Exhibit 3.6
THIRD
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
G REIT, INC.
THIRD
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
G REIT, INC.
By unanimous consent in writing dated June 28, 2002, the Board of Directors
of G REIT, Inc., a Virginia corporation (the "Corporation"), found that the
following proposed Amendment to and Restatement of the Articles of Incorporation
of the Corporation was in the best interests of the Corporation, and directed
that it be submitted for shareholder approval. These Third Amended and Restated
Articles of Incorporation, as recommended by the Board of Directors and set
forth below, were approved and adopted by written consent of the sole
shareholder of the Corporation on June 28, 2002.
Table of Contents
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Page
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ARTICLE I .......................................................................... 1
Section 1.1. Name ................................................................ 1
Section 1.2. Registered Agent .................................................... 1
Section 1.3. Purpose ............................................................. 1
Section 1.4. Definitions ......................................................... 1
ARTICLE II ......................................................................... 9
Section 2.1. Number Vacancies .................................................... 9
Section 2.2. Term ................................................................ 10
Section 2.3. Experience .......................................................... 10
Section 2.4. Committees .......................................................... 10
Section 2.5. Approval of Independent Directors ................................... 10
Section 2.6. Removal ............................................................. 10
Section 2.7. Fiduciary Duties .................................................... 11
Section 2.8. Control Share Acquisition Statute ................................... 11
ARTICLE III ........................................................................ 11
ARTICLE IV ......................................................................... 11
Section 4.1. Appointment of Advisor .............................................. 11
Section 4.2. Supervision of Advisor .............................................. 12
Section 4.3. Termination ......................................................... 13
ARTICLE V .......................................................................... 13
Section 5.1. Organization and Offering Expenses .................................. 13
Section 5.2. Acquisition Fees and Acquisition Expenses ........................... 13
Section 5.3. Total Operating Expenses ............................................ 13
Section 5.4. Property Disposition Fee ............................................ 14
ARTICLE VI ......................................................................... 14
Section 6.1. Investment Objectives ............................................... 14
Section 6.2. Review of Objectives ................................................ 14
Section 6.3. Certain Permitted Investments ....................................... 15
Section 6.4. Investment Limitations .............................................. 15
ARTICLE VII ........................................................................ 18
Section 7.1. Sales and Leases to Company ......................................... 18
Section 7.2. Sales and Leases to the Sponsor, Advisor, Directors or Affiliates ... 18
Section 7.3. Other Transactions .................................................. 18
ARTICLE VIII ....................................................................... 19
Section 8.1. Authorized Stock; Dividend or Distribution Rights ................... 19
Section 8.2. Restrictions on Transfer ............................................ 20
Section 8.3. Shares-in-Trust ..................................................... 27
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Section 8.4. Remedies not Limited ............................................... 30
Section 8.5. Ambiguity .......................................................... 30
Section 8.6. Legend ............................................................. 30
Section 8.7. Severability ....................................................... 31
Section 8.8. Dividend Reinvestment Program ...................................... 32
ARTICLE IX ......................................................................... 32
Section 9.1. Meetings of Shareholders ........................................... 32
Section 9.2. Voting Rights of Shareholders ...................................... 33
Section 9.3. Right of Inspection ................................................ 33
Section 9.4. Access to Shareholder List ......................................... 33
Section 9.5. Reports ............................................................ 34
ARTICLE X .......................................................................... 35
Section 10.1. Limitation of Shareholder Liability ................................ 35
Section 10.2. Limitation of Liability and Indemnification ........................ 35
Section 10.3. Payment of Expenses ................................................ 36
Section 10.4. Express Exculpatory Clauses in Instruments ......................... 37
ARTICLE XI ......................................................................... 37
Section 11.1. Amendment .......................................................... 37
Section 11.2. Reorganization ..................................................... 38
Section 11.3. Merger, Consolidation or Sale of Company Property .................. 38
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ARTICLE I
THE COMPANY; DEFINITIONS
Section 1.1. Name.
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The name of the corporation (which is hereinafter called the "Company") is
G REIT, Inc.
Section 1.2. Registered Agent.
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The address of the Company's initial registered office is 701 East Byrd
Street, 15/th/ Floor, Richmond, Virginia 23219, which is in the City of
Richmond. The name and address of the initial registered agent is Louis J.
Rogers, who is a resident of Virginia and a member of the Virginia State Bar,
and whose business address is the same as the Company's initial registered
office.
Section 1.3. Purpose.
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The purposes for which the Company is formed are to conduct any and all
lawful business for which corporations may be incorporated under the Virginia
Stock Corporation Act, as amended from time to time.
Section 1.4. Definitions.
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As used in these Articles of Incorporation (these "Articles of
Incorporation"), the following terms shall have the following meanings unless
the context otherwise requires (certain other terms used in Article VIII hereof
are defined in Section 8.2 hereof):
"Acquisition Expenses" means any and all expenses incurred by the Company,
the Advisor, or any Affiliate of either in connection with the selection or
acquisition of any Property, 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.
"Acquisition Fee" means any and all fees and commissions paid by any Person
or entity to any other Person or entity (including any fees or commissions paid
by or to any Affiliate of the Company or the Advisor) in connection with the
purchase, development, or construction of a Property, including, without
limitation, real estate commissions, finder's fees, selection fees, development
fees, construction fees, nonrecurring management fees, consulting fees, loan
fees, points, or any other fees or commissions of a similar nature. Excluded
shall be development fees and
construction fees paid to any Person or entity not affiliated with the Advisor
in connection with the actual development and construction of any Property.
"Advisor" or "Advisors" means the Person or Persons, if any, appointed,
employed, or contracted with by the Company pursuant to Section 4.1 hereof and
responsible for directing or performing the day-to-day business affairs of the
Company, including any Person to whom the Advisor subcontracts substantially all
of such functions.
"Advisory Agreement" means the agreement between the Company and the
Advisor pursuant to which the Advisor will direct or perform the day-to-day
business affairs of the Company.
"Affiliate" or "Affiliated" means, as to any individual, corporation,
partnership, trust, limited liability company, or other legal entity (other than
the Company), (i) any Person directly or indirectly owning, controlling or
holding, with the power to vote, ten percent (10%) or more of the outstanding
voting securities of such other Person; (ii) any Person ten percent (10%) 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 Persons; (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, manager, trustee or general
partner.
"Assets" means Properties.
"Average Invested Assets" means, for a specified period, the average of the
aggregate book value of the assets of the Company invested, directly or
indirectly, in equity interests in and loans secured by real estate before
reserves for depreciation or bad debts or other similar non-cash reserves,
computed by taking the average of such values at the end of each month during
such period.
"Bylaws" means the bylaws of the Company, as the same are in effect from
time to time.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute thereto. Reference to any provision of the Code
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.
"Company Property" means any and all property, real, personal or otherwise,
tangible or intangible, which is transferred or conveyed to the Company
(including
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all rents, income, profits and gains therefrom), which is owned or held by, or
for the account of, the Company.
"Competitive Real Estate Commission" means a real estate or brokerage
commission for the purchase or sale of property which is reasonable, customary,
and competitive in light of the size, type, and location of the property.
"Contract Price for the Property" means the amount actually paid or
allocated to the purchase, development, construction, or improvement of a
property exclusive of Acquisition Fees and Acquisition Expenses.
"Construction Fee" means a fee or other remuneration for acting as general
contractor and/or construction manager to construct improvements, supervise and
coordinate projects, or to provide major repairs or rehabilitations on a Company
Property.
"Dealer Manager" means NNN Capital Corp., a member of the National
Association of Securities Dealers, Inc., or such other Person or entity selected
by the Board of Directors to act as the dealer manager for the offering of the
Company's securities.
"Development Fee" means a fee for the packaging of a Property, including
negotiating and approving plans, and undertaking to assist in obtaining zoning
and necessary variances and financing for the specific Property, either
initially or at a later date.
"Directors," "Board of Directors," or "Board" means the members of the body
which manages the Company.
"Equity Stock" means transferable shares of capital stock of the Company of
any class or series, including Common Stock or Preferred Stock.
"Gross Proceeds" means the aggregate purchase price of all Equity Stock
sold for the account of the Company, without deduction for Selling Commissions,
volume discounts, marketing support, and due diligence expense reimbursement
fees or Organizational and Offering Expenses.
"Independent Director" means a Director who is not, and within the last two
(2) years has not been, directly or indirectly associated with the Sponsor or
the Advisor by virtue of (i) ownership of an interest in the Sponsor, Advisor,
or their Affiliates, (ii) employment by the Sponsor, Advisor, or their
Affiliates, (iii) service as an officer or director of the Sponsor, Advisor, or
their Affiliates, (iv) performance of services, other than as a Director, for
the Company, (v) service as a director or trustee of more than three (3) real
estate investment trusts organized by the
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Sponsor or advised by the Advisor, or (vi) maintenance of a material business or
professional relationship with the Sponsor, Advisor, or any of their Affiliates.
An indirect relationship shall include circumstances in which a Director's
spouse, parents, children, siblings, mothers- or fathers-in-law, sons- or
daughters-in-law, or brothers- or sisters-in-law is or has been associated with
the Sponsor, the Advisor, any of their Affiliates, or the Company. A business or
professional relationship is considered material if the gross revenue derived by
the Director from the Sponsor, the Advisor, or their Affiliates exceeds five
percent (5%) of either the Director's annual gross revenue during either of the
last two (2) years or the Director's net worth on a fair market value basis.
"Independent Expert" means a Person or entity with no material current or
prior business or personal relationship with the Advisor or the Directors and
who is engaged to a substantial extent in the business of rendering opinions
regarding the value of assets of the type held by the Company.
"Initial Investment" means that portion of the initial capitalization of
the Company contributed by the Sponsor or its Affiliates pursuant to Section
II.A. of the NASAA REIT Guidelines.
