<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE
[ ] Definitive Proxy Statement OF THE COMMISSION
[ ] Definitive Additional Materials ONLY (AS PERMITTED BY
[ ] Soliciting Material Pursuant to RULE 14a-6(e)(2))
Rule 14a-11(c) or Rule 14a-12
REALTY INCOME CORPORATION
(Name of Registrant as Specified in its Charter)
Realty Income Corporation
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction
applies:
________________________________________________________
2) Aggregate number of securities to which transaction
applies:
________________________________________________________
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):
________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________
5) Total fee paid:
________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as proviced 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.
1) Amount Previously Paid:
________________________________________________________
2) Form, Schedule or Registration Statement No.:
________________________________________________________
3) Filing Party:
________________________________________________________
4) Date Filed:
________________________________________________________
<PAGE>
(Realty Income Corporation Letterhead)
March __, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders of Realty Income Corporation to be held at 9:00
a.m., local time, on May 13, 1997 at the California Center for
the Arts Escondido, 340 North Escondido Boulevard, Escondido,
California.
At the Annual Meeting, you will be asked to consider and
vote upon a proposal to reincorporate the Company as a Maryland
corporation, which will also be named Realty Income Corporation,
pursuant to a merger of the Company into a wholly-owned Maryland
subsidiary and the conversion of each outstanding share of common
stock of the Company into one share of common stock of the
surviving corporation (the "Reincorporation"). Approval of the
Reincorporation shall constitute approval of all of the
provisions set forth in the Charter and Bylaws of the Maryland
corporation.
In addition to voting on the Reincorporation, you will be
asked to consider and vote upon the election of seven directors
to the Board of Directors of the Company. THE ELECTION OF THE
DIRECTORS IS NOT CONDITIONED ON THE APPROVAL OF THE OTHER
PROPOSALS.
The Reincorporation and the election of the members of the
Board of Directors of the Company are more fully described in the
accompanying Proxy Statement. We urge you to review carefully
the Proxy Statement and accompanying Appendices. A copy of the
Agreement and Plan of Merger, a copy of the Charter of the
Maryland corporation and a copy of the Bylaws of the Maryland
corporation are attached as Appendices A, B and C, respectively,
to the accompanying Proxy Statement.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
REINCORPORATION AND A VOTE FOR THE ELECTION OF EACH NOMINEE TO
THE BOARD OF DIRECTORS NAMED IN THE ACCOMPANYING PROXY STATEMENT.
YOUR VOTE IS IMPORTANT TO THE COMPANY, WHETHER YOU OWN FEW
OR MANY SHARES! Failure to return your proxy card or vote would
have the same effect as a vote against the Reincorporation.
Please complete, date and sign the enclosed proxy card and return
it in the accompanying postage paid envelope, even if you plan to
attend the Annual Meeting. If you attend the Annual Meeting, you
may if you wish, withdraw your proxy and vote in person.
Sincerely,
William E. Clark
Chairman of the Board and
Chief Executive Officer
<PAGE>
REALTY INCOME CORPORATION
220 West Crest Street
Escondido, California 92025-1707
---------------
NOTICE OF ANNUAL MEETING TO BE HELD ON
May 13, 1997
---------------
TO THE STOCKHOLDERS OF
REALTY INCOME CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders (the "Annual Meeting") of Realty Income Corporation,
a Delaware corporation (the "Company" or "Realty Income"), will
be held at the California Center for the Arts Escondido, 340
North Escondido Boulevard, Escondido, California, 92025 at 9:00
a.m., local time, on May 13, 1997, to consider and act upon:
1. A proposal to approve the reincorporation of the Company
as a Maryland corporation, which will also be named Realty Income
Corporation, pursuant to a merger of the Company into a wholly-
owned Maryland subsidiary and the conversion of each outstanding
share of Common Stock of the Company into one share of Common
Stock of the surviving corporation, which approval shall
constitute approval of all of the provisions set forth in the
Charter and Bylaws of the Maryland corporation, as described in
the proxy statement attached hereto;
2. The election of members of the Board of Directors of the
Company; and
3. Such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
The Reincorporation and the election of directors are more
fully described in the accompanying Proxy Statement, which forms
a part of this Notice.
During the course of the Annual Meeting, management will
report on the current activities of Realty Income and comment on
its future plans. A discussion period is planned so that
stockholders will have an opportunity to ask questions and
present their comments.
The Board of Directors has fixed the close of business on
March 14, 1997 as the record date (the "Record Date") for the
determination of stockholders entitled to notice of and to vote
at the Annual Meeting or any adjournment or postponement thereof.
Only stockholders of record on the Record Date will be entitled
to notice of and to vote at the Annual Meeting or any adjournment
or postponement thereof. A list of such stockholders will be
available for inspection at the offices of the Company at 220
West Crest Street, Escondido, California, at least ten days prior
to the Annual Meeting.
<PAGE>
If you plan to be present, please notify the undersigned so
that identification can be prepared for you. Whether or not you
plan to attend the Annual Meeting, please execute, date and
return promptly the enclosed proxy. A return envelope is
enclosed for your convenience and requires no postage for mailing
in the United States. If you are present at the Annual Meeting
you may, if you wish, withdraw your proxy and vote in person.
Thank you for your interest and consideration.
Sincerely,
MICHAEL R. PFEIFFER
March __, 1997 Vice President, General Counsel
and Secretary
YOUR VOTE IS IMPORTANT
TO VOTE YOUR SHARES, PLEASE SIGN, DATE AND COMPLETE THE ENCLOSED
PROXY AND MAIL IT IN THE ENCLOSED RETURN ENVELOPE
<PAGE>
REALTY INCOME CORPORATION
220 West Crest Street
Escondido, California 92025-1707
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
MAY 13, 1997
This Proxy Statement is furnished to the stockholders of
Realty Income Corporation, a Delaware corporation ("Realty
Income" or the "Company"), in connection with the solicitation of
proxies by the Board of Directors of the Company for use at the
Annual Meeting of Stockholders (the "Annual Meeting") to be held
on May 13, 1997, at 9:00 a.m., local time, at the California
Center for the Arts Escondido, 340 North Escondido Boulevard,
Escondido, California 92025, and at any adjournment or
postponement thereof. The approximate date on which this proxy
statement and form of proxy solicited on behalf of the Board of
Directors will first be sent to the Company's stockholders is on
or about March __, 1997.
At the Annual Meeting, holders of record of shares of Realty
Income Common Stock will consider and vote upon (i) the
reincorporation of the Company as a Maryland corporation, which
will also be named Realty Income Corporation, pursuant to a
merger of the Company into a wholly-owned Maryland subsidiary and
the conversion of each outstanding share of Common Stock of the
Company into one share of common stock of the surviving
corporation (the "Reincorporation"), which approval shall
constitute approval of all of the provisions set forth in the
Charter and Bylaws of the Maryland corporation, as described
herein, (ii) the election of members of the Board of Directors of
the Company and (iii) such other business as may properly come
before the Annual Meeting or any adjournment or postponement
thereof. The Board of Directors recommends a vote FOR the
Reincorporation and a vote FOR each person nominated to be
elected to the Board of Directors. See "Proposal 1 --
Reincorporation of the Company in Maryland and Related Changes to
the Rights of Stockholders" and "Proposal 2 -- Election of
Directors."
On March 14, 1997, the record date for the determination of
stockholders entitled to notice of and to vote at the Annual
Meeting, the Company had 22,988,237 shares of common stock, par
value $1.00 per share (the "Common Stock"), outstanding. Each
such share of Common Stock is entitled to one vote on all matters
properly brought before the meeting. Stockholders are not
permitted to cumulate their shares of Common Stock for the
purpose of electing directors or otherwise. Presence at the
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Annual Meeting, in person or by proxy, of a majority of the
outstanding shares of Common Stock will constitute a quorum for
the transaction of business at the Annual Meeting.
Unless contrary instructions are indicated on the proxy, all
shares of Common Stock represented by valid proxies received
pursuant to this solicitation (and not revoked before they are
voted) will be voted at the Annual Meeting FOR the
Reincorporation and FOR the election of the persons nominated to
the Board of Directors. With respect to any other business which
may properly come before the Annual Meeting and be submitted to a
vote of stockholders, proxies received by the Board of Directors
will be voted in the discretion of the designated proxy holders.
A stockholder may revoke his or her proxy at any time before
exercise by delivering to the Secretary of the Company a written
notice of such revocation, by filing with the Secretary of the
Company a duly executed proxy bearing a later date, or by voting
in person at the Annual Meeting. Attendance at the Annual
Meeting will not by itself be sufficient to revoke a proxy.
The election inspector will treat shares represented by
properly signed and returned proxies that reflect abstentions as
shares that are present and entitled to vote for purposes of
determining the presence of a quorum and for purposes of
determining the outcome of any matter submitted to the
stockholders for a vote. Abstentions do not constitute a vote
"for" or "against" any matter and thus will be disregarded in the
calculation of "votes cast." For the purposes of determining the
outcome of any matter, "broker non-votes" (i.e., shares held by
brokers or nominees that are represented at the meeting by
properly signed and returned proxies but with respect to which
the broker or nominee is not empowered to vote on a particular
matter) will be treated by the election inspector as not present
and not entitled to vote with respect to that matter (although
such shares may be entitled to vote on other matters), and will
be deemed to be present and entitled to vote for quorum purposes.
If the Annual Meeting is postponed or adjourned for any
reason, at any subsequent reconvening of the Annual Meeting all
proxies will be voted in the same manner as such proxies would
have been voted at the original convening of the Annual Meeting
(except for any proxies that have theretofore effectively been
revoked or withdrawn).
The Company will bear the cost of soliciting proxies from
its stockholders. The Company will pay D.F. King & Co., Inc.
("D.F. King") a fee of approximately $115,000 to cover its
services in soliciting the forwarding and return of proxy
material. In addition, the Company will reimburse D.F. King for
out-of-pocket expenses incurred in connection therewith. In
addition to solicitation by mail, directors, officers and
employees of the Company may solicit proxies by telephone,
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telegram or otherwise. Such directors, officers and employees of
the Company will not be additionally compensated for such
solicitation, but may be reimbursed for out-of-pocket expenses
incurred in connection therewith. Brokerage firms, fiduciaries
and other custodians who forward soliciting material to the
beneficial owners of shares of Realty Income Common Stock held of
record by them will be reimbursed for their reasonable expenses
incurred in forwarding such material.
The Company's Common Stock is traded on the New York Stock
Exchange, Inc. ("NYSE") under the symbol "O". On March ___,
1997, the last reported sale price for the Company's Common Stock
on the NYSE was $________ per share.
No person is authorized to make any representation with
respect to the matters described in this Proxy Statement other
than those contained herein and, if given or made, such
information or representation must not be relied upon as having
been authorized by the Company or any other person.
---------------
THE DATE OF THIS PROXY STATEMENT IS MARCH ___, 1997.
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PROPOSAL 1
REINCORPORATION OF THE COMPANY IN MARYLAND
AND RELATED CHANGES TO THE RIGHTS OF STOCKHOLDERS
GENERAL
The Board of Directors has unanimously approved a proposal
to change the Company's state of incorporation from Delaware to
Maryland (the "Reincorporation"). The Company believes that
after the Reincorporation it will be organized and will operate
in such a manner as to continue to qualify for taxation as a real
estate investment trust ("REIT") under Sections 856 through 860
of the Internal Revenue Code of 1986, as amended (the "Code"),
for its taxable year ending December 31, 1997 and the Company
intends to operate in such a manner in the future. The Board of
Directors believes the Reincorporation is in the best interests
of the Company and its stockholders.
The primary reason for the proposed change in domicile is to
avoid having to continue to pay Delaware's annual franchise tax.
For the year ended December 31, 1996, the Company paid to the
State of Delaware a franchise tax totaling $150,000. The Company
anticipates having to pay the same amount in franchise taxes for
future years if it continues as a Delaware corporation. As a
Maryland corporation, the Company would not be subject to such
annual taxes or other similar taxes greater than the personal
property tax filing fee of $100, provided that Maryland does not
alter its current laws.
In addition to avoiding the imposition of Delaware's annual
franchise tax on the Company, a number of changes will be
effected as a result of the Reincorporation. Such changes are
described below under the headings "Certain Consequences of the
Merger" and "Comparison of Rights of Stockholders of the Company
and Stockholders of the Maryland Company."
The Board of Directors estimates the aggregate costs to the
Company of Reincorporation to be approximately $250,000.
In the event this proposal is not adopted, the Company will
continue to operate as a Delaware corporation, subject to
Delaware's annual franchise tax.
MERGER OF REALTY INCOME CORPORATION INTO NEWLY FORMED MARYLAND
SUBSIDIARY
The proposed Reincorporation would be accomplished by
merging the Company into a newly formed Maryland subsidiary,
which is currently named Realty Income of Maryland, Inc. (the
"Maryland Company"), pursuant to an Agreement and Plan of Merger
(the "Merger Agreement"), substantially in the form which is
attached as Appendix "A" to this Proxy Statement. The Maryland
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Company was incorporated in Maryland on March ___, 1997
specifically for purposes of the Reincorporation and has
conducted no business and has no material assets or liabilities.
After completion of the merger, the Maryland Company will change
its name to Realty Income Corporation. The Maryland Company's
principal executive offices are located at 220 West Crest Street,
Escondido, California 92025-1707, telephone (619) 741-2111. The
Reincorporation would not result in any change in the Company's
business, assets or liabilities and would not result in any
relocation of management or other employees.
CERTAIN CONSEQUENCES OF THE MERGER
EFFECTIVE TIME. The merger will take effect on the later of
the times (the "Effective Time") at which a Certificate of
Ownership and Merger is filed with the Secretary of State of
Delaware and Articles of Merger are filed with the State
Department of Assessments and Taxation of Maryland, which filings
are anticipated to be made as soon as practicable after the
Reincorporation proposal is approved by the stockholders of the
Company. At the Effective Time, the separate corporate existence
of the Company will cease and stockholders of the Company will
become stockholders of the Maryland Company.
MANAGEMENT AFTER THE MERGER. Immediately after the merger
of the Company into the Maryland Company, the Board of Directors
of the Maryland Company (the "Maryland Board of Directors") will
be composed of the current members of the Board of Directors of
the Company; however, the directors of the Maryland Company will
have staggered terms, as described below under "Comparison of
Rights of Stockholders of the Company and Stockholders of the
Maryland Company -- Classified Board."
STOCKHOLDER RIGHTS. Certain differences in stockholder
rights exist under Delaware General Corporation Law (the "DGCL")
and Maryland General Corporation Law (the "MGCL") and the
organization documents of the Company and the Maryland Company.
For example, special meetings of stockholders require written
request by a greater percentage of stockholders owning the stock
of the Company issued and outstanding and entitled to vote under
the MGCL as compared with the DGCL. Business combination
transactions involving the Company and interested stockholders
require a longer waiting period and the affirmative vote of a
greater percentage of outstanding voting shares under the MGCL
than under the DGCL. The DGCL has no provisions comparable to
the "control share" statutes under the MGCL. See "Comparison of
Rights of Stockholders of the Company and Stockholders of the
Maryland Company" for a more complete discussion of the effects
of these and other differences between the rights of stockholders
under the DGCL and the MGCL.
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CONVERSION OF COMMON STOCK. As a result of the
Reincorporation, each outstanding share of Common Stock of the
Company will automatically be converted into one share of Common
Stock of the Maryland Company (the "Maryland Common Stock").
Other than changes due to the differences between Delaware and
Maryland law and certain differences between the Delaware
Certificate and Delaware By-Laws and the Maryland Charter and
Maryland Bylaws (each as defined below) (see "Comparison of
Rights of Stockholders of the Company and Stockholders of the
Maryland Company"), there will be no material changes in the
rights and obligations of holders of the Common Stock as a result
of the Reincorporation. The Maryland Common Stock will be listed
on the NYSE under the same symbol as the Company's Common Stock.
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING. The number of
outstanding shares of Maryland Common Stock immediately following
the Reincorporation will equal the number of shares of Common
Stock of the Company outstanding immediately prior to the
Effective Time.
EMPLOYEE PLANS. The Company's employee benefit plans (the
"Plans"), including the Company's stock incentive plan, will each
be continued by the Maryland Company following the
Reincorporation. Approval of the proposed Reincorporation will
constitute approval of the adoption and assumption of the Plans
by the Maryland Company.
OUTSTANDING OPTIONS. In addition to the assumption by the
Maryland Company of all options outstanding under the Plans, any
and all other outstanding options and other rights to acquire
shares of Common Stock of the Company, will be converted into
options or rights to acquire shares of the Maryland Company.
FRANCHISE TAX. As a result of the Reincorporation, the
Maryland Company will not be subject to Delaware's annual
franchise tax. For the year ended December 31, 1996, the Company
and its subsidiaries paid to the State of Delaware annual
franchise tax totaling $150,000. The Company anticipates having
to pay the same amount in franchise tax for future years if it
continues as a Delaware corporation. As a Maryland corporation,
the Maryland Company would not be subject to such annual taxes or
other similar taxes greater than the personal property tax filing
fee of $100, provided that Maryland does not alter its current
laws.
FEDERAL INCOME TAX CONSEQUENCES. The Reincorporation is
intended to be tax free under the Code. Accordingly, no gain or
loss will be recognized by the holders of shares of the Company's
Common Stock as a result of the Reincorporation, and no gain or
loss will be recognized by the Company or the Maryland Company.
Each former holder of shares of the Company's Common Stock will
have the same tax basis in the Maryland Common Stock received by
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such holder pursuant to the Reincorporation as such holder has in
the shares of the Company's Common Stock held by such holder at
the Effective Time. Each stockholder's holding period with
respect to the Maryland Common Stock will include the period
during which such holder held the shares of Common Stock,
provided the latter were held by such holder as a capital asset
at the Effective Time. The Company has not obtained, and does
not intend to obtain, a ruling from the Internal Revenue Service
with respect to the tax consequences of the Reincorporation.
The Company believes no gain or loss should be recognized by
the holders of outstanding options to purchase shares of Common
Stock, provided that (i) such options (a) were originally issued
in connection with the performance of services by the optionee
and (b) lacked a readily ascertainable value (e.g., were not
actively traded on an established market) when originally granted
and (ii) the options to purchase the Maryland Common Stock into
which the Company's outstanding options will be converted in the
Reincorporation also lack a readily ascertainable value when
issued. Notwithstanding the foregoing, optionees seeking more
specific tax advice should consult their own tax advisors
regarding the tax consequences to them of the Reincorporation.
The foregoing is only a summary of certain federal income
tax consequences. Stockholders should consult their own tax
advisers regarding the federal tax consequences of the
Reincorporation as well as any consequences under the laws of any
other jurisdiction.
ACCOUNTING TREATMENT OF THE MERGER
Upon consummation of the merger, all assets and liabilities
of the Company will be transferred to the Maryland Company at
book value because the Reincorporation will be accounted for as a
pooling of interests.
APPRAISAL RIGHTS
Delaware law provides that stockholders of a Delaware
corporation do not have appraisal rights when a Delaware
corporation whose shares are listed on a national securities
exchange merges with a foreign corporation. Consequently,
because the Common Stock is listed on the NYSE, appraisal rights
are not available to stockholders of the Company with respect to
the Reincorporation.
APPROVAL REQUIRED FOR REINCORPORATION
Under Delaware law, the affirmative vote of a majority of
the outstanding shares of each class of the Company's capital
stock entitled to vote on the proposal is required for approval
of the Reincorporation. The Common Stock is the only class of
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the Company's capital stock of which shares are outstanding and
is the only class of stock entitled to vote on the proposal to
approve the Reincorporation. Abstentions and broker non-votes
will have no effect of votes against the proposal to approve the
Reincorporation. The Reincorporation may be abandoned or the
Merger Agreement may be amended (with certain exceptions), either
before or after stockholder approval has been obtained, if in the
opinion of the Board of Directors, circumstances arise that make
such action advisable.
COMPARISON OF RIGHTS OF STOCKHOLDERS OF THE COMPANY AND
STOCKHOLDERS OF THE MARYLAND COMPANY
The Company is organized as a corporation under the laws of
the State of Delaware and the Maryland Company is organized as a
corporation under the laws of the State of Maryland. As a
Delaware corporation, the Company is subject to the DGCL, a
general corporation statute dealing with a wide variety of
matters, including election, tenure, duties and liabilities of
directors and officers; dividends and other distributions;
meetings of stockholders; and extraordinary actions, such as
amendments to the certificate of incorporation, mergers, sales of
all or substantially all of the assets and dissolution. The
Company also is governed by its Amended and Restated Certificate
of Incorporation (the "Delaware Certificate") and Amended and
Restated By-Laws (the "Delaware By-Laws"), which have been
adopted pursuant to the DGCL. As a Maryland corporation, the
Maryland Company is governed by the MGCL, a general corporation
statute covering generally the same matters as the DGCL, and by
its Charter (the "Maryland Charter") and Bylaws (the "Maryland
Bylaws"). Certain differences between the DGCL and the MGCL and
among these various documents are summarized below.
This summary of the comparative rights of the stockholders
of the Company and the stockholders of the Maryland Company does
not purport to be complete and is subject to and qualified in its
entirety by reference to the DGCL and the MGCL and also to the
Maryland Charter, Maryland Bylaws, Delaware Certificate and
Delaware By-Laws. The Maryland Charter and Bylaws will be
substantially in the forms of Appendices "B" and "C,"
respectively, to this Proxy Statement and the Delaware
Certificate and Delaware By-Laws may be obtained from the
Company, without charge, by contacting Michael R. Pfeiffer, Vice
President, General Counsel and Secretary, Realty Income
Corporation, 220 West Crest Street, Escondido, California 92025-
1707, telephone (619) 741-2111.
STANDARD OF CONDUCT FOR DIRECTORS. Under Delaware law, the
standards of conduct for directors have developed through written
opinions of the Delaware courts in cases decided by them.
Generally, directors of Delaware corporations are subject to a
duty of loyalty and a duty of care. The duty of loyalty has been
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said to require directors to refrain from self-dealing.
According to the Delaware Supreme Court, the duty of care
requires "directors...in managing the corporate affairs...to use
that amount of care which ordinarily careful and prudent men
would use in similar circumstances." Later case law has
established "gross negligence" as the standard for awarding money
damages for violation of the duty of care in the process of
decision-making by directors of Delaware corporations.
Under Maryland law, the standards of conduct for the
performance by directors of their duties are governed by statute.
Section 2-405.1 of the MGCL requires that a director of a
Maryland corporation perform his duties in "good faith," with a
reasonable belief that his actions are "in the best interests of
the corporation" and with the care of an "ordinarily prudent
person in a like position...under similar circumstances."
LIMITATION OF LIABILITY. Pursuant to the DGCL and the
Delaware Certificate, the liability of directors of the Company
to the Company or to any stockholder of the Company for money
damages for breach of fiduciary duty has been eliminated, except
(i) for breach of the directors' duty of loyalty to the Company
or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of
law, (iii) for unlawful dividends or redemptions or purchases of
stock or (iv) for any transaction from which the directors
derived an improper personal benefit. In general, the liability
of officers may not be eliminated or limited under Delaware law.
Pursuant to the MGCL and the Maryland Charter, the liability
of directors and officers of the Maryland Company to the Maryland
Company or to any stockholder of the Maryland Company for money
damages has been eliminated except for (i) actual receipt of an
improper personal benefit in money, property or services and (ii)
active and deliberate dishonesty established by a final judgment
as being material to the cause of action. As a result, directors
of the Maryland Company may not be liable for money damages for
certain actions for which they would have otherwise been liable
under the DGCL. In addition, the Maryland Charter contains
restrictions on the liability of officers for money damages which
are not currently available to officers of the Company.
There is no pending or, to the Company's knowledge,
threatened litigation to which any of its directors or officers
is a party in which the rights of the Company or its stockholders
would be affected if the Company already were subject to the
provisions of Maryland law rather than Delaware law.
INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Delaware
Certificate and the Delaware By-Laws require the Company, to the
fullest extent permitted by the DGCL, to indemnify its officers
and directors and to advance expenses incurred by such officers
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and directors in relation to any action, suit or proceeding. The
Delaware By-Laws, as permitted by the DGCL, require the Company
to indemnify every person who is or was a party or is or was
threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was a director, officer or
employee of the Company or, while a director, officer or employee
of the Company, is or was serving at the request of the Company
as a director, officer, employee, agent or trustee of another
corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise, against expenses (including counsel
fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such action,
suit or proceeding, to the full extent permitted by applicable
law. Under the DGCL, indemnification for a judgment or a
settlement of a suit by or in the right of the corporation is not
permitted. In addition, the DGCL requires the Company, as a
condition to advancing expenses, to receive an undertaking by or
on behalf of the director or officer to repay such amount if it
is ultimately determined that he or she is not entitled to
indemnification.
The Maryland Charter authorizes the Maryland Company to
obligate itself to indemnify its present and former directors and
officers and to pay or reimburse expenses in advance of the final
disposition of a proceeding to the maximum extent permitted from
time to time by the laws of Maryland. The Maryland Bylaws
obligate the Maryland Company to indemnify present and former
directors and officers and to pay or reimburse expenses in
advance of the final disposition of a proceeding to the maximum
extent permitted by Maryland law. The Maryland Bylaws also
permit the Maryland Company to provide indemnification to a
present or former director or officer who served a predecessor of
the Maryland Company in such capacity and to any employee or
agent of the Maryland Company or a predecessor of the Maryland
Company. The MGCL permits a corporation to indemnify its present
and former directors and officers, among others, against
judgments, penalties, fines, settlements and reasonable expenses
actually incurred by them in connection with any proceeding to
which they may be made a party by reason of their service in
those or other capacities unless it is established that (a) the
act or omission of the director or officer was material to the
matter giving rise to the proceeding and (i) was committed in bad
faith or (ii) was the result of active and deliberate dishonesty,
(b) the director or officer actually received an improper
personal benefit in money, property or services, or (c) in the
case of any criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was
unlawful. Indemnification for settlement of a suit by or in the
right of the corporation is permitted under the MGCL. In
addition, the MGCL requires the Maryland Company, as conditions
to advancing expenses, to obtain (i) a written affirmation by the
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director or officer of his or her good faith belief that he or
she has met the standard of conduct necessary for indemnification
by the Maryland Company as authorized by the bylaws and (ii) a
written statement by or on his or her behalf to repay the amount
paid or reimbursed by the Maryland Company if it shall ultimately
be determined that the standard of conduct was not met. Under
the MGCL, rights to indemnification and expenses are non-
exclusive, in that they need not be limited to those expressly
provided by statute.
Because the indemnification provisions of the Maryland
Charter and Maryland Bylaws are tied to applicable Maryland law,
they may be modified by future changes in such law without
further stockholder action. The Maryland Bylaws provide that
amendment or repeal of the indemnification provisions of the
Maryland Bylaws would be effective on a prospective basis only
and neither repeal nor modification of such provisions would
adversely affect rights to indemnification in effect at the time
of any act or omission which is the subject of a proceeding
against an indemnified person. The indemnification provisions of
the Maryland Bylaws are intended to apply to proceedings arising
from acts or omissions occurring before or after their respective
adoption or execution. There is presently no pending or already
completed litigation nor, to the best knowledge of the Company,
is there any threatened litigation to which the expanded nature
of the coverage under the Maryland Bylaws would apply.
Under the DGCL, the termination of any proceeding by
conviction or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that such person is
prohibited from being indemnified. Under Maryland law, such a
termination creates a rebuttable presumption that such person is
not entitled to indemnification.
The DGCL, the MGCL and the Bylaws of both the Company and
the Maryland Company may permit indemnification for liabilities
arising under the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Board of Directors has been
advised that, in the opinion of the SEC, indemnification for
liabilities arising under the Securities Act or the Exchange Act
is contrary to public policy and is therefore unenforceable,
absent a decision to the contrary by a court of appropriate
jurisdiction.
ACTIONS BY WRITTEN CONSENT OF STOCKHOLDERS. Under both the
DGCL and the MGCL, stockholders may act by written consent in
lieu of a stockholder meeting. The DGCL provides that, unless
otherwise provided in the certificate of incorporation of a
Delaware corporation, any action that may be taken at a
stockholder meeting may be taken without a meeting, without prior
notice and without a vote, upon the written consent of the
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holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such
action at a stockholder meeting at which all shares entitled to
vote were present and voted. The Delaware Certificate permits
written consents subject to the rules of the NYSE. The NYSE
generally prohibits the use of written consents in lieu of
shareholder meetings. The MGCL provides that any action that may
be taken at a stockholder meeting may be taken without a meeting
only if (i) a unanimous written consent setting forth the matter
is signed by each stockholder entitled to vote on the matter and
(ii) a written waiver of any right to dissent is signed by each
stockholder entitled to notice of the meeting but not entitled to
vote at it.
Because the MGCL requires the unanimous written consent of
all stockholders entitled to vote for actions by written consent,
it will be very unlikely that stockholders of the Maryland
Company will be able to take action by written consent under the
MGCL. This provision of the MGCL may deter hostile takeovers, as
a holder or group of holders controlling a majority in interest
of the Maryland Company's stock will not be able to amend the
Maryland Bylaws or remove directors pursuant to a stockholders'
written consent unless they obtain a unanimous written consent of
all stockholders. However, the Company does not believe that
this provision will have any material effect on the operation of
the Company because the NYSE generally prohibits listed companies
from using written consents in lieu of meetings.
INSPECTION OF BOOKS AND RECORDS. Under the DGCL, any
stockholder of the Company may examine the list of stockholders
and any stockholder making a written demand may inspect any other
corporate books and records for any purpose reasonably related to
the stockholder's interest as a stockholder. The MGCL provides
an absolute right of inspection for any purpose to stockholders
who for more than six months or as a group have owned at least
five percent (5%) of the outstanding stock of any class of a
Maryland corporation's outstanding voting shares. In addition,
any stockholder of a Maryland corporation has the right to
request the corporation to provide a sworn statement showing all
stock and securities issued and all consideration received by the
corporation within the preceding 12 months. Thus, stockholders
of less than 5% of the Maryland Company's Common Stock will not
be able to make written demand to inspect the books and records
of the Maryland Company if the Reincorporation is approved.
LIMITATION ON INDEBTEDNESS. The Delaware By-Laws contain a
restriction on indebtedness which limits the ability of the
Company to incur indebtedness if, as a result, the consolidated
indebtedness of the Company would exceed 50% of total assets, as
defined in the Delaware By-Laws. The Maryland Bylaws do not
contain this indebtedness restriction. Instead, the Board of
Directors of the Company has adopted a policy limiting the
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Company's indebtedness at incurrence to not more than 50% of the
Company's total market capitalization, which is defined as the
market value of the issued and outstanding Common Stock plus the
total principal amount of indebtedness of the Company reflected
in the Company's most recent fiscal year end balance sheet. The
Board of Directors may, without shareholder approval, amend or
modify its current policy on borrowing at any time. Since the
Board of Directors of the Company is also authorized to amend or
repeal this provision of the Delaware By-Laws, the Board of
Directors believes that the elimination of this provision from
the Maryland Bylaws will not have a material effect on the
operation of the Company.
CLASSIFIED BOARD. The Delaware By-Laws currently provide
for seven directors, all of whom are elected at the annual
meeting of stockholders, and shall hold office until the next
annual meeting of stockholders or until their successors are
elected and qualified. The Maryland Charter provides for a board
of seven directors, and provides further that the directors of
the Maryland Company will be divided into three classes, as
nearly equal in number as possible, designated Class I, Class II
and Class III. (See "Proposal 2: Election of Directors" below
for the identity of the Directors nominated for designation as
Class I, Class II and Class III Directors, and for their initial
respective terms of office which will range from one to three
years.) At each annual meeting of stockholders of the Maryland
Company, commencing in 1998, successors of the class of directors
whose term expires at that annual meeting will be elected for a
three-year term. If the number of directors is changed (other
than with respect to directors elected by the holders of any
then-outstanding preferred stock), any increase or decrease is to
be apportioned among the classes so as to maintain the number of
directors in each class as nearly equal as possible. The MGCL
does not permit a decrease in the number of directors to shorten
the term of any incumbent director. A director elected to fill a
vacancy, other than a vacancy resulting from a increase in the
authorized number of directors, serves for the remainder of the
term of the class to which he was elected.
The Board of Directors believes that including a classified
board provision in the Maryland Charter will be advantageous to
the Maryland Company and its stockholders because, by providing
that directors will serve three-year terms rather than one-year
terms, it will enhance the likelihood of continuity and stability
in the composition of the Maryland Company's Board of Directors
and in the policies formulated by its Board of Directors. The
Board of Directors believes that this, in turn, will permit the
Board more effectively to represent the interests of all
stockholders.
Since the Company's governing instruments do not presently
permit cumulative voting, under the Delaware By-Laws, a majority
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stockholder can fill all seven seats on the Board of Directors in
only one election of directors. The Maryland Charter similarly
does not provide for cumulative voting in the election of
directors. With a classified board of directors, it will
generally take a majority stockholder two annual meetings of
stockholders to elect a majority of the board of directors. As a
result, a classified board may delay, defer or prevent a tender
offer or change in control of the Maryland Company, even though a
tender offer or change in control might be in the best interests
of stockholders. In addition, because under the Maryland Charter
a director may be removed, but only for cause by the affirmative
vote of the holders of a majority of the outstanding shares
entitled to vote in the election of directors, the classified
Board of Directors would delay stockholders who do not agree with
the policies of the Board of Directors from replacing a majority
of the Board of Directors for two years, unless they can
demonstrate that the director should be removed for cause and
obtain the requisite vote. The Board of Directors believes this
change will facilitate continuity in management and orderly
transitions in power by preventing a hostile acquiror of the
Maryland Company from removing all of the directors
simultaneously without regard to their terms.
VACANCIES ON THE BOARD OF DIRECTORS. As permitted under the
DGCL, the Delaware By-Laws provide that if, at the time of
filling any vacancy or newly created directorship, the directors
then in office shall constitute less than a majority of the whole
Board of Directors (as constituted immediately prior to such
increase), the Court of Chancery may, upon application of any
stockholder or stockholders holding at least ten percent of the
total number of outstanding shares having the right to vote for
such directors, summarily order an election to be held to fill
any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office. Neither
the MGCL nor the Maryland Bylaws has a comparable provision for
the filling of vacancies on the board of directors by Maryland
courts. Instead, the MGCL and the Maryland Bylaws permit the
directors of the Maryland Company to fill vacancies in its Board
of Directors. The Maryland Bylaws provide that any vacancy on
the Board of Directors for any cause other than an increase in
the number of directors shall be filled by a majority of the
remaining directors, even if such majority is less than a quorum,
and any vacancy in the number of directors created by an increase
in the number of directors may be filled by a majority vote of
the entire Board of Directors.
LIMITATION ON CLASSES OF DIRECTORS. Although both the MGCL
and the DGCL permit the division of the board of directors into
classes of directors, the DGCL permits the creation of no more
than three such classes. The MGCL contains no such limitation.
Under the DGCL, the term of any class may not exceed three years.
Under the MGCL, the term of a director may not exceed five years.
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REMOVAL OF DIRECTORS. Under the DGCL, directors generally
may be removed, with or without cause, by the holders of a
majority of voting shares. The Delaware Certificate provides
that the stockholders shall have the right to propose the removal
of any or all of the directors by the affirmative vote of holders
of a majority of the outstanding shares entitled to vote in the
election of directors. The Delaware By-Laws provide that
directors may be removed, either with or without cause, at any
meeting of stockholders by a majority of stock represented and
entitled to vote thereat. The Maryland Charter provides that the
directors may be removed from office at any time, but only for
cause, by the affirmative vote of the holders of a majority of
the outstanding shares entitled to vote in the election of
directors. Cause is defined as, with respect to any particular
director, a final judgement of a court of competent jurisdiction
holding that such director caused demonstrable, material harm to
the Maryland Company through bad faith or active and deliberate
dishonesty.
AUTHORIZED SHARES OF CAPITAL STOCK. The Maryland Charter
authorizes the issuance of a greater number of shares of common
stock and preferred stock than currently provided for in the
Delaware Certificate. As of March 14, 1997, there were
40,000,000 shares of Common Stock authorized, of which 22,988,237
shares were issued and outstanding, and there were 5,000,000
shares of preferred stock authorized, of which none were issued
and outstanding. Upon approval of the Reincorporation by the
stockholders, the Board of Directors of the Maryland Company will
be authorized to issue up to 100,000,000 shares of Maryland
Common Stock from time to time, and to issue up to 20,000,000
shares of preferred stock (the "Maryland Preferred Stock") from
time to time without further stockholder approval. The Delaware
Certificate provides that preemptive rights shall not exist with
respect to shares of stock of the Company or securities
convertible into shares of stock of the Company. The Maryland
Charter provides that the Board of Directors of the Maryland
Company may, in setting the terms of shares of stock to be issued
by the Maryland Company, provide that holders of the shares will
have preemptive rights. Unless so provided by the Board of
Directors of the Maryland Company, holders of shares will have no
preemptive rights to purchase or subscribe for any additional
shares of Company stock, except to the extent the Maryland
Company may grant a stockholder preemptive rights pursuant a
written contract.
The greater number of shares of stock which the Maryland
Company is authorized to issue is recommended by the Board of
Directors in order to provide a sufficient reserve of shares to
satisfy future needs and finance the future growth of the
Company. If approved by the stockholders, the additional
authorized shares would be available for future issuance for
various corporate purposes and upon terms approved by the Board
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of Directors without further authorization by the stockholders
(subject to the requirements of the New York Stock Exchange).
Those purposes might include, without limitation, stock splits,
stock dividends or other distributions, financings, acquisitions,
stock grants, stock options and employee benefit plans. While
the Maryland Company has no present plans, agreements or
commitments for the issuance of additional shares of Maryland
Common Stock or Maryland Preferred Stock other than pursuant to
its employee benefit plans or upon exercise of stock options, the
Board of Directors believes that the availability of these shares
would allow the Maryland Company to issue shares of Maryland
Common Stock or Maryland Preferred Stock if market or other
conditions indicate that such a course of action is advisable.
DIVIDENDS AND OTHER DISTRIBUTIONS. Under the DGCL,
dividends may be paid out of the surplus of the corporation or,
if there is no surplus, out of net profits for the year in which
the dividend is declared and/or the preceding fiscal year.
Surplus is defined by the DGCL to be the excess of the net assets
of the corporation over its capital. The MGCL allows the payment
of dividends and other distributions (e.g., redemption of stock)
unless (i) the corporation would not be able to pay indebtedness
that became due in the ordinary course of business or (ii) the
corporation's total assets would be less than the sum of the
corporation's liabilities plus, unless the charter provides
otherwise (which the Maryland Charter does not), the amount that
would be needed upon dissolution to satisfy the preferential
rights of those stockholders whose preferential rights upon
dissolution are superior to those receiving the distribution.
The Company has historically paid monthly cash dividends and
plans to continue to do so. The Company does not believe that
the differences between Delaware and Maryland law regarding
dividends or distributions will result in any material
differences between the past practice of the Company and the
future practice of the Maryland Company in the payment of
dividends or distributions.
CERTAIN BUSINESS COMBINATIONS. The DGCL requires that
certain transactions between a corporation and the owner of 15%
or more of the outstanding voting stock of the corporation or an
affiliate of such person (an "Interested Stockholder") may not
occur for three years following the date such person became an
Interested Stockholder unless (i) approved by the board of
directors and holders of at least two-thirds of the outstanding
voting stock (other than shares controlled by the Interested
Stockholder), (ii) the board of directors approved the
acquisition of voting stock pursuant to which such person became
an Interested Stockholder or (iii) an exemption is available. As
permitted by the DGCL, the Delaware Certificate provides that the
Company shall not be governed by the provisions of the DGCL
described above.
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Under the MGCL, certain "business combinations" (including a
merger, consolidation, share exchange, or, in certain
circumstances, an asset transfer or issuance or reclassification
of equity securities) between a Maryland corporation and any
person who beneficially owns ten percent (10%) or more of the
voting power of the corporation's shares or an affiliate of the
corporation who, at any time within the two-year period prior to
the date in question, was the beneficial owner of ten percent
(10%) or more of the voting power of the then-outstanding voting
stock of the corporation (an "Interested Maryland Stockholder")
or an affiliate of such Interested Maryland Stockholder are
prohibited for five years after the most recent date on which the
Interested Maryland Stockholder becomes an Interested Maryland
Stockholder. Thereafter, the MGCL provides that any such
business combination must be recommended by the board of
directors of such corporation and approved by the affirmative
vote of at least (a) eighty percent (80%) of the votes entitled
to be cast by holders of outstanding voting shares of the
corporation and (b) two-thirds of the votes entitled to be cast
by holders of outstanding voting shares of the corporation other
than shares held by the Interested Maryland Stockholder with whom
(or with whose affiliate) the business combination is to be
effected, unless, among other things, the corporation's
stockholders receive a minimum price (as defined in the MGCL) for
their shares and the consideration is received in cash or in the
same form as previously paid by the Interested Maryland
Stockholder for its shares or the business combination is
approved or exempted by the board of directors of the corporation
prior to the time that the Interested Maryland Stockholder
becomes an Interested Maryland Stockholder. These provisions of
Maryland law do not apply, however, to business combinations that
are approved or exempted by the board of directors of the
corporation prior to the time that the Interested Maryland
Stockholder becomes an Interested Maryland Stockholder.
CONTROL SHARE ACQUISITIONS. The MGCL provides that "control
shares" of a Maryland corporation acquired in a "control share
acquisition" have no voting rights except to the extent approved
by a vote of two-thirds of the votes entitled to be cast on the
matter, excluding shares of stock owned by the acquiror or by
officers or directors who are employees of the corporation.
"Control Shares" are voting shares of stock which, if aggregated
with all other shares of stock previously acquired by such
person, would entitle the acquiror to exercise voting power in
electing directors within one of the following ranges of voting
power: (i) one-fifth or more but less than one-third, (ii) one-
third or more but less than a majority, or (iii) a majority or
more of all voting power. Control shares do not include shares
the acquiring person is then entitled to vote as a result of
having previously obtained stockholder approval. A "control
share acquisition" means the acquisition of control shares,
subject to certain exceptions.
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A person who has made or proposes to make a control share
acquisition, upon satisfaction of certain conditions (including
an undertaking to pay expenses), may compel the board of
directors to call a special meeting of stockholders to be held
within fifty (50) days of demand to consider the voting rights of
the shares. If no request for a meeting is made, the corporation
may itself present the question at any stockholders meeting. If
voting rights are not approved at the meeting or if the acquiring
person does not deliver an acquiring person statement as required
by the statute, then, subject to certain conditions and
limitations, the corporation may redeem any or all of the control
shares (except those for which voting rights have previously been
approved) for fair value determined, without regard to voting
rights, as of the date of the last control share acquisition or
of any meeting of stockholders at which the voting rights of such
are considered and not approved. If voting rights for control
shares are approved at a stockholders meeting and the acquiror
becomes entitled to vote a majority of the shares entitled to
vote, all other stockholders may exercise appraisal rights. The
fair value of the shares as determined for purposes of such
appraisal rights may not be less than the highest price per share
paid in the control share acquisition, and certain limitations
and restrictions otherwise applicable to the exercise of
dissenters' rights do not apply in the context of a control share
acquisition.
The control share acquisition statute does not apply to
shares acquired in a merger, consolidation or share exchange if
the corporation is a party to the transaction, or to acquisitions
approved or exempted by the charter or bylaws of the corporation.
The DGCL has no provisions comparable to the Maryland
control share acquisition statute.
The Maryland Bylaws contain a provision exempting from the
control share acquisition statue any and all acquisitions by any
person of the Maryland Company's shares of stock. The Board may,
however, amend the Maryland Bylaws at any time to eliminate such
provision.
DISSOLUTION OF THE COMPANY AND THE MARYLAND COMPANY. Under
the DGCL, a corporation may be dissolved if (i) the board of
directors of the corporation, by resolution adopted by a majority
of the whole board of directors at any meeting called for that
purpose, deems such dissolution advisable and (ii) a majority of
the outstanding stock of the corporation votes for the proposed
dissolution at a stockholders meeting called for the purpose of
acting upon such resolution. Dissolution of a corporation may
also be authorized without action by the board of directors if
all stockholders entitled to vote thereon shall consent thereto
in writing.
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The MGCL permits the dissolution of the Maryland Company if
(i) the board of directors adopts by a majority vote of the
entire board a resolution advising dissolution and (ii) the
dissolution is approved by the affirmative vote of not less than
two-thirds of all votes entitled to be cast on the matter. As
permitted by the MGCL, the Maryland Charter reduces the
stockholder approval requirement for dissolution from the
affirmative vote of not less than two thirds of the votes
entitles to be cast on the matter to the affirmative vote of a
majority of the votes entitled to be cast on the matter.
JUDICIAL DISSOLUTION. Under both the DGCL and the MGCL, if
a deadlock of the directors precludes corporate action, or if a
division of the stockholders makes election of directors
impossible, stockholders are permitted to seek judicial action.
Under the DGCL, the Court of Chancery may appoint a custodian or
receiver, while under the MGCL, involuntary dissolution by
judicial order may be sought only by stockholders entitled to
cast at least 25% of the votes entitled to be cast in the
election of directors. However, when the individuals in control
of the corporation are alleged to be acting illegally,
oppressively or fraudulently, or when the division among
stockholders is so severe that for a period which includes two
consecutive meeting dates the stockholders have failed to elect
successors to directors whose terms should have expired, any
stockholder entitled to vote in the election of directors may
petition for dissolution.
AMENDMENTS TO BYLAWS. Under the DGCL, the stockholders may
never be divested of the power to adopt, amend or repeal the
bylaws, although this power may be shared with the board of
directors. Under the MGCL, the power to adopt, amend or repeal
the bylaws may be conferred solely upon the stockholders or upon
the board of directors or may be shared by both groups.
Under the DGCL, the Delaware By-Laws may be altered, amended
or repealed or new bylaws adopted by a majority of the Board of
Directors, when such power is conferred upon the Board of
Directors by a Certificate of Incorporation (which the Delaware
Certificate does). The Delaware Certificate expressly authorizes
the Board of Directors to make, alter, amend or repeal the
Delaware By-Laws. The Delaware By-Laws provide that the Delaware
By-Laws generally may be amended or repealed or new By-Laws
adopted by a majority of the Board of Directors, that the
stockholders may also amend or repeal the By-Laws or adopt new
By-Laws and that all By-Laws made by the Board may be amended or
repealed by the stockholders. The sections of the Delaware By-
Laws relating to (i) the written statement the Company is
required to furnish to stockholders, (ii) the investment policies
and restrictions on investments of the Company (except for those
relating to the Company's right to borrow funds), (iii) the
annual report, (iv) amendments to the Delaware By-Laws and (v)
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the definitions of any terms used in these sections of the
Delaware By-Laws may not be amended, repealed or modified, or
inconsistent provisions adopted with respect thereto, without the
affirmative vote of the stockholders holding a majority of the
shares of stock of each class entitled to vote on the matter.
As permitted by the MGCL, the Maryland Charter and the
Maryland Bylaws provide that the Board of Directors of the
Maryland Company has the exclusive power to alter, amend or
repeal the Maryland Bylaws, although amendments to sections of
the Maryland Bylaws relating to (i) the written statement the
Company is required to furnish to the stockholders, (ii) the
investment policies and restrictions on investments of the
Company (except for those relating to the Company's right to
borrow funds), (iii) the annual report, (iv) amendments to the
Maryland Bylaws and (v) the definitions of any terms used in
these sections of the Maryland Bylaws, also require the
affirmative vote of the stockholders holding majority of the
shares of stock of each class entitled to vote on the matter.
DENIAL OF VOTING RIGHTS. The DGCL provides that holders of
the outstanding shares of a class of stock shall be entitled to
vote as a class upon a proposed amendment to the certificate of
incorporation, whether or not entitled to vote thereon by the
certificate of incorporation, if the amendment would change the
aggregate number of authorized shares or the par value of the
class or would adversely affect the powers, preferences or
special rights of the class. Under the MGCL, holders of the
outstanding shares of any class of stock may be denied all voting
rights.
PAYMENT FOR STOCK. The DGCL provides that future labor or
services do not constitute payment for stock or convertible
securities. The MGCL allows both a promissory note and contract
for future labor to constitute payment for stock or convertible
securities. The MGCL allows both a promissory note and a
contract for future labor to constitute consideration for the
issuance of stock.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS.
