Restrictions on Ownership and Transfer. To facilitate compliance with the ownership limitations applicable to a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), our certificate of incorporation contains restrictions on the ownership and transfer of our capital stock. These ownership and transfer restrictions could delay, defer or prevent a transaction or a change in control that might involve a premium price for our common stock or that our stockholders might otherwise deem to be in their best interests. For us to qualify for taxation as a REIT under the Code, our capital stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year. Also, not more than 50% of the value of the outstanding shares of our capital stock may be owned, directly or indirectly, by five or fewer “individuals” (as defined in the Code to include certain entities such as private foundations) during the last half of a taxable year. To facilitate compliance with these ownership requirements and other requirements for continued qualification as a REIT and to otherwise protect us from the consequences of a concentration of ownership among our stockholders, our certificate of incorporation contains provisions restricting the ownership or transfer of shares of capital stock. The relevant sections of our certificate of incorporation provide that, subject to the exceptions and the constructive ownership rules described below, no person (as defined in our certificate of incorporation) may beneficially or constructively own more than 9.8% in value of the aggregate of outstanding shares of capital stock, including common stock and preferred stock, or more than 9.8% in value or number (whichever is more restrictive) of the outstanding shares of any class or series of capital stock. We refer to these restrictions as the “ownership limits.” The applicable constructive ownership rules under the Code are complex and may cause capital stock owned actually or constructively by an individual or entity to be treated as owned by another individual or entity. As a result, the acquisition of less than 9.8% in value of outstanding capital stock or less than 9.8% in value or number of outstanding shares of any class or series of capital stock (including through the acquisition of an interest in an entity that owns, actually or constructively, any class or series of capital stock) by an individual or entity could nevertheless cause that individual or entity, or another individual or entity, to own, constructively or beneficially, in excess of 9.8% in value of outstanding capital stock or 9.8% in value or number of outstanding shares of any class or series of capital stock. In addition to the ownership limits, our certificate of incorporation prohibits any person from actually or constructively owning shares of capital stock to the extent that such ownership would cause any of our income that would otherwise qualify as “rents from real property” for purposes of Section 856(d) of the Code to fail to qualify as such. Our board of directors has in the past granted ownership limitation waivers and may, in its sole discretion, in the future grant such a waiver to a person exempting them from the ownership limits and certain other REIT limits on ownership and transfer of capital stock described above, and may establish a different limit on ownership for any such person. However, our board of directors may not exempt any person whose ownership of outstanding capital stock in violation of these limits would result in our failing to qualify as a REIT. In order to be considered by our board of directors for an ownership limitation waiver or a different limit on ownership, a person must make such representations and undertakings as are reasonably necessary to ascertain that such person’s beneficial or constructive ownership of capital stock will not now or in the future jeopardize our ability to qualify as a REIT under the Code and must generally agree that any violation or attempted violation of such representations or undertakings (or other action that is contrary to the ownership limits and certain other REIT limits on ownership and transfer of capital stock described above) will result in the shares of capital stock being automatically transferred to a trust as described below. As a condition of its waiver, our board of directors may require an opinion of counsel or Internal Revenue Service ruling satisfactory to our board of directors with respect to our qualification as a REIT and may impose such other conditions as it deems appropriate in connection with the granting of the waiver or a different limit on ownership. In connection with the waiver of the ownership limits or at any other time, our board of directors may from time to time increase the ownership limits for one or more persons and decrease the ownership limits for all other persons; provided that the new ownership limits may not, after giving effect to such increase and under certain assumptions stated in our certificate of incorporation, result in us being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interests are held during the last half of a taxable year). Reduced ownership limits will not apply to any person whose percentage ownership of total shares of capital stock or of the shares of a class or series of capital stock, as applicable, is in excess of such decreased ownership limits until such time as such person’s percentage of total shares of capital stock or of the shares of a class or series of capital stock, as applicable, equals or falls below the decreased ownership limits, but any further acquisition of capital stock in excess of such percentage will be in violation of the ownership limits. Our certificate of incorporation further prohibits: • any person from transferring shares of capital stock if such transfer would result in shares of capital stock being beneficially owned by fewer than 100 persons (determined without reference to any rules of attribution); and • any person from beneficially or constructively owning shares of capital stock if such ownership would result in our failing to qualify as a REIT. The foregoing provisions on transferability and ownership will not apply if our board of directors determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT. Any person who acquires or attempts or intends to acquire beneficial or constructive ownership of shares of capital stock that will or may violate the ownership limits or any of the other foregoing restrictions on transferability and ownership will be required to give notice to us immediately (or, in the case of a proposed or attempted transaction, at least 15 days prior to such transaction) and provide us with such other information as we may request in order to determine the effect, if any, of such transfer on our qualification as a REIT. Pursuant to our certificate of incorporation, if there is any purported transfer of our capital stock or other event or change of circumstances that, if effective or otherwise, would violate any of the restrictions described above, then the number of shares causing the violation (rounded up to the nearest whole share) will be automatically transferred to a trust for the exclusive benefit of a designated charitable beneficiary, except that any transfer that results in the violation of the restriction relating to our capital stock being beneficially owned by fewer than 100 persons will be automatically void and of no force or effect. The automatic transfer will be effective as of the close of business on the business day prior to the date of the purported transfer or other event or change of circumstances that requires the transfer to the trust. We refer below to the person that would have owned the shares if they had not been transferred to the trust as the purported transferee. Any ordinary dividend paid to the purported transferee, prior to our discovery that the shares had been automatically transferred to a trust as described above, must be repaid to a trustee designated in accordance with the certificate of incorporation upon demand. Our certificate of incorporation also provides for adjustments to the entitlement to receive extraordinary dividends and other distributions as between the purported transferee and the trust. If the transfer to the trust as described above is not automatically effective, for any reason, to prevent violation of the applicable restriction contained in our certificate of incorporation, then the transfer of the excess shares will be automatically void and of no force or effect. Shares of our capital stock transferred to the trustee are deemed to be offered for sale to us or our designee at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in such transfer to the trust or, if the purported transferee did not give value for the shares in connection with the event causing the shares to be held in trust (e.g., in the case of a gift, devise or other such transaction), the market price at the time of such event and (ii) the market price on the date we accept, or our designee accepts, such offer. We have the right to accept such offer until the trustee has sold the shares of our capital stock held in the trust pursuant to the clauses described below. Upon a sale to us, the interest of the charitable beneficiary in the shares sold terminates and the trustee must distribute the net proceeds of the sale to the purported transferee, except that the trustee may reduce the amount payable to the purported transferee by the amount of any ordinary dividends that we paid to the purported transferee prior to our discovery that the shares had been transferred to the trust and that is owed by the purported transferee to the trustee as described above. Any net sales proceeds and extraordinary dividends in excess of the amount payable to the purported transferee shall be immediately paid to the charitable beneficiary, and any ordinary dividends held by the trustee with respect to such capital stock will be promptly paid to the charitable beneficiary. After receiving notice that the shares have been transferred to the trust, the trustee must, as soon as reasonably practicable (and, if the shares are listed on a national securities exchange, within 20 days) after receiving notice from us of the transfer of shares to the trust, sell the shares to a person or entity who could own the shares without violating the restrictions described above. Upon such a sale, the trustee must distribute to the purported transferee an amount equal to the lesser of (i) the price paid by the purported transferee for the shares or, if the purported transferee did not give value for the shares in connection with the event causing the shares to be held in trust (e.g., in the case of a gift, devise or other such transaction), the market price of the shares on the day of the event causing the shares to be held in the trust, and (ii) the sales proceeds (net of commissions and other expenses of sale) received by the trustee for the shares. The trustee may reduce the amount payable to the purported transferee by the amount of any ordinary dividends that we paid to the purported transferee before our discovery that the shares had been transferred to the trust and that is owed by the purported transferee to the trustee as described above. Any net sales proceeds in excess of the amount payable to the purported transferee will be immediately paid to the charitable beneficiary, together with any ordinary dividends held by the trustee with respect to such capital stock. In addition, if prior to discovery by us that shares of our capital stock have been transferred to a trust, such shares of capital stock are sold by a purported transferee, then such shares will be deemed to have been sold on behalf of the trust and, to the extent that the purported transferee received an amount for or in respect of such shares that exceeds the amount that such purported transferee was entitled to receive as described above, such excess amount shall be paid to the trustee upon demand. The purported transferee has no rights in the shares held by the trustee. The trustee will be indemnified by us or from the proceeds of sales of capital stock in the trust for its costs and expenses reasonably incurred in connection with conducting its duties and satisfying its obligations under our certificate of incorporation. The trustee will also be entitled to reasonable compensation for services provided as determined by agreement between the trustee and the board of directors, which compensation may be funded by us or the trust. If we pay any such indemnification or compensation, we are entitled on a first priority basis (subject to the trustee’s indemnification and compensation rights) to be reimbursed from the trust. To the extent the trust funds any such indemnification and compensation, the amounts available for payment to a purported transferee (or the charitable beneficiary) would be reduced. The trustee will be designated by us and must be unaffiliated with us and with any purported transferee. Prior to the sale of any shares by the trust, the trustee will receive, in trust for the beneficiary, all distributions paid by us with respect to the shares, and may also exercise all voting rights with respect to the shares. Subject to the DGCL, effective as of the date that the shares have been transferred to the trust, the trustee will have the authority, at the trustee’s sole discretion: • to rescind as void any vote cast by a purported transferee prior to our discovery that the shares have been transferred to the trust; and • to recast the vote in accordance with the desires of the trustee acting for the benefit of the charitable beneficiary of the trust. In addition, if the board of directors determines that a proposed or purported transfer would violate the restrictions on ownership and transfer of our capital stock set forth in our certificate of incorporation, the board of directors may take such action as it deems advisable to refuse to give effect to or to prevent such violation, including but not limited to, causing us to repurchase shares of our capital stock, refusing to give effect to the transfer on our books or instituting proceedings to enjoin the transfer. From time to time, at our request, every person that is an owner of 5% or more (or such lower percentage as required by the Code or the Treasury regulations thereunder) of the outstanding shares of any class or series of our capital stock, must provide us written notice of its name and address, the number of shares of each class and series of our capital stock that the person beneficially owns and a description of the manner in which the shares are held. Each such owner must also provide us with such additional information as we may request in order to determine the effect, if any, of such owner’s beneficial ownership on our qualification as a REIT and to ensure compliance with the ownership limits. In addition, each beneficial owner or constructive owner of our capital stock, and any person (including the stockholder of record) who is holding shares of our capital stock for a beneficial owner or constructive owner will, upon demand, be required to provide us with such information as we may request in good faith in order to determine our qualification as a REIT and to comply with the requirements of any taxing authority or governmental authority or to determine such compliance. Provisions of our certificate of incorporation and bylaws may delay or discourage transactions involving an actual or potential change in control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our common stock. Among other things, our certificate of incorporation and bylaws: • permit our board of directors to issue up to 100,000,000 shares of preferred stock, with any rights, preferences and privil
Appears in 3 contracts
Sources: Equity Distribution Agreement, Equity Distribution Agreement, Equity Distribution Agreement
Restrictions on Ownership and Transfer. To facilitate compliance with the ownership limitations applicable to qualify as a REIT under the Internal Revenue Code of 1986, as amended amended, (the “Code”), our certificate shares of incorporation contains restrictions on the ownership and transfer of our capital stock. These ownership and transfer restrictions could delay, defer or prevent a transaction or a change in control that might involve a premium price for our common stock or that our stockholders might otherwise deem to be in their best interests. For us to qualify for taxation as a REIT under the Code, our capital stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months (other than the first year for which an election to be a REIT has been made) or during a proportionate part of a shorter taxable year. Also, not more than 50% of the value of the outstanding shares of our capital stock may be owned, directly or indirectly, by five or fewer “individuals” individuals (as defined in the Code to include certain entities such as private foundationsentities) during the last half of a taxable yearyear (other than the first year for which an election to be a REIT has been made). To facilitate compliance with these ownership requirements and other requirements for continued qualification We elected to be taxed as a REIT and beginning with our taxable year ended December 31, 2013, in which case, these ownership limits applied to otherwise protect us from the consequences of a concentration of ownership among beginning with our stockholderstaxable year ending December 31, our certificate of incorporation contains provisions restricting 2014. Our charter imposes restrictions on the ownership or and transfer of shares of our capital stock. The relevant sections of our certificate of incorporation charter provide that, subject to the exceptions and the constructive ownership rules described below, no person (as defined in our certificate of incorporation) or entity may own, or be deemed to own, beneficially or constructively own by virtue of the applicable constructive ownership provisions of the Code, more than 9.83.3% in value of the aggregate of the outstanding shares of all classes and series of our capital stock, including common stock and preferred stock, or more than 9.83.3% in value or in number of shares (whichever is more restrictive) of the outstanding shares of any class or series of capital our common stock. We refer to these restrictions this limit as the “ownership limitslimit.” An individual or entity that becomes subject to the ownership limit or any of the other restrictions on ownership and transfer of our capital stock described below is referred to as a “prohibited owner” if, had the violative transfer or other event been effective, the individual or entity would have been a beneficial owner or, if appropriate, a record owner of shares of our capital stock. The applicable constructive ownership rules under the Code are complex and may cause shares of capital stock owned actually or constructively by an individual or entity a group of related individuals and/or entities to be treated as owned constructively by another one individual or entity. As a result, the acquisition of less than 9.83.3% in value of the outstanding shares of all classes and series of our capital stock or less than 9.8% in value or in number of shares (whichever is more restrictive) of the outstanding shares of any class or series of capital our common stock (including through or the acquisition of an interest in an entity that owns, actually or constructively, any class or series shares of our capital stock) stock by an individual or entity could nevertheless entity), could, nevertheless, cause that individual or entity, or another individual or entity, to own, own constructively or beneficially, in excess of 9.8% in value of outstanding capital stock or 9.8% in value or number of outstanding shares of any class or series of capital stock. In addition to the ownership limits, our certificate of incorporation prohibits any person from actually or constructively owning shares of capital stock to the extent that such ownership would cause any of our income that would otherwise qualify as “rents from real property” for purposes of Section 856(d) of the Code to fail to qualify as suchlimit. Our board of directors has in the past granted ownership limitation waivers and may, in its sole