SCHEDULE 14A
INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, For Use of the Commission Only (as permitted by Rule 14a-
6(e) (2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
CNL American Properties Fund, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed to
Exchange Act Rule 0-11 (Set forth the amount on which the fee is calculated
and state how it was determined):
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[_] Fee paid previously with preliminary materials:
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[_] Check box if any part of the fee is offset as provided by Exchange Act 0-
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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Notes:
CNL AMERICAN PROPERTIES FUND, INC.
CNL Center at City Commons
450 South Orange Avenue
Orlando, Florida 32801
April 28, 2000
Dear Stockholders:
You are cordially invited to attend the annual meeting of stockholders of
CNL American Properties Fund, Inc. (the "Company") on June 15, 2000 at 10:30
a.m. at CNL Center at City Commons, 450 South Orange Avenue, Orlando, Florida.
The directors and officers of the Company look forward to greeting you
personally.
Enclosed for your review are the 1999 Annual Report, the Notice of Annual
Meeting of Stockholders, the proxy statement and the proxy card. The proxy
statement gives a detailed account of the business to be conducted at the
meeting. An update will also be given at the meeting on the current status of
the Company.
Regardless of the number of shares you own in the Company, it is very
important that your shares be represented. Our goal is to minimize operational
expenses so we ask that you please return your proxy card promptly because re-
soliciting stockholders adds unnecessary costs to the Company.
As we prepare for the exciting year ahead, the Board of Directors
unanimously recommends that you vote in favor of the proposed items. Please
complete and return the proxy card today. Your vote counts. Thank you for your
attention to this matter.
Sincerely,
/s/ James M. Seneff, Jr. /s/ Robert A. Bourne
James M. Seneff, Jr. Robert A. Bourne
Chairman of the Board Vice Chairman of the Board
CNL AMERICAN PROPERTIES FUND, INC.
CNL Center at City Commons
450 South Orange Avenue
Orlando, Florida 32801
Notice of 2000 Annual Meeting and Proxy Statement
Annual Meeting to be Held June 15, 2000
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of CNL
American Properties Fund, Inc. (the "Company") will be held at 10:30 a.m.
local time, on June 15, 2000 at CNL Center at City Commons, 450 South Orange
Avenue, Orlando, Florida, for the following purposes:
1. To approve a proposal to amend and restate the Company's Articles of
Incorporation to modify certain provisions to reflect that the Company
became internally advised;
2. To approve a proposal to amend and restate the Company's Articles of
Incorporation to modify certain provisions to reflect changes to the
Company's business strategy;
3. To elect five directors; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on April 3, 2000, will
be entitled to notice of, and to vote at, the meeting or at any adjournment
thereof.
Stockholders are cordially invited to attend the meeting in person. All
stockholders, whether or not they plan to attend the meeting, are requested to
complete, date and sign the enclosed proxy card and return it promptly in the
envelope provided. You may also grant your proxy by telephone by following the
instructions on the proxy card. It is important that your shares be voted. By
returning your proxy promptly, you can help the Company avoid additional
expenses to ensure a quorum is met so the meeting can be held. If you decide
to attend the meeting, you may revoke your proxy and vote your shares in
person.
By Order of the Board of Directors,
/s/ Steven D. Shackelford
Steven D. Shackelford
Secretary
April 28, 2000
Orlando, Florida
CNL AMERICAN PROPERTIES FUND, INC.
CNL Center at City Commons
450 South Orange Avenue
Orlando, Florida 32801
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PROXY STATEMENT
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This proxy statement is furnished by the Board of Directors of CNL American
Properties Fund, Inc. (the "Company"), a Maryland corporation, in connection
with the solicitation by management of proxies to be voted at the Annual
Meeting of Stockholders of the Company to be held on June 15, 2000, and at any
adjournment thereof, for the purposes set forth in the accompanying notice of
such meeting. All stockholders of record at the close of business on April 3,
2000, the record date, will be entitled to vote at the annual meeting.
Any proxy, if received in time, properly signed and not revoked, will be
voted at such meeting in accordance with the directions of the stockholder. If
no directions are specified on a proxy that is received, the proxy will be
voted "FOR" each proposal set forth in this proxy statement. Any stockholder
giving a proxy has the power to revoke it at any time before it is exercised.
A proxy may be revoked (1) by delivery of a written statement to the Secretary
of the Company that the proxy is revoked, (2) by delivery, at the annual
meeting or otherwise, of a subsequent proxy executed by the person executing
the prior proxy, or (3) by attendance at the annual meeting and voting in
person.
Votes cast in person or by proxy at the annual meeting will be tabulated and
a determination will be made as to whether or not a quorum is present. The
Company will treat abstentions as shares that are present and entitled to vote
for purposes of determining the presence or absence of a quorum, but as
unvoted for purposes of determining the approval of any matter submitted to
the stockholders. If a broker submits a proxy indicating that it does not have
discretionary authority as to certain shares to vote on a particular matter,
those shares will not be considered as present and entitled to vote with
respect to such matter.
Solicitation of proxies will be primarily by mail. However, directors,
officers and other employees of the Company also may solicit proxies, for no
additional compensation, by telephone or telegram or in person. All of the
expenses of preparing, assembling, printing and mailing the materials used in
the solicitation of proxies will be paid by the Company. Arrangements may be
made with brokerage houses and other custodians, nominees and fiduciaries to
forward soliciting materials, at the expense of the Company, to the beneficial
owners of shares held of record by such persons. In addition, the Company has
engaged D.F. King & Co., Inc., a professional proxy solicitation firm, to aid
in the solicitation of proxies at a fee estimated to be approximately $15,000
plus reimbursement of reasonable out-of-pocket costs and expenses. The Company
has agreed to indemnify D.F. King & Co., Inc. against certain liabilities that
it may incur arising out of the services it provides in connection with the
annual meeting.
As of the record date, April 3, 2000, 43,495,919 shares of the Company's
common stock, which are referred to as the Company Shares, were outstanding.
Each Company Share entitles the holder thereof to one vote on each of the
matters to be voted upon at the annual meeting. As of the record date,
officers and directors of the Company beneficially owned in the aggregate
approximately 12 percent of the outstanding Company Shares. It is anticipated
that this proxy statement and the enclosed proxy first will be mailed to
stockholders on or about April 28, 2000.
TABLE OF CONTENTS
PROPOSAL I:
Approval of Changes to Existing Articles to Reflect that Company is No
Longer Externally Advised............................................... 1
PROPOSAL II:
Approval of Additional Changes to Company's Articles of Incorporation.... 3
PROPOSAL III:
Election of Directors.................................................... 7
Executive Compensation................................................... 13
SECURITY OWNERSHIP......................................................... 14
CERTAIN TRANSACTIONS....................................................... 15
INDEPENDENT AUDITORS....................................................... 17
OTHER MATTERS.............................................................. 17
PROPOSALS FOR NEXT ANNUAL MEETING.......................................... 17
ANNUAL REPORT.............................................................. 18
PROPOSAL I and PROPOSAL II
PROPOSALS TO APPROVE AN AMENDMENT AND RESTATEMENT OF
COMPANY'S ARTICLES OF INCORPORATION
On March 22, 2000, the Board of Directors of the Company unanimously
approved a proposal to amend and restate the Company's existing Articles of
Incorporation, or Existing Articles, and directed that such proposal be
submitted to the Company's stockholders for their approval at the annual
meeting. If approved in their entirety, the amended and restated Articles of
Incorporation, or Restated Articles:
. will modify certain provisions to reflect that the Company is no longer
externally advised (became internally advised as a result of its
acquisition of CNL Fund Advisors, Inc., its external Advisor in September
1999); and
. will effect certain other modifications to the Existing Articles that the
Company believes are desirable in connection with the changes to its
business strategy to conform more closely to the articles of
incorporation of other publicly-traded REITs.
The text of the proposed Restated Articles is set forth in Exhibit A to this
proxy statement and a marked version of the Existing Articles, which shows the
modifications proposed to be made, is set forth in Exhibit B to this proxy
statement.
The adoption of the Restated Articles is split into two separate,
independent proposals. Because each of these proposals will be voted upon
separately, one of the proposals may be approved by the stockholders while the
other proposal may not.
The Board of Directors has determined it to be in the best interests of the
Company and its stockholders to adopt the Restated Articles. The Board
unanimously recommends that stockholders vote "FOR" each of the proposals set
forth below.
Approval of each of the proposals requires the affirmative vote of the
holders of a majority of the outstanding Company Shares entitled to vote
thereon. Proxies received will be voted for approval of each proposal unless
stockholders designate otherwise. The Restated Articles will become effective
upon their filing with the Maryland Department of Assessments and Taxation.
The paragraphs below describe the amendments to the Existing Articles that
will be made if each of the proposals are approved by the stockholders and the
reasons that the Board of Directors have proposed such amendments.
PROPOSAL I
CHANGES TO EXISTING ARTICLES TO REFLECT THAT THE COMPANY
IS NO LONGER EXTERNALLY ADVISED
On September 1, 1999, the Company became internally advised and gained
complete acquisition, development and in-house management functions by
acquiring its external Advisor, CNL Fund Advisors, Inc. Because the Company
had no employees prior to September 1, 1999, the Advisor provided these
functions on behalf of the Company and was responsible for the day-to-day
operations of the Company, including raising capital, investment analysis,
acquisitions, due diligence, asset management and accounting services. The
acquisition of the Advisor also provides the Company with restaurant
development capabilities including site selection, construction management and
build-to-suit development.
Prior to its acquisition by the Company, the Advisor was entitled to various
fees for providing services to the Company, including fees that were
determined in part based on the cost basis of the Company's assets. Upon the
acquisition of the Advisor, the operations of the Advisor became part of the
business of the Company and, accordingly, the Company ceased to pay such fees.
The Company had not previously sought to become internally
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advised because, historically, it did not have a large enough asset base to
provide the economies of scale needed to support efficiently the extensive
general and administrative expenses of an internal management team. The
Company believes that its asset base has now grown sufficiently large to
support such an infrastructure efficiently and that, due to such growth, the
Company will experience long-term cost savings as a result of the acquisition
of the Advisor.
The Existing Articles contain a number of provisions that impose guidelines
on transactions between the Company and the Advisor and its affiliates. As
discussed above, the Company acquired the Advisor in September 1999. As a
result of that acquisition, the separate existence of the Advisor ceased, its
operations became part of the business of the Company and the Company became
an internally advised real estate investment trust ("REIT"). Accordingly, the
provisions in the Existing Articles relating to the Advisor and its affiliates
and to transactions and relations between the Company and the Advisor and its
affiliates are no longer applicable. These provisions, which are eliminated in
the Restated Articles, are discussed below.
Independent Director Requirements. Section 2.1 of the Existing Articles
provides that a majority of the members of the Board must be "Independent
Directors." An "Independent Director" is defined in the Existing Articles as
someone who is not, and has not been for the previous two years, associated
with the Advisor. Because the Company acquired the Advisor and became
internally advised, the Restated Articles eliminate the requirement that the
Company have directors not associated with the Advisor. The Restated Articles
also eliminate any provisions of the Existing Articles that are only relevant
if the Company has "Independent Directors." This includes, among others,
Section 2.2 of the Existing Articles (requiring that a majority of the members
of Board committees be Independent Directors), Section 2.6 (requiring that the
Independent Directors approve certain enumerated matters) and Section 5.2
(requiring the Independent Directors to conduct an annual review of the
Company's investment policies).
The term "Independent Director" is more commonly used to refer to a director
who is not also an employee of the company of which he or she is a director
and who is otherwise free of any relationship that would interfere with his or
her ability to exercise independent judgment in respect of that company's
business. In this regard, the Company currently has five directors, two of
whom, James M. Seneff, Jr. and Robert A. Bourne, serve as Chairman and Vice
Chairman, respectively, of the Company's Board of Directors, and three of whom
are Independent Directors under the more common meaning of the term. Pursuant
to Proposal III described herein, we have nominated the current directors
(including the three independent directors) for election as directors to serve
until the next annual meeting of stockholders or until their successors shall
have been elected and qualified. The Company's Bylaws currently provide that
the majority of the directors be independent. It is expected that for the
foreseeable future a majority of the Board will continue to be comprised of
Independent Directors.
Provisions Relating to Advisor Services. Article IV of the Existing Articles
consists of provisions that govern the relationship between the Company and
the Advisor. These provisions include guidelines for supervision of the
Advisor by the Board, provisions relating to the termination of the Advisor,
restrictions on the types and amount of fees payable by the Company to the
Advisor for services provided and limitations on reimbursement of expenses
incurred by the Advisor in performing those services. Because the Company
acquired the Advisor and became internally advised, Article IV of the Existing
Articles is no longer applicable to the Company's operations and will
therefore be eliminated in the Restated Articles.
Certain Conflict of Interest Provisions. In order to mitigate certain
potential conflicts of interest with the Advisor, Sections 6.3 and 6.4 of
Article VI of the Existing Articles contain a number of restrictions with
respect to transactions between the Company and the Advisor and their
respective affiliates and on certain activities of the Advisor and its
affiliates. For the reasons discussed below, these provisions also are
eliminated in the Restated Articles.
Section 6.3(i) of the Existing Articles provides that the Advisor and its
affiliates will not offer or sell interests in certain subsequently formed
public programs prior to the completion of the Company's initial public
offering and restricts investing by such programs prior to the time a certain
percentage of the proceeds of the
2
Company's initial public offering were invested. As described above, now that
the Company has acquired the Advisor, restrictions on the activities of the
Advisor and its affiliates are no longer applicable. The particular provisions
of Section 6.3(i) also are no longer relevant as the Company's initial public
offering was completed in early 1997 and the proceeds of the initial public
offering were fully invested thereafter.
Sections 6.3(ii) and 6.4 also are eliminated in the Restated Articles
because they similarly are inapplicable now that the Company has acquired the
Advisor. The provisions that are being so eliminated include: (i) guidelines
on how to resolve conflicts when an investment opportunity becomes available
which is suitable for both the Company and a public or private entity with
which the Advisor or its affiliates are affiliated (Section 6.3(ii)), (ii)
restrictions on the provision of goods and services to the Company by the
Advisor or its affiliates (Section 6.4(i)) and (iii) restrictions on loans by
the Advisor and its affiliates to the Company (Section 6.4(ii)). Section
6.4(ii) also restricts the Company from making any loans to affiliates. That
provision is eliminated in the Restated Articles for the reasons described
below under "Proposal II: Effecting the Other Changes to the Existing
Articles--Restrictions on Affiliated Transactions."
PROPOSAL II
EFFECTING THE OTHER CHANGES TO THE EXISTING ARTICLES
This proposal, if approved, would effect the remaining changes to Existing
Articles as set forth in the Restated Articles. Discussed further below, these
changes are designed to reflect the changes to the Company's business strategy
to conform more closely to the articles of incorporation of other publicly-
traded REITs.
The Existing Articles were adopted prior to the Company's commencing
operations and when the Company had not yet acquired restaurant properties. In
that context, a number of limitations and restrictions were included in the
Company's Existing Articles. The principal purpose of these limitations and
restrictions was to impose parameters on, and provide guidelines for, the
development of the Company's operating capabilities and the acquisition of its
restaurant property portfolio. Since the adoption in 1995 of the Company's
Articles of Incorporation (which have not been comprehensively amended), the
Company has become a fully operating restaurant REIT and as of December 31,
1999, had investments in properties, mortgage, equipment and other loans, and
other investments of approximately $1 billion. The Company has a five-year
operating history, which means that investors and potential investors now have
substantial information on which to evaluate the Company and its business.
In addition, certain of the limitations and restrictions in the Existing
Articles were required under state regulations in connection with the initial
and subsequent public offerings of Company Shares since the shares were
unlisted. The Company does not intend to make any public offerings of Company
Shares until after its shares are listed on a national securities exchange or
over the counter market and thus, these types of provisions are not required
to be included in its governing documents.
In view of the Company's operating history, its decision not to make any
additional public offerings of Company Shares until after its shares are
listed on a national securities exchange or over the counter market, and the
changes to its business strategy, the Company and the Board believe that many
of the limitations and restrictions that were included in the Existing
Articles are unduly restrictive and could prevent the Company from pursuing
favorable investment opportunities which could enhance stockholder value. In
addition, these provisions could impair the Company's ability to compete
effectively for investments and management talent. The Board believes such
limitations and restrictions should be modified so that the Company will be
able to fully implement its business strategy. The proposed Restated Articles
reflect the modifications that the Company and the Board believe should be
made to the Existing Articles.
The paragraphs below discuss, with respect to each provision of the Existing
Articles proposed to be modified by the Restated Articles, other than
modifications discussed above, the current provision as it appears in the
Existing Articles, the modified provision as it will appear in the Restated
Articles and the reason or reasons why the Board believes the provision should
be so modified.
3
References to NASAA REIT Guidelines. Several provisions of the Existing
Articles reference the guidelines for Real Estate Investment Trusts published
by the North American Securities Administrators Association. These guidelines,
which are referred to herein as the NASAA REIT guidelines, which consist of
substantive restrictions on the operations of a REIT, are applicable when a
REIT is making a public offering of its securities unless those securities are
listed for trading on a national securities exchange or designated for
quotation on Nasdaq. As we mentioned, the Company does not intend to make any
additional public offerings of Company Shares until after it is listed and
thus, these references have been eliminated in the Restated Articles.
The Existing Articles also contain provisions that, while they do not
specifically reference the NASAA REIT guidelines, were included to comply with
those guidelines. Many of those provisions are modified or eliminated by the
Restated Articles as described elsewhere in this proxy statement.
Experience of Directors. The Existing Articles contain provisions requiring
that a director must have had, prior to his or her election to the Company's
Board, "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." The Existing Articles further
provide that one of the Independent Directors must have three years of
relevant real estate experience. For a discussion of elimination of the
Independent Director requirement, see "Proposal I: Changes to Reflect that the
Company Became Internally Advised in September 1999--Independent Director
Requirements" above.
The director experience requirements were included in the Existing Articles
in order to ensure that the directors guiding the Company through its initial
development and acquisition phases were sufficiently experienced in the type
of activities in which the Company intended to engage. While relevant
experience and particularly relevant real estate experience are factors that
the Company would consider in recruiting and proposing nominees for director
positions, the Company believes that because it is now a fully operating
company with a large portfolio of restaurant properties, it is no longer
necessary or desirable to require that directors have a particular type or
specific number of years of experience. Indeed, the Company believes that
having a director experience requirement may prevent the Company from
proposing nominees who could potentially enrich the composition of the Board
by bringing to it broad and useful experience, although they might not
necessarily be experienced in the acquisition and development of real
properties. Examples of individuals who might be precluded from serving as
directors due to the director experience requirements include government
officials and representatives and senior executives and directors of other
companies that are not engaged in real estate or restaurant-related
activities. Individuals with such backgrounds often are desired by companies
to serve on their boards of directors.
The Company believes that its Board should be composed of persons who can
best serve the interests of its stockholders. Because some of those persons
might not meet the director experience requirements under the Existing
Articles, those requirements have been eliminated under the Restated Articles.
Investment Limitations. The Existing Articles contain a number of
limitations and restrictions on the Company's ability to make certain types of
investments. These investment limitations and restrictions were established,
as described above, in order to impose parameters on the Company's operations
because at the time it had not commenced operations or acquired any restaurant
properties. The Board believes that now that the Company is a fully operating
company, these limitations and restrictions are no longer necessary or
desirable because they could impede the Company's ability to take advantage of
favorable investment opportunities. Moreover, the elimination of certain of
these limitations and restrictions (for example, limitations under the
Existing Articles on the Company's mortgage lending activities) are desirable
in light of the Company's expansion of its financing capabilities in
connection with its acquisition of CNL Fund Advisors, Inc., CNL Financial
Services, Inc. and CNL Financial Corp. (together, the "CNL Restaurant
Financial Services Group") and its revised business strategy. If this proposal
is approved, the Board of Directors and the Company's management would be
responsible in evaluating and determining whether to make these types of
investments.
For the foregoing reasons, the Board of Directors is proposing the
elimination of the investment limitations and restrictions summarized below.
The full text of the eliminated provisions is set forth in the marked version
of the Existing Articles in Exhibit B to this proxy statement.
4
. Section 5.4 Investment Limitations. The investment limitations in Section
5.4 of the Existing Articles that are eliminated in the Restated Articles
for the reasons outlined above prohibit the Company from: (1) investing
more than 10% of its total assets in unimproved real property or
indebtedness secured by a deed of trust or mortgage loan on unimproved
real property (Section 5.4(i)); (2) investing in commodities or commodity
future contracts (Section 5.4(ii)); (3) investing in or making mortgage
loans unless an appraisal is obtained concerning the property and certain
other conditions are met (Sections 5.4(iii), (iv) and (v)); (4) investing
in equity securities, except under certain limited circumstances (Section
5.4(vi)); (5) except under specified circumstances, issuing (A) equity
securities redeemable solely at the option of the holder, (B) debt
securities, (C) common or preferred shares on a deferred payment basis or
under similar arrangements, (D) non-voting or assessable securities and
(E) options, warrants, or similar evidences of right to buy its
securities (Section 5.4(vii)); (6) investing in contracts for the sale of
real estate unless they are in recordable form and appropriately recorded
in the chain of title (Section 5.4(viii)); (7) acquiring a restaurant
property unless the consideration to be paid for each such property is
authorized by the Board (Section 5.4(ix)); (8) engaging in underwriting
or the agency distribution of securities issued by others or in trading
(Section 5.4(x)); (9) investing in any foreign currency or bullion or
engaging in any short sales (Section 5.4(xi)); and (10) issuing senior
securities except notes to lenders and preferred shares (Section
5.4(xii)).
. Limitations on Secured Equipment Financing. The Restated Articles also
eliminate the requirement under Section 5.3(iv) of the Existing Articles
that the offering by the Company of leases secured by restaurant
equipment must be approved by a majority of directors, including a
majority of Independent Directors, as being fair, competitive and
commercially reasonable.
. Limitations on Investment in Equity Securities. The restriction in
Section 5.3(iii) of the Existing Articles on investment by the Company in
equity securities also is eliminated under the Restated Articles. Under
Section 5.3(iii), the Company may invest in equity securities so long as
a majority of the disinterested directors (including a majority of the
Independent Directors) approve the investment as being fair, competitive
and commercially reasonable.
Limitations on Borrowing and Indebtedness. Historically, the Company has
funded acquisitions using net proceeds from offerings of Company Shares. Since
the investment of proceeds from its last offering of Company Shares in
December 1998, the Company has funded, and intends in the future to fund,
acquisitions and the development of new restaurant properties through short-
term borrowings and by financing or refinancing its indebtedness on such
properties on a longer-term basis when market conditions are appropriate. The
Company no longer intends to make any public offerings of Company Shares until
our stock is listed. Under Section 3.2(iv) and Section 5.4(xiii) of the
Existing Articles, total indebtedness of the Company generally cannot exceed
300% of the net asset value of the Company's assets. Although it is unlikely
that the Company would ever exceed that level of indebtedness, an absolute
limit on the Company's borrowings could impair its ability to engage in
potentially advantageous transactions and investment opportunities. The
proposed Restated Articles therefore do not contain any limitation on the
amount or percentage of indebtedness that the Company may incur in the future.
The Company's Board has agreed that, as a general policy, the Company will
borrow funds only when the Company's ratio of debt-to-total assets is 45% or
less. Because the Restated Articles would eliminate any limitations on the
Company's ability to borrow, however, the Company's Board could modify that
policy at any time after the Restated Articles are adopted. If that policy
were changed, the Company could become more highly leveraged, resulting in an
increase in the amount of debt repayment. This, in turn, could increase the
Company's risk of default on its obligations and adversely affect the
Company's results of operations and its ability to make distributions to its
stockholders. Because this is only a policy, the Board could, depending on the
market conditions, modify the policy and increase the Company's leverage above
45%.
Restrictions on Affiliated Transactions. Various provisions of the Existing
Articles limit the Company's ability to engage in transactions with the
Advisor, a director of the Company or any of their affiliates. In general,
these provisions require that such transactions, which are referred to herein
as affiliated transactions, be approved by a majority of the disinterested
directors. They also contain limitations on the substantive aspects of the
affiliated transactions themselves, such as restrictions on the consideration
to be paid by the Company for services provided or assets acquired from or
sold to such persons.
5
The provisions in the Existing Articles restricting affiliated transactions
are eliminated in the Restated Articles for a number of reasons. First,
because the Company acquired the Advisor, the likelihood of the Company
engaging in any affiliated transactions is greatly reduced. Second, the
corporate laws of the State of Maryland already contain provisions restricting
affiliated transactions. Under Maryland corporate law, to which the Company is
subject, transactions between the Company and its directors, or persons in
which such directors have a material financial interest, may be void or
voidable unless the conflict giving rise to the transaction is disclosed and
the transaction is approved or ratified by a majority of disinterested
directors or a majority of the stockholders or the transaction is fair and
reasonable to the Company. Thus, the Company's ability to enter into
affiliated transactions is restricted under applicable state law even if the
affiliated transactions provisions in the Existing Articles are eliminated by
the Restated Articles.
The affiliated transaction provisions that are proposed to be eliminated in
the Restated Articles are the following:
. Joint Ventures. The Restated Articles eliminate Section 5.3(ii) of the
Existing Articles which provides that the Company may invest in joint
ventures with the Advisor, one or more directors and any affiliates only
if a majority of disinterested directors approve the investment as being
fair and reasonable to the Company and on substantially the same terms
and conditions as those received by other joint venturers.
. Sales and Leases to and from the Company. The Restated Articles also
eliminate Sections 6.1 and 6.2 of the Existing Articles which require
that the Company's disinterested directors approve as fair and reasonable
to the Company the purchase of property by the Company from the Advisor,
a director or any affiliate, and the acquisition or lease of assets from
the Company by the Advisor, a director or any affiliate. Section 6.1 also
provides that the purchase by the Company of any property from the
Advisor, a director or any affiliate must be at a price no greater than
the cost of the asset to the Advisor, or, as the case may be, such
director or affiliate, or if the price to the Company is in excess of
such cost, that substantial justification for such excess exists, such
excess is reasonable and that the cost does not exceed the asset's
appraised value.
. Loans to Affiliates. The first sentence of Section 6.4(ii) prohibiting
the Company from making loans to affiliates similarly is eliminated in
the Restated Articles.
. General Restriction. Section 9.5 of the Existing Articles contains
certain general restrictions on all transactions between the Company and
its affiliates. The Restated Articles eliminate these restrictions which,
in addition to disinterested director approval, require that an
affiliated transaction be fair and reasonable to the Company and its
stockholders, that the terms of such transaction are at least as
favorable as the terms of comparable arms-length transactions and that if
an acquisition is involved, the total consideration is not in excess of
the appraised value of the property being acquired. The Restated Articles
also eliminate the limitations in Section 9.5 on the payment by the
Company of compensation to affiliates.
Voting Restrictions. The Restated Articles also eliminate Section 8.3 of the
Existing Articles which prohibits the Advisor, the directors and any of their
affiliates from voting on matters submitted to the Company stockholders
regarding removal of the Advisor, directors or any of their affiliates or any
transaction between the Company and them. This provision, which was included
in the Existing Articles in accordance with the NASAA REIT guidelines,
discussed above, is eliminated because the Company no longer intends to make
any public offerings of Company Shares and, with respect to the restrictions
on the Advisor and voting on removal of or transactions with the Advisor,
because the Company has acquired the Advisor.
Reports to Stockholders. Section 8.7 of the Existing Articles lists the
items of information that must be included in the Company's annual report to
stockholders. However, because the Company is a reporting company under the
rules and regulations of the Securities and Exchange Commission, or the SEC,
the Company's annual report will be required to comply with the SEC annual
reporting requirements. For this reason, Section 8.7 has been modified by
eliminating the enumerated informational requirements and providing that the
reports to stockholders be prepared and delivered to stockholders in
accordance with the requirements of the SEC.
6
Indemnification. Under Section 9.2(i) of the Existing Articles, the Company
is required to indemnify its directors and officers and permitted to indemnify
its employees and agents for losses or liabilities incurred by any of them,
each referred to herein as an indemnitee, may incur in connection with the
Company's business. Indemnification is not available, however, (1) for losses
or liabilities resulting from conduct by the indemnitee that constitutes
negligence, misconduct, bad faith or active or deliberate dishonesty, (2) if
the indemnitee received an improper personal benefit, (3) in the case of a
criminal proceeding, the indemnitee had reasonable cause to believe his or her
acts were unlawful, or (4) in a proceeding by or in the right of the Company,
the indemnitee is adjudged liable to the Company. Under Section 9.2(ii) of the
Existing Articles, the Company also may not provide indemnification for losses
or liabilities arising from alleged violations by an indemnitee of federal or
state securities laws, except under certain specified circumstances.
The indemnification provisions under the Existing Articles are more narrow
than the ability to provide indemnification to the extent permitted by
Maryland corporate law. The Restated Articles modify the indemnification
provisions consistent with Maryland law, to provide that the Company will
indemnify its directors and officers and may indemnify its employees and
agents to the fullest extent permitted by Maryland law. This modification will
allow the Company to offer director and officer candidates indemnification
similar to the indemnification they would receive from other companies and
thus to compete with those companies for the most qualified candidates.
Conforming Changes and Other Ministerial Modifications. The Restated
Articles reflect a number of conforming changes and other modifications of a
ministerial nature that are necessary in view of the other modifications being
proposed. These changes and modifications include, among other things,
deletion and revision of definitions, references and cross-references and the
re-numbering and lettering of remaining provisions. The Restated Articles also
eliminate provisions of the Existing Articles that were relevant only in the
context of the Company's initial public offering, which was completed in early
1997. All of these changes are indicated in the marked version of the Existing
Articles in Exhibit B to this proxy statement.
PROPOSAL III
ELECTION OF DIRECTORS
Nominees
The persons named below have been nominated by the Board for election as
directors to serve until the next Annual Meeting of Stockholders or until
their successors shall have been elected and qualified. Messrs. Bourne and
Seneff have been directors since May 1994. Messrs. Hostetter, Huseman and
Kruse have been directors since March 1995. The table sets forth each
nominee's name, age, principal occupation or employment during at least the
last five years and directorships in other public corporations.
The Company's officers and directors have advised the Company that they
intend to vote their shares of common stock for the election of each of the
nominees. Proxies will be voted FOR the election of the following nominees
unless authority is withheld.
Name and Age Background
------------ ----------
Robert A. Bourne, 53.. Mr. Bourne is Vice Chairman of the Board of Directors
of the Company. Mr. Bourne served as President of the
Company from 1994 through February 1999, and Treasurer
from February 1999 through August 1999. He also served
in various executive positions with the Advisor prior
to its merger with the Company including, President
from 1994 through September 1997, and director from
1994 through August 1999. Mr. Bourne is the President
and Treasurer of CNL Financial Group, Inc. (formerly
CNL Group, Inc.); a director, Vice Chairman of the
Board andPresident of CNL Hospitality Corp., a public,
unlisted real estate investment trust; as well as, a
director and President of CNL Hospitality Corp., its
advisor. In addition, Mr. Bourne is a director and
President of CNL Health Care Properties, Inc., a
public, unlistedreal estate investment trust; as well
as, a director and President of its advisor, CNL Health
Care Corp. Mr. Bourne also serves as a director of CNL
Bank. He has served as a
7
Name and Age Background
------------ ----------
director since 1992, Vice Chairman of the
Board since February 1996, Secretary and
Treasurer from February 1996 through 1997,
and President from July 1992 through February
1996, of Commercial Net Lease Realty, Inc., a
public real estate investment trust listed on
the New York Stock Exchange. Mr. Bourne also
serves as a director, President and Treasurer
for various affiliates of CNL Financial
Group, Inc. including, CNL Investment
Company, CNL Securities Corp. and CNL
Institutional Advisors, Inc., a registered
investment advisor for pension plans. Mr.
Bourne has participated as a general partner
or co-venturer in over 100 real estate
ventures involved in the financing,
acquisition, construction, and leasing of
restaurants, office buildings, apartment
complexes, hotels, and other real estate. Mr.
Bourne began his career as a certified public
accountant employed by Coopers & Lybrand,
Certified Public Accountants, from 1971
through 1978, where he attained the position
of tax manager in 1975. Mr. Bourne graduated
from Florida State University in 1970 where
he received a B.A. in Accounting, with
honors.
G. Richard Hostetter, Esq., 60.. Mr. Hostetter is a director of, and receives
compensation under a management consulting
agreement for Century Capital Markets LLC, a
sponsor of a commercial paper conduit. Since
January 1, 1999, Mr. Hostetter has served as
President and General Counsel of MRH, Inc.
which manages two of the businesses formerly
owned by MRH, L.P. From 1989 through 1998,
Mr. Hostetter served as President and General
Counsel of Mills, Ragland & Hostetter, Inc.,
the corporate general partner of MRH, L.P., a
holding company involved in corporate
acquisitions, in which he also was a general
and limited partner. Mr. Hostetter served as
a director of CNL Hospitality Properties,
Inc. from July 1997 until February 1999. Mr.
Hostetter was associated with the law firm of
Miller and Martin from 1966 through 1989, the
last ten years of such association as a
senior partner. As a lawyer, he served for
more than 20 years as counsel for various
corporate real estate groups, fast-food
companies and public companies, including The
Krystal Company, resulting in his extensive
participation in transactions involving the
sale, lease, and sale/leaseback of
approximately 250 restaurant units. Mr.
Hostetter graduated from the University of
Georgia and received his Juris Doctor from
Emory Law School in 1966. He is licensed to
practice law in Tennessee and Georgia.
Richard C. Huseman, 61.......... Dr. Huseman is a professor in the College of
Business Administration, and from 1990
through 1995, served as the Dean of the
College of Business Administration of the
University of Central Florida. Dr. Huseman
served as a director of CNL Hospitality
Properties, Inc. from July 1997 to February
1999, and has served as a consultant in the
area of managerial strategies to a number of
Fortune 500 corporations, including IBM,
AT&T, and 3M, as well as to several branches
of the U.S. government, including the U.S.
Department of Health and Human Services, the
U.S. Department of Justice, and the Internal
Revenue Service. Dr. Huseman received a
Bachelor of Arts degree from Greenville
College in 1961, and a Master of Arts degree
and a Ph.D. from the University of Illinois
in 1963 and 1965, respectively.
J. Joseph Kruse, 67............. Mr. Kruse has been President and Chief
Executive Officer of Kruse & Co., Inc., a
merchant banking company engaged in real
estate since 1993. Mr. Kruse also serves as a
director of Gateway American Bank of Florida
and Chairman of Topsider Building Systems.
