EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
WILSHIRE REAL ESTATE INVESTMENT TRUST INC.
(A Stock Corporation)
Wilshire Real Estate Investment Trust Inc., a Maryland corporation (which
is hereinafter called the "CORPORATION"), hereby certifies to the State
Department of Assessments and Taxation of Maryland (the "SDAT") that:
FIRST: The name of the Corporation is "Wilshire Real Estate Investment
Trust Inc." The Corporation desires to amend and restate its charter as
currently in effect. The Articles of Incorporation of the Corporation were
originally filed with the SDAT on October 24, 1997.
SECOND: Pursuant to Section 2-609 of the Maryland General Corporation Law
(the "MGCL"), these Articles of Amendment and Restatement restate and further
amend the provisions of the Articles of Incorporation of the Corporation.
THIRD: The text of the Articles of Incorporation of the Corporation is
hereby amended and restated in its entirety as follows:
I.
The name of the corporation (which is hereinafter called the "Corporation")
is:
WILSHIRE REAL ESTATE INVESTMENT TRUST INC.
II.
The purpose for which this Corporation is formed is to transact any and all
lawful act or activity for which corporations may be organized under the General
Laws of the State of Maryland now or hereafter in force.
III.
The total number of shares of stock of all classes which the Corporation
has authority to issue is 225,000,000 shares of capital stock (par value $.0001
per share), of which 200,000,000 shares are
initially classified as "Common Stock" and 25,000,000 shares are initially
classified "Preferred Stock." The aggregate par value of all authorized shares
of stock having par value is $22,500. This amendment increases the aggregate par
value of all shares of stock of all classes from $10 to $22,500. The Board of
Directors may classify and reclassify any unissued shares of capital stock by
setting or changing in any one or more respects the preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, or terms or conditions of redemption of such shares of capital
stock.
No holder of any stock or any other securities of the Corporation, whether
now or hereafter authorized, shall have any preemptive right to subscribe for or
purchase any stock or any other securities of the Corporation, including,
without limitation: (i) any shares of any class of the Corporation; (ii) any
warrants, rights, or options to purchase any such shares; or (iii) any
securities or obligations convertible into any such shares or into warrants,
rights, or options to purchase any such shares.
The Board of Directors is hereby empowered to authorize the issuance from
time to time of shares of its stock of any class, whether now or hereafter
authorized, or securities convertible into shares of its stock of any class or
classes, whether now or hereafter authorized, for such consideration as may be
deemed advisable by the Board of Directors and without any action by the
stockholders. Also, the Preferred Stock may be issued from time to time by the
Board of Directors of the Corporation, in such series and with such preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or other provisions as may be fixed by the Board of
Directors without any action by the stockholders.
IV.
The present address of the principal office of the Corporation in this
State is 11 East Chase Street, Suite 9E, Baltimore, Maryland 21202.
V.
The name and address of the resident agent of the Corporation in this State
are CSC-Lawyers Incorporating Service Company, 11 East Chase Street, Suite 9E,
Baltimore, Maryland 21202. Said resident agent is a Maryland corporation.
VI.
A. The number of directors of the Corporation shall be five (5), which
number may be increased or decreased pursuant to the Bylaws of the Corporation;
provided that in no case shall the Board of Directors consist of less than three
(3) or more than nine (9) members unless otherwise determined from time to time
by resolution adopted by the affirmative vote of at least eighty percent (80%)
of the members of the Board of Directors; provided further that in any case the
number of directors of the Corporation shall never be
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less than the minimum number permitted by the General Laws of the State of
Maryland now or hereafter in force. Any director, or the entire Board of
Directors, may be removed from office at any time, but only for cause and then
only by the affirmative vote of not less than two-thirds (2/3) of all the votes
entitled to be cast by the outstanding shares of capital stock of the
Corporation generally in the election of directors which are cast on the matter
at any meeting of the stockholders called for that purpose, voting together for
this purpose as a single class. A director need not be a stockholder. At each
annual meeting of the stockholders, the stockholders shall elect directors to
serve a one (1) year term and until successors are elected and qualify.
B. The following Persons are the initial directors of the Corporation, to
serve until their successors are elected at the 1999 annual meeting of the
stockholders and qualified: Andrew Wiederhorn, Lawrence Mendelsohn, John
Condas, David Egelhoff, and Steven Kapiloff.
C. Notwithstanding anything herein to the contrary, at all times (except
during a period not to exceed sixty (60) days following the death, resignation,
incapacity, or removal from office of a director prior to expiration of the
director's term of office), a majority of the Board of Directors shall be
"Independent Directors." "Independent Director" shall mean a director who,
within the last two years, has not (i) been employed by WFSG or any of its
Affiliates, (ii) been an officer or director of WFSG or any of its Affiliates,
(iii) performed services for WFSG or any of its Affiliates, or (iv) had any
material business or professional relationship with WFSG or any of its
Affiliates. "WFSG" shall mean Wilshire Financial Services Group Inc., a Delaware
corporation. "Affiliate" shall mean (i) any person directly or indirectly
owning, controlling, or holding, with power to vote ten percent or more of the
outstanding voting securities of such other person, (ii) any person ten percent
or more of whose outstanding voting securities are directly or indirectly owned,
controlled, or held, with power to vote, by such other person, (iii) any person
directly or indirectly controlling, controlled by, or under common control with
such other person, (iv) any executive officer, director, trustee or general
partner of such other person, and (v) any legal entity for which such person
acts as an executive officer, director, trustee or general partner. The term
"person" means and includes any natural person, corporation, partnership,
association, limited liability company or any other legal entity. An indirect
relationship shall include circumstances in which a person's spouse, children,
parents, siblings or mothers-, fathers-, sisters- or brothers-in-law is or has
been associated with a person.
