Attached files
| file | filename |
|---|---|
| 8-K - LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST II INC | v190785_8k.htm |
LIGHTSTONE
VALUE PLUS REAL ESTATE INVESTMENT TRUST II, INC.
CONFORMED
ARTICLES OF AMENDMENT AND RESTATEMENT
FIRST: Lightstone
Value Plus Real Estate Investment Trust II, Inc., a Maryland corporation,
desires to amend and restate its charter as currently in effect and as
hereinafter amended.
SECOND: The
following provisions are all the provisions of the charter currently in effect
and as hereinafter amended:
ARTICLE
I
NAME
The name
of the corporation is Lightstone Value Plus Real Estate Investment Trust II,
Inc. (the “Company”). So far
as may be practicable, the business of the Company shall be conducted and
transacted under that name. Under circumstances in which the Company’s Board of
Directors determines that the use of the name “Lightstone Value Plus Real Estate
Investment Trust II, Inc.” is not practicable, it may use any other designation
or name for the Company.
ARTICLE
II
PURPOSES
AND POWERS
The
purposes for which the Company is formed are to engage in any lawful act or
activity (including, without limitation or obligation, qualifying and engaging
in business as a real estate investment trust under Sections 856 through 860, or
any successor sections, of the Internal Revenue Code of 1986, as amended (the
“Code”)), for which
corporations may be organized under the Maryland General Corporation Law, as
amended from time to time (the “MGCL”) and the general laws of
the State of Maryland as now or hereafter in force.
ARTICLE
III
RESIDENT
AGENT AND PRINCIPAL OFFICE
The name
and address of the resident agent for service of process of the Company in the
State of Maryland is The Corporation Trust Incorporated, 351 West Camden Street,
Baltimore, MD 21201. The resident agent is a Maryland
corporation. The address of the Company’s principal office in the
State of Maryland is c/o The Corporation Trust Incorporated, 351 West Camden
Street, Baltimore, MD 21201. The Company may have such other offices
and places of business within or outside the State of Maryland as the Board may
from time to time determine.
ARTICLE
IV
DEFINITIONS
As used
in the Charter, the following terms shall have the following meanings unless the
context otherwise requires:
“ACQUISITION EXPENSES” means
any and all expenses incurred by the Company, the Advisor, or any Affiliate of
either in connection with the selection, acquisition or development of any
Asset, whether or not acquired, including, without limitation, legal fees and
expenses, travel and communications expenses, costs of appraisals, nonrefundable
option payments on property not acquired, accounting fees and expenses, and
title insurance premiums.
“ACQUISITION FEE” means any and
all fees and commissions, exclusive of Acquisition Expenses, paid by any Person
to any other Person (including any fees or commissions paid by or to any
Affiliate of the Company or the Advisor) in connection with making or investing
in Mortgages or the purchase, development or construction of a Property,
including real estate commissions, selection fees, development fees,
construction fees, nonrecurring management fees, loan fees, points or any other
fees of a similar nature. Excluded shall be development fees and
construction fees paid to any Person not affiliated with the Sponsor in
connection with the development and construction of a project.
“ADVISOR” or “ADVISORS” means the Person or
Persons, if any, appointed, employed or contracted with by the Company pursuant
to Section 8.1 hereof and responsible for directing or performing the day-to-day
business affairs of the Company, including any Person to whom the Advisor
subcontracts all or substantially all of such functions.
“ADVISORY AGREEMENT” means the
agreement between the Company and the Advisor pursuant to which the Advisor will
direct or perform the day-to-day business affairs of the Company.
“AFFILIATE” or “AFFILIATED” means, with
respect to any Person, (i) any Person directly or indirectly owning, controlling
or holding, with the 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 the 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.
“ASSET” means any Property,
Mortgage or other investment (other than investments in bank accounts, money
market funds or other current assets) owned by the Company, directly or
indirectly through one or more of its Affiliates, and any other investment made
by the Company, directly or indirectly through one or more of its
Affiliates.
-2-
“AVERAGE INVESTED ASSETS”
means, for a specified period, the average of the aggregate book value of the
assets of the Company and the Operating Partnership invested, directly or
indirectly in equity interests in and loans secured by real estate, before
deducting depreciation, bad debts or other non-cash reserves, computed by taking
the average of such values at the end of each month during such
period.
“BOARD” means, collectively,
the individuals named in Section 6.1 of the Charter and such other individuals
who may be duly elected and qualified to serve as Directors thereafter to
replace any such person or fill a vacancy caused by the death, removal or
resignation of any such person or caused by an increase in the number of
Directors.
“BYLAWS” means the Bylaws of
the Company, as amended from time to time.
“CHARTER” means these Articles
of Amendment and Restatement and any Articles of Amendment, Articles
Supplementary or other modification or amendment thereto.
“CODE” shall have the meaning
as provided in Article II herein.
“COMMENCEMENT OF THE INITIAL PUBLIC
OFFERING” shall mean the date that the Securities and Exchange Commission
declares effective the registration statement filed under the Securities Act for
the Initial Public Offering.
“COMMON SHARES” shall have the
meaning as provided in Section 5.1 herein.
“COMPANY” shall have the
meaning as provided in Article I herein.
“CONTRACT PURCHASE PRICE” means
the amount actually paid or allocated in respect of the purchase, development,
construction or improvement of a Property or the amount of funds advanced with
respect to a Mortgage, or the amount actually paid or allocated in respect of
the purchase of other Assets, in each case exclusive of Acquisition Fees and
Acquisition Expenses, but in each case including any indebtedness assumed or
incurred in respect of such Property.
“DEALER MANAGER” means
Lightstone Securities, LLC, an Affiliate of the Company, or such other Person
selected by the Board to act as the dealer manager for an Offering.
“DIRECTOR” means a member of
the Company’s Board.
“DISTRIBUTIONS” means any
distributions of money or other property, pursuant to Section 5.2(iii) hereof,
by the Company to owners of Shares, including distributions that may constitute
a return of capital for federal income tax purposes.
“EXCESS AMOUNT” has the meaning
set forth in Section 8.12 herein.
“EXTENSION AMENDMENT” has the
meaning as provided in Article XV herein.
-3-
“GROSS PROCEEDS” means the
aggregate purchase price of all Shares sold for the account of the Company
through an Offering, without deduction for Selling Commissions, volume
discounts, any marketing support and due diligence expense reimbursement or
Organization and Offering Expenses. For the purpose of computing
Gross Proceeds, the purchase price of any Share purchased by the Company’s
Advisor for a discount, or for which reduced Selling Commissions are paid to the
Dealer Manager or a Soliciting Dealer (where net proceeds to the Company are not
reduced) shall be deemed to be the full amount of the offering price per Share
pursuant to the Prospectus for such Offering without reduction.
“INDEMNITEE” has the meaning
provided in Section 12.2 herein.
“INDEPENDENT APPRAISER” means a
Person with no material current or prior business or personal relationship with
the Advisor or the Directors and who is engaged to a substantial extent in the
business of rendering opinions regarding the value of Real Property and/or other
Assets of the type held by the Company. Membership in a nationally
recognized appraisal society such as the American Institute of Real Estate
Appraisers or the Society of Real Estate Appraisers shall be conclusive evidence
of being engaged to a substantial extent in the business of rendering opinions
regarding the value of Real Property.
“INDEPENDENT DIRECTOR” means a
Director who is not on the date of determination, and within the last two years
from the date of determination has not been, directly or indirectly associated
with the Sponsor or the Advisor by virtue of (i) ownership of an interest in the
Sponsor, the Advisor or any of their Affiliates, other than the Company, (ii)
employment by the Sponsor, Advisor or any of their Affiliates, (iii) service as
an officer of the Sponsor, the Advisor or any of their Affiliates, other
than as a Director of the Company, (iv) performance of services, other than as a
Director of the Company, (v) service as a director or trustee of more than three
real estate investment trusts organized or controlled by the Sponsor or advised
by the Advisor, or (vi) maintenance of a material business or professional
relationship with the Sponsor, the Advisor or any of their Affiliates. A
business or professional relationship is considered “material” if the aggregate
gross revenue derived by the Director from the Sponsor, the Advisor and their
Affiliates exceeds five percent of either the Director’s annual gross income
during either of the last two years or the Director’s net worth on a fair market
value basis. An indirect association with the Sponsor or the Advisor
shall include circumstances in which a Director’s spouse, parent, child,
sibling, mother- or father-in-law, son- or daughter-in-law or brother- or
sister-in-law is or has been associated with the Sponsor, the Advisor, any of
their Affiliates or the Company.
“INITIAL INVESTMENT” means that
portion of the initial capitalization of the Company contributed by the Sponsor
or its Affiliates pursuant to Section II.A. of the NASAA REIT
Guidelines.
“INITIAL PUBLIC OFFERING” means
the first Offering.
“INVESTED CAPITAL” means the
amount calculated by multiplying the total number of Shares purchased by
Stockholders by the issue price at the time of such purchase, reduced by the
portion of any Distribution that is attributable to Net Sales Proceeds and by
any amounts paid by the Company to repurchase Shares pursuant to the Company’s
plan for the repurchase of Shares.
-4-
“JOINT VENTURES” means those
joint venture or partnership arrangements in which the Company or the Operating
Partnership is a co-venturer, limited liability company member, limited partner
or general partner established to acquire or hold Assets.
“LEVERAGE” means the aggregate
amount of indebtedness of the Company for money borrowed (including purchase
money mortgage loans) outstanding at any time, both secured and
unsecured.
“LISTING” means the listing of
the Common Shares on a National Stock Exchange or the trading of the Common
Shares in the over-the-counter market. Upon such Listing, the Common Shares
shall be deemed Listed.
“MERGER” means a merger to be
effected pursuant to Section 3-105 of the MGCL.
“MGCL” shall have the meaning
as provided in Article II herein.
“MORTGAGES” means, in
connection with mortgage financing provided, invested in, participated in or
purchased by the Company, all of the notes, deeds of trust, security interests
or other evidences of indebtedness or obligations, which are secured or
collateralized by Real Property owned by the borrowers under such notes, deeds
of trust, security interests or other evidences of indebtedness or
obligations.
“NATIONAL STOCK EXCHANGE” means
either NYSE or NASDAQ.
“NASAA REIT GUIDELINES” means
the Statement of Policy Regarding Real Estate Investment Trusts published by the
North American Securities Administrators Association on May 7,
2007.
“NET ASSETS” means the total
Assets of the Company and the Operating Partnership (other than intangibles) at
cost, before deducting depreciation, reserves for bad debts or other non-cash
reserves, less total liabilities, calculated quarterly by the Company on a basis
consistently applied.
“NET INCOME” means for any
period, the Company’s and the Operating Partnership’s total revenues applicable
to such period, less the total expenses applicable to such period other than
additions to reserves for depreciation, bad debts or other similar non-cash
reserves and excluding any gain from the sale of the Assets.
-5-
“NET SALES PROCEEDS” means in
the case of a transaction described in clause (i) (A) of the definition of Sale,
the proceeds of any such transaction less the amount of selling expenses
incurred by or on behalf of the Company, including all real estate commissions,
closing costs and legal fees and expenses. In the case of a
transaction described in clause (i) (B) of such definition, Net Sales Proceeds
means the proceeds of any such transaction less the amount of selling expenses
incurred by or on behalf of the Company, including any legal fees and expenses
and other selling expenses incurred in connection with such
transaction. In the case of a transaction described in clause (i) (C)
of such definition, Net Sales Proceeds means the proceeds of any such
transaction actually distributed to the Company or the Operating Partnership
from the Joint Venture less the amount of any selling expenses, including legal
fees and expenses incurred by or on behalf of the Company (other than those paid
by the Joint Venture). In the case of a transaction or series of
transactions described in clause (i) (D) of the definition of Sale, Net Sales
Proceeds means the proceeds of any such transaction (including the aggregate of
all payments under a Mortgage on or in satisfaction thereof other than
regularly scheduled interest payments) less the amount of selling expenses
incurred by or on behalf of the Company, including all commissions, closing
costs and legal fees and expenses. In the case of a transaction
described in clause (i) (E) of such definition, Net Sales Proceeds means the
proceeds of any such transaction less the amount of selling expenses incurred by
or on behalf of the Company, including any legal fees and expenses and other
selling expenses incurred in connection with such transaction. In the
case of a transaction described in clause (ii) of the definition of Sale, Net
Sales Proceeds means the proceeds of such transaction or series of transactions
less all amounts generated thereby which are reinvested in one or more Assets
within 180 days thereafter and less the amount of any real estate commissions,
closing costs, and legal fees and expenses and other selling expenses incurred
by or allocated to the Company or the Operating Partnership in connection with
such transaction or series of transactions. Net Sales Proceeds shall
also include any amounts that the Company determines, in its discretion, to be
economically equivalent to proceeds of a Sale. Net Sales Proceeds
shall not include any reserves established by the Company in its sole
discretion.
“OFFERING” means any public
offering and sale of Shares pursuant to an effective registration statement
filed under the Securities Act.
“OPERATING PARTNERSHIP” means
Lightstone Value Plus REIT II LP, an Affiliate of the Company through which the
Company may own Assets.
“ORGANIZATION and OFFERING
EXPENSES” means any and all costs and expenses incurred by and to be paid
from the assets of the Company in connection with the formation, qualification
and registration of the Company, and the marketing and distribution of Shares,
including, without limitation, total underwriting and brokerage discounts and
commissions (including fees of the underwriters’ attorneys), expenses for
printing, engraving, amending, supplementing, mailing and distributing costs,
salaries of employees while engaged in sales activity, telephone and other
telecommunications costs, all advertising and marketing expenses (including the
costs related to investor and broker-dealer sales meetings), charges of transfer
agents, registrars, trustees, escrow holders, depositories, experts, fees,
expenses and taxes related to the filing, registration and qualification of the
sale of the Shares under federal and state laws, including taxes and fees, and
accountants’ and attorneys’ fees.
