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ARTICLES SUPPLEMENTARY
CLASSIFYING 2,000,000 SHARES OF PREFERRED
STOCK AS CLASS A SENIOR CUMULATIVE
CONVERTIBLE PREFERRED STOCK AND 2,000,000
SHARES OF EXCESS STOCK AS EXCESS CLASS A
PREFERRED STOCK
OF
LEXINGTON CORPORATE PROPERTIES, INC.
Pursuant to Section 2-105 of the Maryland General Corporation
Law (the "M.G.C.L."), Lexington Corporate Properties, Inc., a corporation
organized and existing under the M.G.C.L. (the "Corporation"), and having its
principal office in the State of Maryland located at c/o The Corporation Trust
Incorporated, 32 South Street, Baltimore, Maryland 21202.
DOES HEREBY CERTIFY TO THE STATE DEPARTMENT OF ASSESSMENT AND
TAXATION OF MARYLAND THAT:
Pursuant to authority granted to and vested in the Board of
Directors of the Corporation (the "Board") by the Charter of the Corporation
(the "Charter"), and pursuant to the provisions of Section 2-105 of the
M.G.C.L., the Board, at a meeting duly convened and held on December 30, 1996,
adopted resolutions classifying 2,000,000 shares of Preferred Stock of the
Corporation into a single series of Preferred Stock to be designated as "Class A
Senior Cumulative Convertible Preferred Stock, par value $.0001 per share," and
classifying 2,000,000 shares of Excess Stock of the Corporation into a single
series of Excess Preferred Stock to be designated as "Excess Class A Preferred
Stock, par value $.0001 per share," which resolution is as follows:
"RESOLVED that a series of Preferred Stock of this
Corporation, to be designated "Class A Senior Cumulative Convertible
Preferred Stock," be and hereby is created to consist of 2,000,000
shares, and that a series of Excess Preferred Stock of this Corporation
to be designated "Excess Class A Preferred Stock," be and hereby is
created to consist of 2,000,000 shares; and
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FURTHER RESOLVED that the preferences, conversion or other
rights, voting powers, limitations as to dividends, qualifications and
terms and conditions of redemption of each such series, shall be as
follows:
Section 1. Preferred Shares -- Designation and Amount. The
shares of such class of Preferred Stock shall be designated as "Class A Senior
Cumulative Convertible Preferred Stock" and the number of shares constituting
the series so designated shall be 2,000,000 (the "Preferred Shares").
Section 2. Preferred Shares -- Dividends.
(a) General. Subject to Section 9, the Corporation shall pay
in cash, when, as and if declared by the Board, out of funds legally available
therefor as provided by Section 2-304 of the M.G.C.L and limited by Section
2-311 of the M.G.C.L. (the "Legally Available Funds"), dividends at the
quarterly rate equal to the Applicable Dividend Rate (as defined below) per
Preferred Share, per quarter. Such dividends shall be cumulative, shall be paid
for each of the quarters ending March 30, June 30, September 30 and December 31
of each year, and shall be paid quarterly on each February 15, May 15, August 15
and November 15, with respect to the prior quarter, commencing May 15, 1997
(except that if such date is not a Business Day (as defined below), then such
dividend will be payable on the next succeeding Business Day) to the holders of
record at the close of business on the date specified by the Board at the time
such dividend is declared no more than thirty (30) days prior to the date fixed
for payment thereof. Dividends shall begin to accrue and be cumulative from the
date of issuance of such Preferred Share to and including the first to occur of
(i) the date on which the Liquidation Value (as defined herein) of such
Preferred Share (plus all accrued and unpaid dividends thereon whether or not
declared) is paid to the holder thereof in connection with the liquidation of
the Corporation or the redemption of such Preferred Share by the Corporation,
(ii) the last day of the quarter preceding the quarter in which such Preferred
Shares are converted into shares of Common Stock hereunder if such date is after
the record date for the Regular Quarterly Dividend (as defined herein) on the
Common Stock for the quarter in which such conversion takes place, (iii) the
last day of the quarter second preceding the quarter in which such Preferred
Shares are converted into shares of Common Stock hereunder if such date is prior
to the record date for the Regular Quarterly Dividend on the Common Stock for
the quarter in which such conversion takes place, or (iv) the date on which such
share is otherwise acquired and paid for by the Corporation.
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(b) Cumulative Dividends. Each of such dividends shall be
fully cumulative, to the extent not previously paid. Any accrued dividend that
is not paid, or made available for payment, on the date set forth in Section
2(a) above shall accrue dividends at the Applicable Dividend Rate until such
amount has been paid. Any dividend payment with respect to the Preferred Shares
shall first be credited against any prior accrued and unpaid dividend. No
dividends shall be set apart for or paid upon the Common Stock or any other
shares of stock ranking junior in respect of dividends and distributions of
assets upon liquidation to the Preferred Shares unless all such cumulative
dividends on the Preferred Shares have been paid.
(c) Applicable Dividend Rate. With respect to any Preferred
Share issued and outstanding, the "Applicable Dividend Rate" shall be the
greater of (i) $0.295 per Preferred Share, per quarter, and (ii) the product of
1.05 and the per share quarterly dividend paid in that quarter in respect of the
common stock, par value $.0001 per share, of the Corporation (the "Common
Stock") (adjusted to reverse the effect of any event set forth in Section 7 that
would require an adjustment to the Conversion Ratio (as defined herein)). The
Applicable Dividend Rate shall be pro rated for the actual number of days in any
partial quarter.
(d) Pro Rata Distribution. All dividends paid with respect to
Preferred Shares pursuant to this Section 2 shall be paid pro rata in respect of
each Preferred Share entitled thereto. In the event that the Legally Available
Funds available for the payment of dividends shall be insufficient for the
payment of the entire amount of dividends payable with respect to Preferred
Shares on any date on which the Board has declared the payment of a dividend or
otherwise, the amount of any available surplus shall be allocated for the
payment of dividends with respect to the Preferred Shares and any other shares
of capital stock that are pari passu as to dividends pro rata based upon the
amount of accrued and unpaid dividends of such shares of capital stock.
(e) Business Day. For purposes hereof, the term "Business Day"
shall mean any Monday, Tuesday, Wednesday, Thursday or Friday which is not a day
on which banking institutions in New York City are authorized or obligated by
law or executive order to close.
Section 3. Preferred Shares -- Certain Restrictions. Unless
the dividends (including accrued and unpaid dividends in arrears whether or not
declared) described above in Section 2, which pursuant to their terms should
have been paid, have been paid in full or declared and set apart for payment,
the Corporation shall be prohibited from paying dividends on, making any other
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distributions on, or redeeming or purchasing or otherwise acquiring for
consideration any capital stock of the Corporation (without regard to its rank,
either as to dividends or upon liquidation, dissolution or winding up). The
Corporation shall not permit any subsidiary or subpartnership of the Corporation
to purchase or otherwise acquire for consideration or make any payment with
respect to any shares of capital stock of the Corporation if the Corporation is
prohibited from purchasing or otherwise acquiring for consideration or making
any payment with respect to such shares at such time and in such manner pursuant
to the prior sentence, provided, however, that the Corporation shall not be
prohibited from making a capital contribution of capital stock of the
Corporation to any of its subsidiaries or subpartnerships or from issuing shares
of Common Stock upon conversion of any operating partnership units or similar
securities issued by any subsidiary or subpartnership.
Section 4. Preferred Shares -- Voting Rights.
(a) General. Except as limited by law or as specifically
provided herein, the holders of the Preferred Shares shall be entitled to vote
or consent on all matters submitted to the holders of Common Stock, together
with the holders of the Common Stock and the holders of any other classes or
series of stock which are entitled to vote on such matter, as a single class and
not as a separate class.
(b) Calculation of Votes. For the purposes of calculating the
votes cast for a particular matter when voting or consenting pursuant to Section
4(a), each Preferred Share will entitle the holder thereof to one vote for each
share of Common Stock into which such Preferred Share is convertible as provided
in Section 7 herein as of the record date for such vote or consent or, if no
record date is specified, as of the date of such vote or consent.
