UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 4, 2010
NetREIT, Inc.
(Exact name of registrant as specified in its charter)
         
MARYLAND   000-53673   33-0841255
         
(State or other jurisdiction
of incorporation)
  (Commission File Number)   (IRS Employer Identification No.)
     
1282 Pacific Oaks Place
Escondido, California
   
92029
     
(Address of principal executive offices)   (Zip Code)
Registrant’s telephone number, including area code: (760) 471-8536
NetREIT
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 


 

Item 1.01   Entry into a Definitive Material Agreement.
On August 4, 2010, NetREIT, a California corporation (“NetREIT-CA”) consummated the reincorporation merger (the “Reincorporation Merger”) with and into its wholly owned subsidiary, NetREIT, Inc., a Maryland corporation (the “Company” or “NetREIT-MD”) for the purpose of changing the Company’s state of incorporation from California to Maryland pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), the form of which was included as Appendix A to Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on April 21, 2010 (the “Proxy Statement”). The Merger Agreement was approved by NetREIT-CA’s shareholders at a meeting of the shareholders which was held in part and adjourned on May 21, 2010 and reconvened on May 28, 2010 (the “Shareholder Meeting”). A copy of the Merger Agreement is attached hereto as Exhibit 2.01 to this Current Report on Form 8-K and incorporated herein by reference.
In connection with the Reincorporation Merger, Articles of Merger were filed with the Secretary of State of California and the Maryland State Department of Assessments and Taxation on August 4, 2010 to effect the reincorporation. The Reincorporation Merger does not result in any change in the business, management, location of the Company’s principal executive offices, assets, liabilities, net worth, or accounting practices. The Reincorporation Merger does not give rise to any appraisal or dissenters’ rights. Each outstanding share of NetREIT-CA’s common stock is automatically converted into one share of the common stock of NetREIT-MD. All of NetREIT-CA’s Series AA Preferred Stock was redeemed prior to the effectiveness of the Reincorporation Merger. The name of the surviving corporation is “NetREIT, Inc.”
In connection with the Reincorporation Merger and pursuant to the Merger Agreement, at the effective time of the Reincorporation Merger: (i) each outstanding share of NetREIT-CA common stock, no par value per share was automatically converted into one share of NetREIT-MD’s common stock, $0.01 par value per share, with the result that NetREIT-MD is now the publicly-held corporation and NetREIT-CA has been merged out of existence; (ii) each stock certificate representing issued and outstanding shares of NetREIT-CA capital stock continues to represent the same number of shares of NetREIT-MD’s capital stock; (iii) the shareholders of NetREIT-CA became the shareholders of NetREIT-MD; (iv) each option, other right to purchase, or security convertible into or exercisable for, shares of NetREIT-CA capital stock (a “Right”) outstanding immediately prior to the Reincorporation Merger was converted into and became an equivalent Right to acquire, upon the same terms and conditions, the equal number of shares of NetREIT-MD’s capital stock (whether or not such Right was then exercisable) and the exercise price per share under each respective Right remained equal to the exercise price per share immediately prior to the Reincorporation Merger; (v) the directors and officers of NetREIT-CA in office immediately prior to the Reincorporation Merger became the directors and officers NetREIT-MD following the Reincorporation Merger, (vi) Kenneth W. Elsberry was appointed to the Company’s Board of Directors, and (vii) certain other changes approved at the Shareholder Meeting and described more fully in the Proxy Statement.
Item 3.03   Material Modifications to Rights of Security Holders.
As disclosed in the Proxy Statement, the Reincorporation Merger will not materially modify the rights of the Company’s shareholders. However, Maryland corporate law will now be applicable in the determination of the rights of shareholders of the Company. The Company refers its shareholders to the discussion entitled “PROPOSAL 2: PROPOSAL TO APPROVE REINCORPORATION IN MARYLAND” beginning on page 12 of the Proxy Statement and “PROPOSAL 3: A PROPOSAL TO APPROVE AND ADOPT THE SURVIVING CORPORATION’S CHARTER AND BYLAWS AS PART OF THE REINCORPORATION” beginning on page 37 of the Proxy Statement and incorporated herein by reference, for a summary of all of the material terms of the charter documents, bylaws and laws of the two states as they pertain to shareholder rights.
The constituent instruments defining the rights of holders of the Company’s capital stock will now be the Articles of Amendment and Restatement of the Articles of Incorporation of the Company (the “Surviving Articles”) and Amended and Restated Bylaws of NetREIT-MD, which are filed as Exhibit 3.01 and Exhibit 3.02, respectively, to this Current Report on Form 8-K and incorporated by reference herein.

 

 


 

Item 5.02   Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(d) On August 4, 2010, Kenneth W. Elsberry was appointed to the Board of Directors of the Company, pursuant to the terms of the Surviving Articles filed with the Maryland State Department of Assessments and Taxation in connection with the consummation of the Reincorporation Merger. The authorized number of directors on the Board is eight (8).
Mr. Elsberry served as the Chief Financial Officer of NetREIT-CA since its inception until August 4, 2010, the date of its dissolution, and continues to serve as the Chief Financial Officer of NetREIT-MD. He is a member of the California Society of Certified Public Accountants, American Institute of Certified Public Accountants and National Association of Accountants. From December 2004 to October 2007, Mr. Elsberry served as chief financial officer of Trusonic, Inc., a startup technology company based in San Diego, California. Mr. Elsberry also served as a Director of the Centurion Counsel Funds, an investment company registered under the Investment Company Act of 1940, from March 10, 2001 until 2005. Mr. Elsberry presently holds a license as a registered securities principal with Centurion Institutional Services, Inc., a FINRA member broker-dealer. Mr. Elsberry also currently serves as chief financial officer of Centurion Institutional Services and CHG Properties, Inc. From 1994 until 1998, Mr. Elsberry served as chief financial officer of Clover REIT. Mr. Elsberry received his Bachelor of Science degree in accounting from Colorado State University and is a registered securities principal.
There are no arrangements or understandings between the Company and any other person pursuant to which Mr. Elsberry was elected as director. Mr. Elsberry and the Company are party to certain agreements related to Mr. Elsberry’s compensation as Chief Financial Officer of the Company, including an Employment Agreement, dated as of January 28, 1999, as amended, and certain restricted stock grants. Such arrangements have been previously reported by NetREIT-CA pursuant to Item 402 of Regulation S-K, including most recently in the Proxy Statement.
Item 9.01   Financial Statements and Exhibits
         
       
 
  2.01    
Plan and Agreement of Merger, by and between NetREIT, Inc., a Maryland corporation, and NetREIT, a California corporation, dated as of July 30, 2010.
       
 
  3.01    
Articles of Amendment and Restatement of the Articles of Incorporation of NetREIT, dated as of July 30, 2010.
       
 
  3.02    
Amended and Restated Bylaws of NetREIT, Inc.
       
 
  3.03    
Articles of Merger filed with the Maryland State Department of Assessments and Taxation and the California Secretary of State on August 4, 2010.

 

 


 

SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
         
  NetREIT
 
 
Date: August 10, 2010  By:   /s/ Kenneth Elsberry    
    Name:   Kenneth Elsberry   
    Title:   Chief Financial Officer   

 

 

Exhibit 2.01
PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (this “Agreement”), dated as of July 30, 2010, is made and entered into by and between NETREIT, INC. , a Maryland corporation (“NetREIT-MD”), and NETREIT , a California corporation (the “Company”).
W I T N E S S E T H :
WHEREAS, NetREIT-MD is a corporation duly organized and existing under the laws of the State of Maryland, having been incorporated on June 1, 2010;
WHEREAS, the Company is a corporation duly organized and existing under the laws of the State of California, having been incorporated on January 28, 1999; and
WHEREAS, the Boards of Directors and the shareholders representing at least a majority of the outstanding shares of capital stock entitled to vote of NetREIT-MD and at least a majority of the outstanding shares of Series AA Preferred Stock and Common Stock, Series A of the Company, each voting as a separate class and on a combined basis, have approved this Agreement under which the Company shall be merged with and into NetREIT-MD with NetREIT-MD being the surviving corporation (such merger being hereinafter referred to as the “Merger”).
NOW, THEREFORE, in consideration of the premises, the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Company shall be merged with and into NetREIT-MD on the terms and conditions hereinafter set forth.
ARTICLE I
MERGER
Effective the later to occur of (i) 12:01 a.m. Eastern Standard time, on or about August  4, 2010, or (ii) the time of effectiveness as provided in the Articles of Merger that are accepted for filing in Maryland (the “Effective Time”), the Company shall be merged with and into NetREIT-MD in accordance with the Maryland General Corporations Law and the California Corporations Code, and the separate existence of the Company shall cease and NetREIT-MD (hereinafter sometimes referred to as the “Surviving Corporation”) shall continue to exist under the name of NetREIT, Inc. by virtue of, and shall be governed by, the laws of the State of Maryland. The address of the registered office of the Surviving Corporation in the State of Maryland will be 715 St. Paul Street, Baltimore, Maryland 21202. The name of the Surviving Corporation’s registered agent at such address is HIQ Corporate Services, Inc.

 

 


 

ARTICLE II
ARTICLES OF INCORPORATION

OF THE SURVIVING CORPORATION
The Charter of the Surviving Corporation, as in effect immediately prior to the Effective Time, shall be the Charter of NetREIT-MD without change unless and until thereafter amended as provided by applicable law.
ARTICLE III
BYLAWS OF THE SURVIVING CORPORATION
The Bylaws of NetREIT-MD, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation without change, unless and until amended or repealed in accordance with applicable law.
ARTICLE IV
EFFECT OF MERGER ON STOCK

OF CONSTITUENT CORPORATIONS
4.01 At the Effective Time, each authorized share of Series A Common Stock of the Company, no par value per share (the “Company Common Stock”), then issued and outstanding shall be converted into one (1) share of Series A Common Stock, $0.01 par value per share, of the Surviving Corporation, par value $0.01 per share (the “NetREIT-MD Common Stock”). There are no shares of Series B Common Stock of the Company, no par value per share, issued and outstanding as of the date hereof.
4.02 At and after the Effective Time, each share of the Company Common Stock shall be cancelled and retired and, by virtue of the Merger and without further action, shall cease to exist.
4.03 At the Effective Time, each authorized share of Series AA Preferred Stock of the Company, no par value per share (the “Company Preferred Stock”), then issued and outstanding shall be converted into one (1) share of Series AA Preferred Stock of the Surviving Corporation, par value $0.01 per share (the “NetREIT-MD Preferred Stock”). There are no shares of Series AA Preferred Stock of the Company, no par value per share, issued and outstanding as of the date hereof.
4.04 At and after the Effective Time, each share of the Company Preferred Stock shall be cancelled and retired and, by virtue of the Merger and without further action, shall cease to exist.
4.05 At and after the Effective Time, all documentation which prior to that time evidenced and represented the Company Common Stock or the Company Preferred Stock, as applicable, shall be deemed for all purposes to evidence ownership of and to represent those shares of NetREIT-MD Common Stock or NetREIT-MD Preferred Stock, as applicable, into which the Company Common Stock or the Company Preferred Stock, as applicable, represented by such documentation has been converted as herein provided and shall be so registered on the books and records of NetREIT-MD. The registered owner of any outstanding stock certificate evidencing the Company Common Stock or the Company Preferred Stock, as applicable, shall, until such certificate shall have been surrendered for transfer or conversion or otherwise accounted for to NetREIT-MD or its transfer agent, have and be entitled to exercise any voting and other rights with respect to and to receive any dividend and other distributions upon the shares of NetREIT-MD Common Stock or NetREIT-MD Preferred Stock, as applicable, evidenced by such outstanding certificate as above provided.