"Initial Public Offering" means the offering and sale of Common Stock of
the Company pursuant to the Company's first effective registration statement
covering such Common Stock filed under the Securities Act of 1933, as amended.
"Joint Ventures" means those joint venture or general partnership
arrangements in which the Company is a co-venturer or general partner which are
established to acquire Properties.
"Leverage" means the aggregate amount of indebtedness of the Company for
money borrowed (including purchase money mortgage loans) outstanding at any
time, both secured and unsecured.
"Mortgage" means mortgages, deeds of trust, or other security interests on
or applicable to Real Property.
"NASAA REIT Guidelines" means the Statement of Policy Regarding Real Estate
Investment Trusts published by the North American Securities Administrators
Association.
"Net Assets" means the total assets of the Company (other than
intangibles), at cost, before deducting depreciation or other non-cash reserves,
less total liabilities, calculated quarterly by the Company on a basis
consistently applied.
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"Net Income" means for any period, the total revenues applicable to
such period, less the total expenses applicable to such period excluding
additions to reserves for depreciation, bad debts, or other similar non-cash
reserves; provided, however, Net Income for purposes of calculating total
allowable Operating Expenses shall exclude the gain from the sale of the
Company's assets.
"Net Sales Proceeds" means 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 all real estate commissions and closing costs paid by the
Company. 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 any legal 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 Company from 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 less the amount of all commissions and closing costs paid by the
Company. 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 thereby and reinvested in one or more
Properties within one hundred eighty (180) days thereafter and less the amount
of any real estate commissions, closing costs, and legal and other selling
expenses incurred by or allocated to the Company in connection with such
transaction or series of transactions. Net Sales Proceeds shall also include, in
the case of any lease of a Property consisting of a building only, any amounts
from tenants, borrowers, or lessees that the Company determines, in its
discretion, to be economically equivalent to the proceeds of a Sale. Net Sales
Proceeds shall not include, as determined by the Company in its sole discretion,
any amounts reinvested in one or more Properties, or other assets, to repay
outstanding indebtedness, or to establish reserves.
"Operating Expenses" means all costs and expenses incurred by the
Company, as determined under generally accepted accounting principles, which in
any way are related to the operation of the Company or to Company business,
including fees paid to the Advisor, but excluding (i) the expenses of raising
capital such as Organizational 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 Securities, (ii) interest
payments, (iii) taxes, (iv) non-cash expenditures such as depreciation,
amortization, and bad debt reserves, (v) Acquisition Fees and Acquisition
Expenses, and (vi) real estate commissions on the Sale of property, and other
expenses connected with the acquisition, operation, management, and ownership of
real estate interests, mortgage loans, or other property (such as the costs of
foreclosure, insurance
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premiums, legal services, maintenance, repair, and improvement of property). The
exclusion from this definition for costs related directly to asset acquisition,
operation and disposition is intended to allow exclusion of expenses incurred on
he individual property level but not to allow the exclusion of expenses incurred
on the Company level.
"Operating Partnership" means G REIT, L.P., a Virginia limited
partnership.
"OP Unit" means a unit of limited partnership interest in the Operating
Partnership.
"Organizational and Offering Expenses" means any and all costs and
expenses incurred by the Company, the Advisor, or any Affiliate of either in
connection with the formation, qualification and registration of the Company,
and the marketing and distribution of Securities, including, without limitation,
the following: 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, telegraph and telephone 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, and fees, expenses, and taxes related to
the filing, registration, and qualification of the sale of the securities under
Federal and State laws, including taxes and fees, accountants' and attorneys'
fees.
"Person" means an individual, corporation, partnership, estate, trust
(including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a
portion of a trust permanently set aside for or to be used exclusively for the
purposes described in Section 642(c) of the Code, association, private
foundation within the meaning of Section 509(a) of the Code, joint stock company
or other entity, or any government or any agency or political subdivision
thereof, and also includes a group as that term is used for purposes of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended.
"Property" or "Properties" means (i) the real properties, including the
buildings located thereon, (ii) the real properties only, or (iii) the buildings
only, which are acquired by the Company, either directly or through joint
venture arrangements or other partnerships.
"Prospectus" means the same as that term is defined in Section 2(10) of
the Securities Act of 1933, including a preliminary prospectus, an offering
circular as described in Rule 256 of the General Rules and Regulations under the
Securities Act of 1933 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 Property" or "Real Estate" means land, rights in land (including
leasehold interests), and any buildings, structures, improvements, furnishings,
fixtures, and equipment located on or used in connection with land and rights or
interests in land.
"REIT" means a corporation, trust, association, or other legal entity
(other than a real estate syndication) which is engaged primarily in investing
in equity interests in real estate (including fee ownership and leasehold
interests) or in loans secured by real estate or both.
"REIT Provisions of the Code" means 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.
"Roll-Up Entity" means 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" means a transaction involving the acquisition,
merger, conversion, or consolidation, directly or indirectly, of the Company and
the issuance of securities of a Roll-Up Entity. Such term does not include: (i)
a transaction involving Securities of the Company that have been listed on a
national securities exchange or included for quotation on the National Market
System of the National Association of Securities Dealers Automated Quotation
System for at least 12 months; or (ii) a transaction involving the conversion to
corporate, trust, or association form of only the Company if, as a consequence
of the transaction, there will be no significant adverse change in Shareholder
voting rights, the term of existence of the Company, compensation to the
Advisor, or the investment objectives of the Company.
"Sale" or "Sales" (i) means any transaction or series of transactions
whereby: (A) the Company sells, grants, transfers, conveys, or relinquishes its
ownership of any Property or portion thereof, including the lease of any
Property consisting of the 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 Company sells, grants, transfers, conveys, or
relinquishes its ownership of all or substantially all of the interest of the
Company in any Joint Venture in which it is a co-venturer or partner; (C) any
Joint Venture in which the Company 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; or (D) the Company sells, grants,
conveys, or relinquishes its interest in any asset, or portion thereof,
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including an event with respect to any asset which gives rise to a significant
amount of insurance proceeds or similar awards, but (ii) shall not include any
transaction or series of transactions specified in clause (i)(A), (i)(B), or
(i)(C) above in which the proceeds of such transaction or series of transactions
are reinvested in one or more Properties within one hundred eighty (180) days
thereafter.
"Securities" means Equity Stock, Shares-in-Trust, any other stock,
shares, or other evidences of equity 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.
"Selling Commissions" means any and all commissions payable to
underwriters, dealer managers, or other broker-dealers in connection with the
sale of Securities, including, without limitation, commissions payable to NNN
Capital Corp.
"Shareholders" means the registered holders of the Company's Equity
Stock.
"Soliciting Dealers" means those broker-dealers that are members of the
National Association of Securities Dealers, Inc., or that are exempt from
broker-dealer registration, and that, in either case, enter into participating
broker or other agreements with the Dealer Manager to sell Equity Stock.
"Sponsor" means any Person directly or indirectly instrumental in
organizing, wholly or in part, the Company or any Person who will control,
manage, or participate in the management of the Company, and any Affiliate of
such Person. Not included is any Person whose only relationship with the Company
is that of an independent property manager of Company assets, and whose only
compensation is as such. Sponsor does not include wholly independent third
parties such as attorneys, accountants, and underwriters whose only compensation
is for professional services. A Person may also be deemed a Sponsor of the
Company by:
(i) taking the initiative, directly or indirectly, in
founding or organizing the business or enterprise of the Company, either alone
or in conjunction with one or more other Persons;
(ii) receiving a material participation in the Company in
connection with the founding or organizing of the business of the Company, in
consideration of services or property, or both services and property;
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(iii) having a substantial number of relationships and
contacts with the Company;
(iv) possessing significant rights to control Company
properties;
(v) receiving fees for providing services to the Company
which are paid on a basis that is not customary in the industry; or
(vi) providing goods or services to the Company on a basis
which was not negotiated at arms length with the Company.
"Successor" means any successor in interest of the Company.
"Total Proceeds" means Gross Proceeds from the Initial Public Offering.
"Unimproved Real Property" means Property in which the Company has an
equity interest that is 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 (1) year.
"VSCA" means the Virginia Stock Corporation Act, as amended.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1. Number and Vacancies.
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The Company shall have a Board of Directors consisting of not less than
three (3) nor more than nine (9) members unless otherwise determined from time
to time by resolution adopted by the affirmative vote of a majority of the
Shareholders. A Director need not be a Shareholder. Notwithstanding anything
herein to the contrary, at all times (except during a period not to exceed sixty
(60) days following the death, resignation, incapacity, or removal from office
of a director prior to expiration of the director's term of office), a majority
of the Board of Directors shall be comprised of persons who are Independent
Directors. Any vacancies will be filled by the affirmative vote of a majority of
the remaining Directors, though less than a quorum. Independent Directors shall
nominate replacements for vacancies in the Independent Director positions. No
reduction in the number of Directors shall cause the removal of any Director
from office prior to the expiration of his term.
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Section 2.2. Term.
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At the annual meeting of Shareholders at which a quorum is present, the
Shareholders shall elect Directors without the necessity for concurrence by the
Board of Directors to serve a one-year term and until their successors are duly
elected and qualified. Directors may be elected to an unlimited number of
successive terms.
Section 2.3. Experience.
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A Director shall have had at least three (3) years of relevant
experience demonstrating the knowledge and experience required to successfully
acquire and manage the type of assets being acquired by the Company. At least
one of the Independent Directors shall have three (3) years of relevant real
estate experience. "Relevant real estate experience" shall mean actual direct
experience by the Director in acquiring or managing the type of real estate to
be acquired by the Company for his or her own account or as an agent. For
example, if the Company will acquire commercial real estate, i.e., office
buildings or shopping centers, "relevant real estate experience" would not
include experience in buying and selling houses because it is apparent that a
different level of sophistication and knowledge is required.
Section 2.4. Committees.