D. To the extent permitted by applicable law, and subject to such
approval of the Independent Directors and such other conditions, if any, as may
be required by any applicable law or other applicable rule or regulation, the
Board of Directors may engage a manager to advise the Board of Directors and be
responsible for directing the day-to-day affairs of the Corporation (a
"Manager") pursuant to a written agreement (a "Management Agreement"). The
approval of any Management Agreement and the renewal or termination thereof
shall require the affirmative vote of a majority of the Independent Directors.
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E. A majority of the Independent Directors shall approve general
guidelines ("Guidelines") for the Corporation's investments, borrowings and
operations, and the Independent Directors shall conduct a quarterly review of
all transactions engaged in by the Corporation. The Independent Directors shall
approve any transactions with WFSG or any Affiliate of WFSG, in advance, to
insure compliance with the Guidelines.
F. Notwithstanding any other provisions of the Charter or the Bylaws of
the Corporation (and notwithstanding that some lesser percentage may be
specified by law, the Charter or the Bylaws of the Corporation), the provisions
of this Article VI shall not be amended, altered, changed, or repealed, and no
provision inconsistent with this Article VI shall be adopted, without the
affirmative vote of at least eighty percent (80%) of the members of the Board of
Directors and by the affirmative vote of not less than two-thirds (2/3) of all
the votes entitled to be cast by the outstanding shares of capital stock of the
Corporation generally in the election of directors which are cast on the matter
at any meeting of the stockholders called for that purpose, voting together for
this purpose as a single class.
VII.
A. The Corporation shall indemnify (A) its directors and officers,
whether serving the Corporation or, at its request, any other entity, to the
full extent required or permitted by the General Laws of the State of Maryland
now or hereafter in force, including the advance of expenses under the
procedures and to the full extent permitted by law and (B) other employees and
agents to such extent as shall be authorized by the Board of Directors of the
Corporation or the Corporation's Bylaws and be permitted by law. The foregoing
rights of indemnification shall not be exclusive of any other rights to which
those seeking indemnification may be entitled. The Board of Directors may take
such action as is necessary to carry out these indemnification provisions and is
expressly empowered to adopt, approve, and amend from time to time such bylaws,
resolutions, or contracts, implementing such provisions or such further
indemnification arrangements as may be permitted by law. No amendment of the
Charter of the Corporation or repeal of any of its provisions shall limit or
eliminate the right to indemnification provided hereunder with respect to acts
or omissions occurring prior to such amendment or repeal.
B. To the fullest extent permitted by Maryland statutory or decisional
law, as amended or interpreted, no director or officer of this Corporation shall
be personally liable to the Corporation or its stockholders for money damages.
No amendment of the Charter of the Corporation or repeal of any of its
provisions shall limit or eliminate the limitation on liability provided to
directors and officers hereunder with respect to any act or omission occurring
prior to such amendment or repeal.
VIII.
The Corporation shall seek to elect and maintain its status as a real
estate investment trust ("REIT") under Section 856 under the Internal Revenue
Code of 1986, as amended
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from time to time (the "Code"). It shall be the duty of the Board of Directors
to ensure that the Corporation satisfies the requirements for qualification as a
REIT under the Code, including, but not limited to, the ownership of its
outstanding stock, the nature of its assets, the sources of its income, and the
amount and timing of its distributions to its stockholders. The Board of
Directors shall take no action to disqualify the Corporation as a REIT or to
otherwise revoke the Corporation's election to be taxed as a REIT without the
affirmative vote of at least eighty percent (80%) of the members of the Board of
Directors and by the affirmative vote of not less than two-thirds (2/3) of all
the votes entitled to be cast by the outstanding shares of the capital stock of
the Corporation on the matter at any meeting of the stockholders called for that
purpose, voting together for this purpose as a single class.
IX.
A. Restrictions on Transfer.
1. Definitions. The following terms shall have the following
meanings:
"Beneficial Ownership" shall mean ownership of shares of Equity Stock
by a Person who would be treated as an owner of such shares of Equity Stock
either directly or indirectly through the application of Section 544 of the
Code, as modified by Section 856(h)(1)(B) of the Code. The terms "Beneficial
Owner," "Beneficially Owns," and "Beneficially Owned" shall have correlative
meanings.
"Beneficiary" shall mean, with respect to any Trust, one or more
organizations described in each of Section 170(b)(1)(A) (other than clauses
(vii) or (viii) thereof) and Section 170(c)(2) of the Code that are named by the
Corporation as the beneficiary or beneficiaries of such Trust, in accordance
with the provisions of Section (B)(1) of Article IX hereof.
"Board of Directors" shall mean the Board of Directors of the
Corporation.
"Closing Price" on any date shall mean the average of the high bid and
low asked prices in the over-the-counter market, as reported by The Nasdaq Stock
Market, or, if such system is no longer in use, the principal other automated
quotations system that may then be in use or, if the shares of Equity Stock are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the shares
of Equity Stock selected by the Board of Directors.
"Constructive Ownership" shall mean ownership of shares of Equity
Stock by a Person who would be treated as an owner of such shares of Equity
Stock either directly or indirectly through the application of Section 318 of
the Code, as modified by Section 856(d)(5) of the Code. The terms "Constructive
Owner," "Constructively Owns," and "Constructively Owned" shall have correlative
meanings.
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"Disqualified Person" means (A) the United States, any State or
political subdivision thereof, any foreign government, any international
organization, or any agency or instrumentality of any of the foregoing, (B) any
organization (other than a cooperative described in Section 521 of the Code)
which is exempt from tax unless such organization is subject to the tax imposed
by Section 511 of the Code, and (C) any organization described in Section
1381(a)(2)(c) of the Code.
"Equity Stock" shall mean Preferred Stock and Common Stock of the
Corporation. The term "Equity Stock" shall include all shares of Preferred
Stock and Common Stock of the Corporation that are held as Shares-in-Trust in
accordance with the provisions of Section (B) of Article IX hereof.
"Initial Public Offering" means the sale of shares of Common Stock
pursuant to the Corporation's first effective registration statement for such
shares of Common Stock filed under the Securities Act of 1933, as amended.