discretion, in subject to such conditions as it may determine and the future grant such a waiver to a person exempting them from receipt of certain representations and undertakings, prospectively or retroactively, waive the ownership limits and certain other REIT limits on ownership and transfer of capital stock described above, and may limit or establish a different limit on ownership, or excepted holder limit, for a particular stockholder if the stockholder’s ownership for any such person. However, our board in excess of directors may the ownership limit would not exempt any person whose ownership of outstanding capital stock in violation of these limits would result in our failing to qualify as a REIT. In order to be considered by our board of directors for an ownership limitation waiver or a different limit on ownership, a person must make such representations and undertakings as are reasonably necessary to ascertain that such person’s beneficial or constructive ownership of capital stock will not now or in the future jeopardize our ability to qualify as a REIT under the Code and must generally agree that any violation or attempted violation of such representations or undertakings (or other action that is contrary to the ownership limits and certain other REIT limits on ownership and transfer of capital stock described above) will result in the shares of capital stock being automatically transferred to a trust as described below. As a condition of its waiverwaiver or grant of excepted holder limit, our board of directors may may, but is not required to, require an opinion of counsel or Internal Revenue Service (“IRS”) ruling satisfactory to our board of directors with respect in order to determine or ensure our qualification as a REIT REIT. Our charter contains or our board of directors has created excepted holder limits for ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and may impose such other conditions as it deems appropriate the Gladstone Future Trust, a trust for the benefit of ▇▇. ▇▇▇▇▇▇▇▇▇’▇ adult children. The excepted holder limits, which our charter contains or our board of directors approved, allow ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and Gladstone Future Trust to hold up to 33.3% and 17%, respectively, in connection with the granting value of the waiver aggregate of outstanding shares of our capital stock, or a different limit on ownership33.3% and 17% in value or number of shares, whichever is more restrictive, of our outstanding shares of common stock. In connection with the waiver Additionally, our charter permits certain qualified institutional investors to each hold up to 9.8% by value or number of shares of the aggregate of the outstanding shares of capital stock or up to 9.8% by value or number of shares, whichever is more restrictive, of our outstanding shares of common stock (excluding any outstanding shares of capital or common stock not treated as outstanding for federal income tax purposes). As of March 6, 2020, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ holds approximately 11.8% of the number of shares of capital stock outstanding and Gladstone Future Trust holds approximately 3.1% of the number of shares of capital stock outstanding (which shares will be attributed to ▇▇. ▇▇▇▇▇▇▇▇▇ for purposes of the REIT stock ownership limits or at any other time, our diversification requirements). Our board of directors may from time to time increase the ownership limits for one or more persons and decrease the ownership limits limit for all other persons; provided that the new ownership limits may not, individuals and entities unless after giving effect to such increase increase, five or fewer individuals could beneficially or constructively own in the aggregate, more than 49.9% in value of the shares then outstanding. A reduced ownership limit will not apply to any person or entity whose percentage ownership of our common stock or capital stock of all classes and under series, as applicable, is in excess of such decreased ownership limit until such time as such individual’s or entity’s percentage ownership of our common stock or capital stock of all classes and series, as applicable, equals or falls below the decreased ownership limit, but any further acquisition of shares of our common stock or capital stock of any other class or series, as applicable, in excess of such percentage ownership of our common stock or capital stock of all classes and series will be in violation of the ownership limit. Our charter further prohibits: • any person from beneficially or constructively owning, applying certain assumptions stated attribution rules of the Code, shares of our capital stock that would result in our certificate of incorporation, result in us being “closely held” within the meaning of under Section 856(h) of the Code (without regard to whether the ownership interests are interest is held during the last half of a taxable year). Reduced ) ) or our constructively owning 10% or more of ownership limits will not apply interests in a tenant (other than a taxable REIT subsidiary) of our real property or otherwise cause us to any person whose percentage ownership of total shares of capital stock or of the shares of fail to qualify as a class or series of capital stock, as applicable, is in excess of such decreased ownership limits until such time as such person’s percentage of total shares of capital stock or of the shares of a class or series of capital stock, as applicable, equals or falls below the decreased ownership limits, but any further acquisition of capital stock in excess of such percentage will be in violation of the ownership limits. Our certificate of incorporation further prohibits: REIT; and • any person from transferring shares of our capital stock if such transfer would result in shares of our capital stock being beneficially owned by fewer than 100 persons (determined without reference to any rules of attribution); and • any . Any person from beneficially who acquires or constructively owning attempts or intends to acquire beneficial or constructive ownership of shares of our capital stock if that will or may violate the ownership limit or any of the other foregoing restrictions on ownership and transfer of our capital stock, or who would have owned shares of our capital stock transferred to a trust as described below, must immediately give us written notice of the event or, in the case of an attempted or proposed transaction, must give at least 15 days prior written notice to us and provide us with such ownership would result other information as we may request in order to determine the effect of such transfer on our failing to qualify qualification as a REIT. The foregoing provisions restrictions on transferability ownership and ownership transfer of our capital stock will not apply if our board of directors determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT. Any person who acquires REIT or attempts or intends to acquire beneficial or constructive that compliance with the restrictions and limitations on ownership of shares of capital stock that will or may violate the ownership limits or any of the other foregoing restrictions on transferability and ownership will be required to give notice to us immediately (or, in the case of a proposed or attempted transaction, at least 15 days prior to such transaction) and provide us with such other information as we may request in order to determine the effect, if any, of such transfer on our qualification as a REIT. Pursuant to our certificate of incorporation, if there is any purported transfer of our capital stock or other event or change of circumstances that, if effective or otherwise, would violate as described above is no longer required in order for us to qualify as a REIT. If any of the restrictions described above, then the number transfer of shares causing the violation (rounded up to the nearest whole share) will be automatically transferred to a trust for the exclusive benefit of a designated charitable beneficiary, except that any transfer that results our capital stock would result in the violation shares of the restriction relating to our capital stock being beneficially owned by fewer than 100 persons persons, such transfer will be null and void and the intended transferee will acquire no rights in such shares. In addition, if any purported transfer of shares of our capital stock or any other event would otherwise result in any person violating the ownership limit or an excepted holder limit established by our board of directors or in our being “closely held” under Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) ) or our constructively owning 10% or more of ownership interests in a tenant (other than a taxable REIT subsidiary) of our real property or our failure to qualify as a REIT, then that number of shares (rounded up to the nearest whole share) that would cause us to violate such restrictions will be automatically void transferred to, and held by, a trust for the exclusive benefit of one or more charitable organizations selected by us and the intended transferee will acquire no force or effectrights in such shares. The automatic transfer will be effective as of the close of business on the business day prior to the date of the purported violative transfer or other event or change of circumstances that requires the results in a transfer to the trust. We refer below to the person that would have owned the shares if they had not been transferred to the trust as the purported transferee. Any ordinary dividend or other distribution paid to the purported transfereeprohibited owner, prior to our discovery that the shares had been automatically transferred to a trust as described above, must be repaid to a the trustee designated in accordance with the certificate of incorporation upon demand. Our certificate of incorporation also provides demand for adjustments distribution to the entitlement to receive extraordinary dividends and other distributions as between the purported transferee and beneficiary by the trust. If the transfer to the trust as described above is not automatically effective, for any reason, to prevent violation of the applicable restriction contained in ownership limit or our certificate being “closely held” under Section 856(h) of incorporationthe 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, then our charter provides that the transfer of the excess shares will be automatically void null and of no force or effectvoid. Shares of our capital stock transferred to the trustee are deemed to be offered for sale to us us, or our designee designee, at a price per share equal to the lesser of (i1) the price per share in paid by the transaction that resulted in such transfer to the trust or, if the purported transferee did not give value prohibited owner for the shares in connection with the event causing the shares to be held in trust (e.g.or, in the case of a devise or gift, devise or other such transaction), the market last reported sales price on the principal securities exchange on which our shares are listed at the time of such event devise or gift) and (ii2) the market price on the date we accept, or our designee accepts, such offer. We may reduce the amount payable by the amount of any dividend or other distribution that we have paid to the prohibited owner before we discovered that the shares had been automatically transferred to the trust and that are then owed to the trustee as described above and we may pay the amount of any such reduction to the trustee for the benefit of the charitable beneficiary. We have the right to accept such offer of sale until the trustee has sold the shares of our capital stock held in the trust pursuant to the clauses described as discussed below. Upon a sale to us, the interest of the charitable beneficiary in the shares sold terminates and terminates, the trustee must distribute the net proceeds of the sale to the purported transferee, except that the trustee may reduce the amount payable to the purported transferee by the amount of any ordinary dividends that we paid to the purported transferee prior to our discovery that the shares had been transferred to the trust and that is owed by the purported transferee to the trustee as described above. Any net sales proceeds and extraordinary dividends in excess of the amount payable to the purported transferee shall be immediately paid to the charitable beneficiary, prohibited owner and any ordinary dividends or other distributions held by the trustee with respect to such shares of capital stock will be promptly paid to the charitable beneficiary. After receiving notice that If we do not buy the shares have been transferred to the trustshares, the trustee must, as soon as reasonably practicable (and, if the shares are listed on a national securities exchange, within 20 days) after days of receiving notice from us of the transfer of shares to the trust, sell the shares to a person or entity designated by the trustee who could own the shares without violating the ownership limit or the other restrictions described aboveon ownership and transfer of our capital stock. Upon such a saleAfter the sale of the shares, the interest of the charitable beneficiary in the shares transferred to the trust will terminate and the trustee must distribute to the purported transferee prohibited owner an amount equal to the lesser of (i1) the price paid by the purported transferee prohibited owner for the shares (or, if the purported transferee event which resulted in the transfer to the trust did not give value for the involve a purchase of such shares in connection with the event causing the shares to be held in trust (e.g., in the case of a gift, devise or other such transaction)at market price, the market last reported sales price of on the principal securities exchange on which our shares are listed on the day of the event causing the shares to be held which resulted in the transfer of such shares of capital stock to the trust, ) and (ii2) the sales proceeds (net of commissions and other expenses of sale) received by the trustee trust for the shares. The trustee may reduce the amount payable to the purported transferee prohibited owner by the amount of any ordinary dividends dividend or other distribution that we paid to the purported transferee prohibited owner before our discovery we discovered that the shares had been automatically transferred to the trust and that is are then owed by the purported transferee to the trustee as described above. Any net sales proceeds in excess of the amount payable to the purported transferee prohibited owner will be immediately paid to the charitable beneficiary, together with any ordinary dividends held by the trustee with respect to such capital stockor other distributions thereon. In addition, if if, prior to discovery by us that shares of our capital stock have been transferred to a trust, such shares of capital stock are sold by a purported transfereeprohibited owner, then such shares will be deemed to have been sold on behalf of the trust and, and to the extent that the purported transferee prohibited owner received an amount for or in respect of such shares that exceeds the amount that such purported transferee prohibited owner was entitled to receive as described abovereceive, such excess amount shall will be paid to the trustee upon demand. The purported transferee prohibited owner has no rights in the shares held by the trustee. The trustee will be indemnified by us or from the proceeds of sales of capital stock in the trust for its costs and expenses reasonably incurred in connection with conducting its duties and satisfying its obligations under our certificate of incorporation. The trustee will also be entitled to reasonable compensation for services provided as determined by agreement between the trustee and the board of directors, which compensation may be funded by us or the trust. If we pay any such indemnification or compensation, we are entitled on a first priority basis (subject to the trustee’s indemnification and compensation rights) to be reimbursed from the trust. To the extent the trust funds any such indemnification and compensation, the amounts available for payment to a purported transferee (or the charitable beneficiary) would be reduced. The trustee will be designated by us and must will be unaffiliated with us and with any purported transfereeprohibited owner. Prior to the sale of any shares by the trust, the trustee will receive, in trust for the beneficiarybeneficiary of the trust, all dividends and other distributions paid by us with respect to the shares, shares held in trust and may also exercise all voting rights with respect to the sharesshares held in trust. These rights will be exercised for the exclusive benefit of the beneficiary of the trust. Any dividend or other distribution paid prior to our discovery that shares of capital stock have been transferred to the trust will be paid by the recipient to the trustee upon demand. Subject to the DGCLMGCL, effective as of the date that the shares have been transferred to the trust, the trustee will have the authority, at the trustee’s sole discretion: • to rescind as void any vote cast by a purported transferee prohibited owner prior to our discovery that the shares have been transferred to the trust; and • to recast the vote in accordance with the desires of the trustee acting for the benefit of the charitable beneficiary of the trust. However, if we have already taken irreversible corporate action, then the trustee may not rescind and recast the vote. In addition, if the our board of directors determines in good faith that a proposed transfer or purported transfer other event would violate the restrictions on ownership and transfer of our capital stock set forth in stock, our certificate of incorporation, the board of directors may take such action as it deems advisable to refuse to give effect to or to prevent such violationtransfer, including including, but not limited to, causing us to repurchase redeem the shares of our capital stock, refusing to give effect to the transfer on our books or instituting proceedings to enjoin the transfer. From time to time, at our request, every person that is an Every owner of 5% or more (or such lower percentage as required by the Code or the Treasury regulations promulgated thereunder) of the outstanding shares of any class or series more of our capital stock, within 30 days after the end of each taxable year, must provide give us written notice of its notice, stating the stockholder’s name and address, the number of shares of each class and series of our capital stock that the person stockholder beneficially owns and a description of the manner in which the shares are held. Each such owner must also provide to us with in writing such additional information as we may request in order to determine the effect, if any, of such ownerthe stockholder’s beneficial ownership on our qualification as a REIT and to ensure compliance with the ownership limitslimit. In addition, each beneficial owner or constructive owner of our capital stock, and any person (including the stockholder of record) who is holding shares of our capital stock for a beneficial owner or constructive owner will, upon demand, be required must provide to provide us with in writing such information as we may request in good faith in order to determine our qualification as a REIT and to comply with the requirements of any taxing authority or governmental authority or to determine such compliance. Provisions of our certificate of incorporation These restrictions on ownership and bylaws may delay transfer could delay, defer or discourage transactions involving an actual prevent a transaction or potential a change in control or change in our management, including transactions in which stockholders that might otherwise receive involve a premium price for their shares, the common stock or transactions that our stockholders might otherwise deem to be in their the best interests. Therefore, these provisions could adversely affect interest of the price of our common stock. Among other things, our certificate of incorporation and bylaws: • permit our board of directors to issue up to 100,000,000 shares of preferred stock, with any rights, preferences and privilstockholders.
