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Exhibit 3.1
INLAND REAL ESTATE CORPORATION
THIRD ARTICLES OF AMENDMENT AND RESTATEMENT
To the State Department
of Assessments and Taxation
State of Maryland
Pursuant to the provisions of Section 2-608 of the Maryland General
Corporation Law, Inland Real Estate Corporation (the "corporation"), a Maryland
corporation having its principal office in Baltimore City, hereby certifies
that:
FIRST: The corporation desires to restate its Second Articles of Amendment
and Restatement as currently in effect.
SECOND: The provisions hereinafter set forth in the Third Articles of
Amendment and Restatement are all the provisions of the charter of the
corporation as currently in effect.
THIRD: The Third Articles of Amendment and Restatement of the corporation
has been approved by the entire Board of Directors of the corporation and by the
stockholders of the corporation.
ARTICLE I
NAME
The name of the corporation is: Inland Real Estate Corporation.
ARTICLE II
PURPOSE
The purposes for which the Company is formed are to engage in any lawful
act or activity (including, without limitation or obligation, qualifying as a
real estate investment trust (a "REIT") under Sections 856 through 860 of 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.
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ARTICLE III
PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT
The post office address of the principal office of the Company in the State
of Maryland is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202. The name of the resident agent of the Company in the
State of Maryland is The Corporation Trust Incorporated at 32 South Street,
Baltimore, Maryland 21202. The resident agent is a corporation located in the
State of Maryland.
ARTICLE IV
INCORPORATOR
The name and address of the incorporator shall be Don S. Hershman, 444
North Michigan Avenue, Suite 2500, Chicago, Illinois 60611.
ARTICLE V
DEFINITIONS
For the purposes of these Articles, the following terms shall have the
following meanings:
"ACQUISITION EXPENSES" means expenses related to the Company's selection,
evaluation and acquisition of, and investment in, properties, whether or not
acquired or made, including but not limited to legal fees and expenses, travel
and communications expenses, cost of appraisals and surveys, non-refundable
option payments on property not acquired, accounting fees and expenses, computer
use related expenses, architectural and engineering reports, environmental and
asbestos audits, title insurance and escrow fees, and personnel and
miscellaneous expenses related to the selection and acquisition of properties.
"AFFILIATE" means: (i) any Person directly or indirectly owning,
controlling or holding, with the power to vote 10% or more of the outstanding
voting securities of such other Person; (ii) any Person 10% or more of whose
outstanding voting securities are directly or indirectly owned, controlled or
held, with the power to vote, by such other Person; (iii) any Person directly or
indirectly controlling, controlled by or under common control with such other
Person; (iv) any executive officer, director, trustee or general partner of such
other Person; and (v) any legal entity for which such Person acts as an
executive officer, director, trustee or general partner.
"AVERAGE INVESTED ASSETS" shall mean, for any period, the average of the
aggregate book value of the assets of the Company invested, directly or
indirectly, in equity interests and in loans
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secured by real estate, before reserves for depreciation or bad debts or other
similar noncash reserves, computed by taking the average of such values at the
end of each month during such period.
"COMPETITIVE REAL ESTATE COMMISSION" means the real estate or brokerage
commission paid for the purchase or sale of a property which is reasonable,
customary and competitive in light of the size, type and location of such
property.
"CONTRACT PRICE FOR THE PROPERTY" means the amount actually paid or
allocated to the purchase, development, construction or improvement of a
property exclusive of Acquisition Expenses.
"DEVELOPMENT FEE" means a fee for the packaging of a property of the
Company, including negotiating and approving plans, and undertaking to assist in
obtaining zoning and necessary variances and necessary financing for the
specific property, either initially or at a later date.
"DIRECTORS" means the members of the Board of Directors of the Company.
"EQUITY STOCK" shall mean stock that is either Common Stock and/or
Preferred Stock of the Company.
"INDEPENDENT DIRECTORS" means the Directors who perform no other services
for the Company, except as Directors.
"INDEPENDENT EXPERT" shall mean a person with no current or prior business
or personal relationship with the Directors and who is engaged, to a substantial
extent, in the business of rendering opinions regarding the value of assets of
the type held by the Company.
"LEVERAGE" shall mean the aggregate amount of indebtedness of the Company
for money borrowed (including purchase money mortgage loans) outstanding at any
time, both secured and unsecured.
"NET ASSETS" or "NET ASSET VALUE" means the total assets of the Company
(other than intangibles) at cost before deducting depreciation or other non-cash
reserves less total liabilities of the Company, calculated at least quarterly on
a basis consistently applied.
"NET INCOME" means, for any period, total revenues applicable to such
period, less the expenses applicable to such period other than additions to or
allowances for reserves for depreciation, amortization or bad debts or other
similar non-cash reserves; provided, however, that Net Income shall not include
the gain from the sale of the Company's assets.
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"ORGANIZATION AND OFFERING EXPENSES" means those expenses incurred by and
to be paid from the assets of the Company in connection with and in preparing
the Company for registration and subsequently offering and distributing Shares
to the public, including, but not limited to, total underwriting and brokerage
discounts and commissions (including fees of the underwriters' attorneys),
expenses for printing, engraving, mailing, salaries of employees while engaged
in sales activity, charges of transfer agents, registrars, trustees, escrow
holders, depositaries, experts, expenses of qualification of the sale of the
securities under federal and state laws, including taxes and fees, and
accountants' and attorneys' fees.
"OWNERSHIP LIMIT" means the beneficial ownership of no more than 9.8% of
the outstanding Shares of the Company.
"PARTICIPANT" means a Stockholder who purchases Shares pursuant to this
Offering and elects to participate in the DRP.
"PERSON" means any natural person, partnership, corporation, association,
trust, limited liability company or other legal entity.
"REIT" means a corporation, trust, association or other legal entity (other
than a real estate syndication) which is engaged primarily in investing in
equity interests in real estate (including fee ownership and leasehold
interests) or in loans secured by real estate or both.
"ROLL-UP" means a transaction involving the acquisition, merger, conversion
or consolidation either directly or indirectly of the Company and the issuance
of securities of a RollUp Entity. Such term does not include:
(a) a transaction involving securities of the Company that have been
for at least 12 months listed on a national securities exchange or traded
through The Nasdaq Stock Market-Nasdaq National Market; or
(b) a transaction involving the conversion to corporate, trust or
association form of only the Company if, as a consequence of the
transaction, there will be no significant adverse change in any of the
following:
(i) Stockholders' voting rights;
(ii) the term and existence of the Company; or
(iii) the Company's investment objectives.
"ROLL-UP ENTITY" means a partnership, real estate investment trust,
corporation, trust or other entity that would be created or would survive after
the successful completion of a proposed Roll-Up transaction.
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"SHARES" means the common stock, par value $.01 per share, of the Company.
"STOCKHOLDERS" means holders of shares of Common Stock.
"TOTAL OPERATING EXPENSES" means the aggregate expenses of every character
paid or incurred by the Company as determined under generally accepted
accounting principles, but excluding:
(a) the expenses of raising capital such as Organization and Offering
Expenses, legal, audit, accounting, underwriting, brokerage, listing,
registration and other fees, printing and other such expenses, and taxes
incurred in connection with the issuance, distribution, transfer,
registration and stock exchange listing of the Shares;
(b) interest payments;
(c) taxes;
(d) non-cash expenditures such as depreciation, amortization and bad
debt reserves; and
(e) Acquisition Expenses, real estate commissions on resale of
property and other expenses connected with the acquisition, disposition and
ownership of real estate interests, mortgage loans or other property (such
as the costs of foreclosure, insurance premiums, legal services,
maintenance, repair and improvement of property).