"Market Price" on any date shall mean the average of the Closing Price
for the five consecutive Trading Days ending on such date.
"Non-Transfer Event" shall mean an event other than a purported
Transfer that would cause any Person to Beneficially Own or Constructively Own
shares of Equity Stock in excess of the Ownership Limit, including, but not
limited to, the granting of any option or entering into any agreement for the
sale, transfer, or other disposition of shares of Equity Stock or the sale,
transfer, assignment, or other disposition of any securities or rights
convertible into or exchangeable for shares of Equity Stock.
"Operating Partnership" shall mean Wilshire Real Estate Partnership
L.P., a Delaware limited partnership.
"Operating Partnership Agreement" shall mean the agreement of limited
partnership governing the Operating Partnership.
"Ownership Limit" shall mean the restriction on ownership (or deemed
ownership by virtue of the attribution provisions of the Code) of more than 9.8%
of the number of shares or value (whichever is more restrictive) of the
outstanding Common Stock by any Person other than Wilshire Financial Services
Group Inc., a Delaware corporation ("WFSG"), or twenty percent (20%) of the
number of shares or value (whichever is more restrictive) of Common Stock by
WFSG (provided that the Board of Directors has obtained representations and
undertakings from WFSG in form and substance satisfactory to the Board of
Directors in its sole discretion as it may deem necessary or advisable in order
to determine that WFSG's Beneficial Ownership or Constructive Ownership will not
impair the Corporation's status as a REIT and provided further that WFSG agrees
that any actual or attempted violation of such representations or undertakings
(or other action which is contrary to the restrictions contained in Section
(A)(2) of Article IX hereof) will result in the transfer
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of such Equity Stock to a Trustee in his capacity as trustee of a Trust in
accordance with Section (A)(3) of Article IX hereof) or 9.8% of the number of
shares or value (whichever is more restrictive) of the outstanding Preferred
Stock (or such other number or value of Preferred Stock as the Board of
Directors may determine in fixing the terms of the Preferred Stock). In
determining the Ownership Limit, the number and value of Common Stock and/or
Preferred Stock of the Corporation shall be determined by the Board in good
faith, which determination shall be conclusive for all purposes hereof.
"Permitted Transferee" shall mean any Person designated as a Permitted
Transferee in accordance with the provisions of Section (B)(5) of Article IX
hereof.
"Person" shall mean an individual, corporation, limited liability
company, partnership, estate, trust, a portion of a trust permanently set aside
for or to be used exclusively for the purposes described in Section 642(c) of
the Code, association, private foundation within the meaning of Section 509(a)
of the Code, joint stock company, or other entity and also includes a "group" as
that term is used for purposes of Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended.
"Prohibited Owner" shall mean, with respect to any purported Transfer
or Non-Transfer Event, any Person who, but for the provisions of Section (A)(3)
of Article IX hereof, would be the actual owner (within the meaning of Treasury
Regulation (S) 1.857-8(b)) of shares of Equity Stock.
"Redemption Rights" shall mean the rights granted under the Operating
Partnership Agreement to the limited partners to redeem, under certain
circumstances, their limited partnership interests for shares of Common Stock
(or cash at the option of the Corporation).
"Restriction Termination Date" shall mean the first day after the date
of the Initial Public Offering on which (A)(i) the Board of Directors determines
that it is no longer in the best interests of the Corporation to retain the
restrictions on transfer and ownership contained in Article IX and (ii) such
restrictions are no longer required for the Corporation to qualify as a REIT; or
(B)(i) the Board of Directors determines that it is no longer in the best
interests of the Corporation to qualify, or to continue to qualify, as a REIT,
and (ii) pursuant to Article VIII, there is an affirmative vote of not less than
two-thirds (2/3) of all the votes entitled to be cast on the matter at any
meeting of the stockholders called for that purpose, voting together for this
purpose as a single class.
"Shares-in-Trust" shall mean any shares of Equity Stock designated
Shares-in-Trust pursuant to Section (A)(3) of Article IX hereof.
"Tenant" shall mean any Person (other than an individual) from whom
the Corporation derives (or is deemed to derive for purposes of applying Section
856 of the Code to the Corporation), directly or indirectly, gross income.
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"Tenant Interest" shall mean an interest, expressed as a percentage,
of the total combined voting power or total number of shares of all classes of
stock of a Tenant that is a corporation, or an interest, expressed as a
percentage, of the assets or net profits (within the meaning of Section
856(d)(2)(B) of the Code) of a Tenant that is not a corporation.
"Trading Day" shall mean any day other than a Saturday, a Sunday, or a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Transfer" shall mean any sale, transfer, gift, assignment, devise, or
other disposition of shares of Equity Stock, whether voluntary or involuntary,
whether of record, constructively or beneficially, and whether by operation of
law or otherwise.
"Trust" shall mean any separate trust created pursuant to Section
(A)(3) of Article IX hereof and administered in accordance with the terms of
Section (B) of Article IX hereof, for the exclusive benefit of any Beneficiary.
"Trustee" shall mean any Person or entity unaffiliated with both the
Corporation and any Prohibited Owner, such Trustee to be designated by the
Corporation to act as trustee of any Trust, or any successor trustee thereof.