“PERSON” means an individual,
corporation, partnership, estate, trust (including a trust qualified under
Sections 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 legal 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, and a group to which an Excepted Holder Limit
applies.
-6-
“PLAN OF LIQUIDATION” shall
have the meaning as provided in Article XV herein.
“PREFERRED SHARES” shall have
the meaning as provided in Section 5.1 herein.
“PROPERTY” or “PROPERTIES” means, as the
context requires, any, or all, respectively, of the Real Property acquired by
the Company, directly or indirectly through joint venture arrangements or other
partnership or investment interests.
“PROSPECTUS” means the same as
that term is defined in Section 2(10) of the Securities Act, including a
preliminary prospectus and an offering circular as described in Rule 256 of the
General Rules and Regulations under the Securities Act, or, in the case of an
intrastate offering, any document by whatever name known, utilized for the
purpose of offering and selling Securities to the public.
“REAL PROPERTY” or “REAL ESTATE” means land,
rights in land (including leasehold interests), and any buildings, structures,
improvements, furnishings, fixtures and equipment located on or used in
connection with land and rights or interests in land.
“REINVESTMENT PLAN” shall have
the meaning as provided in Section 5.15 herein.
“REIT” means a corporation,
trust, association or other legal entity (other than a real estate syndication)
that is engaged primarily in investing in equity interests in real estate
(including fee ownership and leasehold interests) or in loans secured by real
estate or both as defined pursuant to the REIT Provisions of the
Code.
“REIT PROVISIONS OF THE CODE”
means Sections 856 through 860 of the Code and any successor or other provisions
of the Code relating to real estate investment trusts (including provisions as
to the attribution of ownership of beneficial interests therein) and the
regulations promulgated thereunder.
“ROLL-UP ENTITY” means a
partnership, real estate investment trust, corporation, trust or similar entity
that would be created or would survive after the successful completion of a
proposed Roll-Up Transaction.
“ROLL-UP TRANSACTION” means a
transaction involving the acquisition, merger, conversion or consolidation
either directly or indirectly of the Company and the issuance of securities of a
Roll-Up Entity to the Stockholders. Such term does not
include:
(a) a
transaction involving securities of the Company that have been for at least
twelve months listed on a national securities exchange or traded through
Nasdaq’s National Market System; or
-7-
(b) a
transaction involving the conversion to corporate, trust or association form of
only the Company, if, as a consequence of the transaction, there will be no
significant adverse change in any of the following:
(i)
Stockholders’ voting rights;
(ii) the
term of existence of the Company;
(iii)
Sponsor or Advisor compensation; or
(iv) the
Company’s investment objectives.
“SALE” or “SALES” means (i) any
transaction or series of transactions whereby: (A) the Company or the
Operating Partnership directly or indirectly (except as described in other
subsections of this definition) sells, grants, transfers, conveys, or
relinquishes its ownership of any Property or portion thereof, including the
lease of any Property consisting of a building only, and including any event
with respect to any Property which gives rise to a significant amount of
insurance proceeds or condemnation awards; (B) the Company or the Operating
Partnership directly or indirectly (except as described in other subsections of
this definition) sells, grants, transfers, conveys, or relinquishes its
ownership of all or substantially all of the interest of the Company or the
Operating Partnership in any Joint Venture in which it is a co-venturer or
partner; (C) any Joint Venture in which the Company or the Operating Partnership
as a co-venturer or partner directly or indirectly (except as described in other
subsections of this definition) sells, grants, transfers, conveys, or
relinquishes its ownership of any Property or portion thereof, including any
event with respect to any Property which gives rise to insurance claims or
condemnation awards; (D) the Company or the Operating Partnership directly
or indirectly (except as described in other subsections of this definition)
sells, grants, conveys or relinquishes its interest in any Mortgage or portion
thereof (including with respect to any Mortgage, all payments thereunder or in
satisfaction thereof other than regularly scheduled interest payments) of
amounts owed pursuant to such Mortgage and any event which gives rise to a
significant amount of insurance proceeds or similar awards; or (E) the Company
or the Operating Partnership directly or indirectly (except as described in
other subsections of this definition) sells, grants, transfers, conveys, or
relinquishes its ownership of any other Asset not previously described in this
definition or any portion thereof, but (ii) not including any transaction or
series of transactions specified in clause (i) (A) through (E) above in which
the proceeds of such transaction or series of transactions are reinvested by the
Company in one or more Assets within 180 days thereafter.
“SDAT” shall have the meaning
as provided in Section 5.4 herein.
“SECURITIES” means any of the
following issued by the Company, as the text requires: Shares, any other stock,
shares or other evidences of equity or beneficial or other interests, voting
trust certificates, bonds, debentures, notes or other evidences of indebtedness,
secured or unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as “securities” or any certificates of interest,
shares or participations in, temporary or interim certificates for, receipts
for, guarantees of, or warrants, options or rights to subscribe to, purchase or
acquire, any of the foregoing.
-8-
“SECURITIES ACT” means the
Securities Act of 1933, as amended from time to time, or any successor statute
thereto. Reference to any provision of the Securities Act shall mean such
provision as in effect from time to time, as the same may be amended, and any
successor provision thereto, as interpreted by any applicable regulations as in
effect from time to time.
“SELLING COMMISSIONS” means any
and all commissions payable to underwriters, dealer managers or other
broker-dealers in connection with the sale of Shares, including, without
limitation, commissions payable to the Dealer Manager.
“SHARES” means shares of stock
of the Company of any class or series, including Common Shares or Preferred
Shares.
“SOLICITING DEALERS” means
those broker-dealers that are members of the Financial Industry Regulatory
Authority, or that are exempt from broker-dealer registration, and that, in
either case, enter into participating broker or other agreements with the Dealer
Manager to sell Shares.
“SPONSOR” means any Person
which (i) is directly or indirectly instrumental in organizing, wholly or in
part, the Company, (ii) will control, manage or participate in the management of
the Company, and any Affiliate of any such Person, (iii) takes the initiative,
directly or indirectly, in founding or organizing the Company, either alone or
in conjunction with one or more other Persons, (iv) receives a material
participation in the Company in connection with the founding or organizing of
the business of the Company, in consideration of services or property, or both
services and property, (v) has a substantial number of relationships and
contacts with the Company, (vi) possesses significant rights to control
Properties, (vii) receives fees for providing services to the Company which are
paid on a basis that is not customary in the industry, or (viii) provides goods
or services to the Company on a basis which was not negotiated at arm’s-length
with the Company. The term “Sponsor” does not include any Person
whose only relationship with the Company is that of an independent property
manager and whose only compensation is as such, wholly independent of third
parties such as attorneys, accountants and underwriters whose only compensation
is for professional services.
“STOCKHOLDER LIST” has the
meaning provided in Section 11.6 herein.
“STOCKHOLDERS” means the
holders of record of the Shares as maintained in the books and records of the
Company or its transfer agent.
“TERMINATION DATE” means the
date of termination of the Advisory Agreement.
“TERMINATION OF THE INITIAL PUBLIC
OFFERING” shall mean the earlier of (i) the date on which the Initial
Public Offering expires or is terminated by the Company or (ii) the date on
which all Shares offered in the Initial Public Offering are sold, excluding
warrants, if any, and offered thereunder and Shares that may be acquired
pursuant to the Reinvestment Plan.
-9-
“TOTAL OPERATING EXPENSES”
means all costs and expenses paid or incurred by the Company, as determined
under generally accepted accounting principles, that are in any way related to
the operation of the Company or to Company business, including advisory fees,
but excluding (i) the expenses of raising capital such as Organization and
Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing,
registration, and other fees, printing and other such expenses and tax incurred
in connection with the issuance, distribution, transfer, registration and
Listing of the Shares, (ii) interest payments, (iii) taxes, (iv) non-cash
expenditures such as depreciation, amortization and bad debt reserves, (v)
incentive fees paid in compliance with the NASAA REIT Guidelines; (vi)
Acquisition Fees and Acquisition Expenses, (vii) real estate commissions on the
Sale of Property, and (viii) other fees and expenses connected with the
acquisition, disposition, management and ownership of real estate interests,
mortgage loans or other property (including the costs of foreclosure, insurance
premiums, legal services, maintenance, repair, and improvement of
property).
“UNIMPROVED REAL PROPERTY”
means Property in which the Company has an equity interest that was not acquired
for the purpose of producing rental or other operating income, that has no
development or construction in process and for which no development or
construction is planned, in good faith, to commence within one
year.
“2%/25% GUIDELINES” has the
meaning provided in Section 8.12 herein.
ARTICLE
V
STOCK
SECTION 5.1 AUTHORIZED
SHARES. The total number of Shares that the Company shall have
authority to issue is 110,000,000 Shares, of which (i) 100,000,000 shall be
designated as common stock, $0.01 par value per Share (the “Common Shares”); and (ii)
10,000,000 shall be designated as preferred stock, $0.01 par value per Share
(the “Preferred
Shares”). All shares shall be fully paid and nonassessable
when issued. The aggregate par value of all authorized shares of
stock having par value is $1,100,000. If Shares of one class of stock
are classified or reclassified into Shares of another class of stock pursuant to
Article V, the number of authorized Shares of the former class shall be
automatically decreased and the number of Shares of the latter class shall be
automatically increased, in each case by the number of Shares so classified or
reclassified so that the aggregate number of Shares of all classes that the
Company has authority to issue shall not be more than the total number of Shares
set forth in the first sentence of this Section 5.1. The Board, with
the approval of a majority of the entire Board and without any action by the
Stockholders, may amend the Charter from time to time to increase or decrease
the aggregate number of Shares or the number of Shares of any class or series
that the Company has authority to issue.
-10-
SECTION
5.2 COMMON SHARES.
(i)
COMMON SHARES SUBJECT TO TERMS OF PREFERRED SHARES. The Common Shares
shall be subject to the express terms of any series of Preferred
Shares.
(ii)
DESCRIPTION. Subject to Section 5.9 of this Article V and except as
may otherwise be specified in the terms of any class or series of Common Shares,
each Common Share shall entitle the holder thereof to one vote per share on all
matters upon which Stockholders are entitled to vote pursuant to Section 11.2
hereof. The Board may classify or reclassify any unissued Common
Shares from time to time in one or more classes or series of Shares; provided,
however, that the voting rights per Share (other than any publicly held Share)
sold in a private offering shall not exceed the voting rights which bear the
same relationship to the voting rights of a publicly held Share as the
consideration paid to the Company for each privately offered Share bears to the
book value of each outstanding publicly held Share.
(iii)
DISTRIBUTION RIGHTS. The Board from time to time may authorize the
Company to declare and pay to Stockholders such dividends or other Distributions
in cash or other assets of the Company or in securities of the Company, or from
any other source, as the Board in its discretion shall determine. The
Board shall endeavor to authorize the Company to declare and pay such dividends
and Distributions as shall be necessary for the Company to qualify as a REIT
under the Code unless the Board has determined, in its sole discretion, that
qualification as a REIT is not in the best interests of the Company; provided,
however, Stockholders shall have no right to any dividend or Distribution unless
and until authorized by the Board and declared by the Company. The
exercise of the powers and rights of the Board pursuant to this section shall be
subject to the provisions of any class or series of Shares at the time
outstanding. The receipt by any Person in whose name any Shares are
registered on the records of the Company or by his or her duly authorized agent
shall be a sufficient discharge for all dividends or Distributions payable or
deliverable in respect of such Shares and from all liability to see to the
application thereof. Distributions in kind shall not be permitted,
except for distributions of readily marketable securities, distributions of
beneficial interests in a liquidating trust established for the dissolution of
the Company and the liquidation of its assets in accordance with the terms of
the Charter or distributions in which (i) the Board advises each Stockholder of
the risks associated with direct ownership of the property, (ii) the Board
offers each Stockholder the election of receiving such in-kind distributions,
and (iii) in-kind distributions are made only to those Stockholders that accept
such offer.
(iv)
RIGHTS UPON LIQUIDATION. In the event of any voluntary or involuntary
liquidation, dissolution or winding up, or any Distribution of the assets of the
Company, the aggregate assets available for Distribution to holders of the
Common Shares shall be determined in accordance with applicable
law. Each holder of Common Shares shall be entitled to receive,
ratably with each other holder of Common Shares, that portion of such aggregate
assets available for Distribution as the number of outstanding Common Shares
held by such holder bears to the total number of outstanding Common Shares then
outstanding.
(v)
VOTING RIGHTS. Except as may be provided otherwise in the Charter,
and subject to the express terms of any series of Preferred Shares, the holders
of the Common Shares shall have the exclusive right to vote on all matters (as
to which a common stockholder shall be entitled to vote pursuant to applicable
law) at all meetings of the Stockholders.
-11-
SECTION 5.3 PREFERRED
SHARES. The Board may classify any unissued Preferred Shares
and reclassify any previously classified but unissued Preferred Shares of any
series from time to time, in one or more classes or series of Shares; provided,
however, that the voting rights per Share (other than any publicly held Share)
sold in a private offering shall not exceed the voting rights that bear the same
relationship to the voting rights of a publicly held Share as the consideration
paid to the Company for each privately offered Share bears to the book value of
each outstanding publicly held Share.
SECTION 5.4 CLASSIFIED OR
RECLASSIFIED SHARES. Prior to issuance of classified or
reclassified Shares of any class or series, the Board by resolution
shall: (a) designate that class or series to distinguish it from
all other classes and series of Shares; (b) specify the number of Shares to
be included in the class or series; (c) set or change, subject to the provisions
of Section 5.9 and subject to the express terms of any class or series of
Shares outstanding at the time, the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends or other distributions,
qualifications and terms and conditions of redemption for each class or series;
and (d) cause the Company to file articles supplementary with the State
Department of Assessments and Taxation of Maryland (“SDAT”). Any of the
terms of any class or series of Shares set or changed pursuant to clause (c) of
this Section 5.4 may be made dependent upon facts or events ascertainable
outside the Charter (including determinations by the Board or other facts or
events within the control of the Company) and may vary among holders thereof,
provided that the manner in which such facts, events or variations shall operate
upon the terms of such class or series of Shares is clearly and expressly set
forth in the articles supplementary or other charter document.
