ARTICLES OF RESTATEMENT
OF
WINSTON HOTELS, INC.
The undersigned corporation hereby submits these Articles of
Restatement for the purpose of integrating into one document its
original articles of incorporation and all amendments thereto:
1. The name of the corporation is Winston Hotels, Inc.
2. Attached hereto as an exhibit are the restated articles
of incorporation.
3. The restated articles of incorporation of the
corporation do not contain any amendments to the articles of
incorporation requiring shareholder approval, and the restated
articles of incorporation were adopted by the Board of Directors.
This the 24th day of August, 1998.
WINSTON HOTELS, INC.
By: /s/ Robert W. Winston, III
------------------------------
Robert W. Winston, III
Chief Executive Officer and
President
EXHIBIT A
RESTATED ARTICLES OF INCORPORATION
OF
WINSTON HOTELS, INC.
1. Name. The name of the corporation (which is
----
hereinafter called the "Corporation") is Winston Hotels, Inc.
2. For Profit. The Corporation is for profit.
----------
3. Principal and Registered Office. The address of the
-------------------------------
Corporation's registered office and its principal office is 2209
Century Drive, Suite 300, Raleigh, Wake County, North Carolina
27612.
4. Registered Agent. The name of the Corporation's
-----------------
registered agent at that office is Robert W. Winston, III.
5. Authorized Capital Stock. The total number of shares
------------------------
of stock which the Corporation has authority to issue is fifty
million (50,000,000) shares of a class denominated Common Stock,
$.01 par value per share, and ten million (10,000,000) shares of
a class denominated Preferred Stock, $.01 par value per share.
The Preferred Stock may be issued from time to time by the
Board of Directors of the Corporation, 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.
(a) Series A Preferred Stock
(i) TITLE. The series of Preferred Stock is
hereby designated as the "9.25% Series A Cumulative Preferred
Stock" (the "Series A Preferred Stock").
(ii) NUMBER. The maximum number of authorized
shares of the Series A Preferred Stock shall be 3,000,000.
(iii) RELATIVE SENIORITY. In respect of
rights to receive dividends and to participate in distributions
of payments in the event of any liquidation, dissolution or
winding up of the Corporation, the Series A Preferred Stock shall
rank (i) senior to all classes or series of Common Stock of the
Corporation, and to all equity securities ranking junior to the
Series A Preferred Stock with respect to dividend rights or
rights upon liquidation, dissolution or winding up of the
Corporation; (ii) on a parity with all equity securities issued
by the Corporation, the terms of which specifically provide that
such equity securities rank on a parity with the Series A
Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution or winding up of the Corporation; and
(iii) junior to all existing and future indebtedness of the
Corporation. The term "equity securities" does not include
convertible debt securities, which will rank senior to the Series
A Preferred Stock prior to conversion.
(iv) DIVIDENDS.
(A) The holders of the then outstanding Series A Preferred
Stock shall be entitled to receive, when and as declared by the
Board of Directors out of any funds legally available therefor,
preferential cumulative cash dividends at the rate of 9.25% per
annum of the Liquidation Preference (as defined herein) per
share (equivalent to a fixed annual amount of $2.3125 per share).
Dividends on the Series A Preferred Stock shall be
cumulative from the date of original issue and shall be payable
quarterly in arrears on or before the sixteenth day of January,
April, July and October of each year, or, if not a Business Day
(as defined below), the next succeeding Business Day (each, a
"Dividend Payment Date"). The first dividend will be paid on or
before January 16, 1998. Dividends payable on the Series A
Preferred Stock for any partial dividend period will be computed
on the basis of a 360-day year consisting of twelve 30-day
months. Dividends will be payable to holders of record as they
appear in the stock records of the Corporation at the close of
business on the applicable record date, which shall be the last
Business Day of March, June, September and December,
respectively, or on such other date designated by the Board of
Directors of the Corporation for the payment of dividends that is
not more than 30 nor less than 10 days prior to the applicable
Dividend Payment Date (each, a "Dividend Record Date").
"Business Day" shall mean any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which
banking institutions in New York City are authorized or required
by law, regulation or executive order to close.
(B) The amount of any dividends accrued on any Series A
Preferred Stock at any Dividend Payment Date shall be the amount
of any unpaid dividends accumulated thereon, to and including
such Dividend Payment Date, whether or not earned or declared,
and the amount of dividends accrued on any shares of Series A
Preferred Stock at any date other than a Dividend Payment Date
shall be equal to the sum of the amount of any unpaid dividends
accumulated thereon, to and including the last preceding Dividend
Payment Date, whether or not earned or declared, plus an amount
calculated on the basis of the annual dividend rate of $2.3125
per share for the period after such last preceding Dividend
Payment Date to and including the date as of which the
calculation is made based on a 360-day year of twelve 30-day
months.
(C) Except as provided in this subsection (a) of Article 5,
the Series A Preferred Stock will not be entitled to any
dividends in excess of full cumulative dividends as described
above and shall not be entitled to participate in the earnings or
assets of the Corporation, and no interest, or sum of money in
lieu of interest, shall be payable in respect of any dividend
payment or payments on the Series A Preferred Stock which may be
in arrears.
(D) Any dividend payment made on the Series A Preferred
Shares shall be first credited against the earliest accrued but
unpaid dividend due with respect to such shares which remains
payable.
(E) No dividends on shares of Series A Preferred Stock
shall be declared by the Board of Directors or paid or set apart
for payment by the Corporation at such time as the terms and
provisions of any agreement of the Corporation, including any
agreement relating to its indebtedness, prohibits such
declaration, payment or setting apart for payment or provides
that such declaration, payment or setting apart for payment would
constitute a breach thereof or a default thereunder, or if such
declaration or payment shall be restricted or prohibited by law.
Notwithstanding the foregoing, dividends on the Series A
Preferred Stock will accrue whether or not the Corporation has
earnings, whether or not there are funds legally available for
the payment of such dividends and whether or not such dividends
are declared. Accrued but unpaid dividends on the Series A
Preferred Stock will not bear interest and holders of the Series
A Preferred Stock will not be entitled to any distributions in
excess of full cumulative distributions described above.
(F) Except as set forth in the next sentence, no dividends
will be declared or paid or set apart for payment on any capital
stock of the Corporation or any other series of Preferred Stock
ranking, as to dividends, on a parity with or junior to the
Series A Preferred Stock (other than a dividend in shares of the
Corporation's Common Stock or in shares of any other class of
stock ranking junior to the Series A Preferred Stock as to
dividends and upon liquidation) for any period unless full
cumulative dividends have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof
is set apart for such payment on the Series A Preferred Stock for
all past dividend periods and the then current dividend period.
When dividends are not paid in full (or a sum sufficient for such
full payment is not so set apart) upon the Series A Preferred
Stock and the shares of any other series of Preferred Stock
ranking on a parity as to dividends with the Series A Preferred
Stock, all dividends declared upon the Series A Preferred Stock
and any other series of Preferred Stock ranking on a parity as to
dividends with the Series A Preferred Stock shall be declared pro
rata so that the amount of dividends declared per share of Series
A Preferred Stock and such other series of Preferred Stock shall
in all cases bear to each other the same ratio that accrued
dividends per share on the Series A Preferred Stock and such
other series of Preferred Stock (which shall not include any
accrual in respect of unpaid dividends for prior dividend periods
if such Preferred Stock does not have a cumulative dividend) bear
to each other.
