (a) to generate an attractive level of current income for distribution to the Stockholders;
(b) to provide the Stockholders with the potential for long-term
capital appreciation; and (c) to offer an investment option in
which the per share price volatility is correlated to real estate as
an asset class rather than traditional asset classes such as stocks
and bonds. By resolution, the Board may
change or otherwise amend the investment objectives of the Corporation as provided in this Section
9.1 herein only with the approval of a majority of the Shares entitled to vote as provided in
Section 11.2 herein. The sheltering from tax of income from other sources is not an objective of
the Corporation. Subject to the restrictions set forth herein, if the Corporation elects to qualify
for federal income tax treatment as a REIT, the Board will use its reasonable best efforts to
conduct the affairs of the Corporation in such a manner as to continue to qualify the Corporation
for the tax treatment provided in the REIT Provisions of the Code unless and until the Board
determines, in its sole discretion, that REIT qualification is not in the best interests of the
Corporation; provided, however, that no Director, officer, employee or agent of the Corporation
shall be liable for any act or omission resulting in the loss of tax benefits under the Code,
except to the extent provided in Section 12.2 hereof.
Section 9.2 Review of Investment Policies. The Independent Directors shall review the
investment policies of the Corporation with sufficient frequency (not less often than annually) to
determine that the policies being followed by the Corporation are in the best interests of its
Stockholders. Each such determination and the basis therefor shall be set forth in the minutes of
the meetings of the Board.
Section 9.3 Operation of Business. The Corporation shall not engage in any material
business activities or operations other than through the Operating Partnership or other direct or
indirect subsidiaries of the Corporation. Notwithstanding the foregoing, the Corporation shall have
the power to do all things related in any manner or incidental to (i) its status, powers, duties
and responsibilities as the general partner of the Operating Partnership, (ii) its ownership
interest in any direct or indirect subsidiaries of the Corporation, (iii) capital raising,
shareholder servicing and investment management activities, including, without limitation,
activities related to the issuance and redemption of Securities, and (iv) its operation as a REIT,
status as a Maryland corporation and compliance with all applicable laws, rules and regulations.
Section 9.4 Certain Permitted Investments. Unless and until such time as the Common
Shares are Listed, the following investment limitations shall apply:
(a) The Corporation may invest in Assets.
(b) The Corporation may invest in Joint Ventures with the Sponsor, Advisor, one or more
Directors or any Affiliate, only if a majority of Directors (including a majority of Independent
Directors) not otherwise interested in the transaction, approve such investment as being fair and
reasonable to the Corporation and on substantially the same terms and conditions as those received
by the other joint venturers.
(c) The Corporation may not invest in equity securities except to the extent that such
investment is within the specific parameters set forth in the investment guidelines approved by a
majority of Directors (including a majority of Independent Directors) as being fair, competitive
and commercially reasonable.
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Section 9.5 Investment Limitations. In addition to other investment restrictions
imposed by the Board from time to time consistent with the Corporation’s objective of qualifying as
a REIT, the following investment limitations shall apply to the Corporation until such time as the
Common Shares are Listed:
(a) Not more than ten percent of the Corporation’s total Assets shall be invested in
Unimproved Real Property or mortgage loans on Unimproved Real Property.
(b) The Corporation shall not invest in commodities or commodity future contracts. This
limitation is not intended to apply to futures contracts, when used solely for hedging purposes in
connection with the Corporation’s ordinary business of investing in real estate assets and
Mortgages.
(c) The Corporation shall not invest in or make any Mortgage unless an appraisal is obtained
concerning the underlying property except for those loans insured or guaranteed by a government or
government agency. In cases in which a majority of Independent Directors so determine, and in all
cases in which the transaction is with the Advisor, Sponsor, Directors, or any Affiliates thereof,
such appraisal of the underlying property must be obtained from an Independent Appraiser. Such
appraisal shall be maintained in the Corporation’s records for at least five years and shall be
available for inspection and duplication by any Stockholder for a reasonable charge. In addition
to the appraisal, a mortgagee’s or owner’s title insurance policy or commitment as to the priority
of the mortgage or condition of the title must be obtained.