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The Directors may establish such committees as they deem appropriate,
in their discretion, provided that the majority of the members of each committee
are Independent Directors.
Section 2.5. Approval of Independent Directors.
---------------------------------
A majority of Independent Directors must approve all matters to which
Sections 4.2, 4.3, 5.2, 5.3, 6.2, 6.3(b), 6.3(c), 6.4(g), 6.4(j), 6.4(k), 7.1,
7.2, 7.3, 8.8, 9.1, and 10.2 herein relate.
Section 2.6. Removal.
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A Director may be removed from office with or without cause and without
the necessity for concurrence by the Board of Directors only at a meeting of the
Shareholders called for that purpose, by the affirmative vote of the holders of
not less than a majority of the Equity Stock then outstanding and entitled to
vote, subject to the rights of any Preferred Stock to vote for such Directors.
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Section 2.7. Fiduciary Duties.
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The Directors and the Advisor shall be deemed to be in a fiduciary
relationship with the Company and the Shareholders. Further, the Directors shall
have a fiduciary duty to the Shareholders to supervise the Company's
relationship with the Advisor.
Section 2.8. Control Share Acquisition Statute.
---------------------------------
Notwithstanding any other provision of these Articles of Incorporation
or any contrary provision of law, the Virginia control share acquisition
statute, found in Article 14.1 of the VSCA, amended from time to time, or any
successor statute thereto shall not apply to any acquisition of Securities of
the Company by any Person.
ARTICLE III
REIT QUALIFICATION
The Company shall seek to elect and maintain status as a REIT under the
REIT Provisions of the Code. It shall be the duty of the Board of Directors to
ensure that the Company satisfies the requirements for qualification as a REIT
under the REIT Provisions of the Code, including, but not limited to, the
ownership of its outstanding stock, the nature of its assets, the sources of its
income, and the amount and timing of its distributions to its Shareholders. The
Board of Directors shall take no affirmative action designed to disqualify the
Company as a REIT or to otherwise revoke the Company's election to be taxed as a
REIT without the affirmative vote of a majority of the number of shares of
Equity Stock entitled to vote on such matter at a meeting of the Shareholders.
ARTICLE IV
ADVISOR
Section 4.1. Appointment of Advisor.
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The Directors are responsible for setting the general policies of the
Company and for the general supervision of its business conducted by officers,
agents, employees, advisors, or independent contractors of the Company. However,
the Directors are not required personally to conduct the business of the
Company, and they 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 Directors may, in their
sole discretion, deem necessary or desirable. The term of retention of any
Advisor shall not exceed one (1) year, although there is no limit to the number
of times that a particular Advisor may be retained.
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Section 4.2. Supervision of Advisor.
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The Directors 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 meetings of the Board. The
Directors may exercise broad discretion in allowing the Advisor to administer
and regulate the operations of the Company, to act as agent for the Company, to
execute documents on behalf of the Company, and to make executive decisions
which conform to general policies and principles established by the Directors.
The Directors shall monitor the Advisor to assure that the administrative
procedures, operations, and programs of the Company are in the interests of the
Shareholders and are fulfilled. The Independent Directors are responsible for
reviewing the fees and expenses of the Company at least annually or with
sufficient frequency to determine that the expenses incurred are reasonable in
light of the investment performance of the Company, 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 of Directors. The Independent Directors also will be responsible for
reviewing 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 Company and that the
provisions of the Advisory Agreement are being carried out. Specifically, the
Independent Directors will consider factors such as:
(a) the Net Assets and Net Income of the Company;
(b) the amount of the fee paid to the Advisor in relation to
the size, composition, and performance of the Company's portfolio;
(c) the success of the Advisor in generating opportunities
that meet the investment objectives of the Company;
(d) rates charged to other REITs and to investors other than
REITs by advisors performing the same or similar services;
(e) additional revenues realized by the Advisor and its
Affiliates through their relationship with the Company, whether paid by the
Company or by others with whom the Company does business;
(f) the quality and extent of service and advice furnished
by the Advisor;
(g) the performance of the investment portfolio of the
Company, including income, conservation or appreciation of capital, frequency of
problem investments, and competence in dealing with distress situations; and
12
(h) the quality of the portfolio of the Company relative to
the investments generated by the Advisor for its own account.
The Independent Directors may also consider all other factors which they deem
relevant and the findings of the Independent Directors on each of the factors
considered shall be recorded in the minutes the Board of Directors. The Board of
Directors shall determine whether any successor Advisor possesses sufficient
qualifications to perform the advisory function for the Company and whether the
compensation provided for in its contract with the Company is justified.
Section 4.3. Termination.
-----------
A majority of the Independent Directors may terminate the Advisory
Agreement on sixty (60) days' written notice without cause or penalty.
ARTICLE V
FEES, COMPENSATION AND EXPENSES
Section 5.1. Organization and Offering Expenses.
----------------------------------
The Organization and Offering Expenses paid in connection with the
Company's formation and the Initial Public Offering shall be reasonable and
shall in no event exceed an amount equal to fifteen percent (15%) of the
proceeds raised in the Initial Public Offering.
Section 5.2. Acquisition Fees and Acquisition Expenses.
-----------------------------------------
The total of all Acquisition Fees and Acquisition Expenses shall be
reasonable, and shall not exceed an amount equal to six percent (6%) of the
Contract Price of the Property, or in the case of a mortgage loan, six percent
(6%) of the funds advanced.
Section 5.3. Total Operating Expenses.
------------------------
In the absence of a showing to the contrary, the total Operating
Expenses of the Company shall be deemed to be excessive if they exceed in any
fiscal year the greater of two percent (2%) of the Average Invested Assets or
twenty-five percent (25%) of the Net Income for such year. The Independent
Directors shall have the responsibility of limiting such expenses to amounts
that do not exceed such limitations.
13
Section 5.4. Property Disposition Fee.
------------------------
The Company may pay the Advisor, Director, Sponsor, or any Affiliate
thereof a real estate disposition fee upon Sale of one or more Properties, in an
amount equal to the lesser of:
(a) fifty percent (50%) of a customary Competitive Real
Estate Commission given the circumstances surrounding the Sale, or
(b) three percent (3%) of the Contract Price of the Property
or Properties.
In addition, the amount paid when added to the sums paid to unaffiliated parties
in such a capacity shall not exceed the lesser of the Competitive Real Estate
Commission or an amount equal to six percent (6%) of the sales price of such
Property or Properties. Payment of such fee shall be made only if the Advisor,
Director, Sponsor, or Affiliate provides a substantial amount of services in
connection with the Sale of a Property or Properties.
ARTICLE VI
INVESTMENT OBJECTIVES AND LIMITATIONS
Section 6.1. Investment Objectives.
---------------------
The Company's primary investment objectives are:
(a) to invest in income producing real property through
equity investments or mortgage loans in a manner which permits the Company to
qualify as a REIT for federal income tax purposes;
(b) to generate cash available for distribution to
Shareholders; and
(c) to seek to realize capital appreciation upon the
ultimate sale of the Company's Properties.
The sheltering from tax of income from other sources is not an objective of the
Company. The Shareholders have no voting rights with respect to implementing the
Company's investment objectives and policies, all of which are the
responsibility of the Board of Directors and may be changed at any time.
Section 6.2. Review of Objectives.
--------------------
The Independent Directors shall review the investment policies of the
Company with sufficient frequency and at least annually to determine that the
14
policies being followed by the Company at any time are in the best interests of
its Shareholders. Each such determination and the basis therefor shall be set
forth in the minutes of the meetings of the Board of Directors.
Section 6.3. Certain Permitted Investments.
-----------------------------
(a) The Company may invest in Properties, as defined in
Section 1.4 hereto.
(b) The Company may invest in Joint Ventures with the
Sponsor, Advisor, one or more Directors or any Affiliate thereof, 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 Company and on substantially the same terms and conditions as
those received by the other joint venturers.
(c) Subject to any limitations in Section 6.4(i), the Company
may invest in equity securities if a majority of Directors (including a majority
of Independent Directors) not otherwise interested in the transaction approve
such investment as being fair, competitive, and commercially reasonable.
Section 6.4. Investment Limitations.
----------------------
In addition to other investment restrictions imposed by the Directors
from time to time, consistent with the Company's objective of qualifying as a
REIT, the following shall apply to the Company's investments:
(a) Not more than ten percent (10%) of the Company's total
assets shall be invested in Unimproved Real Property or mortgage loans on
Unimproved Real Property.
(b) The Company 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 Company's ordinary
business of investing in real estate assets and mortgages.
(c) The Company shall not invest in or make mortgage loans
unless an appraisal is obtained concerning the underlying property except for
those loans insured or guaranteed by a government or government agency. Mortgage
indebtedness on any property shall not exceed such property's appraised value.
Such appraisal of the underlying property shall be (i) obtained from an
Independent Expert; (ii) maintained in the Company's records for at least five
(5) years; and (iii) available for inspection and duplication by any
Shareholder. In addition to the
15
appraisal, a mortgagee's or owner's title insurance policy or commitment as to a
priority of the mortgage or condition of the title shall be obtained.
(d) The Company shall not make or invest in mortgage loans,
including construction loans, on any one (1) Property if the aggregate amount of
all mortgage loans outstanding on the Property, including the loans of the
Company, would exceed an amount equal to eighty-five percent (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 Company" 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 (5%) per annum of the principal
balance of the loan. All of the Company's mortgage loans must provide for one of
the following: (i) except for differences attributable to adjustable rate loans,
equal periodic payments on a schedule that would be sufficient to fully amortize
the loan over a twenty (20) to forty (40) year period; (ii) payments of interest
only for a period of not greater than ten (10) years with the remaining balance
payable in equal periodic payments on a schedule that would fully amortize the
loan over a twenty (20) to thirty (30) year period; or (iii) payments of a
portion of the stated interest currently and deferral of the remaining interest
for a period not greater than five (5) years, with the remaining principal and
interest payable in equal periodic payments on a schedule that would fully
amortize the loan over a twenty (20) to thirty-five (35) year period.