Mr. Kruse served as a director of CNL
Hospitality Properties, Inc. from July 1997
to February 1999. Formerly,
8
Name and Age Background
------------ ----------
Mr. Kruse was a Senior Vice President with Textron,
Inc. for twenty years, and then served as Senior
Vice President at G. William Miller & Co., a firm
founded by a former Chairman of the Federal Reserve
Board and the Secretary of the Treasury of the
United States. Mr. Kruse was responsible for
evaluations of commercial real estate and retail
shopping mall projects and continues to serve as
counsel to the firm. Mr. Kruse received a Bachelor
of Science degree in Education from the University
of Florida in 1957 and a Master of Science degree
in Administration in 1958 from Florida State
University. He also graduated from the Advanced
Management Program of the Harvard Graduate School
of Business.
James M. Seneff, Jr., 53.. Mr. Seneff is Chairman of the Board of Directors of
the Company. Mr. Seneff served as Chief Executive
Officer of the Company from 1994 through August
1999. In addition, he served as Chairman of the
Board and Chief Executive Officer of the Advisor
until it merged with the Company in September 1999.
Mr. Seneff is a principal stockholder of CNL
Holdings, Inc., the parent company of CNL Financial
Group, Inc. (formerly CNL Group, Inc.), a
diversified real estate company, and has served as
a director, Chairman of the Board and Chief
Executive Officer of CNL Financial Group, Inc.
since its formation in 1980. CNL Financial Group,
Inc. is the parent company, either directly or
indirectly through subsidiaries, of CNL Real Estate
Services, Inc., CNL Capital Markets, Inc., CNL
Investment Company and CNL Securities Corp. Mr.
Seneff also serves as a director, Chairman of the
Board and Chief Executive Officer of CNL
Hospitality Corp., a public, unlisted real estate
investment trust, as well as, CNL Hospitality
Corp., its advisor. In addition, he serves as a
director, Chairman of the Board and Chief Executive
Officer of CNL Health Care Properties, Inc., a
public, unlisted real estate investment trust and
its advisor, CNL Health Care Corp. Since 1992, Mr.
Seneff has also served as a director, Chairman of
the Board and Chief Executive Officer of Commercial
Net Lease Realty, Inc., a public real estate
investment trust that is listed on the New York
Stock Exchange. Mr. Seneff has also served as a
director, Chairman of the Board and Chief Executive
Officer of CNL Securities Corp. since 1979; CNL
Investment Company since 1990; and CNL
Institutional Advisors, Inc., a registered
investment advisor for pension plans, since 1990.
Since 1971, Mr. Seneff has been active in the
acquisition, development, and management of real
estate projects and, directly or through an
affiliated entity, has served as a general partner
or co-venturer in over 100 real estate ventures.
These ventures have involved the financing,
acquisition, construction, and leasing of
restaurants, office buildings, apartment complexes,
hotels, and other real estate. Mr. Seneff formerly
served as a director of First Union National Bank
of Florida, N.A., and currently serves as the
Chairman of the Board of CNL Bank. Mr. Seneff
served on the Florida State Commission on Ethics
and is a former member and past Chairman of the
State of Florida Investment Advisory Council, which
recommends to the Florida Board of Administration
investments for various Florida employee retirement
funds. The Florida Board of Administration is
Florida's principal investment advisory and money
management agency and oversees the investment of
more than $60 billion of retirement funds.
Mr. Seneff received his degree in Business
Administration from Florida State University in
1968.
In the event that any nominee(s) should be unable to accept the office of
director, which is not anticipated, it is intended that the persons named in
the proxy will vote FOR the election of such other person in the place of such
nominee(s) for the office of director as the Board of Directors may recommend.
The affirmative vote of a majority of the shares of common stock present in
person or represented by proxy and entitled to vote is required for the
election of directors.
9
If Proposal I is approved by the requisite vote of the stockholders, a
majority of the Company's directors will no longer be required to be
independent, as that term is defined in the Existing Articles. However,
Messrs. Hostetter, Kruse and Huseman continue to be Independent Directors and
it is expected that for the foreseeable future a majority of the Board will
continue to be comprised of Independent Directors.
Compensation of Directors
During the year ended December 31, 1999, Messrs. Hostetter, Huseman and
Kruse, Independent Directors, earned $6,000 and Messrs. Seneff and Bourne
earned $2,000 for serving on the Board of Directors. Each Independent Director
also received $750 per Board meeting and Audit Committee meeting attended
($375 for each telephonic meeting in which the director participated), and
received $1,000 per Special Committee meeting and Compensation Committee
meeting ($500 for each telephonic meeting in which the director participated).
The Board of Directors met 16 times during the year ended December 31, 1999,
and the average attendance by directors at Board meetings was approximately 98
percent. Each current member attended at least 98 percent of the total
meetings of the Board and of any committee on which he served.
Committees of the Board of Directors
The Company has a standing Audit Committee, the members of which are
selected by the Board of Directors each year. The current members of the Audit
Committee are Messrs. Bourne, Hostetter and Kruse. The Audit Committee makes
recommendations to the Board of Directors as to the independent accountants of
the Company and reviews with such accounting firm the scope of the audit and
the results of the audit upon its completion. The Audit Committee met twice
during the year ended December 31, 1999.
During 1998, the Board of Directors established a Special Committee of the
Board of Directors to consider the implementation of strategic alternatives.
The Special Committee consists of Messrs. Hostetter, Kruse and Huseman, each
being an independent member of the Company's Board of Directors having no
financial interest in the implementation of certain strategic alternatives
designed to increase stockholder value. The Special Committee met six times
during the year ended December 31, 1999.
The Company has a standing Compensation Committee consisting of Messrs.
Seneff, Kruse and Huseman. The Compensation Committee advises the Board of
Directors on all matters pertaining to future compensation programs and
policies and establishes guidelines for future employee incentive and benefits
programs. The Compensation Committee met once during the year ended December
31, 1999.
During 1999, the Board of Directors established a Nominating Committee. The
Nominating Committee consists of Messrs. Seneff, Huseman and Hostetter. The
Nominating Committee makes recommendations to the Board regarding the size of
the Board and its makeup in terms of specific areas of expertise and
diversity. The Nominating Committee also nominates candidates to fill any
vacancies on the Board and will consider nominees recommended by stockholders.
The Nominating Committee did not meet during the year ended December 31, 1999.
Executive Officers
The executive officers of the Company are as follows:
Name Position
---- --------
Curtis B. McWilliams... Chief Executive Officer
John T. Walker......... President and Chief Operating Officer
Howard J. Singer....... Executive Vice President of Development Operations
Senior Vice President, Chief Financial Officer,
Steven D. Shackelford.. Secretary and Treasurer
Barry L. Goff.......... Senior Vice President and Chief Investment Officer
Timothy J. Neville..... Senior Vice President and Chief Credit Officer
Michael I. Wood........ Senior Vice President of Asset Management
Robert W. Chapin Jr.... Senior Vice President of Development Operations
10
Curtis B. McWilliams, age 44, has served as Chief Executive Officer of the
Company since September 1999. Mr. McWilliams served as President of the
Company from February 1999 until September 1999. From April 1997 to February
1999, Mr. McWilliams served as Executive Vice President of the Company. Mr.
McWilliams joined CNL Financial Group, Inc. (formerly CNL Group, Inc.) in
April 1997 and served as an Executive Vice President until September 1999. In
addition, Mr. McWilliams served as President of the Advisor and CNL Financial
Services, Inc. from April 1997 until the acquisition of such entities by the
Company in September 1999. From September 1983 through March 1997,
Mr. McWilliams was employed by Merrill Lynch & Co. The majority of his career
at Merrill Lynch & Co. was in the Investment Banking division where he served
as a Managing Director. Mr. McWilliams received a B.S.E. in Chemical
Engineering from Princeton University in 1977 and a Master of Business
Administration degree with a concentration in finance from the University of
Chicago in 1983.
John T. Walker, age 41, has served as President since September 1999 and as
Chief Operating Officer since March 1995 of the Company. Previously, he served
as Executive Vice President of the Company from January 1996 to September
1999. Mr. Walker joined the Advisor in September 1994, as Senior Vice
President, responsible for Research and Development. He served as the Chief
Operating Officer of the Advisor from April 1995 until September 1999 and as
Executive Vice President from January 1996 until September 1999, at which time
it merged with the Company. Mr. Walker also served as Executive Vice President
of CNL Hospitality Properties, Inc. and CNL Hospitality Corp. (formerly CNL
Hospitality Advisors, Inc.) from 1997 to October 1998. From May 1992 to May
1994, he was Executive Vice President for Finance and Administration and Chief
Financial Officer of Z Music, Inc., a cable television network which was
subsequently acquired by Gaylord Entertainment, where he was responsible for
overall financial and administrative management and planning. From January
1990 through April 1992, Mr. Walker was Chief Financial Officer of the First
Baptist Church in Orlando, Florida. From April 1984 through December 1989, he
was a partner in the accounting firm of Chastang, Ferrell & Walker, P.A.,
where he was the partner in charge of audit and consulting services, and from
1981 to 1984, Mr. Walker was a Senior Consultant/Audit Senior at Price
Waterhouse. Mr. Walker is a cum laude graduate of Wake Forest University with
a Bachelor of Science degree in Accountancy and is a certified public
accountant.
Howard J. Singer, age 57, has served as Executive Vice President of
Development Operations of the Company since September 1999. Mr. Singer joined
CNL Restaurant Development, Inc. in October 1995 and served as Chief Operating
Officer for that company until September 1999, responsible for complete
services ranging from site selection, site development and construction. From
October 1986 to September 1995, Mr. Singer was Executive Vice President of
Development for Long John Silver's. He has also worked for KFC Corporation and
Burger King Corporation where he held positions in development, franchising,
national and international operations. Mr. Singer received a Bachelor of
Science degree from the University of Florida in 1965 and a Juris Doctor from
the University of Miami in 1972.
Steven D. Shackelford, age 36, has served as Senior Vice President and Chief
Financial Officer of the Company since January 1997. He has also served as
Secretary and Treasurer of the Company since September 1999. He also served as
Chief Financial Officer of the Advisor from September 1996 to September 1999.
From March 1995 to July 1996, Mr. Shackelford was a senior manager in the
national office of Price Waterhouse LLP where he was responsible for advising
foreign clients seeking to raise capital and a public listing in the United
States. From August 1992 to March 1995, he was a manager in the Paris, France
office of Price Waterhouse, serving several multi-national clients. Mr.
Shackelford was an audit staff and senior from 1986 to 1992 in the Orlando,
Florida office of Price Waterhouse. Mr. Shackelford received a Bachelor of
Arts degree in Accounting, with honors, and a Master of Business
Administration degree from Florida State University and is a certified public
accountant.
Barry L. Goff, age 38, has served as Chief Investment Officer and Senior
Vice President of the Company since September 1999. Mr. Goff joined the
Advisor in August 1998 as Chief Investment Officer and served in such position
until September 1999. Mr. Goff is responsible for marketing the Company's
restaurant finance, development and strategic advisory services and products
to the restaurant industry. Prior to joining the Advisor
11
and from 1989 to July 1998, Mr. Goff was an attorney and a shareholder of
Lowndes, Drosdick, Doster, Kantor & Reed, PA., a law firm in Orlando, Florida,
where he specialized in U.S. and international taxation. Prior to joining
Lowndes in 1989, Mr. Goff practiced law with Loeb & Loeb in Los Angeles. Mr.
Goff received his Bachelor of Science degree in Business Administration from
the University of Central Florida in 1983, his Juris Doctor degree from the
University of Florida in 1986 and a Master of Laws in Taxation from New York
University in 1988.
Timothy J. Neville, age 51, has served as Senior Vice President and Chief
Credit Officer of the Company since September 1999. Mr. Neville was Senior
Vice President and Chief Credit Officer of CNL Financial Services, Inc.,
responsible for underwriting loans to select operators of top restaurant
chains, from mid 1998 to September 1999. He has more than 25 years of lending
and risk management experience at major financial institutions. From 1992 to
early 1998, Mr. Neville served as Executive Vice President and Senior Credit
Policy Officer at Barnett Bank, N.A. In that capacity, he was responsible for
loan approval, asset quality and portfolio management of a loan portfolio
totaling $1.4 billion. Prior responsibilities included management of lending
departments and lending teams with various financial institutions. Mr. Neville
earned a Master in Business Administration degree from Xavier University and a
Bachelor of Business Administration degree from the University of Cincinnati.
Michael I. Wood, age 38, has served as Senior Vice President of Asset
Management since September 1999. Mr. Wood joined the Advisor in September 1997
and was appointed Senior Vice President of Asset Management in December 1997,
serving in such position until September 1999. Mr. Wood is responsible for
overseeing the property management and portfolio management of the various
portfolios advised by the Company. Prior to joining the Advisor, Mr. Wood
spent more than 10 years with Xerox Corporation in a variety of positions in
its real estate investment and corporate real estate divisions. His most
recent position with Xerox was as manager of real estate acquisitions and
dispositions where he was responsible for Xerox's major real estate projects.
Mr. Wood has achieved the professional designation of Certified Commercial
Investment Member. He received a Bachelor of Science degree in Computer
Science and a Master of Business Administration degree from the University of
North Carolina at Chapel Hill.
Robert W. Chapin, Jr., age 38, has served as Senior Vice President of
Operations of the Company since September 1999. In July 1997, Mr. Chapin
joined CNL Restaurant Development, Inc. and was Senior Vice President of
Development Operations for that company until September 1999, responsible for
complete development services ranging from site selection, site development
and construction management. From July 1997 to June 1998, Mr. Chapin served as
a full-time consultant with CNL Financial Group, Inc. (formerly CNL Group,
Inc.), working on a number of strategic project initiatives. From November
1994 to June 1997, Mr. Chapin served as President of Leader Enterprises, a
full-service sports marketing firm. From October 1989 to November 1994, Mr.
Chapin was employed by VOA Associates, a Chicago-based design and development
company, most recently as managing principal of the Florida office. Mr. Chapin
received his Bachelor of Science degree from Appalachian State University.
12
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation earned by the Company's
Chief Executive Officer. No other officers who were serving as executive
officers on December 31, 1999, received compensation in excess of $100,000.
Because the Company was externally advised by the Advisors, no annual or long-
term compensation was paid by the Company to any executive officers for
services rendered in all capacities to the Company during the fiscal years
ended December 31, 1997 and 1998, and during the eight months ended August 31,
1999.
Long-Term
Compensation Awards
---------------------------
Securities
Name and Principal Compensation Restricted Underlying All Other
Position Year Salary ($)* Bonus ($)* Stock ($) Options/SARs (#) Compensations ($)
------------------ ---- ------------ ---------- ---------- ---------------- -----------------
Curtis B. McWilliams.... 1999 76,923* 100,000* 0 0 0
Chief Executive Officer
- --------
* Compensation paid for the period September 1, 1999 through December 31,
1999.
COMPENSATION COMMITTEE REPORT
The Compensation Committee is comprised of Messrs. Seneff, Huseman and
Kruse. The Compensation Committee determines compensation for the Company's
executive officers, reviews and approves management's recommendations for the
annual salaries of all the Company officers and administers any stock
incentive or other compensation plans adopted by the Company, including the
1999 Performance Incentive Plan (the "Plan"). The Compensation Committee
believes that the Company's compensation package must be structured in a
manner that will help the Company attract and retain qualified executives and
will align compensation of such executives with the interests of stockholders.
The compensation package currently consists of salary, bonus and long-term
compensation in the form of stock options, stock appreciation rights or
restricted stock issued pursuant to the Plan.
Salary and Bonus
Salary and bonus are determined by the Compensation Committee using a
subjective evaluation process. In making determinations of salary and bonus
for particular officers, including the Chief Executive Officer, the
Compensation Committee considers the general performance of the Company, the
officer's position, level and scope of responsibility, the officer's
anticipated performance and contributions to the Company's achievement of its
long-term goals, and the salary and bonus for the officer recommended by
management.
Long-Term Incentive Compensation
The Board of Directors and the stockholders approved the Plan as the
principal means of providing long-term incentives. The Compensation Committee
believes that the use of equity incentives aligns the interest of executive
officers with those of stockholders and promotes long-term stockholder value
better than does cash alone. The Plan provides for grants of stock options,
stock appreciation rights and restricted stock to key employees, directors and
officers of the Company. The Compensation Committee administers the Plan and
determines the participants who receive awards, the terms of the awards, the
schedule for exercisability or nonforfeitability, the time and conditions for
expiration of the awards, and the form of payment upon exercise. The
Compensation Committee may make determinations under the Plan that are not
uniform as to the participants and that do not consider whether possible
participants are similarly situated. The Committee did not grant any awards
under the Plan in 1999.
Compensation Committee
James M. Seneff, Jr.
Richard C. Huseman
J. Joseph Kruse
13
Compensation Committee Interlocks and Insider Participation
Currently, none of Messrs. Seneff, Huseman and Kruse are officers or
employees of the Company.
SECURITY OWNERSHIP
The following table sets forth, as of April 3, 2000, the number and
percentage of Company Shares beneficially owned by (i) each person or entity
known by the Company to own beneficially 5% or more of the outstanding Company
Shares, (ii) the named officers, (iii) the directors, and (iv) all executive
officers and directors, as a group. Unless otherwise noted below, the persons
named in the table have the sole voting and sole investment power with respect
to each of the shares beneficially owned by them. The address of the named
officers and directors, unless otherwise noted, is CNL Center at City Commons,
450 South Orange Avenue, Orlando, Florida 32801.
Number of Percent of
Company Shares Company
Name and Address of Beneficial Owner Beneficially Owned Shares Outstanding
------------------------------------ ------------------ ------------------
James M. Seneff, Jr..................... 3,721,672(2) 8.6%
Robert A. Bourne........................ 988,108(3) 2.3%
Curtis B. McWilliams.................... 290,322(4) (1)
John T. Walker.......................... 172,114(5) (1)
Howard J. Singer........................ 38,000(6) (1)
Steven D. Shackelford................... 26,600(7) (1)
Barry L. Goff........................... -- --
Timothy J. Neville...................... -- --
Michael I. Wood......................... -- --
Robert W. Chapin, Jr.................... -- --
G. Richard Hostetter.................... 2,739 (1)
SunTrust Bank of Chattanooga, N.A.
P.O. Box 1638
Mail Code M0321
Chattanooga, TN 37401
J. Joseph Kruse......................... -- --
494 Woonasquatucket Avenue, Unit 114
North Providence, RI 02911
Richard C. Huseman -- --
3300 University Boulevard, Suite 251
Winter Park, FL 32792
All executive officers and directors as
a group (13 persons).................... 5,239,555 12.0%
- --------
(1) Less than 1%
(2) Includes 3,242,962 shares owned by CNL Financial Group, Inc. in which Mr.
Seneff and his spouse own 100%. In addition, 26,819 of these shares are
held by two trusts of which Mr. Seneff's brother-in-law serves as trustee.
Mr. Seneff disclaims beneficial ownership of the shares held in the
trusts. Finally, 396,084 of these shares represent shares issued by the
Company in connection with the Company's acquisition of the CNL Restaurant
Financial Services Group which are held in escrow pending the attainment
of certain milestones contained in the transaction documents.
14
(3) Includes 19,842 shares held in trust of which Mr. Bourne's personal
attorney and a fellow business associate serve as trustees. Mr. Bourne
disclaims beneficial ownership of the shares held in the trusts.
(4) Of these shares, 35,276 shares were issued by the Company in connection
with the Company's acquisition of the CNL Restaurant Financial Services
Group which are held in escrow pending the attainment of certain
milestones contained in the transaction documents.
(5) Of these shares, 20,913 shares were issued by the Company in connection
with the Company's acquisition of the CNL Restaurant Financial Services
Group which are held in escrow pending the attainment of certain
milestones contained in the transaction documents.
(6) Of these shares, 4,617 shares were issued by the Company in connection
with the Company's acquisition of the CNL Restaurant Financial Services
Group which are held in escrow pending the attainment of certain
milestones contained in the transaction documents.
(7) Of these shares, 3,232 shares were issued by the Company in connection
with the Company's acquisition of the CNL Restaurant Financial Services
Group which are held in escrow pending the attainment of certain
milestones contained in the transaction documents.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities (collectively, the "Reporting Persons"), to
file reports of ownership and changes in ownership on Forms 3, 4 and 5 with
the SEC. Reporting Persons are required by SEC regulation to furnish the
Company with copies of all Forms 3, 4 and 5 that they file.
Based solely upon a review of Section 16(a) reports furnished to the Company
for fiscal year 1999, written representations that no other reports were
required and other information known to the Company, the Company believes that
the Reporting Persons have complied with all filing requirements for fiscal
year 1999.
CERTAIN TRANSACTIONS
On September 1, 1999, the Company became internally advised and gained
complete acquisition, development and in-house asset management functions by
acquiring the Advisor, pursuant to which the Company paid 3,800,000 Company
Shares to acquire the Advisor. On September 1, 1999, the Company acquired the
Advisor through the exchange of 100% of the outstanding shares of common stock
of the Advisor for 3.8 million shares ($76,000,000) of the Company's common
stock. In addition, on September 1, 1999, the Company acquired CNL Financial
Services, Inc. and CNL Financial Corporation and its subsidiaries through the
exchange of 100% of the outstanding shares of common stock of those entities
for 2.35 million shares ($47,000,000) of the Company's common stock.
Prior to the acquisition of the Advisor, all of the executive officers of
the Company were executive officers of the Advisor, a majority owned
subsidiary of CNL Financial Group, Inc. (formerly CNL Group, Inc.) or the CNL
Restaurant Financial Services Group, of which Messrs. Seneff and Bourne are
affiliates. In addition, Messrs. Seneff and Bourne are executive officers and
directors of CNL Securities Corp., the managing dealer of the Company's prior
offerings of Company Shares, and a wholly owned subsidiary of CNL Financial
Group, Inc. Prior to the acquisition of the Advisor, administration of the
day-to-day operations of the Company was provided by the Advisor, pursuant to
the terms of an advisory agreement (the "Advisory Agreement"). The Advisor
also served as the Company's consultant in connection with policy decisions
made by the Company's Board of Directors, managed the Company's properties and
rendered such other services as the Board of Directors deemed appropriate. The
Advisor paid all of its own expenses prior to its acquisition by the Company,
including salaries, wages, payroll taxes, costs of employee benefit plans and
charges for incidental help incurred in connection with acquisition
activities. The Advisor also paid its own accounting fees and related
expenses, legal fees, insurance, rent, telephone, utilities and certain travel
expenses of its officers and employees. As a result of the acquisition, all of
these expenses are now borne directly by the Company; however, the Company no
longer incurs fees for these services payable to an outside party.
CNL Securities Corp. is also entitled to receive, in connection with each of
the Company's offerings of Company Shares, a soliciting dealer servicing fee
payable annually in the amount of 0.20% of the stockholders'
15
investment in the Company. CNL Securities Corp. in turn may re-allow all or a
portion of such fee to soliciting dealers whose clients purchased shares in
such offering and who held shares on such date. During 1999, the Company
incurred $1,493,437 of such fees relating to its three public offerings of
Company Shares.
During 1999, the Advisor received acquisition fees for services in
identifying the properties and structuring the terms of the acquisition and
leases of the properties and structuring the terms of the mortgage loans equal
to 4.5% of total dollars invested in restaurant properties. For the year ended
December 31, 1999, the Company had incurred $6,185,005 of such fees.
For negotiating secured equipment leases and supervising the secured
equipment lease program, the Advisor was entitled to receive from the Company
a one-time secured equipment lease servicing fee of 2% of the purchase price
of the equipment that is the subject of a secured equipment lease. For the
year ended December 31, 1999, the Company incurred $77,317 in such fees.
In accordance with the Advisory Agreement, the Advisor received a monthly
asset management fee of one-twelfth of 0.60% of the Company's real estate
asset value (generally, the total amount invested in the properties as of the
end of the preceding month, exclusive of acquisition fees and acquisition
expenses), plus one-twelfth of 0.60% of the Company's total principal amount
of the mortgage loans as of the end of the preceding month. The management fee
did not exceed fees which were competitive for similar services in the same
geographic area. For the year ended December 31, 1999, the Company incurred
$2,685,887 of such fees, $342,580 of which was capitalized as part of the cost
of the buildings for properties under construction.
The Advisor and its affiliates provided accounting and administrative
services to the Company (including accounting and administrative services in
connection with the offering of shares) on a day-to-day basis. For the year
ended December 31, 1999, the Company incurred a total of $2,215,704 for these
services, $28,421 of such costs representing stock issuance costs and
$2,187,283 representing general operating and administrative expenses,
including costs related to preparing and distributing reports required by the
SEC. Since becoming internally advised, the Company outsourced certain
services relating to human resources and information technology to an
affiliate. The Company incurred expenses related to these services of
approximately $655,000 for the fiscal year 1999.
During the year ended December 31, 1999, the Company acquired 41 properties
for an aggregate purchase price of approximately $39,700,000 from affiliates
of the Company. The affiliates had purchased and temporarily held title to
these properties in order to facilitate the acquisition of the properties by
the Company. Each property was acquired at a cost no greater than the lesser
of the cost of the property to the affiliate (including carrying costs) or the
property's appraised value. Of the 41 properties acquired from affiliates in
1999, 38 were acquired for a total purchase price of approximately $36,800,000
from Commercial Net Lease Realty, Inc. ("NNN"), a publicly traded REIT.
James M. Seneff, Jr., the Chairman of the Board of the Company, is the
Chairman of the Board and Chief Executive Officer of NNN and Robert A. Bourne,
Vice Chairman of the Board of the Company, is also Vice Chairman of the Board
of NNN. This transaction was approved by the Company's Independent Directors.
For the year ended December 31, 1999, the Company incurred $56,352 in
development/construction management fees payable to affiliates of the Advisor
for services relating to the construction of the properties. Such fees were
included in the purchase price of the properties and are therefore included in
the basis on which the Company charges rent on the properties.
In connection with the acquisition of properties subject to approval by the
Company's Board of Directors, the Company will incur advisory fees payable to
affiliates of the Company. Such fees are included in the purchase price of the
properties and are therefore included in the basis on which the Company
charges rent on the properties. During the year ended December 31, 1999, the
Company incurred $539,976 of such fees relating to 25 properties.
As of December 31, 1999, the Company was in the process of finalizing a
lease agreement for its office space (the "Lease") with an affiliate of James
M. Seneff, Jr., the Company's Chairman of the Board. The Lease provides for
rent in the amount of approximately $857,000 per year, with a three percent
increase annually, expiring in October 2014.
16
INDEPENDENT AUDITORS
Upon recommendation of and approval by the Board, including the Independent
Directors, PricewaterhouseCoopers LLP has been selected to act as independent
certified public accountants for the Company during the current fiscal year. A
representative of PricewaterhouseCoopers LLP will be present at the annual
meeting and will be provided with the opportunity to make a statement if
desired. Such representative will also be available to respond to appropriate
questions.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
annual meeting other than those stated above. If any other business should
come before the annual meeting, the person(s) named in the enclosed proxy will
vote thereon as he, she or they determine to be in the best interests of the
Company.
PROPOSALS FOR NEXT ANNUAL MEETING
Any stockholder proposal to be considered for inclusion in the Company's
proxy statement and form of proxy for the annual meeting of stockholders to be
held in 2001 has to be received at the Company's office at CNL Center at City
Commons, 450 South Orange Avenue, Orlando, Florida 32801, no later than
December 29, 2000.
Under the Company's bylaws, a stockholder must comply with certain
procedures to nominate directors or to propose other matters to be considered
at an annual meeting of stockholders. These procedures provide that the
stockholders desiring to make nominations for directors or to bring a proper
subject before a meeting must do so by notice timely delivered to the
Company's Secretary. To be timely, the Secretary must receive the notice at
the Company's principal executive offices not less than 60 days nor more than
90 days before the anniversary of the preceding year's annual meeting of
stockholders. In the case of the Company's annual meeting of stockholders in
2001, the Company's Secretary must receive notice of any such proposal no
earlier than March 17, 2001, and no later than April 16, 2001 (other than
proposals intended to be included in the proxy statement and form of proxy
which, as noted above, have to be received by December 29, 2000). Generally,
such notice must set forth: (1) as to each person whom the stockholder
proposes to nominate for election or re-election as a director, all
information relating to such person that is required to be disclosed in
solicitations or proxies for election of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (including such person's written consent to being named in
the proxy statement as a nominee and to serving as a director if elected); (2)
as to any other business that the stockholder proposes to bring before the
meeting, a brief description of the business desired to be brought before the
meeting, the reasons for conducting such business at the meeting and any
material interest in such business of such stockholder and of the beneficial
owner, if any, on whose behalf the proposal is made; (3) as to the stockholder
giving the notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made, the name and address of such stockholder, as
they appear on the Company's books, and of such beneficial owner and the class
and number of Company Shares which are owned beneficially and of record by
such stockholder and such beneficial owner. The Chairman of the annual meeting
shall have the power to declare that any proposal not meeting these and any
other applicable requirements imposed by the bylaws shall be disregarded. A
copy of the bylaws may be obtained without charge on written request addressed
to CNL American Properties Fund, Inc., Attn. Corporate Secretary, CNL Center
at City Commons, 450 South Orange Avenue, Orlando, Florida 32801.
17
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1999, accompanies this Proxy Statement.
By Order of the Board of Directors,
/s/ Steven D. Shackelford
Steven D. Shackelford
Secretary
April 28 , 2000
Orlando, Florida
18
Exhibit A
APF's Restated Articles (clean version)
- --------------------------------------------------------------------------------
SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
CNL AMERICAN PROPERTIES FUND, INC.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Article I : THE COMPANY; DEFINITIONS...................................... A-1
1.1 Name................................................................. A-1
1.2 Resident Agent....................................................... A-1
1.3 Nature of Company.................................................... A-1
1.4 Purposes............................................................. A-1
1.5 Definitions.......................................................... A-1
Article II : BOARD OF DIRECTORS........................................... A-4
2.1 Number............................................................... A-4
2.2 Committees........................................................... A-4
2.3 Initial Board; Term.................................................. A-4
2.4 Fiduciary Obligations................................................ A-5
2.5 Resignation, Removal or Death........................................ A-5
2.6 Business Combination Statute......................................... A-5
2.7 Control Share Acquisition Statute.................................... A-5
Article III : POWERS OF DIRECTORS......................................... A-5
3.1 General.............................................................. A-5
3.2 Specific Powers and Authority........................................ A-6
3.3 Determination of Best Interest of Company............................ A-10
Article IV : INVESTMENT OBJECTIVES AND OPERATING RESTRICTIONS............. A-10
4.1 Investment Objectives................................................ A-10
4.2 Operating Restrictions............................................... A-10
Article V : SHARES....................................................... A-10
5.1 Authorized Shares.................................................... A-10
5.2 Common Shares........................................................ A-11
5.3 Preferred Shares..................................................... A-12
5.4 General Nature of Shares............................................. A-13
5.5 No Issuance Of Share Certificates.................................... A-13
5.6 Restrictions On Ownership and Transfer............................... A-13
5.7 Excess Shares........................................................ A-19
5.8 Settlements.......................................................... A-21
5.9 Severability......................................................... A-21
5.10 Waiver.............................................................. A-22
Article VI : STOCKHOLDERS................................................. A-22
6.1 Meetings of Stockholders............................................. A-22
6.2 Voting Rights of Stockholders........................................ A-22
6.3 Stockholder Action to be Taken by Meeting............................ A-22
6.4 Right of Inspection.................................................. A-22
6.5 Access to Stockholder List........................................... A-23
6.6 Reports.............................................................. A-23
Article VII : LIABILITY; TRANSACTIONS BETWEEN AFFILIATES AND THE COMPANY.. A-23
7.1 Limitation of Stockholder Liability.................................. A-23
7.2 Exculpation.......................................................... A-23
7.3 Indemnification...................................................... A-24
7.4 Express Exculpatory Clauses In Instruments........................... A-24
7.5 Transactions with Affiliates......................................... A-24
A-i
Article VIII: AMENDMENT; REORGANIZATION; MERGER, ETC....................... A-24
8.1 Amendment............................................................. A-24
8.2 Reorganization........................................................ A-25
8.3 Merger, Consolidation or Sale of Company Property..................... A-25
Article IX : DURATION OF COMPANY........................................... A-26
9.1 Automatic Dissolution................................................. A-26
9.2 Dissolution of the Company by Stockholder Vote........................ A-26
Article X : MISCELLANEOUS.................................................. A-26
10.1 Governing Law........................................................ A-26
10.2 Reliance by Third Parties............................................ A-26
10.3 Provisions in Conflict with Law or Regulations....................... A-27
10.4 Construction......................................................... A-27
10.5 Recordation.......................................................... A-27
A-ii
Article I:
THE COMPANY; DEFINITIONS
1.1 Name.
The name of the corporation (the "Company") is:
CNL American Properties Fund, Inc.
So far as may be practicable, the business of the Company shall be conducted
and transacted under that name, which name, and the word "Company" wherever
used in these Second Amended and Restated Articles of Incorporation of CNL
American Properties Fund, Inc. (these "Articles of Incorporation"), except
where the context otherwise requires, shall refer to the Directors
collectively but not individually or personally and shall not refer to the
Stockholders or to any officers, employees or agents of the Company or of such
Directors.
Under circumstances in which the Directors determine that the use of the
name "CNL American Properties Fund, Inc." is not practicable, they may use any
other designation or name for the Company.
1.2 Resident Agent.
The name and address of the resident agent for service of process of the
Company in the State of Maryland shall be The Corporation Trust Incorporated,
32 South Street, Baltimore, Maryland 21202. The Company may have such
principal office within the State of Maryland as the Directors may from time
to time determine. The Company may also have such other offices or places of
business within or without the State of Maryland as the Directors may from
time to time determine.
1.3 Nature of Company.
The Company is a Maryland corporation within the meaning of the MGCL.
1.4 Purposes.
The purposes for which the Company is formed are to conduct any business for
which corporations may be organized under the laws of the State of Maryland
including, but not limited to, the following: (i) to acquire, hold, own,
develop, construct, improve, maintain, operate, sell, lease, transfer,
encumber, convey, exchange and otherwise dispose of or deal with real and
personal property; (ii) to engage in the business of offering furniture,
fixture, and equipment financing to operators of Restaurant Chains; and (iii)
to enter into any partnership, joint venture or other similar arrangement to
engage in any of the foregoing.
1.5 Definitions.
As used in these Articles of Incorporation, the following terms shall have
the following meanings unless the context otherwise requires (certain other
terms used in Article V hereof are defined in Sections 5.2, 5.3, 5.6 and 5.7
hereof):
"Affiliate" or "Affiliated" means, as to any individual, corporation,
partnership, trust or other association (other than the Excess Shares Trust),
(i) any Person or entity directly or indirectly, through one or more
intermediaries controlling, controlled by, or under common control with
another person or entity; (ii) any Person or entity, directly or indirectly
owning or controlling ten percent (10%) or more of the outstanding voting
securities of another Person or entity; (iii) any officer, director, partner
or trustee of such Person or entity; (iv) any Person ten percent (10%) or more
of whose outstanding voting securities are directly or indirectly owned,
controlled, or held, with power to vote, by such other Person; and (v) if such
other Person or entity is an officer,
A-1
director, partner, or trustee of a Person or entity, the Person or entity for
which such Person or entity acts in any such capacity.
