SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant|X|
Filed by a Party other than the Registrant|_|
Check the appropriate box:
|X| Preliminary Proxy Statement |_| Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
WILSHIRE REAL ESTATE INVESTMENT TRUST INC.
(Name of Registrant as Specified In Its Charter)
-------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials.
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|_| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
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(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[Insert Logo]
1776 SW Madison Street
Portland, OR 97205
July ___, 1999
Dear Shareholder:
You are cordially invited to the 1999 Annual Meeting of Stockholders of
Wilshire Real Estate Investment Trust Inc., to be held on Monday, August [9],
1999 at 10:00 a.m. Pacific Time at the Multnomah Athletic Club, 1849 S.W.
Salmon, Portland, Oregon 97205.
At the meeting, in addition to the election of directors and ratification
of the selection of independent accountants, you will be asked to decide whether
the Company should elect to be taxed as a real estate investment trust, or REIT,
under the tax laws. The Board of Directors believes that electing not to be
treated as a REIT will not have an adverse impact on the Company's or its
shareholders' tax positions, and may allow the Company to reduce its taxes by
utilizing certain net operating losses incurred in the second half of 1998. The
Board is also concerned that, if the Company were to elect to be treated as a
REIT, certain adverse consequences (including tax penalties) may result if,
despite having made such election, the Company is unable to qualify for REIT tax
treatment. The Board of Directors believes it to be in the best interest of the
Company and its shareholders that the Company not elect to be taxed as a REIT
and, accordingly, recommends that you vote FOR the proposal to amend the
Company's charter to permit the Company to so elect. Such election, the
consequences of which are further described in the accompanying Proxy Statement,
is likely to have a significant effect on the Company, and so I urge you to take
the time to carefully read this Proxy Statement and send in your completed
Proxy. BECAUSE A DECISION TO NOT BE TREATED AS A REIT REQUIRES THE APPROVAL OF
THE HOLDERS OF AT LEAST TWO-THIRDS OF THE COMPANY'S COMMON STOCK, IT IS
ABSOLUTELY ESSENTIAL THAT ALL SHAREHOLDERS VOTE ON THIS PROPOSAL.
In the event the shareholders approve the above-described proposal
concerning the Company's election to not be treated as a REIT, you will also be
asked at the meeting to decide whether the Company should change its name to a
name that would not suggest that the Company is a real estate investment trust.
The Board of Directors believes it is in the best interests of the Company and
its shareholders to change the Company's name to "Wilshire Real Estate
Investment Inc." and, accordingly, recommends that you vote FOR the proposal to
rename the Company.
<PAGE>
Our Annual Report on Form 10-K for the fiscal year ended December 31, 1998
is also enclosed. I hope you will read it carefully. Enclosed with this letter
is a Proxy authorizing officers of the Company to vote your shares for you if
you do not attend the Annual Meeting. Whether or not you are able to attend the
Annual Meeting, I urge you to complete your Proxy and return it in the enclosed
addressed, postage-paid envelope, as a quorum of the shareholders must be
present at the Annual Meeting, either in person or by Proxy.
I would appreciate your immediate attention to the mailing of this Proxy.
Yours truly,
[insert signature]
Andrew A. Wiederhorn
Chairman and Chief Executive Officer
<PAGE>
[Insert Logo]
1776 SW Madison Street
Portland, OR 97205
NOTICE OF ANNUAL MEETING
The 1999 Annual Meeting of Shareholders of Wilshire Real Estate Investment
Trust Inc., a Maryland corporation, will be held on Monday, August [9], 1999 at
10:00 a.m. Pacific Time at the Multnomah Athletic Club, 1849 S.W. Salmon,
Portland, Oregon 97205 for the following purposes:
1. To elect five directors to the Board of Directors;
2. To ratify the selection of Arthur Andersen LLP as independent accountants
of the Company for the fiscal year ending December 31, 1999;
3. To amend the Company's Amended and Restated Articles of Incorporation (the
"Charter") in order to enable the Company to elect not to be taxed as a
real estate investment trust under U.S. tax law;
4. To amend the Company's Charter to change the name of the Company to
"Wilshire Real Estate Investment Inc.", provided that Proposal 3 has been
approved by the shareholders; and
5. To transact such other business as may properly come before the Annual
Meeting and any and all adjournments thereof.
The Board of Directors has fixed the close of business on July 14, 1999 as
the record date for the determination of shareholders entitled to notice of and
to vote at the Annual Meeting and any and all adjournments.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING
REGARDLESS OF THE SIZE OF YOUR HOLDINGS, ESPECIALLY GIVEN THE IMPORTANCE OF
PROPOSAL 3. Whether or not you expect to attend the Annual Meeting, please
complete, date and sign the enclosed proxy and return it in the envelope
provided for that purpose, which does not require postage if mailed in the
United States. The proxy is revocable at any time prior to its use.
By Order of the Board of Directors,
[INSERT SIGNATURE]
Lawrence A. Mendelsohn
President
July ___, 1999
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WILSHIRE REAL ESTATE INVESTMENT TRUST INC.
1776 SW MADISON STREET
PORTLAND, OR 97205
ANNUAL MEETING OF SHAREHOLDERS
August [5], 1999
-------------------
PROXY STATEMENT
-------------------
ANNUAL MEETING AND PROXY SOLICITATION INFORMATION
The accompanying proxy is solicited by the Board of Directors of Wilshire
Real Estate Investment Trust Inc., a Maryland corporation (the "Company" or
"WREIT"), for use at the 1999 Annual Meeting of Shareholders to be held at the
Multnomah Athletic Club, 1849 S.W. Salmon, Portland, Oregon 97205, on Monday,
August [9], 1999, at 10:00 a.m. Pacific Time, and at any and all adjournments
thereof (the "Annual Meeting"). The proxy may be revoked at any time before it
is voted. If no contrary instruction is received, signed proxies returned by
shareholders will be voted in accordance with the Board of Directors'
recommendations.
This Proxy Statement and accompanying proxy were first sent to shareholders
on or about July __, 1999.
Only shareholders of record at the close of business on July 14, 1999 are
entitled to vote at the Annual Meeting. Each outstanding share of Common Stock
is entitled to one vote. The holders of a majority of the votes entitled to be
cast whether present in person or by proxy shall constitute a quorum for
purposes of the Annual Meeting. The Company's executive officers and directors
and their affiliates, as a group, will be entitled to vote at the Annual Meeting
1,874,467 shares (approximately 16.3%) of the outstanding Common Stock.
The Company will pay the cost of soliciting proxies for the Annual Meeting.
Proxies may be solicited by regular employees of the Company in person, or by
mail, courier, telephone or facsimile. Arrangements also may be made with
brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation material to the beneficial owners of stock held of
record by such persons. The Company may reimburse such brokerage houses,
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred by them in connection therewith. The Company has retained D.F. King &
Co., Inc. ("D.F. King") as a solicitation agent to aid in the solicitation of
proxies for the Annual Meeting. The fee of such firm is $7,000 plus
reimbursement of out-of-pocket costs and expenses. The Company's contract with
D.F. King requires D.F. King to solicit proxies from brokers, banks and other
institutional holders in compliance with all legal requirements relating to such
solicitation. The Company has agreed to indemnify D.F. King against any losses
or liabilities arising out of D.F. King's fulfillment of the contract, except
for such losses or liabilities arising out of D.F. King's own negligence or
willful misconduct.
<PAGE>
At the Annual Meeting, shareholders will vote on the election of directors
(Proposal 1) and the ratification of the selection of independent accountants
(Proposal 2). In addition, shareholders will consider and vote upon a proposal
to amend the Company's Amended and Restated Articles of the "Charter") to enable
the Company to elect not to be taxed as a real estate investment trust, or
"REIT," under the Internal Revenue Code of 1986, as amended (the "Code")
(Proposal 3), and a proposal to amend the Charter to change the name of the
Company to "Wilshire Real Estate Investment Inc.", in the event Proposal 3 is
approved by the shareholders (Proposal 4).
Shareholders representing a majority of the shares of stock outstanding and
entitled to vote must be present or represented by proxy in order to constitute
a quorum to conduct business at the Annual Meeting. Under the Maryland General
Corporation Law ("MGCL"), any corporate action, other than the election of
directors, must be authorized by a majority of the votes entitled to be cast on
the matter, except as otherwise required by the MGCL or the Company's articles
of incorporation with respect to a specific proposal. With regard to the
election of directors, if a quorum is present, then the nominees receiving a
plurality of the votes cast at the Annual Meeting will be elected directors.
Votes may be cast in favor of or withheld from each nominee; votes that are
withheld will be excluded entirely from the vote and will have no effect.
However, the provision of the Company's Charter relating to the Company's
election to be taxed as a REIT cannot be amended without the affirmative vote of
at least two-thirds of the votes entitled to be cast on the matter (i.e., all
outstanding shares).
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the independent tabulator appointed for the Annual Meeting. For the purposes of
determining whether a proposal has received the requisite vote in instances
where brokers are prohibited from exercising or choose not to exercise
discretionary authority for beneficial owners who have not provided voting
instructions (so-called "broker non-votes"), those shares will not be included
in the vote totals and, therefore, will have no effect on the vote. Pursuant to
the NASD Rules of Fair Practice, brokers who hold shares in street name have the
authority, in limited circumstances, to vote on certain items when they have not
received instructions from beneficial owners. A broker will only have such
authority if (i) the broker holds the shares as executor, administrator,
guardian, trustee, or similar representative or fiduciary capacity with
authority to vote, or (ii) the broker is acting pursuant to the rules of any
national securities exchange to which the broker is also a member.
Abstentions may be specified on all proposals except the elections of
directors and will be counted as present for the purposes of the proposal for
which the abstention is noted. For purposes of determining whether a proposal
has received a majority of the votes cast, where a shareholder abstains from
voting, those shares will be counted against the proposal.
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VOTING SECURITIES AND PRINCIPAL HOLDERS
As of July 14, 1999, the Company had outstanding [11,500,000] shares of
common stock, par value $0.0001 per share (the "Common Stock"), which are the
only outstanding voting securities of the Company.
The following table sets forth, as of June 1, 1999, the beneficial
ownership of common stock with respect to (i) each person who was known by the
Company to own beneficially more than 5% of the outstanding shares of the ach
director and nominee for director, (iii) each executive officer named below, and
(iv) directors and executive officers as a group.
Amount and
Nature of
Name and Address of Beneficial Percent of
Beneficial Owner(1) Ownership(2) Class
Andrew A. Wiederhorn............................. 714,633 (3) 6.2%
Lawrence A. Mendelsohn........................... 218,338 (4) 1.9
Chris Tassos..................................... 15,860 (5) *
Bo G. Aberg...................................... 2,016 *
David C. Egelhoff................................ 16,300 (6) *
Jordan D. Schnitzer.............................. 757,320 (7) 6.6
Patrick Terrell.................................. 150,000 (8) 1.3
Thomson Horstmann & Bryant, Inc.................. 1,110,500 (9) 9.7
Value Partners, Ltd.............................. 1,000,000 (10) 8.7
Wellington Management Company, LLP............... 964,000 (11) 8.4
Wilshire Financial Services Group, Inc........... 990,000 8.6
Putnam Investments, Inc.......................... 845,000 (12) 7.3
DePrince, Race & Zollo, Inc...................... 837,173 (13) 7.3
Kramer Spellman, L.P............................. 708,500 (14) 6.2
Jayhawk Capital Management, L.L.C................ 666,600 (15) 5.8
Howard Amster ................................... 567,200 (16) 4.9
All executive officers and directors
as a group (7 persons)........................... 1,874,467 16.3%
- - -----------
(1) The address for each stockholder, other than Thomson Horstman & Bryant,
Inc., Value Partners, Ltd., Wellington Management Company, LLP, Putnam
Investments, Inc., DePrince, Race & Zollo, Inc., Kramer Spellman, L.P.
and Howard Amster, is c/o Wilshire Real Estate Investment Trust Inc.,
1776 SW Madison Street, Portland, OR 97205. The address for Thomson
Horstmann & Bryant, Inc. is Park 80 West, Plaza One, Saddle Brook, NJ,
07663. The address for Value Partners, Ltd. Is 4514 Cole Avenue, Suite
808, Dallas, TX 75205. The address for Wellington Management Company, LLP
is 75 State Street, Boston, MA 02109. The address for Putnam Investments,
Inc. is One Post Office Square, Boston, MA 02109. The address for
DePrince, Race & Zollo, Inc. is 201 S. Orange Avenue, Suite 850, Orlando,
FL 32801. The address for Jayhawk Capital Management, L.L.C. is 8201
Mission Road, Suite 110, Prairie Village, KS 66208. The address for
Kramer, Spellman, L.P. is 2050 Center Avenue, Suite 300, Fort Lee, NJ
07024. The address for Howard Amster is 23811 Chagrin Blvd., #200,
Beachwood, OH 44122.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Shares of Common Stock subject to
options or warrants exercisable within 60 days of May 31, 1999 are deemed
outstanding for computing the percentage beneficially owned by the person
or group holding such options or warrants, but are not deemed outstanding
for computing the percentage of any other person. Except as noted, each
shareholder has sole voting power and sole investment power with respect
to all shares beneficial owned by such shareholder.