(d) The Corporation shall not make or invest in any Mortgage, including a construction loan,
on any one property if the aggregate amount of all mortgage loans outstanding on the property,
including the loans of the Corporation, would exceed an amount equal to 85% of the appraised value
of the property as determined by appraisal unless substantial justification exists because of the
presence of other underwriting criteria. For purposes of this subsection, the “aggregate amount of
all mortgage loans outstanding on the property, including the loans of the Corporation” shall
include all interest (excluding contingent participation in income and/or appreciation in value of
the mortgaged property), the current payment of which may be deferred pursuant to the terms of such
loans, to the extent that deferred interest on each loan exceeds five percent per annum of the
principal balance of the loan.
(e) The Corporation shall not invest in indebtedness secured by a mortgage on real property
which is subordinate to the lien or other indebtedness of the Advisor, any Director, the Sponsor or
any Affiliate of the Corporation.
(f) The Corporation shall not issue (A) equity Securities redeemable solely at the option of
the holder (except that Stockholders may offer their Common Shares to the Corporation pursuant to
any repurchase plan adopted by the Board on terms outlined in the Prospectus relating to any
Offering, as such plan is thereafter amended in accordance with its terms); (B) debt Securities
unless the historical debt service coverage (in the most recently completed fiscal year) as
adjusted for known changes is sufficient to properly service that higher level of debt; (C) equity
Securities on a deferred payment basis or under similar arrangements; or (D) options or warrants to
the Advisor, Directors, Sponsor or any Affiliate thereof except on the same terms as such options
or warrants are sold to the general public. Options or warrants may be issued to Persons other
than the Advisor, Directors, Sponsor or any Affiliate thereof, but not at exercise prices less than
the fair market value of the underlying Securities on the date of grant and not for consideration
(which may include services) that in the judgment of the Independent Directors has a market value
less than the value of such option or warrant on the date of grant. Options or warrants issuable
to the Advisor, Directors, Sponsor or any Affiliate thereof shall not exceed ten percent of the
outstanding Shares on the date of grant. The voting rights per Share (other than any publicly held
Share) sold in a private offering shall not exceed the voting rights which bear the same
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relationship to the voting rights of a publicly held Share as the consideration paid to the
Corporation for each privately offered Share bears to the book value of each outstanding publicly
held Share.
(g) The consideration to be paid for each Real Property shall ordinarily be based on the fair
market value of the Real Property. If a majority of the Independent Directors on the Board of
Directors or a duly authorized committee determines, or if the Real Property is acquired from the
Advisor, a Director, the Sponsor or their Affiliates, such fair market value shall be determined by
a qualified Independent Appraiser selected by such Independent Directors.
(h) The aggregate Leverage shall be reasonable in relation to the Net Assets and shall be
reviewed by the Board at least quarterly. The maximum amount of such Leverage in relation to Net
Assets shall not exceed 300%. Notwithstanding the foregoing, Leverage may exceed such limit if any
excess in borrowing over such level is approved by a majority of the Independent Directors. Any
such excess borrowing shall be disclosed to Stockholders in the next quarterly report of the
Corporation following such borrowing, along with justification for such excess.
(i) The Corporation will continually review its investment activity to attempt to ensure that
it is not classified as an “investment company” under the Investment Company Act of 1940, as
amended.
(j) The Corporation will not make any investment that the Corporation believes will be
inconsistent with its objectives of qualifying and remaining qualified as a REIT unless and until
the Board determines, in its sole discretion, that REIT qualification is not in the best interests
of the Corporation.
(k) The Corporation shall not invest in real estate contracts of sale unless such contracts of
sale are in recordable form and appropriately recorded in the chain of title.
ARTICLE X
CONFLICTS OF INTEREST
Section 10.1 Sales and Leases to the Corporation. The Corporation may purchase or
lease any Real Property from the Sponsor, the Advisor, a Director or any Affiliate thereof upon a
finding by a majority of Directors (including a majority of Independent Directors) not otherwise
interested in the transaction that such transaction is fair and reasonable to the Corporation and
at a price to the Corporation no greater than the cost of the Asset to such Sponsor, Advisor,
Director or Affiliate, or, if the price to the Corporation is in excess of such cost, that
substantial justification for such excess exists and such excess is reasonable. In no event shall
the purchase price of any Property to the Corporation exceed its current appraised value.