(G) Except as provided in the immediately preceding
paragraph, unless full cumulative dividends on the Series A
Preferred Stock have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof is
set apart for payment for all past dividend periods and the then
current dividend period, no dividends (other than in shares of
Common Stock or other shares of capital stock ranking junior to
the Series A Preferred Stock as to dividends and upon
liquidation) shall be declared or paid or set aside for payment
nor shall any other distribution be declared or made upon the
Common Stock or any other capital stock of the Corporation
ranking junior to or on a parity with the Series A Preferred
Stock as to dividends or upon liquidation, nor shall any shares
of Common Stock, or any other shares of capital stock of the
Corporation ranking junior to or on a parity with the Series A
Preferred Stock as to dividends or upon liquidation, be redeemed,
purchased or otherwise acquired for any consideration (or any
monies be paid to or made available for a sinking fund for the
redemption of any such shares) by the Corporation (except by
conversion into or exchange for other capital stock of the
Corporation ranking junior to the Series A Preferred Stock as to
dividends and upon liquidation or redemptions for the purpose of
preserving the Corporation's qualification as a real estate
investment trust ("REIT")). Holders of shares of the Series A
Preferred Stock shall not be entitled to any dividend, whether
payable in cash, property or stock, in excess of full cumulative
dividends on the Series A Preferred Stock as provided above. Any
dividend payment made on shares of the Series A Preferred Stock
shall first be credited against the earliest accrued but unpaid
dividend due with respect to such shares which remains payable.
(v) LIQUIDATION RIGHTS.
(A) Upon any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the
holders of shares of Series A Preferred Stock are entitled to be
paid out of the assets of the Corporation legally available for
distribution to its shareholders a liquidation preference of
$25.00 per share (the "Liquidation Preference"), plus an amount
equal to any accrued and unpaid dividends to the date of payment,
but without interest, before any distribution of assets is made
to holders of Common Stock or any other class or series of
capital stock of the Corporation that ranks junior to the Series
A Preferred Stock as to liquidation rights. Holders of Series A
Preferred Stock will be entitled to written notice of any event
triggering the right to receive such Liquidation Preference.
(B) After the payment to the holders of the Series A
Preferred Stock of the full preferential amounts provided for in
this subsection (a) of Article 5, the holders of the Series A
Preferred Stock, as such, shall have no right or claim to any of
the remaining assets of the Corporation.
(C) If, upon any voluntary or involuntary dissolution,
liquidation, or winding up of the Corporation, the amounts
payable with respect to the Liquidation Preference, plus an
amount equal to any accrued and unpaid dividends to the date of
payment, of the Series A Preferred Stock and any other shares of
the Corporation ranking as to any such distribution on a parity
with the Series A Preferred Stock are not paid in full, the
holders of the Series A Preferred Stock and of such other shares
will share ratably in any such distribution of assets of the
Corporation in proportion to the full respective preference
amounts to which they are entitled.
(D) The consolidation, share exchange or merger of the
Corporation with or into any other corporation, trust or entity
or of any other corporation with or into the Corporation, or the
sale, lease or conveyance of all or substantially all of the
property or business of the Corporation, shall not be deemed to
constitute a liquidation, dissolution or winding up of the
Corporation for the purposes of this subsection (a) of Article 5.
(vi) REDEMPTION.
(A) OPTIONAL REDEMPTION. On and after September 28, 2001,
the Corporation may, at its option, redeem at any time from time
to time, in whole or in part, the Series A Preferred Stock at a
price per share (the " Redemption Price"), payable in cash, of
$25.00, together with all accrued and unpaid dividends to and
including the date fixed for redemption (the "Redemption Date"),
without interest, to the full extent the Corporation has funds
legally available therefor. The shares of Series A Preferred
Stock have no stated maturity, except as provided for in
subparagraph (ix) below, and will not be subject to any sinking
fund or mandatory redemption provisions.
(B) REDEMPTION UPON A CHANGE OF CONTROL.
(1) At any time prior to September 28, 2001, the
Corporation may, at its option, upon the occurrence of a
Change of Control Event (as defined below) redeem all of the
outstanding Series A Preferred Stock at the applicable
redemption price reflected below, plus accrued and unpaid
dividends (if any) to the date of redemption. The
redemption price shall be as follows:
DATE OF REDEMPTION PURCHASE
-------------------------------------
FROM THROUGH PRICE
----------- ---------------- --------
September 11, 1997 December 31, 1997 $25.80
January 1, 1998 March 31, 1998 25.75
April 1, 1998 June 30, 1998 25.70
July 1, 1998 September 30, 1998 25.65
October 1, 1998 December 31, 1998 25.60
January 1, 1999 March 31, 1999 25.55
April 1, 1999 June 30, 1999 25.50
July 1, 1999 September 30, 1999 25.45
October 1, 1999 December 31, 1999 25.40
January 1, 2000 March 31, 2000 25.35
April 1, 2000 June 30, 2000 25.30
July 1, 2000 September 30, 2000 25.25
October 1, 2000 December 31, 2000 25.20
January 1, 2001 March 31, 2001 25.15
April 1, 2001 June 30, 2001 25.10
July 1, 2001 September 27, 2001 25.05
Such redemption may be consummated at any time prior
to, contemporaneously with or after the Change of Control
(as defined below), provided that notice of any such
redemption pursuant to this paragraph is given no later than
90 days following the date upon which the Change of Control
Event occurred, the redemption date must be within 60 days
of the date of notice and a sum sufficient to redeem the
shares must be deposited in trust to effect the redemption.
(2) Definitions.
(a) A "Change of Control Event" shall mean the
execution by the Corporation or any of its subsidiaries
or affiliates of any agreement with respect to any
proposed transaction or event or series of transactions
or events which, individually or in the aggregate, may
reasonably be expected to result in a Change of
Control.
(b) A "Change of Control" shall be deemed to have
occurred at such time as (i) a "person" or "group"
(within the meaning of Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act")) becomes the ultimate "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a person or group shall be
deemed to have beneficial ownership of all shares of
Voting Stock that such person or group has the right to
acquire regardless of when such right is first
exercisable), directly or indirectly, of Voting Stock
representing more than 35% of the total voting power of
the total Voting Stock of the Corporation on a fully
diluted basis; (ii) the date the Corporation sells,
transfers or otherwise disposes of all or substantially
all of the assets of the Corporation; and (iii) the
date of the consummation of a merger or share exchange
of the Corporation with another corporation where the
shareholders of the Corporation immediately prior to
the merger or share exchange would not beneficially own
immediately after the merger or share exchange, shares
entitling such shareholders to 50% or more of all votes
(without consideration of the rights of any class of
stock to elect directors by a separate group vote) to
which all shareholders of the corporation issuing cash
or securities in the merger or share exchange would be
entitled in the election of directors, or where members
of the Board of Directors of the Corporation
immediately prior to the merger or share exchange would
not immediately after the merger or share exchange
constitute a majority of the board of directors of the
corporation issuing cash or securities in the merger or
share exchange.