(3) Includes 601,001 shares of Common Stock held by Mr. Wiederhorn's spouse,
13,632 shares of Common Stock held by Mr. Wiederhorn's minor children and
100,000 shares of Common Stock held by a limited partnership controlled
by Mr. Wiederhorn's spouse.
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<PAGE>
(4) Includes 14,736 shares of Common Stock held by Mr. Mendelsohn's spouse,
143,602 shares of Common Stock held by two limited liability companies
controlled by Mr. Mendelsohn's spouse and 60,000 shares of Common Stock
held by a limited partnership controlled by Mr. Mendelsohn.
(5) Includes 12,500 shares of Common Stock issuable upon the exercise of
outstanding options. The exercise price of these options is substantially
in excess of the market price of the Common Stock as of June 1, 1999.
(6) Includes 5,500 shares of Common Stock issuable upon the exercise of
outstanding options. The exercise price of these options is substantially
in excess of the market price of the Common Stock as of June 1, 1999.
(7) Includes 5,500 shares of Common Stock issuable upon the exercise of
outstanding options. The exercise price of these options is substantially
in excess of the market price of the Common Stock as of June 1, 1999.
Also includes 50,000 shares of Common Stock held by an employee benefit
plan of which Mr. Schnitzer, as sole trustee, has sole power to direct
the disposition of the shares, and of which plan Mr. Schnitzer is one of
the beneficiaries. Mr. Schnitzer disclaims beneficial ownership of the
shares held by such plan except to the extent of his pecuniary interest
therein. Also includes 566,780 shares of Common stock held by charitable
foundations of which Mr. Schnitzer is a director, with the sole power to
direct the disposition of such shares. Mr. Schnitzer disclaims beneficial
ownership of the shares held by such foundations.
(8) Includes 100,000 shares held by Mr. Terrell's spouse.
(9) Based upon information obtained from a Schedule 13G filed with the
Securities and Exchange Commission on or about January 25, 1999.
(10) Based upon information obtained from a Schedule 13G filed with the
Securities and Exchange Commission on or about March 1, 1999. The
Schedule 13G was filed on behalf of Value Partners, Ltd. ("Value
Partners"), a Texas limited partnership, Ewing & Partners, a Texas
general partnership and the general partner of Value Partners, and
Timothy G. Ewing, the managing general partner of Ewing & Partners.
(11) Based upon information obtained from a Schedule 13G filed with the
Securities and Exchange Commission on or about December 31, 1998.
(12) Based upon information obtained from a Schedule 13G filed with the
Securities and Exchange Commission on or about January 26, 1999. The
Schedule 13G was filed on behalf of Putnam Investments, Inc. ("PI"), a
Massachusetts corporation and wholly-owned subsidiary of Marsh & McLennan
Companies, Inc. ("M&MC"), a Delaware corporation, Putnam Investment
Management, Inc., ("PIM"), a Massachusetts corporation, and The Putnam
Advisory Company, Inc. ("PAC"), a Massachusetts corporation, and Putnam
Capital Appreciation Fund (the "Fund"), a Massachusetts business trust,
both of which are wholly-owned by PI. Both PIM and PAC have dispository
power over the shares of Common Stock as investment managers, but each of
the Fund's trustees have voting power over the shares held by the Fund,
and PIM has shared voting power over the shares held by its institutional
clients. M&MC and PI disclaim beneficial ownership of the shares of
Common Stock..
(13) Based upon information obtained from a Schedule 13G filed with the
Securities and Exchange Commission on or about February 8, 1999.
(14) Based upon information obtained from a Schedule 13G filed with the
Securities and Exchange Commission on or about February 10, 1999. The
Schedule 13G was filed on behalf of Kramer Spellman, L.P., a Delaware
limited partnership ("KS") and Orin S. Kramer, in his capacity as general
partner of KS and an individual holder of the Common Stock. KS serves as
a general partner to investment partnerships and as a discretionary
investment manager to managed accounts.
(15) Based upon information obtained from Schedule 13G filed with the
Securities and Exchange Commission on or about May 4, 1999. The Schedule
13G was filed on behalf of Jayhawk Investments, L.P., a Delaware
partnership, and Jayhawk Institutional Partners, L.P.
(16) Based upon information obtained from a Schedule 13G filed with the
Securities and Exchange Commission on behalf of Howard Amster, Amster
Trading Company and Howard Amster and Tamra F. Gould Charitable Remainder
Unitrust on or about [April __], 1999. Includes 333,700 shares held by
Howard Amster, 56,500 shares held by Amster Trading Company and 177,000
shares held by Howard Amster and Tamra F. Gould Charitable Remainder
Unitrust.
* Less than one percent.
4
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires a company's directors and executive officers, and
beneficial owners of more than 10% of the common stock of such company to file
with the Securities and Exchange Commission initial reports of ownership and
periodic reports of changes in ownership of the company's securities. Due to a
processing error, a purchase of 10,000 shares of Common Stock made in August
1998 by Lawrence A. Mendelsohn, a director and officer of the Company, was
inadvertently not reported. Report of such purchase was made as soon as the
omission was discovered.
MANAGEMENT OF THE COMPANY
The Manager
The business and investment affairs of the Company are managed by Wilshire
Realty Services Company ("WRSC"), a Delaware corporation formed for this sole
purpose and wholly-owned by Wilshire Financial Services Group Inc., an affiliate
of the Company ("WFSG"), pursuant to a management agreement, dated as of April
6, 1998 (the "Management Agreement"). WFSG is primarily engaged in the
acquisition, servicing and resolution of pools of performing, sub-performing and
non-performing residential and commercial mortgage loans, as well as foreclosed
real estate in the United States and foreign countries. WFSG also acquires
mortgage-backed securities, originates mortgage loans and services loans for
third parties. Through its subsidiaries, WFSG provides WRSC, as the Manager,
with substantially all of the managerial and administrative services required in
connection with the operations of the Company.
Pursuant to the Management Agreement, WRSC, subject to the supervision of
WREIT's Board of Directors, consults in the formulation of operating strategies
for the Company, arranges for the acquisition of assets by the Company, arranges
for various types of financing for the Company, including repurchase agreements,
secured term loans, warehouse lines of credit, mortgage loans and the issuance
of mortgage-backed securities, monitors the performance of the Company's assets,
provides certain administrative and managerial services and is generally
responsible for the day-to-day operation of the Company.
Compensation of the Manager
Pursuant to the Management Agreement, WRSC receives for its services a base
management fee of 1% per annum of the first $1.0 billion on the average invested
assets, 0.75% of the next $500 million on the average invested assets and 0.50%
on the average invested assets above $1.5 billion, payable quarterly.
The term "average invested assets" for any period is defined in the
Management Agreement as the average of the aggregate book value of the Company's
assets, including the assets of all the Company's subsidiaries, before
depreciation or reserves for bad debts or other similar noncash reserves,
computed by taking the daily average of such values during such period.
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In addition, WRSC is also eligible to receive an annual incentive fee
generally equal to 25% of the dollar amount by which the Company's funds from
operations exceeds the return on 10 year U.S. Treasury securities, plus 5% per
annum. Finally, WRSC is entitled to be reimbursed for certain reasonable
out-of-pocket expenses. The base management fees paid to WRSC in 1998 aggregated
approximately $3.2 million. No incentive fee was paid in 1998.
Board of Directors
The business of the Company is managed by WRSC under the Management
Agreement, and supervised by the Board of Directors. The Board has
responsibility for establishing broad corporate policies and for the overall
performance of the Company. Two of the five directors of the Company, Andrew A.
Wiederhorn and Lawrence A. Mendelsohn, in addition to their positions as both
officers and directors of the Company, are officers and directors of WFSG and
WRSC. Due to conflicts of interest arising from the foregoing, as well as other
interrelationships set forth more fully below, the Company's Charter provides
that a majority of the Board of Directors must be unaffiliated with WFSG (the
"Independent Directors"). See "EXECUTIVE COMPENSATION--Certain Relationships and
Related Transactions." Andrew A. Wiederhorn and Lawrence A. Mendelsohn, as
officers and directors of WRSC, are involved in the operating details of the
Company on a day-to-day basis. The three Independent Directors are kept advised
of the Company's business by the directors and officers of the Manager and
officers of the Company.
A majority of the Independent Directors must approve in advance any
purchase of assets from WFSG or its affiliates or any other significant
transaction not contemplated under the Management Agreement or the servicing
agreements with certain affiliates of WFSG for the loan servicing of the
Company's assets (the "Servicing Agreements"). Although the Independent
Directors review the guidelines quarterly and monitor compliance with those
guidelines, in conducting this review, the Independent Directors rely primarily
on information provided to them by WRSC. WRSC obtains price evaluations
concerning the price for mortgage-backed securities and appraisals for real
estate and loans purchased from WRSC or its affiliates, but the Independent
Directors are likely to rely substantially on information and analysis provided
by WRSC to evaluate the Company's guidelines, compliance therewith and other
matters relating to its investments.
If the Independent Directors determine in their periodic review of
transactions that a particular transaction does not comply with the guidelines,
then the Independent Directors consider what corrective action, if any, can be
taken. If the transaction is one with WRSC or an affiliate of WRSC, then WRSC or
such affiliate is required to repurchase the asset at the purchase price to the
Company.
Moreover, if transactions are consummated that materially and adversely
deviate from the guidelines (which determination shall be made by the
Independent Directors), then the Independent Directors have the option, under
the terms of the Management Agreement, to terminate WRSC without the Company
being required to pay a termination fee. See "MANAGEMENT OF THE COMPANY--The
Manager."
All directors are elected at each annual meeting of WREIT's shareholders
for a term of one year, and hold office until their successors are elected and
qualified. All officers serve at the discretion of the Board of Directors. The
Company may have salaried employees and, although it currently does not have
employees, it is currently evaluating this option.
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Compensation of Directors
In 1998, each Independent Director was paid an annual director's fee equal
to $12,000, with no additional fee paid for the first four meetings of the Board
of Directors. Each Independent Director received a fee of $1,000 for each
additional meeting of the Board of Directors or committee thereof attended in
person by such non-employee director which is not a regularly scheduled
quarterly meeting. For meetings attended telephonically, each of the Independent
Directors received a fee of $100 per hour. All Independent Directors were
reimbursed for their costs and expenses in attending all meetings of the Board
of Directors. Each of the Independent Directors also received, on April 6, 1998,
the day of the Company's initial public offering, immediately vesting options
under the Company's non-qualified stock option plan (the "Option Plan") to
purchase 5,000 shares of Common Stock at an exercise price equal to $16.00,
which was the public offering price. In the future, newly elected Independent
Directors and other directors who are neither employees of the Company nor
Independent Directors ("Non-Employee Directors") will receive options to
purchase 5,000 shares of Common Stock at the closing price on the day that they
join the Board. In addition, on the last day of each calendar quarter, each
Independent Director and Non-Employee Director receives a non-statutory stock
option for 1,500 shares of Common Stock at an exercise price equal to 110% of
the fair market value of the Common Stock on that day. Such grants vest
one-third on each of the first three anniversaries of the grant date and expire
on the tenth anniversary of the grant date.
Compensation of the Independent Directors and the Non-Employee Directors
was determined by the shareholders of the Company prior to the initial public
offering on April 6, 1998. Affiliated Directors do not receive any retainer or
additional fees for serving as directors, nor do they receive any stock options
in respect of their service as directors.
Meetings of the Board of Directors
In calendar year 1998, the Board of Directors held 21 meetings. Each of the
current directors of the Company, other than Patrick Terrell, who was appointed
to the Board on December 28, 1998 to replace Stephen Kapiloff and did not attend
any meetings in calendar year 1998, attended at least 75% of the aggregate
meetings held by the Board of Directors and by the committee on which the
director served.
Committees of the Board of Directors
The only standing committee of the Board of Directors at present is the
Audit Committee. The entire Board of Directors functions in the capacity of the
Company's Compensation Committee. In such capacity, the Board establishes and
administers compensation policies, determines awards of restricted stock and
grants of stock options under the Company's Option Plan, monitors compensation
payable to the Manager under the Management Agreement and approves all other
compensation related matters of the Company as it determines necessary and
appropriate. Because the Company was externally managed in 1998, the Company did
not have any employees. In addition, the Affiliated Directors and the officers
of the Company are employees of WFSG and were not separately compensated by the
Company for their services.