SECTION 5.5 STOCKHOLDERS’ CONSENT IN
LIEU OF MEETING. Any action required or permitted to be taken
at any meeting of the Stockholders may be taken without a meeting by consent, in
writing or by electronic transmission, in any manner permitted by the MGCL and
set forth in the Bylaws.
SECTION 5.6 CHARTER AND
BYLAWS. The rights of all Stockholders and the terms of all
Shares are subject to the provisions of the Charter and the Bylaws.
SECTION 5.7 NO ISSUANCE OF SHARE
CERTIFICATES. Unless otherwise provided by the Board of
Directors, the Company shall not issue stock certificates. A
Stockholder’s investment shall be recorded on the books of the
Company. To transfer his or her Shares, a Stockholder shall submit an
executed form to the Company, which form shall be provided by the Company upon
request. Such transfer will also be recorded on the books of the
Company. Upon issuance or transfer of Shares, the Company will
provide the Stockholder with information concerning his or her rights with
regard to such Shares, as required by the Bylaws and the MGCL or other
applicable law.
-12-
SECTION
5.8 SUITABILITY OF STOCKHOLDERS.
Until
Listing, the following provisions shall apply:
(i)
INVESTOR SUITABILITY STANDARDS. Subject to suitability standards
established by individual states, to become a Stockholder in the Company, if
such prospective Stockholder is an individual (including an individual
beneficiary of a purchasing Individual Retirement Account), or if the
prospective Stockholder is a fiduciary (such as a trustee of a trust or
corporate pension or profit sharing plan, or other tax-exempt organization, or a
custodian under a Uniform Gifts to Minors Act), such individual or fiduciary, as
the case may be, must represent to the Company, among other requirements as the
Company may require from time to time:
(a) that
such individual (or, in the case of a fiduciary, that the fiduciary account or
the donor who directly or indirectly supplies the funds to purchase the Shares)
has a minimum annual gross income of $70,000 and a net worth (excluding home,
home furnishings and automobiles) of not less than $70,000; or
(b) that
such individual (or, in the case of a fiduciary, that the fiduciary account or
the donor who directly or indirectly supplies the funds to purchase the Shares)
has a net worth (excluding home, furnishings and automobiles) of not less than
$250,000.
(ii)
DETERMINATION OF SUITABILITY OF SALE. The Sponsor and each Person
selling Shares on behalf of the Sponsor or the Company shall make every
reasonable effort to determine that the purchase of Shares by Stockholders is a
suitable and appropriate investment for such Stockholder. In making
this determination, each Person selling Shares on behalf of the Company shall
ascertain that the prospective Stockholder: (a) meets the minimum
income and net worth standards established for the Company; (b) can reasonably
benefit from the Company based on the prospective Stockholder’s overall
investment objectives and portfolio structure; (c) is able to bear the
economic risk of the investment based on the prospective Stockholder’s overall
financial situation; and (d) has apparent understanding of (1) the fundamental
risks of the investment; (2) the risk that the Stockholder may lose the entire
investment; (3) the lack of liquidity of the Shares; (4) the restrictions on
transferability of the Shares; and (5) the tax consequences of the
investment.
The
Sponsor or each Person selling Shares on behalf of the Sponsor or the Company
shall make this determination on the basis of information it has obtained from a
prospective Stockholder. Relevant information for this purpose will
include at least the age, investment objectives, investment experiences, income,
net worth, financial situation, and other investments of the prospective
Stockholder, as well as any other pertinent factors.
The
Sponsor or each Person selling Shares on behalf of the Sponsor or the Company
shall maintain records of the information used to determine that an investment
in Shares is suitable and appropriate for a Stockholder. The Sponsor
or each Person selling Shares on behalf of the Sponsor or the Company shall
maintain these records for at least six years.
-13-
(iii)
MINIMUM INVESTMENT. Subject to certain individual state requirements
and the issuance of Shares under the Reinvestment Plan, the Company will sell
shares of its common stock only to investors who initially purchase a minimum of
200 shares for an aggregate price of $2,000, including tax-exempt
entities.
SECTION
5.9 RESTRICTIONS ON OWNERSHIP AND TRANSFER.
(i)
DEFINITIONS. For purposes of Section 5.9, the following terms shall
have the following meanings:
“AGGREGATE SHARE OWNERSHIP
LIMIT” means not more than 9.8% in value of the aggregate of the
outstanding Shares and not more than 9.8% (in value or in number of shares,
whichever is more restrictive) of any class or series of Shares.
“BENEFICIAL OWNERSHIP” means
ownership of Shares by a Person, whether the interest in the Shares is held
directly or indirectly (including by a nominee), and shall include interests
that would be treated as owned 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 the
correlative meanings.
“BUSINESS DAY” means any day,
other than a Saturday or Sunday, that is neither a legal holiday nor a day on
which banking institutions in New York City are authorized or required by law,
regulation or executive order to close.
“CHARITABLE BENEFICIARY” means
one or more beneficiaries of the Trust as determined pursuant to Section
5.9(iii)(f), provided that each such organization must be described in Section
501(c)(3) of the Code and contributions to each such organization must be
eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the
Code.
“CONSTRUCTIVE OWNERSHIP” means
ownership of Shares by a Person, whether the interest in the Shares is held
directly or indirectly (including by a nominee), and shall include interests
that would be treated as owned through the application of Section 318(a) of the
Code, as modified by Section 856(d)(5) of the Code. The terms
“Constructive Owner,” “Constructively Owns” and “Constructively Owned” shall
have the correlative meanings.
“EQUITY SHARES” means shares of
stock of all classes or series, including, without limitation, Common Shares and
Preferred Shares.
“EXCEPTED HOLDER” means a
Stockholder for whom an Excepted Holder Limit is created by this Charter or by
the Board pursuant to Section 5.9(ii)(g).
“EXCEPTED HOLDER LIMIT” means,
provided that the affected Excepted Holder agrees to comply with the
requirements established by the Board pursuant to Section 5.9(ii)(g), and
subject to adjustment pursuant to Section 5.9(ii)(h), the percentage limit
established by the Board pursuant to Section 5.9(ii)(g).
-14-
“INITIAL DATE” means the date
on which Shares are first issued in the Company’s first Offering.
“MARKET PRICE” on any date
means, with respect to any class or series of outstanding Shares, the Closing
Price for such Shares on such date. The “Closing Price” on any date
shall mean the last sale price for such Shares, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, for such Shares, in either case as reported on the principal
national securities exchange on which such Shares are Listed or admitted to
trading or, if such Shares are not Listed or admitted to trading on any national
securities exchange, the last quoted price, or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported by
the National Association of Securities Dealers, Inc. Automated Quotation System
or, if such system is no longer in use, the principal other automated quotation
system that may then be in use or, if such Shares 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 such Shares selected by the Board
or, in the event that no trading price is available for such Shares, the fair
market value of the Shares, as determined in good faith by the
Board.
“NYSE” means the New York Stock
Exchange.
“PROHIBITED OWNER” means, with
respect to any purported Transfer, any Person who, but for the provisions of
Section 5.9(ii)(a), would Beneficially Own or Constructively Own Shares, and if
appropriate in the context, shall also mean any Person who would have been the
record owner of the Shares that the Prohibited Owner would have so
owned.
“RESTRICTION TERMINATION DATE”
means the first day after the Commencement of the Initial Public Offering on
which the Company determines pursuant to Section 7.3 of the Charter that it is
no longer in the best interests of the Company to attempt to, or continue to,
qualify as a REIT or that compliance with the restrictions and limitations on
Beneficial Ownership, Constructive Ownership and Transfers of Shares set forth
herein is no longer required in order for the Company to qualify as a
REIT.
“TRANSFER” means any issuance,
sale, transfer, gift, assignment, devise or other disposition, as well as any
other event that causes any Person to acquire Beneficial Ownership or
Constructive Ownership, or any agreement to take any such actions or cause any
such events, of Shares or the right to vote or receive dividends on Shares,
including (a) the granting or exercise of any option (or any disposition of any
option), (b) any disposition of any securities or rights convertible into or
exchangeable for Shares or any interest in Shares or any exercise of any such
conversion or exchange right and (c) Transfers of interests in other entities
that result in changes in Beneficial or Constructive Ownership of Shares; in
each case, whether voluntary or involuntary, whether owned of record,
Constructively Owned or Beneficially Owned and whether by operation of law or
otherwise. The terms “Transferring” and “Transferred” shall have the
correlative meanings.
“TRUST” means any trust
provided for in Section 5.9(iii)(a).
-15-
“TRUSTEE” means the Person
unaffiliated with the Company and a Prohibited Owner, that is appointed by the
Company to serve as trustee of the Trust.
(ii)
SHARES.
(a)
OWNERSHIP LIMITATIONS. During the period commencing on the Initial Date and
prior to the Restriction Termination Date, but subject to Section
5.10:
(I) BASIC
RESTRICTIONS.
(A) (1)
No Person, other than an Excepted Holder, shall Beneficially Own or
Constructively Own Shares in excess of the Aggregate Share Ownership Limit and
(2) no Excepted Holder shall Beneficially Own or Constructively Own Shares in
excess of the Excepted Holder Limit for such Excepted Holder.
(B) No
Person shall Beneficially or Constructively Own Shares to the extent that such
Beneficial or Constructive Ownership of Shares would result in the Company being
“closely held” within the meaning of Section 856(h) of the Code (without regard
to whether the ownership interest is held during the last half of a taxable
year), or otherwise failing to qualify as a REIT (including, but not limited to,
Beneficial or Constructive Ownership that would result in the Company owning
(actually or Constructively) an interest in a tenant that is described in
Section 856(d)(2)(B) of the Code if the income derived by the Company from such
tenant would cause the Company to fail to satisfy any of the gross income
requirements of Section 856(c) of the Code).
(C) Any
Transfer of Shares that, if effective, would result in Shares being beneficially
owned by less than 100 Persons (determined under the principles of Section
856(a)(5) of the Code) shall be void ab initio , and the intended
transferee shall acquire no rights in such Shares.
(II)
TRANSFER IN TRUST. If any Transfer of Shares (whether or not such
Transfer is the result of a transaction entered into through the facilities of
the NYSE or any other national securities exchange or automated inter-dealer
quotation system) occurs which, if effective, would result in any Person
Beneficially Owning or Constructively Owning Shares in violation of Section
5.9(ii)(a)(I)(A) or (B),
(A) then
that number of Shares the Beneficial or Constructive Ownership of which
otherwise would cause such Person to violate Section 5.9(ii)(a)(I)(A) or (B)
(rounded to the nearest whole share) shall be automatically Transferred to a
Trust for the benefit of a Charitable Beneficiary, as described in Section
5.9(iii), effective as of the close of business on the Business Day prior to the
date of such Transfer, and such Person shall acquire no rights in such Shares;
or
-16-
(B) if
the Transfer to the Trust described in clause (A) of this sentence would not be
effective for any reason to prevent the violation of Section 5.9(ii)(a)(I)(A) or
(B) then the Transfer of that number of Shares that otherwise would cause any
Person to violate Section 5.9(ii)(a)(I)(A) or (B) shall be void ab initio, and the intended
transferee shall acquire no rights in such Shares.
(b)
REMEDIES FOR BREACH. If the Board or its designee (including any duly
authorized committee of the Board) shall at any time determine in good faith
that a Transfer or other event has taken place that results in a violation of
Section 5.9(ii)(a) or that a Person intends to acquire or has attempted to
acquire Beneficial or Constructive Ownership of any Shares in violation of
Section 5.9(ii)(a) (whether or not such violation is intended), the Board or its
designee shall take such action as it deems advisable to refuse to give effect
to or to prevent such Transfer or other event, including, without limitation,
causing the Company to redeem Shares, refusing to give effect to such Transfer
on the books of the Company or instituting proceedings to enjoin such Transfer
or other event; provided, however, that any Transfer or attempted Transfer or
other event in violation of Section 5.9(ii)(a) shall automatically result in the
Transfer to the Trust described above, and, where applicable, such Transfer (or
other event) shall be void ab
initio as provided above irrespective of any action (or non-action) by
the Board or its designee.
(c)
NOTICE OF RESTRICTED TRANSFER. Any Person who acquires or attempts or
intends to acquire Beneficial Ownership or Constructive Ownership of Shares that
will or may violate Section 5.9(ii)(a)(I)(A) or (B) or any Person who would have
owned Shares that resulted in a Transfer to the Trust pursuant to the provisions
of Section 5.9(ii)(a)(II) shall immediately give written notice to the Company
of such event, or in the case of such a proposed or attempted transaction, give
at least 15 days prior written notice, and shall provide to the Company such
other information as the Company may request in order to determine the effect,
if any, of such Transfer on the Company’s status as a REIT.
(d)
OWNERS REQUIRED TO PROVIDE INFORMATION. From the Initial Date and
prior to the Restriction Termination Date:
(I) every
owner of more than five percent (or such lower percentage as required by the
Code or the Treasury Regulations promulgated thereunder) of the outstanding
Shares, within 30 days after the end of each taxable year, shall give written
notice to the Company stating the name and address of such owner, the number of
Shares and other Shares Beneficially Owned and a description of the manner in
which such Shares are held. Each such owner shall provide to the
Company such additional information as the Company may request in order to
determine the effect, if any, of such Beneficial Ownership on the Company’s
status as a REIT and to ensure compliance with the Aggregate Share Ownership
Limit; and
(II) each
Person who is a Beneficial or Constructive Owner of Shares and each Person
(including the stockholder of record) who is holding Shares for a Beneficial or
Constructive Owner shall provide to the Company such information as the Company
may request, in good faith, in order to determine the Company’s status as a REIT
and to comply with requirements of any taxing authority or governmental
authority or to determine such compliance.
-17-
(e)
REMEDIES NOT LIMITED. Subject to Section 7.3 of the Charter, nothing
contained in this Section 5.9(ii)(e) shall limit the authority of the Board to
take such other action as it deems necessary or advisable to protect the Company
and the interests of its stockholders in preserving the Company’s status as a
REIT.