"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, including without limitation mortgage loans, interests
in trust certificates and Secured Equipment Leases, which is transferred or
conveyed to the Company (including all rents, income, profits and gains
therefrom), which is owned or held by, or for the account of, the Company.
"Directors," "Board of Directors" or "Board" means, collectively, the
individuals named in Section 2.3 of these Articles of Incorporation so long as
they continue in office and all other individuals who have been duly elected
and qualify as Directors of the Company hereunder.
"Distributions" means any distributions of money or securities by the
Company to owners of Shares, including distributions that may constitute a
return of capital for federal income tax purposes. The Company will make no
distributions other than distributions of money or securities.
"Equity Shares" means transferable shares of beneficial interest of the
Company of any class or series, including Common Shares or Preferred Shares.
"Initial Public Offering" means the offering and sale of Common Shares of
the Company pursuant to the Company's first effective registration statement
covering such Common Shares filed under the Securities Act of 1933, as
amended.
"Listing" means the listing of the Shares of the Company on a national
securities exchange or over-the-counter market.
"MGCL" means the Maryland General Corporation Law as contained in the
Corporations and Associations Article of the Annotated Code of Maryland.
"Mortgages" means mortgages, deeds of trust or other security interests on
or applicable to Real Property.
"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.
"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, but does not include an underwriter that participates in a public
offering of Equity Shares for a period of sixty (60) days following the
initial purchase by such underwriter of such Equity Shares in such public
offering, provided that the foregoing exclusion shall apply only if the
ownership of such Equity Shares by an underwriter would not cause the Company
to fail to qualify as a REIT by reason of being "closely held" within the
meaning of Section 856(a) of the Code or otherwise cause the Company to fail
to qualify as a REIT.
A-2
"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 or similar arrangements.
"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 "real estate investment trust" as defined pursuant to
Sections 856 through 860 of the Code.
"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.
"Restaurant Chains" shall mean the national and regional restaurant chains,
primarily fast-food, family-style, and casual dining chains who themselves or
through their franchisees will either (i) lease the Properties purchased by
the Company or (ii) become lessees of Secured Equipment Leases.
"Roll-Up Entity" shall mean a partnership, real estate investment trust,
corporation, trust or similar entity that would be created or would survive
after the successful completion of a proposed Roll-Up Transaction.
"Roll-Up Transaction" shall mean 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 Stockholder voting rights, the term of existence of the
Company 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 Secured Equipment Lease or
portion thereof, including any event with respect to any Secured Equipment
Lease 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 or Secured Equipment Leases within one hundred eighty (180)
days thereafter.
"Secured Equipment Leases" means furniture, fixtures and equipment financing
made available by the Company.
"Securities" means Equity Shares, Excess Shares, any other stock, shares or
other evidences of equity or beneficial or other interests, voting trust
certificates, bonds, debentures, notes or other evidences of indebtedness,
secured or unsecured, convertible, subordinated or otherwise, or in general
any instruments commonly known as "securities" or any certificates of
interest, shares or participations in, temporary or interim certificates for,
receipts for, guarantees of, or warrants, options or rights to subscribe to,
purchase or acquire, any of the foregoing.
A-3
"Shares" means shares of beneficial interest of the Company of any class or
series, including Common Shares, Preferred Shares and Excess Shares.
"Stockholders" means the registered holders of the Company's Equity Shares.
Article II:
BOARD OF DIRECTORS
2.1 Number.
The number of Directors initially shall be five (5), which number may be
increased or decreased from time to time by resolution of the Directors then
in office or by a majority vote of the Stockholders entitled to vote;
provided, however, that the total number of Directors shall be not fewer than
three (3) and not more than fifteen (15), subject to the Bylaws and to any
express rights of any holders of any series of Preferred Shares to elect
additional directors under specified circumstances. No reduction in the number
of Directors shall cause the removal of any Director from office prior to the
expiration of his term. Any vacancy created by an increase in the number of
Directors will be filled, at any regular meeting or at any special meeting of
the Directors called for that purpose, by a majority of the Directors. Any
other vacancy will be filled at any annual meeting or at any special meeting
of the Stockholders called for that purpose, by a majority of the Common
Shares outstanding and entitled to vote. For the purposes of voting for
directors, each Share of stock may be voted for as many individuals as there
are directors to be elected and for whose election the Share is entitled to be
voted, or as may otherwise be required by the MGCL or other applicable law as
in effect from time to time.
2.2 Committees.
Subject to the MGCL, the Directors may establish such committees as they
deem appropriate, in their discretion.
2.3 Initial Board; Term.
The initial Directors are James M. Seneff, Jr., Robert A. Bourne, G. Richard
Hostetter, J. Joseph Kruse and Richard C. Huseman. Each Director shall hold
office for one (1) year, until the next annual meeting of Stockholders and
until his successor shall have been duly elected and shall have qualified.
Directors may be elected to an unlimited number of successive terms.
The names and address of the initial Directors are as follows:
Name Address
---- -------
James M. Seneff, Jr. .. CNL Center at City Commons
450 South Orange Avenue
Orlando, Florida 32801
Robert A. Bourne....... CNL Center at City Commons
450 South Orange Avenue
Orlando, Florida 32801
G. Richard Hostetter... CNL Center at City Commons
450 South Orange Avenue
Orlando, Florida 32801
J. Joseph Kruse........ CNL Center at City Commons
450 South Orange Avenue
Orlando, Florida 32801
Richard C. Huseman..... CNL Center at City Commons
450 South Orange Avenue
Orlando, Florida 32801
A-4
2.4 Fiduciary Obligations.
The Directors serve in a fiduciary capacity to the Company and have a
fiduciary duty to the Stockholders of the Company.
2.5 Resignation, Removal or Death.
Any Director may resign by written notice to the Board of Directors,
effective upon execution and delivery to the Company of such written notice or
upon any future date specified in the notice. A Director may be removed from
office with or without cause only at a meeting of the Stockholders called for
that purpose, by the affirmative vote of the holders of not less than a
majority of the Common Shares then outstanding and entitled to vote in the
election of the Directors, subject to the rights of any Preferred Shares to
vote for such Directors. The notice of such meeting shall indicate that the
purpose, or one of the purposes, of such meeting is to determine if a Director
should be removed. Upon the resignation or removal of any Director, or his
otherwise ceasing to be a Director, he shall automatically cease to have any
such right, title or interest in and to the Company Property and shall execute
and deliver such documents as the remaining Directors require for the
conveyance of any Company Property held in his name, and shall account to the
remaining Directors as they require for all property which he holds as
Director. Upon the incapacity or death of any Director, his legal
representative shall perform the acts described in the foregoing sentence.
2.6 Business Combination Statute.
Notwithstanding any other provision of these Articles of Incorporation or
any contrary provision of law, the Maryland Business Combination Statute,
found in Title 3, subtitle 6 of the MGCL, as amended from time to time, or any
successor statute thereto, shall not apply to any "business combination" (as
defined in Section 3-601(e) of the MGCL, as amended from time to time, or any
successor statute thereto) of the Company and any Person.
2.7 Control Share Acquisition Statute.
Notwithstanding any other provision of these Articles of Incorporation or
any contrary provision of law, the Maryland Control Share Acquisition Statute,
found in Title 3, subtitle 7 of the MGCL, as 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:
POWERS OF DIRECTORS
3.1 General.
Subject to the express limitations herein or in the Bylaws and to the
general standard of care required of directors under the MGCL and other
applicable law, (i) the business and affairs of the Company shall be managed
under the direction of the Board of Directors and (ii) the Directors shall
have full, exclusive and absolute power, control and authority over the
Company Property and over the business of the Company as if they, in their own
right, were the sole owners thereof, except as otherwise limited by these
Articles of Incorporation. The Directors have established the written policies
on investments set forth in Article IV hereof and shall monitor the
administrative procedures, investment operations, and performance of the
Company to assure that such policies are carried out. The Directors may take
any actions that, in their sole judgment and discretion, are necessary or
desirable to conduct the business of the Company. A majority of the Board of
Directors has approved these Articles of Incorporation, which shall be
construed with a presumption in favor of the grant of power and authority to
the Directors. Any construction of these Articles of Incorporation or
determination made in good faith by the Directors concerning their powers and
authority hereunder shall be conclusive. The enumeration and definition of
particular powers of the Directors included in this Article III shall in no
way be limited or restricted
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by reference to or inference from the terms of this or any other provision of
these Articles of Incorporation or construed or deemed by inference or
otherwise in any manner to exclude or limit the powers conferred upon the
Directors under the general laws of the State of Maryland as now or hereafter
in force.
3.2 Specific Powers and Authority.
Subject only to the express limitations herein, and in addition to all other
powers and authority conferred by these Articles of Incorporation or by law,
the Directors, without any vote, action or consent by the Stockholders, shall
have and may exercise, at any time or times, in the name of the Company or on
its behalf the following powers and authorities:
(i) Investments. Subject to Article IV and Section 7.5 hereof, to invest in,
purchase or otherwise acquire and to hold real, personal or mixed, tangible or
intangible, property of any kind wherever located, or rights or interests
therein or in connection therewith, all without regard to whether such
property, interests or rights are authorized by law for the investment of
funds held by trustees or other fiduciaries, or whether obligations the
Company acquires have a term greater or lesser than the term of office of the
Directors, for such consideration as the Directors may deem proper (including
cash, property of any kind or Securities of the Company); provided, however,
that the Directors shall take such actions as they deem necessary and
desirable to comply with any requirements of the MGCL relating to the types of
assets held by the Company.
(ii) REIT Qualification. The Board of Directors shall use its best efforts
to cause the Company and its Stockholders to qualify for U.S. federal income
tax treatment in accordance with the provisions of the Code applicable to
REITs (as those terms are defined in Section 1.5 hereof). In furtherance of
the foregoing, the Board of Directors shall use its best efforts to take such
actions as are necessary, and may take such actions as it deems desirable (in
its sole discretion) to preserve the status of the Company as a REIT;
provided, however, that in the event that the Board of Directors determines,
by vote of at least two-thirds ( 2/3) of the Directors, that it no longer is
in the best interests of the Company to qualify as a REIT, the Board of
Directors shall take such actions as are required by the Code, the MGCL and
other applicable law, to cause the matter of termination of qualification as a
REIT to be submitted to a vote of the Stockholders of the Company pursuant to
Section 6.2.
(iii) Sale, Disposition and Use of Property. Subject to Article IV and
Sections 7.5 and 8.3 hereof, to sell, rent, lease, hire, exchange, release,
partition, assign, mortgage, grant security interests in, encumber, negotiate,
dedicate, grant easements in and options with respect to, convey, transfer
(including transfers to entities wholly or partially owned by the Company or
the Directors) or otherwise dispose of any or all of the Company Property by
deeds (including deeds in lieu of foreclosure with or without consideration),
trust deeds, assignments, bills of sale, transfers, leases, mortgages,
financing statements, security agreements and other instruments for any of
such purposes executed and delivered for and on behalf of the Company or the
Directors by one or more of the Directors or by a duly authorized officer,
employee, agent or nominee of the Company, on such terms as they deem
appropriate; to give consents and make contracts relating to the Company
Property and its use or other property or matters; to develop, improve,
manage, use, alter or otherwise deal with the Company Property; and to rent,
lease or hire from others property of any kind; provided, however, that the
Company may not use or apply land for any purposes not permitted by applicable
law.
(iv) Financings. To borrow or, in any other manner, raise money for the
purposes and on the terms they determine, which terms may (i) include
evidencing the same by issuance of Securities of the Company and (ii) may have
such provisions as the Directors determine; to reacquire such Securities of
the Excess Shares Trust; to enter into other contracts or obligations on
behalf of the Excess Shares Trust; to guarantee, indemnify or act as surety
with respect to payment or performance of obligations of any Person; to
mortgage, pledge, assign, grant security interests in or otherwise encumber
the Company Property to secure any such Securities of the Company, contracts
or obligations (including guarantees, indemnifications and suretyships); and
to renew, modify, release, compromise, extend, consolidate or cancel, in whole
or in part, any obligation to or of the Company or participate in any
reorganization of obligors to the Company.
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(v) Lending. Subject to the provisions of Section 7.5 hereof, to lend money
or other Company Property on such terms, for such purposes and to such Persons
as they may determine.
(vi) Secured Equipment Leases. To engage in the business of offering
furniture, fixture, and equipment financing to the operators of Restaurant
Chains, provided, however, that the Company shall use its best efforts to
ensure that the total value of Secured Equipment Leases, in the aggregate will
not exceed 25% of the Company's total assets and that Secured Equipment Leases
to a single lessee, in the aggregate, will not exceed 5% of the Company's
total assets.
(vii) Issuance of Securities. Subject to the provisions of Article V hereof,
to create and authorize and direct the issuance (on either a pro rata or a
non-pro rata basis) by the Company, in shares, units or amounts of one or more
types, series or classes, of Securities of the Company, which may have such
voting rights, dividend or interest rates, preferences, subordinations,
conversion or redemption prices or rights; maturity dates, distribution,
exchange, or liquidation rights or other rights as the Directors may
determine, without vote of or other action by the Stockholders, to such
Persons for such consideration, at such time or times and in such manner and
on such terms as the Directors determine, to list any of the Securities of the
Company on any securities exchange; and to purchase or otherwise acquire,
hold, cancel, reissue, sell and transfer any Securities of the Company.
(viii) Expenses and Taxes. To pay any charges, expenses or liabilities
necessary or desirable, in the sole discretion of the Directors, for carrying
out the purposes of these Articles of Incorporation and conducting business of
the Company, including compensation or fees to Directors, officers, employees
and agents of the Company, and to Persons contracting with the Company, and
any taxes, levies, charges and assessments of any kind imposed upon or
chargeable against the Company, the Company Property or the Directors in
connection therewith; and to prepare and file any tax returns, reports or
other documents and take any other appropriate action relating to the payment
of any such charges, expenses or liabilities.
(ix) Collection and Enforcement. To collect, sue for and receive money or
other property due to the Company; to consent to extensions of the time for
payment, or to the renewal, of any Securities or obligations; to engage or to
intervene in, prosecute, defend, compound, enforce, compromise, release,
abandon or adjust any actions, suits, proceedings, disputes, claims, demands,
security interests or things relating to the Company, the Company Property or
the Company's affairs; to exercise any rights and enter into any agreements
and take any other action necessary or desirable in connection with the
foregoing.
(x) Deposits. To deposit funds or Securities constituting part of the
Company Property in banks, trust companies, savings and loan associations,
financial institutions and other depositories, whether or not such deposits
will draw interest, subject to withdrawal on such terms and in such manner as
the Directors determine.
(xi) Allocation; Accounts. To determine whether moneys, profits or other
assets of the Company shall be charged or credited to, or allocated between,
income and capital, including whether or not to amortize any premium or
discount and to determine in what manner any expenses or disbursements are to
be borne as between income and capital (regardless of how such items would
normally or otherwise be charged to or allocated between income and capital
without such determination); to treat any dividend or other distribution on
any investment as, or apportion it between, income and capital; in their
discretion to provide reserves for depreciation, amortization, obsolescence or
other purposes in respect of any Company Property in such amounts and by such
methods as they determine; to determine what constitutes net earnings, profits
or surplus; to determine the method or form in which the accounts and records
of the Company shall be maintained; and to allocate to the Stockholders'
equity account less than all of the consideration paid for Securities and to
allocate the balance to paid-in capital or capital surplus.
(xii) Valuation of Property. To determine the value of all or any part of
the Company Property and of any services, Securities, property or other
consideration to be furnished to or acquired by the Company, and to revalue
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all or any part of the Company Property, all in accordance with such
appraisals or other information as are reasonable, in their sole judgment.
(xiii) Ownership and Voting Powers. To exercise all of the rights, powers,
options and privileges pertaining to the ownership of any Mortgages,
Securities, Real Estate, Secured Equipment Leases and other Company Property
to the same extent that an individual owner might, including without
limitation to vote or give any consent, request or notice or waive any notice,
either in person or by proxy or power of attorney, which proxies and powers of
attorney may be for any general or special meetings or action, and may include
the exercise of discretionary powers.
(xiv) Officers, Etc.; Delegation of Powers. To elect, appoint or employ such
officers for the Company and such committees of the Board of Directors with
such powers and duties as the Directors may determine, the Company's Bylaws
provide or the MGCL requires; to engage, employ or contract with and pay
compensation to any Person (including subject to Section 7.5 hereof, any
Director and Person who is an Affiliate of any Director) as agent,
representative, member of an advisory board, employee or independent
contractor (including advisors, consultants, transfer agents, registrars,
underwriters, accountants, attorneys-at-law, real estate agents, property and
other managers, appraisers, brokers, architects, engineers, construction
managers, general contractors or otherwise) in one or more capacities, to
perform such services on such terms as the Directors may determine; to
delegate to one or more Directors, officers or other Persons engaged or
employed as aforesaid or to committees of Directors, the performance of acts
or other things (including granting of consents), the making of decisions and
the execution of such deeds, contracts, leases or other instruments, either in
the names of the Company, the Directors or as their attorneys or otherwise, as
the Directors may determine; and to establish such committees as they deem
appropriate.
(xv) Associations. Subject to Section 7.5 hereof, to cause the Company to
enter into joint ventures, general or limited partnerships, participation or
agency arrangements or any other lawful combinations, relationships or
associations of any kind.
(xvi) Reorganizations, Etc. Subject to Sections 8.2 and 8.3 hereof, to cause
to be organized or assist in organizing any Person under the laws of any
jurisdiction to acquire all or any part of the Company Property, carry on any
business in which the Company shall have an interest or otherwise exercise the
powers the Directors deem necessary, useful or desirable to carry on the
business of the Company or to carry out the provisions of these Articles of
Incorporation, to merge or consolidate the Company with any Person; to sell,
rent, lease, hire, convey, negotiate, assign, exchange or transfer all or any
part of the Company Property to or with any Person in exchange for Securities
of such Person or otherwise; and to lend money to, subscribe for and purchase
the Securities of, and enter into any contracts with, any Person in which the
Company holds, or is about to acquire, Securities or any other interests.
(xvii) Insurance. To purchase and pay for out of Company Property insurance
policies insuring the Company and the Company Property against any and all
risks, and insuring the Stockholders, Directors, officers, Affiliates,
employees and agents of the Company individually (each an "Insured") against
all claims and liabilities of every nature arising by reason of holding or
having held any such status, office or position or by reason of any action
alleged to have been taken or omitted by the Insured in such capacity, whether
or not the Company would have the power to indemnify against such claim or
liability, provided that such insurance be limited to the indemnification
permitted by Section 7.3 hereof in regard to any liability or loss resulting
from negligence, gross negligence, misconduct, willful misconduct or an
alleged violation of federal or state securities laws. Nothing contained
herein shall preclude the Company from purchasing and paying for such types of
insurance, including extended coverage liability and casualty and workers'
compensation, as would be customary for any Person owning comparable assets
and engaged in a similar business, or from naming the Insured as an additional
insured party thereunder, provided that such addition does not add to the
premiums payable by the Company.
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(xviii) Executive Compensation, Pension and Other Plan. To adopt and
implement executive compensation, pension, profit sharing, share option, share
bonus, share purchase, share appreciation rights, restricted share, savings,
thrift, retirement, incentive or benefit plans, trusts or provisions,
applicable to any or all Directors, officers, employees or agents of the
Company, or to other Persons who have benefited the Company, all on such terms
and for such purposes as the Directors may determine or the Bylaws provide.
(xix) Distributions. To declare and pay dividends or other distributions to
Stockholders, subject to the provisions of Section 5.4 hereof.
(xx) Indemnification. To the extent permitted by Section 7.3 hereof, to
indemnify any Person with whom the Company has dealings.
(xxi) Charitable Contributions. To make donations for the public welfare or
for community, charitable, religious, educational, scientific, civic or
similar purposes, regardless of any direct benefit to the Company.
(xxii) Discontinue Operations; Bankruptcy. To discontinue the operations of
the Company (subject to Section 8.2 hereof); to petition or apply for relief
under any provision of federal or state bankruptcy, insolvency or
reorganization laws or similar laws for the relief of debtors; to permit any
Company Property to be foreclosed upon without raising any legal or equitable
defenses that may be available to the Company or the Directors or otherwise
defending or responding to such foreclosure; to confess judgment against the
Excess Shares Trust; or to take such other action with respect to indebtedness
or other obligations of the Directors, the Company Property or the Company as
the Directors, in such capacity, and in their discretion may determine.
(xxiii) Termination of Status. To terminate the status of the Company as a
real estate investment trust under the REIT Provisions of the Code; provided,
however, that the Board of Directors shall take no action to terminate the
Company's status as a real estate investment trust under the REIT Provisions
of the Code until such time as (i) the Board of Directors adopts a resolution
recommending that the Company terminate its status as a real estate investment
trust under the REIT Provisions of the Code, (ii) the Board of Directors
presents the resolution at an annual or special meeting of the Stockholders
and (iii) such resolution is approved by the holders of two-thirds ( 2/3) of
the issued and outstanding Common Shares (as defined in Section 5.2 hereof).
(xxiv) Fiscal Year. Subject to the Code, to adopt, and from time to time
change, a fiscal year for the Company.
(xxv) Seal. To adopt and use a seal, but the use of a seal shall not be
required for the execution of instruments or obligations of the Company.
(xxvi) Bylaws. To adopt, implement and from time to time alter, amend or
repeal the Bylaws of the Company relating to the business and organization of
the Company, provided that such amendments are not inconsistent with the
provisions of these Articles of Incorporation, and further provided that the
Directors may not amend the Bylaws, without the affirmative vote of a majority
of the Equity Shares, to the extent that such amendments adversely affect the
rights, preferences and privileges of Stockholders.
(xxvii) Listing Shares. To cause the listing of the Shares at any time, but
in no event shall such Listing occur more than ten (10) years after completion
of the Initial Public Offering.
(xxviii) Further Powers. To do all other acts and things and execute and
deliver all instruments incident to the foregoing powers, and to exercise all
powers which they deem necessary, useful or desirable to carry on the business
of the Company or to carry out the provisions of these Articles of
Incorporation, even if such powers are not specifically provided hereby.
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3.3 Determination of Best Interest of Company.
In determining what is in the best interest of the Company, a Director shall
consider the interests of the Stockholders of the Company and, in his or her
sole and absolute discretion, may consider (i) the interests of the Company's
employees, suppliers, creditors and customers, (ii) the economy of the nation,
(iii) community and societal interests, and (iv) the long-term as well as
short-term interests of the Company and its Stockholders, including the
possibility that these interests may be best served by the continued
independence of the Company.
Article IV:
INVESTMENT OBJECTIVES AND OPERATING RESTRICTIONS
4.1 Investment Objectives.
The Company's primary investment objectives are to preserve, protect, and
enhance the Company's assets; while (i) distributing dividends commencing in
the initial year of Company operations; (ii) obtaining fixed income through
the receipt of base rent on leased properties and interest on mortgage loans,
and increasing the Company's income (and dividends) and providing protection
against inflation through automatic increases in base rent and receipt of
percentage rent, and obtaining fixed income through the receipt of payments on
Secured Equipment Leases; (iii) qualifying and remaining qualified as a REIT
for federal income tax purposes; and (iv) providing Stockholders of the
Company with liquidity of their investment within five (5) to ten (10) years
after commencement of the offering, either in whole or in part, through (a)
Listing, or, (b) the commencement of orderly Sales of the Company's Properties
and Secured Equipment Leases, (outside the ordinary course of business and
consistent with its objective of qualifying as a REIT) and distribution of the
proceeds thereof. The sheltering from tax of income from other sources is not
an objective of the Company. Subject to Sections 3.2(ii) and (xxiii) hereof
and to the restrictions set forth herein, the Directors will use their best
efforts to conduct the affairs of the Company in such a manner as to continue
to qualify the Company for the tax treatment provided in the REIT Provisions
of the Code; provided, however, no Director, officer, employee or agent of the
Company shall be liable for any act or omission resulting in the loss of tax
benefits under the Code, except to the extent provided in Section 7.2 hereof.
4.2 Operating Restrictions.
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:
(i) The Company shall not operate so as to be classified as an
"investment company" under the Investment Company Act of 1940, as amended.
(ii) The Company will not make any investment that the Company believes
will be inconsistent with its objectives of qualifying and remaining
qualified as a REIT.
The foregoing objectives may not be modified or eliminated without the
approval of Stockholders owning a majority of the outstanding Common Shares.
Article V:
SHARES
5.1 Authorized Shares.
The capital stock of the Company shall be divided into Shares. The total
number of Shares which the Company is authorized to issue is one hundred forty
three million five hundred thousand (143,500,000) Shares, consisting of sixty
two million five hundred thousand (62,500,000) Common Shares (as defined and
described in
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Section 5.2 hereof), three million (3,000,000) Preferred Shares (as defined
and described in Section 5.3 hereof) and seventy-eight million (78,000,000)
Excess Shares (as defined and described in Section 5.7 hereof). All Shares
shall be fully paid and nonassessable when issued. Shares may be issued for
such consideration as the Directors determine or, if issued as a result of a
Share dividend or Share split, without any consideration.
5.2 Common Shares.
(i) Common Shares Subject to Terms of Preferred Shares. The Common Shares
shall be subject to the express terms of any series of Preferred Shares.
(ii) Description. Common Shares (herein so called) shall have a par value of
$.01 per share and shall entitle the holders to one (1) vote per share on all
matters upon which Stockholders are entitled to vote pursuant to Section 6.2
hereof, and shares of a particular class of issued Common Shares shall have
equal dividend, distribution, liquidation and other rights, and shall have no
preference, cumulative, preemptive, appraisal, conversion or exchange rights.
The Directors may classify or reclassify any unissued Common Shares by setting
or changing the number, designation, preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends, qualifications or
terms or conditions of redemption of any such Common Shares and, in such
event, the Company shall file for record with the State Department of
Assessments and Taxation of the State of Maryland amended articles in
substance and form as prescribed by Title 2 of the MGCL.
(iii) Distribution Rights. The holders of Common Shares shall be entitled to
receive such Distributions as may be declared by the Board of Directors of the
Company out of funds legally available therefor.
(iv) Dividend or Distribution Rights. The Directors from time to time may
declare and pay to Stockholders such dividends or Distributions in cash or
securities as the Directors in their discretion shall determine. The Directors
shall endeavor to declare and pay such dividends and Distributions as shall be
necessary for the Company to qualify as a real estate investment trust under
the REIT Provisions of the Code; provided, however, Stockholders shall have no
right to any dividend or Distribution unless and until declared by the
Directors. The exercise of the powers and rights of the Directors pursuant to
this Section 5.2(iv) shall be subject to the provisions of any class or series
of Equity Shares at the time outstanding. The receipt by any Person in whose
name any Equity Shares are 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 Shares and from
all liability to see to the application thereof. Distributions in kind shall
not be permitted, except for distributions of readily marketable securities;
distributions of beneficial interests in a liquidating trust established for
the dissolution of the Company and the liquidation of its assets in accordance
with the terms of these Articles of Incorporation; or distributions of in-kind
property as long as the Directors (i) advise each Stockholder of the risks
associated with direct ownership of the property; (ii) offer each Stockholder
the election of receiving in-kind property distributions; and (iii) distribute
in-kind property only to those Stockholders who accept the Directors' offer.
(v) Rights Upon Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up, or any distribution of the assets of
the Company, the aggregate assets available for distribution to holders of the
Common Shares (including holders of Excess Shares resulting from the exchange
of Common Shares pursuant to Section 5.6(iii) hereof) shall be determined in
accordance with applicable law. Except as provided below as a consequence of
the limitations on distributions to holders of Excess Shares, each holder of
Common Shares shall be entitled to receive, ratably with (i) each other holder
of Common Shares and (ii) each holder of Excess Shares resulting from the
exchange of Common Shares, that portion of such aggregate assets available for
distribution as the number of the outstanding Common Shares held by such
holder bears to the total number of outstanding Common Shares and Excess
Shares resulting from the exchange of Common Shares then outstanding. Anything
herein to the contrary notwithstanding, in no event shall the amount payable
to a holder of Excess Shares exceed (i) the price per share such holder paid
for the Common Shares in the purported Transfer or Acquisition (as those terms
are defined in Section 5.6(i) or change in capital structure or other
transaction or event that resulted in the Excess Shares or (ii) if the holder
did not give full value for such Excess Shares (as
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through a gift, a devise or other event or transaction), a price per share
equal to the Market Price (as that term is defined in Section 5.6(i) for the
Common Shares on the date of the purported Transfer, Acquisition, change in
capital structure or other transaction or event that resulted in such Excess
Shares. Any amount available for distribution in excess of the foregoing
limitations shall be paid ratably to the holders of Common Shares and other
holders of Excess Shares resulting from the exchange of Common Shares to the
extent permitted by the foregoing limitations.
(vi) Voting Rights. Except as may be provided in these Articles of
Incorporation, and subject to the express terms of any series of Preferred
Shares, the holders of the Common Shares shall have the exclusive right to
vote on all matters (as to which a holder of common stock shall be entitled to
vote pursuant to applicable law) at all meetings of the Stockholders of the
Company, and shall be entitled to one (1) vote for each Common Share entitled
to vote at such meeting.
5.3 Preferred Shares.
The Directors are hereby expressly granted the authority to authorize from
time to time the issuance of one or more series of Preferred Shares. Prior to
the issuance of each such series, the Board of Directors, by resolution, shall
fix the number of shares to be included in each series, and the terms, rights,
restrictions and qualifications of the shares of each series, however, the
voting rights for each share of the Preferred Shares shall not exceed voting
rights which bear the same relationship to the voting rights of the Common
Shares as the consideration paid to the Company for each of Preferred Shares
bears to the book value of the Common Shares or the date that such Preferred
Shares are issued. The authority of the Board of Directors with respect to
each series shall include, but not be limited to, determination of the
following:
(i) The designation of the series, which may be by distinguishing number,
letter or title.
(ii) The dividend rate on the shares of the series, if any, whether any
dividends shall be cumulative and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares of
the series.
(iii) The redemption rights, including conditions and the price or
prices, if any, for shares of the series.
(iv) The terms and amounts of any sinking fund for the purchase or
redemption of shares of the series.
(v) The rights of the shares of the series in the event of any voluntary
or involuntary liquidation, dissolution or winding up of the affairs of the
Company, and the relative rights of priority, if any, of payment of shares
of the series.
(vi) Whether the shares of the series shall be convertible into shares of
any other class or series, or any other security, of the Company or any
other corporation or other entity, and, if so, the specification of such
other class or series of such other security, the conversion price or
prices or rate or rates, any adjustments thereof, the date or dates on
which such shares shall be convertible and all other terms and conditions
upon which such conversion may be made.
(vii) Restrictions on the issuance of shares of the same series or of any
other class or series.
(viii) The voting rights of the holders of shares of the series subject
to the limitations contained in this Section 5.3.
(ix) Any other relative rights, preferences and limitations on that
series.
Subject to the express provisions of any other series of Preferred Shares
then outstanding, and notwithstanding any other provision of these Articles of
Incorporation, the Board of Directors may increase or decrease (but not below
the number of shares of such series then outstanding) the number of shares, or
alter the designation or classify or reclassify any unissued shares of a
particular series of Preferred Shares, by fixing or altering, in one or more
respects, from time to time before issuing the shares, the terms, rights,
restrictions and qualifications of the shares of any such series of Preferred
Shares.
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5.4 General Nature of Shares.
All Shares shall be personal property entitling the Stockholders only to
those rights provided in these Articles of Incorporation, the MGCL or in the
resolution creating any class or series of Shares. The legal ownership of the
Company Property and the right to conduct the business of the Company are
vested exclusively in the Directors; the Stockholders shall have no interest
therein other than the beneficial interest in the Company conferred by their
Shares and shall have no right to compel any partition, division, dividend or
Distribution of the Company or any of the Company Property. The death of a
Stockholder shall not terminate the Company or give his legal representative
any rights against other Stockholders, the Directors or the Company Property,
except the right, exercised in accordance with applicable provisions of the
Bylaws, to require the Company to reflect on its books the change in ownership
of the Shares. Holders of Shares shall not have any preemptive or other right
to purchase or subscribe for any class of securities of the Company which the
Company may at any time issue or sell.
5.5 No Issuance Of Share Certificates.
The Company shall not issue share certificates. A Stockholder's investment
shall be recorded on the books of the Company. To transfer his or her Shares a
Stockholder shall submit an executed form to the Company, which form shall be
provided by the Company upon request. Such transfer will also be recorded on
the books of the Company. Upon issuance or transfer of shares, the Company
will provide the Stockholder with information concerning his or her rights
with regard to such stock, in a form substantially similar to Section
5.6(xii), and required by the Bylaws and the MGCL or other applicable law.
5.6 Restrictions On Ownership and Transfer.
(i) Definitions. For purposes of Sections 5.6 and 5.7, the following terms
shall have the following meanings:
"Acquire" means the acquisition of Beneficial or Constructive Ownership of
Equity Shares by any means, including, without limitation, the exercise of any
rights under any option, warrant, convertible security, pledge or other
security interest or similar right to acquire shares, but shall not include
the acquisition of any such rights unless, as a result, the acquiror would be
considered a Beneficial Owner or Constructive Owner. The terms "Acquires" and
"Acquisition" shall have correlative meanings.
"Beneficial Ownership" means ownership of Shares by an individual who would
be treated as an owner of such Shares under Section 542(a)(2) of the Code,
either directly or constructively through the application of Section 544 of
the Code, as modified by Section 856(h)(1)(B) of the Code. For purposes of
this definition, the term "individual" shall include any organization, trust,
or other entity that is treated as an individual for purposes of Section
542(a)(2) of the Code. The terms "Beneficial Owner," "Beneficially Owns" and
"Beneficially Owned" shall have correlative meanings.
"Beneficiary" means a beneficiary of the Excess Shares Trust as determined
pursuant to Section 5.7(i) hereof.
"Closing Price" on any day shall mean the last sale price, regular way on
such day, or, if no such sale takes place on that day, the average of the
closing bid and asked prices, regular way, in either case as reported on the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange, or if the
affected class or series of Equity Shares are not so listed or admitted to
trading, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange (including the National Market System of the National Association of
Securities Dealers, Inc. Automated Quotation System) on which the affected
class or series of Equity Shares are listed or admitted to trading, or, if the
affected class or series of Equity Shares are not so listed or admitted to
trading, the last quoted price or, if not 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
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or, if such system is no longer in use, the principal automated quotation
system then in use, or, if the affected class or series of Equity Shares are
not so quoted by any such system, the average of the closing bid and asked
prices as furnished by a professional market maker selected by the Board of
Directors making a market in the affected class or series of Equity Shares,
or, if there is no such market maker or such closing prices otherwise are not
available, the fair market value of the affected class or series of Equity
Shares as of such day, as determined by the Board of Directors in its
discretion.