 

 


 

4.06 At and after the Effective Time, (i) each of the Company’s equity incentive plans, including without limitation the Company’s 1999 Flexible Incentive Plan (collectively, the “Plan”) shall be assumed by NetREIT-MD and all options to purchase Company Common Stock issued under the Plan (the “Company Options”) and all shares of Company Common Stock issued under the Plan (the “Company Grants”), shall be deemed for all purposes to evidence options to purchase NetREIT-MD Common Stock and shares of NetREIT-MD Common Stock and shall be subject to the same restrictions as set forth in such Company Options and in such documentation pursuant to which such Company Grants were issued, including without limitation any vesting provisions set forth therein; and (ii) all other options, warrants and other securities and rights convertible into, or exercisable or exchangeable for, shares of the Company Common Stock or the Company Preferred Stock shall be deemed for all purposes to evidence options, warrants and other securities and rights to purchase NetREIT-MD Common Stock or NetREIT-MD Preferred Stock, as applicable, and shall be subject to the same restrictions as set forth in the documentation pursuant to which such options, warrants and other securities and rights were issued, including without limitation any vesting and exercise provisions set forth therein.
ARTICLE V
CORPORATE EXISTENCE, POWERS AND

LIABILITIES OF SURVIVING CORPORATION
5.01 At the Effective Time, the separate existence of the Company shall cease and the Company shall be merged with and into the Surviving Corporation in accordance with the provisions of this Agreement. Thereafter, the Surviving Corporation shall possess all of the rights, privileges, powers and franchises as well of a public as of a private nature, and shall be subject to all the restrictions, disabilities and duties of the Company; and all rights, privileges, powers and franchises of the Company, and all property, real, personal and mixed, and all debts due to each of them on whatever account, as well as stock subscriptions and all other things in action or belonging to the Company shall be vested in the Surviving Corporation; and all property, rights, privileges, powers and franchises, and all and every other interest shall be thereafter effectually the property of the Surviving Corporation as they were of the Company, and the title to any real estate, whether by deed or otherwise, vested in the Company shall not revert or be in any way impaired by reason of the Merger; but all rights of creditors and all liens upon any property of the Company shall be preserved unimpaired, and all debts, liabilities and duties shall thenceforth attach to the Surviving Corporation and may be enforced against it to the same extent as if said debts, liabilities and duties had been incurred or contracted by it.

 

 


 

5.02 The Company agrees that it will execute and deliver (or cause to be executed and delivered) all such deeds, assignments and other instruments, and will take or cause to be taken such further or other action as the Surviving Corporation may deem necessary or desirable in order to vest in and confirm to the Surviving Corporation title to and possession of all the property, rights, privileges, immunities, powers, purposes and franchises, and all and every other interest, of the Company and otherwise to carry out the intent and purposes of this Agreement.
ARTICLE VI
OFFICERS AND DIRECTORS

OF SURVIVING CORPORATION
At the Effective Time, the officers and directors of the Company shall become the officers and directors of the Surviving Corporation, and such persons shall hold office in accordance with the Bylaws of the Surviving Corporation or until their respective successors shall have been appointed or elected and qualified.
ARTICLE VII
APPROVAL BY SHAREHOLDERS;

AMENDMENT; EFFECTIVE TIME
7.01 This Agreement and the Merger contemplated hereby are subject to approval by the requisite vote of the shareholders of the Company in accordance with California law. As promptly as practicable after approval of this Agreement by such shareholders in accordance with applicable law, duly authorized officers of NetREIT-MD and the Company shall make and execute Articles of Merger or other applicable certificates or documentation effecting this Agreement and shall cause such document or documents to be filed with the Department of Assessments and Taxation for the State of Maryland and the Secretary of State for the State of California, respectively, in accordance with the applicable Maryland and California law.
7.02 The respective Boards of Directors of NetREIT-MD and the Company may amend this Agreement at any time prior to the Effective Time, provided that an amendment made subsequent to the approval of the Merger by the shareholders of the Company shall not (1) alter or change the amount or kind of shares, securities, cash, property or rights to be received in exchange for or on conversion of all or any the Company Common Stock or the Company Preferred Stock; (2) alter or change any term of the Charter of the Surviving Corporation; or (3) alter or change any of the terms and conditions of this Agreement if such alteration or change would adversely affect the holders of any the Company Common Stock or the Company Preferred Stock.

 

 


 

ARTICLE VIII
PAYMENT OF FEES AND FRANCHISE TAXES
The Surviving Corporation shall be responsible for the payment of all fees and franchise taxes of the Company relating to or required to be paid in connection with the Merger.
ARTICLE IX
TERMINATION OF MERGER
This Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time, whether before or after shareholder approval of this Agreement, by the consent of the Board of Directors of NetREIT-MD and the Board of Directors of the Company.
[Signature page to follow]

 

 


 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers, all as of the day and year first above written.
         
  NETREIT, INC.
a Maryland corporation
 
 
  By:   /s/ Jack K. Heilbron    
    Name:   Jack K. Heilbron   
    Title:   President and CEO   
 
 
  NETREIT
a California corporation
 
 
  By:   /s/ Jack K. Heilbron    
    Name:   Jack K. Heilbron   
    Title:   President and CEO   
[Signature page to Plan and Agreement of Merger]

 

 

Exhibit 3.01
Appendix B
ARTICLES OF AMENDMENT AND RESTATEMENT
OF THE
ARTICLES OF INCORPORATION
OF
NetREIT, INC.

(a Maryland corporation)
The undersigned, being authorized to execute and file these Articles of Amendment and Restatement of the Articles of Incorporation of NetREIT, Inc., hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST : The Corporation desires to amend and restate its charter as currently in effect pursuant to these Articles of Amendment and Restatement. The provisions set forth in these Articles of Amendment and Restatement are all the provisions of the charter of the Corporation as currently in effect.
SECOND : The charter of the Corporation is hereby amended by striking in their entirety Articles I through IX, inclusive, and by substituting the following in lieu thereof:
ARTICLE I
INCORPORATION
The undersigned, being at least eighteen (18) years of age and duly authorized to execute and file these Articles of Incorporation does hereby form a corporation under and by virtue of the general laws of the State of Maryland.
ARTICLE II
NAME
The name of the corporation (which is hereinafter called the “ Corporation ”) is:
NetREIT, 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; RESIDENT AGENT
The address of the principal office of the Corporation in the State of Maryland is 715 St. Paul Street, Baltimore, Maryland 21202. The name and address of the resident agent of the Corporation in the State of Maryland is HIQ Corporate Services, Inc., 715 St. Paul Street, Baltimore, Maryland 21202. Said Resident Agent is a Maryland corporation duly authorized to act as resident agent in the State of Maryland.
ARTICLE V
PROVISIONS FOR DEFINING, LIMITING AND REGULATING CERTAIN POWERS OF THE CORPORATION AND OF ITS STOCKHOLDERS AND DIRECTORS
Section 5.1 NUMBER 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 eight (8), which number may be increased or decreased only by the Board of Directors pursuant to the Bylaws of the Corporation, but shall never be less than the minimum number required by the Maryland General Corporation Law (the “ MGCL ”). The names of the directors who shall serve until their successors are duly elected and qualified are:
     
Jack K. Heilbron
  Larry G. Dubose
David T. Bruen
  Thomas Schwartz
Sumner J. Rollings
  William Allen
Bruce A. Staller
  Kenneth W. Elsberry
Section 5.2 ACTIONS BY STOCKHOLDERS .
Section 5.2.1. Quorum . Except with respect to the election of directors provided for in Section 5.2.2 by the holders of Common Stock, the presence in person or by proxy of the holders of shares of stock of the Corporation entitled to cast a majority of the votes entitled to be cast on a matter (without regard to class) shall constitute a quorum at any meeting of stockholders with respect to such matter, except with respect to any such matter that, under applicable statutes or regulatory requirements or the charter, requires approval by a separate vote of the holders of one or more classes of stock, in which case the presence in person or by proxy of the holders of shares entitled to cast a majority of the votes entitled to be cast by each such class on such a matter shall constitute a quorum. Notwithstanding the foregoing, to the extent permitted by the MGCL, the Bylaws may provide for a greater or lesser quorum requirement, provided that such requirement shall not be less than forty percent (40%) nor more than sixty-six and two-thirds percent (66 2/3rds%) of the votes entitled to be cast (without regard to class) on matters submitted for a vote of the stockholders.

 

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Section 5.2.2 Election of Directors . Except as otherwise provided in Section 6.4(i) with respect to the holders of the Corporation’s Preferred Stock or in the Bylaws of the Corporation, directors shall be elected by the affirmative vote of holders of Common Stock entitled to cast a majority of all the votes entitled to be cast at a meeting at which a quorum is present. As provided in the Bylaws, stockholders shall have the right to cumulate votes for the election of directors where the names of candidates are placed in nomination prior to commencement of the voting and a stockholder gives notice prior to commencement of the voting of the stockholder’s intention to cumulate votes. In that circumstance, every stockholder entitled to vote may cumulate votes for candidates in nomination and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which such stockholder’s shares are entitled, or distribute votes on the same principle among any or all of the candidates standing for election.
Section 5.3 AUTHORIZATION BY BOARD OF STOCK ISSUANCES . 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 shares of stock pursuant to Section 6.5 or as may be otherwise agreed by contract, 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.
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 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, managing member, partner or trustee of another corporation, real estate investment trust, 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.

 

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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; any matter relating to the acquisition, holding or disposition of any assets by the Corporation; or any other matter relating to the business and affairs of the Corporation or required or permitted by applicable law, the charter or Bylaws or otherwise to be determined by the Board of Directors.
Section 5.7 REIT QUALIFICATION . The Corporation has elected to qualify for federal income tax treatment as a REIT. 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 continue to be qualified as a REIT, then upon receipt of a recommendation to such effect from the Board of Directors, the holders of Common Stock, by a vote of such stockholders as are entitled to cast a majority of all the votes entitled to be cast on the matter, may cause the Corporation to revoke or otherwise terminate the Corporation’s REIT election pursuant to Section 856(g) of the Code. The holders of Common Stock, upon receipt of a recommendation from the Board of Directors, 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 and cause the Corporation to amend the charter to remove such restriction or limitation.
Section 5.8 VACANCIES ON THE BOARD . A majority of the Board of Directors shall have the power to fill any and all vacancies on the Board of Directors, even if the remaining directors do not constitute a quorum, except that a vacancy with respect to any Series AA Director shall be filled by the holders of the Series AA Preferred Stock and any vacancy created by the removal of a director other than a Series AA Director may be filled only by the vote of holders of a majority of the Common Stock. Any director elected to fill a vacancy shall serve until the next annual meeting of the stockholders and until a successor is elected and qualifies.
Section 5.9 REMOVAL OF DIRECTORS . Any director (other than a Series AA Preferred Director, who may be removed from office only by vote of the Series AA Preferred Stock as provided in Section 6.4(i)), or the entire Board of Directors, may be removed from office at any time, with or without cause, by the affirmative vote or the written consent of a majority of the shares of Common Stock outstanding or by vote at a special meeting of the stockholders called in the manner provided for in the Bylaws, provided, however, that no director may be removed when the votes cast against such removal, or not consenting in writing to such removal, would be sufficient to elect such director if voted cumulatively in accordance with the provisions of the Bylaws.