ARTICLE VI
STOCK
Section 1. Authorized Shares. The total number of shares of stock which the
Company has authority to issue is 106,000,000 shares, of which 100,000,000 are
shares of common stock, $0.01 par value per share ("Common Stock"), and
6,000,000 shares are preferred stock, $0.01 par value per share ("Preferred
Stock"). The aggregate par value of the shares of authorized Common Stock and
Preferred Stock is $1,000,000 and $60,000, respectively. The Board of Directors
of the Company is authorized, from time to time, to issue any additional stock
or convertible securities and to classify or reclassify, as the case may be, any
unissued shares of stock of the Company without approval of the holders of
outstanding stock.
Section 2. Liquidation. Subject to any preferential rights in favor of any
class of Preferred Stock, upon liquidation or dissolution of the Company, each
issued and outstanding share of Common Stock shall be entitled to participate
pro rata in the assets of the Company remaining after payment of, or adequate
provision for, all known debts and liabilities of the Company.
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Section 3. Common Stock.
(a) Subject to the provisions of Article VIII regarding Excess Stock
(as such term is defined therein), each issued and outstanding share of
Common Stock shall entitle the holder thereof to one vote on all matters
presented for a vote of stockholders.
(b) Subtitle 7 of Title 3 of the Maryland General Corporation Law (or
any successor statute) ("Maryland Law") shall not apply to any acquisition
of shares of stock by any Existing Holder (as defined herein) that is not
prohibited or restricted by Article VIII of these Articles.
(c) Notwithstanding any provision of Maryland Law to the contrary, the
Company shall not, without the concurrence of holders of at least a
majority of the outstanding Shares: (i) amend these Articles: (ii) dissolve
or liquidate the Company; or (iii) remove the Directors.
(d) With respect to Shares owned by the Directors or any Affiliate,
neither the Directors, nor any Affiliate may vote or consent on matters
submitted to the Stockholders regarding the removal of the Directors, or
any Affiliate or any transaction between the Company and any of them.
Shares held by the Directors and their Affiliates shall not be included in
determining the number of outstanding Shares entitled to vote on the
matters as described above.
Section 4. Preferred Stock. Shares of Preferred Stock may be issued, from
time to time, in one or more series, as authorized by the Board of Directors.
Prior to issuance of shares of each series, the Board of Directors by resolution
shall: (i) designate that series to distinguish it from all other series and
classes of stock of the Company; (ii) specify the number of shares to be
included in the series and, subject to the provisions of Article VIII regarding
Excess Stock, shall set the terms, preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends or other distributions,
qualifications and terms or conditions of redemption. Subject to the express
terms of any other series of Preferred Stock outstanding at the time and
notwithstanding any other provision of these Articles, the Board of Directors
may increase or decrease the number of shares of, or alter the designation
classify or reclassify, any unissued shares of any series of Preferred Stock by
setting or changing, in any one or more respects, from time to time before
issuing the shares, and, subject to the provisions of Article VIII regarding
Excess Stock, the terms, preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends or other distributions, qualifications
or terms or conditions of redemption of the shares of any series of Preferred
Stock.
Section 5. Articles of Incorporation and Bylaws. All persons who shall
acquire stock in the Company shall acquire the same subject to the provisions of
these Articles and the Bylaws of the Company as amended.
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Section 6. Liability of Stockholders. The Shares of the Company will be
nonassessable by the Company.
ARTICLE VII
PROVISIONS FOR DEFINING, LIMITING AND REGULATING CERTAIN
POWERS OF THE COMPANY AND OF ITS DIRECTORS AND STOCKHOLDERS
Section 1. Number and Classification. The number of Directors of the
Company shall never be less than three, nor more than nine, a majority of which
will be Independent Directors. A Director shall have had at least three years of
relevant real estate experience demonstrating the knowledge and experience
required to successfully acquire and manage the type of assets being acquired by
the Company. At least one of the Independent Directors shall have three years of
relevant real estate experience. The names of the Directors who shall serve
effective as of the effective date of the Company's Registration Statement with
the Securities and Exchange Commission and until the first annual meeting of the
Stockholders and until their successors are duly elected and qualified are:
Robert D. Parks
G. Joseph Cosenza
Douglas R. Finlayson, M.D. (independent Director)
Heidi N. Lawton (Independent Director)
Robert L. Sohol (Independent Director)
Section 2. Term. Each director will be elected for a one year term and will
hold office for the term for which he or she is elected and until his or her
successor is duly elected and qualified.
Section 3. Removal. A director may be removed with or without cause by the
affirmative vote of the holders of at least a majority of all the votes entitled
to be cast for the election of directors. A special meeting of the stockholders
may be called, in accordance with the Bylaws of the Company, upon the written
request of stockholders holding 10% or more of the shares of the Company
entitled to vote at such meeting for the purpose of removing a director.
Section 4. Authorization by Board of Stock Issuance. The Board of Directors
of the Company may authorize the issuance from time to time of shares of its
stock of any class, whether now or hereafter authorized, or securities
convertible into shares of its stock of any class, whether now or hereafter
authorized, for such consideration as the Board of Directors may deem advisable,
subject to such restrictions or limitations, if any, as may be set forth in
these Articles or the Bylaws of the Company or under Maryland Law.
Section 5. Preemptive Rights. Except as may be provided by the Board of
Directors in authorizing the issuance of shares of Preferred Stock pursuant to
Article VII, Section 4, no holder of shares of stock of the Company shall, as
such holder, have any preemptive right to purchase or
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subscribe for any additional shares of the stock of the Company or any other
security of the Company which it may issue or sell.
Section 6. Indemnification.
(a) The Company shall, to the fullest extent permitted by Maryland
statutory or decisional law, as amended or interpreted and, without
limiting the generality of the foregoing, in accordance with Section 2-418
of Maryland Law, to indemnify and pay or reimburse reasonable expenses to
any Director (each an "Indemnified Party") provided, that (i) the Director
has determined, in good faith, that the course of conduct which caused the
loss or liability was in the best interest of the Company; (ii) the
Director was acting on behalf of or performing services on the part of the
Company; (iii) such liability or loss was not the result of negligence or
misconduct on the part of the Indemnified Party, except that in the event
the Indemnified Party is or was an Independent Director, such liability or
loss shall not have been the result of gross negligence or willful
misconduct; and (iv) such indemnification or agreement to be held harmless
is recoverable only out of the assets of the Company and not from the
Stockholders.
(b) The Company shall not indemnify a Director for losses, liabilities
or expenses arising from or out of an alleged violation of federal or state
securities laws by such party unless one or more of the following
conditions are met: (i) there has been a successful adjudication on the
merits of each count involving alleged securities law violations as to the
particular indemnitee; (ii) such claims have been dismissed with prejudice
on the merits by a court of competent jurisdiction as to the particular
indemnitee; or (iii) a court of competent jurisdiction approves a
settlement of the claims and finds that indemnification of the settlement
and related costs should be made and the court considering the request has
been advised of the position of the Securities and Exchange Commission (the
"Commission") and the published opinions of the Tennessee Securities
Division and any other state securities regulatory authority in which
securities of the Company were offered and sold as to indemnification for
securities law violations.
(c) The Company may advance amounts to persons entitled to
indemnification hereunder for legal and other expenses and costs incurred
as a result of any legal action for which indemnification is being sought
only if all of the following conditions are satisfied: (i) the legal action
relates to acts or omissions with respect to the performance of duties or
services by the Indemnified Party for or on behalf of the Company; (ii) the
legal action is initiated by a third party who is not a Stockholder or the
legal action is initiated by a Stockholder acting in his or her capacity as
such and a court of competent jurisdiction specifically approves such
advancement; and (iii) the Indemnified Party receiving such advances
undertakes to repay the advanced funds to the Company, together with the
applicable legal rate of interest thereon, in cases in which such party is
found not to be entitled to indemnification.