"Common Share Ownership Limit" means, with respect to the Common Shares,
nine point eight percent (9.8%) of the outstanding Common Shares, subject to
adjustment pursuant to Section 5.6(x) (but not more than nine point nine
percent (9.9%) of the outstanding Common Shares, as so adjusted) and to the
limitations contained in Section 5.6(xi).
"Constructive Ownership" means ownership of Equity Shares by a Person who
would be treated as an owner of such Equity Shares, either actually or
constructively, directly or indirectly, through the application of Section 318
of the Code, as modified by Section 856(d)(5) thereof. The terms "Constructive
Owner," "Constructively Owns" and "Constructively Owned" shall have
correlative meanings.
"Excess Shares Trust" means the trust created pursuant to Section 5.7(i)
hereof.
"Excess Shares Trustee" means the Company as trustee for the Excess Shares
Trust, and any successor trustee appointed by the Company.
"Market Price" means, until the Equity Shares are listed for trading on an
exchange or market, a price determined on the basis of the quarterly valuation
of the Company's assets. Upon listing of the Shares, market price shall mean
the average of the Closing Prices for the ten (10) consecutive Trading Days
immediately preceding such day (or those days during such ten (10) Trading Day
period for which Closing Prices are available).
"Ownership Limit" means the Common Share Ownership Limit or the Preferred
Share Ownership Limit, or both, as the context may require.
"Preferred Share Ownership Limit" means, with respect to the Preferred
Shares, nine point eight percent (9.8%) of the outstanding shares of a
particular series of Preferred Shares of the Company, subject to adjustment
pursuant to Section 5.6(x) (but not more than nine point nine percent (9.9%)
of the outstanding Preferred Shares, as so adjusted) and to the limitations
contained in this Section 5.6.
"Purported Beneficial Holder" means, with respect to any event or
transaction other than a purported Transfer or Acquisition which results in
Excess Shares, the Person for whom the applicable Purported Record Holder held
the Equity Shares that were, pursuant to Section 5.6(iii), automatically
exchanged for Excess Shares upon the occurrence of such event or transaction.
The Purported Beneficial Holder and the Purported Record Holder may be the
same Person.
"Purported Beneficial Transferee" means, with respect to any purported
Transfer or Acquisition which results in Excess Shares, the purported
beneficial transferee for whom the Purported Record Transferee would have
acquired Equity Shares if such Transfer or Acquisition which results in Excess
Shares had been valid under Section 5.6(ii). The Purported Beneficial
Transferee and the Purported Record Transferee may be the same Person.
"Purported Record Holder" means, with respect to any event or transaction
other than a purported Transfer or Acquisition which results in Excess Shares,
the record holder of the Equity Shares that were, pursuant to Section
5.6(iii), automatically exchanged for Excess Shares upon the occurrence of
such an event or transaction. The Purported Record Holder and the Purported
Beneficial Holder may be the same Person.
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"Purported Record Transferee" means, with respect to any purported Transfer
or Acquisition which results in Excess Shares, the record holder of the Equity
Shares if such Transfer or Acquisition which results in Excess Shares had been
valid under Section 5.6(ii). The Purported Record Transferee and the Purported
Beneficial Transferee may be the same Person.
"Restriction Termination Date" means the first day on which the Board of
Directors of the Company determines, pursuant to Section 3.2(xxiii) hereof,
that it is no longer in the best interests of the Company to attempt or
continue to qualify as REIT.
"Trading Day" means a day on which the principal national securities
exchange on which the affected class or series of Equity Shares are listed or
admitted to trading is open for the transaction of business or, if the
affected class or series of Equity Shares are not listed or admitted to
trading, shall mean any day other than a Saturday, Sunday or other day on
which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Transfer" means any sale, transfer, gift, hypothecation, assignment, devise
or other disposition of a direct or indirect interest in Equity Shares or the
right to vote or receive dividends on Equity Shares (including (i) the
granting of any option (including any option to acquire an option or any
series of such options) or entering into any agreement for the sale, transfer
or other disposition of Equity Shares or the right to vote or receive
dividends on Equity Shares or (ii) the sale, transfer, assignment or other
disposition of any securities or rights convertible into or exchangeable for
Equity Shares, whether voluntary or involuntary, of record, constructively or
beneficially, and whether by operation of law or otherwise. The terms
"Transfers," "Transferred" and "Transferable" shall have correlative meanings.
(ii) Ownership and Transfer Limitations.
(a) Notwithstanding any other provision of these Articles of Incorporation,
except as provided in Section 5.6(ix) and Section 5.8, prior to the
Restriction Termination Date, no Person shall Beneficially or Constructively
Own Equity Shares in excess of the Common or Preferred Share Ownership Limit.
(b) Notwithstanding any other provision of these Articles of Incorporation,
except as provided in Section 5.6(ix) and Section 5.8, prior to the
Restriction Termination Date, any Transfer, Acquisition, change in the capital
structure of the Company, other purported change in Beneficial or Constructive
Ownership of Equity Shares or other event or transaction that, if effective,
would result in any Person Beneficially or Constructively Owning Equity Shares
in excess of the Common or Preferred Share Ownership Limit shall be void ab
initio as to the Transfer, Acquisition, change in the capital structure of the
Company, other purported change in Beneficial or Constructive Ownership or
other event or transaction with respect to that number of Equity Shares which
would otherwise be Beneficially or Constructively Owned by such Person in
excess of the Common or Preferred Share Ownership Limit, and none of the
Purported Beneficial Transferee, the Purported Record Transferee, the
Purported Beneficial Holder or the Purported Record Holder shall acquire any
rights in that number of Equity Shares.
(c) Notwithstanding any other provision of these Articles of Incorporation,
and except as provided in Section 5.8, prior to the Restriction Termination
Date, any Transfer, Acquisition, change in the capital structure of the
Company, or other purported change in Beneficial or Constructive Ownership
(including actual ownership) of Equity Shares or other event or transaction
that, if effective, would result in the Equity Shares being actually owned by
fewer than 100 Persons (determined without reference to any rules of
attribution) shall be void ab initio as to the Transfer, Acquisition, change
in the capital structure of the Company, other purported change in Beneficial
or Constructive Ownership (including actual ownership) with respect to that
number of Equity Shares which otherwise would be owned by the transferee, and
the intended transferee or subsequent owner (including a Beneficial Owner or
Constructive Owner) shall acquire no rights in that number of Equity Shares.
(d) Notwithstanding any other provision of these Articles of Incorporation,
except as provided in Section 5.8, prior to the Restriction Termination Date,
any Transfer, Acquisition, change in the capital structure of the
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Company, other purported change in Beneficial or Constructive Ownership of
Equity Shares or other event or transaction that, if effective, would cause
the Company to fail to qualify as a REIT by reason of being "closely held"
within the meaning of Section 856(h) of the Code or otherwise, directly or
indirectly, would cause the Company to fail to qualify as a REIT shall be void
ab initio as to the Transfer, Acquisition, change in the capital structure of
the Company, other purported change in Beneficial or Constructive Ownership or
other event or transaction with respect to that number of Equity Shares which
would cause the Company to be "closely held" within the meaning of Section
856(h) of the Code or otherwise, directly or indirectly, would cause the
Company to fail to qualify as a REIT, and none of the Purported Beneficial
Transferee, the Purported Record Transferee, the Purported Beneficial Holder
or the Purported Record Holder shall acquire any rights in that number of
Equity Shares.
(e) Notwithstanding any other provision of these Articles of Incorporation,
except as provided in Section 5.8, prior to the Restriction Termination Date,
any Transfer, Acquisition, change in capital structure of the Company, or
other purported change in Beneficial or Constructive Ownership of Equity
Shares or other event or transaction that, if effective, would (i) cause the
Company to own (directly or Constructively) an interest in a tenant that is
described in Section 856(d)(2)(B) of the Code and (ii) cause the Company to
fail to satisfy any of the gross income requirements of Section 856(c) of the
Code, shall be void ab initio as to the Transfer, Acquisition, change in
capital structure of the Company, other purported change in Beneficial or
Constructive Ownership or other event or transaction with respect to that
number of Equity Shares which would cause the Company to own an interest
(directly or Constructively) in a tenant that is described in Section
856(d)(2)(B) of the Code, and none of the Purported Beneficial Transferee, the
Purported Record Transferee, the Purported Beneficial Holder or the Purported
Record Holder shall acquire any rights in that number of Equity Shares.
(iii) Exchange for Excess Shares.
(a) If, notwithstanding the other provisions contained in this Article V, at
any time prior to the Restriction Termination Date, there is a purported
Transfer, Acquisition, change in the capital structure of the Company, other
purported change in the Beneficial or Constructive Ownership of Equity Shares
or other event or transaction such that any Person would either Beneficially
or Constructively Own Equity Shares in excess of the Common or Preferred Share
Ownership Limit, then, except as otherwise provided in Section 5.6(ix), such
Equity Shares (rounded up to the next whole number of shares) in excess of the
Common or Preferred Share Ownership Limit automatically shall be exchanged for
an equal number of Excess Shares having terms, rights, restrictions and
qualifications identical thereto, except to the extent that this Article V
requires different terms. Such exchange shall be effective as of the close of
business on the business day next preceding the date of the purported
Transfer, Acquisition, change in capital structure, other change in purported
Beneficial or Constructive Ownership of Equity Shares, or other event or
transaction.
(b) If, notwithstanding the other provisions contained in this Article V, at
any time prior to the Restriction Termination Date, there is a purported
Transfer, Acquisition, change in the capital structure of the Company, other
purported change in the Beneficial or Constructive Ownership of Equity Shares
or other event or transaction which, if effective, would result in a violation
of any of the restrictions described in subparagraphs (b), (c), (d) and (e) of
Section 5.6(ii) or, directly or indirectly, would cause the Company for any
reason to fail to qualify as a REIT by reason of being "closely held" within
the meaning of Section 856(h) of the Code, or otherwise, directly or
indirectly, would cause the Company to fail to qualify as a REIT, then the
Equity Shares (rounded up to the next whole number of shares) being
Transferred or which are otherwise affected by the change in capital structure
or other purported change in Beneficial or Constructive Ownership and which,
in any case, would cause the Company to be "closely held" within the meaning
of such Section 856(h) or otherwise would cause the Company to fail to qualify
as a REIT automatically shall be exchanged for an equal number of Excess
Shares having terms, rights, restrictions and qualifications identical
thereto, except to the extent that this Article V requires different terms.
Such exchange shall be effective as of the close of business on the business
day prior to the date of the purported Transfer, Acquisition, change in
capital structure, other purported change in Beneficial or Constructive
Ownership or other event or transaction.
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(iv) Remedies For Breach. If the Board of Directors or its designee shall at
any time determine in good faith that a Transfer, Acquisition, change in the
capital structure of the Company or other purported change in Beneficial or
Constructive Ownership or other event or transaction has taken place in
violation of Section 5.6(ii) or that a Person intends to Acquire or has
attempted to Acquire Beneficial or Constructive Ownership of any Equity Shares
in violation of this Section 5.6, the Board of Directors or its designee shall
take such action as it deems advisable to refuse to give effect to or to
prevent such Transfer, Acquisition, change in the capital structure of the
Company, other attempt to Acquire Beneficial or Constructive Ownership of any
Equity Shares or other event or transaction, including, but not limited to,
refusing to give effect thereto on the books of the Company or instituting
injunctive proceedings with respect thereto; provided, however, that any
Transfer, Acquisition, change in the capital structure of the Company,
attempted Transfer or other attempt to Acquire Beneficial or Constructive
Ownership of any Equity Shares or other event or transaction in violation of
subparagraphs (b), (c), (d) and (e) of Section 5.6(ii) (as applicable) shall
be void ab initio and where applicable automatically shall result in the
exchange described in Section 5.6(iii), irrespective of any action (or
inaction) by the Board of Directors or its designee.
(v) Notice of Restricted Transfer. Any Person who acquires or attempts to
Acquire Beneficial or Constructive Ownership of Equity Shares in violation of
Section 5.6(ii) and any Person who Beneficially or Constructively Owns Excess
Shares as a transferee of Equity Shares resulting in an exchange for Excess
Shares, pursuant to Section 5.6(iii), or otherwise shall immediately give
written notice to the Company, or, in the event of a proposed or attempted
Transfer, Acquisition, or purported change in Beneficial or Constructive
Ownership, shall give at least fifteen (15) days prior written notice to the
Company, of such event and shall promptly provide to the Company such other
information as the Company, in its sole discretion, may request in order to
determine the effect, if any, of such Transfer, attempted Transfer,
Acquisition, Attempted Acquisition or purported change in Beneficial or
Constructive Ownership on the Company's status as a REIT.
(vi) Owners Required To Provide Information. Prior to the Restriction
Termination Date:
(a) Every Beneficial or Constructive Owner of more than five percent
(5%), or such lower percentages as determined pursuant to regulations under
the Code or as may be requested by the Board of Directors, in its sole
discretion, of the outstanding shares of any class or series of Equity
Shares of the Company shall annually, no later than January 31 of each
calendar year, give written notice to the Company stating (i) the name and
address of such Beneficial or Constructive Owner; (ii) the number of shares
of each class or series of Equity Shares Beneficially or Constructively
Owned; and (iii) a description of how such shares are held. Each such
Beneficial or Constructive Owner promptly shall provide to the Company such
additional information as the Company, in its sole discretion, may request
in order to determine the effect, if any, of such Beneficial or
Constructive Ownership on the Company's status as a REIT and to ensure
compliance with the Common or Preferred Share Ownership Limit and other
restrictions set forth herein.
(b) Each Person who is a Beneficial or Constructive Owner of Equity
Shares and each Person (including the Stockholder of record) who is holding
Equity Shares for a Beneficial or Constructive Owner promptly shall provide
to the Company such information as the Company, in its sole discretion, may
request in order to determine the Company's status as a REIT, to comply
with the requirements of any taxing authority or other governmental agency,
to determine any such compliance or to ensure compliance with the Common or
Preferred Share Ownership Limit and other restrictions set forth herein.
(vii) Remedies Not Limited. Nothing contained in this Article V except
Section 5.8 shall limit scope or application of the provisions of this Section
5.6, the ability of the Company to implement or enforce compliance with the
terms thereof or the authority of the Board of Directors to take any such
other action or actions as it may deem necessary or advisable to protect the
Company and the interests of its Stockholders by preservation of the Company's
status as a REIT and to ensure compliance with the Ownership Limits for each
class or series of Equity Shares and other restrictions set forth herein,
including, without limitation, refusal to give effect to a transaction on the
books of the Company.
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(viii) Ambiguity. In the case of an ambiguity in the application of any of
the provisions of this Section 5.6, including any definition contained in
Sections 1.5 and 5.6(i), the Board of Directors shall have the power and
authority, in its sole discretion, to determine the application of the
provisions of this Section 5.6 with respect to any situation based on the
facts known to it.
(ix) Exception. The Board of Directors, upon receipt of a ruling from the
Internal Revenue Service, an opinion of counsel or other evidence satisfactory
to the Board of Directors, in its sole discretion, in each case to the effect
that the restrictions contained in subparagraphs (c), (d) and (e) of Section
5.6(ii) will not be violated, may waive or change, in whole or in part, the
application of the Common or Preferred Share Ownership Limit with respect to
any Person that is not an individual, as such term is defined in Section
542(a)(2) of the Code. In connection with any such waiver or change, the Board
of Directors may require such representations and undertakings from such
Person or Affiliates and may impose such other conditions as the Board deems
necessary, advisable or prudent, in its sole discretion, to determine the
effect, if any, of the proposed transaction or ownership of Equity Shares on
the Company's status as a REIT.
(x) Increase in Common or Preferred Share Ownership Limit. Subject to the
limitations contained in Section 5.6(xi), the Board of Directors may from time
to time increase the Common or Preferred Share Ownership Limit.
(xi) Limitations on Modifications.
(a) The Ownership Limit for a class or series of Equity Shares may not be
increased and no additional ownership limitations may be created if, after
giving effect to such increase or creation, the Company would be "closely
held" within the meaning of Section 856(h) of the Code (assuming ownership of
shares of Equity Shares by all Persons equal to the greatest of (A) the actual
ownership, (B) the Beneficial Ownership of Equity Shares by each Person, or
(C) the applicable Ownership Limit with respect to such Person.
(b) Prior to any modification of the Ownership Limit with respect to any
Person, the Board of Directors may require such opinions of counsel,
affidavits, undertakings or agreements as it may deem necessary, advisable or
prudent, in its sole discretion, in order to determine or ensure the Company's
status as a REIT.
(c) Neither the Preferred Share Ownership Limit nor the Common Share
Ownership Limit may be increased to a percentage that is greater than nine
point nine percent (9.9%).
(xii) Notice to Stockholders Upon Issuance or Transfer. Upon issuance or
transfer of Shares, the Company shall provide the recipient with a notice
containing information about the shares purchased or otherwise transferred, in
lieu of issuance of a share certificate, in a form substantially similar to
the following:
"The securities issued or transferred are subject to restrictions on
transfer and ownership for the purpose of maintenance of the Company's status
as a real estate investment trust (a "REIT") under Sections 856 through 860 of
the Internal Revenue Code of 1986, as amended (the "Code"). Except as
otherwise provided pursuant to the Articles of Incorporation of the Company,
no Person may (i) Beneficially or Constructively Own Common Shares of the
Company in excess of 9.8% (or such greater percent as may be determined by the
Board of Directors of the Company) of the outstanding Common Shares; (ii)
Beneficially or Constructively Own shares of any series of Preferred Shares of
the Company in excess of 9.8% of the outstanding shares of such series of
Preferred Shares; or (iii) Beneficially or Constructively Own Common Shares or
Preferred Shares (of any class or series) which would result in the Company
being "closely held" under Section 856(h) of the Code or which otherwise would
cause the Company to fail to qualify as a REIT. Any Person who has Beneficial
or Constructive Ownership, or who Acquires or attempts to Acquire Beneficial
or Constructive Ownership of Common Shares and/or Preferred Shares in excess
of the above limitations and any Person who Beneficially or Constructively
Owns Excess Shares as a transferee of Common or Preferred Shares resulting in
an exchange for Excess Shares (as described below) immediately must notify the
Company in writing or, in the event of a proposed or attempted Transfer or
Acquisition or purported change in Beneficial or Constructive Ownership, must
give written notice
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to the Company at least 15 days prior to the proposed or attempted transfer,
transaction or other event. Any Transfer or Acquisition of Common Shares
and/or Preferred Shares or other event which results in violation of the
ownership or transfer limitations set forth in the Company's Articles of
Incorporation shall be void ab initio and the Purported Beneficial and Record
Transferee shall not have or acquire any rights in such Common Shares and/or
Preferred Shares. If the transfer and ownership limitations referred to herein
are violated, the Common Shares or Preferred Shares represented hereby
automatically will be exchanged for Excess Shares to the extent of violation
of such limitations, and such Excess Shares will be held in trust by the
Company, all as provided by the Articles of Incorporation of the Company. All
defined terms used in this legend have the meanings identified in the
Company's Articles of Incorporation, as the same may be amended from time to
time, a copy of which, including the restrictions on transfer, will be sent
without charge to each Stockholder who so requests."
5.7 Excess Shares.
(i) Ownership In Trust. Upon any purported Transfer, Acquisition, change in
the capital structure of the Company, other purported change in Beneficial or
Constructive Ownership or event or transaction that results in Excess Shares
pursuant to Section 5.6(iii), such Excess Shares shall be deemed to have been
transferred to the Company, as Excess Shares Trustee of an Excess Shares Trust
for the benefit of such Beneficiary or Beneficiaries to whom an interest in
such Excess Shares may later be transferred pursuant to Section 5.6(v). Excess
Shares so held in trust shall be issued and outstanding stock of the Company.
The Purported Record Transferee (or Purported Record Holder) shall have no
rights in such Excess Shares except the right to designate a transferee of
such Excess Shares upon the terms specified in Section 5.6(v). The Purported
Beneficial Transferee shall have no rights in such Excess Shares except as
provided in Section 5.7(iii) and (v).
(ii) Distribution Rights. Excess Shares shall not be entitled to any
dividends or Distributions (except as provided in Section 5.7(iii)). Any
dividend or Distribution paid prior to the discovery by the Company that the
Equity Shares have been exchanged for Excess Shares shall be repaid to the
Company upon demand, and any dividend or Distribution declared but unpaid at
the time of such discovery shall be void ab initio with respect to such Excess
Shares.
(iii) Rights Upon Liquidation.
(a) Except as provided below, in the event of any voluntary or involuntary
liquidation, dissolution or winding up, or any other distribution of the
assets, of the Company, each holder of Excess Shares resulting from the
exchange of Preferred Shares of any specified series shall be entitled to
receive, ratably with each other holder of Excess Shares resulting from the
exchange of Preferred Shares of such series and each holder of Preferred
Shares of such series, such accrued and unpaid dividends, liquidation
preferences and other preferential payments, if any, as are due to holders of
Preferred Shares of such series. In the event that holders of shares of any
series of Preferred Shares are entitled to participate in the Company's
distribution of its residual assets, each holder of Excess Shares resulting
from the exchange of Preferred Shares of any such series shall be entitled to
participate, ratably with (A) each other holder of Excess Shares resulting
from the exchange of Preferred Shares of all series entitled to so
participate; (B) each holder of Preferred Shares of all series entitled to so
participate; and (C) each holder of Common Shares and Excess Shares resulting
from the exchange of Common Shares (to the extent permitted by Section
5.6(iii) hereof), that portion of the aggregate assets available for
distribution (determined in accordance with applicable law) as the number of
shares of such Excess Shares held by such holder bears to the total number of
(1) outstanding Excess Shares resulting from the exchange of Preferred Shares
of all series entitled to so participate; (2) outstanding Preferred Shares of
all series entitled to so participate; and (3) outstanding Common Shares and
Excess Shares resulting from the exchange of Common Shares. The Company, as
holder of the Excess Shares in trust, or, if the Company shall have been
dissolved, any trustee appointed by the Company prior to its dissolution,
shall distribute ratably to the Beneficiaries of the Excess Shares Trust, when
determined, any such assets received in respect of the Excess Shares in any
liquidation, dissolution or winding up, or any distribution of the assets, of
the Company. Anything to the contrary herein notwithstanding, in no event
shall the amount payable to a holder with respect to Excess Shares resulting
from the exchange of Preferred Shares exceed (A) the price per share such
holder paid for the Preferred Shares in the
A-19
purported Transfer, Acquisition, change in capital structure or other
transaction or event that resulted in the Excess Shares or (B) if the holder
did not give full value for such Excess Shares (as through a gift, devise or
other event or transaction), a price per share equal to the Market Price for
the shares of Preferred Shares on the date of the purported Transfer,
Acquisition, change in capital structure or other transaction or event that
resulted in such Excess Shares. Any amount available for distribution in
excess of the foregoing limitations shall be paid ratably to the holders of
Preferred Shares and Excess Shares resulting from the exchange of Preferred
Shares to the extent permitted by the foregoing limitations.
(b) Except as provided below, in the event of any voluntary or involuntary
liquidation, dissolution or winding up, or any other distribution of the
assets, of the Company, each holder of Excess Shares resulting from the
exchange of Common Shares shall be entitled to receive, ratably with (A) each
other holder of such Excess Shares and (B) each holder of Common Shares, that
portion of the aggregate assets available for distribution to holders of
Common Shares (including holders of Excess Shares resulting from the exchange
of Common Shares pursuant to Section 5.6(iii)), determined in accordance with
applicable law, as the number of such Excess Shares held by such holder bears
to the total number of outstanding Common Shares and outstanding Excess Shares
resulting from the exchange of Common Shares then outstanding. The Company, as
holder of the Excess Shares in trust, or, if the Company shall have been
dissolved, any trustee appointed by the Company prior to its dissolution,
shall distribute ratably to the Beneficiaries of the Excess Shares, when
determined, any such assets received in respect of the Excess Shares in any
liquidation, dissolution or winding up, or any distribution of the assets, of
the Company. Anything herein to the contrary notwithstanding, in no event
shall the amount payable to a holder with respect to Excess Shares exceed (A)
the price per share such holder paid for the Equity Shares in the purported
Transfer, Acquisition, change in capital structure or other transaction or
event that resulted in the Excess Shares or (B) if the holder did not give
full value for such Equity Shares (as through a gift, devise or other event or
transaction), a price per share equal to the Market Price for the Equity
Shares on the date of the purported Transfer, Acquisition, change in capital
structure or other transaction or event that resulted in such Excess Shares.
Any amount available for distribution in excess of the foregoing limitations
shall be paid ratably to the holders of Common Shares and Excess Shares
resulting from the exchange of Common Shares to the extent permitted by the
foregoing limitations.
(iv) Voting Rights. The holders of Excess Shares shall not be entitled to
vote on any matters (except as required by the MGCL).
(v) Restrictions on Transfer; Designation of Beneficiary.
(a) Excess Shares shall not be transferable. The Purported Record Transferee
(or Purported Record Holder) may freely designate a Beneficiary of its
interest in the Excess Shares Trust (representing the number of Excess Shares
held by the Excess Shares Trust attributable to the purported Transfer or
Acquisition that resulted in the Excess Shares), if (A) the Excess Shares held
in the Excess Shares Trust would not be Excess Shares in the hands of such
Beneficiary and (B) the Purported Beneficial Transferee (or Purported
Beneficial Holder) does not receive a price for designating such Beneficiary
that reflects a price per share for such Excess Shares that exceeds (1) the
price per share such Purported Beneficial Transferee (or Purported Beneficial
Holder) paid for the Equity Shares in the purported Transfer, Acquisition,
change in capital structure, or other transaction or event that resulted in
the Excess Shares or (2) if the Purported Beneficial Transferee (or Purported
Beneficial Holder) did not give value for such Excess Shares (as through a
gift, devise or other event or transaction), a price per share equal to the
Market Price for the Equity Shares on the date of the purported Transfer,
Acquisition, change in capital structure, or other transaction or event that
resulted in the Excess Shares. Upon such transfer of an interest in the Excess
Shares Trust, the corresponding Excess Shares in the Excess Shares Trust
automatically shall be exchanged for an equal number of Equity Shares
(depending on the type and class of Shares that were originally exchanged for
such Excess Shares), and such Equity Shares shall be transferred of record to
the Beneficiary of the interest in the Excess Shares Trust designated by the
Purported Record Transferee (or Purported Record Holder), as described above,
if such Equity Shares would not be Excess Shares in the hands of such
Beneficiary. Prior to any transfer of any interest in the Excess Shares Trust,
the Purported Record Transferee (or Purported
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Record Holder) must give advance written notice to the Company of the intended
transfer and the Company must have waived in writing its purchase rights under
Section 5.7(vi).
(b) Notwithstanding the foregoing, if a Purported Beneficial Transferee (or
Purported Beneficial Holder) receives a price for designating a Beneficiary of
an interest in the Excess Shares Trust that exceeds the amounts allowable
under subparagraph (i) of this Section 5.6(v), such Purported Beneficial
Transferee (or Purported Beneficial Holder) shall pay, or cause the
Beneficiary of the interest in the Excess Shares Trust to pay, such excess in
full to the Company.
(c) If any of the transfer restrictions set forth in this Section 5.6(v), or
any application thereof, are determined to be void, invalid or unenforceable
by any court having jurisdiction over the issue, the Purported Record
Transferee (or Purported Record Holder) may be deemed, at the option of the
Company, to have acted as the agent of the Company in acquiring the Excess
Shares as to which such restrictions would otherwise, by their terms, apply
and to hold such Excess Shares on behalf of the Company.
(vi) Purchase Right in Excess Shares. Excess Shares 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 Excess Shares (or, in the case of devise or gift or event other than a
Transfer or Acquisition which results in the issuance of Excess Shares, the
Market Price at the time of such devise or gift or event other than a Transfer
or Acquisition which results in the issuance of Excess Shares) and (ii) the
Market Price of the Equity Shares exchanged for such Excess Shares on the date
the Company, or its designee, accepts such offer. The Company and its
assignees shall have the right to accept such offer for a period of ninety
(90) days after the later of (i) the date of the purported Transfer,
Acquisition, change in capital structure of the Company, purported change in
Beneficial Ownership or other event or transaction which resulted in such
Excess Shares and (ii) the date on which the Board of Directors determines in
good faith that a Transfer, Acquisition, change in capital structure of the
Company, purported change in Beneficial or Constructive Ownership resulting in
Excess Shares has occurred, if the Company does not receive a notice pursuant
to Section 5.6(v), but in no event later than a permitted Transfer pursuant to
and in compliance with the terms of Section 5.7(v).
(vii) Remedies Not Limited. Nothing contained in this Article V except
Section 5.8 shall limit scope or application of the provisions of this Section
5.7, the ability of the Company to implement or enforce compliance with the
terms hereof or the authority of the Board of Directors to take any such other
action or actions as it may deem necessary or advisable to protect the Company
and the interests of its Stockholders by preservation of the Company's status
as a REIT and to ensure compliance with applicable Share Ownership Limits and
the other restrictions set forth herein, including, without limitation,
refusal to give effect to a transaction on the books of the Company.
(viii) Authorization. At such time as the Board of Directors authorizes a
series of Preferred Shares pursuant to Section 5.3 of this Article V, without
any further or separate action of the Board of Directors, there shall be
deemed to be authorized a series of Excess Shares consisting of the number of
shares included in the series of Preferred Shares so authorized and having
terms, rights, restrictions and qualifications identical thereto, except to
the extent that such Excess Shares are already authorized or this Article V
requires different terms.
5.8 Settlements.
Nothing in Sections 5.6 and 5.7 or in any other provision of these Articles
of Incorporation shall preclude the settlement of any transaction with respect
to the Common Shares entered into through the facilities of the New York Stock
Exchange or other national securities exchange on which the Common Shares are
listed.
5.9 Severability.
If any provision of this Article V 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
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provisions of this Article V 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.
5.10 Waiver.
The Company shall have authority at any time to waive the requirements that
Excess Shares be issued or be deemed outstanding in accordance with the
provisions of this Article V if the Company determines, based on an opinion of
nationally recognized tax counsel, that the issuance of such Excess Shares or
the fact that such Excess Shares are deemed to be outstanding, would
jeopardize the status of the Company as a REIT (as that term is defined in
Section 1.5).
Article VI:
STOCKHOLDERS
6.1 Meetings of Stockholders.
There shall be an annual meeting of the Stockholders, 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 at a location convenient to
the Stockholders, on a date which is a reasonable period of time following the
distribution of the Company's annual report to Stockholders but not less than
thirty (30) days after delivery of such report. A majority of Stockholders
present in person or by proxy at an annual meeting at which a quorum is
present, may, without the necessity for concurrence by the Directors, vote to
elect the Directors. Special meetings of Stockholders may be called in the
manner provided in the Bylaws, including at any time by Stockholders holding,
in the aggregate, not less than ten percent (10%) of the outstanding Equity
Shares entitled to be cast on any issue proposed to be considered at any such
special meeting. If there are no Directors, the officers of the Company shall
promptly call a special meeting of the Stockholders entitled to vote for the
election of successor Directors. Any meeting may be adjourned and reconvened
as the Directors determine or as provided by the Bylaws.
6.2 Voting Rights of Stockholders.
Subject to the provisions of any class or series of Shares then outstanding
and the mandatory provisions of any applicable laws or regulations, the
Stockholders shall be entitled to vote only on the following matters; (a)
election or removal of Directors as provided in Sections 2.3, 2.5 and 6.1
hereof; (b) amendment of these Articles of Incorporation as provided in
Section 8.1 hereof; (c) termination of the Company as provided in Section 9.2
hereof; (d) reorganization of the Company as provided in Section 8.2 hereof;
(e) merger, consolidation or sale or other disposition of all or substantially
all of the Company Property, as provided in Section 8.3 hereof; and (f)
termination of the Company's status as a real estate investment trust under
the REIT Provisions of the Code, as provided in Section 3.2(xxiii) hereof. The
Stockholders may terminate the status of the Company as a REIT under the Code
by a vote of two-thirds of the Shares outstanding and entitled to vote. Except
with respect to the foregoing matters, no action taken by the Stockholders at
any meeting shall in any way bind the Directors.
6.3 Stockholder Action to be Taken by Meeting.
Any action required or permitted to be taken by the Stockholders of the
Company must be effected at a duly called annual or special meeting of
Stockholders of the Company and may not be effected by any consent in writing
of such Stockholders.
6.4 Right of Inspection.
Any Stockholder 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
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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.
6.5 Access to Stockholder List.
An alphabetical list of the names, addresses and telephone numbers of the
Stockholders of the Company, along with the number of Shares held by each of
them (the "Stockholder List"), shall be maintained as part of the books and
records of the Company and shall be available for inspection by any
Stockholder or the Stockholder's designated agent at the home office of the
Company upon the request of the Stockholder. The Stockholder List shall be
updated at least quarterly to reflect changes in the information contained
therein and a copy of such list shall be mailed to any Stockholder so
requesting within ten (10) days of the request. The Company may impose a
reasonable charge for expenses incurred in reproduction pursuant to the
Stockholder request. A Stockholder may request a copy of the Stockholder List
in connection with matters relating to Stockholders' voting rights, and the
exercise of Stockholder rights under federal proxy laws. The Company may
require the Stockholder requesting the Stockholder List to represent that the
list is not requested for a commercial purpose unrelated to the Stockholder's
interest in the Company. The Company may impose a reasonable charge for
expenses incurred in reproducing such Stockholder List. The Stockholder List
may not be used for commercial purposes.
If the Directors neglect or refuse to exhibit, produce or mail a copy of the
Stockholder List as requested, the Directors shall be liable to any
Stockholder requesting the list for the costs, including attorneys' fees,
incurred by that Stockholder for compelling the production of the Stockholder
List, and for actual damages suffered by any Stockholder by reason of such
refusal or neglect. It shall be a defense that the actual purpose and reason
for the requests for inspection or for a copy of the Stockholder List is to
secure such list of Stockholders 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 Stockholder relative
to the affairs of the Company. The remedies provided hereunder to Stockholders
requesting copies of the Stockholder List are in addition, to and shall not in
any way limit, other remedies available to Stockholders under federal law, or
the laws of any state.
6.6 Reports.
The Directors shall take reasonable steps to insure that the Company shall
cause to be prepared and mailed or delivered to each Stockholder as of a
record date after the end of the fiscal year and each holder of other publicly
held securities of the Company an annual report for each fiscal year in
accordance with the requirements of the Securities and Exchange Commission and
the national securities exchange or over-the-counter market on which the
Company's Securities are listed.