The Maryland Bylaws provide that (a) with respect to an annual
meeting of stockholders, nominations of persons for election to
the Board of Directors and the proposal of business to be
considered by stockholders may be made only (i) pursuant to the
Maryland Company's notice of the meeting, (ii) by the Board of
Directors or (iii) by a stockholder who is entitled to vote at
the meeting and has complied with the advance notice procedures
set forth in the Maryland Bylaws and (b) with respect to special
meeting of stockholders, only the business specified in the
Maryland Company's notice of meeting may be brought before the
meeting of stockholders and nominations of persons for election
to the Board of Directors may be made only (i) pursuant to the
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Maryland Company's notice of the meeting, (ii) by the Board of
Directors of (iii) provided that the Board of Directors has
determined that directors shall be elected at such meeting and
has complied with the advance notice provisions set forth in the
Maryland Bylaws.
The Delaware By-Laws contain no such provisions.
RESTRICTIONS ON OWNERSHIP AND TRANSFER OF COMMON STOCK. For
the Company to qualify as a REIT under the Code, no more than 50%
in value of its outstanding shares of stock may be owned,
actually or constructively, by five or fewer individuals (as
defined in the Code to include certain entities) during the last
half of a taxable year (other than the first year). In addition,
if the Company, or an owner of 10% or more of the Company,
actually or constructively owns 10% or more of a tenant of the
Company (or a tenant of any partnership in which the Company is a
partner), the rent received by the Company (either directly or
through any such partnership) from such tenant will not be
qualifying income for purposes of the REIT gross income tests of
the Code. Common Stock must also be beneficially owned by 100 or
more persons during at least 335 days of a taxable year of twelve
months or during a proportionate part of a shorter taxable year.
Because the Company expects to qualify as a REIT, the Delaware
Certificate and the Maryland Charter contains restrictions on the
ownership and transfer of Common Stock intended to assist the
Company in complying with these requirements.
The ownership limit provision in the Maryland Charter
provides that, subject to certain specified exceptions, no person
or entity may own, or be deemed to own by virtue of the
applicable constructive ownership provisions of the Code, more
than 9.8% (by number or value, whichever is more restrictive) of
the outstanding shares of Common Stock (the "Ownership Limit").
The constructive ownership rules are complex, and may cause
shares of Common Stock owned actually or constructively by a
group of related individuals and/or entities to be constructively
owned by one individual or entity. As a result, the acquisition
of less than 9.8% of the shares of Common Stock (or the
acquisition of an interest in an entity that owns, actually or
constructively, Common Stock) by an individual or entity, could,
nevertheless, cause that individual or entity, or another
individual or entity, to own constructively in excess of 9.8% of
the outstanding Common Stock and thus subject such shares to the
ownership limit provision in the Maryland Charter. The Board of
Directors may, but in no event will be required to, waive the
Ownership Limit with respect to a particular stockholder if it
determines that such ownership will not jeopardize the Company's
status as a REIT. As a condition of such waiver, the Board of
Directors may require opinions of counsel satisfactory to it
and/or undertakings or representations from the applicant with
respect to preserving the REIT status of the Company. The above
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provisions in the Maryland Charter are very similar to the
ownership limit provisions set forth in the Delaware Certificate.
The remedy provided in the Maryland Charter arising from a
violation of the Ownership Limit is different from the remedy
provided in the Delaware Certificate arising from a violation of
the comparable provisions in the Delaware Certificate. Pursuant
to the Maryland Charter, if any purported transfer of Common
Stock of the Company or any other event would otherwise result in
any person violating the Ownership Limit, then any such purported
transfer will be void and of no force or effect with respect to
the purported transferee (the "Prohibited Transferee") as to that
number of shares in excess of the Ownership Limit and the
Prohibited Transferee shall acquire no right or interest (or, in
the case of any event other than a purported transfer, the person
or entity holding record title to any such shares in excess of
the Ownership Limit (the "Prohibited Owner") shall cease to own
any right or interest) in such excess shares. Any such excess
shares described above will be transferred automatically, by
operation of law, to a trust, the beneficiary of which will be a
qualified charitable organization selected by the Company (the
"Beneficiary"). Within 20 days of receiving notice from the
Company of the transfer of shares to the trust, the trustee of
the trust (who shall be designated by the Company and be
unaffiliated with the Company and any Prohibited Transferee or
Prohibited Owner) will be required to sell such excess shares to
a person or entity who could own such shares without violating
the Ownership Limit and distribute to the Prohibited Transferee
an amount equal to the lesser of the price paid by the Prohibited
Transferee for such excess shares or the sales proceeds received
by the trust for such excess shares. In the case of any excess
shares resulting from any event other than a transfer, or from a
transfer for no consideration (such as a gift), the trustee will
be required to sell such excess shares to a qualified person or
entity and distribute to the Prohibited Owner an amount equal to
the lesser of the fair market value of such excess shares as of
the date of such event or the sales proceeds received by the
trust for such excess shares. In either case, any proceeds in
excess of the amount distributable to the Prohibited Transferee
or Prohibited Owner, as applicable, will be distributed to the
Beneficiary. Prior to a sale of any such excess shares by the
trust, the trustee will be entitled to receive, in trust for the
Beneficiary, all dividends and other distributions paid by the
Company with respect to such excess shares, and also will be
entitled to exercise all voting rights with respect to such
excess shares. Any dividend or other distribution paid to the
Prohibited Transferee or Prohibited Owner (prior to the discovery
by the Company that such shares had been automatically
transferred to a trust as described above) will be required to be
repaid to the trustee upon demand for distribution to the
Beneficiary. In the event that the transfer to the trust as
described above is not automatically effective (for any reason)
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<PAGE>
to prevent violation of the Ownership Limit, then the Maryland
Charter provides that the transfer of the excess shares will be
void.
Under the Delaware Certificate, any transfers of Common
Stock in violation of stock ownership limits set forth in such
certificate are void. The ownership limit provisions in the
Delaware Certificate may not apply to limit certain transactions
which could result in a constructive transfer or ownership of
Common Stock without an actual transfer of such stock. Because
the Maryland Charter is intended to restrict both actual and
constructive transfers and ownership of Common Stock, the
Maryland Charter should enhance the Company's ability to comply
with the REIT provisions of the Code.
In both the Delaware Certificate and the Maryland Charter,
if any purported transfer of Common Stock would cause the Company
to be beneficially owned by fewer than 100 persons, such transfer
will be null and void in its entirety and the intended transferee
will acquire no rights to the stock.
All certificates representing shares of Maryland Common
Stock will bear a legend referring to the restrictions set forth
in the Maryland Charter which are described above.
Under both the Delaware Certificate and the Maryland
Charter, every owner of a specified percentage (or more) of the
outstanding shares of Common Stock must file a completed
questionnaire with the Company containing information regarding
their ownership of such shares, as set forth in the Treasury
Regulations. Under current Treasury Regulations, the percentage
will be set between 0.5% and 5.0%, depending upon the number of
record holders of the Company's shares. In addition, each
stockholder shall upon demand be required to disclose to the
Company in writing such information as the Company may request in
order to determine the effect, if any, of such stockholder's
actual and constructive ownership of Common Stock on the
Company's status as a REIT and to ensure compliance with the
Ownership Limit.
The foregoing ownership limitations may have the effect of
precluding acquisition of control of the Company without the
consent of the Board of Directors.
VALIDITY OF THE MARYLAND COMMON STOCK
The validity of the Maryland Common Stock will be passed
upon for the Maryland Company by Ballard Spahr Andrews &
Ingersoll, Baltimore, Maryland.
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VOTE REQUIRED; BOARD RECOMMENDATION
The affirmative vote of a majority of the outstanding shares
of each class of the Company's capital stock entitled to vote at
the Meeting is required to approve the Reincorporation proposal.
Abstentions and broker non-votes will have the effect of votes
AGAINST the Reincorporation proposal. The persons named as
proxies in the accompanying form of proxy intend to vote in favor
of Reincorporation. A vote FOR the Reincorporation proposal will
constitute approval of (i) the change in the Company's state of
incorporation through a merger of the Company into the Maryland
Company, (ii) the Maryland Charter, (iii) the Maryland Bylaws,
and (iv) all other aspects of the Reincorporation proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
APPROVAL OF THE PROPOSAL TO REINCORPORATE THE COMPANY IN THE
STATE OF MARYLAND.
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<PAGE>
PROPOSAL 2
ELECTION OF DIRECTORS
GENERAL
The Company's Board of Directors currently consists of seven
directors. If the Reincorporation is approved by the
stockholders and becomes effective, the Maryland Company will be
governed by a classified Board of Directors consisting of seven
directors. The Director nominees listed below are named in the
Maryland Charter as the initial Board of Directors of the
Maryland Company, to serve until the term of the class set forth
next to his name below expires and his successor is elected and
qualifies. (See "Proposal 1 -- Reincorporation of the Company in
Maryland and Related Changes to the Rights of Stockholders --
Classified Board" above.) The Maryland Company's directors will
be divided into three classes, and one class of directors will be
elected at each annual meeting of stockholders. Each director of
the Maryland Company (except, initially, the directors in Classes
I and II with terms expiring in 1998 and 1999, respectively) will
hold office for a term of three years and until his or her
successor is duly elected and qualified. At each annual meeting
of stockholders of the Maryland Company, the successors to the
class of directors whose terms expire at that meeting will be
elected to hold office for a term expiring at the annual meeting
of stockholders held in the third year following the year of
their election. The terms of office of two directors will expire
in 1998 (Class I), two directors will expire in 1999 (Class II)
and three directors will expire in 2000 (Class III). If the
Reincorporation is not approved, the Director nominees, if
elected, will each serve until the next annual meeting of
stockholders and his successor is elected and qualified.
VOTE REQUIRED; BOARD RECOMMENDATION
The seven directors will be elected by a favorable vote of a
plurality of the shares of stock represented and entitled to
vote, in person or by proxy, at the Annual Meeting. Accordingly,
abstentions or broker non-votes as to the election of directors
will not affect the election of the candidates receiving the
plurality of votes. Unless instructed to the contrary, the
shares represented by the proxies will be voted FOR the election
of each of the seven nominees named below as directors. Although
it is anticipated that each nominee will be able to serve as a
director, should any nominee become unavailable to serve, the
shares represented by the proxies will be voted for another
person or persons designated by the Company's Board of Directors.
In no event will the proxies be voted for more than seven
nominees.
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<PAGE>
DIRECTOR NOMINEES
The following table sets forth certain information regarding
the Director nominees all of whom are current directors of Realty
Income:
NAME AGE TITLE CLASS
William E. Clark 59 Chairman of the Board III
and Chief Executive Officer
Richard J. VanDerhoff 44 President and III
Chief Operating Officer
Thomas A. Lewis 44 Vice Chairman of the Board III
and Vice President Capital
Markets
Donald R. Cameron 57 Director II
Roger P. Kuppinger 56 Director I
Michael D. McKee 51 Director I
Willard H. Smith 59 Director II
WILLIAM E. CLARK has been the Chairman of the Board of
Directors and Chief Executive Officer and a Director of the
Company since September 1993 and has been involved as a principal
in commercial real estate acquisition, development, management
and sales for over 30 years. His involvement includes land
acquisition, tenant lease negotiations, construction and sales of
prime commercial properties for regional and national fast-food
restaurant, automotive and retail chain store operations
throughout the United States. He had been a director and an
officer of R.I.C. Advisor, Inc. ("R.I.C. Advisor") since 1969
until it was merged with the Company on August 17, 1995 (the
"Merger").
RICHARD J. VANDERHOFF has been President and Chief Operating
Officer of Realty Income since November 1994 and a Director of
the Company since July 1996 and had been with R.I.C. Advisor from
1987 until the Merger. From August 1994 to November 1994, he
served as general counsel of the Company. Prior to 1987, he was
in private law practice specializing in real property and
business law (1980 - 1984) and was employed as Vice President,
General Counsel and Secretary of FNCO Corporation, an owner and
operator of community newspaper companies located throughout the
Midwest United States. He graduated from Jacksonville
University, B.S., and the University of San Diego School of Law,
J.D.
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<PAGE>
THOMAS A. LEWIS has been the Vice Chairman of the Board of
Directors, Vice President, Capital Markets and a Director of the
Company since September 1993 and had been with R.I.C. Advisor
from 1987 until the Merger. Prior to joining R.I.C. Advisor, he
served in various capacities, including Senior Vice President
with Johnstown Capital, a real estate management and syndication
company (1982-1987), and Investment Specialist with Sutro & Co.,
a member of the New York Stock Exchange (1979-1982), and was
employed by the Procter & Gamble Company (1974-1979). He
graduated from Chaminade University of Hawaii, B.A., and holds
NASD General Securities (Series 7) and Registered Principal
(Series 24) licenses.
DONALD R. CAMERON has been a Director of the Company since
August 1994 and is a co-founder and President of Cameron, Murphy
& Spangler, Inc., a securities broker-dealer firm located in
Pasadena, California. He graduated from the University of
Glasgow, Scotland, B.Sc. Prior to founding Cameron, Murphy &
Spangler in 1975, he worked at the securities brokerage firm of
Glore Forgan Staats, Inc. and its successors (1969-1975). He is
currently a director of Ayr United Football and Athletic Club,
Ltd. Mr. Cameron is chairman of the Compensation Committee and
is a member of the Audit Committee, the Special Committee and the
Corporate Governance Committee.
ROGER P. KUPPINGER has been a Director of the Company since
August 1994 and is a self-employed investment banker and
financial advisor and is an active investor in both private and
public companies. Prior to March 1994, he was a Managing
Director at the investment banking firm Sutro & Co. Inc. He
graduated from Northwestern University, B.S. and M.B.A., and from
LaSalle University in Chicago, LL.B. Prior to joining Sutro in
1969, he worked at First Interstate Bank, formerly named United
California Bank (1964-1969). He has served on over ten boards of
directors for both public and private companies, and currently
serves on the board of directors of Harlyn Products, Inc. and
REIT of California. Mr. Kuppinger is chairman of the Audit
Committee and is a member of the Compensation Committee, the
Special Committee and the Corporate Governance Committee.
MICHAEL D. MCKEE has been a Director of the Company since
August 1994 and has been Executive Vice President of The Irvine
Company since March 1994 and has served as Chief Financial
Officer of The Irvine Company since December 1996. Prior
thereto, he was a partner in the law firm of Latham & Watkins.
He graduated from Pacific College, B.A., University of Southern
California, M.A., and University of California at Los Angeles,
J.D. His business and legal experience includes numerous
acquisition and disposition transactions, as well as a variety of
public and private offerings of equity and debt securities. He
is currently a member of the board of directors of Health Care
Property Investors, Inc., Circus Circus Enterprises, Inc. and
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<PAGE>
Irvine Apartment Communities, Inc. Mr. McKee is chairman of the
Special Committee and is a member of the Compensation Committee,
the Audit Committee and the Corporate Governance Committee.
WILLARD H. SMITH JR. has been a Director of the Company
since July 1996 and was the Managing Director, Equity Capital
Markets Division, of Merrill Lynch & Co. from 1983 until his
recent retirement. Prior to joining Merrill Lynch in 1979, he
was employed by F. Eberstadt & Co. (1971 - 1979). Mr. Smith also
serves on the board of directors of three investment companies:
Cohen & Steers Realty Shares; Cohen & Steers Realty Income Fund;
and Cohen & Steers Total Return Realty Fund. Additionally, he is
a member of the board of directors of Essex Property Trust and
Highwoods Property Trust, two NYSE listed real estate investment
trusts. Mr. Smith is the chairman of the Corporate Governance
Committee and is a member of the Audit Committee and the
Compensation Committees of the Board of Directors.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors is comprised
of Messrs. Cameron, Kuppinger (chairman), McKee and Smith. The
Audit Committee's principal responsibilities include recommending
the selection of the Company's independent auditors to the Board
of Directors, approving any special assignments given to the
independent auditors and reviewing (i) the scope and results of
the audit engagement with the independent auditors and
management, including the accountant's letter of comments and
management's responses thereto, (ii) the independence of the
independent auditors, (iii) the effectiveness and efficiency of
the Company's internal accounting staff and (iv) any proposed
significant accounting changes.
The Compensation Committee of the Board of Directors is
comprised of Messrs. Cameron (chairman), Kuppinger, McKee and
Smith. The Compensation Committee's principal responsibilities
include establishing remuneration levels for officers of the
Company, reviewing management organization and development,
reviewing significant employee benefits programs and establishing
and administering executive compensation programs, including
bonus plans, stock option and other equity-based programs,
deferred compensation plans and any other cash or stock incentive
programs.
The Special Committee of the Board of Directors is comprised
of Messrs. Cameron, Kuppinger and McKee (chairman). The Special
Committee was formed in August 1994 to explore the advisability
of the combination of the Company and R.I.C. Advisor. On behalf
of Realty Income, the Special Committee negotiated the terms of
the Merger on behalf of Realty Income which was consummated on
August 17, 1995.
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<PAGE>
The Corporate Governance Committee of the Board of Directors
was formed in November 1996 and is comprised of Messrs. Cameron,
Kuppinger, McKee and Smith (chairman). The Corporate Governance
Committee's principal purpose is to provide counsel to the Board
of Directors with respect to (i) organization, membership and
function of the Board of Directors, (ii) structure and membership
of the committees of the Board of Directors and (iii) succession
planning for the executive management of the Company.
The Board of Directors may from time to time establish
certain other committees to facilitate the management of the
Company.
The Maryland Company will have an Audit Committee, a
Compensation Committee, a Special Committee and a Corporate
Governance Committee comprised of the same directors and to
perform the same tasks described above.
MEETINGS AND ATTENDANCE
The Board of Directors met 13 times during the fiscal year
ended December 31, 1996. The Audit Committee and the
Compensation Committee met three and nine times in 1996,
respectively. The Special Committee did not hold any meetings in
1996. The Corporate Governance Committee was formed in November
1996 and did not hold any meetings in 1996. All directors
attended at least 75% of the aggregate of (i) the total number of
meetings of the Board and (ii) the total number of meetings of
the committees of the Board on which such directors served.
COMPENSATION OF THE COMPANY'S DIRECTORS
No officer of the Company receives or will receive any
compensation for serving the Company as a member of the Board of
Directors or any of its committees. Directors who are not
officers of the Company receive an annual fee of $15,000 for
serving on the Board of Directors. Such directors also receive
fees of $1,000 for attending Board of Directors meetings in
person, $500 ($750 for the chairman of the committee) for
attending Board of Directors committee meetings in person, $200
for attending Board of Directors meetings by telephone and $200
($450 for the chairman of the committee) for attending Board of
Director committee meetings by telephone. Directors serving on
the Special Committee received $1,000 ($1,500 for the chairman of
the committee) for all meetings of the Special Committee whether
attended in person or by telephone. The Company may also
reimburse such directors for travel expenses incurred in
connection with their activities on behalf of the Company. In
addition, under the Company's stock incentive plan, upon his or
her initial appointment to the Board of Directors (and every four
years after the date of such appointment if the Director is still
serving as a Director), each Director who is not an officer of
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<PAGE>
the Company is automatically granted options to purchase 10,000
shares of Realty Income Common Stock at the then current market
price. These options vest during the Directors' continued
service period at a rate of 2,500 shares per year. As of March
14, 1997, each of Messrs. Cameron, Kuppinger and McKee held
options to purchase 10,000 shares of Realty Income Common Stock
at an exercise price of $20.00 per share, of which options to
purchase 5,000 shares of Realty Income Common Stock are currently
exercisable. As of March 14, 1997, Mr. Smith held options to
purchase 10,000 shares of Realty Income Common Stock at an
exercise price of $21.625 per share, of which none are currently
exercisable.
OFFICERS OF THE COMPANY
NAME AGE TITLE
William E. Clark 59 Chairman of the Board and
Chief Executive Officer
Richard J. VanDerhoff 43 President and Chief
Operating Officer
Thomas A. Lewis 44 Vice Chairman of the Board
and Vice President
Capital Markets
John H. Wolfe 48 Vice President,
Portfolio Acquisitions
Gary M. Malino 39 Vice President, Chief Financial
Officer and Treasurer
Michael R. Pfeiffer 36 Vice President, General Counsel
and Secretary
Richard G. Collins 48 Vice President,
Portfolio Management
Biographical information with respects to Messrs. Clark,
VanDerhoff and Lewis is set forth above under "Proposal 2 --
Election of Directors -- Director Nominees."
GARY M. MALINO has been Chief Financial Officer of the
Company since August 1994 and the Vice President, Chief Financial
Officer and Treasurer of the Company since August 1995 and had
been with R.I.C. Advisor from 1985 until the Merger. Prior to
joining R.I.C. Advisor in 1985, he was a Certified Public
Accountant ("CPA") with Kendall & Forman, an accountancy
corporation (1981-1985) and Assistant Controller with McMillin
Development Company, a real estate development company (1979-
1981). He graduated from San Diego State University, B.S.
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<PAGE>
JOHN H. WOLFE has been Vice President, Portfolio
Acquisitions of the Company since August 1995 and had been with
R.I.C. Advisor from 1983 until the Merger. He expects to retire
from this position in June 1997. Prior to joining R.I.C.
Advisor, he was the Director of Development for Black Angus
Restaurants (1978-1983) and owned and operated a real estate
investment company (1975 - 1978). He graduated from San Diego
State University, B.S.
MICHAEL R. PFEIFFER has been Vice President, General Counsel
and Secretary of the Company since August 1995 and had been with
R.I.C. Advisor from 1990 until the Merger. Prior to joining
R.I.C. Advisor he was in private practice specializing in real
estate transactional law (1987-1990), and was employed as
Associate Counsel with First American Title Insurance Company
(1986-1987). He graduated from the University of Rhode Island,
B.S., and the University of San Diego School of Law, J.D. He is
a licensed attorney and member of the State Bar of California and
the State Bar of Florida.
RICHARD G. COLLINS has been Vice President, Portfolio
Management of the Company since August 1995 and had been with
R.I.C. Advisor from 1990 until the Merger. Prior to joining
R.I.C. Advisor, he was involved as a principal in the acquisition
and sale of land and commercial real estate and a general partner
for land and commercial real estate partnerships (1979-1990) and
a leasing and sales specialist in the Office Properties Division
for Grubb & Ellis Commercial Real Estate Services (1974-1979).
He graduated from San Diego State University, B.S.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the
compensation awarded to, earned by or paid during the fiscal
years ended December 31, 1996 and 1995 to the Company's Chief
Executive Officer and to the other four most highly compensated
executive officers of the Company for the fiscal years ended
December 31, 1996 and 1995 (the "Named Executive Officers").
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<PAGE>
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------- ----------------------------------------
Awards Payouts
------------------- -------
Restricted All Other
Name And Options Stock LTIP Compen-
Principal Position Year (1) Salary Bonus (#) Awards (3) Payouts sation (4)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
WILLIAM E. CLARK 1996 $250,000 -- 8,000 900 -- $4,750
Chairman of the 1995(2) $ 98,958 --
Board and Chief
Executive Officer
RICHARD J. VANDERHOFF 1996 $225,000 -- 6,300 600 -- $4,750
President and Chief 1995(2) $ 89,063 --
Operating Officer
THOMAS A. LEWIS 1996 $200,000 -- 4,800 500 -- $4,750
Vice Chairman of 1995(2) $ 79,167 --
the Board and Vice
President Capital
Markets
JOHN H. WOLFE 1996 $200,000 -- 4,800 500 -- $4,750
Vice President 1995(2) $ 79,167 --
Property
Acquisitions
GARY M. MALINO 1996 $175,000 -- 4,200 400 -- $4,750
Vice President, 1995(2) $ 69,271 --
Chief Financial
Officer and
Treasurer
</TABLE>
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<PAGE>
____________________
(1) Prior to August 17, 1995, no executive officer of the
Company, including the Chief Executive Officer, received any
compensation from the Company, but rather received compensation
from R.I.C. Advisor for services as an employee and officer of
R.I.C. Advisor. Subsequent to the merger of R.I.C. Advisor with
the Company, all officers and employees of the Company were
compensated directly by the Company.