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(d) The Company shall have the power to purchase and maintain
insurance on behalf of an Indemnified Party against any liability asserted
which was incurred in any such capacity with the Company or arising out of
such status; provided, however, that the Company shall not incur the costs
of any liability insurance which insures any person against liability for
which he, she or it could not be indemnified under the Articles. Nothing
contained herein shall constitute a waiver by any Indemnified Party of any
right which he, she or it may have against any party under federal or state
securities laws.
Section 7. Choice of Law. These Articles and the Bylaws, as amended, shall
be construed in accordance with the laws of the State of Maryland and the
obligations, rights and remedies of the parties hereunder shall be determined in
accordance with such laws; provided, however, that causes of action for
violations of federal or state securities laws shall not be governed by this
Section 7.
Section 8. 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 these Articles 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 Company and every holder of shares of its stock: (i)
the amount of the net income of the Company for any period and the amount of
assets at any time legally available for the payment of dividends, redemption of
its stock or the payment of other distributions on its stock; (ii) 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; (iii) 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);
and (iv) the fair value, or any sale, bid or asked price to be applied in
determining the fair value, of any asset owned or held by the Company; and any
matters relating to the acquisition, holding and disposition of any assets by
the Company.
Section 9. Reserved Powers of Board. The enumeration and definition of
particular powers of the Board of Directors included in this Article VII shall
in no way be limited or restricted by reference to or inference from the terms
of any other clause of this or any other provision of these Articles, or
construed or deemed by inference or otherwise in any manner to exclude or limit
the powers conferred upon the Board of Directors under Maryland Law as now or
hereafter in force.
Section 10. REIT Qualification. The Board of Directors shall use its
reasonable best efforts to cause the Company and its stockholders to qualify for
U.S. federal income tax treatment in accordance with the provisions of the Code
applicable to a REIT. In furtherance of the foregoing, the Board of Directors
shall use its reasonable best efforts to take such actions as are necessary, and
may take such actions as in its sole judgment and discretion are desirable, to
preserve the status of the Company as a REIT; provided, however, that if a
majority of the Board of Directors determines that it is no longer in the best
interests of the Company to continue to have the Company qualify as a REIT, the
Board of Directors may revoke or otherwise terminate the Company's REIT election
pursuant to Section 856(g) of the Code.
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The Company is an infinite-life REIT which may be dissolved pursuant to the
procedures set forth in the MGCL at any time by the affirmative vote of a
majority of the Stockholders. However, should the Board of Directors determine
within five years of the date of the Prospectus that the Shares will not be
listed for trading on a national stock exchange or market, the Company
anticipates recommending to the Stockholders that the Company be liquidated
within ten years of the date thereof.
Section 11. Distributions. Prior to the completion of the acquisition of
the properties with the proceeds of the Company's offering, Distributions to
Stockholders shall be declared and payable quarterly, in amounts as may be
determined by the Board of Directors out of funds legally available. Upon
completion of the acquisition process, the Company will pay regular monthly
Distributions to its Stockholders. Concurrently with any Distribution, the
Company shall provide Stockholders with a statement disclosing the source of the
funds distributed. If such information is not available concurrently with the
making of a Distribution, a statement setting forth the reasons why such
information is not available shall be provided concurrently. In no event shall
such information be provided to Stockholders more than 60 days of making such
Distribution. Distributions in-kind shall not be permitted, except for
distributions of: (i) readily marketable securities; (ii) beneficial interests
in a liquidating trust established for the dissolution of the Company and the
liquidation of its assets in accordance with the terms of these Articles; or
(iii) distributions of in-kind property which meet all of the following
conditions: (a) the Directors advise each Stockholder of the risks associated
with direct ownership of the property; (b) the Directors offer each Stockholder
the election of receiving in-kind property distributions, and (c) the Directors
distribute in-kind property only to those Stockholders who accept the Directors'
offer. The Directors shall endeavor to declare and pay such distributions as
shall be necessary under the Code; however, Stockholders shall have no right to
any distribution unless and until declared by the Directors. The exercise of the
powers and rights of the Directors pursuant to this Section 11 shall be subject
to the provisions of any class or series of Shares at the time outstanding. The
receipt by any person in whose name any Shares are registered on the records of
the Company or by his, her or its duly authorized agent shall be a sufficient
discharge for all dividends or distributions payable or deliverable in respect
of such Shares and from all liability related to the application thereof.
Section 12. Distribution Reinvestment Program. The Directors may adopt a
distribution reinvestment program on such terms and conditions as shall be set
forth in the Prospectus, which program may be amended from time to time by the
Directors, provided, however, that such program shall, at a minimum, provide for
the following:
(a) All material information regarding the distribution to the
Stockholder and the effect of reinvesting such distribution, including the
tax consequences thereof, shall be provided to the Stockholder at least
annually; and
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(b) Each Stockholder participating in the distribution reinvestment
program shall have a reasonable opportunity to withdraw from the
distribution reinvestment program at least annually after receipt of the
information required in subparagraph (a) above.
Section 13. [Reserved]
Section 14. Termination of the Company. The Board of Directors may
terminate the existence of the Company and discontinue the operations of the
Company only upon the affirmative vote, at a meeting of stockholders called for
that purpose, of a majority of the voting power of the Company entitled to vote
or the written consent of a majority of the voting power of the Company entitled
to vote.
Section 15. Limitation on Transactions with Affiliates. The Company shall
not sell property or make loans (except as provided under Article IX(c)) to any
Director or Affiliates thereof. In all other cases in which the Company shall
enter into a transaction with Director or Affiliates thereof, an appraisal must
be obtained from an Independent Expert concerning the underlying property. The
appraisal shall be maintained in the Company's records for at least five years,
and shall be available for inspection and duplication by any Stockholder. The
Company shall not purchase property from, borrow money from, invest in joint
ventures with or enter into transactions with any Director or Affiliates
thereof, unless a majority of the Directors (including a majority of the
Independent Directors) not otherwise interested in such transaction determines
that the transaction is fair and reasonable to the Company and is on terms and
conditions no less favorable than from unaffiliated third parties. With respect
to property which the Company purchases from a Director or Affiliate thereof,
the price to the Company may not exceed the cost of the assets of such Director
or Affiliate thereof, or if the price to the Company is in excess of such cost,
substantial justification for such excess must exist, and such excess must be
reasonable. In no event shall the cost of such asset to the Company ever exceed
its current appraised value.
Section 16. Limitation on Total Operating Expenses. The annual Total
Operating Expenses of the Company shall not exceed in any fiscal year the
greater of 2% of the Average Invested Assets of the Company or 25% of the
Company's Net Income. The Independent Directors have a fiduciary responsibility
to limit the Company's annual Total Operating Expenses to amounts that do not
exceed the limitations described above. The Independent Directors may, however,
determine that a higher level of Total Operating Expenses is justified for such
period because of unusual and non-recurring expenses. Any such finding by the
Independent Directors and the reasons in support thereof shall be recorded in
the minutes of the meeting of Directors. Within 60 days after the end of any
fiscal quarter of the Company for which Total Operating Expenses (for the 12
months then ended) exceed 2% of Average Invested Assets or 25% of Net Income,
whichever is greater, as described above, there shall be sent to the
Stockholders a written disclosure of such fact. If the Independent Directors
determine that such higher Total Operating Expenses are justified, such
disclosure will also contain an explanation of the Independent Directors'
conclusion.
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Section 17. Limitation on Borrowing. The Company may not incur indebtedness
to enable it to make Distributions except as necessary to satisfy the
requirement that the Company distribute at least 95% of its REIT Taxable Income,
or otherwise as necessary or advisable to assure that the Company maintains its
qualification as a REIT for federal income tax purposes. The aggregate borrowing
of the Company, secured and unsecured, shall be reasonable in relation to the
Net Assets of the Company and shall be reviewed by the Board of Directors at
least quarterly. The maximum amount of borrowings in relation to the Net Assets
shall, in the absence of a satisfactory showing that a higher level of borrowing
is appropriate, not exceed 300% of Net Assets. Any excess in borrowing over such
300% level shall be subject to the approval by a majority of the Stockholders.