Section 10.2 Sales and Leases to the Sponsor, Advisor, Directors or Affiliates. An
Advisor, Sponsor, Director or Affiliate thereof may purchase or lease Assets from the Corporation
if a majority of Directors (including a majority of Independent Directors) not otherwise interested
in the transaction determine that the transaction is fair and reasonable to the Corporation.
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Section 10.3 Other Transactions.
(a) The Corporation shall not engage in any other transaction with the Sponsor, the Advisor, a
Director or any Affiliates thereof unless a majority of the Directors (including a majority of the
Independent Directors) not otherwise interested in such transaction approve such transaction as
fair and reasonable to the Corporation and on terms and conditions not less favorable to the
Corporation than those available from unaffiliated third parties, other than transactions involving
marketable securities at market prices consistent with the investment guidelines approved by a
majority of the Directors (including a majority of the Independent Directors).
(b) The Corporation shall not make loans to the Sponsor, the Advisor, a Director or any
Affiliates thereof except Mortgages pursuant to Section 9.4(c) hereof or loans to wholly owned
subsidiaries of the Corporation. The Sponsor, Advisor, Directors and any Affiliates thereof shall
not make loans to the Corporation, or to joint ventures in which the Corporation is a co-venturer,
unless approved by a majority of the Directors (including a majority of the Independent Directors)
not otherwise interested in such transaction as fair, competitive, and commercially reasonable, and
no less favorable to the Corporation than comparable loans between unaffiliated parties.
Section 10.4 Review of Investment Opportunities. The Board shall determine (not less
often than annually) whether the method for the allocation of the acquisition of real properties
between the Corporation and other programs affiliated with the Advisor is fairly applied to the
Corporation.
ARTICLE XI
STOCKHOLDERS
Section 11.1 Meetings. There shall be an annual meeting of the Stockholders, to be
held on such date and at such time and place as shall be determined by or in the manner prescribed
in the Bylaws, at which the Directors shall be elected and any other proper business may be
conducted; provided that such annual meeting will be held upon reasonable notice and within a
reasonable period (not less than 30 days) following delivery of the annual report. The holders of
a majority of Shares entitled to vote who are present in person or by proxy at an annual meeting at
which a quorum is present, may, without the necessity for concurrence by the Board, vote to elect
the Directors. A quorum shall be the presence in person or by proxy of Stockholders entitled to
cast at least a majority of all the votes entitled to be cast at such meeting on any matter.
Special meetings of Stockholders may be called in the manner provided in the Bylaws, including by
the president or the chairman of the board or by a majority of the Directors or a majority of the
Independent Directors, and shall be called by the secretary of the Corporation upon the written
request of the holders of shares entitled to cast not less than ten percent of all the votes
entitled to be cast at such meeting. Notice of any special meeting of Stockholders shall be given
as provided in the Bylaws, and the special meeting shall be held not less than 15 days nor more
than 60 days after the delivery of such notice. If the meeting is called by written request of
Stockholders as described in this Section 11.1, the special meeting shall be held at the time and
place specified in the Stockholder request; provided, however, that if none is so specified, at
such time and place convenient to the Stockholders. If there are no Directors, the officers of the
Corporation shall promptly call a special meeting of the Stockholders entitled to vote for the
election of successor Directors. Any meeting may be adjourned and reconvened as the Board may
determine or as otherwise provided in the Bylaws.
Section 11.2 Voting Rights of Stockholders. Subject to the provisions of any class or
series of Shares then outstanding and the mandatory provisions of any applicable laws or
regulations, the Stockholders shall be entitled to vote only on the following matters: (a) election
or removal of Directors, without the necessity for concurrence by the Board, as provided in
Sections 11.1, 7.4 and 7.11 hereof; (b)
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amendment
of the Charter as provided in Article XIII hereof without the
necessity for concurrence by the Board; (c) dissolution of the
Corporation without the
necessity for concurrence by the Board; (d) merger or consolidation of the Corporation, or the sale or other disposition of
all or substantially all of the Corporation’s Assets; and (e) such other matters with respect to
which the Board of Directors has adopted a resolution declaring that a proposed action is advisable
and directing that the matter be submitted to the Stockholders for approval or ratification.