(e) The Company shall not invest in indebtedness ("Junior
Debt") secured by a mortgage on real property which is subordinate to the lien
of other indebtedness ("Senior Debt"), except where the amount of such Junior
Debt, plus the outstanding amount of the Senior Debt does not exceed eighty-five
percent (85%) of the appraised value of such property. The value of all such
investments, as shown on the Company's books in accordance with generally
accepted accounting principles, after all reasonable reserves but before
depreciation, shall not exceed five percent (5%) of the Company's total assets.
(f) The Company shall not make or invest in any mortgage
loans that are subordinate to any mortgage, other indebtedness, or equity
interest of the Advisor, the Directors, the Sponsor, or an Affiliate of the
Company.
(g) The Company shall not engage in trading, as opposed to
investment activities, and shall not invest in the securities of other issuers,
unless a majority of Directors (including a majority of Independent Directors)
not otherwise interested in the transaction approve the transaction as being
fair, competitive, and commercially reasonable.
16
(h) The Company shall not engage in the underwriting or
agency distribution of securities of other issuers.
(i) The Company shall not issue (i) equity securities
redeemable solely at the option of the holder; (ii) 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; (iii) Equity Stock on a deferred payment basis or under similar
arrangements; (iv) nonvoting or assessable securities; (v) options, warrants, or
similar evidence of a right to buy its Securities (collectively, "Options") to
the Advisor, Directors, Sponsors or any Affiliate thereof except on the same
terms as such Options are sold to the general public. Notwithstanding the
limitations set forth in the proceeding sentence, the Company may issue such
Options to the Dealer Manager on terms different from those of Options sold to
the general public in connection with the Initial Public Offering, or part of a
stock option plan available to Directors, officers, or employees of the Company.
The voting rights share of Equity Stock of the Company (other than the publicly
held Equity Stock of the Company) sold in a private offering shall not exceed
the voting rights which bear the same relationship to the voting rights of the
publicly held Equity Stock as the consideration paid to the Company for each
privately offered Equity Stock of the Company bears to the book value of each
outstanding publicly held Equity Stock.
(j) The consideration paid for real property acquired by
the Company shall be approved by a majority of the Independent Directors and be
based on the fair market value of the Property. The consideration paid for each
Property shall be supported by an appraisal from an appraiser who is a
member-in-good-standing of the American Institute of Real Estate Appraisers or a
similar national or regional organization. In cases in which a majority of the
Independent Directors so determine, and in all cases in which the Company
acquires a Property from the Sponsor, Advisor, Director, or any Affiliates
thereof, the fair market value of such Property will be determined by an
Independent Expert who is a member-in-good-standing of the American Institute of
Real Estate Appraisers or similar national or regional organization and who will
be selected by the Independent Directors.
(k) The aggregate Leverage of the Company shall be
reasonable in relation to the Net Assets of the Company and shall be reviewed by
the Directors at least quarterly. The maxim amount of such Leverage in relation
to the Net Assets of the Company shall not exceed 300%.
(l) The Company shall not make loans to the Sponsor,
Advisor, Directors, officers or any principal of the Company or any Affiliate
thereof.
17
(m) The Company shall not invest in real estate contracts
of sale.
The foregoing investment limitations may not be modified or eliminated
without the approval of Shareholders owning a majority of the outstanding Equity
Stock.
ARTICLE VII
CONFLICTS OF INTEREST
Section 7.1. Sales and Leases to Company.
---------------------------
The Company may purchase or lease a Property or Properties from the
Sponsor, Advisor, 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 competitive and
commercially reasonable to the Company and at a price to the Company no greater
than the cost of the asset to such Sponsor, Advisor, Director or Affiliate
thereof, or, if the price to the Company is in excess of such cost, that
substantial justification for such excess exists. In no event shall the cost of
such asset to the Company exceed its current appraised value.
Section 7.2. Sales and Leases to the Sponsor, Advisor, Directors or
-------------------------------------------------------
Affiliates.
- ----------
An Advisor, Director, or Affiliate thereof may purchase or lease a
Property or Properties from the Company 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 Company.
Section 7.3. Other Transactions.
------------------
(a) No goods or services will be provided by the Sponsor,
Advisor, Director, or any Affiliates thereof to the Company, except for
transactions in which the Sponsor, Advisor, Director, or any Affiliates thereof
provide goods or services to the Company in accordance with these Articles of
Incorporation or if a majority of the Directors (including a majority of the
Independent Directors) not otherwise interested in such transactions approve
such transactions as fair and reasonable to the Company and on terms and
conditions not less favorable to the Company than those available from
unaffiliated third parties.
(b) The Sponsor, Advisor, Directors, and any Affiliates
thereof shall not make loans to the Company, or to joint ventures in which the
Company is a co-venturer, unless a majority of Directors (including a majority
of Independent Directors) not otherwise interested in the transaction approve
the transaction as
18
being fair, competitive, and commercially reasonable and no less favorable to
the Company than comparable loans between unaffiliated parties.
ARTICLE VIII
CAPITAL STOCK
Section 8.1. Authorized Stock; Dividend or Distribution Rights.
-------------------------------------------------
(a) The total number of shares of stock that the Company
has authority to issue is fifty million (50,000,000) shares of Common Stock,
$.01 par value per share, and ten million (10,000,000) shares of Preferred
Stock, $.01 par value per share.
No holder of shares of capital stock of the Company
shall have any preemptive or preferential right to subscribe to or purchase (i)
any shares of any class of the Company, whether now or hereafter authorized;
(ii) any warrants, rights, or options to purchase any such shares; or (iii) any
securities or obligations convertible into any such shares or into warrants,
rights, or options to purchase any such shares.
The Preferred Stock may be issued from time to time by
the Board of Directors in such series and with such preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, or other provisions as may be fixed by the Board of Directors.
(b) The Directors from time to time may authorize and the
Company may pay to Shareholders such dividends or distributions in cash or other
property as the Directors in their discretion shall determine. The Directors
shall endeavor to authorize and the Company may pay such dividends and
distributions as shall be necessary for the Company to qualify as real estate
investment trust under the REIT Provisions of the Code; provided, however,
Shareholders shall have no right to any dividend or distribution unless and
until declared by the Board of Directors in its discretion. The exercise of the
powers and rights of the Directors pursuant to this section shall be subject to
the provisions of any class or series of Equity Stock at the time outstanding.
The receipt by any Person in whose name any Equity Stock is registered on the
records of the Company or by his duly authorized agent shall be a sufficient
discharge for all dividends or distributions payable or deliverable in respect
of such Equity Stock and from all liability to see to the application thereof.
Distributions in kind shall not be permitted, except for distributions of
readily marketable securities and distributions of beneficial interests in a
liquidating trust established for the dissolution of the Company and the
liquidation of its assets in accordance with the terms of these Articles of
Incorporation.
19
Section 8.2. Restrictions on Transfer.
------------------------
(a) Definitions.
-----------
The following terms shall have the following meanings:
"Beneficial Ownership" shall mean ownership of shares
of Equity Stock by a Person who would be treated as an owner of such shares of
Equity Stock either directly or indirectly 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
correlative meanings.
"Beneficiary" shall mean, with respect to any Trust,
one or more organizations described in each of Section 170(b)(1)(A) (other than
clause (vii) or (viii) thereof) and Section 170(c)(2) of the Code that are named
by the Company as the beneficiary or beneficiaries of such Trust, in accordance
with the provisions of Section 8.3(a) hereof.
"Board of Directors" shall mean the Board of Directors
of the Company.
"Constructive Ownership" shall mean ownership of shares
of Equity Stock by a Person who would be treated as an owner of such shares of
Equity Stock either directly or indirectly through the application of Section
318 of the Code, as modified by Section 856(d)(5) of the Code. The terms
"Constructive Owner," "Constructively Owns," and "Constructively Owned" shall
have correlative meanings.
"Equity Stock" shall mean the Preferred Stock and
Common Stock of the Company. The term "Equity Stock" shall include all shares of
Preferred Stock and Common Stock of the Company that are held as Shares-in-Trust
in accordance with the provisions of Section 8.3 hereof.
"ERISA Investor" shall mean (i) an employee benefit or
other retirement plan or arrangement that is subject to the Employee Retirement
Income Security Act of 1974, as amended, or the prohibited transaction
provisions of the Code, (ii) a person acting on behalf of a plan described in
clause (i), or (iii) a person using the assets of a plan described in clause
(i).
"Insignificant Participation Exception" shall mean the
exception to the Plan Asset Regulations which provides that an ERISA Investor's
assets will not include any of the underlying assets of an entity in which it
invests if at all
20
times less than 25% of the value of each class of equity interests in the entity
is held by ERISA Investors.
"Market Price" on any date shall mean the average of the Closing
Price for the five (5) consecutive Trading Days ending on such date. The
"Closing Price" on any date shall mean the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the shares of Equity
Stock are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
shares of Equity Stock are listed or admitted to trading or, if the shares of
Equity Sock 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 over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System or,
if such system is no longer in use, the principal other automated quotations
system that may then be in use or, if the shares of Equity Stock are not quoted
by any such organization, a price determined by the Board of Directors in good
faith.
"Non-Transfer Event" shall mean an event other than a purported
Transfer that would change any Person's Beneficial Ownership or Constructive
Ownership of shares of Equity Stock, including, but not limited to, the granting
of any option or entering into any agreement for the sale, transfer, or other
disposition of shares of Equity Stock or the sale, transfer, assignment, or
other disposition of any securities or rights convertible into or exchangeable
for shares of Equity Stock.
"Ownership Limit" shall mean, with respect to the Common Stock,
9.9% of the number of outstanding shares of Common Stock and, with respect to
any class or series of Preferred Stock, 9.9% of the number of outstanding shares
of such class or series of Preferred Stock.