(f)
AMBIGUITY. In the case of an ambiguity in the application of any of
the provisions of this Section 5.9(ii), Section 5.9(iii), or any definition
contained in Section 5.9(i), the Board shall have the power to determine the
application of the provisions of this Section 5.9(ii) or Section 5.9(iii) or any
such definition with respect to any situation based on the facts known to it. In
the event Section 5.9(ii) or (iii) requires an action by the Board and the
Charter fails to provide specific guidance with respect to such action, the
Board shall have the power to determine the action to be taken so long as such
action is not contrary to the provisions of Section 5.9. Absent a
decision to the contrary by the Board (which the Board may make in its sole and
absolute discretion), if a Person would have (but for the remedies set forth in
Section 5.9(ii)(b)) acquired Beneficial or Constructive Ownership of Shares in
violation of Section 5.9(ii)(a), such remedies (as applicable) shall apply first
to the Shares which, but for such remedies, would have been Beneficially Owned
or Constructively Owned (but not actually owned) by such Person, pro rata among
the Persons who actually own such Shares based upon the relative number of the
Shares held by each such Person.
(g)
EXCEPTIONS.
(I)
Subject to Section 5.9(ii)(a)(I)(B), the Board, in its sole discretion, may
(prospectively or retroactively) exempt a Person from the Aggregate Share
Ownership Limit and may establish or increase an Excepted Holder Limit for such
Person if:
(A) the
Board obtains such representations and undertakings from such Person as are
reasonably necessary to ascertain that no individual’s Beneficial or
Constructive Ownership of such Shares will violate Section
5.9(ii)(a)(I)(B);
(B) such
Person does not and represents that it will not own, actually or Constructively,
an interest in a tenant of the Company (or a tenant of any entity owned or
controlled by the Company) that would cause the Company to own, actually or
Constructively, more than a 9.9% interest (as set forth in Section 856(d)(2)(B)
of the Code) in such tenant and the Board obtains such representations and
undertakings from such Person as are reasonably necessary to ascertain this fact
(for this purpose, a tenant from whom the Company (or an entity owned or
controlled by the Company) derives (and is expected to continue to derive) a
sufficiently small amount of revenue such that, in the opinion of the Board,
rent from such tenant would not adversely affect the Company’s ability to
qualify as a REIT, shall not be treated as a tenant of the Company);
and
-18-
(C) such
Person agrees that any violation or attempted violation of such representations
or undertakings (or other action which is contrary to the restrictions contained
in Section 5.9(ii)(a) through Section 5.9(ii)(f)) will result in such Shares
being automatically Transferred to a Trust in accordance with Section
5.9(ii)(A)(II) and Section 5.9(iii).
(II)
Prior to granting any exception pursuant to Section 5.9(ii)(g)(I), the Board may
require a ruling from the Internal Revenue Service, or an opinion of counsel, in
either case in form and substance satisfactory to the Board in its sole
discretion, as it may deem necessary or advisable in order to determine or
ensure the Company’s status as a REIT. Notwithstanding the receipt of
any ruling or opinion, the Board may impose such conditions or restrictions as
it deems appropriate in connection with granting such exception.
(III)
Subject to Section 5.9(ii)(a)(I)(B), an underwriter which participates in an
Offering or a private placement of Shares (or Securities convertible into or
exchangeable for Shares) may Beneficially Own or Constructively Own Shares (or
Securities convertible into or exchangeable for Shares) in excess of the
Aggregate Share Ownership Limit but only to the extent necessary to facilitate
such Offering or private placement.
(IV) The
Board may only reduce the Excepted Holder Limit for an Excepted
Holder: (1) with the written consent of such Excepted Holder at any
time, or (2) pursuant to the terms and conditions of the agreements and
undertakings entered into with such Excepted Holder in connection with the
establishment of the Excepted Holder Limit for that Excepted
Holder. No Excepted Holder Limit shall be reduced to a percentage
that is less than the Aggregate Share Ownership Limit.
(h)
INCREASE IN AGGREGATE SHARE OWNERSHIP LIMIT. Subject to Section
5.9(ii)(a)(I)(B), the Board may from time to time increase the Aggregate Share
Ownership Limit for one or more Persons and decrease the Aggregate Share
Ownership Limit for all other Persons; provided, however, that the decreased
Aggregate Share Ownership Limit will not be effective for any Person whose
percentage ownership of Shares is in excess of such decreased Aggregate Share
Ownership Limit until such time as such Person’s percentage of Shares equals or
falls below the decreased Aggregate Share Ownership Limit, but any further
acquisition of Shares in excess of such percentage ownership of Shares will be
in violation of the Aggregate Share Ownership Limit and, provided further, that
the new Aggregate Share Ownership Limit would not allow five or fewer Persons to
Beneficially Own or Constructively Own more than 49.9% in value of the
outstanding Shares.
(i)
NOTICE TO STOCKHOLDERS UPON ISSUANCE OR TRANSFER. Upon issuance or
transfer of Shares prior to the Restriction Termination Date, the Company shall
provide the recipient with a notice containing information about the Shares
purchased or otherwise transferred, in lieu of issuance of a share certificate,
in a form substantially similar to the following:
-19-
The
securities of Lightstone Value Plus Real Estate Investment Trust II, Inc. (the
“Company”) are subject to restrictions on Beneficial and Constructive Ownership
and Transfer for the purpose, among others, of the Company’s maintenance of its
status as a real estate investment trust under the Internal Revenue Code of
1986, as amended (the “Code”). Subject to certain further
restrictions and except as expressly provided in the Charter, (i) no Person may
Beneficially or Constructively Own Shares in excess of 9.8% of the value of the
total outstanding Shares unless such Person is an Excepted Holder (in which case
the Excepted Holder Limit shall be applicable); (ii) no Person may
Beneficially or Constructively Own Shares that would result in the Company being
“closely held” under Section 856(h) of the Code or otherwise cause the Company
to fail to qualify as a REIT; and (iii) no Person may Transfer Shares if such
Transfer would result in the Shares of the Company being owned by fewer than 100
Persons. Any Person who Beneficially or Constructively Owns or
attempts to Beneficially or Constructively Own Shares which causes or will cause
a Person to Beneficially or Constructively Own Shares in excess or in violation
of the above limitations must immediately notify the Company. If any
of the restrictions on transfer or ownership are violated, the Shares
represented hereby will be automatically transferred to a Trustee of a Trust for
the benefit of one or more Charitable Beneficiaries. In addition, the
Company may redeem shares upon the terms and conditions specified by the Board
in its sole discretion if the Board determines that ownership or a Transfer or
other event may violate the restrictions described
above. Furthermore, upon the occurrence of certain events, attempted
Transfers in violation of the restrictions described above may be void ab initio. All
capitalized terms in this notice have the meanings defined in the Charter, as
the same may be amended from time to time, a copy of which, including the
restrictions on transfer and ownership, will be furnished to each holder of
Shares of the Company on request and without charge. Requests for
such a copy may be directed to the Secretary of the Company at its principal
office.
(iii)
TRANSFER OF SHARES IN TRUST.
(a)
OWNERSHIP IN TRUST. Upon any purported Transfer or other event
described in Section 5.9(ii)(a)(III) that would result in a Transfer of Shares
to a Trust, such Shares shall be deemed to have been Transferred to the Trustee
as trustee of a Trust for the exclusive benefit of one or more Charitable
Beneficiaries. Such Transfer to the Trustee shall be deemed to be
effective as of the close of business on the Business Day prior to the purported
Transfer or other event that results in the Transfer to the Trust pursuant to
Section 5.9(ii)(a)(III). The Trustee shall be appointed by the
Company and shall be a Person unaffiliated with the Company and any Prohibited
Owner. Each Charitable Beneficiary shall be designated by the Company
as provided in Section 5.9(iii)(f).
(b)
STATUS OF SHARES HELD BY THE TRUSTEE. Shares held by the Trustee
shall continue to be issued and outstanding Shares of the
Company. The Prohibited Owner shall have no rights in the Shares held
by the Trustee. The Prohibited Owner shall not benefit economically
from ownership of any Shares held in trust by the Trustee, shall have no rights
to dividends or other Distributions and shall not possess any rights to vote or
other rights attributable to the Shares held in the Trust.
-20-
(c)
DIVIDEND AND VOTING RIGHTS. The Trustee shall have all voting rights
and rights to dividends or other Distributions with respect to Shares held in
the Trust, which rights shall be exercised for the exclusive benefit of the
Charitable Beneficiary. Any dividend or other Distribution paid prior
to the discovery by the Company that Shares have been Transferred to the Trustee
shall be paid by the recipient of such dividend or Distribution to the Trustee
upon demand and any dividends or other Distribution authorized but unpaid shall
be paid when due to the Trustee. Any dividend or Distribution so paid
to the Trustee shall be held in trust for the Charitable
Beneficiary. The Prohibited Owner shall have no voting rights with
respect to Shares held in the Trust and, subject to Maryland law, effective as
of the date that Shares have been Transferred to the Trustee, the Trustee shall
have the authority (at the Trustee’s sole discretion) (i) to rescind as void any
vote cast by a Prohibited Owner prior to the discovery by the Company that
Shares have been Transferred to the Trustee and (ii) to recast such vote in
accordance with the desires of the Trustee acting for the benefit of the
Charitable Beneficiary; provided, however, that if the Company has already taken
irreversible corporate action, then the Trustee shall not have the authority to
rescind and recast such vote. Notwithstanding the provisions of this
Section 5.9, until the Company has received notification that Shares have been
Transferred into a Trust, the Company shall be entitled to rely on its share
transfer and other stockholder records for purposes of preparing lists of
Stockholders entitled to vote at meetings, determining the validity and
authority of proxies and otherwise conducting votes of
Stockholders.
(d) SALE
OF SHARES BY TRUSTEE. Within 20 days of receiving notice from the
Company that Shares have been Transferred to the Trust, the Trustee shall sell
the Shares held in the Trust to a person, designated by the Trustee, whose
ownership of the Shares will not violate the ownership limitations set forth in
Section 5.9(ii)(a)(I) or (II). Upon such sale, the interest of the
Charitable Beneficiary in the Shares sold shall terminate and the Trustee shall
distribute the net proceeds of the sale to the Prohibited Owner and to the
Charitable Beneficiary as provided in this Section 5.9(iii)(d). The
Prohibited Owner shall receive the lesser of (1) the price paid by the
Prohibited Owner for the Shares or, if the Prohibited Owner did not give value
for the Shares in connection with the event causing the Shares to be held in the
Trust (e.g., in the case of a gift, devise or other such transaction), the
Market Price of the Shares on the day of the event causing the Shares to be held
in the Trust and (2) the price per Share received by the Trustee (net of any
commissions and other expenses of sale) from the sale or other disposition of
the Shares held in the Trust. The Trustee may reduce the amount
payable to the Prohibited Owner by the amount of dividends and Distributions
which have been paid to the Prohibited Owner and are owed by the Prohibited
Owner to the Trustee pursuant to Section 5.9(c). Any net sales proceeds in
excess of the amount payable to the Prohibited Owner shall be immediately paid
to the Charitable Beneficiary. If, prior to the discovery by the Company that
Shares have been Transferred to the Trustee, such Shares are sold by a
Prohibited Owner, then (i) such Shares shall be deemed to have been sold on
behalf of the Trust and (ii) to the extent that the Prohibited Owner received an
amount for such Shares that exceeds the amount that such Prohibited Owner was
entitled to receive pursuant to this Section 5.9, such excess shall be paid to
the Trustee upon demand.
-21-
(e)
PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE. Shares
Transferred to the Trustee shall be deemed to have been offered for sale to the
Company, or its designee, at a price per Share equal to the lesser of (i) the
price per Share in the transaction that resulted in such Transfer to the Trust
(or, in the case of a devise or gift, the Market Price at the time of such
devise or gift) and (ii) the Market Price on the date the Company, or its
designee, accepts such offer. The Company may reduce the amount
payable to the Prohibited Owner by the amount of dividends and Distributions
which has been paid to the Prohibited Owner and is owed by the Prohibited Owner
to the Trustee pursuant to Section 5.9(c). The Company may pay the
amount of such reduction to the Trustee for the benefit of the Charitable
Beneficiary. The Company shall have the right to accept such offer
until the Trustee has sold the shares held in the Trust pursuant to Section
5.9(iii)(d). Upon such a sale to the Company, the interest of the
Charitable Beneficiary in the Shares sold shall terminate and the Trustee shall
distribute the net proceeds of the sale to the Prohibited Owner.
(f)
DESIGNATION OF CHARITABLE BENEFICIARIES. By written notice to the
Trustee, the Company shall designate one or more nonprofit organizations to be
the Charitable Beneficiary of the interest in the Trust such that (i) the Shares
held in the Trust would not violate the restrictions set forth in Section
5.9(ii)(a)(I) or (II) in the hands of such Charitable Beneficiary and (ii) each
such organization must be described in Section 501(c)(3) of the Code and
contributions to each such organization must be eligible for deduction under
each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.
SECTION 5.10
SETTLEMENTS. Nothing in Section 5.9 shall preclude the
settlement of any transaction entered into through the facilities of the NYSE or
any other national securities exchange or automated inter-dealer quotation
system. The fact that the settlement of any transaction occurs shall
not negate the effect of any other provision of Section 5.9, and any transferee
in such a transaction shall be subject to all of the provisions and limitations
set forth in Section 5.9.
SECTION 5.11
SEVERABILITY. If any provision of Section 5.9 or any
application of any such provision is determined to be void, invalid or
unenforceable by any court having jurisdiction over the issue, the validity and
enforceability of the remaining provisions of Section 5.9 shall not be affected
and other applications of such provision shall be affected only to the extent
necessary to comply with the determination of such court.
SECTION 5.12 ENFORCEMENT. The
Company is authorized specifically to seek equitable relief, including
injunctive relief, to enforce the provisions of Section 5.9.