(c) Section 4(c) Directors. In addition to the other voting
rights described herein, so long as Five Arrows Realty Securities L.L.C., an
affiliate thereof, a successor in which the current members of Five Arrows
Realty Securities L.L.C. own greater than a majority interest of such successor,
or a member of Five Arrows Realty Securities L.L.C., is the holder of either (A)
all of the outstanding Preferred Shares or (B) an amount of the voting
securities of the Corporation which, if converted into shares of Common Stock,
would exceed 7.5% of the outstanding Common Stock on a fully diluted basis
(determined on the basis of then convertible, exercisable or exchangeable
securities, warrants or options issued by the Corporation (such amount as set
forth in clauses (A) and (B) above, the "Minimum Threshold"), then in each such
case, (i) the
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number of directors constituting the Board shall be automatically increased by
one (1) member and (ii) upon the occurrence of any of (x) the payment of the
Regular Quarterly Dividend on the Common Stock for any quarter of less than $.28
per share (adjusted to reverse the effect of any event set forth in Section 7
that would require an adjustment to the Conversion Ratio (the "Dividend
Reduction Default"), (y) the Corporation's ratio of its Consolidated EBITDA to
its reported interest expense (as described in clause (2) under the definition
of Consolidated EBITDA below) for each of three consecutive fiscal quarters was
less than 1.25 to 1.00 (the "Earnings Default"), or (z) the Corporation fails to
pay in full the quarterly dividend payable hereunder (whether or not declared)
at any time in respect of the Preferred Shares (the "Dividend Payment Default"),
then, in the case of any of the events described in clauses (x), (y), or (z),
the Board shall be automatically increased by an additional one (1) member for
an aggregate increase of two (2) directors pursuant to clauses (i) and (ii) of
this Section 4(c). The position on the Board established pursuant to clause (i)
of this Section 4(c) shall remain available until the Minimum Threshold is no
longer satisfied and shall not be available at any time thereafter. The position
on the Board established pursuant to clause (ii) of this Section 4(c) shall
remain available until the earlier of (i) the date on which the Minimum
Threshold fails to be satisfied and (ii) the Dividend Reduction/Earnings Cure
(as defined herein). Any director elected pursuant to this section shall be
deemed to have resigned upon the position created hereby not being available and
shall promptly tender a written resignation if so requested.
The term "Regular Quarterly Dividend" means any cash dividend
or dividends paid in any calendar quarter that do not in the aggregate exceed
the Corporation's reported Funds From Operations (as defined by the National
Association of Real Estate Investment Trusts prior to 1996) for the quarter
relating to such dividend.
The term "Consolidated EBITDA" means the consolidated net
income of the Corporation (before extraordinary income or gains) as reported in
its Quarterly Report on Form 10-Q under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or otherwise furnished to holders of Preferred
Shares pursuant to Section 4(m) increased (to the extent deducted in determining
consolidated net income) by the sum of the following (without duplication):
(1) all income and state franchise taxes paid or
accrued according to Generally Accepted Accounting Principals
("GAAP") for such period (other than income taxes attributable
to extraordinary, unusual or non-
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recurring gains or losses except to the extent that such
gains were not included in Consolidated EBITDA),
(2) all interest expense paid or accrued in
accordance with GAAP for such period (including financing fees
and amortization of deferred financing fees and amortization
of original issue discount),
(3) depreciation and depletion reflected in such
reported net income,
(4) amortization reflected in such reported net
income including, without limitation, amortization of
capitalized debt issuance costs (only to the extent that such
amounts have not been previously included in the amount of
Consolidated EBITDA pursuant to clause (2) above), and
(5) any other non-cash charges or discretionary
prepayment penalties, to the extent deducted from consolidated
net income (including, but not limited to, income allocated to
minority interests).
(d) Section 4(d) Directors. If, at any time, (i) the rights
granted pursuant to Section 4(c) shall no longer be available, (ii) any persons
designated to serve on the Board pursuant to Section 4(c) shall have resigned as
required by the terms of Section 4(c) and (iii) a Dividend Payment Default shall
have occurred for three consecutive quarters, the number of directors
constituting the Board shall be automatically increased by two (2) members. The
position on the Board created pursuant to this Section 4(d) shall continue to be
available until the earlier of (i) the date on which there are no Preferred
Shares of the Corporation outstanding and (ii) the date on which the Dividend
Payment Cure (as defined herein) is effected. Any director elected pursuant to
this section shall be deemed to have resigned upon the position created hereby
not being available and shall promptly tender a written resignation if so
requested.
(e) Election of Preferred Directors. The holders of the
Preferred Shares shall have the special right, voting separately as a single
class, to elect as soon as practical, a director to fill each vacancy created
pursuant to Section 4(c) or 4(d) and to elect their respective successors at
each succeeding annual meeting of the Corporation thereafter at which such
successor is to be elected. The director so elected from time to time in respect
of clause (i) of Section 4(c) shall be referred to herein as the "Section
4(c)(i) Director." The director so elected from time to time in respect of
clause (ii) of Section 4(c) shall be referred to
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herein as the "Section 4(c)(ii) Director." The directors so elected from time to
time in respect of Section 4(d) shall be referred to herein as the "Section 4(d)
Directors." As used herein, the term "Preferred Director" shall refer to each of
the Section 4(c)(i) Director, the Section 4(c)(ii) Director or a Section 4(d)
Director, as appropriate, and the term "Preferred Directors" shall refer to all
such directors.
(f) Classification of Board. Each vacancy created upon the
Board from time to time pursuant to clause (i) or (ii) of Section 4(c) or
Section 4(d), as the case may be, shall if the Corporation shall have a
classified board of directors, be apportioned among the classes of directors in
nearly as equal a number as possible.
(g) Cure. Upon the occurrence of a Dividend Reduction Default
or an Earnings Default, the same shall be deemed to continue to exist until such
time as (the "Dividend Reduction/Earnings Cure") (i) the Regular Quarterly
Dividend paid in the immediately preceding quarter on the Common Stock shall be
greater than $.28 per share (adjusted to reverse the effect of any event set
forth in Section 7 that would require an adjustment to the Conversion Ratio),
(ii) the Corporation reports for the prior three consecutive fiscal quarters
that the ratio of its Consolidated EBITDA to its reported interest expense (as
described in clause (2) under the definition of Consolidated EBITDA above) for
each such quarter was greater than 1.25 to 1.00, and (iii) all accrued and
unpaid dividends, whether or not declared, on the Preferred Shares have been
paid or made available for payment. Upon the occurrence of the Dividend Payment
Default, the same shall be deemed to continue and exist until (the "Dividend
Payment Cure") such time as the earlier to occur of (i) none of the Preferred
Shares shall remain outstanding and (ii) all accrued and unpaid dividends,
whether or not declared, on the Preferred Shares have been paid or made
available for payment.
(h) Board Committees. The 4(c)(i) Director shall be designated
as a member of every committee of the Board.
(i) Voting Procedures. At each meeting of the stockholders of
the Corporation at which the holders of the Preferred Shares shall have the
right to vote as a single class, as provided in this Section 4, the presence in
person or by proxy of the holders of record of a majority of the total number of
Preferred Shares then outstanding shall be necessary and sufficient to
constitute a quorum of such class for such election by such stockholders as a
class. At any such meeting or adjournment thereof, (x) the absence of a quorum
of holders of Preferred Shares shall not prevent the election of directors other
than the
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Preferred Directors, and the absence of a quorum of the holders of any other
class or series of stock for the election of such other directors shall not
prevent the election of any Preferred Directors by the holders of the Preferred
Shares, and (y) in the absence of a quorum of the holders of the Preferred
Shares, a majority of the holders present or by proxy shall, subject to
applicable law, have the power to adjourn the meeting after all other business
has been conducted from time to time and place to place without notice other
than announcement at the meeting until a quorum shall be present.
(j) Vacancy. In case any vacancy shall occur among the
Preferred Directors such vacancy shall be filled by the vote of holders of a
majority of the Preferred Shares, voting as a single class, present and voting,
in person or by proxy, at a special meeting of such stockholders called for that
purpose.
(k) Written Consent. Notwithstanding the foregoing, any action
required or permitted to be taken by holders of Preferred Shares at any meeting
of stockholders may be taken without a meeting, without prior notice and without
a vote, if a consent, in writing, setting forth the action so taken, shall be
signed by the holders of Preferred Shares who would have been sufficient to
approve such action at a meeting duly held and shall be executed and delivered
to the Secretary of the Corporation for placement among the minutes of
proceedings of the stockholders of the Corporation.