(2) Salary figures are for the period from August 17, 1995
through December 31, 1995 and are presented on annualized
salaries of $250,000; $225,000; $200,000; $200,000 and $175,000
for each of Messrs. Clark, VanDerhoff, Lewis, Wolfe and Malino,
respectively. None of the Named Executive Officers received any
other compensation from the Company in 1995 for their services as
officers of the Company. In connection with the merger of R.I.C.
Advisor and the Company, each of the Named Executive Officers
received Common Stock of the Company. See "--Certain
Transactions".
(3) Restricted Stock is awarded pursuant to the Company's
management incentive plan. All awards granted under the
management incentive plan are made in accordance with the
provisions of the Company's stock incentive plan. Restricted
Stock vests over three years. Dividends on the Restricted Stock
shall be payable from the date of grant.
(4) Represents the amount the Company contributes pursuant to a
401(k) retirement plan. Under the terms of this plan, the
Company matches 50% of the first 6% of the employee's salary.
Employees may contribute up to 15% of their salary, capped at
$9,500, with the maximum amount of the Company's contribution
being $4,750.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in
1996 to Named Executive Officers.
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<PAGE>
<TABLE>
<CAPTION>
Individual Grants
- --------------------------------------------------------------------
Potential
Realizable Value
At Assumed Annual
% Of Total Rates Of Stock
Number Of Options Price Apprecia-
Shares Granted To Exercise tion For Option
Underlying Employees Price Term (2)
Options In Fiscal Per Expiration -------------------
Name Granted (1) Year Share Date 5% 10%
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William E. Clark 8,800 26.7 $23.13 11/1/06 $128,008 $324,397
Richard J. VanDerhoff 6,300 19.1 $23.13 11/1/06 $ 91,642 $232,239
Thomas A. Lewis 4,800 14.5 $23.13 11/1/06 $ 69,822 $176,944
John W. Wolfe 4,800 14.5 $23.13 11/1/06 $ 69,822 $176,944
Gary M. Malino 4,200 12.7 $23.13 11/1/06 $ 61,095 $154,826
</TABLE>
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<PAGE>
____________________
(1) Options vest ratably over three years. Under the terms of
the Company's stock incentive plan, the Compensation Committee
retains discretion, subject to certain restrictions, to modify
the terms of outstanding options and to reprice outstanding
options. Options are granted for a term of 10 years, subject to
earlier termination in certain events related to termination of
employment. The option exercise price is equal to fair market
value of the shares on the date of grant.
(2) Assumed annual rates of stock price appreciation for
illustrative purposes only. Actual stock prices will vary from
time to time based upon market factors and the Company's
financial performance. No assurance can be given that these
appreciation rates will be achieved.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE
TABLE
The following table provides information related to the
exercise of stock options during the year ended December 31, 1996
by each of the Named Executive Officers and the 1996 fiscal year-
end value of unexercised options.
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<PAGE>
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options Options at FY-End
Shares at FY-End Exercisable/
Acquired Value Exercisable/ Unexercisable
Name on Exercise Realized Unexercisable (1)
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William E. Clark -- -- 0/8,800 $0/6,556
Richard J. VanDerhoff -- -- 0/6,300 $0/4,694
Thomas A. Lewis -- -- 0/4,800 $0/3,576
John H. Wolfe -- -- 0/4,800 $0/3,576
Gary M. Malino -- -- 0/4,200 $0/3,129
</TABLE>
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<PAGE>
____________________
(1) Market value of underlying Common Stock on date of fiscal
year-end minus the exercise price. The share price as of
December 31, 1996 was $23.875.
EMPLOYMENT AGREEMENTS
Each of Messrs. Clark, VanDerhoff, Lewis, Wolfe and Malino
have entered into employment agreements with the Company pursuant
to which each employee receives a base salary of $250,000,
$25,000, $200,000, $200,000 and $175,000, respectively, and the
right to receive severance compensation upon the occurrence of
certain events as specified in the agreements. The term of each
employment agreement is indefinite. The employee may terminate
the agreement at any time upon two weeks' written notice to the
Company. The Company may terminate the agreement without cause
at any time upon written notice to the employee. The employment
agreements provide that upon termination by the Company,
including termination resulting from a change in control of the
Company, the employee will be entitled to receive monthly
severance payments in an amount equal to the employee's base
salary, payable in monthly installments. Each of Messrs.
VanDerhoff, Lewis, Wolfe and Malino is entitled to receive
severance payments for 12 months following termination, and Mr.
Clark is entitled to receive severance payments for 18 months
following termination. The amount of severance compensation is
increased by 50% in the event of a termination resulting from a
change in control of the Company.
The employment agreements provide that the employee must
devote his full time, attention and energy to the business of the
Company and may not engage in any other business activity which
would interfere with the performance of his duties or be
competitive with the Company, unless specifically permitted by
the Board. This restriction does not prevent the employee from
making passive investments in a business not in competition with
the Company, so long as the investment does not require the
employee's services in a manner that would impair the performance
of his duties under the employment agreement.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee, which is comprised of four
independent non-employee directors, is responsible for, among
other things, establishing remuneration levels for officers of
the Company and establishing and administering executive
compensation programs.
The compensation policies of the Company have been
structured to link the compensation of the executive officers of
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<PAGE>
the Company with enhanced stockholder value. Through the
establishment of short- and long-term incentive plans, the
Company seeks to align the financial interests of the executive
officers with those of its stockholders.
EXECUTIVE COMPENSATION PHILOSOPHY
In designing its compensation programs, the Company has
followed its belief that compensation should reflect the value
created for stockholders while supporting the business strategies
and long-range plans of the Company and the markets the Company
serves. In doing so, the compensation programs reflect the
following themes:
A compensation program that stresses the Company's
financial performance and the executive officers' individual
performance.
A compensation program that strengthens the
relationship between pay and performance by providing variable,
at-risk compensation that is reflective of current market
practices and comparable executive rates and is dependent upon
the level of success in meeting specified Company and individual
performance goals.
An annual incentive plan that supports a performance-
oriented environment and which generates a portion of
compensation based on the achievement of specific performance
goals, with superior performance resulting in total annual
compensation above competitive levels.
A long-term incentive plan that is designed to reward
executive officers for long-term strategic management of the
Company and the enhancement of stockholder value.
The Compensation Committee will review and determine the
compensation of the executive officers of the Company with this
philosophy on compensation as its basis.
EXECUTIVE COMPENSATION COMPONENTS
The Company's executive compensation is based on two
components, each of which is intended to serve the overall
compensation philosophy.
BASE SALARY. Base salary is set at a level competitive with
amounts paid to executive officers of comparable companies with
similar business structure, size and marketplace orientation. In
determining appropriate salary levels, the Compensation Committee
considers the individual's scope of responsibility, experience
and performance. In addition, the Compensation Committee reviews
competitive market and industry data compiled by independent
Page 38
<PAGE>
compensation consultants. The data provided compares the
Company's compensation practices to a group of comparable
companies which tend to have similar business structure, size and
marketplace orientation.
Salaries for executive officers are reviewed by the
Compensation Committee on an annual basis. Increases to base
salaries are driven primarily by individual performance. Base
salaries allow executives to be rewarded for individual
performance based on the Company's evaluation process which
encourages the development of executives and sustained levels of
contribution to the Company. Base salaries also offer security
to executives and allow the Company to attract competent
executive talent and maintain a stable management team.
EXECUTIVE INCENTIVE COMPENSATION. In August 1996, the
Company adopted a Management Incentive Plan which is linked to
the long term performance of the Company. Executive officers are
eligible to receive annual grants of non-qualified stock options
and restricted stock based upon the achievement by the executive
officers of annual financial criteria stated in terms of target
and maximum goals as determined by the Compensation Committee at
the beginning of the fiscal year and the following three factors:
(a) growth in the Company's funds from operations ("FFO"), which
is a common statistical benchmark in the real estate investment
trust ("REIT") industry, (b) the Company's performance compared
to a peer group of comparable companies, and (c) the executive's
individual performance. In keeping with the Company's commitment
to provide a total compensation package which emphasizes at-risk
components of compensation, awards granted under the plan are
intended to retain and motivate executive officers to improve
long-term stock market performance.
CHIEF EXECUTIVE OFFICER COMPENSATION. In 1996, William E.
Clark, the Company's Chairman and Chief Executive Officer,
received base compensation of $250,000. In accordance with the
terms of the Management Incentive Plan, the Compensation
Committee established an FFO performance target at the beginning
of the 1996 fiscal year. Mr. Clark's award under the Management
Incentive Plan is attributable 75% to FFO performance and 25% to
total shareholder return as compared to the Company's peer group.
Mr. Clark's incentive award for 1996 was $107,859, which amount
was granted 50% in restricted stock and 50% in stock options.
The restricted stock and the stock options vest one-third each
year. Effective January 1997, Mr. Clark and the Compensation
Committee have agreed to a restructuring of his salary, reducing
his base compensation to $100,000 and increasing his potential
award under the Management Incentive Plan so that a larger
percentage of his compensation is tied to FFO performance and
total shareholder return.
Page 39
<PAGE>
RULE 162(m). The 1993 Omnibus Budget Reconciliation Act
("OBRA") became law in August 1993. Under the new law, income
tax deductions of publicly-traded companies in tax years
beginning on or after January 1, 1994 may be limited to the
extent total compensation (including base salary, annual bonus,
stock option exercises, and non-qualified benefits) for certain
executive officers exceeds $1 million (less the amount of any
"excess parachute-payments" as defined in Section 280G of the
Code) in any one year. Under OBRA, the deduction limit does not
apply to payments which qualify as "performance-based." To
qualify as "performance-based," compensation payments must be
based solely upon the achievement of objective performance goals
and made under a plan that is administered by a committee of
outside directors. In addition, the material terms of the plan
must be disclosed to and approved by stockholders, and the
compensation committee must certify that the performance goals
were achieved before payments can be made.
The Compensation Committee intends to design the Company's
compensation to conform with the OBRA legislation and related
regulations so that total compensation paid to any employee will
not exceed $1 million in any one year, except for compensation
payments which qualify as "performance-based." The Company may,
however, pay compensation which is not deductible in limited
circumstances when sound management of the Company so requires.
Donald R. Cameron, Chairman
Roger P. Kuppinger
Michael D. McKee
Willard H. Smith Jr.
Date: March __, 1997
THE ABOVE REPORT OF THE COMPENSATION COMMITTEE WILL NOT BE
DEEMED TO BE INCORPORATED BY REFERENCE INTO ANY FILING BY THE
COMPANY UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT THAT THE COMPANY
SPECIFICALLY INCORPORATES THE SAME BY REFERENCE.
STOCK PERFORMANCE GRAPH
As a part of the rules concerning executive compensation
disclosure, Realty Income is obligated to provide a chart
comparing the yearly percentage change in the cumulative total
stockholder return on Realty Income Common Stock over a five-year
period. However, since Realty Income Common Stock has been
publicly traded only since October 18, 1994, such information is
provided from this date through December 31, 1996.
The chart below compares the performance of Realty Income
Common Stock with the performance of an index including all
securities for U.S. companies listed on Standard & Poor's 500
Page 40
Total Return Index (the "S&P 500 Total Return Index") and of a
peer group of companies, measuring the changes in common stock
prices from October 18, 1994 through December 31, 1996. The
chart assumes an investment of $100 on October 18, 1994, and as
required by the Commission, all values shown assume the
reinvestment of all distributions, if any, and, in the case of
the peer group, are weighted to reflect the market capitalization
of the component companies. The peer group consists of Franchise
Finance Corporation of America, Lexington Corporate Properties,
Inc., Commercial Net Lease Realty and Tri-Net Corporate Realty
Trust.
TOTAL RETURN PERFORMANCE
[GRAPH]
Page 41
<PAGE>
<TABLE>
<CAPTION>
PERIOD ENDING
-------------------------------------------------------------------------------
1994 1995 1996
============== ============================= ==============================
10-18 12-31 3-31 6-30 9-30 12-31 3-31 6-30 9-30 12-31
-------------- ----------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Realty
Income
Corp 100.00 108.41 119.39 142.36 144.66 161.50 149.44 152.86 171.16 183.27
Realty
Income
Peers 100.00 102.75 108.75 122.14 124.37 130.80 143.26 149.68 154.31 167.05
S&P 500
Total
Return 100.00 98.83 107.25 115.32 123.61 131.06 125.40 138.45 146.90 172.70
</TABLE>
Page 42
<PAGE>
COMPLIANCE WITH FEDERAL SECURITIES LAWS
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Company's officers and directors, and
persons who own more than ten percent of a registered class of
the Company's equity securities (collectively, "Insiders"), to
file with the Commission initial reports of ownership and reports
of changes in ownership of Realty Income Common Stock and other
equity securities of the Company. Insiders are required by
regulation of the Commission to furnish the Company with copies
of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the
copies of such reports furnished to the Company or written
representations that no other reports were required, during the
year ended December 31, 1996, all Insiders complied with all
Section 16(a) filing requirements applicable to them.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 15, 1997 certain
information with respect to the beneficial ownership of shares of
Realty Income Common Stock by (i) each director and Named
Executive Officer and (ii) all directors and executive officers
of the Company as a group. The Company does not know of any
person who beneficially owns 5% or more of the outstanding shares
of Realty Income Common Stock. Except as otherwise noted, the
Company believes that the beneficial owners of shares of Realty
Income Common Stock listed below, based on information furnished
by such owners, have sole voting and investment power with
respect to such shares.
Shares of Realty Income
Common Stock
Beneficially Owned
-----------------------
Name Number Percent
- -----------------------------------------------------------------
William E. Clark (1) 548,241 2.4
Richard J. VanDerhoff (2) 80,478 *
Thomas A. Lewis 78,953 *
John H. Wolfe (3) 114,329 *
Gary Malino (4) 64,669 *
Donald R. Cameron (5)(6) 16,081 *
Michael D. McKee (6) 7,000 *
Roger P. Kuppinger (6) 5,500 *
Willard H. Smith Jr. 1,000 *
All directors and executive
officers of the Company,
as a group (10 persons) (7) 917,126 4.0%
Page 43
<PAGE>
____________________
* Less than one percent
(1) Mr. Clark's total includes 544,263 shares owned of record by
The William E. Clark, Jr. and Evelyn J. Clark Family Trust (the
"Clark Family Trust"), of which he is a trustee and 449 shares
owned of record by his wife. Mr. Clark disclaims beneficial
ownership of the shares owned of record by his wife.
(2) Mr. VanDerhoff's total includes 2,440 shares owned of record
by his wife, as to which he disclaims beneficial ownership.
(3) Mr. Wolfe's total includes 12,835 shares owned by J.H. Wolfe
Properties, Inc. and 10,976 shares owned by J.H. Wolfe
Properties, Inc. Pension and Profit Sharing Plan, 14,080 shares
owned of record by the Wolfe Family Trust of which he is the
trustee, and 825 shares owned of record by his son. Mr. Wolfe
disclaims beneficial ownership of the shares owned of record by
his son.
(4) Mr. Malino's total includes 206 shares owned of record by
his wife, as to which he disclaims beneficial ownership, and
1,043 shares owned of record jointly by he and his wife, as to
which he shares voting and disposition power with his wife.
(5) Mr. Cameron's total includes 9400 shares owned of record by
the Cameron, Murphy and Spangler, Inc. Amended and Restated
Pension Trust dated April 1, 1984, of which he is the trustee.
Of the 9400 shares, 9,000 shares are in the account of Mr.
Cameron, 200 shares in the account of his son, Lachlan Cameron,
and 200 shares in the account of his daughter, Elsie Berquist.
Mr. Cameron's total also includes 695 shares owned of record by
his wife, and 749 shares owned of record by his son. Mr. Cameron
disclaims beneficial ownership of the 695 shares owned by his
wife, 749 shares owned by his son and the 400 shares owned by the
Cameron, Murphy and Spangler, Inc. Amended and Restated Pension
Trust in the accounts of Lachlan Cameron and Elsie Berquist.
(6) For each of Messrs. Cameron, McKee and Kuppinger the total
includes 2,500 shares subject to options that became exercisable
on August 24, 1995 and 2,500 shares subject to options that
became exercisable on August 24, 1996.
(7) See notes (1) through (6).
Page 44
<PAGE>
AUDITORS
Subject to its discretion to appoint alternative auditors if
it deems such action appropriate, the Board of Directors has
retained KPMG Peat Marwick LLP as the Company's auditors for the
current fiscal year. The Board of Directors has been advised
that KPMG Peat Marwick LLP is independent with respect to the
Company and its subsidiaries within the meaning of the Securities
Act and the applicable published rules and regulations
thereunder. Representatives of KPMG Peat Marwick LLP are
expected to be present at the Annual Meeting and will have the
opportunity to make statements if they desire and to respond to
appropriate questions from stockholders.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
All proposals of stockholders intended to be presented at
the Company's 1998 Annual Meeting of Stockholders must be
received by the Secretary of the Company by December 2, 1997 to
be considered for possible inclusion in the proxy statement and
form of proxy used in connection with such annual meeting.
YOUR PROXY IS IMPORTANT
WHETHER YOU OWN FEW OR MANY SHARES
PLEASE DATE, SIGN AND MAIL THE ENCLOSED PROXY CARD TODAY.
Page 45
<PAGE>
Appendix A
AGREEMENT AND PLAN OF MERGER
Appendix A
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
_______________, 1997, between Realty Income Corporation, a
Delaware corporation (the "Company"), and Realty Income of
Maryland, Inc., a Maryland corporation (the "Maryland Company").
RECITALS
WHEREAS, the Board of Directors of the Company and the Board
of Directors of the Maryland Company each have determined that it
is in the best interests of their respective stockholders to
effect the merger provided for herein (the "Merger") upon the
terms and subject to the conditions set forth herein; and
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained
herein the parties hereto adopt the plan of merger encompassed by
this agreement and agree as follows:
ARTICLE I
THE MERGER; CLOSING; EFFECTIVE TIME
1.1 THE MERGER. Subject to the terms and conditions of
this Agreement, at the Effective Time (as defined in Section
1.3), the Company shall be merged with and into the Maryland
Company and the separate corporate existence of the Company shall
thereupon cease (the "Merger"). To the extent the Merger
constitutes a transaction for federal income tax purposes, the
parties intend that the Merger qualify as a reorganization
described in Section 368(a)(1)(F) of the Internal Revenue Code of
1986, as amended. The Maryland Company shall be the surviving
entity in the Merger (sometimes hereinafter referred to as the
"Surviving Entity") and shall continue to be governed by the laws
of the State of Maryland and the separate existence of the
Maryland Company with all its rights, privileges, immunities,
powers and franchises shall continue unaffected by the Merger.
The Merger shall have the effects specified in the Delaware
General Corporation Law (the "DGCL") and the Maryland General
Corporation Law (the "MGCL").
1.2 CLOSING. The closing of the Merger (the "Closing")
shall take place (i) at the offices of Latham & Watkins, 650 Town
Center Drive, Suite 2000, Costa Mesa, California 92626 at 10:00
a.m local time on the first business day on which the last to be
fulfilled or waived of the conditions set forth in Section 6.1
hereof shall be fulfilled or (ii) at such other place and time
and/or on such other date as the Company and the Maryland Company
may agree.
A-1
<PAGE>
1.3 EFFECTIVE TIME. Following the Closing, and provided
that this Agreement has not been terminated or abandoned pursuant
to Article VII hereof, the Company and the Maryland Company will,
at such time as they deem advisable, cause a Certificate of
Merger (the "Certificate of Merger") to be executed, acknowledged
and filed with the Secretary of State of Delaware as provided in
Section 252 of the DGCL and Articles of Merger (the "Articles of
Merger") to be filed with the State Department of Assessments and
Taxation of Maryland (the "SDAT") as provided in Section 3-105 of
the MGCL. The Merger shall become effective at the latter of the
filing of the Certificate of Merger with the Secretary of State
of Delaware and the acceptance for record of the Articles of
Merger by the SDAT (the "Effective Time").
ARTICLE II
ARTICLES OF INCORPORATION AND BYLAWS
OF THE SURVIVING CORPORATION
2.1 ARTICLES OF INCORPORATION. The Articles of
Incorporation of the Maryland Company in effect at the Effective
Time shall be the Articles of Incorporation of the Surviving
Entity, until duly amended in accordance with the terms thereof,
and the MGCL.
2.2 THE BYLAWS. The Bylaws of the Maryland Company in
effect at the Effective Time shall be the Bylaws of the Surviving
Entity, until duly amended in accordance with the terms thereof
and the MGCL.
ARTICLE III
DIRECTORS AND OFFICERS
OF THE SURVIVING CORPORATION
3.1 DIRECTORS AND OFFICERS. The directors and officers of
the Company at the Effective Time shall, from and after the
Effective Time, be the directors and officers, respectively, of
the Surviving Entity until their successors have been duly
elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Entity's
Articles of Incorporation and Bylaws.
ARTICLE IV
EFFECT OF THE MERGER ON CAPITAL STOCK;
EXCHANGE OF CERTIFICATES
4.1 Effect on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the
holder of any capital stock of the Company;
A-2
<PAGE>
(a) Each share of the common stock, par value $1.00 per
share (the "Company Shares") of the Company issued and
outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable
share of common stock, par value $1.00 per share (the "Maryland
Company Shares") of the Maryland Company. Each certificate
(each, a "Certificate") representing any such Company Shares
shall thereafter represent the right to receive Maryland Company
Shares. All Company Shares shall no longer be outstanding and
shall be cancelled and retired and shall cease to exist.
(b) Each Company Share issued and held in the Company's
treasury at the Effective Time, shall by virtue of the Merger and
without any action on the part of the holder thereof, cease to be
outstanding, shall be cancelled and retired without payment of
any consideration therefor and shall cease to exist.
(c) At the Effective Time, each Maryland Company Share
issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part
of the Maryland Company or the holder of such shares, be
cancelled and retired without payment of any consideration
therefor.
(d) Each option or other right to purchase or otherwise
acquire Company Shares pursuant to stock option or other
stock-based plans of the Company granted and outstanding
immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder of such
option or right, be converted into and become a right to purchase
or otherwise acquire the same number of Maryland Company Shares
at the same price per share and upon the same terms and subject
to the same conditions as applicable to such options or other
rights immediately prior to the Effective Time.
4.2 EXCHANGE OF CERTIFICATES FOR COMPANY SHARES.
(a) TRANSFER AGENT. As of the Effective Time, the
Company shall deposit with an exchange agent (the "Transfer
Agent"), for the benefit of the holders of Company Shares, for
exchange in accordance with this Article IV, certificates
representing the Maryland Company Shares (such certificates,
together with the amount of any dividends or distributions with
respect thereto, being hereinafter referred to as the "Exchange
Fund") to be issued pursuant to Section 4.1 in exchange for
outstanding Company Shares.
(b) EXCHANGE PROCEDURES. Promptly after the Effective
Time, the Surviving Entity shall cause the Transfer Agent to mail
to each holder of record of a Certificate or Certificates (i) a
letter of transmittal which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall
A-3
<PAGE>
pass, only upon delivery of the Certificates to the Transfer
Agent and shall be in such form and have such other provisions as
the Surviving Entity may specify and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for
certificates representing Maryland Company Shares. Upon
surrender of a Certificate for cancellation to the Transfer Agent
together with such letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in
exchange therefor (x) a certificate representing that number of
Maryland Company Shares and (y) a check representing unpaid
dividends and distributions, if any, which such holder has the
right to receive in respect of shares represented by the
Certificate surrendered pursuant to the provisions of this
Article IV, and the Certificate so surrendered shall forthwith be
cancelled. No interest will be paid or accrue on unpaid
dividends and distributions, if any, payable to holders of
Certificates. In the event of a transfer of ownership of Company
Shares which is not registered in the transfer records of the
Company, a certificate representing the proper number of Maryland
Company Shares may be issued to such a transferee if the
Certificate representing such Company Shares is presented to the
Transfer Agent, accompanied by all documents required to evidence
and effect such transfer and to evidence that any applicable
stock transfer taxes have been paid. If any certificate for
Maryland Company Shares is to be issued in a name other than that
in which the Certificate surrendered in exchange therefor is
registered, it shall be a condition of such exchange that the
person requesting this exchange shall pay any transfer or other
taxes required by reason of the issuance of Certificates for such
Maryland Company Shares in a name other than that of the
registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Surviving Entity that such
tax has been paid or is not applicable.