"Permitted Transferee" shall mean any Person designated as a
Permitted Transferee in accordance with the provisions of Section 8.3(e).
"Person" shall mean an individual, corporation, partnership,
limited liability company, estate, trust, 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 12(d)(3) of the Securities
Exchange Act of 1934, as amended.
21
"Plan Asset Regulations" shall mean Section 2510.3-101 of the
regulations of the Department of Labor.
"Prohibited Owner" shall mean, with respect to any purported
Transfer or Non-Transfer Event, any Person who, but for the provisions of
Section 8.2(c) hereof, would own record title to shares of Equity Stock.
"Redemption Rights" shall mean the rights granted under the G
REIT L.P. Partnership Agreement to the limited partners to redeem, under certain
circumstances, their limited partnership interests for shares of Common Stock
(or cash at the option of the Company).
"Restriction Termination Date" shall mean the first day after
which (i) the Board of Directors determines that it is no longer in the best
interests of the Company to attempt to, or continue to, qualify as a REIT and
(ii) there is an affirmative vote of a majority of the number of shares of
Equity Stock entitled to vote on such matter at a general or special meeting of
the shareholders of the Company.
"Shares-in-Trust" shall mean any shares of Equity Stock
designated Shares-in-Trust pursuant to Section 8.2(c).
"Trading Day" shall mean a day on which the principal national
securities exchange on which the shares of Equity Stock are listed or admitted
to trading is open for the transaction of business or, if the shares of Equity
Stock are not listed or admitted to trading on any national securities exchange,
shall mean any day other than a Saturday, a Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law or
executive order to close.
"Transfer" (as a noun) shall mean any sale, transfer, gift,
assignment, devise, or other disposition of shares of Equity Stock, whether
voluntary or involuntary, whether of record, constructively, or beneficially and
whether by operation of law or otherwise. "Transfer" (as a verb) shall have the
correlative meaning.
"Trust" shall mean any separate trust created pursuant to Section
8.2(c) administered in accordance with the terms of Section 8.3, for the
exclusive benefit of any Beneficiary.
"Trustee" shall mean any Person or entity unaffiliated with both
the Company and any Prohibited Owner, such Trustee to be designated by the
Company to act as trustee of any Trust, or any successor trustee thereof.
22
(b) Restriction on Transfers.
------------------------
(i) Except as provided in Section 8.2(g), prior
to the Restriction Termination Date, (A) no Person shall Beneficially Own or
Constructively Own outstanding shares of Equity Stock in excess of the Ownership
Limit and (B) any Transfer that, if effective, would result in any Person
Beneficially Owning or Constructively Owning shares of Equity Stock in excess of
the Ownership Limit shall be void ab initio as to the Transfer of the number of
-- ------
shares of Equity Stock which would be otherwise Beneficially Owned or
Constructively Owned by such Person in excess of the Ownership Limit, and the
intended transferee shall acquire no rights in such excess shares of Equity
Stock.
(ii) Except as provided in Section 8.2(g), prior
to the Restriction Termination Date, any Transfer that, if effective, would
result in shares of Equity Stock being beneficially owned by fewer than 100
Persons (determined without reference to any rules of attribution) shall be void
ab initio as to the Transfer of that number of shares which would be otherwise
- -- ------
beneficially owned (determined without reference to any rules of attribution) by
the transferee, and the intended transferee shall acquire no rights in such
shares of Equity Stock.
(iii) Prior to the Restriction Termination Date,
any Transfer of shares of Equity Stock that, if effective, would result in the
Company being "closely held" within the meaning of Section 856(h) of the Code
shall be void ab initio as to the Transfer of the number of shares of Equity
-- ------
Stock which would cause the Company to be "closely held" within the meaning of
Section 856(h) of the Code, and the intended transferee shall acquire no rights
in such shares of Equity Stock.
(iv) Prior to the Restriction Termination Date,
any Transfer of shares of Equity Stock that, if effective, would cause the
Company to Constructively Own 10% or more of the ownership interests in a tenant
of the Company's real property, within the meaning of Section 856(d)(2)(B) of
the Code, shall be void ab initio as to the Transfer of that number of shares of
-- ------
Equity Stock which would cause the Company to Constructively Own 10% or more of
the ownership interests in a tenant of the Company's real property, within the
meaning of Section 856(d)(2 ) of the Code, and the intended transferee shall
acquire no rights in such excess shares of Equity Stock.
(v) Prior to either (A) the qualification of
each class of Equity Stock as a class of "publicly offered securities," within
the meaning of Section 2510.3-101(b)(2) of the Plan Asset Regulations, or (B)
the Company's qualification for another exception to the Plan Asset Regulations
(other than the Insignificant Participation Exception), any Transfer of shares
of Equity, Stock that, if effective, would result in 25% or more of any class of
Equity being Beneficially Owned by one or more ERISA Investors, shall be void ab
--
initio as to that number of shares of
- ------
23
Equity Stock which would cause 25% or more of any class of Equity Stock to be
Beneficially Owned by ERISA Investors, and the intended transferee shall acquire
no rights in such shares of Equity Stock.
(c) Transfer to Trust.
-----------------
(i) If, notwithstanding the other provisions
contained in this Section 8.2, at any time prior to the Restriction Termination
Date, there is a purported Transfer or Non-Transfer Event such that any Person
would either Beneficially Own or Constructively Own shares of Equity Stock in
excess of the Ownership Limit, then, (A) except as otherwise provided in Section
8.2(g) hereof, the purported transferee shall acquire no right or interest (or,
in the case of a Non-Transfer Event, the Person holding record title to the
shares of Equity Stock Beneficially Owned or Constructively Owned by such
Beneficial Owner or Constructive Owner, shall cease to own any right or
interest) in such number of shares of Equity Stock which would cause such
Beneficial Owner or Constructive Owner to Beneficially Own or Constructively Own
shares of Equity Stock in excess of the Ownership Limit, (B) such number of
shares of Equity Stock in excess of the Ownership Limit (rounded up to the
nearest whole share) shall be designated Shares-in-Trust and, in accordance with
the provisions of Section 8.3, transferred automatically and by operation of law
to the Trust to be held in accordance with that Section 8.3, and (C) the
Prohibited Owner shall submit such number of shares of Equity Stock to the
Company for registration in the name of the Trustee. Such transfer to a Trust
and the designation of shares as Shares-in-Trust shall be effective as of the
close of business on the business day prior to the date of the Transfer or
Non-Transfer Event, as the case may be.
(ii) If, notwithstanding the other provisions
contained in this Section 8.2, at any time prior to the Restriction Termination
Date, there is a purported Transfer or Non-Transfer Event that, if effective,
would (A) result in the shares of Equity Stock being beneficially owned by fewer
than 100 Persons (determined without reference to any rules of attribution), (B)
result in a Company being "closely held" within the meaning of Section 856(h) of
a Code, or (C) cause the Company to Constructively Own 10% or more of the
ownership interests in a tenant of the Company's real property, within the
meaning of Section 856(d)(2)(B) of the Code, then (1) a purported transferee
shall not acquire any right or interest (or, in the case of a Non-Transfer
Event, the Person holding record title of the shares of Equity Stock with
respect to which such Non-Transfer Event occurred, shall cease to own any right
or interest) in such number of shares of Equity Stock, the ownership of which by
such purported transferee or record holder would (a) result in the shares of
Equity Stock being beneficially owned by fewer than 100 Persons (determined
without reference to any rules of attribution), (b) result in the Company being
"closely held" within the meaning of Section 856(h) of the Code, or (c) cause a
Company to Constructively Own 10% or more of the ownership interests
24
in a tenant of the Company's real property, within the meaning of Section
856(d)(2)(B) of the Code, (2) such number of shares of Equity Stock (rounded up
to the nearest whole share) shall be designated Shares-in-Trust and, in
accordance with the provisions of Section 8.3, transferred automatically and by
operation of law to the Trust to be held in accordance with that Section 8.3,
and (3) the Prohibited Owner shall submit such number of shares of Equity Stock
to the Company for registration in the name of the Trustee. Such transfer to a
Trust and the designation of shares as Shares-in-Trust shall be effective as of
the close of business on the business day prior to the date of the Transfer or
Non-Transfer Event, as the case may be.
(iii) If, notwithstanding the other provisions contained in this
Section 8.2, at any time prior to either (A) the qualification of each class of
Equity Stock as a class of "publicly offered securities," within the meaning of
the Plan Asset Regulations, or (B) the Company's qualification for another
exception to the Plan Asset Regulations (other than the Insignificant
Participation Exception), there is a purported Transfer or Non-Transfer Event
that, if effective, would result in 25% or more of the shares of Equity Stock
being Beneficially Owned by ERISA Investors, then (A) the purported transferee
shall acquire no rights or interest (or, in the case of a Non-Transfer Event,
the Person holding record title to the shares of Equity Stock with respect to
which such Non-Transfer Event occurred, shall cease to own any right or
interest) in such number of shares of Equity Stock the ownership of which by
such purported transferee or record holder would cause 25% or more of any class
of Equity Stock to be Beneficially Owned by one or more ERISA Investors, (B)
such number of shares of Equity Stock (rounded up to the nearest whole share)
shall be designated Shares-in-Trust and, in accordance with the provisions of
Section 8.3, transferred automatically and by operation of law to the Trust to
be held in accordance with that Section 8.3, and (C) the Prohibited Owner shall
submit such number of shares of Equity Stock to the Company for registration in
the name of the Trustee. Such transfer to a Trust and the designation of shares
as Shares-in-Trust shall be effective as of the close of business, on the
business day prior to the date of the Transfer or Non-Transfer Event, as the
case may be.
(d) Remedies For Breach.