(l) Restrictions. So long as any Preferred Shares of the
Corporation are outstanding, without the consent of the holders of at least a
majority of the Preferred Shares at the time outstanding, given in person or by
proxy, at a meeting called for that purpose at which the holders of the
Preferred Shares shall vote separately as a class, or by the unanimous consent
in writing of all of the holders of the Preferred Shares, the Corporation may
not (i) effect or validate the amendment, alteration or repeal of any provision
of these Articles Supplementary, (ii) effect or validate the amendment,
alteration or repeal of any provision of the Charter of the Corporation which
would adversely effect the rights of the holders of the Preferred Shares as
such, (iii) other than as required to maintain the status of the Corporation as
a real estate investment trust (or to prevent the Company from becoming a
Pension-held REIT) as described in Section 856 of the Internal Revenue Code of
1986, as amended, effect or validate the amendment, alteration or repeal of any
provision of the Charter of the Corporation which would increase in any respect
the restrictions or limitations on ownership applicable to the Preferred Shares
pursuant thereto, (iv) effect or validate the amendment, alteration or repeal of
any provision of the Charter of the Corporation or By-Laws of the Corporation in
a manner which
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would make the right to indemnification provided to any present or future
Preferred Director materially different from that provided to other members of
the Board, (v) other than the 2,000,000 Preferred Shares authorized herein,
issue Preferred Shares (or a series of preferred stock that would vote as a
class with the Preferred Shares with respect to the election of any Preferred
Director) or shares of stock ranking senior or equal to the Preferred Shares (as
to dividends or upon liquidation, dissolution or winding up), or (vi) effect or
validate the amendment, alteration or repeal of any provision of the Charter of
the Corporation or By-Laws of the Corporation so as to increase the number of
members of the Board beyond twelve (12) members (not including any Preferred
Directors). Nothing in this Section 4(l) shall prevent the Corporation from (i)
issuing any shares of stock of the Corporation which rank junior (as to
dividends and upon liquidation, dissolution or winding up) to the Preferred
Shares upon such terms as the Board shall authorize from time to time, (ii)
changing the domicile of the Corporation, or (iii) changing the Corporation's
form from a corporation to a statutory business trust.
(m) Reports. The Corporation shall mail to each holder of
record of Preferred Shares, at such holder's address in the records of the
Corporation, within 45 days after the end of the first three fiscal quarters of
each fiscal year and within 90 days after the end of each fiscal year, its
financial reports for such fiscal period in such form and containing such
independent accountants report as set forth under the rules of the Securities
and Exchange Commission (the "Commission") (together with the report of the
Corporation's independent accountants with respect to such fiscal period)
irrespective of whether the Corporation is then required to file reports under
such rules; provided, however, that (i) such independent accountants report need
only be provided in connection with the fiscal year end report and (ii) in the
event that the Corporation has duly filed a Form 12b-25 under the Exchange Act
with the Commission in respect of any financial report, the Corporation may
provide such financial report to the holders of the Preferred Shares within the
time period specified by Rule 12b-25 under the Exchange Act.
(n) Compensation. Except to the extent that the Board may
otherwise determine hereafter, the Preferred Directors shall not be entitled to
receive any compensation, in cash or kind, in connection with their service as a
director of the Corporation; provided, that, the indemnification or insurance
provided by the Corporation to its directors shall not be deemed "compensation"
for these purposes.
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Section 5. Preferred Share -- Redemption.
(a) General. Subject to Section 8, the Corporation may, at its
option, to the extent it shall have Legally Available Funds therefor, redeem all
(but not less than all) of the outstanding Preferred Shares, at any time on or
after the date which is the fifth anniversary of the original date of issuance
of Preferred Shares.
(b) Notice. The option of the Corporation to redeem the
Preferred Shares pursuant to this Section 5 shall be exercised by mailing of a
written notice of election by the Corporation to the holders of the Preferred
Shares at such holder's address appearing in the records of the Corporation,
which notice shall be sent at least 30 days prior to the date specified therein
for the redemption of the Preferred Shares. Such notice shall state, at a
minimum, the date on which such redemption shall occur and the last date on
which such holder can exercise the conversion rights provided for in Section 7
herein (the "Final Conversion Date").
(c) Conversion. During the period beginning on the date on
which each holder of the Preferred Shares receives such a written notice of
election pursuant to subsection (b) above and ending on the thirtieth day
following the mailing of such notice, each holder of the Preferred Shares may
exercise its rights pursuant to Section 7 herein.
(d) Redemption Price. On the redemption date specified in the
redemption notice (which shall not be less than 30 days after the mailing of
such notice), the Corporation shall be required, unless such holder of Preferred
Shares has exercised its rights pursuant to subsection (c) above, to purchase
from such holder of Preferred Shares (upon surrender by such holder at the
Corporation's principal office of the certificate representing such Share), such
Preferred Shares, at a price equal to the product of (i) $12.50 per share plus
accrued and unpaid dividends (whether or not declared and accrued through, but
not including, the date of payment for redemption or the date payment is made
available for payment to the holder thereof), plus a premium equal to the
following percentage of $12.50:
Redemption Occurs
On or After But Prior to % Premium
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December 31, 2001 December 31, 6.0
2003
December 31, 2003 December 31, 5.0
2005
December 31, 2005 December 31, 4.0
2007
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Redemption Occurs
On or After But Prior to % Premium
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December 31, 2007 December 31, 3.0
2009
December 31, 2009 December 31, 2.0
2010
December 31, 2010 December 31, 1.0
2011
December 31, 2011 0.0
and (ii) the number of Preferred Shares held by such holder to be redeemed (the
"Redemption Price").
(e) Dividends. No Preferred Share is entitled to any dividends
accruing thereon after the date on which the payments provided by and in
accordance with Section 5(d) are paid or made available for payment to the
holder thereof. On such date all rights of the holder of such Preferred Share
shall cease, and such Preferred Share shall not be deemed to be outstanding.
(f) In addition to the redemption provisions set forth in this
Section 5, if a Change of Control occurs, the Corporation will have the right to
redeem the Preferred Shares as provided in Section 8(a).
Section 6. Preferred Shares -- Liquidation, Dissolution or
Winding Up.
(a) Liquidation Payment. In the event of any liquidation,
dissolution or winding up of the Corporation, then out of the assets of the
Corporation before any distribution or payment to the holders of shares of
capital stock of the Corporation ranking junior to the Preferred Shares (as to
dividends or upon liquidation, dissolution or winding up), the holders of the
Preferred Shares shall be entitled to be paid $12.50 per share (the "Liquidation
Value") plus accrued and unpaid dividends whether or not declared (or a pro rata
portion thereof with respect to fractional shares); provided, however, that if
such liquidation, dissolution or winding up of the Corporation occurs in
connection with or subsequent to a Change of Control (as defined in Section 8),
then the holders of the Preferred Shares shall be entitled to be paid the Put
Payment (as defined herein). Except as provided in this Section 6, the holders
of the Preferred Shares shall be entitled to no other or further distribution in
connection with such liquidation, dissolution or winding up. A merger or
consolidation alone, in which the Corporation is a constituent party, shall not
be deemed to be a liquidation, dissolution or winding up hereunder; provided
that (i) the Corporation is the surviving entity of such merger or consolidation
and (ii) the Preferred Shares shall not have been adversely affected thereby.
Additionally, a transaction, the sole purpose of which is that the
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Corporation is seeking to change its domicile or to change its form from a
corporation to a statutory business trust shall not be deemed to be a
liquidation, dissolution or winding up hereunder.
(b) Pro Rata Distribution. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation
available for distribution to the holders of Preferred Shares shall be
insufficient to permit payment in full to such holders the sums which such
holders are entitled to receive in such case, then all of the assets available
for distribution to the holders of the Preferred Shares shall be distributed
among and paid to the holders of Preferred Shares, ratably in proportion to the
respective amounts that would be payable to such holders if such assets were
sufficient to permit payment in full.
Section 7. Preferred Shares -- Conversion.
(a) Conversion Rights. Subject to and upon compliance with the
provisions of this Section 7, a holder of Preferred Shares shall have the right,
at such holders' option, at any time to convert all or a portion of such shares
into the number of fully paid and non-assessable shares of Common Stock obtained
by dividing the number of Preferred Shares being converted by the Conversion
Ratio (as in effect at the time and on the date provided for in the last
paragraph of paragraph (b) of this Section 7) and by surrendering to the
Corporation such Preferred Shares to be converted. Such surrender shall be made
in the manner provided in Section 7, paragraph (b); provided, however, that the
right to convert any Preferred Shares called for redemption pursuant to Section
5 shall terminate at the close of business on the Final Conversion Date, unless
the Corporation shall default in making payment of any cash payable upon such
redemption under Section 5 hereof. The Conversion Ratio with respect to any
Preferred Shares will initially be equal to 1, subject to adjustment as
described below.
(b) Manner of Conversion.
(i) In order to exercise the conversion right, the
holder of each Preferred Share to be converted shall surrender to the
Corporation the certificate representing such share, duly endorsed or assigned
to the Corporation or in blank, accompanied by written notice to the Corporation
that the holder thereof elects to convert such Preferred Shares. Unless the
shares of Common Stock issuable on conversion are to be issued in the same name
as the name in which such Preferred Shares are registered, each Preferred Share
surrendered for conversion shall be accompanied by instruments of transfer, in
form satisfactory to the Corporation, duly executed by the holder or such
holder's duly authorized attorney.