(c) TRANSFERS. After the Effective Time, there shall
be no transfers on the stock transfer books of the Company of the
Company Shares which were outstanding immediately prior to the
Effective Time. If after the Effective Time, Certificates are
presented to the Surviving Entity for transfer, they shall be
cancelled and exchanged for the Maryland Company Shares
deliverable in respect thereof pursuant to this Agreement in
accordance with the procedures set forth in this Article IV.
(d) TERMINATION OF EXCHANGE FUND. Any portion of the
Exchange Fund (including the proceeds of any investments thereof
and any Maryland Company Shares that remains unclaimed by the
stockholders of the Company for six months after the Effective
Time) shall be paid to the Surviving Entity. Any stockholders of
the Company who have not theretofore complied with this Article
IV shall thereafter look only to the Surviving Entity for payment
of their Maryland Company Shares and unpaid dividends on
Maryland Company Shares deliverable in respect of each Company
A-4
<PAGE>
Share such stockholder holds as determined pursuant to this
Agreement, in each case, without any interest thereon.
Notwithstanding the foregoing, none of the Surviving Entity, the
Transfer Agent or any other person shall be liable to any former
holder of Company Shares for any amount properly delivered to a
public official pursuant to applicable abandoned property,
escheat or similar laws.
(e) NO LIABILITY. In the event any Certificate shall
have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to
be lost, stolen or destroyed and, if required by the Surviving
Entity, the posting by such person of a bond in such amount as
the Surviving Entity may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the
Transfer Agent will issue in exchange for such lost, stolen or
destroyed Certificate, a certificate representing Maryland
Company Shares and cash in lieu of fractional shares deliverable
in respect thereof pursuant to this Agreement.
ARTICLE V
COVENANTS
5.1 STOCK EXCHANGE LISTING. The Maryland Company shall use
its best efforts to cause the Maryland Company Shares to be
issued in the Merger to be approved for listing on the New York
Stock Exchange, Inc. (NYSE), subject to official notice of
issuance, prior to the Closing Date.
5.2 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
From and after the Effective Time, the Surviving Entity agrees
that it will indemnify, and pay or reimburse reasonable expenses
in advance of final disposition of a proceeding to, (i) any
individual who is a present or former director or officer of the
Company or (ii) any individual who, while a director of the
Company and at the request of the Company, serves or has served
another corporation, partnership, joint venture, trust, employee
benefit plan or any other enterprise as a director, officer,
partner or trustee of such corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise,
arising out of or pertaining to matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior
to, at or after the Effective Time, to the fullest extent
permitted by law.
ARTICLE VI
CONDITIONS
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of the Maryland Company and
A-5
<PAGE>
the Company to consummate the Merger are subject to the
fulfillment of each of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement shall have been
duly approved by the holders of a majority of the Company Shares,
in accordance with applicable law and the Amended and Restated
Certificate of Incorporation and Amended and Restated Bylaws of
the Company.
(b) NYSE LISTING. The Maryland Company Shares issuable to
the Company stockholders pursuant to this Agreement shall have
been authorized for listing on the NYSE upon official notice of
issuance.
ARTICLE VII
TERMINATION
7.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated and the Merger may be abandoned at any time prior to
the Effective Time, before or after the approval by holders of
the Company Shares, by the mutual consent of the Board of
Directors of the Company and the Board of Directors of the
Maryland Company.
7.2 EFFECT OF TERMINATION AND ABANDONMENT. In the event of
termination of this Agreement and abandonment of the Merger
pursuant to this Article VII, no party hereto (or any of its
directors or officers) shall have any liability or further
obligation to any other party to this Agreement.
ARTICLE VIII
MISCELLANEOUS AND GENERAL
8.1 MODIFICATION OR AMENDMENT. Subject to the applicable
provisions of the DGCL and the MGCL, at any time prior to the
Effective Time, the parties hereto may modify or amend this
Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties.
8.2 WAIVER OF CONDITIONS. The conditions to each of the
parties' obligations to consummate the Merger are for the sole
benefit of such party and may be waived by such party in whole or
in part to the extent permitted by applicable law.
8.3 COUNTERPARTS. For the convenience of the parties
hereto, this Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an
original instrument, and all such counterparts shall together
constitute the same agreement.
A-6
<PAGE>
8.4 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the States of Delaware
and Maryland.
8.5 NO THIRD PARTY BENEFICIARIES. Except as provided in
Section 5.2, this Agreement is not intended to confer upon any
person other than the parties hereto any rights or remedies
hereunder.
8.6 HEADINGS. The Article, Section and paragraph headings
herein are for convenience of reference only, do not constitute a
part of this Agreement and shall not be deemed to limit or
otherwise affect any of the provisions hereof.
8.7 SERVICE OF PROCESS. The Maryland Company may be served
with process in the State of Maryland in any proceeding for the
enforcement of any obligation of the Company, as well as for
enforcement of any obligations of the Maryland Company arising
from the Merger, and it does hereby irrevocably appoint the
Secretary of State of the State of Maryland as its agent to
accept service of process in any such suit or other proceedings.
The address to which a copy of such process shall be mailed by
the Secretary of State to the Maryland Company is 220 West Crest
Street, Escondido, California 92025-1707, Attn: Legal Department.
8.8 CHANGE OF NAME. The Maryland Company will change its
name to Realty Income Corporation.
A-7
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly
executed and delivered by the duly authorized officers of the
parties hereto on the date first hereinabove written.
REALTY INCOME CORPORATION
Attest:_____________________ By:____________________________
Michael R. Pfeiffer Richard J. VanDerhoff
Vice President, General President and Chief
Counsel and Secretary Operating Officer
REALTY INCOME OF MARYLAND, INC.
Attest:_____________________ By:____________________________
Michael R. Pfeiffer Richard J. VanDerhoff
Vice President, General President and Chief
Counsel and Secretary Operating Officer
A-8
<PAGE>
Appendix B
MARYLAND CHARTER
Appendix B
<PAGE>
REALTY INCOME OF MARYLAND, INC.
-------------------------------
ARTICLES OF INCORPORATION
ARTICLE I
INCORPORATOR
The undersigned, James J. Hanks, Jr., whose address is c/o
Ballard Spahr Andrews & Ingersoll, 300 East Lombard Street,
Baltimore, Maryland 21202, being at least 18 years of age, does
hereby form a corporation under the general laws of the State of
Maryland.
ARTICLE II
NAME
The name of the corporation (the "Corporation") is:
Realty Income of Maryland, Inc.
ARTICLE III
PURPOSE
The purposes for which the Corporation is formed are to
engage in any lawful act or activity (including, without
limitation or obligation, engaging in business as a real estate
investment trust under the Internal Revenue Code of 1986, as
amended, or any successor statute (the "Code")) for which
corporations may be organized under the general laws of the State
of Maryland as now or hereafter in force. For purposes of these
Articles, "REIT" means a real estate investment trust under
Sections 856 through 860 of the Code.
ARTICLE IV
PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT
The address of the principal office of the Corporation in
the State of Maryland is c/o Ballard Spahr Andrews & Ingersoll,
300 East Lombard Street, Baltimore, Maryland 21202, Attention:
James J. Hanks, Jr. The name of the resident agent of the
Corporation in the State of Maryland is James J. Hanks, Jr.,
whose post address is c/o Ballard Spahr Andrews & Ingersoll, 300
East Lombard Street, Baltimore, Maryland 21202. The resident
agent is a citizen of and resides in the State of Maryland.
B-1
<PAGE>
ARTICLE V
PROVISIONS FOR DEFINING, LIMITING
AND REGULATING CERTAIN POWERS OF THE
CORPORATION AND OF THE STOCKHOLDERS AND DIRECTORS
Section 5.1 NUMBER AND CLASSIFICATION OF DIRECTORS. The
business and affairs of the Corporation shall be managed under
the direction of the Board of Directors. The number of directors
of the Corporation initially shall be 7, which number may be
increased or decreased pursuant to the Bylaws, but shall never be
less than the minimum number required by the Maryland General
Corporation Law. The names of the directors who shall serve
until the annual meeting of stockholders held in the year
adjacent to their names below, and until their successors are
duly elected and qualify are:
William E. Clark ............. 2000
Thomas A. Lewis .............. 2000
Richard J. VanDerhoff ........ 2000
Donald R. Cameron ............ 1999
Willard H. Smith Jr. ......... 1999
Roger P. Kuppinger ........... 1998
Michael D. McKee ............. 1998
These directors may increase the number of directors and may
fill any vacancy, whether resulting from an increase in the
number of directors or otherwise, on the Board of Directors prior
to the first annual meeting of stockholders in the manner
provided in the Bylaws.
The Corporation's Board of Directors (other than any
director elected solely by holders of one or more series of
Preferred Stock) is divided into three classes of directors, as
nearly equal in number as possible, one class to hold office
initially for a term expiring at the next succeeding annual
meeting of stockholders, another class to hold office initially
for a term expiring at the second succeeding annual meeting of
stockholders and another class to hold office initially for a
term expiring at the third succeeding annual meeting of
stockholders, with the members of each class to hold office until
their successors are duly elected and qualify. At each annual
meeting of the stockholders, the successors to the class of
directors whose term expires at such meeting shall be elected to
hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of their
election.
Section 5.2 EXTRAORDINARY ACTIONS. Except as specifically
provided in Article VIII, notwithstanding any provision of law
permitting or requiring any action to be taken or authorized by
the affirmative vote of the holders of a greater number of votes,
any such action shall be effective and valid if taken or
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authorized by the affirmative vote of holders of shares entitled
to cast a majority of all the votes entitled to be cast on the
matter.
Section 5.3 AUTHORIZATION BY BOARD OF STOCK ISSUANCE. The
Board of Directors may authorize the issuance from time to time
of shares of stock of the Corporation of any class or series,
whether now or hereafter authorized, or securities or rights
convertible into shares of its stock of any class or series,
whether now or hereafter authorized, for such consideration as
the Board of Directors may deem advisable (or without
consideration in the case of a stock split or stock dividend),
subject to such restrictions or limitations, if any, as may be
set forth in the Charter or the Bylaws.
Section 5.4 PREEMPTIVE RIGHTS. Except as may be provided
by the Board of Directors in setting the terms of classified or
reclassified shares of stock pursuant to Section 6.4, no holder
of shares of stock of the Corporation shall, as such holder, have
any preemptive right to purchase or subscribe for any additional
shares of stock of the Corporation or any other security of the
Corporation which it may issue or sell unless the Corporation
agrees to grant such holder preemptive rights pursuant to a
written contract.
Section 5.5 INDEMNIFICATION. The Corporation shall have
the power, to the maximum extent permitted by Maryland law in
effect from time to time, to obligate itself to indemnify, and to
pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to, (a) any individual who is a
present or former director or officer of the Corporation who is
made a party to a proceeding by reason of his service in that
capacity or (b) any individual who, while a director of the
Corporation and at the request of the Corporation, serves or has
served as a director, officer, partner or trustee of another
corporation, partnership, joint venture, trust, employee benefit
plan or any other enterprise from and against any claim or
liability to which such person may become subject or which such
person may incur by reason of his status as a present or former
director or officer of the Corporation. The Corporation shall
have the power, with the approval of the Board of Directors, to
provide such indemnification and advancement of expenses to a
person who served a predecessor of the Corporation in any of the
capacities described in (a) or (b) above and to any employee or
agent of the Corporation or a predecessor of the Corporation.
Neither the amendment nor repeal of this Section 5.5, nor the
adoption or amendment of any other provision of the Bylaws or
Charter of the Corporation inconsistent with this Section 5.5,
shall apply to or affect in any respect the applicability of the
foregoing with respect to any act or failure to act which
occurred prior to such amendment, repeal or adoption.
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Section 5.6 DETERMINATIONS BY BOARD. The determination as
to any of the following matters, made in good faith by or
pursuant to the direction of the Board of Directors consistent
with the Charter and in the absence of actual receipt of an
improper benefit in money, property or services or active and
deliberate dishonesty established by a court, shall be final and
conclusive and shall be binding upon the Corporation and every
holder of shares of its stock: the amount of the net income of
the Corporation for any period and the amount of assets at any
time legally available for the payment of dividends, redemption
of its stock or the payment of other distributions on its stock;
the amount of paid-in surplus, net assets, other surplus, annual
or other net profit, net assets in excess of capital, undivided
profits or excess of profits over losses on sales of assets; the
amount, purpose, time of creation, increase or decrease,
alteration or cancellation of any reserves or charges and the
propriety thereof (whether or not any obligation or liability for
which such reserves or charges shall have been created shall have
been paid or discharged); the fair value, or any sale, bid or
asked price to be applied in determining the fair value, of any
asset owned or held by the Corporation; and any matters relating
to the acquisition, holding and disposition of any assets by the
Corporation.
Section 5.7 REIT QUALIFICATION. The Board of Directors
shall use its reasonable best efforts to take such actions as are
necessary or appropriate to preserve the status of the
Corporation as a REIT; however, if the Board of Directors
determines that it is no longer in the best interests of the
Corporation to qualify or continue to be qualified as a REIT and
such determination is approved by the affirmative vote of the
holders of not less than two-thirds of all votes entitled to be
cast on this matter, the Board of Directors may revoke or
otherwise terminate the Corporation's REIT election pursuant to
Section 856(g) of the Code. The Board of Directors also may
determine that compliance with any restriction or limitation on
stock ownership and transfers set forth in Article VII is no
longer required for REIT qualification.
Section 5.8 REMOVAL OF DIRECTORS. Subject to the rights of
one or more classes or series of Preferred Stock to elect or
remove one or more directors, any director, or the entire Board
of Directors, may be removed from office at any time, but only
for cause, by the affirmative vote of the holders of a majority
of the outstanding shares entitled to vote, voting as a class, in
the election of directors. For the purpose of this paragraph,
"cause" shall mean with respect to any particular director a
final judgment of a court of competent jurisdiction holding that
such director caused demonstrable, material harm to the
Corporation through bad faith or active and deliberate
dishonesty.
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Section 5.9 ADVISOR AGREEMENTS. Subject to such approval
of stockholders and other conditions, if any, as may be required
by any applicable statute, rule or regulation, the Board of
Directors may authorize the execution and performance by the
Corporation of one or more agreements with any person,
corporation, association, company, trust, partnership (limited or
general) or other organization whereby, subject to the
supervision and control of the Board of Directors, any such
other person, corporation, association, company, trust,
partnership (limited or general) or other organization shall
render or make available to the Corporation managerial,
investment, advisory and/or related services, office space and
other services and facilities (including, if deemed advisable by
the Board of Directors, the management or supervision of the
investments of the Corporation) upon such terms and conditions as
may be provided in such agreement or agreements (including, if
deemed fair and equitable by the Board of Directors, the
compensation payable thereunder by the Corporation).
ARTICLE VI
STOCK
Section 6.1 AUTHORIZED SHARES. The Corporation has
authority to issue 100,000,000 shares of Common Stock, $1.00 par
value per share ("Common Stock"), and 20,000,000 shares of
Preferred Stock, $1.00 par value per share ("Preferred Stock").
The aggregate par value of all authorized shares of stock having
par value is $120,000,000.
Section 6.2 COMMON STOCK. Subject to the provisions of
Article VII, each share of Common Stock shall entitle the holder
thereof to one vote. The Board of Directors may reclassify any
unissued shares of Common Stock from time to time in one or more
classes or series of stock.
Section 6.3 PREFERRED STOCK. The Board of Directors may
classify any unissued shares of Preferred Stock and reclassify
any previously classified but unissued shares of Preferred Stock
of any series from time to time, in one or more series of stock.
Section 6.4 CLASSIFIED OR RECLASSIFIED SHARES. Prior to
issuance of classified or reclassified shares of any class or
series, the Board of Directors by resolution shall: (a) designate
that class or series to distinguish it from all other classes and
series of stock of the Corporation; (b) specify the number of
shares to be included in the class or series; (c) set or change,
subject to the provisions of Article VII and subject to the
express terms of any class or series of stock of the Corporation
outstanding at the time, the preferences, conversion or other
rights, voting powers, restrictions, limitations as to
transferability, dividends or other distributions, qualifications
and terms and conditions of redemption for each class or series;
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and (d) cause the Corporation to file articles supplementary with
the State Department of Assessments and Taxation of Maryland
("SDAT"). Any of the terms of any class or series of stock set
or changed pursuant to clause (c) of this Section 6.4 may be made
dependent upon facts or events ascertainable outside the Charter
(including determinations by the Board of Directors or other
facts or events within the control of the Corporation) and may
vary among holders thereof, provided that the manner in which
such facts, events or variations shall operate upon the terms of
such class or series of stock is clearly and expressly set forth
in the articles supplementary filed with the SDAT.
Section 6.5 CHARTER AND BYLAWS. All persons who shall
acquire stock in the Corporation shall acquire the same subject
to the provisions of the Charter and the Bylaws.
ARTICLE VII
RESTRICTIONS ON OWNERSHIP AND TRANSFER TO PRESERVE TAX BENEFIT
Section 7.1 DEFINITIONS. For the purposes of this Article
VII, the following terms shall have the following meanings:
"BENEFICIAL OWNERSHIP" shall mean ownership of Common Shares
by a Person who is or would be treated as an owner of such Common
Shares either actually or constructively 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 Own,"
"Beneficially Owns" and "Beneficially Owned" shall have the
correlative meanings.
"CHARITABLE BENEFICIARY" shall mean one or more
beneficiaries of the Trust as determined pursuant to Section
7.3(f) of this Article VII.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute.
"COMMON SHARES" shall mean shares of the Corporation's
Common Stock.
"CONSTRUCTIVE OWNERSHIP" shall mean ownership of Common
Shares by a Person who is or would be treated as an owner of such
Common Shares either actually or constructively through the
application of Section 318 of the Code, as modified by Section
856(d)(5) of the Code. The terms "Constructive Owner,"
"Constructively Own," "Constructively Owns" and "Constructively
Owned" shall have the correlative meanings.
"IRS" means the United States Internal Revenue Service.
"MARKET PRICE" shall mean the last reported sales price
reported on the New York Stock Exchange of the Common Shares on
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the trading day immediately preceding the relevant date, or if
the Common Shares are not then traded on the New York Stock
Exchange, the last reported sales price of the Common Shares on
the trading day immediately preceding the relevant date as
reported on any exchange or quotation system over which the
Common Shares may be traded, or if the Common Shares are not then
traded over any exchange or quotation system, then the market
price of the Common Shares on the relevant date as determined in
good faith by the Board of Directors of the Corporation.
"OWNERSHIP LIMIT" shall mean 9.8% (by value or by number of
shares, whichever is more restrictive) of the outstanding Common
Shares of the Corporation.
"PERSON" shall mean an individual, corporation, partnership,
limited liability company, estate, trust (including a trust
qualified under Section 401(a) or 501(c)(17) of the Code), a
portion of a trust permanently set aside for or to be used
exclusively for the purposes described in Section 642(c) of the
Code, association, private foundation within the meaning of
Section 509(a) of the Code, joint stock company or other entity;
but does not include an underwriter acting in a capacity as such
in a public offering of the Common Shares provided that the
ownership of Common Shares by such underwriter would not result
in the Corporation being "closely held" within the meaning of
Section 856(h) of the Code, or otherwise result in the
Corporation failing to qualify as a REIT.
"PURPORTED BENEFICIAL TRANSFEREE" shall mean, with respect
to any purported Transfer which results in a transfer to a Trust,
as provided in Section 7.2(b) of this Article VII, the purported
beneficial transferee or owner for whom the Purported Record
Transferee would have acquired or owned Common Shares, if such
Transfer had been valid under Section 7.2(a) of this Article VII.
"PURPORTED RECORD TRANSFEREE" shall mean, with respect to
any purported Transfer which results in a transfer to a Trust, as
provided in Section 7.2(b) of this Article VII, the record holder
of the Common Shares if such Transfer had been valid under
Section 7.2(a) of this Article VII.
"REINCORPORATION" shall mean the merger of Realty Income
Corporation, a Delaware corporation, into its wholly-owned
subsidiary, Realty Income of Maryland, Inc., a Maryland
corporation.
"REIT" shall mean a real estate investment trust under
Section 856 through 860 of the Code.
"RESTRICTION TERMINATION DATE" shall mean the first day
after the date of the Reincorporation on which the Board of
Directors of the Corporation determines that it is no longer in
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the best interests of the Corporation to attempt to, or continue
to, qualify as a REIT.
"TRANSFER" shall mean any sale, transfer, gift, assignment,
devise or other disposition of Common Shares, including (i) the
granting of any option or entering into any agreement for the
sale, transfer or other disposition of Common Shares or (ii) the
sale, transfer, assignment or other disposition of any securities
(or rights convertible into or exchangeable for Common Shares),
whether voluntary or involuntary, whether of record or
beneficially or Beneficially or Constructively (including but not
limited to transfers of interests in other entities which result
in changes in Beneficial or Constructive Ownership of Common
Shares), and whether by operation of law or otherwise.
"TRUST" shall mean each of the trusts provided for in
Section 7.3 of this Article VII.
"TRUSTEE" shall mean the Person unaffiliated with the
Corporation, the Purported Beneficial Transferee, and the
Purported Record Transferee, that is appointed by the Corporation
to serve as trustee of the Trust.
Section 7.2 RESTRICTION ON OWNERSHIP AND TRANSFERS.
(a) From the date of Reincorporation and prior to the
Restriction Termination Date:
(i) except as provided in Section 7.9 of this Article
VII, no Person shall Beneficially Own Common Shares in excess of
the Ownership Limit;
(ii) except as provided in Section 7.9 of this Article
VII, no Person shall Constructively Own Common Shares in excess
of the Ownership Limit; and
(iii) no Person shall Beneficially or Constructively
Own Common Shares to the extent that such Beneficial or
Constructive Ownership would result in the Corporation being
"closely held" within the meaning of Section 856(h) of the Code,
or otherwise failing to qualify as a REIT (including but not
limited to ownership that would result in the Corporation owning
(actually or Constructively) an interest in a tenant that is
described in Section 856(d)(2)(B) of the Code if the income
derived by the Corporation (either directly or indirectly through
one or more partnerships) from such tenant would cause the
Corporation to fail to satisfy any of the gross income
requirements of Section 856(c) of the Code).
(b) If, during the period commencing on the date of the
Reincorporation and prior to the Restriction Termination Date,
any Transfer (whether or not such Transfer is the result of a
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transaction entered into through the facilities of the New York
Stock Exchange ("NYSE")) or other event occurs that, if
effective, would result in any Person Beneficially or
Constructively Owning Common Shares in violation of Section
7.2(a) of this Article VII, (1) then that number of Common Shares
that otherwise would cause such Person to violate Section 7.2(a)
of this Article VII (rounded up to the nearest whole share) shall
be automatically transferred to a Trust for the benefit of a
Charitable Beneficiary, as described in Section 7.3, effective as
of the close of business on the business day prior to the date of
such Transfer or other event, and such Purported Beneficial
Transferee shall thereafter have no rights in such Common Shares
or (2) if, for any reason, the transfer to the Trust described in
clause (1) of this sentence is not automatically effective as
provided therein to prevent any Person from Beneficially or
Constructively Owning Common Shares in violation of Section
7.2(a) of this Article VII, then the Transfer of that number of
Common Shares that otherwise would cause any Person to violate
Section 7.2(a) shall be void AB INITIO, and the Purported
Beneficial Transferee shall have no rights in such Common Shares.
(c) Notwithstanding any other provisions contained herein,
during the period commencing on the date of the Reincorporation
and prior to the Restriction Termination Date, any Transfer of
Common Shares (whether or not such Transfer is the result of a
transaction entered into through the facilities of the NYSE)
that, if effective, would result in the capital stock of the
Corporation being beneficially owned by less than 100 Persons
(determined without reference to any rules of attribution) shall
be void ab initio, and the intended transferee shall acquire no
rights in such Common Shares.
Section 7.3 TRANSFERS OF COMMON SHARES IN TRUST.
(a) Upon any purported Transfer or other event described in
Section 7.2(b) of this Article VII, such Common Shares shall be
deemed to have been transferred to the Trustee in his capacity as
trustee of a Trust for the exclusive benefit of one or more
Charitable Beneficiaries. Such transfer to the Trustee shall be
deemed to be effective as of the close of business on the
business day prior to the purported Transfer or other event that
results in a transfer to the Trust pursuant to Section 7.2(b).