Appears in 2 contracts
Restrictions on Ownership and Transfer. To facilitate compliance with the ownership limitations applicable to a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), our certificate of incorporation contains restrictions on the ownership and transfer of our capital stock. These ownership and transfer restrictions could delay, defer or prevent a transaction or a change in control that might involve a premium price for our common stock or that our stockholders might otherwise deem to be in their best interests. For us to qualify for taxation as a REIT under the Code, among other things, not more than 50% in value of our outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals (defined in the Code to include certain entities) during the last half of a taxable year, and such capital stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year. Also, not more than 50% of To ensure that we continue to meet the value of the outstanding shares of our capital stock may be owned, directly or indirectly, by five or fewer “individuals” (as defined in the Code to include certain entities such as private foundations) during the last half of a taxable year. To facilitate compliance with these ownership requirements and other requirements for continued qualification as a REIT and to otherwise protect us from the consequences of a concentration of ownership among our stockholdersREIT, our certificate of incorporation contains provisions restricting the ownership or transfer of shares of capital stock. The relevant sections of our certificate of incorporation provide thatcharter, subject to certain exceptions, provides that no holder may own, or be deemed to own by virtue of the exceptions and attribution provisions of the constructive ownership rules described belowCode, no person (as defined in our certificate of incorporation) may beneficially or constructively own more than 9.83.3% in value of the aggregate of our outstanding shares of capital stock, including common stock and preferred stock, or more than 9.8% in value or number (whichever is more restrictive) of the outstanding shares of any class or series of capital stock. We refer to these restrictions as the “Our Board of Directors may waive this ownership limits.” The applicable constructive ownership rules under the Code are complex and may cause capital stock owned actually or constructively by an individual or entity to be treated as owned by another individual or entity. As a result, the acquisition of less than 9.8% in value of outstanding capital stock or less than 9.8% in value or number of outstanding shares of any class or series of capital stock (including through the acquisition of an interest in an entity that owns, actually or constructively, any class or series of capital stock) by an individual or entity could nevertheless cause that individual or entity, or another individual or entity, to own, constructively or beneficially, in excess of 9.8% in value of outstanding capital stock or 9.8% in value or number of outstanding shares of any class or series of capital stock. In addition to the ownership limits, our certificate of incorporation prohibits any person from actually or constructively owning shares of capital stock to the extent that such ownership would cause any of our income that would otherwise qualify as “rents from real property” for purposes of Section 856(d) of the Code to fail to qualify as such. Our board of directors has in the past granted ownership limitation waivers and may, in its sole discretion, in the future grant such a waiver limit with respect to a person exempting them from stockholder if evidence satisfactory to our Board of Directors and our tax counsel is presented that the changes in ownership limits and certain other REIT limits on ownership and transfer of capital stock described above, and may establish a different limit on ownership for any such person. However, our board of directors may not exempt any person whose ownership of outstanding capital stock in violation of these limits would result in our failing to qualify as a REIT. In order to be considered by our board of directors for an ownership limitation waiver or a different limit on ownership, a person must make such representations and undertakings as are reasonably necessary to ascertain that such person’s beneficial or constructive ownership of capital stock will not now then or in the future jeopardize our ability to qualify status as a REIT under the Code and must generally agree that any violation or attempted violation of such representations or undertakings (or other action that is contrary to the ownership limits and certain other REIT limits on ownership and REIT. Any transfer of capital stock described above) will or any security convertible into capital stock that would result in the shares a direct or indirect ownership of capital stock being automatically transferred by a stockholder in excess of the ownership limit or that would result in our failure to a trust as described below. As a condition of its waiver, our board of directors may require an opinion of counsel or Internal Revenue Service ruling satisfactory to our board of directors with respect to our meet the requirements for qualification as a REIT and may impose such other conditions as it deems appropriate REIT, including any transfer that results in connection with the granting of the waiver capital stock being owned by fewer than 100 persons or a different limit on ownership. In connection with the waiver of the ownership limits or at any other time, our board of directors may from time to time increase the ownership limits for one or more persons and decrease the ownership limits for all other persons; provided that the new ownership limits may not, after giving effect to such increase and under certain assumptions stated results in our certificate of incorporation, result in us being “closely held” within the meaning of Section section 856(h) of the Code (without regard Code, will be null and void, and the intended transferee will acquire no rights to whether the ownership interests are held during the last half of a taxable year). Reduced ownership limits will not apply to any person whose percentage ownership of total shares of capital stock or of the shares of a class or series of capital stock, as applicable, is in excess of such decreased ownership limits until such time as such person’s percentage of total shares of capital stock or of the shares of a class or series of capital stock, as applicable, equals or falls below the decreased ownership limits, but any further acquisition of capital stock in excess of such percentage will be in violation of the ownership limits. Our certificate of incorporation further prohibits: • any person from transferring shares of capital stock if such transfer would result in shares of capital stock being beneficially owned by fewer than 100 persons (determined without reference to any rules of attribution); and • any person from beneficially or constructively owning shares of capital stock if such ownership would result in our failing to qualify as a REIT. The foregoing provisions restrictions on transferability and ownership will not apply if our board Board of directors Directors determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT. Any person who acquires Capital stock owned, or attempts deemed to be owned, or intends transferred to acquire beneficial or constructive ownership of shares of capital stock that will or may violate the ownership limits or any a stockholder in excess of the other foregoing restrictions on transferability and 3.3% ownership will be required to give notice to us immediately (or, in the case of a proposed or attempted transaction, at least 15 days prior to such transaction) and provide us with such other information as we may request in order to determine the effect, if any, of such transfer on our qualification as a REIT. Pursuant to our certificate of incorporation, if there is any purported transfer of our capital stock or other event or change of circumstances that, if effective or otherwise, would violate any of the restrictions described above, then the number of shares causing the violation (rounded up to the nearest whole share) limit will be automatically transferred to a charitable trust for the exclusive benefit of a designated charitable beneficiary, except that any transfer that results beneficiary as more fully described in the violation accompanying prospectus under the caption “Description of the restriction relating to our capital stock being beneficially owned by fewer than 100 persons will be automatically void Capital Stock— Restrictions on Ownership and of no force or effectTransfer”. The automatic transfer will be effective as of the close of business on the business day prior to the date of the purported transfer or other event or change of circumstances that requires the transfer to the trust. We refer below to the person that would have owned the shares if they had not been transferred to the trust as the purported transferee. Any ordinary dividend paid to the purported transferee, prior to our discovery that the shares had been automatically transferred to a trust as described above, must be repaid to a trustee designated in accordance with the certificate of incorporation upon demand. Our certificate of incorporation also provides for adjustments to the entitlement to receive extraordinary dividends agent and other distributions as between the purported transferee and the trust. If the transfer to the trust as described above is not automatically effective, for any reason, to prevent violation of the applicable restriction contained in our certificate of incorporation, then the transfer of the excess shares will be automatically void and of no force or effect. Shares of our capital stock transferred to the trustee are deemed to be offered for sale to us or our designee at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in such transfer to the trust or, if the purported transferee did not give value registrar for the shares in connection with the event causing the shares to be held in trust (e.g.Series C Preferred Stock is Computershare, in the case of a gift, devise or other such transaction), the market price at the time of such event and (ii) the market price on the date we accept, or our designee accepts, such offer. We have the right to accept such offer until the trustee has sold the shares of our capital stock held in the trust pursuant to the clauses described below. Upon a sale to us, the interest of the charitable beneficiary in the shares sold terminates and the trustee must distribute the net proceeds of the sale to the purported transferee, except that the trustee may reduce the amount payable to the purported transferee by the amount of any ordinary dividends that we paid to the purported transferee prior to our discovery that the shares had been transferred to the trust and that is owed by the purported transferee to the trustee as described above. Any net sales proceeds and extraordinary dividends in excess of the amount payable to the purported transferee shall be immediately paid to the charitable beneficiary, and any ordinary dividends held by the trustee with respect to such capital stock will be promptly paid to the charitable beneficiary. After receiving notice that the shares have been transferred to the trust, the trustee must, as soon as reasonably practicable (and, if the shares are listed on a national securities exchange, within 20 days) after receiving notice from us of the transfer of shares to the trust, sell the shares to a person or entity who could own the shares without violating the restrictions described above. Upon such a sale, the trustee must distribute to the purported transferee an amount equal to the lesser of (i) the price paid by the purported transferee for the shares or, if the purported transferee did not give value for the shares in connection with the event causing the shares to be held in trust (e.g., in the case of a gift, devise or other such transaction), the market price of the shares on the day of the event causing the shares to be held in the trust, and (ii) the sales proceeds (net of commissions and other expenses of sale) received by the trustee for the shares. The trustee may reduce the amount payable to the purported transferee by the amount of any ordinary dividends that we paid to the purported transferee before our discovery that the shares had been transferred to the trust and that is owed by the purported transferee to the trustee as described above. Any net sales proceeds in excess of the amount payable to the purported transferee will be immediately paid to the charitable beneficiary, together with any ordinary dividends held by the trustee with respect to such capital stock. In addition, if prior to discovery by us that shares of our capital stock have been transferred to a trust, such shares of capital stock are sold by a purported transferee, then such shares will be deemed to have been sold on behalf of the trust and, to the extent that the purported transferee received an amount for or in respect of such shares that exceeds the amount that such purported transferee was entitled to receive as described above, such excess amount shall be paid to the trustee upon demand. The purported transferee has no rights in the shares held by the trustee. The trustee will be indemnified by us or from the proceeds of sales of capital stock in the trust for its costs and expenses reasonably incurred in connection with conducting its duties and satisfying its obligations under our certificate of incorporation. The trustee will also be entitled to reasonable compensation for services provided as determined by agreement between the trustee and the board of directors, which compensation may be funded by us or the trust. If we pay any such indemnification or compensation, we are entitled on a first priority basis (subject to the trustee’s indemnification and compensation rights) to be reimbursed from the trust. To the extent the trust funds any such indemnification and compensation, the amounts available for payment to a purported transferee (or the charitable beneficiary) would be reduced. The trustee will be designated by us and must be unaffiliated with us and with any purported transferee. Prior to the sale of any shares by the trust, the trustee will receive, in trust for the beneficiary, all distributions paid by us with respect to the shares, and may also exercise all voting rights with respect to the shares. Subject to the DGCL, effective as of the date that the shares have been transferred to the trust, the trustee will have the authority, at the trustee’s sole discretion: • to rescind as void any vote cast by a purported transferee prior to our discovery that the shares have been transferred to the trust; and • to recast the vote in accordance with the desires of the trustee acting for the benefit of the charitable beneficiary of the trust. In addition, if the board of directors determines that a proposed or purported transfer would violate the restrictions on ownership and transfer of our capital stock set forth in our certificate of incorporation, the board of directors may take such action as it deems advisable to refuse to give effect to or to prevent such violation, including but not limited to, causing us to repurchase shares of our capital stock, refusing to give effect to the transfer on our books or instituting proceedings to enjoin the transfer. From time to time, at our request, every person that is an owner of 5% or more (or such lower percentage as required by the Code or the Treasury regulations thereunder) of the outstanding shares of any class or series of our capital stock, must provide us written notice of its name and address, the number of shares of each class and series of our capital stock that the person beneficially owns and a description of the manner in which the shares are held. Each such owner must also provide us with such additional information as we may request in order to determine the effect, if any, of such owner’s beneficial ownership on our qualification as a REIT and to ensure compliance with the ownership limits. In addition, each beneficial owner or constructive owner of our capital stock, and any person (including the stockholder of record) who is holding shares of our capital stock for a beneficial owner or constructive owner will, upon demand, be required to provide us with such information as we may request in good faith in order to determine our qualification as a REIT and to comply with the requirements of any taxing authority or governmental authority or to determine such compliance. Provisions of our certificate of incorporation and bylaws may delay or discourage transactions involving an actual or potential change in control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our common stock. Among other things, our certificate of incorporation and bylaws: • permit our board of directors to issue up to 100,000,000 shares of preferred stock, with any rights, preferences and privilInc.