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(ii) Holders of Preferred Shares shall be entitled on
the date of conversion of any Preferred Shares to receive all accumulated and
unpaid dividends provided for pursuant to Section 2.
(iii) As promptly as practicable after the surrender
of certificates of Preferred Shares as aforesaid, the Corporation shall issue
and shall deliver at such office to such holder, or on such holder's written
order, a certificate or certificates for the number of full shares of Common
Stock issuable upon the conversion of such Preferred Shares in accordance with
the provisions of this Section 7, and any fractional interest in respect of a
share of Common Stock arising upon such conversion shall be settled as provided
in paragraph (c) of this Section 7 and shall pay the amounts provided under
Section 7(b)(ii).
(iv) Each conversion shall be deemed to have been
effected immediately prior to the close of business on the date on which
certificates for Preferred Shares have been surrendered and such notice received
by the Corporation as aforesaid, and the person or persons in whose name or
names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby at such time on such date
and such conversion shall be at the Conversion Ratio in effect at such time on
such date unless the stock transfer books of the Corporation shall be closed on
that date, in which event such conversion shall have been deemed to have been
effected and such person or persons shall be deemed to have become the holder or
holders of record at the close of business on the next succeeding day on which
such stock transfer books are open, but such conversion shall be at the
Conversion Ratio in effect on the date on which such shares shall have been
surrendered and such notice received by the Corporation.
(c) Fractional Shares. No fractional shares or scrip
representing fractions of shares of Common Stock shall be issued upon conversion
of the Preferred Shares. Instead of any fractional interest in a share of Common
Stock that would otherwise be deliverable upon the conversion of Preferred
Shares, the Corporation shall pay to the holder of such share an amount in cash
based upon the Current Market Price (as defined herein) of Common Stock on the
Trading Day (as defined herein) immediately preceding the date of conversion. If
more than one Preferred Share shall be surrendered for conversion at one time by
the share holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
Preferred Shares so surrendered.
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(d) Adjustment of Conversion Ratio. The Conversion Ratio shall
be adjusted from time to time as follows:
(i) If the Corporation shall, while any Preferred
Shares are outstanding, (A) pay a dividend or make a distribution with respect
to its capital stock in shares of its Common Stock, (B) subdivide its
outstanding Common Stock into a greater number of shares, (C) combine its
outstanding Common Stock into smaller number of shares or (D) issue any shares
of capital stock by reclassification of its Common Stock, the Conversion Ratio
in effect at the opening of business on the day next following the date fixed
for the determination of shareholders entitled to receive such dividend or
distribution or at the opening of business on the day following the day on which
such subdivision, combination or reclassification becomes effective, as the case
may be, shall be adjusted so that the holder of any Preferred Shares thereafter
surrendered for conversion shall be entitled to receive the number of shares of
Common Stock that such holder would have owned or have been entitled to receive
after the happening of any of the events described above had such Preferred
Shares been converted immediately prior to the record date in the case of a
dividend or distribution or the effective date in the case of a subdivision,
combination or reclassification. An adjustment made pursuant to this
subparagraph (i) shall become effective immediately after the opening of
business on the day next following the record date (except as provided in
paragraph (h) below) in the case of a dividend or distribution and shall become
effective immediately after the opening of business on the day next following
the effective date in the case of a subdivision, combination or
reclassification.
(ii) If the Corporation shall, while any Preferred
Shares are outstanding, issue rights, options or warrants to all holders of
Common Stock entitling them (for a period expiring within 45 days after the
record date mentioned below) to subscribe for or purchase Common Stock at a
price per share less than the Current Market Price per share of Common Stock on
the record date for the determination of shareholders entitled to receive such
rights or warrants, then the Conversion Ratio in effect at the opening of
business on the day next following such record date shall be adjusted to equal
the ratio determined by multiplying (I) the Conversion Ratio in effect
immediately prior to the opening of business on the day next following the date
fixed for such determination by (II) a fraction, the numerator of which shall be
the sum of (A) the number of shares of Common Stock outstanding on the close of
business on the date fixed for such determination (without giving effect to such
issuance) and (B) the number of shares that the aggregate proceeds to the
Corporation from the exercise of such rights or warrants for Common Stock would
purchase
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at such Current Market Price, and the denominator of which shall be the sum of
(A) the number of Shares of Common Stock outstanding on the close of business on
the date fixed for such determination (without giving effect to such issuance)
and (B) the number of additional shares of Common Stock offered for subscription
or purchase pursuant to such rights or warrants. Such adjustment shall become
effective immediately after the opening of business on the day next following
such record date (except as provided in paragraph (h) below). In determining
whether any rights or warrants entitle the holders of Common Stock to subscribe
for or purchase shares of Common Stock at less than such Current Market Price,
there shall be taken into account any consideration received by the Corporation
upon issuance and upon exercise of such rights or warrants, the value of such
consideration, if other than cash, to be determined by the Board of Directors.
(iii) If the Corporation shall distribute to all
holders of its Common Stock any shares of capital stock of the Corporation
(other than Common Stock) or evidence of its indebtedness or assets (excluding
Regular Quarterly Dividends and excluding distributions referred to in (i)
above) or rights or warrants to subscribe for or purchase any of its securities
(excluding those rights and warrants issued to all holders of Common Stock
entitling them for a period expiring within 45 days after the record date
referred to in subparagraph (ii) above to subscribe for or purchase Common
Stock, which rights and warrants are referred to in and treated under
subparagraph (ii) above) (any of the foregoing being hereinafter in this
subparagraph (iii) called the "Securities"), then in each such case each holder
of Preferred Shares shall receive concurrently with the receipt by holders of
the Common Stock the kind and amount of such Securities that it would have owned
or been entitled to receive had such Preferred Shares been converted immediately
prior to such distribution or related record date, as the case may be.
(iv) Distribution of Cash. In case the Corporation
shall pay or make a dividend or other distribution on its Common Stock
exclusively in cash (excluding Regular Quarterly Dividends), each holder of
Preferred Shares shall receive concurrently with the receipt by holders of the
Common Stock the kind and amount of any such distribution that it would have
owned or been entitled to receive had such Preferred Shares been converted
immediately prior to such distribution or related record date, as the case may
be.
(v) No adjustment in the Conversion Ratio shall be
required unless such adjustment would require a cumulative increase or decrease
of at least .5%; provided, however, that any adjustments that by reason of this
subparagraph (v) are not required to be made shall be carried forward and taken
into account
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in any subsequent adjustment until made. Notwithstanding any other provisions of
this Section 7, the Corporation shall not be required to make any adjustment of
the Conversion Ratio for (x) the issuance of any shares of Common Stock pursuant
to any plan providing for the reinvestment of dividends or interest payable on
securities of the Corporation and the investment of additional optional amounts
in shares of Common Stock pursuant to any plan providing for the reinvestment of
dividends or interest payable on securities of the Corporation and the
investment of additional optional amounts in shares of Common Stock under such
plan, (y) the issuance of contingent rights issued pursuant to a stockholders'
rights plan adopted by the Corporation pursuant to which the acquisition by any
third party of a specified percentage of Common Stock triggers the
exercisability of such rights to purchase Common Stock, for so long as no event
has occurred triggering such rights to exercise or the issuance of shares of
Common Stock upon conversion of currently outstanding operating partnership
units, and (z) the issuance of Common Stock or options to purchase Common Stock
pursuant to an employee benefit plan. All calculations under this Section 7
shall be made to the nearest cent (with $.005 being rounded upward) or to the
nearest one-tenth of a share (with .05 of a share being rounded upward), as the
case may be. Anything in this paragraph (d) to the contrary notwithstanding, the
Corporation shall be entitled, to the extent permitted by law, to make such
reductions in the Conversion Ratio, in addition to those required by this
paragraph (d), as it in its discretion shall determine to be advisable in order
that any stock dividends, subdivision of shares, reclassification or combination
of shares, distribution of rights or warrants to purchase stock or securities,
or a distribution of other assets (other than cash dividends) hereafter made by
the Corporation to its shareholders shall not be taxable, or if that is not
possible, to diminish any income taxes that are otherwise payable because of
such event.
(e) Adjustment of Conversion Ratio Upon Certain Transactions.