2. Restriction on Transfers.
a. Except as provided in Section (A)(7) of Article IX hereof, from
the date of the Initial Public Offering and prior to the Restriction Termination
Date, (i) no Person shall Beneficially Own or Constructively Own outstanding
shares of Equity Stock in excess of the Ownership Limit and (ii) any Transfer
that, if effective, would result in any Person Beneficially Owning or
Constructively Owning shares of Equity Stock in excess of the Ownership Limit
shall be void ab initio as to the Transfer of that number of shares of Equity
Stock which would be otherwise Beneficially Owned or Constructively Owned by
such Person in excess of the Ownership Limit, and the intended transferee shall
acquire no rights in such excess shares of Equity Stock.
b. Except as provided in Section (A)(7) of Article IX hereof, from
the date of the Initial Public Offering and prior to the Restriction Termination
Date, any Transfer that, if effective, would result in shares of Equity Stock
being beneficially owned by fewer than 100 Persons (determined without reference
to any rules of attribution) shall be void ab initio as to the Transfer of that
number of shares which would be otherwise beneficially owned (determined without
reference to any rules of attribution) by the transferee, and the intended
transferee shall acquire no rights in such shares of Equity Stock.
c. From the date of the Initial Public Offering and prior to the
Restriction Termination Date, any Transfer of shares of Equity Stock that, if
effective, would result in the Corporation being "closely held" within the
meaning of Section 856(h) of the
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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.
d. From the date of the Initial Public Offering and prior to the
Restriction Termination Date, any Transfer of shares of Equity Stock that, if
effective, would cause the Corporation to Constructively Own a Tenant Interest
of ten percent (10%) or more shall be void ab initio as to the Transfer of that
number of shares of Equity Stock which would cause the Corporation to
Constructively Own a Tenant Interest of ten percent (10%) or more and the
intended transferee shall acquire no rights in such excess shares of Equity
Stock.
e. From the date of the Initial Public Offering and prior to the
Restriction Termination Date, any Transfer of shares of Equity Stock that, if
effective, would result in shares of Equity Stock being Beneficially Owned by a
Disqualified Person shall be void ab initio as to the Transfer of that number of
shares which would be otherwise Beneficially Owned by the transferee, and the
intended transferee shall acquire no rights in such shares of Equity Stock.
f. It is expressly intended that the restrictions on ownership and
Transfer described in this Section (A)(2) of Article IX shall apply to the
Redemption Rights. Notwithstanding any of the provisions of the Operating
Partnership Agreement to the contrary, a partner of the Operating Partnership
shall not be entitled to effect an exchange of an interest in the Operating
Partnership for Common Stock if the Beneficial Ownership or Constructive
Ownership of Common Stock would be prohibited under the provisions of this
Article IX.
3. Transfer to Trust.
a. If, notwithstanding the other provisions contained in this
Section (A) of Article IX, at any time after the Initial Public Offering and
prior to the Restriction Termination Date, there is a purported Transfer or Non-
Transfer Event such that any Person would either Beneficially Own or
Constructively Own shares of Equity Stock in excess of the Ownership Limit,
then, (i) except as otherwise provided in Section (A)(7) of Article IX hereof,
the purported transferee shall acquire no right or interest (or, in the case of
a Non-Transfer Event, the actual owner (within the meaning of Treasury
Regulation (S) 1.857-8(b)) of the shares of Equity Stock Beneficially Owned or,
Constructively Owned by such Beneficial Owner or Constructive Owner, shall cease
to own any right or interest) in such number of shares of Equity Stock which
would cause such Beneficial Owner or Constructive Owner to Beneficially Own or
Constructively Own shares of Equity Stock in excess of the Ownership Limit, (ii)
such number of shares of Equity Stock in excess of the Ownership Limit (rounded
up to the nearest whole share) shall be designated Shares-in-Trust and, in
accordance with the provisions of Section (B) of Article IX hereof, transferred
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automatically and by operation of law to a Trustee in his capacity as trustee of
a Trust to be held in accordance with that Section (B) of Article IX, and (iii)
the Prohibited Owner shall submit such number of shares of Equity Stock to the
Corporation for registration in the name of the Trustee. Such transfer to a
Trustee and the designation of shares as Shares-in-Trust shall be effective as
of the close of business on the business day prior to the date of the Transfer
or Non-Transfer Event, as the case may be.
b. If, notwithstanding the other provisions contained in this
Section (A) of Article IX (after application of paragraph (a) above), at any
time after the Initial Public Offering and prior to the Restriction Termination
Date, there is a purported Transfer or Non-Transfer Event that, if effective,
would (i) result in the shares of Equity Stock being Beneficially Owned by fewer
than 100 Persons (determined without reference to any rules of attribution),
(ii) result in the Corporation being "closely held" within the meaning of
Section 856(h) of the Code, or (iii) cause the corporation to Constructively Own
a Tenant Interest of ten percent (10%) or more, or (iv) result in the shares of
Equity Stock being Beneficially Owned by a Disqualified Person, then (x) the
purported transferee shall not acquire any right or interest (or, in the case of
a Non-Transfer Event, the Person who, but for the provisions of this Section
(A)(3), would be the actual owner (within the meaning of Treasury Regulation (S)
1.857-8(b)) of the shares of Equity Stock with respect to which such Non-
Transfer Event occurred, shall cease to own any right or interest) in such
number of shares of Equity Stock, the ownership of which by such purported
transferee or purported actual owner would (A) result in the shares of Equity
Stock being beneficially owned by fewer than 100 Persons (determined without
reference to any rules of attribution), (B) result in the Corporation being
"closely held" within the meaning of Section 856(h) of the Code, (C) cause the
Corporation to Constructively Own a Tenant Interest of ten percent (10%) or more
or (D) result in the shares of Equity Stock being Beneficially Owned by a
Disqualified Person, (y) such number of shares of Equity Stock (rounded up to
the nearest whole share) shall be designated Shares-in-Trust and, in accordance
with the provisions of Section (B) of Article IX hereof, transferred
automatically and by operation of law to a Trustee in his capacity as trustee of
a Trust to be held in accordance with that Section (B) of Article IX, and (z)
the Prohibited Owner shall submit such number of shares of Equity Stock to the
Corporation for registration in the name of the Trustee. Such transfer to a
Trustee in his capacity as trustee of a Trust and the designation of shares as
Shares-in-Trust shall be effective as of the close of business on the business
day prior to the date of the Transfer or Non-Transfer Event, as the case may be.