The Audit Committee makes recommendations concerning the engagement of
independent public accountants, reviews with the independent public accountants
the plans and results of the audit engagement, approves professional services
provided by the independent public accountants, reviews the independence of the
independent public accountants, considers the range of audit and non-audit fees
and reviews the
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adequacy of the Company's internal accounting controls. Its 1998 members were
David C. Egelhoff and Steven A. Kapiloff. The Audit Committee met twice in
1998.
The Company may, from time to time, form other committees as circumstances
warrant. Such committees will have authority and responsibility as delegated by
the Board of Directors.
Compensation Committee Interlocks and Insider Participation
In the absence of a standing Compensation Committee, determinations
regarding compensation are made by the full Board of Directors. Presently, the
Company has no employees and the executive officers of the Company do not
receive any compensation from the Company for their services, although there is
nothing preventing the Company from hiring employees or compensating its
employees or officers. To the extent such officers are also officers of WFSG,
they are compensated by WFSG for their services. WFSG is the parent company of
WRSC, which receives certain fees from the Company for management services it
provides the Company under the Management Agreement. See "MANAGEMENT OF THE
COMPANY --The Manager" and "--Compensation of the Manager." However, the primary
purpose of such transactions is not to furnish compensation to the executive
officers of the Company.
Directors and Executive Officers of the Company
The following provides information about the directors and executive
officers of the Company as of June 1, 1999, including data on the business
backgrounds, and the names of public companies and other selected entities for
which they also served as directors and officers during the fiscal year ended
December 31, 1998.
Affiliated Directors
Andrew A. Wiederhorn, age 33, has been the Chairman of the Board of
Directors and Chief Executive Officer of the Company since its formation. Mr.
Wiederhorn founded the Company in 1997 and continues to serve as the Chief
Executive Officer, Treasurer and Secretary. Mr. Wiederhorn is also the Chairman
of the Board of Directors, Chief Executive Officer, Secretary, Treasurer and a
director for both WRSC and WFSG. In 1987 Mr. Wiederhorn founded Wilshire Credit
Corporation ("WCC") and served as its Chief Executive Officer until June 8,
1999, when its loan servicing operations were acquired by WCC Inc., a newly
formed subsidiary of WFSG. Mr. Wiederhorn received his B.S. degree in Business
Administration from the University of Southern California.
Lawrence A. Mendelsohn, age 38, has been a director and the President of
the Company since its formation. Mr. Mendelsohn is also the President of WFSG.
From January 1992 until February 1993 Mr. Mendelsohn was Vice President,
Principal and Head of Capital Markets for Emerging Markets at Bankers Trust New
York Corporation/BT Securities Corporation. From August 1987 until January 1992,
Mr. Mendelsohn was the Vice President, Senior Options Principal and Head of
Proprietary Trading for Equities, Equity Options and Distressed Debt at J.P.
Morgan and Co./J.P. Morgan Securities. Mr. Mendelsohn received an A.B. degree in
Economics from the University of Chicago, an M.A. degree in International
Politics from the University of Texas, an M.S. degree in Business Research from
the University of Southern California and a Ph.D./ABD in Finance from the
University of Southern California.
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Independent Directors
David C. Egelhoff, age 50, has been a director of the Company since its
formation. Mr. Egelhoff has been President of Macadam Forbes, Inc., a commercial
real estate brokerage company headquartered in Portland, Oregon since 1981. Mr.
Egelhoff is a licensed real estate broker who has extensive brokerage
experience, including transactions with REITs. He is a member of the Oregon and
National Board of Realtors and the Builders and Owners Management Association.
Mr. Egelhoff received a degree in Finance and Marketing from the University of
Wisconsin-Madison in 1971.
Jordan D. Schnitzer, age 48, has been a director since March 1998. Mr.
Schnitzer has been President of Jordan Schnitzer Properties, an owner and
developer of commercial and residential properties in Oregon, Washington and
California, since 1976. Mr. Schnitzer is also President of Harsch Investment
Properties, LLC, which owns and operates a portfolio of 25 properties in seven
western U.S. states. Mr. Schnitzer received his undergraduate degree in
Literature from the University of Oregon in 1973 and his J.D. from the
Northwestern School of Law of Lewis and Clark College in 1976.
Patrick Terrell, age 44, became a director of the Company in December 1998.
Mr. Terrell founded Leading Technology Company in 1986 and worked as the Chief
Executive Officer until he sold the company in 1992. Mr. Terrell was also
founder and Chief Executive Officer of Byte Shops Computer Stores, which he
founded in 1976 and sold to Pacific Telesis in 1985. Mr. Terrell currently
serves on the boards of B. S. Medical, United Soil Recycling, Microware, Inc.
and Lakeside Associates. Mr. Terrell attended Oregon State University prior to
forming Byte Shops computer stores in 1976. Mr. Terrell was appointed to the
Board in December 1998 to replace Steven Kapiloff, who resigned in October 1998
due to pressing work and family commitments, which left him insufficient time to
continue as a director of the Company.
Officers who are not Directors
Chris Tassos, age 41, is Executive Vice President and Chief Financial
Officer of the Company. Mr. Tassos also serves as an Executive Vice President
and Chief Financial Officer of WFSG. Mr. Tassos was Executive Vice President of
WCC until the acquisition of its loan servicing operations by WFSG on June 8,
1999 and from August 1995 until June 1997 was Senior Vice President of WCC.
From March 1992 to February 1995, he was the Chief Financial Officer and/or
Senior Vice President of Finance of Long Beach Mortgage Company (formerly Long
Beach Bank). Mr. Tassos received a B.A. degree from California State University,
Fullerton.
Bo G. Aberg, age 50, is Senior Vice President in charge of European
operations for the Company. Mr. Aberg is also Senior Vice President of WFSG.
From November 1994 to September 1996, Mr. Aberg was Chief Executive Officer of
Securum Holding B.V., a Kingdom of Sweden owned work-out company in Europe. From
September 1992 to November 1994, Mr. Aberg was Chief Executive Officer of
Securum Real Estate Group, Malmo, Sweden. Mr. Aberg is a citizen of Sweden.
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EXECUTIVE COMPENSATION
Compensation of Executive Officers
The executive officers of the Company do not receive any compensation from
the Company for their services. To the extent such officers are also officers of
WFSG, they are compensated by WFSG for their services. WFSG is the parent
company of WRSC, which receives certain fees from the Company for management
services it provides the Company under the Management Agreement. See "MANAGEMENT
OF THE COMPANY--Compensation Committee Interlocks and Insider Participation."
Certain Relationships and Related Transactions
The Company granted to WRSC options under the Option Plan representing the
right to acquire 1,150,000 shares of Common Stock, at an exercise price per
share of $16.00. If the options could be exercised immediately, they would
represent [10.0%] of the number of shares of Common Stock outstanding as of July
14, 1999. However, only one quarter of WRSC's shares have vested and become
exercisable. One quarter of the remaining three quarters will vest and become
exercisable on each of the next three anniversaries of the closing of the
Company's initial public offering. In addition, all of WRSC's options will vest
and become exercisable upon a change in control of the Company, as defined in
the Option Plan.
The Company, on the one hand, and WFSG and its affiliates (including WRSC),
on the other, also enter into a number of relationships other than those
governed by the Management Agreement and the Servicing Agreements. Some of these
relationships may give rise to conflicts of interest. Moreover, the two
Affiliated Directors and all of WREIT's officers are also employed by WFSG
and/or its affiliates. See "MANAGEMENT OF THE COMPANY".
The Company has in place guidelines that establish certain parameters for
its operations, including qualitative limitations on the assets that may be
acquired. These guidelines are to assist and instruct WRSC and to establish
restrictions applicable to transactions with affiliates of WFSG or with
unrelated third parties. A majority of the Independent Directors are asked to
approve in advance any purchase or sale of assets from or to WFSG or its
affiliates or any other significant transaction not contemplated under the
Management Agreement or the Servicing Agreements. The Company may also purchase
or sell assets from or to WFSG or its affiliates in the future, subject to the
approval of its Independent Directors.
The Independent Directors rely primarily on information provided to them by
WRSC. WRSC obtains price evaluations concerning the price for mortgage-backed
securities and appraisals for real estate and loans purchased from WRSC or its
affiliates, but the Independent Directors are likely to rely substantially on
information and analysis provided by WRSC to evaluate the Company's guidelines,
compliance therewith and other matters relating to the Company's investments.
Moreover, the market for unregistered or subordinate mortgage-backed securities
is illiquid, and therefore accurate prices are difficult to estimate.
If the Independent Directors determine in their periodic review of
transactions that a particular transaction does not comply with the guidelines,
then the Independent Directors consider what corrective action, if any, can be
taken. If the transaction is one with WRSC or an affiliate of WRSC, then WRSC is
required to repurchase the asset at the purchase price to the Company.
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Moreover, if transactions are consummated that materially and adversely
deviate from the guidelines (which determination shall be made by the
Independent Directors), then the Independent Directors have the option, under
the terms of the Management Agreement, to terminate WRSC without the Company
being required to pay a termination fee.
A potential conflict of interest also arose out of the Company's
relationship with WFSG. In addition to holding certain of WFSG's 13% Series B
Notes, WREIT had an outstanding receivable of approximately $17.0 million from
WFSG. WFSG incurred significant losses as a result of adverse market conditions
in 1998 and on March 3, 1999 filed a prepackaged plan of reorganization (the
"Restructuring Plan") with the U.S. Bankruptcy Court for the District of
Delaware as part of a voluntary bankruptcy filing under Chapter 11 of the U.S.
Bankruptcy Code. The Restructuring Plan was approved by the court on April 12,
1999 and on June 10, 1999, WFSG emerged from bankruptcy pursuant to the
Restructuring Plan. As part of the Plan, during the quarter ended March 31,
1999, the Company agreed to provide WFSG with debtor-in-possession financing of
up to $10.0 million (the "DIP Facility") as part of a compromise and settlement
of WFSG's $17.0 million obligation payable to the Company. The DIP facility
bears interest at a rate of 12% per annum and is secured by the stock of First
Bank of Beverly Hills, FSB, WFSG's savings bank subsidiary. The Company funded
$5.0 million of the DIP facility on March 3, 1999 but elected not to provide
WFSG with the remaining balance. Accordingly, under the agreement negotiated by
the Company's Independent Directors with WFSG and its creditors, 50%, or
approximately $8.5 million, of WFSG's obligation was treated pari passu with the
claims of WFSG's noteholders and converted, together with approximately $21.4
million (in principal plus accrued but unpaid interest) of WFSG's 13% Series B
Notes, to 2,874,791 shares of newly issued common stock of WFSG on June 10,
1999, the effective date of the Restructuring Plan. Additionally, on the
effective date of the Restructuring Plan, WREIT acquired approximately $8.5
million in principal amount of WFSG's 6% Convertible PIK Notes due 2006 (the
"New Notes") in exchange for the remaining 50% of the $17.0 million intercompany
receivable owed by WFSG to the Company. The Company may elect to convert the New
Notes into new common stock of WFSG upon receipt of a notice of redemption of
the New Notes by WFSG.
Following the completion of WFSG's Restructuring Plan, the Company held
2,874,791 shares, or approximately 14.4%, of the common stock of WFSG, and filed
a Schedule 13D with the Securities and Exchange Commission indicating such
ownership. As indicated in the Schedule 13D, the Company intends to work with a
financial advisor to evaluate whether it should dispose of its currently owned
shares of new common stock of WFSG, maintain its current holdings, or acquire
additional shares. The Company also indicated in the Schedule 13D that it does
not currently have an intention to, among other things, conduct any
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, with respect to WFSG, cause any material change in WFSG's business
or corporate struture, or change WFSG's charter or by laws or take other actions
that may impede the acquisition of control of WFSG by any person. The Company
did, however, in a letter to the independent directors of WFSG dated May 11,
1999, express concerns as a shareholder about certain aspects of WSFG's
business, including its liquidity position, and proposed that the New Notes
and the $5.0 million outstanding under the DIP Facility be converted into new
common stock of WFSG at the rate of 70% of the book value of WFSG (on a
post-reorganization basis) per share to reduce WFSG's current debt service
obligations.
In the ordinary course of its business, WREIT received cash from WCC in
connection with payments on the Company's assets that were collected by WCC as
servicer, and WREIT made payments to WCC of servicing fees and reimbursed it for
certain expenses. These payments were made at market rates pursuant to the
Servicing Agreement, which was entered into prior to the Company's initial
public offering following
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extensive negotiations with the underwriters. However, as part of the
Restructuring Plan, the loan servicing assets of WCC were acquired (and its
liabilities assumed) on June 8, 1999 by WCC Inc., a subsidiary of WFSG newly
formed for such purpose, and the Company will continue such arrangements with
such successor. During the adverse market conditions in the third and fourth
quarters of 1998, WREIT borrowed money from WCC to increase its liquidity and
for other general corporate purposes. In connection with the restructuring of
WCC's debt, WREIT paid all amounts owed by it to WCC and prepaid a portion of
future servicing fees for a release of any and all claims against the Company.