SECTION 5.13
NON-WAIVER. No delay or failure on the part of the Company or
the Board in exercising any right hereunder shall operate as a waiver of any
right of the Company or the Board, as the case may be, except to the extent
specifically waived in writing.
-22-
SECTION 5.14 REPURCHASE OF
SHARES. The Board may establish, from time to time, a program
or programs by which the Company voluntarily repurchases Shares from its
Stockholders; provided, however, that such repurchase does not impair the
capital or operations of the Company. The Sponsor, Advisor, members
of the Board or any Affiliates thereof may not receive any fees arising out of
the repurchase of Shares by the Company.
SECTION 5.15 DISTRIBUTION
REINVESTMENT PLANS. The Board may establish, from time to
time, a Distribution reinvestment plan or plans (each, a “Reinvestment
Plan”). Under any such Reinvestment Plan, (i) all material
information regarding Distributions to the Stockholders and the effect of
reinvesting such Distributions, including the tax consequences thereof, shall be
provided to the Stockholders not less often than annually, and (ii) each
Stockholder participating in such Reinvestment Plan shall have a reasonable
opportunity to withdraw from the Reinvestment Plan not less often than annually
after receipt of the information required in clause (i) above.
SECTION 5.16 PREEMPTIVE AND APPRAISAL
RIGHTS. Except as may be provided by the Board in setting the
terms of classified or reclassified Shares pursuant to Section 5.4 or as may
otherwise be provided by contract approved by the Board, no holder of Shares
shall, as such holder, have any preemptive right to purchase or subscribe for
any additional Shares or any other security of the Company which it may issue or
sell. Holders of Shares shall not be entitled to exercise any rights
of an objecting stockholder provided for under Title 3, Subtitle 2 of the MGCL
or any successor statute unless the Board, upon the affirmative vote of a
majority of the Board, shall determine that such rights apply, with respect to
all or any classes or series of Shares, to one or more transactions occurring
after the date of such determination in connection with which holders of such
Shares would otherwise be entitled to exercise such rights.
ARTICLE
VI
BOARD
OF DIRECTORS
SECTION 6.1 NUMBER OF
DIRECTORS. The number of Directors of the Company shall be
five, which number may be increased or decreased from time to time pursuant to
the Bylaws; provided, however, that the total number of Directors shall be not
fewer than three. A majority of the Board will be Independent Directors
except for a period of up to 60 days after the death, removal or resignation of
an Independent Director pending the election of such Independent Director’s
Successor. The Company elects, at such time as it becomes eligible to
make the election provided for under Section 3-804(c) of the MGCL, that, except
as may be provided by the Board in setting the terms of any class or series of
Shares, any and all vacancies on the Board may be filled only by the affirmative
vote of a majority of the remaining Directors in office, even if the remaining
Directors do not constitute a quorum, and any Director elected to fill a vacancy
shall serve for the remainder of the full term of the directorship in which such
vacancy occurred. Notwithstanding the foregoing sentence, Independent
Directors shall nominate replacements for vacancies among the Independent
Directors’ positions. No reduction in the number of Directors shall
cause the removal of any Director from office prior to the expiration of his
term, except as may otherwise be provided in the terms of any Preferred
Shares. For the purposes of voting for Directors, each Share may be
voted for as many individuals as there are Directors to be elected and for whose
election the Share is entitled to be voted. Cumulative voting for Directors is
prohibited.
-23-
The names
of the Directors who shall serve on the Board until the first annual meeting of
the Stockholders and until their successors are duly elected and qualify
are:
David
Lichtenstein
Edwin J.
Glickman
George R.
Whittemore
Shawn R.
Tominus
Bruno de
Vinck
These
Directors may increase the number of Directors and fill any vacancy, whether
resulting from an increase in the number of Directors or otherwise, on the Board
prior to the first annual meeting of Stockholders in the manner provided in the
Bylaws.
SECTION 6.2
EXPERIENCE. Each Director shall have at least three years of
relevant experience demonstrating the knowledge and experience required to
successfully acquire and manage the type of assets being acquired by the
Company. At least one of the Independent Directors shall have three
years of relevant real estate experience, and at least one of the Independent
Directors shall be a financial expert with at least three years of relevant
finance experience.
SECTION 6.3
COMMITTEES. Subject to the MGCL, the Board may establish such
committees as it deems appropriate, in its discretion, provided that the
majority of the members of each committee are Independent
Directors. Any Audit Committee established by the Board shall be
composed solely of Independent Directors.
SECTION 6.4
TERM. Except as may otherwise be provided in the terms of any
Preferred Shares issued by the Company, each Director shall hold office for one
year, until the next annual meeting of Stockholders and until his successor is
duly elected and qualifies. Directors may be elected to an unlimited
number of successive terms.
SECTION 6.5 FIDUCIARY
OBLIGATIONS. The Directors and the Advisor serve in a
fiduciary capacity to the Company and have a fiduciary duty to the Stockholders
of the Company, including, with respect to the Directors, a specific fiduciary
duty to supervise the relationship of the Company with the Advisor.
SECTION 6.6 RESIGNATION, REMOVAL OR
DEATH. Any Director may resign by written notice to the Board,
effective upon execution and delivery to the Company of such written notice or
upon any future date specified in the notice. Any Director or the
entire Board may be removed from office, with our without cause, by the
affirmative vote of the holders of not less than a majority if votes entitled to
be cast generally in the election of Directors, subject to the rights of holders
of one or more classes or series of Preferred Shares to elect or remove one or
more of the Directors.
-24-
ARTICLE
VII
POWERS
OF THE BOARD OF DIRECTORS
SECTION 7.1
GENERAL. The business and affairs of the Company shall be
managed under the direction of the Board, and the Board shall have full,
exclusive and absolute power, control and authority over the Company’s assets
and over the business of the Company as if it, in its own right, was the sole
owner thereof, except as otherwise limited by the Charter. In
accordance with the policies on investments and borrowing set forth in this
Article VII and Article IX hereof, the Board shall monitor the administrative
procedures, investment operations and performance of the Company and the Advisor
to assure that such policies are carried out. The Board may take any
action that, in its sole judgment and discretion, is necessary or desirable to
conduct the business of the Company. The Charter shall be construed
with a presumption in favor of the grant of power and authority to the
Board. Any construction of the Charter or determination made in good
faith by the Board concerning its powers and authority hereunder shall be
conclusive. The enumeration and definition of particular powers of
the Board included in this Article VII shall in no way be limited or restricted
by reference to or inference from the terms of this or any other provision of
the Charter or construed or deemed by inference or otherwise in any manner to
exclude or limit the powers conferred upon the Board under the general laws of
the State of Maryland as now or hereafter in force.
SECTION 7.2 AUTHORIZATION BY BOARD OF
STOCK ISSUANCE. The Board may authorize the issuance from time
to time of Shares of any class or series, whether now or hereafter authorized,
or securities or rights convertible into Shares of any class or series, whether
now or hereafter authorized, for such consideration as the Board may deem
advisable (or without consideration in the case of a stock split or stock
dividend), subject to such restrictions or limitations, if any, as may be set
forth in the Charter or the Bylaws. The issuance of Preferred Shares
shall also be approved by a majority of Independent Directors not otherwise
interested in the transaction, who shall have access at the Company’s expense to
the Company’s legal counsel or to independent legal counsel.
SECTION 7.3
FINANCINGS. The Board shall have the power and authority to
borrow or, in any other manner, raise money for the purposes and on the terms it
determines, which terms may (i) include evidencing the same by issuance of
Securities of the Company and (ii) have such provisions as the Board may
determine (a) to reacquire such Securities; (b) to enter into other contracts or
obligations on behalf of the Company; (c) to guarantee, indemnify or act as
surety with respect to payment or performance of obligations of any Person and
(d) to mortgage, pledge, assign, grant security interests in or otherwise
encumber the Company’s assets to secure any such Securities of the Company,
contracts or obligations (including guarantees, indemnifications and
suretyships); and to renew, modify, release, compromise, extend, consolidate or
cancel, in whole or in part, any obligation to or of the Company or participate
in any reorganization of obligors to the Company.
-25-
SECTION 7.4 REIT
QUALIFICATION. If the Company elects to qualify for federal
income tax treatment as a REIT, the Board shall use its reasonable best efforts
to take such actions as are necessary or appropriate to preserve the status of
the Company as a REIT; however, if the Board determines that it is no longer in
the best interests of the Company to continue to be qualified as a REIT, the
Board may revoke or otherwise terminate the Company’s REIT election pursuant to
Section 856(g) of the Code. The Board also may determine that
compliance with any restriction or limitation on stock ownership and Transfers
set forth in Section 5.9 of Article V is no longer required for REIT
qualification.
SECTION 7.5 DETERMINATIONS BY
BOARD. The determination as to any of the following matters,
made in good faith by or pursuant to the direction of the Board consistent with
the Charter, shall be final and conclusive and shall be binding upon the Company
and every holder of Shares: the amount of the net income of the Company for any
period and the amount of assets at any time legally available for the payment of
dividends, redemption of Shares or the payment of other Distributions on Shares;
the amount of paid in surplus, net assets, other surplus, annual or other cash
flow, funds from operations, net profit, net assets in excess of capital,
undivided profits or excess of profits over losses on sales of assets; the
amount, purpose, time of creation, increase or decrease, alteration or
cancellation of any reserves or charges and the propriety thereof (whether or
not any obligation or liability for which such reserves or charges shall have
been created shall have been paid or discharged); any interpretation of the
terms, preferences, conversion or other rights, voting powers or rights,
restrictions, limitations as to dividends or Distributions, qualifications or
terms or conditions of redemption of any class or series of Shares; the fair
value, or any sale, bid or asked price to be applied in determining the fair
value, of any Asset owned or held by the Company or of any Shares; the number of
Shares of any class of the Company; any conflict between the MGCL and the
provisions set forth in the NASAA REIT Guidelines or any matter relating to the
acquisition, holding and disposition of any Assets by the Company; or any other
matter relating to the business and affairs of the Company or required or
permitted by applicable law, the Charter or Bylaws or otherwise to be determined
by the Board; provided,
however, that any
determination by the Board as to any of the preceding matters shall not render
invalid or improper any action taken or omitted prior to such determination and
no Director shall be liable for making or failing to make such a determination;
and provided, further, that to the extent the Board determines that the MGCL
conflicts with the provisions set forth in the NASAA REIT Guidelines, the NASAA
REIT Guidelines control to the extent any provisions of the MGCL are not
mandatory.
SECTION 7.6. STOCKHOLDER CONCURRENCE
REQUIRED. Notwithstanding the foregoing, without concurrence
of a majority of the outstanding Shares, the Board may not (i) amend the
Charter, except for amendments that do not adversely affect the rights,
preferences and privileges of Stockholders (including amendments to provisions
relating to Director qualifications, fiduciary duty, liability and
indemnification, conflicts of interest, investment policies or investment
restrictions), (ii) sell all or substantially all of the Company’s assets other
than in the ordinary course of the Company’s business or in connection with
liquidation and dissolution, (iii) cause the merger or other reorganization of
the Company or (iv) dissolve or liquidate the Company, other than before the
Company’s initial investment in property.
-26-
SECTION 7.7. VOTE OF MAJORITY OF
INDEPENDENT DIRECTORS REQUIRED. Notwithstanding the foregoing,
the Directors and Independent Directors are bound by, and a majority of the
Independent Directors must approve matters relating to, the following
restrictions on and obligations of the Directors and the Independent
Directors: (i) the requirement that a majority of Directors and of
Independent Directors review and ratify the Charter at or before the first
meeting of the Board; (ii) the duty of the Board to establish written policies
on investments and borrowing and to monitor the administrative procedures,
investment operations and performance of the Company and the Advisor to assure
that such policies are carried out; (iii) the Company’s minimum capitalization;
(iv) the Advisory Agreement; (v) liability and indemnification; (vi)
reasonableness of the Company’s fees and expenses; (vii) limitations on
Organization and Offering Expenses; (viii) limitations on Acquisition Fees and
Acquisition Expenses; (viii) limitations on Total Operating Expenses; (ix)
limitations on Real Estate commissions on resale of property; (x) limitations on
incentive fees; (xi) Advisor compensation; (xii) the Independent Directors’
periodic duty to review the Company’s investment policies; (xiii) the authority
of a majority of the Independent Directors to select an Independent Appraiser to
determine the fair market value that the Company pays for Real Estate that it
acquires both (a) when a majority of the Independent Directors determine to
appoint an Independent Appraiser to determine fair market value in connection
with any acquisition by the Company and (b) whenever the Company acquires
property from the Advisor, Directors, the Sponsor or their Affiliates; (xiv) the
restrictions and procedures contained herein relating to meetings of
Stockholders; (xv) the authority of a majority of Stockholders present in person
or by proxy at an annual meeting at which a quorum is present, without the
necessity for concurrence by the Board, to vote to elect the Directors; (xvi)
those requirements of any Reinvestment Plan that the Board establishes,
contained herein, relating to periodic distribution of certain material
information to Stockholders and opportunity for participating Stockholders to
withdraw; and (xvii) the requirement that a majority of Independent Directors
must approve matters relating to the duties and restrictions enumerated in this
Section 7.7.
ARTICLE
VIII
ADVISOR
SECTION 8.1 APPOINTMENT AND INITIAL
INVESTMENT OF ADVISOR. The Board is responsible for setting
the general policies of the Company and for the general supervision of its
business conducted by officers, agents, employees, advisors or independent
contractors of the Company. However, the Board is not required
personally to conduct the business of the Company, and it may (but need not)
appoint, employ or contract with any Person (including a Person Affiliated with
any Director) as an Advisor and may grant or delegate such authority to the
Advisor as the Board may, in its sole discretion, deem necessary or
desirable. The term of retention of any Advisor shall not exceed one
(1) year, although there is no limit to the number of times that a particular
Advisor may be retained. The Advisor or its Affiliates have made an
initial investment of $200,000 in the Company. The Advisor or any
such Affiliate may not sell this initial investment while the Advisor remains a
Sponsor but may transfer the initial investment to other
Affiliates.