4. Remedies for Breach. If the Corporation, or its designees, shall
at any time determine in good faith that a Transfer or Non-Transfer Event has
taken place that, if effective, would result in a violation of Section (A)(2) of
Article IX hereof or that a Person intends to acquire or has attempted to
acquire Beneficial Ownership or Constructive Ownership of any shares of Equity
Stock in violation of Section (A)(2) of Article IX hereof, the Corporation shall
take such action as it deems advisable to refuse to give effect to or to prevent
such Transfer or acquisition of Beneficial Ownership or Constructive Ownership,
including, but not limited to, causing the Corporation to redeem shares of
Equity Stock,
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refusing to give effect to such Transfer on the books of the Corporation or
instituting proceedings to enjoin such Transfer or acquisition.
5. Notice of Restricted Transfer. Any Person who acquires or
attempts to acquire Beneficial Ownership or Constructive Ownership of shares of
Equity Stock in violation of Section (A)(2) of Article IX hereof, or any Person
who owned shares of Equity Stock that were transferred to a Trustee in his
capacity as trustee of a Trust pursuant to the provisions of Section (A)(3) of
Article IX hereto, shall immediately give written notice to the Corporation of
such event and shall provide to the Corporation such other information as the
Corporation may request in order to determine the effect, if any, of such
Transfer or Non-Transfer Event, as the case may be, on the Corporation's status
as a REIT.
6. Owners Required To Provide Information. From the date of the
Initial Public Offering and prior to the Restriction Termination Date:
a. Every Beneficial Owner or Constructive Owner of more than five
percent (5%), or such lower percentages as required pursuant to regulations
under the Code, of the outstanding shares of all classes of capital stock of the
Corporation shall, within thirty (30) days after January 1 of each year, provide
to the Corporation a written statement or affidavit stating the name and address
of such Beneficial Owner or Constructive Owner, the number of shares of Equity
Stock Beneficially Owned or Constructively Owned, and a description of how such
shares are held. Each such Beneficial Owner or Constructive Owner shall provide
to the Corporation such additional information as the Corporation may request in
order to determine the effect, if any, of such Beneficial Ownership or
Constructive Ownership on the Corporation's status as a REIT and to ensure
compliance with the restrictions on ownership set forth in this Article IX.
b. Each Person (including the stockholder of record) who is holding
shares of Equity Stock for a Beneficial Owner or Constructive Owner shall
provide to the Corporation a written statement or affidavit stating such
information as the Corporation may request in order to determine the
Corporation's status as a REIT and to ensure compliance with the Ownership
Limit.
7. Exceptions.
a. The provisions of Section (A)(2) of Article IX hereof shall not
apply to the acquisition of shares of Equity Stock by an underwriter that
participates in a public offering of such shares or securities convertible into
such shares for a period of ninety (90) days following the purchase by such
underwriter of such shares provided that the restrictions contained in Section
(A)(2) of Article IX hereof will not be violated following the distribution by
such underwriter of such shares.
b. The Board of Directors, in its sole discretion, may exempt a
Person from the restrictions set forth in Section (A)(2) of this Article IX if:
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(i) the Board of Directors obtains such representations and
undertakings from such Person as are deemed by the Board of Directors to be
reasonably necessary to ascertain that no individual's Beneficial Ownership
of shares of Equity Stock will violate the restrictions set forth in
Section (A)(2) of this Article IX or that any such violation will not cause
the Corporation to fail to qualify as a REIT under the Code, and such
Person agrees that any actual or attempted violation of such
representations or undertakings (or other action which is contrary to the
restrictions contained in Section (A)(2) of this Article IX) will result in
the transfer of such Equity Stock to a Trustee in his capacity as trustee
of a Trust in accordance with Section (A)(3) of this Article IX; or
(ii) such Person does not own, and represents that it will not
own, actually or Constructively, a Tenant Interest that would cause the
Corporation to own, actually or Constructively, a Tenant Interest of more
than 9.8%, the Corporation obtains such other representations and
undertakings from such Person (or any other Person who could be treated as
Constructively Owning the Equity Shares actually or Constructively Owned by
such Person) as are deemed by the Board of Directors to be reasonably
necessary to ascertain this fact and such Person agrees that any actual or
attempted violation of such representations or undertakings will result in
the transfer of such Equity Stock to a Trustee in his capacity as trustee
of a Trust in accordance with Section (A)(3) of this Article IX.
Notwithstanding the foregoing, the inability of a Person to make the
certification described in this paragraph shall not prevent the Board of
Directors, in its sole discretion, from exempting such Person from the
restrictions set forth in Section (A)(2) of this Article IX if the Board of
Directors determines that the resulting application of Section 856(d)(2)(B)
of the Code would affect the characterization of less than 0.5% of the
gross income (as such term is used in Section 856(c)(2) of the Code) of the
Corporation in any taxable year.
c. Prior to granting any exception pursuant to Section (A)(7)(b)(i)
or (ii) of this Article IX, the Board of Directors may require a ruling from the
IRS, or an opinion of counsel, in either case in form and substance satisfactory
to the Board of Directors in its sole discretion, as it may deem necessary or
advisable in order to determine or ensure the Corporation's status as a REIT or
otherwise would not affect the Corporation's status as a REIT.
B. Shares-in-Trust.
1. Trust. Any shares of Equity Stock transferred to a Trustee in
his capacity as trustee of a Trust and designated Shares-in-Trust pursuant to
Section (A)(3) of Article IX hereof shall be held for the exclusive benefit of
the Beneficiary. The Corporation shall name a Beneficiary (such that the shares
of Equity Stock held in the Trust would not violate the restrictions set forth
in Section (A)(2) of Article IX hereof) for each Trust within five (5) days
after discovery of the existence thereof. Any transfer to a Trust, and
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subsequent designation of shares of Equity Stock as Shares-in-Trust, pursuant to
Section (A)(3) of Article IX hereof shall be effective as of the close of
business on the business day prior to the date of the Transfer or Non-Transfer
Event that results in the transfer to the Trust. Shares-in-Trust shall remain
issued and outstanding shares of Equity Stock of the Corporation and shall be
entitled to the same rights and privileges on identical terms and conditions as
are all other issued and outstanding shares of Equity Stock of the same class
and series. When transferred to a Permitted Transferee in accordance with the
provisions of Section (B)(5) of Article IX hereof, such Shares-in-Trust shall
cease to be designated as Shares-in-Trust.