It is the position of the Company and its management that, at December 31, 1998,
such prepaid future servicing fees totaled $3.2 million. However, this figure is
disputed by the noteholders (but not the management) WFSG, which claims that the
amount of the prepayment credit is $2.3 million.
The Management Agreement and Servicing Agreements do not limit the right of
WRSC or WFSG to engage in business or render services to others that compete
with the Company, except that the Manager and WFSG have granted a right of first
refusal with respect to certain real estate investments. WFSG and its
subsidiaries do not invest in any such investments unless a majority of the
Independent Directors have decided that the Company should not invest in such
asset. In deciding whether to invest in such an asset, the Independent Directors
may consider, among other factors, whether the asset is well-suited for the
Company and whether the Company is financially able to take advantage of the
investment opportunity. However, WFSG and its subsidiaries have no obligation to
offer mortgage-backed securities to the Company if the mortgage loans
collateralizing such securities were owned by WFSG or one of its subsidiaries.
Moreover, WFSG has no obligation to reveal to the Company any business
opportunities to invest in real estate related assets other than real estate
assets subject to the right of first refusal. As a consequence, the opportunity
for the Company to invest in such assets is limited if such investment
opportunities are attractive to WFSG or one of its subsidiaries.
From time to time, mortgage lenders offer for sale large pools of mortgage
loans and real properties pursuant to a competitive bidding process. In such a
case, WFSG or its affiliates may choose an unaffiliated entity with which to
submit a joint bid for the pool, as long as WFSG or its affiliates takes title
only to assets as to which it has not given WREIT the right of first refusal.
At the closing of the Company's initial public offering, WFSG purchased
990,000 shares of Common Stock at a price equal to the public offering price,
net of any underwriting discounts or commissions. This resulted in WFSG's
ownership of approximately 8.6% of WREIT's Common Stock. WRSC also received
stock options pursuant to the Company's Stock Option Plan. WFSG is expected to
retain its WREIT Stock for at least two years after the initial public offering,
but may dispose of its shares any time thereafter in accordance with the
provisions of Rule 144 under the Securities Act of 1933, as amended.
Notwithstanding the foregoing, if the Company terminates the Management
Agreement, WRSC may require the Company to register for public resale any shares
of Common Stock acquired by WFSG pursuant to the Stock Option Plan.
The market in which the Company expects to purchase assets is characterized
by rapid evolution of products and services and, thus, there may in the future
be relationships between the Company, WFSG, and its affiliates in addition to
those described herein. WREIT may change its policies in connection with any of
the foregoing without the approval of its stockholders, including, but not
limited to, the amount in which the Company may leverage its investments.
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PERFORMANCE GRAPH
The Performance Graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act or under the Exchange Act, except to the extent
the Company specifically incorporates this information by reference, and shall
not otherwise be deemed filed under the Securities Act or the Exchange Act.
The following Performance Graph covers the period beginning April 6, 1998
when the Company's Common Stock was first traded on the NASDAQ Stock Market,
through ________. The graph compares the performance of the Company's Common
Stock to the S&P 500 and a Peer Group Index ("PGI").
[PRINTER TO INSERT PERFORMANCE GRAPH]
1998 Measurement Period(1)(2)
April 6, December 31, ------
1998 1998 1999
----------- -------------- ---------
Company........................... $ 100.00 $ $
--------- --------
PGI (3)........................... $ 100.00 $ $
--------- --------
S&P 500........................... $ 100.00 $ $
--------- --------
- - --------
(1) Assumes all distributions to shareholders are reinvested on the payment
dates.
(2) Assumes $100 invested on April 6, 1998 in the Company's Common Stock, the
S&P 500 Index and the PGI.
((3) The companies included in the PGI are Ocwen Asset Investment Corp.;
Anthracite Capital, Resource Asset Investment Trust, Impac Commercial
Holdings Inc., Imperial Credit Commercial Mortgage Investment Corp. And
LASER Mortgage Management, Inc.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
The directors of the Company serve for a term of one year, and hold office
until their successors are elected and qualified. At the Annual Meeting, five
directors are to be elected for one-year terms expiring at the annual meeting in
2000. Andrew A. Wiederhorn, Lawrence A. Mendelsohn, David C. Egelhoff, Jordan D.
Schnitzer and Patrick Terrell have been nominated by the Board of Directors for
election at the Annual Meeting. The accompanying form of proxy will be voted for
the Board of Directors' nominees, except where authority to so vote is withheld.
If a nominee is unable or unwilling to serve, the shares to be voted for
such nominee which are represented by proxies will be voted for any substitute
nominee designated by the Board of Directors. The Company has no reason to
believe that any of the nominees will be unable or unwilling to serve if
elected.
The affirmative vote of a plurality of the votes of the shares of Common
Stock entitled to vote on the election of directors is required to elect a
nominee. The Board of Directors recommends a vote IN FAVOR of the nominees for
director listed above. If not otherwise specified, proxies will be voted IN
FAVOR of the nominees.
PROPOSAL NO. 2
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
A resolution will be presented at the Annual Meeting to ratify the
appointment by the Board of Directors of the firm of Arthur Andersen LLP as
independent accountants, to examine the financial statements of the Company for
the year ending December 31, 1999, and to perform other appropriate accounting
services. Representatives of the firm will attend the Annual Meeting and will
have the opportunity to make a statement if they desire to do so. They will be
available to respond to appropriate questions.
The affirmative vote of a majority of the shares of Common Stock entitled
to vote is required to ratify the appointment of Arthur Andersen LLP. The Board
of Directors recommends a vote IN FAVOR of the ratification of its appointment
of Arthur Andersen LLP as independent accountants. If not otherwise specified,
proxies will be voted IN FAVOR of this proposal.
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PROPOSAL NO. 3
PROPOSAL TO AMEND THE COMPANY'S CHARTER TO
ENABLE THE COMPANY TO ELECT NOT TO BE TAXED AS A REIT
Introduction
WREIT is a diversified financial services company that invests primarily in
real estate related investments. The Company was incorporated on October 24,
1997. On April 6, 1998, the Company completed an initial public offering of
common stock from which the Company received net cash proceeds of approximately
$167 million.
From April 6 through September 1998, the Company deployed the proceeds of
its initial public offering and further levered acquired assets primarily
through various short-term borrowing arrangements. Total assets grew to $1.0
billion by the third quarter of 1998.
Beginning in August 1998, and more significantly during the fourth quarter
of 1998, the Company was significantly and adversely affected by various market
factors. These factors, which are discussed further below, resulted in a
dramatic reduction in market valuations for certain of our mortgage-backed
securities and other assets, as well as a reduction in the availability of
borrowings for those assets and certain of our loan assets, thereby reducing our
liquidity.
Turmoil in the Russian financial markets, following a prolonged period of
uncertainty in Asian financial markets, caused investors to reassess their risk
tolerance. This resulted in a dramatic movement of liquidity toward less risky
assets (e.g., U.S. Treasury instruments) and away from higher risk assets,
including most non-investment grade assets and commercial and other mortgage-
and asset-backed securities. This movement toward higher quality investments
dramatically reduced available liquidity to non-investment grade assets. Without
available funding sources, many investors in these assets, including several
well-known hedge funds, were forced to liquidate holdings at reduced prices.
With greater sales pressure and supply outpacing demand, prices continued to
fall as more lenders made margin calls, demanding additional collateral for
their loan positions. Many companies were rapidly depleting available cash
reserves.
On October 12, 1998, another well-known hedge fund was liquidated. This
event triggered further collateral calls, forcing additional companies to sell
assets to cover borrower collateral calls, and continuing the downward spiral in
prices. On October 15, 1998 the Federal Reserve lowered interest rates, largely
in response to this liquidity crisis.
During the fourth quarter of 1998, the Company sold a significant amount of
assets in response to the above conditions to meet collateral calls by lenders
and to increase liquidity. The downward pressure on prices and our need to sell
assets to meet these collateral calls resulted in our disposing of certain
assets for proceeds which resulted in significant losses for the year ended
December 31, 1998.
Income Tax Status
The Company originally was formed with a view to qualifying as a REIT under
Sections 856 through 860 of the Code, and its long-term intention is still to so
qualify. Generally, a REIT is not subject to federal income taxation on that
portion of its income that qualifies as REIT taxable income, to the extent that
it
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distributes at least 95% of its REIT taxable income to shareholders by the due
date of the tax return and complies with certain other requirements. However, to
qualify as a REIT, the Company must first make an affirmative election to be
taxed as a REIT. As this election is not made until the time the Company files
its federal income tax return, the Company has not yet made the election to be
taxed as a REIT and would not be subject to any penalty for deferring or failing
to make such election. Recent economic conditions and other factors have caused
the Company's management to carefully evaluate the Company's current tax status,
and the Board of Directors has concluded that the Company and its shareholders
may derive a greater benefit by deferring REIT election until a subsequent
taxable year. However, in order to preserve the Company's long-term plan to be
taxed as a REIT, the Company will maintain the restrictions on transfer
contained in the Company's Charter and give the Board of Directors the ability
to elect REIT status.
At March, 31, 1999, the Company had, for federal income tax purposes, a net
operating loss carryforward ("NOL") in excess of $70 million, which could be
used to offset taxable income recognized by the Company in the future. NOLs
benefit the Company by offsetting taxable income dollar-for-dollar by the amount
of the NOLs, thereby eliminating (subject to a relatively minor alternative
minimum tax) the federal corporate tax on such income.
In addition, the Board of Directors has been informed by its accountants
that potentially serious adverse tax consequences could result (including tax
penalties) in the event that the Company elects to be a REIT but is unable to
qualify as such under the Code. Although there are favorable factors suggesting
that the Company might be able to so qualify, a substantial number of other
factors (principally arising out of forced sales of assets in the fourth quarter
of 1998) make it difficult for management to determine whether the Company can
in fact qualify. However, should the Company at some future time fully utilize
its NOLs or no longer be permitted to use its NOLs, then if the Company were
able to satisfy the requirements for REIT qualification, it could elect REIT
status under the Code. If the Company does not at that point elect REIT status,
the full amount of the Company's net income would then be subject to federal
income taxation.
Since the Company will make its first tax election upon the filing of its
1998 tax return later this year, the Company is not currently a REIT unless, in
such filing, it so elects. Therefore, if the Company does not elect to be a
REIT, it will not be subject to the penalties for disqualification imposed upon
REITs that in previous tax years had elected REIT status. Such penalties
include, without limitation, being prohibited from again electing REIT status
until the fifth year after the election to not be taxed as a REIT.
For the reasons described above, the Board of Directors has unanimously
adopted resolutions declaring the advisability of, and submits to the
shareholders for approval, an amendment to the Charter to permit the Company to
elect not to be taxed as a REIT under Section 856 of the Code (the "Amended
Charter"). At present, Article VIII of the Charter provides that no action to
disqualify the Company as a REIT or to amend or remove the transfer restrictions
on the Company's Common Stock be taken without the approval of not less than 80%
of the Board of Directors and the holders of two-thirds of the shares of Common
Stock entitled to vote on the matter and Article IX provides that, upon the
occurrence of such approval, the transfer restrictions will terminate.
Under the provisions of the Amended Charter, the Company may elect to be
taxed as a REIT only upon the affirmative vote of 80% of the Board of Directors,
although, once such election has been made, the approval of at least 80% of the
Board of Directors would be required to revoke it. Further, the transfer
restrictions will remain in effect from the date of the Annual Meeting until the
Company determines that they are no longer necessary (if the Company is not a
REIT) or such restrictions are no longer required to maintain REIT status
generally (if the Company has subsequently elected REIT status). The text of the
Amended Charter, marked to show changes from the Company's current Charter, is
attached as Appendix A to this Proxy Statement.
The affirmative vote of two-thirds of the shares of Common Stock entitled
to vote on the matter is required to approve the Amended Charter. If the Amended
Charter is approved by the shareholders, it will become effective upon the
filing of a Certificate of Amendment in accordance with the MGCL. In light of
the potential adverse consequences of such an election and the benefits
associated with not electing
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REIT status, the Board of Directors strongly urges you to vote IN FAVOR of
this proposal. If not otherwise specified, proxies will be voted IN FAVOR of
this proposal.
PROPOSAL NO. 4
PROPOSAL TO AMEND THE COMPANY'S
CHARTER TO CHANGE THE NAME OF THE CORPORATION
The Board of Directors has unanimously adopted resolutions declaring the
advisability of, and submits to the stockholders for approval, an amendment to
the Company's Charter that, in the event the Company's shareholders approve
Proposal 3, will be filed to effect Proposal 3 and to change the name of the
Company from "Wilshire Real Estate Investment Trust Inc." to "Wilshire Real
Estate Investment Inc."