Appears in 1 contract
Sources: Dealer Manager Agreement
Restrictions on Ownership and Transfer. To facilitate compliance with the ownership limitations applicable In order for us to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), our certificate shares of incorporation contains restrictions on the ownership and transfer of our capital stock. These ownership and transfer restrictions could delay, defer or prevent a transaction or a change in control that might involve a premium price for our common stock or that our stockholders might otherwise deem to be in their best interests. For us to qualify for taxation as a REIT under the Code, our capital stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months (other than the first year for which an election to be a REIT has been made) or during a proportionate part of a shorter taxable year. AlsoIn addition, not no more than 50% of the value of the outstanding shares of our capital stock may be owned, directly or indirectly, by five or fewer “individuals” individuals (as defined in the Code to include certain entities such as private foundationsentities) during the last half of any taxable year (other than the first year for which an election to be a taxable yearREIT has been made). To facilitate compliance with these qualify as a REIT, we must satisfy other requirements as well. See “U.S. Federal Income Tax Considerations—Requirements for Qualification—General.” Our charter contains restrictions on the ownership requirements and transfer of our shares of common stock and other requirements for continued qualification as a REIT and to otherwise protect us from the consequences of a concentration of ownership among our stockholders, our certificate of incorporation contains provisions restricting the ownership or transfer of outstanding shares of capital stock. The relevant sections of our certificate charter provide that no person or entity may own, or be deemed to own, by virtue of incorporation provide that, subject to the exceptions and the applicable constructive ownership rules described below, no person (as defined in our certificate of incorporation) may beneficially or constructively own more than 9.8% in value provisions of the aggregate of outstanding shares of capital stockCode, including common stock and preferred stock, or more than 9.8% in value or number (of shares, whichever is more restrictive) , of the outstanding shares of any class our common stock (the common stock ownership limit), or 9.8% in value or number of shares, whichever is more restrictive, of the outstanding shares of all classes and series of our capital stockstock (the aggregate stock ownership limit). We refer to these restrictions the common stock ownership limit and the aggregate stock ownership limit collectively as the “ownership limits.” A person or entity that, but for operation of the ownership limits or another restriction on ownership and transfer of our stock as described below, would beneficially own or be deemed to beneficially own, by virtue of the applicable constructive ownership provisions of the Code, shares of our stock and/or, if appropriate in the context, a person or entity that would have been the record owner of such shares of our stock is referred to as a “prohibited owner.” The applicable constructive ownership rules under the Code are complex and may cause capital shares of stock owned actually or constructively by an individual or entity a group of related individuals and/or entities to be treated as owned constructively by another one individual or entity. As a result, the acquisition of less than 9.8% in value or number of shares, whichever is more restrictive, of the outstanding capital shares of our common stock or less than 9.8% in value or number of shares, whichever is more restrictive, of the outstanding shares of any class all classes or series of capital our stock (including through or the acquisition of an interest in an entity that owns, actually or constructively, any class or series shares of capital our stock) by an individual or entity could nevertheless entity, could, nevertheless, cause that individual or entity, or another individual or entity, to own, own shares constructively or beneficially, in excess of 9.8% in value of outstanding capital stock or 9.8% in value or number of outstanding shares of any class or series of capital stock. In addition to the ownership limits, our certificate of incorporation prohibits any person from actually or constructively owning shares of capital stock to the extent that such ownership would cause any of our income that would otherwise qualify as “rents from real property” for purposes of Section 856(d) of the Code to fail to qualify as such. Our board of directors has in the past granted ownership limitation waivers and may, in its sole discretionand absolute discretion and subject to the receipt of such certain representations, in covenants and undertakings deemed reasonably necessary by the future grant such a waiver to board, prospectively or retroactively, exempt a person exempting them from the ownership limits and certain other REIT limits on ownership and transfer of capital stock described above, and may establish a different an excepted holder limit on ownership for any such person. However, our board of directors may not exempt any person whose ownership of our outstanding capital stock in violation of these limits would result in our failing to qualify as a REIT. In order to be considered by our board of directors for an ownership limitation waiver or a different limit on ownership, a person must make such representations and undertakings as are reasonably necessary to ascertain that such person’s beneficial or constructive ownership of capital stock will not now or in the future jeopardize our ability to qualify as a REIT under the Code and must generally agree that any violation or attempted violation of such representations or undertakings (or other action that is contrary to the ownership limits and certain other REIT limits on ownership and transfer of capital stock described above) will result in the shares of capital stock being automatically transferred to a trust as described below. As a condition of its waiver, our board of directors may require an opinion of counsel or Internal Revenue Service ruling satisfactory to our board of directors with respect to our qualification as a REIT and may impose such other conditions as it deems appropriate in connection with the granting of the waiver or a different limit on ownership. In connection with the waiver of the ownership limits or at any other time, our board of directors may from time to time increase the ownership limits for one or more persons and decrease the ownership limits for all other persons; provided that the new ownership limits may not, after giving effect to such increase and under certain assumptions stated in our certificate of incorporation, result in us being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interests are interest is held during the last half of a taxable year)) or otherwise would result in our failing to qualify as a REIT. In order to be considered by the board of directors for exemption, a person also must provide our board of directors with information and undertakings requested by our board of directors that such person does not own, actually or constructively, an interest in one of our tenants (or a tenant of any entity which we own or control) that would cause us to own beneficially or constructively more than a 9.9% interest in the tenant unless the amount of income derived by us from such tenant would not adversely affect our ability to qualify as a REIT. The person seeking an exemption must provide representations and undertakings to the satisfaction of our board of directors that it will not violate these restrictions. The person also must agree that any violation or attempted violation of these restrictions will result in the automatic transfer to a trust of the shares of stock causing the violation. As a condition of its waiver, our board of directors may require an opinion of counsel or the IRS ruling satisfactory to our board of directors with respect to our qualification as a REIT. In connection with the waiver of the ownership limits, creating an excepted holder limit or at any other time, our board of directors may, in its sole and absolute discretion, from time to time increase or decrease the ownership limits subject to the restrictions in the paragraph above; provided, however, that the ownership limits may not be decreased or increased if, after giving effect to such decrease or increase, five or fewer persons could own or beneficially own in the aggregate, more than 49.9% in value of our shares then outstanding. Prior to the modification of the ownership limits, our board of directors may require such opinions of counsel, affidavits, undertakings or agreements as it may deem necessary or advisable in order to determine or ensure our qualification as a REIT. Reduced ownership limits will not apply to any person or entity whose percentage ownership of total in our shares of capital common stock or stock of the shares of a class or series of capital stockall classes and series, as applicable, is in excess of such decreased ownership limits until such time as such person’s or entity’s percentage ownership of total shares of capital our common stock or stock of the shares of a class or series of capital stockall classes and series, as applicable, equals or falls below the decreased ownership limits, but any further acquisition of capital shares of our common stock or stock of all classes and series, as applicable, in excess of such percentage ownership of our shares of common stock or total shares of stock will be in violation of the ownership limits. Our certificate of incorporation charter further prohibits: • any person from transferring beneficially or constructively owning (taking into account applicable attribution rules under the Code) shares of capital our stock that would result in our being “closely held” under Section 856(h) of the Code or otherwise cause us to fail to qualify as a REIT (including, without limitation, any person beneficially or constructively owning shares of our stock that would result in us owning (directly or indirectly) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by us from such tenant would cause us to fail to satisfy any of the gross income requirements of Section 856(c) of the Code); and • any person from transferring our shares of stock if such transfer would result in our shares of capital stock being beneficially owned by fewer than 100 persons (determined determined, as a general matter, without reference to any rules of attributionattribution rules); and • any person from beneficially or constructively owning shares of capital stock if such ownership would result in our failing to qualify as a REIT. The foregoing provisions on transferability and ownership will not apply if our board of directors determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT. Any person who acquires or attempts or intends to acquire beneficial or constructive ownership of shares of capital our stock that will or may violate the ownership limits or any of the other foregoing restrictions on transferability ownership and ownership transfer will be required to give written notice immediately to us immediately (or, in the case of a proposed or attempted transactionacquisition, at least 15 days prior written notice to such transactionus) and provide us with such other information as we may request in order to determine the effect, if any, effect of such transfer on our qualification as a REIT. Pursuant to If any transfer of shares of our certificate stock would result in shares of incorporationour stock being beneficially owned by fewer than 100 persons, such transfer will be null and void and the intended transferee will acquire no rights in such shares. In addition, if there is any purported transfer of shares of our capital stock or any other event would otherwise result in any person violating the ownership limits or change such other limit established by our board of circumstances that, if effective directors or otherwise, would violate any in our being “closely held” under Section 856(h) of the restrictions described aboveCode or otherwise failing to qualify as a REIT, then the generally that number of shares causing the violation (rounded up to the nearest whole share) that would cause us to violate such restrictions will be automatically transferred to to, and held by, a trust for the exclusive benefit of a designated one or more charitable beneficiary, except that any transfer that results organizations selected by us and the intended transferee will acquire no rights in the violation of the restriction relating to our capital stock being beneficially owned by fewer than 100 persons will be automatically void and of no force or effectsuch shares. The automatic transfer will be effective as of the close of business on the business day prior to the date of the purported violative transfer or other event or change of circumstances that requires the results in a transfer to the trust. We refer below to the person that would have owned the shares if they had not been transferred to the trust as the purported transferee. Any ordinary dividend or other distribution paid to the purported transfereeprohibited owner, prior to our discovery that the shares had been automatically transferred to a trust as described above, must be repaid to a the trustee designated in accordance with upon demand for the certificate benefit of incorporation upon demand. Our certificate the charitable beneficiary of incorporation also provides for adjustments to the entitlement to receive extraordinary dividends and other distributions as between the purported transferee and the trust. If the transfer to the trust as described above is not automatically effective, for any reason, to prevent violation of the applicable restriction contained in ownership limits, or our certificate being “closely held” under Section 856(h) of incorporationthe Code or otherwise failing to qualify as a REIT or the ownership and transfer restrictions described above, then our charter provides that the transfer of the excess shares will be automatically void null and of no force or effectvoid. Shares of our capital stock transferred to the trustee are deemed to be offered for sale to us us, or our designee designee, at a price per share equal to the lesser of (i) the price per share in paid by the transaction that resulted in such transfer to the trust or, if the purported transferee did not give value prohibited owner for the shares in connection with the event causing the shares to be held in trust (e.g.or, in the case event of a gift, devise or other such transaction), the market last reported sales price reported on NASDAQ (or other applicable exchange) at the time of the gift, devise or other such event transaction) and (ii) the market price on the date we acceptwe, or our designee acceptsdesignee, accepts such offer. We have the right to accept such offer until the trustee has sold the shares of our capital stock held in the trust pursuant to the clauses described discussed below. Upon a sale to us, the interest of the charitable beneficiary in the shares sold terminates and terminates, the trustee must distribute the net proceeds of the sale to the purported transfereeprohibited owner, except that but the trustee may reduce the amount payable to the purported transferee prohibited owner by the amount of any ordinary dividends that we and other distributions which have been paid to the purported transferee prior to our discovery that the shares had been transferred to the trust prohibited owner and that is are owed by the purported transferee prohibited owner to the trustee as described abovetrustee. Any net sales proceeds and extraordinary dividends in excess of To the extent the prohibited owner would receive an amount for such shares that exceeds the amount payable that such prohibited owner would have been entitled to receive had the purported transferee trustee sold the shares held in the trust to a third party, such excess shall be immediately paid to the charitable beneficiary, and any ordinary dividends held retained by the trustee with respect to such capital stock will be promptly paid to for the benefit of the charitable beneficiary. After receiving notice that If we do not buy the shares have been transferred to the trustshares, the trustee must, as soon as reasonably practicable (and, if the shares are listed on a national securities exchange, within 20 days) after days of receiving notice from us of the transfer of shares to the trust, use best efforts to sell the shares to a person or entity designated by the trustee who could own the shares without violating the restrictions described aboveownership limitations set forth in the charter. Upon such a sale, the trustee must distribute to the purported transferee prohibited owner an amount equal to the lesser of (i) the price paid by the purported transferee prohibited owner for the shares (or, if the purported transferee did not give value for the shares in connection with the event causing the shares to be held in trust (e.g., in the case event of a gift, devise or other such transaction), the market last reported sales price of the shares reported on NASDAQ (or other applicable exchange) on the day of the event causing the shares to be held which resulted in the transfer of such shares of stock to the trust, ) and (ii) the sales proceeds (net of commissions and other expenses of sale) received by the trustee for the shares. The trustee may will reduce the amount payable to the purported transferee prohibited owner by the amount of any ordinary dividends that we and other distributions which have been paid to the purported transferee before our discovery that the shares had been transferred to the trust prohibited owner and that is are owed by the purported transferee prohibited owner to the trustee as described abovetrustee. Any net sales proceeds in excess of the amount payable to the purported transferee prohibited owner will be immediately paid to the beneficiary of the trust and any dividend or other distribution paid to trustee shall be held in trust for the charitable