If the Corporation shall be a party to any transaction (including, without
limitation, a merger, consolidation, statutory share exchange, self tender offer
for all or substantially all shares of Common Stock, sale of all or
substantially all of the Corporation's assets or recapitalization of the Common
Stock and excluding any transaction as to which subparagraph (d) of this Section
7 applies) (each of the foregoing being referred to herein as a "Transaction"),
in each case as a result of which shares of Common Stock shall be converted into
the right to receive stock, securities or other property (including cash or any
combination thereof) of another corporation, each Preferred Share that is not
converted into the right to receive stock, securities or other property in
connection with such Transaction shall thereafter be convertible into the kind
and
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amount of shares of stock, securities and other property (including cash or any
combination thereof) receivable upon the consummation of such Transaction by a
holder of that number of shares of Common Stock into which one Preferred Share
was convertible immediately prior to such Transaction, assuming such holder of
Common Stock (i) is not a person with which the Corporation consolidated or into
which the Corporation merged or which merged into the Corporation or to which
such sale or transfer was made, as the case may be ("Constituent Person"), or an
affiliate of a Constituent Person or (ii) failed to exercise his or her rights
of election, if any, as to the kind or amount of stock, securities and other
property (including cash) receivable upon such Transaction (provided that if the
kind or amount of stock, securities and other property (including cash)
receivable upon such Transaction is not the same for each share of Common Stock
of the Corporation held immediately prior to such Transaction by other than a
Constituent Person or an affiliate thereof and in respect of which such rights
of election shall not have been exercised ("Non-electing Share"), then for the
purpose of this paragraph (e) the kind and amount of stock, securities and other
property (including cash) receivable upon such Transaction by each Non-electing
Share shall be deemed to be the kind and amount so receivable per share by a
plurality of the Non-electing Shares). The Corporation shall not be a party to
any Transaction unless the terms of such Transaction are consistent with the
provisions of this paragraph (e), and it shall not consent or agree to the
occurrence of any Transaction until the Corporation has entered into an
agreement with the successor or purchasing entity, as the case may be, for the
benefit of the holders of the Preferred Shares that will contain provisions
enabling the holders of the Preferred Shares that remain outstanding after such
Transaction to convert into the consideration received by holders of Common
Stock at the Conversion Ratio in effect immediately prior to such Transaction.
The provisions of this paragraph (e) shall similarly apply to successive
Transactions.
(f) Notice of Certain Events. If:
(i) the Corporation shall declare a dividend (or any
other distribution) on the Common Stock (other than the Regular Quarterly
Dividend); or
(ii) the Corporation shall authorize the granting to
the holders of Common Stock of rights or warrants to subscribe for or purchase
any shares of any class or any other rights or warrants; or
(iii) there shall be any reclassification of the
Common Stock (other than any event to which subparagraph (d)(i) of this Section
7 applies) or any consolidation or merger to which the
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Corporation is a party and for which approval of any shareholders of the
Corporation is required, or a statutory share exchange, or self tender offer by
the Corporation for all or substantially all of its outstanding shares of Common
Stock or the sale or transfer of all or substantially all of the assets of the
Corporation as an entity; or
(iv) there shall occur the involuntary liquidation,
dissolution or winding up of the Corporation, then, in each such case, the
Corporation shall cause to be mailed to the holders of Preferred Shares, at the
address as shown on the stock records of the Corporation, as promptly as
possible, but at least 15 Business Days prior to the applicable date hereinafter
specified, a notice stating (A) the date on which a record is to be taken for
the purpose of such dividend, distribution or rights or warrants, or, if a
record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution or rights or warrants are
to be determined or (B) the date on which such reclassification, consolidation,
merger, statutory share exchange, sale, transfer, liquidation, dissolution or
winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock shall be entitled to exchange their shares
of Common Stock for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, statutory share exchange, sale,
transfer, liquidation, dissolution or winding up. Failure to give or receive
such notice or any defect therein shall not affect the legality or validity of
the proceedings described in this Section 7.
(g) Notice of Adjustment of Conversion Ratio. Whenever the
Conversion Ratio is adjusted as herein provided, the Corporation shall prepare a
notice of such adjustment of the Conversion Ratio setting forth the adjusted
Conversion Ratio and the effective date of such adjustment and shall mail such
notice of such adjustment of the Conversion Ratio to the holders of the
Preferred Shares at such holders' last address as shown on the stock records of
the Corporation.
(h) Timing of Adjustment. In any case in which paragraph (d)
of this Section 7 provides that an adjustment shall become effective on the day
next following the record date for an event, the Corporation may defer until the
occurrence of such event (A) issuing to the holder of Preferred Shares converted
after such record date and before the occurrence of such event the additional
shares of Common Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable upon such
conversion before giving effect to such adjustment and (B) paying to such holder
any amount of cash in lieu of any fraction pursuant to paragraph (c) of this
Section 7.
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(i) No Duplication of Adjustments. There shall be no
adjustment of the Conversion Ratio in case of the issuance of any stock of the
Corporation in a reorganization, acquisition or other similar transaction except
as specifically set forth in this Section 7. If any action or transaction would
require adjustment of the Conversion Ratio pursuant to more than one paragraph
of this Section 7, only one adjustment shall be made and such adjustment shall
be the amount of adjustment that has the highest absolute value.
(j) Other Adjustments to Conversion Ratio. If the Corporation
shall take any action affecting the Common Stock, other than action described in
this Section 7, that would materially adversely affect the conversion rights of
the holders of the Preferred Shares or the value of such conversion rights, the
Conversion Ratio for the Preferred Shares may be adjusted, to the extent
permitted by law, in such manner, if any, and at such time, as the Board of
Directors, in its sole discretion, may determine to be equitable in the
circumstances.
(k) Reservation, Validity, Listing and Securities Law
Compliance With Respect to Shares of Common Stock.
(i) The Corporation covenants that it will at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued shares of Common Stock for the purpose
of effecting conversion of the Preferred Shares, the full number of shares of
Common Stock deliverable upon the conversion of all outstanding Preferred Shares
not therefore converted. Before taking any action which would cause an
adjustment in the Conversion Ratio such that Common Stock issuable upon the
conversion of Preferred Shares would be issued below par value of the Common
Stock, the Corporation will take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Corporation may validly and
legally issue fully-paid and nonassessable shares of Common Stock at such
adjusted Conversion Ratio.
(ii) The Corporation covenants that any shares of
Common Stock issued upon the conversion of the Preferred Shares shall be validly
issued, fully paid and non-assessable.
(iii) The Corporation shall endeavor to list the
shares of Common Stock required to be delivered upon conversion of the Preferred
Shares, prior to such delivery, upon each national securities exchange, if any,
upon which the outstanding Common Stock is listed at the time of such delivery.
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(iv) Prior to the delivery of any securities that
the Corporation shall be obligated to deliver upon conversion of the Preferred
Shares, the Corporation shall endeavor to comply with all federal and state laws
and regulations thereunder requiring the registration of such securities with,
or any approval of or consent to the delivery thereof, by any governmental
authority.
(l) Transfer Taxes. The Corporation will pay any and all
documentary stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of Common Stock or other securities or property on
conversion of the Preferred Shares pursuant hereto; provided, however, that the
Corporation shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issue or delivery of shares of Common Stock or
other securities or property in a name other than that of the holder of the
Preferred Shares to be converted, and no such issue or delivery shall be made
unless and until the person requesting such issue or delivery has paid to the
Corporation the amount of any such tax or established, to the reasonable
satisfaction of the Corporation, that such tax has been paid.
(m) Certain Defined Terms. The following definitions shall
apply to terms used in this Section 7:
(1) Current Market Price. For the purpose of any computation
under this Section 7, the Current Market Price per share of
Common Stock on any date in question shall be deemed to be the
average of the daily closing prices for the five consecutive
Trading Days immediately preceding such date in question;
provided, however, that if another event occurs that would
require an adjustment pursuant to subsection (f) through (j),
inclusive, the Board may make such adjustments to the closing
prices during such five Trading Day period as it deems
appropriate to effectuate the intent of the adjustments in
this Section 7, in which case any such determination by the
Board shall be set forth in a resolution of the Board and
shall be conclusive.
(2) "Trading Day" shall mean a day on which Preferred Shares
are traded on the national securities exchange or quotation
system used to determine the closing price.
Section 8. Preferred Shares -- Change of Control, Put Option
and REIT-Put Option.