If Proposal 3 is approved, upon the effectiveness of the Amended Charter,
the Company will no longer be required to elect to be a real estate investment
trust, and the Company may elect to be taxed as a corporation. The Board of
Directors therefore believes that it is in the best interests of the Company
that its name not be misleading to the public, and that it therefore be changed
to reflect the fact that the Company is not a real estate investment trust. The
Amended Charter therefore contains a provision effecting such name change.
The affirmative vote of the holders of a majority of the Common Stock
entitled to vote on the matter is required to approve the name change. If the
name change is approved by the shareholders, it will become effective upon the
filing of the Amended Charter in accordance with the MGCL. The Board of
Directors recommends a vote IN FAVOR of the name change. If not otherwise
specified, proxies will be voted IN FAVOR of this proposal.
PROPOSALS OF SHAREHOLDERS
If a shareholder notifies the Company after [________], 2000 of an intent
to present a proposal at the Company's annual meeting in 2000, the Company will
have the right to exercise its discretionary voting authority with respect to
such proposal, if presented at the meeting, without including information
regarding such proposal in its proxy materials. Shareholders of the Corporation
wishing to include proposals in the proxy material in relation to the annual
meeting in 2000 must submit the same in writing so as to be received by the
Corporate Secretary at the principal executive offices of the Company at 1776 SW
Madison Street, Portland, OR 97205, no later than the close of business on
[________], 2000. Such proposals must also meet the other requirements of the
rules of the Securities and Exchange Commission relating to shareholders'
proposals.
By order of the Board of Directors
[INSERT SIGNATURE]
Andrew A. Wiederhorn
Chairman and Chief Executive Officer
July , 1999
---
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APPENDIX A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
WILSHIRE REAL ESTATE INVESTMENT TRUST INC.
(A Stock Corporation)
Wilshire Real Estate Investment Trust Inc., a Maryland corporation having
its principal office in the State of Maryland in Baltimore City, Maryland
(hereinafter called the "Corporation"), hereby certifies to the State Department
of Assessments and Taxation of Maryland (the "SDAT") that:
FIRST: The Charter of the Corporation is hereby amended and restated in its
entirety as follows:
I.
The name of the corporation (which is hereinafter called the "Corporation")
is:
WILSHIRE REAL ESTATE INVESTMENT INC.
II.
The purpose for which this Corporation is formed is to transact any and all
lawful act or activity for which corporations may be organized under the General
Laws of the State of Maryland now or hereafter in force.
III.
The total number of shares of stock of all classes which the Corporation
has authority to issue is 225,000,000 shares of capital stock (par value $.0001
per share), of which 200,000,000 shares are initially classified as "Common
Stock" and 25,000,000 shares are initially classified "Preferred Stock." The
aggregate par value of all authorized shares of stock having par value is
$22,500.
A-1
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The Board of Directors may classify and reclassify any unissued shares of
capital stock by setting or changing in any one or more respects the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, or terms or conditions of
redemption of such shares of capital stock.
No holder of any stock or any other securities of the Corporation, whether
now or hereafter authorized, shall have any preemptive right to subscribe for or
purchase any stock or any other securities of the Corporation, including,
without limitation: (i) any shares of any class of the Corporation; (ii) any
warrants, rights, or options to purchase any such shares; or (iii) any
securities or obligations convertible into any such shares or into warrants,
rights, or options to purchase any such shares.
The Board of Directors is hereby empowered to authorize the issuance from
time to time of shares of its stock of any class, whether now or hereafter
authorized, or securities convertible into shares of its stock of any class or
classes, whether now or hereafter authorized, for such consideration as may be
deemed advisable by the Board of Directors and without any action by the
stockholders. Also, the Preferred Stock may be issued from time to time by the
Board of Directors of the Corporation, in such series and with such preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or other provisions as may be fixed by the Board of
Directors without any action by the stockholders.
IV.
The present address of the principal office of the Corporation in this
State is 11 East Chase Street, Suite 9E, Baltimore, Maryland 21202.
V.
The name and address of the resident agent of the Corporation in this State
are CSC-Lawyers Incorporating Service Company, 11 East Chase Street, Suite 9E,
Baltimore, Maryland 21202. Said resident agent is a Maryland corporation.
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VI.
A. The number of directors of the Corporation shall be five (5), which
number may be increased or decreased pursuant to the Bylaws of the Corporation;
provided that in no case shall the Board of Directors consist of less than three
(3) or more than nine (9) members unless otherwise determined from time to time
by resolution adopted by the affirmative vote of at least eighty percent (80%)
of the members of the Board of Directors; provided further that in any case the
number of directors of the Corporation shall never be less than the minimum
number permitted by the General Laws of the State of Maryland now or hereafter
in force. Any director, or the entire Board of Directors, may be removed from
office at any time, but only for cause and then only by the affirmative vote of
not less than two-thirds (2/3) of all the votes entitled to be cast by the
outstanding shares of capital stock of the Corporation generally in the election
of directors which are cast on the matter at any meeting of the stockholders
called for that purpose, voting together for this purpose as a single class. A
director need not be a stockholder. At each annual meeting of the stockholders,
the stockholders shall elect directors to serve a one (1) year term and until
successors are elected and qualify.
B. The following Persons are the current directors of the Corporation, to
serve until their successors are elected and qualified: Andrew Wiederhorn,
Lawrence Mendelsohn, David Egelhoff, Jordan Schnitzer and Patrick Terrell.
C. Notwithstanding anything herein to the contrary, at all times (except
during a period not to exceed sixty (60) days following the death, resignation,
incapacity, or removal from office of a director prior to expiration of the
director's term of office), a majority of the Board of Directors shall be
"Independent Directors." "Independent Director" shall mean a director who,
within the last two years, has not (i) been employed by WFSG or any of its
Affiliates, (ii) been an officer or director of WFSG or any of its Affiliates,
(iii) or whose business or employer within the last two years has not performed
services for WFSG or any of its Affiliates that annually exceeded the lesser of
(a) the dollar amount provided in Item 404(a) of Regulation S-K or (b) 10% of
the gross revenue of the entity that provided such services, or (iv) had any
material business or professional relationship with WFSG or any of its
Affiliates. "WFSG" shall mean Wilshire Financial Services Group Inc., a Delaware
corporation. "Affiliate" shall mean (i) any person directly or indirectly
owning, controlling, or holding, with power to vote ten percent or more of the
outstanding voting securities of such other person, (ii) any person ten percent
or more of whose outstanding voting securities are directly or indirectly owned,
controlled, or held, with power to vote, by such other person, (iii) any person
directly or indirectly controlling, controlled by, or under common control with
such other person, (iv) any executive officer, director, trustee or general
partner of such other person, and (v) any legal entity for which such person
acts as an executive officer, director, trustee or general partner. The term
"person" means and includes any natural person, corporation, partnership,
association, limited liability company or any other legal entity. An indirect
relationship shall include circumstances in which a person's spouse, children,
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parents, siblings or mothers-, fathers-, sisters- or brothers-in-law is or has
been associated with a person.
D. To the extent permitted by applicable law, and subject to such
approval of the Independent Directors and such other conditions, if any, as may
be required by any applicable law or other applicable rule or regulation, the
Board of Directors may engage a manager to advise the Board of Directors and be
responsible for directing the day-to-day affairs of the Corporation (a
"Manager") pursuant to a written agreement (a "Management Agreement"). The
approval of any Management Agreement and the renewal or termination thereof
shall require the affirmative vote of a majority of the Independent Directors.
E. A majority of the Independent Directors shall approve general
guidelines ("Guidelines") for the Corporation's investments, borrowings and
operations, and the Independent Directors shall conduct a quarterly review of
all transactions engaged in by the Corporation. The Independent Directors shall
approve any transactions with WFSG or any Affiliate of WFSG, in advance, to
insure compliance with the Guidelines.
F. Notwithstanding any other provisions of the Charter or the Bylaws of
the Corporation (and notwithstanding that some lesser percentage may be
specified by law, the Charter or the Bylaws of the Corporation), the provisions
of this Article VI shall not be amended, altered, changed, or repealed, and no
provision inconsistent with this Article VI shall be adopted, without the
affirmative vote of at least eighty percent (80%) of the members of the Board of
Directors and by the affirmative vote of not less than two-thirds (2/3) of all
the votes entitled to be cast by the outstanding shares of capital stock of the
Corporation generally in the election of directors which are cast on the matter
at any meeting of the stockholders called for that purpose, voting together for
this purpose as a single class.
VII.
A. The Corporation shall indemnify (A) its directors and officers,
whether serving the Corporation or, at its request, any other entity, to the
full extent required or permitted by the General Laws of the State of Maryland
now or hereafter in force, including the advance of expenses under the
procedures and to the full extent permitted by law and (B) other employees and
agents to such extent as shall be authorized by the Board of Directors of the
Corporation or the Corporation's Bylaws and be permitted by law. The foregoing
rights of indemnification shall not be exclusive of any other rights to which
those seeking indemnification may be entitled. The Board of Directors may take
such action as is necessary to carry out these indemnification provisions and is
expressly empowered to adopt, approve, and amend from time to time such bylaws,
resolutions, or contracts, implementing such provisions or such further
indemnification arrangements as may be permitted by law. No amendment of the
Charter of the Corporation or repeal of any of its provisions shall limit or
eliminate the right to indemnification provided hereunder with respect to acts
or omissions occurring prior to such amendment or repeal.
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B. To the fullest extent permitted by Maryland statutory or decisional
law, as amended or interpreted, no director or officer of this Corporation shall
be personally liable to the Corporation or its stockholders for money damages.
No amendment of the Charter of the Corporation or repeal of any of its
provisions shall limit or eliminate the limitation on liability provided to
directors and officers hereunder with respect to any act or omission occurring
prior to such amendment or repeal.
VIII.
The Corporation shall not, without the affirmative vote of at least eighty
percent (80%) of the members of the Board of Directors, seek to elect to be
taxed as a real estate investment trust ("REIT") under Section 856 under the
Internal Revenue Code of 1986, as amended from time to time (the "Code").
However, in the event the Board of Directors should so vote, (i) it shall be the
duty of the Board of Directors to ensure that the Corporation satisfies the
requirements for qualification as a REIT under the Code, including, but not
limited to, the ownership of its outstanding stock, the nature of its assets,
the sources of its income, and the amount and timing of its distributions to its
stockholders, and (ii) the Board of Directors shall take no action thereafter to
disqualify the Corporation as a REIT or to otherwise revoke the Corporation's
election to be taxed as a REIT without the affirmative vote of at least eighty
percent (80%) of the members of the Board of Directors.
IX.
A. Restrictions on Transfer.
1. Definitions. The following terms shall have the following
meanings:
"Beneficial Ownership" shall mean ownership of shares of Equity Stock
by a Person who would be treated as an owner of such shares of Equity Stock
either directly or indirectly through the application of Section 544 of the
Code, as modified by Section 856(h)(1)(B) of the Code. The terms "Beneficial
Owner," "Beneficially Owns," and "Beneficially Owned" shall have correlative
meanings.
"Beneficiary" shall mean, with respect to any Trust, one or more
organizations described in each of Section 170(b)(1)(A) (other than clauses
(vii) or (viii) thereof) and Section 170(c)(2) of the Code that are named by the
Corporation as the beneficiary or beneficiaries of such Trust, in accordance
with the provisions of Section (B)(1) of Article IX hereof.
"Board of Directors" shall mean the Board of Directors of the
Corporation.
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"Closing Price" on any date shall mean the average of the high bid and
low asked prices in the over-the-counter market, as reported by The Nasdaq Stock
Market, or, if such system is no longer in use, the principal other automated
quotations system that may then be in use or, if the shares of Equity Stock are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the shares
of Equity Stock selected by the Board of Directors.
"Constructive Ownership" shall mean ownership of shares of Equity
Stock by a Person who would be treated as an owner of such shares of Equity
Stock either directly or indirectly through the application of Section 318 of
the Code, as modified by Section 856(d)(5) of the Code. The terms "Constructive
Owner," "Constructively Owns," and "Constructively Owned" shall have correlative
meanings.
"Disqualified Person" means (A) the United States, any State or
political subdivision thereof, any foreign government, any international
organization, or any agency or instrumentality of any of the foregoing, (B) any
organization (other than a cooperative described in Section 521 of the Code)
which is exempt from tax unless such organization is subject to the tax imposed
by Section 511 of the Code, and (C) any organization described in Section
1381(a)(2)(c) of the Code.
"Equity Stock" shall mean Preferred Stock and Common Stock of the
Corporation. The term "Equity Stock" shall include all shares of Preferred Stock
and Common Stock of the Corporation that are held as Shares-in-Trust in
accordance with the provisions of Section (B) of Article IX hereof.
"Market Price" on any date shall mean the average of the Closing Price
for the five consecutive Trading Days ending on such date.