The Company shall not borrow funds from any Director or Affiliates thereof,
unless a majority of the Directors (including a majority of the Independent
Directors) not otherwise interested in such transaction determines that such
transaction is fair and reasonable and no less favorable to the Company than
from unaffiliated parties under the same or similar circumstances.
Section 18. Limitation on Real Estate Commissions. If the Company sells
property, the Company may pay real estate brokerage fees which are reasonable,
customary and competitive, taking into consideration the size, type and location
of the property ("Competitive Real Estate Commission"), which shall not in the
aggregate exceed the lesser of the Competitive Real Estate Commission or an
amount equal to 6% of the gross sales price of the property.
Section 19. [Reserved]
Section 20. Limitation on Acquisition Fees and Expenses. The total of all
Acquisition Expenses paid by the Company in connection with the purchase of a
property by the Company shall in no event exceed an amount equal to 6% of the
Contract Price for the Property, unless a majority of the Directors (including
the majority of the Independent Directors) not otherwise interested in the
transaction approve the transaction as being commercially competitive, fair and
reasonable to the Company.
Section 21. Determination of Consideration. The consideration paid for
real property acquired by the Company shall ordinarily be based on the fair
market value of the property as determined by a majority of the Directors
(including a majority Of the Independent Directors). In cases in which a
majority of the Independent Directors so determine, or if assets are acquired
from a Director or an Affiliate of a Director, pursuant to Section 15 of this
Article VII such fair market value shall be as determined by a qualified
independent real estate appraiser selected by the Independent Director.
Section 22. Fiduciary Duty. The Directors shall serve in a fiduciary
capacity and shall have a fiduciary duty to the Stockholders of the Company.
Section 23. Review of Investment Policies. The Directors shall establish
written policies on investments and borrowing and shall monitor the
administrative procedures, investment operations and performance of the Company
to assure that such policies are carried out. The Independent
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Directors shall review such policies of the Company with sufficient frequency
and at least annually to determine that the policies being followed by the
Company at any time are in the best interests of the Stockholders. Each such
determination and the basis therefor shall be set forth in the minutes of the
Board of Directors.
Section 24. Limitation on Organization and Offering Expenses. The
Organization and Offering Expenses paid in connection with the Company's
formation or the syndication or sale of the Shares shall be reasonable and shall
in no event exceed fifteen percent (15%) of the proceeds raised in the Initial
Public Offering, determined at the termination of the Initial Public Offering.
ARTICLE VIII
RESTRICTION ON TRANSFER,
ACQUISITION AND REDEMPTION OF SHARES
Section 1. Definitions. For the purposes of this Article VIII, the
following terms shall have the following meanings:
"Beneficial Ownership" shall mean ownership of Equity Stock by a Person who
would be treated as an owner of such Equity Stock under Section 542(a)(2) of the
Code either directly 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 Owns," "Beneficially Own" and "Beneficially Owned" shall
have the correlative meanings.
"Beneficiary" shall mean the beneficiary of the Trust as determined
pursuant to Section 15 of this Article VII.
"Equity Stock" shall mean any class of stock of the Company.
"Existing Holder" shall mean: (i) any Person who is, or would be, upon the
exchange of any security of the Company, the Beneficial Owner of Equity Stock in
excess of the Ownership Limit both upon and immediately after the closing of the
Initial Public Offering, so long as, but only so long as, such Person
Beneficially Owns, or would Beneficially Own, upon the exchange of any security
of the Company, Equity Stock in excess of the Ownership Limit; and (ii) any
Person to whom an Existing Holder Transfers, subject to the limitations provided
in this Article VIII Beneficial Ownership of Equity Stock causing such
transferee to Beneficially Own Equity Stock in excess of the Ownership Limit.
"Existing Holder Limit" (i) for any Existing Holder who is an Existing
Holder by virtue of clause (i) of the definition thereof, shall mean, initially,
the percentage of the outstanding Equity Stock Beneficially Owned or which would
be Beneficially Owned upon the exchange of any security of the Company by such
Existing Holder upon and immediately after the date of the closing of the
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Initial Public Offering and, after any adjustment pursuant to Section 9 of this
Article VIII, shall mean such percentage of the outstanding Equity Stock as so
adjusted; and (ii) for any Existing Holder who becomes an Existing Holder by
virtue of clause (ii) of the definition thereof, shall mean, initially, the
percentage of the outstanding Equity Stock Beneficially Owned by such Existing
Holder at the time that such Existing Holder becomes an Existing Holder but in
no event shall such percentage be greater than the Existing Holder Limit for the
Existing Holder who Transfers Beneficial Ownership of the Equity Stock or, in
the case of more than one transferor, in no event shall such percentage be
greater than the smallest Existing Holder Limit of any transferring Existing
Holder, and, after any adjustment pursuant to Section 9 of this Article VIII,
shall mean such percentage of the outstanding Equity Stock as so adjusted. From
the date of the Initial Public Offering and until the Restriction Termination
Date, the Secretary of the Company shall maintain and, upon request, make
available to each Existing Holder, a schedule which sets forth the then current
Existing Holder Limits for each Existing Holder.
"Initial Public Offering" means the sale of shares of Common Stock in a
public offering pursuant to the Company's first effective registration statement
for such Common Stock filed under the Securities Act of 1933, as amended.
"Ownership Limit" shall initially mean 9.8%, in number of shares or value,
of the outstanding Equity Stock of the Company, and after any adjustment as set
forth in Section 10 of this Article VIII, shall mean such greater percentage of
the outstanding Equity Stock as so adjusted. The number and value of shares of
the outstanding Equity Stock of the Company shall be determined by the Board of
Directors in good faith, which determination shall be conclusive for all
purposes hereof.
"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), 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 which participated in a public offering of the Equity Stock for a
period of 90 days following the purchase by such underwriter of the Equity
Stock.
"Purported Beneficial Transferee" shall mean, with respect to any purported
Transfer which results in Excess Stock as defined in Section 3 of this Article
VIII, the purported beneficial transferee for whom the Purported Record
Transferee would have acquired shares of Equity Stock, if such Transfer had been
valid under Section 2 of this Article VIII.
"Purported Record Transferee" shall mean, with respect to any purported
Transfer which results in Excess Stock as defined below in Section 3 of this
Article VIII, the purported record transferee of the Equity Stock who would have
acquired such record ownership of shares of Equity Stock if such Transfer had
been valid under Section 2 of this Article VIII.
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"Restriction Termination Date" shall mean the first day after the date of
the Initial Public Offering on which the Board of Directors of the Company
determines that it is no longer in the best interests of the Company to attempt
to, or continue to, qualify as a REIT.
"Transfer" shall mean any sale, issuance, transfer, gift, assignment,
devise or other disposition of Equity Stock (including: (i) the granting of any
option or entering into any agreement for the sale, transfer or other
disposition of Equity Stock; (ii) the sale, transfer, assignment of other
disposition of any securities or rights convertible into or exchangeable for
Equity Stock, but excluding the exchange of any security of the Company for
Equity Stock; (iii) any transfer or other disposition of any interest in Equity
Stock (as a result of a change in the marital status of the holder thereof),
whether voluntary or involuntary, whether of record or beneficially (including
but not limited to transfers of interests in other entities which result in
changes in beneficial ownership of Equity Stock) and whether by operation of law
or otherwise; and (iv) the issuance by the Company of Equity Stock. The terms
"Transfers" and "Transferred" shall have the correlative meanings.
"Trust" shall mean the trust created pursuant to Section 15 of this Article
VIII.
"Trustee" shall mean the Company as trustee for the Trust, and any
successor trustee appointed by the Company.
Section 2. Ownership Limitation.