-27-
SECTION 8.2 SUPERVISION OF
ADVISOR. The Board shall evaluate the performance of the
Advisor before entering into or renewing an Advisory Agreement, and the criteria
used in such evaluation shall be reflected in the minutes of the meetings of the
Board. The Board may exercise broad discretion in allowing the
Advisor to administer and regulate the operations of the Company, to act as
agent for the Company, to execute documents on behalf of the Company and to make
executive decisions that conform to general policies and principles established
by the Board. The Board shall monitor the Advisor to assure that the
administrative procedures, operations and programs of the Company are in the
best interests of the Stockholders and are fulfilled. The Independent
Directors are responsible for reviewing the total fees and expenses of the
Company at least annually or with sufficient frequency to determine that the
expenses incurred are reasonable in light of the investment performance of the
Company, its Net Assets, its Net Income and the fees and expenses of other
comparable unaffiliated REITs. Each such determination shall be
reflected in the minutes of the meetings of the Board. In addition,
from time to time, but not less often than annually, a majority of the
Independent Directors and a majority of Directors not otherwise interested in
the transaction must approve each transaction with the Advisor or its
Affiliates. The Independent Directors also will be responsible for
reviewing, from time to time and at least annually, the performance of the
Advisor and determining that compensation to be paid to the Advisor is
reasonable in relation to the nature and quality of services performed and the
investment performance of the Company and that the provisions of the Advisory
Agreement are being carried out. Specifically, the Independent
Directors will consider factors such as (i) the amount of the fee paid to the
Advisor in relation to the size, composition and performance of the Assets, (ii)
the success of the Advisor in generating opportunities that meet the investment
objectives of the Company, (iii) rates charged to other REITs and to investors
other than REITs by advisors performing the same or similar services, (iv)
additional revenues realized by the Advisor and its Affiliates through their
relationship with the Company, including loan administration, underwriting or
broker commissions, servicing, engineering, inspection and other fees, whether
paid by the Company or by others with whom the Company does business, (v) the
quality and extent of service and advice furnished by the Advisor, (vi) the
performance of the Assets, including income, conservation or appreciation of
capital, frequency of problem investments and competence in dealing with
distress situations, and (vii) the quality of the Assets relative to the
investments generated by the Advisor for its own account. The
Independent Directors may also consider all other factors that it deems
relevant, and the findings of the Independent Directors on each of the factors
considered shall be recorded in the minutes of the Board. The Board
shall determine whether any successor Advisor possesses sufficient
qualifications to perform the advisory function for the Company and whether the
compensation provided for in its contract with the Company is
justified.
SECTION 8.3 FIDUCIARY
OBLIGATIONS. The Advisor shall have a fiduciary responsibility
and duty to the Company and to the Stockholders.
SECTION 8.4 AFFILIATION AND
FUNCTIONS. The Board, by resolution or in the Bylaws, may
provide guidelines, provisions or requirements concerning the affiliation and
functions of the Advisor.
SECTION 8.5
TERMINATION. Either a majority of the Independent Directors or
the Advisor may terminate the Advisory Agreement on sixty days’ written notice
without cause or penalty, and, in such event, the Advisor will cooperate with
the Company and the Board in making an orderly transition of the advisory
function.
SECTION
8.6 [RESERVED]
-28-
SECTION 8.7 ORGANIZATION AND OFFERING
EXPENSES LIMITATION. Unless otherwise provided in any
resolution adopted by the Board, the Company shall reimburse the Advisor and its
Affiliates for Organization and Offering Expenses incurred by the Advisor or its
Affiliates; provided, however, that the total amount of all Organization and
Offering Expenses shall be reasonable and shall in no event exceed 15% of the
Gross Proceeds of each Offering.
SECTION 8.8 ACQUISITION
FEES. Unless otherwise provided in any resolution adopted by
the Board, the Company may pay the Advisor and its Affiliates fees for the
review and evaluation of potential investments in Assets; provided, however,
that the total of all Acquisition Fees and Acquisition Expenses shall be
reasonable and shall not exceed an amount equal to five percent of the Contract
Purchase Price or, in the case of a Mortgage, five percent of the funds
advanced; provided, however, that a majority of the Directors (including a
majority of the Independent Directors) not otherwise interested in the
transaction may approve fees and expenses in excess of this limit if they
determine the transaction to be commercially competitive, fair and reasonable to
the Company.
SECTION 8.9 ASSET MANAGEMENT
FEE. The Company may pay the Advisor and its Affiliates
quarterly fees for the Advisor’s management of the Company’s Assets; provided,
however, that the total of all such asset management fees shall not exceed
0.2375% of the average, as of the last day of the immediately preceding quarter,
of the aggregate book value of the Company’s Assets invested in equity interests
and loans secured by real estate, before reserves for depreciation or bad debt
or other similar non-cash reserves.
SECTION 8.10 FEES UPON TERMINATION OF
ADVISOR. Upon the termination of the Advisor by reason of a
change of control of the Company, by the Company without cause, or by the
Advisor for good reason (as such terms may be defined in the definitive
agreement memorializing the engagement of the Advisor by the Company), or upon
liquidation of the Company, the Company shall pay the Advisor payment of any
earned but unpaid compensation and expense reimbursements accrued as of the date
of termination. In addition, the Advisor may require that its
subordinated profits interests be converted into cash in an amount equal to the
purchase price of the subordinated profits interests, or may otherwise continue
to hold such subordinated profits interests after the termination of the
advisory agreement.
SECTION 8.11 REIMBURSEMENT FOR TOTAL
OPERATING EXPENSES. Unless otherwise provided in any
resolution adopted by the Board, the Company may reimburse the Advisor, at the
end of each fiscal quarter, for Total Operating Expenses incurred by the
Advisor; provided, however that the Company shall not reimburse the Advisor at
the end of any fiscal quarter for Total Operating Expenses that, in the four
consecutive fiscal quarters then ended, exceed the greater of two percent of
Average Invested Assets or 25% of Net Income (the “2%/25% Guidelines”) for such
year. The Independent Directors shall have the responsibility of
limiting Total Operating Expenses to amounts that do not exceed the 2%/25%
Guidelines unless they have made a finding that, based on such unusual and
non-recurring factors that they deem sufficient, a higher level of expenses (an
“Excess Amount”) is
justified. Within 60 days after the end of any fiscal quarter of the
Company for which there is an Excess Amount which the Independent Directors
conclude was justified and reimbursable to the Advisor, there shall be sent to
the Stockholders a written disclosure of such fact, together with an explanation
of the factors the Independent Directors considered in determining that such
Excess Amount was justified. Any such finding and the reasons in
support thereof shall be reflected in the minutes of the meetings of the
Board. In the event that the Independent Directors do not determine
that excess expenses are justified, the Advisor shall reimburse the Company the
amount by which the expenses exceeded the 2%/25% Guidelines.
-29-
SECTION 8.12 LIMITATIONS ON
COMPENSATION. In no event will the Acquisition Fees,
Acquisition Expenses and Asset Management Fee paid to the Advisor, plus the
subordinated payments payable by the Operating Partnership to the Sponsor
(Program Structure) exceed the sum of (i) an amount equal to 6 percent of the
gross Contract Purchase Price of all Properties acquired by the Company; (ii) an
amount determined annually (“Asset Management Amount”) equal in the aggregate to
the greater of 2 percent of the Average Invested Assets or 25 percent of the Net
Income of the Company after reducing such Asset Management Amount by those Total
Operating Expenses as defined in the Guidelines that exclude the Asset
Management Amount; (iii) an amount equal to the Disposition Fees, if any, but
not to exceed 3 percent of the contract sales price of all Properties sold by
the Company; and (iv) an amount equal to 15 percent of the Net Sales Proceeds,
if any, remaining after the payment to the shareholders in the aggregate of an
amount equal to 100 percent of the original issue price of their Shares plus an
amount equal to 6 percent of the original issue price of the Company’s Shares
per annum, cumulative (Guideline Structure).
For
purposes of determining compliance with this undertaking, the comparison between
the Program Structure and the Guideline Structure shall be determined on an
annual basis at the end of each fiscal year of the Company (“Comparison
Date”). To the extent that at the Comparison Date the Program
Structure amount exceeds the Guideline Structure amount on a cumulative basis,
the Sponsor shall return such excess to the shareholders within 30 days after
the Comparison Date.
SECTION 8.13 REIMBURSEMENT
LIMITATION. The Company shall not reimburse the Advisor or its
Affiliates for services for which the Advisor or its Affiliates are entitled to
compensation in the form of a separate fee.
ARTICLE
IX
INVESTMENT
OBJECTIVES AND LIMITATIONS
SECTION 9.1 REVIEW OF
OBJECTIVES. The Independent Directors shall review the
investment objectives and policies of the Company with sufficient frequency (not
less often than annually) to determine that the objectives and policies being
followed by the Company are in the best interests of its
Stockholders. Each such determination and the basis therefor shall be
set forth in the minutes of the meetings of the Board.
SECTION 9.2 CERTAIN PERMITTED
INVESTMENTS. Until such time as the Common Shares are Listed
the following investment limitations shall apply:
-30-
(i) The
Company may invest in Assets.
(ii) The
Company may invest in Joint Ventures with the Sponsor, Advisor, one or more
Directors or any of their Affiliates only if a majority of Directors (including
a majority of Independent Directors) not otherwise interested in the
transaction, approve such investment as being fair and reasonable to the Company
and on substantially the same terms and conditions as those received by the
other joint venturers.
(iii) Subject
to any limitations in Section 9.3, the Company may invest in equity
securities only if a majority of Directors (including a majority of Independent
Directors) not otherwise interested in the transaction approve such investment
as being fair, competitive and commercially reasonable.
SECTION 9.3 INVESTMENT
LIMITATIONS. Until such time as the Common Shares are Listed,
the following investment limitations shall apply. In addition to
other investment restrictions imposed by the Board from time to time, consistent
with the Company’s objective of qualifying as a REIT, the following shall apply
to the Company’s investments:
(i) Not
more than ten percent of the Company’s total assets shall be invested in
Unimproved Real Property or mortgage loans on Unimproved Real
Property.
(ii) The
Company shall not invest in commodities or commodity future
contracts. This limitation is not intended to apply to futures
contracts, when used solely for hedging purposes in connection with the
Company’s ordinary business of investing in real estate assets and
Mortgages.
(iii) The
Company shall not invest in or make any Mortgage, including a mezzanine
loan, unless an appraisal is obtained concerning the underlying property
except for those loans insured or guaranteed by a government or government
agency. In cases in which a majority of Independent Directors so
determine, and in all cases in which the transaction is with the Advisor, the
Sponsor, any Director or any Affiliates thereof, such appraisal of the
underlying property must be obtained from an Independent
Appraiser. Such appraisal shall be maintained in the Company’s
records for at least five years and shall be available for inspection and
duplication by any Stockholder for a reasonable charge. In addition
to the appraisal, a mortgagee’s or owner’s title insurance policy or commitment
as to the priority of the mortgage or condition of the title must be
obtained.
(iv) The
Company shall not make or invest in any Mortgage, including a construction loan,
on any one property if the aggregate amount of all mortgage loans outstanding on
the property, including the loans of the Company, would exceed an amount equal
to 85% of the appraised value of the property as determined by appraisal unless
substantial justification exists because of the presence of other underwriting
criteria. For purposes of this subsection, the “aggregate amount of
all mortgage loans outstanding on the property, including the loans of the
Company” shall include all interest (excluding contingent participation in
income and/or appreciation in value of the mortgaged property), the current
payment of which may be deferred pursuant to the terms of such loans, to the
extent that deferred interest on each loan exceeds five percent per annum of the
principal balance of the loan.
-31-
(v)
The Company shall not invest in indebtedness secured by a mortgage on real
property which is subordinate to the lien or other indebtedness of the Advisor,
the Sponsor, any Director or any Affiliate of the Company.
(vi)
The Company shall not issue (A) equity Securities redeemable
solely at the option of the holder (except that Stockholders may offer their
Common Shares to the Company pursuant to any repurchase plan adopted by the
Board on terms outlined in the Prospectus relating to any Offering, as such plan
is thereafter amended in accordance with its terms); (B) debt Securities unless
the historical debt service coverage (in the most recently completed fiscal
year) as adjusted for known changes is sufficient to properly service that
higher level of debt; (C) equity Securities on a deferred payment basis or under
similar arrangements; or (D) options or warrants to purchase Shares to the
Advisor, Sponsor or any Affiliate thereof except on the same terms as such
options or warrants are sold to the general public. Options or
warrants may be issued to persons other than the Advisor, Sponsor or any
Affiliate thereof, but not at exercise prices less than the fair market value of
the underlying Securities on the date of grant and not for consideration (which
may include services) that in the judgment of the Independent Directors has a
market value less than the value of such option or warrant on the date of
grant. Options or warrants issuable to the Advisor, Directors,
Sponsor or any Affiliate thereof shall not exceed ten percent of the outstanding
Shares on the date of grant. The voting rights per Share (other than
any publicly held Share) sold in a private offering shall not exceed the voting
rights which bear the same relationship to the voting rights of a publicly held
Share as the consideration paid to the Company for each privately offered Share
bears to the book value of each outstanding publicly held Share.
(vii)
A majority of the Directors or a majority of
a duly authorized committee of the Board shall authorize the consideration to be
paid for each Asset, ordinarily based on the fair market value of the
Asset. If a majority of the Independent Directors on the Board or
such duly authorized committee determine, or if the Asset is acquired from the
Advisor, a Director, the Sponsor or their Affiliates, such fair market value
shall be determined by a qualified Independent Appraiser selected by such
Independent Directors. The Advisor may purchase an Asset on behalf of
the Company without seeking the prior written consent of the Board if and to the
extent that:
(a)
The aggregate purchase price of such Asset (other
than an Asset acquired from the Advisor, a Director, the Sponsor or their
Affiliates, in which case the approval of the Independent Directors will be
required) is less than $15,000,000;
(b)
The acquisition of such Asset would not, if
consummated, violate or conflict with the investment guidelines of the Company
as set forth in the Company’s Prospectus as filed with the Securities and
Exchange Commission;
(c)
The acquisition of such Asset would not, if
consummated, violate the limitations on Leverage contained in
Section 9.3(viii) below; and
-32-
(d)
The consideration to be paid for such Asset does not exceed
the fair market value of such Asset, as determined by an Independent Appraiser
selected in good faith by the Advisor and acceptable to the Independent
Directors.