"Non-Transfer Event" shall mean an event other than a purported
Transfer that would cause any Person to Beneficially Own or Constructively Own
shares of Equity Stock in excess of the Ownership Limit, including, but not
limited to, the granting of any option or entering into any agreement for the
sale, transfer, or other disposition of shares of Equity Stock or the sale,
transfer, assignment, or other disposition of any securities or rights
convertible into or exchangeable for shares of Equity Stock.
"Operating Partnership" shall mean Wilshire Real Estate Partnership
L.P., a Delaware limited partnership.
"Operating Partnership Agreement" shall mean the agreement of limited
partnership governing the Operating Partnership.
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"Ownership Limit" shall mean the restriction on ownership (or deemed
ownership by virtue of the attribution provisions of the Code) of more than 9.8%
of the number of shares or value (whichever is more restrictive) of the
outstanding Common Stock by any Person other than Wilshire Financial Services
Group Inc., a Delaware corporation ("WFSG"), or twenty percent (20%) of the
number of shares or value (whichever is more restrictive) of Common Stock by
WFSG (provided that the Board of Directors has obtained representations and
undertakings from WFSG in form and substance satisfactory to the Board of
Directors in its sole discretion as it may deem necessary or advisable in order
to determine that WFSG's Beneficial Ownership or Constructive Ownership will not
impair the Corporation's status as a REIT and provided further that WFSG agrees
that any actual or attempted violation of such representations or undertakings
(or other action which is contrary to the restrictions contained in Section
(A)(2) of Article IX hereof) will result in the transfer of such Equity Stock to
a Trustee in his capacity as trustee of a Trust in accordance with Section
(A)(3) of Article IX hereof) or 9.8% of the number of shares or value (whichever
is more restrictive) of the outstanding Preferred Stock (or such other number or
value of Preferred Stock as the Board of Directors may determine in fixing the
terms of the Preferred Stock). In determining the Ownership Limit, the number
and value of Common Stock and/or Preferred Stock of the Corporation shall be
determined by the Board in good faith, which determination shall be conclusive
for all purposes hereof.
"Permitted Transferee" shall mean any Person designated as a Permitted
Transferee in accordance with the provisions of Section (B)(5) of Article IX
hereof.
"Person" shall mean an individual, corporation, limited liability
company, partnership, estate, trust, a portion of a trust permanently set aside
for or to be used exclusively for the purposes described in Section 642(c) of
the Code, association, private foundation within the meaning of Section 509(a)
of the Code, joint stock company, or other entity and also includes a "group" as
that term is used for purposes of Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended.
"Prohibited Owner" shall mean, with respect to any purported Transfer
or Non-Transfer Event, any Person who, but for the provisions of Section (A)(3)
of Article IX hereof, would be the actual owner (within the meaning of Treasury
Regulation ss. 1.857-8(b)) of shares of Equity Stock.
"Redemption Rights" shall mean the rights granted under the Operating
Partnership Agreement to the limited partners to redeem, under certain
circumstances, their limited partnership interests for shares of Common Stock
(or cash at the option of the Corporation).
"REIT Disqualification Meeting" shall mean an annual or special meeting of
the stockholders of the Corporation at which a proposal to delete provisions of
the Articles of Incorporation that require the Corporation to elect to be taxed
as a REIT is approved by the affirmative vote of not less than two-thirds (2/3)
of all the votes entitled to be cast by the outstanding shares of the
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capital stock of the Corporation on the matter, voting together for this purpose
as a single class.
"Restriction Termination Date" shall mean (A) if the Corporation has
elected not to be taxed as a REIT, the first day after the Board of Directors
determines in writing that it is no longer in the best interests of the
Corporation to retain the restrictions on transfer and ownership contained in
Article IX; or (B) if the Corporation has elected to be taxed as a REIT, the
first day after (i) the Board of Directors determines in writing that it is no
longer in the best interests of the Corporation to retain the restrictions on
transfer and ownership contained in Article IX and (ii) such restrictions are no
longer required for the Corporation to qualify or to continue to qualify, as a
REIT.
"Shares-in-Trust" shall mean any shares of Equity Stock designated
Shares-in-Trust pursuant to Section (A)(3) of Article IX hereof.
"Tax Benefits" shall mean the Corporation's net operating loss
carryforwards, capital loss carryforwards and built-in losses.
"Tenant" shall mean any Person (other than an individual) from whom
the Corporation derives (or is deemed to derive for purposes of applying Section
856 of the Code to the Corporation), directly or indirectly, gross income.
"Tenant Interest" shall mean an interest, expressed as a percentage,
of the total combined voting power or total number of shares of all classes of
stock of a Tenant that is a corporation, or an interest, expressed as a
percentage, of the assets or net profits (within the meaning of Section
856(d)(2)(B) of the Code) of a Tenant that is not a corporation.
"Trading Day" shall mean any day other than a Saturday, a Sunday, or a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Transfer" shall mean any sale, transfer, gift, assignment, devise, or
other disposition of shares of Equity Stock, whether voluntary or involuntary,
whether of record, constructively or beneficially, and whether by operation of
law or otherwise.
"Trust" shall mean any separate trust created pursuant to Section
(A)(3) of Article IX hereof and administered in accordance with the terms of
Section (B) of Article IX hereof, for the exclusive benefit of any Beneficiary.
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"Trustee" shall mean any Person or entity unaffiliated with both the
Corporation and any Prohibited Owner, such Trustee to be designated by the
Corporation to act as trustee of any Trust, or any successor trustee thereof.
2. Restriction on Transfers.
a. Except as provided in Section (A)(7) of Article IX hereof,
from the date of a REIT Disqualification Meeting and prior to the Restriction
Termination Date, (i) no Person shall Beneficially Own or Constructively Own
outstanding shares of Equity Stock in excess of the Ownership Limit and (ii) any
Transfer that, if effective, would result in any Person Beneficially Owning or
Constructively Owning shares of Equity Stock in excess of the Ownership Limit
shall be void ab initio as to the Transfer of that number of shares of Equity
Stock which would be otherwise Beneficially Owned or Constructively Owned by
such Person in excess of the Ownership Limit, and the intended transferee shall
acquire no rights in such excess shares of Equity Stock.
b. Except as provided in Section (A)(7) of Article IX hereof,
from the date of a REIT Disqualification Meeting and prior to the Restriction
Termination Date, any Transfer that, if effective, would result in shares of
Equity Stock being beneficially owned by fewer than 100 Persons (determined
without reference to any rules of attribution) shall be void ab initio as to the
Transfer of that number of shares which would be otherwise beneficially owned
(determined without reference to any rules of attribution) by the transferee,
and the intended transferee shall acquire no rights in such shares of Equity
Stock.
c. From the date of a REIT Disqualification Meeting and prior
to the Restriction Termination Date, any Transfer of shares of Equity Stock
that, if effective, would result in the Corporation being "closely held" within
the meaning of Section 856(h) of the Code shall be void ab initio as to the
Transfer of that number of shares of Equity Stock which would cause the
Corporation to be "closely held" within the meaning of Section 856(h) of the
Code, and the intended transferee shall acquire no rights in such shares of
Equity Stock.
d. From the date of a REIT Disqualification Meeting and prior
to the Restriction Termination Date, any Transfer of shares of Equity Stock
that, if effective, would cause the Corporation to Constructively Own a Tenant
Interest of ten percent (10%) or more shall be void ab initio as to the Transfer
of that number of shares of Equity Stock which would cause the Corporation to
Constructively Own a Tenant Interest of ten percent (10%) or more and the
intended transferee shall acquire no rights in such excess shares of Equity
Stock.
e. From the date of a REIT Disqualification Meeting and prior
to the Restriction Termination Date, any Transfer of shares of Equity Stock
that, if effective, would result in shares of Equity Stock being Beneficially
Owned by a
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Disqualified Person shall be void ab initio as to the Transfer of that number of
shares which would be otherwise Beneficially Owned by the transferee, and the
intended transferee shall acquire no rights in such shares of Equity Stock.
f. It is expressly intended that the restrictions on ownership
and Transfer described in this Section (A)(2) of Article IX shall apply to the
Redemption Rights. Notwithstanding any of the provisions of the Operating
Partnership Agreement to the contrary, a partner of the Operating Partnership
shall not be entitled to effect an exchange of an interest in the Operating
Partnership for Common Stock if the Beneficial Ownership or Constructive
Ownership of Common Stock would be prohibited under the provisions of this
Article IX.
3. Transfer to Trust.
a. If, notwithstanding the other provisions contained in this
Section (A)of Article IX, at any time after a REIT Disqualification Meeting and
prior to the Restriction Termination Date, there is a purported Transfer or
Non-Transfer Event such that any Person would either Beneficially Own or
Constructively Own shares of Equity Stock in excess of the Ownership Limit,
then, (i) except as otherwise provided in Section (A)(7) of Article IX hereof,
the purported transferee shall acquire no right or interest (or, in the case of
a Non-Transfer Event, the actual owner (within the meaning of Treasury
Regulation ss. 1.857-8(b)) of the shares of Equity Stock Beneficially Owned or,
Constructively Owned by such Beneficial Owner or Constructive Owner, shall cease
to own any right or interest) in such number of shares of Equity Stock which
would cause such Beneficial Owner or Constructive Owner to Beneficially Own or
Constructively Own shares of Equity Stock in excess of the Ownership Limit, (ii)
such number of shares of Equity Stock in excess of the Ownership Limit (rounded
up to the nearest whole share) shall be designated Shares-in-Trust and, in
accordance with the provisions of Section (B) of Article IX hereof, transferred
automatically and by operation of law to a Trustee in his capacity as trustee of
a Trust to be held in accordance with that Section (B) of Article IX, and (iii)
the Prohibited Owner shall submit such number of shares of Equity Stock to the
Corporation for registration in the name of the Trustee. Such transfer to a
Trustee and the designation of shares as Shares-in-Trust shall be effective as
of the close of business on the business day prior to the date of the Transfer
or Non-Transfer Event, as the case may be.
b. If, notwithstanding the other provisions contained in this
Section (A)of Article IX (after application of paragraph (a) above), at any time
after a REIT Disqualification Meeting and prior to the Restriction Termination
Date, there is a purported Transfer or Non-Transfer Event that, if effective,
would (i) result in the shares of Equity Stock being Beneficially Owned by fewer
than 100 Persons (determined without reference to any rules of attribution),
(ii) result in the Corporation being "closely held" within the meaning of
Section 856(h) of the Code, or (iii) cause the corporation to Constructively Own
a Tenant Interest of ten percent (10%) or more, or (iv) result in the shares of
Equity Stock being Beneficially Owned by a Disqualified Person, then (x) the
purported transferee shall not acquire any right or interest (or, in the case of
a Non-Transfer Event, the Person who, but for the
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provisions of this Section (A)(3), would be the actual owner (within the meaning
of Treasury Regulation ss. 1.857-8(b)) of the shares of Equity Stock with
respect to which such Non-Transfer Event occurred, shall cease to own any right
or interest) in such number of shares of Equity Stock, the ownership of which by
such purported transferee or purported actual owner would (A) result in the
shares of Equity Stock being beneficially owned by fewer than 100 Persons
(determined without reference to any rules of attribution), (B) result in the
Corporation being "closely held" within the meaning of Section 856(h) of the
Code, (C) cause the Corporation to Constructively Own a Tenant Interest of ten
percent (10%) or more or (D) result in the shares of Equity Stock being
Beneficially Owned by a Disqualified Person, (y) such number of shares of Equity
Stock (rounded up to the nearest whole share) shall be designated
Shares-in-Trust and, in accordance with the provisions of Section (B) of Article
IX hereof, transferred automatically and by operation of law to a Trustee in his
capacity as trustee of a Trust to be held in accordance with that Section (B) of
Article IX, and (z) the Prohibited Owner shall submit such number of shares of
Equity Stock to the Corporation for registration in the name of the Trustee.
Such transfer to a Trustee in his capacity as trustee of a Trust and the
designation of shares as Shares-in-Trust shall be effective as of the close of
business on the business day prior to the date of the Transfer or Non-Transfer
Event, as the case may be.
4. Remedies for Breach. If the Corporation, or its designees,
shall at any time determine in good faith that a Transfer or Non-Transfer Event
has taken place that, if effective, would result in a violation of Section
(A)(2) of Article IX hereof or that a Person intends to acquire or has attempted
to acquire Beneficial Ownership or Constructive Ownership of any shares of
Equity Stock in violation of Section (A)(2) of Article IX hereof, the
Corporation shall take such action as it deems advisable to refuse to give
effect to or to prevent such Transfer or acquisition of Beneficial Ownership or
Constructive Ownership, including, but not limited to, causing the Corporation
to redeem shares of Equity Stock, refusing to give effect to such Transfer on
the books of the Corporation or instituting proceedings to enjoin such Transfer
or acquisition.