Article VII:
LIABILITY; TRANSACTIONS BETWEEN AFFILIATES AND THE COMPANY
7.1 Limitation of Stockholder Liability.
No Stockholder shall be liable for any debt, claim, demand, judgment or
obligation of any kind of, against or with respect to the Company by reason of
his being a Stockholder, nor shall any Stockholder be subject to any personal
liability whatsoever, in tort, contract or otherwise, to any Person in
connection with the Company Property or the affairs of the Company by reason
of his being a Stockholder. The Company shall include a clause in its
contracts which provides that Stockholders shall not be personally liable for
obligations entered into on behalf of the Company.
7.2 Exculpation.
To the maximum extent that Maryland law in effect from time to time permits
limitation of the liability of directors and officers, no director or officer
of the Company shall be liable to the Company or any of the
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Stockholders for money damages. Neither the amendment nor repeal of this
Section 7.2, nor the adoption or amendment of any provision of these Articles
of Incorporation inconsistent with this Section 7.2, 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.
7.3 Indemnification.
Each person who is or was or who agrees to become a director or officer of
the Company, or each person who, while a director of the Company, is or was
serving or who agrees to serve, at the request of the Company, as a director,
officer, partner, joint venture, employee or trustee of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
(including the heirs, executor, administrators or estate of such person),
shall be indemnified by the Company, and shall be entitled to have paid on his
behalf or be reimbursed for reasonable expenses in advance of final
disposition of a proceeding, in accordance with the Bylaws of the Company, to
the full extent permitted from time to time by the MGCL as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment) or any other applicable laws presently or hereafter in effect.
The Company shall have the power, with the approval of the Board of Directors,
to provide such indemnification and advancement of expenses to any employee or
agent of the Company, in accordance with the Bylaws of the Company. Without
limiting the generality or the effect of the foregoing, the Company may enter
into one or more agreements with any person which provide for indemnification
greater or different than that provided in this Article VII. Any amendment or
repeal of this Article VII shall not adversely affect any right or protection
existing hereunder immediately prior to such amendment or repeal.
7.4 Express Exculpatory Clauses In Instruments.
Neither the Stockholders 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 Stockholders, 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 Stockholder, 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.
7.5 Transactions with Affiliates.
The Company may engage in transactions with any Affiliates, subject to any
express restrictions in these Articles of Incorporation (including Article IV
and Section 5.7) or adopted by the Directors in the Bylaws or by resolution,
and further subject to the disclosure and ratification requirements of MGCL
(S) 2-419 and other applicable law.
Article VIII:
AMENDMENT; REORGANIZATION; MERGER, ETC.
8.1 Amendment.
(i) 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 Shares then outstanding and entitled to vote
thereon, except that (1) no amendment may be made which would change any
rights with respect to any outstanding class of securities, by reducing the
amount payable thereon upon liquidation, or by diminishing or
A-24
eliminating any voting rights pertaining thereto; and (2) Section 8.2 hereof
and this Section 8.1 shall not be amended (or any other provision of these
Articles of Incorporation be amended or any provision of these Articles of
Incorporation be added that would have the effect of amending such sections),
without the affirmative vote of the holders of two-thirds ( 2/3) of the Shares
then outstanding and entitled to vote thereon.
(ii) The Directors, by a two-thirds ( 2/3) 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 the Code. With the exception of the foregoing, the Directors may not amend
these Articles of Incorporation.
(iii) An amendment to these Articles of Incorporation shall become effective
as provided in Section 10.5.
(iv) These Articles of Incorporation may not be amended except as provided
in this Section 8.1.
8.2 Reorganization.
Subject to the provisions of any class or series of Shares at the time
outstanding, the Directors shall have the power (i) 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 (ii) 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 (i) or (ii)
above terminate the Company and deliver such Securities or beneficial
interests ratably among the Stockholders according to the respective rights of
the class or series of Shares held by them; provided, however, that any such
action shall have been approved, at a meeting of the Stockholders called for
that purpose, by the affirmative vote of the holders of not less than a
majority of the Shares then outstanding and entitled to vote thereon.
8.3 Merger, Consolidation or Sale of Company Property.
Subject to the provisions of any class or series of Shares at the time
outstanding, the Directors shall have the power to (i) merge the Company into
another entity, (ii) consolidate the Company with one (1) or more other
entities into a new entity; (iii) sell or otherwise dispose of all or
substantially all of the Company Property; or (iv) dissolve or liquidate the
Company; provided, however, that such action shall have been approved, at a
meeting of the Stockholders called for that purpose, by the affirmative vote
of the holders of not less than a majority of the Shares then outstanding and
entitled to vote thereon. Any such transaction involving an Affiliate of the
Company also must be approved by a majority of the 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, which, in general
terms, is any transaction involving the acquisition, merger, conversion, or
consolidation, directly or indirectly, of the Company and the issuance of
securities of a Roll-Up Entity that would be created or would survive after
the successful completion of the Roll-Up Transaction, an appraisal of all
Properties shall be obtained from a competent independent appraiser. The
Properties 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 Properties as of a date immediately prior to the announcement of
the proposed Roll-Up Transaction. The appraisal shall assume an orderly
liquidation of Properties over a 12-month period. The terms of the engagement
of the independent appraiser shall clearly state that the engagement is for
the benefit of the Company and the Stockholders. A summary of the appraisal,
indicating all material assumptions underlying the appraisal, shall be
included in a report to Stockholders in connection with a proposed Roll-Up
Transaction. In connection with a proposed Roll-Up Transaction which has not
been approved by vote of at least two-thirds ( 2/3) of the Stockholders, the
person sponsoring the Roll-Up Transaction shall offer to Stockholders who vote
against the proposed Roll-Up Transaction the choice of:
(i) accepting the securities of a Roll-Up Entity offered in the proposed
Roll-Up Transaction; or
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(ii) one of the following:
(a) remaining Stockholders of the Company and preserving their
interests therein on the same terms and conditions as existed
previously; or
(b) receiving cash in an amount equal to the Stockholder'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:
(iii) which would result in the Stockholders having democracy rights in a
Roll-Up Entity that are less than the rights provided for in Sections 6.1,
6.2, 6.3, 6.4, 6.5, 6.6 and 7.1 of these Articles of Incorporation;
(iv) 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 pre serve the tax status of the Roll-Up Entity), or
which would limit the ability of an investor to exercise the voting rights
of its Securities of the Roll-Up Entity on the basis of the number of
Shares held by that investor;
(v) in which investor's rights to access of records of the Roll-Up Entity
will be less than those described in Sections 6.4 and 6.5 hereof; or
(vi) in which any of the costs of the Roll-Up Transaction would be borne
by the Company if the Roll-Up Transaction is not approved by the
Stockholders.
Article IX:
DURATION OF COMPANY
9.1 Automatic Dissolution.
The Company automatically will terminate and dissolve on December 31, 2005,
will undertake orderly liquidation and Sales of Company Properties and Secured
Equipment Leases, and will distribute any Net Sales Proceeds to Stockholders,
unless Listing occurs, in which event the Company shall continue perpetually
unless dissolved pursuant to the provisions contained herein or pursuant to
any applicable provision of the MGCL.
9.2 Dissolution of the Company by Stockholder Vote.
The Company may be terminated at any time, without the necessity for
concurrence by the Board of Directors, by the vote or written consent of a
majority of the outstanding Equity Shares.
Article X:
MISCELLANEOUS
10.1 Governing Law.
These Articles of Incorporation have been approved by the Directors
executing the Articles of Amendment in which they are included and delivered
in the State of Maryland with reference to the laws thereof, and the rights of
all parties and the validity, construction and effect of every provision
hereof shall be subject to and construed according to the laws of the State of
Maryland without regard to conflicts of laws provisions thereof.
10.2 Reliance by Third Parties.
Any certificate shall be final and conclusive as to any Persons dealing with
the Company if executed by an individual who, according to the records of the
Company or of any recording office in which these Articles of
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Incorporation may be recorded, appears to be the Secretary or an Assistant
Secretary of the Company or a Director, and if certifying to: (i) the number
or identity of Directors, officers of the Company or Stockholders; (ii) the
due authorization of the execution of any document; (iii) the action or vote
taken, and the existence of a quorum, at a meeting of the Directors or
Stockholders; (iv) a copy of the Articles of Incorporation or of the Bylaws as
a true and complete copy as then in force; (v) an amendment to these Articles
of Incorporation; (vi) the dissolution of the Company; or (vii) the existence
of any fact or facts which relate to the affairs of the Company. No purchaser,
lender, transfer agent or other Person shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made on behalf of
the Company by the Directors or by any duly authorized officer, employee or
agent of the Company.
10.3 Provisions in Conflict with Law or Regulations.
(i) The provisions of these Articles of Incorporation are severable, and if
the Directors shall determine that any one or more of such provisions are in
conflict with the REIT Provisions of the Code, or other applicable federal or
state laws, the conflicting provisions shall be deemed never to have
constituted a part of these Articles of Incorporation, even without any
amendment of these Articles of Incorporation pursuant to Section 8.1 hereof;
provided, however, that such determination by the Directors shall not affect
or impair any of the remaining provisions of these Articles of Incorporation
or render invalid or improper any action taken or omitted prior to such
determination. No Director shall be liable for making or failing to make such
a determination.
(ii) If any provision of these Articles of Incorporation shall be held
invalid or unenforceable in any jurisdiction, such holding shall not in any
manner affect or render invalid or unenforceable such provision in any other
jurisdiction or any other provision of these Articles of Incorporation in any
jurisdiction.
10.4 Construction.
In these Articles of Incorporation, unless the context otherwise requires,
words used in the singular or in the plural include both the plural and
singular and words denoting any gender include both genders. The title and
headings of different parts are inserted for convenience and shall not affect
the meaning, construction or effect of these Articles of Incorporation. In
defining or interpreting the powers and duties of the Company and its
Directors and officers, reference may be made, to the extent appropriate, to
the Code and to Titles 1 through 3 of the Corporations and Associations
Article of the Annotated Code of Maryland, referred to herein as the "MGCL."
10.5 Recordation.
These Articles of Incorporation and any amendment hereto shall be filed for
record with the State Department of Assessments and Taxation of Maryland and
may also be filed or recorded in such other places as the Directors deem
appropriate, but failure to file for record these Articles of Incorporation or
any amendment hereto in any office other than in the State of Maryland shall
not affect or impair the validity or effectiveness of these Articles of
Incorporation or any amendment hereto. A restated Articles of Incorporation
shall, upon filing, be conclusive evidence of all amendments contained therein
and may thereafter be referred to in lieu of the original Articles of
Incorporation and the various amendments thereto.
* * * * * * * * * *
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Exhibit B
APF's Restated Articles (marked to show changes from Existing Articles)
- --------------------------------------------------------------------------------
SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
CNL AMERICAN PROPERTIES FUND, INC.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Article I: THE COMPANY; DEFINITIONS....................................... B-1
1.1 Name................................................................. B-1
1.2 Resident Agent....................................................... B-1
1.3 Nature of Company.................................................... B-1
1.4 Purposes............................................................. B-1
1.5 Definitions.......................................................... B-1
Article II: BOARD OF DIRECTORS............................................ B-7
2.1 Number............................................................... B-7
2.2 Committees........................................................... B-8
2.3 Initial Board; Term.................................................. B-8
2.4 Fiduciary Obligations................................................ B-8
2.5 Resignation, Removal or Death........................................ B-9
2.6 Business Combination Statute......................................... B-9
2.7 Control Share Acquisition Statute.................................... B-9
Article III: POWERS OF DIRECTORS.......................................... B-9
3.1 General.............................................................. B-9
3.2 Specific Powers and Authority........................................ B-10
3.3 Determination of Best Interest of Company............................ B-14
Article IV: INVESTMENT OBJECTIVES AND OPERATING RESTRICTIONS.............. B-18
4.1 Investment Objectives................................................ B-18
4.2 Operating Restrictions............................................... B-19
Article V: SHARES......................................................... B-22
5.1 Authorized Shares.................................................... B-22
5.2 Common Shares........................................................ B-22
5.3 Preferred Shares..................................................... B-23
5.4 General Nature of Shares............................................. B-24
5.5 No Issuance Of Share Certificates.................................... B-24
5.6 Restrictions On Ownership and Transfer............................... B-24
5.7 Excess Shares........................................................ B-30
5.8 Settlements.......................................................... B-33
5.9 Severability......................................................... B-33
5.10 Waiver............................................................... B-33
Article VI: STOCKHOLDERS.................................................. B-34
6.1 Meetings of Stockholders............................................. B-34
6.2 Voting Rights of Stockholders........................................ B-34
6.3 Stockholder Action to be Taken by Meeting............................ B-34
6.4 Right of Inspection.................................................. B-34
6.5 Access to Stockholder List........................................... B-35
6.6 Reports.............................................................. B-35
Article VII: LIABILITY; TRANSACTIONS BETWEEN AFFILIATES AND THE COMPANY... B-36
7.1 Limitation of Stockholder Liability.................................. B-36
7.2 Exculpation.......................................................... B-36
7.3 Indemnification...................................................... B-36
7.4 Express Exculpatory Clauses In Instruments........................... B-37
7.5 Transactions with Affiliates......................................... B-37
Article VIII: AMENDMENT; REORGANIZATION; MERGER, ETC....................... B-38
8.1 Amendment.............................................................. B-38
8.2 Reorganization......................................................... B-38
8.3 Merger, Consolidation or Sale of Company Property...................... B-39
Article IX: DURATION OF COMPANY............................................ B-40
9.1 Automatic Dissolution.................................................. B-40
9.2 Dissolution of the Company by Stockholder Vote......................... B-40
Article X: MISCELLANEOUS................................................... B-40
10.1 Governing Law......................................................... B-40
10.2 Reliance by Third Parties............................................. B-40
10.3 Provisions in Conflict with Law or Regulations........................ B-40
10.4 Construction.......................................................... B-41
10.5 Recordation........................................................... B-41
ARTICLE I:Article I:
THE COMPANY; DEFINITIONS
SECTION 2.11.1 Name.
The name of the corporation (the "Company") is:
CNL American Properties Fund, Inc.
So far as may be practicable, the business of the Company shall be conducted
and transacted under that name, which name, (and the word "Company" wherever
used in these Second Amended and Restated Articles of Incorporation Amendment
and Restatement of CNL American Properties Fund, Inc. (these "Articles of
Incorporation"), except where the context otherwise requires,) shall refer to
the Directors collectively but not individually or personally and shall not
refer to the Stockholders or to any officers, employees or agents of the
Company or of such Directors.
Under circumstances in which the Directors determine that the use of the
name "CNL American Properties Fund, Inc." is not practicable, they may use any
other designation or name for the Company.
SECTION 1.21.2 Resident Agent.
The name and address of the resident agent for service of process of the
Company in the State of Maryland shall be is The Corporation Trust
Incorporated, 32 South Street, Baltimore, Maryland 21202. The Company may have
such principal office within the State of Maryland as the Directors may from
time to time determine. The Company may also have such other offices or places
of business within or without the State of Maryland as the Directors may from
time to time determine.
SECTION 1.31.3 Nature of Company.
The Company is a Maryland corporation within the meaning of the MGCL.
SECTION 1.41.4 Purposes .
The purposes for which the Company is formed are to conduct any business for
which corporations may be organized under the laws of the State of Maryland
including, but not limited to, the following: (i) to acquire, hold, own,
develop, construct, improve, maintain, operate, sell, lease, transfer,
encumber, convey, exchange and otherwise dispose of or deal with real and
personal property; (ii) to engage in the business of offering furniture,
fixture, and equipment financing to operators of Restaurant Chains; and (iii)
to enter into any partnership, joint venture or other similar arrangement to
engage in any of the foregoing.
1.11.5 Definitions.
As used in these Articles of Incorporation, the following terms shall have
the following meanings unless the context otherwise requires (certain other
terms used in Article V Article VII hereof are defined in Sections 5.2, 5.3,
5.6 and 5.7 7.2, 7.3, 7.6, and 7.7 hereof):
"Acquisition Expenses" shall mean 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" shall mean any and all fees and commissions, exclusive of
Acquisition Expenses, 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 making or investing in mortgage
loans and the
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selection or acquisition of any Property, including, without limitation, real
estate commissions, acquisition fees, finder's fees, selection fees,
nonrecurring management fees, consulting fees, loan fees, points, or any other
fees or commissions of a similar nature.
"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.
"Affiliate" or "Affiliated" means, as to any individual, corporation,
partnership, trust or other association (other than the Excess Shares Trust),
(i) any Person or entity directly or indirectly,; through one or more
intermediaries controlling, controlled by, or under common control with
another person or entity; (ii) any Person or entity, directly or indirectly
owning or controlling ten percent (10%) or more of the outstanding voting
securities of another Person or entity; (iii) any officer, director, partner
or trustee of such Person or entity; (iv) any Person ten percent (10%) or more
of whose outstanding voting securities are directly or indirectly owned,
controlled, or held, with power to vote, by such other Person; and (v) if such
other Person or entity is an officer, director, partner, or trustee of a
Person or entity, the Person or entity for which such Person or entity acts in
any such capacity.
"Asset Management Fee" shall mean the fee payable to the Advisor for
specified day-to-day professional management services in connection with the
Company and its Properties pursuant to the Advisory Agreement.
"Average Invested Assets" shall mean, for a specified period, the average of
the aggregate book value of the assets of the Company invested, directly or
indirectly, in Properties 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, including without limitation mortgage loans, interests
in trust certificates and Secured Equipment Leases, which is transferred or
conveyed to the Company (including 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. The total of all real estate commissions paid by the Company to all
Persons (including the subordinated real estate disposition fee payable to the
Advisor) in connection with any Sale of one or more of the Company's
Properties shall not exceed the lesser of (i) a Competitive Real Estate
Commission or (ii) six percent (6%) of the gross sales price of the Property
or Properties.
"Directors," "Board of Directors" or "Board" means, collectively, the
individuals named in Section 2.32.4 of these Articles of Incorporation so long
as they continue in office and all other individuals who have been duly
elected and qualify as Directors of the Company hereunder.
"Distributions" means any distributions of money or securities by the
Company to owners of Shares, including distributions that may constitute a
return of capital for federal income tax purposes. The Company will make no
distributions other than distributions of money or securities.
"Equipment" shall mean the furniture, fixtures and equipment used at
Restaurant Facilities.
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"Equity Shares" means transferable shares of beneficial interest of the
Company of any class or series, including Common Shares or Preferred Shares.
"Gross Proceeds" means the aggregate purchase price of all Shares sold for
the account of the Company through the offering, without deduction for selling
commissions, volume discounts, the marketing support and due diligence expense
reimbursement fee or Organization and Offering Expenses. For the purpose of
computing Gross Proceeds, the purchase price of any Share for which reduced
Selling Commissions are paid to the Managing Dealer or a Soliciting Dealer
(where net proceeds to the Company are not reduced) shall be deemed to be
$10.00.
"Independent Director" means a Director who is not, and within the last two
(2) years has not been, directly or indirectly associated with the Advisor by
virtue of (i) ownership of an interest in the Advisor or its Affiliates, (ii)
employment by the Advisor or its Affiliates, (iii) service as an officer or
director of the Advisor or its 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 advised by the Advisor, or
(vi) maintenance of a material business or professional relationship with the
Advisor or any of its Affiliates. A business or professional relationship is
considered material if the gross revenue derived by the Director from the
Advisor and 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. 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 Advisor, any of its Affiliates or
the Company.
"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 Public Offering" means the offering and sale of Common Shares of
the Company pursuant to the Company's first effective registration statement
covering such Common Shares filed under the Securities Act of 1933, as
amended.
"Invested Capital" means the amount calculated by multiplying the total
number of Shares purchased by Stockholders by the issue price, reduced by the
portion of any Distribution that is attributable to Net Sales Proceeds and by
any amounts paid by the Company to repurchase Shares pursuant to the Company's
share redemption plan.
"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.
"Listing" means the listing of the Shares of the Company on a national
securities exchange or over-the-counter market.
"Loan" means a loan, the maximum principal amount of which shall not exceed
10% of Gross Proceeds.
"Managing Dealer" means CNL Securities Corp., an Affiliate of the Advisor,
or such other person or entity selected by the Board of Directors to act as
the managing dealer for the offering. CNL Securities Corp. is a member of the
National Association of Securities Dealers, Inc.
"MGCL" means the Maryland General Corporation Law as contained in the
Corporations and Associations Article of the Annotated Code of Maryland.
"Mortgages" means mortgages, deeds of trust or other security interests on
or applicable to Real Property.
"NASAA REIT Guidelines" means the guidelines for Real Estate Investment
Trusts published by the North American Securities Administrators Association.
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"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.
"Net Income" shall mean 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 Property consisting of a building only, any
amounts that the Company determines, in its discretion, to be economically
equivalent to the proceeds of a Sale. Net Sales Proceeds shall not include any
reserves established by the Company in its sole discretion.
"Operating Expenses" shall include 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 (a) advisory fees, (b) the Soliciting Dealer Servicing Fee, (c) the
Asset Management Fee, (d) the Performance Fee, and (e) the Subordinated
Incentive Fee, 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 the Shares, (ii) interest payments,
(iii) taxes, (iv) non-cash expenditures such as depreciation, amortization and
bad debt reserves, (v) the Advisor's subordinated ten percent (10%) share of
Net Sales Proceeds, (vi) the Secured Equipment Lease Servicing Fee, and (vii)
Acquisition Fees and Acquisition Expenses, real estate commissions on the
resale of property, and other expenses connected with the acquisition and
ownership of real estate interests, mortgage loans, or other property (such as
the costs of foreclosure, insurance premiums, legal services, maintenance,
repair, and improvement of property).
"Organizational and Offering Expenses" means any and all costs and expenses,
other than Selling Commissions, the 0.5% marketing support and due diligence
expense reimbursement fee, and the Soliciting Dealer Servicing Fee 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 Shares, including, without limitation, the following: legal,
accounting and escrow fees; printing, amending, supplementing, mailing and
distributing costs; filing, registration and qualification fees and taxes;
telegraph and telephone costs; and all advertising and marketing expenses,
including the costs related to investor and broker-dealer sales meetings. The
Organizational and Offering Expenses paid by the Company in connection with
formation of the Company, together with all Selling Commissions, the 0.5%
marketing support and due diligence reimbursement fee, and the Soliciting
Dealer Servicing Fee incurred by the Company, will not exceed fifteen percent
(15%) of the proceeds raised in connection with such offering.
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"Performance Fee" means the fee payable to the Advisor under certain
circumstances if certain performance standards have been met and the
Subordinated Incentive Fee has not been paid.
"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, but does not include (i) an underwriter that participates in a public
offering of Equity Shares for a period of sixty (60) days following the
initial purchase by such underwriter of such Equity Shares in such public
offering, or (ii) CNL Fund Advisors, Inc., during the period ending December
31, 1995, provided that the foregoing exclusions shall apply only if the
ownership of such Equity Shares by an underwriter or CNL Fund Advisors, Inc.
would not cause the Company to fail to qualify as a REIT by reason of being
"closely held" within the meaning of Section 856(a) of the Code or otherwise
cause the Company to fail to qualify as a REIT.
"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 or similar arrangements.
"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.
"Real Estate Asset Value" shall mean the amount actually paid or allocated
to the purchase, development, construction or improvement of a Property,
exclusive of Acquisition Fees and Acquisition Expenses.
"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 "real estate investment trust" as defined pursuant to
Sections 856 through 860 of the Code.
"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.
"Restaurant Chains" shall mean the national and regional restaurant chains,
primarily fast-food, family-style, and casual dining chains, to be selected by
the Advisor, who themselves or through their franchisees will either (i) lease
the Properties purchased by the Company or (ii) become lessees of Secured
Equipment Leases.
"Roll-Up Entity" shall mean a partnership, real estate investment trust,
corporation, trust or similar entity that would be created or would survive
after the successful completion of a proposed Roll-Up Transaction.
"Roll-Up Transaction" shall mean 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 Stockholder voting rights, the term of existence of the
Company, compensation to the Advisor or the investment objectives of the
Company.
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"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 Secured Equipment Lease or
portion thereof, including any event with respect to any Secured Equipment
Lease 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 or Secured Equipment Leases within one hundred eighty (180)
days thereafter.
"Secured Equipment Leases" means the furniture, fixtures and equipment
financing made available by the Company. to operators of Restaurant Chains
pursuant to which the Company will finance, through direct financing leases,
the Equipment.
"Secured Equipment Lease Servicing Fee" means the fee payable to the Advisor
by the Company out of the proceeds of the Loan for negotiating Secured
Equipment Leases and supervising the Secured Equipment Lease equal to 2% of
the purchase price of the Equipment subject to each Secured Equipment Lease
and paid upon entering into such lease.
"Securities" means Equity Shares, Excess Shares, any other stock, shares or
other evidences of equity or beneficial or other interests, voting trust
certificates, bonds, debentures, notes or other evidences of indebtedness,
secured or unsecured, convertible, subordinated or otherwise, or in general
any instruments commonly known as "securities" or any certificates of
interest, shares or participations in, temporary or interim certificates for,
receipts for, guarantees of, or warrants, options or rights to subscribe to,
purchase or acquire, any of the foregoing.
"Selling Commissions" shall mean any and all commissions payable to
underwriters, managing dealers, or other broker-dealers in connection with the
sale of Shares, including, without limitation, commissions payable to CNL
Securities Corp.
"Shares" means shares of beneficial interest of the Company of any class or
series, including Common Shares, Preferred Shares and Excess Shares. up to
16,500,000 Shares of common stock of the Company to be sold in the Initial
Public Offering.
"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 Managing Dealer to sell Shares.
"Soliciting Dealer Servicing Fee" means an annual fee of .20% of Invested
Capital on December 31 of each year following the year in which the offering
of the Shares terminates, payable to the Managing Dealer, which in turn may
reallow all or a portion of such fee to the Soliciting Dealers whose clients
hold Shares on such date.
"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
B-6
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:
a. 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;
b. 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;
c. having a substantial number of relationships and contacts with the
Company,
d. possessing significant rights to control Company properties;
e. receiving fees for providing services to the Company which are paid on
a basis that is not customary in the industry; or
f. providing goods or services to the Company on a basis which was not
negotiated at arms length with the Company.
"Stock Option Plan" means a plan that provides for the matters set forth in
Rule 260.140.41 of Section 25140 of the Corporations Code of California, as in
effect as of the date of these Articles of Incorporation.
"Stockholders' 7% Return," as of each date, means an aggregate amount equal
to a seven percent (7%) cumulative, noncompounded, annual return on Invested
Capital.
"Stockholders" means the registered holders of the Company's Equity Shares.
"Subordinated Incentive Fee" means the fee payable to the Advisor under
certain circumstances if the Shares are listed on a national securities
exchange or over-the-counter market.
"Successor" means any successor in interest of the Company.
"Termination Date" means the date of termination of the Advisory Agreement.
"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 year.
ARTICLE II:Article II:
BOARD OF DIRECTORS
SECTION 2.12.1 Number.
The number of Directors initially shall be five (5), which number may be
increased or decreased from time to time by resolution of the Directors then
in office or by a majority vote of the Stockholders entitled to vote;:
provided, however, that the total number of Directors shall be not fewer than
three (3) and not more than fifteen (15), subject to the Bylaws and to any
express rights of any holders of any series of Preferred Shares to elect
additional directors under specified circumstances. A majority of the Board of
Directors will be Independent Directors. Independent Directors shall nominate
replacements for vacancies among the Independent Directors. No reduction in
the number of Directors shall cause the removal of any Director from office
prior to the expiration of his term. Any vacancy created by an increase in the
number of Directors will be filled, at any regular meeting or at any special
meeting of the Directors called for that purpose, by a majority of the
Directors. Any other vacancy will be filled at any annual meeting or at any
special meeting of the Stockholders called for that purpose, by a majority of
the Common Shares outstanding and entitled to vote. For the purposes of voting
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for directors, each Share of stock may be voted for as many individuals as
there are directors to be elected and for whose election the Share is entitled
to be voted, or as may otherwise be required by the MGCL or other applicable
law as in effect from time to time.
SECTION 2.2 Experience.
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.
SECTION 2.32.2 Committees.
Subject to the MGCL, 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 2.42.3 Initial Board; Term.
The initial Directors are James M. Seneff, Jr., Robert A. Bourne, G. Richard
Hostetter, J. Joseph Kruse and Richard C. Huseman. Each Director shall hold
office for one (1) year, until the next annual meeting of Stockholders and
until his successor shall have been duly elected and shall have qualified.
Directors may be elected to an unlimited number of successive terms.
The names and address of the initial Directors are as follows:
Name Address
---- ----------------------------------------
James M. Seneff, Jr. CNL Center at City Commons
450 South Orange Avenue 400 E. South
Street Orlando, Florida 32801
Robert A. Bourne CNL Center at City Commons
450 South Orange Avenue 400 E. South
Street Orlando, Florida 32801
G. Richard Hostetter CNL Center at City Commons
450 South Orange Avenue 400 E. South
Street Orlando, Florida 32801
J. Joseph Kruse CNL Center at City Commons
450 South Orange Avenue 400 E. South
Street Orlando, Florida 32801
Richard C. Huseman CNL Center at City Commons
450 South Orange Avenue 400 E. South
Street Orlando, Florida 32801
SECTION 2.52.4 Fiduciary Obligations.
The Directors serve in a fiduciary capacity to the Company and have a
fiduciary duty to the Stockholders of the Company., including a specific
fiduciary duty to supervise the relationship of the Company with the Advisor.
SECTION 2.6 Approval by Independent Directors.
A majority of Independent Directors must approve all matters to which
Sections 2.1, 3.2(vii) and (xii), 3.3, 4.1, 4.2, 4.6, 4.7, 4.8, 4.10, 4.13,
5.2, 5.4(xiii) and (xiv), 6.3, 6.4, 8.1, 8.2, 9.2 and 9.4 herein apply.
B-8
SECTION 2.72.5 Resignation, Removal or Death.
Any Director may resign by written notice to the Board of Directors,
effective upon execution and delivery to the Company of such written notice or
upon any future date specified in the notice. A Director may be removed from
office with or without cause only at a meeting of the Stockholders called for
that purpose, by the affirmative vote of the holders of not less than a
majority of the Common Shares then outstanding and entitled to vote in the
election of the Directors, subject to the rights of any Preferred Shares to
vote for such Directors. The notice of such meeting shall indicate that the
purpose, or one of the purposes, of such meeting is to determine if a Director
should be removed. Upon the resignation or removal of any Director, or his
otherwise ceasing to be a Director, he shall automatically cease to have any
such right, title or interest in and to the Company Property and shall execute
and deliver such documents as the remaining Directors require for the
conveyance of any Company Property held in his name, and shall account to the
remaining Directors as they require for all property which he holds as
Director. Upon the incapacity or death of any Director, his legal
representative shall perform the acts described in the foregoing sentence.
SECTION 2.82.6 Business Combination Statute.
Notwithstanding any other provision of these Articles of Incorporation or
any contrary provision of law, the Maryland Business Combination Statute,
found in Title 3, subtitle 6 of the MGCL, as amended from time to time, or any
successor statute thereto, shall not apply to any "business combination" (as
defined in Section 3-601(e) of the MGCL, as amended from time to time, or any
successor statute thereto) of the Company and any Person.
SECTION 2.92.7 Control Share Acquisition Statute.
Notwithstanding any other provision of these Articles of Incorporation or
any contrary provision of law, the Maryland Control Share Acquisition Statute,
found in Title 3, subtitle 7 of the MGCL, as 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:Article III:
POWERS OF DIRECTORS
SECTION 3.13.1 General.
Subject to the express limitations herein or in the Bylaws and to the
general standard of care required of directors under the MGCL and other
applicable law, (i) the business and affairs of the Company shall be managed
under the direction of the Board of Directors and (ii) the Directors shall
have full, exclusive and absolute power, control and authority over the
Company Property and over the business of the Company as if they, in their own
right, were the sole owners thereof, except as otherwise limited by these
Articles of Incorporation. The Directors have established the written policies
on investments and borrowing set forth in Article IV this Article III and
Article V hereof and shall monitor the administrative procedures, investment
operations, Secured Equipment Lease program and performance of the Company and
the Advisor to assure that such policies are carried out. The Directors may
take any actions that, in their sole judgment and discretion, are necessary or
desirable to conduct the business of the Company. A majority of the Board of
Directors, including a majority of Independent Directors, has approved hereby
ratify these Articles of Incorporation, which shall be construed with a
presumption in favor of the grant of power and authority to the Directors. Any
construction of these Articles of Incorporation or determination made in good
faith by the Directors concerning their powers and authority hereunder shall
be conclusive. The enumeration and definition of particular powers of the
Directors included in this Article III shall in no way be limited or
restricted by reference to or inference from the terms of this or any other
provision of these Articles of Incorporation or construed or deemed by
inference or otherwise in any manner to exclude or limit the powers conferred
upon the Directors under the general laws of the State of Maryland as now or
hereafter in force.
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3.2 Specific Powers and Authority.
Subject only to the express limitations herein, and in addition to all other
powers and authority conferred by these Articles of Incorporation or by law,
the Directors, without any vote, action or consent by the Stockholders, shall
have and may exercise, at any time or times, in the name of the Company or on
its behalf the following powers and authorities:
(i) Investments. Subject to Article IV and Section 7.5 Article V and Section
9.5 hereof, to invest in, purchase or otherwise acquire and to hold real,
personal or mixed, tangible or intangible, property of any kind wherever
located, or rights or interests therein or in connection therewith, all
without regard to whether such property, interests or rights are authorized by
law for the investment of funds held by trustees or other fiduciaries, or
whether obligations the Company acquires have a term greater or lesser than
the term of office of the Directors, or the possible termination of the
Company, for such consideration as the Directors may deem proper (including
cash, property of any kind or Securities of the Company); provided, however,
that the Directors shall take such actions as they deem necessary and
desirable to comply with any requirements of the MGCL relating to the types of
assets held by the Company.
(ii) REIT Qualification. The Board of Directors shall use its best efforts
to cause the Company and its Stockholders to qualify for U.S. federal income
tax treatment in accordance with the provisions of the Code applicable to
REITs (as those terms are defined in Section 1.5 hereof). In furtherance of
the foregoing, the Board of Directors shall use its best efforts to take such
actions as are necessary, and may take such actions as it deems desirable (in
its sole discretion) to preserve the status of the Company as a REIT;
provided, however, that in the event that the Board of Directors determines,
by vote of at least two-thirds ( 2/3) of the Directors, that it no longer is
in the best interests of the Company to qualify as a REIT, the Board of
Directors shall take such actions as are required by the Code, the MGCL and
other applicable law, to cause the matter of termination of qualification as a
REIT to be submitted to a vote of the Stockholders of the Company pursuant to
Section 6.2. 8.2.