Except with respect to the foregoing matters, no action taken by the Stockholders at any meeting
shall in any way bind the Board. Without the approval of a majority of the Shares entitled to vote
on the matter, the Board may not (i) amend the Charter to materially and adversely affect the
rights, preferences and privileges of the Stockholders; (ii) amend provisions of the Charter
relating to director qualifications, fiduciary duties, liability and indemnification, conflicts of
interest, investment policies or investment restrictions; (iii) liquidate or dissolve the
Corporation other than before the initial investment in Property; (iv) sell all or substantially
all of the Corporation’s Assets other than in the ordinary course of business or as otherwise
permitted by law; or (v) cause the merger or reorganization of the Corporation except as permitted
by law.
Section 11.3 Voting Limitations on Shares Held by the Advisor, Directors and
Affiliates. With respect to Shares owned by the Advisor, any Director, or any of their
Affiliates, neither the Advisor, nor such Director(s), nor any of their Affiliates may vote or
consent on matters submitted to the Stockholders regarding the removal of the Advisor, such
Director(s) or any of their Affiliates or any transaction between the Corporation and any of them.
In determining the requisite percentage in interest of Shares necessary to approve a matter on
which the Advisor, such Director(s) and any of their Affiliates may not vote or consent, any Shares
owned by any of them shall not be included.
Section 11.4 Right of Inspection. Any Stockholder and any designated representative
thereof shall be permitted access to the records of the Corporation to which it is entitled under
applicable law at all reasonable times, and may inspect and copy any of them for a reasonable
charge. Inspection of the Corporation’s books and records by the office or agency administering
the securities laws of a jurisdiction shall be provided upon reasonable notice and during normal
business hours.
Section 11.5 Access to Stockholder List. An alphabetical list of the names, addresses
and telephone numbers of the Stockholders, along with the number of Shares held by each of them
(the “Stockholder List”), shall be maintained as part of the books and records of the Corporation
and shall be available for inspection by any Stockholder or the Stockholder’s designated agent, at
the home office of the Corporation upon the request of such Stockholder. The Stockholder List
shall be updated at least quarterly to reflect changes in the information contained therein. A
copy of the Stockholder List shall be mailed to any Stockholder so requesting within ten days of
receipt by the Corporation of the request. The copy of the Stockholder List shall be printed in
alphabetical order, on white paper, and in a readily readable type size (in no event smaller than
ten-point type). The Corporation may impose a reasonable charge for expenses incurred in
reproduction pursuant to the Stockholder request. A Stockholder may request a copy of the
Stockholder List for reasons including, but not limited to, matters relating to Stockholders’
voting rights, and the exercise of Stockholder rights under federal proxy laws.
If the Advisor or the Board neglects or refuses to exhibit, produce or mail a copy of the
Stockholder List as requested, the Advisor and/or the Board, as the case may be, shall be liable to
any Stockholder requesting the Stockholder List for the costs, including reasonable attorneys’
fees, incurred by that Stockholder for compelling the production of the Stockholder List, and for
actual damages suffered by such Stockholder by reason of such refusal or neglect. It shall be a
defense that the actual purpose and reason for the requests for inspection or for a copy of the
Stockholder List is to secure the Stockholder List or other information for the purpose of selling
the Stockholder List or copies thereof, or of using the same for a commercial purpose other than in
the interest of the applicant as a Stockholder relative to the affairs of the Corporation. The
Corporation may require the Stockholder requesting the Stockholder List to represent that the
Stockholder List is not requested for a commercial purpose
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unrelated to the Stockholder’s interest in the Corporation. The remedies provided hereunder to
Stockholders requesting copies of the Stockholder List are in addition, to and shall not in any way
limit, other remedies available to Stockholders under federal law, or the laws of any state.