5. Notice of Restricted Transfer. Any Person who acquires or
attempts to acquire Beneficial Ownership or Constructive Ownership of shares of
Equity Stock in violation of Section (A)(2) of Article IX hereof, or any Person
who owned shares of Equity Stock that were transferred to a Trustee in his
capacity as trustee of a Trust pursuant to the provisions of Section (A)(3) of
Article IX hereto, shall immediately give written notice to the Corporation of
such event and shall provide to the Corporation such other information as the
Corporation may request in order to determine the effect, if any, of such
Transfer or Non-Transfer Event, as the case may be, on the Corporation's status
as a REIT.
6. Owners Required To Provide Information. From the date of a
REIT Disqualification Meeting and prior to the Restriction Termination Date:
a. Every Beneficial Owner or Constructive Owner of more
than five percent (5%), or such lower percentages as required pursuant to
regulations under the Code, of the outstanding shares of all classes of capital
stock of the Corporation shall, within thirty (30)
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days after January 1 of each year, provide to the Corporation a written
statement or affidavit stating the name and address of such Beneficial Owner or
Constructive Owner, the number of shares of Equity Stock Beneficially Owned or
Constructively Owned, and a description of how such shares are held. Each such
Beneficial Owner or Constructive Owner shall provide to the Corporation such
additional information as the Corporation may request in order to determine the
effect, if any, of such Beneficial Ownership or Constructive Ownership on the
Corporation's status as a REIT and to ensure compliance with the restrictions on
ownership set forth in this Article IX.
a. Each Person (including the stockholder of record) who
is holding shares of Equity Stock for a Beneficial Owner or Constructive Owner
shall provide to the Corporation a written statement or affidavit stating such
information as the Corporation may request in order to determine the
Corporation's status as a REIT and to ensure compliance with the Ownership
Limit.
7. Exceptions.
a. The provisions of Section (A)(2) of Article IX hereof
shall not apply to the acquisition of shares of Equity Stock by an underwriter
that participates in a public offering of such shares or securities convertible
into such shares for a period of ninety (90) days following the purchase by such
underwriter of such shares provided that the restrictions contained in Section
(A)(2) of Article IX hereof will not be violated following the distribution by
such underwriter of such shares.
b. The Board of Directors, in its sole discretion, may
exempt a Person from the restrictions set forth in Section (A)(2) of this
Article IX if:
(i) the Board of Directors obtains such
representations and undertakings from such Person as are deemed by the
Board of Directors to be reasonably necessary to ascertain that no
individual's Beneficial Ownership of shares of Equity Stock will violate
the restrictions set forth in Section (A)(2) of this Article IX or that any
such violation will not cause the Corporation to fail to qualify as a REIT
under the Code, and such Person agrees that any actual or attempted
violation of such representations or undertakings (or other action which is
contrary to the restrictions contained in Section (A)(2) of this Article
IX) will result in the transfer of such Equity Stock to a Trustee in his
capacity as trustee of a Trust in accordance with Section (A)(3) of this
Article IX; or
(ii) such Person does not own, and represents that it
will not own, actually or Constructively, a Tenant Interest that would
cause the Corporation to own, actually or Constructively, a Tenant Interest
of more than 9.8%, the Corporation obtains such other representations and
undertakings from such Person (or any other Person who could be treated as
Constructively Owning the Equity Shares actually or Constructively Owned by
such Person) as are deemed by the Board of Directors to be
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reasonably necessary to ascertain this fact and such Person agrees that any
actual or attempted violation of such representations or undertakings will
result in the transfer of such Equity Stock to a Trustee in his capacity as
trustee of a Trust in accordance with Section (A)(3) of this Article IX.
Notwithstanding the foregoing, the inability of a Person to make the
certification described in this paragraph shall not prevent the Board of
Directors, in its sole discretion, from exempting such Person from the
restrictions set forth in Section (A)(2) of this Article IX if the Board of
Directors determines that the resulting application of Section 856(d)(2)(B)
of the Code would affect the characterization of less than 0.5% of the
gross income (as such term is used in Section 856(c)(2) of the Code) of the
Corporation in any taxable year.
c. Prior to granting any exception pursuant to Section
(A)(7)(b)(i) or (ii) of this Article IX, the Board of Directors may require a
ruling from the IRS, or an opinion of counsel, in either case in form and
substance satisfactory to the Board of Directors in its sole discretion, as it
may deem necessary or advisable in order to determine or ensure the
Corporation's status as a REIT or otherwise would not affect the Corporation's
status as a REIT.
B. Shares-in-Trust.
1. Trust. Any shares of Equity Stock transferred to a Trustee in his
capacity as trustee of a Trust and designated Shares-in-Trust pursuant to
Section (A)(3) of Article IX hereof shall be held for the exclusive benefit of
the Beneficiary. The Corporation shall name a Beneficiary (such that the shares
of Equity Stock held in the Trust would not violate the restrictions set forth
in Section (A)(2) of Article IX hereof) for each Trust within five (5) days
after discovery of the existence thereof. Any transfer to a Trust, and
subsequent designation of shares of Equity Stock as Shares-in-Trust, pursuant to
Section (A)(3) of Article IX hereof shall be effective as of the close of
business on the business day prior to the date of the Transfer or Non-Transfer
Event that results in the transfer to the Trust. Shares-in-Trust shall remain
issued and outstanding shares of Equity Stock of the Corporation and shall be
entitled to the same rights and privileges on identical terms and conditions as
are all other issued and outstanding shares of Equity Stock of the same class
and series. When transferred to a Permitted Transferee in accordance with the
provisions of Section (B)(5) of Article IX hereof, such Shares-in-Trust shall
cease to be designated as Shares-in-Trust.
2. Dividend Rights. The Trust, as record holder of Shares-in-Trust,
shall be entitled to receive all dividends and distributions as may be declared
by the Board of Directors on such shares of Equity Stock and shall hold such
dividends or distributions in trust for the benefit of the Beneficiary. The
Prohibited Owner with respect to Shares-in-Trust shall be required to repay to
the Trust the amount of any dividends or distributions received by it that (i)
are attributable to any shares of Equity Stock designated Shares-in-Trust and
(ii) the record date of which was on or after the date that such shares became
Shares-in-Trust. The Corporation shall take all measures that it determines
reasonably necessary to recover the amount of any such dividend or distribution
paid to a Prohibited Owner, including, if necessary, withholding any
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<PAGE>
portion of future dividends or distributions payable on shares of Equity Stock
Beneficially Owned or Constructively Owned by the Person who, but for the
provisions of Section (A)(3) of Article IX hereof, would Constructively Own or
Beneficially Own the Shares-in-Trust; and, as soon as reasonably practicable
following the Corporation's receipt or withholding thereof, shall pay over to
the Trust for the benefit of the Beneficiary the dividends so received or
withheld, as the case may be.
3. Rights upon Liquidation. In the event of any voluntary or
involuntary liquidation, dissolution, or winding up of, or any distribution of
the assets of, the Corporation, each holder of Shares-in-Trust shall be entitled
to receive, ratably with each other holder of shares of Equity Stock of the same
class or series, that portion of the assets of the Corporation which is
available for distribution to the holders of such class and series of shares of
Equity Stock. The Trust shall distribute to the Prohibited Owner the amounts
received upon such liquidation, dissolution, or winding up, or distribution;
provided, however, that the Prohibited Owner shall not be entitled to receive
amounts pursuant to this Section (B)(3) of Article IX in excess of, in the case
of a purported Transfer in which the Prohibited Owner paid fair market value for
shares of Equity Stock and which Transfer resulted in the transfer of the shares
to the Trustee in his capacity as trustee of a Trust, the price per share, if
any, such Prohibited Owner paid for the shares of Equity Stock and, in the case
of a Non-Transfer Event or Transfer in which the Prohibited Owner did not pay
fair market value for such shares (e.g., if the shares were received through a
gift or devise) and which Non-Transfer Event or Transfer, as the case may be,
resulted in the transfer of shares to a Trustee in his capacity as trustee of a
Trust, the price per share equal to the Market Price on the date of such
Non-Transfer Event or Transfer. Any remaining amount in such Trust shall be
distributed to the Beneficiary.
4. Voting Rights. The Trustee shall be entitled to vote all
Shares-in-Trust. Any vote by a Prohibited Owner as a holder of shares of Equity
Stock prior to the discovery by the Corporation that the shares of Equity Stock
are Shares-in-Trust shall, subject to applicable law, be rescinded and shall be
void ab initio with respect to such Shares-in-Trust and the Prohibited Owner
shall be deemed to have given, as of the close of business on the business day
prior to the date of the purported Transfer or Non-Transfer Event that results
in the transfer to the Trust of shares of Equity Stock under Section (A)(3) of
Article IX hereof, an irrevocable proxy to the Trustee to vote the
Shares-in-Trust in the manner in which the Trustee, in its sole and absolute
discretion, desires.
5. Designation of Permitted Transferee. The Trustee shall have the
exclusive and absolute right to designate a Permitted Transferee of any or all
Shares-in-Trust. In an orderly fashion so as not to materially adversely affect
the Market Price of the Shares-in-Trust, the Trustee shall either sell the
Shares-in-Trust using the facilities of a national stock exchange on which the
class and series of such Shares-in-Trust are then actively traded, if any, or
designate any Person as Permitted Transferee, provided, however, that (i) the
Permitted Transferee so designated purchases for valuable consideration (whether
in a public or private sale) the Shares-in-Trust and (ii) the Permitted
Transferee so designated may acquire such Shares-in-Trust without such
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acquisition resulting in a transfer to a Trustee in his capacity as trustee of
the Trust and the redesignation of such shares of Equity Stock so acquired as
Shares-in-Trust under Section (A)(3) of Article IX hereof. Upon the sale of
Shares-in-Trust by the Trustee of a Permitted Transferee in accordance with the
provisions of this Section (B)(5) of Article IX, the Trustee shall (i) if such
sale was to a Permitted Transferee, cause to be transferred to the Permitted
Transferee that number of Shares-in-Trust acquired by the Permitted Transferee,
(ii) if such sale was to a Permitted Transferee, cause to be recorded on the
books of the Corporation that the Permitted Transferee is the holder of record
of such number of shares of Equity Stock, (iii) cause the Shares-in-Trust to be
canceled, and (iv) distribute to the Beneficiary any and all amounts held with
respect to the Shares-in-Trust after making that payment to the Prohibited Owner
pursuant to Section (B)(6) of Article IX hereof.
6. Compensation to Record Holder of Shares of Equity Stock that
Become Shares-in-Trust. Any Prohibited Owner shall be entitled (following
discovery of the Shares-in-Trust and subsequent sale of such Shares-in-Trust in
accordance with Section (B)(5) of Article IX hereof or following the acceptance
of the offer to purchase such shares in accordance with Section (B)(7) of
Article IX hereof) to receive from the Trustee following the sale or other
disposition of such Shares-in-Trust the lesser of (i) in the case of (a) a
purported Transfer in which the Prohibited Owner paid fair market value for
shares of Equity Stock and which Transfer resulted in the transfer of the shares
to the Trust, the price per share, if any, such Prohibited Owner paid for the
shares of Equity Stock, or (b) a Non-Transfer Event or Transfer in which the
Prohibited Owner did not pay fair market value for such shares (e.g., if the
shares were received through a gift or devise) and which Non-Transfer Event or
Transfer, as the case may be, resulted in the transfer of shares to the Trust,
the price per share equal to the Market Price on the date of such Non-Transfer
Event or Transfer, and (ii) the price per share received by the Trustee from the
sale or other disposition of such Shares-in-Trust in accordance with Section
(B)(5) of Article IX hereof. Any amounts received by the Trustee in respect of
such Shares-in-Trust and in excess of such amounts to be paid the Prohibited
Owner pursuant to this Section (B)(6) shall be distributed to the Beneficiary in
accordance with the provisions of Section (B)(5) of Article IX hereof. Each
Beneficiary and Prohibited Owner waive any and all claims that the may have
against the Trustee and the Trust arising out of the disposition of
Shares-in-Trust, except for claims arising to or out of the gross negligence or
willful misconduct of, or any failure to make payments in accordance with this
Section (B), by such Trustee or the Corporation.
7. Purchase Right in Shares-in-Trust. Shares-in-Trust shall be
deemed to have been offered for sale to the Corporation, or its designee, at a
price per share equal to the lesser of (i) the price per share in the
transaction that created such Shares-in-Trust (or, in the case of devise, gift
or Non-Transfer Event, the Market Price at the time of such devise, gift or
Non-Transfer Event) and (ii) the Market Price on the date the Corporation or its
designee accepts such offer. The Corporation shall have the right to accept such
offer for a period of ninety (90) days after the later of (i) the date of the
Non-Transfer Event or purported Transfer which resulted in such Shares-in-Trust
and (ii) the date the Corporation determines in good faith that a Transfer or
Non-Transfer Event resulting in Shares-in-Trust has occurred, if the Corporation
does not
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<PAGE>
receive a notice of such Transfer or Non-Transfer Event pursuant to Section
(A)(5) of Article IX hereof.