beneficiary, together with any ordinary dividends held by the trustee with respect to such capital stock. In addition, if if, prior to discovery by us that shares of our capital stock have been transferred to a trust, such shares of capital stock are sold by a purported transfereeprohibited owner, then such shares will be deemed to have been sold on behalf of the trust and, and to the extent that the purported transferee prohibited owner received an amount for or in respect of such shares that exceeds the amount that such purported transferee prohibited owner was entitled to receive as described abovereceive, such excess amount shall will be paid to the trustee upon demand. The purported transferee prohibited owner has no rights in the shares held by the trustee. The trustee will be indemnified by us or from the proceeds of sales of capital stock in the trust for its costs and expenses reasonably incurred in connection with conducting its duties and satisfying its obligations under our certificate of incorporation. The trustee will also be entitled to reasonable compensation for services provided as determined by agreement between the trustee and the board of directors, which compensation may be funded by us or the trust. If we pay any such indemnification or compensation, we are entitled on a first priority basis (subject to the trustee’s indemnification and compensation rights) to be reimbursed from the trust. To the extent the trust funds any such indemnification and compensation, the amounts available for payment to a purported transferee (or the charitable beneficiary) would be reduced. The trustee will be designated by us and must will be unaffiliated with us and with any purported transfereeprohibited owner. Prior to the sale of any shares by the trust, the trustee will receive, in trust for the beneficiarybeneficiary of the trust, all dividends and other distributions paid by us with respect to the shares, shares held in trust and may also exercise all voting rights with respect to the sharesshares held in trust. These rights will be exercised for the exclusive benefit of the beneficiary of the trust. Any dividend or other distribution paid prior to our discovery that shares of stock have been transferred to the trust will be paid by the recipient to the trustee upon demand. Any dividend or other distribution authorized but unpaid will be paid when due to the trustee. Subject to the DGCLMaryland law, effective as of the date that the shares have been transferred to the trust, the trustee will have the authority, at the trustee’s sole discretion: • to rescind as void any vote cast by a purported transferee prohibited owner prior to our discovery that the shares have been transferred to the trust; and • to recast the vote in accordance with the desires of the trustee acting for the benefit of the charitable beneficiary of the trust. However, if we have already taken irreversible corporate action, then the trustee may not rescind and recast the vote. In addition, if the our board of directors determines determine that a proposed or purported transfer would violate the restrictions on ownership and transfer of our capital shares of stock set forth in our certificate of incorporationcharter, the our board of directors may will take such action as it deems or they deem advisable to refuse to give effect to or to prevent such violationtransfer, including including, but not limited to, causing us to repurchase redeem the shares of our capital stock, refusing to give effect to the transfer on our books or instituting proceedings to enjoin the transfer. From time to time, at our request, every person that is an Every owner of 5% or more (or such lower percentage as required by the Code or the Treasury regulations promulgated thereunder) of the outstanding shares of any class or series of our capital stock, must provide within 30 days after the end of each taxable year, is required to give us written notice of its notice, stating the stockholder’s name and address, the number of shares of each class and series of our capital stock that the person stockholder beneficially or constructively owns and a description of the manner in which the shares are held. Each such owner must also provide us with such additional information as we may request in order to determine the effect, if any, effect of such ownerthe stockholder’s beneficial or constructive ownership on our qualification as a REIT and to ensure compliance with the ownership limits. In addition, each beneficial owner or constructive owner of our capital stock, and any person (including the stockholder of record) who is holding shares of our capital stock for a beneficial owner or constructive owner will, upon demand, be required to must provide us with such information as we may request in good faith in order to determine our qualification as a REIT and to comply with the requirements of any taxing authority or governmental authority or to determine such compliance. Provisions Any certificates, or written statements of information delivered in lieu of certificates, representing shares of our certificate of incorporation stock will bear a legend referring to the restrictions described above. These restrictions on ownership and bylaws may delay or discourage transactions involving an actual or potential change in control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our common stock. Among other things, our certificate of incorporation and bylaws: • permit transfer will not apply if our board of directors determines that it is no longer in our best interests to issue up to 100,000,000 shares qualify as a REIT or that compliance with such provisions is no longer required for REIT qualification. These ownership limits could delay, defer or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise be in the best interest of preferred stock, with any rights, preferences and privilour stockholders.
Appears in 1 contract
Restrictions on Ownership and Transfer. To facilitate compliance with the ownership limitations applicable In order for us to qualify as a REIT under the Internal Revenue Code of 1986, as amended (or the “Internal Revenue Code”), our certificate of incorporation contains restrictions on the ownership and transfer ) shares of our capital stock. These ownership and transfer restrictions could delay, defer or prevent a transaction or a change in control that might involve a premium price for our common stock or that our stockholders might otherwise deem to be in their best interests. For us to qualify for taxation as a REIT under the Code, our capital stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months (other than the first year for which we made an election to be taxed as a REIT) or during a proportionate part of a shorter taxable year. Also, not more than 50% of the value of the outstanding shares of our capital stock may be owned, directly or indirectly, by five or fewer “individuals” individuals (as defined in the Internal Revenue Code to include certain entities such as private foundationsentities) during the last half of a taxable yearyear (other than the first year for which we make an election to be taxed as a REIT). To facilitate compliance assist us in complying with these ownership requirements and other requirements for continued qualification as a REIT and to otherwise protect us from such limitations on the consequences of a concentration of ownership ownership, among our stockholdersother purposes, our certificate of incorporation contains provisions restricting the ownership or transfer of shares of capital stock. The relevant sections of our certificate of incorporation provide charter provides that, subject to the exceptions and the constructive ownership rules described below, no person (as defined in our certificate of incorporation) or entity may beneficially own, or constructively own more than 9.8% in value be deemed to own, by virtue of the aggregate applicable constructive ownership provisions of outstanding shares of capital stockthe Internal Revenue Code, including common stock and preferred stock, or more than 9.8% in value or number (in number, whichever is more restrictive) , of the outstanding shares of any class our common stock (or the common share ownership limit), or 9.8% in value or in number, whichever is more restrictive, of the outstanding shares of all classes and series of our capital stockstock (or the aggregate share ownership limit). We refer to these restrictions the common share ownership limit and the aggregate share ownership limit collectively as the “ownership limitslimit.” A person or entity that becomes subject to the ownership limit by virtue of a violative transfer that results in a transfer to a trust, as described below, is referred to as a “purported transferee” if, had the violative transfer been effective, the person or entity would have been a record owner and beneficial owner or solely a beneficial owner of shares of our stock. The applicable constructive ownership rules under the Internal Revenue Code are complex and may cause capital shares of stock owned actually or constructively by an individual or entity a group of related individuals and/or entities to be treated as owned constructively by another one individual or entity. As a result, the acquisition of less than 9.8% in value or in number, whichever is more restrictive, of the outstanding capital stock shares of our common stock, or less than 9.8% in value or number in number, whichever is more restrictive, of the outstanding shares of any class or all classes and series of our capital stock (including through or the acquisition of an interest in an entity that owns, actually or constructively, any class or series shares of capital stock) our stock by an individual or entity could nevertheless entity), could, nevertheless, cause that individual or entity, or another individual or entity, to own, own constructively or beneficially, in excess of 9.8% in value of outstanding capital stock or 9.8% in value or number of outstanding shares of any class or series of capital stock. In addition to the ownership limits, our certificate of incorporation prohibits any person from actually or constructively owning shares of capital stock to the extent that such ownership would cause any of our income that would otherwise qualify as “rents from real property” for purposes of Section 856(d) of the Code to fail to qualify as suchlimit. Our board of directors has in the past granted ownership limitation waivers and Board may, in its sole discretion, in subject to such conditions as it may determine and the future grant such a waiver to a person exempting them from receipt of certain representations and undertakings, prospectively or retroactively, waive the ownership limits and certain other REIT limits on ownership and transfer of capital stock described above, and may limit or establish a different limit on ownership for any such person. However, our board of directors may not exempt any person whose ownership of outstanding capital stock in violation of these limits would result in our failing to qualify as a REIT. In order to be considered by our board of directors for an ownership limitation waiver or a different limit on ownership, or excepted holder limit, for a person must make such representations and undertakings as are reasonably necessary to ascertain that such personparticular stockholder if the stockholder’s beneficial or constructive ownership of capital stock will not now or in the future jeopardize our ability to qualify as a REIT under the Code and must generally agree that any violation or attempted violation of such representations or undertakings (or other action that is contrary to the ownership limits and certain other REIT limits on ownership and transfer of capital stock described above) will result in the shares of capital stock being automatically transferred to a trust as described below. As a condition of its waiver, our board of directors may require an opinion of counsel or Internal Revenue Service ruling satisfactory to our board of directors with respect to our qualification as a REIT and may impose such other conditions as it deems appropriate in connection with the granting of the waiver or a different limit on ownership. In connection with the waiver excess of the ownership limits or at any other time, our board of directors may from time to time increase the ownership limits for one or more persons and decrease the ownership limits for all other persons; provided that the new ownership limits may not, after giving effect to such increase and under certain assumptions stated limit would not result in our certificate of incorporation, result in us Company being “closely held” within the meaning of Section 856(h) of the Internal Revenue Code (without regard to whether the ownership interests are interest is held during the last half of a taxable year)) or otherwise would result in us failing to qualify as a REIT. Reduced As a condition of its waiver, our Board may, but is not required to, require an opinion of counsel or the Internal Revenue Service (or IRS) ruling satisfactory to the Board with respect to its qualification as a REIT. In connection with granting a waiver of the ownership limits limit or creating an excepted holder limit or at any other time, our Board may from time to time increase the ownership limit for one or more persons or entities and decrease the ownership limit for all other persons and entities unless, after giving effect to such increase, five or fewer individuals could beneficially own in the aggregate, more than 49.9% in value of the shares then outstanding or our Company would be “closely held” within the meaning of Section 856(h) of the Internal Revenue Code (without regard to whether the ownership interest is held during the last half of a taxable year) or we would otherwise fail to qualify as a REIT. A reduced ownership limit will not apply to any person or entity whose percentage ownership of total shares of capital our common stock or stock of the shares of a class or series of capital stockall classes and series, as applicable, is in excess of such decreased ownership limits limit until such time as such person’s or entity’s percentage ownership of total shares of capital our common stock or stock of the shares of a class or series of capital stockall classes and series, as applicable, equals or falls below the decreased ownership limitslimit, but any further acquisition of capital shares of our common stock or stock of any other class or series, as applicable, in excess of such percentage ownership of our common stock or stock of all classes and series will be in violation of the ownership limitslimit. Our certificate of incorporation charter further prohibits: • any person from beneficially or constructively owning, applying certain attribution rules of the Internal Revenue Code, shares of our stock that would result in our Company being “closely held” under Section 856(h) of the Internal Revenue Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise cause our Company to fail to qualify as a REIT; and • any person from transferring shares of capital our stock if such transfer would result in shares of capital our stock being beneficially owned by fewer than 100 persons (determined without reference to any rules of attribution); and • any . Any person from beneficially who acquires or constructively owning attempts or intends to acquire beneficial or constructive ownership of shares of capital our stock if that will or may violate the ownership limit or any of the foregoing restrictions relating to transferability and ownership must immediately give written notice to our Company or, in the case of a proposed or attempted transaction, give at least 15 days’ prior written notice and provide our Company with such ownership would result other information as our Company may request in order to determine the effect of such transfer on our failing to qualify qualification as a REIT. The foregoing provisions on transferability and ownership will not apply if our board of directors Board determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT. Any person who acquires or attempts or intends to acquire beneficial or constructive ownership If any transfer of shares of capital our stock that will or may violate the ownership limits or any would result in shares of the other foregoing restrictions on transferability and ownership our stock being beneficially owned by fewer than 100 persons, such transfer will be required to give notice to us immediately (or, null and void and the intended transferee will acquire no rights in the case of a proposed or attempted transaction, at least 15 days prior to such transaction) and provide us with such other information as we may request in order to determine the effectshares. In addition, if any, of such transfer on our qualification as a REIT. Pursuant to our certificate of incorporation, if there is any purported transfer of shares of our capital stock or any other event would otherwise result in any person violating the ownership limit or change of circumstances that, if effective an excepted holder limit established by our Board or otherwise, would violate any in our Company being “closely held” under Section 856(h) of the restrictions described aboveInternal Revenue Code or otherwise failing to qualify as a REIT, then the that number of shares causing the violation (rounded up to the nearest whole share) that would cause our Company to violate such restrictions will be automatically transferred to to, and held by, a trust for the exclusive benefit of a designated one or more charitable beneficiary, except that any transfer that results organizations selected by our Company and the intended transferee will acquire no rights in the violation of the restriction relating to our capital stock being beneficially owned by fewer than 100 persons will be automatically void and of no force or effectsuch shares. The automatic transfer will be effective as of the close of business on the business day prior to the date of the purported violative transfer or other event or change of circumstances that requires the results in a transfer to the trust. We refer below to the person that would have owned the shares if they had not been transferred to the trust as the purported transferee. Any ordinary