(i) Except as provided in Section 12 of this Article VIII, from
the date of the Initial Public Offering and prior to the Restriction
Termination Date, no Person (other than an Existing Holder) shall
Beneficially Own shares of Equity Stock in excess of the Ownership
Limit and no Existing Holder shall Beneficially Own shares of Equity
Stock in excess of the Existing Holder Limit for such Existing Holder.
(ii) Except as provided in Sections 9 and 12 of this Article
VIII, from the date of the Initial Public Offering and prior to the
Restriction Termination Date, any Transfer that, if effective, would
result in any Person (other than an Existing Holder) Beneficially
Owning Equity Stock in excess of the Ownership Limit shall be void ab
initio as to the Transfer of such shares of Equity Stock which would
be otherwise Beneficially Owned by such Person in excess of the
Ownership Limit; and the intended transferee shall acquire no rights
in such shares of Equity Stock.
(iii) Except as provided in Sections 9 and 12 of this Article
VIII, from the date of the Initial Public Offering and prior to the
Restriction Termination Date, any Transfer that, if effective, would
result in any Existing Holder Beneficially Owning Equity Stock in
excess of the applicable Existing Holder Limit shall be void ab initio
as to the Transfer of such shares of Equity Stock which would be
otherwise Beneficially Owned by such Existing Holder in excess of the
applicable Existing
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Holder Limit; and such Existing Holder shall acquire no rights in such
shares of Equity Stock.
(iv) Except as provided in Section 12 of this Article VIII, from
the date of the Initial Public Offering and prior to the Restriction
Termination Date, any Transfer that, if effective, would result in the
Equity Stock being beneficially owned (as provided in Section 856(a)
of the Code) by less than 100 Persons (determined without reference to
any rules of attribution) shall be void ab initio as to the Transfer
of such shares of Equity Stock which would be otherwise beneficially
owned (as provided in Section 856(a) of the Code) by the transferee;
and the intended transferee shall acquire no rights in such shares of
Equity Stock.
(v) From the date of the Initial Public Offering and prior to the
Restriction Termination Date, any Transfer that, if effective, would
result in the Company being "closely held" within the meaning of
Section 856(h) of the Code or would otherwise result in the Company
failing to qualify as a REIT (including, but not limited to, a
Transfer or other event that would result in the Company owning an
interest in a tenant that is described in Section 856(d)(2)(B) of the
Code if the income derived by the Company from such tenant would cause
the Company to fail to satisfy any of the gross income requirements of
Section 856(c) of the Code), shall be void ab initio as to the
Transfer of the shares of Equity Stock which would cause the Company:
(i) to be "closely held" within the meaning of Section 856(h) of the
Code; or (ii) otherwise to fail to qualify as a REIT, as the case may
be; and the intended transferee shall acquire no rights in such shares
of Equity Stock.
Section 3. Excess Stock.
(i) If, notwithstanding the other provisions contained in this
Article VIII, at any time after the date of the Initial Public
Offering and prior to the Restriction Termination Date, there is a
purported Transfer or other change in the capital structure of the
Company such that any Person would Beneficially Own Equity Stock in
excess of the applicable Ownership Limit or Existing Holder Limit,
then, except as otherwise provided in Sections 9 and 12 of this
Article VIII, such shares of Equity Stock in excess of such Ownership
Limit or Existing Holder Limit (rounded up to the nearest whole share)
shall constitute "Excess Stock" and be treated as provided in this
Article VIII. Such designation and treatment shall be effective as of
the close of business on the business day prior to the date of the
purported Transfer or change in capital structure.
(ii) If, notwithstanding the other provisions contained in this
Article VIII, at any time after the date of the Initial Public
Offering and prior to the Restriction Termination Date, there is a
purported Transfer or other change in the capital structure of the
Company which, if effective, would cause the Company to become
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"closely held" within the meaning of Section 856(h) of the Code, then
the shares of Equity Stock being Transferred which would cause the
Company to be "closely held" within the meaning of Section 856(h) of
the Code (rounded up to the nearest whole share) shall constitute
Excess Stock and be treated as provided in this Article VIII. Such
designation and treatment shall be effective as of the close of
business on the business day prior to the date of the purported
Transfer or change in capital structure.
Section 4. Prevention of Transfer. If the Board of Directors or its
designee shall at any time determine in good faith that a purported Transfer has
taken place in violation of Section 2 of this Article VIII, or that a Person
intends to acquire Beneficial Ownership (determined without reference to any
rules of attribution) or Beneficial Ownership of any shares of stock of the
Company in violation of Section 2 of this Article VIII, the Board of Directors
or its designee shall take such action as it deems advisable to enforce this
Article VIII by refusing to give effect to or to prevent such proposed or
purported Transfer, including, but not limited to, refusing to give effect to
any purported Transfer on the books of the Company or instituting proceedings to
enjoin any proposed Transfer; provided, however, that any purported Transfers in
violation of Sections 2(ii), (iii), (iv) and (v) of this Article VIII shall
automatically result in the designation and treatment described in Section 3 of
this Article VIII, irrespective of any action (or non-action) by the Board of
Directors.
Section 5. Notice to the Company. Any Person who purports to acquire shares
in violation of Section 2 of this Article VIII, or any Person who is a Purported
Beneficial Transferee or a Purported Record Transferee such that Excess Stock
results under Section 3 of this Article VIII, shall immediately give notice to
the Company or, in the event of a proposed Transfer, give at least 15 days prior
written notice to the Company of such proposed Transfer and in either event,
shall provide to the Company such other information as the Company may request
in order to determine the effect, if any, of such purported or proposed Transfer
on the Company's status as a REIT.
Section 6. Information for the Company. From the date of the Initial Public
Offering and prior to the Restriction Termination Date:
(i) Every Beneficial Owner of more than 9.8% (or such other
percentage, between 0.5% and 9.8%, as provided in the income tax
regulations promulgated under the Code) of the number or value of
outstanding shares of Equity Stock of the Company shall, within 30
days after January 1 of each year, give written notice to the Company
stating the name and address of such Beneficial Owner, the number of
shares Beneficially Owned, and a description of how such shares are
held. Each such Beneficial Owner shall provide to the Company such
additional information as the Company may reasonably request in order
to determine the effect, if any, of such Beneficial Ownership on the
Company's status as a REIT.
(ii) Each Person who is a Beneficial Owner of Equity Stock and
each Person (including the stockholder of record) who is holding
Equity Stock for a Beneficial Owner shall provide to the Company such
information that the Company
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may reasonably request in order to determine the Company's status as a
REIT, to comply with the requirements of any taxing authority or
governmental agency or to determine any such compliance.
Section 7. Other Action by the Board. Nothing contained in this Article
VIII, shall limit the authority of the Board of Directors to take such other
action as it deems necessary or advisable to protect the Company and the
interests of its stockholders by preservation of the Company's status as a REIT.
Section 8. Ambiguities. In the case of an ambiguity in the application of
any of the provisions of this Article VIII, including any definition contained
in Section 1, the Board of Directors shall have the power to determine the
application of the provisions of this Article VIII, with respect to any
situation based on the facts known to it.
Section 9. Modification of Existing Holder Limits. The Existing Holder
Limits may be modified as follows:
(i) Subject to the limitations provided in Section 11 of this
Article VIII, the Board of Directors of the Company may grant stock
options which result in Beneficial Ownership of Equity Stock by an
Existing Holder pursuant to a stock option plan approved by the Board
of Directors and/or the stockholders of the Company. Any such grant
shall increase the Existing Holder Limit for the affected Existing
Holder to the maximum extent possible under Section 11 of this Article
VIII to permit the Beneficial Ownership of the shares of Equity Stock
issuable upon the exercise of such stock option.
(ii) Subject to the limitations provided in Section 11 of this
Article VIII, an Existing Holder may elect to participate in a
dividend reinvestment program approved by the Board of Directors of
the Company which results in Beneficial Ownership of Equity Stock by
such participating Existing Holder wherein those Existing Holders
holding Equity Stock are entitled to purchase additional Equity Stock.