(viii)
The aggregate Leverage of the Company shall be reasonable in
relation to the Net Assets of the Company and shall be reviewed by the Board at
least quarterly. Subject to the immediately following sentence, the maximum
amount of such Leverage shall not exceed seventy-five percent (75%) of the
aggregate fair market value of the Company’s assets as of the date of any
borrowing, provided, that Leverage on any individual Asset may exceed such
limit. Any excess in borrowing over such 75% level shall be approved
by a majority of the Independent Directors and disclosed to Stockholders in the
next quarterly report of the Company, along with justification for such
excess.
(ix)
The Company will continually review its investment activity
to attempt to ensure that it is not classified as an “investment company” under
the Investment Company Act of 1940, as amended.
(x)
The Company will not make any investment that the
Company believes will be inconsistent with its objectives of qualifying and
remaining qualified as a REIT unless and until the Board determines, in its sole
discretion, that REIT qualification is not in the best interests of the
Company.
(xi)
The Company shall not invest in real estate contracts
of sale unless such contracts of sale are in recordable form and appropriately
recorded in the chain of title.
(xii)
The Company will not, directly or indirectly, including
through any subsidiary, extend or maintain credit, arrange for the extension of
credit, or renew an extension of credit, in the form of a personal loan to or
for any of the Company’s directors or executive officers.
(xiii)
The Company will not invest in any equity securities unless a
majority of disinterested directors, including a majority of disinterested
Independent Directors, approves the transaction as being fair, competitive and
commercially reasonable. Investments in entities affiliated with the
Advisor, the Sponsor, any director, or any of their Affiliates shall be subject
to the restrictions on joint venture investments set forth in
Section 9.2(ii) of the Charter.
(xiv)
The Company shall not engage in any short
sale.
(xv)
The value of all investments in debt secured by a mortgage on
real property that is subordinate to the lien of other debt shall not exceed 25%
of the Company’s tangible assets.
(xvi)
The Company shall not engage in trading, as opposed to
investment activities.
-33-
(xvii)
The Company shall not engage in underwriting activities or
distribute, as agent, securities issued by others.
(xviii)
The Company shall not invest in foreign currency or
bullion.
(xix)
The aggregate amount of long-term permanent borrowing shall not exceed
300% of the Company’s and the Operating Partnership’s net assets as of the date
of the borrowing unless the excess is approved by a majority of the Independent
Directors and disclosed to the stockholders in the Company’s next quarterly
report to stockholders following such borrowing along with justification for
such excess.
The
Company shall not acquire securities in any entity holding investments or
engaging in activities prohibited by the restrictions on investments set forth
in the foregoing clauses (i) through (xvi) of this
Section 9.3.
ARTICLE
X
CONFLICTS
OF INTEREST
SECTION 10.1 SALES AND LEASES TO
COMPANY. The Company may not purchase or lease an Asset or
Assets from the Sponsor, the Advisor, a Director, or any Affiliate
thereof.
SECTION 10.2 SALES AND LEASES TO THE
SPONSOR, ADVISOR, DIRECTORS OR AFFILIATES. An Advisor,
Sponsor, Director or any Affiliate thereof may not purchase or lease Assets from
the Company.
SECTION
10.3 OTHER TRANSACTIONS.
(a)
Except pursuant to the Advisory Agreement or the Management Agreement, the
Company shall not engage in any other transaction with the Sponsor, Advisor, a
Director or any Affiliates thereof unless a majority of the Directors (including
a majority of the Independent Directors) not otherwise interested in such
transaction approve such transaction as fair and reasonable to the Company and
on terms and conditions not less favorable to the Company than those available
from unaffiliated third parties.
(b) The
Company shall not make loans to the Sponsor, Advisor, a Director or any
Affiliates thereof except Mortgages pursuant to Section 9.3(iii) hereof or loans
to wholly owned subsidiaries of the Company. The Sponsor, Advisor,
Directors and any Affiliates thereof shall not make loans to the Company, or to
joint ventures in which the Company is a co-venturer, unless approved by a
majority of the Directors (including a majority of the Independent Directors)
not otherwise interested in such transaction as fair, competitive, and
commercially reasonable, and no less favorable to the Company than comparable
loans between unaffiliated parties.
-34-
(c) The
Company may enter into joint ventures with the Sponsor or its Affiliates
provided that (i) a majority of Directors (including a majority of Independent
Directors) not otherwise interested in the transaction approves the transaction
as being fair and reasonable to the Company and (ii) the investment by the
Company is on substantially the same terms as those received by other joint
venturers.
SECTION
10.4 CONFLICT RESOLUTION PROCEDURES.
(a)
Before the Advisor may take advantage of an investment opportunity for its own
account or recommend it to others, the Advisor is obligated to present such
opportunity to the Company if (i) such opportunity is compatible with the
Company’s investment objectives and policies, (ii) such opportunity is of a
character which could be taken by the Company, and (iii) the Company has
the financial resources to take advantage of such opportunity.
(b) In
the event that an investment opportunity becomes available that is suitable for
both the Company and a public or private entity with which the Advisor or its
Affiliates are affiliated for which both entities have sufficient uninvested
funds, and the requirements of Section 10.4(i) above have been satisfied, then
the entity that has had uninvested funds for the longest period of time will
first be offered the investment opportunity. An investment
opportunity will not be considered suitable for an entity if the 2%/25%
Guidelines could not be satisfied if the entity were to make the
investment. In determining whether or not an investment opportunity
is suitable for more than one entity, the Board and the Advisor will examine
such factors, among others, as the cash requirements of each entity, the effect
of the acquisition both on diversification of each entity’s investments by type
of property and geographic area and on diversification of the tenants of its
properties, the policy of each entity relating to leverage of properties, the
anticipated cash flow of each entity, the income tax effects of the purchase to
each entity, the size of the investment and the amount of funds available to
each program and the length of time such funds have been available for
investment. If a subsequent development, such as a delay in the
closing of the acquisition of such investment or a delay in the construction of
a property, causes any such investment, in the opinion of the Board and the
Advisor, to be more appropriate for an entity other than the entity that
committed to make the investment, the Advisor may determine that the other
entity affiliated with the Advisors or its Affiliates will make the
investment. It shall be the duty of the Board, including the
Independent Directors, to ensure that the method used by the Advisor for the
allocation of the acquisition of investments by two or more affiliated programs
seeking to acquire similar types of Assets is applied fairly to the
Company.
-35-
ARTICLE
XI
STOCKHOLDERS
SECTION 11.1 MEETINGS OF
STOCKHOLDERS. There shall be an annual meeting of the
Stockholders, to be held on such date and at such time and place as shall be
determined by or in the manner prescribed in the Bylaws, at which the Directors
shall be elected and any other proper business may be conducted; provided that
such annual meeting will be held upon reasonable notice and within a reasonable
period (not less than 30 days) following delivery of the annual
report. The holders of a majority of Shares entitled to vote who are
present in person or by proxy at an annual meeting at which a quorum is present
may, without the necessity for concurrence by the Board, vote to elect the
Directors. A quorum shall be the presence in person or by proxy of
Stockholders entitled to cast at least 50% of all the votes entitled to be cast
at such meeting on any matter. Special meetings of Stockholders may
be called in the manner provided in the Bylaws, including by the president, the
chairman of the Board, the chief executive officer or by a majority of the
Directors or a majority of the Independent Directors, and shall be called by the
secretary of the Company upon the written request of the holders of shares
entitled to cast not less than ten percent of all the votes entitled to be cast
at such meeting. Notice of any special meeting of Stockholders shall
be given as provided in the Bylaws, and the special meeting shall be held not
less than 15 days nor more than 60 days after the delivery of such
notice. If the meeting is called by written request of Stockholders
as described in this Section 11.1, the special meeting shall be held at the time
and place specified in the Stockholder request; provided, however, that if none
is so specified, at such time and place convenient to the
Stockholders. If there are no Directors, the officers of the Company
shall promptly call a special meeting of the Stockholders entitled to vote for
the election of successor Directors. Any meeting may be adjourned and
reconvened as the Board may determine or as otherwise provided in the
Bylaws. Without the approval of a majority of the Shares entitled to
vote on the matter, the Board may not (i) amend the Charter to materially and
adversely affect the rights, preferences and privileges of the Stockholders;
(ii) amend provisions of the Charter relating to director qualifications,
fiduciary duties, liability and indemnification, conflicts of interest,
investment policies or investment restrictions; (iii) liquidate or dissolve the
Company other than before the initial investment in Property; (iv) sell all or
substantially all of the Company’s assets other than in the ordinary course of
business or as otherwise permitted by law; or (v) cause the merger or
reorganization of the Company except as permitted by law.
SECTION 11.2 VOTING RIGHTS OF
STOCKHOLDERS. Subject to the provisions of any class or series
of Shares then outstanding, and subject to the mandatory provisions of any
applicable laws or regulations, the Stockholders shall be entitled to vote only
on the following matters: (a) election or removal of Directors,
without the necessity for concurrence by the Board, as provided in Sections
11.1, 6.4 and 6.6 hereof; (b) amendment of the Charter as provided in Article
XIII hereof without the necessity for concurrence by the Board;
(c) dissolution of the Company without the necessity for
concurrence by the Board; (d) Merger or consolidation of the Company or the
sale or other disposition of all or substantially all of the Company’s assets
without the necessity for concurrence by the Board; and (e) such other
matters with respect to which the Board has adopted a resolution declaring that
a proposed action is advisable and directing that the matter be submitted to the
Stockholders for approval or ratification. Except with respect to the
foregoing matters, no action taken by the Stockholders at any meeting shall in
any way bind the Board. Without the approval of a majority of the
Shares entitled to vote on the matter, the Board may not (i) amend the Charter
to materially and adversely affect the rights, preferences and privileges of the
Stockholders; (ii) amend provisions of the Charter relating to director
qualifications, fiduciary duties, liability and indemnification, conflicts of
interest, investment policies or investment restrictions; (iii) liquidate or
dissolve the Company other than before the initial investment in property; (iv)
sell all or substantially all of the Company’s assets other than in the ordinary
course of business; or (v) cause the merger or reorganization of the
Company.
-36-
SECTION 11.3 EXTRAORDINARY
ACTIONS. Notwithstanding any provision of law permitting or
requiring any action to be taken or approved by the affirmative vote of the
holders of Shares entitled to cast a greater number of votes, any such action
shall be effective and valid if declared advisable by the Board and taken or
approved by the affirmative vote of holders of Shares entitled to cast a
majority of all the votes entitled to be cast on the matter.
SECTION 11.4 VOTING LIMITATIONS ON
SHARES HELD BY THE ADVISOR, DIRECTORS AND AFFILIATES. With
respect to Shares owned by the Advisor, any Director, or any of their
Affiliates, neither the Advisor, nor such Director(s), nor any of their
Affiliates may vote or consent on matters submitted to the Stockholders
regarding the removal of the Advisor, such Director(s) or any of their
Affiliates or any transaction between the Company and any of them. In
determining the requisite percentage in interest of Shares necessary to approve
a matter on which the Advisor, such Director(s) and any of their Affiliates may
not vote or consent, any Shares owned by any of them shall not be
included.
SECTION 11.5 RIGHT OF
INSPECTION. Any Stockholder and any designated representative
thereof shall be permitted access to the records of the Company to which it is
entitled under applicable law at all reasonable times, and may inspect and copy
any of them for a reasonable charge. Inspection of the Company books
and records by the office or agency administering the securities laws of a
jurisdiction shall be provided upon reasonable notice and during normal business
hours.
SECTION 11.6 ACCESS TO STOCKHOLDER
LIST. An alphabetical list of the names, addresses and
telephone numbers of the Stockholders of the Company, along with the number of
Shares held by each of them (the “Stockholder List”), shall be maintained as
part of the books and records of the Company and shall be available for
inspection by any Stockholder or the Stockholder’s designated agent at the home
office of the Company upon the request of the Stockholder. The
Stockholder List shall be updated at least quarterly to reflect changes in the
information contained therein. A copy of the Stockholder List shall
be mailed to any Stockholder so requesting within ten days of receipt by the
Company of the request. The copy of the Stockholder List shall be
printed in alphabetical order, on white paper, and in a readily readable type
size (in no event smaller than 10-point type). The Company may impose
a reasonable charge for expenses incurred in reproduction pursuant to the
Stockholder request. A Stockholder may request a copy of the
Stockholder List in connection with matters including, but not limited to,
Stockholders’ voting rights, and the exercise of Stockholder rights under
federal proxy laws.
If the
Advisor or the Board neglects or refuses to exhibit, produce or mail a copy of
the Stockholder List as requested, the Advisor and/or the Board, as the case may
be, shall be liable to any Stockholder requesting the Stockholder List for the
costs, including reasonable attorneys’ fees, incurred by that Stockholder for
compelling the production of the Stockholder List, and for actual damages
suffered by any Stockholder by reason of such refusal or neglect. It
shall be a defense that the actual purpose and reason for the requests for
inspection or for a copy of the Stockholder List is to secure the Stockholder
List or other information for the purpose of selling the Stockholder List or
copies thereof, or of using the same for a commercial purpose other than in the
interest of the applicant as a Stockholder relative to the affairs of the
Company. The Company may require the Stockholder requesting the
Stockholder List to represent that the Stockholder List is not requested for a
commercial purpose unrelated to the Stockholder’s interest in the
Company. The remedies provided hereunder to Stockholders requesting
copies of the Stockholder List are in addition, to and shall not in any way
limit, other remedies available to Stockholders under federal law, or the laws
of any state.