(a) In addition to the redemption provisions of Section 5, if
on or before December 31, 2001, an event or transaction will result in a Change
of Control (as defined herein), the Corporation
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may, at its option, to the extent it shall have Legally Available Funds
therefor, redeem all (but not less than all) of the outstanding Preferred Shares
on the date of such Change of Control. The right of the Corporation to redeem
the Preferred Shares pursuant to this Section 8(a) shall be exercised by mailing
a written notice of election by the Corporation to the holders of Preferred
Shares at such holder's address appearing in the records of the Corporation, to
the extent practicable, not less than 30 days prior to the date of the Change of
Control. During the period beginning on the date such notice is mailed and
ending on the date seven days prior to the date of such Change of Control, each
holder of Preferred Shares may exercise its right to convert pursuant to Section
7 herein (which exercise shall, unless otherwise indicated, be conditioned upon
the occurrence of the specified Change of Control). On the date of the Change of
Control, the Corporation shall be required, unless such holder of Preferred
Shares has exercised its right to convert pursuant to the prior sentence, to
purchase from such holder of Preferred Shares (upon surrender by such holder at
the Corporation's principal office of the certificate representing such share),
such Preferred Shares, at a price equal to the product of (i) $13.75 plus
accrued and unpaid dividends (accrued through the date of payment for redemption
or the date such payment is made available) and (ii) the number of Preferred
Shares held by such holder to be redeemed. No Preferred Share is entitled to any
dividends accruing after the date on which the payment for such share is paid or
made available for payment to the holder thereof.
(b) If a Change of Control or Put Event occurs each holder of
Preferred Shares will have the right to require that the Corporation, to the
extent the Corporation shall have Legally Available Funds therefor, to redeem
such holder's Preferred Shares at a redemption price payable in cash in an
amount equal to 102% of the Liquidation Value thereof, plus accrued and unpaid
dividends whether or not declared, if any (the "Put Payment"), to the date of
redemption or the date payment is made available (the "Put Date"), pursuant to
the offer described in subsection (d) below (the "Put Offer"). Upon the
expiration of the Put Offer holders of Preferred Shares shall have no further
right to require the Corporation to redeem such holder's Preferred Shares unless
and until another Change of Control or Put Event occurs.
(c) If a REIT-Put Event occurs each holder of Preferred Shares
will have the right to require that the Corporation, to the extent the
Corporation shall have Legally Available Funds therefor, to redeem such holder's
Preferred Shares at a redemption price payable in cash in an amount equal to the
greater of (i) 110% of the Liquidation Value thereof, plus accrued and unpaid
dividends whether or not declared, if any, (ii) 105% of the Current Market
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Price (as defined in Section 7(m), plus accrued and unpaid dividends whether or
not declared, if any, and (iii) the difference between the 52-Week Trading High
and $12.50, plus accrued and unpaid dividends whether or not declared, if any
(any of (i), (ii) or (iii), the "REIT-Put Payment"), to the date of redemption
or the date payment is made available (the "REIT-Put Date"), pursuant to the
offer described in subsection (d) below (the "REIT-Put Offer"). Upon the
expiration of the REIT-Put Offer holders of Preferred Shares shall have no
further right to require the Corporation to redeem such holder's Preferred
Shares unless and until another REIT-Put Event occurs. "52-Week Trading High"
means, for any date, the highest per share closing price of the Common Stock for
the 52-calendar week period immediately preceding such date
(d) Within 15 days following the Corporation becoming aware
that an event has occurred that has resulted in any Change of Control, Put Event
or REIT-Put Event, the Corporation shall mail a notice to each holder of
Preferred Shares, at such holder's address appearing in the records of the
Corporation, stating (i) that a Change of Control, Put Event or REIT-Put Event,
as applicable, has occurred and that such holder has the right to require the
Corporation to redeem such holder's Preferred Shares in cash, (ii) the date of
redemption (which shall be a Business Day, no earlier than 30 days and no later
than 60 days from the date such notice is mailed, or such later date as may be
necessary to comply with the requirements of the Exchange Act), (iii) the
redemption price for the redemption, and (iv) the instructions determined by the
Corporation, consistent with this subsection, that a holder must follow in order
to have its Preferred Shares redeemed.
(e) On the Put Date or the REIT-Put Date, as applicable, the
Corporation will, to the extent lawful, accept for payment Preferred Shares or
portions thereof tendered pursuant to the Put Offer or the REIT-Put Offer, as
applicable, and pay an amount equal to the Put Payment or the REIT-Put Payment,
as applicable, in respect of all Preferred Shares or portions thereof so
tendered. The Corporation shall promptly mail to each holder of Preferred Shares
to be redeemed payment in an amount equal to the redemption price for such
Preferred Shares.
(f) Notwithstanding anything else herein, to the extent they
are applicable to any Change of Control Offer, the Corporation will comply with
Section 14 of the Exchange Act and the provisions of Regulation 14D and 14E and
any other tender offer rules under the Exchange Act and any other federal and
state securities laws, rules and regulations and all time periods and
requirements shall be adjusted accordingly
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(g) "Change of Control" means each occurrence of any of the
following: (i) the acquisition, directly or indirectly, by any individual or
entity or group (as such term is used in Section 13(d)(3) of the Exchange Act)
of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act, except
that such individual or entity shall be deemed to have beneficial ownership of
all shares that any such individual or entity has the right to acquire, whether
such right is exercisable immediately or only after passage of time) of more
than 30% of the aggregate outstanding voting power of capital stock of the
Corporation; (ii) other than with respect to the election, resignation or
replacement of the Preferred Directors, during any period of two consecutive
years, individuals who at the beginning of such period constituted the Board of
Directors of the Corporation (together with any new directors whose election by
such Board of Directors or whose nomination for election by the shareholders of
the Corporation was approved by a vote of 66 2/3% of the directors of the
Corporation (excluding Preferred Directors) then still in office who were either
directors at the beginning of such period, or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Corporation then in office; and (iii)
(A) the Corporation consolidates with or merges into another entity or conveys,
transfers or leases all or substantially all of their respective assets
(including, but not limited to, real property investments) to any individual or
entity, or (B) any corporation consolidates with or merges into the Corporation,
which in either event (A) or (B) is pursuant to a transaction in which the
outstanding voting capital stock of the Corporation is reclassified or changed
into or exchanged for cash, securities (unless the holders of the exchanged
securities of the Corporation immediately prior to such transaction hold
immediately after such transaction at least a majority of the securities into
which such exchange was made) or other property; provided, however, that the
events described in clause (iii) shall not be deemed to be a Change of Control
if the sole purpose of such event is that the Corporation is seeking to change
its domicile or to change its form from a corporation to a statutory business
trust.
(h) "Put Event" means each occurrence of the Corporation
ceasing to be engaged primarily in the business of owning and managing triple
net leased properties directly, or through subsidiaries, as carried on as of the
date hereof and described in the Corporation's Annual Report on Form 10-K as
filed with the Commission for the year ended December 31, 1995.
(i) "REIT-Put Event" means each occurrence of either of (i)
the Corporation fails to qualify as a real estate investment trust as described
in Section 856 of the Internal Revenue Code of 1986, as amended, other than as a
result of any action, or
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unreasonable failure to act, by the holders of Preferred Shares; (ii) the
Corporation becomes a "Pension-held REIT" as defined in Section 856(h)(3)(D) of
the Internal Revenue Code of 1986, as amended, other than as a result of any
action, or unreasonable failure to act, by holders of Preferred Shares.
Section 9. Preferred Shares -- Ownership Limitations.
(a) (1) For the purposes of this Section 9, the following
terms shall have the following meanings:
"Beneficial Ownership" shall mean ownership of Capital Stock by a
Person who would be treated as an owner of such shares of Capital Stock
either directly or indirectly through the application of Section 544 of
the Code as modified by Section 856(h)(1)(B) of the Code. The terms
"Beneficial Owner," "Beneficially Owns" and "Beneficially Owned" shall
have correlative meanings:
"Beneficiary" shall mean a beneficiary of the Trust as determined
pursuant to Section 9(b)(5).
"Board of Directors" shall mean the Board of Directors of the
Corporation.
"By-Laws" shall mean the By-Laws of the Corporation.
"Capital Stock" shall mean stock that is Common Stock, Excess Stock or
Preferred Stock, if any.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Constructive Ownership" shall mean ownership of Capital Stock by a
Person who would be treated as an owner of such shares of Capital Stock
either directly or indirectly through the application of Section 318 of
the Code, as modified by Section 856(d)(5) of the Code. The terms
"Constructive Owner," "Constructively Owns" and "Constructively Owned"
shall have correlative meanings.
"Equity Stock" shall mean Common Stock and Preferred Stock in
the aggregate.