(iii) Sale, Disposition and Use of Property. Subject to Article IV Article V
and Sections 7.5 and 8.3 Sections 9.5 and 10.3 hereof, to sell, rent, lease,
hire, exchange, release, partition, assign, mortgage, grant security interests
in, encumber, negotiate, dedicate, grant easements in and options with respect
to, convey, transfer (including transfers to entities wholly or partially
owned by the Company or the Directors) or otherwise dispose of any or all of
the Company Property by deeds (including deeds in lieu of foreclosure with or
without consideration), trust deeds, assignments, bills of sale, transfers,
leases, mortgages, financing statements, security agreements and other
instruments for any of such purposes executed and delivered for and on behalf
of the Company or the Directors by one or more of the Directors or by a duly
authorized officer, employee, agent or nominee of the Company, on such terms
as they deem appropriate; to give consents and make contracts relating to the
Company Property and its use or other property or matters; to develop,
improve, manage, use, alter or otherwise deal with the Company Property; and
to rent, lease or hire from others property of any kind; provided, however,
that the Company may not use or apply land for any purposes not permitted by
applicable law.
(iv) Financings. To borrow or, in any other manner, raise money for the
purposes and on the terms they determine, which terms may (i) include
evidencing the same by issuance of Securities of the Company and (ii) may have
such provisions as the Directors determine; to reacquire such Securities of
the Excess Shares Trust; to enter into other contracts or obligations on
behalf of the Excess Shares Trust; to guarantee, indemnify or act as surety
with respect to payment or performance of obligations of any Person; to
mortgage, pledge, assign, grant security interests in or otherwise encumber
the Company Property to secure any such Securities of the Company, contracts
or obligations (including guarantees, indemnifications and suretyships); and
to renew, modify, release, compromise, extend, consolidate or cancel, in whole
or in part, any obligation to or of the Company or participate in any
reorganization of obligors to the Company. ; provided, however, that the
Companys Leverage may not exceed 300% of Net Assets.
(v) Lending. Subject to the provisions of Section 7.5 9.5 hereof, to lend
money or other Company Property on such terms, for such purposes and to such
Persons as they may determine.
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(vi) Secured Equipment Leases. To engage in the business of offering
furniture, fixture, and equipment financing to the operators of Restaurant
Chains, provided, however, that the Company shall use its best efforts to
ensure that the total value of Secured Equipment Leases, in the aggregate will
not exceed 25% of the Company's total assets and that Secured Equipment Leases
to a single lessee, in the aggregate, will not exceed 5% of the Company's
total assets.
(vii) Issuance of Securities. Subject to the provisions of Article V Article
VII hereof, to create and authorize and direct the issuance (on either a pro
rata or a non-pro rata basis) by the Company, in shares, units or amounts of
one or more types, series or classes, of Securities of the Company, which may
have such voting rights, dividend or interest rates, preferences,
subordinations, conversion or redemption prices or rights; maturity dates,
distribution, exchange, or liquidation rights or other rights as the Directors
may determine, without vote of or other action by the Stockholders, to such
Persons for such consideration, at such time or times and in such manner and
on such terms as the Directors determine, to list any of the Securities of the
Company on any securities exchange; and to purchase or otherwise acquire,
hold, cancel, reissue, sell and transfer any Securities of the Company.
Notwithstanding the foregoing, the Organizational and Offering Expenses paid
in connection with the REITs formation or the syndication of its Shares
through 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.
(viii) Expenses and Taxes. To pay any charges, expenses or liabilities
necessary or desirable, in the sole discretion of the Directors, for carrying
out the purposes of these Articles of Incorporation and conducting business of
the Company, including compensation or fees to Directors, officers, employees
and agents of the Company, and to Persons contracting with the Company, and
any taxes, levies, charges and assessments of any kind imposed upon or
chargeable against the Company, the Company Property or the Directors in
connection therewith; and to prepare and file any tax returns, reports or
other documents and take any other appropriate action relating to the payment
of any such charges, expenses or liabilities.
(ix) Collection and Enforcement. To collect, sue for and receive money or
other property due to the Company; to consent to extensions of the time for
payment, or to the renewal, of any Securities or obligations; to engage or to
intervene in, prosecute, defend, compound, enforce, compromise, release,
abandon or adjust any actions, suits, proceedings, disputes, claims, demands,
security interests or things relating to the Company, the Company Property or
the Company's affairs; to exercise any rights and enter into any agreements
and take any other action necessary or desirable in connection with the
foregoing.
(x) Deposits. To deposit funds or Securities constituting part of the
Company Property in banks, trust companies, savings and loan associations,
financial institutions and other depositories, whether or not such deposits
will draw interest, subject to withdrawal on such terms and in such manner as
the Directors determine.
(xi) Allocation; Accounts. To determine whether moneys, profits or other
assets of the Company shall be charged or credited to, or allocated between,
income and capital, including whether or not to amortize any premium or
discount and to determine in what manner any expenses or disbursements are to
be borne as between income and capital (regardless of how such items would
normally or otherwise be charged to or allocated between income and capital
without such determination); to treat any dividend or other distribution on
any investment as, or apportion it between, income and capital; in their
discretion to provide reserves for depreciation, amortization, obsolescence or
other purposes in respect of any Company Property in such amounts and by such
methods as they determine; to determine what constitutes net earnings, profits
or surplus; to determine the method or form in which the accounts and records
of the Company shall be maintained; and to allocate to the Stockholders'
equity account less than all of the consideration paid for Securities and to
allocate the balance to paid-in capital or capital surplus.
(xii) Valuation of Property. To determine the value of all or any part of
the Company Property and of any services, Securities, property or other
consideration to be furnished to or acquired by the Company, and to revalue
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all or any part of the Company Property, all in accordance with such
appraisals or other information as are reasonable, in their sole judgment.
(xiii) Ownership and Voting Powers. To exercise all of the rights, powers,
options and privileges pertaining to the ownership of any Mortgages,
Securities, Real Estate, Secured Equipment Leases and other Company Property
to the same extent that an individual owner might, including without
limitation to vote or give any consent, request or notice or waive any notice,
either in person or by proxy or power of attorney, which proxies and powers of
attorney may be for any general or special meetings or action, and may include
the exercise of discretionary powers.
(xiv) Officers, Etc.; Delegation of Powers. To elect, appoint or employ such
officers for the Company and such committees of the Board of Directors with
such powers and duties as the Directors may determine, the Company's Bylaws
provide or the MGCL requires; to engage, employ or contract with and pay
compensation to any Person (including subject to Section 7.5 9.5 hereof, any
Director and Person who is an Affiliate of any Director) as agent,
representative, Advisor, member of an advisory board, employee or independent
contractor (including advisors, consultants, transfer agents, registrars,
underwriters, accountants, attorneys-at-law, real estate agents, property and
other managers, appraisers, brokers, architects, engineers, construction
managers, general contractors or otherwise) in one or more capacities, to
perform such services on such terms as the Directors may determine; to
delegate to one or more Directors, officers or other Persons engaged or
employed as aforesaid or to committees of Directors, or to the Advisor, the
performance of acts or other things (including granting of consents), the
making of decisions and the execution of such deeds, contracts, leases or
other instruments, either in the names of the Company, the Directors or as
their attorneys or otherwise, as the Directors may determine; and to establish
such committees as they deem appropriate.
(xv) Associations. Subject to Section 7.5 9.5 hereof, to cause the Company
to enter into joint ventures, general or limited partnerships, participation
or agency arrangements or any other lawful combinations, relationships or
associations of any kind.
(xvi) Reorganizations, Etc. Subject to Sections 8.2 and 8.3 10.2 and 10.3
hereof, to cause to be organized or assist in organizing any Person under the
laws of any jurisdiction to acquire all or any part of the Company Property,
carry on any business in which the Company shall have an interest or otherwise
exercise the powers the Directors deem necessary, useful or desirable to carry
on the business of the Company or to carry out the provisions of these
Articles of Incorporation, to merge or consolidate the Company with any
Person; to sell, rent, lease, hire, convey, negotiate, assign, exchange or
transfer all or any part of the Company Property to or with any Person in
exchange for Securities of such Person or otherwise; and to lend money to,
subscribe for and purchase the Securities of, and enter into any contracts
with, any Person in which the Company holds, or is about to acquire,
Securities or any other interests.
(xvii) bInsurance. To purchase and pay for out of Company Property insurance
policies insuring the Company and the Company Property against any and all
risks, and insuring the Stockholders, Directors, officers, Advisors,
Affiliates, employees and agents of the Company individually (each an
"Insured") against all claims and liabilities of every nature arising by
reason of holding or having held any such status, office or position or by
reason of any action alleged to have been taken or omitted by the Insured in
such capacity, whether or not the Company would have the power to indemnify
against such claim or liability, provided that such insurance be limited to
the indemnification permitted by Section 7.3 9.2 hereof in regard to any
liability or loss resulting from negligence, gross negligence, misconduct,
willful misconduct or an alleged violation of federal or state securities
laws. Nothing contained herein shall preclude the Company from purchasing and
paying for such types of insurance, including extended coverage liability and
casualty and workers' compensation, as would be customary for any Person
owning comparable assets and engaged in a similar business, or from naming the
Insured as an additional insured party thereunder, provided that such addition
does not add to the premiums payable by the Company. The Board of Directors'
power to purchase and pay for such insurance policies shall be limited to
policies that comply with all applicable state laws and the NASAA REIT
Guidelines.
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(xviii) Executive Compensation, Pension and Other Plans. To adopt and
implement executive compensation, pension, profit sharing, share option, share
bonus, share purchase, share appreciation rights, restricted share, savings,
thrift, retirement, incentive or benefit plans, trusts or provisions,
applicable to any or all Directors, officers, employees or agents of the
Company, or to other Persons who have benefited the Company, all on such terms
and for such purposes as the Directors may determine or the Bylaws provide.
(xix) Distributions. To declare and pay dividends Dividends or other
distributions to Stockholders, subject to the provisions of Section 5.4 7.4
hereof.
(xx) Indemnification. To the extent permitted by Section 7.3 9.2 hereof, to
indemnify any Person with whom the Company has dealings. The Board of
Directors' ability to indemnify any Person shall be limited to indemnification
provisions that comply with all applicable state laws and the NASAA REIT
Guidelines.
(xxi) Charitable Contributions. To make donations for the public welfare or
for community, charitable, religious, educational, scientific, civic or
similar purposes, regardless of any direct benefit to the Company.
(xxii) Discontinue Operations; Bankruptcy. To discontinue the operations of
the Company (subject to Section 8.2 10.2 hereof); to petition or apply for
relief under any provision of federal or state bankruptcy, insolvency or
reorganization laws or similar laws for the relief of debtors; to permit any
Company Property to be foreclosed upon without raising any legal or equitable
defenses that may be available to the Company or the Directors or otherwise
defending or responding to such foreclosure; to confess judgment against the
Excess Shares Trust; or to take such other action with respect to indebtedness
or other obligations of the Directors, the Company Property or the Company as
the Directors, in such capacity, and in their discretion may determine.
(xxii)(xxiii) Termination of Status. To terminate the status of the Company
as a real estate investment trust under the REIT Provisions of the Code;
provided, however, that the Board of Directors shall take no action to
terminate the Company's status as a real estate investment trust under the
REIT Provisions of the Code until such time as (i) the Board of Directors
adopts a resolution recommending that the Company terminate its status as a
real estate investment trust under the REIT Provisions of the Code, (ii) the
Board of Directors presents the resolution at an annual or special meeting of
the Stockholders and (iii) such resolution is approved by the holders of two-
thirds ( 2/3) of the issued and outstanding Common Shares (as defined in
Section 5.2 7.2 hereof).
(xxiv) Fiscal Year. Subject to the Code, to adopt, and from time to time
change, a fiscal year for the Company.
(xxv) Seal. To adopt and use a seal, but the use of a seal shall not be
required for the execution of instruments or obligations of the Company.
(xxvi) Bylaws. To adopt, implement and from time to time alter, amend or
repeal the Bylaws of the Company relating to the business and organization of
the Company, provided that such amendments are not inconsistent with the
provisions of these Articles of Incorporation, and further provided that the
Directors may not amend the Bylaws, without the affirmative vote of a majority
of the Equity Shares, to the extent that such amendments adversely affect the
rights, preferences and privileges of Stockholders.
(xxvii) Listing Shares. To cause the listing of the Shares at any time,
after completion of the Initial Public Offering but in no event shall such
Listing occur more than ten (10) years after completion of the Initial Public
oOffering.
(xxviii) Further Powers. To do all other acts and things and execute and
deliver all instruments incident to the foregoing powers, and to exercise all
powers which they deem necessary, useful or desirable to carry on the business
of the Company or to carry out the provisions of these Articles of
Incorporation, even if such powers are not specifically provided hereby.
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SECTION 3.33.3 Determination of Best Interest of Company.
In determining what is in the best interest of the Company, a Director shall
consider the interests of the Stockholders of the Company and, in his or her
sole and absolute discretion, may consider (i) the interests of the Company's
employees, suppliers, creditors and customers, (ii) the economy of the nation,
(iii) community and societal interests, and (iv) the long-term as well as
short-term interests of the Company and its Stockholders, including the
possibility that these interests may be best served by the continued
independence of the Company.
ARTICLE IV:
ADVISOR
SECTION 4.1 Appointment and Initial Investment of Advisor.
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. The Advisor is the
holder of 20,000 Shares, representing an initial investment of $200,000.
SECTION 4.2 Supervision of Advisor.
The Directors shall evaluate the performance of the Advisor before entering
into or renewing an advisory contract 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 (including the Secured Equipment Lease program),
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 are responsible for monitoring the administrative procedures,
investment operations, Secured Equipment Lease program and performance of the
Company and the Advisor to assure that such procedures, operations and
programs are in the best interests of the Stockholders and are fulfilled.
The Board of Directors is also responsible for reviewing the fees and
expenses of the Company at least annually or with sufficient frequency to
determine that the expenses incurred are in the best interests of the
Stockholders. In addition, a majority of the Independent Directors and a
majority of Directors not otherwise interested in the transaction must approve
each transaction with the Advisor or its Affiliates. The Board of 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 to be performed and the
investment performance of the Company and that the provisions of the Advisory
Agreement are being carried out. Specifically, the Board of Directors will
consider factors such as the Net Assets and Net Income of the Company, the
amount of the fee paid to the Advisor in relation to the size, composition and
performance of the Company's portfolio, the success of the Advisor in
generating opportunities that meet the investment objectives of the Company,
rates charged to other REITs and to investors other than REITs by advisors
performing the same or similar services, 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,
the quality and extent of service and advice furnished by the Advisor, the
performance of the investment portfolio of the Company and the quality of the
portfolio of the Company relative to the investments generated by the Advisor
for its own account. The Directors also shall determine whether any
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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 Fiduciary Obligations.
The Advisor has a fiduciary responsibility to the Company and to the
Stockholders.
SECTION 4.4 Affiliation and Functions.
The Directors, by resolution or in the Bylaws, may provide guidelines,
provisions, or requirements concerning the affiliation and functions of the
Advisor.
SECTION 4.5 Termination.
Either a majority of the Independent Directors or the Advisor may terminate
the advisory contract on sixty (60) days' written notice without cause or
penalty, and, in such event, the Advisor will cooperate with the Company and
the Directors in making an orderly transition of the advisory function.
SECTION 4.6 Real Estate Commission on Resale of Property.
The Company shall pay the Advisor a deferred, subordinated real estate
disposition fee upon Sale of one or more Properties, in an amount equal to the
lesser of (i) one-half ( 1/2) of a Competitive Real Estate Commission, or (ii)
three percent (3%) of the sales price of such Property or Properties. Payment
of such fee shall be made only if the Advisor provides a substantial amount of
services in connection with the Sale of a Property or Properties and shall be
subordinated to receipt by the Stockholders of Dividends equal to the sum of
(i) their aggregate Stockholders' 7% Return and (ii) their aggregate Invested
Capital. If, at the time of a Sale, payment of such disposition fee is
deferred because the subordination conditions have not been satisfied, then
the disposition fee shall be paid at such later time as the subordination
conditions are satisfied. Upon Listing, if the Advisor has accrued but not
been paid such real estate disposition fee, then for purposes of determining
whether the subordination conditions have been satisfied, stockholders will be
deemed to have received a Dividend in the amount equal to the product of the
total number of shares outstanding and the average closing price of the Shares
over a period, beginning 180 days after Listing, of 30 days during which the
Shares are traded.
SECTION 4.7 Subordinated Share of Net Sales Proceeds.
The Company shall pay the Advisor a deferred, subordinated share from a Sale
or Sales of a Property or Secured Equipment Lease, whether or not in
liquidation of the Company, equal to 10% of Net Sales Proceeds remaining after
receipt by the Stockholders of Dividends equal to the sum of (i) the
Stockholders' 7% Return and (ii) 100% of Invested Capital. Following Listing,
no share of Net Sales Proceeds will be paid to the Advisor.
SECTION 4.8 Incentive Fees.
(i) At such time, if any, as Listing occurs, the Advisor shall be paid the
Subordinated Incentive Fee in an amount equal to ten percent (10%) of the
amount by which (i) the market value of the Company (as defined below) plus
the total Dividends paid to Stockholders from the Company's inception until
the date of Listing exceeds (ii) the sum of (A) one hundred percent (100%) of
Invested Capital and (B) the total Dividends required to be paid to the
Stockholders in order to pay the Stockholders' 7% Return from inception
through the date the market value is determined. For purposes of calculating
the Subordinated Incentive Fee, the market value of the Company shall be the
average closing price or average of bid and asked price, as the case may be,
over a period of thirty (30) days during which the Shares are traded with such
period beginning one hundred eighty (180) days after Listing. In the case of
multiple Advisors, Advisors and any Affiliate shall be allowed incentive fees
provided such fees are distributed by a proportional method reasonably
designed to reflect the value added to
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Company assets by each respective Advisor or any Affiliate. The Subordinated
Incentive Fee will be reduced by the amount of any prior payment to the
Advisor of a deferred, subordinated share of Net Sales Proceeds from a Sale or
Sales of a Property or Secured Equipment Lease.
(ii) In no event shall the Company pay a single Advisor both the
Subordinated Incentive Fee and the deferred subordinated share of Net Sales
Proceeds.
(iii) In the event that the Company becomes a perpetual life entity (which
will occur) if the Shares become listed on a national securities exchange or
over-the-counter market, the Company and the Advisor will negotiate in good
faith a fee structure appropriate for an entity with a perpetual life, subject
to approval by a majority of the Independent Directors. In negotiating a new
fee structure, the Independent Directors shall consider all of the factors
they deem relevant. These are expected to include, but will not necessarily be
limited to: (i) the amount of the advisory fee in relation to the asset value,
composition, and profitability of the Company's portfolio; (ii) the success of
the Advisor in generating opportunities that meet the investment objectives of
the Company; (iii) the rates charged to other REITs and to investors other
than REITs by Advisors that perform the same or similar services; (iv)
additional revenues realized by the Advisor and its Affiliates through their
relationship with the Company, including loan administration, underwriting or
broker commissions, servicing, engineering, inspection and other fees, whether
paid by the Company or by others with whom the Company does business; (v) the
quality and extent of service and advice furnished by the Advisor; (vi) the
performance of the investment portfolio of the Company, including income,
conservation or appreciation of capital, and number and frequency of problem
investments; and (vii) the quality of the Property portfolio of the Company in
relationship to the investments generated by the Advisor for its own account.
The Board of Directors, including a majority of the Independent Directors, may
not approve a new fee structure that, in its judgment, is more favorable to
the Advisor than the current fee structure.
SECTION 4.9 Performance Fee.
Upon termination of the Advisory Agreement, the Advisor shall be entitled to
receive a Performance Fee if performance standards satisfactory to a majority
of the Board of Directors, including a majority of the Independent Directors,
when compared to (a) the performance of the Advisor in comparison with its
performance for other entities; and (b) the performance of other advisors for
similar entities, have been met. If Listing has not occurred, the Performance
Fee, if any, shall equal ten percent (10%) of the amount, if any, by which (i)
the appraised value of the Properties and Secured Equipment Leases on the
Termination Date, less the amount of all indebtedness secured by Properties
and Secured Equipment Leases, plus the total Dividends paid to Stockholders
from the Company's inception through the Termination Date, exceeds (ii)
Invested Capital plus an amount equal to the Stockholders' 7% Return from
inception through the Termination Date. The Advisor shall be entitled to
receive all accrued but unpaid compensation and expense reimbursements in cash
within thirty (30) days of the Termination Date. All other amounts payable to
the Advisor in the event of a termination shall be evidenced by a promissory
note and shall be payable from time to time. The Performance Fee shall be paid
in twelve (12) equal quarterly installments without interest on the unpaid
balance, provided, however, that no payment will be made in any quarter in
which such payment would jeopardize the Company's REIT status, in which case
any such payment or payments will be delayed until the net quarter in which
payment would not jeopardize REIT status. Notwithstanding the preceding
sentence, any amounts which may be deemed payable at the date the obligation
to pay the Performance Fee is incurred which relate to the appreciation of the
Company's Properties shall be an amount which provides compensation to the
terminated Advisor only for that portion of the holding period for the
respective Properties during which such terminated Advisor provided services
to the Company. Upon Listing, the Performance Fee, if any, payable thereafter
will be as negotiated between the Company and the Advisor. The Advisor shall
not be entitled to payment of the Performance Fee in the event the Advisory
Agreement is terminated because of failure of the Company and the Advisor to
establish a fee structure appropriate for a perpetual-life entity at such
time, if any, as the Shares become listed on a national securities exchange or
over-the-counter market. The Performance Fee, to the extent payable at the
time of Listing, will not be paid in the event that the Subordinated Incentive
Fee is paid.
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SECTION 4.10 Acquisition Fee and Acquisition Expenses.
The Company shall pay the advisor a fee in the amount of 4.5% of Gross
Proceeds from the sale of Shares as Acquisition Fees. The Acquisition Fees
shall be reduced to the extent that, and if necessary to limit, the total
compensation paid to all persons involved in the acquisition of any Property
to the amount customarily charged in arms-length transactions by other persons
or entities rendering similar services as an ongoing public activity in the
same geographical location and for comparable types of Properties, and to the
extent that other acquisition fees, finder's fees, real estate commissions, or
other similar fees or commissions are paid by any person in connection with
the transaction. The Company shall reimburse the Advisor for Acquisition
Expenses incurred in connection with the initial selection and acquisition of
Properties, provided that reimbursement shall be limited to the actual cost of
goods and services used by the Company and obtained from entities not
affiliated with the Advisor, or the lesser of the actual cost or 90% of the
competitive rate charged by unaffiliated persons providing similar goods and
services in the same geographic location for goods or services provided by the
Advisor or its Affiliates. 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 a Property, or in the case of a mortgage
loan, six percent (6%) of the funds advanced unless a majority of the Board of
Directors, including a majority of the Independent Directors, not otherwise
interested in the transaction approves fees in excess of these limits subject
to a determination that the transaction is commercially competitive, fair and
reasonable to the Company.
SECTION 4.11 Asset Management Fee.
The Company shall pay the Advisor monthly Asset Management Fee in an amount
equal to one-twelfth of .60% of the Company's Real Estate Asset Value as of
the end of the preceding month. Specifically, Real Estate Asset Value equals
the amount invested in the Properties wholly owned by the Company, determined
on the basis of cost, plus, in the case of Properties owned by any Joint
Venture or partnership in which the Company is a co-venturer or partner, the
portion of the cost of such Properties paid by the Company, exclusive of
Acquisition Fees and Expenses. Payment of a portion of the monthly Asset
Management Fee (one-twelfth of .25% of the Company's Real Estate Asset Value)
is noncumulative and subordinated to payment of the Stockholders' 7% Return
and will be payable in arrears on a quarterly basis. The Asset Management Fee,
which will not exceed fees which are competitive for similar services in the
same geographic area, may or may not be taken, in whole or in part as to any
year, in the sole discretion of the Advisor. All or any portion of the Asset
Management Fee not taken as to any fiscal year shall be deferred without
interest and may not be taken in such other fiscal year as the Advisor shall
determine.
SECTION 4.12 Secured Equipment Lease Servicing Fee.
The Company shall pay the Advisor a fee out of the proceeds of the Loan for
negotiating Secured Equipment Leases and supervising the Secured Equipment
Lease program equal to 2% of the purchase price of the Equipment subject to
each Secured Equipment Lease and paid upon entering into such lease.
SECTION 4.13 Reimbursement for Operating Expenses.
The Company shall not reimburse the Advisor at the end of any fiscal quarter
Operating Expenses that, in the four consecutive fiscal quarters then ended
(the "Expense Year") exceed (the "Excess Amount") the greater of 2% of Average
Invested Assets or 25% of Net Income (the "2%/25% Guidelines") for such year.
If there is an Excess Amount in any Expense Year and the Independent Directors
determine that such excess was justified, based on unusual and nonrecurring
factors which they deem sufficient, the Excess Amount may be carried over and
included in Operating Expenses in subsequent Expense Years, and reimbursed to
the Advisor in one or more of such years, provided that Operating Expenses in
any Expense Year, including any Excess Amount to be paid to the Advisor, shall
not exceed the 2%/25% Guidelines. Within 60 days after the end of any fiscal
quarter of the Company for which total Operating Expenses for the Expense Year
exceed the 2%/25% Guidelines, there shall be sent to the Stockholders a
written disclosure of such fact, together with an explanation of the factors
the
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Independent Directors considered in determining that such excess expenses were
justified. Such determination shall be reflected in the minutes of the
meetings of the Board of Directors.
ARTICLE V:Article IV:
Investment Objectives And Operating Restrictions Limitations
SECTION 5.14.1 Investment Objectives.
The Company's primary investment objectives are to preserve, protect, and
enhance the Company's assets; while (i) distributing Ddividends commencing in
the initial year of Company operations; (ii) obtaining fixed income through
the receipt of base rent on leased properties and interest on mortgage loans,
and increasing the Company's income (and Ddividends) and providing protection
against inflation through automatic increases in base rent and receipt of
percentage rent, and obtaining fixed income through the receipt of payments on
Secured Equipment Leases; (iii) qualifying and remaining qualified as a REIT
for federal income tax purposes; and (iv) providing Stockholders of the
Company with liquidity of their investment within five (5) to ten (10) years
after commencement of the offering, either in whole or in part, through (a)
Listing, or, (b) the commencement of orderly Sales of the Company's Properties
and Secured Equipment Leases, (outside the ordinary course of business and
consistent with its objective of qualifying as a REIT) and distribution of the
proceeds thereof. The sheltering from tax of income from other sources is not
an objective of the Company. Subject to Sections 3.2(ii) and (xxiii) 3.2(v)
hereof and to the restrictions set forth herein, the Directors will use their
best efforts to conduct the affairs of the Company in such a manner as to
continue to qualify the Company for the tax treatment provided in the REIT
Provisions of the Code; provided, however, no Director, officer, employee or
agent of the Company shall be liable for any act or omission resulting in the
loss of tax benefits under the Code, except to the extent provided in Section
7.2 9.2 hereof.
SECTION 5.2 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
policies being followed by the Company at any time are in the best interests
of its Stockholders. Each such determination and the basis therefor shall be
set forth in the minutes of the meetings of the Board of Directors.
SECTION 5.3 Certain Permitted Investments.
(i) The Company may invest in Properties related to the fast-food, family-
style and casual dining segments of the restaurant industry, in various
locations across the United States.
(ii) The Company may invest in Joint Ventures with the Advisor, one or more
Directors or any Affiliate, 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.
(iii) 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.
(iv) The Company may offer Secured Equipment Leases to operators of
Restaurant Chains provided that a majority of Directors (including a majority
of Independent Directors) approve the Secured Equipment Leases as being fair,
competitive and commercially reasonable.
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SECTION 5.44.2 Operating Restrictions. 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:
(i) Not more than 10% of the Company's total assets shall be invested in
unimproved real property or mortgage loans on unimproved real property. For
purposes of this paragraph, "unimproved real property" does not include any
Property or Real Estate Financing property acquisitions under construction,
under contract for development or planned for development within one year.
(ii) The Company shall not invest in commodities or commodity future
contracts. This limitation is not intended to apply to interest rate
futures, when used solely for hedging purposes.
(iii) The Company shall not invest in or make mortgage loans unless an
appraisal is obtained concerning the underlying property. Mortgage
indebtedness on any property shall not exceed such property's appraised
value. In cases in which a majority of Independent Directors so determine,
and in all cases in which the mortgage loan involves the Advisor,
Directors, or Affiliates, such appraisal of the underlying property must be
obtained from an independent expert. Such appraisal shall be maintained in
the Company's records for at least five (5) years and shall be available
for inspection and duplication by any Stockholder. In addition to the
appraisal, a mortgagee's or owner's title insurance policy or commitment as
to the priority of the mortgage or condition of the title must be obtained.
(iv) 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.
(v) 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 Director or their Affiliates. In addition, the Company shall
not invest in any security of any entity holding investments or engaging in
activities prohibited by these Articles of Incorporation.
(vi) The Company shall not invest in equity securities unless a majority
of the Directors (including a majority of Independent Directors) not
otherwise interested in such transaction approve the transaction as being
fair, competitive and commercially reasonable and determine that the
transaction will not jeopardize the Company's ability to qualify and remain
qualified as a REIT. Investments in entities affiliated with the Advisor, a
Director, the Company or their Affiliates are subject to restrictions on
Joint Venture investments.
(vii) The Company shall not issue (A) equity securities redeemable solely
at the option of the holder (except that Stockholders may offer their
Common Shares to the Company pursuant to that certain redemption plan
adopted or to be adopted by the Board of Directors on terms outlined in the
section relating to Common Shares entitled "Redemption of Shares" in the
Company's Prospectus relating to the Initial Public Offering); (B) debt
securities unless the historical debt service coverage (in the most
recently completed fiscal year) as adjusted for known charges is sufficient
to properly service that higher level of debt; (C) Equity Shares on a
deferred payment basis or under similar arrangements; (D) non-voting or
assessable securities; (E) options, warrants, or similar evidences of a
right to buy its securities (collectively, "Options") unless (1) issued to
all of its Stockholders ratably, (2) as part of a financing arrangement, or
(3) as part of a Stock Option Plan available to Directors, officers,
employees of the Company or the Advisor. Options may not be issued to the
Advisor, Director or any Affiliate thereof except on the same terms as such
Options are sold to the general public. Options may be issued to persons
other than the Advisor, Directors or any Affiliate thereof but not at
exercise prices less than the fair market value of the underlying
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securities on the date of grant and not for consideration that in the
judgment of the Independent Directors has a market value less than the
value of such Option on the date of grant. Options issuable to the Advisor,
Directors or any Affiliate thereof shall not exceed 10% of the outstanding
Shares on the date of grant.
(viii) The Company shall not invest in real estate contracts of sale
unless such contracts of sale are in recordable form and appropriately
recorded in the chain of title.
(ix) A majority of the Directors shall authorize the consideration to be
paid for each Property, based on the fair market value of the Property. If
a majority of the Independent Directors determine, or if the Property is
acquired from the Advisor, a Director, or their Affiliates, such fair
market value shall be determined by a qualified independent real estate
appraiser selected by the Independent Directors.
(x) The Company shall not engage in underwriting or the agency
distribution of securities issued by others or in trading, as compared to
investment activities.
(xi) The Company shall not invest in any foreign currency or bullion or
engage in short sales.
(xii) The Company shall not issue senior securities except notes to banks
and other lenders and Preferred Shares.
(xiii) 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 maximum amount of such Leverage in
relation to the Net Assets shall, in the absence of a satisfactory showing
that a higher level of borrowing is appropriate, not exceed three hundred
percent (300%). Any excess in Leverage over such three hundred percent
(300%) level shall be approved by at least a majority of the Independent
Directors and disclosed to Stockholders in the next quarterly report of the
Company, along with the justification for such excess.
(xiv) The Company may borrow money from the 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 fair, competitive and commercially
reasonable and no less favorable to the Company than loans between
unaffiliated parties under the same circumstances; provided, however, that
the Advisor and its Affiliates shall not make loans to the Company, or to
Joint Ventures in which the Company is a co-venturer, for the purchase of
Properties. Notwithstanding the foregoing, the Advisor and its Affiliates
shall be entitled to reimbursement, at cost, for actual expenses incurred
by the Advisor or its Affiliates on behalf of the Company or Joint Ventures
in which the Company is a co-venturer, subject to subsection (xix) below.
(xv) The Company shall not make loans to the Advisor or its Affiliates.
(xvi)(i) The Company shall not operate so as to be classified as an
"investment company" under the Investment Company Act of 1940, as amended.
(xvii)(ii) The Company will not make any investment that the Company
believes will be inconsistent with its objectives of qualifying and
remaining qualified as a REIT.
The foregoing objectives may not be modified or eliminated without the
approval of Stockholders owning a majority of the outstanding Common Equity
Shares.
ARTICLE VI:
CONFLICTS OF INTEREST
SECTION 6.1 Sales and Leases to Company.
The Company may purchase property from the Advisor, Director, or any
Affiliate upon a finding by a majority of Directors (including a majority of
Independent Directors) not otherwise interested in the transaction that such
transaction is fair and reasonable to the Company and at a price to the
Company no greater than the
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cost of the asset to such Advisor, Director or Affiliate, or, if the price to
the Company is in excess of such cost, that substantial justification for such
excess exists and such excess is reasonable. In no event shall the cost of
such asset to the Company exceed its current appraised value.
SECTION 6.2 Sales and Leases to the Advisor, Directors or Affiliates.
An Advisor, Director or Affiliate may acquire or lease assets 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.
Multiple Programs.
(i) Until completion of the initial public offering of Shares by the
Company, the Advisor and its Affiliates will not offer or sell interests in
any subsequently formed public program that has investment objectives and
structure similar to those of the Company and that intends to (a) invest, on a
cash and/or leveraged basis, in a diversified portfolio of restaurant
properties (either existing properties or properties upon which restaurants
are to be constructed) to be leased on a "triple-net" basis to operators of
national and regional fast-food, family-style, and casual dining restaurant
chains; and (b) offer Secured Equipment Leases. The Advisor and its Affiliates
also will not purchase property or offer Secured Equipment Leases for any such
subsequently formed public program until substantially all (generally, eighty
percent (80%)) of the funds available for investment (net offering proceeds)
by the Company have been invested or committed to investment. (For purposes of
the preceding sentence only, funds are deemed to have been committed to
investment to the extent written agreements in principle or letters of
understanding are executed and in effect at any time, whether or not any such
investment is consummated, and also to the extent any funds have been reserved
to make contingent payments in connection with any Property, whether or not
any such payments are made). Affiliates of the Advisor are currently
purchasing restaurant facilities, including furniture, fixtures, and
equipment, and incurring related costs for public and private investor
programs, which have investment objectives that are not similar to those of
the Company, but which make investments that include "triple-net" leases of
fast-food, family-style, and casual dining restaurant properties. The Advisor
or its Affiliates currently and in the future may offer interests in one or
more public or private investor programs organized to purchase and lease fast-
food, family-style, and casual dining restaurants on a "triple-net" basis.