Section 11.6 Reports. The Directors, including the Independent Directors, shall take
reasonable steps to insure that the Corporation shall cause to be prepared and mailed or delivered
to each Stockholder as of a record date after the end of the fiscal year and each holder of other
publicly held Securities within 120 days after the end of the fiscal year to which it relates an
annual report for each fiscal year ending after the Commencement of the Initial Public Offering
that shall include: (a) financial statements prepared in accordance with generally accepted
accounting principles which are audited and reported on by independent certified public
accountants; (b) the ratio of the costs of raising capital during the period to the capital raised;
(c) the aggregate amount of advisory fees and the aggregate amount of other fees paid to the
Advisor and any Affiliate of the Advisor by the Corporation and including fees or charges paid to
the Advisor and any Affiliate of the Advisor by third parties doing business with the Corporation;
(d) the Total Operating Expenses of the Corporation, stated as a percentage of Average Invested
Assets and as a percentage of its Net Income; (e) a report from the Independent Directors that the
policies being followed by the Corporation are in the best interests of its Stockholders and the
basis for such determination; and (f) separately stated, full disclosure of all material terms,
factors and circumstances surrounding any and all transactions involving the Corporation,
Directors, Advisors, Sponsors and any Affiliate thereof occurring in the year for which the annual
report is made, and the Independent Directors shall be specifically charged with a duty to examine
and comment in the report on the fairness of such transactions.
ARTICLE XII
LIABILITY LIMITATION AND INDEMNIFICATION
Section 12.1 Limitation of Stockholder Liability. No Stockholder shall be liable for
any debt, claim, demand, judgment or obligation of any kind of, against or with respect to the
Corporation by reason of his being a Stockholder, nor shall any Stockholder be subject to any
personal liability whatsoever, in tort, contract or otherwise, to any Person in connection with the
Corporation’s Assets or the affairs of the Corporation by reason of his being a Stockholder.
Section 12.2 Limitation of Director and Officer Liability; Indemnification.
(a) Subject to any limitations set forth under Maryland law or in paragraph (c) or (d) below,
no Director or officer of the Corporation shall be liable to the Corporation or its Stockholders
for money damages. Neither the amendment nor repeal of this Section 12.2(a), nor the adoption or
amendment of any other provision of the Charter or Bylaws inconsistent with this Section 12.2(a),
shall apply to or affect in any respect the applicability of the preceding sentence with respect to
any act or failure to act which occurred prior to such amendment, repeal or adoption.
(b) Subject to any limitations set forth under Maryland law or in paragraph (c) or (d) below,
the Corporation shall indemnify and, without requiring a preliminary determination of the ultimate
entitlement to indemnification, pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to (i) any individual who is a present or former Director or officer of
the Corporation and who is made or threatened to be made a party to the proceeding by reason of his
or her service in that capacity, (ii) any individual who, while a Director or officer of the
Corporation and at the request of the Corporation, serves or has served as a director, officer,
partner or trustee of such corporation, real estate investment trust, partnership, joint venture,
trust, employee benefit plan or other enterprise and who is made or threatened to be made a party
to the proceeding by reason of his or her service in that capacity or
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(iii) the Advisor of any of its Affiliates acting as an agent of the Corporation. The
Corporation may, with the approval of the Board of Directors or any duly authorized committee
thereof, provide such indemnification and advance for expenses to a Person who served a predecessor
of the Corporation in any of the capacities described in (i) or (ii) above and to any employee or
agent of the Corporation or a predecessor of the Corporation. The Board may take such action as is
necessary to carry out this Section 12.3(a). No amendment of the Charter or repeal of any of its
provisions shall limit or eliminate the right of indemnification provided hereunder with respect to
acts or omissions occurring prior to such amendment or repeal.
(c) Notwithstanding anything to the contrary contained in paragraph (a) or (b) above, the
Corporation shall not provide for indemnification of a Director, the Advisor or any Affiliate of
the Advisor (the “Indemnitee”) for any liability or loss suffered by such Indemnitee, unless all of
the following conditions are met:
(i) The Indemnitee has determined, in good faith, that the course of conduct that caused the
loss or liability was in the best interests of the Corporation.
(ii) The Indemnitee was acting on behalf of or performing services for the Corporation.