 

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Section 5.10 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).
Section 5.11 ACTION BY WRITTEN CONSENT . Subject to compliance with the notice and other requirements of Section 2-505 of the MGCL and any procedures adopted by the Board of Directors from time to time, the holders of Common Stock entitled to vote generally in the election of directors may take action or consent to any action by delivering a consent, in writing or by electronic transmission, of the stockholders entitled to cast not less than the minimum number of votes that would be necessary to authorize or take the action at a stockholders meeting.
ARTICLE VI
STOCK
Section 6.1 AUTHORIZED SHARES . The Corporation shall have the authority to issue one hundred ten million one thousand (110,001,000) shares of stock, consisting of one hundred million one thousand (100,001,000) shares of Common Stock, par value $0.01 per share (“ Common Stock ”), and ten million (10,000,000) shares of Preferred Stock, par value $0.01 per share (“ Preferred Stock ”). The aggregate par value of all authorized shares of stock having par value is $1,100,010.
Section 6.2 COMMON STOCK . The one hundred million one thousand (100,001,000) shares of Common Stock shall be divided into two (2) classes: (i) one hundred million (100,000,000) shares of Series A Common Stock (“ Series A Common ”), and (ii) one thousand (1,000) shares of Series B Common Stock (“ Series B Common ”). Subject to the provisions of Article VII, each share of Common Stock shall entitle the holder thereof to one vote. The Corporation’s Series A Common and Series B Common shall be identical with respect to all preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption, except that the Series A Common shall enjoy a liquidation preference to the exclusion of Series B Common, which preference shall be junior to the Liquidation Preference enjoyed by the Series AA Preferred Stock, but which shall entitle the holders of Series A Common Stock, on liquidation, dissolution or winding up of the Corporation, to share ratably in all of the Corporation’s assets that are legally available for distribution after all debts and other liabilities of the Corporation are retired and the Liquidation Preference, including accrued dividends, if any, enjoyed by the Series AA Preferred Stock paid to the holders of the Series AA Preferred Stock.

 

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Section 6.3 PREFERRED STOCK . The Board of Directors may classify any unissued shares of Preferred Stock from time to time, in one or more classes or series of stock having such preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption as determined by the Board of Directors. One million (1,000,000) shares of the Corporation’s authorized Preferred Stock shall be designated as Series AA Preferred Stock (“ Series AA Preferred Stock ”). The rights, preferences and privileges and other terms and conditions of the Series AA Preferred Stock shall be as set forth in Section 6.4 below.
Section 6.4 SERIES AA PREFERRED STOCK . The Series AA Preferred Stock shall have the following rights, preferences and privileges:
(a)  Liquidation Preference . The Liquidation Preference of the Series AA Preferred Stock is twenty-five dollars ($25.00) per share (“ Liquidation Preference ”).
(b)  Dividends . Each share of the Series AA Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds at the time legally available therefore, an annual cash dividend equal to seven percent (7%) of the Liquidation Preference, which dividends shall be declared in equal monthly installments in arrears on the 25th day of each month. Dividends duly declared shall be paid on March 31, June 30, September 30 and December 31 of each year, provided that if any such day shall be a Saturday, Sunday or a or a legal holiday (any of the foregoing a “ Non-Business Day ”), then such dividend shall be payable on the next succeeding day which is not a Non-Business Day. Dividends shall be cumulative and accrue for each share of the Series AA Preferred Stock from the date of its first issuance and shall be payable to holders of record as they appear on the stock books of the Corporation on such record dates as they are fixed by the Board of Directors. No interest shall be payable with respect to any dividend payment on the Series AA Preferred Stock which may be in arrears.
(c)  Preference to Dividends . The Series AA Preferred Stock shall have priority as to dividends over the Corporation’s Common Stock and any series or class of the Corporation’s stock hereafter issued (referred to as “ junior dividend stock ”), except such Preferred Stock which the Corporation may issue which is, by its express terms, senior to the Series AA Preferred Stock “ senior dividend stock ”) or on parity with the Series AA Preferred Stock (“ parity dividend stock ”), provided, however, the issuance of such senior dividend stock or parity dividend stock shall first be approved by the affirmative vote of a majority of the outstanding shares of the Series AA Preferred Stock (a “ Majority Vote ”). No dividend (other than dividends payable solely in Common Stock or any series or class of junior dividend stock) shall be declared, paid or set apart for payment on, and no

 

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purchase or other acquisition shall be made by the Corporation of any Common Stock or junior dividend stock, unless all accrued and unpaid dividends on the Series AA Preferred Stock shall have been declared and paid or set apart for payment. No dividend shall be paid on any parity dividend stock unless the Corporation shall have declared and paid or set aside for payment, or shall have contemporaneously declared and paid or set apart for payment, all accrued and unpaid dividends for all prior periods on the Series AA Preferred Stock. The Corporation shall not pay dividends on the Series AA Preferred Stock unless it shall have declared and paid or set aside for payment or shall have contemporaneously declared and paid or set apart for payment all accrued and unpaid dividends for all prior periods on the parity dividend stock. Whenever all accrued dividends are not paid in full on the Series AA Preferred Stock, or any parity dividend stock, all dividends declared on the Series AA Preferred Stock and such parity dividend stock shall be declared and made pro rata so that the amount of dividends declared per share on the Series AA Preferred Stock and such parity dividend stock shall bear the same ratio that accrued and unpaid dividends per share on the Series AA Preferred Stock and such parity dividend stock bear to each other.
(d)  Preference Upon Liquidation . In the event of any liquidation, dissolution or winding up of the Corporation, each share of Series AA Preferred Stock shall be entitled to receive, out of legally available assets, an amount equal to the Liquidation Preference, plus an amount equal to any accrued and unpaid dividends on such share to the date such liquidation payment is made, and no more, before payment or distribution is made to the holders of the Corporation’s Common Stock or any series or class of the Corporation’s stock hereafter issued that ranks junior as to the liquidation rights of the Series AA Preferred Stock. The holders of the Series AA Preferred Stock shall not be entitled to receive the Liquidation Preference on shares of the Series AA Preferred Stock until the liquidation preferences of any other series or class of the Corporation’s stock hereinafter issued that ranks senior as to liquidation rights of the Series AA Preferred Stock (“ senior liquidation stock ”) has been paid in full. The holders of the Series AA Preferred Stock and all other series or classes of the Corporation’s stock hereafter issued that rank on a parity as to liquidation rights with the Series AA Preferred Stock shall share ratably, in accordance with the respective preferential amounts payable on such stock, in any distribution (after payment of the liquidation preferences of the senior liquidation stock) which is not sufficient to pay in full the aggregate of the amounts payable thereon. After payment in full of the Liquidation Preference of the shares of Series AA Preferred Stock (and the payment of dividends thereon as provided above), the holders of the Series AA Preferred Stock shall not receive any further participation in any distribution of the Corporation’s assets. Neither a consolidation, merger or other business combination of the Corporation with or into another corporation or other entity, nor a sale or transfer of all or part of the Corporation’s assets for cash, securities or other property shall be considered a liquidation, dissolution or winding up of the Corporation.
For purposes of the Series AA Preferred Stock liquidation rights, a consolidation or a merger of the Corporation into any other corporation or corporations or a sale of all or substantially all of the assets of the Corporation shall be deemed not to be a liquidation, dissolution or winding up of the Corporation.

 

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(e)  Corporation’s Optional Redemption Rights . The Series AA Preferred Stock shall be redeemable at the election of the Corporation in whole, or in part, at any time or from time to time, by giving written notice to the holders of the Series AA Preferred Stock not less than thirty (30) days nor more than sixty (60) days prior to the date set for such redemption (the “ Redemption Date ”). The Series AA Preferred Stock shall be redeemable for the sum equal to the Liquidation Preference per share, plus a cash payment equal to all accrued but unpaid dividends (the “ Call Price ”). Dividends shall cease to accrue on the Redemption Date for the Series AA Preferred Stock so called for redemption. If fewer than all outstanding shares of Series AA Preferred Stock shall be called for redemption, the Series AA Preferred Stock redeemed shall be selected by the Corporation by lot or pro rata (as nearly as may be possible) or by and other method determined by the Board of Directors in its sole discretion, to be equitable.
(f)  Holders’ Optional Conversion . At any time prior to any Redemption Date, each share of the Series AA Preferred Stock shall be convertible, in whole or part only, at the election of the holder thereof, into two (2) shares of the Corporation’s Series A Common Stock (the “ Conversion Rate ”). This right of optional conversion shall terminate immediately before the close of business on any Redemption Date. Any such conversion shall be effected by delivery of the certificate evidencing such Series AA Preferred Stock, together with written notice of conversion and a proper assignment of such certificate to the Corporation or in blank (and, if applicable, cash payment of an amount equal to the dividend attributable to the current quarterly dividend period payable on such shares), to the office of the transfer agent, if any, for the Series AA Preferred Stock (or to any other office or agency maintained by the Corporation) for that purpose and otherwise in accordance with conversion procedures established by the Corporation. Any such conversion shall be deemed to have been effected immediately before the close of business on the date on which the foregoing requirements have been satisfied.
(g)  Adjustments . The Conversion Rate shall be adjusted in accordance with the following provisions:
(1)  Mandatory Adjustments . In the event the Corporation (A) pays a stock dividend or makes a distribution with respect to its Common Stock in shares of Common Stock; (B) subdivides or splits its outstanding Common Stock; (C) combines its outstanding Common Stock into a smaller number of shares; (D) issues any shares of Common Stock by reclassification of its shares of Common Stock; or (E) pays a dividend or distributes to all holders of its Common Stock evidences of its indebtedness, cash or other assets (including capital stock of the Corporation but excluding any Permitted Cash Dividends (as defined below) or distributions and dividends referred to in Section 6.4(g)(1) above), the Conversion Rate shall be adjusted as of the date such event first becomes effective.
(2)  Discretionary Adjustments . The Corporation will be entitled (but will not be required) to make upward adjustments in the Conversion Rate as the Corporation, in its discretion, shall determine to be advisable in order that any stock dividend, subdivisions of shares, distribution of rights to purchase stock or securities, or distribution of securities convertible into or exchangeable for stock (or any transaction which could be treated as any of the events described in Section 6.4(g)(1) above under Section 305 of the Internal Revenue Code of 1986, as amended) hereafter made by the Corporation to its stockholders will not be taxable.

 

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(3)  Permitted Cash Dividends . “ Permitted Cash Dividends ” shall mean, with respect to any consecutive 12-month period, all cash dividends and cash distributions on the Common Stock (other than cash dividends and cash distributions for which an adjustment to the Conversion Rate was previously made) not in excess of an amount equal to ten percent (10%) per annum on the Share Price of the Corporation’s Common Stock, excepting any dividends paid with funds from capital gains within the meaning of federal income tax law.
The Share Price shall be the average of the closing share price of the Common Stock in any public market as reported over such period, or if the Corporation’s Common Stock was not traded in a public market during such period, the price at which the Common Stock was last sold by the Corporation to any unaffiliated person during such period, or if no such sale occurred, the value of the Common Stock determined by the Corporation’s Board of Directors, in which event, the Board of Directors’ decision will be final.
(4)  Reclassification, Consolidation or Merger . Unless sooner redeemed or converted, in case of any reclassification of the Common Stock, any consolidation of the Corporation with, or merger of the Corporation into, any other entity, any merger of any entity into the Corporation (other than a consolidation or merger that does not result in a reclassification, conversion, exchange or cancellation of the outstanding shares of Common Stock), any sale or transfer of all or substantially all of the assets of the Corporation or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or other property (a “ Transaction ”), each share of Series AA Preferred Stock shall, after consummation of such Transaction, be entitled to be converted (A) on the Conversion Date into the kind and amounts of securities, cash or other property receivable upon consummation of such Transaction by a holder of the number of shares of Common Stock into which such Series AA Preferred Stock would have been converted if the conversion on the Conversion Date had occurred immediately before the date of consummation of such Transaction, plus the right to receive cash in an amount equal to all accrued and unpaid dividends on such Series AA Preferred Stock (other than previously declared dividends payable to a holder of record as of a prior date); or (B) at the option of the holder, into the kinds and amount of securities, cash or other property receivable upon consummation of such Transaction by a holder of the number of shares of Common Stock into which such Series AA Preferred Stock might have been converted immediately before consummation of such Transaction. The kind and amount of securities into or for which the Series AA Preferred Stock will be convertible or redeemable after consummation of such Transaction will be subject to adjustment as described above in Section 6.4(g), following the date of consummation of such Transaction. No fractional shares of Common Stock will be issued upon redemption or conversion of Series AA Preferred Stock. In lieu of any fractional share otherwise issuable in respect of the aggregate number of shares of Series AA Preferred Stock of any holder that are redeemed or converted, such holder will be entitled to receive an amount in cash equal to the same fraction of the share value of the Common Stock, determined as of the Conversion Date in the case of a mandatory conversion, or the effective date of the conversion in the case of an optional conversion by a holder.