The Trustee shall be appointed by the Corporation and shall be a
Person unaffiliated with the Corporation, any Purported
Beneficial Transferee, and any Purported Record Transferee. Each
Charitable Beneficiary shall be designated by the Corporation as
provided in Section 7.3(f) of this Article VII.
(b) Common Shares held by the Trustee shall be issued and
outstanding Common Shares of the Corporation. The Purported
Beneficial Transferee or Purported Record Transferee shall not
benefit economically from ownership of any Common Shares held in
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trust by the Trustee, shall have no rights to dividends and shall
not possess any rights to vote or other rights attributable to
the Common Shares held in the Trust.
(c) The Trustee shall have all voting rights and rights to
dividends with respect to Common Shares held in the Trust, which
rights shall be exercised for the exclusive benefit of the
Charitable Beneficiary. Any dividend or distribution paid prior
to the discovery by the Corporation that the Common Shares have
been transferred to the Trustee shall be paid to the Trustee upon
demand, and any dividend or distribution declared but unpaid
shall be paid when due to the Trustee with respect to such Common
Shares. Any dividends or distributions so paid over to the
Trustee shall be held in trust for the Charitable Beneficiary.
The Purported Record Transferee and Purported Beneficial
Transferee shall have no voting rights with respect to the Common
Shares held in the Trust and, subject to Maryland law, effective
as of the date the Common Shares have been transferred to the
Trustee, the Trustee shall have the authority (at the Trustee's
sole discretion) (i) to rescind as void any vote cast by a
Purported Record Transferee prior to the discovery by the
Corporation that the Common Shares have been transferred to the
Trustee and (ii) to recast such vote in accordance with the
desires of the Trustee acting for the benefit of the Charitable
Beneficiary; provided, however, that if the Corporation has
already taken irreversible corporate action, then the Trustees
shall not have the authority to rescind and recast such vote.
Notwithstanding the provisions of this Article VII, until the
Corporation has received notification that the Common Shares have
been transferred into a Trust, the Corporation shall be entitled
to rely on its share transfer and other stockholder records for
purposes of preparing lists of stockholders entitled to vote at
meetings, determining the validity and authority of proxies and
otherwise conducting votes of stockholders.
(d) Within 20 days of receiving notice from the Corporation
that Common Shares have been transferred to the Trust, the
Trustee of the Trust shall sell the Common Shares held in the
Trust to a person, designated by the Trustee, whose ownership of
the Common Shares will not violate the ownership limitations set
forth in Section 7.2(a). Upon such sale, the interest of the
Charitable Beneficiary in the Common Shares sold shall terminate
and the Trustee shall distribute the net proceeds of the sale to
the Purported Record Transferee and to the Charitable Beneficiary
as provided in this Section 7.3(d). The Purported Record
Transferee shall receive the lesser of (1) the price paid by the
Purported Record Transferee for the Common Shares in the
transaction that resulted in such transfer to the Trust (or, if
the event which resulted in the transfer to the Trust did not
involve a purchase of such Common Shares at Market Price, the
Market Price of such Common Shares on the day of the event which
resulted in the transfer of the Common Shares to the Trust) and
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(2) the price per share received by the Trustee (net of any
commissions and other expenses of sale) from the sale or other
disposition of the Common Shares held in the Trust. Any net
sales proceeds in excess of the amount payable to the Purported
Record Transferee shall be immediately paid to the Charitable
Beneficiary together with any dividends or other distributions
thereon. If, prior to the discovery by the Corporation that such
Common Shares have been transferred to the Trustee, such Common
Shares are sold by a Purported Record Transferee then (i) such
Common Shares shall be deemed to have been sold on behalf of the
Trust and (ii) to the extent that the Purported Record Transferee
received an amount for such Common Shares that exceeds the amount
that such Purported Record Transferee was entitled to receive
pursuant to this subparagraph 7.3(d), such excess shall be paid
to the Trustee upon demand.
(e) Common Shares transferred to the Trustee 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 paid by the Purported Record Transferee for the Common
Shares in the transaction that resulted in such transfer to the
Trust (or, if the event which resulted in the transfer to the
Trust did not involve a purchase of such Common Shares at Market
Price, the Market Price of such Common Shares on the day of the
event which resulted in the transfer of the Common Shares to the
Trust) 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 until the Trustee has sold the Common
Shares held in the Trust pursuant to Section 7.3(d). Upon such a
sale to the Corporation, the interest of the Charitable
Beneficiary in the Common Shares sold shall terminate and the
Trustee shall distribute the net proceeds of the sale to the
Purported Record Transferee and any dividends or other
distributions held by the Trustee with respect to such Common
Shares shall thereupon be paid to the Charitable Beneficiary.
(f) By written notice to the Trustee, the Corporation shall
designate one or more nonprofit organizations to be the
Charitable Beneficiary of the interest in the Trust such that (i)
the Common Shares held in the Trust would not violate the
restrictions set forth in Section 7.2(a) in the hands of such
Charitable Beneficiary and (ii) each Charitable Beneficiary is an
organization described in Sections 170(b)(1)(A), 170(c)(2) and
501(c)(3) of the Code.
Section 7.4 REMEDIES FOR BREACH. If the Board of
Directors, or a committee thereof (or other designees if
permitted by Maryland law) shall at any time determine in good
faith that a Transfer or other event has taken place in violation
of Section 7.2 of this Article VII or that a Person intends to
acquire, has attempted to acquire or may acquire beneficial
ownership (determined without reference to any rules of
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attribution), Beneficial Ownership or Constructive Ownership of
any Common Shares of the Corporation in violation of Section 7.2
of this Article VII, the Board of Directors, or a committee
thereof (or other designees if permitted by Maryland law) shall
take such action as it deems advisable to refuse to give effect
or to prevent such Transfer, including, but not limited to,
causing the Corporation to redeem Common Shares, refusing to give
effect to such Transfer on the books of the Corporation or
instituting proceedings to enjoin such Transfer; provided,
however, that any Transfers (or, in the case of events other than
a Transfer, ownership or Constructive Ownership or Beneficial
Ownership) in violation of Section 7.2(a) of this Article VII,
shall automatically result in the transfer to a Trust or be void
ab initio as described in Section 7.2(b) and any Transfer in
violation of Section 7.2(c) shall automatically be void ab initio
irrespective of any action (or non-action) by the Board of
Directors.
Section 7.5 NOTICE OF RESTRICTED TRANSFER. Any Person who
acquires or attempts to acquire Common Shares in violation of
Section 7.2 of this Article VII or any Person who is a Purported
Transferee such that an automatic transfer to a Trust results
under Section 7.2(b) of this Article VII, shall immediately give
written notice to the Corporation of such event and shall provide
to the Corporation such other information as the Corporation may
request in order to determine the effect, if any, of such
Transfer or attempted Transfer on the Corporation's status as a
REIT.
Section 7.6 OWNERS REQUIRED TO PROVIDE INFORMATION. From
the date of the Reincorporation and prior to the Restriction
Termination Date, each Person who is a beneficial owner or
Beneficial Owner or Constructive Owner of Common Shares and each
Person (including the shareholder of record) who is holding
Common Shares for a Beneficial Owner or Constructive Owner shall
provide to the Corporation such information that the Corporation
may request, in good faith, in order to determine the
Corporation's status as a REIT.
Section 7.7 REMEDIES NOT LIMITED. Nothing contained in
this Article VII (but subject to Section 7.12 of this Article VII
and Section 5.7 of the Charter) shall limit the authority of the
Board of Directors to take such other action as it deems
necessary or advisable to protect the Corporation and the
interests of its shareholders by preservation of the
Corporation's status as a REIT.
Section 7.8 AMBIGUITY. In the case of an ambiguity in the
application of any of the provisions of Sections 7.2 through 7.9
of this Article VII, including any definition contained in
Section 7.1, the Board of Directors shall have the power to
determine the application of the provisions of Sections 7.2
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through 7.9 with respect to any situation based on the facts
known to it (subject, however, to the provisions of Section 7.12
of this Article VII). In the event any of Sections 7.2 through
7.9 requires an action by the Board of Directors and these
Amended and Restated Articles of Incorporation fail to provide
specific guidance with respect to such action, the Board of
Directors shall have the power to determine the action to be
taken so long as such action is not contrary to the provisions of
such Sections 7.2 through 7.9 of this Article VII. Absent a
decision to the contrary by the Board of Directors (which the
Board may make in its sole and absolute discretion), if a Person
would have (but for the remedies set forth in Section 7.2(b))
acquired Beneficial or Constructive Ownership of Common Shares in
violation of Section 7.2(a) such remedies (as applicable) shall
apply first to the Common Shares which, but for such remedies,
would have been actually owned by such Person, and second to
Common Shares which, but for such remedies, would have been
Beneficially Owned or Constructively Owned (but not actually
owned) by such Person, pro rata among the Persons who actually
own such Common Shares based upon the relative number of the
Common Shares held by each such Person.
Section 7.9 EXCEPTIONS.
(a) Subject to Section 7.2(a)(iii), the Board of Directors,
in its sole discretion, may exempt a Person from the limitation
on a Person Beneficially Owning Common Shares in excess of the
Ownership Limit if the Board of Directors obtains such
representations and undertakings from such Person as are
reasonably necessary to ascertain that no individual's Beneficial
Ownership of such Common Shares will violate the Ownership Limit
or that any such violation will not cause the Corporation to fail
to qualify as a REIT under the Code, and agrees that any
violation of such representations or undertakings (or other
action which is contrary to the restrictions contained in Section
7.2 of this Article VII) or attempted violation will result in
such Common Shares being transferred to a Trust in accordance
with Section 7.2(b) of this Article VII.
(b) Subject to Section 7.2(a)(iii), the Board of Directors,
in its sole discretion, may exempt a Person from the limitation
on a Person Constructively Owning Common Shares in excess of the
Ownership Limit if such Person does not and represents that it
will not own, actually or Constructively, an interest in a tenant
of the Corporation (or a tenant of any entity owned in whole or
in part by the Corporation) that would cause the Corporation to
own, actually or Constructively more than a 9.8% interest (as set
forth in Section 856(d)(2)(B) of the Code) in such tenant and the
Corporation obtains such representations and undertakings from
such Person as are reasonably necessary to ascertain this fact
and agrees that any violation or attempted violation will result
in such Common Shares being transferred to a Trust in accordance
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with Section 7.2(b) of this Article VII. Notwithstanding the
foregoing, the inability of a Person to make the certification
described in this Section 7.9(b) shall not prevent the Board of
Directors, in its sole discretion, from exempting such Person
from the limitation on a Person Constructively Owning Common
Shares in excess of the Ownership Limit 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, after taking
into account the effect of this sentence with respect to all
other Common Shares to which this sentence applies.
(c) Prior to granting any exception pursuant to Section
7.9(a) or (b) of this Article VII, the Board of Directors may
require a ruling from the Internal Revenue Service, or an opinion
of counsel, in either case in form and substance satisfactory to
the Board 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.
Section 7.10 LEGEND. Each certificate for Common Shares
shall bear substantially the following legend:
The Corporation will furnish to any stockholder, on
request and without charge, a full statement of the
information required by Section 2-211(b) of the
Corporations and Associations Article of the Annotated
Code of Maryland with respect to the designations and
any preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends and
other distributions, qualifications, and terms and
conditions of redemption of the stock of each class
which the Corporation has authority to issue and, [if
the Corporation is authorized to issue any preferred or
special class in series,] (i) the differences in the
relative rights and preferences between the shares of
each series to the extent set, and (ii) the authority of
the Board of Directors to set such rights and preferences
of subsequent series. The foregoing summary does not
purport to be complete and is subject to and qualified in
its entirety by reference to the charter of the Corporation
(the "Charter"), a copy of which will be sent without charge
to each stockholder who so requests. Requests for such
written statement may be directed to Michael R. Pfeiffer,
the Secretary of the Company, at the Company's principal
office.
The shares represented by this certificate are subject
to restrictions on Beneficial and Constructive Ownership
and Transfer for the purpose of the Corporation's
maintenance of its status as a Real Estate Investment
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Trust under the Internal Revenue Code of 1986, as amended
(the "Code"). Subject to certain further restrictions
and except as expressly provided in the Corporation's
Charter, (i) no Person may Beneficially Own in excess of
9.8% of the outstanding Common Shares of the Corporation
(by value or by number of shares, whichever is more
restrictive); (ii) no Person may Constructively Own in
excess of 9.8% of the outstanding Common Shares of the
Corporation (by value or by number of shares, whichever
is more restrictive); (iii) no Person may Beneficially or
Constructively Own Common Shares that would result in the
Corporation being "closely held" under Section 856(h) of
the Code or otherwise cause the Corporation to fail to
qualify as a REIT; and (iv) no Person may Transfer Common
Shares if such Transfer would result in the capital stock
of the Corporation being owned by fewer than 100 Persons.
Any Person who Beneficially or Constructively Owns or
attempts to Beneficially or Constructively Own Common
Shares which causes or will cause a Person to Beneficially
or Constructively Own Common Shares in excess of the above
limitations must immediately notify the Corporation. If
any of the restrictions on transfer or ownership are
violated, the Common Shares represented hereby will be
automatically transferred to a Trustee of a Trust for the
benefit of one or more Charitable Beneficiaries. In
addition, the Corporation may redeem shares upon the terms
and conditions specified by the Board of Directors in its
sole discretion if the Board of Directors determines that
ownership or a Transfer or other event may violate the
restrictions described above. Furthermore, upon the
occurrence of certain events, attempted Transfers in
violation of the restrictions described above may be void
AB INITIO. All capitalized terms in this legend have the
meanings defined in the Charter of the Corporation, as the
same may be amended from time to time, a copy of which,
including the restrictions on transfer and ownership, will
be furnished to each holder of Common Shares on request and
without charge. Requests for such a copy may be directed to
Michael R. Pfeiffer, the Secretary of the Company, at the
Company's principal office."
Instead of the foregoing legend, the share certificate may
state that the Corporation will furnish a full statement about
certain restrictions on transferability to a stockholder on
request and without charge.
Section 7.11 SEVERABILITY. If any provision of this
Article VII 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
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provision shall be affected only to the extent necessary to
comply with the determination of such court.
Section 7.12 NYSE. Nothing in this Article VII shall
preclude the settlement of any transaction entered into through
the facilities of the NYSE. The fact that the settlement of any
transaction is so permitted shall not negate the effect of any
other provision of this Article VII and any transferee in such a
transaction shall be subject to all the provisions and
limitations of this Article VII.
ARTICLE VIII
AMENDMENTS AND TRANSACTIONS OUTSIDE
THE ORDINARY COURSE OF BUSINESS
Section 8.1 BYLAWS. The Board of Directors shall have the
exclusive power to adopt, amend or repeal the Bylaws for the
Corporation except as such power is limited in the Bylaws.
Section 8.2 CHARTER. The Corporation reserves the right
from time to time to make any amendment now or hereafter
authorized by law, including any amendment altering the terms or
contract rights, as expressly set forth in this charter, of any
shares of outstanding stock. All rights and powers conferred by
this charter on stockholders, directors and officers of the
Corporation are granted subject to this reservation.
ARTICLE IX
LIMITATION OF LIABILITY
To the maximum extent that Maryland law in effect from time
to time permits limitation of the liability of directors and
officers of a Corporation, no director or officer of the
Corporation shall be liable to the Corporation or its
stockholders for money damages. Neither the amendment nor repeal
of this Article IX, nor the adoption or amendment of any other
provision of the Charter or Bylaws inconsistent with this Article
IX, shall apply to or affect in any respect the applicability of
the preceding sentence with respect to any act or failure to act
which occurred prior to such amendment, repeal or adoption.
ARTICLE X
ELECTION OF DIRECTORS
Elections of directors need not be by written ballot unless
the Bylaws of the Corporation shall so provide.
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IN WITNESS WHEREOF, I have signed these Articles of
Incorporation and acknowledge the same to be my act on this 13th
day of May, 1997.
By:_________________________________
James J. Hanks, Jr., Incorporator
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Appendix C
MARYLAND BYLAWS
Appendix C
<PAGE>
BYLAWS
OF
REALTY INCOME OF MARYLAND, INC.
-------------------------------
ARTICLE I
DEFINITIONS
Whenever used in these Bylaws, unless the context
otherwise requires, the terms defined in this Article I shall
have the following respective meanings:
"ADVISOR" means any Person (other than a Director,
officer or employee of the Corporation) to whom the Corporation
may delegate the responsibility for directing or performing the
day-to-day business affairs of the Corporation, including a
Person or entity to which an Advisor subcontracts substantially
all such functions.
"AFFILIATE" of a Person means (a) any other Person
directly or indirectly controlling, controlled by and under
common control with such Person, (b) any other Person owning or
controlling ten percent (10%) or more of the outstanding voting
securities of such Person, (c) any officer, director or general
partner of such Person, or (d) if such Person is an officer,
director or general partner, any Person for which such Person
acts as an officer, director or general partner. For purposes of
this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by" and "under common
control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement
or otherwise.
"ANCILLARY SERVICES" means any business activity
rendered in connection with, or incidental to, the Corporation's
primary activity of leasing its properties, which generates
revenue for the Corporation that would be treated by the IRS as
Nonqualifying Income, including, but not limited to, the sale of
goods and services to its tenants and others.
"APPRAISED VALUE" means the value of a property as
determined by an appraisal made by one or more independent
qualified appraisers selected in accordance with procedures
established by the Board (and a majority of the Independent
Directors as to any proposed acquisition from any Advisor, a
Director or an officer or any Affiliate thereof).
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"BOARD" means the Board of the Corporation, as
constituted from time to time.
"BYLAWS" means the Bylaws of the Corporation, as in
effect from time to time.
"CHAIRMAN OF THE BOARD" shall have the meaning assigned
to such term in Section 4 of Article V hereof.
"CHARTER" shall mean the Charter of Realty Income of
Maryland, Inc., as in effect from time to time.
"CHIEF EXECUTIVE OFFICER" shall have the meaning
assigned to such term in Section 5 of Article V hereof.
"CHIEF OPERATING OFFICER" shall have the meaning
assigned to such term in Section 6 of Article V hereof.
"CODE" means the Internal Revenue Code of 1986, as it
may be amended from time to time.
"COMMON STOCK" means the Common Stock of the
Corporation, par value $1.00 per share.
"CORPORATION" means Realty Income of Maryland, Inc. a
Maryland corporation.
"DIRECTORS" means the directors of the Corporation's
Board.
"INDEBTEDNESS" of any Person means the principal of,
premium, if any, and interest on, (i) all indebtedness of such
Person (including Indebtedness of others guaranteed by such
Person), incurred or assumed which is (A) for money borrowed or
(B) evidenced by a note or similar instrument given in connection
with the acquisition of any businesses, properties or assets of
any kind and (ii) amendments, renewals, extensions, modifications
and refundings of any such indebtedness or obligation.
"INDEPENDENT DIRECTORS" means the Directors who are not
employees of the Corporation or any Subsidiaries of the
Corporation.
"INTERESTED PARTY" of the Corporation shall have the
meaning ascribed to such term in Section 7 of Article VII.
"IRS" means the United States Internal Revenue Service.
"NONQUALIFYING INCOME" means income not described in
Section 856(c)(2) of the Code, or any successor provision.
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"PERSON" means an individual, a corporation, limited
partnership, general partnership, joint stock company or an
association, a joint venture, trust, bank, trust company, land
trust, business trust or an estate, or any other entity and
governmental agency and any political subdivision thereof, and
also includes a group as that term is defined for purposes of
Section 13(d)(3) of the Securities Act of 1933, as amended.
"PREFERRED STOCK" means the Preferred Stock of the
Corporation, par value $1.00 per share, authorized to be issued
in one or more series under the Charter.
"PRESIDENT" shall have the meaning assigned to such
term in Section 7 of Article V.
"REIT" means a real estate investment trust under
Sections 856 to 860 the Code or any successor provisions.
"REIT PROVISIONS OF THE CODE" means Part II, Subchapter
M of Chapter 1 of the Code, as now enacted or hereafter amended,
or successor statutes, relating to REITs.
"SECRETARY" shall have the meaning assigned to such
term in Section 9 of Article V.
"SUBSIDIARY" means, with respect to any Person, any
other Person of which more than 50% of (i) the equity or other
ownership interest or (ii) the total voting power of shares of
capital stock or other ownership interests entitled (without
regard to the occurrence of any contingency) to vote in the
election of directors, managers, trustees or general or managing
partners thereof is at the time owned by such Person or one or
more of the other Subsidiaries of such Person or a combination
thereof.
"TREASURER" shall have the meaning assigned to such
term in Section 11 of Article V.
"VICE PRESIDENT" shall have the meaning assigned to
such term in Section 8 of Article V.
"WHOLLY-OWNED SUBSIDIARY" means, with respect to any
Person, any other Person all the outstanding (i) equity or other
ownership interest or (ii) voting power of shares of capital
stock or other ownership interests entitled (without regard to
the occurrence of any contingency) to vote in the election of
directors, managers, trustees or general or managing partners
thereof (in each case other than directors' qualifying shares) is
owned at such time by such Person or by one or more Wholly-Owned
Subsidiaries of such Person or by such Person and one or more
Wholly-Owned Subsidiaries of such Person.
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ARTICLE II
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office of the
Corporation shall be located at such place or places as the Board
may designate.
Section 2. ADDITIONAL OFFICES. The Corporation may have
additional offices at such places as the Board may from time to
time determine or the business of the Corporation may require.
ARTICLE III
MEETINGS OF STOCKHOLDERS
Section 1. PLACE. All meetings of stockholders shall be
held at the principal office of the Corporation or at such other
place within the United States as shall be stated in the notice
of the meeting.
Section 2. ANNUAL MEETING. An annual meeting of the
stockholders for the election of directors and the transaction of
any business within the powers of the Corporation shall be held
on a date and at the time set by the Board during the month of
May in each year, unless the Board elects to hold the meeting in
any other month.
Section 3. SPECIAL MEETINGS. The President, Chief
Executive Officer or Board of Directors may call special meetings
of the stockholders. Special meetings of stockholders shall also
be called by the Secretary of the Corporation upon the written
request of the holders of shares entitled to cast not less than a
majority of all the votes entitled to be cast at such meeting.
Such request shall state the purpose of such meeting and the
matters proposed to be acted on at such meeting. The Secretary
shall inform such stockholders of the reasonably estimated cost
of preparing and mailing notice of the meeting and, upon payment
to the Corporation by such stockholders of such costs, the
Secretary shall give notice to each stockholder entitled to
notice of the meeting.
Section 4. NOTICE. Not less than 10 nor more than 90 days
before each meeting of stockholders, the Secretary shall give to
each stockholder entitled to vote at such meeting and to each
stockholder not entitled to vote who is entitled to notice of the
meeting written or printed notice stating the time and place of
the meeting and, in the case of a special meeting or as otherwise
may be required by any statute, the purpose for which the meeting
is called, either by mail or by presenting it to such stockholder
personally or by leaving it at his residence or usual place of
business. If mailed, such notice shall be deemed to be given
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when deposited in the United States mail addressed to the
stockholder at his post office address as it appears on the
records of the Corporation, with postage thereon prepaid.
Section 5. SCOPE OF NOTICE. Any business of the
Corporation may be transacted at an annual meeting of
stockholders without being specifically designated in the notice,
except such business as is required by any statute to be stated
in such notice. No business shall be transacted at a special
meeting of stockholders except as specifically designated in the
notice.
Section 6. ORGANIZATION. At every meeting of stockholders,
the Chairman of the Board, if there be one, shall conduct the
meeting or, in the case of vacancy in office or absence of the
Chairman of the Board, one of the following officers present
shall conduct the meeting in the order stated: the Vice Chairman
of the Board, if there be one, the President, the Vice Presidents
in their order of rank and seniority, or a chairman chosen by the
stockholders entitled to cast a majority of the votes which all
stockholders present in person or by proxy are entitled to cast,
shall act as chairman, and the Secretary, or, in his absence, an
Assistant Secretary, or in the absence of both the Secretary and
Assistant Secretaries, a person appointed by the chairman shall
act as Secretary.