(c) "Voting Stock" shall mean capital stock of
any class or kind having the power to vote generally
for the election of directors of the Corporation.
(C) PROCEDURES OF REDEMPTION.
(1) Notice of redemption will be given by publication
in a newspaper of general circulation in the City of New
York, such publication to be made once a week for two
successive weeks commencing not less than 30 nor more than
60 days prior to the Redemption Date. A similar notice will
be mailed by the Corporation, postage prepaid, not less than
30 nor more than 60 days prior to the Redemption Date,
addressed to the respective holders of record of the Series
A Preferred Stock to be redeemed at their respective
addresses as they appear on the stock transfer records of
the Corporation. No failure to give such notice or any
defect therein or in the mailing thereof shall affect the
validity of the proceedings for the redemption of any shares
of Series A Preferred Stock except as to the holder to whom
the Corporation has failed to give notice or except as to
the holder to whom notice was defective. In addition to any
information required by law or by the applicable rules of
any exchange upon which the Series A Preferred Stock may be
listed or admitted to trading, each such notice shall state:
(a) the Redemption Date; (b) the Redemption Price; (c) the
number of shares of Series A Preferred Stock to be redeemed;
(d) the place or places where certificates for such shares
are to be surrendered for payment of the Redemption Price;
and (e) that dividends on the shares to be redeemed will
cease to accumulate on the Redemption Date. If less than
all of the shares of Series A Preferred Stock held by any
holder are to be redeemed, the notice mailed to such holder
shall also specify the number of shares of Series A
Preferred Stock to be redeemed from such holder.
(2) If notice has been mailed in accordance with
subparagraph (vi)(C)(1) above and provided that on or before
the Redemption Date specified in such notice all funds
necessary for such redemption shall have been irrevocably
set aside by the Corporation, separate and apart from its
other funds in trust for the pro rata benefit of the holders
of the Series A Preferred Stock so called for redemption, so
as to be, and to continue to be available therefor, then,
from and after the Redemption Date, dividends on the Series
A Preferred Stock so called for redemption shall cease to
accumulate, and said shares shall no longer be deemed to be
outstanding and shall not have the status of Series A
Preferred Stock and all rights of the holders thereof as
shareholders of the Corporation shall cease, except the
right to receive the Redemption Price. Upon surrender, in
accordance with such notice, of the certificates for any
Series A Preferred Stock so redeemed (properly endorsed or
assigned for transfer, if the Corporation shall so require
and the notice shall so state), such Series A Preferred
Stock shall be redeemed by the Corporation at the Redemption
Price. In case fewer than all the shares of Series A
Preferred Stock represented by any such certificate are
redeemed, a new certificate or certificates shall be issued
representing the unredeemed shares of Series A Preferred
Stock without cost to the holder thereof.
(3) Any funds deposited with a bank or trust
corporation for the purpose of redeeming Series A Preferred
Stock shall be irrevocable except that:
(a) the Corporation shall be entitled to receive
from such bank or trust corporation the interest or
other earnings, if any, earned on any money so
deposited in trust, and the holders of any shares
redeemed shall have no claim to such interest or other
earnings; and
(b) any balance of monies so deposited by the
Corporation and unclaimed by the holders of the Series
A Preferred Stock entitled thereto at the expiration of
two years from the applicable Redemption Date shall be
repaid, together with any interest or other earnings
earned thereon, to the Corporation, and after any such
repayment, the holders of the shares entitled to the
funds so repaid to the Corporation shall look only to
the Corporation for payment without interest or other
earnings.
(4) Unless full cumulative dividends on all shares of
Series A Preferred Stock shall have been or
contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for payment
for all past dividend periods and the then current dividend
period, no shares of Series A Preferred Stock shall be
redeemed unless all outstanding shares of Series A Preferred
Stock are simultaneously redeemed and the Corporation shall
not purchase or otherwise acquire directly or indirectly any
shares of Series A Preferred Stock (except by exchange for
capital stock of the Corporation ranking junior to the
Series A Preferred Stock as to dividends and upon
liquidation); provided, however, that the foregoing shall
not prevent the redemption by the Corporation of shares of
Series A Preferred Stock in order to ensure that the
Corporation continues to meet the requirements for
qualification as a REIT, or the purchase or acquisition of
shares of Series A Preferred Stock pursuant to a purchase or
exchange offer made on the same terms to holders of all
outstanding shares of Series A Preferred Stock. So long as
no dividends are in arrears, the Corporation shall be
entitled at any time and from time to time to repurchase
shares of Series A Preferred Stock in open-market
transactions duly authorized by the Board of Directors and
effected in compliance with applicable laws.
(5) Immediately prior to any redemption of Series A
Preferred Stock, the Corporation shall pay, in cash, any
accumulated and unpaid dividends through the Redemption
Date, unless a Redemption Date falls after a Dividend Record
Date and prior to the corresponding Dividend Payment Date,
in which case each holder of Series A Preferred Stock at the
close of business on such Dividend Record Date shall be
entitled to the dividend payable on such shares on the
corresponding Dividend Payment Date notwithstanding the
redemption of such shares before such Dividend Payment Date.
(6) If less than all of the outstanding Series A
Preferred Stock is to be redeemed, the Series A Preferred
Stock to be redeemed shall be selected pro rata (as nearly
as may be practicable without creating fractional shares) or
by any other equitable method determined by the Corporation.
(vii) VOTING RIGHTS. Except as required by law, and
as set forth below, the holders of the Series A Preferred Stock
shall not be entitled to vote at any meeting of the shareholders
for election of directors or for any other purpose or otherwise
to participate in any action taken by the Corporation or the
shareholders thereof, or to receive notice of any meeting of
shareholders.
(A) Whenever dividends on any shares of Series A Preferred
Stock shall be in arrears for six or more quarters, whether
consecutive or not (a "Preferred Dividend Default"), the holders
of such shares of Series A Preferred Stock (voting separately as
a voting group with all other series of Preferred Stock ranking
on a parity with the Series A Preferred Stock as to dividends or
upon liquidation ("Parity Preferred") upon which like voting
rights have been conferred and are exercisable) will be entitled
to vote separately as a voting group for the election of a total
of two additional directors to serve on the Board of Directors of
the Corporation (the "Preferred Stock Directors") at a special
meeting called by the holders of record of at least 20% of the
Series A Preferred Stock and the holders of record of at least
20% of any series of Parity Preferred so in arrears (unless such
request is received less than 90 days before the date fixed for
the next annual or special meeting of shareholders) or at the
next annual meeting of shareholders, and at each subsequent
annual meeting until all dividends accumulated on such shares of
Series A Preferred Stock for the past dividend periods and the
dividend for the then current dividend period shall have been
fully paid or declared and a sum sufficient for the payment
thereof set aside for payment. A quorum for any such meeting
shall exist if at least a majority of the outstanding shares of
Series A Preferred Stock and shares of Parity Preferred upon
which like voting rights have been conferred and are exercisable
are represented in person or by proxy at such meeting. Such
Preferred Stock Directors shall be elected upon the affirmative
vote of a plurality of the shares of Series A Preferred Stock and
such Parity Preferred present and voting in person or by proxy at
a duly called and held meeting at which a quorum is present. If
and when all accumulated dividends and the dividend for the then
current dividend period on the Series A Preferred Stock shall
have been paid in full or set aside for payment in full, the
holders thereof shall be divested of the foregoing voting rights
(subject to revesting in the event of each and every Preferred
Dividend Default) and, if all accumulated dividends and the
dividend for the then current dividend period have been paid in
full or declared and set aside for payment in full on all series
of Parity Preferred upon which like voting rights have been
conferred and are exercisable, the term of office of each
Preferred Stock Director so elected shall terminate. Any
Preferred Stock Director may be removed at any time with or
without cause by, and shall not be removed otherwise than by the
vote of, the holders of record of a majority of the outstanding
shares of the Series A Preferred Stock and such Parity Preferred
when they have the voting rights described above (voting
separately as a voting group with all series of Parity Preferred
upon which like voting rights have been conferred and are
exercisable). So long as a Preferred Dividend Default shall
continue, any vacancy in the office of a Preferred Stock Director
may be filled by written consent of the Preferred Stock Director
remaining in office, or if none remains in office, by a vote of
the holders of record of a majority of the outstanding shares of
Series A Preferred Stock and such Parity Preferred when they have
the voting rights described above (voting separately as a voting
group with all series of Parity Preferred upon which like voting
rights have been conferred and are exercisable). The Preferred
Stock Directors shall each be entitled to one vote per director
on any matter.