 

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(h)  Calculation and Documentation of Adjustments . All adjustments to the Conversion Rate shall be calculated to the nearest 1/100th of a share of Common Stock. No adjustment in the Conversion Rate shall be required unless such adjustment would require any increase or decrease of at least one percent (1%) therein; provided, however , that any adjustments which, by reason of this Section 6.4(h), shall not be required to be made will be carried forward and taken into account in any subsequent adjustment. All adjustments shall be made successively. Whenever the Conversion Rate shall be so adjusted, the Corporation shall file with its transfer agent, if any, for the Series AA Preferred Stock a certificate with respect to such adjustment, and shall make a prompt public announcement of such adjustment on its web site or by such other means as the Board of Directors may determine.
(i)  Voting Rights . The Series AA Preferred Stock shall have only the voting rights set forth in this Section 6.4(i), except as may otherwise be required by law. So long as any Series AA Preferred Stock is outstanding, the Corporation shall not, without the Majority Vote of the holders of record of the Series AA Preferred Stock then outstanding, voting separately as a class:
(1) amend, alter or repeal any provision of the charter or the Bylaws of the Corporation so as to affect adversely the relative rights, preferences, qualifications, limitations or restrictions of the Series AA Preferred Stock;
(2) authorize or issue, or increase the authorized amount of, any additional class or series of stock, or any security convertible into any senior dividend stock, senior liquidation stock, parity dividend stock or parity liquidation stock;
(3) affect any reclassification of the Series AA Preferred Stock; or
(4) effect the merger of the Corporation with another corporation, exchange of shares or sale of all or substantially all of the assets of the Corporation if the stockholders of the Corporation prior to such merger, share exchange or sale will own less than fifty percent (50%) of the shares of the surviving (in case of a merger) or acquiring (in the case of an exchange of shares or sale of assets) corporation immediately following such merger, share exchange or sale.
Except as provided below in this Section 6.4(i), holders of Series AA Preferred Stock shall not have the right to vote for the election of directors. If dividends on the Series AA Preferred Stock have accrued and remain unpaid for a period of one year, the Board of Directors shall call and hold a meeting of the Board of Directors within thirty (30) days to consider and adopt a resolution to increase the number of directors of the Corporation by two (2) (such additional directors, the “ Series AA Preferred Directors ”), name nominees for positions as Series AA Preferred Directors and call a special meeting of the holders of the Series AA Preferred Stock for the sole purpose of electing Series AA Preferred Directors. Series AA Preferred Directors elected by the holders of the Series AA Preferred Stock pursuant to this Section 6.4(i) shall serve until the earlier of (1) the date the Corporation pays a dividend sufficient to retire all accrued and unpaid dividends on the Series AA Preferred Stock, (2) their resignation or removal by a vote of the majority of the Series AA Preferred Stock, or (3) the date their respective successors are duly elected and qualify. If any Series AA Preferred Director shall resign or be removed from office, the holders of the Series AA Preferred Stock shall have the right to elect such Series AA Preferred Directors as are required to fill any such vacancy(ies) until such time that the director election rights of the holders of Series AA Preferred Stock terminate.

 

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(j)  Notice of Corporate Action . The Corporation shall give the holders of record of the Series AA Preferred Stock at least twenty (20) days prior written notice of: (1) the granting by the Corporation to all holders of its Common Stock of rights to purchase any shares of capital stock or other rights; (2) any reclassification of Common Stock, or consolidation of the Corporation with, or merger of the Corporation into, any other persons, any merger of any person into the Corporation (other than a merger that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock); or (3) any sale or transfer of all or substantially all of the assets of the Corporation.
Section 6.5 CLASSIFIED SHARES . Prior to issuance of shares of any class or series, the Board of Directors by resolution shall: (a) designate that particular 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, 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 dividends or other distributions, qualifications and terms and conditions of redemption for each class or series; 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 6.5 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 6.6 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
RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES
Section 7.1 DEFINITIONS . For the purpose of this Article VII, (i) terms defined elsewhere in these Articles of Incorporation are incorporated by reference, and (ii) the following terms shall have the following meanings:
AGGREGATE STOCK OWNERSHIP LIMIT . The term “ Aggregate Stock Ownership Limit ” shall mean not more than nine and 8/10ths percent (9.8%) in value of the aggregate outstanding shares of Capital Stock. The value of the outstanding shares of Capital Stock shall be determined by the Board of Directors of the Corporation in good faith, which determination shall be conclusive for all purposes hereof.

 

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BENEFICIAL OWNERSHIP . The term “ Beneficial Ownership ” shall mean ownership of Capital Stock by a Person, whether the interest in the shares of Capital Stock is held directly or indirectly (including by a nominee), and shall include interests that would be treated as owned through the application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The terms “ Beneficial Owner ”, “ Beneficially Owns ” and “ Beneficially Owned ” shall have the correlative meanings.
BUSINESS DAY . The term “ Business Day ” shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in California are authorized or required by law, regulation or executive order to close.
CAPITAL STOCK . The term “ Capital Stock ” shall mean all classes or series of stock of the Corporation, including, without limitation, Common Stock and Preferred Stock.
CHARITABLE BENEFICIARY . The term “ Charitable Beneficiary ” shall mean one or more beneficiaries of the Charitable Trust as determined pursuant to Section 7.3.6, provided that each such organization must be described in Section 501(c)(3) of the Code and contributions to each such organization must be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.
CHARITABLE TRUST . The term “ Charitable Trust ” shall mean any trust provided for in Section 7.3.1.
CHARTER . The term “ charter ” shall mean the charter of the Corporation, as that term is defined in the MGCL.
CODE . The term “ Code ” shall mean the Internal Revenue Code of 1986, as amended from time to time.
COMMON STOCK OWNERSHIP LIMIT . The term “ Common Stock Ownership Limit ” shall mean not more than nine and 8/10ths percent (9.8%) (in value or in number of shares, whichever is more restrictive) of the aggregate outstanding shares of Common Stock of the Corporation. The number and value of outstanding shares of Common Stock of the Corporation shall be determined by the Board of Directors of the Corporation in good faith, which determination shall be conclusive for all purposes hereof.
CONSTRUCTIVE OWNERSHIP . The term “ Constructive Ownership ” shall mean ownership of Capital Stock by a Person, whether the interest in the shares of Capital Stock is held directly or indirectly (including by a nominee), and shall include interests that would be treated as owned through the application of Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code. The terms “ Constructive Owner ”, “ Constructively Owns ” and “ Constructively Owned ” shall have the correlative meanings.

 

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EXCEPTED HOLDER . The term “ Excepted Holder ” shall mean a stockholder of the Corporation for whom an Excepted Holder Limit is created by the charter or by the Board of Directors pursuant to Section 7.2.7.
EXCEPTED HOLDER LIMIT . The term “ Excepted Holder Limit ” shall mean, provided that the affected Excepted Holder agrees to comply with the requirements established by the Board of Directors pursuant to Section 7.2.7, and subject to adjustment pursuant to Section 7.2.8, the percentage limit established by the Board of Directors pursuant to Section 7.2.7.
INITIAL DATE . The term “ Initial Date ” shall mean the date upon which the Articles of Amendment and Restatement of the Articles of Incorporation containing this Article VII are filed with the SDAT.
MARKET PRICE . The term “ Market Price ” on any date shall mean, with respect to any class or series of outstanding shares of Capital Stock, the Closing Price for such Capital Stock on such date. The “Closing Price” on any date shall mean the last sale price for such Capital Stock, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, for such Capital Stock, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if such Capital Stock is not listed or admitted to trading on the NYSE, as reported on the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such Capital Stock is listed or admitted to trading or, if such Capital Stock is not listed or admitted to trading on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotation system that may then be in use or, if such Capital Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such Capital Stock selected by the Board of Directors of the Corporation or, in the event that no trading price is available for such Capital Stock, the fair market value of the Capital Stock, as determined in good faith by the Board of Directors of the Corporation.
NYSE . The term “ NYSE ” shall mean the New York Stock Exchange.
PERSON . The term “ Person ” shall mean an individual, corporation, partnership, estate, trust (including a trust qualified under Sections 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity and also includes a group as that term s used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, and a group to which an Excepted Holder Limit applies.
PROHIBITED OWNER . The term “ Prohibited Owner ” shall mean, with respect to any purported Transfer, any Person who, but for the provisions of Section 7.2.1, would Beneficially Own or Constructively Own shares of Capital Stock, and if appropriate in the context, shall also mean any Person who would have been the record owner of the shares that the Prohibited Owner would have so owned.

 

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REIT . The term “ REIT ” shall mean a real estate investment trust within the meaning of Section 856 of the Code.
RESTRICTION TERMINATION DATE . The term “ Restriction Termination Date ” shall mean the first day after the Initial Date on which pursuant to Section 5.7 of the charter the Board of Directors determines that it is no longer in the best interests of the Corporation to continue to be qualified as a REIT and the holders of Common Stock, by a vote of such stockholders as are entitled to cast a majority of all the votes entitled to be cast on the matter, causes the Corporation to revoke or otherwise terminate the Corporation’s REIT election pursuant to Section 856(g) of the Code or that compliance with the restrictions and limitations on Beneficial Ownership, Constructive Ownership and Transfers of shares of Capital Stock set forth herein is no longer required in order for the Corporation to qualify as a REIT.
TENANT . The term “ Tenant ” shall mean a tenant, subtenant or any other Person that is a subtenant through a chain of subtenancies of a property owned by the Corporation.
TRANSFER . The term “ Transfer ” shall mean any issuance, sale, transfer, gift, assignment, devise or other disposition, as well as any other event that causes any Person to acquire Beneficial Ownership or Constructive Ownership, or any agreement to take any such actions or cause any such events, of Capital Stock or the right to vote or receive dividends on Capital Stock, including (a) the granting or exercise of any option (or any disposition of any option), (b) any disposition of any securities or rights convertible into or exchangeable for Capital Stock or any interest in Capital Stock or any exercise of any such conversion or exchange right and (c) Transfers of interests in other entities that result in changes in Beneficial or Constructive Ownership of Capital Stock; in each case, whether voluntary or involuntary, whether owned of record, Constructively Owned or Beneficially Owned and whether by operation of law or otherwise. The terms “ Transferring ” and “ Transferred ” shall have the correlative meanings.
TRUSTEE. The term “ Trustee ” shall mean a Person unaffiliated with the Corporation and Prohibited Owner that is appointed by the Corporation to serve as trustee of a Charitable Trust.
Section 7.2 CAPITAL STOCK .
Section 7.2.1 OWNERSHIP LIMITATIONS . During the period commencing on the Initial Date and prior to the Restriction Termination Date:
(a) BASIC RESTRICTIONS .
(i) (1) No Person, other than an Excepted Holder, shall Beneficially Own or Constructively Own shares of Capital Stock in excess of the Aggregate Stock Ownership Limit, (2) no Person, other than an Excepted Holder, shall Beneficially Own or Constructively Own shares of Common Stock in excess of the Common Stock Ownership Limit and (3) no Excepted Holder shall Beneficially Own or Constructively Own shares of Capital Stock in excess of the Excepted Holder Limit for such Excepted Holder.