Section 7. QUORUM. At any meeting of stockholders, the
presence in person or by proxy of stockholders entitled to cast a
majority of all the votes entitled to be cast at such meeting
shall constitute a quorum; but this section shall not affect any
requirement under any statute or the charter of the Corporation
for the vote necessary for the adoption of any measure. A
quorum, once established, shall not be broken by the withdrawal
of enough votes to leave less than a quorum, and the votes
present may continue to transact business until adjournment. If,
however, such quorum shall not be present at any meeting of the
stockholders, the stockholders entitled to vote at such meeting,
present in person or by proxy, shall have the power to adjourn
the meeting from time to time to a date not more than 120 days
after the original record date without notice other than
announcement at the meeting. At such adjourned meeting at which
a quorum shall be present, any business may be transacted which
might have been transacted at the meeting as originally notified.
Section 8. VOTING. A plurality of all the votes cast at a
meeting of stockholders duly called and at which a quorum is
present shall be sufficient to elect a director. Each share may
be voted for as many individuals as there are directors to be
elected and for whose election the share is entitled to be voted.
A majority of the votes cast at a meeting of stockholders duly
called and at which a quorum is present shall be sufficient to
approve any other matter which may properly come before the
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meeting, unless more than a majority of the votes cast is
required by statute or by the charter of the Corporation. Unless
otherwise provided in the charter, each outstanding share,
regardless of class, shall be entitled to one vote on each matter
submitted to a vote at a meeting of stockholders.
Section 9. PROXIES. A stockholder may vote the stock owned
of record by him, either in person or by proxy executed in
writing by the stockholder or by his duly authorized attorney in
fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall
be valid after eleven months from the date of its execution,
unless otherwise provided in the proxy.
Section 10. VOTING OF STOCK BY CERTAIN HOLDERS. Stock of
the Corporation registered in the name of a corporation,
partnership, trust or other entity, if entitled to be voted, may
be voted by the President or a Vice President, a general partner
or trustee thereof, as the case may be, or a proxy appointed by
any of the foregoing individuals, unless some other person who
has been appointed to vote such stock pursuant to a bylaw or a
resolution of the governing body of such corporation or other
entity or agreement of the partners of a partnership presents a
certified copy of such bylaw, resolution or agreement, in which
case such person may vote such stock. Any director or other
fiduciary may vote stock registered in his name as such
fiduciary, either in person or by proxy.
Shares of stock of the Corporation directly or indirectly
owned by it shall not be voted at any meeting and shall not be
counted in determining the total number of outstanding shares
entitled to be voted at any given time, unless they are held by
it in a fiduciary capacity, in which case they may be voted and
shall be counted in determining the total number of outstanding
shares at any given time.
The Board may adopt by resolution a procedure by which a
stockholder may certify in writing to the Corporation that any
shares of stock registered in the name of the stockholder are
held for the account of a specified person other than the
stockholder. The resolution shall set forth the class of
stockholders who may make the certification, the purpose for
which the certification may be made, the form of certification
and the information to be contained in it; if the certification
is with respect to a record date or closing of the stock transfer
books, the time after the record date or closing of the stock
transfer books within which the certification must be received by
the Corporation; and any other provisions with respect to the
procedure which the Board considers necessary or desirable. On
receipt of such certification, the person specified in the
certification shall be regarded as, for the purposes set forth in
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the certification, the stockholder of record of the specified
stock in place of the stockholder who makes the certification.
Notwithstanding any other provision of the charter of the
Corporation or these Bylaws, Title 3, Subtitle 7 of the
Corporations and Associations Article of the Annotated Code of
Maryland (or any successor statute) shall not apply to any
acquisition by any person of shares of stock of the Corporation.
This section may be repealed, in whole or in part, at any time,
whether before or after an acquisition of control shares and,
upon such repeal, may, to the extent provided by any successor
bylaw, apply to any prior or subsequent control share
acquisition.
Section 11. INSPECTORS. At any meeting of stockholders,
the chairman of the meeting may appoint one or more persons as
inspectors for such meeting. Such inspectors shall ascertain and
report the number of shares represented at the meeting based upon
their determination of the validity and effect of proxies, count
all votes, report the results and perform such other acts as are
proper to conduct the election and voting with impartiality and
fairness to all the stockholders.
Each report of an inspector shall be in writing and signed
by him or by a majority of them if there is more than one
inspector acting at such meeting. If there is more than one
inspector, the report of a majority shall be the report of the
inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of
the voting shall be PRIMA FACIE evidence thereof.
Section 12. NOMINATIONS AND STOCKHOLDER BUSINESS
(a) ANNUAL MEETINGS OF STOCKHOLDERS. (1) Nominations of
persons for election to the Board and the proposal of business to
be considered by the stockholders may be made at an annual
meeting of stockholders (i) pursuant to the Corporation's notice
of meeting, (ii) by or at the direction of the Board or (iii) by
any stockholder of the Corporation who was a stockholder of
record both at the time of giving of notice provided for in this
Section 12(a) and at the time of the annual meeting, who is
entitled to vote at the meeting and who complied with the notice
procedures set forth in this Section 12(a).
(1) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to
clause (iii) of paragraph (a)(1) of this Section 12, the
stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not less than 60 days nor
more than 90 days prior to the first anniversary of the preceding
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year's annual meeting; provided, however, that in the event that
the date of the annual meeting is advanced by more than 30 days
or delayed by more than 60 days from such anniversary date,
notice by the stockholder to be timely must be so delivered not
earlier than the 90th day prior to such annual meeting and not
later than the close of business on the later of the 60th day
prior to such annual meeting or the tenth day following the day
on which public announcement of the date of such meeting is first
made. Such stockholder's notice shall set forth (i) as to each
person whom the stockholder proposes to nominate for election or
reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (the "Exchange Act") (including such person's
written consent to being named in the proxy statement as a
nominee and to serving as a director if elected); (ii) as to any
other business that the stockholder proposes to bring before the
meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such
business at the meeting and any material interest in such
business of such stockholder and of the beneficial owner, if any,
on whose behalf the proposal is made; and (iii) as to the
stockholder giving the notice and the beneficial owner, if any,
on whose behalf the nomination or proposal is made, (x) the name
and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (y) the
number of shares of each class of stock of the Corporation which
are owned beneficially and of record by such stockholder and such
beneficial owner.
(2) Notwithstanding anything in the second sentence of
paragraph (a)(2) of this Section 12 to the contrary, in the event
that the number of directors to be elected to the Board is
increased and there is no public announcement naming all of the
nominees for director or specifying the size of the increased
Board made by the Corporation at least 70 days prior to the first
anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Section 12(a) shall also be
considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to
the Secretary at the principal executive offices of the
Corporation not later than the close of business on the tenth day
following the day on which such public announcement is first made
by the Corporation.
(b) SPECIAL MEETINGS OF STOCKHOLDERS. Only such business
shall be conducted at a special meeting of stockholders as shall
have been brought before the meeting pursuant to the
Corporation's notice of meeting. Nominations of persons for
election to the Board may be made at a special meeting of
stockholders at which directors are to be elected (i) pursuant to
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the Corporation's notice of meeting, (ii) by or at the direction
of the Board or (iii) provided that the Board has determined that
directors shall be elected at such special meeting, by any
stockholder of the Corporation who is a stockholder of record at
the time of giving of notice provided for in this Section 12(b),
who is entitled to vote at the meeting and who complied with the
notice procedures set forth in this Section 12(b). In the event
the Corporation calls a special meeting of stockholders for the
purpose of electing one or more directors to the Board, any such
stockholder may nominate a person or persons (as the case may be)
for election to such position as specified in the Corporation's
notice of meeting, if the stockholder's notice containing the
information required by paragraph (a)(2) of this Section 12 shall
be delivered to the Secretary at the principal executive offices
of the Corporation not earlier than the 90th day prior to such
special meeting and not later than the close of business on the
later of the 60th day prior to such special meeting or the tenth
day following the day on which public announcement is first made
of the date of the special meeting and of the nominees proposed
by the Board to be elected at such meeting.
(c) GENERAL. (1) Only such persons who are nominated in
accordance with the procedures set forth in this Section 12 shall
be eligible to serve as directors and only such business shall be
conducted at a meeting of stockholders as shall have been brought
before the meeting in accordance with the procedures set forth in
this Section 12. The presiding officer of the meeting shall have
the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made in
accordance with the procedures set forth in this Section 12 and,
if any proposed nomination or business is not in compliance with
this Section 12, to declare that such defective nomination or
proposal be disregarded.
(2) For purposes of this Section 12, "public
announcement" shall mean disclosure in a press release reported
by the Dow Jones News Service, Associated Press or comparable
news service or in a document publicly filed by the Corporation
with the Securities and Exchange Commission pursuant to Section
13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this
Section 12, a stockholder shall also comply with all applicable
requirements of state law and of the Exchange Act and the rules
and regulations thereunder with respect to the matters set forth
in this Section 12. Nothing in this Section 12 shall be deemed
to affect any rights of stockholders to request inclusion of
proposals in the Corporation's proxy statement pursuant to Rule
14a-8 under the Exchange Act.
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Section 13. VOTING BY BALLOT. Voting on any question or in
any election may be VIVA VOCE unless the presiding officer shall
order or any stockholder shall demand that voting be by ballot.
ARTICLE IV
DIRECTORS
Section 1. GENERAL POWERS. The business and affairs of the
Corporation shall be managed under the direction of its Board.
Section 2. NUMBER, TENURE AND QUALIFICATIONS. The
Corporation shall have a board of seven (7) directors. At any
regular meeting or at any special meeting called for that
purpose, a majority of the entire Board may establish, increase
or decrease the number of directors, provided that the number
thereof shall not be less than the minimum number required by
the Maryland General Corporation Law ("MGCL"), and further
provided that the tenure of office of a director shall not be
affected by any decrease in the number of directors. The
directors shall be divided into three classes in accordance with
the Charter of the Corporation and, except as provided in Section
10 of this Article IV with respect to vacancies, shall be elected
as provided in the Charter at the annual meeting of the
stockholders, and each director elected shall hold office until
his successor is elected and qualified or until his death,
retirement, resignation or removal.
Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting
of the Board shall be held immediately after the annual meeting
of stockholders, no notice other than this Bylaw being necessary.
The Board may provide, by resolution, the time and place, either
within or without the State of Maryland, for the holding of
regular meetings of the Board without other notice than such
resolution.
Section 4. SPECIAL MEETINGS. Special meetings of the Board
may be called by or at the request of the Chairman of the Board,
President or by a majority of the directors then in office. The
person or persons authorized to call special meetings of the
Board may fix any place, either within or without the State of
Maryland, as the place for holding any special meeting of the
Board called by them.
Section 5. NOTICE. Notice of any special meeting of the
Board shall be delivered personally or by telephone, facsimile
transmission, United States mail or courier to each director at
his business or residence address. Notice by personal delivery,
by telephone or a facsimile transmission shall be given at least
one day prior to the meeting. Notice by mail shall be given at
least three days prior to the meeting and shall be deemed to be
given when deposited in the United States mail properly
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addressed, with postage thereon prepaid. Telephone notice shall
be deemed to be given when the director is personally given such
notice in a telephone call to which he is a party. Facsimile
transmission notice shall be deemed to be given upon completion
of the transmission of the message to the number given to the
Corporation by the director and receipt of a completed answer-
back indicating receipt. Neither the business to be transacted
at, nor the purpose of, any annual, regular or special meeting of
the Board need be stated in the notice, unless specifically
required by statute or these Bylaws.
Section 6. QUORUM. A majority of the directors shall
constitute a quorum for transaction of business at any meeting of
the Board, provided that, if less than a majority of such
directors are present at said meeting, a majority of the
directors present may adjourn the meeting from time to time
without further notice, and provided further that if, pursuant to
the charter of the Corporation or these Bylaws, the vote of a
majority of a particular group of directors is required for
action, a quorum must also include a majority of such group.
The Board present at a meeting which has been duly called
and convened may continue to transact business until adjournment,
notwithstanding the withdrawal of enough directors to leave less
than a quorum.
Section 7. VOTING. The action of the majority of the
directors present at a meeting at which a quorum is present shall
be the action of the Board, unless the concurrence of a greater
proportion is required for such action by applicable statute.
Section 8. TELEPHONE MEETINGS. Directors may participate
in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the
meeting can hear each other at the same time. Participation in a
meeting by these means shall constitute presence in person at the
meeting.
Section 9. INFORMAL ACTION BY DIRECTORS. Any action
required or permitted to be taken at any meeting of the Board may
be taken without a meeting, if a consent in writing to such
action is signed by each director and such written consent is
filed with the minutes of proceedings of the Board.
Section 10. VACANCIES. If for any reason any or all the
directors cease to be directors, such event shall not terminate
the Corporation or affect these Bylaws or the powers of the
remaining directors hereunder. Any vacancy on the Board for any
cause other than an increase in the number of directors shall be
filled at any regular meeting or at any special meeting called
for that purpose by a majority vote of the remaining directors,
although such majority may be less than a quorum. Any individual
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so elected as director shall hold office for the remainder of the
term of the class to which he was elected. Any vacancy in the
number of directors created by an increase in the number of
directors may be filled by a majority vote of the entire Board.
Any individual so elected as director shall hold office until the
next annual meeting of stockholders and until his successor is
elected and qualified.
Section 11. COMPENSATION OF DIRECTORS. Unless otherwise
restricted by the Charter or these Bylaws, the Board of Directors
shall have the authority to fix the compensation of directors.
The directors may be paid their expenses, if any, of attendance
at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of Directors
and/or a stated salary as director. No such payment shall
preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor. Members of special
or standing committees may be allowed like compensation for
attending committee meetings.
Section 12. LOSS OF DEPOSITS. No director shall be liable
for any loss which may occur by reason of the failure of the
bank, trust company, savings and loan association, or other
institution with whom moneys or stock have been deposited.
Section 13. SURETY BONDS. Unless required by law, no
director shall be obligated to give any bond or surety or other
security for the performance of any of his duties.
Section 14. RELIANCE. Each director, officer, employee and
agent of the Corporation shall, in the performance of his duties
with respect to the Corporation, be fully justified and protected
with regard to any act or failure to act in reliance in good
faith upon the books of account or other records of the
Corporation, upon an opinion of counsel or upon reports made to
the Corporation by any of its officers or employees or by the
adviser, accountants, appraisers or other experts or consultants
selected by the Board or officers of the Corporation, regardless
of whether such counsel or expert may also be a director.
Section 15. COMMITTEES OF DIRECTORS. The Board may, by
resolution passed by a majority of the whole Board, designate one
or more committees, each such committee to consist of one or more
of the directors of the Corporation. The Board may designate one
or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of
the Board to act at the meeting in the place of any such absent
or disqualified member. Any such committee, to the extent
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provided in the resolution of the Board, shall have and may
exercise all the powers and authority of the Board in the
management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the
power or authority in reference to amending the Charter, adopting
an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially
all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of
a dissolution, or amending the Bylaws of the Corporation; and,
unless the resolution or the Charter expressly so provide, no
such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock.
Section 16. COMMITTEE MEETINGS. Notice of committee
meetings shall be given in the same manner as notice for special
meetings of the Board. A majority of the members of the
committee shall constitute a quorum for the transaction of
business at any meeting of the committee. The act of a majority
of the committee members present at a meeting shall be the act of
such committee. The Board may designate a chairman of any
committee, and such chairman or any two members of any committee
may fix the time and place of its meeting unless the Board shall
otherwise provide. Each committee shall keep minutes of its
proceedings. Members of a committee of the Board may participate
in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the
meeting can hear each other at the same time. Participation in a
meeting by these means shall constitute presence in person at the
meeting.
Section 17. INFORMAL ACTION BY COMMITTEES. Any action
required or permitted to be taken at any meeting of a committee
of the Board may be taken without a meeting, if a consent in
writing to such action is signed by each member of the committee
and such written consent is filed with the minutes of proceedings
of such committee.
Section 18. COMMITTEE VACANCIES. Subject to the provisions
hereof, the Board shall have the power at any time to change the
membership of any committee, to fill all vacancies, to designate
alternate members to replace any absent or disqualified member or
to dissolve any such committee.
ARTICLE V
OFFICERS
Section 1. GENERAL PROVISIONS. The officers of the
Corporation shall be chosen by the Board and shall include a
President, a Secretary and a Treasurer and may include a Chairman
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Section 1. GENERAL PROVISIONS. The officers of the
Corporation shall be chosen by the Board and shall include a
President, a Secretary and a Treasurer and may include a Chairman
of the Board, a Chief Executive Officer, one or more Vice
Presidents, a Chief Operating Officer, a Chief Financial Officer,
one or more Assistant Secretaries and one or more Assistant
Treasurers. In addition, the Board may from time to time appoint
such other officers with such powers and duties as they shall
deem necessary or desirable. The officers of the Corporation
shall be elected annually by the Board at the first meeting of
the Board held after each annual meeting of stockholders. If the
election of officers shall not be held at such meeting, such
election shall be held as soon thereafter as may be convenient.
Each officer shall hold office until his successor is elected and
qualifies or until his death, resignation or removal in the
manner hereinafter provided. Any two or more offices except
President and Vice President may be held by the same person. In
its discretion, the Board may leave unfilled any office except
that of President, Treasurer and Secretary. Election of an
officer or agent shall not of itself create contract rights
between the Corporation and such officer or agent.
Section 2. REMOVAL AND RESIGNATION. Any officer or agent
of the Corporation may be removed by the Board if in its judgment
the best interests of the Corporation would be served thereby,
but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Any officer of the
Corporation may resign at any time by giving written notice of
his resignation to the Board, the Chairman of the Board, the
President or the Secretary. Any resignation shall take effect at
any time subsequent to the time specified therein or, if the time
when it shall become effective is not specified therein,
immediately upon its receipt. The acceptance of a resignation
shall not be necessary to make it effective unless otherwise
stated in the resignation. Such resignation shall be without
prejudice to the contract rights, if any, of the Corporation.
Section 3. VACANCIES. A vacancy in any office may be
filled by the Board for the balance of the term.
Section 4. CHAIRMAN OF THE BOARD. The Chairman of the
Board, if such an officer be elected, shall, if present, preside
at all meetings of the Board and exercise and perform such other
powers and duties as may be from time to time assigned to him or
her by the Board or prescribed by these Bylaws. If there is no
President, the Chairman of the Board shall in addition be the
Chief Executive Officer of the Corporation and shall have the
powers and duties prescribed in Section 4 of this Article V.
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Section 5. CHIEF EXECUTIVE OFFICER. The Board may
designate a Chief Executive Officer. In the absence of such
designation, the Chairman of the Board shall be the Chief
Executive Officer of the Corporation. The Chief Executive
Officer shall have general responsibility for implementation of
the policies of the Corporation, as determined by the Board, and
for the management of the business and affairs of the
Corporation.
Section 6. CHIEF OPERATING OFFICER. The Board may
designate a Chief Operating Officer. The Chief Operating Officer
shall have the responsibilities and duties as set forth by the
Board or the Chief Executive Officer.
Section 7. PRESIDENT. The Board may designate a President.
The President shall have the responsibilities and duties as set
forth by the Board or the Chief Executive Officer.
Section 8. VICE PRESIDENT. In the absence or disability of
the President, the Vice Presidents in order of their rank as
fixed by the Board, or if not ranked, the Vice President
designated by the Board, shall perform all the duties of the
President, and when so acting shall have all the powers of and be
subject to all the restrictions upon the President. The Vice
Presidents shall have such other duties as from time to time may
be prescribed for them, respectively, by the Board.
Section 9. SECRETARY. The Secretary shall attend all
sessions of the Board and all meetings of the stockholders and
record all votes and the minutes of all proceedings in a book to
be kept for that purpose, and shall perform like duties for the
standing committees when required by the Board. He or she shall
give, or cause to be given, notice of all meetings of the
stockholders and of the Board, and shall perform such other
duties as may be prescribed by the Board or these Bylaws. He or
she shall keep in safe custody the seal of the Corporation, and
when authorized by the Board, affix the same to any instrument
requiring it, and when so affixed it shall be attested by his or
her signature or by the signature of an Assistant Secretary. The
Board may give general authority to any other officer to affix
the seal of the Corporation and to attest the affixing by his or
her signature.
Section 10. ASSISTANT SECRETARIES. If there shall be
one, the Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the Board, or if
there be no such determination, the Assistant Secretary
designated by the Board, shall, in the absence or disability of
the Secretary, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other
powers as the Board may from time to time prescribe.
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Section 11. TREASURER. The Treasurer shall have the
custody of the corporate funds and securities and shall keep full
and accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all moneys, and
other valuable effects in the name and to the credit of the
Corporation, in such depositories as may be designated by the
Board. He or she shall disburse the funds of the Corporation as
may be ordered by the Board, taking proper vouchers for such
disbursements, and shall render to the Board, at its regular
meetings, or when the Board so requires, an account of all of his
or her transactions as Treasurer and of the financial condition
of the Corporation. If required by the Board, he or she shall
give the Corporation a bond, in such sum and with such surety or
sureties as shall be satisfactory to the Board, for the faithful
performance of the duties of his or her office and for the
restoration to the Corporation, in case of his or her death,
resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in
his or her possession or under his or her control belonging to
the Corporation.
Section 12. ASSISTANT TREASURER. If there shall be one,
the Assistant Treasurer, or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board, or if
there be no such determination, the Assistant Treasurer
designated by the Board, shall, in the absence or disability of
the Treasurer, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other
powers as the Board may from time to time prescribe.
Section 13. SALARIES. The salaries and other compensation
of the officers shall be fixed from time to time by the Board and
no officer shall be prevented from receiving such salary or other
compensation by reason of the fact that he is also a director.
ARTICLE VI
STOCK
Section 1. CERTIFICATES. Each stockholder shall be
entitled to a certificate or certificates which shall represent
and certify the number of shares of each class of stock held by
him in the Corporation. Each certificate shall be signed by the
Chairman of the Board, the President or a Vice President and
countersigned by the Secretary or an assistant Secretary or the
Treasurer or an Assistant Treasurer and may be sealed with the
seal, if any, of the Corporation. The signatures may be either
manual or facsimile. Certificates shall be consecutively
numbered; and if the Corporation shall, from time to time, issue
several classes of stock, each class may have its own number
series. A certificate is valid and may be issued whether or not
an officer who signed it is still an officer when it is issued.
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Each certificate representing shares which are restricted as to
their transferability or voting powers, which are preferred or
limited as to their dividends or as to their allocable portion of
the assets upon liquidation or which are redeemable at the option
of the Corporation, shall have a statement of such restriction,
limitation, preference or redemption provision, or a summary
thereof, plainly stated on the certificate. If the Corporation
has authority to issue stock of more than one class, the
certificate shall contain on the face or back a full statement or
summary of the designations and any preferences, conversion and
other rights, voting powers, restrictions, limitations as to
dividends and other distributions, qualifications and terms and
conditions of redemption of each class of stock and, if the
Corporation is authorized to issue any preferred or special class
in series, the differences in the relative rights and preferences
between the shares of each series to the extent they have been
set and the authority of the Board to set the relative rights and
preferences of subsequent series. In lieu of such statement or
summary, the certificate may state that the Corporation will
furnish a full statement of such information to any stockholder
upon request and without charge. If any class of stock is
restricted by the Corporation as to transferability, the
certificate shall contain a full statement of the restriction or
state that the Corporation will furnish information about the
restrictions to the stockholder on request and without charge.
Section 2. TRANSFERS. Upon surrender to the Corporation or
the transfer agent of the Corporation of a stock certificate duly
endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, the Corporation shall issue
a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
The Corporation shall be entitled to treat the holder of
record of any share of stock as the holder in fact thereof and,
accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or on the part of any
other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the
State of Maryland.
Notwithstanding the foregoing, transfers of shares of any
class of stock will be subject in all respects to the charter of
the Corporation and all of the terms and conditions contained
therein.
Section 3. REPLACEMENT CERTIFICATE. Any officer designated
by the Board may direct a new certificate to be issued in place
of any certificate previously issued by the Corporation alleged
to have been lost, stolen or destroyed upon the making of an
affidavit of that fact by the person claiming the certificate to
be lost, stolen or destroyed. When authorizing the issuance of a
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new certificate, an officer designated by the Board may, in his
discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate
or the owner's legal representative to advertise the same in such
manner as he shall require and/or to give bond, with sufficient
surety, to the Corporation to indemnify it against any loss or
claim which may arise as a result of the issuance of a new
certificate.
Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD
DATE. The Board may set, in advance, a record date for the
purpose of determining stockholders entitled to notice of or to
vote at any meeting of stockholders or determining stockholders
entitled to receive payment of any dividend or the allotment of
any other rights, or in order to make a determination of
stockholders for any other proper purpose. Such date, in any
case, shall not be prior to the close of business on the day the
record date is fixed and shall be not more than 90 days and, in
the case of a meeting of stockholders, not less than ten days,
before the date on which the meeting or particular action
requiring such determination of stockholders of record is to be
held or taken.
In lieu of fixing a record date, the Board may provide that
the stock transfer books shall be closed for a stated period but
not longer than 20 days. If the stock transfer books are closed
for the purpose of determining stockholders entitled to notice of
or to vote at a meeting of stockholders, such books shall be
closed for at least ten days before the date of such meeting.
If no record date is fixed and the stock transfer books are
not closed for the determination of stockholders, (a) the record
date for the determination of stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of
business on the day on which the notice of meeting is mailed or
the 30th day before the meeting, whichever is the closer date to
the meeting; and (b) the record date for the determination of
stockholders entitled to receive payment of a dividend or an
allotment of any other rights shall be the close of business on
the day on which the resolution of the directors, declaring the
dividend or allotment of rights, is adopted.
When a determination of stockholders entitled to vote at any
meeting of stockholders has been made as provided in this
section, such determination shall apply to any adjournment
thereof, except when (i) the determination has been made through
the closing of the transfer books and the stated period of
closing has expired or (ii) the meeting is adjourned to a date
more than 120 days after the record date fixed for the original
meeting, in either of which case a new record date shall be
determined as set forth herein.
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Section 5. STOCK LEDGER. The Corporation shall maintain at
its principal office or at the office of its counsel, accountants
or transfer agent, an original or duplicate share ledger
containing the name and address of each stockholder and the
number of shares of each class held by such stockholder.
Section 6. FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board
may issue fractional stock or provide for the issuance of scrip,
all on such terms and under such conditions as they may
determine. Notwithstanding any other provision of the charter or
these Bylaws, the Board may issue units consisting of different
securities of the Corporation. Any security issued in a unit
shall have the same characteristics as any identical securities
issued by the Corporation, except that the Board may provide that
for a specified period securities of the Corporation issued in
such unit may be transferred on the books of the Corporation only
in such unit.
ARTICLE VII
INVESTMENT POLICY AND RESTRICTIONS
Section 1. INVESTMENT. The Corporation intends to invest,
directly or indirectly, in such real estate investments as may be
approved by the Board from time to time. Subject to the
restrictions of this Article VII, the Corporation's investments
may be acquired in such manner, through such means and upon such
terms and conditions as may be determined by the Board, and such
investments may include, but are not limited to, direct
acquisitions by the Corporation of real estate interests as well
as investments in corporations, business trusts, general
partnerships, limited partnerships, joint ventures or other legal
entities and other investments. All investments made by the
Corporation, except those pursuant to Article VII, Section 4,
must be approved by a majority of the directors or made in
accordance with guidelines approved by the Board and which are in
effect at the time the investments are made by the Corporation's
management.
Section 2. TAX TREATMENT AS A REIT. As soon as the
Corporation commences doing business, the Corporation shall use
its best efforts to be eligible for tax treatment as an REIT
under the Code, shall make such elections and filings, and take
such other actions as may be necessary, to be treated as a REIT
under the Code, and shall thereafter conduct its business to
continue to qualify as a REIT under the REIT Provisions of the
Code.
Section 3. NO LIABILITY TO QUALIFY AS REIT. Although a
general purpose of the Corporation is to qualify as a REIT under
the REIT Provisions of the Code, no director, officer, employee,
agent or independent contractor of the Corporation shall be
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liable for any act or omission resulting in the loss of tax
benefits under the Code.
Section 4. SPECIFIC INVESTMENTS. Pending investment or
reinvestment of the Corporation's assets in the type of
investments described in Article VII, Section 1, the Corporation
may invest its assets in investments such as: (a) United States
government securities, (b) bankers' acceptances, (c) certificates
of deposit, (d) bank repurchase agreements covering securities of
the United States government or governmental agencies, (e)
commercial paper rated A-1 (or the equivalent) or better by
Moody's Investors Services, Inc. or any other nationally-
recognized rating agency, (f) interest-bearing time deposits in
banks and thrift institutions, (g) money market funds, (h)
mortgage-backed or related securities issued or guaranteed by the
United States government or its agencies, (i) debt securities or
equity securities collateralized by debt securities rated A-1 (or
the equivalent) or better by Moody's Investors Services, Inc. or
any other nationally-recognized rating agency, (j) other short-
or medium-term liquid investments or hybrid debt/equity
securities approved by the Board, or (k) any combination of the
foregoing investments.
Section 5. RESERVES. The Corporation may retain, as a
permanent reserve, such funds as the Board deems reasonable, in
cash and in the types of investments described in Section 4 of
this Article VII.
Section 6. INVESTMENT RESTRICTIONS. The Corporation shall
not: (a) invest in foreign currency, bullion, commodities or
commodity future contracts; (b) invest in contracts for the sale
of real estate; (c) engage in underwriting or the agency
distribution of securities issued by others; (d) issue
"redeemable securities" (as defined in Section 2(a)(32) of the
Investment Company Act of 1940, as amended), "face amount
certificates of the installment type" (as defined in Section
2(a)(15) thereof) or "periodic payment plan certificates" (as
defined in Section 2(a)(27) thereof); or (e) engage in short
sales or trading activities in securities, except for purposes of
hedging the Company's short-term investments and obligations.
Section 7. RESTRICTIONS UPON DEALINGS BETWEEN THE
CORPORATION AND INTERESTED PARTIES.
(a) GENERAL RESTRICTIONS. Except as provided in this
Section 7, the Corporation shall not engage in a transaction
described in this Section 7 with any director, officer, any
advisor, any person owning or controlling ten percent (10%) or
more of any class of the Corporation's outstanding voting
securities, or any Affiliate of any of the aforementioned
(individually, the "Interested Party" and collectively, the
"Interested Parties"), except in compliance with the restrictions
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contained in this Section 7. Any transaction between the
Corporation and any of the Interested Parties made in compliance
with the requirements of this Section 7 shall be valid
notwithstanding such relationship, and such Interested Party
shall not be under any disability from or have any liability as a
result of entering into any such transaction with the
Corporation.
(b) SALES TO THE CORPORATION. Except as provided in this
Paragraph (b), the Corporation shall not purchase property from
any of the Interested Parties unless, after disclosure to the
Board of the interest of the Interested Party in the proposed
transaction, a majority of directors not otherwise interested in
such transaction (including a majority of the Independent
Directors) has in good faith determined that (x) the property is
being offered to the Corporation upon terms fair and commercially
reasonable to the Corporation and at a price not greater than the
cost of such asset to the selling party or its Appraised Value,
and (y) the cost of such property and any improvements thereof is
clearly established at the time of the proposed transaction and,
regardless of such property's Appraised Value, if such cost is
less than the price to be paid by the Corporation, some material
change has occurred to the property which would increase its
value after the selling party acquired an interest therein. The
passage of time, increases in gross revenues, substantial
repairs, rehabilitation or improvements, and the receipt of
permits, consents, approvals, licenses and other authorizations
from governmental agencies or bodies, may be regarded as events
increasing the value of the property and supporting a price in
excess of the selling entity's costs.
(c) SALES BY THE CORPORATION. The Corporation shall not
sell property to any Interested Parties, unless the interest of
any such Interested Party in such proposed transaction has been
disclosed to the Board and a majority of directors not otherwise
interested in such transaction (including a majority of the
Independent Directors) have determined in good faith that the
transaction is fair, competitive and commercially reasonable to
the Corporation and on terms and conditions not less favorable
than the terms and conditions that would have been made available
from unaffiliated third parties.
(d) LOANS TO THE CORPORATION. The Corporation shall not
borrow funds from, any of the Interested Parties unless, after
disclosure to the Board of the interest of the Interested Party
in the proposed transaction, a majority of Directors not
otherwise interested in such transaction (including a majority of
the Independent Directors) have determined in good faith that the
transaction is fair, competitive and commercially reasonable to
the Corporation and on terms and conditions no less favorable to
the Corporation than loans between unaffiliated lenders and
borrowers under the same circumstances.
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Section 8. CORPORATION'S RIGHT TO BORROW FUNDS. Subject to
the restrictions contained in this Section 8, the Corporation
may, at any time, at the discretion of the Board, create, incur,
assume, guarantee, extend the maturity of or otherwise become
liable with respect to any Indebtedness, on a secured or
unsecured basis, and in connection therewith execute, issue and
deliver promissory notes, commercial paper, notes, debentures,
bonds and other debt obligations (which may be convertible into
shares of capital stock or other equity interests or be issued
together with warrants to acquire shares of capital stock or
other equity interests).
Section 9. PURSUIT OF ANCILLARY SERVICES.
(a) The Corporation may provide any Ancillary Services to
its tenants or others as long as the Board believes in good faith
that the Corporation's pursuit of such Ancillary Services would
not jeopardize the Corporation's qualification as a REIT under
the Code.
(b) In the event that the Corporation's pursuit of one or
more of the Ancillary Services might jeopardize the qualification
of the Corporation as a REIT under the Code, the Corporation may,
in lieu of offering such Ancillary Services directly:
(i) Restructure the manner in which such Ancillary
Services are offered to the Corporation's tenants or others,
alter the pricing of other Ancillary Services or take such other
action as the Corporation deems necessary;
(ii) Invest in one or more other entities which
directly provide the Ancillary Services to the Corporation's
tenants or others; or
(iii) Permit others, including Interested Parties, to
offer the Ancillary Services to the Corporation's customers or
others or to use the Corporation's properties as a site for
offering such services, if such permission is granted in
compliance with the terms of Paragraph (c) of this Section 9;
PROVIDED, HOWEVER, that, in each such instance, the Board has
received an opinion from tax counsel or a ruling from the IRS
that such action, subject to the qualifications and restrictions
imposed by the Board, and such other assumptions as the Board may
reasonably establish, would not disqualify the Corporation from
taxation as a REIT under the Code.
(c) The Corporation may permit one or more third parties in
addition to an Advisor (including entities in which a Director,
officer or an Affiliate thereof has an interest), to offer
Ancillary Services to its customers or others, or to use the
Corporation's properties as a site for offering such Ancillary
Services, if the Board has in good faith made the following
determinations:
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(i) The Corporation does not wish, or consider it
advisable, to offer the Ancillary Services directly to its
tenants or others or has determined that rendering such Ancillary
Services would jeopardize the qualification of the Corporation as
a REIT under the Code;
(ii) Permitting others to render such Ancillary
Services would likely increase the rental revenues or other
income derived from the ownership of the Corporation's
properties, enhance the competitiveness of the Corporation or
otherwise provide economic benefits, directly or indirectly, to
the Corporation; and
(iii) The party or parties rendering the Ancillary
Services are competent to do so, have experience in rendering
such Ancillary Services and have entered into a written contract
with the Corporation with respect to the provision of the
Ancillary Services, having terms and conditions deemed fair and
equitable by the Board.
Section 10. INVESTMENT IN CORPORATION'S SHARES. The
Corporation may, at any time, at the discretion of the Board,
invest in any class or series of the Common Stock or Preferred
Stock, or in any of its promissory notes, commercial paper,
Notes, debentures, bonds or other debt obligations, for the
purpose of supporting the value of any such securities or for any
other purpose.
ARTICLE VIII
INDEPENDENT ACTIVITIES
Section 1. SHARES HELD BY DIRECTORS AND OFFICERS. Any
director or officer may acquire, own, hold and dispose of shares
of capital stock in the Corporation, for his or her individual
account, and may exercise all rights of a stockholder to the same
extent and in the same manner as if he or she were not a director
or officer.
Section 2. BUSINESS INTERESTS AND INVESTMENTS OF DIRECTORS.
Subject to the limitations contained in this Section 2, any
director who is not an officer of the Corporation may have
personal business interests and may engage in personal business
activities, which interests and activities may include the
acquisition, syndication, holding, management, operation or
disposition, for his or her own account or for the account of
others, of interests in real property or persons engaged in the
real estate business, even if the same directly compete with the
actual business being conducted by the Corporation, and is not
required to present to the Corporation any business opportunity
which comes to him or her even though such opportunity is within
the Corporation's investment policies.
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Section 3. OTHER BUSINESS RELATIONSHIPS OF DIRECTOR.
Subject to the provisions of Article VII, any director or officer
may be interested as trustee, officer, director, stockholder,
partner, member, advisor or employee, or otherwise have a direct
or indirect interest in any person who may be engaged to render
advice or services to the Corporation, and may receive
compensation from such person as well as compensation as
director, officer or otherwise hereunder, and no such activity
shall be deemed to conflict with his or her duties and powers as
director or officer.
ARTICLE IX
GENERAL PROVISIONS
Section 1. DIVIDENDS. Dividends upon the capital stock of
the Corporation, subject to the provisions of the Charter, if
any, may be declared by the Board at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the
provisions of the Charter.
Section 2. PAYMENT OF DIVIDENDS; DIRECTORS' DISCRETION TO
ESTABLISH RESERVES. Before payment of any dividend there may be
set aside out of any funds of the Corporation available for
dividends such sum or sums as the Board from time to time, in
their absolute discretion, think proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such other
purpose as the Board shall think conducive to the interests of
the Corporation, and the Board may abolish any such reserve.
Section 3. DUTIES. For the purpose of determining
stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights or the stockholders
entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other
lawful action, the Board may fix a record date, which record date
shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more
than thirty (30) (or the maximum number permitted by applicable
law) days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose
shall be at the close of business on the day on which the Board
adopts the resolution relating thereto. Any distribution of
income or capital assets of the Corporation to stockholders will
be accompanied by a written statement disclosing the source of
the funds distributed. If, at the time of distribution, this
information is not available, a written explanation of the
relevant circumstances will accompany the distribution and a
written statement disclosing the source of funds distributed will
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be sent to the stockholders not later than sixty (60) days after
the close of the fiscal year in which the distribution was made.
Section 4. CORPORATE SEAL. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its
organization and the words "Corporate Seal, Maryland." Said seal
may be used by causing it or a facsimile thereof to be impressed
or affixed or reproduced or otherwise. Whenever the Corporation
is permitted or required to affix its seal to a document, it
shall be sufficient to meet the requirements of any law, rule or
regulation relating to a seal to place the word "(SEAL)" adjacent
to the signature of the person authorized to execute the document
on behalf of the Corporation.
Section 5. MANNER OF GIVING NOTICE. Whenever, under the
provisions of the statutes or of the Charter or of these Bylaws,
notice is required to be given to any director or stockholder, it
shall not be construed to mean personal notice, but such notice
may be given in writing, by mail, addressed to such director or
stockholder, at his or her address as it appears on the records
of the Corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to directors may
also be given by telegram.
Section 6. WAIVER OF NOTICE. Whenever any notice is
required to be given under the provisions of the statutes or of
the Charter or of these Bylaws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed to be
equivalent.
Section 7. ANNUAL STATEMENT. The Board shall cause an
annual report to be sent to the stockholders not later than one
hundred twenty (120) days after the close of the fiscal year
adopted by the Corporation. This report shall be sent at least
thirty (30) days before the annual meeting of stockholders to be
held during the next fiscal year and in the manner specified in
Section 5 of this Article IX for giving notice to stockholders of
the Corporation. The annual report shall contain financial
statements prepared in accordance with generally accepted
accounting principles which are audited and reported on by
independent certified public accountants. If the Corporation
engages an Advisor to administer its affairs, the annual report
shall include the aggregate amount of advisory fees and the
aggregate amount of other fees paid to the Advisor and its
Affiliates, including fees or charges paid to the Advisor and its
Affiliates by third parties doing business with the Corporation.
Section 8. FISCAL YEAR. The Board shall have the power,
from time to time, to fix the fiscal year of the Corporation by a
duly adopted resolution.
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Section 9. CONTRACTS. The Board may authorize any officer
or agent to enter into any contract or to execute and deliver any
instrument in the name of and on behalf of the Corporation and
such authority may be general or confined to specific instances.
Any agreement, deed, mortgage, lease or other document executed
by one or more of the directors or by an authorized person shall
be valid and binding upon the Board and upon the Corporation when
authorized or ratified by action of the Board.
Section 10. CHECKS AND DRAFTS. All checks, drafts or other
orders for the payment of money, notes or other evidences of
indebtedness issued in the name of the Corporation shall be
signed by such officer or agent of the Corporation in such manner
as shall from time to time be determined by the Board.
Section 11. DEPOSITS. All funds of the Corporation not
otherwise employed shall be deposited from time to time to the
credit of the Corporation in such banks, trust companies or other
depositories as the Board may designate.
ARTICLE X
INDEMNIFICATION AND ADVANCES FOR EXPENSES
To the maximum extent permitted by Maryland law in effect
from time to time, the Corporation, without requiring a
preliminary determination of the ultimate entitlement to
indemnification, shall indemnify and shall pay or reimburse
reasonable expenses in advance of final disposition of a
proceeding to (a) any individual who is a present or former
director or officer of the Corporation and who is made a party to
the proceeding by reason of his service in that capacity or (b)
any individual who, while a director of the Corporation and at
the request of the Corporation, serves or has served another
corporation, real estate investment trust, partnership, joint
venture, trust, employee benefit plan or any other enterprise as
a director, officer, partner or trustee of such corporation, real
estate investment trust, partnership, joint venture, trust,
employee benefit plan or other enterprise and who is made a party
to the proceeding by reason of his service in that capacity. The
Corporation may, with the approval of its Board, provide such
indemnification and advance for expenses to a person who served a
predecessor of the Corporation in any of the capacities described
in (a) or (b) above and to any employee or agent of the
Corporation or a predecessor of the Corporation.
Neither the amendment nor repeal of this Article, nor the
adoption or amendment of any other provision of the Bylaws or
charter of the Corporation inconsistent with this Article, shall
apply to or affect in any respect the applicability of the
preceding paragraph with respect to any act or failure to act
which occurred prior to such amendment, repeal or adoption.
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ARTICLE XI
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the
charter of the Corporation or these Bylaws or pursuant to
applicable law, a waiver thereof in writing, signed by the person
or persons entitled to such notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of
such notice. Neither the business to be transacted at nor the
purpose of any meeting need be set forth in the waiver of notice,
unless specifically required by statute. The attendance of any
person at any meeting shall constitute a waiver of notice of such
meeting, except where such person attends a meeting for the
express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or
convened.
ARTICLE XII
AMENDMENT OF BYLAWS
The Board of Directors shall have the exclusive power to
adopt, alter or repeal any provision of these Bylaws and to make
new Bylaws; PROVIDED, HOWEVER, that Section 3 of Article IX
(relating to the written statement the Corporation is required to
furnish to stockholders), Article VII except for Section 8
thereof (relating to investment policy and restrictions), Section
7 of Article IX (relating to an annual report), and the
definitions in Article I, to the extent that such definitions are
to be used in any of the Sections cited in this Article XII
(relating to amendments to the Bylaws) may not be amended,
repealed or modified, or inconsistent provisions adopted with
respect thereto, without the affirmative vote of the stockholders
holding a majority of the outstanding shares of each class
entitled to vote.
ARTICLE XIII
MISCELLANEOUS
Section 1. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
The provisions of these Bylaws are separable, and if the Board
shall determine, with the advice of counsel, that any one or more
of such provisions (the "Conflicting Provisions") are in conflict
with the REIT Provisions of the Code, the Maryland General
Corporation Law or other applicable federal or Delaware laws and
regulations, the Conflicting Provisions shall be deemed never to
have constituted a part of these Bylaws; provided, however, that
such determination of the Directors shall not affect or impair
any of the remaining provisions of these Bylaws or render invalid
or improper any action taken or omitted (including, but not
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limited to, the election of Directors) prior to such
determination. Such determination shall become effective when a
certificate, signed by a majority of the Directors setting forth
any such determination and reciting that it was duly adopted by
the Directors, shall be filed with the books and records of the
Corporation. The Directors shall not be liable for failure to
make any determination under this Section 1 of Article XIII.
Nothing in this Section 1 shall in any way limit or affect the
rights of the Directors or the stockholders to amend these
Bylaws.
Section 2. RELIANCE UPON LEGAL ADVICE. The Directors,
including the Independent Directors, may retain one or more legal
counsel to assist them in making any determination required by
them, or which they are permitted to make, pursuant to the terms
of these Bylaws. Such directors shall not be liable for any loss
caused by or resulting from any action taken or omitted in
reliance upon any legal opinion rendered by such counsel, so long
as the selection of the legal counsel and reliance on the advice
was in good faith.
In making any such determinations, the Directors shall not,
however, be obligated to follow the advice of any legal counsel
engaged to advise them.
Section 3. MARYLAND LAW TO GOVERN. Unless the context
requires otherwise, the general provisions, rules of construction
and definitions in the Maryland General Corporation Law shall
govern the construction of these Bylaws.
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CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
(1) That I am duly elected and acting Secretary of Realty
Income of Maryland, Inc. a Maryland corporation; and
(2) That the foregoing bylaws, comprising ___ pages,
constitute the bylaws of said corporation as duly adopted by the
written consent of the stockholders of said corporation as of May
13, 1997.
IN WITNESS WHEREOF, I have hereunto subscribed my name this
13th day of May, 1997.
------------------------------
Michael R. Pfeiffer, Secretary
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REALTY INCOME CORPORATION
ANNUAL MEETING OF STOCKHOLDERS -- MAY 13, 1997
Please mark your /X/
votes as indicated
in this example
The undersigned stockholder of Realty Income Corporation, a
Delaware corporation (the "Company") hereby appoints Richard J.
VanDerhoff and Michael R. Pfeiffer, and each of them, as proxies
for the undersigned with full power of substitution in each of
them, to attend the Annual Meeting of the Stockholders of the
Company to be held on May 13, 1997 at 9:00 a.m. Pacific Standard
Time, and any adjournment or postponement thereof, to cast on
behalf of the undersigned all votes that the undersigned is
entitled to cast at such meeting and otherwise to represent the
undersigned at the meeting with all powers possessed by the
undersigned if personally present at the meeting. The
undersigned hereby acknowledges receipt of the Notice of the
Annual Meeting of Stockholders and revokes any proxy heretofore
given with respect to such meeting.
The votes entitled to be cast by the undersigned will be cast as
instructed below. If this proxy is executed but no instruction
is given, the votes entitled to be cast by the undersigned will
be cast "for" the following proposals:
The Board of Directors recommends a vote FOR Items 1 and 2.
Item 1. -- Reincorporation of the Company in Maryland and Related
Changes to the Rights of Stockholders
FOR AGAINST
/ / / /
Item 2. -- Election of Directors:
Nominees:
FOR WITHHOLD AUTHORITY
For all (except as indicated to the contrary)
/ / / /
William E. Clark, Richard J. VanDerhoff, Thomas A. Lewis, Donald
R. Cameron, Roger P. Kuppinger, Michael D. McKee and Willard H.
Smith
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided below)
(Continued on the other side)
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<PAGE>
(Continued from other side)
Item 3. -- In their discretion, the Proxies are authorized to
vote upon such other business as may properly come
before the Annual Meeting or any adjournment or
postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION
IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
PLEASE DATE THIS PROXY AND SIGN IT EXACTLY AS YOUR NAME OR NAMES
APPEAR BELOW. WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD
SIGN. WHEN SIGNING AS AN ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF SHARES
ARE HELD BY A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY
THE PRESIDENT OR OTHER AUTHORIZED OFFICER. IF SHARES ARE HELD BY
A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AN AUTHORIZED
PERSON.
All other proxies heretofore given by the undersigned to vote
shares of stock of the Company, which the undersigned would be
entitled to vote if personally present at the Annual Meeting or
any adjournment or postponement thereof, are hereby expressly
revoked.
Signature(s) _____________________________ Dated _________, 1997
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THE PROXY CARD USING
THE ENCLOSED ENVELOPE. IF YOUR ADDRESS IS INCORRECTLY SHOWN,
PLEASE PRINT CHANGES.
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FOLD AND DETACH HERE