(ii) In the event that an investment opportunity becomes available which is
suitable for both the Company and a public or private entity with which the
Advisor or its Affiliates are affiliated for which both entities have
sufficient uninvested funds, then the entity which has had the longer period
of time elapse since it was offered an investment opportunity will first be
offered the investment opportunity. An investment opportunity will not be
considered suitable for a program if the requirements of subparagraph (i)
above could not be satisfied if the program were to make the investment. In
determining whether or not an investment opportunity is suitable for more than
one program, the Board of Directors and the Advisor will examine such factors,
among others, as the cash requirements of each program, the effect of the
acquisition both on diversification of each program's investments by types of
restaurants and geographic area, and on diversification of the tenants of its
properties (which also may affect the need for one of the programs to prepare
or produce audited financial statements for a property or a tenant), the
anticipated cash flow of each program, the size of the investment, the amount
of funds available to each program, and the length of time such funds have
been available for investment. If a subsequent development, such as a delay in
the closing of a property or a delay in the construction of a property, causes
any such investment, in the opinion of the Advisor, to be more appropriate for
an entity other than the entity which committed to make the investment,
however, the Advisor has the right to agree that the other entity affiliated
with the Advisor or its Affiliates may make the investment.
SECTION 6.4 Other Transactions.
(i) No goods or services will be provided by the Advisor or its Affiliates
to the Company except for transactions in which the Advisor or its Affiliates
provide goods or services to the Company in accordance with
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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.
(ii) The Company will not make any loans to Affiliates. The Advisor and its
Affiliates will not make loans to the Company, or to Joint Ventures in which
the Company is a co-venturer, for the purchase of Properties. Any loans to the
Company by the Advisor or its Affiliates for other purposes must be approved
by a majority of the Directors (including a majority of Independent Directors)
not otherwise interested in such transaction as fair, competitive, and
commercially reasonable, and no less favorable to the Company than comparable
loans between unaffiliated parties.
ARTICLE VII:Article V:
SHARES
SECTION 7.15.1 Authorized Shares.
The capital stock of the Company shall be divided into Equity Shares. The
total number of Equity Shares which the Company is authorized to issue is one
hundred forty three million five hundred thousand (143,500,000) Shares, shares
of beneficial interest, consisting of sixty two million five hundred thousand
(62,500,000) Common Shares (as defined and described in Section 5.2 7.2(ii)
hereof), three million (3,000,000) Preferred Shares (as defined and described
in Section 5.37.3 hereof) and seventy-eight million (78,000,000) Excess Shares
(as defined and described in Section 5.77.7 hereof). All Shares shall be fully
paid and nonassessable when issued. Shares may be issued for such
consideration as the Directors determine or, if issued as a result of a Share
dividend or Share split, without any consideration.
SECTION 7.25.2 Common Shares.
(i) Common Shares Subject to Terms of Preferred Shares. The Common Shares
shall be subject to the express terms of any series of Preferred Shares.
(ii) Description. Common Shares (herein so called) shall have a par value of
$.01 per share and shall entitle the holders to one (1) vote per share on all
matters upon which Stockholders are entitled to vote pursuant to Section
6.28.2 hereof, and shares of a particular class of issued Common Shares shall
have equal dividend, distribution, liquidation and other rights, and shall
have no preference, cumulative, preemptive, appraisal, conversion or exchange
rights. The Directors may classify or reclassify any unissued Common Shares by
setting or changing the number, designation, preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption of any such Common Shares
and, in such event, the Company shall file for record with the State
Department of Assessments and Taxation of the State of Maryland amended
articles in substance and form as prescribed by Title 2 of the MGCL.
(iii) Distribution Rights. The holders of Common Shares shall be entitled to
receive such Distributions as may be declared by the Board of Directors of the
Company out of funds legally available therefor.
(iv) Dividend or Distribution Rights. The Directors from time to time may
declare and pay to Stockholders such dividends or Distributions in cash or
securities as the Directors in their discretion shall determine. The Directors
shall endeavor to declare and pay such dividends and Distributions as shall be
necessary for the Company to qualify as a real estate investment trust under
the REIT Provisions of the Code; provided, however, Stockholders shall have no
right to any dividend or Distribution unless and until declared by the
Directors. The exercise of the powers and rights of the Directors pursuant to
this Section 5.2(iv) section shall be subject to the provisions of any class
or series of Equity Shares at the time outstanding. The receipt by any Person
in whose name any Equity Shares are registered on the records of the Company
or by his duly authorized agent
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shall be a sufficient discharge for all dividends or Distributions
distributions payable or deliverable in respect of such Equity Shares and from
all liability to see to the application thereof. Distributions in kind shall
not be permitted, except for distributions of readily marketable securities;
distributions of beneficial interests in a liquidating trust established for
the dissolution of the Company and the liquidation of its assets in accordance
with the terms of these Articles of Incorporation; or distributions of in-kind
property as long as the Directors (i) advise each Stockholder of the risks
associated with direct ownership of the property; (ii) offer each Stockholder
the election of receiving in-kind property distributions; and (iii) distribute
in-kind property only to those Stockholders who accept the Directors' offer.
(v) Rights Upon Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up, or any distribution of the assets of
the Company, the aggregate assets available for distribution to holders of the
Common Shares (including holders of Excess Shares resulting from the exchange
of Common Shares pursuant to Section 5.6(iii) 7.6(iii) hereof) shall be
determined in accordance with applicable law. Except as provided below as a
consequence of the limitations on distributions to holders of Excess Shares,
each holder of Common Shares shall be entitled to receive, ratably with (i)
each other holder of Common Shares and (ii) each holder of Excess Shares
resulting from the exchange of Common Shares, that portion of such aggregate
assets available for distribution as the number of the outstanding Common
Shares held by such holder bears to the total number of outstanding Common
Shares and Excess Shares resulting from the exchange of Common Shares then
outstanding. Anything herein to the contrary notwithstanding, in no event
shall the amount payable to a holder of Excess Shares exceed (i) the price per
share such holder paid for the Common Shares in the purported Transfer or
Acquisition (as those terms are defined in Section 5.6(i)7.6(i) or change in
capital structure or other transaction or event that resulted in the Excess
Shares or (ii) if the holder did not give full value for such Excess Shares
(as through a gift, a devise or other event or transaction), a price per share
equal to the Market Price (as that term is defined in Section 5.6(i)7.6(i) for
the Common Shares on the date of the purported Transfer, Acquisition, change
in capital structure or other transaction or event that resulted in such
Excess Shares. Any amount available for distribution in excess of the
foregoing limitations shall be paid ratably to the holders of Common Shares
and other holders of Excess Shares resulting from the exchange of Common
Shares to the extent permitted by the foregoing limitations.
(vi) Voting Rights. Except as may be provided in these Articles of
Incorporation, and subject to the express terms of any series of Preferred
Shares, the holders of the Common Shares shall have the exclusive right to
vote on all matters (as to which a holder of common stock Stockholder shall be
entitled to vote pursuant to applicable law) at all meetings of the
Stockholders of the Company, and shall be entitled to one (1) vote for each
Common Share entitled to vote at such meeting.
SECTION 7.35.3 Preferred Shares.
The Directors are hereby expressly granted the authority to authorize from
time to time the issuance of one or more series of Preferred Shares. Prior to
the issuance of each such series, the Board of Directors, by resolution, shall
fix the number of shares to be included in each series, and the terms, rights,
restrictions and qualifications of the shares of each series, however, the
voting rights for each share of the Preferred Shares shall not exceed voting
rights which bear the same relationship to the voting rights of the Common
Shares as the consideration paid to the Company for each of Preferred Shares
bears to the book value of the Common Shares or the date that such Preferred
Shares are issued. The authority of the Board of Directors with respect to
each series shall include, but not be limited to, determination of the
following:
(i) The designation of the series, which may be by distinguishing number,
letter or title.
(ii) The dividend rate on the shares of the series, if any, whether any
dividends shall be cumulative and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares of
the series.
(iii) The redemption rights, including conditions and the price or
prices, if any, for shares of the series.
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(iv) The terms and amounts of any sinking fund for the purchase or
redemption of shares of the series.
(v) The rights of the shares of the series in the event of any voluntary
or involuntary liquidation, dissolution or winding up of the affairs of the
Company, and the relative rights of priority, if any, of payment of shares
of the series.
(vi) Whether the shares of the series shall be convertible into shares of
any other class or series, or any other security, of the Company or any
other corporation or other entity, and, if so, the specification of such
other class or series of such other security, the conversion price or
prices or rate or rates, any adjustments thereof, the date or dates on
which such shares shall be convertible and all other terms and conditions
upon which such conversion may be made.
(vii) Restrictions on the issuance of shares of the same series or of any
other class or series.
(viii) The voting rights of the holders of shares of the series subject
to the limitations contained in this Section 5.37.3.
(ix) Any other relative rights, preferences and limitations on that
series.
Subject to the express provisions of any other series of Preferred Shares
then outstanding, and notwithstanding any other provision of these Articles of
Incorporation, the Board of Directors may increase or decrease (but not below
the number of shares of such series then outstanding) the number of shares, or
alter the designation or classify or reclassify any unissued shares of a
particular series of Preferred Shares, by fixing or altering, in one or more
respects, from time to time before issuing the shares, the terms, rights,
restrictions and qualifications of the shares of any such series of Preferred
Shares.
SECTION 7.45.4 General Nature of Shares.
All Shares shall be personal property entitling the Stockholders only to
those rights provided in these Articles of Incorporation, the MGCL or in the
resolution creating any class or series of Shares. The legal ownership of the
Company Property and the right to conduct the business of the Company are
vested exclusively in the Directors; the Stockholders shall have no interest
therein other than the beneficial interest in the Company conferred by their
Shares and shall have no right to compel any partition, division, dividend or
Distribution of the Company or any of the Company Property. The death of a
Stockholder shall not terminate the Company or give his legal representative
any rights against other Stockholders, the Directors or the Company Property,
except the right, exercised in accordance with applicable provisions of the
Bylaws, to require the Company to reflect on its books the change in ownership
of the Shares. Holders of Shares shall not have any preemptive or other right
to purchase or subscribe for any class of securities of the Company which the
Company may at any time issue or sell.
5.5 No Issuance Of Share Certificates.
The Company shall not issue share certificates. A Stockholder's investment
shall be recorded on the books of the Company. To transfer his or her Shares a
Stockholder shall submit an executed form to the Company, which form shall be
provided by the Company upon request. Such transfer will also be recorded on
the books of the Company. Upon issuance or transfer of shares, the Company
will provide the Stockholder with information concerning his or her rights
with regard to such stock, in a form substantially similar to Section
57.6(xii), and required by the Bylaws and the MGCL or other applicable law.
SECTION 7.65.6 Restrictions On Ownership and Transfer.
(i) Definitions. For purposes of Sections 5.6 and 5.7, 7.6 and 7.7, the
following terms shall have the following meanings:
"Acquire" means the acquisition of Beneficial or Constructive Ownership of
Equity Shares by any means, including, without limitation, the exercise of any
rights under any option, warrant, convertible security, pledge or
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other security interest or similar right to acquire shares, but shall not
include the acquisition of any such rights unless, as a result, the acquiror
would be considered a Beneficial Owner or Constructive Owner. The terms
"Acquires" and "Acquisition" shall have correlative meanings.
"Beneficial Ownership" means ownership of Shares by an individual who would
be treated as an owner of such Shares under Section 542(a)(2) of the Code,
either directly or constructively through the application of Section 544 of
the Code, as modified by Section 856(h)(1)(B) of the Code. For purposes of
this definition, the term "individual" shall include any organization, trust,
or other entity that is treated as an individual for purposes of Section
542(a)(2) of the Code. The terms "Beneficial Owner," "Beneficially Owns" and
"Beneficially Owned" shall have correlative meanings.
"Beneficiary" means a beneficiary of the Excess Shares Trust as determined
pursuant to Section 5.7(i)7.7(v)(a) hereof.
"Closing Price" on any day shall mean the last sale price, regular way on
such day, or, if no such sale takes place on that day, the average of the
closing bid and asked prices, regular way, in either case as reported on the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange, or if the
affected class or series of Equity Shares are not so listed or admitted to
trading, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange (including the National Market System of the National Association of
Securities Dealers, Inc. Automated Quotation System) on which the affected
class or series of Equity Shares are listed or admitted to trading, or, if the
affected class or series of Equity Shares are not so listed or admitted to
trading, the last quoted price or, if not 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 automated quotation
system then in use, or, if the affected class or series of Equity Shares are
not so quoted by any such system, the average of the closing bid and asked
prices as furnished by a professional market maker selected by the Board of
Directors making a market in the affected class or series of Equity Shares,
or, if there is no such market maker or such closing prices otherwise are not
available, the fair market value of the affected class or series of Equity
Shares as of such day, as determined by the Board of Directors in its
discretion.
"Common Share Ownership Limit" means, with respect to the Common Shares,
nine point eight percent (9.8%) of the outstanding Common Shares, subject to
adjustment pursuant to Section 5.6(x)7.6(x) (but not more than nine point nine
percent (9.9%) of the outstanding Common Shares, as so adjusted) and to the
limitations contained in Section 5.6(xi)7.6(xi).
"Constructive Ownership" means ownership of Equity Shares by a Person person
who would be treated as an owner of such Equity Shares, shares, either
actually or constructively, directly or indirectly, through the application of
Section 318 of the Code, as modified by Section 856(d)(5) thereof. The terms
"Constructive Owner," "Constructively Owns" and "Constructively Owned" shall
have correlative meanings.
"Excess Shares Trust" means the trust created pursuant to Section
5.7(i)7.7(i) hereof.
"Excess Shares Trustee" means the Company as trustee for the Excess Shares
Trust, and any successor trustee appointed by the Company.
"Market Price" means, during the offering, the price per Equity Share and
thereafter, until the Equity Shares are listed for trading on an exchange or
market, a price determined on the basis of the quarterly valuation of the
Company's assets. Upon listing of the Shares, market price shall mean the
average of the Closing Prices for the ten (10) consecutive Trading Days
immediately preceding such day (or those days during such ten (10) Trading Day
day period for which Closing Prices are available).
"Ownership Limit" means the Common Share Ownership Limit or the Preferred
Share Ownership Limit, or both, as the context may require.
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"Preferred Share Ownership Limit" means, with respect to the Preferred
Shares, nine point eight percent (9.8%) of the outstanding shares Shares of a
particular series of Preferred Shares of the Company, subject to adjustment
pursuant to Section 5.6(x)7.6(x) (but not more than nine point nine percent
(9.9%) of the outstanding Preferred Shares, as so adjusted) and to the
limitations contained in this Section 5.67.6.
"Purported Beneficial Holder" means, with respect to any event or
transaction other than a purported Transfer or Acquisition which results in
Excess Shares, the Person for whom the applicable Purported Record Holder held
the Equity Shares that were, pursuant to paragraph (iii) of this Section
5.6(iii)7.6, automatically exchanged for Excess Shares upon the occurrence of
such event or transaction. The Purported Beneficial Holder and the Purported
Record Holder may be the same Person.
"Purported Beneficial Transferee" means, with respect to any purported
Transfer or Acquisition which results in Excess Shares, the purported
beneficial transferee for whom the Purported Record Transferee would have
acquired Equity Shares if such Transfer or Acquisition which results in Excess
Shares had been valid under Section 5.6(ii)7.6(ii). The Purported Beneficial
Transferee and the Purported Record Transferee may be the same Person.
"Purported Record Holder" means, with respect to any event or transaction
other than a purported Transfer or Acquisition which results in Excess Shares,
the record holder of the Equity Shares that were, pursuant to Section
5.6(iii)7.6(iii), automatically exchanged for Excess Shares upon the
occurrence of such an event or transaction. The Purported Record Holder and
the Purported Beneficial Holder may be the same Person.
"Purported Record Transferee" means, with respect to any purported Transfer
or Acquisition which results in Excess Shares, the record holder of the Equity
Shares if such Transfer or Acquisition which results in Excess Shares had been
valid under Section 5.6(ii)7.6(ii). The Purported Record Transferee and the
Purported Beneficial Transferee may be the same Person.
"Restriction Termination Date" means the first day after the date of the
closing of the Initial Public Offering on which the Board of Directors of the
Company determines, pursuant to Section 3.2(xxiii) 3.2(xxii) hereof, that it
is no longer in the best interests of the Company to attempt or continue to
qualify as REIT.
"Trading Day" means a day on which the principal national securities
exchange on which the affected class or series of Equity Shares are listed or
admitted to trading is open for the transaction of business or, if the
affected class or series of Equity Shares are not listed or admitted to
trading, shall mean any day other than a Saturday, Sunday or other day on
which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Transfer" means any sale, transfer, gift, hypothecation, assignment, devise
or other disposition of a direct or indirect interest in Equity Shares or the
right to vote or receive dividends on Equity Shares (including (i) the
granting of any option (including any option to acquire an option or any
series of such options) or entering into any agreement for the sale, transfer
or other disposition of Equity Shares or the right to vote or receive
dividends on Equity Shares or (ii) the sale, transfer, assignment or other
disposition of any securities or rights convertible into or exchangeable for
Equity Shares, whether voluntary or involuntary, of record, constructively or
beneficially, and whether by operation of law or otherwise. The terms
"Transfers," "Transferred" and "Transferable" shall have correlative meanings.
(ii) Ownership and Transfer Limitations.
(a) Notwithstanding any other provision of these Articles of Incorporation,
except as provided in Section 5.6(ix)7.6(ix) and Section 5.87.8, from the date
of the Initial Public Offering and prior to the Restriction Termination Date,
no Person shall Beneficially or Constructively Own Equity Shares in excess of
the Common or Preferred Share Ownership Limit.
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(b) Notwithstanding any other provision of these Articles of Incorporation,
except as provided in Section 5.6(ix)7.6(ix) and Section 5.87.8, from the date
of the Initial Public Offering and prior to the Restriction Termination Date,
any Transfer, Acquisition, change in the capital structure of the Company,
other purported change in Beneficial or Constructive Ownership of Equity
Shares or other event or transaction that, if effective, would result in any
Person Beneficially or Constructively Owning Equity Shares in excess of the
Common or Preferred Share Ownership Limit shall be void ab initio as to the
Transfer, Acquisition, change in the capital structure of the Company, other
purported change in Beneficial or Constructive Ownership or other event or
transaction with respect to that number of Equity Shares which would otherwise
be Beneficially or Constructively Owned by such Person in excess of the Common
or Preferred Share Ownership Limit, and none of the Purported Beneficial
Transferee, the Purported Record Transferee, the Purported Beneficial Holder
or the Purported Record Holder shall acquire any rights in that number of
Equity Shares.
(c) Notwithstanding any other provision of these Articles of Incorporation,
and except as provided in Section 5.8, 7.8, from the date of the Initial
Public Offering and prior to the Restriction Termination Date, any Transfer,
Acquisition, change in the capital structure of the Company, or other
purported change in Beneficial or Constructive Ownership (including actual
ownership) of Equity Shares or other event or transaction that, if effective,
would result in the Equity Shares being actually owned by fewer than 100
Persons (determined without reference to any rules of attribution) shall be
void ab initio as to the Transfer, Acquisition, change in the capital
structure of the Company, other purported change in Beneficial or Constructive
Ownership (including actual ownership) with respect to that number of Equity
Shares which otherwise would be owned by the transferee, and the intended
transferee or subsequent owner (including a Beneficial Owner or Constructive
Owner) shall acquire no rights in that number of Equity Shares.
(d) Notwithstanding any other provision of these Articles of Incorporation,
except as provided in Section 5.8, 7.8, from the date of the Initial Public
Offering and prior to the Restriction Termination Date, any Transfer,
Acquisition, change in the capital structure of the Company, other purported
change in Beneficial or Constructive Ownership of Equity Shares or other event
or transaction that, if effective, would cause the Company to fail to qualify
as a REIT by reason of being "closely held" within the meaning of Section
856(h) of the Code or otherwise, directly or indirectly, would cause the
Company to fail to qualify as a REIT shall be void ab initio as to the
Transfer, Acquisition, change in the capital structure of the Company, other
purported change in Beneficial or Constructive Ownership or other event or
transaction with respect to that number of Equity Shares which would cause the
Company to be "closely held" within the meaning of Section 856(h) of the Code
or otherwise, directly or indirectly, would cause the Company to fail to
qualify as a REIT, and none of the Purported Beneficial Transferee, the
Purported Record Transferee, the Purported Beneficial Holder or the Purported
Record Holder shall acquire any rights in that number of Equity Shares.
(e) Notwithstanding any other provision of these Articles of Incorporation,
except as provided in Section 5.87.8, from the date of the Initial Public
Offering and prior to the Restriction Termination Date, any Transfer,
Acquisition, change in capital structure of the Company, or other purported
change in Beneficial or Constructive Ownership of Equity Shares or other event
or transaction that, if effective, would (i) cause the Company to own
(directly or Constructively) an interest in a tenant that is described in
Section 856(d)(2)(B) of the Code and (ii) cause the Company to fail to satisfy
any of the gross income requirements of Section 856(c) of the Code, shall be
void ab initio as to the Transfer, Acquisition, change in capital structure of
the Company, other purported change in Beneficial or Constructive Ownership or
other event or transaction with respect to that number of Equity Shares which
would cause the Company to own an interest (directly or Constructively) in a
tenant that is described in Section 856(d)(2)(B) of the Code, and none of the
Purported Beneficial Transferee, the Purported Record Transferee, the
Purported Beneficial Holder or the Purported Record Holder shall acquire any
rights in that number of Equity Shares.
(f) Notwithstanding any other provision of these Articles of Incorporation,
any person selling securities on behalf of the Company in its Initial Public
Offering may not complete a sale of securities to a Stockholder until at least
five (5) business days after the date the Stockholder receives a final
Prospectus and shall send each Stockholder a confirmation of his or her
purchase.
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(iii) Exchange for Excess Shares.
(a) If, notwithstanding the other provisions contained in this Article V,
Article VII, at any time from the date of the Initial Public Offering and
prior to the Restriction Termination Date, there is a purported Transfer,
Acquisition, change in the capital structure of the Company, other purported
change in the Beneficial or Constructive Ownership of Equity Shares or other
event or transaction such that any Person would either Beneficially or
Constructively Own Equity Shares in excess of the Common or Preferred Share
Ownership Limit, then, except as otherwise provided in Section 5.6(ix)7.6(ix),
such Equity Shares (rounded up to the next whole number of shares) in excess
of the Common or Preferred Share Ownership Limit automatically shall be
exchanged for an equal number of Excess Shares having terms, rights,
restrictions and qualifications identical thereto, except to the extent that
this Article V Article VII requires different terms. Such exchange shall be
effective as of the close of business on the business day next preceding the
date of the purported Transfer, Acquisition, change in capital structure,
other change in purported Beneficial or Constructive Ownership of Equity
Shares, or other event or transaction.
(b) If, notwithstanding the other provisions contained in this Article V,
Article VII, at any time after the date of the Initial Public Offering and
prior to the Restriction Termination Date, there is a purported Transfer,
Acquisition, change in the capital structure of the Company, other purported
change in the Beneficial or Constructive Ownership of Equity Shares or other
event or transaction which, if effective, would result in a violation of any
of the restrictions described in subparagraphs (b), (c), (d) and (e) of
paragraph (ii) of this Section 5.6(ii)7.6 or, directly or indirectly, would
cause the Company for any reason to fail to qualify as a REIT by reason of
being "closely held" within the meaning of Section 856(h) of the Code, or
otherwise, directly or indirectly, would cause the Company to fail to qualify
as a REIT, then the Equity Shares (rounded up to the next whole number of
shares) Shares) being Transferred or which are otherwise affected by the
change in capital structure or other purported change in Beneficial or
Constructive Ownership and which, in any case, would cause the Company to be
"closely held" within the meaning of such Section 856(h) or otherwise would
cause the Company to fail to qualify as a REIT automatically shall be
exchanged for an equal number of Excess Shares having terms, rights,
restrictions and qualifications identical thereto, except to the extent that
this Article V Article VII requires different terms. Such exchange shall be
effective as of the close of business on the business day prior to the date of
the purported Transfer, Acquisition, change in capital structure, other
purported change in Beneficial or Constructive Ownership or other event or
transaction.
(iv) Remedies For Breach. If the Board of Directors or its designee shall at
any time determine in good faith that a Transfer, Acquisition, change in the
capital structure of the Company or other purported change in Beneficial or
Constructive Ownership or other event or transaction has taken place in
violation of Section 5.6(ii)7.6(ii) or that a Person intends to Acquire or has
attempted to Acquire Beneficial or Constructive Ownership of any Equity Shares
in violation of this Section 5.67.6, the Board of Directors or its designee
shall take such action as it deems advisable to refuse to give effect to or to
prevent such Transfer, Acquisition, change in the capital structure of the
Company, other attempt to Acquire Beneficial or Constructive Ownership of any
Equity Shares or other event or transaction, including, but not limited to,
refusing to give effect thereto on the books of the Company or instituting
injunctive proceedings with respect thereto; provided, however, that any
Transfer, Acquisition, change in the capital structure of the Company,
attempted Transfer or other attempt to Acquire Beneficial or Constructive
Ownership of any Equity Shares or other event or transaction in violation of
subparagraphs (b), (c), (d) and (e) of Section 5.6(ii)7.6(ii) (as applicable)
shall be void ab initio and where applicable automatically shall result in the
exchange described in Section 5.6(iii)7.6(iii), irrespective of any action (or
inaction) by the Board of Directors or its designee.
(v) Notice of Restricted Transfer. Any Person who acquires or attempts to
Acquire Beneficial or Constructive Ownership of Equity Shares in violation of
Section 5.6(ii)7.6(ii) and any Person who Beneficially or Constructively Owns
Excess Shares as a transferee of Equity Shares resulting in an exchange for
Excess Shares, pursuant to Section 5.6(iii)7.6(iii), or otherwise shall
immediately give written notice to the Company, or, in the event of a proposed
or attempted Transfer, Acquisition, or purported change in Beneficial or
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Constructive Ownership, shall give at least fifteen (15) days prior written
notice to the Company, of such event and shall promptly provide to the Company
such other information as the Company, in its sole discretion, may request in
order to determine the effect, if any, of such Transfer, attempted Transfer,
Acquisition, Attempted Acquisition or purported change in Beneficial or
Constructive Ownership on the Company's status as a REIT.
(vi) Owners Required To Provide Information. Prior From the date of the
Initial Public Offering and prior to the Restriction Termination Date:
(a) Every Beneficial or Constructive Owner of more than five percent
(5%), or such lower percentages as determined pursuant to regulations under
the Code or as may be requested by the Board of Directors, in its sole
discretion, of the outstanding shares of any class or series of Equity
Shares of the Company shall annually, no later than January 31 of each
calendar year, give written notice to the Company stating (i) the name and
address of such Beneficial or Constructive Owner; (ii) the number of shares
of each class or series of Equity Shares Beneficially or Constructively
Owned; and (iii) a description of how such shares are held. Each such
Beneficial or Constructive Owner promptly shall provide to the Company such
additional information as the Company, in its sole discretion, may request
in order to determine the effect, if any, of such Beneficial or
Constructive Ownership on the Company's status as a REIT and to ensure
compliance with the Common or Preferred Share Ownership Limit and other
restrictions set forth herein.
(b) Each Person who is a Beneficial or Constructive Owner of Equity
Shares and each Person (including the Stockholder of record) who is holding
Equity Shares for a Beneficial or Constructive Owner promptly shall provide
to the Company such information as the Company, in its sole discretion, may
request in order to determine the Company's status as a REIT, to comply
with the requirements of any taxing authority or other governmental agency,
to determine any such compliance or to ensure compliance with the Common or
Preferred Share Ownership Limit and other restrictions set forth herein.
(vii) Remedies Not Limited. Nothing contained in this Article V Article VII
except Section 5.87.8 shall limit scope or application of the provisions of
this Section 5.67.6, the ability of the Company to implement or enforce
compliance with the terms thereof or the authority of the Board of Directors
to take any such other action or actions as it may deem necessary or advisable
to protect the Company and the interests of its Stockholders by preservation
of the Company's status as a REIT and to ensure compliance with the Ownership
Limits for each any class or series of Equity Shares and other restrictions
set forth herein, including, without limitation, refusal to give effect to a
transaction on the books of the Company.
(viii) Ambiguity. In the case of an ambiguity in the application of any of
the provisions of this Section 5.67.6, including any definition contained in
Sections 1.51.5 and 5.6(i)7.6(i), the Board of Directors shall have the power
and authority, in its sole discretion, to determine the application of the
provisions of this Section 5.67.6 with respect to any situation based on the
facts known to it.
(ix) Exception. The Board of Directors, upon receipt of a ruling from the
Internal Revenue Service, an opinion of counsel or other evidence satisfactory
to the Board of Directors, in its sole discretion, in each case to the effect
that the restrictions contained in subparagraphs (c), (d) and (e) of Section
5.6(ii)7.6(ii) will not be violated, may waive or change, in whole or in part,
the application of the Common or Preferred Share Ownership Limit with respect
to any Person that is not an individual, as such term is defined in
Section 542(a)(2) of the Code. In connection with any such waiver or change,
the Board of Directors may require such representations and undertakings from
such Person or Affiliates affiliates and may impose such other conditions as
the Board deems necessary, advisable or prudent, in its sole discretion, to
determine the effect, if any, of the proposed transaction or ownership of
Equity Shares on the Company's status as a REIT.
(x) Increase in Common or Preferred Share Ownership Limit. Subject to the
limitations contained in Section 5.6(xi)7.6(xi), the Board of Directors may
from time to time increase the Common or Preferred Share Ownership Limit.
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(xi) Limitations on Modifications.
(a) The Ownership Limit for a class or series of Equity Shares may not be
increased and no additional ownership limitations may be created if, after
giving effect to such increase or creation, the Company would be "closely
held" within the meaning of Section 856(h) of the Code (assuming ownership of
shares of Equity Shares by all Persons equal to the greatest of (A) the actual
ownership, (B) the Beneficial Ownership of Equity Shares by each Person, or
(C) the applicable Ownership Limit with respect to such Person.
(b) Prior to any modification of the Ownership Limit with respect to any
Person, the Board of Directors may require such opinions of counsel,
affidavits, undertakings or agreements as it may deem necessary, advisable or
prudent, in its sole discretion, in order to determine or ensure the Company's
status as a REIT.
(c) Neither the Preferred Share Ownership Limit nor the Common Share
Ownership Limit may be increased to a percentage that is greater than nine
point nine percent (9.9%).
(xii) Notice to Stockholders Upon Issuance or Transfer. Upon issuance or
transfer of Shares, the Company shall provide the recipient with a notice
containing information about the shares purchased or otherwise transferred, in
lieu of issuance of a share certificate, in a form substantially similar to
the following:
"The securities issued or transferred are subject to restrictions on
transfer and ownership for the purpose of maintenance of the Company's status
as a real estate investment trust (a "REIT") under Sections 856 through 860 of
the Internal Revenue Code of 1986, as amended (the "Code"). Except as
otherwise provided pursuant to the Articles of Incorporation of the Company,
no Person may (i) Beneficially or Constructively Own Common Shares of the
Company in excess of 9.8% (or such greater percent as may be determined by the
Board of Directors of the Company) of the outstanding Common Shares; (ii)
Beneficially or Constructively Own shares of any series of Preferred Shares of
the Company in excess of 9.8% of the outstanding shares of such series of
Preferred Shares; or (iii) Beneficially or Constructively Own Common Shares or
Preferred Shares (of any class or series) which would result in the Company
being "closely held" under Section 856(h) of the Code or which otherwise would
cause the Company to fail to qualify as a REIT. Any Person who has Beneficial
or Constructive Ownership, or who Acquires or attempts to Acquire Beneficial
or Constructive Ownership of Common Shares and/or Preferred Shares in excess
of the above limitations and any Person who Beneficially or Constructively
Owns Excess Shares as a transferee of Common or Preferred Shares resulting in
an exchange for Excess Shares (as described below) immediately must notify the
Company in writing or, in the event of a proposed or attempted Transfer or
Acquisition or purported change in Beneficial or Constructive Ownership, must
give written notice to the Company at least 15 days prior to the proposed or
attempted transfer, transaction or other event. Any Transfer or Acquisition of
Common Shares and/or Preferred Shares or other event which results in
violation of the ownership or transfer limitations set forth in the Company's
Articles of Incorporation shall be void ab initio and the Purported Beneficial
and Record Transferee shall not have or acquire any rights in such Common
Shares and/or Preferred Shares. If the transfer and ownership limitations
referred to herein are violated, the Common Shares or Preferred Shares
represented hereby automatically will be exchanged for Excess Shares to the
extent of violation of such limitations, and such Excess Shares will be held
in trust by the Company, all as provided by the Articles of Incorporation of
the Company. All defined terms used in this legend have the meanings
identified in the Company's Articles of Incorporation, as the same may be
amended from time to time, a copy of which, including the restrictions on
transfer, will be sent without charge to each Stockholder who so requests."
SECTION 7.75.7 Excess Shares.
(i) Ownership In Trust. Upon any purported Transfer, Acquisition, change in
the capital structure of the Company, other purported change in Beneficial or
Constructive Ownership or event or transaction that results in Excess Shares
pursuant to Section 5.6(iii)7.6(iii), such Excess Shares shall be deemed to
have been transferred to the Company, as Excess Shares Trustee of an Excess
Shares Trust for the benefit of such Beneficiary or Beneficiaries to whom an
interest in such Excess Shares may later be transferred pursuant to Section
5.6(v)7.6(v). Excess Shares so held in trust shall be issued and outstanding
stock of the Company. The Purported Record
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Transferee (or Purported Record Holder) shall have no rights in such Excess
Shares except the right to designate a transferee of such Excess Shares upon
the terms specified in Section 5.6(v)7.6(v). The Purported Beneficial
Transferee shall have no rights in such Excess Shares except as provided in
Section 5.7(iii) and (v). 7.7(iii) and (v) .
(ii) Distribution Rights. Excess Shares shall not be entitled to any
dividends or Distributions (except as provided in Section 5.7(iii)7.7(iii)).
Any dividend or Distribution paid prior to the discovery by the Company that
the Equity Shares have been exchanged for Excess Shares shall be repaid to the
Company upon demand, and any dividend or Distribution declared but unpaid at
the time of such discovery shall be void ab initio with respect to such Excess
Shares.
(iii) Rights Upon Liquidation.