 

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(ii) No Person shall Beneficially or Constructively Own shares of Capital Stock to the extent that such Beneficial or Constructive Ownership of Capital Stock would result in the Corporation being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year), or otherwise failing to qualify as a REIT (including, but not limited to, Beneficial or Constructive Ownership that would result in the Corporation owning (actually or Constructively (substituting, solely for purposes of this determination, “Section 856(d)(5)” for Section 897(c)(6)(C)” in the definition of Constructive Ownership)) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Corporation from such tenant would cause the Corporation to fail to satisfy any of the gross income requirements of Section 856(c) of the Code).
(iii) Subject to Section 7.4 of the charter, any Transfer of shares of Capital Stock (whether or not such Transfer is the result of a transaction entered into through the facilities of the NYSE or any other national securities exchange or automated inter-dealer quotation system) that, if effective, would result in the Capital Stock being beneficially owned by fewer than one hundred (100) Persons (determined under the principles of Section 856(a)(5) of the Code) shall be void ab initio, and the intended transferee shall acquire no rights in such shares of Capital Stock.
(b)  TRANSFER IN TRUST . Subject to Section 7.4 of the charter, if any Transfer of shares of Capital Stock (whether or not such Transfer is the result of a transaction entered into through the facilities of the NYSE or any other national securities exchange or automated inter-dealer quotation system) occurs which, if effective, would result in any Person Beneficially Owning or Constructively Owning shares of Capital Stock in violation of Section 7.2.1(a)(i) or (ii),
(i) then that number of shares of the Capital Stock the Beneficial or Constructive Ownership of which otherwise would cause such Person to violate Section 7.2.1(a)(i) or (ii) (rounded to the nearest whole share) shall be automatically transferred to a Charitable 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, and such Person shall acquire no rights in such shares; or
(ii) if the transfer to the Charitable Trust described in clause (i) of this sentence would not be effective for any reason to prevent the violation of Section 7.2.1(a)(i) or (ii), then the Transfer of that number of shares of Capital Stock that otherwise would cause any Person to violate Section 7.2.1(a)(i) or (ii) shall be void ab initio , and the intended transferee shall acquire no rights in such shares of Capital Stock.

 

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Section 7.2.2 REMEDIES FOR BREACH . If the Board of Directors of the Corporation or any duly authorized committee thereof shall at any time determine in good faith that a Transfer or other event has taken place that results in a violation of Section 7.2.1 or that a Person intends to acquire or has attempted to acquire Beneficial or Constructive Ownership of any shares of Capital Stock in violation of Section 7.2.1 (whether or not such violation is intended), the Board of Directors or a committee thereof shall take such action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, without limitation, causing the Corporation to redeem shares, refusing to give effect to such Transfer on the books of the Corporation or instituting proceedings to enjoin such Transfer or other event; provided , however , that any Transfer or attempted Transfer or other event in violation of Section 7.2.1 shall automatically result in the transfer to the Charitable Trust described above, and, where applicable, such Transfer (or other event) shall be void ab initio as provided above irrespective of any action (or non-action) by the Board of Directors or a committee thereof.
Section 7.2.3 NOTICE OF RESTRICTED TRANSFER . Any Person who acquires or attempts or intends to acquire Beneficial Ownership or Constructive Ownership of shares of Capital Stock that will or may violate Section 7.2.1(a) or any Person who would have owned shares of Capital Stock that resulted in a transfer to the Charitable Trust pursuant to the provisions of Section 7.2.1(b) shall immediately give written notice to the Corporation of such event, or in the case of such a proposed or attempted transaction, give at least fifteen (15) days prior written notice, 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 on the Corporation’s status as a REIT.
Section 7.2.4 OWNERS REQUIRED TO PROVIDE INFORMATION . From the Initial Date and prior to the Restriction Termination Date:
(a) every Person who Beneficially Owns more than five percent (5%) (or such lower percentage as required by the Code or the Treasury Regulations promulgated thereunder) of the outstanding shares of Capital Stock, within 30 days after the end of each taxable year, shall give written notice to the Corporation stating the name and address of such owner, the number of shares of Capital Stock Beneficially Owned and a description of the manner in which such shares are held. Each such Person shall provide to the Corporation such additional information as the Corporation may request in order to determine the effect, if any, of such Beneficial Ownership on the Corporation’s status as a REIT and to ensure compliance with the Aggregate Stock Ownership Limit; and
(b) each Person who is a Beneficial or Constructive Owner of Capital Stock and each Person (including the stockholder of record) who is holding Capital Stock for a Beneficial or Constructive Owner shall provide to the Corporation such information as the Corporation may request, in good faith, in order to determine the Corporation’s status as a REIT and to comply with requirements of any taxing authority or governmental authority or to determine such compliance and ensure compliance with Aggregate Stock Ownership Limit.
Section 7.2.5 REMEDIES NOT LIMITED . Subject to Section 5.7 of the charter, nothing contained in this Section 7.2 shall limit the authority of the Board of Directors of the Corporation to take such other action as it deems necessary or advisable to protect the Corporation and the interests of its stockholders in preserving the Corporation’s status as a REIT.

 

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Section 7.2.6 AMBIGUITY . In the case of an ambiguity in the application of any of the provisions of this Article VII, including any definition contained in Section 7.1, the Board of Directors of the Corporation shall have the power to determine the application of the provisions of this Article VII with respect to any situation based on the facts known to it. In the event Article VII requires an action by the Board of Directors and the charter fails 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 this Article VII.
Section 7.2.7 EXCEPTIONS .
(a) Subject to Section 7.2.1(a)(ii), the Board of Directors of the Corporation, in its sole discretion, may exempt (prospectively or retroactively) a Person from the Aggregate Stock Ownership Limit and the Common Stock Ownership Limit, as the case may be, and may establish or increase an Excepted Holder Limit for such Person if:
(i) the Board of Directors obtains such representations and undertakings from such Person as are reasonably necessary to ascertain that no individual’s Beneficial or Constructive Ownership of such shares of Capital Stock will violate Section 7.2.1(a)(ii);
(ii) 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 or controlled by the Corporation) that would cause the Corporation to own, actually or Constructively, more than a nine and 8/10ths percent (9.8%) interest in such Tenant and the Board of Directors obtains such representations and undertakings from such Person as are reasonably necessary to ascertain this fact (for this purpose, a Tenant from whom the Corporation (or an entity owned or controlled by the Corporation) derives (and is expected to continue to derive) a sufficiently small amount of revenue such that, in the opinion of the Board of Directors of the Corporation, rent from such Tenant would not adversely affect the Corporation’s ability to qualify as a REIT need not be treated as a Tenant of the Corporation); and
(iii) such Person agrees that any violation or attempted violation of such representations or undertakings (or other action which is contrary to the restrictions contained in Sections 7.2.1 through 7.2.6) will result in such shares of Capital Stock being automatically transferred to a Charitable Trust in accordance with Sections 7.2.1(b) and 7.3.
(b) Prior to granting any exception pursuant to Section 7.2.7(a), the Board of Directors of the Corporation 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. Notwithstanding the receipt of any ruling or opinion, the Board of Directors may impose such conditions or restrictions as it deems appropriate in connection with granting such exception.

 

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(c) Subject to Section 7.2.1(a)(ii), an underwriter or placement agent that participates in a public offering or a private placement of Capital Stock (or securities convertible into or exchangeable for Capital Stock) may Beneficially Own or Constructively Own shares of Capital Stock (or securities convertible into or exchangeable for Capital Stock) in excess of the Aggregate Stock Ownership Limit, the Common Stock Ownership Limit, or both such limits, but only to the extent necessary to facilitate such public offering or private placement and provided that the restrictions contained in Section 7.2.1(a) will not be violated following the distribution of such underwriter or placement agent of such shares of Capital Stock.
(d) The Board of Directors may only reduce the Excepted Holder Limit for an Excepted Holder: (1) with the written consent of such Excepted Holder at any time, or (2) pursuant to the terms and conditions of the agreements and undertakings entered into with such Excepted Holder in connection with the establishment of the Excepted Holder Limit for that Excepted Holder. No Excepted Holder Limit shall be reduced to a percentage that is less than the Common Stock Ownership Limit.
Section 7.2.8 INCREASE IN AGGREGATE STOCK OWNERSHIP AND COMMON STOCK OWNERSHIP LIMITS . The Board of Directors may from time to time increase the Common Stock Ownership Limit and the Aggregate Stock Ownership Limit.
Section 7.2.9 LEGEND . Each certificate for shares of Capital Stock shall bear substantially the following legend:
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 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 or Constructively Own shares of the Corporation’s Common Stock in excess of nine and 8/10ths percent (9.8%) (in value or number of shares) of the outstanding shares of Common Stock of the Corporation unless such Person is an Excepted Holder (in which case the Excepted Holder Limit shall be applicable); (ii) no Person may Beneficially or Constructively Own shares of Capital Stock of the Corporation in excess of nine and 8/10ths percent (9.8%) of the value of the total outstanding shares of Capital Stock of the Corporation, unless such Person is an Excepted Holder (in which case the Excepted Holder Limit shall be applicable); (iii) no Person may Beneficially or Constructively Own Capital Stock 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 shares of Capital Stock 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 shares of Capital Stock which causes or will cause a Person to Beneficially or Constructively Own shares of Capital Stock in excess or in violation of the above limitations must

 

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immediately notify the Corporation. If any of the restrictions on transfer or ownership are violated, the shares of Capital Stock represented hereby will be automatically transferred to a Trustee of a Charitable Trust for the benefit of one or more Charitable Beneficiaries. In addition, 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, 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 Capital Stock of the Corporation on request and without charge.
Instead of the foregoing legend, the certificate may state that the Corporation will furnish a full statement about certain restrictions on transferability to each holder of Capital Stock of the Corporation on request and without charge.
Section 7.3 TRANSFER OF CAPITAL STOCK IN TRUST .
Section 7.3.1 OWNERSHIP IN TRUST . Upon any purported Transfer or other event described in Section 7.2.1(b) that would result in a transfer of shares of Capital Stock to a Charitable Trust, such shares of Capital Stock shall be deemed to have been transferred to the Trustee as trustee of a Charitable Trust for the exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the Trustee shall be deemed to be effective as of the close of business on the Business Day prior to the purported Transfer or other event that results in the transfer to the Charitable Trust pursuant to Section 7.2.1(b). The Trustee shall be appointed by the Corporation and shall be a Person unaffiliated with the Corporation and any Prohibited Owner. Each Charitable Beneficiary shall be designated by the Corporation as provided in Section 7.3.6.
Section 7.3.2 STATUS OF SHARES HELD BY THE TRUSTEE . Shares of Capital Stock held by the Trustee shall be issued and outstanding shares of Capital Stock of the Company. The Prohibited Owner shall have no rights in the shares held by the Trustee. The Prohibited Owner shall not benefit economically from ownership of any shares held in trust by the Trustee, shall have no rights to dividends or other distributions and shall not possess any rights to vote or other rights attributable to the shares held in the Charitable Trust.
Section 7.3.3 DIVIDEND AND VOTING RIGHTS . The Trustee shall have all voting rights and rights to dividends or other distributions with respect to shares of Capital Stock held in the Charitable Trust, which rights shall be exercised for the exclusive benefit of the Charitable Beneficiary. Any dividend or other distribution paid prior to the discovery by the Corporation that the shares of Capital Stock have been transferred to the Trustee shall be paid by the recipient of such dividend or distribution to the Trustee upon demand and any dividend or other distribution authorized but unpaid shall be paid when due to the Trustee. Any dividend or distribution so paid to the Trustee shall be held in trust for the Charitable Beneficiary. The Prohibited Owner shall have no voting rights with respect to shares held in the Charitable Trust and, subject to Maryland law, effective as of the date that the shares of Capital Stock have been transferred to the Trustee, the Trustee shall have the authority (at the Trustee’s

 

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sole discretion) (i) to rescind as void any vote cast by a Prohibited Owner prior to the discovery by the Corporation that the shares of Capital Stock 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 Trustee 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 shares of Capital Stock have been transferred into a Charitable 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.
Section 7.3.4 SALE OF SHARES BY TRUSTEE . Within twenty (20) days of receiving notice from the Corporation that shares of Capital Stock have been transferred to the Charitable Trust, the Trustee of the Charitable Trust shall sell the shares held in the Charitable Trust to a person, designated by the Trustee, whose ownership of the shares will not violate the ownership limitations set forth in Section 7.2.1(a). Upon such sale, the interest of the Charitable Beneficiary in the shares sold shall terminate and the Trustee shall distribute the net proceeds of the sale to the Prohibited Owner and to the Charitable Beneficiary as provided in this Section 7.3.4. The Prohibited Owner shall receive the lesser of (1) the price paid by the Prohibited Owner for the shares or, if the Prohibited Owner did not give value for the shares in connection with the event causing the shares to be held in the Charitable Trust (e.g., in the case of a gift, devise or other such transaction), the Market Price of the shares on the day of the event causing the shares to be held in the Charitable Trust and (2) the price per share received by the Trustee from the sale or other disposition of the shares held in the Charitable Trust. Any net sales proceeds in excess of the amount payable to the Prohibited Owner shall be immediately paid to the Charitable Beneficiary. If, prior to the discovery by the Corporation that shares of Capital Stock have been transferred to the Trustee, such shares are sold by a Prohibited Owner, then (i) such shares shall be deemed to have been sold on behalf of the Charitable Trust and (ii) to the extent that the Prohibited Owner received an amount for such shares that exceeds the amount that such Prohibited Owner was entitled to receive pursuant to this Section 7.3.4, such excess shall be paid to the Trustee upon demand.
Section 7.3.5 PURCHASE RIGHT IN STOCK TRANSFERRED TO THE TRUSTEE . Shares of Capital Stock 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 per share in the transaction that resulted in such transfer to the Charitable Trust (or, in the case of a devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation shall have the right to accept such offer until the Trustee has sold the shares held in the Charitable Trust pursuant to Section 7.3.4. Upon such a sale to the Corporation, the interest of the Charitable Beneficiary in the shares sold shall terminate and the Trustee shall distribute the net proceeds of the sale to the Prohibited Owner.