-37-
SECTION 11.7
REPORTS. The Directors, including the Independent Directors,
shall take reasonable steps to insure that the Company shall cause to be
prepared and mailed or delivered to each Stockholder as of a record date after
the end of the fiscal year and each holder of other publicly held Securities
within 120 days after the end of the fiscal year to which it relates an annual
report for each fiscal year ending after the Commencement of the Initial Public
Offering that shall include: (i) financial statements prepared in
accordance with generally accepted accounting principles which are audited and
reported on by independent certified public accountants; (ii) the ratio of the
costs of raising capital during the period to the capital raised; (iii) the
aggregate amount of advisory fees and the aggregate amount of other fees paid to
the Advisor and any Affiliate of the Advisor by the Company and including fees
or charges paid to the Advisor and any Affiliate of the Advisor by third parties
doing business with the Company; (iv) the Total Operating Expenses of the
Company, stated as a percentage of Average Invested Assets and as a percentage
of its Net Income; (v) a report from the Independent Directors that the policies
being followed by the Company are in the best interests of its Stockholders and
the basis for such determination; and (vi) separately stated, full disclosure of
all material terms, factors and circumstances surrounding any and all
transactions involving the Company, Directors, Advisors, Sponsors and any
Affiliate thereof occurring in the year for which the annual report is made, and
the Independent Directors shall be specifically charged with a duty to examine
and comment in the report on the fairness of such transactions.
ARTICLE
XII
LIABILITY
LIMITATION AND INDEMNIFICATION
SECTION 12.1 LIMITATION OF
STOCKHOLDER LIABILITY. No Stockholder shall be liable for any
debt, claim, demand, judgment or obligation of any kind of, against or with
respect to the Company by reason of his being a Stockholder, nor shall any
Stockholder be subject to any personal liability whatsoever, in tort, contract
or otherwise, to any Person in connection with the Company’s assets or the
affairs of the Company by reason of his being a Stockholder.
SECTION
12.2 LIMITATION OF DIRECTOR AND OFFICER LIABILITY.
(a)
Subject to any limitations set forth under
Maryland law or in paragraph (b), no Director or officer of the Company shall be
liable to the Company or its Stockholders for money damages. Neither
the amendment nor repeal of this Section 12.2(a), nor the adoption or amendment
of any other provision of the Charter or Bylaws inconsistent with this Section
12.2(a), shall apply to or affect in any respect the applicability of the
preceding sentence with respect to any act or failure to act which occurred
prior to such amendment, repeal or adoption.
-38-
(b)
Notwithstanding anything to the contrary contained in
paragraph (a) above, the Company shall not provide that a Director, the Advisor
or any Affiliate of the Advisor (the “Indemnitee”) be held harmless for any loss
or liability suffered by the Company, unless all of the following conditions are
met:
|
(i)
|
The
Indemnitee has determined, in good faith, that the course of conduct that
caused the loss or liability was in the best interests of the
Company.
|
|
(ii)
|
The
Indemnitee was acting on behalf of or performing services for the
Company.
|
|
(iii)
|
Such
liability or loss was not the result of (A) negligence or misconduct, in
the case that the Indemnitee is a Director (other than an Independent
Director), the Advisor or an Affiliate of the Advisor or (B) gross
negligence or willful misconduct, in the case that the Indemnitee is an
Independent Director.
|
|
(iv)
|
Such
agreement to hold harmless is recoverable only out of Net Assets and not
from the Stockholders.
|
SECTION
12.3. INDEMNIFICATION
(a)
Subject to any limitations set forth under
Maryland law or in paragraph (b) or (c) below, the Company shall indemnify and,
without requiring a preliminary determination of the ultimate entitlement to
indemnification, pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to (i) any individual who is a present or former
Director or officer of the Company and who is made or threatened to be made a
party to the proceeding by reason of his or her service in that capacity, (ii)
any individual who, while a Director or officer of the Company and at the
request of the Company, serves or has served as a director, officer, partner or
trustee of another corporation, real estate investment trust, partnership, joint
venture, trust, employee benefit plan or other enterprise and who is made or
threatened to be made a party to the proceeding by reason of his or her service
in that capacity or (iii) the Advisor of any of its Affiliates acting as an
agent of the Company. The Company may, with the approval of the Board
of Directors or any duly authorized committee thereof, provide such
indemnification and advance for expenses to a Person who served a predecessor of
the Company in any of the capacities described in (i) or (ii) above and to any
employee or agent of the Company or a predecessor of the Company. The
Board may take such action as is necessary to carry out this Section
12.3(a). No amendment of the Charter or repeal of any of its
provisions shall limit or eliminate the right of indemnification provided
hereunder with respect to acts or omissions occurring prior to such amendment or
repeal.
(b)
Notwithstanding anything to the contrary contained in paragraph (a)
above, the Company shall not provide for indemnification of an Indemnitee for
any loss or liability suffered by such Indemnitee, unless all of the following
conditions are met:
(i)
The Indemnitee has determined, in good faith, that the course
of conduct that caused the loss or liability was in the best interests of the
Company.
-39-
(ii)
The Indemnitee was acting on behalf of or performing
services for the Company.
(iii)
Such liability or loss was not the result of (A)
negligence or misconduct, in the case that the Indemnitee is a Director (other
than an Independent Director), the Advisor or an Affiliate of the Advisor or (B)
gross negligence or willful misconduct, in the case that the Indemnitee is an
Independent Director.
(iv)
Such indemnification or agreement to hold harmless is recoverable
only out of Net Assets and not from the Stockholders.
(c)
Notwithstanding anything to the contrary contained in
paragraph (a) above, the Company shall not provide indemnification for any loss,
liability or expense arising from or out of an alleged violation of federal or
state securities laws by such party unless one or more of the following
conditions are met: (i) there has been a successful adjudication on
the merits of each count involving alleged securities law violations as to
the Indemnitee; (ii) such claims have been dismissed with prejudice on the
merits by a court of competent jurisdiction as to the Indemnitee; or (iii) a
court of competent jurisdiction approves a settlement of the claims against the
Indemnitee and finds that indemnification of the settlement and the related
costs should be made, and the court considering the request for indemnification
has been advised of the position of the Securities and Exchange Commission and
of the published position of any state securities regulatory authority in which
Securities were offered or sold as to indemnification for violations of
securities laws.
SECTION 12.4 PAYMENT OF
EXPENSES. The Company may pay or reimburse reasonable legal
expenses and other costs incurred by an Indemnitee in advance of final
disposition of a proceeding only if all of the following are
satisfied: (i) the proceeding relates to acts or omissions with
respect to the performance of duties or services on behalf of the Company, (ii)
the Indemnitee provides the Company with a written affirmation of the
Indemnitee’s good faith belief that the Indemnitee has met the standard of
conduct necessary for indemnification by the Company as authorized by
Section 12.3 hereof, (iii) the legal proceeding was initiated by a third
party who is not a Stockholder or, if by a Stockholder acting in his or her
capacity as such, a court of competent jurisdiction approves such advancement,
and (iv) the Indemnitee provides the Company with a written undertaking to repay
the amount paid or reimbursed by the Company, together with the applicable legal
rate of interest thereon, if it is ultimately determined that the Indemnitee did
not comply with the requisite standard of conduct and is not entitled to
indemnification.
SECTION 12.5 EXPRESS EXCULPATORY
CLAUSES IN INSTRUMENTS. Neither the Stockholders nor the
Directors, officers, employees or agents of the Company shall be liable under
any written instrument creating an obligation of the Company by reason of their
being Stockholders, Directors, officers, employees or agents of the Company, and
all Persons shall look solely to the Company’s assets for the payment of any
claim under or for the performance of that instrument. The omission
of the foregoing exculpatory language from any instrument shall not affect the
validity or enforceability of such instrument and shall not render any
Stockholder, Director, officer, employee or agent liable thereunder to any third
party, nor shall the Directors or any officer, employee or agent of the Company
be liable to anyone as a result of such omission.
-40-
ARTICLE
XIII
AMENDMENTS
The
Company reserves the right from time to time to make any amendment to the
Charter, now or hereafter authorized by law, including any amendment altering
the terms or contract rights, as expressly set forth in the Charter, of any
Shares. All rights and powers conferred by the Charter on
Stockholders, Directors and officers are granted subject to this
reservation. Except for those amendments permitted to be made without
Stockholder approval under Maryland law or by specific provision in the Charter,
any amendment to the Charter shall be valid only if approved by the affirmative
vote of a majority of all votes entitled to be cast on the matter, including,
without limitation, (i) any amendment which would adversely affect the rights,
preferences and privileges of the Stockholders and (ii) any amendment to
Sections 6.2, 6.5 and 6.6 of Article VI, Article IX,
Article X, Article XII, Article XIV, Article XV hereof and
this Article XIII (or any other amendment of the Charter that would have
the effect of amending such sections).
ARTICLE
XIV
ROLL-UP
TRANSACTIONS
(xix)
In connection with any proposed Roll-Up Transaction, an appraisal of all
of the Company’s assets shall be obtained from a competent Independent
Appraiser. The Company’s assets shall be appraised on a consistent
basis, and the appraisal shall be based on the evaluation of all relevant
information and shall indicate the value of the assets as of a date immediately
prior to the announcement of the proposed Roll-Up Transaction. The
appraisal shall assume an orderly liquidation of the assets over a 12-month
period. If the appraisal will be included in a prospectus used to
offer the securities of a roll-up entity, the appraisal shall be filed with the
SEC and the states as an Exhibit to the Registration Statement for the offering.
Accordingly, an issuer using the appraisal shall be subject to liability for
violation of Section 11 of the Securities Act of 1933, as amended, and
comparable provisions under state laws for any material misrepresentations or
material omissions in the appraisal. The terms of the engagement of
the Independent Appraiser shall clearly state that the engagement is for the
benefit of the Company and the Stockholders. A summary of the
appraisal, indicating all material assumptions underlying the appraisal, shall
be included in a report to Stockholders in connection with a proposed Roll-Up
Transaction. In connection with a proposed Roll-Up Transaction, the
Person sponsoring the Roll-Up Transaction shall offer to Stockholders who vote
against the proposed Roll-Up Transaction the choice of:
(a)
accepting the securities of a Roll-Up Entity offered in the proposed
Roll-Up Transaction; or
-41-
(b)
one of the following:
(I)
remaining as Stockholders of the Company and preserving their interests therein
on the same terms and conditions as existed previously; or
(II) receiving
cash in an amount equal to the Stockholder’s pro rata share of the appraised
value of the net assets of the Company.
(xx)
The Company is prohibited from participating in any proposed Roll-Up
Transaction:
(a)
that would result in the Stockholders having voting rights in a Roll-Up
Entity that are less than the rights provided for in Article XI
hereof;
(b)
that includes provisions that would operate as a material impediment to,
or frustration of, the accumulation of Shares by any purchaser of the securities
of the Roll-Up Entity (except to the minimum extent necessary to preserve the
tax status of the Roll-Up Entity), or which would limit the ability of an
investor to exercise the voting rights of its securities of the Roll-Up Entity
on the basis of the number of Shares held by that investor;
(c)
in which investor’s rights to access of records of the Roll-Up Entity will
be less than those described in Sections 11.5 and 11.6 hereof;
or
(d)
in which any of the costs of the Roll-Up Transaction would be borne by the
Company if the Roll-Up Transaction is rejected by the Stockholders.
ARTICLE
XV
DURATION
In the
event that Listing does not occur on or before the tenth anniversary of the
Termination of the Initial Public Offering, then the Board must either (a) adopt
a resolution that sets forth a proposed amendment to the Charter extending or
eliminating this deadline (the “Extension Amendment”), declaring that the
Extension Amendment is advisable and directing that the proposed Extension
Amendment be submitted for consideration at either an annual or special meeting
of the Stockholders, or (b) adopt a resolution that declares that a proposed
liquidation of the Company is advisable on substantially the terms and
conditions set forth in, or referred to, in the resolution (the “Plan of
Liquidation”). If the Board seeks the Extension Amendment as
described above and the Stockholders do not approve such amendment, then the
Board shall adopt a Plan of Liquidation and commence an orderly liquidation of
the assets of the Company pursuant to such Plan of Liquidation. In
the event that Listing occurs on or before the tenth anniversary of the
Termination of the Initial Public Offering, the Company shall continue
perpetually unless dissolved pursuant to any applicable provision of the
MGCL.
-42-
THIRD: The
amendment to and restatement of the charter as hereinabove set forth have been
duly advised by the Board of Directors and approved by the stockholders of the
Company as required by law.
FOURTH: The current
address of the principal office of the Company is as set forth in
Article III of the foregoing amendment and restatement of the
charter.
FIFTH: The name and
address of the Company’s current resident agent is as set forth in
Article III of the foregoing amendment and restatement of the
charter.
SIXTH: The number
of directors of the Company and the names of those currently in office are as
set forth in Section 6.1 of Article VI of the foregoing amendment and
restatement of the charter.
SEVENTH: The total
number of shares of stock which the Company had authority to issue immediately
prior to this amendment was 20,000, consisting of 20,000 shares of Common
Shares, $0.01 par value per share. The aggregate par value of all
shares of stock having par value was $200.
EIGHTH: The total
number of shares of stock which the Company has authority to issue pursuant to
the foregoing amendment and restatement of the charter of the Company is
110,000,000, consisting of 100,000,000 Common Shares, $0.01 par value per share,
and 10,000,000 Preferred Shares, $0.01 par value per share. The
aggregate par value of all authorized shares of stock having par value is
$1,100,000.
NINTH: The
undersigned Chief Executive Officer acknowledges these Articles of Amendment and
Restatement to be the corporate act of the Company and, as to all matters or
facts required to be verified under oath, the undersigned Chief Executive
Officer acknowledges that, to the best of his knowledge, information and belief,
these matters and facts are true in all material respects and that this
statement is made under the penalties for perjury.
-43-