Any such participation shall increase the Existing Holder Limit for
the affected Existing Holder to the maximum extent possible under
Section 11 to permit Beneficial Ownership of the shares of Equity
Stock acquired as a result of such participation.
(iii) The Board of Directors will reduce the Existing Holder
Limit for any Existing Holder after any Transfer permitted in this
Article VIII by such Existing Holder by the percentage of the
outstanding Equity Stock so Transferred or after the lapse (without
exercise) of a stock option described in Section 9(i)) of this Article
VIII by the percentage of the Equity Stock that the stock option, if
exercised, would have represented, but in either case no Existing
Holder Limit shall be reduced to a percentage which is less than the
Ownership Limit.
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(iv) Subject to the limitations provided in Section 11 of this
Article VIII, the Board of Directors may grant a waiver of the
Ownership Limit of Existing Holder Limit pursuant to Section 12 of
this Article VIII. Any such waiver shall increase (or create) the
Existing Holder Limit for such Person to the extent of the waiver of
the proposed or purported Transfer.
Section 10. Increase in Ownership Limit. Subject to the limitations
provided in Section 11 of this Article VIII and Section 6 of Article VIII, the
Board of Directors may from time to time increase or decrease the Ownership
Limit; provided, however, that any decrease may only be made prospectively as to
subsequent holders other than a decrease as a result of a retroactive change in
existing law, in which case such decrease shall be effective immediately.
Section 11. Limitations on Changes in Existing Holder and Ownership Limits.
(i) Neither the Ownership Limit nor any Existing Holder Limit may
be increased (nor may any additional Existing Holder be created) if,
after giving effect to such increase (or creation), five Beneficial
Owners of Common Stock (including all of the then Existing Holders)
could Beneficially Own, in the aggregate, more than 50.0% in number or
value of the outstanding shares of Equity Stock.
(ii) Prior to the modification of any Existing Holder Limit or
Ownership Limit pursuant to Section 9 or 10 of this Article VIII, the
Board of Directors of the Company may require such opinions of
counsel, affidavits, undertakings or agreements as it may deem
necessary or advisable in order to determine or ensure the Company's
status as a REIT.
(iii) No Existing Holder Limit shall be reduced to a percentage
which is less than the Ownership Limit.
Section 12. Waivers by Board. The Board of Directors, upon receipt of a
ruling from the Internal Revenue Service or an opinion of counsel or other
evidence satisfactory to the Board of Directors and upon at least 15 days
written notice from a transferee of a purported Transfer or a proposed Transfer
which, if consummated, would result in the intended transferee Beneficially
Owning shares in excess of Ownership Limit or Existing Holder Limit, as the case
may be, and upon such other conditions as the Board of Directors may direct, may
waive the Ownership Limit or the Existing Holder Limit, as the case may be with
respect to such transferee.
Section 13. Legend. Each certificate for shares of Equity Stock shall bear
substantially the following legend:
The securities represented by this certificate are subject to
restrictions on transfer for the purpose of the Company's maintenance
of its status as a real estate investment trust under the Internal
Revenue Code of 1986, as amended. Except as otherwise
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provided pursuant to these Articles of the Company, no Person may
Beneficially Own shares of Equity Stock in excess of 9.8% (or such
greater percentage as may be determined by the Board of Directors of
the Company) of the number or value of the outstanding Equity Stock of
the Company (unless such Person is an Existing Holder). Any Person who
purports or proposes to Beneficially Own shares of Equity Stock in
excess of 9.8% (or such greater percentage as may be determined by the
Board of Directors of the Company) of the number or value of the
outstanding Equity Stock of the Company (unless such Person is an
Existing Holder) is in violation of the restrictions on transfer and
any securities so transferred shall be designated as Excess Stock and
held in trust by the Company. Any Person who purports or proposes to
Beneficially Own shares of Equity Stock in excess of the above
limitations must notify the Company in writing immediately, in the
case of a purported Transfer, and at least 15 days prior to a proposed
Transfer. All capitalized terms in this legend have the meanings
defined in these Articles of the Company, a copy of which, including
the restrictions on transfer, will be sent without charge to each
stockholder who so requests. If the restrictions on transfer are
violated, the securities represented hereby will be designated and
treated as shares of Excess Stock which will be held in trust by the
Company.
Section 14. Severability. If any provision of this Article VIII or any
application of any such provision is determined to be void, invalid or
unenforceable by any court having jurisdiction over the issue, the validity and
enforceability of the remaining provisions shall be affected only to the extent
necessary to comply with the determination of such court.
Section 15. Trust for Excess Stock. Upon any purported Transfer that
results in Excess Stock pursuant to Section 3 of this Article VIII, such Excess
Stock shall be deemed to have been transferred to the Company, as Trustee of a
Trust for the benefit of such Beneficiary or Beneficiaries to whom an interest
in such Excess Stock may later be transferred pursuant to Section 18 of this
Article VIII. Shares of Excess Stock so held in trust shall be issued and
outstanding stock of the Company. The Purported Record Transferee shall have no
rights in such Excess Stock except the right to designate a Beneficiary of an
interest in the Trust (representing the number of shares of Excess Stock held by
the Trust attributable to a purported Transfer that resulted in the Excess Stock
upon the terms specified in Section 18 of this Article VIII. The Purported
Beneficial Transferee shall have no rights in such Excess Stock except as
provided in Section 18 of this Article VIII.
Section 16. No Distributions for Excess Stock. The holder of any Excess
Stock or any beneficiary of the Trust established pursuant to Section 15 of this
Article VIII shall not be entitled to any distributions (whether as dividends or
as distributions upon liquidation, dissolution or winding up). Any dividend or
distribution paid prior to the discovery by the Company that the shares of
Equity Stock have been Transferred so as to be deemed Excess Stock shall be
repaid to the Company upon demand.
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Section 17. No Voting Rights for Excess Stock. The Purported Record
Transferee of shares of Excess Stock shall not be entitled to vote on any matter
with respect to those shares of Excess Stock.
Section 18. Non-Transferability of Excess Stock. Excess Stock shall not be
transferable. The Purported Record Transferee may freely designate a Beneficiary
of an interest in the Trust (representing the number of shares of Excess Stock
held by the Trust attributable to a purported Transfer to a purported Record
Transferee that resulted in the Excess Stock), if: (i) the shares of Excess
Stock held in the Trust would not be Excess Stock in the hands of such
Beneficiary; and (ii) the Purported Beneficial Transferee does not receive a
price for designating such Beneficiary that reflects a price per share for such
Excess Stock that exceeds (a) the price per share such Purported Beneficial
Transferee paid for the Equity Stock in the purported Transfer that resulted in
the Excess Stock, or (b) if the Purported Beneficial Transferee did not give
value for such Excess Stock (through a gift, devise or other transaction), a
price per share equal to the Market Price for the shares of the Excess Stock on
the date of the purported Transfer that resulted in the Excess Stock. Upon such
transfer of an interest in the Trust, the corresponding shares of Excess Stock
in the Trust shall be automatically exchanged for an equal number of shares of
Equity Stock and such shares of Equity Stock shall be transferred of record to
the transferee of the interest in the Trust if such shares of Equity Stock would
not be Excess Stock in the hands of such transferee. Prior to any transfer of
any interest in the Trust, the Purported Record Transferee must give advance
notice to the Company of the intended transfer and the Company must have waived
in writing its purchase rights under Section 19 of this Article VIII.
Notwithstanding the foregoing, if a Purported Beneficial Transferee
receives a price for designating a Beneficiary of an interest in the Trust that
exceeds the amounts allowable under this Section 18 of this Article VIII, such
Purported Beneficial Transferee shall pay, or cause such Beneficiary to
immediately pay, such excess to the Company.