-------------------
If the Company, or its designees, shall at any time determine in
good faith that a Transfer has taken place in violation of Section 8.2(b) or
that a Person intends to acquire or has attempted to acquire Beneficial
Ownership or Constructive Ownership of any shares of Equity Stock in violation
of Section 8.2(b), the Company shall take such action as it deems advisable to
refuse to give effect to or to prevent such Transfer or acquisition, including,
but not limited to, refusing to give effect to such Transfer on the books of the
Company or instituting proceedings to enjoin such Transfer or acquisition.
25
(e) Notice of Restricted Transfer.
-----------------------------
Any Person who acquires or attempts to acquire shares of Equity
Stock in violation of Section 8.2(b), or any Person who owned shares of Equity
Stock that were transferred to the Trust pursuant to the provisions of Section
8.2(c), shall immediately give written notice to the Company of such event and
shall provide to the Company such other information as the Company may request
in order to determine the effect, if any, of such Transfer or Non-Transfer
Event, as the case may be, on the Company's status as a REIT.
(f) Owners Required To Provide Information.
--------------------------------------
Prior to the Restriction Termination Date:
(i) Every Beneficial Owner or Constructive Owner of more than
5%, or such lower percentages as required pursuant to regulations under the REIT
Provisions of the Code, of the outstanding Equity Stock of the Company shall,
within 30 days after January 1 of each year, provide to the Company a written
statement or affidavit stating the name and address of such Beneficial Owner or
Constructive Owner, the number of shares of Equity Stock Beneficially Owned or
Constructively Owned, and a description of how such shares are held. Each such
Beneficial Owner or Constructive Owner shall provide to the Company such
additional information as the Company may request in order to determine the.
effect, if any, of such Beneficial Ownership or Constructive Ownership on the
Company's status as a REIT and to ensure compliance with the Ownership Limit.
(ii) Each Person who is a Beneficial Owner or Constructive Owner
of shares of Equity Stock and each Person (including the Shareholder of record)
who is holding shares of Equity Stock for a Beneficial Owner or Constructive
Owner shall provide to the Company a written statement or affidavit stating such
information as the Company may request in order to determine the Company's
status as a REIT and to ensure compliance with the Ownership Limit.
(g) Exceptions.
----------
(i) The Ownership Limit shall not apply to the acquisition of
shares of Equity Stock by an underwriter that participates in a public offering
of such shares for a period of 90 days following the purchase by such
underwriter of such shares provided that the restrictions contained in
paragraphs (i) through (iv) of Section 8.2(b) will not be violated following the
distribution by such underwriter of such shares. In addition, the Board of
Directors, upon receipt of a ruling from the Internal Revenue Service or an
opinion of counsel in each case to the effect that the exemption will not cause
the Company to lose its status as a REIT, may exempt a Person from one or more
of the restrictions contained in paragraphs (i) through (iv)
26
of Section 8.2(b) provided that (i) the Board of Directors obtains such
representations and undertakings from such Person as are reasonably necessary to
ascertain that no Person's Beneficial Ownership or Constructive Ownership of
shares of Equity Stock will cause the Company to lose its REIT status as a
result of the exemption and (ii) such Person agrees in writing that any
violation or attempted violation of the terms of the exemption will result in
transfer to the Trust of shares of Equity Stock pursuant to Section 8.2(c). The
Board of Directors, upon receipt of a ruling from the Internal Revenue Service
or an opinion of counsel in each case to the effect that the Company will not
fail to qualify for the Insignificant Participation Exception or another
applicable exception to the Plan Asset Regulations as a result of the exemption,
may exempt an ERISA Investor from the restriction contained in paragraph (v) of
Section 8.2(b), provided that the Board of Directors obtains such
representations and undertakings from such ERISA Investor as are reasonably
necessary to ascertain the foregoing.
(ii) The Ownership Limit shall not apply to the acquisition
of shares of Equity Stock by the Advisor, except to the extent necessary to
comply with the REIT Provisions of the Code or as otherwise determined by the
Board of Directors.
Section 8.3. Shares-in-Trust.
---------------
(a) Trust.
-----
Any shares of Equity Stock transferred to a Trust and
designated Shares-in-Trust pursuant to Section 8.2(c) shall be held for the
exclusive benefit of the Beneficiary. The Company shall name a Beneficiary for
each Trust within five (5) days after discovery of the existence thereof. Any
transfer to a Trust, and subsequent designation of shares of Equity Stock as
Shares-in-Trust, pursuant to Section 8.2(c) shall be effective as of the close
of business on the business day prior to the date of the Transfer or
Non-Transfer Event that results in the transfer to the Trust. Shares-in-Trust
shall remain issued and outstanding shares of Equity Stock of the Company and
shall be entitled to the same rights and privileges on identical terms and
conditions as are all other issued and outstanding shares of Equity Stock of the
same class and series. When transferred to a Permitted Transferee in accordance
with the provisions of Section 8.3(e), such Shares-in-Trust shall cease to be
designated as Shares-in-Trust.
(b) Dividend Rights.
---------------
The Trust, as record holder of Shares-in-Trust, shall be
entitled to receive all dividends and distributions as may be declared by the
Board of Directors on such shares of Equity Stock and shall hold such dividends
or distributions in trust for the benefit of the Beneficiary. The Prohibited
Owner with
27
respect to Shares-in-Trust shall repay to the Trust the amount of any dividends
or distributions received by it that (i) are attributable to any shares of
Equity Stock designated Shares-in-Trust and (ii) the record date of which was on
or after the date that such shares became Shares-in-Trust. The Company shall
take all measures that it determines reasonably necessary to recover the amount
of any such dividend or distribution paid to a Prohibited Owner, including, if
necessary, withholding any portion of future dividends or distributions payable
on shares of Equity Stock Beneficially Owned or Constructively Owned by the
Person who, but for the provisions of Section 8.2(c), would Constructively Own
or Beneficially Own the Shares-in-Trust; and, as soon as reasonably practicable
following the Company's receipt or withholding thereof, shall pay over to the
Trust for the benefit of the Beneficiary the dividends so received or withheld,
as the case may be.
(c) Rights Upon Liquidation.
-----------------------
In the event of any voluntary or involuntary liquidation,
dissolution, or winding up of, or any distribution of the assets of, the
Company, each holder of Shares-in-Trust shall be entitled to receive, ratably
with each other holder of shares of Equity Stock of the same class or series,
that portion of the assets of the Company which is available for distribution to
the holders of such class and series of shares of Equity Stock. The Trust shall
distribute to the Prohibited Owner the amounts received upon such liquidation,
dissolution, or winding up, or distribution; provided, however, that the
-------- -------
Prohibited Owner shall not be entitled to receive amounts pursuant to this
Section 8.3(c) in excess of, in the case of a purported Transfer in which the
Prohibited Owner gave value for shares of Equity Stock and which Transfer
resulted in the transfer of the shares to the Trust, the price per share, if
any, such Prohibited Owner paid for the shares of Equity Stock and, in the case
of a Non-Transfer Event or Transfer in which the Prohibited Owner did not give
value for such shares (e.g., if the shares were received through a gift or
----
devise) and which Non-Transfer Event or Transfer, as the case may be, resulted
in the transfer of shares to the Trust, the price per share equal to the Market
Price on the date of such Non-Transfer Event or Transfer. Any remaining amount
in such Trust shall be distributed to the Beneficiary.
(d) Voting Rights.
-------------
The Trustee shall be entitled to vote all Shares-in-Trust. Any
vote by a Prohibited Owner as a holder of shares of Equity Stock prior to the
discovery by the Company that the shares of Equity Stock are Shares-in-Trust
shall, subject to applicable law, be rescinded and shall be void ab initio with
-- ------
respect to such Shares-in-Trust and the Prohibited Owner shall be deemed to have
given, as of the close of business on the business day prior to the date of the
purported Transfer or Non-Transfer Event that results in the transfer to the
Trust of shares of Equity Stock under Section 8.2(c), an irrevocable proxy to
the Trustee to vote the
28
Shares-in-Trust in the manner in which the Trustee, in its sole and absolute
discretion, desires.
(e) Designation of Permitted Transferee.
-----------------------------------
The Trustee shall have the exclusive and absolute
right to designate a Permitted Transferee of any and all Shares-in-Trust. In an
orderly fashion so as not to materially and adversely affect the Market Price of
the Shares-in-Trust, the Trustee shall designate any Person as Permitted
Transferee; provided, however, that the Permitted Transferee so designated
purchases for valuable consideration (whether in a public or private sale) the
Shares-in-Trust and the Permitted Transferee so designated may acquire such
Shares-in-Trust without such acquisition resulting in a transfer to a Trust and
the redesignation of such shares of Equity Stock so acquired as Shares-in-Trust
under Section 8.2(c). Upon the designation by the Trustee of a Permitted
Transferee in accordance with the provisions of this Section 8.3(e), the Trustee
shall (i) cause to be transferred to the Permitted Transferee that number of
Shares-in-Trust acquired by the Permitted Transferee, (ii) cause to be recorded
on the books of the Company that the Permitted Transferee is the holder of
record of such number of shares of Equity Stock, (iii) cause the Share-in-Trust
to be canceled, and (iv) distribute to the Beneficiary any and all amounts held
with respect to the Shares-in-Trust after making that payment to the Prohibited
Owner pursuant to Section 8.3(f).
(f) Compensation to Record Holder of Shares of Equity
--------------------------------------------------
Stock that Become Shares-in-Trust.