 

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Section 7.3.6 DESIGNATION OF CHARITABLE BENEFICIARIES . 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 Charitable Trust such that (i) the shares of Capital Stock held in the Charitable Trust would not violate the restrictions set forth in Section 7.2.1(a) in the hands of such Charitable Beneficiary and (ii) each such organization must be described in Section 501(c)(3) of the Code and contributions to each such organization must be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.
Section 7.4 NYSE TRANSACTIONS . Nothing in this Article VII shall preclude the settlement of any transaction entered into through the facilities of the NYSE or any other national securities exchange or automated inter-dealer quotation system. The fact that the settlement of any transaction occurs shall not negate the effect of any other provision of this Article VII and any transferee in such a transaction shall be subject to all of the provisions and limitations set forth in this Article VII.
Section 7.5 ENFORCEMENT . The Corporation is authorized specifically to seek equitable relief, including injunctive relief, to enforce the provisions of this Article VII.
Section 7.6 NON-WAIVER . No delay or failure on the part of the Corporation or the Board of Directors in exercising any right hereunder shall operate as a waiver of any right of the Corporation or the Board of Directors, as the case may be, except to the extent specifically waived in writing.
ARTICLE VIII
AMENDMENTS TO CHARTER; APPROVAL OF CERTAIN EXTRAORDINARY ACTIONS
Section 8.1 AMENDMENTS TO CHARTER . The Corporation reserves the right from time to time to make any amendment to its charter 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, other than the outstanding shares of Series AA Preferred Stock which shall have and retain all of the rights provided for in Section 6.4(i). All rights and powers conferred by the charter on stockholders, directors and officers are granted subject to the reservation set forth in the previous sentence. Except as otherwise provided in the charter and except for those amendments permitted to be made without stockholder approval under Maryland law, any amendment to the charter shall be valid only if approved by the stockholders of the Corporation by the affirmative vote of a majority of all the votes entitled to be cast on the matter.
Section 8.2 APPROVAL OF CERTAIN EXTRAORDINARY ACTIONS . The affirmative vote of the holders of shares entitled to cast a majority of all the votes entitled to be cast on the matter shall be required to authorize a merger, consolidation, share exchange, dissolution or sale of substantially all of the assets of the Corporation.

 

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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.
THIRD: The foregoing amendment and restatement to the charter does not increase the authorized capital stock of the Corporation. The preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions for redemption of the classes of capital stock are not changed by the foregoing amendment and restatement
FOURTH: The Corporation was originally incorporated in the State of Maryland on May 21, 2010, and foregoing amendment and restatement to the charter of the Corporation shall amend, restate and supersede in their entirety any and all prior Articles of Incorporation and any and all amendments and restatements thereto filed with the State Department of Assessments and Taxation of Maryland from the date of the Corporation’s original incorporation through the date hereof.
FIFTH: The foregoing amendment and restatement to the charter of the Corporation has been advised by resolution adopted by the Board of Directors of the Corporation and approved by the stockholders of the Corporation.
[ Signatures Appear On The Following Page .]

 

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IN WITNESS WHEREOF, NetREIT, Inc. has caused these Articles of Amendment and Restatement to be signed and acknowledged in its name and on its behalf by its President and attested to by its Secretary on this 4th day of August, 2010, and its President acknowledges that these Articles of Amendment and Restatement are the act of NetREIT, Inc. and he further acknowledges that, as to all matters or facts set forth herein which are required to be verified under oath, such matters and facts are true in all material respects to the best of his knowledge, information and belief, and that this statement is made under the penalties for perjury.
             
ATTEST:
  NetREIT, INC.    
 
           
/s/ Kenneth W. Elsberry
  By:   /s/ Jack K. Heilbron    
 
Name: Kenneth W. Elsberry
     
 
Name: Jack K. Heilbron
   
Title: Chief Financial Officer
      Title:   President and CEO    

 

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CONSENT TO SERVE AS RESIDENT AGENT
Having been named as registered agent and to accept service of process for NetREIT, Inc. at the place designated in these Articles of Incorporation, the undersigned, a Maryland corporation duly authorized to act as a resident agent in the state of Maryland, hereby accepts the appointment as registered agent and agrees to act in this capacity.
             
    HIQ CORPORATE SERVICES, INC.
 
           
 
  By:        
         
 
      Name:    
 
           
 
      Title:    
 
           
Date: __________ __, 2010

 

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Exhibit 3.02
Appendix C
NetREIT, Inc.
AMENDED AND RESTATED BYLAWS
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office of the Corporation shall be located at such place or places as the Board of Directors may designate.
Section 2. ADDITIONAL OFFICES. The Corporation may have additional offices at such places as the Board of Directors may from time to time determine or the business of the Corporation may require.
ARTICLE II
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. Regular meetings of the stockholders for the election of directors and the transaction of any other business that is proper for stockholder action under the charter of the Corporation, these bylaws and applicable law and as may properly come before the meeting shall be held once each calendar year (each such meeting an “annual meeting”). Annual meetings may only be called by the Board of Directors. The Board of Directors shall determine the date, time and place for any annual meeting, which place may be within or without the State of Maryland, or any adjournments or postponements thereof. Any annual meeting so called may be postponed by the Board of Directors prior to the meeting with notice to the stockholders entitled to vote at that meeting.
Section 3. SPECIAL MEETINGS. The chairman of the board, chief executive officer, president or the Board of Directors may call special meetings of the stockholders. Special meetings of stockholders may also be called by the secretary of the Corporation upon the written request of holders of shares constituting at least ten percent (10%) of 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. A special meeting may be called only for the purpose of transacting of such business that is proper for stockholder action under the charter of the Corporation, these bylaws and applicable law and as may properly come before such meeting. The secretary shall inform such requesting 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 receive notice of the meeting.

 

 


 

Section 4. NOTICE. Not less than ten (10) nor more than sixty (60) 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 applicable 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 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. The notice of any meeting of stockholders may be accompanied by a form of proxy approved by the Board of Directors in favor of the actions or persons as the Board of Directors may select. Notice of any meeting of stockholders shall be deemed waived by any stockholder who attends the meeting in person or by proxy or who before or after the meeting submits a signed waiver of notice that is filed with the records of the meeting.
Section 5. SCOPE OF NOTICE. Except for action on (i) a contract or transaction in which a director has a direct or indirect financial interest, (ii) an amendment to the charter, (iii) a reorganization of the Corporation, (iv) a voluntary dissolution of the Corporation, or (v) a distribution in dissolution other than in accordance with the rights of outstanding shares of preferred stock, as to any of which such notice shall state the general nature of any proposed action, 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 chief executive officer, 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 entitled to cast a majority of the votes entitled to be cast on a matter (without regard to class) 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. 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 sixty (60) 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.

 

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Section 8. VOTING. Directors shall be elected (1) by the affirmative vote of the holders of a majority of the shares of common stock outstanding and entitled to vote thereon, or (2) in the case of directors elected by the holders of preferred stock voting separately as a class, by the affirmative vote of the holders of a majority of the shares of preferred stock outstanding and entitled to vote thereon, unless otherwise set forth in these bylaws or the Corporation’s charter.
Each outstanding share of the Corporation’s common stock entitles the holder thereof to one vote on all matters presented to the holders of common stock for a vote with the exception that the holders of common stock have cumulative voting rights with respect to the election of the Board of Directors as described in the following paragraph of this Section 8. The stockholders’ vote may be by voice vote or by ballot; provided, however, that any election for directors must be by ballot if demanded by any stockholder before the voting has begun. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on any matter (other than the election of directors) shall be the act of the stockholders, unless otherwise set forth in these bylaws or the Corporation’s charter.
At a stockholders’ meeting at which directors are to be elected, no stockholder shall be entitled to cumulate votes (i.e., cast for any one or more candidates a number of votes greater than the number of the stockholder’s shares), unless the candidates’ names have been placed in nomination prior to commencement of the voting and a stockholder has given notice prior to commencement of the voting of the stockholder’s intention to cumulate votes. If any stockholder has given such a notice, then every stockholder entitled to vote may cumulate votes for candidates in nomination and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which that stockholder’s shares are entitled, or distribute the stockholder’s votes on the same principle among any or all of the candidates, as the stockholder thinks fit. The candidates receiving the highest number of votes, up to the number of directors to be elected, shall be elected.
Section 9. PROXIES. A stockholder may cast the votes entitled to be cast by the shares of the stock owned of record by him either in person or by proxy executed in writing by the stockholder or by his duly authorized agent. Such proxy shall be filed with the secretary of the Corporation before or at the time of the meeting. A proxy shall be deemed signed if the stockholder’s name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the stockholder or the stockholder’s attorney-in-fact. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless (a) revoked by the person executing it, or by a subsequent proxy executed by, or attendance at the meeting and voting in person by, the person executing the proxy; or (b) written notice of the death or incapacity of the maker of the proxy is received by the Corporation before the vote pursuant to that proxy is counted; provided, however, that no proxy shall be valid after the expiration of eleven (11) months from the date of the proxy unless otherwise provided in the proxy. The revocability of a proxy that states on its face that it is revocable shall be governed by the provisions of Section 2-507 of the Maryland General Corporation Law (“ MGCL ”).

 

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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 of Directors 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 of Directors 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 the certification, the stockholder of record of the specified stock in place of the stockholder who makes the certification.
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.

 

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Section 12. NOMINATIONS AND PROPOSALS BY STOCKHOLDERS.
(a) ANNUAL MEETINGS OF STOCKHOLDERS.
(1) Except as otherwise provided for in the charter of the Corporation with respect to Series AA Preferred Directors, nominations of persons for election to the Board of Directors 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 of Directors 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).
(2) 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 and such other business must otherwise be a proper matter for action by stockholders. To be timely, a stockholder’s notice shall be delivered to the secretary at the principal executive offices of the Corporation not later than the close of business on the 60th day nor earlier than the close of business on the 90th day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than thirty (30) days or delayed by more than sixty (60) days from such anniversary date or if the Corporation has not previously held an annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the close of business on 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 by the Corporation. In no event shall the public announcement of a postponement or adjournment of an annual meeting to a later date or time commence a new time period for the giving of a stockholder’s notice as described above. 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 in an election contest, 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.
(3) 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 of Directors is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least 50 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 no later than the close of business on the tenth day following the day on which such public announcement is first made by the Corporation.