dividend or other distribution paid to the purported transferee, prior to our discovery that the shares had been automatically transferred to a trust as described above, must be repaid to a the trustee designated in accordance with the certificate of incorporation upon demand. Our certificate of incorporation also provides demand for adjustments distribution to the entitlement to receive extraordinary dividends and other distributions as between the purported transferee and beneficiary by the trust. If the transfer to the trust as described above is not automatically effective, for any reason, to prevent violation of the applicable restriction contained in ownership limit or excepted holder limit or our certificate Company being “closely held” under Section 856(h) of incorporationthe Internal Revenue Code or otherwise failing to qualify as a REIT, then our charter provides that the transfer of the excess shares will be automatically null and void and of the purported transferee will acquire no force or effectrights in such shares. Shares of our capital stock transferred to the trustee of the charitable trust are deemed to be offered for sale to us us, or our designee designee, at a price per share equal to the lesser of (i1) the price per share paid by the purported transferee for the shares (or, in the transaction that resulted case of a devise or gift, the market price at the time of such devise or gift) and (2) the market price on the date we, or our designee, accepts such offer. We may reduce the amount payable to the purported transferee by the amount of dividends and other distributions which have been paid to the purported transferee and are owed by the purported transferee to the trustee. We have the right to accept such offer until the trustee of the charitable trust has sold the shares of our stock held in the trust pursuant to the clauses discussed below. Upon a sale to us, the interest of the charitable beneficiary in the shares sold terminates, the trustee of the charitable trust must distribute the net proceeds of the sale to the purported transferee and any dividends or other distributions held by the trustee with respect to such shares of stock will be paid to the charitable beneficiary. If we do not buy the shares, the trustee must, within 20 days of receiving notice from us of the transfer of shares to the trust, sell the shares to a person or entity designated by the trustee who could own the shares without violating the ownership limit or the other restrictions relating to the ownership and transfer of our stock. After the sale of the shares, the interest of the charitable beneficiary in the shares transferred to the trust will terminate and the trustee must distribute to the purported transferee an amount equal to the lesser of (1) the price paid by the purported transferee for the shares (or, if the purported transferee did not give value for the shares in connection with the event causing the shares to be held in trust (e.g., in the case of a gift, devise or other such transaction), the market price at the time of such event and (ii) the market price on the date we accept, or our designee accepts, such offer. We have the right to accept such offer until the trustee has sold the shares of our capital stock held in the trust pursuant to the clauses described below. Upon a sale to us, the interest of the charitable beneficiary in the shares sold terminates and the trustee must distribute the net proceeds of the sale to the purported transferee, except that the trustee may reduce the amount payable to the purported transferee by the amount of any ordinary dividends that we paid to the purported transferee prior to our discovery that the shares had been transferred to the trust and that is owed by the purported transferee to the trustee as described above. Any net sales proceeds and extraordinary dividends in excess of the amount payable to the purported transferee shall be immediately paid to the charitable beneficiary, and any ordinary dividends held by the trustee with respect to such capital stock will be promptly paid to the charitable beneficiary. After receiving notice that the shares have been transferred to the trust, the trustee must, as soon as reasonably practicable (and, if the shares are listed on a national securities exchange, within 20 days) after receiving notice from us of the transfer of shares to the trust, sell the shares to a person or entity who could own the shares without violating the restrictions described above. Upon such a sale, the trustee must distribute to the purported transferee an amount equal to the lesser of (i) the price paid by the purported transferee for the shares or, if the purported transferee did not give value for the shares in connection with the event causing the shares to be held in 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 which resulted in the transfer of such shares of stock to the trust, ) and (ii2) the sales proceeds (net of commissions and other expenses of sale) received by the trustee trust for the shares. The trustee may reduce the amount payable to the purported transferee by the amount of any ordinary dividends that we paid to the purported transferee before our discovery that the shares had been transferred to the trust and that is owed by the purported transferee to the trustee as described above. Any net sales proceeds in excess of the amount payable to the purported transferee will be immediately paid to the charitable beneficiarybeneficiary of the trust, together with any ordinary dividends held by the trustee with respect to such capital stockor other distributions thereon. In addition, if if, prior to discovery by us our Company that shares of our capital stock have been transferred to a trust, such shares of capital stock are sold by a purported transferee, then such shares will be deemed to have been sold on behalf of the trust and, and to the extent that the purported transferee received an amount for or in respect of such shares that exceeds the amount that such purported transferee was entitled to receive as described abovereceive, such excess amount shall will be paid to the trustee upon demand. The purported transferee has no rights in the shares held by the trustee. The trustee will be indemnified by us or from the proceeds of sales of capital stock in the trust for its costs and expenses reasonably incurred in connection with conducting its duties and satisfying its obligations under our certificate of incorporation. The trustee will also be entitled to reasonable compensation for services provided as determined by agreement between the trustee and the board of directors, which compensation may be funded by us or the trust. If we pay any such indemnification or compensation, we are entitled on a first priority basis (subject to the trustee’s indemnification and compensation rights) to be reimbursed from the trust. To the extent the trust funds any such indemnification and compensation, the amounts available for payment to a purported transferee (or the charitable beneficiary) would be reduced. The trustee trust will be designated by us our Company and must will be unaffiliated with us our Company and with any purported transferee. Prior to the sale of any shares by the trust, the trustee will receive, in trust for the beneficiarybeneficiary of the trust, all dividends and other distributions paid by us our Company with respect to the shares, shares held in trust and may also exercise all voting rights with respect to the sharesshares held in trust. These rights will be exercised for the exclusive benefit of the beneficiary of the trust. Any dividend or other distribution paid prior to our discovery that shares of stock have been transferred to the trust will be paid by the recipient to the trustee upon demand. Any dividend or other distribution authorized but unpaid will be paid when due to the trustee. Subject to the DGCLMaryland law, effective as of the date that the shares have been transferred to the trust, the trustee will have the authority, at the trustee’s sole discretion: • to rescind as void any vote cast by a purported transferee prior to our discovery that the shares have been transferred to the trust; and • to recast the vote in accordance with the desires of the trustee acting for the benefit of the charitable beneficiary of the trust. However, if our Company has already taken irreversible corporate action, then the trustee may not rescind and recast the vote. In addition, if the board of directors our Board determines in good faith that a proposed transfer or purported transfer other event has taken place that would violate the restrictions on relating to the ownership and transfer of our capital stock set forth or that a person intends or has attempted to acquire beneficial or constructive ownership of stock in violation of such restrictions (whether or not such violation is intended), our certificate of incorporation, the board of directors may Board will take such action as it deems advisable to refuse to give effect to or to prevent such violationtransfer, including but not limited to, causing us our Company to repurchase redeem the shares of our capital stock, refusing to give effect to the transfer on our its books or instituting proceedings to enjoin the transfer. From time to time, at our request, every person that is an Every owner of 5% or more (or such lower percentage as required by the Internal Revenue Code or the Treasury regulations promulgated thereunder) of the outstanding shares of any class or series of our capital stock, within 30 days after the end of each taxable year, must provide us give our Company written notice of its notice, stating the stockholder’s name and address, the number of shares of each class and series of our capital stock that the person stockholder beneficially owns and a description of the manner in which the shares are held. Each such owner must also provide us our Company with such additional information as we our Company may request in order to determine the effect, if any, of such ownerthe stockholder’s beneficial ownership on our qualification as a REIT and to ensure compliance with the ownership limitslimit. In addition, each beneficial owner or constructive owner of stockholder must provide our capital stock, and any person (including the stockholder of record) who is holding shares of our capital stock for a beneficial owner or constructive owner will, upon demand, be required to provide us Company with such information as we our Company may request in good faith in order to determine our its qualification as a REIT and to comply with the requirements of any taxing authority or governmental authority or to determine such compliance. Provisions Any certificates representing shares of our certificate of incorporation stock will bear a legend referring to the restrictions described above. These restrictions relating to ownership and bylaws may delay transfer will not apply if our Board determines that it is no longer in our best interests to continue to qualify as a REIT. These ownership limits could delay, defer or discourage transactions involving an actual prevent a transaction or potential a change in control or change in our management, including transactions in which stockholders that might otherwise receive involve a premium price for their shares, our common stock or transactions that our stockholders might otherwise deem to be in their the best interests. Therefore, these provisions could adversely affect the price interest of our common stockstockholders. Among other thingsAmerican Stock Transfer & Trust Company, LLC acts as our certificate of incorporation transfer agent and bylaws: • permit registrar for our board of directors to issue up to 100,000,000 shares of preferred stock, with any rights, preferences common stock and privilOP units.
Appears in 1 contract
Sources: Sales Agreement
Restrictions on Ownership and Transfer. To facilitate compliance with the ownership limitations applicable to a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), our certificate of incorporation contains restrictions on the ownership and transfer of our capital stock. These ownership and transfer restrictions could delay, defer or prevent a transaction or a change in control that might involve a premium price In order for our common stock or that our stockholders might otherwise deem to be in their best interests. For us to qualify for taxation as a REIT under the CodeREIT, our capital stock must be beneficially owned by 100 or more persons during for at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year. Also, not more than 50% of the value of the outstanding shares of our capital stock may be owned, directly or indirectly, by five or fewer “individuals” individuals (as defined in the Code Code, to include certain entities such as private foundationsexempt entities) during the last half of a taxable year. To facilitate compliance with these ownership requirements and other requirements for continued qualification as a REIT and to otherwise protect us from the consequences of a concentration of ownership among our stockholders, our certificate of incorporation contains provisions restricting the ownership or transfer of shares of capital stock. The relevant sections of our certificate of incorporation provide Our charter provides that, subject to the exceptions and the constructive ownership rules described belowcertain exceptions, no person stockholder or “group” (as defined in our certificate Section 13(d)(3) of incorporationthe Exchange Act) may beneficially own, or constructively be deemed to own by virtue of the attribution provisions of the Code, more than 9.8% in value of the aggregate of outstanding shares of capital stock, including common stock and preferred stock, number or more than 9.8% in value or number (whichever is more restrictive) of the outstanding shares of any class or series of capital stock. We refer to these restrictions as the “ownership limits.” The applicable constructive ownership rules under the Code are complex and may cause capital stock owned actually or constructively by an individual or entity to be treated as owned by another individual or entity. As a result, the acquisition of less than 9.8% in value of outstanding capital stock or less than 9.8% in value or number of outstanding shares of any class or series of our capital stock (including through or the acquisition of an interest in an entity that owns, actually or constructively, any class or series of capital stock) by an individual or entity could nevertheless cause that individual or entity, or another individual or entity, to own, constructively or beneficially, in excess of 9.8% in value of outstanding capital stock or 9.8% in value or number of outstanding shares of any class or series of capital stock. In addition to the ownership limits, our certificate of incorporation prohibits any person from actually or constructively owning shares of capital stock to the extent that such ownership would cause any of our income that would otherwise qualify as “rents from real property” for purposes of Section 856(d) of the Code to fail to qualify as suchOwnership Limit). Our board of directors has in may waive the past granted ownership limitation waivers and may, in its sole discretion, in Ownership Limit if it is presented with evidence satisfactory to it that the future grant such a waiver to a person exempting them from the ownership limits and certain other REIT limits on ownership and transfer of capital stock described above, and may establish a different limit on ownership for any such person. However, will not jeopardize our board of directors may not exempt any person whose ownership of outstanding capital stock in violation of these limits would result in our failing to qualify qualification as a REIT. In order to be considered by our board of directors for an ownership limitation waiver or a different limit on ownership, a person must make such representations and undertakings as are reasonably necessary to ascertain that such person’s beneficial or constructive ownership of capital stock will not now or in the future jeopardize our ability to qualify as a REIT under the Code and must generally agree that any violation or attempted violation of such representations or undertakings (or other action that is contrary to the ownership limits and certain other REIT limits on ownership and transfer of capital stock described above) will result in the shares of capital stock being automatically transferred to a trust as described below. As a condition of its to any such waiver, our board of directors may require a ruling of the Internal Revenue Service (or the IRS) or an opinion of counsel or Internal Revenue Service ruling satisfactory to our board of directors it and must receive certain undertakings and representations from the applicant with respect to preserving our qualification as a REIT and may impose such other conditions as it deems appropriate in connection with the granting of the waiver or a different limit on ownership. In connection with the waiver of the ownership limits or at any other time, our board of directors may from time to time increase the ownership limits for one or more persons and decrease the ownership limits for all other persons; provided that the new ownership limits may not, after giving effect to such increase and under certain assumptions stated in our certificate of incorporation, result in us being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interests are held during the last half of a taxable year). Reduced ownership limits will not apply to any person whose percentage ownership of total shares of capital stock or of the shares of a class or series of capital stock, as applicable, is in excess of such decreased ownership limits until such time as such person’s percentage of total shares of capital stock or of the shares of a class or series of capital stock, as applicable, equals or falls below the decreased ownership limits, but any further acquisition of capital stock in excess of such percentage will be in violation of the ownership limits. Our certificate of incorporation further prohibits: • any person from transferring shares of capital stock if such transfer would result in shares of capital stock being beneficially owned by fewer than 100 persons (determined