- ---------------------------------
Any Prohibited Owner shall be entitled
(following discovery of the Shares-in-Trust and subsequent designation of the
Permitted Transferee in accordance with Section 8.3(e) or following the
acceptance of the offer to purchase such shares in accordance with Section
8.3(g)) to receive from the Trustee following the sale or other disposition of
such Shares-in-Trust a lesser of (i) in the case of (A) a purported Transfer in
which the Prohibited Owner gave value for shares of Equity Stock and which
Transfer resulted in the transfer of a shares to the Trust, the price per share,
if any, such Prohibited Owner paid for the shares of Equity Stock, or (B) a
Non-Transfer Event or Transfer in which the Prohibited Owner did not give value
for such shares (e.g., if the shares were received through a gift or devise) and
which Non-Transfer Event or Transfer, as the case may be, resulted in the
transfer of shares to the Trust, a price per share equal to the Market Price on
the date of such Non-Transfer Event or Transfer, and (ii) the price per share
received by the Trustee from the sale or other disposition of such
Shares-in-Trust in accordance with Section 8.3(e). Any amounts received by the
Trustee in respect to such Shares-in-Trust and in excess of such amounts to be
paid the Prohibited Owner pursuant to this Section 8.3(f) shall be distributed
to the Beneficiary in accordance with the provisions of Section 8.3(e). Each
Beneficiary and Prohibited
29
Owner waive any and all claims that they may have against a Trustee and the
Trust arising out of the disposition of Shares-in-Trust, except for claims
arising out of the gross negligence or willful misconduct of, or any failure to
make payments in accordance with this Section 8.3, by such Trustee or the
Company.
(g) Purchase Right in Shares-in-Trust.
---------------------------------
Shares-in-Trust shall be deemed to have been offered
for sale to the Company, or its designee, at a price per share equal to the
lesser of (i) the price per share in the transaction that created such
Shares-in-Trust (or, in the case of devise, gift or Non-Transfer Event, the
Market Price at the time of such devise, gift, or Non-Transfer Event) and (ii)
the Market Price on the date the Company, or its designee, accepts such offer.
The Company shall have the right to accept such offer for a period of ninety
(90) days after the later of the date of the Non-Transfer Event or purported
Transfer which resulted in such Shares-in-Trust and the date the Company
determines in good faith that a Transfer or Non-Transfer Event resulting in
Shares-in-Trust has occurred, if the Company does not receive a notice of such
Transfer or Non-Transfer Event pursuant to Section 8.2(e).
Section 8.4. Remedies not Limited.
--------------------
Nothing contained in this Article VIII shall limit the authority of the
Company to take such other action as it deems necessary or advisable to protect
the Company and the interests of its Shareholders by preservation of the
Company's status as a REIT and to ensure compliance with the Ownership Limit and
the other restrictions set forth in Section 8.2(b).
Section 8.5. Ambiguity.
---------
In the case of an ambiguity in the application of any of the provisions
of this Article VIII, including any definition contained in Section 8.2(a), the
Board of Directors shall have the power to determine the application of the
provisions of this Article VIII with respect to any situation based on the facts
known to it.
Section 8.6. Legend.
------
Each certificate for shares of Equity Stock shall bear the following
legend:
"The shares of [Common or Preferred] Stock represented by this
certificate are subject to restrictions on transfer for the
purpose of the Company's maintenance of its status as a real
estate investment trust under the Internal Revenue Code of
1986, as amended (the "Code"), and for certain other purposes
under the Code and the
30
Employee Retirement Income Security Act of 1974, as amended
("ERISA"). No Person may (i) Beneficially Own or
Constructively Own shares of Common Stock in excess of 9.9% of
the number of outstanding shares of Common Stock, (ii)
Beneficially Own or Constructively Own shares of any class or
series of Preferred Stock in excess of 9.9% of the number of
outstanding shares of such class or series of Preferred Stock,
(iii) beneficially own shares of Equity Stock that would
result in the shares of Equity Stock being beneficially owned
by fewer than 100 Persons (determined without reference to any
rules of attribution), (iv) Beneficially own shares of Equity
Stock that would result in the Company being "closely held"
within the meaning of Section 856(h) of the Code, (v)
Constructively Own shares of Equity Stock that would cause the
Company to Constructively Own 10% or more of the ownership
interests in a tenant of the Company's real property, within
the meaning of Section 856(d)(2)(B) of the Code, or (vi)
Beneficially Own shares of Equity Stock that would result in
25% or more of any class of the Equity Stock being
Beneficially Owned by one or more ERISA Investors. Any Person
who attempts to Beneficially Own or Constructively Own shares
of Equity Stock in excess of the above limitations must
immediately notify the Company in writing. If the restrictions
above are violated, the shares of [Common or Preferred] Stock
represented hereby will be transferred automatically and by
operation of law to a Trust and shall be designated
Shares-in-Trust. All capitalized terms in this legend have the
meanings defined in the Company's Articles of Incorporation,
as the same may be further amended and restated from time to
time, a copy of which, including the restrictions on transfer,
will be sent without charge to each shareholder who so
requests."
Section 8.7. Severability.
------------
If any provision of this Article VIII or any application of any such
provision is determined to be void, invalid, or unenforceable by any court
having jurisdiction over the issue, the validity and enforceability of the
remaining provisions of this Article VIII shall not be affected and other
applications of such provision shall be affected only to the extent necessary to
comply with the determination of such court.
31
Section 8.8. Dividend Reinvestment Program.
-----------------------------
The Board of Directors may establish, from time to time, a dividend
reinvestment plan or plans ("DRIP"). Pursuant to such DRIP, (i) all material
information regarding the distribution to the Shareholders and the effect of
reinvesting such distribution, including the tax consequences thereof, shall be
provided to the Shareholders at least annually, and (ii) each Shareholder
participating in such DRIP shall have a reasonable opportunity to withdraw from
the DRIP at least annually after receipt of the information required in clause
(i) above.
ARTICLE IX
SHAREHOLDERS
Section 9.1. Meetings of Shareholders.
------------------------
There shall be an annual meeting of the Shareholders, to be held at
such time and place as shall be determined by or in the manner prescribed in the
Bylaws, at which the Directors shall be elected and any other proper business
may be conducted. The annual meeting will be held on a date which is a
reasonable period of time following the distribution of the Company's annual
report to Shareholders but not less than thirty (30) days after delivery of such
report. At an annual meeting at which a quorum is present, holders of a majority
of the votes entitled to be cast in an election of Directors may, without the
necessity for concurrence by the Directors, vote to elect the Directors. A
quorum shall be the presence in person or by proxy of Shareholders entitled to
cast a majority of all the votes entitled to be cast at such meeting. Special
meetings of Shareholders may be called in the manner provided in the Bylaws,
including by the president or by a majority of the Directors, and shall be
called by an officer of the Company upon written request of Shareholders holding
in the aggregate not less than ten percent (10%) of the outstanding Equity Stock
entitled to be cast on any issue proposed to be considered at any such special
meeting. Upon receipt of a written request, either in person or by mail, stating
the purpose(s) of the meeting, the Company shall provide all Shareholders within
ten (10) days after receipt of said request, written notice, either in person or
by mail, of a meeting and the purpose of such meeting to be held on a date not
less than fifteen (15) nor more than sixty (60) days after the distribution of
such notice, at a time and place specified in the request, or if none is
specified, at a time and place convenient to the Shareholders. If there are no
Directors, the officers of the Company shall promptly call a special meeting of
the Shareholders entitled to vote for the election of successor Directors. Any
meeting may be adjourned and reconvened as the Directors determine or as
provided by the Bylaws.
32
Section 9.2. Voting Rights of Shareholders.
-----------------------------
Subject to the provisions of any class or series of Equity Stock then
outstanding and the mandatory provisions of any applicable laws or regulations,
the Shareholders shall be entitled to vote only on the following matters: (a)
election or removal of Directors, without the necessity for concurrence by the
Directors; (b) amendment of these Articles of Incorporation, without the
necessity for concurrence by the Directors; (c) termination of the Company,
without the necessity for concurrence by the Directors; (d) reorganization of
the Company; (e) merger, consolidation, or sale or other disposition of all or
substantially all of the Company Property; (f) termination of the Company's
status as a real estate investment trust under the REIT Provisions of the Code;
and (g) such other matters as required under applicable laws or regulations.
Without the concurrence of Shareholders holding not less than a majority of the
Equity Stock then outstanding and entitled to vote, the Directors may not
consummate any of the foregoing matters. Except with respect to the foregoing
matters, no action taken by the Shareholders at any meeting shall in any way
bind the Directors. The voting rights per share of the Equity Stock of the
Company (other than the publicly held Equity Stock of the Company) sold in a
private offering shall not exceed voting rights which bear the same relationship
to the voting rights of the publicly held shares of the Company as the
consideration paid to the Company for each privately offered Company share bears
to the book value of each outstanding publicly held share. With respect to
Equity Stock owned by the Advisor, the Directors, or any Affiliate, neither the
Advisor, the Directors, nor any Affiliate may vote or consent on matters
submitted to the Shareholders regarding the removal of the Advisor, Directors,
or any Affiliate or any transaction between the Company and any of them. In
determining the requisite percentage in interest of Equity Stock necessary to
approve a matter on which the Advisor, the Directors, and any Affiliate may not
vote or consent, any shares of Equity Stock owned by any of them shall not be
included.
Section 9.3. Right of Inspection.
-------------------
Any Shareholder and any designated representative thereof shall be
permitted access to all records of the Company at all reasonable times, and may
inspect and copy any of them for a reasonable charge. Inspection of the Company
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 9.4. Access to Shareholder List.
--------------------------
An alphabetical list of the names, addresses, and telephone numbers of
the Shareholders of the Company, along with the number of Equity Stock held by
each of them (the "Shareholder List"), shall be maintained as part of the books
and records of the Company and shall be available for inspection by any
Shareholder or the Shareholder's designated agent at the home office of the
Company upon the request of the Shareholder. The Shareholder List shall be
updated at least quarterly to reflect changes in the information contained
therein. A copy of such list shall be mailed to any Shareholder so requesting
within ten (10) days of the
33
request. The copy of the Shareholder List shall be printed in alphabetical order
on white paper, and in a readily readable type size (in no event smaller than
10-point type). The Company may impose a reasonable charge for expenses incurred
in reproduction pursuant to the Shareholder request. A Shareholder may request a
copy of the Shareholder List in connection with matters relating to
Shareholders' voting rights, and the exercise of Shareholder rights under
federal proxy laws.