 

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(b) SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall be conducted at a special meeting of the 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 of Directors may be made at a special meeting of stockholders at which directors are to be elected (i) pursuant to the Corporation’s notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) provided that the Board of Directors has determined that directors shall be elected at such special meeting, by any stockholder of the Corporation who is a stockholder of record both at the time of giving of notice provided for in this Section 12(b) and at the time of the special meeting, 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 of Directors, any such stockholder entitled to vote at the meeting 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 close of business on 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 of Directors to be elected at such meeting. Only holders of Series AA Preferred Stock shall be entitled to vote at a special meeting called for the purpose of electing one or more Series AA Preferred Directors, as provided in Section 6.4(i) of the charter of the Corporation. In no event shall the public announcement of a postponement or adjournment of a special meeting to a later date or time commence a new time period for the giving of a stockholder’s notice as described above.
(c) GENERAL.
(1) Only such persons who are nominated in accordance with the procedures set forth in this Section 12 or, in the case of Series AA Preferred Directors, Section 6.4(i) of the charter of the Corporation, 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 chairman 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 or proposed, as the case may be, in accordance with the procedures set forth in this Section 12 and, if any proposed nomination or proposed business is not in compliance with this Section 12, to declare that such nomination or proposal shall 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, or the right of the Corporation to omit a proposal from, 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.
Section 14. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action which may be taken at any annual or special meeting of stockholders may be taken without a meeting and without prior notice if a consent, in writing, setting forth the action so taken is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or to take that action at a meeting at which all the shares entitled to vote on that action were present and voted. In the case of election of directors, such a consent shall be effective only if signed by the holders of all outstanding shares entitled to vote for the election of directors. All such consents shall be delivered to the Corporation by delivery to the secretary of the Corporation and shall be maintained among the corporate records. No written consent of any stockholder, or the stockholder’s proxy holders, or a transferee of the shares, or a personal representative of the stockholder or their respective proxy holders shall take effect unless written consents signed by a sufficient number of stockholders to take the proposed action are delivered to the secretary of the Corporation within sixty (60) days after the date on which the earliest consent is dated.
If the consents of all stockholders entitled to vote have not been solicited in writing and if the unanimous written consent of all stockholders shall not have been received, the secretary shall give prompt notice of the corporate action approved by the stockholders without a meeting. This notice shall be given in the manner specified in Section 4 of this Article, the notice shall be given not later than ten (10) days after the effective date of such action to each holder of common stock and to each stockholder who, if the action had been taken at a meeting, would have been entitled to notice of the meeting.
ARTICLE III
DIRECTORS
Section 1. GENERAL POWERS. The business and affairs of the Corporation shall be managed under the direction of its Board of Directors.
Section 2. NUMBER AND TENURE. The Corporation shall have eight (8) directors, which number may be increased or decreased from time to time by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors, but the number of directors shall never be less than six (6) nor more than eleven (11), unless otherwise approved by the majority vote of the stockholders entitled to cast a majority of all the votes entitled to be cast on the matter. No reduction in the number of directors by resolution of the Board of Directors shall have the effect of removing any director from office prior to the expiration of his or her term.

 

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Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board of Directors shall be held immediately after and at the same place as the annual meeting of stockholders, no notice other than this Bylaw being necessary. The Board of Directors 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 of Directors without other notice than such resolution.
Section 4. SPECIAL MEETINGS. Special meetings of the Board of Directors 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 of Directors may fix any place, either within or without the State of Maryland, as the place for holding any special meeting of the Board of Directors called by them.
Section 5. NOTICE. Notice of any special meeting of the Board of Directors 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 two (2) days prior to the meeting. Notice by mail shall be given at least five (5) days prior to the meeting and shall be deemed to be given when deposited in the United States mail properly 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 of Directors need be stated in the notice, unless specifically required by statute or these bylaws.
Section 6. QUORUM. A majority of the authorized directors shall constitute a quorum for transaction of business at any meeting of the Board of Directors, 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 directors 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 of Directors, unless the concurrence of a greater proportion is required for such action by the Company’s charter, these bylaws or 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.

 

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Section 9. INFORMAL ACTION BY DIRECTORS. Any action required or permitted to be taken at any meeting of the Board of Directors 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 of Directors.
Section 10. COMPENSATION. Directors shall not receive any stated salary for their services as directors but, by resolution of the Board of Directors, may receive compensation per year and/or per meeting and/or per visit to real property or other facilities owned or leased by the Corporation and for any service or activity they performed or engaged in as directors. Directors may be reimbursed for expenses of attendance, if any, at each annual, regular or special meeting of the Board of Directors or of any committee thereof and for their expenses, if any, in connection with each property visit and any other service or activity they performed or engaged in as directors; but nothing herein contained shall be construed to preclude any directors from serving the Corporation in any other capacity and receiving compensation therefor.
Section 11. LOSS OF DEPOSITS. No director shall be liable for any loss which may occur by reason of the failure of a bank, trust company, savings and loan association, or other institution with whom moneys or stock of the Corporation have been deposited.
Section 12. 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 13. 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 of Directors or officers of the Corporation, regardless of whether such counsel or expert may also be a director.
Section 14. CERTAIN DUTIES OF THE DIRECTORS. The directors shall have a fiduciary duty to the Corporation and the stockholders to supervise the relationship between the Corporation and any Advisor. The Board of Directors, by a majority vote (including a majority vote of the Independent Directors), shall approve the form and content of any reports provided to the Corporation’s stockholders as required by these bylaws or the Corporation’s charter and shall take reasonable steps to insure that the requirements regarding such reports and the calling of the annual meeting of the stockholders, as provided for in Article II, Section 2 of these bylaws, are met. For purposes of these bylaws, the term “Advisor” shall mean a person or firm providing real estate investment advisory services to the Corporation on an ongoing basis. For purposes of these bylaws, the term “Independent Director” shall mean a director of the Corporation who is not affiliated, directly or indirectly, with an Advisor (other than in his capacity as a trustee or a director of another real estate investment entity being advised by an Advisor), whether by ownership of, ownership interest in, employment by, any business or professional relationship with or service as an officer or director of such Advisor or any of its Affiliates, and who performs no other services for the Corporation at the time his or her independence is being determined. A director, however, will not be considered independent if he or she is serving as a director for more than three real estate investment entities organized by or affiliated with an Advisor of the Corporation, or any director who is not an Independent Director. The term “Independent Director” shall also mean an individual who performs no other service for the Corporation, except service as a director. For purposes of these bylaws, the term “Affiliate” shall mean (i) any person directly or indirectly controlling, controlled by or under common control with another person, (ii) any person owning or controlling ten percent (10%) or more of the outstanding voting securities of such other person, (iii) any officer, director, trustee, or general partner of such person, and (iv) if such person is an officer, director, trustee or general partner of another entity, then the entity for which that person acts in any capacity.

 

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Section 15. CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. The directors shall have no responsibility to devote their full time to the affairs of the Corporation. Any director or officer, employee or agent of the Corporation, in his personal capacity or in a capacity as an affiliate, employee, or agent of any other person, or otherwise, may have business interests and engage in business activities similar to or in addition to or in competition with those of or relating to the Corporation.
Section 16. INDEPENDENT DIRECTORS. A majority of the directors of the Corporation shall be Independent Directors.
ARTICLE IV
COMMITTEES
Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Board of Directors may appoint from among its members an Executive Committee, an Audit and Review Committee, a Compensation Committee and other committees, composed of one or more directors, to serve at the pleasure of the Board of Directors.
Section 2. POWERS. The Board of Directors may delegate to committees appointed under Section 1 of this Article any of the powers of the Board of Directors, except as prohibited by law.
Section 3. MEETINGS. Notice of committee meetings shall be given in the same manner as notice for special meetings of the Board of Directors. 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 members present at a meeting shall be the act of such committee. The Board of Directors may designate a chairman of any committee, and such chairman or any two members of any committee (if there are at least two members of the committee) may fix the time and place of its meeting unless the Board of Directors shall otherwise provide. In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another director to act in the place of such absent member. Each committee shall keep minutes of its proceedings.
Section 4. TELEPHONE MEETINGS. Members of a committee of the Board of Directors may participate in a meeting by means of a conference telephone, video conference 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.

 

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Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or permitted to be taken at any meeting of a committee of the Board of Directors 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 6. VACANCIES. Subject to the provisions hereof, the Board of Directors 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 include a chairman of the board, a chief executive officer, a president, a secretary and a treasurer and may include a vice chairman of the board, 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 of Directors 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 of Directors at the first meeting of the Board of Directors 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 qualified 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 of Directors 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 of Directors 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 of Directors, the chairman of the board, the chief executive officer, 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 of Directors for the balance of the term.
Section 4. CHIEF EXECUTIVE OFFICER. The Board of Directors 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 of Directors, and for the management of the business and affairs of the Corporation.

 

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Section 5. CHIEF OPERATING OFFICER. The Board of Directors may designate a chief operating officer. The chief operating officer shall have the responsibilities and duties as set forth by the Board of Directors and the chief executive officer.
Section 6. CHIEF FINANCIAL OFFICER. The Board of Directors may designate a chief financial officer. The chief financial officer shall have the responsibilities and duties as set forth by the Board of Directors and the chief executive officer.
Section 7. CHAIRMAN OF THE BOARD. The Board of Directors shall designate a chairman of the board. The chairman of the board shall preside over the meetings of the Board of Directors and of the stockholders at which he shall be present. The chairman of the board shall perform such other duties as may be assigned to him or them by the Board of Directors.
Section 8. PRESIDENT. The president shall have the responsibilities and duties as set forth by the Board of Directors and the chief executive officer. In the absence of a designation of a chief operating officer by the Board of Directors, the president shall be the chief operating officer.
Section 9. VICE PRESIDENTS. In the absence of the president or in the event of a vacancy in such office, the vice president (or in the event there be more than one vice president, the vice presidents in the order designated at the time of their election or, in the absence of any designation, then in the order of their election) shall perform 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; and shall perform such other duties as from time to time may be assigned to him by the president or by the Board of Directors. The Board of Directors may designate one or more vice presidents as executive vice president or as vice president for particular areas of responsibility.
Section 10. SECRETARY. The secretary shall (a) keep the minutes of the proceedings of the stockholders, the Board of Directors and committees of the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation; (d) keep a register of the post office address of each stockholder which shall be furnished to the secretary by such stockholder; (e) have general charge of the share transfer books of the Corporation; and (f) in general perform such other duties as from time to time may be assigned to him by the chief executive officer, the president or by the Board of Directors.
Section 11. TREASURER. The treasurer shall have the custody of the funds and securities of the Corporation 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 of Directors. In the absence of a designation of a chief financial officer by the Board of Directors, the treasurer shall be the chief financial officer of the Corporation.

 

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The treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the president and Board of Directors, at the regular meetings of the Board of Directors or whenever it may so require, an account of all his transactions as treasurer and of the financial condition of the Corporation.
If required by the Board of Directors, the treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, moneys and other property of whatever kind in his possession or under his control belonging to the Corporation.
Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The assistant secretaries and assistant treasurers, in general, shall perform such duties as shall be assigned to them by the secretary or treasurer, respectively, or by the president or the Board of Directors. The assistant treasurers shall, if required by the Board of Directors, give bonds for the faithful performance of their duties in such sums and with such surety or sureties as shall be satisfactory to the Board of Directors.
Section 13. SALARIES. The salaries and other compensation of the officers shall be fixed from time to time by the Board of Directors 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
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The Board of Directors 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 of Directors and upon the Corporation when authorized or ratified by action of the Board of Directors.
Section 2. 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 of Directors.
Section 3. 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 of Directors may designate.

 

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ARTICLE VII
STOCK CERTIFICATES, RECORDS AND REPORTS
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 chief executive officer, 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. 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 of Directors 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 of Directors 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 new certificate, an officer designated by the Board of Directors 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.

 

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Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The Board of Directors 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 ninety (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 of Directors may provide that the stock transfer books shall be closed for a stated period but not longer than twenty (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 one hundred twenty (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.
Section 5. FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of Directors 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 of Directors 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 of Directors 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.