(B) So long as any shares of Series A Preferred Stock
remain outstanding, the Corporation will not, without the
affirmative vote or consent of the holders of at least two-thirds
of the shares of Series A Preferred Stock outstanding at the
time, given in person or by proxy, either in writing or at a
meeting (such series voting separately as a voting group), amend,
alter or repeal the provisions of the Amended and Restated
Articles of Incorporation or this subsection (a) of Article 5
thereof, whether by merger, share exchange or otherwise (an
"Event"), so as to materially and adversely affect any right,
preference, privilege or voting power of the Series A Preferred
Stock or the holders thereof; provided, however, that with
respect to the occurrence of any Event set forth above, so long
as the Series A Preferred Stock remains outstanding with the
terms thereof materially unchanged, taking into account that upon
the occurrence of an Event, the Corporation might not be the
surviving entity, the occurrence of any such Event shall not be
deemed to materially and adversely affect such rights,
preferences, privileges or voting power of holders of the Series
A Preferred Stock, and provided further that (i) any increase in
the amount of the authorized Preferred Stock or the creation or
issuance of any other series of Preferred Stock, or (ii) any
increase in the amount of authorized shares of such series, in
each case ranking on a parity with or junior to the Series A
Preferred Stock with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding
up, shall not be deemed to affect materially and adversely such
rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or
prior to the time when the act with respect to which such vote
would otherwise be required shall be effected, all outstanding
shares of Series A Preferred Stock shall have been redeemed or
called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.
(C) On each matter submitted to a vote of the holders of
Series A Preferred Stock in accordance with this paragraph (vii),
or as otherwise required by law, each share of Series A Preferred
Stock shall be entitled to one vote. With respect to each share
of Series A Preferred Stock, the holder thereof may designate a
proxy, with each such proxy having the right to vote on behalf of
the holder.
(viii) CONVERSION. The shares of Series A Preferred
Stock are not convertible into or exchangeable for any other
property or securities of the Corporation.
(ix) RESTRICTIONS ON OWNERSHIP AND TRANSFER.
(A) Definitions. The following terms shall have the
-----------
following meanings:
"Affiliate" shall mean, with respect to any person,
(i) any person directly or indirectly owning, controlling, or
holding, with power to vote ten percent or more of the
outstanding voting securities of such other person, (ii) any
person ten percent or more of whose outstanding voting securities
are directly or indirectly owned, controlled, or held, with power
to vote, by such other person, (iii) any person directly or
indirectly controlling, controlled by, or under common control
with such other person, (iv) any executive officer, director,
trustee or general partner of such other person, and (v) any
legal entity for which such person acts as an executive officer,
director, trustee or general partner. The term "person" means
and includes any natural person, corporation, partnership,
association, limited liability company or any other legal entity.
An indirect relationship shall include circumstances in which a
person's spouse, children, parents, siblings or mothers-, fathers-
, sisters- or brothers-in-law is or has been associated with a
person.
"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 clauses (vii) or (viii) thereof) and
Section 170(c)(2) of the Code that are named by the Corporation
as the beneficiary or beneficiaries of such Trust, in accordance
with the provisions of Section 2(a)(ix)(I)(1) hereof.
"Board of Directors" shall mean the Board of Directors
of the Corporation.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Common Stock" shall mean the shares of common stock,
par value $0.01 per share, of the Corporation.
"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 Common Stock and the
Series A Preferred Stock of the Corporation. The term "Equity
Stock" shall include all shares of Common Stock and Series A
Preferred Stock of the Corporation that are held as Shares-in-
Trust in accordance with the provisions of Section 2(a)(ix)(I)
hereof.
"Offering" means the offering and sale of shares of
Series A Preferred Stock pursuant to the Corporation's first
effective registration statement for such shares of Series A
Preferred Stock filed under the Securities Act of 1933, as
amended.
"Market Price" on any date shall mean the average of
the Closing Price for the five 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 ("NYSE"), or, if the Equity Stock is not listed or
admitted to trading on the NYSE, as reported in the principal
consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange
on which the Equity Stock is listed or admitted to trading, or,
if the Equity Stock is not listed or admitted to trading on any
national securities exchange, the last quoted price, or if not so
quoted, 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, the average of the closing bid
and asked prices as furnished by a professional market maker
making a market in the shares of Equity Stock selected by the
Board of Directors.
"Non-Transfer Event" shall mean an event other than a
purported Transfer that would cause any Person to Beneficially
Own or Constructively Own shares of Equity Stock in excess of the
Ownership Limitation, 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 Limitation" shall mean the restriction on
ownership by any stockholder of (a) more than 9.9% of the number
of outstanding shares of Series A Preferred Stock and (b) if the
stockholder owns both Series A Preferred Stock and Common Stock,
more than 9.9% of the number of outstanding shares of Common
Stock.
"Permitted Transferee" shall mean any Person designated
as a Permitted Transferee in accordance with the provisions of
Section 2(a)(ix)(I)(5) hereof.
"Person" shall mean an individual, corporation,
partnership, 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.
"Prohibited Owner" shall mean, with respect to any
purported Transfer or Non-Transfer Event, any Person who, but for
the provisions of Section 2(a)(ix)(C) hereof, would own record
title to shares of Equity Stock.
"Restriction Termination Date" shall mean the first day
after the date of the Offering on which (i) the Board of
Directors determines that it is no longer in the best interests
of the Corporation to attempt to, or continue to, qualify as a
REIT and (ii) there is an affirmative vote of two-thirds of the
number of shares of Common Stock entitled to vote on such matter
at a regular or special meeting of the shareholders of the
Corporation.
"Shares-in-Trust" shall mean any shares of Equity Stock
designated Shares-in-Trust pursuant to Section 2(a)(ix)(C)
hereof.
"Trading Day" 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 2(a)(ix)(C) hereof and administered in accordance with
the terms of Section 2(a)(ix)(I) hereof, for the exclusive
benefit of any Beneficiary.