without reference to any rules of attribution); and • any person from beneficially or constructively owning shares of capital stock if such ownership would result in our failing to qualify as a REITqualification. The foregoing provisions on transferability and ownership Ownership Limit will not apply if our board of directors determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, qualify as a REIT. Any person who acquires or attempts or intends to acquire beneficial or constructive ownership of If shares of capital common stock that will or may violate the ownership limits or any and/or preferred stock (i) in excess of the other foregoing restrictions on transferability and ownership will Ownership Limit, (ii) which would cause us to be required beneficially owned by fewer than 100 persons or (iii) that cause us to give notice to us immediately (or, in the case of a proposed or attempted transaction, at least 15 days prior to such transactionbecome “closely held” under Section 856(h) and provide us with such other information as we may request in order to determine the effect, if any, of such transfer on our qualification as a REIT. Pursuant to our certificate of incorporation, if there is any purported transfer of our capital stock or other event or change of circumstances that, if effective or otherwise, would violate any of the restrictions described aboveCode, then are transferred to any person, the transfer shall be void as to the number of shares causing in violation of such restrictions and the violation intended transferee will acquire no rights to such shares of common stock and/or preferred stock. Shares transferred that would cause any stockholder (rounded up or a Prohibited Owner) to own more than the nearest whole shareOwnership Limit or cause us to become “closely held” under Section 856(h) of the Code will automatically be converted into an equal number of shares of excess stock. All excess stock will be automatically transferred transferred, without action by the Prohibited Owner, to a trust for the exclusive benefit of a designated one or more charitable beneficiarybeneficiaries that we select, except that and the Prohibited Owner will not acquire any transfer that results rights in the violation shares of the restriction relating to our capital stock being beneficially owned by fewer than 100 persons will be automatically void and of no force or effectexcess stock. The Such automatic transfer will shall be deemed to be effective as of the close of business on the business day prior to the date of the purported transfer causing a violation. The trustee of the trust shall be appointed by us and must be independent of us and the Prohibited Owner. The Prohibited Owner shall have no right to receive dividends or other event distributions with respect to, or change be entitled to vote, any shares of circumstances that requires the transfer to excess stock held in the trust. We refer below Any dividend or other distribution paid prior to the person discovery by us that would have owned the shares if they had not excess stock has been transferred to the trust as must be paid by the purported transfereerecipient of the dividend or distribution to the trustee upon demand for the benefit of the charitable beneficiary, and any dividend or other distribution authorized but unpaid shall be paid when due to the trust. The trust shall have all dividend and voting rights with respect to the shares of excess stock held in the trust, which rights shall be exercised for the exclusive benefit of the charitable beneficiary. Any ordinary dividend or distribution so paid to the purported transferee, prior to our discovery that trust shall be held in trust for the shares had been automatically transferred to a trust as described above, must be repaid to a trustee designated in accordance with the certificate charitable beneficiary. Within 20 days of incorporation upon demand. Our certificate of incorporation also provides for adjustments to the entitlement to receive extraordinary dividends and other distributions as between the purported transferee and the trust. If the transfer to the trust as described above is not automatically effective, for any reason, to prevent violation of the applicable restriction contained in our certificate of incorporation, then the transfer of the excess shares will be automatically void and of no force or effect. Shares receipt of our capital notice that excess stock has been transferred to the trust, the trustee are deemed will sell the excess stock held in the trust to be offered for a person, designated by the trustee, whose ownership of the shares will not violate the ownership limitations set forth in our charter. Upon such sale, any interest of the charitable beneficiary in the excess stock sold shall terminate and the trustee shall distribute the net proceeds of the sale to us or our designee at a price per share equal the Prohibited Owner and to the charitable beneficiary as follows. The Prohibited Owner shall receive the lesser of (ia) the price per share in paid by the transaction that resulted in such transfer to Prohibited Owner for the trust excess stock or, if the purported transferee Prohibited Owner did not give value for the shares excess stock in connection with the event causing the shares excess stock to be held in the trust (e.g., in the case of a gift, devise or other such transaction), the market price at the time of such event and Market Price (iias defined in our charter) the market price on the date we accept, or our designee accepts, such offer. We have the right to accept such offer until the trustee has sold the shares of our capital stock held in the trust pursuant to the clauses described below. Upon a sale to us, the interest of the charitable beneficiary in the shares sold terminates and the trustee must distribute the net proceeds of the sale to the purported transferee, except that the trustee may reduce the amount payable to the purported transferee by the amount of any ordinary dividends that we paid to the purported transferee prior to our discovery that the shares had been transferred to the trust and that is owed by the purported transferee to the trustee as described above. Any net sales proceeds and extraordinary dividends in excess of the amount payable to the purported transferee shall be immediately paid to the charitable beneficiary, and any ordinary dividends held by the trustee with respect to such capital stock will be promptly paid to the charitable beneficiary. After receiving notice that the shares have been transferred to the trust, the trustee must, as soon as reasonably practicable (and, if the shares are listed on a national securities exchange, within 20 days) after receiving notice from us of the transfer of shares to the trust, sell the shares to a person or entity who could own the shares without violating the restrictions described above. Upon such a sale, the trustee must distribute to the purported transferee an amount equal to the lesser of (i) the price paid by the purported transferee for the shares or, if the purported transferee did not give value for the shares in connection with the event causing the shares to be held in 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 excess stock to be held in the trust, and (ii) the sales proceeds (net of commissions and other expenses of sale) received by the trustee for the shares. The trustee may reduce the amount payable to the purported transferee by the amount of any ordinary dividends that we paid to the purported transferee before our discovery that the shares had been transferred to the trust and that is owed by the purported transferee to the trustee as described above. Any net sales proceeds in excess of the amount payable to the purported transferee will be immediately paid to the charitable beneficiary, together with any ordinary dividends held by the trustee with respect to such capital stock. In addition, if prior to discovery by us that shares of our capital stock have been transferred to a trust, such shares of capital stock are sold by a purported transferee, then such shares will be deemed to have been sold on behalf of the trust and, to the extent that the purported transferee received an amount for or in respect of such shares that exceeds the amount that such purported transferee was entitled to receive as described above, such excess amount shall be paid to the trustee upon demand. The purported transferee has no rights in the shares held by the trustee. The trustee will be indemnified by us or from the proceeds of sales of capital stock in the trust for its costs and expenses reasonably incurred in connection with conducting its duties and satisfying its obligations under our certificate of incorporation. The trustee will also be entitled to reasonable compensation for services provided as determined by agreement between the trustee and the board of directors, which compensation may be funded by us or the trust. If we pay any such indemnification or compensation, we are entitled on a first priority basis (subject to the trustee’s indemnification and compensation rights) to be reimbursed from the trust. To the extent the trust funds any such indemnification and compensation, the amounts available for payment to a purported transferee (or the charitable beneficiary) would be reduced. The trustee will be designated by us and must be unaffiliated with us and with any purported transferee. Prior to the sale of any shares by the trust, the trustee will receive, in trust for the beneficiary, all distributions paid by us with respect to the shares, and may also exercise all voting rights with respect to the shares. Subject to the DGCL, effective as of the date that the shares have been transferred to the trust, the trustee will have the authority, at the trustee’s sole discretion: • to rescind as void any vote cast by a purported transferee prior to our discovery that the shares have been transferred to the trust; and • to recast the vote in accordance with the desires of the trustee acting for the benefit of the charitable beneficiary of the trust. In addition, if the board of directors determines that a proposed or purported transfer would violate the restrictions on ownership and transfer of our capital stock set forth in our certificate of incorporation, the board of directors may take such action as it deems advisable to refuse to give effect to or to prevent such violation, including but not limited to, causing us to repurchase shares of our capital stock, refusing to give effect to the transfer on our books or instituting proceedings to enjoin the transfer. From time to time, at our request, every person that is an owner of 5% or more (or such lower percentage as required by the Code or the Treasury regulations thereunder) of the outstanding shares of any class or series of our capital stock, must provide us written notice of its name and address, the number of shares of each class and series of our capital stock that the person beneficially owns and a description of the manner in which the shares are held. Each such owner must also provide us with such additional information as we may request in order to determine the effect, if any, of such owner’s beneficial ownership on our qualification as a REIT and to ensure compliance with the ownership limits. In addition, each beneficial owner or constructive owner of our capital stock, and any person (including the stockholder of record) who is holding shares of our capital stock for a beneficial owner or constructive owner will, upon demand, be required to provide us with such information as we may request in good faith in order to determine our qualification as a REIT and to comply with the requirements of any taxing authority or governmental authority or to determine such compliance. Provisions of our certificate of incorporation and bylaws may delay or discourage transactions involving an actual or potential change in control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our common stock. Among other things, our certificate of incorporation and bylaws: • permit our board of directors to issue up to 100,000,000 shares of preferred stock, with any rights, preferences and privil
Appears in 1 contract
Sources: Distribution Agreement
Restrictions on Ownership and Transfer. To facilitate compliance with the ownership limitations applicable In order to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”)amended, our certificate of incorporation contains restrictions on the ownership and transfer of our capital stock. These ownership and transfer restrictions could delay, defer or prevent a transaction or a change in control that might involve a premium price for our common stock or that our stockholders might otherwise deem to be in their best interests. For us to qualify for taxation as a REIT under the Code, our capital shares of stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months (other than the first year for which an election to be a REIT has been made) or during a proportionate part of a shorter taxable year. Also, not more than 50% of the value of the our outstanding shares of our capital stock may be owned, directly or indirectly, by five or fewer “individuals” individuals (as defined in the Code to include certain entities such as private foundationsentities) during the last half of a taxable yearyear (other than the first year for which an election to be a REIT has been made). To facilitate compliance with these ownership requirements and other requirements Because our Board of Directors believes it is at present in our best interests for continued qualification us to qualify as a REIT and to otherwise protect us from the consequences of a concentration of ownership REIT, among our stockholdersother purposes, our certificate of incorporation charter, subject to certain exceptions, contains provisions restricting restrictions on the ownership or transfer number of shares of capital stockour stock that a person may own. The relevant sections of our certificate of incorporation provide Our charter provides that, subject to the exceptions and the constructive ownership rules described belowcertain exceptions, no person (as defined in our certificate of incorporation) may beneficially or constructively own more than 9.8% in value or in number of the aggregate of outstanding shares of capital stockshares, including common stock and preferred stock, or more than 9.8% in value or number (whichever is more restrictive) , of the outstanding shares of any class or series of our capital stock. We refer to these restrictions as the “ownership limits.” The applicable constructive ownership rules under the Code are complex and may cause capital stock owned actually or constructively by an individual or entity to be treated as owned by another individual or entity. As a result, the acquisition of less than 9.8% in value of outstanding capital stock or less than 9.8% in value or number of outstanding shares of any class or series of capital stock (including through the acquisition of an interest in an entity that owns, actually or constructively, any class or series of capital stock) by an individual or entity could nevertheless cause that individual or entity, or another individual or entity, to own, constructively or beneficially, in excess of 9.8% in value of outstanding capital stock or 9.8% in value or number of outstanding shares of any class or series of capital stockthe Ownership Limit. In addition to the ownership limits, our certificate of incorporation Our charter also prohibits any person from actually from: • beneficially or constructively owning or transferring shares of our capital stock to the extent that if such ownership would cause any of our income that would otherwise qualify as “rents from real property” for purposes of Section 856(d) of the Code to fail to qualify as such. Our board of directors has in the past granted ownership limitation waivers and may, in its sole discretion, in the future grant such a waiver to a person exempting them from the ownership limits and certain other REIT limits on ownership and or transfer of capital stock described above, and may establish a different limit on ownership for any such person. However, our board of directors may not exempt any person whose ownership of outstanding capital stock in violation of these limits would result in our failing to qualify as a REIT. In order to be considered by our board of directors for an ownership limitation waiver or a different limit on ownership, a person must make such representations and undertakings as are reasonably necessary to ascertain that such person’s beneficial or constructive ownership of capital stock will not now or in the future jeopardize our ability to qualify as a REIT under the Code and must generally agree that any violation or attempted violation of such representations or undertakings (or other action that is contrary to the ownership limits and certain other REIT limits on ownership and transfer of capital stock described above) will result in the shares of capital stock being automatically transferred to a trust as described below. As a condition of its waiver, our board of directors may require an opinion of counsel or Internal Revenue Service ruling satisfactory to our board of directors with respect to our qualification as a REIT and may impose such other conditions as it deems appropriate in connection with the granting of the waiver or a different limit on ownership. In connection with the waiver of the ownership limits or at any other time, our board of directors may from time to time increase the ownership limits for one or more persons and decrease the ownership limits for all other persons; provided that the new ownership limits may not, after giving effect to such increase and under certain assumptions stated in our certificate of incorporation, result in us being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interests are interest is held during the last half of a taxable year). Reduced ownership limits will not apply to any person whose percentage ownership of total shares of capital stock or of the shares of a class or series of capital stock, as applicable, is in excess of such decreased ownership limits until such time as such person’s percentage of total shares of capital stock or of the shares of a