"Market Price" on any date shall mean, with respect to the Common
Stock, the average of the daily market price for ten consecutive
trading days immediately preceding the date. The market price for each
such trading day shall be determined as follows: (A) if the Common
Stock is listed or admitted to
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trading on any securities exchange or included for quotation on the
NASDAQ-National Market System, the closing price, regular way, on such
day, or if no such sale takes place on such day, the average of the
closing bid and asked prices on such day, as reported by a reliable
quotation source designated by the Corporation; (B) if the Common Stock
is not listed or admitted to trading on any securities exchange or
included for quotation on the NASDAQ-National Market System, the last
reported sale price on such day or, if no sale takes place on such day,
the average of the closing bid and asked prices on such day, as
reported by a reliable quotation source designated by the Corporation;
or (C) if the Common Stock is not listed or admitted to trading on any
securities exchange or included for quotation on the NASDAQ-National
Market System and no such last reported sale price or closing bid and
asked prices are available, the average of the reported high bid and
low asked prices on such day, as reported by a reliable quotation
source designated by the Corporation, or if there shall be no bid and
asked prices on such day, the average of the high bid and low asked
prices, as so reported, on the most recent day (not more than ten days
prior to the date in question) for which prices have been so reported;
provided that if there are no bid and asked prices reported during the
ten days prior to the date in question, the Market Price of the Common
Stock shall be determined by the Corporation acting in good faith on
the basis of such quotations and other information as it considers, in
its reasonable judgment, appropriate.
"Ownership Limit" shall mean 9.8% of the value of the outstanding
Equity Stock of the Corporation.
"Person" shall mean 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 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.
"Purported Beneficial Transferee" shall mean, with respect to any
purported Transfer that results in Excess Stock, the purported
beneficial transferee for whom the Purported Record Transferee would
have acquired shares of Equity Stock if such transfer had been valid
under Section 9(a)(2).
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"REIT" shall mean a Real Estate Investment Trust under Section 856 of
the Code.
"Restriction Termination Date" shall mean the first day on which the
Board of Directors of the Corporation determines that it is no longer
in the best interests of the Corporation to attempt to, or continue to,
qualify as a REIT.
"Transfer" shall mean any sale, transfer, gift, hypothecation, pledge,
assignment, devise or other disposition of Capital Stock (including (i)
the granting of any option or entering into any agreement for the sale,
transfer or the disposition of Equity Stock or (ii) the sale, transfer,
assignment or other disposition of any securities or rights convertible
into or exchangeable for Capital Stock), whether voluntary or
involuntary, whether of record, constructively or beneficially and
whether by operation of law or otherwise.
"Trust shall mean the trust created pursuant to Section 9(b)(1).
"Trustee" shall mean the Corporation, acting as trustee for the Trust,
or any successor trustee appointed by the Corporation.
(2)(A) Except as provided in Section 9(a)(9), prior
to the Restriction Termination Date, no Person shall Beneficially Own
or Constructively Own shares of the outstanding Equity Stock in excess
of the Ownership Limit; (B) except as provided in Section 9(a)(9),
prior to the Restriction Termination Date, any Transfer that, if
effective, would result in any Person Beneficially Owning or
Constructively Owning Equity Stock in excess of the Ownership Limit
shall be void ab initio as to the Transfer of that number of shares of
Equity Stock which would be otherwise Beneficially or Constructively
Owned by such Person in excess of the Ownership Limit; and the intended
transferee shall acquire no rights in such excess shares of Equity
Stock; (C) except as provided in Section 9(a)(9), prior to the
Restriction Termination Date, any Transfer that, if effective, would
result in the Equity Stock's being Beneficially Owned by fewer than 100
Persons (determined without reference to any rules of attribution)
shall be void ab initio as to the Transfer of that number of shares
which would be otherwise Beneficially or Constructively Owned by the
transferee; and the intended transferee shall acquire no rights in such
excess shares of Equity Stock; and (D) prior to the Restriction
Termination Date, any Transfer of shares of Equity Stock that, if
effective, would result in the Corporation's being "closely
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held" within the meaning of Section 856(h) of the Code shall be void ab
initio as to the Transfer of that number of shares of Equity Stock
which would cause the Corporation to be "closely held" within the
meaning of Section 856(h) of the Code; and the intended transferee
shall acquire no rights in such shares of Equity Stock.
(3)(A) If, notwithstanding the other provisions
contained in this Section 9, at any time prior to the Restriction
Termination Date, there is a purported Transfer or other change in the
capital structure of the Corporation such that any Person would either
Beneficially Own or Constructively Own Equity Stock in excess of the
Ownership Limit, then, except as otherwise provided in Section 9(a)(9),
such shares of Equity Stock in excess of the Ownership Limit (rounded
up to the nearest whole share) shall be automatically converted into an
equal number of shares of Excess Stock (such conversion shall be
effective as of the close of business on the business day prior to the
date of the Transfer or change in capital structure); and (B) if,
notwithstanding the other provisions contained in this Section 9, at
any time prior to the Restriction Termination Date, there is a
purported Transfer or other change in the capital structure of the
Corporation which, if effective, would cause the Corporation to become
"closely held" within the meaning of Section 856(h) of the Code, then
the shares of Equity Stock being Transferred or which are otherwise
affected by the change in capital structure and which, in either case,
would cause the Corporation to be "closely held" within the meaning of
Section 856(h) of the Code (rounded up to the nearest whole share)
shall be automatically converted into an equal number of shares of
Excess Stock. Such conversion shall be effective as of the close of
business on the business day prior to the date of the transfer or
change in capital structure.
(4) If the Board of Directors or its designees at any
time determine in good faith that a transfer has taken place in
violation of Section 9(a)(2) or that a Person intends to acquire or has
attempted to acquire Beneficial Ownership or Constructive Ownership of
any shares of Equity Stock in violation of Section 9(a)(2), the Board
of Directors or its designees shall take such action as it or they deem
advisable to refuse to give effect to or to prevent such Transfer,
including, but not limited to, refusing to give effect to such transfer
on the books of the Corporation or instituting proceedings to enjoin
such Transfer, provided, however, that any Transfers or attempted
Transfers in violation of Section 9(a)(2) shall be void ab initio and
automatically result in the conversion described in Section 9(a)(3),
irrespective of
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any action (or non-action) by the Board of Directors or its designees.
(5) Any Person who acquires or attempts to acquire
shares of Equity Stock in violation of Section 9(a)(2), or any Person
who is a transferee such that Excess Stock results under Section
9(a)(3), shall immediately give written notice to the Corporation of
such event and shall provide to the Corporation such other information
as the Corporation may request in order to determine the effect, if
any, of such transfer or attempted transfer on the Corporation's status
as a REIT.
(6) Prior to the Restriction Termination Date: (A)
every Beneficial Owner or Constructive Owner of 5.0% or more (during
any periods in which the number of such Beneficial Owners or
Constructive Owners exceeds 1,999) or of more than 1% (during any
periods in which the number of such Beneficial Owners or Constructive
Owners is less than 2,000), or such lower percentages as required
pursuant to regulations under the Code, of the outstanding Equity Stock
of the Corporation shall, within 30 days after January 1 of each year,
give written notice to the Corporation stating the name and address of
such Beneficial Owner or Constructive Owner, the number of shares of
Equity Stock Beneficially Owned or Constructively Owned, and a
description of how such shares are held. Each such Beneficial Owner or
Constructive Owner shall provide to the Corporation such additional
information as the Corporation may request in order to determine the
effect, if any, of such Beneficial Ownership on the Corporation's
status as a REIT and to ensure compliance with the Ownership Limit; and
(B) each Person who is a Beneficial Owner or Constructive Owner of
Equity Stock and each Person (including the stockholder of record) who
is holding Equity Stock for a Beneficial Owner or Constructive Owner
shall provide to the Corporation such information as the Corporation
may request in order to determine the Corporation's status as a REIT
and to ensure compliance with the Ownership Limit.
(7) Nothing contained in this Section 9 shall limit
the authority of the Board of Directors to take such other action as it
deems necessary or advisable to protect the Corporation and the
interests of its stockholders by preservation of the Corporation's
status as a REIT and to ensure compliance with the Ownership Limit.
(8) In the case of an ambiguity in the application of
any of the provisions of Section 9(a), including any definition
contained in Section 9(a)(1), the Board of
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Directors shall have the power to determine the application of the
provisions of Section 9(a) with respect to any situation based on the
facts known to it.
(9) The Board of Directors, upon receipt of a ruling
from the Internal Revenue Service or an opinion of counsel or other
evidence satisfactory to the Board of Directors and upon such other
conditions as the Board of Directors may direct, in each case provided
that the restrictions contained in Section 9(a)(2)(C) and/or Section
9(a)(2)(d) will not be violated, may exempt a Person from the Ownership
Limit.