C. Remedies Not Limited. Nothing contained in this Article IX shall limit
the authority of the Board of Directors to take such other action to the extent
permitted by law as it deems necessary or advisable to protect the Corporation
and the interests of its stockholders by preserving the ability of the
Corporation to elect to be taxed as a REIT or, once such election has been made,
preserving the Corporation's status as a REIT or preserving the Tax Benefits.
Without limiting the generality of the foregoing, the Board of Directors may, by
adopting a written resolution, (i) extend the Restriction Termination Date, (ii)
modify the Ownership Limit, or (iii) modify the definitions of any terms set
forth in this Article IX; provided, however, that the Board of Directors shall
not cause there to be such extension, change or modification unless it concludes
in writing that such action is reasonably necessary or advisable to preserve the
Corporation's status as a REIT or to preserve the Tax Benefits, or that the
continuation of these restrictions is no longer reasonably necessary for the
preservation of the Corporation's status as a REIT or the preservation of the
Tax Benefits. Such written conclusion shall be filed with the Secretary of the
Corporation and shall be mailed by the Secretary to all stockholders of this
Corporation within 10 days after the date of any such conclusion.
D. The Corporation and the members of the Board of Directors shall be
fully protected in relying in good faith upon the information, opinions, reports
or statements of the chief executive officer, the chief financial officer or the
chief accounting officer of the Corporation or of the Corporation's legal
counsel, independent auditors, transfer agent, investment bankers or other
employees and agents in making the determinations and findings contemplated by
this Article IX and the members of the Board of Directors shall not be
responsible for any good faith errors made in connection therewith.
E. Ambiguity. In the case of an ambiguity in the application of any of
the provisions of this Article IX, including any definition contained in Section
(A)(1) of Article IX hereof, the Board of Directors shall have the power to
determine the application of the provisions of this Article IX with respect to
any situation based on the facts known to it.
F. Legend.
1. Each certificate for shares of Equity Stock or securities
convertible into Equity Stock shall bear the following legend:
"The securities represented by this certificate are
subject to restrictions on transfer and ownership for the
purpose of the Corporation's maintenance of its status as a
real estate investment trust under the Internal Revenue Code
of 1986, as amended (the "Code"). No Person other than WFSG
may (i) Beneficially Own or
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<PAGE>
Constructively Own in excess of 9.8% of the number of shares
or value (whichever is more restrictive) of the outstanding
Common Stock or 9.8% of the number of shares or value
(whichever is more restrictive) of the outstanding Preferred
Stock (or such other number or value of Preferred Stock as
the Board may determine in fixing the terms of the Preferred
Stock), (ii) Beneficially Own shares of Equity Stock that
would result in the shares of Equity Stock being
Beneficially Owned by fewer than 100 Persons (determined
without reference to any rules of attribution), (iii)
Beneficially Own shares of Equity Stock that would result in
the Corporation being "closely held" under Section 856(h) of
the Code, (iv) Constructively Own shares of Equity Stock
that would cause the Corporation to Constructively Own a
Tenant Interest of 10% or more or (v) Beneficially Owned
shares of Equity Stock that would result in the shares of
Equity Stock being Beneficially Owned by (A) the United
States, any international organization, or any agency or
instrumentality of any of the foregoing, (B) any
organization (other than a cooperative described in Section
521 of the Code) which is exempt from tax unless such
organization is subject to the tax imposed by Section 511 of
the Code, and (C) any organization described in Section
1381(a)(2)(c) of the Code. Any Person who attempts to
Beneficially Own or Constructively Own shares of Equity
Stock in excess of the above limitations must immediately
notify the Corporation in writing. Furthermore, upon the
occurrence of certain events, attempted transfers in
violation of the restrictions described above may be void ab
initio. If the restrictions above are violated, the shares
of Equity Stock represented hereby will be transferred
automatically and by operation of law to a Trustee for the
benefit of one or more Beneficiaries and shall be designated
Shares-in-Trust and the Prohibited Owner shall acquire no
rights or interest in such shares of Equity Stock. All
capitalized terms in this legend have the meanings defined
in the Corporation's Amended and Restated Articles of
Incorporation, as the same may be further amended from time
to time, a copy of which, including the restrictions on
transfer and ownership, will be sent without charge to each
stockholder who so requests."
2. The restrictions on transfer and ownership contained in this
Article IX, as amended or modified from time to time in accordance with the
provisions hereof, shall be valid and binding on all holders of shares of Equity
Stock or securities convertible into Equity Stock, regardless of whether the
legend borne on the certificates representing such shares or
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<PAGE>
securities accurately reflects the restrictions on transfer and ownership as so
amended or modified.
G. Exchange of OP Units. So long as the Corporation remains the sole
stockholder of the general partner of the Operating Partnership, the Board of
Directors of the Corporation is hereby expressly vested with authority (subject
to the restrictions on ownership, transfer and redemption set forth in this
Article IX) to issue, and shall issue to the extent provided in the Operating
Partnership Agreement, Common Stock in exchange for the units into which
partnership interests of the Operating Partnership are divided (the "OP Units"),
and as the same may be adjusted, as provided in the Partnership Agreement.
H. Reservation of Shares. The Board of Directors is hereby required
to reserve and authorize for issuance a sufficient number of authorized but
unissued shares of Common Stock to permit the issuance of Common Stock in
exchange for OP Units that may be exchanged for or converted into Common Stock
as provided in the Operating Partnership Agreement.
I. Severability. If any provision of this Article IX or any
application of any such provision is determined to be invalid by any federal or
state court having jurisdiction over the issues, the validity of the remaining
provisions shall not be affected and other applications of such provision shall
be affected only to the extent necessary to comply with the determination of
such court.
J. Removal of Restrictions. The restrictions on transfer contained
in this Article IX shall not be removed until the Restriction Termination Date.
K. Notwithstanding any other provisions of the Charter or the Bylaws
of the Corporation (and notwithstanding that some lesser percentage may be
specified by law, the Charter or the Bylaws of the Corporation), the provisions
of this Article IX shall not be amended, altered, changed, or repealed, and no
provision inconsistent with this Article IX shall be adopted, without the
affirmative vote of at least eighty percent (80%) of the members of the Board of
Directors and by the affirmative vote of not less than two-thirds (2/3) of all
the votes entitled to be cast by the outstanding shares of capital stock of the
Corporation on the matter at any meeting of the stockholders called for that
purpose, voting together for this purpose as a single class.
X.
A. The following provisions are hereby adopted for the purpose of
defining, limiting, and regulating the powers of the Corporation and of the
directors and stockholders:
1. The Board of Directors of the Corporation shall, consistent with
applicable law, have power in its sole discretion to determine from time to time
in accordance with sound practice or other reasonable valuation methods what
constitutes annual or other net profits, earnings, surplus, or net assets in
excess of capital; to fix and vary from time to time the amount
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<PAGE>
to be reserved as working capital, or determine that retained earnings or
surplus shall remain in the hands of the Corporation; to set apart out of any
funds of the Corporation such reserve or reserves in such amount or amounts and
for such proper purpose or purposes as it shall determine and to abolish any
such reserve or any part thereof; to distribute and pay distributions or
dividends in stock, cash, or other securities or property, out of surplus or any
other funds or amounts legally available therefor, as such times and to the
stockholders of record on such dates as it may, from time to time, determine;
and to determine whether and to what extent and at what times and places and
under what conditions and regulations the books, accounts, and documents of the
Corporation, or any of them, shall be open to the inspection of stockholders,
except as otherwise provided by statute or by the Bylaws, and, except as so
provided, no stockholder shall have any right to inspect any book, account, or
document of the Corporation unless authorized so to do by resolution of the
Board of Directors.
2. Notwithstanding any provision of law requiring the authorization
of any action by a greater proportion than a majority of the total number of
shares of all classes of capital stock or of the total number of shares of any
class of capital stock, such action shall be valid and effective if authorized
by the affirmative vote of the holders of a majority of the total number of
shares of all classes outstanding and entitled to vote thereon, except as
otherwise provided in the Charter.
3. Except as otherwise specifically set forth in Articles VI and IX,
the Corporation reserves the right from time to time to make any amendments of
its Charter which may now or hereafter be authorized by law, including any
amendments changing the terms or contract rights, as expressly set forth in its
Charter, of any of its outstanding stock by classification, reclassification, or
otherwise.
B. The enumeration and definition of particular powers of the Board of
Directors included in the foregoing shall in no way be limited or restricted by
reference to or inference from the terms of any other clause of this or any
other Article of the Charter of the Corporation, or construed as or deemed by
inference or otherwise in any manner to exclude or limit any powers conferred
upon the Board of Directors under the General Laws of the State of Maryland now
or hereafter in force.
XI.
The duration of the Corporation shall be perpetual.
SECOND: This Amendment and Restatement does not increase the authorized
capital stock of the Corporation.
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<PAGE>
THIRD: The foregoing Amendment and Restatement to the Charter has been
advised by the Board of Directors and approved by the stockholders of the
Corporation.
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<PAGE>
IN WITNESS WHEREOF, Wilshire Real Estate Investment Trust Inc. has caused
these presents to be signed in its name and on its behalf by its President and
witnessed by its Secretary this ___ day of __________, 1999.
WITNESS: WILSHIRE REAL ESTATE INVESTMENT TRUST INC.
By: (SEAL)
- - ------------------------------------- -----------------------------------
Andrew Wiederhorn, Secretary Chris Tassos, Executive Vice
President
THE UNDERSIGNED, the Executive Vice President of Wilshire Real Estate
Investment Trust Inc. (the "Corporation"), who executed on behalf of the
Corporation the foregoing Amended and Restated Articles of Incorporation, of
which this certificate is made a part, hereby acknowledges in the name and on
behalf of said Corporation the foregoing Amended and Restated Articles of
Incorporation to be the corporate act of said Corporation and hereby certifies
that to the best of his knowledge, information and belief the matters and facts
set forth therein with respect to the authorization and approval thereof are
true in all material respects under the penalties of perjury.
Dated: , 1999 By: (SEAL)
------------ -----------------------------------
Chris Tassos, Executive Vice President
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<PAGE>
WILSHIRE REAL ESTATE INVESTMENT TRUST INC.
PROXY
This proxy is solicited on behalf of the Board of Directors of Wilshire
Real Estate Investment Trust Inc. for the Annual Meeting on August [5], 1999.
The undersigned appoints Andrew A. Wiederhorn, Lawrence A. Mendelsohn and
Patrick Terrell, and each of them, with full power of substitution in each, the
proxies of the undersigned, to represent the undersigned and vote all shares of
Wilshire Real Estate Investment Trust Inc., Common Stock which the undersigned
may be entitled to vote at the Annual Meeting of Shareholders to be held on
August [5], 1999, and at any adjournment or postponement thereof as indicated on
the reverse side.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is given this proxy will
be voted FOR proposals 1, 2, 3 and 4.
1. ELECTION OF DIRECTORS
FOR all nominees listed WITHHOLD AUTHORITY to
below except as marked vote for all nominees
to the contrary below [_] listed below [_]
Andrew A. Wiederhorn, Lawrence A. Mendelsohn, David Egelhoff, Jordan
Schnitzer and Patrick Terrell.
(INSTRUCTION: To withhold authority to vote for any individual nominee
write that nominee's name in the space provided below.)
--------------------------------------------------------------------------
2. PROPOSAL TO RATIFY THE APPOINTMENT BY THE BOARD OF DIRECTORS OF ARTHUR
ANDERSEN LLP AS INDEPENDENT ACCOUNTANTS FOR THE COMPANY FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1999.
[_] FOR [_] AGAINST [_] ABSTAIN
3. PROPOSAL TO AMEND THE COMPANY'S CHARTER TO PERMIT THE COMPANY TO ELECT NOT
TO BE TAXED AS A REAL ESTATE INVESTMENT TRUST UNDER THE TAX LAWS.
[_] FOR [_] AGAINST [_] ABSTAIN
4. PROPOSAL TO AMEND THE COMPANY'S CHARTER TO CHANGE THE NAME OF THE
COMPANY TO "WILSHIRE REAL ESTATE INVESTMENT INC.", PROVIDED THAT PROPOSAL 3
HAS BEEN APPROVED BY THE SHAREHOLDERS.
[_] FOR [_] AGAINST [_] ABSTAIN
5. In their discretion upon such other matters as may properly come before the
meeting.
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2, 3 AND 4.
Please sign exactly as your name appears on your stock certificates. When
shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee, or guardian, please give full title as such.
If a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
---------------------------------
Signature
---------------------------------
Signature if held jointly
DATED: , 1999
------------- --
Please return in the enclosed postage paid envelope.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