If any of the foregoing restrictions on transfer of Excess Stock are
determined to be void, invalid or unenforceable by any court of competent
jurisdiction, then the Purported Record Transferee may be deemed, at the option
of the Company, to have acted as an agent of the Company in acquiring such
Excess Stock and to hold such Excess Stock on behalf of the Company.
Section 19. Call by Company on Excess Stock. Shares of Excess Stock shall
be deemed to have been offered for sale to the Company, or its designee, at a
price per share equal to the lesser of: (i) the price per share in the
transaction that created such Excess Stock (or, in the case of a devise or gift,
the Market Price at the time of such devise or gift); and (ii) the Market Price
of the Equity Stock to which such Excess Stock relates on the date the Company,
or its designee, accepts such offer. The Company shall have the right to accept
such offer for a period of 90 days after the later of: (i) the date of the
Transfer which resulted in such Excess Stock; and (ii) the date the Board of
Directors determines in good faith that a Transfer resulting in Excess Stock has
occurred, if the Company does not receive a notice of such Transfer pursuant to
Section 5 of this Article VIII but in
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no event later than a permitted Transfer pursuant to and in compliance with the
terms of Section 18 of this Article VIII.
ARTICLE IX
INVESTMENT RESTRICTIONS
The investment policies set forth in this Article IX shall be approved by a
majority of the Independent Directors. Subject to the restrictions contained
herein, such Independent Directors may alter the investment policies if they
determine that such change is in the best interests of the Company. The Company
shall not make investments in: (i) any foreign currency or bullion; (ii) short
sales; and (iii) any security in any entity holding investments or engaging in
activities prohibited by these Articles.
In addition to other investment restrictions imposed by the Directors from
time to time consistent with the Company's objective to qualify as a REIT, the
Company will observe the following restrictions on its investments:
(a) Not more than 10% of the Company's total assets will be invested
in unimproved real property or mortgage loans on unimproved real property.
For purposes of this paragraph, "unimproved real properties" does not
include properties under construction, under contract for development or
plan for development within one year;
(b) The Company may not invest in commodities or commodity future
contracts. Such limitation is not intended to apply to interest rate
futures, when used solely for hedging purposes;
(c) The Company shall not invest in or make mortgage loans unless an
appraisal is obtained concerning the underlying property. Mortgage
indebtedness on any property shall not exceed such property's appraised
value. In cases in which the majority of Independent Directors so
determine, and in all cases in which the mortgage loan involves the
Directors or any Affiliates, such appraisal must be obtained from an
Independent Expert concerning the underlying property. The appraisal shall
be maintained in the Company's records for at least five years, and shall
be available for inspection and duplication by any Stockholder. In addition
to the appraisal, a mortgagee's or owner's title insurance policy or
commitment as to the priority of the mortgage or condition of the title
must be obtained. The Company may not invest in real estate contracts of
sale otherwise known as land sale contracts;
(d) The Company may not make or invest in mortgage loans, including
construction loans, on any one property if the aggregate amount of all
mortgage loans outstanding on the property, including the loans of the
Company, would exceed an amount equal to 85% of the appraised value of the
property as determined by appraisal unless
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substantial justification exists because of the presence of other
underwriting criteria provided that such loans would in no event exceed the
appraised value of the property at the date of the loans;
(e) The Company may not make or invest in any mortgage loans that are
subordinate to any mortgage or equity interest of any Director or
Affiliates thereof;
(f) The Company shall not invest in equity securities unless a
majority of the Directors (including a majority of the Independent
Directors) not otherwise interested in such transaction approves the
transaction as being fair, competitive and commercially reasonable.
Investments in entities affiliated with any Directors or Affiliates thereof
are subject to the restrictions on joint venture investments.
Notwithstanding these restrictions, the Company may purchase its own
securities, when traded on a secondary market or on a national securities
exchange or market, if a majority of the Directors (including a majority of
the Independent Directors) determine such purchase to be in the best
interests of the Company;
(g) The Company shall not issue: (i) redeemable equity securities;
(ii) debt securities unless the historical debt service coverage (in the
most recently completed fiscal year) as adjusted for known charges is
sufficient to properly service the higher level of debt; (iii) options or
warrants to purchase Shares to any Directors, or their Affiliates except on
the same terms as sold to the general public, provided that the Company may
issue options or warrants to persons not affiliated with the Company at
exercise prices not less than the fair market value of such securities on
the date of grant and for consideration (which may include securities that
in the judgment of the Independent Directors have a market value not less
than the value of such option on the date of grant); options or warrants
issuable to Directors or Affiliates thereof shall not exceed an amount
equal to ten percent (10%) of the outstanding Shares on the date of grant
of any options or warrants; or (d) issue Shares on a deferred payment basis
or similar arrangement;
(h) To the extent the Company invests in real property, a majority of
the Directors shall determine the consideration paid for such real
property, based on the fair market value of the property. If a majority of
the Independent Directors determine, or if the real property is acquired
from any Director, or Affiliates thereof, such fair market value shall be
determined by a qualified independent real estate appraiser selected by the
Independent Directors;
(i) The Company may not invest in indebtedness (herein called "Junior
Debt") secured by a mortgage on real property which is subordinate to the
lien of other indebtedness (herein called "Senior Debt"), except where the
amount of such Junior Debt, plus the outstanding amount of the Senior Debt,
does not exceed 90% of the appraised value of such property, if after
giving effect thereto, the value of all such investments of the Company (as
shown on the books of the Company in accordance with generally accepted
accounting principles, after all reasonable reserves but before provision
for depreciation) would not then exceed 25% of the Company's tangible
assets. The value of all investments in Junior Debt of
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the Company which does not meet the aforementioned requirements would be
limited to 10% of the Company's tangible assets (which would be included
within the 25% limitation);
(j) Engage in trading, as compared with investment activities; and
(k) Engage in underwriting or the agency distribution of securities
issued by others.
ARTICLE X
ACCESS TO RECORDS
Any Stockholder and any designated representative thereof shall be
permitted access to all records of the Company at all reasonable times, and may
inspect and copy any of them for the purposes specified below. Inspection of the
Company's books and records by a state securities administrator shall be
provided upon reasonable notice and during normal business hours. In addition,
an alphabetical list of names, addresses and business telephone numbers of the
Stockholders of the Company along with the number of Shares held by each of them
(the "Stockholder List") shall be maintained and updated quarterly as part of
the books and records of the Company and shall be available for inspection by
any Stockholder or the Stockholder's designated agent at the business office of
the Company upon the request of the Stockholder. A copy of the Stockholder List
shall be mailed to any Stockholder requesting the Stockholder List within ten
days of the request. The copy of the Stockholder List shall be printed in
alphabetical order, on white paper, and in a readily readable type size (in no
event smaller than 10-point type). The Company may impose a reasonable charge
for expenses incurred in reproducing such list. The permitted purposes for which
a Stockholder may request a copy of the Stockholder List include, without
limitation, matters relating to Stockholders' voting rights under these Articles
and the exercise of Stockholders' rights under federal proxy laws. If the
Directors of the Company neglect or refuse to exhibit, produce or mail a copy of
the Stockholder List as requested in accordance with and as required by
applicable law and these Articles, the Directors shall be liable to any
Stockholder requesting the Stockholder List, for the costs, including reasonable
attorneys' fees, incurred by that Stockholder for compelling the production of
the Stockholder List, and for actual damages suffered by any Stockholder by
reason of such refusal or neglect. It shall be a defense to such liability that
the actual purpose and reason for the requests for inspection or for a copy of
the Stockholder List is to secure such list of Stockholders or other information
for the purpose of selling such Stockholder List or copies thereof, or of using
the same for a commercial purpose or other purpose not in the interest of the
applicant as a Stockholder relative to the affairs of the Company. The Company
may require the Stockholder requesting the Stockholder List to represent that
the Stockholder List is not requested for a commercial purpose unrelated to the
Stockholder's interest in the Company. The remedies provided hereunder to
Stockholders requesting copies of the Stockholder List are in addition to, and
shall not in any way limit, other remedies available to Stockholders under
federal law, or the laws of any state.