 

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Section 6. 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 7. ANNUAL REPORT TO STOCKHOLDERS. The Board of Directors shall cause an annual report to be sent to the stockholders not later than one hundred twenty (120) days after the close of each fiscal year. This report shall be sent at least fifteen (15) days before the annual meeting of stockholders to be held during the next fiscal year and in the manner specified in Article II, Section 4 of these bylaws. The annual report shall contain financial statements (balance sheet, statement of income, statement of changes of financial position) prepared in accordance with generally accepted accounting principles and accompanied by an auditor’s report containing the opinion of an independent certified public accountant or independent public accountant or, if there is no such report, the certificate of an authorized officer of the Corporation that the statements were prepared without audit from the Corporation’s books and records. The foregoing requirement of an annual report shall be waived so long as the shares of common stock of the Corporation are held by fewer than one hundred (100) holders of record.
ARTICLE VIII
ACCOUNTING YEAR
The Board of Directors shall have the power, from time to time, to fix the fiscal year of the Corporation by a duly adopted resolution.
ARTICLE IX
DISTRIBUTIONS
Section 1. AUTHORIZATION. Dividends and other distributions upon the stock of the Corporation may be authorized and declared by the Board of Directors, subject to the provisions of law and the charter of the Corporation. Dividends and other distributions may be paid in cash, property or stock of the Corporation, subject to the provisions of law and the charter.
Section 2. CONTINGENCIES. Before payment of any dividends or other distributions, there may be set aside out of any assets of the Corporation available for dividends or other distributions such sum or sums as the Board of Directors may from time to time, in its absolute discretion, think proper as a reserve fund for contingencies, for equalizing dividends or other distributions, for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors shall determine to be in the best interest of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.
Section 3. DISCLOSURE ON DISTRIBUTION. Any distribution of income or capital assets of the Corporation to holders of securities of the Corporation other than its promissory notes shall 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 shall accompany the distribution and the written statement disclosing the sources of the funds distributed shall be sent to such holders not later than sixty (60) days after the close of the year in which the distribution was made.

 

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ARTICLE X
INVESTMENT POLICY
Subject to the provisions of the charter of the Corporation, the Board of Directors may from time to time adopt, amend, revise or terminate any policy or policies with respect to investments by the Corporation as it shall deem appropriate in its sole discretion.
ARTICLE XI
SEAL
Section 1. SEAL. The Board of Directors may authorize the adoption of a seal by the Corporation. The seal shall contain the name of the Corporation and the year of its incorporation and the words “Incorporated Maryland.” The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof.
Section 2. AFFIXING SEAL. 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.
ARTICLE XII
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 XIII
AMENDMENT OF BYLAWS
Section 1. POWER OF DIRECTORS TO AMEND. The Board of Directors shall have the power to adopt, alter or repeal these bylaws not inconsistent with the Corporation’s charter or applicable law for the regulation and management of the affairs of the Corporation; provided, however, that the Board of Directors may adopt a bylaw or an amendment to a bylaw changing the authorized number of directors only for the purpose of fixing the exact number of directors of the Corporation as provided in Article III, Section 2 of these bylaws; and, provided, further, that no amendment that would change any rights with respect to any outstanding class of common stock by reducing the amount payable thereon upon liquidation of the Corporation, or diminishing or eliminating any voting rights pertaining thereto, may be made unless also approved by sixty-six and two-thirds percent (66-2/3rds%) of the outstanding shares of such class.

 

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Section 2. POWER OF STOCKHOLDERS TO AMEND. The holders of the Corporation’s common stock, at any annual meeting or at a special meeting called for the purpose, may adopt, alter or repeal the bylaws of the Corporation; provided, however, that the holders of the Series AA Preferred Stock shall have the right, pursuant to Section 6.4(i)(1) of the charter, to approve an amendment, alteration or repeal of any provision of these bylaws that affects adversely the relative rights, preferences, qualifications, limitations or restrictions of the Series AA Preferred Stock. Any change to the bylaws made by the stockholders may not be altered in any manner by the directors prior to the next annual meeting of stockholders.
ARTICLE XIV
MARYLAND BUSINESS COMBINATION STATUTE
The Corporation elects to be governed by the provisions of Sections 3-601 through 3-604 of the MGCL (the “ Maryland Business Combination Act ”) as in effect on the date these bylaws are adopted (“ Effective Date ”). The Corporation elects not to be governed by any amendment to the Maryland Business Combination Act after the Effective Date unless the Board of Directors, pursuant to a resolution approved by a majority of the directors then in office, determines that such amendment shall apply to the Corporation. In the event that the Maryland Business Combination Act is repealed or, in the sole discretion of the Board of Directors, amended or substantially altered to the detriment of the Corporation, the Corporation shall continue to be governed by the provisions of the Maryland Business Combination Act in effect on the Effective Date, together with any amendments to the Maryland Business Combination Act that the Board of Directors has determined shall apply to the Corporation.

 

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Exhibit 3.03
ARTICLES OF MERGER
merging
NetREIT
a California corporation
with and into
NetREIT, INC.
a Maryland corporation
NetREIT, a California corporation (the “ Merging Corporation ”) and NetREIT, Inc., a Maryland corporation (the “ Surviving Corporation ”), hereby certify to the State Department of Assessments and Taxation of Maryland that:
FIRST: Merging Corporation and Surviving Corporation agree that Merging Corporation shall be merged with and into Surviving Corporation, which shall continue under the name of NetREIT, Inc., a Maryland corporation (the “ Merger ”). The names of the corporations included in the merger are as set forth above. Surviving Corporation was incorporated under the general laws of the State of Maryland on June 1, 2010. Merging Corporation was incorporated under the general laws of the State of California on January 28, 1999.
SECOND: The address of Surviving Corporation’s principal office in the State of Maryland is c/o HIQ Maryland Corporation, 715 St. Paul Street, Baltimore, Maryland 21202. Merging Corporation owns no interest in land in the State of Maryland, the title to which could be affected by the recording of an instrument among the land records.
THIRD: The terms and conditions of the merger set forth in these Articles of Merger were advised, authorized, and approved by Surviving Corporation in the manner and by the vote required by its charter and the general laws of the State of Maryland. The manner in which the merger was approved is set forth below.
FOURTH: The merger was duly advised by the board of directors of the Surviving Corporation in the following manner: The board of directors of Surviving Corporation adopted resolutions declaring that the merger of Merging Corporation into the Surviving Corporation is advisable in the form and upon the terms and conditions set forth in these articles of merger, and directing that the proposed merger be submitted to the stockholders for consideration and approval. The resolutions of the board of directors were lawfully adopted by a written consent signed by the sole director of Surviving Corporation.
The merger was duly advised by the board of directors of Merging Corporation in the following manner: The board of directors of Merging Corporation adopted resolutions declaring that the merger of Merging Corporation into Surviving Corporation is advisable in the form and upon the terms and conditions set forth in these articles of merger, and directing that the proposed merger be submitted to the shareholders for consideration and approval. The resolutions of the board of directors were lawfully adopted by a written consent signed by all of the directors of Merging Corporation and at a duly called meeting of the directors of the Merging Corporation in accordance with its charter, bylaws and California law.

 

 


 

FIFTH: The merger was duly approved by the stockholders of Surviving Corporation in the following manner: The sole stockholder of Surviving Corporation approved the merger, in the form and upon the terms and conditions set forth in these articles of merger, by written consent.
The merger was duly approved by the shareholders of Merging Corporation in the following manner: The shareholders of Merging Corporation approved the merger, in the form and upon the terms and conditions set forth in these articles of merger, at a duly called meeting of the shareholders of the Merging Corporation in accordance with its articles of incorporation, bylaws and California law.
SIXTH: The total number of shares of stock which each of the corporations party to these articles of merger has authority to issue, the number and par value of the shares of each class, and the aggregate par value of those shares of stock, are as follows:
(a) Merging Corporation has authorized 110,001,000 shares of capital stock, consisting of 100,001,000 shares of common stock, with no par value, and 10,000,000 shares of preferred stock, with no par value. The shares of common stock are further designated as follows: (i) 100,000,000 shares of Series A Common Stock, with no par value, and (ii) 1,000 shares of Series B Common Stock, with no par value. 1,035,000 shares of preferred stock are further designated as follows: (iii) 35,000 shares of Series A Preferred Stock, with no par value, and (iv) 1,000,000 shares of Series AA Preferred Stock, with no par value. The aggregate par value for the Merging Corporation’s capital stock is $0.
(b) Surviving Corporation has authorized 110,001,000 shares of capital stock, consisting of 100,001,000 shares of common stock, $0.01 par value per share for an aggregate par value of $1,000,010, and 10,000,000 shares of preferred stock, $0.01 par value per share for an aggregate par value of $100,000. The shares of common stock are further designated as follows: (i) 100,000,000 shares of Series A Common Stock, $0.01 par value per share for an aggregate par value of $1,000,000, and (ii) 1,000 shares of Series B Common Stock, $0.01 par value per share with an aggregate par value of $10.00. 1,000,000 shares of the preferred stock are further designated as Series AA Preferred Stock, $0.01 par value per share with an aggregate par value of $10,000. The remaining 9,000,000 shares of preferred stock have an aggregate par value of $90,000.
SEVENTH: The manner and basis of converting or exchanging outstanding capital stock of the Merging Corporation into capital stock of the Surviving Corporation shall be as follows:
(a) Every share of the outstanding Series A Common Stock of the Merging Corporation shall be converted into a share of Series A Common Stock of the Surviving Corporation.

 

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(b) Every share of the outstanding Series AA Preferred Stock of the Merging Corporation shall be converted into a share of Series AA Preferred Stock of the Surviving Corporation.
(c) Merging Corporation has no Series B Common Stock or Series A Preferred Stock issued and outstanding.
EIGHTH: The charter of the Surviving Corporation will not be amended as a result of the Merger.
NINTH: Upon effecting the Merger, all property, rights, privileges, franchises, patents, trademarks, licenses, registrations, and other assets of every kind, nature, and description of Merging Corporation shall be transferred to, vested in, and devolved upon Surviving Corporation without further act or deed, and all property, rights, and every other interest of Merging Corporation and Surviving Corporation shall be as effectively the property of the Surviving Corporation as they were of Merging Corporation and Surviving Corporation, respectively. All rights of creditors of Merging Corporation and all liens upon any property of Merging Corporation shall be preserved unimpaired, and all debts, liabilities and duties of Merging Corporation shall attach to Surviving Corporation and may be enforced against Surviving Corporation to the same extent as if such debts, liabilities and duties had been incurred or contracted by Surviving Corporation.
TENTH: The effective time of the merger shall be 11:59 p.m. on August 4, 2010.
[ Signatures appear on the following page .]

 

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IN WITNESS WHEREOF, as of this 4th day of August, 2010, Merging Corporation has caused these articles of merger to be executed and acknowledged in its name and on its behalf by its President and attested to by its Secretary, and Surviving Corporation has caused these articles of merger to be executed and acknowledged in its name and on its behalf by its President and attested to by its Secretary, and the President of Merging Corporation and the President of Surviving Corporation acknowledge that these articles of merger are the act of the party on whose behalf such individual is executing these articles of merger, and the President of Merging Corporation and the President of Surviving Corporation further acknowledge that, as to all matters or facts set forth herein which are required to be verified under oath, such matters and facts are true in all material respects to the best of his knowledge, information and belief, and that this statement is made under the penalties for perjury.
             
WITNESS/ATTEST:   MERGING CORPORATION:
         
 
           
        NetREIT
        a California corporation
 
           
/s/ Kathryn Richman   /s/ Jack K. Heilbron
     
Name:
  Kathryn Richman   Name:   Jack K. Heilbron
Title:
  Secretary   Title:   President and CEO
 
           
WITNESS/ATTEST:   SURVIVING CORPORATION:
         
 
           
        NetREIT , Inc.
        a Maryland corporation
 
           
/s/ Kathryn Richman   /s/ Jack K. Heilbron
     
Name:
  Kathryn Richman   Name:   Jack K. Heilbron
Title:
  Secretary   Title:   President and CEO

 

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