"Trustee" shall mean any Person or entity that is not
an Affiliate of either the Corporation or any Prohibited Owner,
such Trustee to be designated by the Corporation to act as
trustee of any Trust, or any successor trustee thereof.
(B) Restriction on Transfers.
------------------------
(1) Except as provided in Section 2(a)(ix)(G) hereof,
from the date of the Offering and prior to the Restriction
Termination Date, (i) no Person shall Beneficially Own or
Constructively Own outstanding shares of Equity Stock in excess
of the Ownership Limitation and (ii) any Transfer that, if
effective, would result in any Person Beneficially Owning or
Constructively Owning shares of Equity Stock in excess of the
Ownership Limitation shall be void ab initio as to the Transfer
of that number of shares of Equity Stock which would be otherwise
Beneficially Owned or Constructively Owned by such Person in
excess of the Ownership Limitation, and the intended transferee
shall acquire no rights in such shares of Equity Stock.
(2) Except as provided in Section 2(a)(ix)(G) hereof,
from the date of the Offering and prior to the Restriction
Termination Date, any Transfer of shares of Series A Preferred
Stock 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
otherwise would be 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
Series A Preferred Stock.
(3) From the date of the Offering and prior to the
Restriction Termination Date, any Transfer of shares of Series A
Preferred Stock that, if effective, would result in the
Corporation being "closely held" within the meaning of Section
856(h) of the Code shall be void ab initio as to the Transfer of
that number of shares of Equity Stock which would cause the
Corporation 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 Series A Preferred Stock.
(4) From the date of the Offering and prior to the
Restriction Termination Date, any Transfer of shares of Series A
Preferred Stock that, if effective, would cause the Corporation
to Constructively Own 10% or more of the ownership interests in a
tenant of the Corporation's or a subsidiary'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 Corporation to Constructively
Own 10% or more of the ownership interests in a tenant of the
Corporation's or a subsidiary's real property, within the meaning
of Section 856(d)(2)(B) of the Code, and the intended transferee
shall acquire no rights in such shares of Series A Preferred
Stock.
(C) Transfer to Trust.
-----------------
(1) If, notwithstanding the other provisions contained
in this Section 2(a)(ix), at any time after the Offering and
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 Limitation, then, (i) except as otherwise
provided in Section 2(a)(ix)(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 Limitation, (ii) such number of shares of
Equity Stock in excess of the Ownership Limitation (rounded up to
the nearest whole share) shall be designated Shares-in-Trust and
transferred automatically and by operation of law to a Trust to
be held in accordance with that Section 2(a)(ix)(I), and (iii)
the Prohibited Owner shall submit such number of shares of Equity
Stock to the Corporation 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. There shall be a separate
Trust with respect to each designation and transfer of Shares-in-
Trust.
(2) If, notwithstanding the other provisions contained
in this Section 2(a)(ix), at any time after the Offering and
prior to the Restriction Termination Date, there is a purported
Transfer or Non-Transfer Event that, if effective, would (i)
result in shares of Equity Stock being Beneficially Owned by
fewer than 100 Persons (determined without reference to any rules
of attribution), (ii) result in the Corporation being "closely
held" within the meaning of Section 856(h) of the Code, or (iii)
cause the Corporation to Constructively Own 10% or more of the
ownership interests in a tenant of the Corporation's or a
subsidiary's real property, within the meaning of Section
856(d)(2)(B) of the Code, then (x) the 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
Series A Preferred Stock with respect to which such Non-Transfer
Event occurred, shall cease to own any right or interest) in such
number of shares of Series A Preferred Stock, the ownership of
which by such purported transferee or record holder would (A)
result in shares of Equity Stock being Beneficially Owned by
fewer than 100 Persons, (B) result in the Corporation being
"closely held" within the meaning of Section 856(h) of the Code,
or (C) cause the Corporation to Constructively Own 10% or more of
the ownership interests in a tenant of the Corporation's or a
subsidiary's real property, within the meaning of Section
856(d)(2)(B) of the Code, (y) such number of shares of Series A
Preferred Stock (rounded up to the nearest whole share) shall be
designated Shares-in-Trust and transferred automatically and by
operation of law to a Trust to be held in accordance with that
Section 2(a)(ix)(I), and (z) the Prohibited Owner shall submit
such number of shares of Series A Preferred Stock to the
Corporation 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. There shall be a separate Trust with
respect to each designation and transfer of Shares-in-Trust.
(D) Remedies For Breach. If the Corporation, or its
-------------------
designees, shall at any time determine in good faith that a
Transfer has taken place in violation of Section 2(a)(ix)(B)
hereof 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 2(a)(ix)(B)
hereof, the Corporation 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 Corporation or
instituting proceedings to enjoin such Transfer or acquisition.
(E) Notice of Restricted Transfer. Any Person who acquires
-----------------------------
or attempts to acquire shares of Equity Stock in violation of
Section 2(a)(ix)(B) hereof, or any Person who owned shares of
Equity Stock that were transferred to a Trust pursuant to the
provisions of Section 2(a)(ix)(C) hereof, shall immediately give
written notice to the Corporation of such event and shall provide
to the Corporation such other information as the Corporation may
request in order to determine the effect, if any, of such
Transfer or Non-Transfer Event, as the case may be, on the
Corporation's status as a REIT.
(F) Owners Required To Provide Information. From the date
--------------------------------------
of the Offering and prior to the Restriction Termination Date:
(1) Every Beneficial Owner or Constructive Owner of
more than 5%, or such lower percentages as required pursuant
to regulations under the Code, of the outstanding shares of
all classes of capital stock of the Corporation shall,
within 30 days after January 1 of each year, provide to the
Corporation 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 Corporation such additional
information as the Corporation may request in order to
determine the effect, if any, of such Beneficial Ownership
or Constructive Ownership on the Corporation's status as a
REIT and to ensure compliance with the Ownership Limitation.
(2) Each Person who is a Beneficial Owner or
Constructive Owner of shares of Equity Stock and each Person
(including the stockholder of record) who is holding shares
of Equity Stock for a Beneficial Owner or Constructive Owner
shall provide to the Corporation a written statement or
affidavit stating such information as the Corporation may
request in order to determine the Corporation's status as a
REIT and to ensure compliance with the Ownership Limitation.
(G) Exception. The Ownership Limitation 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 Section 2(a)(ix)(B)
hereof 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
restrictions contained in Section 2(a)(ix)(B) hereof will not be
violated, may exempt a Person from the Ownership Limitation
provided that (i) the Board of Directors obtains such
representations and undertakings from such Person as are
reasonably necessary to ascertain that no individual's Beneficial
Ownership or Constructive Ownership of shares of Equity Stock
will violate the Ownership Limitation and (ii) such Person agrees
in writing that any violation or attempted violation of such
representations or undertakings will result in such transfer to a
Trust of shares of Equity Stock pursuant to Section 2(a)(ix)(C)
hereof.
(H) Removal of Ownership Limitation. The Ownership
-------------------------------
Limitation will not be removed until (i) the Board of Directors
determines that it is no longer in the best interest of the
Corporation to attempt to qualify, or to continue to qualify, as
a REIT and (ii) there is an affirmative vote of two-thirds of the
number of shares of Common Stock entitled to vote on such matter
at a regular or special meeting of the stockholders of the
Corporation.