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ARTICLE XI
REPORTS AND MEETINGS
Each year, within 120 days after the close of its fiscal year, an annual
report of the Company will be submitted to each Stockholder concerning its
operations for each prior fiscal year ending after the Initial Public Offering
which contains financial statements prepared in accordance with generally
accepted accounting principles which are audited and reported on by independent
certified public accountants. The annual report shall also include: (i) the
ratio of the costs of raising capital during the period to the capital raised;
(ii) the Total Operating Expenses of the Company stated as a percentage of
Average Invested Assets and as a percentage of Net Income; (iii) a report from
the Independent Directors that the policies being followed by the Company are in
the best interests of the Stockholders, and the basis for such determination;
and (iv) separately stated, full disclosure of all material terms, factors and
circumstances surrounding any and all transactions involving the Company, the
Directors and any Affiliates thereof occurring in the year for which the annual
report is made. Independent Directors shall examine and comment in the annual
report on the fairness of all transactions involving the Company. The annual
report shall be mailed or delivered to each Stockholder as of a record date
after the end of such fiscal year. There shall be an annual meeting of the
Stockholders of the Company upon reasonable notice and within a reasonable
period (not less than 30 days) following delivery of the annual report, but
within six months after the end of each fiscal year. The Directors, including
the Independent Directors, are required to take reasonable steps to insure that
the requirements of this Article XI are met.
ARTICLE XII
CONVERSION TRANSACTIONS
Notwithstanding any provision to the contrary in these Articles, and
subject to the restrictions on Roll-Ups described in Article XIII, Stockholders
representing 66% in interest of the Shares and all the Independent Directors
must approve certain exchange offers, mergers, consolidations or similar
transactions involving the Company in which the Stockholders receive securities
in a surviving entity having a substantially longer duration or materially
different investment objectives and policies, or that provides significantly
greater compensation to management from that which is described in the
Prospectus, except for any such transaction effected because of changes in
applicable law, or to preserve tax advantages for a majority in interest of the
Stockholders. Standards such as "substantially longer life," "materially
different investment objectives and policies" or "provides significantly greater
compensation to management" are not defined and their application will be
resolved by the Directors (a majority of whom are independent).
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ARTICLE XIII
ROLL-UPS
Section 1. Appraisal. An appraisal of all of the Company's assets shall be
obtained from an Independent Expert. The appraisal will be included in a
prospectus used to offer the securities of a Roll-Up Entity and shall be filed
with the Securities and Exchange Commission and the state regulatory commissions
as an exhibit to the registration statement for the offering of the Roll-Up
Entity's Shares. Accordingly, an issuer using the appraisal shall be subject to
liability for violation of Section 11 of the Securities Act of 1933, as amended,
and comparable provisions under state laws for any material misrepresentations
or material omissions in the appraisal.
The Company's assets shall be appraised in a consistent manner. The
appraisal shall:
(a) be based on an evaluation of all relevant information;
(b) indicate the value of the Company's assets as of a date
immediately prior to the announcement of the proposed Roll-Up transaction;
and
(c) assume an orderly liquidation of the Company's assets over a
12-month period.
The terms of the engagement of the Independent Expert shall clearly state
that the engagement is for the benefit of the Company and its Stockholders. A
summary of the independent appraisal, indicating all material assumptions
underlying the appraisal, shall be included in a report to the Stockholders in
connection with the proposed Roll-Up.
Section 2. Stockholder Options. Stockholders who vote "no" on the proposed
Roll-Up shall have the choice of:
(a) accepting the securities of the Roll-Up Entity offered in the
proposed Roll-Up; or
(b) one of either;
(i) remaining as Stockholders of the Company and preserving
their interests therein on the same terms and conditions as
previously existed, or
(ii) receiving cash in an amount equal to the Stockholder's
pro rata share of the appraised value of the net assets of the
Company.
Section 3. Restrictions. The Company may not participate in any proposed
Roll-Up which would:
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(a) result in the Stockholders having rights to meetings less
frequently or which are more restrictive to Stockholders than those
provided in these Articles;
(b) result in the Stockholders having voting rights that are less
than those provided in these Articles;
(c) result in the Stockholders having greater liability than as
provided in these Articles;
(d) result in the Stockholders having rights to receive reports
that are less than those provided in these Articles;
(e) result in the Stockholders having access to records that are
more limited than those provided in these Articles;
(f) include provisions which would operate to materially impede
or frustrate the accumulation of Shares by any purchaser of the securities
of the Roll-Up Entity (except to the minimum extent necessary to preserve
the tax status of the Roll-Up Entity);
(g) limit the ability of an investor to exercise the voting
rights of its securities in the Roll-Up Entity on the basis of the number
of Shares held by that investor;
(h) result in investors in the Roll-Up Entity having rights of
access to the records of the Roll-Up Entity that are less than those
provided in these Articles; or
(i) place any of the costs of the transaction on the Company if
the Roll-Up is not approved by the Stockholder;
provided, however, that nothing herein shall be construed to prevent
participation in any proposed Roll-Up which would result in Stockholders having
rights and restrictions comparable to those contained in these Articles, with
the prior approval of a majority of the Stockholders.
ARTICLE XIV
AMENDMENTS
The Company reserves the right from time to time to make any amendment to
these Articles, now or hereafter authorized by law, including any amendment
altering the terms or contract rights, as expressly set forth in these Articles,
of any shares of outstanding stock. Without concurrence of a majority of the
outstanding Shares, the Directors may not: (a) amend the Articles, except for
amendments which do not adversely affect the rights, preferences and privileges
of the Stockholders, including amendments to provisions relating to Director
qualifications, fiduciary duty, liability and
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indemnification, conflicts of interest, investment policies or investment
restrictions; (b) sell all or substantially all of the Company assets other than
in the ordinary course of the Company's business or in connection with
liquidation and dissolution; (c) cause a merger or other reorganization of the
Company; or (d) dissolve or liquidate the Company, other than before the initial
investment in a property by the Company. For purposes of the above provision, a
sale of all or substantially all of the Company assets shall mean the sale of
two-thirds or more of the Company's assets based on the total number of
properties or the current fair market value of these assets.
ARTICLE XV
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, no director or officer of
the Company shall be liable to the Company or its stockholders for money
damages. Neither the amendment nor repeal of this Article XV, nor the adoption
or amendment of any other provision of these Articles or of the Bylaws, as
amended, of the Company inconsistent with this Article XV, 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,
THIRD: The amendment to and restatement of the charter of the Corporation
as hereinabove set forth has been duly advised by the board of directors and
approved by the stockholders of the Corporation as required by law.
FOURTH: The current address of the principal office of the Corporation is
as set forth in Article III of the foregoing amendment and restatement of the
charter.
FIFTH: The name and address of the Corporation's current resident agent is
as set forth in Article III of the foregoing amendment and restatement of the
charter.
SIXTH: The number of directors of the Corporation and the names of those
currently in office are as set forth in Article VII of the foregoing amendment
and restatement of the charter.
[BALANCE OF THIS PAGE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, THE UNDERSIGNED, President of Inland Real Estate
Corporation, who executed on behalf of said corporation, the foregoing Third
Articles of Amendment and Restatement, of which this certificate is made a part,
hereby acknowledges, in the name and on behalf of said corporation, the
foregoing Third Articles of Amendment and Restatement to be the corporate act of
said corporation and further certifies that, to the best of his knowledge,
information, and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, under the penalties of
perjury.
/s/ Norbert Treonis
--------------------------------------
Norbert Treonis, President and
Chief Executive Officer
ATTEST: Inland Real Estate Corporation
/s/ Samuel A. Orticelli
--------------------------------------
Samuel A. Orticelli, Secretary and
General Counsel
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