2. Dividend Rights. The Trust, as record holder of Shares-in-Trust,
shall be entitled to receive all dividends and distributions as may be declared
by the Board of Directors on such shares of Equity Stock and shall hold such
dividends or distributions in trust for the benefit of the Beneficiary. The
Prohibited Owner with respect to Shares-in-Trust shall be required to repay to
the Trust the amount of any dividends or distributions received by it that (i)
are attributable to any shares of Equity Stock designated Shares-in-Trust and
(ii) the record date of which was on or after the date that such shares became
Shares-in-Trust. The Corporation shall take all measures that it determines
reasonably necessary to recover the amount of any such dividend or distribution
paid to a Prohibited Owner, including, if necessary, withholding any portion of
future dividends or distributions payable on shares of Equity Stock Beneficially
Owned or Constructively Owned by the Person who, but for the provisions of
Section (A)(3) of Article IX hereof, would Constructively Own or Beneficially
Own the Shares-in-Trust; and, as soon as reasonably practicable following the
Corporation's receipt or withholding thereof, shall pay over to the Trust for
the benefit of the Beneficiary the dividends so received or withheld, as the
case may be.
3. Rights upon Liquidation. In the event of any voluntary or
involuntary liquidation, dissolution, or winding up of, or any distribution of
the assets of, the Corporation, each holder of Shares-in-Trust shall be entitled
to receive, ratably with each other holder of shares of Equity Stock of the same
class or series, that portion of the assets of the Corporation which is
available for distribution to the holders of such class and series of shares of
Equity Stock. The Trust shall distribute to the Prohibited Owner the amounts
received upon such liquidation, dissolution, or winding up, or distribution;
provided, however, that the Prohibited Owner shall not be entitled to receive
amounts pursuant to this Section (B)(3) of Article IX in excess of, in the case
of a purported Transfer in which the Prohibited Owner paid fair market value for
shares of Equity Stock and which Transfer resulted in the transfer of the shares
to the Trustee in his capacity as trustee of a Trust, the price per share, if
any, such Prohibited Owner paid for the shares of Equity Stock and, in the case
of a Non-Transfer Event or Transfer in which the Prohibited Owner did not pay
fair market value for such shares (e.g., if the shares were received through a
gift or devise) and which Non-Transfer Event or Transfer, as the case may be,
resulted in the transfer of shares to a Trustee in his capacity as trustee of a
Trust, the price per share equal to the Market
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Price on the date of such Non-Transfer Event or Transfer. Any remaining amount
in such Trust shall be distributed to the Beneficiary.
4. Voting Rights. The Trustee shall be entitled to vote all Shares-
in-Trust. Any vote by a Prohibited Owner as a holder of shares of Equity Stock
prior to the discovery by the Corporation that the shares of Equity Stock are
Shares-in-Trust shall, subject to applicable law, be rescinded and shall be void
ab initio with respect to such Shares-in-Trust and the Prohibited Owner shall be
deemed to have given, as of the close of business on the business day prior to
the date of the purported Transfer or Non-Transfer Event that results in the
transfer to the Trust of shares of Equity Stock under Section (A)(3) of Article
IX hereof, an irrevocable proxy to the Trustee to vote the Shares-in-Trust in
the manner in which the Trustee, in its sole and absolute discretion, desires.
5. Designation of Permitted Transferee. The Trustee shall have the
exclusive and absolute right to designate a Permitted Transferee of any or all
Shares-in-Trust. In an orderly fashion so as not to materially adversely affect
the Market Price of the Shares-in-Trust, the Trustee shall either sell the
Shares-in-Trust using the facilities of a national stock exchange on which the
class and series of such Shares-in-Trust are then actively traded, if any, or
designate any Person as Permitted Transferee, provided, however, that (i) the
Permitted Transferee so designated purchases for valuable consideration (whether
in a public or private sale) the Shares-in-Trust and (ii) the Permitted
Transferee so designated may acquire such Shares-in-Trust without such
acquisition resulting in a transfer to a Trustee in his capacity as trustee of
the Trust and the redesignation of such shares of Equity Stock so acquired as
Shares-in-Trust under Section (A)(3) of Article IX hereof. Upon the sale of
Shares-in-Trust by the Trustee of a Permitted Transferee in accordance with the
provisions of this Section (B)(5) of Article IX, the Trustee shall (i) if such
sale was to a Permitted Transferee, cause to be transferred to the Permitted
Transferee that number of Shares-in-Trust acquired by the Permitted Transferee,
(ii) if such sale was to a Permitted Transferee, cause to be recorded on the
books of the Corporation that the Permitted Transferee is the holder of record
of such number of shares of Equity Stock, (iii) cause the Shares-in-Trust to be
canceled, and (iv) distribute to the Beneficiary any and all amounts held with
respect to the Shares-in-Trust after making that payment to the Prohibited Owner
pursuant to Section (B)(6) of Article IX hereof.