(I) Shares-in-Trust.
---------------
(1) Trust. Any shares of Equity Stock transferred to
-----
a Trust and designated Shares-in-Trust pursuant to Section
2(a)(ix)(C) hereof shall be held for the exclusive benefit of the
Beneficiary. The Corporation shall name a Beneficiary for each
Trust within five days after discovery of the existence thereof.
No Beneficiary shall be a Beneficiary of more than one Trust at
any time. Any transfer to a Trust, and subsequent designation of
shares of Equity Stock as Shares-in-Trust, pursuant to Section
2(a)(ix)(C) hereof 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 Corporation 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 2(a)(ix)(I)(5) hereof,
such Shares-in-Trust shall cease to be designated as Shares-in-
Trust.
(2) 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 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 Corporation 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 2(a)(ix)(C) hereof, would Constructively
Own or Beneficially Own the Shares-in-Trust; and, as soon as
reasonably practicable following the Corporation'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.
(3) 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 Corporation, 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 Corporation
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
2(a)(ix)(I)(3) 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.
(4) 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
Corporation 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 2(a)(ix)(C) hereof, an
irrevocable proxy to the Trustee to vote the Shares-in-Trust in
the manner in which the Trustee, in its sole and absolute
discretion, desires.
(5) 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 adversely affect the
Market Price of the Shares-in-Trust, the Trustee shall designate
any Person as Permitted Transferee, provided, however, that (i)
-------- -------
the Permitted Transferee so designated purchases for valuable
consideration (whether in a public or private sale) the Shares-in-
Trust and (ii) 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
2(a)(ix)(C) hereof. Upon the designation by the Trustee of a
Permitted Transferee in accordance with the provisions of this
Section 2(a)(ix)(I)(5), 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 Corporation that the Permitted
Transferee is the holder of record of such number of shares of
Equity Stock, (iii) cause the Shares-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 2(a)(ix)(I)(6) hereof.
(6) 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 2(a)(ix)(I)(5) hereof or following the acceptance of
the offer to purchase such shares in accordance with Section
2(a)(ix)(I)(7) hereof) to receive from the Trustee following the
sale or other disposition of such Shares-in-Trust the 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 the 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, the 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 2(a)(ix)(I) hereof. Any amounts
received by the Trustee in respect of such Shares-in-Trust and in
excess of such amounts to be paid the Prohibited Owner pursuant
to this Section 2(a)(ix)(I)(6) shall be distributed to the
Beneficiary in accordance with the provisions of Section
2(a)(ix)(I) hereof. Each Beneficiary and Prohibited Owner waive
any and all claims that they may have against the 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 2(a)(ix)(I), by such Trustee or the Corporation.
(7) Purchase Right in Shares-in-Trust. Shares-in-
---------------------------------
Trust shall be deemed to have been offered for sale to the
Corporation, or its designee, at a price per share equal to the
lesser of (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
Corporation, or its designee, accepts such offer. The
Corporation shall have the right to accept such offer for a
period of ninety days after the later of (i) the date of the Non-
Transfer Event or purported Transfer which resulted in such
Shares-in-Trust and (ii) the date the Corporation determines in
good faith that a Transfer or Non-Transfer Event resulting in
Shares-in-Trust has occurred, if the Corporation does not receive
a notice of such Transfer or Non-Transfer Event pursuant to
Section 2(a)(ix)(I)(E) hereof.
(J) Remedies Not Limited. Nothing contained in this
--------------------
Section 2(a)(ix) shall limit the authority of the Corporation to
take such other action as it deems necessary or advisable to
protect the Corporation and the interests of its shareholders by
preservation of the Corporation's status as a REIT and to ensure
compliance with the Ownership Limitation.
(K) Ambiguity. In the case of an ambiguity in the
---------
application of any of the provisions of this Section 2(a)(ix),
including any definition contained in Section 2(a)(ix)(A) hereof,
the Board of Directors shall have the power to determine the
application of the provisions of this Section 2(a)(ix) with
respect to any situation based on the facts known to it.
(L) Legend. Each certificate for shares of Equity Stock
------
shall bear the following legend:
"The shares of Series A Preferred Stock
represented by this certificate are
subject to restrictions on transfer for
the purpose of the Corporation's
maintenance of its status as a real
estate investment trust under the
Internal Revenue Code of 1986, as
amended (the "Code"). No Person may (i)
Beneficially Own or Constructively Own
(a) more than 9.9% of the number of
outstanding shares of Series A Preferred
Stock and (b) if the stockholder owns
both Series A Preferred Stock and Common
Stock, more than 9.9% of the number of
outstanding shares of Common Stock, (ii)
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 Corporation being "closely held"
under Section 856(h) of the Code, or (v)
Constructively Own shares of Equity
Stock that would cause the Corporation
to Constructively Own 10% or more of the
ownership interests in a tenant of the
Corporation's or a subsidiary's real
property, within the meaning of Section
856(d)(2)(B) of the Code. Any Person
who attempts to Beneficially Own or
Constructively Own shares of Equity
Stock in excess of the above limitations
must immediately notify the Corporation
in writing. If the restrictions above
are violated, the shares of Equity 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
Corporation's Amended and Restated
Articles of Incorporation, as the same
may be further amended from time to
time, a copy of which, including the
restrictions on transfer, will be sent
without charge to each shareholder who
so requests."
(M) Severability. If any provision of this Section
------------
2(a)(ix) or any application of any such provision is determined
to be invalid by any federal or state court having jurisdiction
over the issues, the validity of the remaining provisions shall
not be affected and other applications of such provision shall be
affected only to the extent necessary to comply with the
determination of such court.
6. Directors. (a) The Corporation shall have a Board of
---------
Directors consisting of not less than three (3) nor more than
nine (9) members. The number of directors may be fixed from time
to time within this range by the shareholders or by the
affirmative vote of at least 80% of the members of the Board of
Directors. However, the number of directors shall never be less
than the minimum number required by the North Carolina Business
Corporation Act. A director need not be a shareholder.
(b) Independent Directors. 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 not
officers or employees of the Corporation or "Affiliates" of (i)
any advisor to the Corporation under an advisory agreement, (ii)
any lessee of any property of the Corporation, (iii) any
subsidiary of the Corporation or (iv) any partnership which is an
Affiliate of the Corporation.
(c) Definition of Affiliate. For purposes of the foregoing
-----------------------
subsection, "Affiliate" of a person shall mean (i) any person
that, directly or indirectly, controls or is controlled by or is
under common control with such person, (ii) any other person that
owns, beneficially, directly or indirectly, five percent (5%) or
more of the outstanding capital stock, shares or equity interests
of such person, or (iii) any officer, director, employee, partner
or trustee of such person or any person controlling, controlled
by or under common control with such person (excluding trustees
and persons serving in similar capacities who are not otherwise
an Affiliate of such person). The term "person" means and
includes individuals, corporations, general and limited
partnerships, stock companies or associations, joint ventures,
associations, companies, trusts, banks, trust companies, land
trusts, business trusts, or other entities and governments and
agencies and political subdivisions thereof. For the purposes of
this definition, "control" (including the correlative meanings of
the terms "controlled by" and "under common control with"), as
used with respect to any person, shall mean the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, through
the ownership of voting securities, partnership interests or
other equity interests.