(iii) Such liability or loss was not the result of (A) negligence or misconduct, in the case
that the Indemnitee is a Director (other than an Independent Director), the Advisor or an Affiliate
of the Advisor or (B) gross negligence or willful misconduct, in the case that the Indemnitee is an
Independent Director.
(iv) Such indemnification or agreement to hold harmless is recoverable only out of Net Assets
and not from the Stockholders.
(d) Notwithstanding anything to the contrary contained in paragraph (a) above, the Corporation
shall not provide indemnification for any loss, liability or expense arising from or out of an
alleged violation of federal or state securities laws by such party unless one or more of the
following conditions are met: (i) there has been a successful adjudication on the merits of each
count involving alleged material securities law violations as to the Indemnitee, (ii) such claims
have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the
Indemnitee; or (iii) a court of competent jurisdiction approves a settlement of the claims against
the Indemnitee and finds that indemnification of the settlement and the related costs should be
made, and the court considering the request for indemnification has been advised of the position of
the Securities and Exchange Commission and of the published position of any state securities
regulatory authority in which Securities were offered or sold as to indemnification for violations
of securities laws.
Section 12.4 Payment of Expenses. The Corporation shall not pay or reimburse
reasonable legal expenses and other costs incurred by an Indemnitee in advance of final disposition
of a proceeding unless all of the following are satisfied: (a) the proceeding relates to acts or
omissions with respect to the performance of duties or services on behalf of the Corporation, (b)
the Indemnitee provides the Corporation with written affirmation of the Indemnitee’s good faith
belief that the Indemnitee has met the standard of conduct necessary for indemnification by the
Corporation as authorized by Section 12.3 hereof, (c) the legal proceeding was initiated by a third
party who is not a Stockholder or, if by a Stockholder of the Corporation acting in his or her
capacity as such, a court of competent jurisdiction approves such advancement, and (d) the
Indemnitee provides the Corporation with a written agreement to repay the amount paid or reimbursed
by the Corporation, together with the applicable legal rate of interest
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thereon, if it is ultimately determined that the Indemnitee did not comply with the requisite
standard of conduct and is not entitled to indemnification.
Section 12.5 Express Exculpatory Clauses in Instruments. Neither the Stockholders nor
the Directors, officers, employees or agents of the Corporation shall be liable under any written
instrument creating an obligation of the Corporation by reason of their being Stockholders,
Directors, officers, employees or agents of the Corporation, and all Persons shall look solely to
the Corporation’s Assets for the payment of any claim under or for the performance of that
instrument. The omission of the foregoing exculpatory language from any instrument shall not
affect the validity or enforceability of such instrument and shall not render any Stockholder,
Director, officer, employee or agent liable thereunder to any third party, nor shall the Directors
or any officer, employee or agent of the Corporation be liable to anyone as a result of such
omission.
ARTICLE XIII
AMENDMENTS
The Corporation reserves the right
from time to time to make any amendment to the Charter, now
or hereafter authorized by law, including any amendment altering the terms or contract rights, as
expressly set forth in the Charter, of any Shares. All rights and powers conferred by the Charter
on Stockholders, Directors and officers are granted subject to this reservation. Except for those
amendments permitted to be made without Stockholder approval under Maryland law or by specific
provision in the Charter, any amendment to the Charter shall be valid only if approved by the
affirmative vote of a majority of all votes entitled to be cast on the matter, including without
limitation, (a) any amendment which would adversely affect the rights, preferences and privileges
of the Stockholders and (b) any amendment to Sections 7.2, 7.5 and 7.11 of Article VII, Article IX,
Article X, Article XII, Article XIV and Article XV hereof and this Article XIII (or any other
amendment of the Charter that would have the effect of amending such sections).