6. Compensation to Record Holder of Shares of Equity Stock that
Become Shares-in-Trust. Any Prohibited Owner shall be entitled (following
discovery of the Shares-in-Trust and subsequent sale of such Shares-in-Trust in
accordance with Section (B)(5) of Article IX hereof or following the acceptance
of the offer to purchase such shares in accordance with Section (B)(7) of
Article IX hereof) to receive from the Trustee following the sale or other
disposition of such Shares-in-Trust the lesser of (i) in the case of (a) a
purported Transfer in which the Prohibited Owner paid fair market value for
shares of Equity Stock and which Transfer resulted in the transfer of the shares
to the Trust, the price per share, if any, such Prohibited Owner paid for the
shares of Equity Stock, or (b) a Non-Transfer Event or Transfer in which the
Prohibited Owner did not pay fair market value for
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such shares (e.g., if the shares were received through a gift or devise) and
which Non-Transfer Event or Transfer, as the case may be, resulted in the
transfer of shares to the Trust, the price per share equal to the Market Price
on the date of such Non-Transfer Event or Transfer, and (ii) the price per share
received by the Trustee from the sale or other disposition of such Shares-in-
Trust in accordance with Section (B)(5) of Article IX hereof. Any amounts
received by the Trustee in respect of such Shares-in-Trust and in excess of such
amounts to be paid the Prohibited Owner pursuant to this Section (B)(6) shall be
distributed to the Beneficiary in accordance with the provisions of Section
(B)(5) of Article IX hereof. Each Beneficiary and Prohibited Owner waive any and
all claims that the may have against the Trustee and the Trust arising out of
the disposition of Shares-in-Trust, except for claims arising to or out of the
gross negligence or willful misconduct of, or any failure to make payments in
accordance with this Section (B), by such Trustee or the Corporation.
7. Purchase Right in Shares-in-Trust. Shares-in-Trust shall be
deemed to have been offered for sale to the Corporation, or its designee, at a
price per share equal to the lesser of (i) the price per share in the
transaction that created such Shares-in-Trust (or, in the case of devise, gift
or Non-Transfer Event, the Market Price at the time of such devise, gift or Non-
Transfer Event) and (ii) the Market Price on the date the Corporation or its
designee accepts such offer. The Corporation shall have the right to accept
such offer for a period of ninety (90) days after the later of (i) the date of
the Non-Transfer Event or purported Transfer which resulted in such Shares-in-
Trust and (ii) the date the Corporation determines in good faith that a Transfer
or Non-Transfer Event resulting in Shares-in-Trust has occurred, if the
Corporation does not receive a notice of such Transfer or Non-Transfer Event
pursuant to Section (A)(5) of Article IX hereof.
C. Remedies Not Limited. Nothing contained in this Article IX shall
limit the authority of the Corporation to take such other action as it deems
necessary or advisable to protect the Corporation and the interests of its
stockholders by preservation of the Corporation's status as a REIT and to ensure
compliance with the restrictions set forth in this Article IX.
D. Ambiguity. In the case of an ambiguity in the application of any of
the provisions of this Article IX, including any definition contained in Section
(A)(1) of Article IX hereof, the Board of Directors shall have the power to
determine the application of the provisions of this Article IX with respect to
any situation based on the facts known to it.
E. Legend. Each certificate for shares of Equity Stock or securities
convertible into Equity Stock shall bear the following legend:
"The securities represented by this certificate are subject to
restrictions on transfer and ownership 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
15
amended (the "Code"). No Person other than WFSG may (i)
Beneficially Own or Constructively Own in excess of 9.8% of the number
of shares or value (whichever is more restrictive) of the outstanding
Common Stock or 9.8% of the number of shares or value (whichever is
more restrictive) of the outstanding Preferred Stock (or such other
number or value of Preferred Stock as the Board may determine in
fixing the terms of the Preferred Stock), (ii) Beneficially Own shares
of Equity Stock that would result in the shares of Equity Stock being
Beneficially Owned by fewer than 100 Persons (determined without
reference to any rules of attribution), (iii) Beneficially Own shares
of Equity Stock that would result in the Corporation being "closely
held" under Section 856(h) of the Code, (iv) Constructively Own shares
of Equity Stock that would cause the Corporation to Constructively Own
a Tenant Interest of 10% or more or (v) Beneficially Owned shares of
Equity Stock that would result in the shares of Equity Stock being
Beneficially Owned by (A) the United States, any international
organization, or any agency or instrumentality of any of the
foregoing, (B) any organization (other than a cooperative described in
Section 521 of the Code) which is exempt from tax unless such
organization is subject to the tax imposed by Section 511 of the Code,
and (C) any organization described in Section 1381(a)(2)(c) of the
Code. Any Person who attempts to Beneficially Own or Constructively
Own shares of Equity Stock in excess of the above limitations must
immediately notify the Corporation in writing. Furthermore, upon the
occurrence of certain events, attempted transfers in violation of the
restrictions described above may be void ab initio. If the
restrictions above are violated, the shares of Equity Stock
represented hereby will be transferred automatically and by operation
of law to a Trustee for the benefit of one or more Beneficiaries and
shall be designated Shares-in-Trust and the Prohibited Owner shall
acquire no rights or interest in such shares of Equity Stock. All
capitalized terms in this legend have the meanings defined in the
Corporation's Amended and Restated Articles of Incorporation, as the
same may be further amended from time to time, a copy of which,
including the restrictions on transfer and ownership, will be sent
without charge to each stockholder who so requests."
F. Exchange of OP Units. So long as the Corporation remains the sole
stockholder of the general partner of the Operating Partnership, the Board of
Directors of the Corporation is hereby expressly vested with authority (subject
to the restrictions on
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ownership, transfer and redemption set forth in this Article IX) to issue, and
shall issue to the extent provided in the Operating Partnership Agreement,
Common Stock in exchange for the units into which partnership interests of the
Operating Partnership are divided (the "OP Units"), and as the same may be
adjusted, as provided in the Partnership Agreement.
G. Reservation of Shares. The Board of Directors is hereby required to
reserve and authorize for issuance a sufficient number of authorized but
unissued shares of Common Stock to permit the issuance of Common Stock in
exchange for OP Units that may be exchanged for or converted into Common Stock
as provided in the Operating Partnership Agreement.