(d) Amendment of this Section. Notwithstanding any other
-------------------------
provisions of this Charter or the Bylaws of the Corporation (and
notwithstanding that some lesser percentage may be specified by
law, this Charter or the Bylaws of the Corporation), the
provisions of this Article 6 shall not be amended, altered,
changed or repealed without the affirmative vote of at least 80%
of the members of the Board of Directors or the affirmative vote
of the holders of not less than 75% of the outstanding shares of
capital stock of the Corporation entitled to vote generally in
the election of directors, voting separately as a class.
7. Limitation on Indebtedness. The Corporation may not
--------------------------
incur or allow to exist as of the end of any month Indebtedness
(as defined below) in an amount in excess of forty-five percent
(45%) of the Corporation's investment in hotel properties, at
cost, after giving effect to the Corporation's use of proceeds
from any indebtedness. For purposes of the foregoing
restrictions, "cost" shall mean that the cost of properties be
accounted for using the purchase method of accounting, including
situations where properties are acquired from affiliates or
others and are accounted for at the historical cost basis of the
affiliates or others under generally accepted accounting
principles. For purposes of the foregoing restrictions,
"Indebtedness" of the Corporation shall mean all direct and
indirect obligations of the Corporation, its subsidiaries or any
partnership in which the Corporation serves as general partner,
for borrowed money (including all notes payable and drafts
accepted representing extensions of credit) and all obligations
evidenced by bonds, debentures, notes or other similar
instruments on which interest charges are customarily paid,
including obligations under capital leases. For purposes of this
Article 7, the Corporation's investment in hotel properties shall
include all investments made directly or indirectly through the
Corporation or through its subsidiaries or any partnership in
which the Corporation serves as general partner.
8. Dividends. All shares of Common Stock will participate
---------
equally in dividends payable to holders of shares of Common Stock
when and as declared by the Board of Directors and in net assets
available for distribution to holders of shares of Common Stock
upon liquidation or dissolution.
9. Voting. Each holder of Common Stock shall be entitled
------
to one vote per share on all matters to be voted on by the
shareholders of the Corporation.
10. Preemptive Rights. No holder of shares of capital
-----------------
stock of the Corporation shall have any preemptive or
preferential right to subscribe to or purchase (i) any shares of
any class of the Corporation, 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.
11. Limitation on Liability to Shareholders. To the
---------------------------------------
maximum extent that North Carolina law in effect from time to
time permits limitation of the liability of directors and
officers, no director or officer of the Corporation shall be
liable to the Corporation or its shareholders for money damages.
Neither the amendment nor repeal of this provision, nor the
adoption or amendment of any other provision of this Charter or
Bylaws inconsistent with this provision, shall apply to or affect
in any respect the applicability of the preceding sentence with
respect to any act or failure to act which occurred prior to such
amendment, repeal or adoption.
12. Indemnification. Any word or words defined in Part 5
---------------
of Article 8 of Chapter 55 of the General Statutes of North
Carolina, as amended from time to time, or any successor
provision thereof (the "Indemnification Section") used in this
Article 12, shall have the same meaning as provided in the
Indemnification Section.
The Corporation shall indemnify and advance expenses to a
director, officer, employee or agent of the Corporation in
connection with a proceeding to the fullest extent permitted by
and in accordance with the Indemnification Section.
13. Insurance. The Corporation may purchase and maintain
---------
insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation or who, while a
director, officer, employee or agent of the Corporation is or was
serving at the request of the Corporation as a director, officer,
partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, against liability asserted
against or incurred by such person in that capacity or arising
from such person's status as a director, officer, employee or
agent, whether or not the Corporation would have power to
indemnify such person against the same liability under the
Indemnification Section.
14. REIT Status. The Corporation shall seek to elect and
-----------
maintain status as a real estate investment trust ("REIT") under
Sections 856-860 of the Internal Revenue Code of 1986, as amended
from time to time (the "Code"). It shall be the duty of the
Board of Directors to ensure that the Corporation satisfies the
requirements for qualification as a REIT under 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 action to disqualify the
Corporation as a REIT or to otherwise revoke the Corporation's
election to be taxed as a REIT without the affirmative vote of
two-thirds (2/3) of the number of shares of Common Stock entitled
to vote on such matter at a special meeting of the Shareholders.
15. Restrictions on Transfer.
------------------------
(a) Affidavits of Transferees. Whenever it is deemed by
-------------------------
the Board of Directors to be prudent in protecting the tax status
of the Corporation as a REIT under the Code and regulations
issued under the Code, the Board of Directors may require to be
filed with the Corporation a statement or affidavit from each
proposed transferee of shares of capital stock of the Corporation
setting forth the number of such shares already owned by the
transferee and any related person(s) specified in the form
prescribed by the Board of Directors for that purpose. Any
contract for the sale or other transfer of shares of capital
stock of the Corporation shall be subject to this provision.
(b) Affidavits of Shareholders. Prior to any transfer or
--------------------------
transaction which would cause a shareholder to own, directly or
indirectly, shares in excess of the "Limit" as defined in
paragraph (d) of this Article 15, and in any event upon demand of
the Board of Directors, such shareholder shall file with the
Corporation an affidavit setting forth the number of shares of
capital stock of the Corporation (a) owned directly and (b) owned
indirectly by the person filing the affidavit. For purposes of
this paragraph (b), shares of capital stock not owned directly
shall be deemed to be owned indirectly by a person if that person
would be the beneficial owner of such shares for purposes of Rule
13d-3, or any successor rule thereto, promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act") and/or would
be considered to own such shares by reason of the attribution
rules in Section 544 (as modified by Section 856(h)) of the Code
or the regulations issued thereunder.
The affidavit to be filed with the Corporation shall set
forth all information required to be reported in returns filed by
shareholders under Treasury Regulation 1.857-9 issued under the
Code or similar provisions of any successor regulation, and in
reports to be filed under Section 13(d), or any successor rule
thereto, of the Exchange Act. The affidavit, or an amendment
thereto, shall be filed with the Corporation within ten (10) days
after demand therefor and at least fifteen (15) days prior to any
transfer or transaction which, if consummated, would cause the
filing person to hold a number of shares of capital stock of the
Corporation in excess of the "Limit" as defined in paragraph (d)
of this Article 15.
(c) Void Transfers. Notwithstanding any other provision
--------------
hereof to the contrary except Section 15(e), any acquisition of
shares of capital stock that (i) would cause any person's
ownership to exceed the Limit (as defined in Section 15(d)), (ii)
would result in the disqualification of the Corporation as a REIT
under the Code, or (iii) would cause the Corporation to be
treated as owning, directly or indirectly, 10% or more of the
ownership interests in a tenant of the Corporation's real
property, within the meaning of Sections 856(d)(2)(B) and
856(d)(5) of the Code, shall be void ab initio to the fullest
extent permitted under applicable law and the intended transferee
of those shares shall be deemed never to have had an interest
therein. If the foregoing provision is determined to be void or
invalid by virtue of any legal decision, statute, rule or
regulation, then the transferee of those shares shall be deemed
to be Excess Shares (as defined in Section 15(d)) and subject to
Section 15(f) below.