class or series of capital stock, as applicable, equals or falls below the decreased ownership limits, but any further acquisition of capital stock in excess of such percentage will be in violation of the ownership limits. Our certificate of incorporation further prohibits: ; • any person from transferring shares of our capital stock if such transfer would result in our capital stock being owned by fewer than 100 persons, effective beginning on the date on which we first have 100 stockholders; • beneficially or constructively owning shares of our capital stock to the extent such beneficial or constructive ownership would cause us to constructively own 10% or more of the ownership interests in a tenant (other than a taxable REIT subsidiary) of our real property within the meaning of Section 856(d)(2)(B) of the Code; or • beneficially or constructively owning or transferring shares of our capital stock if such beneficial or constructive ownership or transfer would otherwise cause us to fail to qualify as a REIT under the Code. Our Board of Directors, in its sole discretion, may exempt (prospectively or retroactively) a person from the 9.8% ownership limit and other restrictions in our charter and may establish or increase an excepted holder percentage limit for such person if our Board of Directors obtains such representations, covenants and undertakings as it deems appropriate in order to conclude that granting the exemption and/or establishing or increasing the excepted holder percentage limit will not cause us to fail to qualify as a REIT. Our Board of Directors may require a ruling from the Internal Revenue Service, or the IRS, or an opinion of counsel, in either case in form and substance satisfactory to our Board of Directors, in its sole discretion, in order to determine or ensure our status as a REIT. Any attempted transfer of shares of our capital stock which, if effective, would violate any of the restrictions described above will result in the number of shares of our capital stock causing the violation (rounded up to the nearest whole share) to be automatically transferred to a trust for the exclusive benefit of one or more charitable beneficiaries, except that any transfer that results in the violation of the restriction relating to shares of our capital stock being beneficially owned by fewer than 100 persons will be void ab initio. In either case, the proposed transferee will not acquire any rights in those shares. The automatic transfer will be deemed to be effective as of the close of business on the business day prior to the date of the purported transfer or other event that results in the transfer to the trust. Shares held in the trust will be issued and outstanding shares. The proposed transferee will not benefit economically from ownership of any shares held in the trust, will have no rights to dividends or other distributions and will have no rights to vote or other rights attributable to the shares held in the trust. The trustee of the trust will have all voting rights and rights to dividends or other distributions with respect to shares held in the trust. These rights will be exercised for the exclusive benefit of the charitable beneficiary. Any dividend or other distribution paid prior to our discovery that shares have been transferred to the trust will be paid by the recipient to the trustee upon demand. Any dividend or other distribution authorized but unpaid will be paid when due to the trustee. Any dividend or other distribution paid to the trustee will be held in trust for the charitable beneficiary. Subject to Maryland law, the trustee will have the authority (determined without reference in the trustee’s sole discretion) (1) to rescind as void any rules vote cast by the proposed transferee prior to our discovery that the shares have been transferred to the trust and (2) to recast the vote in accordance with the desires of attributionthe trustee acting for the benefit of the charitable beneficiary. However, if we have already taken irreversible corporate action, then the trustee will not have the authority to rescind and recast the vote. Within 20 days of receiving notice from us that shares of our stock have been transferred to the trust, the trustee will sell the shares to a person, designated by the trustee, whose ownership of the shares will not violate the above ownership and transfer limitations. Upon the sale, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the proposed transferee and to the charitable beneficiary as follows. The proposed transferee will receive the lesser of (1) the price paid by the proposed transferee for the shares or, if the proposed transferee did not give value for the shares in connection with the event causing the shares to be held in the trust (e.g., a gift, devise or other similar transaction); , the market price (as defined in our charter) of the shares on the day of the event causing the shares to be held in the trust and • (2) the price per share received by the trustee (net of any commission and other expenses of sale) from the sale or other disposition of the shares. The trustee may reduce the amount payable to the proposed transferee by the amount of dividends and other distributions that have been paid to the proposed transferee and are owed by the proposed transferee to the trustee. Any net sale proceeds in excess of the amount payable to the proposed transferee will be paid immediately to the charitable beneficiary. If, prior to our discovery that shares of our stock have been transferred to the trust, the shares are sold by the proposed transferee, then (1) the shares shall be deemed to have been sold on behalf of the trust and (2) to the extent that the proposed transferee received an amount for the shares that exceeds the amount he or she was entitled to receive, the excess shall be paid to the trustee upon demand. In addition, shares of our stock held in the trust will be deemed to have been offered for sale to us, or our designee, at a price per share equal to the lesser of (1) the price per share in the transaction that resulted in the transfer to the trust (or, in the case of a devise or gift, the market price at the time of the devise or gift) and (2) the market price on the date we, or our designee, accept the offer, which we may reduce by the amount of dividends and distributions that have been paid to the proposed transferee and are owed by the proposed transferee to the trustee. We will have the right to accept the offer until the trustee has sold the shares. Upon a sale to us, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the proposed transferee. If a transfer to a charitable trust, as described above, would be ineffective for any reason to prevent a violation of a restriction, the transfer that would have resulted in a violation will be void ab initio, and the proposed transferee shall acquire no rights in those shares. Any certificate representing shares of our capital stock, and any notices delivered in lieu of certificates with respect to the issuance or transfer of uncertificated shares, will bear a legend referring to the restrictions described above. We do not expect to issue certificates representing shares of our capital stock. Any person who acquires or attempts or intends to acquire beneficial or constructive ownership of shares of our capital stock that will or may violate any of the foregoing restrictions on ownership and transfer, or any person from beneficially or constructively owning who would have owned shares of our capital stock if that resulted in a transfer of shares to a charitable trust, is required to give written notice immediately to us, or in the case of a proposed or attempted transaction, to give at least 15 days’ prior written notice, and provide us with such ownership would result other information as we may request in order to determine the effect of the transfer on our failing to qualify status as a REIT. The foregoing provisions restrictions on transferability ownership and ownership transfer will not apply if our board Board of directors Directors determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT. Any person who acquires REIT or attempts or intends to acquire beneficial or constructive ownership of shares of capital stock that will or may violate compliance with the ownership limits or any of the other foregoing restrictions on transferability and ownership will be required to give notice to us immediately (or, in the case of a proposed or attempted transaction, at least 15 days prior to such transaction) and provide us with such other information as we may request is no longer necessary in order for us to determine the effect, if any, of such transfer on our qualification qualify as a REIT. Pursuant to our certificate Every owner of incorporation, if there is any purported transfer of our capital stock or other event or change of circumstances that, if effective or otherwise, would violate any of the restrictions described above, then the number of shares causing the violation (rounded up to the nearest whole share) will be automatically transferred to a trust for the exclusive benefit of a designated charitable beneficiary, except that any transfer that results in the violation of the restriction relating to our capital stock being beneficially owned by fewer more than 100 persons will be automatically void and of no force or effect. The automatic transfer will be effective as of the close of business on the business day prior to the date of the purported transfer or other event or change of circumstances that requires the transfer to the trust. We refer below to the person that would have owned the shares if they had not been transferred to the trust as the purported transferee. Any ordinary dividend paid to the purported transferee, prior to our discovery that the shares had been automatically transferred to a trust as described above, must be repaid to a trustee designated in accordance with the certificate of incorporation upon demand. Our certificate of incorporation also provides for adjustments to the entitlement to receive extraordinary dividends and other distributions as between the purported transferee and the trust. If the transfer to the trust as described above is not automatically effective, for any reason, to prevent violation of the applicable restriction contained in our certificate of incorporation, then the transfer of the excess shares will be automatically void and of no force or effect. Shares of our capital stock transferred to the trustee are deemed to be offered for sale to us or our designee at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in such transfer to the trust or, if the purported transferee did not give value for the shares in connection with the event causing the shares to be held in trust (e.g., in the case of a gift, devise or other such transaction), the market price at the time of such event and (ii) the market price on the date we accept, or our designee accepts, such offer. We have the right to accept such offer until the trustee has sold the shares of our capital stock held in the trust pursuant to the clauses described below. Upon a sale to us, the interest of the charitable beneficiary in the shares sold terminates and the trustee must distribute the net proceeds of the sale to the purported transferee, except that the trustee may reduce the amount payable to the purported transferee by the amount of any ordinary dividends that we paid to the purported transferee prior to our discovery that the shares had been transferred to the trust and that is owed by the purported transferee to the trustee as described above. Any net sales proceeds and extraordinary dividends in excess of the amount payable to the purported transferee shall be immediately paid to the charitable beneficiary, and any ordinary dividends held by the trustee with respect to such capital stock will be promptly paid to the charitable beneficiary. After receiving notice that the shares have been transferred to the trust, the trustee must, as soon as reasonably practicable (and, if the shares are listed on a national securities exchange, within 20 days) after receiving notice from us of the transfer of shares to the trust, sell the shares to a person or entity who could own the shares without violating the restrictions described above. Upon such a sale, the trustee must distribute to the purported transferee an amount equal to the lesser of (i) the price paid by the purported transferee for the shares or, if the purported transferee did not give value for the shares in connection with the event causing the shares to be held in trust (e.g., in the case of a gift, devise or other such transaction), the market price of the shares on the day of the event causing the shares to be held in the trust, and (ii) the sales proceeds (net of commissions and other expenses of sale) received by the trustee for the shares. The trustee may reduce the amount payable to the purported transferee by the amount of any ordinary dividends that we paid to the purported transferee before our discovery that the shares had been transferred to the trust and that is owed by the purported transferee to the trustee as described above. Any net sales proceeds in excess of the amount payable to the purported transferee will be immediately paid to the charitable beneficiary, together with any ordinary dividends held by the trustee with respect to such capital stock. In addition, if prior to discovery by us that shares of our capital stock have been transferred to a trust, such shares of capital stock are sold by a purported transferee, then such shares will be deemed to have been sold on behalf of the trust and, to the extent that the purported transferee received an amount for or in respect of such shares that exceeds the amount that such purported transferee was entitled to receive as described above, such excess amount shall be paid to the trustee upon demand. The purported transferee has no rights in the shares held by the trustee. The trustee will be indemnified by us or from the proceeds of sales of capital stock in the trust for its costs and expenses reasonably incurred in connection with conducting its duties and satisfying its obligations under our certificate of incorporation. The trustee will also be entitled to reasonable compensation for services provided as determined by agreement between the trustee and the board of directors, which compensation may be funded by us or the trust. If we pay any such indemnification or compensation, we are entitled on a first priority basis (subject to the trustee’s indemnification and compensation rights) to be reimbursed from the trust. To the extent the trust funds any such indemnification and compensation, the amounts available for payment to a purported transferee 5% (or the charitable beneficiary) would be reduced. The trustee will be designated by us and must be unaffiliated with us and with any purported transferee. Prior to the sale of any shares by the trust, the trustee will receive, in trust for the beneficiary, all distributions paid by us with respect to the shares, and may also exercise all voting rights with respect to the shares. Subject to the DGCL, effective as of the date that the shares have been transferred to the trust, the trustee will have the authority, at the trustee’s sole discretion: • to rescind as void any vote cast by a purported transferee prior to our discovery that the shares have been transferred to the trust; and • to recast the vote in accordance with the desires of the trustee acting for the benefit of the charitable beneficiary of the trust. In addition, if the board of directors determines that a proposed or purported transfer would violate the restrictions on ownership and transfer of our capital stock set forth in our certificate of incorporation, the board of directors may take such action as it deems advisable to refuse to give effect to or to prevent such violation, including but not limited to, causing us to repurchase shares of our capital stock, refusing to give effect to the transfer on our books or instituting proceedings to enjoin the transfer. From time to time, at our request, every person that is an owner of 5% or more (or such lower percentage as required by the Code or the Treasury regulations promulgated thereunder) in number or value of the outstanding shares of any class or series of our capital stock, must provide within 30 days after the end of each taxable year, is required to give us written notice of its notice, stating his or her name and address, the number of shares of each class and series of shares of our capital stock that the person he or she beneficially owns and a description of the manner in which the shares are held. Each such owner of these owners must also provide us with such additional information as that we may request in order to determine the effect, if any, of such owner’s his or her beneficial ownership on our qualification status as a REIT and to ensure compliance with the ownership limitslimitations. In addition, each beneficial owner or constructive owner of our capital stock, and any person (including the stockholder of record) who is holding shares of our capital stock for a beneficial owner or constructive owner will, will upon demand, demand be required to provide us with such information as that we may request in good faith in order to determine our qualification status as a REIT and to comply with the requirements of any taxing authority or governmental authority or to determine such our compliance. Provisions of our certificate of incorporation and bylaws may delay These ownership limitations could delay, defer or discourage transactions involving an actual prevent a transaction or potential a change in control or change in our management, including transactions in which stockholders that might otherwise receive involve a premium price for their shares, shares of our capital stock or transactions that our stockholders might otherwise deem to be in their the best interests. Therefore, these provisions could adversely affect the price interest of our common stock. Among other things, our certificate of incorporation and bylaws: • permit our board of directors to issue up to 100,000,000 shares of preferred stock, with any rights, preferences and privilstockholders.
Appears in 1 contract
Sources: Sales Agreement