(a) Except as provided below, in the event of any voluntary or involuntary
liquidation, dissolution or winding up, or any other distribution of the
assets, of the Company, each holder of Excess Shares resulting from the
exchange of Preferred Shares of any specified series shall be entitled to
receive, ratably with each other holder of Excess Shares resulting from the
exchange of Preferred Shares of such series and each holder of Preferred
Shares of such series, such accrued and unpaid dividends, liquidation
preferences and other preferential payments, if any, as are due to holders of
Preferred Shares of such series. In the event that holders of shares of any
series of Preferred Shares are entitled to participate in the Company's
distribution of its residual assets, each holder of Excess Shares resulting
from the exchange of Preferred Shares of any such series shall be entitled to
participate, ratably with (A) each other holder of Excess Shares resulting
from the exchange of Preferred Shares of all series entitled to so
participate; (B) each holder of Preferred Shares of all series entitled to so
participate; and (C) each holder of Common Shares and Excess Shares resulting
from the exchange of Common Shares (to the extent permitted by Section
5.6(iii)7.6(iii) hereof), that portion of the aggregate assets available for
distribution (determined in accordance with applicable law) as the number of
shares of such Excess Shares held by such holder bears to the total number of
(1) outstanding Excess Shares resulting from the exchange of Preferred Shares
of all series entitled to so participate; (2) outstanding Preferred Shares of
all series entitled to so participate; and (3) outstanding Common Shares and
Excess Shares resulting from the exchange of Common Shares. The Company, as
holder of the Excess Shares in trust, or, if the Company shall have been
dissolved, any trustee appointed by the Company prior to its dissolution,
shall distribute ratably to the Beneficiaries of the Excess Shares Trust, when
determined, any such assets received in respect of the Excess Shares in any
liquidation, dissolution or winding up, or any distribution of the assets, of
the Company. Anything to the contrary herein notwithstanding, in no event
shall the amount payable to a holder with respect to Excess Shares resulting
from the exchange of Preferred Shares exceed (A) the price per share such
holder paid for the Preferred Shares in the purported Transfer, Acquisition,
change in capital structure or other transaction or event that resulted in the
Excess Shares or (B) if the holder did not give full value for such Excess
Shares (as through a gift, devise or other event or transaction), a price per
share equal to the Market Price for the shares of Preferred Shares on the date
of the purported Transfer, Acquisition, change in capital structure or other
transaction or event that resulted in such Excess Shares. Any amount available
for distribution in excess of the foregoing limitations shall be paid ratably
to the holders of Preferred Shares and Excess Shares resulting from the
exchange of Preferred Shares to the extent permitted by the foregoing
limitations.
(b) Except as provided below, in the event of any voluntary or involuntary
liquidation, dissolution or winding up, or any other distribution of the
assets, of the Company, each holder of Excess Shares resulting from the
exchange of Common Shares shall be entitled to receive, ratably with (A) each
other holder of such Excess Shares and (B) each holder of Common Shares, that
portion of the aggregate assets available for distribution to holders of
Common Shares (including holders of Excess Shares resulting from the exchange
of Common Shares pursuant to Section 5.6(iii)7.6(iii)), determined in
accordance with applicable law, as the number of such Excess Shares held by
such holder bears to the total number of outstanding Common Shares and
outstanding Excess Shares resulting from the exchange of Common Shares then
outstanding. The Company, as holder of the Excess Shares in trust, or, if the
Company shall have been dissolved, any trustee appointed by the Company prior
to its
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dissolution, shall distribute ratably to the Beneficiaries of the Excess
Shares, when determined, any such assets received in respect of the Excess
Shares in any liquidation, dissolution or winding up, or any distribution of
the assets, of the Company. Anything herein to the contrary notwithstanding,
in no event shall the amount payable to a holder with respect to Excess Shares
exceed (A) the price per share such holder paid for the Equity Shares in the
purported Transfer, Acquisition, change in capital structure or other
transaction or event that resulted in the Excess Shares or (B) if the holder
did not give full value for such Equity Shares (as through a gift, devise or
other event or transaction), a price per share equal to the Market Price for
the Equity Shares on the date of the purported Transfer, Acquisition, change
in capital structure or other transaction or event that resulted in such
Excess Shares. Any amount available for distribution in excess of the
foregoing limitations shall be paid ratably to the holders of Common Shares
and Excess Shares resulting from the exchange of Common Shares to the extent
permitted by the foregoing limitations.
(iv) Voting Rights. The holders of Excess Shares shall not be entitled to
vote on any matters (except as required by the MGCL).
(v) Restrictions on Transfer; Designation of Beneficiary.
(a) Excess Shares shall not be transferable. The Purported Record Transferee
(or Purported Record Holder) may freely designate a Beneficiary of its
interest in the Excess Shares Trust (representing the number of Excess Shares
held by the Excess Shares Trust attributable to the purported Transfer or
Acquisition that resulted in the Excess Shares), if (A) the Excess Shares held
in the Excess Shares Trust would not be Excess Shares in the hands of such
Beneficiary and (B) the Purported Beneficial Transferee (or Purported
Beneficial Holder) does not receive a price for designating such Beneficiary
that reflects a price per share for such Excess Shares that exceeds (1) the
price per share such Purported Beneficial Transferee (or Purported Beneficial
Holder) paid for the Equity Shares in the purported Transfer, Acquisition,
change in capital structure, or other transaction or event that resulted in
the Excess Shares or (2) if the Purported Beneficial Transferee (or Purported
Beneficial Holder) did not give value for such Excess Shares (as through a
gift, devise or other event or transaction), a price per share equal to the
Market Price for the Equity Shares on the date of the purported Transfer,
Acquisition, change in capital structure, or other transaction or event that
resulted in the Excess Shares. Upon such transfer of an interest in the Excess
Shares Trust, the corresponding Excess Shares in the Excess Shares Trust
automatically shall be exchanged for an equal number of Equity Shares
(depending on the type and class of Shares that were originally exchanged for
such Excess Shares), and such Equity Shares shall be transferred of record to
the Beneficiary of the interest in the Excess Shares Trust designated by the
Purported Record Transferee (or Purported Record Holder), as described above,
if such Equity Shares would not be Excess Shares in the hands of such
Beneficiary. Prior to any transfer of any interest in the Excess Shares Trust,
the Purported Record Transferee (or Purported Record Holder) must give advance
written notice to the Company of the intended transfer and the Company must
have waived in writing its purchase rights under Section 5.7(vi). 7.7(vi).
(b) Notwithstanding the foregoing, if a Purported Beneficial Transferee (or
Purported Beneficial Holder) receives a price for designating a Beneficiary of
an interest in the Excess Shares Trust that exceeds the amounts allowable
under subparagraph (i) of this Section 5.6(v)7.6(v), such Purported Beneficial
Transferee (or Purported Beneficial Holder) shall pay, or cause the
Beneficiary of the interest in the Excess Shares Trust to pay, such excess in
full to the Company.
(c) If any of the transfer restrictions set forth in this Section 5.6(v),
7.6(v), or any application thereof, are determined to be void, invalid or
unenforceable by any court having jurisdiction over the issue, the Purported
Record Transferee (or Purported Record Holder) may be deemed, at the option of
the Company, to have acted as the agent of the Company in acquiring the Excess
Shares as to which such restrictions would otherwise, by their terms, apply
and to hold such Excess Shares on behalf of the Company.
(vi) Purchase Right in Excess Shares. Excess Shares 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 Excess Shares (or, in the case of devise or gift or event other than a
Transfer or Acquisition which
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results in the issuance of Excess Shares, the Market Price at the time of such
devise or gift or event other than a Transfer or Acquisition which results in
the issuance of Excess Shares) and (ii) the Market Price of the Equity Shares
exchanged for such Excess Shares on the date the Company, or its designee,
accepts such offer. The Company and its assignees shall have the right to
accept such offer for a period of ninety (90) days after the later of (i) the
date of the purported Transfer, Acquisition, change in capital structure of
the Company, purported change in Beneficial Ownership or other event or
transaction which resulted in such Excess Shares and (ii) the date on which
the Board of Directors determines in good faith that a Transfer, Acquisition,
change in capital structure of the Company, purported change in Beneficial or
Constructive Ownership resulting in Excess Shares has occurred, if the Company
does not receive a notice pursuant to Section 5.6(v)7.6(v), but in no event
later than a permitted Transfer pursuant to and in compliance with the terms
of Section 5.7(v). 7.7(v).
(vii) Remedies Not Limited. Nothing contained in this Article V Article VII
except Section 5.8 7.8 shall limit scope or application of the provisions of
this Section 5.77.7, the ability of the Company to implement or enforce
compliance with the terms hereof or the authority of the Board of Directors to
take any such other action or actions as it may deem necessary or advisable to
protect the Company and the interests of its Stockholders by preservation of
the Company's status as a REIT and to ensure compliance with applicable Share
Ownership Limits and the other restrictions set forth herein, including,
without limitation, refusal to give effect to a transaction on the books of
the Company.
(viii) Authorization. At such time as the Board of Directors authorizes a
series of Preferred Shares pursuant to Section 5.37.3 of this Article V,
Article VII, without any further or separate action of the Board of Directors,
there shall be deemed to be authorized a series of Excess Shares consisting of
the number of shares included in the series of Preferred Shares so authorized
and having terms, rights, restrictions and qualifications identical thereto,
except to the extent that such Excess Shares are already authorized or this
Article V Article VII requires different terms.
SECTION 7.85.8 Settlements.
Nothing in Sections 5.67.6 and 5.77.7 or in any other provision of these
Articles of Incorporation shall preclude the settlement of any transaction
with respect to the Common Shares entered into through the facilities of the
New York Stock Exchange or other national securities exchange on which the
Common Shares are listed.
SECTION 7.95.9 Severability.
If any provision of this Article V Article VII 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 V Article VII 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.
SECTION 7.105.10 Waiver.
The Company shall have authority at any time to waive the requirements that
Excess Shares be issued or be deemed outstanding in accordance with the
provisions of this Article V Article VII if the Company determines, based on
an opinion of nationally recognized tax counsel, that the issuance of such
Excess Shares or the fact that such Excess Shares are deemed to be
outstanding, would jeopardize the status of the Company as a REIT (as that
term is defined in Section 1.51.5).
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ARTICLE VIII:Article VI:
STOCKHOLDERS
SECTION 8.16.1 Meetings of Stockholders.
There shall be an annual meeting of the Stockholders, 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 at a location convenient to
the Stockholders, on a date which is a reasonable period of time following the
distribution of the Company's annual report to Stockholders but not less than
thirty (30) days after delivery of such report. A majority of Stockholders
present in person or by proxy at an annual meeting at which a quorum is
present, may, without the necessity for concurrence by the Directors, vote to
elect the Directors. Special meetings of Stockholders may be called in the
manner provided in the Bylaws, including at any time by Stockholders holding,
in the aggregate, not less than ten percent (10%) of the outstanding Equity
Shares entitled to be cast on any issue proposed to be considered at any such
special meeting. If there are no Directors, the officers of the Company shall
promptly call a special meeting of the Stockholders entitled to vote for the
election of successor Directors. Any meeting may be adjourned and reconvened
as the Directors determine or as provided by the Bylaws.
SECTION 8.26.2 Voting Rights of Stockholders.
Subject to the provisions of any class or series of Shares then outstanding
and the mandatory provisions of any applicable laws or regulations, the
Stockholders shall be entitled to vote only on the following matters; (a)
election or removal of Directors as provided in Sections 2.3, 2.5 and 6.1 8.1,
2.4 and 2.7 hereof; (b) amendment of these Articles of Incorporation as
provided in Section 8.110.1 hereof; (c) termination of the Company as provided
in Section 9.211.2 hereof; (d) reorganization of the Company as provided in
Section 8.210.2 hereof; (e) merger, consolidation or sale or other disposition
of all or substantially all of the Company Property, as provided in Section
8.310.3 hereof; and (f) termination of the Company's status as a real estate
investment trust under the REIT Provisions of the Code, as provided in Section
3.2(xxiii) 3.2(xxiii) hereof. The Stockholders may terminate the status of the
Company as a REIT under the Code by a vote of two-thirds of the Shares
outstanding and entitled to vote. Except with respect to the foregoing
matters, no action taken by the Stockholders at any meeting shall in any way
bind the Directors.
SECTION 8.3 Voting Limitations on Shares held by the Advisor, Directors and
Affiliates.
With respect to Shares owned by the Advisor, the Directors, or any of their
Affiliates, neither the Advisor, nor the Directors, nor any of their
Affiliates may vote or consent on matters submitted to the Stockholders
regarding the removal of the Advisor, Directors or any of their Affiliates or
any transaction between the Company and any of them. In determining the
requisite percentage in interest of Shares necessary to approve a matter on
which the Advisor, Directors and any of their Affiliates may not vote or
consent, any Shares owned by any of them shall not be included.
SECTION 8.46.3 Stockholder Action to be Taken by Meeting.
Any action required or permitted to be taken by the Stockholders of the
Company must be effected at a duly called annual or special meeting of
Stockholders of the Company and may not be effected by any consent in writing
of such Stockholders.
SECTION 8.56.4 Right of Inspection.
Any Stockholder 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.
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SECTION 8.66.5 Access to Stockholder List.
An alphabetical list of the names, addresses and telephone numbers of the
Stockholders of the Company, along with the number of Shares held by each of
them (the "Stockholder List"), shall be maintained as part of the books and
records of the Company and shall be available for inspection by any
Stockholder or the Stockholder's designated agent at the home office of the
Company upon the request of the Stockholder. The Stockholder List shall be
updated at least quarterly to reflect changes in the information contained
therein and a copy of such list shall be mailed to any Stockholder so
requesting within ten (10) days of the request. The Company may impose a
reasonable charge for expenses incurred in reproduction pursuant to the
Stockholder request. A Stockholder may request a copy of the Stockholder List
in connection with matters relating to Stockholders' voting rights, and the
exercise of Stockholder rights under federal proxy laws. The Company may
require the Stockholder requesting the Stockholder List to represent that the
list is not requested for a commercial purpose unrelated to the Stockholder's
interest in the Company. The Company may impose a reasonable charge for
expenses incurred in reproducing such Stockholder List. The Stockholder List
may not be used for commercial purposes.
If the Advisor or Directors neglect or refuse to exhibit, produce or mail a
copy of the Stockholder List as requested, the Advisor and the Directors shall
be liable to any Stockholder requesting the list for the costs, including
attorneys' fees, incurred by that Stockholder for compelling the production of
the Stockholder List, and for actual damages suffered by any Stockholder by
reason of such refusal or neglect. It shall be a defense that the actual
purpose and reason for the requests for inspection or for a copy of the
Stockholder List is to secure such list of Stockholders 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
Stockholder relative to the affairs of the Company. The remedies provided
hereunder to Stockholders requesting copies of the Stockholder List are in
addition, to and shall not in any way limit, other remedies available to
Stockholders under federal law, or the laws of any state.
6.6 Reports.
The Directors, including the Independent Directors, shall take reasonable
steps to insure that the Company shall cause to be prepared and mailed or
delivered to each Stockholder as of a record date after the end of the fiscal
year and each holder of other publicly held securities 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 in accordance with the
requirements of the Securities and Exchange Commission and the national
securities exchange or over-the-counter market on which the Company's
Securities are listed.
ending after the initial public offering of its securities which shall
include: (i) financial statements prepared in accordance with generally
accepted accounting principles which are audited and reported on by
independent certified public accountants; (ii) the ratio of the costs of
raising capital during the period to the capital raised; (iii) 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
changes paid to the Advisor and any Affiliate of the Advisor by third parties
doing business with the Company; (iv) the Operating Expenses of the Company,
stated as a percentage of Average Invested Assets and as a percentage of its
Net Income; (v) a report from the Independent Directors that the policies
being followed by the Company are in the best interests of its Stockholders
and the basis for such determination; (vi) separately stated, full disclosure
of all material terms, factors, and circumstances surrounding any and all
transactions involving the Company, Directors, Advisors and any Affiliate
thereof occurring in the year for which the annual report is made; and (vii)
Dividends to the Stockholders for the period, identifying the source of such
Dividends, and if such information is not available at the time of the
distribution, a written explanation of the relevant circumstances will
accompany the Dividends (with the statement as to the source of Dividends to
be sent to Stockholders not later than sixty (60) days after the end of the
fiscal year in which the distribution was made). Independent Directors shall
be specifically charged with a duty to examine and comment in the report on
the fairness of such transactions.
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Article VII:
Liability; of Stockholders, Directors, Officers, Employees and Agents;
Transactions Between Affiliates and the Company
SECTION 9.17.1 Limitation of Stockholder Liability.
No Stockholder shall be liable for any debt, claim, demand, judgment or
obligation of any kind of, against or with respect to the Company by reason of
his being a Stockholder, nor shall any Stockholder be subject to any personal
liability whatsoever, in tort, contract or otherwise, to any Person in
connection with the Company Property or the affairs of the Company by reason
of his being a Stockholder. The Company shall include a clause in its
contracts which provides that Stockholders shall not be personally liable for
obligations entered into on behalf of the Company.
7.2 Exculpation.
To the maximum extent that Maryland law in effect from time to time permits
limitation of the liability of directors and officers, no director or officer
of the Company shall be liable to the Company or any of the Stockholders for
money damages. Neither the amendment nor repeal of this Section 7.2, nor the
adoption or amendment of any provision of these Articles of Incorporation
inconsistent with this Section 7.2, 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.
1.27.3 Indemnification Limitation of Liability and Indemnification.
Each person who is or was or who agrees to become a director or officer of
the Company, or each person who, while a director of the Company, is or was
serving or who agrees to serve, at the request of the Company, as a director,
officer, partner, joint venture, employee or trustee of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
(including the heirs, executor, administrators or estate of such person),
shall be indemnified by the Company, and shall be entitled to have paid on his
behalf or be reimbursed for reasonable expenses in advance of final
disposition of a proceeding, in accordance with the Bylaws of the Company, to
the full extent permitted from time to time by the MGCL as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment) or any other applicable laws presently or hereafter in effect.
The Company shall have the power, with the approval of the Board of Directors,
to provide such indemnification and advancement of expenses to any employee or
agent of the Company, in accordance with the Bylaws of the Company. Without
limiting the generality or the effect of the foregoing, the Company may enter
into one or more agreements with any person which provide for indemnification
greater or different than that provided in this Article VII. Any amendment or
repeal of this Article VII shall not adversely affect any right or protection
existing hereunder immediately prior to such amendment or repeal.
(i) The Company shall indemnify and hold harmless a present or former
Director, officer, Advisor, or Affiliate and may indemnify and hold harmless a
present or former employee or agent of the Company (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 while a Director, officer, Advisor,
Affiliate, employee, or agent and in such capacity, provided, that the
Indemnitee has determined, in good faith, that the act or omission which
caused the loss or liability was in the best interests of the Company. The
Company shall not indemnify or hold harmless the Indemnitee if one or more of
the following is applicable: (i) the loss or liability was the result of
negligence or misconduct, or if the Indemnitee is an Independent Director, the
loss or liability was the result of gross negligence or willful misconduct,
(ii) 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,
(iii) the Indemnitee actually received an improper personal benefit in money,
property, or
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services, (iv) in the case of any criminal proceeding, the Indemnitee had
reasonable cause to believe that the act or omission was unlawful, or (v) in a
proceeding by or in the right of the Company, the Indemnitee shall have been
adjudged to be liable to the Company.
(ii) The Company shall not provide indemnification for any loss or liability
arising from an alleged violation of federal or state securities laws 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 as to the Indemnitee, (ii) such claims have been
dismissed with prejudice on the merits by a court of competent jurisdiction as
to the Indemnitee; or (iii) a court of competent jurisdiction approves a
settlement of the claims against the Indemnitee and finds that indemnification
of the settlement and the related costs should be made, and the court
considering the request for indemnification has been advised of the position
of the Securities and Exchange Commission and of the published position of any
state securities regulatory authority in which securities of the Company were
offered or sold as to indemnification for violations of securities laws.
(iii) The Directors may take such action as is necessary to carry out this
Section 9.2 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.
7.3 Payment of Expenses.
The Company shall pay or reimburse reasonable expenses incurred by a present
or former Director, officer, Advisor, or Affiliate and may pay or reimburse
reasonable expenses incurred by any other Indemnitee in advance of final
disposition of a proceeding if all of the following are satisfied: (i) the
Indemnitee was made a party to the proceeding by reason of his service as a
Director, officer, Advisor, Affiliate, employee or agent of the Company, (ii)
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 9.2 hereof, (iii) 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 (iv) the legal proceeding was
initiated by a third party who is not a Stockholder or, if by a Stockholder of
the Company acting in his or her capacity as such, a court of competent
jurisdiction approves such advancement. Any indemnification payment or
reimbursement of expenses will be furnished in accordance with the procedures
in Section 2-418 of the Maryland General Corporation Law and may be paid only
out of Net Assets of the Company, and no portion may be receivable from
Stockholders.
SECTION 9.47.4 Express Exculpatory Clauses In Instruments.
Neither the Stockholders 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 Stockholders, 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 Stockholder, 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.
1.57.5 Transactions with Affiliates.
The Company may shall not engage in transactions with any Affiliates,
,except to the extent that each such transaction has, after disclosure of such
affiliation, been approved or ratified by the affirmative vote of a majority
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of the Directors (including a majority of the Independent Directors) not
Affiliated with the person who is party to the transaction and:
(i) The transaction is fair and reasonable to the Company and its
Stockholders.
(ii) The terms of such transaction are at least as favorable as the terms
of any comparable transactions made on an arms-length basis and known to
the Directors.
(iii) The total consideration is not in excess of the appraised value of
the property being acquired, if an acquisition is involved.
(iv) Payments to the Advisor, its Affiliates and the Directors for
services rendered in a capacity other than that as Advisor or Director may
only be made upon a determination that:
(a) The compensation is not in excess of their compensation paid for
any comparable services; and
(b) The compensation is not greater than the charges for comparable
services available from others who are competent and not Affiliated
with any of the parties involved.
Transactions between the Company and its Affiliates are further subject to any
express restrictions in these Articles of Incorporation (including Article IV
and Section 5.7 7.7) or adopted by the Directors in the Bylaws or by
resolution, and further subject to the disclosure and ratification
requirements of MGCL (S) 2-419 and other applicable law.
ARTICLE X:Article VIII:
AMENDMENT; REORGANIZATION; MERGER, ETC.
SECTION 10.18.1 Amendment.
(i) 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 Shares then outstanding and entitled to vote
thereon, except that (1) no amendment may be made which would change any
rights with respect to any outstanding class of securities, by reducing the
amount payable thereon upon liquidation, or by diminishing or eliminating any
voting rights pertaining thereto; and (2) Section 8.210.2 hereof and this
Section 8.110.1 shall not be amended (or any other provision of these Articles
of Incorporation be amended or any provision of these Articles of
Incorporation be added that would have the effect of amending such sections),
without the affirmative vote of the holders of two-thirds ( 2/3) of the Shares
then outstanding and entitled to vote thereon.
(ii) The Directors, by a two-thirds ( 2/3) 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 the Code. With the exception of the foregoing, the Directors may not amend
these Articles of Incorporation.
(iii) An amendment to these Articles of Incorporation shall become effective
as provided in Section 10.512.5.
(iv) These Articles of Incorporation may not be amended except as provided
in this Section 8.110.1.
SECTION 10.28.2 Reorganization.
Subject to the provisions of any class or series of Shares at the time
outstanding, the Directors shall have the power (i) 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 (ii) merge the
Company into, or sell, convey and transfer the Company Property to any such
corporation, association, trust or organization in exchange for
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Securities thereof or beneficial interests therein, and the assumption by the
transferee of the liabilities of the Company, and upon the occurrence of (i)
or (ii) above terminate the Company and deliver such Securities or beneficial
interests ratably among the Stockholders according to the respective rights of
the class or series of Shares held by them; provided, however, that any such
action shall have been approved, at a meeting of the Stockholders called for
that purpose, by the affirmative vote of the holders of not less than a
majority of the Shares then outstanding and entitled to vote thereon.
SECTION 10.38.3 Merger, Consolidation or Sale of Company Property.
Subject to the provisions of any class or series of Shares at the time
outstanding, the Directors shall have the power to (i) merge the Company into
another entity, (ii) consolidate the Company with one (1) or more other
entities into a new entity; (iii) sell or otherwise dispose of all or
substantially all of the Company Property; or (iv) 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 Stockholders called for that purpose, by the affirmative vote of the
holders of not less than a majority of the Shares 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 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, which, in general
terms, is any transaction involving the acquisition, merger, conversion, or
consolidation, directly or indirectly, of the Company and the issuance of
securities of a Roll-Up Entity that would be created or would survive after
the successful completion of the Roll-Up Transaction, an appraisal of all
Properties shall be obtained from a competent independent appraiser. The
Properties 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 Properties as of a date immediately prior to the announcement of
the proposed Roll-Up Transaction. The appraisal shall assume an orderly
liquidation of Properties over a 12-month period. The terms of the engagement
of the independent appraiser shall clearly state that the engagement is for
the benefit of the Company and the Stockholders. A summary of the appraisal,
indicating all material assumptions underlying the appraisal, shall be
included in a report to Stockholders in connection with a proposed Roll-Up
Transaction. In connection with a proposed Roll-Up Transaction which has not
been approved by vote of at least two-thirds ( 2/3) of the Stockholders, the
person sponsoring the Roll-Up Transaction shall offer to Stockholders who vote
against the proposed Roll-Up Transaction the choice of:
(i) accepting the securities of a Roll-Up Entity offered in the proposed
Roll-Up Transaction; or
(ii) one of the following:
(a) remaining Stockholders of the Company and preserving their
interests therein on the same terms and conditions as existed
previously; or
(b) receiving cash in an amount equal to the Stockholder'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:
(iii) which would result in the Stockholders having democracy rights in a
Roll-Up Entity that are less than the rights provided for in Sections 6.1,
6.2, 6.3, 6.4, 6.5, 6.6 and 7.1 8.1, 8.2, 8.4, 8.5, 8.6 and 9.1 of these
Articles of Incorporation;
(iv) 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 pre serve the tax status of the Roll-Up Entity), or
which would limit the ability of an investor to exercise the voting rights
of its Securities of the Roll-Up Entity on the basis of the number of
Shares held by that investor;
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(v) in which investor's rights to access of records of the Roll-Up Entity
will be less than those described in Sections 6.4 and 6.5 8.5 and 8.6
hereof; or
(vi) in which any of the costs of the Roll-Up Transaction would be borne
by the Company if the Roll-Up Transaction is not approved by the
Stockholders.
ARTICLE XI:Article IX:
DURATION OF COMPANY
9.1 Automatic Dissolution.
The Company automatically will terminate and dissolve on December 31, 2005,
will undertake orderly liquidation and Sales of Company Properties and Secured
Equipment Leases, and will distribute any Net Sales Proceeds to Stockholders,
unless Listing occurs, in which event the Company shall continue perpetually
unless dissolved pursuant to the provisions contained herein or pursuant to
any applicable provision of the MGCL.
9.2 Dissolution of the Company by Stockholder Vote.
The Company may be terminated at any time, without the necessity for
concurrence by the Board of Directors, by the vote or written consent of a
majority of the outstanding Equity Shares.
ARTICLE XII:Article X:
MISCELLANEOUS
SECTION 12.110.1 Governing Law.
These Articles of Incorporation have been approved by the Directors
executing the Articles of Amendment in which they are included are executed by
the undersigned Directors and delivered in the State of Maryland with
reference to the laws thereof, and the rights of all parties and the validity,
construction and effect of every provision hereof shall be subject to and
construed according to the laws of the State of Maryland without regard to
conflicts of laws provisions thereof.
SECTION 12.210.2 Reliance by Third Parties.
Any certificate shall be final and conclusive as to any Persons persons
dealing with the Company if executed by an individual who, according to the
records of the Company or of any recording office in which these Articles of
Incorporation may be recorded, appears to be the Secretary or an Assistant
Secretary of the Company or a Director, and if certifying to: (i) the number
or identity of Directors, officers of the Company or Stockholders; (ii) the
due authorization of the execution of any document; (iii) the action or vote
taken, and the existence of a quorum, at a meeting of the Directors or
Stockholders; (iv) a copy of the Articles of Incorporation or of the Bylaws as
a true and complete copy as then in force; (v) an amendment to these Articles
of Incorporation; (vi) the dissolution of the Company; or (vii) the existence
of any fact or facts which relate to the affairs of the Company. No purchaser,
lender, transfer agent or other Person person shall be bound to make any
inquiry concerning the validity of any transaction purporting to be made on
behalf of the Company by the Directors or by any duly authorized officer,
employee or agent of the Company.
SECTION 12.310.3 Provisions in Conflict with Law or Regulations.
(i) The provisions of these Articles of Incorporation are severable, and if
the Directors shall determine that any one or more of such provisions are in
conflict with the REIT Provisions of the Code, or other applicable federal or
state laws, the conflicting provisions shall be deemed never to have
constituted a part of these Articles
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of Incorporation, even with-out any amendment of these Articles of
Incorporation pursuant to Section 8.110.1 hereof; provided, however, that such
determination by the Directors shall not affect or impair any of the remaining
provisions of these Articles of Incorporation or render invalid or improper
any action taken or omitted prior to such determination. No Director shall be
liable for making or failing to make such a determination.
(ii) If any provision of these Articles of Incorporation shall be held
invalid or unenforceable in any jurisdiction, such holding shall not in any
manner affect or render invalid or unenforceable such provision in any other
jurisdiction or any other provision of these Articles of Incorporation in any
jurisdiction.
SECTION 12.410.4 Construction.
In these Articles of Incorporation, unless the context otherwise requires,
words used in the singular or in the plural include both the plural and
singular and words denoting any gender include both genders. The title and
headings of different parts are inserted for convenience and shall not affect
the meaning, construction or effect of these Articles of Incorporation. In
defining or interpreting the powers and duties of the Company and its
Directors and officers, reference may be made, to the extent appropriate, to
the Code and to Titles 1 through 3 of the Corporations and Associations
Article of the Annotated Code of Maryland, referred to herein as the "MGCL."
SECTION 12.510.5 Recordation.
These Articles of Incorporation and any amendment hereto shall be filed for
record with the State Department of Assessments and Taxation of Maryland and
may also be filed or recorded in such other places as the Directors deem
appropriate, but failure to file for record these Articles of Incorporation or
any amendment hereto in any office other than in the State of Maryland shall
not affect or impair the validity or effectiveness of these Articles of
Incorporation or any amendment hereto. A restated Articles of Incorporation
shall, upon filing, be conclusive evidence of all amendments contained therein
and may thereafter be referred to in lieu of the original Articles of
Incorporation Declaration of Trust and the various amendments thereto.
B-41
CNL AMERICAN PROPERTIES FUND, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
This Proxy will be voted as directed. If no direction is
given, it will be voted "FOR" the matters stated.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING ITEMS:
1. Proposal to Approve Changes to Existing Articles to Reflect that the Company
is No Longer Externally Advised
[_] FOR [_] AGAINST [_] ABSTAIN
2. Proposal to Approve Additional Changes to the Company's Articles of
Incorporation in accordance with other REITs
[_] FOR [_] AGAINST [_] ABSTAIN
3. Election of Five Directors: (01) Robert A. Bourne; (02) G. Richard Hostetter;
(03) Richard C. Huseman; (04) J. Joseph Kruse; (05) James M. Seneff, Jr.
[_] FOR all listed nominees [_] WITHHOLD AUTHORITY to vote for
all listed nominees
[_] LISTED NOMINEES except for the following (Instruction: To
withhold authority to vote for any individual nominee(s),
write the name of such nominee(s) in the space provided.):
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4. Other Matters:
Grant authority upon such other matters as may come before the Meeting as
they determine to be in the best interest of the Company.
[_] FOR [_] AGAINST [_] ABSTAIN
Please indicate whether you will attend the Annual Meeting of Stockholders in
Orlando on June 15, 2000.
[_] I plan to attend the Annual Meeting
CNL AMERICAN PROPERTIES FUND, INC.
Annual Meeting of Stockholders
CNL Center at City Commons
450 South Orange Avenue
Orlando, Florida
June 15, 2000 at 10:30 a.m.
**Voting Options**
YOU MAY VOTE BY TOLL-FREE TELEPHONE
(OR COMPLETE THE PROXY CARD BELOW AND RETURN IT BY
MAIL IN THE ENCLOSED ENVELOPE)
If voting by proxy, you may vote either by mail or by telephone. Your telephone
vote authorizes the named proxies to vote your shares in the same manner as if
you marked, signed, and returned your proxy card by mail. To vote by telephone,
please read the accompanying proxy statement and then follow these steps:
YOUR CONTROL NUMBER
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9999999
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TO VOTE BY PHONE:
CALL TOLL FREE 1-800-999-9999 ANY TIME ON A TOUCH-TONE TELEPHONE. THERE
IS NO CHARGE TO YOU FOR THE CALL. PLEASE HAVE THIS FORM AVAILABLE WHEN
YOU CALL THE TOLL-FREE NUMBER.
Enter the 7-digit control number located above, FOLLOWED BY THE # SIGN.
Option #1: To vote as the Board of Directors recommends on
ALL proposals: Press 1
When asked, please confirm your vote by pressing 1
Option #2: If you choose to vote on each proposal separately:
Press 2 and follow the recorded instructions
If you vote by telephone, please DO NOT mail
back the proxy card.
THANK YOU FOR VOTING!
FOLD AND DETACH HERE
The undersigned hereby appoints James M. Seneff, Jr. and Robert A. Bourne, and
each of them, as proxies, with full power of substitution in each, to vote all
shares of common stock of CNL American Properties Fund, Inc., the "Company,"
which the undersigned is entitled to vote, at the Annual Meeting of Stockholders
of the Company to be held on June 15, 2000 at 10:30 a.m., local time, and any
adjournment thereof, on all matters set forth in the Notice of Annual Meeting
and Proxy Statement, dated , 2000, a copy of which has been received by the
undersigned, as follows:
Please complete, date and sign this proxy card and
return it in the accompanying envelope.
DATE 2000
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SIGNATURE(S)
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SIGNATURE(S)
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IMPORTANT: Please sign exactly as name
appears hereon. Joint owners should each
sign personally. Trustees and others
signing in a representative or fiduciary
capacity should indicate their full
titles in such capacity.
Please Vote!
Your vote counts, so please be sure to do the following:
Read the Enclosed Materials
Enclosed you will find the following information for the Annual Meeting of
Stockholders:
.1999 Annual Report
.Proxy Statement that discusses the proposals being voted
.Proxy Card
Complete the Proxy Card . . .
Please review and vote on all the proposals on the proxy card.
Simply cast your vote on each proposal, sign and return it in the postage-paid
envelope provided. Please note, all parties must sign.
. . . or Vote by Telephone
For your convenience, you may grant your proxy by telephone.
Please refer to the proxy card for telephonic instructions.
For Assistance
If you have any questions or need assistance in completing your
proxy card, please call our information agent, D.F. King & Co., Inc.,
toll free at 1-800-207-3159.
Mail the Proxy Card Today
We encourage you to cast your vote promptly, so we can avoid
additional costs soliciting your vote.
If you voted by telephone, please DO NOT mail back the proxy card.
Thank You!
We appreciate your participation and support. Again, please be sure to vote
on all the proposals. Your vote is important!