(d) Excess Shares. Except as provided in Section 15(e), no
-------------
person shall at any time directly or indirectly own in the
aggregate more than 9.9% of the outstanding shares of capital
stock of the Corporation (the "Limit"). Shares which but for
this Article 15 would be owned by a person and would, at any
time, be in excess of the Limit shall be deemed "Excess Shares"
and shall become subject to Section 15(f). For the purpose of
determining whether shares are Excess Shares, "ownership" of
shares shall be deemed to include shares constructively owned by
a person under the provisions of Section 544 (as modified by
Section 856(h)) of the Code. All shares of capital stock of the
Corporation which any person has the right to acquire upon
exercise of outstanding rights, options and warrants, and upon
conversion of any securities convertible into those shares, if
any, shall be considered outstanding for purposes of determining
the applicable Limit if such inclusion will cause such person to
own more than the Limit.
(e) Exemptions. The ownership limits set forth in
----------
paragraphs (c) and (d) of this Article 15 shall not apply to the
acquisition of shares of capital stock of the Corporation by an
underwriter in a public offering of those shares or in any
transaction involving the issuance of shares of capital stock by
the Corporation in which the Board of Directors determines that
the underwriter or other person or party initially acquiring
those shares will timely distribute those shares to or among
others so that, following such distribution, the ownership of
those shares will not be in violation of Sections 15(c) or (d).
The Board of Directors in its discretion may exempt from the
Limit and from the filing requirements of paragraph (b) of this
Article 15 ownership or transfers of certain designated shares of
capital stock of the Corporation while owned by or transferred to
a person who has provided the Board of Directors with evidence
and assurances acceptable to the Board of Directors that the
qualification of the Corporation as a REIT under the Code and the
regulations issued under the Code would not be jeopardized
thereby.
(f) Treatment of Excess Shares.
--------------------------
(i) If the Board of Directors of the Corporation shall
at any time determine that a transaction has taken place within
the scope of Section 15(c) or that any person intends to acquire
Excess Shares, the Board of Directors shall take such action as
it or they deem advisable to refuse to give effect to or to
prevent such transaction, including but not limited to refusing
to give effect to such transfer on the books of the Corporation.
(ii) If, notwithstanding Sections 15(c) and (f)(i), a
purported transferee (a "Record Transferee") acquires Excess
Shares, the Record Transferee shall be deemed to have received
such Excess Shares as agent on behalf of, and to hold such Excess
Shares in trust for the exclusive benefit of, the person(s) to
whom the Excess Shares may be later transferred pursuant to
Section 15(f)(iii). The Record Transferee shall have no right to
receive dividends or other distributions on the Excess Shares and
shall have no right to vote the Excess Shares. The Record
Transferee shall have no claim, cause of action, or any other
recourse whatsoever against the transferor of the Excess Shares.
The Record Transferee's sole right with respect to the trust
shall be to receive, at the Corporation's sole and absolute
discretion, either (i) an amount upon the resale of the Excess
Shares as directed by the Corporation pursuant to Section
15(f)(iii) or (ii) an amount upon the redemption of the Excess
Shares by the Corporation pursuant to Section 15(f)(iii).
(iii) The Board of Directors will, within six
months after receiving a notice of a transfer that causes a
Record Transferee to own Excess Shares, either, in its sole and
absolute discretion, (a) direct the Record Transferee to sell all
of the Excess Shares held in trust pursuant to Section 15(f)(ii)
for cash in such manner as the Board of Directors directs or (b)
redeem such Excess Shares for the price and on the terms set
forth in Section 15(f)(iii)(b) on such date within such six month
period as the Board of Directors may determine.
(a) If the Board of Directors directs the Record
Transferee to sell the Excess Shares in held in trust, the Record
Transferee shall pay the Corporation out of the proceeds of such
sale all expenses incurred by the Corporation in connection with
such sale plus any remaining amount of such proceeds that exceeds
the amount paid by the Record Transferee for the Excess Shares,
and the Record Transferee shall be entitled to retain only any
proceeds in excess of such amount required to be paid to the
Corporation. (b) If the Board of Directors
determines to redeem the Excess Shares, written notice of
redemption (the "Notice") shall be provided to the Record
Transferee of the Excess Shares not less than one week prior to
the redemption date (the "Redemption Date") determined by the
Board of Directors and included in the Notice. The redemption
price per share to be paid for Excess Shares will be equal to the
lesser of (i) the principal price paid by the Record Transferee
from whom Excess Shares are being redeemed, (ii)(a) the closing
price per share of the shares on the principal national
securities exchange on which the shares are listed or admitted to
trading on the date of Notice, or (b) if the shares are not so
listed or admitted to trading, the closing bid price on the date
of Notice as reported on the National Association of Securities
Dealers, Inc. System, if quoted thereon (the price per share
determined under clause (a) or (b) being herein defined as the
"Market Price"), or (c) if a Market Price is not determinable in
accordance with either clause (a) or (b) of this sentence, the
net asset value per share on the date of Notice determined in
good faith by the Board of Directors, (iii) the Market Price on
the date on which the person would but for this Article 15 have
been deemed to acquire ownership of the Excess Shares, or (iv)
the maximum price allowed under Part 5 of Chapter 35 of Title 48
of the North Carolina Code Annotated. The amount payable to the
Record Transferee for Excess Shares so redeemed may be paid, at
the option of the Corporation, in the form of the number of
"Units" equal to the number of shares redeemed divided by the
"Conversion Factor," as those terms are defined in the Amended
and Restated Agreement of Limited Partnership of WINN Limited
Partnership. The redemption price for any shares of capital
stock of the Corporation so redeemed shall be paid on the
Redemption Date. From and after the Redemption Date, the holder
of any redeemed shares of capital stock of the Corporation shall
cease to be entitled to any distributions or other benefits with
respect to redeemed shares, except the right to receive payment
of the redemption price fixed as aforesaid.
(g) Application of Article. Nothing contained in this
----------------------
Article 15 or in any other provision hereof shall limit the
authority of the Board of Directors to take any and all other
action as it in its sole discretion deems necessary or advisable
to protect the Corporation and the interests of its shareholders
by maintaining the Corporation's eligibility to be, and
preserving the Corporation's status as, a REIT under the Code.
(h) Definition of "Person". For purposes of this Article
----------------------
only, the term "person" shall include individuals, corporations,
limited partnerships, general partnerships, joint stock companies
or associations, joint ventures, associations, consortia,
companies, trusts, banks, trust companies, land trusts, common
law trusts, business trusts, or other entities and governments
and agencies and political subdivisions thereof.
(i) Severability. If any provision of this Article 15 or
------------
any application of any such provision is determined to be invalid
by any federal or state court having jurisdiction over the issue,
the validity of the remaining provisions shall not be affected
and other applications of such provision shall be affected only
to the extent necessary to comply with the determination of that
court.
(j) Legend. Certificates representing shares of capital
------
stock of the Corporation shall bear a legend referencing the
restrictions set forth in this Article 15.
(k) Nothing in these Articles of Incorporation shall
preclude settlement of any transaction entered into through the
facilities of the New York Stock Exchange.