H. Severability. If any provision of this Article IX or any application
of any such provision is determined to be invalid by any federal or state court
having jurisdiction over the issues, the validity of the remaining provisions
shall not be affected and other applications of such provision shall be affected
only to the extent necessary to comply with the determination of such court.
I. Removal of Restrictions. The restrictions on transfer contained in
this Article IX shall not be removed until the Restriction Termination Date.
J. Notwithstanding any other provisions of the Charter or the Bylaws of
the Corporation (and notwithstanding that some lesser percentage may be
specified by law, the Charter or the Bylaws of the Corporation), the provisions
of this Article IX shall not be amended, altered, changed, or repealed, and no
provision inconsistent with this Article IX shall be adopted, without the
affirmative vote of at least eighty percent (80%) of the members of the Board of
Directors and by the affirmative vote of not less than two-thirds (2/3) of all
the votes entitled to be cast by the outstanding shares of capital stock of the
Corporation on the matter at any meeting of the stockholders called for that
purpose, voting together for this purpose as a single class.
X.
A. The following provisions are hereby adopted for the purpose of
defining, limiting, and regulating the powers of the Corporation and of the
directors and stockholders:
1. The Board of Directors of the Corporation shall, consistent with
applicable law, have power in its sole discretion to determine from time to time
in accordance with sound practice or other reasonable valuation methods what
constitutes annual or other net profits, earnings, surplus, or net assets in
excess of capital; to fix and vary from time to time the amount to be reserved
as working capital, or determine that retained earnings or surplus shall remain
in the hands of the Corporation; to set apart out of any funds of the
Corporation such reserve or reserves in such amount or amounts and for such
proper purpose or purposes as it shall determine and to abolish any such reserve
or any part thereof; to distribute and pay distributions or dividends in stock,
cash, or other securities or
17
property, out of surplus or any other funds or amounts legally available
therefor, as such times and to the stockholders of record on such dates as it
may, from time to time, determine; and to determine whether and to what extent
and at what times and places and under what conditions and regulations the
books, accounts, and documents of the Corporation, or any of them, shall be open
to the inspection of stockholders, except as otherwise provided by statute or by
the Bylaws, and, except as so provided, no stockholder shall have any right to
inspect any book, account, or document of the Corporation unless authorized so
to do by resolution of the Board of Directors.
2. Notwithstanding any provision of law requiring the authorization
of any action by a greater proportion than a majority of the total number of
shares of all classes of capital stock or of the total number of shares of any
class of capital stock, such action shall be valid and effective if authorized
by the affirmative vote of the holders of a majority of the total number of
shares of all classes outstanding and entitled to vote thereon, except as
otherwise provided in the Charter.
3. Except as otherwise specifically set forth in Articles VI, VIII
and IX, the Corporation reserves the right from time to time to make any
amendments of its Charter which may now or hereafter be authorized by law,
including any amendments changing the terms or contract rights, as expressly set
forth in its Charter, of any of its outstanding stock by classification,
reclassification, or otherwise.
B. The enumeration and definition of particular powers of the Board of
Directors included in the foregoing shall in no way be limited or restricted by
reference to or inference from the terms of any other clause of this or any
other Article of the Charter of the Corporation, or construed as or deemed by
inference or otherwise in any manner to exclude or limit any powers conferred
upon the Board of Directors under the General Laws of the State of Maryland now
or hereafter in force.
XI.
The duration of the Corporation shall be perpetual.
FOURTH: Each member of the Board of Directors has signed a written
consent pursuant to Section 2-408 of the MGCL, in which consent these Amended
and Restated Articles of Incorporation of the Corporation (these "ARTICLES")
were set forth, declared to be advisable and directed to be submitted to the
sole stockholder of the Corporation for consideration and approval.
FIFTH: The sole stockholder of the Corporation adopted and approved
these Articles by written consent pursuant to Section 2-505 of the MGCL.
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SIXTH: As of immediately before the effectiveness of these Articles, the
total number of shares of stock of all classes which the Corporation had
authority to issue was One Thousand (1,000) shares of capital stock, of which
One Thousand (1,000) shares are classified as "Common Stock", par value $0.01
per share.
Subsequent to the filing of these Articles, the total amount of the
authorized capital stock of the Corporation shall be Two Hundred Twenty-Five
Million (225,000,000) shares of capital stock, of which Two Hundred Million
(200,000,000) shares are initially classified as Common Stock, par value $0.0001
per share, and Twenty-Five Million (25,000,000) shares are initially classified
as Preferred Stock, par value $0.0001 per share.
The aggregate par value of all shares having par value which the
Corporation is authorized to issue is Twenty-Two Thousand Five Hundred
($22,500). These Articles increased the aggregate par value of all classes of
capital stock of the Corporation from $10 to $22,500.
A description of each class of capital stock of the Corporation, including
preferences and other rights, voting powers, restriction, limitations as to
dividends and qualifications, appears in Article III of the Articles set forth
above.
IN WITNESS WHEREOF, Wilshire Real Estate Investment Trust Inc. has cause
these Amended and Restated Articles of Incorporation to be signed in its name
and on its behalf by its President and attested by its Secretary this ___ day of
__________, 1998.
ATTEST: WILSHIRE REAL ESTATE INVESTMENT TRUST
_____________________________ By:_______________________________(SEAL)
Andrew Wiederhorn, Secretary Lawrence Mendelsohn, President
THE UNDERSIGNED, the President of Wilshire Real Estate Investment Trust
Inc. (the "Corporation"), who executed on behalf of the Corporation the
foregoing Amended and Restated Articles of Incorporation, of which this
certificate is made a part, hereby acknowledges in the name and on behalf of
said Corporation the foregoing Amended and Restated Articles of Incorporation to
be the corporate act of said Corporation and hereby certifies that to the best
of his knowledge, information and belief the matters and facts set forth therein
with respect to the authorization and approval thereof are true in all material
respects under the penalties of perjury.
Dated: _____________, 1998 By:________________________________(SEAL)
Lawrence Mendelsohn, President
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