If the Advisor or Directors neglect or refuse to exhibit, produce, or
mail a copy of the Shareholder List as requested, the Advisor and the Directors
shall be liable to any Shareholder requesting the list for the costs, including
attorneys' fees, incurred by that Shareholder for compelling the production of
the Shareholder List, and for actual damages suffered by any Shareholder 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 Shareholder List
is to secure such list of Shareholders or other information for the purpose of
selling such list or copies thereof, or of using the same for a commercial
purpose other than in the interest of the applicant as a Shareholder relative to
the affairs of the Company. The Company may require the Shareholder requesting
the Shareholder List to represent that the list is not requested for a
commercial purpose unrelated to the Shareholder's interest in the Company. The
remedies provided hereunder to Shareholders requesting copies of the Shareholder
List are in addition to and shall not in any way limit other remedies available
to Shareholders under federal law or the laws of any state.
Section 9.5. Reports.
-------
The Directors, including the Independent Directors, shall take
reasonable steps to ensure that the Company shall cause to be prepared and
mailed or delivered to each Shareholder as of a record date after the end of the
fiscal year and each holder of other publicly held securities of the Company
within one hundred twenty (120) days after the end of the fiscal year to which
it relates an annual report for each fiscal year ending after the Initial Public
Offering which 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
Company and including fees or charges paid to the Advisor and any Affiliate of
the Advisor by third parties doing business with the Company;
34
(d) the Operating Expenses of the Company, 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 Company are in the best interests of its Shareholders and the
basis for such determination;
(f) separately stated, full disclosure of all material terms, factors,
and circumstances surrounding any and all transactions involving the Company,
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; and
(g) distributions to the Shareholders for the period, identifying the
source of such distributions, and if such information is not available at the
time of the distribution, a written explanation of the relevant circumstances
will accompany the distributions (with the statement as to the source of
distributions to be sent to Shareholders not later than sixty (60) days after
the end of the fiscal year in which the distribution was made).
ARTICLE X
LIABILITY OF SHAREHOLDERS, DIRECTORS, ADVISORS
AND AFFILIATES; TRANSACTIONS
BETWEEN AFFILIATES AND THE COMPANY
Section 10.1. Limitation of Shareholder Liability.
-----------------------------------
No Shareholder shall be liable for any debt, claim, demand, judgment,
or obligation of any kind of, against, or with respect to the Company by reason
of his being a Shareholder, nor shall any Shareholder be subject to any personal
liability whatsoever, in tort, contract, or otherwise, to any Person in
connection with the Company Property or the affairs of the Company by reason of
his being a Shareholder.
Section 10.2. Limitation of Liability and Indemnification.
-------------------------------------------
(a) The Company shall indemnify and hold harmless a Director, Advisor,
or Affiliate (the "Indemnitee") against any or all losses or liabilities
reasonably incurred by the Indemnitee in connection with or by reason of any act
or omission performed or omitted to be performed on behalf of the Company in
such capacity, provided, that the Directors, Advisor, or Affiliate have
determined, in good faith, that the course of conduct which caused the loss or
liability was in the best interests of the Company. The Company shall not
indemnify or hold harmless the
35
Indemnitee if: (i) in the case that the Indemnitee is a Director (other than an
Independent Director), an Advisor, or an Affiliate, the loss or liability was
the result of negligence or misconduct by the Indemnitee, or (ii) in the case
that the Indemnitee is an Independent Director, the loss or liability was the
result of gross negligence or willful misconduct by the Indemnitee. Any
indemnification of expenses or agreement to hold harmless may be paid only out
of the Net Assets of the Company and no portion may be recoverable from the
Shareholders.
(b) The Company 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 securities law violations 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 of a Company were offered or sold as to indemnification for
violations of securities laws.
(c) Notwithstanding anything to the contrary contained in the
provisions of subsections (a) and (b) above of this Section 10.2, the Company
shall not indemnify or hold harmless an Indemnitee if it is established that:
(i) the act or omission was material to the loss or liability and was committed
in bad faith or was the result of active or deliberate dishonesty, (ii) the
Indemnitee actually received an improper personal benefit in money, property, or
services, (iii) in the case of any criminal proceeding, the Indemnitee had
reasonable cause to believe that the act or omission was unlawful, or (iv) in a
proceeding by or in the right of the Company, the Indemnitee shall have been
adjudged to be liable to the Company.
(d) The Directors may take such action as is necessary to
carry out this Section 10.2 and are expressly empowered to adopt, approve, and
amend from time to time Bylaws, resolutions, or contracts implementing such
provisions. No amendment of these Articles of Incorporation 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.
Section 10.3. Payment of Expenses.
-------------------
The Company shall pay or reimburse reasonable legal expenses and other
costs incurred by a Director, Advisor, or Affiliate in advance of final
disposition of a proceeding if all of the following are satisfied:
36
(a) the proceeding relates to acts or omissions with respect to
the performance of duties or services on behalf of the Company,
(b) the Indemnitee provides the Company with written affirmation
of his good faith belief that he has met the standard of conduct necessary for
indemnification by the Company as authorized by Section 10.2 hereof,
(c) the legal proceeding was initiated by a third party who is
not a Shareholder or, if by a Shareholder of the Company acting in his or her
capacity as such, a court of competent jurisdiction approves such advancement,
and
(d) the Indemnitee provides the Company with a written agreement
to repay the amount paid or reimbursed by the Company, together with the
applicable legal rate of interest 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 10.4. Express Exculpatory Clauses in Instruments.
------------------------------------------
Neither the Shareholders nor the Directors, officers, employees, or
agents of the Company shall be liable under any written instrument creating an
obligation of the Company by reason of their being Shareholders, Directors,
officers, employees, or agents of the Company, and all Persons shall look solely
to the Company Property for the payment of any claim under or for the
performance of that instrument. The omission of the foregoing exculpatory
language from any instrument shall not affect the validity or enforceability of
such instrument and shall not render any Shareholder, Director, officer,
employee, or agent liable thereunder to any third party, nor shall the Directors
or any officer, employee, or agent of the Company be liable to anyone as a
result of such omission.
ARTICLE XI
AMENDMENT; REORGANIZATION; MERGER, ETC.
Section 11.1. Amendment.
---------
(a) These Articles of Incorporation may be amended, without the
necessity for concurrence by the Directors, by the affirmative vote of the
holders of not less than a majority of the Equity Stock then outstanding and
entitled to vote thereon.
(b) The Directors, by a majority vote, may amend provisions of
these Articles of Incorporation from time to time as necessary to enable the
Company to qualify as a real estate investment trust under the REIT Provisions
of
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the Code. With the exception of the foregoing, the Directors may not amend these
Articles of Incorporation.
Section 11.2. Reorganization.
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Subject to the provisions of any class or series of Equity Stock at the
time outstanding, the Directors shall have the power:
(a) to cause the organization of a corporation, association,
trust, or other organization to take over the Company Property and to carry on
the affairs of the Company, or
(b) merge the Company into, or sell, convey, and transfer the
Company Property to any such corporation, association, trust, or organization in
exchange for Securities thereof or beneficial interests therein, and the
assumption by the transferee of the liabilities of the Company, and upon the
occurrence of (a) or (b) above, terminate the Company and deliver such
Securities or beneficial interests ratably among the Shareholders according to
the respective rights of the class or series of Equity Stock held by them;
provided, however, that any such action shall have been approved, at a meeting
of the Shareholders called for that purpose, by the affirmative vote of the
holders of not less than a majority of the Equity Stock then outstanding and
entitled to vote thereon.
Section 11.3. Merger, Consolidation or Sale of Company Property.
-------------------------------------------------
Subject to the provisions of any class or series of Equity Stock at the
time outstanding, the Directors shall have the power to:
(a) merge the Company into another entity,
(b) consolidate the Company with one (1) or more other entities
into a new entity;
(c) sell or otherwise dispose of all or substantially all of the
Company Property; or
(d) dissolve or liquidate the Company, other than before the
initial investment in Company Property; provided, however, that such action
shall have been approved, at a meeting of the Shareholders called for that
purpose, by the affirmative vote of the holders of not less than a majority of
the Equity Stock then outstanding and entitled to vote thereon.
Any such transaction involving an Affiliate of the Company or the
Advisor also must be approved by a majority of the Directors (including a
majority of the
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Independent Directors) not otherwise interested in such transaction as fair and
reasonable to the Company and on terms and conditions not less favorable to the
Company than those available from unaffiliated third parties.
In connection with any proposed Roll-Up Transaction, an appraisal of
all Assets shall be obtained from an Independent Expert. The 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 Assets
over a twelve (12) month period. The terms of the engagement of an Independent
Expert shall clearly state that the engagement is for the benefit of the Company
and the Shareholders. A summary of the appraisal, indicating all material
assumptions underlying the appraisal, shall be included in a report to
Shareholders 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 Shareholders 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:
(i) remaining as Shareholders of the Company and preserving
their interests therein on the same terms and conditions as existed previously;
or
(ii) receiving cash in an amount equal to the Shareholder's pro
rata share of the appraised value of the Net Assets of the Company.
The Company is prohibited from participating in any proposed Roll-Up
Transaction:
(c) which would result in the Shareholders having democracy rights in
a Roll-Up Entity that are less than the rights provided for in Sections 9.1,
9.2, 9.3, 9.4, 9.5, and 10.1 of these Articles of Incorporation;
(d) which 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 of Equity Stock held by that
investor;
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(e) in which investor's rights to access of records of the
Roll-Up Entity will be less than those described in Sections 9.3 and 9.4 hereof;
or
(f) in which any of the costs of the Roll-Up Transaction would
borne by the Company if the Roll-Up Transaction is not approved by the
Shareholders.
Dated: June 28, 2002 /s/ Anthony W. Thompson
-----------------------
Anthony W. Thompson, President
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