ARTICLE XIV
ROLL-UP TRANSACTIONS
In connection with any proposed Roll-Up
Transaction, an appraisal of all of the Corporation’s
Assets shall be obtained from a competent Independent Appraiser. If the appraisal will be included in a prospectus used to offer the
securities of a Roll-Up Entity, the appraisal shall be filed with the Securities and Exchange Commission and the states as an
exhibit to the registration statement for the offering. Accordingly, an issuer using the appraisal shall be subject to liability
for violation of Section 11 of the Securities Act and comparable provisions under state laws for any material misrepresentations or
material omissions in the appraisal. The Corporation’s Assets shall be
appraised on a consistent basis, and the appraisal shall be based on the evaluation of all relevant
information and shall indicate the value of the Assets as of a date immediately prior to the
announcement of the proposed Roll-Up Transaction. The appraisal shall assume an orderly
liquidation of the Assets over a twelve-month period. The terms of the engagement of the
Independent Appraiser shall clearly state that the engagement is for the benefit of the Corporation
and the Stockholders. A summary of the appraisal, indicating all material assumptions underlying
the appraisal, shall be included in a report to Stockholders in connection with a proposed Roll-Up
Transaction. In connection with a proposed Roll-Up Transaction, the Person sponsoring the Roll-Up
Transaction shall offer to Stockholders who vote against the proposed Roll-Up Transaction the
choice of:
(a) accepting the securities
of a Roll-Up Entity offered in the proposed Roll-Up Transaction;
or
(b) one of the following:
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(i) remaining as Stockholders and preserving their interests therein on the same terms and
conditions as existed previously; or
(ii) receiving cash in an amount equal to the Stockholder’s pro rata share of the appraised
value of the Net Assets of the Corporation.
The Corporation is prohibited from participating in any proposed Roll-Up Transaction:
(a) that would result in the Stockholders having voting rights in a Roll-Up Entity that are
less than the rights provided for in Sections 11.1 and 11.2 hereof;
(b) that includes provisions that would operate as a material impediment to, or frustration
of, the accumulation of Shares by any purchaser of the securities of the Roll-Up Entity (except to
the minimum extent necessary to preserve the tax status of the Roll-Up Entity), or which would
limit the ability of an investor to exercise the voting rights of its securities of the Roll-Up
Entity on the basis of the number of Shares held by that investor;
(c) in which investor’s rights to access of records of the Roll-Up Entity will be less than
those described in Sections 11.4 and 11.5 hereof; or
(d) in which any of the costs of the Roll-Up Transaction would be borne by the Corporation if
the Roll-Up Transaction is rejected by the Stockholders.
ARTICLE XV
DURATION
The Corporation shall continue perpetually unless dissolved pursuant to any applicable
provision of the MGCL.
THIRD: The amendment and restatement of the charter of the Corporation as hereinabove
set forth has been duly advised by the Board of Directors and approved by the stockholders of the
Corporation as required by law.
FOURTH: The current address of the principal office of the Corporation is as set
forth in Article III of the foregoing amendment and restatement of the charter.
FIFTH: The name and address of the Corporation’s current resident agent is as set
forth in Article III of the foregoing amendment and restatement of the charter.
SIXTH: The number of directors of the Corporation and the names of those currently in
office are as set forth in Article VII of the foregoing amendment and restatement of the charter.
SEVENTH: The total number of shares of stock which the Corporation had authority to
issue immediately prior to the foregoing amendment and restatement of the charter of the
Corporation was 1,050,000,000 consisting of shares of 1,000,000,000 shares of Common Stock, $0.01
par value per share, and 50,000,000 shares of Preferred Stock, $0.01 par value per share. The
aggregate par value of all shares of stock having par value was $10,500,000.
EIGHTH: The total number of shares of stock which the Corporation has authority to
issue pursuant to the foregoing amendment and restatement of the charter of the Corporation is
1,050,000,000
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consisting of 1,000,000,000 shares of Common Stock, $0.01 par value per share, and 50,000,000
shares of Preferred Stock, $0.01 par value per share. The aggregate par value of all authorized
shares of stock having par value is $10,500,000.
NINTH: The undersigned President acknowledges these Articles of Amendment and
Restatement to be the corporate act of the Corporation and as to all matters or facts required to
be verified under oath, the undersigned President acknowledges that to the best of his knowledge,
information and belief, these matters and facts are true in all material respects and that this
statement is made under the penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused these First Articles of Amendment and
Restatement to be signed in its name and on its behalf by its President and attested to by its
Secretary on this day of , 2008.