(10) Legend. Each Preferred Share shall bear the
following Legend:
The shares of preferred stock represented by this certificate
are subject to restrictions on transfer for the purpose of the
Corporation's maintenance of its status as a real estate
investment trust under the Internal Revenue Code of 1986, as
amended (the "Code"). No Person may, without the consent of
the Corporation, (1) Beneficially Own or Constructively Own
shares of Equity Stock in excess of 9.8% of the value of the
outstanding Equity Stock of the Corporation; or (2)
Beneficially Own Equity Stock that would result in the
Corporation's being "closely held" under Section 856(h) of the
Code. Any Person who attempts to Beneficially Own or
Constructively Own shares of Equity Stock in excess of the
above limitations must immediately notify the Corporation. All
capitalized terms in this legend have the meanings defined in
the Corporation's Charter, as the same may be further amended
from time to time, a copy of which including the restrictions
on transfer, will be sent without charge to each stockholder
who so requests. If the restrictions on transfer are violated,
the shares of Equity Stock represented hereby will be
automatically converted for shares of Excess Stock which will
be held in trust by the Corporation.
(b) (1) Upon any purported Transfer that results in Excess
Stock pursuant to Section 9(a)(3), such Excess Stock shall be deemed to
have been transferred to the Corporation, as Trustee of a Trust for the
exclusive benefit of such Beneficiary or Beneficiaries to whom an
interest in such Excess Stock may later be transferred pursuant to
Section 9(b)(5). Shares of Excess Stock so held in trust shall be
issued and outstanding stock of the Corporation. The Purported Record
Transferee shall have no rights in such Excess Stock except the right
to designate a transferee of
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such Excess Stock upon the terms specified in Section 9(b)(5). The
Purported Beneficial Transferee shall have no rights in such Excess
Stock except as provided in Section 9(b)(5).
(2) Excess Stock shall not be entitled to any
dividends. Any dividend or distribution paid prior to the discovery by
the Corporation that the shares of Equity Stock have been converted for
Excess Stock shall be repaid to the Corporation upon demand, and any
dividend or distribution declared but unpaid shall be rescinded as void
ab initio with respect to such shares of Equity Stock.
(3) Subject to the preferential rights of the
Preferred Stock, if any, as may be determined by the Board of Directors
of the Corporation pursuant to Article SIXTH of the Charter, in the
event of any voluntary or involuntary liquidation, dissolution or
winding up of, or any distribution of the assets of, the Corporation,
each holder of shares of Excess Stock shall be entitled to receive,
ratably with each other holder of Common Stock and Excess Stock, that
portion of the assets of the Corporation available for distribution to
its stockholders as the number of shares of the Excess Stock held by
such holder bears to the total number of shares of Common Stock and
Excess Stock then outstanding. The Corporation, as holder of the Excess
Stock in trust or, if the Corporation has been dissolved, any trustee
appointed by the Corporation prior to its dissolution, shall distribute
ratably to the Beneficiaries of the Trust, when determined, any such
assets received in respect of the Excess Stock in any liquidation,
dissolution or winding up of, or any distribution of the assets of, the
Corporation.
(4) The holders of shares of Excess Stock shall not
be entitled to vote on any matters (except as required by the General
Corporation Laws of the State of Maryland).
(5)(A) Excess Stock shall not be transferable. The
Purported Record Transferee may freely designate a Beneficiary of its
interest in the Trust (representing the number of shares of Excess
Stock held by the Trust attributable to a purported transfer that
resulted in the Excess Stock), if (i) the shares of Excess Stock held
in the Trust would not be Excess Stock in the hands of such Beneficiary
and (ii) the Purported Beneficial Transferee does not receive a price
for designating such Beneficiary that reflects a price per share for
such Excess Stock that exceeds (x) the price per share such Purported
Beneficial Transferee paid for the Equity Stock in the purported
Transfer that resulted in the Excess Stock, or (y) if the Purported
Beneficial Transferee did not give
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value for such shares of Excess Stock (such as through a gift, devise
or other transaction), a price per share equal to the Market Price on
the date of the purported Transfer that resulted in the Excess Stock.
Upon such transfer of an interest in the Trust, the corresponding
shares of Excess Stock in the Trust shall be automatically converted to
an equal number of shares of Equity Stock, and such shares of Equity
Stock shall be transferred of record to the Beneficiary of the interest
in the Trust designated by the Purported Record Transferee as described
above if such Equity Stock would not be Excess Stock in the hands of
such Beneficiary. Prior to any transfer of any interest in the Trust,
the Purported Record Transferee must give advance notice to the
Corporation of the intended transfer, and the Corporation must have
waived in writing its purchase rights under Section 9(b)(6); (B)
notwithstanding the foregoing, if a Purported Beneficial Transferee
receives a price for designating a Beneficiary of an interest in the
Trust that exceeds the amounts allowable under Section 9(b)(5)(A), such
Purported Beneficial Transferee shall pay, or cause the Beneficiary of
the interest in the Trust to pay, such excess to the Corporation.
(6) Shares of Excess Stock shall be deemed to have
been offered for sale to the Corporation, or its designee at a price
per share equal to the lesser of (i) the price per share in the
transaction that created such Excess Stock (or, in the case of devise
or gift, the Market Price at the time of such devise or gift) and (ii)
the Market Price on the date the Corporation, or its designee, accepts
such offer. Subject to the satisfaction of any applicable requirements
of the General Corporation Laws of the State of Maryland, the
Corporation shall have the right to accept such offer for a period of
90 days after the later of (i) the date of the transfer that resulted
in such Excess Stock and (ii) the date the Board of Directors
determines in good faith that a Transfer resulting in Excess Stock has
occurred, if the Corporation does not receive a notice of such Transfer
pursuant to Section 9(a)(5).
(c) Nothing contained in this Section 9 or in any other
provision of the Charter shall limit the authority of the Board of Directors to
take such other action as it, in its sole discretion, deems necessary or
advisable to protect the Corporation and the interests of the stockholders by
maintaining the Corporation's eligibility to be, and preserving the
Corporation's status as, a qualified REIT under the Code.
(d) If any of the foregoing restrictions on transfer of
Excess Stock are determined to be void, invalid or unenforceable by
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any court of competent jurisdiction, the Purported Beneficial Transferee may be
deemed, at the option of the Board of Directors, to have acted as an agent of
the Corporation in acquiring such Excess Stock and to hold such Excess Stock on
behalf of the Corporation.
(e) Nothing in this Section 9 precludes the settlement of
transactions entered into through the facilities of the New York Stock Exchange.
Section 10. Miscellaneous.
(a) Exchange or Market Transactions. Nothing in Section 9 or
this Section 10 shall preclude the settlement of any transaction entered into
through the facilities of the New York Stock Exchange or any other national
securities exchange or automated inter-dealer quotation system. However, as set
forth in Section 9 or this Section 10 certain transactions may be settled by
providing shares of Excess Stock.
(b) Severability. If any provision of Section 9 or this
Section 10 or any application of any such provision is determined to be invalid
by any federal or state court having jurisdiction over the issues, the validity
of the remaining provisions shall not be affected and other applications of such
provisions shall be affected only to the extent necessary to comply with the
determination of such court.
(c) Waiver. The Corporation shall have authority at any time
to waive the requirements that Excess Stock be issued or be deemed outstanding
or that the Corporation repurchase Preferred Shares in accordance with the
provisions of Section 9 if the Corporation determines, based on an opinion of
nationally recognized tax counsel, that the issuance of such Excess Stock or the
fact that such Excess Stock is deemed to be outstanding, or any such repurchase,
would not jeopardize the status of the Corporation as a REIT for federal income
tax purposes.
(d) Mailings. All mailings shall be made by overnight United
States mail or by another overnight courier service.
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IN WITNESS WHEREOF, LEXINGTON CORPORATE PROPERTIES, INC. has
caused its corporate seal to be hereunto affixed and these Articles
Supplementary to be signed by its Treasurer and Chief Financial Officer, Antonia
G. Trigiani and attested by its Secretary, Paul R. Wood, this __th day of
January, 1997.
LEXINGTON CORPORATE PROPERTIES,
INC.
By: /s/ Antonia G. Trigiani
--------------------------------
Name: Antonia G. Trigiani
Title: Treasurer and Chief
Financial Officer
THE UNDERSIGNED, Secretary of Lexington Corporate Properties,
Inc. who executed on behalf of said corporation the foregoing Articles
Supplementary, of which this certificate is made a part, hereby acknowledges, in
the name and on behalf of said corporation, the foregoing Articles Supplementary
to be the corporate act of said corporation and further certify that, to the
best of his knowledge, information and belief, the matters and facts set forth
therein with respect to the approval thereof or otherwise required to be
verified under oath are true in all material respects, under the penalties of
perjury.
By: /s/ Paul R. Wood
---------------------------
Name: Paul R. Wood
Title: Secretary
Corporate Seal
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